SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 12, 1998
World Access, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-19998 65-0044209
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
945 E. Paces Ferry Road, Suite 2240, Atlanta, Georgia 30326
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (404) 231-2025
<PAGE>
Item 5. Other Events.
On May 12, 1998, World Access, Inc. (the "Company") announced that it
had entered into (i) a definitive Agreement and Plan of Merger and
Reorganization (the "Merger Agreement") with Cherry Communications Incorporated
(d/b/a Resurgens Communications Group) ("RCG") pursuant to which the Company
will acquire RCG in a merger transaction (the "Merger"), and (ii) a Share
Exchange Agreement and Plan of Reorganization (the "Exchange Agreement") with
the sole shareholder (the "Shareholder") of Cherry Communications U.K. Limited
("Cherry U.K.") pursuant to which the Company will acquire Cherry U.K. in a
share exchange transaction (the "Exchange").
In connection with the Merger, the creditors of RCG will receive an
aggregate of 9,375,000 shares of common stock of WAXS INC. ("New World Access").
New World Access is a wholly-owned subsidiary of the Company that will become
the parent of the Company upon the completion of the previously reported
acquisition of the shares of NACT Telecommunications, Inc. not already owned by
the Company and the holding company reorganization to be effective in connection
therewith (the "Holding Company Reorganization"). Of the shares of New World
Access common stock to be issued to the RCG creditors, two-thirds will be held
in escrow and will be released to the RCG creditors over the two and one-half
years following the consummation of the Merger subject to the attainment of
certain earnings levels for the combined business of RCG and Cherry U.K.
In connection with the Exchange, the Shareholder will receive an
aggregate of 1,875,000 shares of New World Access common stock, of which
one-third will be issued to the Shareholder at closing and the remaining
two-thirds will be issued and held in escrow and will be released to the
Shareholder over the two and one-half year period following the consummation of
the Exchange subject to the attainment of certain earnings levels for the
combined business of RCG and Cherry U.K. The Exchange Agreement provides,
however, that the number of shares of New World Access common stock to be
received by the Shareholder will be reduced to the extent that New World Access
is required to convert options to acquire shares of Cherry U.K. capital stock,
which options may only be granted with the permission of New World Access, into
options to acquire New World Access common stock.
Each of the Merger and the Exchange is subject to the satisfaction of
certain conditions customary in similar transactions, including the approval of
the Company's stockholders and the consummation of the Holding Company
Reorganization. The consummation of the Merger is also subject to the Bankruptcy
Court's approval and confirmation of RCG's Plan of Reorganization which is
expected to be filed by June 5, 1998. In addition, the Merger Agreement is
subject to the approval of the Bankruptcy Court. Finally, the consummation of
the Merger is a condition to the consummation of the Exchange, and the Exchange
is a condition to the consummation of the Merger.
The foregoing description of the Merger and the Exchange is qualified
in its entirety by reference to the Merger Agreement and the Exchange Agreement
which are filed as exhibits herewith.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits. The following exhibits are filed herewith by direct
transmission via "edgar."
99.1 Agreement and Plan of Merger and Reorganization dated as of
May 12, 1998 by and among World Access, Inc., WAXS INC., WA
Merger Corp. and Cherry Communications Incorporated (d/b/a
Resurgens Communications Group).
99.2 Share Exchange Agreement and Plan of Reorganization dated as
of May 12, 1998 by and among World Access, Inc., WAXS INC.,
Cherry Communications U.K. Limited and Renaissance Partners
II.
99.3 Press Release issued on May 12, 1998 (regarding execution of
definitive agreements to acquire RCG and Cherry U.K.).
<PAGE>
SIGNATURE
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, thereunto duly authorized.
WORLD ACCESS, INC.
By: /s/ Martin D. Kidder
---------------------------------
Martin D. Kidder
Its Vice President and Controller
Dated as of May 18, 1998
<PAGE>
Exhibit 99.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
by and among
WORLD ACCESS, INC.,
WAXS INC.,
WA MERGER CORP.
and
CHERRY COMMUNICATIONS INCORPORATED d/b/a
RESURGENS COMMUNICATIONS GROUP
May 12, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS.............................................. 2
Section 1.1. "Acquisition Proposal"............................ 2
Section 1.2. "Administrative Expense Claims"................... 3
Section 1.3. "Adverse Consequences"............................ 3
Section 1.4. "Affiliate"....................................... 3
Section 1.5. "Agreement"....................................... 3
Section 1.6. "Allowed Claims".................................. 3
Section 1.7. "Applicable Bankruptcy Law"....................... 4
Section 1.8. "Articles of Merger".............................. 4
Section 1.9. "Bankruptcy Code"................................. 4
Section 1.10. "Bankruptcy Court"................................ 4
Section 1.11. "Business Day".................................... 4
Section 1.12. "Certificate of Merger"........................... 4
Section 1.13. "Change of Control"............................... 4
Section 1.14. "Chapter 11 Case"................................. 5
Section 1.15. "Cherry U.K."..................................... 5
Section 1.16. "Closing"......................................... 5
Section 1.17. "Closing Date".................................... 5
Section 1.18. "Code"............................................ 5
Section 1.19. "Communications Act".............................. 5
Section 1.20. "Confidential Information"........................ 5
Section 1.21. "Consent"......................................... 5
Section 1.22. "Contingent Payment Stock"........................ 6
Section 1.23. "Controlled Group Liability"...................... 6
Section 1.24. "Debtor's Schedules".............................. 6
Section 1.25. "DGCL"............................................ 6
Section 1.26. "DIP Financing"................................... 6
Section 1.27. "Disbursed Stock"................................. 6
Section 1.28. "Disbursing Agent"................................ 6
Section 1.29. "Disputed Claims"................................. 6
Section 1.30. "District Court".................................. 6
Section 1.31. "EBITDA".......................................... 6
Section 1.32. "Effective Date".................................. 7
Section 1.33. "Effective Time".................................. 7
Section 1.34. "Employee Benefit Plan"........................... 7
Section 1.35. "Employee Pension Benefit Plan"................... 7
Section 1.36. "Employee Welfare Benefit Plan"................... 7
Section 1.37. "Environmental, Health, and Safety Laws".......... 7
Section 1.38. "ERISA"........................................... 7
Section 1.39. "ERISA Affiliate"................................. 7
Section 1.40. "Exchange Act".................................... 7
Section 1.41. "Expenses"........................................ 7
Section 1.42. "Extremely Hazardous Substance"................... 8
Section 1.43. "FCC"............................................. 8
Section 1.44. "Fiduciary"....................................... 8
Section 1.45. "Final Order"..................................... 8
Section 1.46. "GAAP"............................................ 8
Section 1.47. "HSR Act"......................................... 8
Section 1.48. "Holding Company Reorganization".................. 8
Section 1.49. "IBCA"............................................ 8
Section 1.50. "Intellectual Property"........................... 8
Section 1.51. "Knowledge"....................................... 9
Section 1.52. "Losses".......................................... 9
Section 1.53. "Merger".......................................... 9
Section 1.54. "Merger Consideration"............................ 9
Section 1.55. "Merger Sub" ..................................... 9
Section 1.56. "Merger Sub Stock"................................ 9
Section 1.57. "Multi-employer Plan"............................. 9
Section 1.58. "Multiple Employer Plan".......................... 9
Section 1.59. "NACT"............................................ 9
Section 1.60. "NASDAQ".......................................... 9
Section 1.61. "New World Access"................................ 9
Section 1.62. "New World Access Stock".......................... 9
Section 1.63. "Order"........................................... 9
Section 1.64. "Ordinary Course" or
"Ordinary Course of Business"................... 10
Section 1.65. "PBGC"............................................ 10
Section 1.66. "Parties"......................................... 10
Section 1.67. "Party"........................................... 10
Section 1.68. "Performance Period".............................. 10
Section 1.69. "Person".......................................... 10
Section 1.70. "Petition Date"................................... 10
Section 1.71. "Plan"............................................ 10
Section 1.72. "Plan Disclosure Statement"....................... 10
Section 1.73. "Prohibited Transaction".......................... 10
Section 1.74. "Proxy Statement"................................. 10
Section 1.75. "PUC"............................................. 10
Section 1.76. "Qualified RCG Plan".............................. 10
Section 1.77. "RCG"............................................. 10
Section 1.78. "RCG Disclosure Schedule"......................... 10
Section 1.79. "RCG Financial Statements"........................ 10
Section 1.80. "RCG Intellectual Property Rights"................ 11
Section 1.81. "RCG Material Adverse Effect"..................... 11
Section 1.82. "RCG Most Recent Balance Sheet"................... 11
Section 1.83. "RCG Most Recent Financial Statements"............ 11
Section 1.84. "RCG Most Recent Fiscal Month End"................ 11
Section 1.85. "RCG Most Recent Fiscal Year End"................. 11
Section 1.86. "RCG Plans"....................................... 11
Section 1.87. "RCG Stock"....................................... 11
Section 1.88. "Regulatory Authority"............................ 11
Section 1.89. "Reportable Event"................................ 11
Section 1.90. "Required Consents"............................... 11
Section 1.91. "SEC"............................................. 11
Section 1.92. "Securities Act".................................. 12
Section 1.93. "Security Interest"............................... 12
Section 1.94. "Subsidiary"...................................... 12
Section 1.95. "Surviving Corporation"........................... 12
Section 1.96. "Tax Returns"..................................... 12
Section 1.97. "Taxes"........................................... 12
Section 1.98. "Termination Fee"................................. 12
Section 1.99. "Third-Party Intellectual Property Rights"........ 13
Section 1.100. "Trading Day"..................................... 13
Section 1.101. "U.K. Acquisition Agreement"...................... 13
Section 1.102. "U.K. Acquisition"................................ 13
Section 1.103. "WNSI"............................................ 13
Section 1.104. "World Access".................................... 13
Section 1.105. "World Access Disclosure Schedule"................ 13
Section 1.106. "World Access Material Adverse Effect"............ 13
Section 1.107. "World Access Most Recent Balance Sheet".......... 13
Section 1.108. "World Access Most Recent Financial Statements"... 13
Section 1.109. "World Access Most Recent Fiscal Month End"....... 13
Section 1.110. "World Access Most Recent Fiscal Year End"........ 14
Section 1.111. "World Access SEC Documents"...................... 14
Section 1.112. "World Access Stock".............................. 14
ARTICLE 2. THE MERGER............................................... 14
Section 2.1. The Merger........................................ 14
Section 2.2. Closing........................................... 14
Section 2.3. Effective Time.................................... 14
Section 2.4. Effect of Merger.................................. 14
Section 2.5. Charter and Bylaws................................ 15
Section 2.6. Directors and Officers............................ 15
ARTICLE 3. CONVERSION OF STOCK...................................... 15
Section 3.1. Conversion of Merger Sub Stock and RCG Stock...... 15
ARTICLE 4. ADJUSTMENTS.............................................. 15
Section 4.1. Adjustments....................................... 15
ARTICLE 5. PLAN OF REORGANIZATION AND PAYMENT OF CLAIMS............. 16
Section 5.1. Plan of Reorganization............................ 16
Section 5.2. Deposit of New World Access Stock................. 16
Section 5.3. Payment of Claim.................................. 16
Section 5.4. Contingent Payment of Claims...................... 16
ARTICLE 6. RELEASE OF CONTINGENT PAYMENT STOCK
AND TRANSFER RESTRICTIONS.............................. 17
Section 6.1. Release Criteria.................................. 17
Section 6.2. Subsequent Performance............................ 17
Section 6.3. Accelerated Release............................... 18
Section 6.4. Transfer Restrictions............................. 18
ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF WORLD ACCESS,
NEW WORLD ACCESS AND MERGER SUB........................ 18
Section 7.1. Organization, Qualification, and
Corporate Power................................. 19
Section 7.2. Capitalization.................................... 19
Section 7.3. Non-contravention................................. 19
Section 7.4. Brokers' Fees..................................... 20
Section 7.5. World Access SEC Documents........................ 20
Section 7.6. Events Subsequent to World Access
Most Recent Fiscal Year End..................... 21
Section 7.7. Undisclosed Liabilities........................... 22
Section 7.8. Opinion of Financial Advisor...................... 22
Section 7.9. Litigation........................................ 22
Section 7.10. Exemption from Registration....................... 23
ARTICLE 8. REPRESENTATIONS AND WARRANTIES OF RCG.................... 23
Section 8.1. Organization, Qualification, and
Corporate Power................................. 23
Section 8.2. Capitalization.................................... 23
Section 8.3. Non-contravention................................. 24
Section 8.4. Brokers' Fees..................................... 24
Section 8.5. Title to Assets................................... 24
Section 8.6. Subsidiaries...................................... 24
Section 8.7. Financial Statements.............................. 25
Section 8.8. Events Subsequent to RCG Most
Recent Fiscal Year End.......................... 25
Section 8.9. Undisclosed Liabilities........................... 27
Section 8.10. Legal Compliance.................................. 27
Section 8.11. Tax Matters....................................... 27
Section 8.12. Real Property..................................... 28
Section 8.13. Intellectual Property............................. 29
Section 8.14. Tangible Assets................................... 30
Section 8.15. Inventory......................................... 30
Section 8.16. Contracts......................................... 30
Section 8.17. Notes and Accounts Receivable..................... 31
Section 8.18. Insurance......................................... 31
Section 8.19. Litigation........................................ 31
Section 8.20. Employees......................................... 31
Section 8.21. Employee Benefits................................. 32
Section 8.22. Guaranties........................................ 33
Section 8.23. Environment, Health, and Safety................... 33
Section 8.24. Proxy Statement................................... 34
ARTICLE 9. COVENANTS................................................ 34
Section 9.1. Conduct of the Business of RCG
and its Subsidiaries............................ 34
Section 9.2. Conduct of Business of World Access
and its Subsidiaries............................ 36
Section 9.3. Access to Books and Records....................... 37
Section 9.4. Approval of Stockholders of
New World Access................................ 37
Section 9.5. Preparation of Proxy Statement.................... 37
Section 9.6. Affiliates........................................ 38
ARTICLE 10. ADDITIONAL AGREEMENTS.................................... 38
Section 10.1. Best Efforts; Cooperation......................... 38
Section 10.2. Regulatory Matters................................ 38
Section 10.3. Indemnification Regarding the Proxy Statement..... 39
Section 10.4. Notice of Developments............................ 39
Section 10.5. Notices and Consents.............................. 39
Section 10.6. Indemnity......................................... 39
Section 10.7. Offers of Employment.............................. 39
Section 10.8. Exclusive Dealing................................. 40
Section 10.9. Bankruptcy Court Approval......................... 41
ARTICLE 11. MUTUAL CONDITIONS TO CLOSING............................. 41
Section 11.1. Stockholder Approval.............................. 41
Section 11.2. Regulatory Approvals.............................. 41
Section 11.3. Litigation........................................ 41
Section 11.4. Proxy Statement................................... 41
Section 11.5. Consummation of Holding Company Reorganization.... 42
Section 11.6. Resignations...................................... 42
Section 11.7. Material Condition................................ 42
Section 11.8. Consents.......................................... 42
Section 11.9. Bankruptcy Court Approval......................... 42
Section 11.10. NASDAQ Listing.................................... 42
Section 11.11. U.K. Acquisition Transaction...................... 42
ARTICLE 12. CONDITIONS TO THE OBLIGATIONS OF NEW WORLD ACCESS........ 42
Section 12.1. Representations and Warranties.................... 43
Section 12.2. Performance of Obligations........................ 43
Section 12.3. Certificate Representing Satisfaction
of Conditions................................... 43
Section 12.4. Material Adverse Change........................... 43
Section 12.5. Tax Opinion....................................... 43
Section 12.6. Legal Opinion..................................... 43
Section 12.7. Carrier Service Agreement......................... 43
Section 12.8. Operating Performance of RCG...................... 43
Section 12.9. Approval of Plan and Order........................ 43
Section 12.10. Net Operating Losses.............................. 43
Section 12.11. Net Worth......................................... 44
ARTICLE 13. CONDITIONS TO OBLIGATIONS OF RCG......................... 44
Section 13.1. Representations and Warranties.................... 44
Section 13.2. Performance of Obligations........................ 44
Section 13.3. Certificate Representing Satisfaction
of Conditions................................... 44
Section 13.4. Material Adverse Change........................... 44
Section 13.5. Approval of Plan and Order........................ 44
ARTICLE 14. TERMINATION.............................................. 44
Section 14.1. Termination of Agreement.......................... 44
Section 14.2. Effect of Termination and Breach.................. 45
Section 14.3. Confidentiality Upon Termination.................. 46
Section 14.4. Specific Performance.............................. 46
ARTICLE 15. GENERAL PROVISIONS....................................... 46
Section 15.1. Nonsurvival of Representations and Warranties..... 46
Section 15.2. Press Releases and Public Announcements........... 46
Section 15.3. No Third-Party Beneficiaries...................... 47
Section 15.4. Entire Agreement.................................. 47
Section 15.5. Succession and Assignment......................... 47
Section 15.6. Counterparts...................................... 47
Section 15.7. Notices........................................... 47
Section 15.8. Governing Law; Jurisdiction....................... 49
Section 15.9. Amendments and Waivers............................ 49
Section 15.10. Severability...................................... 49
Section 15.11. Construction...................................... 50
Section 15.12. Incorporation of Exhibits and Schedules........... 50
Section 15.13. Transaction Costs................................. 50
EXHIBITS:
Exhibit A - Form of Affiliate Agreement
Exhibit B - Form of Employment Agreement
Exhibit C - Carrier Service Agreement
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (as amended,
supplemented or otherwise modified from time to time, the "Agreement"), dated as
of the 12th day of May, 1998, is entered into by and among WORLD ACCESS, INC., a
Delaware corporation ("World Access"), WAXS INC., a Delaware corporation and a
wholly-owned subsidiary of World Access ("New World Access"), WA MERGER CORP., a
Delaware corporation and a wholly-owned subsidiary of New World Access ("Merger
Sub"), and CHERRY COMMUNICATIONS INCORPORATED d/b/a RESURGENS COMMUNICATIONS
GROUP, an Illinois corporation ("RCG").
W I T N E S S E T H:
WHEREAS, on October 24, 1997 (the "Petition Date"), RCG filed its
petition, Case No. 97 B 32873 (the "Chapter 11 Case"), with the United States
Bankruptcy Court for the Northern District of Illinois, Eastern Division (the
"Bankruptcy Court"), under Chapter 11 of the Bankruptcy Code, 11 U.S.C. ss.ss.
101-1330 (as modified or amended, the "Bankruptcy Code"), and RCG has since
continued in possession of its assets and in the management of its business
pursuant to Sections 1107 and 1108 of the Bankruptcy Code;
WHEREAS, RCG intends to file with the Bankruptcy Court its Plan of
Reorganization on or before May 31, 1998 (as amended, supplemented or otherwise
modified from time to time, the "Plan");
WHEREAS, RCG, intends to seek an order or orders of the Bankruptcy
Court pursuant to Section 1129 of the Bankruptcy Code (i) confirming the Plan
and (ii) approving this Agreement and each of the agreements and other documents
contemplated hereby (such order or orders as approved and entered by the
Bankruptcy Court being hereinafter referred to collectively as the "Order");
WHEREAS, Merger Sub, upon the terms and subject to the conditions of
this Agreement, will be merged with and into RCG (the "Merger");
WHEREAS, on February 24, 1998, World Access, New World Access, WAXS
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of New
World Access, NACT Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of New World Access, and NACT Telecommunications, Inc., a Delaware
corporation and a majority-owned subsidiary of World Access ("NACT"), entered
into that certain Agreement and Plan of Merger and Reorganization, pursuant to
which, among other things, each of World Access and NACT will become
wholly-owned subsidiaries of New World Access (the "Holding Company
Reorganization");
WHEREAS, the respective boards of directors of World Access, New World
Access, RCG and Merger Sub deem it to be advisable, consistent with their
respective long-term business strategies and in the best interests of their
respective stockholders to consummate the Merger upon the terms and conditions
set forth herein and in accordance with the Illinois Business Corporation Act
(the "IBCA");
WHEREAS, the respective boards of directors of all of the Parties have
unanimously approved this Agreement, the board of directors of New World Access
has directed that this Agreement be submitted to its stockholders for approval
and adoption immediately following the consummation of the Holding Company
Reorganization and the board of directors of RCG has directed that this
Agreement be submitted to the Bankruptcy Court for approval;
WHEREAS, the stockholder of Merger Sub has approved this Agreement
prior to its execution;
WHEREAS, World Access, New World Access, Cherry Communications U.K.
Limited, a limited liability company organized under the laws of England
("Cherry U.K."), and certain affiliated parties have entered into that certain
Stock Exchange Agreement and Plan of Reorganization of even date herewith (the
"U.K. Acquisition Agreement") pursuant to which Cherry U.K. will become a
wholly-owned subsidiary of New World Access (the "U.K.
Acquisition");
WHEREAS, the consummation of the transactions contemplated hereby is
a condition to the consummation of the U.K. Acquisition, and the consummation of
the U.K. Acquisition is a condition to the consummation of the transactions
contemplated hereby;
WHEREAS, RCG, World Access and New World Access desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions thereto; and
WHEREAS, for Federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the warranties and covenants
herein contained, the Parties agree as follows:
<PAGE>
ARTICLE 1.
DEFINITIONS
Capitalized terms used in this Agreement shall have the definitions set
forth in this Article 1.
Section 1.1 "Acquisition Proposal" means any acquisition or purchase (or
any inquiry or proposal with respect thereto) of all or any substantial portion
of the assets of RCG or of over 10% of any class of equity securities of RCG, or
any merger, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving RCG other than the transactions
contemplated by this Agreement, or any other transaction the consummation of
which would reasonably be expected to impede, interfere with, prevent or
materially delay the Merger or which would reasonably be expected to dilute
materially the benefits to World Access or New World Access of the Merger.
Section 1.2 "Administrative Expense Claims" shall mean and be the
collective reference to all costs and expenses of administration of the Chapter
11 Case entitled to priority and payment under Sections 503(b) and 507(a)(1) of
the Bankruptcy Code and quarterly fees payable to the Office of the United
States Trustee pursuant to 28 U.S.C. ss. 1930, including, (a) the actual and
necessary costs and expenses incurred after the Petition Date of preserving the
bankruptcy estate and operating the business of RCG (such as wages, salaries or
commissions for services and payments for services or goods), and (b)
compensation for legal, financial advisory, accounting and other services and
reimbursement of expenses awarded or allowed under Sections 330(a) or 331 of the
Bankruptcy Code.
Section 1.3 "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including reasonable court costs and reasonable attorneys'
fees and expenses.
Section 1.4 "Affiliate" means (a), with respect to each Party, an officer
or director of such Party or any Person owning an equity interest of 10% or more
of such Party, any direct or indirect wholly owned subsidiary of such Party, any
other subsidiary owned directly or indirectly by a direct or indirect parent
company of such Party or any other Person in which such Party has at least a 10%
equity interest and (b) with respect to any Person not a Party, any Person who
controls, is controlled by or is under common control with such Person and any
officer or director of such Person or any other Person owning at least a 10%
equity interest in such Person.
Section 1.5 "Agreement" has the meaning set forth in the preamble to this
Agreement.
Section 1.6 "Allowed Claims" shall, with respect to a particular claim,
mean: (a) if the holder of such claim has not timely filed a proof of claim
within the applicable period of limitations fixed by the Bankruptcy Court
pursuant to Bankruptcy Rule 3003(c)(3), and such claim either is not listed in
the Debtor's Schedules or such claim is listed in the Debtor's Schedules as
disputed, contingent or unliquidated, the amount of zero; (b) if the holder of a
claim has duly filed a proof of claim within the applicable period of
limitations fixed by the Bankruptcy Court pursuant to the Bankruptcy Rule
3003(c)(3), then (i) the amount stated in such proof of claim, if no objection
thereto has been interposed within any applicable period of limitation fixed by
applicable bankruptcy rules or as otherwise fixed by the Bankruptcy Court, or
(ii) in the case of a claim to which a timely objection has been or may be made,
such amount as shall be fixed by Final Order; or (c) with respect to a fee
request by an employed professional pursuant to Bankruptcy Code Section 327 or
1103, such amount as shall be fixed by Final Order of the Bankruptcy Court.
Section 1.7 "Applicable Bankruptcy Law" means the Bankruptcy Code and the
Federal Rules of Bankruptcy Procedure (as the same may be modified or amended)
and the interpretation thereof by a court of competent jurisdiction.
Section 1.8 "Articles of Merger" has the meaning set forth in Section 2.3
hereof.
Section 1.9 "Bankruptcy Code" has the meaning set forth in the recitals
hereto.
Section 1.10 "Bankruptcy Court" has the meaning set forth in the recitals
hereto.
Section 1.11 "Business Day" means each day on which national banks in the
Atlanta, Georgia, area are open for business.
Section 1.12 "Certificate of Merger" has the meaning set forth in Section
2.3 hereof."
Section 1.13 "Change of Control" shall be deemed to have occurred if:
(a) any Person (including any syndicate or group deemed to be a
"person" under Section 13(d) (3) of the Exchange Act), other than New World
Access, any subsidiary of New World Access, or any employee benefit plan of New
World Access or any such subsidiary, is or becomes the beneficial owner,
directly or indirectly, through a purchase or other acquisition transaction or
series of transactions (other than a merger or consolidation involving New World
Access), of shares of capital stock of New World Access entitling such Person to
exercise in excess of 50% of the total voting power of all shares of capital
stock of New World Access entitled to vote generally in the election of
directors;
(b) there occurs any consolidation of New World Access with, or merger
of New World Access into, any other Person, any merger of another Person into
New World Access, or any sale or transfer of the assets of New World Access, as
an entirety or substantially as an entirety, to another Person (other than
either (i) any such transaction pursuant to which the holders of the New World
Access Stock immediately prior to such transaction have, directly or indirectly,
shares of capital stock of the continuing or surviving corporation immediately
after such transaction which entitle such holders to exercise in excess of 50%
of the total voting power of all shares of capital stock of the continuing or
surviving corporation entitled to vote generally in the election of directors or
(ii) any merger (A) which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of New World Access Stock or (B)
which is effected solely to change the jurisdiction of incorporation of New
World Access and results in a reclassification, conversion or exchange of
outstanding shares of New World Access Stock solely into shares of common stock
and separate series of common stock carrying substantially the same relative
rights as the New World Access Stock); or
(c) a change in the Board of Directors of New World Access in which the
individuals who constituted the Board of Directors of New World Access at the
beginning of the one-year period immediately preceding such change (together
with any other director whose election by the Board of Directors of New World
Access or whose nomination for election by the stockholders of New World Access
was approved by a vote of at least a majority of the directors then in office
either who were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason (other
than death or resignation) to constitute at least a two-thirds majority of the
directors then in office.
Notwithstanding the foregoing, any Change of Control that results from (i)
WorldCom, Inc. ("WorldCom") or any of its Affiliates soliciting proxies or
becoming a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act) in opposition to the recommendation of
the majority of the members of the Board of Directors of New World Access on any
matter or (ii) the merger, share exchange, consolidation or similar transaction
between New World Access and WorldCom or any of its Affiliates, without the
prior written consent of New World Access, shall not be deemed a Change of
Control for purposes of this Agreement.
Section 1.14 "Chapter 11 Case" has the meaning set forth in the recitals
hereto.
Section 1.15 "Cherry U.K." has the meaning set forth in the recitals
hereto.
Section 1.16 "Closing" has the meaning set forth in Section 2.2 hereof.
Section 1.17 "Closing Date" has the meaning set forth in Section 2.2
hereof.
Section 1.18 "Code" means the Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.
Section 1.19 "Communications Act" means the Federal Communications Act of
1934, as amended, together with the rules and regulations promulgated
thereunder.
Section 1.20 "Confidential Information" means and includes written data,
reports, interpretations, analyses, trade secrets, processes, drawings,
photographs, records, specifications, designs, programs, product development
activities, software packages and related documentation, technical know-how,
concepts, theories, ideas, methods and procedures of operation, business or
marketing plans, proposals, financial information, compiled data,
communications, customer lists and data and equipment, as well as the nature and
results of a Party's development activities and all other information and/or
materials related to the business or activities of a Party, but excluding such
information that is (a) generally available to the public, or (b) available, or
becomes available, to a Party on a non-confidential basis prior to its
disclosure from a Person authorized to disclose the same.
Section 1.21 "Consent" means a consent, approval or authorization, waiver,
clearance, exemption or similar affirmation by any Person pursuant to any
contract, permit, law, regulation or order.
Section 1.22 "Contingent Payment Stock" has the meaning set forth in
Section 5.2 hereof.
Section 1.23 "Controlled Group Liability" means any and all liabilities
under (a) Title IV of ERISA, (b) Section 302 of ERISA, (c) Sections 412 and 4971
of the Code, (d) the continuation coverage requirements of section 601 et seq.
of ERISA and Section 4980B of the Code, and (e) corresponding or similar
provisions of foreign laws or regulations, in each case other than pursuant to
the World Access Plans with respect to World Access and its Subsidiaries, or the
RCG Plans with respect to RCG.
Section 1.24 "Debtor's Schedule" shall mean the schedules and statement of
financial affairs of RCG, as amended, modified or supplemented from time to
time, on file in the Chapter 11 Case.
Section 1.25 "DGCL" means Title 8 of the Delaware Code, as amended.
Section 1.26 "Dip Financing" shall mean post-petition financing provided to
RCG by WNSI pursuant to an order of the Bankruptcy Court.
Section 1.27 "Disbursed Stock" has the meaning set forth in Section 5.2
hereof.
Section 1.28 "Disbursing Agent" shall have the meaning set forth in Section
5.2 hereof.
Section 1.29 "Disputed Claims" shall mean a claim as to which a proof of
claim has been filed or deemed filed under applicable law, as to which an
objection has been or may be timely filed and which objection, if timely filed,
has not been withdrawn on or before any date fixed for filing such objections by
the Plan or Final Order of the Bankruptcy Court and which objection has not been
overruled or denied by a Final Order. Prior to the time that an objection has
been or may be timely filed, for purposes of the Plan, a claim shall be Disputed
Claim if (a) no corresponding claim has been listed in the Debtor's Schedules;
or (b) the amount of the claim exceeds the amount thereof set forth in the
Debtor's Schedules.
Section 1.30 "District Court" means the United States District Court for
the Northern District of Illinois, Eastern Division.
Section 1.31 "EBITDA" means the sum of income before net interest and
provision for income taxes, plus depreciation and amortization expense
determined consistent with RCG's audited consolidated statement of income for
the RCG Most Recent Fiscal Year End. Notwithstanding the foregoing, any change
in the policies or procedures employed in determining the EBITDA of the
Surviving Corporation shall be approved by a majority vote of the members of the
audit committee of the Board of Directors of New World Access who are not
Affiliates of WorldCom, Inc.
Section 1.32 "Effective Date" means the date upon which the Plan shall
become effective in accordance with the terms of the Plan.
Section 1.33 "Effective Time" has the meaning set forth in Section 2.3
hereof.
Section 1.34 "Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-Employer Plan), or (d) Employee Welfare Benefit Plan (or
material fringe benefit plan or program).
Section 1.35 "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
Section 1.36 "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).
Section 1.37 "Environmental, Health, and Safety Laws" means the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
the Resource Conservation and Recovery Act of 1976, and the Occupational Safety
and Health Act of 1970, each as amended, together with all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning pollution or protection of the
environment, public health and safety, or employee health and safety, including
laws relating to emissions, discharges, releases, or threatened releases of
pollutants, contaminants, or chemical, industrial, hazardous, or toxic materials
or waste into ambient air, surface water, ground water, or lands or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport, or handling of pollutants, contaminants, or chemical,
industrial, hazardous, or toxic materials or waste.
Section 1.38 "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Section 1.39 "ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
Section 1.40 "Exchange Act" means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
Section 1.41 "Expenses" has the meaning set forth in Section 10.8 hereof.
Section 1.42 "Extremely Hazardous Substance" has the meaning set forth in
Section 302 of the Emergency Planning and Community Right to Know Act of 1986,
as amended.
Section 1.43 "FCC" means the Federal Communications Commission.
Section 1.44 "Fiduciary" has the meaning set forth in ERISA Section 3(21).
Section 1.45 "Final Order" shall mean an order of the Bankruptcy Court, the
District Court, or any other court as to which (a) the time to appeal, petition
for certiorari or to seek reargument or rehearing has expired and no appeal,
reargument, certiorari petition or rehearing is pending; or (b) if any appeal,
reargument, writ of certiorari or rehearing thereof has been sought, the order
has been affirmed by the highest court to which such order was appealed or from
which the reargument, certiorari, or rehearing was sought, and the time to take
any further appeal or to seek certiorari or further reargument or rehearing has
expired. (In the case of an order of the Bankruptcy Court, the time for appeal,
for the purposes of this definition, shall be the time permitted for an appeal
to the District Court.)
Section 1.46 "GAAP" means United States generally accepted accounting
principles as in effect from time to time. The requirement that such principles
be consistently applied and applied on a consistent basis shall mean that the
accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
Section 1.47 "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
Section 1.48 "Holding Company Reorganization" has the meaning set forth in
the recitals hereto.
Section 1.49 "IBCA" has the meaning set forth in the recitals hereto.
Section 1.50 "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade drafts, logos, trade names,
and corporate names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connections therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier list, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof in whatever form or medium.
Section 1.51 "Knowledge" means either (a) that an individual is actually
aware of a particular fact or other matter or (b) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of performing the duties which are normally performed by an
individual acting in a similar capacity. A Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving as a director, executive officer, partner, executor or
trustee of such Person (or in any similar capacity) has, or at any time had,
knowledge of such fact or other matter.
Section 1.52 "Losses" means any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and attorneys' fees and disbursements.
Section 1.53 "Merger" has the meaning set forth in the recitals hereto.
Section 1.54 "Merger Consideration" has the meaning set forth in Section
3.1 hereof.
Section 1.55 "Merger Sub" has the meaning set forth in the preamble to this
Agreement.
Section 1.56 "Merger Sub Stock" means any share of the common stock, $.01
par value per share, of Merger Sub.
Section 1.57 "Multi-employer Plan" has the meaning set forth in Section
3(37) of ERISA.
Section 1.58 "Multiple Employer Plan" has the meaning set forth in Section
4063 of ERISA.
Section 1.59 "NACT" has the meaning set forth in the recitals hereto.
Section 1.60 "NASDAQ" means The Nasdaq National Market.
Section 1.61 "New World Access" has the meaning set forth in the preamble
to this Agreement.
Section 1.62 "New World Access Stock" means any share of the common stock,
$.01 par value per share, of New World Access.
Section 1.63 "Order" has the meaning set forth in the recitals hereto.
Section 1.64 "Ordinary Course" means any action taken by a Person only if
(a) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person,
or (b) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
Section 1.65 "PBGC" means the Pension Benefit Guaranty Corporation.
Section 1.66 "Parties" means collectively, or any two or more of, World
Access, New World Access, RCG and Merger Sub.
Section 1.67 "Party" means any one of the Parties.
Section 1.68 "Performance Period" has the meaning set forth in Section 6.1
hereof.
Section 1.69 "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or association, a limited liability company, a limited liability
partnership, or a governmental entity (or any department, agency, or political
subdivision thereof, including a Regulatory Authority).
Section 1.70 "Petition Date" has the meaning set forth in the recitals
hereto.
Section 1.71 "Plan" has the meaning set forth in the recitals hereto.
Section 1.72 "Plan Disclosure Statement" has the meaning set forth in
Section 5.1 hereof.
Section 1.73 "Prohibited Transaction" has the meaning set forth in ERISA
Section 406 and Code Section 4975.
Section 1.74 "Proxy Statement" has the meaning set forth in Section 9.5
hereof.
Section 1.75 "PUC" has the meaning set forth in Section 10.2 hereof.
Section 1.76 "Qualified RCG Plan" has the meaning set forth in Section 8.21
hereof.
Section 1.77 "RCG" has the meaning set forth in the preamble to this
Agreement.
Section 1.78 "RCG Disclosure Schedule" has the meaning set forth in Article
8 hereof.
Section 1.79 "RCG Financial Statements" has the meaning set forth in
Section 8.7 hereof.
Section 1.80 "RGC Intellectual Property Rights" has the meaning set forth
in Section 8.13 hereof.
Section 1.81 "RCG Material Adverse Effect" shall mean any change in or
effect on the business of RCG and its Subsidiaries that is, or could reasonably
be expected to be, materially adverse to the business, prospects, assets
(including intangible assets), liabilities (contingent or otherwise), condition
(financial or otherwise) or results of operations of RCG and its Subsidiaries
taken as a whole.
Section 1.82 "RCG Most Recent Balance Sheet" means the consolidated balance
sheet of RCG as of March 31, 1998 included in the RCG Most Recent Financial
Statements.
Section 1.83 "RCG Most Recent Financial Statements" has the meaning set
forth in Section 8.7 hereof.
Section 1.84 "RCG Most Recent Fiscal Month End" has the meaning set forth
in Section 8.7 hereof.
Section 1.85 "RCG Most Recent Fiscal Year End" has the meaning set forth in
Section 8.7 of this Agreement.
Section 1.86 "RCG Plans" means all Employee Benefit Plans, programs,
policies, practices, and other arrangements providing benefits to any employee
or former employee or beneficiary or dependent thereof, whether or not written,
and whether covering one Person or more than one Person, sponsored or maintained
by RCG or any of its Subsidiaries, or to which RCG, or any of its Subsidiaries,
contributes or is obligated to contribute. Without limiting the generality of
the foregoing, the term "RCG Plans" includes all employee welfare benefit plans
within the meaning of Section 3(1) of ERISA and all employee pension benefit
plans within the meaning of Section 3(2) of ERISA.
Section 1.87 "RCG Stock" means any share of the common stock, no par value
per share, of RCG.
Section 1.88 "Regulatory Authority" means, collectively, the FCC, PUCs, the
Federal Trade Commission, the United States Department of Justice, the SEC, the
National Association of Securities Dealers, Inc., and all national and state
securities exchanges and any other governmental or regulatory body, agency,
instrumentality or authority.
Section 1.89 "Reportable Event" has the meaning set forth in ERISA Section
4043.
Section 1.90 "Required Consents" has the meaning set forth in Section 7.3
hereof.
Section 1.91 "SEC" means the Securities and Exchange Commission.
Section 1.92 "Securities Act" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated hereunder.
Section 1.93 "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialman's, and similar liens for work done on the property to the extent
that such liens arise in the Ordinary Course of Business and are not yet due and
payable, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, in each case, where there exists no default in World Access's or
any Subsidiary's obligations with respect to the underlying agreements, and (d)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
Section 1.94 "Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns (directly or indirectly) a
majority of the common stock or has the power to vote or direct the voting of
sufficient securities to elect a majority of the directors.
Section 1.95 "Surviving Corporation" has the meaning set forth in Section
2.1 hereof.
Section 1.96 "Tax Returns" means, collectively, (a) all reports,
declarations, estimates, returns, information statements, and similar documents
relating to, or required to be filed in respect of any Taxes, and (b) all
information statements, returns, reports or similar documents required to be
filed with respect to payments to (or from) third parties or with respect to
transactions in which any Party or any of its Subsidiaries participates. The
term "Tax Return" shall mean any one of the foregoing Tax Returns.
Section 1.97 "Taxes" means, collectively, (a) all net income, gross income,
gross receipts, sales, use, ad valorem, franchise, profits, license, lease,
service, service use, withholding, employment, payroll, excise, severance,
transfer, documentary, mortgage, registration, stamp, occupation, environmental,
premium, property, windfall, profits, customs, duties, and other taxes, fees,
assessments or charges of any kind whatever, including any estimates thereof,
together with any interest, penalties and other additions with respect thereto,
imposed by any federal, territorial, state, local or foreign government; and (b)
any penalties, interest, or other additions to tax for the failure to collect,
withhold, or pay over any of the foregoing, or to accurately file any Tax
Return. The term "Tax" shall mean any one of the foregoing Taxes. When used with
reference to a specified Person, the terms "Taxes" and "Tax" shall include only
amounts of, or in respect of, Taxes for which such Person is, or could become,
liable in whole or part (including any obligation in connection with a duty to
collect, withhold, or pay over any Tax, any obligation to contribute to the
payment of any Taxes determined on a consolidated, combined, or unitary basis,
any liability as a transferee, or any liability as a result of any express or
implied obligation to indemnity or pay the Tax obligations of another Person).
Section 1.98 "Termination Fee" has the meaning set forth in Section 10.8.3
hereof.
Section 1.99 "Third-Party Intellectual Property Rights" means, with respect
to each of World Access and RCG, all licenses, sublicenses and other agreements
as to which it is a party and pursuant to which it is authorized to use any
third-party patents, trademarks, service marks or copyrights.
Section 1.100 "Trading Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday, other than any day on which securities are not traded on NASDAQ.
Section 1.101 "U.K. Acquisition Agreement" has the meaning set forth in the
recitals hereto.
Section 1.102 "U.K. Acquisition" has the meaning set forth in the recitals
hereto.
Section 1.103 "WNSI" means WorldCom Network Services, Inc., a Delaware
corporation.
Section 1.104 "World Access" has the meaning set forth in the preamble to
this Agreement.
Section 1.105 "World Access Disclosure Schedule" has the meaning set forth
in Article 7 hereof.
Section 1.106 "World Access Material Adverse Effect" shall mean (a) prior
to the consummation of the Holding Company Reorganization, any change in or
effect on the business of World Access and its Subsidiaries that is, or could
reasonably be expected to be, materially adverse to the business, prospects,
assets (including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise) or results of operations of World Access and
its Subsidiaries taken as a whole, and (b) after the consummation of the Holding
Company Reorganization, any change in or effect on the business of New World
Access and its Subsidiaries that is, or could reasonably be expected to be,
materially adverse to the business, prospects, assets (including intangible
assets), liabilities (contingent or otherwise), condition (financial or
otherwise) or results of operations of New World Access and its Subsidiaries
taken as a whole.
Section 1.107 "World Access Most Recent Balance Sheet" means the
consolidated balance sheet of World Access as of December 31, 1997 included in
the World Access SEC Documents.
Section 1.108 "World Access Most Recent Financial Statements" means the
consolidated financial statements for the year ended December 31, 1997 included
in the World Access SEC Documents.
Section 1.109 "World Access Most Recent Fiscal Month End" means December
31, 1997.
Section 1.110 "World Access Most Recent Fiscal Year End" means December 31,
1997.
Section 1.111 "World Access SEC Documents" has the meaning set forth in
Section 7.5 hereof.
Section 1.112 "World Access Stock" means any share of the common stock,
$0.01 par value per share,of World Access.
ARTICLE 2.
THE MERGER
Section 2.1. The Merger. Upon the terms and subject to the conditions
contained in this Agreement, and in accordance with the IBCA and the DGCL,
Merger Sub shall be merged with and into RCG at the Effective Time. As a result
of the Merger, the separate corporate existence of Merger Sub shall cease and
RCG, as the surviving corporation (the "Surviving Corporation"), shall continue
to exist and be governed by the IBCA.
Section 2.2. Closing. Upon the terms and subject to the conditions hereof,
unless otherwise agreed upon by the Parties, the closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Rogers & Hardin, 2700 International Tower, 229 Peachtree Street, Atlanta,
Georgia 30303, commencing at 10:00 a.m. local time, as soon as practicable
following the satisfaction or waiver of the conditions set forth in Articles 11
through 13 hereof, but in no event later than two business days thereafter (the
date of such being referred to herein as the "Closing Date"), unless otherwise
mutually agreed to by the Parties.
Section 2.3. Effective Time. If all the conditions to the Merger set forth
in Article 11 through 13 hereof shall have been satisfied or, if permissible,
waived in accordance herewith and this Agreement shall not have been terminated
as provided in Article 14 hereof, the Parties hereto shall cause the Merger to
be consummated by filing on the Closing Date (i) articles of merger meeting the
requirements of the IBCA ("Articles of Merger") with the Secretary of State of
the State of Illinois in such form as required by, and executed in accordance
with such requirements of, the IBCA and (ii) a certificate of merger meeting the
requirements of the DGCL (the "Certificate of Merger") with the Secretary of
State of the State of Delaware in such form as required by, and executed in
accordance with such requirements of, the DGCL. The Merger shall become
effective at the later of the time of filing of the Articles of Merger with the
Secretary of State of the State of Illinois in accordance with the IBCA or of
the Certificate of Merger with the Secretary of State of the State of Delaware
in accordance with the DGCL, or at such other time which the parties hereto
shall have agreed upon and designated in such filings as the effective time of
the Merger (the "Effective Time").
Section 2.4. Effect of Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the IBCA and the
DGCL. Without limiting the generality of the foregoing, and subject thereto, at
the Effective Time, except as otherwise provided herein, the separate existence
of Merger Sub will cease and the Surviving Corporation shall succeed, without
other transfer, to all the rights, privileges, powers, franchises and property
of Merger Sub and, subject to the Plan and the Order, shall be subject to all
the debts, duties and liabilities of Merger Sub in the same manner as if the
Surviving Corporation had itself incurred them.
Section 2.5. Charter and Bylaws. At the Effective Time, the Articles of
Incorporation and Bylaws of RCG, as in effect on the date hereof and otherwise
amended prior to the Effective Time, shall be the Articles of Incorporation and
Bylaws of the Surviving Corporation until further amended as provided therein
and in accordance with applicable law.
Section 2.6. Directors and Officers. From and after the Effective Time, the
directors and officers of RCG shall be the directors and officers of the
Surviving Corporation.
ARTICLE 3.
CONVERSION OF STOCK
Section 3.1. Conversion of Merger Sub Stock and RCG Stock. Subject to the
terms and conditions of this Agreement, as of the Effective Time and by virtue
of the Merger and without any further action on the part of the holder of any
Merger Sub Stock or RCG Stock:
(a) all shares of RCG Stock which are held by RCG as treasury
stock, if any, shall be canceled and retired, and no consideration shall be paid
or delivered in exchange therefor;
(b) the shares of RCG Stock outstanding immediately prior to
the Effective Time shall be canceled and retired and will cease to exist without
the payment of any consideration therefor; and
(c) each share of Merger Sub Stock issued and outstanding
immediately prior to the Effective Time shall be converted into one fully paid
and nonassessable share of common stock without par value of the Surviving
Corporation.
ARTICLE 4.
ADJUSTMENTS
Section 4.1. Adjustments. In the event of any change in the New World
Access Stock after the date hereof by reason of any stock dividend, stock split,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like, then the New World Access Stock to be issued pursuant to Article 5
of this Agreement shall be adjusted appropriately on the Closing Date.
ARTICLE 5.
PLAN OF REORGANIZATION AND PAYMENT OF CLAIMS
Section 5.1. Plan of Reorganization. RCG shall file and use its best
efforts to obtain the Bankruptcy Court's confirmation of the Plan, which shall
provide, inter alia, for the consummation of the Merger in accordance with the
terms and conditions of this Agreement. RCG shall also file and use its best
efforts to obtain the Bankruptcy Court's approval of RCG's Disclosure Statement
with respect to the Plan (the "Plan Disclosure Statement"). Both the Plan and
the Plan Disclosure Statement, as filed and as confirmed and approved by the
Bankruptcy Court, must in form and substance be acceptable to New World Access
and RCG. World Access and its Affiliates shall cooperate in connection with
preparing, filing and obtaining the approval of the Plan and the Plan Disclosure
Statement. The Plan shall provide, inter alia, for (a) a pro-rata distribution
of Disbursed Stock and Contingent Payment Stock as provided herein to holders of
Allowed Claims and Administrative Expense Claims (including the Administration
Expense Claim of WNSI arising in connection with the DIP Financing), and the
approval of this Agreement; (b) except as otherwise provided in the Plan, the
discharge of all indebtedness of and claims against RCG arising before
confirmation of the Plan; and (c) certain transfer restrictions on the shares of
New World Access Stock to be issued pursuant to this Agreement as set forth in
Section 6.4 hereof. RCG estimates that the aggregate amount of Allowed Claims
will be approximately $300,000,000 to $350,000,000.
Section 5.2. Deposit of New World Access Stock. At the Closing, New World
Access and the Person appointed by the Bankruptcy Court pursuant to the Plan and
the Order to act as "Disbursing Agent" under the Plan (the "Disbursing Agent")
shall each execute a Disbursement Agreement reasonably acceptable to the Parties
hereto and, in accordance therewith, New World Access shall deposit with the
Disbursing Agent, immediately following the Effective Time, 3,125,000 shares of
New World Access Stock ("Disbursed Stock") and 6,250,000 shares of New World
Access Stock (the "Contingent Payment Stock").
Section 5.3. Payment of Claims. In accordance with the terms and provisions
of the Plan and unless otherwise provided therein, the Disbursing Agent under
the Disbursement Agreement shall issue to each holder of an Allowed Claim and an
Administrative Expense Claim (including the Administrative Expense Claim of WNSI
arising in connection with the DIP Financing), its pro-rata share of Disbursed
Stock based upon the amount of such claim.
Section 5.4. Contingent Payments of Claims. The Disbursing Agent shall
release to holders of Allowed Claims and Administrative Expense Claims
(including the Administrative Expense Claim of WNSI arising in connection with
the DIP Financing) their pro-rata share of Contingent Payment Stock, if, as,
when and to the extent that the Contingent Payment Stock (or any portion
thereof) is released pursuant to the terms of Article 6 hereof, in accordance
with the terms and provisions of the Plan.
ARTICLE 6.
RELEASE OF CONTINGENT PAYMENT STOCK AND TRANSFER RESTRICTIONS
Section 6.1. Release Criteria. The Contingent Payment Stock will be
released by the Disbursing Agent pursuant to the terms and provisions of the
Plan in the amounts and on the dates specified below if the sum of the EBITDA
for (i) the Surviving Corporation and (ii) Cherry U.K. for the performance
periods set forth below equals or exceeds the Target EBITDA for such performance
period as set forth below:
<TABLE>
Performance Period Release Date Percentage of Target EBITDA
Contingent Payment
Stock to be Released
<CAPTION>
<S> <C> <C> <C>
July 1, 1998 to and February 15, 1999 25% $7,500,000
including December 31, 1998
(the "First Performance
Period")
January 1, 1999 to and February 15, 2000 37.5% $29,000,000
including December 31, 1999
(the "Second Performance
Period")
January 1, 2000 to and February 15, 2001 37.5% $36,500,000
including December 31, 2000
(the "Third Performance
Period)
</TABLE>
Notwithstanding the foregoing, if the Closing Date is (a) on or after July 15,
1998 but prior to August 16, 1998, then the First Performance Period shall
commence on August 1, 1998 and shall terminate on (and including) December 31,
1998 and the Target EBITDA with respect thereto shall be reduced to $7,100,000,
(b) on or after August 16, 1998 but prior to September 30, 1998, then the First
Performance Period shall commence on September 1, 1998 and shall terminate on
(and including) December 31, 1998 and the Target EBITDA with respect thereto
shall be reduced to $6,700,000, or (c) on or after September 30, 1998, then the
First Performance Period shall commence on the first day of the calendar month
in which the Closing occurs and shall terminate on (and including) the last day
of the sixth calendar month following the month in which the Closing occurs, the
release date shall be forty-five (45) days after the end of such period and the
Target EBITDA shall be equal to the sum of (i) $2,100,000 for each calendar
month of 1998 included in the First Performance Period and (ii) $2,400,000 for
each calendar month of 1999 included in the First Performance Period.
Section 6.2. Subsequent Performance. If the EBITDA for the Surviving
Corporation and Cherry U.K. is less than the Target EBITDA required for the
release of Contingent Payment Stock in either of the First or Second Performance
Periods (and with respect to the Second Performance Period is no less than
zero), then, notwithstanding the table above, the Contingent Payment Stock shall
be released if the actual cumulative EBITDA for the Surviving Corporation and
Cherry U.K. for such Performance Period and any subsequent Performance Periods
equals or exceeds the cumulative Target EBITDA for such Performance Periods.
Section 6.3. Accelerated Release. Notwithstanding anything to the contrary,
(a) if during any calendar quarter of the Second Performance Period, the closing
price per share of the New World Access Stock as reported by NASDAQ equals or
exceeds $65.00 for any five consecutive Trading Days during such calendar
quarter, then 25% of all of the shares of Contingent Payment Stock shall be
released on February 15, 2000, provided that if no shares of Contingent Payment
Stock are eligible for release during any such calendar quarter, then such
shares of Contingent Payment Stock shall become eligible for release in a
subsequent calendar quarter of the Second Performance Period if the closing
price per share of the New World Access Stock as reported by NASDAQ equals or
exceeds $65.00 for a total number of consecutive Trading Days during such
subsequent calendar quarter equal to or exceeding the total number of Trading
Days which such closing price was required to equal or exceed for (i) such
subsequent calendar quarter and (ii) each of the previous calendar quarters
beginning with the calendar quarter for which such shares of Contingent Payment
Stock were not eligible for release; (b) if the combined EBITDA for the
Surviving Corporation and Cherry U.K. for the Second Performance Period equals
or exceeds $52,775,000, then the Contingent Payment Stock related to the Third
Performance Period shall be released on February 15, 2000; and (c) all of the
shares of Contingent Payment Stock shall be released upon a Change of Control
(except to the extent that the ability to earn such shares has been lost under
this Article 6) and the restrictions set forth in Section 6.4 shall not apply.
Section 6.4 Transfer Restrictions. Notwithstanding anything to the contrary
contained herein, (a) no holder of Disbursed Stock may, until the 365th day
following the Closing Date, without the prior written consent of New World
Access, offer, sell, contract to sell or otherwise dispose of, directly or
indirectly, any such Disbursed Stock or any security convertible into or
exchangeable or exercisable therefor, either publicly or privately, and (b) no
holder of Contingent Payment Stock upon its release pursuant to Section 6.1
above may, until the 180th day following the release date thereof, without the
prior written consent of New World Access, offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any shares of the Contingent
Payment Stock so released or any security convertible into or exchangeable or
exercisable therefor, either publicly or privately.
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF
WORLD ACCESS, NEW WORLD ACCESS AND MERGER SUB
In order to induce RCG to enter into this Agreement, World Access, New
World Access and Merger Sub, jointly and severally, represent and warrant to RCG
that, except as set forth in the World Access SEC Documents or the Disclosure
Schedule to be delivered by World Access to RCG within ten (10) Business Days of
the date hereof (the "World Access Disclosure Schedule"), which World Access
Disclosure Schedule shall identify exceptions by specific Section references:
Section 7.1. Organization, Qualification, and Corporate Power. Each of
World Access and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of World Access and its Subsidiaries is duly authorized and
qualified to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a World Access Material Adverse Effect. Each of
World Access and its Subsidiaries has full corporate power and authority to
carry on the businesses in which it is engaged and to own, lease, use and
operate the properties owned, leased used and operated by it. The copies of the
Certificate of Incorporation and the Bylaws of World Access and the equivalent
organizational documents of each of its Subsidiaries, which have previously been
made available to RCG, are true, complete and correct copies of such documents
as in effect as of the date of this Agreement.
Section 7.2. Capitalization. The entire authorized common capital stock of
World Access consists of 40,000,000 shares of World Access Stock, of which
21,848,701 shares were issued and outstanding as of May 8, 1998. The entire
authorized common capital stock of New World Access consists of 40,000,000
shares of New World Access Stock, of which 1,000 were issued and outstanding as
of May 8, 1998. No shares of World Access Stock or New World Access Stock are
held in treasury. All of the issued and outstanding shares of World Access Stock
have been duly authorized and are validly issued, fully paid, and nonassessable.
Except as disclosed in the World Access SEC Documents, there are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require World Access or any of its Subsidiaries to issue, sell, or otherwise
cause to become outstanding any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to World Access and its Subsidiaries. World Access
and its Subsidiaries have no outstanding bonds, debentures, notes or similar
obligations the holders of which have the right to vote generally with holders
of World Access Stock or New World Access Stock.
Section 7.3. Non-contravention. Neither the execution and the delivery of
this Agreement, nor the consummation of the transactions contemplated hereby,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which World Access or any of its Subsidiaries
is subject or any provision of the charter or bylaws of any of World Access or
any of its Subsidiaries; or (b) except with respect to those agreements for
which Consent shall be obtained prior to Closing, conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other
arrangement to which World Access or any of its Subsidiaries is a party or by
which it is bound or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets), except where the
violation, conflict, breach, default, acceleration, termination, modification,
cancellation, failure to give notice, or Security Interest would not have a
World Access Material Adverse Effect. Except for Consents required under or in
relation to the (a) HSR Act, (b) the Communications Act and any rates,
regulations, practices and policies of the FCC, (b) state securities or "blue
sky" laws, (d) the Securities Act, (e) the Exchange Act, (f) the IBCA with
respect to the filing of the Articles of Merger, (g) laws, rules, regulations,
practices and orders of any PUC, foreign telecommunications regulatory agencies
or similar state or foreign regulatory bodies, (h) rules and regulations of
NASDAQ, and (i) such Consents and filings the failure of which to make or obtain
would not have a World Access Material Adverse Effect, neither World Access nor
any of its Subsidiaries is required to give any notice to, make any filing with,
or obtain any Consent of any Regulatory Authority in order for the Parties to
consummate the transactions contemplated by this Agreement. All consents,
approvals, orders, authorizations, registrations, declarations and filings
required under or in relation to any of the foregoing clauses (a) through (h)
are hereinafter referred to collectively as the "Required Consents."
Section 7.4. Brokers' Fees. None of World Access or any of its Subsidiaries
has any liability or obligation, contingent or otherwise, to pay any fees or
commissions or similar payments to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement, except to The Robinson-Humphrey
Company, Inc., whose fees and expenses will be paid by World Access in
accordance with its agreement with such firm based upon arrangements made by or
on behalf of World Access and previously disclosed to RCG.
Section 7.5. World Access SEC Documents. Each of World Access and its
Subsidiaries has timely filed with the SEC all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since
December 31, 1995 with the SEC (such documents, as supplemented and amended
since the time of filing, collectively, the "World Access SEC Documents"). The
World Access SEC Documents, including any financial statements or schedules
included therein, at the time filed (and, in the case of registration statements
and proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The consolidated financial statements (including the related notes)
of World Access included in the World Access SEC Documents comply as to form in
all material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto, were prepared in
accordance with GAAP (except, in the case of unaudited statements, as permitted
by Form 10-Q of the SEC) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), and fairly present
(subject in the case of unaudited statements to the absence of footnotes and to
normal, recurring and year-end audit adjustments which will not be material
individually or in the aggregate) the consolidated financial position of World
Access as of the dates thereof and the consolidated results of its operations
and cash flows for the periods then ended.
Section 7.6. Events Subsequent to World Access Most Recent Fiscal Year End.
Since the World Access Most Recent Fiscal Year End, there has not been any World
Access Material Adverse Effect. Without limiting the generality of the
foregoing, since that date:
(a) none of World Access or any of its Subsidiaries has sold,
leased, transferred, or assigned any material assets, tangible or intangible,
outside the Ordinary Course of Business;
(b) none of World Access or any of its Subsidiaries has
entered into any material agreement, contract, lease, or license outside the
Ordinary Course of Business;
(c) no party (including World Access or any of its
Subsidiaries) has accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license to which any of
World Access or any of its Subsidiaries is a party or by which any of them is
bound;
(d) none of World Access or any of its Subsidiaries has
imposed any Security Interest upon any of its assets, tangible or intangible;
(e) none of World Access or any of its Subsidiaries has made
any material capital expenditures outside the Ordinary Course of Business;
(f) none of World Access or any of its Subsidiaries has made
any material capital investment in, or any material loan to, any other Person
outside the Ordinary Course of Business;
(g) World Access and its Subsidiaries have not created,
incurred, assumed, or guaranteed more than $10,000,000 in aggregate indebtedness
(other than internal debt between World Access and/or its Subsidiaries) for
borrowed money and capitalized lease obligations;
(h) other than is normal and customary with respect to their
respective businesses, none of World Access or any of its Subsidiaries has
granted any license or sublicense of any material rights under or with respect
to any Intellectual Property;
(i) there has been no change made or authorized in the charter
or bylaws of World Access or any of its Subsidiaries;
(j) none of World Access or any of its Subsidiaries has
issued, sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;
(k) none of World Access or any of its Subsidiaries has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(l) none of World Access or any of its Subsidiaries has
experienced any material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(m) none of World Access or any of its Subsidiaries has made
any loan to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(n) none of World Access or any of its Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement;
(o) none of World Access or any of its Subsidiaries has
granted any increase in the base compensation of any of its directors, officers
or employees outside the Ordinary Course of Business;
(p) none of World Access or any of its Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(q) none of World Access or any of its Subsidiaries has made
any other material change in employment terms for any of its directors, officers
or employees outside the Ordinary Course of Business; and
(r) none of World Access or any of its Subsidiaries has
committed to any of the foregoing.
Section 7.7. Undisclosed Liabilities. None of World Access or any of its
Subsidiaries has any material liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, and whether due or to
become due, including any liability for taxes), except for (a) liabilities set
forth in the World Access Most Recent Balance Sheet and (b) liabilities which
have arisen since the date of the World Access Most Recent Balance Sheet in the
Ordinary Course of Business.
Section 7.8. Opinion of Financial Advisor. World Access has received the
opinion of The Robinson-Humphrey Company, Inc., dated the date of this
Agreement, that, as of such date, the consideration to be paid to the
shareholders and creditors of RCG hereunder is fair, from a financial point of
view, to World Access.
Section 7.9. Litigation. Neither World Access nor any of its Subsidiaries
(a) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (b) is a party or, to the Knowledge of World Access, is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator, and, to
the Knowledge of World Access, no reasonable basis therefor exists.
Section 7.10. Exemption from Registration. The New World Access Stock to be
issued pursuant to this Agreement is being issued without registration under the
Securities Act in reliance on the exemption therefrom afforded by Section
1145(a) of the Bankruptcy Code and, subject to the certain transfer restrictions
contained herein, each holder of the New World Access Stock issued pursuant to
this Agreement, other than any holder who shall be deemed (a) an "underwriter"
within the meaning of Section 1145(b) of the Bankruptcy Code or (b) an Affiliate
of New World Access, may resell such stock without registration under the
Securities Act.
ARTICLE 8.
REPRESENTATIONS AND WARRANTIES OF RCG
In order to induce World Access to enter into this Agreement, RCG
represents and warrants to World Access and New World Access that, except as set
forth in the Disclosure Schedule to be delivered by RCG to World Access within
ten (10) Business Days of the date hereof (the "RCG Disclosure Schedule"), which
shall identify exceptions by specific Section references:
Section 8.1. Organization, Qualification, and Corporate Power. Each of RCG
and its Subsidiaries is a corporation duly organized, validly existing, and in
good standing under the laws of the jurisdiction of its incorporation. Each of
RCG and its Subsidiaries is duly authorized and qualified to conduct business
and is in good standing under the laws of each jurisdiction where such
qualification is required, except where the lack of such qualification would not
have an RCG Material Adverse Effect. Each of RCG and its Subsidiaries has full
corporate power and authority to carry on the businesses in which it is engaged
and to own, lease, use, and operate the properties owned, leased, used, and
operated by it. The copies of the articles of incorporation and the bylaws of
RCG and the equivalent organizational documents of each of its Subsidiaries,
which have previously been made available to World Access, are true, complete
and correct copies of such documents as in effect as of the date of this
Agreement.
Section 8.2. Capitalization. The entire authorized common capital stock of
RCG consists of 10,000 shares of RCG Stock, of which 1,249 shares of RCG Stock
are issued and outstanding. No shares of RCG Stock are held in treasury. All of
the issued and outstanding shares of RCG Stock have been duly authorized and are
validly issued, fully paid, and nonassessable. There are no outstanding or
authorized options, warrants, purchase rights, subscription rights, conversion
rights, exchange rights, or other contracts or commitments that could require
RCG or any of its Subsidiaries to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or similar rights with
respect to RCG and its Subsidiaries. RCG and its Subsidiaries have no
outstanding bonds, debentures, notes or other similar obligations the holders of
which have the right to vote generally with holders of RCG Stock.
Section 8.3. Non-contravention. Subject to Applicable Bankruptcy Law and to
the entry of the Order by the Bankruptcy Court, neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (a) violate any constitution, statute, regulation,
rule, injunction, judgment, order, decree, ruling, charge, or other restriction
of any government, governmental agency, or court to which any of RCG is subject
or any provision of the charter or bylaws of RCG or any of its Subsidiaries; or
(b) except with respect to those agreements for which Consent shall be obtained
prior to Closing, conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
RCG or any of its Subsidiaries is a party or by which it is bound or to which
any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have an RCG Material Adverse Effect.
Except as required by Applicable Bankruptcy Law and except for the Required
Consents and such Consents and filings the failure of which to make or obtain
would have an RCG Material Adverse Effect, neither RCG nor any of its
Subsidiaries is required to give any notice to, make any filing with, or obtain
any Consent of any Regulatory Authority in order for the Parties to consummate
the transactions contemplated by this Agreement.
Section 8.4. Brokers' Fees. RCG has no liability or obligation, contingent
or otherwise, to pay any fees or commissions or similar payments to any broker,
finder, or agent with respect to the transactions contemplated by this
Agreement.
Section 8.5. Title to Assets. Each of RCG and its Subsidiaries has good and
marketable title to all of its material properties and assets, real and
personal, tangible and intangible, used by it, located on its premises, or shown
on the RCG Most Recent Balance Sheet or acquired after the date thereof, free
and clear of all Security Interests, except for properties and assets disposed
of in the Ordinary Course of Business since the date of the RCG Most Recent
Balance Sheet. All leases pursuant to which RCG or any of its Subsidiaries
leases from other Persons material amounts of real or personal property are in
good standing, valid and effective in accordance with their respective terms,
and there is not, to the Knowledge of RCG, under any of such leases, any
existing material default or event of default (or event which, with notice or
lapse of time, or both, would constitute a material default) except where lack
of such good standing, validity and effectiveness or the existence of such
default or event of default would not reasonably be expected to have an RCG
Material Adverse Effect.
Section 8.6. Subsidiaries. The RCG Disclosure Schedule sets forth for each
Subsidiary of RCG (a) its name and jurisdiction of incorporation, (b) the number
of shares of authorized capital stock of each class of its capital stock, (c)
the number of issued and outstanding shares of each class of its capital stock,
the names of the holders thereof, and the number of shares held by each such
holder, and (d) the number of shares of its capital stock held in treasury. All
of the issued and outstanding shares of capital stock of each Subsidiary of RCG
have been duly authorized and are validly issued, fully paid, and nonassessable
and were issued in accordance with applicable federal and state securities laws.
RCG holds of record and owns beneficially all of the outstanding shares of each
Subsidiary of RCG, free and clear of any restrictions on transfer (other than
restrictions under the Securities Act and state securities laws), taxes,
Security Interests, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require RCG to sell,
transfer, or otherwise dispose of any capital stock of any of its Subsidiaries
or that could require any such Subsidiary to issue, sell, or otherwise cause to
become outstanding any of its own capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to any Subsidiary of RCG. There are no voting trusts, proxies, or other
agreements or understandings with respect to the voting of any capital stock of
any Subsidiary of RCG. None of RCG and its Subsidiaries controls directly or
indirectly, or has any direct or indirect equity participation in, any
corporation, partnership, trust, or other business association which is not a
Subsidiary of RCG.
Section 8.7. Financial Statements. The RCG Disclosure Schedule includes the
following financial statements of RCG (collectively, the "RCG Financial
Statements"): (a) audited consolidated balance sheets and statements of income,
changes in stockholders' equity, and cash flows as of and for the fiscal year
ended December 31, 1996; (b) audited consolidated balance sheets and statements
of income, changes in stockholders' equity, and cash flows as of and for the
fiscal year ended December 31, 1997 (the "RCG Most Recent Fiscal Year End"); and
(c) unaudited consolidated balance sheets and statements of income and cash
flows (the "RCG Most Recent Financial Statements") as of and for the three
months and year to date period ended March 31, 1998 (the "RCG Most Recent Fiscal
Month End"). The RCG Financial Statements (including the notes thereto) have
been prepared in accordance with GAAP applied on a consistent basis throughout
the periods covered thereby and present fairly the consolidated financial
condition of RCG as of such dates and the consolidated results of operations of
RCG for such periods; provided, however, that the RCG Most Recent Financial
Statements are subject to normal recurring adjustments (which will not be
material individually or in the aggregate) and lack footnotes and other
presentation items. Without limiting the generality of the foregoing, the RCG
Most Recent Financial Statements accurately reflect anticipated material costs
to complete all contracts or services pursuant to which RCG or any of its
Subsidiaries has agreed to furnish products and services in accordance with GAAP
applied on a basis consistent with the RCG Financial Statements for the RCG Most
Recent Fiscal Year End.
Section 8.8. Events Subsequent to RCG Most Recent Fiscal Year End. Since
the RCG Most Recent Fiscal Year End, there has not been any RCG Material Adverse
Effect. Without limiting the generality of the foregoing, since that date:
(a) none of RCG or any of its Subsidiaries has sold, leased,
transferred, or assigned any material assets, tangible or intangible, outside
the Ordinary Course of Business;
(b) none of RCG or any of its Subsidiaries has entered into
any material agreement, contract, lease, or license outside the Ordinary Course
of Business;
(c) no party (including RCG or any of its Subsidiaries) has
accelerated, terminated, made material modifications to, or canceled any
material agreement, contract, lease, or license to which RCG or any of its
Subsidiaries is a party or by which any of them is bound;
(d) none of RCG or any of its Subsidiaries has imposed any
Security Interest upon any of its material assets, tangible or intangible;
(e) none of RCG or any of its Subsidiaries has made any
material capital expenditures outside the Ordinary Course of Business;
(f) none of RCG or any of its Subsidiaries has made any
material capital investment in, or any material loan to, any other Person
outside the Ordinary Course of Business;
(g) none of RCG or any of its Subsidiaries has created,
incurred, assumed, or guaranteed more than $50,000 in aggregate indebtedness for
borrowed money (other than amounts outstanding under the DIP Financing) and
capitalized lease obligations;
(h) other than is normal and customary with respect to their
respective businesses, none of RCG or any of its Subsidiaries has granted any
license or sublicense of any material rights under or with respect to any
Intellectual Property;
(i) there has been no change made or authorized in the charter
or bylaws of RCG or any of its Subsidiaries;
(j) none of RCG or any of its Subsidiaries has issued, sold,
or otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange or exercise) any of its capital stock;
(k) none of RCG or any of its Subsidiaries has declared, set
aside, or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(l) none of RCG or any of its Subsidiaries has experienced any
material damage, destruction, or loss (whether or not covered by insurance) to
its property;
(m) none of RCG or any of its Subsidiaries has made any loan
to, or entered into any other transaction with, any of its directors, officers,
and employees outside the Ordinary Course of Business;
(n) none of RCG or any of its Subsidiaries has entered into
any material employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing such contract or agreement outside
the Ordinary Course of Business;
(o) none of RCG or any of its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers or employees
outside the Ordinary Course of Business;
(p) none of RCG or any of its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(q) none of RCG or any of its Subsidiaries has made any other
material change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business; and
(r) none of RCG or any of its Subsidiaries has committed to
any of the foregoing.
Section 8.9. Undisclosed Liabilities. None of RCG or any of its
Subsidiaries has any material liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, and whether due or to
become due, including any liability for taxes), except for (a) liabilities set
forth in the RCG Most Recent Balance Sheet, (b) liabilities which have arisen
since the date of RCG Most Recent Balance Sheet in the Ordinary Course of
Business, and (c) liabilities disclosed or provided for in the Plan to the
extent and in the amounts so disclosed or provided for.
Section 8.10. Legal Compliance. Each of RCG and its Subsidiaries has
complied with all applicable laws (including rules, regulations, codes,
ordinances, plans, injunctions, judgments, orders, decrees, rulings, and charges
thereunder) of federal, state, local, and foreign governments (and all agencies
thereof), and no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or commenced or, to the
Knowledge of RCG, threatened against it alleging any failure so to comply,
except where the failure to comply would not have an RCG Material Adverse
Effect.
Section 8.11. Tax Matters. Except with respect to any such matters that
would not, in the aggregate, have an RCG Material Adverse Effect, (a) each of
RCG and its Subsidiaries has duly filed all federal and state income Tax Returns
and all other material Tax Returns (including those filed on a consolidated,
combined or unitary basis) required to have been filed by RCG or any of its
Subsidiaries prior to the date hereof and will file, on or before the Effective
Time, all such returns which are required to be filed after the date hereof and
on or before the Effective Time, (b) all of the foregoing returns and reports
are true and correct in all material respects, and each of RCG and its
Subsidiaries has paid or, prior to the Effective Time, will pay all Taxes
required to be paid in respect of the periods covered by such returns or reports
to any federal, state, foreign, local or other taxing authority, (c) each of RCG
and its Subsidiaries has paid or made adequate provision in the RCG Financial
Statements for all Taxes payable in respect of all periods ending on or prior to
December 31, 1997, (d) neither RCG nor any of its Subsidiaries will have any
material liability for any Taxes in excess of the amounts so paid or reserves so
established or is delinquent in the payment of any material Tax, assessment or
governmental charge, and none of them has requested any extension of time within
which to file any returns in respect of any fiscal year which have not since
been filed, (e) no deficiencies for any tax, assessment or governmental charge
have been proposed, asserted or assessed in writing (tentatively or definitely),
in each case, by any taxing authority, against RCG or any of its Subsidiaries
for which there are not adequate reserves in the RCG Most Recent Balance Sheet,
(f) as of the date of this Agreement, there are no extensions or waivers or
pending requests for extensions or waivers of the time to assess or collect any
such Tax, (g) the federal income Tax Returns of RCG have not been audited, (h)
neither RCG nor any of its Subsidiaries is nor has been a party to any tax
sharing agreement with any corporation which is not currently a member of the
affiliated group of which RCG is currently a member, (i) there are no liens for
Taxes on any assets of RCG or any of its Subsidiaries (other than statutory
liens for taxes not yet due or liens for which adequate reserves have been
established in the RCG Financial Statements, (j) each of RCG and its
Subsidiaries has withheld and paid (and until the Effective Time will withhold
and pay) all income, social security, unemployment, and all other material
payroll Taxes required to be withheld (including pursuant to Sections 1441 and
1442 of the Code or similar provisions under foreign law) and paid by it in
connection with amounts paid to any employee, independent contractor,
stockholder, creditor or other third party, and (k) RCG has not filed an
election under Section 341(f) of the Code to be treated as a consenting
corporation.
Section 8.12. Real Property
8.12.1. Neither RCG nor any of its Subsidiaries owns any real
property.
8.12.2. To the knowledge of RCG, the RCG Disclosure Schedule
lists and describes briefly all real property leased or subleased to RCG or its
Subsidiaries. RCG shall deliver to World Access concurrent with the delivery of
the RCG Disclosure Schedule correct and complete copies of the leases and
subleases listed on the RCG Disclosure Schedule (as amended to date). With
respect to each material lease and sublease listed on the RCG Disclosure
Schedule:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects;
(b) no party to the lease or sublease is in material
breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a material
breach or default or permit termination, modification, or acceleration
thereunder;
(c) no party to the lease or sublease has repudiated
any material provision thereof;
(d) there are no material disputes, oral agreements,
or forbearance programs in
effect as to the lease or sublease;
(e) neither RCG nor any of its Subsidiaries has
assigned, transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold; and
(f) all facilities leased or subleased thereunder
have received all approvals of
governmental authorities (including material licenses and permits) required in
connection with the operation thereof, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all material
respects.
Section 8.13. Intellectual Property
8.13.1. Each of RCG and its Subsidiaries owns, or is licensed
or otherwise possesses legally enforceable rights to use, all patents, trade
secrets, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or material
that are used in its business as currently conducted, except as would not
reasonably be expected to have an RCG Material Adverse Effect.
8.13.2. Except as would not reasonably be expected to have an
RCG Material Adverse Effect (a) neither RCG nor any of its Subsidiaries is or
will be, as a result of the execution and delivery of this Agreement or the
performance of its obligations hereunder, in violation of any Third-Party
Intellectual Property Rights; (b) no claims with respect to the patents,
registered and material unregistered trademarks and service marks, registered
copyrights, trade names and any applications therefor owned by RCG or any of its
Subsidiaries (the "RCG Intellectual Property Rights"), any trade secret material
to RCG, or Third Party Intellectual Property Rights to the extent arising out of
any use, reproduction or distribution of such Third Party Intellectual Property
Rights by or through RCG or any of its Subsidiaries, are currently pending or,
to the Knowledge of RCG, are overtly threatened by any Person; and (c) RCG does
not know of any valid ground for any bona fide claims (i) to the effect that the
manufacture, sale, licensing or use of any product as now used, sold or licensed
or proposed for use, sale or license by RCG or any of its Subsidiaries infringes
on any copyright, patent, trademark, service mark or trade secret, (ii) against
the use by RCG or any of its Subsidiaries of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software programs
and applications used in the business of RCG or any of its Subsidiaries as
currently conducted or as proposed to be conducted, (iii) challenging the
ownership, validity or effectiveness of the RCG Intellectual Property Rights or
other trade secret material to RCG, or (iv) challenging the license or legally
enforceable right to use of the Third Party Intellectual Rights by RCG or any of
its Subsidiaries.
8.13.3. To the Knowledge of RCG, all material patents,
registered trademarks, service marks and copyrights held by RCG and its
Subsidiaries are valid and subsisting. To the knowledge of RCG, there is no
material unauthorized use, infringement or misappropriation of the RCG
Intellectual Property by any third party, including any employee or former
employee of RCG or any of its subsidiaries.
Section 8.14. Tangible Assets. The buildings, machinery, equipment,
and other tangible assets that RCG and its Subsidiaries own and lease are
free from material defects (patent and latent), have been maintained in
accordance with normal industry practice, and are in good operating
condition and repair (subject to normal wear and tear).
Section 8.15. Inventory. Neither RCG nor any of its Subsidiaries owns
any inventory.
Section 8.16. Contracts. The RCG Disclosure Schedule lists the
following contracts and other agreements to which RCG or any of its
Subsidiaries is a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $25,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $100,000 or under which
it has imposed a Security Interest on any of its assets, tangible or intangible;
(e) any material agreement concerning confidentiality or
noncompetition;
(f) any material agreement with any Affiliates of RCG or any
of its Subsidiaries;
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(h) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $150,000 or providing material severance benefits;
(i) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees outside the Ordinary
Course of Business;
(j) any agreement under which the consequences of a default or
termination could have an RCG Material Adverse Effect not identified on any
other Schedule hereto; and
(k) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
RCG shall deliver to World Access concurrent with the delivery of the
RCG Disclosure Schedule or make available for World Access's review a correct
and complete copy of each written agreement listed in the RCG Disclosure
Schedule (as amended to date), which shall be deemed to be Schedules for
purposes of Section 15.12 hereof, and a written summary setting forth the
material terms and conditions of each oral agreement referred to in the RCG
Disclosure Schedule. Except as set forth on the RCG Disclosure Schedule, to the
Knowledge of RCG, with respect to each such agreement: (a) the agreement is
legal, valid, binding, enforceable, and in full force and effect in all material
respects; (b) no party is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (c) no party has repudiated any material provision of the
agreement.
Section 8.17. Notes and Accounts Receivable. All notes and accounts
receivable of each of RCG and its Subsidiaries are reflected properly on its
books and records, are valid receivables, are current and collectible, and will
be collected in accordance with their terms at their recorded amounts, subject
only to the reserve for bad debts set forth on the face of the RCG Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for operations and
transactions through the Closing Date in the Ordinary Course of Business of RCG.
Section 8.18. Insurance. Each of RCG and its Subsidiaries has been and is
insured with respect to its properties and conduct of its business in such
amounts and against such risks as are reasonable in relation to its business and
will maintain such insurance at least through the Effective Time.
Section 8.19. Litigation. Except for the Chapter 11 Case and the
proceedings brought to enforce or determine the Allowed Claims and the Disputed
Claims and other than orders of the Bankruptcy Court, neither RCG nor any of its
Subsidiaries (a) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (b) is a party or, to the Knowledge of RCG, is
threatened to be made a party to any action, suit, proceeding, hearing, or
investigation of, in, or before any court or quasi-judicial or administrative
agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator, and to the Knowledge of RCG, no reasonable basis therefor exists.
Section 8.20. Employees. To the Knowledge of RCG, no executive, key
employee, or significant group of employees plans to terminate employment with
RCG or its Subsidiaries during the next six months. Neither RCG nor any of its
Subsidiaries is a party to or bound by any collective bargaining agreement, nor
has it experienced any strike or material grievance, claim of unfair labor
practices, or other collective bargaining dispute within the past three years.
Section 8.21. Employee Benefits
8.21.1. The RCG Disclosure Schedule lists all RCG Plans. With
respect to each RCG Plan, RCG has made available to World Access a true, correct
and complete copy of: (a) each writing constituting a part of such RCG Plan,
including all plan documents, benefit schedules, trust agreements, and insurance
contracts and other funding vehicles; (b) the most recent Annual Report (Form
5500 Series) and accompanying schedule, if any; (c) the current summary plan
description, if any; (d) the most recent annual financial report, if any; and
(e) the most recent determination letter from the Internal Revenue Service, if
any.
8.21.2. The Internal Revenue Service has issued a favorable
determination letter or opinion letter with respect to each RCG Plan that is
intended to be a "qualified plan" within the meaning of Section 401(a) of the
Code (a "Qualified RCG Plan") and there are no existing circumstances nor any
events that have occurred that could adversely affect the qualified status of
any Qualified RCG Plan or the related trust.
8.21.3. All contributions required to be made to any RCG Plan
by applicable Law or by any plan document or other contractual undertaking, and
all premiums due or payable with respect to insurance policies funding any RCG
Plan, for any period through the date hereof have been timely made or paid in
full and through the Closing Date will be timely made or paid in full or, to the
extent not required to be made or paid on or before the date hereof or the
Closing Date, as applicable, have been or will be fully reflected in the RCG
Financial Statements.
8.21.4. Each of RCG and its Subsidiaries has complied, and is
now in compliance, in all material respects, with all provisions of ERISA, the
Code and all laws and regulations applicable to the RCG Plans. There is not now,
and there are no existing circumstances that standing alone could give rise to,
any requirement for the posting of security with respect to an RCG Plan or the
imposition of any lien on the assets of RCG under ERISA or the Code.
8.21.5. No RCG Plan is subject to Title IV or Section 302 of
ERISA or Section 412 or 4971 of the Code. No RCG Plan is Multi-employer Plan or
a Multiple Employer Plan, nor has RCG, nor any of its ERISA Affiliates, at any
time within five years before the date hereof, contributed to or been obligated
to contribute to any Multi-employer Plan or Multiple Employer Plan.
8.21.6. There does not now exist, and there are no existing
circumstances that could result in, any Controlled Group Liability that would be
a liability of RCG or any of its Subsidiaries following the Closing, other than
normal funding responsibilities. Without limiting the generality of the
foregoing, neither RCG nor any of its ERISA Affiliates, has engaged in any
transaction described in Section 4069 or Section 4204 of ERISA.
8.21.7. Except for health continuation coverage as required by
Section 4980B of the Code or Part 6 of Title I of ERISA, neither RCG nor any of
it Subsidiaries has any liability for life, health, medical or other welfare
benefits to former employees or beneficiaries or dependents thereof.
8.21.8. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will result in,
cause the accelerated vesting or delivery of, or increase the amount or value
of, any payment or benefit to any employee or director or former employee or
former director of RCG or any of its Subsidiaries, pursuant to a "change in
control" or "change of control" or otherwise. Without limiting the generality of
the foregoing, no amount paid or payable by RCG or any of its Subsidiaries in
connection with the transactions contemplated hereby either solely as a result
thereof or as a result of such transactions in conjunction with any other events
will be an "excess parachute payment" within the meaning of Section 280G of the
Code.
8.21.9. There are no pending or, to the Knowledge of RCG,
threatened claims (other than claims for benefits in the ordinary course),
lawsuits or arbitrations which have been asserted or instituted against the RCG
Plans, any fiduciaries thereof with respect to their duties to the RCG Plans or
the assets of any of the trusts under any of the RCG Plans which could
reasonably be expected to result in any material liability of RCG to the PBGC,
the Department of Treasury, the Department of Labor or any Multi-employer Plan.
Section 8.22. Guaranties. Other than claims against RCG in the Bankruptcy
Case, neither RCG nor any of its Subsidiaries is a guarantor or otherwise is
responsible for any liability or obligation (including indebtedness) of any
other Person.
Section 8.23. Environment, Health, and Safety
8.23.1. Each of RCG and its Subsidiaries: (a) has complied
with the Environmental, Health, and Safety Laws in all material respects, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against any of them alleging any
such failure to comply; (b) has obtained and has at all times been and is in
substantial compliance with all of the terms and conditions of all permits,
licenses, and other authorizations, certifications and training which are
required under any of the Environmental, Health, and Safety Laws; (c) has
complied in all material respects with all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations, schedules, and
timetables which are contained in the Environmental, Health, and Safety Laws;
and (d) will provide World Access within ten Business Days hereof, with copies
within its possession or control of all environmental assessments, complaints,
claims, consent orders or agreements, notices of violations, governmental
inquiries and permits issued or arising under or subject or relating or pursuant
to any Environmental, Health and Safety Laws for any property owned, now or in
the past or to be acquired prior to Closing, by RCG or any of its Subsidiaries,
and such copies shall be deemed to be Schedules for purposes of Section 15.12
hereof.
8.23.2. Neither RCG nor any of its Subsidiaries has any
material liability, and neither RCG nor any of its Subsidiaries or any of their
respective predecessors has handled or disposed of any substance, arranged for
the disposal of any substance, exposed any employee or other individual to any
substance or condition, or owned or operated any property or facility in any
manner that could give rise to any material liability, for contamination or
damage to any site, location, or body of water (surface or subsurface), for any
illness of or personal injury to any employee or other individual, or for any
reason under any Environmental, Health, and Safety Law.
Section 8.24. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of RCG or any of its Subsidiaries for inclusion or
incorporation by reference in the Proxy Statement will, at the date mailed to
the stockholders of New World Access, and at the time of the meeting of
stockholders of New World Access to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE 9.
COVENANTS
Section 9.1. Conduct of Business of RCG and its Subsidiaries. During the
period from the date of this Agreement to the Effective Time, except as
expressly contemplated by any other provision of this Agreement or except as
authorized by Bankruptcy Court order, each of RCG and its Subsidiaries shall (a)
conduct its business in the Ordinary Course or as permitted by the Bankruptcy
Court; (b) use its best efforts to maintain and preserve intact its business
organization, employees, goodwill with customers and advantageous business
relationships and retain the services of its officers and key employees; and (c)
except as required by law, regulation or Bankruptcy Court order, take no action
which would adversely affect or delay the ability of any Party to obtain any
Consent from any Regulatory Authorities or other approvals required for the
consummation of the transactions contemplated hereby or to perform its covenants
and agreements under this Agreement. By way of amplification and not limitation,
except as expressly contemplated by any other provision of this Agreement or
except as authorized by Bankruptcy Court order, neither RCG nor any of its
Subsidiaries shall, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or agree to do, any of the following without the
prior written consent of World Access, which consent shall not be unreasonably
withheld or delayed:
(a) amend or otherwise change its charter or bylaws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant,
transfer, lease, license, guarantee or
encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer,
lease, license or encumbrance of (i) any shares of capital stock of RCG or any
of its Subsidiaries of any class, or securities convertible into or exchangeable
or exercisable for any shares of such capital stock, or any options, warrants or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest of RCG or any of its Subsidiaries, or (ii) other than
in the Ordinary Course, any property or assets of RCG or any of its
Subsidiaries;
(c) (i) except for amounts of DIP Financing not
in excess of $25,000,000, incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse, or otherwise as an
accommodation become responsible for, the obligations of any Person for borrowed
money or make any loans or advances, (ii) other than in the Ordinary Course,
terminate, cancel or request any material change in, or agree to any material
change in, any contract or agreement listed in the RCG Disclosure Schedule or
enter into any contract or agreement material to its business, results of
operations or financial condition, (iii) make or authorize any capital
expenditure, other than capital expenditures in the Ordinary Course that have
been budgeted for calendar year 1998 and disclosed to World Access that are not,
in the aggregate, in excess of $2,500,000, or (iv) enter into or amend any
contract, agreement, commitment or arrangement that, if fully performed, would
not be permitted under this Section 9.1;
(d) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(e) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(f) amend the terms of, repurchase, redeem
or otherwise acquire any of its securities or propose to do any of the
foregoing;
(g) pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than pursuant to Bankruptcy Court order or the
payment, discharge or satisfaction in the Ordinary Course of Business of
liabilities reflected or reserved against on the RCG most recent Balance Sheet
and only to the extent of such reserves;
(h) take any action with respect to accounting
policies or procedures, other than actions in the ordinary course of business
consistent with past practice or as required by GAAP;
(i) make any tax election or settle or
compromise any material federal, state or local United States income tax
liability, or any income tax liability of any other jurisdiction, other than
those made in the Ordinary Course of Business consistent with past practice and
those for which specific reserves have been recorded on the RCG Most Recent
Balance Sheet and only to the extent of such reserves;
(j) enter into or amend any contract, agreement,
commitment or arrangement with, or enter into any transaction with, or make any
payment to or on account or behalf of, any Affiliate of RCG or any of its
Subsidiaries; or
(k) authorize or enter into any formal or
informal agreement or otherwise make any commitment to do any of the foregoing
or to take any action which would make any of the representations or warranties
of RCG contained in this Agreement untrue or incorrect or prevent RCG from
performing or cause RCG not to perform its covenants hereunder or result in any
of the conditions to the Merger set forth herein not being satisfied.
Section 9.2. Conduct of World Access and its Subsidiaries. During the
period from the date of this Agreement to the Effective Time, except for any
actions taken by World Access or New World Access relating to any other
acquisitions or business combinations with a non-Affiliate or as expressly
contemplated by any other provision of this Agreement, each of World Access and
its Subsidiaries shall (a) conduct its business in the Ordinary Course, (b) use
its best efforts to maintain and preserve intact its business organization,
employees, goodwill with customers and advantageous business relationships and
retain the services of its officers and key employees, and (c) except as
required by law or regulation, take no action which would adversely affect or
delay the ability of any Party to obtain any Consent from any Regulatory
Authorities or other approvals required for the consummation of the transactions
contemplated hereby or to perform its covenants and agreements under this
Agreement. By way of amplification and not limitation, except for any actions
taken by World Access relating to any other acquisitions or business
combinations with a non-Affiliate or as expressly contemplated by any other
provision of this Agreement, neither World Access nor any of its Subsidiaries
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of RCG, which consent shall not be unreasonably withheld or delayed:
(a) amend or otherwise change its charter or
bylaws or equivalent organizational documents;
(b) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that (i) any Subsidiary may pay
dividends or make other distributions to World Access or any other Subsidiary
and (ii) World Access or New World Access may adopt a rights plan or "poison
pill";
(c) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(d) sell, transfer, license, sublicense or
otherwise dispose of any material assets having a value in excess of
$10,000,000; or
(e) authorize or enter into any formal or
informal agreement or otherwise make any commitment to do any of the foregoing
or to take any action which would make any of the representations or warranties
of World Access contained in this Agreement untrue or incorrect or prevent World
Access from performing or cause World Access not to perform its covenants
hereunder or result in any of the conditions to the Merger set forth herein not
being satisfied.
Section 9.3. Access to Books and Records. Each of the Parties will, and
World Access and RCG will cause each of their respective Subsidiaries to, permit
representatives of the other Parties to have reasonable access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations, to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to each of the Parties
and their Subsidiaries in accordance with reasonable procedures required by the
Parties that are designed to minimize the impact on each Party's business. Each
of the Parties will treat and hold as such any Confidential Information it
receives from any of the Parties and their Subsidiaries in the course of the
reviews contemplated by this Section, will not use any of the Confidential
Information except in connection with this Agreement, and, if this Agreement is
terminated for any reason whatsoever, agrees to return all tangible embodiments
(and all copies thereof), to whichever of the Parties that originally disclosed
such embodiments, which are in its possession.
Section 9.4. Approval of Stockholders of New World Access. Promptly
following the consummation of the Holding Company Reorganization, New World
Access will take all steps necessary under applicable law and its certificate of
incorporation and bylaws to call, give notice of, convene and hold a meeting of
its stockholders for the purpose of approving this Agreement and the Merger and
for such other purposes consistent with the complete performance of this
Agreement as may be necessary or desirable. Unless the Board of Directors of New
World Access determines in good faith, based upon advice of its outside counsel,
that such recommendation would violate its fiduciary duties to its stockholders,
the Board of Directors of New World Access will recommend to its stockholders
the approval of this Agreement, the Merger and the transactions contemplated
hereby and will use its best efforts to obtain the necessary approvals by its
stockholders of this Agreement, the Merger and the transactions contemplated
hereby.
Section 9.5. Perparation of Proxy Statement. In connection with the meeting
of its stockholders to be held pursuant to Section 9.4 hereof, New World Access
shall promptly prepare a proxy statement for submission to its stockholders (the
"Proxy Statement"). RCG shall promptly furnish New World Access with all
information concerning its business and financial statements and affairs which,
in the reasonable judgment of New World Access or its counsel, may be required
or appropriate for inclusion in the Proxy Statement and shall take such other
action as they may reasonably request in connection with the Proxy Statement.
New World Access shall provide, and is responsible for, all such information
related to New World Access and Merger Sub, and RCG shall provide, and is
responsible for, all such information related to RCG. Once the Proxy Statement
has been authorized for mailing either by notice from the SEC or by the lapse of
time for review and comment by the SEC, New World Access shall thereafter
promptly mail to its stockholders the Proxy Statement in definitive form (as
amended or supplemented). Each of New World Access and RCG shall also take such
other reasonable actions as may be required to be taken under any applicable
state securities laws in connection with the issuance of shares of New World
Access Stock and the transactions contemplated by this Agreement.
Section 9.6. Affiliates. Prior to the Closing Date, RCG shall deliver to
New World Access a letter identifying all Persons who are, at the time this
Agreement is submitted for approval to the stockholders of New World Access,
"affiliates" of RCG for purposes of Rule 145 under the Securities Act. RCG shall
use its best efforts to cause each such "affiliate" to deliver to New World
Access on or prior to the Closing Date a written agreement substantially in the
form attached as Exhibit "A."
ARTICLE 10.
ADDITIONAL AGREEMENTS
Section 10.1. Best Efforts; Cooperation. Subject to the terms and
conditions herein provided, each of the Parties agrees to use its best efforts
promptly to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations, or otherwise, including attempting to obtain all necessary
Consents, to consummate and make effective, as soon as practicable, the
transactions contemplated by this Agreement. Nothing in this Section 10.1 or
elsewhere in this Agreement shall be construed to require RCG, its shareholders
or agents to act in any manner inconsistent with Applicable Bankruptcy Law or
any of their respective duties thereunder.
Section 10.2. Regulatory Matters
10.2.1. Following the execution and delivery of this
Agreement, World Access and RCG shall cause to be prepared and filed all
required applications and filings with the Regulatory Authorities which are
necessary or contemplated for the obtaining of the Consents of the Regulatory
Authorities and the consummation of the Merger, including any Consents required
to be obtained under the HSR Act or the Communications Act or from any state
public service commission ("PUC"). Such applications and filings shall be in
such form as may be prescribed by the respective government agencies and shall
contain such information as they may require. The Parties hereto will cooperate
with each other and use reasonable efforts to prepare and execute all necessary
documentation, to effect all necessary or contemplated filings and to obtain all
necessary or contemplated Consents of the Regulatory Authorities and third
parties which are necessary or contemplated to consummate the transactions
contemplated by this Agreement, including the stockholders of New World Access.
Each of the Parties shall have the right to review and approve in advance, which
approval shall not be unreasonably withheld, any filing made with, or written
material submitted to, any Regulatory Authority in connection with the
transactions contemplated by this Agreement.
10.2.2. Each Party will furnish the other Parties with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders, as applicable, and such other matters as may be necessary or
advisable in connection with any statement or application made by or on behalf
of any such Party to any governmental body in connection with the transactions,
applications or filings contemplated by this Agreement. Upon request, the
Parties hereto will promptly furnish each other with copies of written
communications received by them or their respective Subsidiaries from, or
delivered by any of the foregoing to, any governmental body in respect of the
transactions contemplated hereby.
Section 10.3. Indemnification Regarding the Proxy Statement. New World
Access, with respect to RCG, and RCG, with respect to New World Access, agree to
indemnify, defend and hold harmless the other, their respective Subsidiaries,
and each of their respective present and former officers, directors, employees
and agents, from and against all losses, expenses, claims, damages or
liabilities to which any of them may become subject under applicable laws
(including the Exchange Act), and will reimburse each of them for any legal,
accounting or other expenses reasonably incurred in connection with
investigating or defending any such actions, whether or not resulting in
liability, insofar as such losses, expenses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of material fact provided by the indemnifying Party and contained in the Proxy
Statement or arise out of or are based upon the omission or alleged omission by
the indemnifying Party to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
Section 10.4. Notice of Developments. Each of the Parties will give prompt
written notice to other Parties of any material adverse development that causes
or is likely to cause a material breach of any of its representations and
warranties contained in this Agreement. Such disclosure by any Party pursuant to
this Section shall be deemed to amend or supplement any disclosure contained in
the Schedules attached hereto to prevent or cure any misrepresentation, breach
of warranty, or breach of covenant.
Section 10.5. Notices and Consents. Each of the Parties will give any
notices (and will cause each of the Parties within their control to give any
notices) to third parties, and will use their reasonable efforts to obtain (and
will cause each of the Parties within their control to use their reasonable
efforts to obtain) any third-party consents that may be required to consummate
the transactions contemplated hereby.
Section 10.6. Indemnity
10.6.1. New World Access shall cause the Surviving Corporation
to keep in effect provisions of its articles of incorporation and bylaws
providing for exculpation of director and officer liability and its
indemnification of each Person who is now an officer or director of RCG to the
fullest extent permitted under the IBCA which provisions shall not be amended
except as required by applicable law or except to make changes permitted by law
that would enlarge such Persons' right of indemnification. The provisions of
this Section shall survive the consummation of the Merger and expressly are
intended to benefit each Person who is now an officer or director of RCG.
Section 10.7. Offers of Employment. At the Closing, New World Access shall
execute and deliver to each of Steven A. Odom, John D. Phillips, Hensley E.
West, Mark A. Gergel and W. Tod Chmar an executive employment agreement in
substantially the form attached hereto as Exhibit "B".
Section 10.8. Exclusive Dealing
10.8.1. RCG shall not, nor shall it authorize or permit any
officer, director of employee of, or any attorney or other advisor or
representative of, RCG to, (i) solicit or initiate, or encourage the submission
of, any Acquisition Proposal or (ii) participate in any discussions or
negotiations regarding, or furnish to any Person any information with respect
to, or take any other action to facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal.
10.8.2. The Board of Directors of RCG shall not (i) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal or (ii)
enter into any type of agreement or letter of intent with respect to any
Acquisition Proposal.
10.8.3. If an Acquisition Proposal shall have been made prior
to the termination of this Agreement and RCG at any time thereafter consummates
a transaction contemplated by or resulting from such Acquisition Proposal, then
RCG shall pay, or cause to be paid, in same day funds, to World Access, upon
demand, all of the costs and expenses incurred by World Access in connection
with this Agreement, including fees and expenses of its financial advisors,
accountants and counsel (the "Expenses"), plus the sum of $5,000,000 (the
"Termination Fee"). The Parties acknowledge that damages in the event of a
breach of this Section 10.8 will be difficult to ascertain and that the Expenses
and the Termination Fee are intended to be full liquidated damages and such
damages represent the Parties' best estimate of such damages. RCG will recommend
that the Bankruptcy Court approve the payment of the Expenses and the
Termination Fee. The parties expressly acknowledge that the foregoing liquidated
damages are intended not as a penalty but as full liquidated damages in the
event of a breach of this Section 10.8, and World Access acknowledges the
Expenses and the Termination Fee are its sole and exclusive remedy for a breach
of this Section 10.8.
10.8.4. In addition to the obligations of RCG set forth in
Sections 10.8.1, 10.8.2 and 10.8.3 above, RCG shall immediately advise World
Access orally and in writing of any request for information or of any
Acquisition Proposal, or any inquiry with respect to or which could lead to any
Acquisition Proposal, the material terms and conditions of such request,
Acquisition Proposal or inquiry, and the identity of the Person making any
Acquisition Proposal or inquiry. RCG shall keep World Access fully informed of
the status and details (including amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
10.8.5. Notwithstanding anything in Sections 10.8.1 and 10.8.2
to the contrary, nothing contained in this Section 10.8 shall prohibit the Board
of Directors of RCG from furnishing information to, or entering into discussions
or negotiations or an agreement with, any Person or entity who has made an
unsolicited Acquisition Proposal if the Board of Directors of RCG determines in
its good faith judgment, based upon a written opinion of its independent
counsel, that such action is required for it to comply with its fiduciary duties
to RCG shareholders under applicable law or to otherwise comply with Applicable
Bankruptcy Law or any order of the Bankruptcy Court.
Section 10.9. Bankruptcy Court Approval. Subject to Applicable Bankruptcy
Law, RCG shall use its best efforts to obtain Bankruptcy Court approval of the
Plan. Notwithstanding the foregoing, neither RCG nor any of its directors,
officers, attorneys or agents shall have any liability to World Access or New
World Access if the Plan is not confirmed other than as provided in Section
10.8.3 above.
ARTICLE 11.
MUTUAL CONDITIONS TO CLOSING
The obligations of the Parties to consummate the transactions provided
for herein shall be subject to the satisfaction of the following conditions,
unless any of the following are waived by the Parties:
Section 11.1. Stockholder Approval. The Merger shall have been approved by
the requisite vote of the stockholders of New World Access.
Section 11.2. Regulatory Approvals. All necessary Consents of the
Regulatory Authorities (including the FCC and the PUCs) shall have been obtained
and all notice and waiting periods required by law (including any waiting period
applicable to the Merger under the HSR Act) to pass after receipt of such
Consents shall have been terminated or shall have expired, and all conditions to
consummation of the Merger set forth in such Consents shall have been satisfied.
New World Access shall have received all permits or other authorizations or
confirmations as to the availability of exemptions from registration
requirements under all federal and state securities laws as may be necessary to
issue shares of New World Access Stock pursuant to this Agreement.
Section 11.3. Litigation. There shall be no actual or threatened causes of
action, investigations or proceedings (a) challenging the validity or legality
of this Agreement or the consummation of the transactions contemplated by this
Agreement; (b) seeking damages in connection with the transactions contemplated
by this Agreement; or (c) seeking to restrain or invalidate the transactions
contemplated by this Agreement, which, in the case of (a) through (c), and in
the reasonable judgment of New World Access and RCG, based upon advice of
counsel, would have a material adverse effect with respect to the interests of
New World Access and RCG, as the case may be.
Section 11.4. Proxy Statement. The Proxy Statement shall have been filed
with the SEC for review and comment and shall have been authorized for mailing,
either by notice from the SEC or the lapse of time for review and comment by the
SEC.
Section 11.5. Consummation of Holding Company Reorganization. The Holding
Company Reorganization shall have been consummated.
Section 11.6. Resignations. New World Access shall have received the
resignations, effective as of the Closing, of each director and officer of RCG,
other than those whom shall have been agreed upon by the Parties as specified in
writing at least 30 days prior to the Closing.
Section 11.7. Material Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Merger by any Regulatory Authority which, in connection with
the grant of any Consent by any Regulatory Authority, imposes, in the judgment
of the Parties any material adverse requirement upon the Parties, or any one of
them, provided that no such term or condition imposed by any Regulatory
Authority in connection with the grant of any Consent by any Regulatory
Authority shall be deemed to be a material adverse requirement unless it
materially differs from terms and conditions customarily imposed by any such
entity in connection with the acquisition of corporations under similar
circumstances.
Section 11.8. Consents. All Consents of third parties required in
connection with the transactions contemplated hereby shall have been obtained,
except where the failure to obtain such Consents, in the aggregate, would not
reasonably be expected to result in a World Access Material Adverse Effect or an
RCG Material Adverse Effect, provided that a Party which has not used all
reasonable efforts to obtain a Consent may not assert this condition with
respect to such Consent.
Section 11.9. Bankruptcy Court approval. The Bankruptcy Court shall have
entered the Order, and the Order shall have become a Final Order.
Section 11.10 NASDAQ Listing. The shares of New World Access Stock to be
issued hereunder shall have been approved upon official notice of issuance for
quotation on NASDAQ or listing on a national securities exchange agreed upon by
the Parties in writing prior to the Closing.
Section 11.11. U.K. Acquisition Transaction. The U.K. Acquisition shall
have been consummated.
ARTICLE 12.
CONDITIONS TO THE OBLIGATIONS OF NEW WORLD ACCESS
The obligations of New World Access to consummate the Merger are
subject to the fulfillment of each of the following conditions, unless waived by
World Access or New World Access:
Section 12.1. Representations and Warranties. The representations and
warranties of RCG set forth in this Agreement and in any certificate or document
delivered pursuant hereto shall be true and correct in all material respects as
of the date of this Agreement and as of all times up to and including the
Effective Time (as though made on and as of the Effective Time except to the
extent such representations and warranties are by their express provisions made
as of a specified date and except for changes therein contemplated by this
Agreement).
Section 12.2. Performance of Obligations. RCG shall have performed all
covenants, obligations and agreements required to be performed by it under this
Agreement prior to the Effective Time.
Section 12.3. Certificate Representing Satisfaction of Conditions. RCG
shall have delivered to New World Access a certificate dated as of the Closing
Date as to the satisfaction of the matters described in Sections 12.1 and 12.2
hereof, and such certificate shall be deemed to constitute additional
representations, warranties, covenants, and agreements of RCG under this
Agreement.
Section 12.4. Material Adverse Change. Since the date of this Agreement,
there shall not have been any RCG Material Adverse Effect.
Section 12.5. Tax Opinion. New World Access shall have received an opinion,
dated the Closing Date, from Rogers & Hardin LLP, based upon customary
representations and warranties, to the effect that no gain or loss will be
recognized by New World Access, RCG or Merger Sub as a result of the Merger.
Section 12.6. Legal Opinion. New World Access shall have received an
opinion, dated the Closing Date, from Katten Muchin & Zavis, bankruptcy counsel
to RCG, covering such matters relating to the Chapter 11 Case as shall be
reasonably requested by New World Access.
Section 12.7. Carrier Service Agreement. RCG shall have entered into a
Carrier Service Agreement with WNSI in substantially the form attached hereto as
Exhibit "C".
Section 12.8. Operating Performance of RCG. RCG's gross revenues for the
calendar month immediately preceding the Closing Date shall be no less than
$25.0 million, and its gross profit margin for such month shall be no less than
5.0%.
Section 12.9. Approval of Plan and Order. Each of the Plan and the Order
(which shall have become a Final Order) shall be acceptable to New World Access.
Section 12.10. Net Operating Losses. There shall have been no determination
by New World Access that facts, events or conditions arising or occurring, or of
which New World Access becomes aware, after the date of this Agreement could
reasonably be expected to materially limit the Surviving Corporation's ability
to utilize net operating losses of RCG incurred before the Effective Time to
offset, for federal income tax purposes, at least $125,000,000 of otherwise
taxable income of the Surviving Corporation after the Effective Time.
Section 12.11. Net Worth. At the Effective Time, RCG shall have a positive
tangible net worth.
ARTICLE 13.
CONDITIONS TO OBLIGATIONS OF RCG
The obligations of RCG to consummate the Merger are subject to the
fulfillment of each of the following conditions, unless waived by RCG:
Section 13.1. Representations and Warranties. The representations and
warranties of the other Parties set forth in this Agreement and in any
certificate or document delivered pursuant hereto shall be true and correct in
all material respects as of the date of this Agreement and as of all times up to
and including the Effective Time (as though made on and as of the Effective Time
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for changes therein
contemplated by this Agreement).
Section 13.2. Performance of Obligations. Each of the other Parties shall
have performed all covenants, obligations and agreements required to be
performed by it under this Agreement prior to the Effective Time.
Section 13.3. Certificate Representing Satisfaction of Conditions. All
other Parties shall each have delivered to RCG a certificate dated as of the
Closing Date as to the satisfaction of the matters described in Sections 13.1
and 13.2 hereof, and such certificates shall be deemed to constitute additional
representations, warranties, covenants, and agreements of the other Parties
under this Agreement.
Section 13.4. Material Adverse Change. Since the date of this Agreement,
there shall not have been any World Access Material Adverse Effect.
Section 13.5. Approval of Plan and Order. Each of the Plan and the Order
(which shall have become a Final Order) shall be reasonably acceptable to RCG.
ARTICLE 14.
TERMINATION
Section 14.1. Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written consent duly authorized by the Boards of
Directors of New World Access and RCG at any time prior to the Effective Time;
or
(b) by World Access or New World Access at any time prior to
the Effective Time, if (i) there has been a breach of a representation,
warranty, covenant or agreement of RCG, and such breach has not been cured or is
incapable of being cured within 15 days of notice of such breach; (ii) the
Chapter 11 Case shall be dismissed or converted to a case under Chapter 7 of the
Bankruptcy Code or a trustee for RCG shall be appointed by the Bankruptcy Court,
or (iii) either World Access or New World Access determines in its sole good
faith judgment, within thirty (30) days of the delivery of the RCG Disclosure
Schedule, that the exceptions set forth therein are materially adversely
different from the representations and warranties of RCG in Article 8 hereof,
provided that World Access or New World Access shall inform RCG upon such
termination as to the reasons for its determination; or
(c) by RCG at any time prior to the Effective Time, if (i)
there has been a breach of a representation, warranty, covenant, or agreement of
World Access or New World Access, and such breach has not been cured or is
incapable of being cured within 15 days of notice of such breach; or (ii) RCG
determines, in its sole good faith judgment, within thirty (30) days of the
delivery of the World Access Disclosure Schedule, that the exceptions set forth
therein are materially adversely different from the representations and
warranties of World Access, New World Access and Merger Sub in Article 7 hereof,
provided that RCG shall inform World Access and New World Access upon such
termination as to the reasons for its determination; or
(d) by New World Access or RCG if the Closing has not occurred
by November 1, 1998, unless extended by mutual written consent duly authorized
by the boards of directors of New World Access and RCG (provided that the right
to terminate this Agreement under this Section shall not be available to any
Party whose failure to perform any material covenant or obligation or whose
breach of a representation or warranty under this Agreement has been the cause
of or resulted in the failure of the Closing to occur on or before such date);
or
(e) by New World Access or RCG if at the meeting of New World
Access stockholders held for such purpose (including any adjournment or
postponement thereof) the requisite vote of the New World Access stockholders to
approve the Merger shall not have been obtained; or
(f) by New World Access or RCG if the Plan is not confirmed by
September 15, 1998 or such later date as the Parties may mutually agree upon in
writing; or
(g) by New World Access or RCG if the U.K. Acquisition
Agreement is terminated pursuant to its terms.
Section 14.2. Effect of Termination and Breach. In the event of termination
of this Agreement as provided in Section 14.1, this Agreement shall forthwith
become void and have no effect, without any liability or obligation on the part
of any Party, other than any liability or obligation arising under the
provisions of this Section 14.2 and Sections 10.8.3, 15.3 and 15.13; provided,
however, that in no event shall such termination relieve any Party of liability
for any breach by such Party of any of its covenants and agreements set forth
herein; and further provided, that no Party shall have any liability hereunder
for any breach of a representation or warranty of such Party except to the
extent that such breach shall have been the result of common law fraud,
intentional omission, deliberate concealment or gross negligence.
Section 14.3. Confidentiality Upon Termination. In the event of any
termination of this Agreement for any reason, including any breach by any of the
Parties, each Party shall treat as confidential and shall not disclose, or use
directly or indirectly for their benefit or any third party's benefit or to the
detriment of any other Party in any manner whatsoever, or permit others under
their control to disclose, or to use, Confidential Information concerning the
other Parties obtained pursuant to or in connection with the Merger which is not
generally known to the trade or a matter of public knowledge, except as required
by a court of competent jurisdiction, including, without limitation, the
Bankruptcy Court.
Section 14.4. Specific Performance. The Parties hereto agree that money
damages or other remedy at law would not be a sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement by them and that
in addition to all other remedies available to them, each of them shall be
entitled to the fullest extent permitted by law to an injunction restraining
such breach, violation or default or threatened breach, violation or default and
to any other equitable relief, including specific performance, without bond or
other security being required.
ARTICLE 15.
GENERAL PROVISIONS
Section 15.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time, except for Section 8.9 hereof to the extent it applies to the period
commencing on the date of the confirmation of the Plan and ending at the
Effective Time which shall survive for a one year period following the Effective
Time. Notwithstanding anything contained herein to the contrary, New World
Access shall be entitled, if it so elects, to set-off any Losses incurred as a
result of the breach of the representations and warranties set forth in Section
8.9 hereof against the shares of Contingent Payment Stock as its sole and
exclusive remedy for any such breach. This Section shall not limit any covenant
or agreement of the Parties which by its terms contemplates performance after
the Effective Time.
Section 15.2. Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of all of the other
Parties; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law (in which case the
disclosing Party will use its best efforts to advise the other Parties at the
earliest possible time prior to making such disclosure).
Section 15.3. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Articles 3, 4 and 6 hereof concerning payment of the Merger
Consideration contemplated by this Agreement and certain additional agreements
are intended for the benefit of the stockholders of New World Access and the
creditors of RCG.
Section 15.4. Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they related in any way to the
subject matter hereof.
Section 15.5. Succession and Assignment. This Agreement shall be binding
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of its rights, interests, or obligations hereunder without the prior written
approval of all of the other Parties.
Section 15.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 15.7. Notices. Notices to be given to RCG hereunder shall be in
writing and delivered personally to the designated officer of RCG, transmitted
by facsimile, or deposited in the United States mail, certified and return
receipt requested, postage prepaid, and addressed as follows (or to such other
address as may be specified by RCG in writing):
Resurgens Communications Group
2210 Resurgens Plaza
945 East Paces Ferry Road
Atlanta, Georgia 30326
Attention: Chief Executive Officer
Telephone: (404) 261-6190
Facsimile: (404) 233-2280
with a copy to (which will not constitute notice to RCG):
Long, Aldridge & Norman
Suite 5300
One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308-3201
Attention: Clay C. Long, Esq.
Telephone: (404) 527-4050
Facsimile: (404) 527-4198
and
Katten Muchin & Zavis
525 West Monroe Street
Suite 1600
Chicago, Illinois 60661-3693
Attention: Mark K. Thomas, Esq.
Telephone: (312) 902-5200
Facsimile: (312) 902-1061
Notices to be given to New World Access or Merger Sub hereunder shall
be in writing and delivered personally to the designated officer of New World
Access, transmitted by facsimile, or deposited in the United States mail,
certified and return receipt requested, postage prepaid, and addressed as
follows (or to such other address as may be specified by New World Access in
writing):
WAXS Inc.
c/o World Access, Inc.
945 E. Paces Ferry Road
Suite 2240
Atlanta, Georgia 30326
Attention: Chief Executive Officer
Telephone: (404) 231-2025
Facsimile: (404) 365-9847
with a copy to (which will not constitute notice to New World
Access or Merger Sub):
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Steven E. Fox, Esq.
Telephone: (404) 420-4603
Facsimile: (404) 525-2224
Notices delivered personally shall be effective upon delivery. Notices
transmitted by facsimile shall be effective when receipt is confirmed. Notices
delivered by mail shall be effective upon the acceptance or rejection by the
Person to whom they are addressed.
Section 15.8. Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the domestic laws of the State of Georgia
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Georgia or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of Georgia. The
Parties hereto agree that (a) any disputes or disagreements arising from or
related to this Agreement arising prior to the Effective Date shall be submitted
to and decided by the Bankruptcy Court, which shall be the sole and exclusive
tribunal and forum for presentation and resolution of any such matters; and (b)
any disputes or disagreements arising from or related to this Agreement arising
on or after the Effective Date shall be submitted to and decided by any court of
competent jurisdiction. Notwithstanding anything herein to the contrary, the
terms, provisions and conditions hereof and the respective duties of the Parties
hereunder are subject to Applicable Bankruptcy Law.
Section 15.9. Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors; provided, however,
that any amendment effected subsequent to the approval of this Agreement by the
stockholders of New World Access will be subject to the restrictions contained
in the DGCL. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by all of the Parties. No waiver
by any Party of any default, misrepresentation, or breach of warranty or
covenant hereunder, whether intentional or not, shall be deemed to extend to any
prior or subsequent default, misrepresentation, or breach of warranty or
covenant hereunder or affect in any way any rights arising by virtue of any
prior or subsequent such occurrence.
Section 15.10. Severablilty. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
Section 15.11. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local,
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore, "hereinafter" and
other equivalent words refer to this Agreement as a whole and not solely to the
particular Article or Section in which such word is used. When a reference is
made in this Agreement to a Section or Exhibit, such reference shall be to a
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever any of the words "include", "includes" or "including"
is used in this Agreement, it shall be deemed to be followed by the words
"without limitation".
Section 15.12. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
Section 15.13. Transaction Costs. Each of the Parties shall be responsible
for its own expenses in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby, including those
expenses incurred in connection with the Proxy Statement, attorneys' fees and
disbursements, accounting fees and disbursements and investment banking fees and
disbursements.
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has caused its duly
authorized officer to execute and deliver this Agreement as of the date first
above written.
WORLD ACCESS, INC.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Its: Chairman and CEO
WAXS INC.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Its: Chairman and CEO
WA MERGER CORP.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Its: Chairman and CEO
CHERRY COMMUNICATIONS
INCORPORATED d/b/a RESURGENS
COMMUNICATIONS GROUP
By: /s/ John D. Phillips
-------------------------------------
Name: John D. Phillips
Its: Chairman and CEO
<PAGE>
Exhibit 99.2
SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
by and among
WORLD ACCESS, INC.,
WAXS INC.,
CHERRY COMMUNICATIONS U.K. LIMITED
and
RENAISSANCE PARTNERS II
May 12, 1998
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1. DEFINITIONS....................................................... 2
Section 1.1. "ACT"............................................. 2
Section 1.2. "Acquisition"..................................... 2
Section 1.3. "Acquisition Proposal"............................ 2
Section 1.4. "Adverse Consequence"............................. 2
Section 1.5. "Affiliate"....................................... 2
Section 1.6. "Agreement"....................................... 3
Section 1.7. "Ancillary Documents"............................. 3
Section 1.8. "Business"........................................ 3
Section 1.9. "Business Day".................................... 3
Section 1.10. "Change of Control"............................... 3
Section 1.11. "Cherry U.K."..................................... 4
Section 1.12. "Cherry U.K. Group"............................... 4
Section 1.13. "Cherry U.K. Intellectual Property Rights"........ 4
Section 1.14. "Cherry U.K. Financial Statements"................ 4
Section 1.15. "Cherry U.K. Material Adverse Effect"............. 4
Section 1.16. "Cherry U.K. Most Recent Balance Sheet"........... 4
Section 1.17. "Cherry U.K. Most Recent Financial Statements".... 4
Section 1.18. "Cherry U.K. Most Recent Fiscal Month End"........ 4
Section 1.19. "Cherry U.K. Most Recent Fiscal Year End"......... 4
Section 1.20. "Cherry U.K. Option".............................. 4
Section 1.21. "Cherry U.K. Optionholder"........................ 5
Section 1.22. "Cherry U.K. Plans"............................... 5
Section 1.23. "Cherry U.K. Stock"............................... 5
Section 1.24. "Closing"......................................... 5
Section 1.25. "Closing Date".................................... 5
Section 1.26. "Closing Shares".................................. 5
Section 1.27. "Code"............................................ 5
Section 1.28. "Communications Act".............................. 5
Section 1.29. "Companies Act"................................... 5
Section 1.30. "Competent Authority"............................. 5
Section 1.31. "Confidential Information"........................ 5
Section 1.32. "Consent"......................................... 6
Section 1.33. "Consideration"................................... 6
Section 1.34. "Contingent Escrowed Option Shares"............... 6
Section 1.35. "Controlled Group Liability"...................... 6
Section 1.36. "DGCL"............................................ 6
Section 1.37. "EBITDA".......................................... 6
Section 1.38. "Effective Time".................................. 6
Section 1.39. "Employee Benefit Plan"........................... 6
Section 1.40. "Employee Pension Benefit Plan"................... 6
Section 1.42. "Environment"..................................... 7
Section 1.43. "Environmental, Health, and Safety Laws".......... 7
Section 1.44. "Environmental Laws".............................. 7
Section 1.45. "Environmental Matters"........................... 7
Section 1.46. "Environmental Permits"........................... 8
Section 1.47. "Equivalent Exchange Ratio"....................... 8
Section 1.48. "ERISA"........................................... 8
Section 1.49. "ERISA Affiliate"................................. 8
Section 1.50. "Escrow Agent".................................... 8
Section 1.51. "Escrow Agreement"................................ 8
Section 1.52. "Escrowed Shares"................................. 8
Section 1.53. "Escrowed Option Shares".......................... 8
Section 1.54. "Exchange Act".................................... 8
Section 1.55. "Expenses"........................................ 8
Section 1.56. "FCC"............................................. 8
Section 1.57. "Fiduciary"....................................... 8
Section 1.58. "GAAP"............................................ 8
Section 1.59. "HSR Act"......................................... 9
Section 1.60. "Hazardous Substances"............................ 9
Section 1.61. "Holding Company Reorganization".................. 9
Section 1.62. "Indemnified Party" and "Indemnified Parties"..... 9
Section 1.63. "Intellectual Property"........................... 9
Section 1.64. "Knowledge"....................................... 9
Section 1.65. "Losses"................. ........................ 10
Section 1.66. "Liens"........................................... 10
Section 1.67. "Multi-employer Plan"............................. 10
Section 1.68. "Multiple Employer Plan".......................... 10
Section 1.69. "NACT"............................................ 10
Section 1.70. "NASDAQ".......................................... 10
Section 1.71. "New World Access"................................ 10
Section 1.72. "New World Access Option"......................... 10
Section 1.73. "New World Access Stock".......................... 10
Section 1.74. "Option Escrow Agent"............................. 10
Section 1.75. "Option Escrow Agreement"......................... 10
Section 1.76. "Ordinary Course" or "Ordinary
Course of Business"............................ 10
Section 1.77. "Parties"......................................... 10
Section 1.78. "Party"........................................... 10
Section 1.79. "Performance Period".............................. 10
Section 1.80. "Person".......................................... 11
Section 1.81. "Planning Acts"................................... 11
Section 1.82. "Properties"...................................... 11
Section 1.83. "Proxy Statement"................................. 11
Section 1.84. "PUC"............................................. 11
Section 1.85. "Qualified Cherry U.K. Plan"...................... 11
Section 1.86. "Relevant Accounting Standard".................... 11
Section 1.87. "Remedial Action"................................. 11
Section 1.88. "Regulatory Authority"............................ 12
Section 1.89. "Required Consents"............................... 12
Section 1.90. "SEC"............................................. 12
Section 1.91. "Securities Act".................................. 12
Section 1.92. "Security Interest"............................... 12
Section 1.93. "Shareholder"..................................... 12
Section 1.94. "Shareholder Disclosure Schedule"................. 12
Section 1.95. "Share Consideration"............................. 12
Section 1.96. "Shares".......................................... 12
Section 1.97. "Subsidiary"...................................... 12
Section 1.98. "TCGA"............................................ 12
Section 1.99. "Target EBITDA"................................... 12
Section 1.100. "Tax Returns"..................................... 13
Section 1.101. "Taxes"........................................... 13
Section 1.102. "Third-Party Intellectual Property Rights"........ 13
Section 1.103. "Trading Day"..................................... 13
Section 1.104. "U.K. GAAP"....................................... 13
Section 1.105. "U.S. Merger"..................................... 13
Section 1.106. "U.S. Merger Sub"................................. 13
Section 1.107. "VATA"............................................ 13
Section 1.108. "Waste"........................................... 14
Section 1.109. "World Access".................................... 14
Section 1.110. "World Access Disclosure Schedule"................ 14
Section 1.111. "World Access Financial Statements"............... 14
Section 1.112. "World Access Material Adverse Effect"............ 14
Section 1.113. "World Access Most Recent Balance Sheet".......... 14
Section 1.114. "World Access Most Recent Financial Statements"... 14
Section 1.115. "World Access Most Recent Fiscal Month End"....... 14
Section 1.116. "World Access Most Recent Fiscal Year End"........ 14
Section 1.117. "World Access SEC Documents"...................... 14
Section 1.118. "World Access Stock".............................. 14
ARTICLE 2. EXCHANGE AND RECEIPT OF CHERRY U.K. STOCK...... ......... 15
Section 2.1. Exchange and Receipt of Shares.................... 15
Section 2.2. Consideration for................................. 15
Section 2.3. Cherry U.K. Options............................... 15
Section 2.4. Escrowed Shares................................... 16
Section 2.5. Escrowed Option Shares............................ 17
Section 2.6. Adjustments....................................... 17
ARTICLE 3. EXCHANGE OF CERTIFICATES................................. 17
Section 3.1. Exchange of Certificates.......................... 17
ARTICLE 4. RELEASE OF ESCROWED SHARES............................... 17
Section 4.1. Release Criteria.................................. 17
Section 4.2. Subsequent Performance............................ 18
Section 4.3. Accelerated Release............................... 18
Section 4.4. Transfer Restrictions............................. 19
Section 4.5. Contingent Escrowed Option Shares................. 19
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF WORLD ACCESS
AND NEW WORLD ACCESS................................... 19
Section 5.1. Authority......................................... 19
Section 5.2. Organization, Qualification, and
Corporate Power................................. 20
Section 5.3. Capitalization.................................... 20
Section 5.4. Non-contravention................................. 20
Section 5.5. Brokers' Fees..................................... 21
Section 5.6. World Access SEC Documents........................ 21
Section 5.7. Events Subsequent to World Access Most
Recent Fiscal Year End.......................... 22
Section 5.8. Undisclosed Liabilities........................... 23
Section 5.9. Opinion of Financial Advisor...................... 24
Section 5.10. Litigation........................................ 24
ARTICLE 6. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER............ 24
Section 6.1. Authority......................................... 24
Section 6.2. Organization, Qualification, and
Corporate Power................................. 24
Section 6.3. Capitalization; Title to Shares................... 25
Section 6.4. Non-contravention................................. 25
Section 6.5. Brokers' Fees..................................... 26
Section 6.6. Title to Assets................................... 26
Section 6.7. Subsidiaries...................................... 26
Section 6.8. Financial Statements.............................. 27
Section 6.9. Events Subsequent to Cherry U.K. Most
Recent Fiscal Year End.......................... 28
Section 6.10. Undisclosed Liabilities........................... 29
Section 6.11. Legal Compliance.................................. 29
Section 6.12. Tax Matters....................................... 30
Section 6.13. Real Property..................................... 33
Section 6.14. Intellectual Property............................. 34
Section 6.15. Tangible Assets................................... 35
Section 6.16. Inventory......................................... 35
Section 6.17. Contracts......................................... 35
Section 6.18. Notes and Accounts Receivable..................... 37
Section 6.19. Insurance......................................... 37
Section 6.20. Litigation........................................ 37
Section 6.21. Employees......................................... 37
Section 6.22. Employee Benefits................................. 37
Section 6.23. Guaranties........................................ 40
Section 6.24. Environment, Health, and Safety................... 40
Section 6.25. Licenses, Permits, Consents and Authorities....... 41
Section 6.26. Proxy Statement................................... 41
ARTICLE 7. COVENANTS................................................ 41
Section 7.1. Conduct of the Business of Cherry U.K.
and its Subsidiaries............................ 41
Section 7.2. Conduct of Business of World Access
and its Subsidiaries............................ 43
Section 7.3. Access to Books and Records....................... 44
Section 7.4. Preparation of Proxy Statement.................... 44
ARTICLE 8. ADDITIONAL AGREEMENTS.................................... 44
Section 8.1. Best Efforts; Cooperation......................... 44
Section 8.2. Regulatory Matters................................ 45
Section 8.3. Indemnification Regarding the Proxy Statement..... 45
Section 8.4. Notice of Developments............................ 46
Section 8.5. Notices and Consents.............................. 46
Section 8.6. Indemnity......................................... 46
Section 8.7. Exclusive Dealing................................. 47
Section 8.8. Investment Representations........................ 48
ARTICLE 9. EFFECTIVE TIME; CLOSING; DELIVERIES AT CLOSING........... 49
Section 9.1. Effective Time; Closing........................... 49
Section 9.2. Deliveries by Shareholder......................... 49
Section 9.3. Deliveries by New World Access.................... 50
ARTICLE 10. MUTUAL CONDITIONS TO CLOSING............................. 51
Section 10.1. Board Meeting of Cherry U.K. and Subsidiaries..... 51
Section 10.2. Regulatory Approvals.............................. 51
Section 10.3. Litigation........................................ 52
Section 10.4. Proxy Statement................................... 52
Section 10.5. Consummation of Holding
Company Reorganization.......................... 52
Section 10.6. Resignations...................................... 52
Section 10.7. Escrow Agreement.................................. 52
Section 10.8. Option Escrow Agreement........................... 52
Section 10.9. Material Condition................................ 52
Section 10.10. Consents.......................................... 52
Section 10.11. NASDAQ Listing.................................... 53
Section 10.12. U.S. Merger Transaction........................... 53
ARTICLE 11. CONDITIONS TO THE OBLIGATIONS OF NEW WORLD ACCESS........ 53
Section 11.1. Representations and Warranties.................... 53
Section 11.2. Performance of Obligations........................ 53
Section 11.3. Certificate Representing Satisfaction
of Conditions................................... 53
Section 11.4. Tax Opinion....................................... 53
Section 11.5. Material Adverse Change........................... 54
ARTICLE 12. CONDITIONS TO OBLIGATIONS OF SHAREHOLDER................. 54
Section 12.1. Representations and Warranties.................... 54
Section 12.2. Performance of Obligations........................ 54
Section 12.3. Certificate Representing Satisfaction
of Conditions................................... 54
Section 12.4. Tax Opinion....................................... 54
Section 12.5. Material Adverse Change........................... 54
ARTICLE 13. TERMINATION.............................................. 54
Section 13.1. Termination of Agreement.......................... 54
Section 13.2. Effect of Termination and Breach.................. 55
Section 13.3. Confidentiality Upon Termination.................. 56
Section 13.4. Specific Performance.............................. 56
ARTICLE 14. GENERAL PROVISIONS....................................... 56
Section 14.1. Nonsurvival of Representations
and Warranties.................................. 56
Section 14.2. Press Releases and Public Announcements........... 56
Section 14.3. No Third-Party Beneficiaries...................... 56
Section 14.4. Entire Agreement.................................. 56
Section 14.5. Succession and Assignment......................... 57
Section 14.6. Counterparts...................................... 57
Section 14.7. Notices........................................... 57
Section 14.8. Governing Law..................................... 58
Section 14.9. Amendments and Waivers............................ 58
Section 14.10. Severability...................................... 58
Section 14.11. Construction...................................... 59
Section 14.12. Incorporation of Exhibits and Schedules........... 59
Section 14.13. Transaction Costs................................. 59
EXHIBITS:
Exhibit A -- Escrow Agreement
Exhibit B -- Option Escrow Agreement
<PAGE>
SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION
THIS SHARE EXCHANGE AGREEMENT AND PLAN OF REORGANIZATION (as amended,
supplemented or otherwise modified from time to time, the "Agreement"), dated as
of the 12th day of May, 1998, is entered into by and among WORLD ACCESS, INC., a
Delaware corporation ("World Access"), WAXS INC., a Delaware corporation and a
wholly-owned subsidiary of World Access ("New World Access"), CHERRY
COMMUNICATIONS U.K. LIMITED, a corporation organized and existing under and by
virtue of the laws of England and Wales ("Cherry U.K."), and RENAISSANCE
PARTNERS II, a Georgia general partnership (the "Shareholder"), the partners of
which are JOHN D. PHILLIPS and W. TOD CHMAR, each an individual resident of the
State of Georgia, United States of America.
W I T N E S S E T H:
WHEREAS, on February 24, 1998, World Access, New World Access, WAXS
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of New
World Access, NACT Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of New World Access, and NACT Telecommunications, Inc., a Delaware
corporation and a majority-owned subsidiary of World Access ("NACT"), entered
into that certain Agreement and Plan of Merger and Reorganization, pursuant to
which, among other things, each of World Access and NACT will become
wholly-owned subsidiaries of New World Access (the "Holding Company
Reorganization");
WHEREAS, Shareholder is the sole shareholder of Cherry U.K. and is the
registered holder and beneficial owner of all of the issued and outstanding
ordinary shares (the "Shares"), (pound)1 each, of Cherry U.K. (the "Cherry U.K.
Stock");
WHEREAS, Shareholder desires to exchange with New World Access, and New
World Access desires to receive from Shareholder, the Shares (the "Acquisition")
upon the terms and conditions set forth herein;
WHEREAS, World Access, New World Access, WA Merger Corp., a Delaware
corporation and a wholly-owned subsidiary of New World Access ("U.S. Merger
Sub"), and Cherry Communications Incorporated d/b/a Resurgens Communications
Group, an Illinois corporation ("RCG"), have entered into that certain Agreement
and Plan of Merger and Reorganization dated of even date herewith (the "U.S.
Merger Agreement"), pursuant to which U.S. Merger Sub will be merged with and
into RCG and RCG will become a wholly-owned subsidiary of New World Access (the
"U.S. Merger");
WHEREAS, the consummation of the transactions contemplated hereby is
a condition to the consummation of the U.S. Merger, and the consummation of the
U.S. Merger is a condition to the consummation of the transactions contemplated
hereby;
WHEREAS, the Shareholder, Cherry U.K., World Access and New World
Access desire to make certain representations, warranties and agreements in
connection with the Acquisition and also to prescribe various conditions
thereto; and
WHEREAS, for Federal income tax purposes, it is intended that the
Acquisition shall qualify as a reorganization under the provisions of Section
368(a)(1)(B) of the Code.
NOW, THEREFORE, in consideration of the premises and the mutual
promises herein made, and in consideration of the warranties and covenants
herein contained, the Parties agree as follows:
<PAGE>
ARTICLE 1.
DEFINITIONS
Capitalized terms used in this Agreement shall have the definitions set
forth in this Article 1.
Section 1.1. "ACT" has the meaning set forth in Section 16.12.15 hereof.
Section 1.2. "Acquisition" has the meaning set forth in the recitals
hereto.
Section 1.3. "Acquisition Proposal" means any acquisition or purchase (or
any inquiry or proposal with respect thereto) of all or any substantial portion
of the assets of Cherry U.K. or of over 10% of any class of equity share capital
of Cherry U.K., or any merger, purchase, exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving Cherry U.K. other than the transactions contemplated by this
Agreement, or any other transaction the consummation of which would reasonably
be expected to impede, interfere with, prevent or materially delay the
Acquisition or which would reasonably be expected to dilute materially the
benefits to World Access or New World Access of the Acquisition.
Section 1.4. "Adverse Consequences" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including reasonable court costs and reasonable attorneys'
fees and expenses.
Section 1.5. "Affiliate" means, (a) with respect to each Party, an officer
or director of such Party or any Person owning an equity interest of 10% or more
of such Party, any direct or indirect wholly owned subsidiary of such Party, any
other subsidiary owned directly or indirectly by a direct or indirect parent
company of such Party or any other Person in which such Party has at least a 10%
equity interest in the equity securities or equity share capital, and (b) with
respect to any Person not a Party, any Person who controls, is controlled by or
is under common control with such Person and any officer or director of such
Person or any other Person owning at least a 10% equity interest in such Person.
Section 1.6. "Agreement" has the meaning set forth in the preamble to this
Agreement.
Section 1.7. "Ancillary Documents" means all of the documents and
instruments attached hereto as exhibits or attachments or required to be
delivered by the terms of this Agreement.
Section 1.8. "Business" has the meaning set forth in the recitals hereto.
Section 1.9. "Business Day" means each day on which national banks in the
Atlanta, Georgia area are open for business.
Section 1.10. "Change of Control" shall be deemed to have occurred if:
(a) any Person (including any syndicate or group deemed to be
a "person" under Section 13(d) (3) of the Exchange Act), other than New World
Access, any subsidiary of New World Access, or any employee benefit plan of New
World Access or any such subsidiary, is or becomes the beneficial owner,
directly or indirectly, through a purchase or other acquisition transaction or
series of transactions (other than a merger or consolidation involving New World
Access), of shares of capital stock of New World Access entitling such Person to
exercise in excess of 50% of the total voting power of all shares of capital
stock of New World Access entitled to vote generally in the election of
directors;
(b) there occurs any consolidation of New World Access with,
or merger of New World Access into, any other Person, any merger of another
Person into New World Access, or any sale or transfer of the assets of New World
Access, as an entirety or substantially as an entirety, to another Person (other
than either (i) any such transaction pursuant to which the holders of the New
World Access Stock immediately prior to such transaction have, directly or
indirectly, shares of capital stock of the continuing or surviving corporation
immediately after such transaction which entitle such holders to exercise in
excess of 50% of the total voting power of all shares of capital stock of the
continuing or surviving corporation entitled to vote generally in the election
of directors or (ii) any merger (A) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding shares of
New World Access Stock or (B) which is effected solely to change the
jurisdiction of incorporation of New World Access and results in a
reclassification, conversion or exchange of outstanding shares of New World
Access Stock solely into shares of common stock and separate series of common
stock carrying substantially the same relative rights as the New World Access
Stock); or
(c) a change in the Board of Directors of New World Access in
which the individuals who constituted the Board of Directors of New World Access
at the beginning of the one-year period immediately preceding such change
(together with any other director whose election by the Board of Directors of
New World Access or whose nomination for election by the stockholders of New
World Access was approved by a vote of at least a majority of the directors then
in office either who were directors at the beginning of such period or whose
election or nomination for election was previously so approved) cease for any
reason (other than death or resignation) to constitute at least a two-thirds
majority of the directors then in office.
Notwithstanding the foregoing, any Change of Control that results from (i)
WorldCom, Inc. ("WorldCom") or any of its Affiliates soliciting proxies or
becoming a "participant" in a "solicitation" (as such terms are defined in
Regulation 14A under the Exchange Act) in opposition to the recommendation of
the majority of the members of the Board of Directors of New World Access on any
matter or (ii) the merger, share exchange, consolidation or similar transaction
between New World Access and WorldCom or any of its Affiliates, without the
prior written consent of New World Access, shall not be deemed a Change of
Control for purposes of this Agreement.
Section 1.11. "Cherry U.K." has the meaning set forth in the preamble
hereto.
Section 1.12. "Cherry U.K. Group" means Cherry U.K. and its
Subsidiaries.
Section 1.13. "Cherry U.K. Intellectual Property Rights" has the meaning
set forth in Section 6.14 hereof.
Section 1.14. "Cherry U.K. Financial Statements" has the meaning set forth
in Section 6.8 hereof.
Section 1.15. "Cherry U.K. Material Adverse Effect" shall mean any change
in or effect on the business of Cherry U.K. and its Subsidiaries that is, or
could reasonably be expected to be, materially adverse to the business,
prospects, assets (including intangible assets), liabilities (contingent or
otherwise), condition (financial or otherwise) or results of operations of
Cherry U.K. and its Subsidiaries taken as a whole.
Section 1.16. "Cherry U.K. Most Recent Balance Sheet" means the
consolidated balance sheet of Cherry U.K. as of December 31, 1997 included in
the Cherry U.K. Most Recent Financial Statements.
Section 1.17. "Cherry U.K. Most Recent Financial Statements" has the
meaning set forth in Section 6.8 hereof.
Section 1.18. "Cherry U.K. Most Recent Fiscal Month End" has the meaning
set forth in Section 6.8 hereof.
Section 1.19. "Cherry U.K. Most Recent Fiscal Year End" has the meaning set
forth in Section 6.8 hereof.
Section 1.20. "Cherry U.K. Option" has the meaning set forth in Section 2.3
hereof.
Section 1.21. "Cherry U.K. Optionholder" has the meaning set forth in
Section 2.3 hereof.
Section 1.22. "Cherry U.K. Plans" means all Employee Benefit Plans,
programs, policies, practices, and other arrangements providing benefits to any
employee or former employee or beneficiary or dependent thereof, whether or not
written, and whether covering one Person or more than one Person, sponsored or
maintained by Cherry U.K. or any of its Subsidiaries, or to which Cherry U.K.,
or any of its Subsidiaries, contributes or is obligated to contribute. Without
limiting the generality of the foregoing, the term "Cherry U.K. Plans" includes
all employee welfare benefit plans within the meaning of Section 3(1) of ERISA
and all employee pension benefit plans within the meaning of Section 3(2) of
ERISA.
Section 1.23. "Cherry U.K. Stock" has the meaning set forth in the recitals
hereto.
Section 1.24. "Closing" has the meaning set forth in Section 9.1 hereof.
Section 1.25. "Closing Date" has the meaning set forth in Section 9.1
hereof.
Section 1.26. "Closing Shares" has the meaning set forth in Section 2.2
hereof.
Section 1.27. "Code" means the Internal Revenue Code of 1986, as amended,
together with the rules and regulations promulgated thereunder.
Section 1.28. "Communications Act" means the Federal Communications Act of
1934, as amended, together with the rules and regulations promulgated
thereunder.
Section 1.29. "Companies Act" means the Companies Act 1985 (as amended or
reenacted the Companies Act 1989).
Section 1.30. "Competent Authority" means any national or local government
or national or local governmental agency or any EC body or agency having
regulatory or administrative authority under Environmental Laws.
Section 1.31. "Confidential Information" means and includes written data,
reports, interpretations, analyses, trade secrets, processes, drawings,
photographs, records, specifications, designs, programs, product development
activities, software packages and related documentation, technical know-how,
concepts, theories, ideas, methods and procedures of operation, business or
marketing plans, proposals, financial information, compiled data,
communications, customer lists and data and equipment, as well as the nature and
results of a Party's development activities and all other information and/or
materials related to the business or activities of a Party, but excluding such
information that is (a) generally available to the public, or (b) available, or
becomes available, to a Party on a non-confidential basis prior to its
disclosure from a Person authorized to disclose the same.
Section 1.32. "Consent" means a consent, approval or authorization, waiver,
clearance, exemption or similar affirmation by any Person pursuant to any
contract, permit, law, regulation or order.
Section 1.33. "Consideration" means the Share Consideration and the New
World Access Options.
Section 1.34. "Contingent Escrowed Option Shares" has the meaning set forth
in Section 2.5 hereof.
Section 1.35. "Controlled Group Liability" means any and all liabilities
under (a) Title IV of ERISA, (b) Section 302 of ERISA, (c) Sections 412 and 4971
of the Code, (d) the continuation coverage requirements of section 601 et seq.
of ERISA and Section 4980B of the Code, and (e) corresponding or similar
provisions of foreign laws or regulations, in each case other than pursuant to
the World Access Plans with respect to World Access and its Subsidiaries, or the
Cherry U.K. Plans with respect to Cherry U.K.
Section 1.36. "DGCL" means Title 8 of the Delaware Code, as amended
Section 1.37. "EBITDA" means the sum of income before net interest and
provision for income taxes, plus depreciation and amortization expense
determined consistent with Cherry U.K.'s unaudited consolidated statement of
income for the Cherry U.K. Most Recent Fiscal Year. Notwithstanding the
foregoing, any change in the policies or procedures employed in determining the
EBITDA of Cherry U.K. shall be approved by a majority vote of the members of the
audit committee of the Board of Directors of New World Access who are not
Affiliates of WorldCom, Inc.
Section 1.38. "Effective Time" has the meaning set forth in Section 9.1
hereof.
Section 1.39. "Employee Benefit Plan" means any (a) non-qualified deferred
compensation or retirement plan or arrangement which is an Employee Pension
Benefit Plan, (b) qualified defined contribution retirement plan or arrangement
which is an Employee Pension Benefit Plan, (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-Employer Plan), or (d) Employee Welfare Benefit Plan (or
material fringe benefit plan or program).
Section 1.40. "Employee Pension Benefit Plan" has the meaning set forth in
ERISA Section 3(2).
Section 1.41. "Employee Welfare Benefit Plan" has the meaning set forth in
ERISA Section 3(l).
Section 1.42. "Environment" means all or any of the following media, namely
air, water or land, including such media within buildings or other natural or
man made structures above or below ground and any living organisms or
ecosystems.
Section 1.43. "Environmental, Health, and Safety Laws" means, with respect
to New World Access and World Access, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Resource Conservation and Recovery
Act of 1976, and the Occupational Safety and Health Act of 1970, each as
amended, and with respect to Cherry U.K., the Town and Country Planning Act
1990, the Planning (Listed Buildings and Conservation Areas) Act 1990, the
Planning (Hazardous Substances) Act 1990, the Planning (Consequential
Provisions) Act 1990 and the Planning and Compensation Act 1991 and the Rules,
Regulations and Orders made under them or continued by them as they apply from
time to time, together with the Environmental Laws and all other laws (including
rules, regulations, codes, plans, injunctions, judgments, orders, decrees,
rulings and charges thereunder) of federal, state, local, and foreign
governments (and all agencies thereof) concerning public health and safety, or
employee health and safety.
Section 1.44. "Environmental Laws" means all or any applicable law (whether
civil, criminal or administrative), common law, statute, statutory instrument,
treaty, regulation, directive, decision, by-law, circular, code, plan, order,
notice, demand, decree, injunction, resolution or judgment which relate to
Environmental Matters and which are in force from time to time.
Section 1.45. "Environmental Matters" means any or all of the
following:
(a) protection of the Environment;
(b) pollution or contamination;
(c) the generation, manufacture, processing, handling, storage,
distribution, use, treatment, removal, transport, importation,
exportation, disposal, release, spillage, deposit, escape,
discharge, leak, emission, leaching or migration of Hazardous
Substances or Waste;
(d) exposure of any person to Hazardous Substances or Waste;
(e) the creation of any noise, vibration, radiation, common law or
statutory nuisance, or other impact on the Environment;
(f) any other matters relation to the condition, protection,
maintenance, restoration or replacement of the Environment or
any part of it arising directly or indirectly out of the
manufacturing, processing, treatment, storage, keeping,
handling, use (including as a building material), possession,
supply, receipt, sale, purchase, import, export,
transportation or presence of Hazardous Substances or Waste;
(g) human health and safety; and
(h) town and country planning.
Section 1.46. "Environmental Permits" means all or any authorizations,
certificates, approvals, permits, licenses, or consents (and all conditions
attaching thereto) required under any Environmental Laws for the operation of
the business of Cherry U.K. or the occupation or use of the Properties.
Section 1.47. "Equivalent Exchange Ratio" means the ratio, expressed as a
fraction, obtained by dividing (i) 1,875,000 by (ii) all of the Shares plus all
of the shares of Cherry U.K. Stock underlying the Cherry U.K. Options.
Section 1.48. "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
Section 1.49. "ERISA Affiliate" means, with respect to any entity, trade or
business, any other entity, trade or business that is a member of a group
described in Section 414(b), (c), (m) or (o) of the Code or Section 4001(b)(1)
of ERISA that includes the first entity, trade or business, or that is a member
of the same "controlled group" as the first entity, trade or business pursuant
to Section 4001(a)(14) of ERISA.
Section 1.50. "Escrow Agent" has the meaning set forth in Section 2.3
hereof.
Section 1.51. "Escrow Agreement" has the meaning set forth in Section 2.3
hereof.
Section 1.52. "Escrowed Shares" has the meaning set forth in Section 2.2
hereof.
Section 1.53. "Escrowed Option Shares" has the meaning set forth in Section
2.5 hereof.
Section 1.54. "Exchange Act" means the Securities Exchange Act of 1934, as
amended, together with the rules and regulations promulgated thereunder.
Section 1.55. "Expenses" has the meaning set forth in Section 8.7 hereof.
Section 1.56. "Extra Shares" has the meaning set forth in Section 2.2
hereof.
Section 1.57. "FCC" means the Federal Communications Commission.
Section 1.58. "Fiduciary" has the meaning set forth in ERISA Section 3(21).
Section 1.59. "GAAP" means United States generally accepted accounting
principles as in effect from time to time. The requirement that such principles
be consistently applied and applied on a consistent basis shall mean that the
accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
Section 1.60. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, together with the rules and regulations promulgated
thereunder.
Section 1.61. "Hazardous Substances" means any noxious, dangerous,
hazardous, toxic or flammable materials or substances or any mixture thereof
which are or maybe present in such quantities and concentrations as (a) may
cause harm to the Environment, (b) are regulated under any Environmental Law or
(c) may require investigation or remediation under any Environmental Law.
Section 1.62. "Holding Company Reorganization" has the meaning set forth in
the recitals hereto.
Section 1.63. "Indemnified Party" have the meanings set forth in Section
10.6 hereof.
Section 1.64. "Intellectual Property" means (a) all inventions (whether
patentable or unpatentable), all improvements thereto, and all patents, patent
applications, and patent disclosures, together with all reissuances,
continuations, continuations in part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade drafts, logos, trade names,
and corporate names, together with all translations, adaptations, derivations,
and combinations thereof and including all goodwill associated therewith, and
all applications, registrations, and renewals in connection therewith, (c) all
copyrightable works, all copyrights, and all applications, registrations, and
renewals in connections therewith, (d) all mask works and all applications,
registrations, and renewals in connection therewith, (e) all trade secrets and
confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and
techniques, technical data, designs, drawings, specifications, customer and
supplier list, pricing and cost information, and business and marketing plans
and proposals), (f) all computer software (including data and related
documentation), (g) all other proprietary rights and (h) all copies and tangible
embodiments thereof in whatever form or medium.
Section 1.65. "Knowledge" means either (a) that an individual is actually
aware of a particular fact or other matter or (b) a prudent individual could be
expected to discover or otherwise become aware of such fact or other matter in
the course of performing the duties which are normally performed by an
individual acting in a similar capacity. A Person (other than an individual)
will be deemed to have "Knowledge" of a particular fact or other matter if any
individual who is serving as a director, executive officer, partner, executor or
trustee of such Person (or in any similar capacity) has, or at any time had,
knowledge of such fact or other matter.
Section 1.66. "Losses" means any and all claims, demands, losses, costs,
expenses, obligations, liabilities, damages, recoveries and deficiencies,
including interest, penalties and attorneys' fees and disbursements.
Section 1.67. "Liens" means all liens, claims, charges and other
encumbrances and restrictions of any kind or nature.
Section 1.68. "Multi-employer Plan" has the meaning set forth in Section
3(37) of ERISA.
Section 1.69. "Multiple Employer Plan" has the meaning set forth in Section
4063 of ERISA.
Section 1.70. "NACT" has the meaning set forth in the recitals hereto.
Section 1.71. "NASDAQ" means The Nasdaq National Market."
Section 1.72. "New World Access" has the meaning set forth in the preamble
hereto.
Section 1.73. "New World Access Option" has the meaning set forth in
Section 2.3 hereof.
Section 1.74. "New World Access Stock" means any share of the common stock,
$.01 par value per share, of New World Access.
Section 1.75. "Option Escrow Agent" has the meaning set forth in Section
2.5 hereof.
Section 1.76. "Option Escrow Agreement" has the meaning set forth in
Section 2.5 hereof.
Section 1.77. "Ordinary Course" or "Ordinary Course of Business" means any
action taken by a Person only if (a) such action is consistent with the past
practices of such Person and is taken in the ordinary course of the normal
day-to-day operations of such Person, or (b) such action is similar in nature
and magnitude to actions customarily taken, without any authorization by the
board of directors (or by any Person or group of Persons exercising similar
authority), in the ordinary course of the normal day-to-day operations of other
Persons that are in the same line of business as such Person.
Section 1.78. "Parties" means collectively, or any two or more of, World
Access, New World Access, Cherry U.K., the Shareholder and the Cherry U.K.
Optionholders (if any).
Section 1.79. "Party" means any one of the Parties.
Section 1.80. "Performance Period" has the meaning set forth in Section 4.1
hereof.
Section 1.81. "Person" means an individual, a partnership, a corporation,
an association, a joint stock company, a trust, a joint venture, an
unincorporated organization or association, a limited liability company, a
limited liability partnership, or a governmental entity (or any department,
agency, or political subdivision thereof, including a Regulatory Authority).
Section 1.82. "Planning Acts" means the Town and Country Planning Act 1990,
the Planning (Listed Buildings and Conservation Areas) Act 1990, the Planning
(Hazardous Substances) Act 1990, the Planning (Consequential Provisions) Act
1990 and the Planning and Compensation Act 1991 and the rules, regulations and
orders made under them or continued by them as they apply from time to time.
Section 1.83. "Properties" has the meaning set forth in Section 6.13.2
hereof.
Section 1.84. "Proxy Statement" has the meaning set forth in Section 7.4
hereof.
Section 1.85. "PUC" means any state public service commission.
Section 1.86. "Qualified Cherry U.K. Plan" has the meaning set forth in
Section 6.21 hereof.
Section 1.87. "Relevant Accounting Standard" means any applicable Statement
of Standard Accounting Practice, Financial Reporting Standard, Consensus or
Statement of Recommended Practice issued by the Accounting Standards Board in
the United Kingdom, or any committee of it or body recognized by it in force on
the date of the Cherry U.K. Most Recent Balance Sheet.
Section 1.88. "Remedial Action" means:
(a) removing, remedying, cleaning up, making good, modifying,
restoring, improving, abating, containing or ameliorating the
presence in or effect on the Environment, the Properties or
any organism (including humans) of any Hazardous Substances or
Waste, including the removal from any structure of Hazardous
Substances or Waste incorporated into that structure (whether
above or below ground, natural or man made and including all
pipes and tanks); or
(b) securing compliance of the business of Cherry U.K. with all
Environmental Laws and Environmental Permits, including any
and all investigative activities, sampling, monitoring or
analyzing any pollution or contamination of the Environment
and obtaining expert technical and legal advice required in
relation thereto); or
(c) such other action or steps as are considered necessary by New
World Access to avoid, mitigate, abate or prevent any
nuisance, pollution or contamination of the Environment.
Section 1.89. "Regulatory Authority" means, collectively, the FCC, PUCs,
the Federal Trade Commission, the United States Department of Justice, the SEC,
the National Association of Securities Dealers, Inc., and all national and state
securities exchanges, as well as all regulatory agencies and authorities
organized under the laws of England and Wales and the European Community,
including the European Commission, and any other governmental or regulatory
body, agency, instrumentality or authority.
Section 1.90. "Required Consents" has the meaning set forth in Section 5.3
hereof.
Section 1.91. "SEC" means the United States Securities and Exchange
Commission.
Section 1.92. "Securities Act" means the Securities Act of 1933, as
amended, together with the rules and regulations promulgated hereunder.
Section 1.93. "Security Interest" means any mortgage, pledge, lien,
encumbrance, charge, or other security interest, other than (a) mechanic's,
materialman's, and similar liens for work done on the property to the extent
that such liens arise in the Ordinary Course of Business and are not yet due and
payable, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, in each case, where there exists no default in World Access's or
any Subsidiary's obligations with respect to the underlying agreements, and (d)
other liens arising in the Ordinary Course of Business and not incurred in
connection with the borrowing of money.
Section 1.94. "Shareholder" has the meaning set forth in the preamble
hereto.
Section 1.95. "Shareholder Disclosure Schedule" has the meaning set forth
in Article 6 hereof.
Section 1.96. "Share Consideration" has the meaning set forth in Section
2.2 hereof.
Section 1.97. "Shares" has the meaning set forth in the recitals hereto.
Section 1.98. "Subsidiary" means any corporation with respect to which a
specified Person (or a Subsidiary thereof) owns (directly or indirectly) a
majority of the common stock and share capital or has the power to vote or
direct the voting of sufficient securities to elect a majority of the directors
and, in respect of Cherry U.K., includes the meaning given such term in Part
XXVI of the Companies Act.
Section 1.99. "TCGA" has the meaning set forth in Section 6.12.17 hereof.
Section 1.100. "Target EBITDA" has the meaning set forth in Section 4.1
hereof.
Section 1.101. "Tax Returns" means, collectively, (a) all reports,
declarations, estimates, returns, information statements, and similar documents
relating to, or required to be filed in respect of any Taxes, and (b) all
information statements, returns, reports or similar documents required to be
filed with respect to payments to (or from) third parties or with respect to
transactions in which any Party or any of its Subsidiaries participates. The
term "Tax Return" shall mean any one of the foregoing Tax Returns.
Section 1.102. "Taxes" means, collectively, (a) all net income, gross
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
lease, service, service use, withholding, employment, payroll, excise,
severance, transfer, documentary, mortgage, registration, stamp, occupation,
environmental, premium, property, windfall, profits, customs, duties, and other
taxes, fees, assessments or charges of any kind whatever, including any
estimates thereof, together with any interest, penalties and other additions
with respect thereto, imposed by any federal, territorial, state, local or
foreign government; and (b) any penalties, interest, or other additions to tax
for the failure to collect, withhold, or pay over any of the foregoing, or to
accurately file any Tax Return. The term "Tax" shall mean any one of the
foregoing Taxes. When used with reference to a specified Person, the terms
"Taxes" and "Tax" shall include only amounts of, or in respect of, Taxes for
which such Person is, or could become, liable in whole or part (including any
obligation in connection with a duty to collect, withhold, or pay over any Tax,
any obligation to contribute to the payment of any Taxes determined on a
consolidated, combined, or unitary basis, any liability as a transferee, or any
liability as a result of any express or implied obligation to indemnity or pay
the Tax obligations of another Person).
Section 1.103. "Third-Party Intellectual Property Rights" means, with
respect to each of World Access and Cherry U.K., all licenses, sublicenses and
other agreements as to which it is a party and pursuant to which it is
authorized to use any third-party patents, trademarks, service marks or
copyrights.
Section 1.104. "Trading Day" means each Monday, Tuesday, Wednesday,
Thursday and Friday, other than any day on which securities are not traded on
NASDAQ.
Section 1.105. "U.K. GAAP" means generally accepted accounting principles
and practices in the United Kingdom as in effect from time to time. The
requirement that such principles be consistently applied and applied on a
consistent basis shall mean that the accounting principles observed in a current
period are comparable in all material respects to those applied in a preceding
period.
Section 1.106. "U.S. Merger" has the meaning set forth in the recitals
hereto.
Section 1.107. "U.S. Merger Sub" has the meaning set forth in the recitals
hereto.
Section 1.108. "VATA" has the meaning set forth in Section 6.12.23 hereof.
Section 1.109. "Waste" means any waste as defined in Section 75 of the
Environmental Protection Act 1990.
Section 1.110. "World Access" has the meaning set forth in the preamble
hereto.
Section 1.111. "World Access Disclosure Schedule" has the meaning set forth
in Article 5 hereof.
Section 1.112. "World Access Financial Statements" has the meaning set
forth in Section 5.5 hereof.
Section 1.113. "World Access Material Adverse Effect" shall mean (a) prior
to the consummation of the Holding Company Reorganization, any change in or
effect on the business of World Access and its Subsidiaries that is, or could
reasonably be expected to be, materially adverse to the business, prospects,
assets (including intangible assets), liabilities (contingent or otherwise),
condition (financial or otherwise) or results of operations of World Access and
the its Subsidiaries taken as a whole, and (b) after the consummation of the
Holding Company Reorganization, any change in or effect on the business of New
World Access and its Subsidiaries that is, or could reasonably be expected to
be, materially adverse to the business, prospects, assets (including intangible
assets), liabilities (contingent or otherwise), condition (financial or
otherwise) or results of operations of New World Access and its Subsidiaries
taken as a whole.
Section 1.114. "World Access Most Recent Balance Sheet" means the
consolidated balance sheet of World Access as of December 31, 1997 included in
the World Access SEC Documents.
Section 1.115. "World Access Most Recent Financial Statements" means the
consolidated financial statements for the year ended December 31, 1997 included
in the World Access SEC Documents.
Section 1.116. "World Access Most Recent Fiscal Month End" means December
31, 1997.
Section 1.117. "World Access Most Recent Fiscal Year End" means December
31, 1997.
Section 1.118. "World Access SEC Documents" has the meaning set forth in
Section 7.5 hereof.
Section 1.119. "World Access Stock" means any share of the common stock,
$0.01 par value per share,of World Access.
ARTICLE 2.
EXCHANGE AND RECEIPT OF CHERRY U.K. STOCK
Section 2.1. Exchange and Receipt of Shares. Upon the terms and subject to
the conditions set forth in this Agreement, at the Effective Time, Shareholder
shall exchange, convey, assign, transfer and deliver to New World Access the
legal and beneficial ownership of the Shares, and New World Access shall receive
from Shareholder, all of Shareholder's right, title and interest in and to the
Shares, including all rights now or hereafter attaching to them to any dividend
or other distribution declared, made or paid after the date hereof, for an
amount equal to the Share Consideration. Shareholder covenants that (a) it has
full power and the right to transfer the legal and beneficial title to the
Shares; (b) the Shares shall at Closing be free from any Liens or Security
Interests of any kind and from all other rights exercisable by third parties;
and (c) it will execute at its own cost and expense such documents as New World
Access reasonably considers necessary to transfer the legal and beneficial
ownership of the Shares to New World Access and secure to New World Access the
rights attaching thereto.
Section 2.2. Consideration for Shares. The consideration payable for the
Shares (the "Share Consideration") shall be equal to an aggregate of (a)
1,875,000 shares of New World Access Stock less (b) any shares of New World
Access Stock issuable upon the exercise of options or warrants to purchase
Cherry U.K. Stock granted after the date hereof and converted by New World
Access in accordance with Section 2.3 below prior to the Closing plus (c) any
Escrowed Option Shares delivered to Shareholder pursuant to Section 2.5 below.
The number of shares of New World Access Stock to be issued to Shareholder at
Closing (the "Closing Shares") shall be equal to (a) one-third of the Share
Consideration (excluding the Escrowed Option Shares) plus (b) the number of
Option Shares (the "Extra Shares") underlying New World Access Options to the
extent that less than one-third of such shares may be acquired upon exercise
without regard to the conditions set forth in Article 4 hereof relating to the
release of Escrowed Shares. The remaining number of shares of New World Access
Stock (excluding the Escrowed Option Shares) comprising the Share Consideration
shall be issued and held in escrow pursuant to Section 2.4 below.
Notwithstanding anything to the contrary contained herein, no holder of the
Closing Shares may, until the 365th day following the Closing Date, without the
prior written consent of New World Access, offer, sell, contract to sell or
otherwise dispose of, directly or indirectly, any such shares or any security
convertible into or exchangeable or exercisable therefor, either publicly or
privately.
Section 2.3. Cherry U.K. Options. From and after the date hereof, Cherry
U.K. may grant and award options or warrants to acquire Cherry U.K. Stock (each
a "Cherry U.K. Option") on the terms and conditions set forth in a Cherry U.K.
Option Agreement in a form to be mutually acceptable to Cherry U.K. and New
World Access, provided that the grantee of any such option or warrant (each a
"Cherry U.K. Optionholder") shall execute a counterpart of this Agreement and
thereupon become a Party hereto, and further provided, that the number of shares
of New World Access Stock issuable upon the exercise of such Cherry U.K. Options
(determined in accordance with this Section 2.3) does not exceed 937,500. Each
Cherry U.K. Option granted in accordance with the foregoing shall be assumed by
New World Access at the Effective Time and shall be converted into an option to
acquire New World Access Stock (each New World Access option or warrant granted
hereunder, a "New World Access Option") in such number and at such exercise
price as provided below and otherwise having the same terms and conditions as in
effect immediately prior to the Effective Time except to the extent provided
herein:
(a) the number of shares of New World Access Stock to be
subject to each New World Access Option (the "Option Shares") shall be
equal to (i) the number of shares of Cherry U.K. Stock subject to such
Cherry U.K Option so converted multiplied by (ii) the Equivalent
Exchange Ratio;
(b) the exercise price per share of New World Access Stock for
each New World Access Stock Option issued pursuant hereto shall be
equal to (i) the product obtained by multiplying the number of shares
of Cherry U.K. Stock subject to the Cherry U.K. Option converted
pursuant to this Agreement by the exercise price per share thereunder,
divided by (ii) the number of shares of New World Access Stock issuable
upon the exercise of such New World Access Option determined pursuant
to clause (a) above;
(c) upon each exercise of the New World Access Options by a
holder thereof, the aggregate number of shares of New World Access
Stock deliverable upon such exercise shall be rounded up or down, if
necessary, to the nearest whole share and the aggregate exercise price
shall be rounded up or down, if necessary, to the nearest cent; and
(d) notwithstanding anything herein to the contrary, a Cherry
U.K. Optionholder may only exercise the New World Access Option to the
extent of one-third of the Option Shares unless the Escrowed Shares are
eligible for release pursuant to Article 4 hereof, in which event the
New World Access Option may be exercised to the same extent as Escrowed
Shares may be released and shall be subject to the same restrictions as
provided in Section 4.4 hereof.
Notwithstanding anything herein to the contrary, no Shares or Cherry U.K.
Options may be distributed or granted, without the prior written consent of New
World Access, if New World Access determines in its good faith judgment that
such actions would have a material adverse effect on the financial condition or
results of operations of New World Access and its Subsidiaries, taken as a
whole, for financial reporting purposes.
Section 2.4. Escrowed Shares. Immediately following the Effective Time, the
Escrowed Shares shall be issued by New World Access and deposited with an escrow
agent mutually acceptable to New World Access and Shareholder (the "Escrow
Agent") pursuant to the terms of an Escrow Agreement substantially in the form
attached hereto as Exhibit "A" (the "Escrow Agreement"). The Escrow Agent will
release the Escrowed Shares to the Shareholder as set forth in Article 4 hereof.
Section 2.5. Escrowed Option Shares. Immediately following the Effective
Time, New World Access shall issue and deposit with an escrow agent mutually
acceptable to New World Access and Shareholder (the "Option Escrow Agent") an
aggregate number of shares of New World Access Stock equal to the aggregate
number of Option Shares (the "Escrowed Option Shares") pursuant to the terms of
an Escrow Agreement substantially in the form attached hereto as Exhibit "B"
(the "Option Escrow Agreement"). The Escrowed Option Shares shall be released
and delivered to New World Access for cancellation to the extent that the New
World Access Options (or any portion thereof) vest and become exercisable in
accordance with their terms. The Escrowed Option Shares shall be released and
delivered to Shareholder upon the forfeiture of any of the New World Access
Options (or any portion thereof) in accordance with the terms thereof as
follows: (a) an amount equal to (i) one-third of such shares less (ii) the
number of Extra Shares shall be released and delivered to Shareholder upon such
forfeiture, and (b) the balance of such shares (the "Contingent Escrowed Option
Shares") shall be released as set forth in Article 4 hereof.
Section 2.6. Adjustments. In the event of any change in the New World
Access Stock after the date hereof by reason of any stock dividend, stock split,
subdivision, reclassification, recapitalization, combination, exchange of shares
or the like, then the New World Access Stock to be issued pursuant to this
Agreement (including pursuant to any New World Access Option) shall be adjusted
appropriately on the Closing Date.
ARTICLE 3.
EXCHANGE OF CERTIFICATES
Section 3.1. Exchange of Certificates. At the Closing, Shareholder shall
surrender all certificates representing the Shares to New World Access and
comply with the provisions of Section 9.2, and New World Access shall issue to
Shareholder a certificate or certificates representing the Closing Shares and
shall issue to the Escrow Agent the Escrowed Shares, in each case rounded to the
nearest whole share. All certificates, documents and instruments representing
the Shares so surrendered shall be properly forwarded or otherwise in proper
form for transfer. At the Closing, New World Access shall deliver to each Cherry
U.K. Optionholder an option agreement representing the New World Access Option
into which such Cherry U.K. Optionholder's Cherry U.K. Option was converted.
ARTICLE 4.
RELEASE OF ESCROWED SHARES
Section 4.1. Release Criteria. The Escrowed Shares will be released in the
amounts and on the dates specified below if the sum of the EBITDA for (i) Cherry
U.K. and (ii) the surviving corporation of the U.S. Merger for the performance
periods set forth below equals or exceeds the Target EBITDA for such performance
period as set forth below:
<TABLE>
Performance Period Release Date Percentage of Target EBITDA
Escrowed Merger
Shares to be Released
<CAPTION>
<S> <C> <C> <C>
July 1, 1998 to and February 15, 1999 25% $7,500,000
including December 31, 1998
(the "First Performance
Period")
January 1, 1999 to and February 15, 2000 37.5% $29,000,000
including December 31, 1999
(the "Second Performance
Period")
January 1, 2000 to and February 15, 2001 37.5% $36,500,000
including December 31, 2000
(the "Third Performance
Period)
</TABLE>
Notwithstanding the foregoing, if the Closing Date is (a) on or after July 15,
1998 but prior to August 16, 1998, then the First Performance Period shall
commence on August 1, 1998 and shall terminate on (and including) December 31,
1998 and the Target EBITDA with respect thereto shall be reduced to $7,100,000,
(b) on or after August 16, 1998 but prior to September 30, 1998, then the First
Performance Period shall commence on September 1, 1998 and shall terminate on
(and including) December 31, 1998 and the Target EBITDA with respect thereto
shall be reduced to $6,700,000, or (c) on or after September 30, 1998, then the
First Performance Period shall commence on the first day of the calendar month
in which the Closing occurs and shall terminate on (and including) the last day
of the sixth calendar month following the month in which the Closing occurs, the
release date shall be forty-five (45) days after the end of such period and the
Target EBITDA shall be equal to the sum of (i) $2,100,000 for each calendar
month of the 1998 included in the First Performance Period and (ii) $2,400,000
for each calendar month of 1999 included in the First Performance Period.
Section 4.2. Subsequent Performance. If, after the Acquisition, the
combined EBITDA of Cherry U.K. and the surviving corporation of the U.S. Merger
is less than the Target EBITDA required for the release of Escrowed Shares in
either of the First or Second Performance Periods (and with respect to the
Second Performance Period is no less than zero), then, notwithstanding anything
to the contrary in Section 4.1, the Escrowed Shares shall be released if the
actual cumulative combined EBITDA for Cherry U.K. and the surviving corporation
of the U.S. Merger for such Performance Period and any subsequent Performance
Periods equals or exceeds the cumulative Target EBITDA for such Performance
Periods.
Section 4.3. Accelerated Release. Notwithstanding anything to the contrary,
(a) if during any calendar quarter of the Second Performance Period, the closing
price per share of the New World Access Stock as reported by NASDAQ equals or
exceeds $65.00 for any five consecutive Trading Days during such calendar
quarter, then 25% of all of the shares of Escrowed Shares shall be released on
February 15, 2000, provided that if no Escrowed Shares are eligible for release
during any such calendar quarter, then such Escrowed Shares shall become
eligible for release in a subsequent calendar quarter of the Second Performance
Period if the closing price per share of the New World Access Stock as reported
by NASDAQ equals or exceeds $65.00 for a total number of consecutive Trading
Days during such subsequent calendar quarter equal to or exceeding the total
number of Trading Days which such closing price was required to equal or exceed
for (i) such subsequent calendar quarter and (ii) each of the previous calendar
quarters beginning with the calendar quarter for which such Escrowed Shares were
not eligible for release; (b) if the combined EBITDA of Cherry U.K. and the
surviving corporation of the U.S. Merger for the Second Performance Period
equals or exceeds $52,775,000, then the Escrowed Shares related to the Third
Performance Period shall be released on February 15, 2000; and (c) all of the
Escrowed Shares shall be released upon a Change of Control (except to the extent
that the ability to earn such shares has been lost under this Article 4) and the
transfer restrictions set forth in Sections 2.2 and 4.4 shall not apply.
Section 4.4. Transfer Restrictions. Notwithstanding anything to the
contrary contained herein, no holder of the Escrowed Shares upon their release
may, until the 180th day following the release date thereof, without the prior
written consent of New World Access, offer, sell, contract to sell or otherwise
dispose of, directly or indirectly, any such shares or any security convertible
into or exchangeable or exercisable therefor, either publicly or privately.
Section 4.5. Contingent Escrowed Option Shares. The provisions of Section
4.1 through 4.4 shall apply mutatis mutandis to the Contingent Escrowed Option
Shares.
ARTICLE 5.
REPRESENTATIONS AND WARRANTIES OF
WORLD ACCESS AND NEW WORLD ACCESS
In order to induce Shareholder to enter into this Agreement, World
Access and New World Access, jointly and severally, represent and warrant to
Shareholder that, except as set forth in the World Access SEC Documents or the
Disclosure Schedule to be delivered by World Access to Shareholder within ten
(10) Business Days of the date hereof (the "World Access Disclosure Schedule"),
which World Access Disclosure Schedule shall identify exceptions by specific
Section references:
Section 5.1. Authority. Each of World Access and New World Access has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and the Ancillary Documents to be executed by them and to consummate
the transactions contemplated hereby and thereby. The execution and delivery of
this Agreement by World Access and New World Access and the consummation of the
transactions contemplated on their part hereby have been duly authorized by all
necessary corporate action, and, other than the approval of New World Access's
stockholders contemplated by Section 7.4 hereof, no other corporate proceedings
on the part of either World Access or New World Access are necessary to
authorize the consummation of the transactions contemplated on their part. This
Agreement has been duly executed and delivered by World Access and New World
Access and constitutes, and each of the Ancillary Documents to be signed at
Closing, when executed and delivered by World Access or New World Access (as the
case may be) will constitute, a valid and binding obligation of World Access and
New World Access (as the case may be), enforceable against them in accordance
with their respective terms, except to the extent that such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization or other law
affecting the enforcement of creditors' rights generally or by general equity
principles.
Section 5.2. Organization, Qualification, and Corporate Power. Each of
World Access and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of World Access and its Subsidiaries is duly authorized and
qualified to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a World Access Material Adverse Effect. Each of
World Access and its Subsidiaries has full corporate power and authority to
carry on the businesses in which it is engaged and to own, lease, use and
operate the properties owned, leased, used and operated by it. The copies of the
Certificate of Incorporation and the Bylaws of World Access and the equivalent
organizational documents of each of its Subsidiaries, which have previously been
made available to Shareholder, are true, complete and correct copies of such
documents as in effect as of the date of this Agreement.
Section 5.3. Capitalization. The entire authorized common capital stock of
World Access consists of 40,000,000 shares of World Access Stock, of which
21,848,701 shares were issued and outstanding as of May 8, 1998. The entire
authorized common capital stock of New World Access consists of 40,000,000
shares of New World Access Stock, of which 1,000 were issued and outstanding as
of May 8, 1998. No shares of World Access Stock or New World Access Stock are
held in treasury. All of the issued and outstanding shares of World Access Stock
have been duly authorized and are validly issued, fully paid, and nonassessable.
Except as disclosed in the World Access SEC Documents, there are no outstanding
or authorized options, warrants, purchase rights, subscription rights,
conversion rights, exchange rights, or other contracts or commitments that could
require World Access or any of its Subsidiaries to issue, sell, or otherwise
cause to become outstanding any of its capital stock. There are no outstanding
or authorized stock appreciation, phantom stock, profit participation, or
similar rights with respect to World Access and its Subsidiaries. World Access
and its Subsidiaries have no outstanding bonds, debentures, notes or similar
obligations the holders of which have the right to vote generally with holders
of World Access Stock or New World Access Stock.
Section 5.4. Non-contravention. Neither the execution and the delivery of
this Agreement or the Ancillary Documents, nor the consummation of the
transactions contemplated hereby or thereby, will (a) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
World Access or any of its Subsidiaries is subject or any provision of the
charter or bylaws of any of World Access or any of its Subsidiaries; or (b)
except with respect to those agreements for which Consent shall be obtained
prior to Closing, conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
World Access or any of its Subsidiaries is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Security Interest would not have a World Access Material Adverse
Effect. Except for Consents required under or in relation to the (a) HSR Act,
(b) the Communications Act and any rates, regulations, practices and policies of
the FCC, (b) state securities or "blue sky" laws, (d) the Securities Act, (e)
the Exchange Act, (f) the DGCL, (g) laws, rules, regulations, practices and
orders of any PUC, foreign telecommunications regulatory agencies or similar
state or foreign regulatory bodies, (h) rules and regulations of NASDAQ, and (i)
such Consents and filings the failure of which to make or obtain would not have
a World Access Material Adverse Effect, neither World Access nor any of its
Subsidiaries is required to give any notice to, make any filing with, or obtain
any Consent of any Regulatory Authority in order for the Parties to consummate
the transactions contemplated by this Agreement and the Ancillary Documents. All
consents, approvals, orders, authorizations, registrations, declarations and
filings required under or in relation to any of the foregoing clauses (a)
through (h) are hereinafter referred to collectively as the "Required Consents."
Section 5.5. Brokers' Fees. None of World Access or any of its Subsidiaries
has any liability or obligation, contingent or otherwise, to pay any fees or
commissions or similar payments to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement and the Ancillary Documents,
except to The Robinson-Humphrey Company, Inc., whose fees and expenses will be
paid by World Access in accordance with its agreement with such firm based upon
arrangements made by or on behalf of World Access and previously disclosed to
Cherry U.K.
Section 5.6. World Access SEC Documents. Each of World Access and its
Subsidiaries has timely filed with the SEC all forms, reports, schedules,
statements, exhibits and other documents required to be filed by it since
December 31, 1995 with the SEC (such documents, as supplemented and amended
since the time of filing, collectively, the "World Access SEC Documents"). The
World Access SEC Documents, including any financial statements or schedules
included therein, at the time filed (and, in the case of registration statements
and proxy statements, on the dates of effectiveness and the dates of mailing,
respectively) (a) did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading, and (b) complied in all material respects with
the applicable requirements of the Exchange Act and the Securities Act, as the
case may be. The consolidated financial statements (including the related notes)
of World Access included in the World Access SEC Documents (the "World Access
Financial Statements") comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP (except, in
the case of unaudited statements, as permitted by Form 10-Q of the SEC) applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto), and fairly present (subject in the case of unaudited
statements to the absence of footnotes and to normal, recurring and year-end
audit adjustments which will not be material individually or in the aggregate)
the consolidated financial position of World Access as of the dates thereof and
the consolidated results of its operations and cash flows for the periods then
ended.
Section 5.7. Events Subsequent to World Access Most Recent Fiscal Year End.
Since the World Access Most Recent Fiscal Year End, there has not been any World
Access Material Adverse Effect. Without limiting the generality of the
foregoing, since that date:
(a) none of World Access or any of its Subsidiaries has sold,
leased, transferred, or assigned any material assets, tangible or intangible,
outside the Ordinary Course of Business;
(b) none of World Access or any of its Subsidiaries has
entered into any material agreement, contract, lease, or license outside the
Ordinary Course of Business;
(c) no party (including World Access or any of its
Subsidiaries) has accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license to which any of
World Access or any of its Subsidiaries is a party or by which any of them is
bound;
(d) none of World Access or any of its Subsidiaries has
imposed any Security Interest upon any of its assets, tangible or intangible;
(e) none of World Access or any of its Subsidiaries has made
any material capital expenditures outside the Ordinary Course of Business;
(f) none of World Access or any of its Subsidiaries has made
any material capital investment in, or any material loan to, any other Person
outside the Ordinary Course of Business;
(g) World Access and its Subsidiaries have not created,
incurred, assumed, or guaranteed more than $10,000,000 in aggregate indebtedness
(other than internal debt between World Access and/or its Subsidiaries) for
borrowed money and capitalized lease obligations;
(h) other than is normal and customary with respect to their
respective businesses, none of World Access or any of its Subsidiaries has
granted any license or sublicense of any material rights under or with respect
to any Intellectual Property;
(i) there has been no change made or authorized in the charter
or bylaws of World Access or any of its Subsidiaries;
(j) none of World Access or any of its Subsidiaries has
issued, sold, or otherwise disposed of any of its capital stock, or granted any
options, warrants, or other rights to purchase or obtain (including upon
conversion, exchange or exercise) any of its capital stock;
(k) none of World Access or any of its Subsidiaries has
declared, set aside, or paid any dividend or made any distribution with respect
to its capital stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(l) none of World Access or any of its Subsidiaries has
experienced any material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(m) none of World Access or any of its Subsidiaries has made
any loan to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(n) none of World Access or any of its Subsidiaries has
entered into any employment contract or collective bargaining agreement, written
or oral, or modified the terms of any existing such contract or agreement;
(o) none of World Access or any of its Subsidiaries has
granted any increase in the base compensation of any of its directors, officers
or employees outside the Ordinary Course of Business;
(p) none of World Access or any of its Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(q) none of World Access or any of its Subsidiaries has made
any other material change in employment terms for any of its directors, officers
or employees outside the Ordinary Course of Business; and
(r) none of World Access or any of its Subsidiaries has
committed to any of the foregoing.
Section 5.8. Undisclosed Liabilities. None of World Access or any of its
Subsidiaries has any material liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, and whether due or to
become due, including any liability for taxes), except for (a) liabilities set
forth in the World Access Most Recent Balance Sheet and (b) liabilities which
have arisen since the date of the World Access Most Recent Balance Sheet in the
Ordinary Course of Business.
Section 5.9. Opinion of Financial Advisor. World Access has received the
opinion of The Robinson-Humphrey Company, Inc., dated the date of this
Agreement, that, as of such date, the Consideration to be paid hereunder and in
connection with the U.S. Merger is fair, from a financial point of view, to
World Access.
Section 5.10. Litigation. Neither World Access nor any of its Subsidiaries
(a) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (b) is a party or, to the Knowledge of World Access, is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator, and, to
the Knowledge of World Access, no reasonable basis therefor exists.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
In order to induce World Access and New World Access to enter into this
Agreement, Shareholder represents and warrants to World Access and New World
Access that, except as set forth in the Disclosure Schedule to be delivered by
Shareholder to World Access within ten (10) Business Days of the date hereof
(the "Shareholder Disclosure Schedule"), which shall identify exceptions by
specific Section references:
Section 6.1. Authority. Shareholder has all requisite power and authority
and has full legal capacity and is competent to execute, deliver and perform
this Agreement and the Ancillary Documents to be executed by it and to
consummate the transactions contemplated hereby and thereby. Cherry U.K. has all
requisite corporate power and authority to execute, deliver and perform this
Agreement and the Ancillary Documents to be executed by it and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement by Cherry U.K. and the consummation of the transactions contemplated
on its part hereby have been duly authorized by all necessary corporate action
and no other corporate proceedings on its part is necessary to authorize the
consummation of the transactions contemplated on its part. This Agreement has
been duly executed and delivered by Shareholder and Cherry U.K. and constitutes,
and each of the Ancillary Documents to be signed at Closing, when executed and
delivered by Shareholder or Cherry U.K. (as the case may be) will constitute, a
valid and binding obligation of Shareholder and Cherry U.K. (as the case may
be), enforceable against them in accordance with their respective terms, except
to the extent that such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization or other law affecting the enforcement of creditors'
rights generally or by general equity principles.
Section 6.2. Organization, Qualification, and Corporate Power. Each of
Cherry U.K. and its Subsidiaries is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation. Each of Cherry U.K. and its Subsidiaries is duly authorized and
qualified to conduct business and is in good standing under the laws of each
jurisdiction where such qualification is required, except where the lack of such
qualification would not have a Cherry U.K. Material Adverse Effect. Each of
Cherry U.K. and its Subsidiaries has full corporate power and authority to carry
on the businesses in which it is engaged and to own, lease, use and operate the
properties owned, leased, used and operated by it. The copy of the Memorandum
and Articles of Cherry U.K. to be set forth in the Shareholder Disclosure
Schedule is complete, accurate and up to date and has embodied in or annexed to
it copies of all Resolutions referred to in Section 380 Companies Act passed
prior to the date of this Agreement. No such Resolutions have been passed since
the date of the Cherry U.K. Most Recent Balance Sheet and the Shareholder shall
procure that no such Resolutions shall be passed by Cherry U.K. after the date
of this Agreement without the prior written consent of New World Access. The
Register of Members and all other Statutory Books of Cherry U.K. have been
properly kept and contain a true, accurate and complete record of the business
affairs and financial position of and all material transactions entered into and
material liabilities incurred by Cherry U.K. or to which it has become a party
and all matters with which they should deal. No notice or allegation that any of
such documents are incorrect or should be rectified has been received and such
documents have been retained by Cherry U.K. for such periods as may be required
by all applicable laws.
Section 6.3. Capitalization. The entire authorized capital stock of Cherry
U.K. consists of 50,000 shares of Cherry U.K. Stock, of which 50,000 shares of
Cherry U.K. Stock are issued and outstanding. All of the issued and outstanding
shares of Cherry U.K. have been duly authorized and are validly issued and fully
paid. There are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Cherry U.K. or any of its Subsidiaries to issue,
sell, or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Cherry U.K. and its
Subsidiaries. Cherry U.K. and its Subsidiaries have no outstanding bonds,
debentures, notes or other similar obligations the holders of which have the
right to vote generally with holders of Cherry U.K. Stock. Shareholder is the
legal and beneficial owner of the Shares, and the Shares will be transferred to
New World Access with full legal and beneficial title, free and clear of all
Liens and Security Interests. Shareholder has the power, authority, right and
capacity to transfer and deliver legal and beneficial title to the Shares
pursuant to this Agreement and, except as set forth in the Shareholder
Disclosure Schedule, is not a party to or bound by any agreement, arrangement or
option restricting in any manner the sale and transfer of any of the Shares. No
power of attorney given by Cherry U.K. or any of its Subsidiaries is now in
force or effect.
Section 6.4. Non-contravention. Neither the execution and the delivery of
this Agreement or the Ancillary Documents, nor the consummation of the
transactions contemplated hereby or thereby, will (a) violate any constitution,
statute, regulation, rule, injunction, judgment, order, decree, ruling, charge,
or other restriction of any government, governmental agency, or court to which
Shareholder, Cherry U.K. or any of its Subsidiaries are subject or any provision
of the memorandum and articles of association and any other organizational
documents of Cherry U.K. or any of its Subsidiaries; or (b) except with respect
to those agreements for which Consent shall be obtained prior to Closing,
conflict with, result in a breach of, constitute a default under, result in the
acceleration of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which Shareholder, Cherry U.K. or any of its
Subsidiaries is a party or by which it is bound or to which any of its assets is
subject (or result in the imposition of any Security Interest upon any of its
assets), except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or Security
Interest would not have a Cherry U.K. Material Adverse Effect. Except for the
Required Consents and such Consents and filings the failure of which to make or
obtain would have a Cherry U.K. Material Adverse Effect, neither Shareholder,
Cherry U.K., nor any Subsidiary of Cherry U.K. is required to give any notice
to, make any filing with, or obtain any Consent of any Regulatory Authority in
order for the Parties to consummate the transactions contemplated by this
Agreement or the Ancillary Documents. None of Cherry U.K. nor any of its
Subsidiaries has, directly or indirectly, provided any financial assistance for
the purpose of the acquisition of shares in it or for the purpose of reducing or
discharging any liability incurred in such an acquisition. No member of the
Cherry U.K. Group has in the previous five years been party to any transactions
to which Sections 238 to 246 (inclusive) of the Insolvency Act 1986 may be
applicable.
Section 6.5. Brokers' Fees. Neither Shareholder nor Cherry U.K. has any
liability or obligation, contingent or otherwise, to pay any fees or commissions
or similar payments to any broker, finder, or agent with respect to the
transactions contemplated by this Agreement or the Ancillary Documents.
Section 6.6. Title to Assets. Each of Cherry U.K. and its Subsidiaries has
good and marketable title to all of its material properties and assets, real and
personal, tangible and intangible, used by it, located on its premises, or shown
on the Cherry U.K. Most Recent Balance Sheet or acquired after the date thereof,
free and clear of all Security Interests, except for properties and assets
disposed of in the Ordinary Course of Business since the date of the Cherry U.K.
Most Recent Balance Sheet. All leases pursuant to which Cherry U.K. or any of
its Subsidiaries leases from other Persons material amounts of real or personal
property are in good standing, valid and effective in accordance with their
respective terms, and there is not, to the Knowledge of Shareholder, under any
of such leases, any existing material default or event of default (or event
which, with notice or lapse of time, or both, would constitute a material
default) except where lack of such good standing, validity and effectiveness or
the existence of such default or event of default would not reasonably be
expected to have a Cherry U.K. Material Adverse Effect. All title deeds relating
to the assets of Cherry U.K. and its Subsidiaries and an executed copy of all
material agreements to which it or any of its Subsidiaries is a party are in the
possession of Cherry U.K. or the relevant Subsidiary.
Section 6.7. Subsidiaries. The Shareholder Disclosure Schedule sets forth
for Cherry U.K. and each Subsidiary of Cherry U.K. true, complete and accurate
details of (a) its name and the jurisdiction of incorporation, (b) the number of
shares of authorized capital stock of each class of its capital stock, (c) the
number of issued and outstanding shares of each class of its capital stock, the
names of the holders thereof, and the number of shares held by each such holder,
(d) the number of shares of its capital stock held in treasury, (e) the names of
its directors and secretary and (f) its accounting reference date. All of the
issued and outstanding shares of capital stock of each Subsidiary of Cherry U.K.
have been duly authorized and are validly issued, fully paid, and nonassessable
and were issued in accordance with applicable United States federal and state
securities laws or the Companies Acts and laws of England and Wales, as the case
may be. Cherry U.K. holds of record and owns legally and beneficially all of the
outstanding shares of each Subsidiary of Cherry U.K., free and clear of any
Liens, restrictions on transfer (other than restrictions under the Securities
Act and state securities laws), taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities and demands. Other than the
Cherry U.K. Options, there are no outstanding or authorized options, warrants,
purchase rights, subscription rights, conversion rights, exchange rights, or
other contracts or commitments that could require Cherry U.K. to sell, transfer,
or otherwise dispose of any capital stock of any of its Subsidiaries or that
could require any such Subsidiary to issue, sell, or otherwise cause to become
outstanding any of its own capital stock. There are no outstanding stock
appreciation, phantom stock, profit participation, or similar rights with
respect to any Subsidiary of Cherry U.K. There are no voting trusts, proxies, or
other agreements or understandings with respect to the voting of any capital
stock of any Subsidiary of Cherry U.K. None of Cherry U.K. and its Subsidiaries
controls directly or indirectly, or has any direct or indirect equity
participation in, any corporation, partnership, trust, or other business
association which is not a Subsidiary of Cherry U.K.
Section 6.8. Financial Statements. The Shareholder Disclosure Schedule
includes true and complete copies of the following financial statements of
Cherry U.K. (collectively, the "Cherry U.K. Financial Statements"): (a) the
unaudited consolidated balance sheet and the unaudited consolidated profit and
loss account and cash flow statement and statement of changes in shareholders
funds for the fiscal years ended December 31, 1996 and 1997 (the "Cherry U.K.
Most Recent Fiscal Year End") and in relation to each of Cherry U.K. and its
Subsidiaries the unaudited balance sheet and the unaudited profit and loss
account for the Cherry U.K. Most Recent Fiscal Year End; and (b) unaudited
consolidated balance sheets and profit and loss account and cash flow statement
(the "Cherry U.K. Most Recent Financial Statements") as of and for the three
months and year to date period ended March 31, 1998 (the "Cherry U.K. Most
Recent Fiscal Month End"). The Cherry U.K. Financial Statements (including the
notes thereto) comply with all requirements of the Companies Act, all other
relevant statutes and all Relevant Accounting Standards and in all other
respects have been prepared in accordance with U.K. GAAP applied on a consistent
basis throughout the periods covered thereby and present fairly the consolidated
financial condition of Cherry U.K. as of such dates and the consolidated results
of operations of Cherry U.K. for such periods; provided, however, that the
Cherry U.K. Most Recent Financial Statements are subject to normal recurring
adjustments (which will not be material individually or in the aggregate) and
lack footnotes and other presentation items. Without limiting the generality of
the foregoing, the Cherry U.K. Most Recent Financial Statements accurately
reflect anticipated material costs to complete all contracts or services
pursuant to which Cherry U.K. or any of its Subsidiaries has agreed to furnish
products and services in accordance with U.K. GAAP applied on a basis consistent
with the Cherry U.K. Financial Statements for the Cherry U.K. Most Recent Fiscal
Year End.
Section 6.9. Events Subsequent to Cherry U.K. Most Recent Fiscal Year End.
Since the Cherry U.K. Most Recent Fiscal Year End, there has not been any Cherry
U.K. Material Adverse Effect. Without limiting the generality of the foregoing,
since that date:
(a) none of Cherry U.K. or any of its Subsidiaries has sold,
leased, transferred, or assigned any material assets, tangible or intangible,
outside the Ordinary Course of Business;
(b) none of Cherry U.K. or any of its Subsidiaries has entered
into any material agreement, contract, lease, or license outside the Ordinary
Course of Business;
(c) no party (including Cherry U.K. or any of its
Subsidiaries) has accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license to which Cherry
U.K. or any of its Subsidiaries is a party or by which any of them is bound;
(d) none of Cherry U.K. or any of its Subsidiaries has imposed
any Security Interest upon any of its material assets, tangible or intangible;
(e) none of Cherry U.K. or any of its Subsidiaries has made
any material capital expenditures outside the Ordinary Course of Business;
(f) none of Cherry U.K. or any of its Subsidiaries has made
any material capital investment in, or any material loan to, any other Person
outside the Ordinary Course of Business;
(g) none of Cherry U.K. or any of its Subsidiaries has
created, incurred, assumed, or guaranteed more than $50,000 in aggregate
indebtedness for borrowed money and capitalized lease obligations;
(h) other than is normal and customary with respect to their
respective businesses, none of Cherry U.K. or any of its Subsidiaries has
granted any license or sublicense of any material rights under or with respect
to any Intellectual Property;
(i) there has been no change made or authorized in the
memorandum and articles of association of Cherry U.K. or the memorandum and
articles of association, charter, bylaws or other organizational documents of
any of its Subsidiaries and no resolution of Cherry U.K. or any of its
Subsidiaries has been passed in general meeting;
(j) none of Cherry U.K. or any of its Subsidiaries has issued,
sold, or otherwise disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon conversion,
exchange or exercise) any of its capital stock;
(k) none of Cherry U.K. or any of its Subsidiaries has
declared, set aside, or paid any dividend or made any distribution (whether in
cash or in kind) or redeemed, purchased, or otherwise acquired any of its
capital stock or reduced its capital stock;
(l) none of Cherry U.K. or any of its Subsidiaries has
experienced any material damage, destruction, or loss (whether or not covered by
insurance) to its property;
(m) none of Cherry U.K. or any of its Subsidiaries has made
any loan to, or entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(n) none of Cherry U.K. or any of its Subsidiaries has entered
into any material employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or
agreement outside the Ordinary Course of Business;
(o) none of Cherry U.K. or any of its Subsidiaries has granted
any increase in the base compensation of any of its directors, officers or
employees outside the Ordinary Course of Business;
(p) none of Cherry U.K. or any of its Subsidiaries has
adopted, amended, modified, or terminated any bonus, profit-sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(q) none of Cherry U.K. or any of its Subsidiaries has made
any other material change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business; and
(r) none of Cherry U.K. or any of its Subsidiaries has
committed to any of the foregoing.
Section 6.10. Undisclosed Liabilities. None of Cherry U.K. or any of its
Subsidiaries has any material liability (whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, and whether due or to
become due, including any liability for taxes), except for (a) liabilities set
forth in the Cherry U.K. Most Recent Balance Sheet and (b) liabilities which
have arisen since the date of Cherry U.K. Most Recent Balance Sheet in the
Ordinary Course of Business. Cherry U.K. has not applied for and is not in
receipt of any grant, subsidy or other financial assistance from any government
department, local authority or other body.
Section 6.11. Legal Compliance. Each of Shareholder, Cherry U.K. and its
Subsidiaries has complied with all applicable laws (including rules,
regulations, codes, ordinances, plans, injunctions, judgments, orders, decrees,
rulings, and charges thereunder) of the United States federal, state and local,
and any foreign governments (and all agencies thereof) and with the Companies
Act, the European Communities Act and all European Community legislation, and no
action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced or, to the Knowledge of
Shareholder, threatened against it alleging any failure so to comply, except
where the failure to comply would not have a Cherry U.K. Material Adverse
Effect. All dividends and distributions declared, made or paid by Cherry U.K. or
any of its Subsidiaries at any time were, when declared, made or paid, in
accordance with the requirements of the general law and the Articles of
Association of the relevant company.
Section 6.12. Tax Matters. The Shareholder Disclosure Schedule contains a
list of the countries and jurisdictions (whether the United Kingdom or
otherwise) to which any Taxes are properly payable by any of Cherry U.K. and its
Subsidiaries. Except with respect to any such matters that would not, in the
aggregate, have a Cherry U.K. Material Adverse Effect:
6.12.1. Cherry U.K. and its Subsidiaries have duly and
punctually paid all Taxes which they are or have been liable to pay or account
for prior to the date of this Agreement and has made proper provision in the
Cherry U.K. Financial Statements in respect of all Taxes which they will or may
become liable to pay or account for in respect of all accounting and other
periods ending on or before the date of this Agreement.
6.12.2. The amount of deferred taxation contained in the
Cherry U.K. Financial Statements was at the Cherry U.K. Most Recent Fiscal Year
End adequate and in accordance with generally accepted accountancy practices
and, in particular, was calculated in accordance with SSAP 15. If the Cherry
U.K. Financial Statements were to be drawn as at the date of this Agreement, the
provision for deferred taxation that would be made in them would be no greater
than that stated in the Cherry U.K. Financial Statements.
6.12.3. Cherry U.K. and its Subsidiaries have properly and
punctually deducted and accounted for Taxes which they have been required to
deduct or for which they have been required to account in respect of any
payments made (or deemed to have been made) by them. In particular, Cherry U.K.
and its Subsidiaries have properly operated the PAYE system and have duly made
all deductions and payments required to be made in respect of National Insurance
contributions (including employer's contributions).
6.12.4. Cherry U.K. and its Subsidiaries have duly and
punctually made all returns and given or delivered all notices and accounts and
information and have made all claims, disclaimers and elections which on or
before the date of this Agreement ought to have been made, given or delivered
for the purposes of Taxes or which have been assumed for the purposes of the
Cherry U.K. Financial Statements.
6.12.5. There is no material dispute or disagreement
outstanding nor is any contemplated at the date of this Agreement with any Tax
authority regarding: (a) the computation of any gains profits or losses of
Cherry U.K. or its Subsidiaries for the purposes of Taxes; or (b) any liability
or potential liability to Taxes (including penalties or interest) recoverable
from any of Cherry U.K. or any of its Subsidiaries; or (c) the availability to
any of Cherry U.K. or its Subsidiaries of any relief from Taxes.
6.12.6. Each of Cherry U.K. and its Subsidiaries is not and
will not become liable to pay, reimburse or indemnify any person in respect of
Taxes in consequence of failure by that or any other person to discharge those
Taxes (whether within any specified period or otherwise) where such Taxes relate
to a profit, income, gain, transaction, event, omission or circumstance arising,
occurring or deemed to arise or occur (whether wholly or partly) on or before
the date of this Agreement.
6.12.7. The Shareholder Disclosure Schedule lists all
concessions, agreements and other formal or informal arrangements with any Tax
authority (other than such as are published by a Tax authority in the United
Kingdom) from which any of Cherry U.K. and its Subsidiaries has or will benefit,
or by which it is bound, and (in either case) which are extant on the date of
this Agreement.
6.12.8. Each of Cherry U.K. and its Subsidiaries maintains
complete and up to date information accounts and records of all transactions and
activities in which it has been involved and of its Taxes affairs which will or
may be relevant for calculating any Taxes liability of each of Cherry U.K. and
its Subsidiaries: (a) for any accounting or other period ending on or before the
date of this Agreement or in respect of any event occurring on or before this
date as to which no final agreement relating to Taxes has yet been reached with
the relevant Tax authority; (b) for any such period ending or event occurring
after the date of this Agreement; and (c) as required by law.
6.12.9. Each of Cherry U.K. and its Subsidiaries has not in
the past six years ending on the date of this Agreement been a party to any
scheme or arrangement: (a) in respect of which the main purpose or one of the
main purposes was the avoidance, reduction or deferral of a liability to Taxes;
(b) in respect of which any Taxes clearance has been or should have been
obtained; or (c) which was or included a reorganization or reduction of the
share capital of any of Cherry U.K. or its Subsidiaries.
6.12.10. Each of Cherry U.K. and its Subsidiaries has not been
party to any scheme or arrangement as a result of which on the future disposal
of any asset owned on the date of this Agreement the allowable loss or
chargeable gain otherwise arising or any liability to Taxes is liable to be
adjusted by any Tax authority.
6.12.11. Each of Cherry U.K. and its Subsidiaries has not in
the six years ending on the date of this Agreement carried out or been engaged
in any transaction or arrangement in respect of which there has been or may be
substituted for the consideration given or received by any of Cherry U.K. and
its Subsidiaries (including a nil consideration) a different consideration for
Taxes purposes, and none of Cherry U.K. and its Subsidiaries has an obligation
to enter into any such transaction or arrangement in the future.
6.12.12. Each of Cherry U.K. and its Subsidiaries has not
since the Cherry U.K. Most Recent Fiscal Year End made or incurred and is not
liable to make or incur any payments or expenditure in excess of $100,000 in
aggregate which will not be wholly deductible in computing its taxable profits
or which will not be a charge on income or otherwise allowable for the purposes
of corporation tax whether on the grounds of being a dividend or distribution or
for any other reason.
6.12.13. Each of Cherry U.K. and its Subsidiaries has not
since the Cherry U.K. Most Recent Fiscal Year End disposed of any asset
otherwise than in the Ordinary Course.
6.12.14. Otherwise than Cherry U.K. and its Subsidiaries taken
together, each of Cherry U.K. and its Subsidiaries has not at any time in the
six years ending on the Cherry U.K.. Most Recent Fiscal Year End been a member
of a group of companies for Taxes purposes.
6.12.15. The Shareholder Disclosure Schedule details all
relevant surrenders of or claims for group relief or Advance Corporation Tax
("ACT") which affect each of Cherry U.K. and its Subsidiaries for accounting
periods in respect of which no final agreement has been reached with the
relevant Tax authority as to its Taxes affairs or which were made in the six
years ending with the date of this Agreement. All such surrenders and claims are
valid and have been or will be allowed by the relevant Tax authority. None of
Cherry U.K. and its Subsidiaries has made or received any payment in respect of
a claim for or surrender of group relief or ACT which could in any circumstances
be liable to be refunded.
6.12.16. None of Cherry U.K. and its Subsidiaries owns any
asset which it acquired within the period of six years ending on the date of
this Agreement from another company which was at the date of acquisition a
member of the same group of companies as Cherry U.K. and its Subsidiaries.
6.12.17. No asset of any company shall be deemed under Section
178 or 179 Taxation of Chargeable Gains Act 1992 ("TCGA") to have been disposed
of and reacquired by virtue of or in consequence of the entering into or
performance of this Agreement or any other event after the Cherry U.K. Most
Recent Fiscal Year End.
6.12.18. All expenditures which any of Cherry U.K. and its
Subsidiaries have incurred or is liable to incur under any subsisting commitment
on the provision of machinery or plant has qualified or will qualify (if not
deductible as a trading expense) for capital allowances.
6.12.19. All allowances available to any of Cherry U.K. and
its Subsidiaries in respect of capital expenditure incurred prior to the date of
this Agreement or to be incurred under any subsisting commitment will be
available in taxing the trade of the relevant company.
6.12.20. None of the assets of any of Cherry U.K. and its
Subsidiaries is or may be a long-life asset within the meaning of Chapter IV A
of Part II Capital Allowances Act 1990.
6.12.21. None of Cherry U.K. and its Subsidiaries is in
dispute with any Person as to any entitlement to capital allowances under
Section 51 Capital Allowances Act 1990, nor at the date of this Agreement are
there any circumstances which might give rise to such a dispute.
6.12.22. All documents which each of Cherry U.K. and its
Subsidiaries may be interested in the enforcement of have been duly stamped, and
there is no liability to any fine or penalty in respect thereof nor are there
any circumstances which may result in any of Cherry U.K. or its Subsidiaries
becoming liable to any such fine or penalty.
6.12.23. Each of Cherry U.K. and its Subsidiaries has duly
registered for VAT purposes and has complied with all relevant provisions of the
Value Added Tax Act 1994 ("VATA") and regulations made or notices issued under
any legislation relating to VAT.
6.12.24. Each of Cherry U.K. and its Subsidiaries has not
applied to become, nor is it treated as, a member of a group of companies for
VAT purposes.
6.12.25. The Shareholder Disclosure Schedule contains
particulars (including the date of the acquisition) of all capital items to
which Part XV Value Added Tax Regulations 1995 may be applied.
6.12.26. Neither Cherry U.K. and its Subsidiaries nor any
relevant associate of any of them (within the meaning of paragraph 3(7) of
Schedule 10 to VATA) has made an election in accordance with paragraphs 2 and 3
of Schedule 10 to VATA.
6.12.27. In respect of any loan relationship (within the
meaning of Section 81 Finance Act 1996) to which any of Cherry U.K. and its
Subsidiaries is a party, the relevant company used a basis of accounting in the
Cherry U.K. Financial Statements which is an authorized accounting method under
Section 85 of that Act.
6.12.28. None of Cherry U.K. and its Subsidiaries has been a
party to a loan relationship which had an unallowable purpose within the meaning
of paragraph 13 of Schedule 9 to the Finance Act 1996.
Section 6.13. Real Property
6.13.1. Neither Cherry U.K. nor any of its Subsidiaries owns
any real or freehold property.
6.13.2. To the Knowledge of Shareholder, the Shareholder
Disclosure Schedule lists and describes briefly all real property leased or
subleased to or occupied or used by Cherry U.K. or its Subsidiaries (the
"Properties"). Cherry U.K. has been in possession of and shall deliver to World
Access concurrent with the delivery of the Shareholder Disclosure Schedule
correct and complete copies of the leases and subleases together with all other
relevant documents of title listed on the Shareholder Disclosure Schedule (as
amended to date). With respect to each material lease and sublease listed on the
Shareholder Disclosure Schedule:
(a) the lease or sublease is legal, valid, binding,
enforceable, and in full force and effect in all material respects;
(b) no party to the lease or sublease is in material
breach or default, and no event
has occurred which, with notice or lapse of time, would constitute a material
breach or default or permit termination, modification, or acceleration
thereunder;
(c) no party to the lease or sublease has repudiated
any material provision thereof;
(d) there are no material disputes, oral agreements,
or forbearance programs in
effect as to the lease or sublease;
(e) neither Cherry U.K. nor any of its Subsidiaries
has charged, assigned, leased, transferred, conveyed, mortgaged, deeded in
trust, or encumbered any interest in the leasehold or subleasehold and the
Properties are free from any options or agreements to do the same;
(f) all facilities leased or subleased thereunder
have received all approvals of
governmental authorities (including material licenses and permits) required in
connection with the operation thereof, and have been operated and maintained in
accordance with applicable laws, rules, and regulations in all material
respects, including health and safety provisions and provisions relating to
safety from fire.
Section 6.14. Intellectual Property
6.14.1. Each of Cherry U.K. and its Subsidiaries owns, or is
licensed or otherwise possesses legally enforceable rights to use, all patents,
trade secrets, trademarks, trade names, service marks, copyrights, and any
applications therefor, technology, know-how, computer software programs or
applications, and tangible or intangible proprietary information or material
that are used in its business as currently conducted, except as would not
reasonably be expected to have a Cherry U.K. Material Adverse Effect.
6.14.2. Except as would not reasonably be expected to have a
Cherry U.K. Material Adverse Effect (a) neither Cherry U.K. nor any of its
Subsidiaries is or will be, as a result of the execution and delivery of this
Agreement or the performance of its obligations hereunder, in violation of any
Third-Party Intellectual Property Rights; (b) no claims with respect to the
patents, registered and material unregistered trademarks and service marks,
copyrights, registered designs, trade names and any applications therefor owned
by Cherry U.K. or any of its Subsidiaries (the "Cherry U.K. Intellectual
Property Rights"), any trade secret material to Cherry U.K., or Third Party
Intellectual Property Rights to the extent arising out of any use, reproduction
or distribution of such Third Party Intellectual Property Rights by or through
Cherry U.K. or any of its Subsidiaries, are currently pending or, to the
Knowledge of Shareholder, are overtly threatened by any Person; and (c) Cherry
U.K. does not know of any valid ground for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by Cherry U.K. or any of
its Subsidiaries infringes on any copyright, patent, trademark, service mark,
registered design or trade secret, (ii) against the use by Cherry U.K. or any of
its Subsidiaries of any trademarks, trade names, trade secrets, copyrights,
patents, technology, know-how or computer software programs and applications
used in the business of Cherry U.K. or any of its Subsidiaries as currently
conducted or as proposed to be conducted, (iii) challenging the ownership,
validity or effectiveness of the Cherry U.K. Intellectual Property Rights or
other trade secret material to Cherry U.K., or (iv) challenging the license or
legally enforceable right to use of the Third Party Intellectual Rights by
Cherry U.K. or any of its Subsidiaries.
6.14.3. To the Knowledge of Shareholder, all material patents,
registered trademarks, registered designs, service marks and copyrights held by
Cherry U.K. and its Subsidiaries are valid and subsisting. To the Knowledge of
Shareholder, there is no material unauthorized use, infringement or
misappropriation of the Cherry U.K. Intellectual Property by any third party,
including any employee or former employee of Cherry U.K. or any of its
subsidiaries. Cherry U.K. and each of its Subsidiaries has complied with all
requirements of the Data Protection Act 1984 and in particular: (a) has
registered as a data user under that Act for all purposes for which registration
is required by the business as carried on by Cherry U.K.; and (b) has complied
with the data protection principles. No member of the Cherry U.K. Group has
received any notice letter or complaint alleging a breach by it of the
provisions of the Data Protection Act 1984 and has no reason to believe that
circumstances exist which may give rise to such a notice letter or complaint.
Section 6.15. Tangible Assets. The buildings, machinery, equipment, and
other tangible assets that Cherry U.K. and its Subsidiaries own and lease are
free from material defects (patent and latent), have been maintained in
accordance with normal industry practice, and are in good operating condition
and repair (subject to normal wear and tear).
Section 6.16. Inventory. Neither Cherry U.K. nor any of its Subsidiaries
owns any inventory.
Section 6.17. Contracts. The Shareholder Disclosure Schedule lists the
following contracts and other agreements to which Cherry U.K. or any of its
Subsidiaries is a party:
(a) any agreement (or group of related agreements) for the
lease of personal property to or from any Person providing for lease payments in
excess of $25,000 per annum;
(b) any agreement (or group of related agreements) for the
purchase or sale of raw materials, commodities, supplies, products, or other
personal property, or for the furnishing or receipt of services, the performance
of which will extend over a period of more than one year or involve
consideration in excess of $25,000;
(c) any agreement concerning a partnership or joint venture;
(d) any agreement (or group of related agreements) under which
it has created, incurred, assumed, or guaranteed any indebtedness for borrowed
money, or any capitalized lease obligation, in excess of $100,000 or under which
it has imposed a Security Interest on any of its assets, tangible or intangible;
(e) any material agreement concerning confidentiality or non-
competition;
(f) any material agreement with any Affiliates of Cherry U.K.
or any of its Subsidiaries or any other Connected Person (as defined in Section
839 Income and Corporation Taxes Act 1988);
(g) any profit sharing, stock option, stock purchase, stock
appreciation, deferred compensation, severance, or other material plan or
arrangement for the benefit of its current or former directors, officers, and
employees;
(h) any agreement under which any other Person is entitled
to act as agent for Cherry U.K. or any of its Subsidiaries;
(i) any agreement for the employment of any individual on a
full-time, part-time, consulting, or other basis providing annual compensation
in excess of $100,000 or providing material severance benefits;
(j) any agreement under which it has advanced or loaned any
amount to any of its directors, officers, and employees or any other Connected
Person outside the Ordinary Course of Business;
(k) any agreement under which the consequences of a default or
termination could have a Cherry U.K. Material Adverse Effect not identified on
any other Schedule hereto; and
(l) any other agreement (or group of related agreements) the
performance of which involves consideration in excess of $25,000.
Cherry U.K. shall deliver to World Access concurrent with the delivery
of the Shareholder Disclosure Schedule or make available for World Access's
review a correct and complete copy of each written agreement listed in the
Shareholder Disclosure Schedule (as amended to date), which shall be deemed to
be Schedules for purposes of Section 14.12 hereof, and a written summary setting
forth the material terms and conditions of each oral agreement referred to in
the Shareholder Disclosure Schedule. Except as set forth on the Shareholder
Disclosure Schedule, to the Knowledge of Shareholder, with respect to each such
agreement: (a) the agreement is legal, valid, binding, enforceable, and in full
force and effect in all material respects; (b) no party is in material breach or
default, and no event has occurred which with notice or lapse of time would
constitute a material breach or default, or permit termination, modification, or
acceleration, under the agreement; and (c) no party has repudiated any material
provision of the agreement.
Section 6.18. Notes and Accounts Receivable. All notes and accounts
receivable of each of Cherry U.K. and its Subsidiaries are reflected properly on
its books and records, are valid receivables, are current and collectible, and
will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the face of the Cherry
U.K. Most Recent Balance Sheet (rather than in any notes thereto) as adjusted
for operations and transactions through the Closing Date in the Ordinary Course
of Business of Cherry U.K.
Section 6.19. Insurance. Each of Cherry U.K. and its Subsidiaries has been
and is insured with respect to its properties and conduct of its business in
such amounts and against such risks as are reasonable in relation to its
business and will maintain such insurance at least through the Effective Time.
Section 6.20. Litigation. Neither Cherry U.K. nor any of its Subsidiaries
(a) is subject to any outstanding injunction, judgment, order, decree, ruling,
or charge or (b) is a party or, to the Knowledge of Shareholder, is threatened
to be made a party to any action, suit, proceeding, hearing, or investigation
of, in, or before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator, and to
the Knowledge of Shareholder, no reasonable basis therefor exists. No order has
been made, petition presented or resolution passed for the winding up of Cherry
U.K. or any of its Subsidiaries.
Section 6.21. Employees. To the Knowledge of Shareholder, no executive, key
employee, or significant group of employees plans to terminate employment with
Cherry U.K. or its Subsidiaries during the next six months. Neither Cherry U.K.
nor any of its Subsidiaries is a party to or bound by any collective bargaining
agreement or any agreement with any trade union or any other body representing
employees and neither Cherry U.K. nor any of its Subsidiaries has done anything
that might result in such an agreement or arrangement being implied, nor has it
experienced any strike or material grievance, claim of unfair labor practices,
or other organized labor or collective bargaining dispute within the past three
years.
Section 6.22. Employee Benefits
6.22.1. The Cherry U.K. Plans are the only arrangements under
which Cherry U.K. and its Subsidiaries have or may have any obligation (whether
or not legally binding) to provide or contribute towards pension, lump sum,
death, ill-health, disability or accident benefits in respect of their past or
present officers and employees.
6.22.2. True and complete details of the Cherry U.K. Plans are
set out in the Shareholder Disclosure Schedule, including in particular: (a)
copies of all documentation governing the Cherry U.K. Plans and of any
announcements, valuations or accounts relating to them; (b) details of all
officers and employees of Cherry U.K. and its Subsidiaries who are members of
the Cherry U.K. Plans, and of any other members of the Plans; (c) details of the
exercise of any powers under the Cherry U.K. Plans to provide additional
benefits in respect of any members of the Plans; and (d) details of the Cherry
U.K. Plans' assets and liabilities.
6.22.3. The Cherry U.K. Plans are exempt approved schemes
within the meaning of Section 592 of the Income and Corporation Taxes Act 1988,
and there is no reason why approval may be withdrawn.
6.22.4. If any Cherry U.K. Plan is a contracted-out scheme
within the meaning of the Pension Schemes Act 1993, there is in force a
contracting out certificate covering Cherry U.K. and its Subsidiaries, and there
is no reason why the certificate might be cancelled.
6.22.5. No proposal or announcement has been made to any
officer or employee of Cherry U.K. or its Subsidiaries about the introduction,
continuance, increase or improvement of any pension, lump sum, death,
ill-health, disability or accident benefit.
6.22.6. The respective assets of the Cherry U.K. Plans are
sufficient to satisfy their respective liabilities (current and contingent) as
at the date of this Agreement.
6.22.7. All contributions due to the Cherry U.K. Plans, all
insurance premiums due in respect of the Cherry U.K. Plans and all taxes and
expenses in respect of the Cherry U.K. Plans have been duly paid. The
contributions in respect of each Cherry U.K. Plan have been paid at the rates
recommended in the last actuarial valuation of such Plan.
6.22.8. Cherry U.K., its Subsidiaries and the trustees of the
Cherry U.K. Plans have complied in all material respects with their obligations
under and in respect of the Cherry U.K. Plans.
6.22.9. No discrimination on grounds of sex is or has at any
stage been made in the provision of pension, lump sum, death, ill-health,
disability or accident benefits by Cherry U.K. or its Subsidiaries.
6.22.10. No claims (other than routine claims for benefits),
complaints to the Pensions Ombudsman or reports to the Occupational Pensions
Regulatory Authority have been made or are pending or threatened in respect of
the provision of (or failure to provide) pension, lump sum, death, ill-health,
disability or accident benefits by Cherry U.K. or its Subsidiaries. There is no
fact or circumstance likely to give rise to such claims or complaints.
6.22.11. Full and accurate particulars in relation to each
officer and employee of the Cherry U.K. Group, including full name, age, sex,
marital status, date of commencement of employment (including employment with a
previous employer which counts as continuous employment for the purposes of the
Employment Rights Act 1996 or any similar enactment in the jurisdiction in which
Cherry U.K. is incorporated) and terms and conditions of employment are given in
the Shareholder Disclosure Schedule (if appropriate by reference to disclosed
standard terms and conditions of employment) and the officers and employees
listed in the Shareholder Disclosure Schedule are all the officers and employees
of Cherry U.K.
6.22.12. Since the date of the Cherry U.K. Most Recent Balance
Sheet: (a) there have been no changes in the remuneration of any officer or
employee of Cherry U.K. whose remuneration as at the Cherry U.K. Most Recent
Balance Sheet Date was in excess of $50,000 per annum; (b) other than normal
annual increases, there have been no changes in the rate of remuneration of any
other officer or employee of Cherry U.K.; and (c) there has been no change in
the terms and conditions of employment (other than remuneration) of any officer
or employee of Cherry U.K.
6.22.13. Cherry U.K. has complied with, and fulfilled all the
requirements of, its Memorandum and Articles of Association and of any statutes,
regulations and general law in relation to its employees.
6.22.14. The Cherry U.K. Group does not operate, nor has it
proposed or agreed to operate, for any of its officers or employees any
incentive scheme or arrangement, option scheme or bonus or profit sharing scheme
whether or not share based, nor are any of the Cherry U.K. Group's officers or
employees participating in or entitled (now or at any time) to participate in or
otherwise receive benefit from any such incentive scheme or arrangement, option
scheme or bonus or profit sharing scheme.
6.22.15. All subsisting contracts of service to which Cherry
U.K. is a party are determinable on not more than three months' notice without
compensation (other than compensation in accordance with the Employment Rights
Act 1996, as amended).
6.22.16. Details of those former officers or employees of
Cherry U.K. whose employment has been terminated by Cherry U.K. within the
twelve months before this Agreement have been included in the Shareholder
Disclosure Schedule and in respect of such persons: (a) Cherry U.K. has not paid
and has no liability to pay any sums to such persons in respect of the
termination of their employment; and (b) no notice of the intention of any of
such persons to assert any statutory or other claim for reinstatement of, or
compensation for loss of, their employment has been received.
6.22.17. Except as disclosed in the Shareholder Disclosure
Schedule, there are no subsisting contracts for the provision by any person of
any consultancy or other similar services.
6.22.18. Except to the extent (if any) to which provision or
allowance has been made in the Cherry U.K. Financial Statements: (a) no member
of the Cherry U.K. Group has any liability in respect of any contract of service
or for services for redundancy payments (including protective awards) or for
compensation for wrongful dismissal or unfair dismissal or for failure to comply
with any order for the reinstatement or re-engagement of any employees; and (b)
no gratuitous payment has been made or promised by any member of the Cherry
Group in connection with the actual or proposed termination or suspension of
employment or variation of any contract of employment of any present or former
director or employee.
Section 6.23. Guaranties. Neither Cherry U.K. nor any of its Subsidiaries
is a guarantor or otherwise is responsible for any liability or obligation
(including indebtedness) of any other Person.
Section 6.24. Environment, Health, and Safety
6.24.1. Each of Cherry U.K. and its Subsidiaries: (a) has
complied with the Planning Acts and all other Environmental Laws, health, and
safety laws of England and Wales in all material respects, and no action, suit,
proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any such failure to
comply; (b) has obtained and has at all times been and is in substantial
compliance with all of the terms and conditions of all permits, licenses, and
other authorizations, certifications and training which are required under
Environmental Laws and all other environmental, health, and safety laws of
England and Wales; (c) has complied in all material respects with all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules, and timetables which are contained in Environmental Laws
and all other environmental, health, and safety laws of England and Wales; and
(d) will provide World Access within ten Business Days hereof, with copies
within its possession or control of all environmental assessments, complaints,
claims, consent orders or agreements, notices of violations, governmental
inquiries and permits issued or arising under or subject or relating or pursuant
to Environmental Laws and all other environmental, health and safety laws of
England and Wales for any property owned, now or in the past or to be acquired
prior to Closing, by Cherry U.K. or any of its Subsidiaries, and such copies
shall be deemed to be Schedules for purposes of Section 14.12 hereof.
6.24.2. Neither Cherry U.K. nor any of its Subsidiaries has
any material liability, and neither Cherry U.K. nor any of its Subsidiaries or
any of their respective predecessors has handled or disposed of any substance,
arranged for the disposal of any substance, exposed any employee or other
individual to any substance or condition, or owned or operated any property or
facility in any manner that could give rise to any material liability, for
contamination or damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under the Planning Acts and all other
environmental, health, and safety law of England and Wales.
Section 6.25. Licenses, Permits, Consents, and Authorities. Cherry U.K. and
each of its Subsidiaries has all necessary licenses (including statutory
licenses), permits, consents and authorities (public and private) for the proper
and effective carrying on of its business in the manner in which such business
is now carried on. All such licenses, permits, consents and authorities are
valid and subsisting and, to the Knowledge of Shareholder, there is no reason
why any of them should be suspended, cancelled or revoked. Cherry U.K. does not
carry on or purport to carry on in the United Kingdom any investment business
within the meaning of the Financial Services Act 1986 and has never done so.
Section 6.26. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of Cherry U.K. or any of its Subsidiaries for inclusion
or incorporation by reference in the Proxy Statement will, at the date mailed to
the stockholders of New World Access, and at the time of the meeting of
stockholders of New World Access to be held in connection with the Acquisition,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading.
ARTICLE 7.
COVENANTS
Section 7.1. Conduct of Business of Cherry U.K. and its Subsidiaries.
During the period from the date of this Agreement to the Effective Time, except
as expressly contemplated by any other provision of this Agreement, Shareholder
shall use his best efforts to cause each of Cherry U.K. and its Subsidiaries to
(a) conduct its business in the Ordinary Course; (b) use its best efforts to
maintain and preserve intact its business organization, employees, goodwill with
customers and advantageous business relationships and retain the services of its
officers and key employees; and (c) except as required by law or regulation,
take no action which would adversely affect or delay the ability of any Party to
obtain any Consent from any Regulatory Authorities or other approvals required
for the consummation of the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement. By way of amplification and not
limitation, except as expressly contemplated by any other provision of this
Agreement, Shareholder shall use his best efforts to ensure that neither Cherry
U.K. nor any of its Subsidiaries shall, between the date of this Agreement and
the Effective Time, directly or indirectly, do, or agree to do, any of the
following without the prior written consent of World Access, which consent shall
not be unreasonably withheld or delayed:
(a) amend or otherwise change its memorandum and
articles of association, charter or bylaws or equivalent organizational
documents or pass any shareholders' resolutions (other than as contemplated by
this Agreement);
(b) other than the issuance of Cherry U.K. Options,
issue, sell, pledge, dispose of, grant, transfer, lease, license, guarantee or
encumber, or authorize the issuance, sale, pledge, disposition, grant, transfer,
lease, license or encumbrance of (i) any shares of capital stock of Cherry U.K.
or any of its Subsidiaries of any class, or securities convertible into or
exchangeable or exercisable for any shares of such capital stock, or any
options, warrants or other rights of any kind to acquire any shares of such
capital stock, or any other ownership interest of Cherry U.K. or any of its
Subsidiaries, or (ii) any property or assets of Cherry U.K. or any of its
Subsidiaries;
(c) (i) incur any indebtedness for borrowed
money or issue any debt securities or assume, guarantee or endorse, or otherwise
as an accommodation become responsible for, the obligations of any Person for
borrowed money or make any loans or advances, (ii) other than in the Ordinary
Course, terminate, cancel or request any material change in, or agree to any
material change in, any contract or agreement listed in the Shareholder
Disclosure Schedule or enter into any contract or agreement material to its
business, results of operations or financial condition, (iii) make or authorize
any capital expenditure, other than capital expenditures in the Ordinary Course
that have been budgeted for calendar year 1998 and disclosed to World Access
that are not, in the aggregate, in excess of $2,500,000, or (iv) enter into or
amend any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 7.1;
(d) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock;
(e) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(f) amend the terms of, repurchase, redeem
or otherwise acquire any of its securities or propose to do any of the
foregoing;
(g) pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or satisfaction in
the Ordinary Course of Business of liabilities reflected or reserved against on
the Cherry U.K. Most Recent Balance Sheet and only to the extent of such
reserves;
(h) take any action with respect to
accounting policies or procedures, other than actions in the ordinary course of
business consistent with past practice or as required by GAAP or U.K. GAAP, as
the case may be;
(i) make any tax election or settle or compromise
any material federal, state or local income tax liability, or any income tax
liability of any other jurisdiction, other than those made in the Ordinary
Course of Business consistent with past practice and those for which specific
reserves have been recorded on the Cherry U.K. Most Recent Balance Sheet and
only to the extent of such reserves;
(j) enter into or amend any contract, agreement,
commitment or arrangement with, or enter into any transaction with, or make any
payment to or on account or behalf of, any Affiliate of Cherry U.K. or any of
its Subsidiaries; or
(k) authorize or enter into any formal or informal
agreement or otherwise make any commitment to do any of the foregoing or to take
any action which would make any of the representations or warranties of Cherry
U.K. contained in this Agreement untrue or incorrect or prevent Cherry U.K. from
performing or cause Cherry U.K. not to perform its covenants hereunder or result
in any of the conditions to the Acquisition set forth herein not being
satisfied.
Section 7.2. Conduct of Business of World Access and its Subsidiaries.
During the period from the date of this Agreement to the Effective Time, except
for any actions taken by World Access or New World Access relating to any other
acquisitions or business combinations with a non-Affiliate or as expressly
contemplated by any other provision of this Agreement, each of World Access and
its Subsidiaries shall (a) conduct its business in the Ordinary Course, (b) use
its best efforts to maintain and preserve intact its business organization,
employees, goodwill with customers and advantageous business relationships and
retain the services of its officers and key employees, and (c) except as
required by law or regulation, take no action which would adversely affect or
delay the ability of any Party to obtain any Consent from any Regulatory
Authorities or other approvals required for the consummation of the transactions
contemplated hereby or to perform its covenants and agreements under this
Agreement. By way of amplification and not limitation, except for any actions
taken by World Access relating to any other acquisitions or business
combinations with a non-Affiliate or as expressly contemplated by any other
provision of this Agreement, neither World Access nor any of its Subsidiaries
shall, between the date of this Agreement and the Effective Time, directly or
indirectly, do, or agree to do, any of the following without the prior written
consent of Cherry U.K., which consent shall not be unreasonably withheld or
delayed:
(a) amend or otherwise change its charter or
bylaws or equivalent organizational documents;
(b) declare, set aside, make or pay any dividend
or other distribution, payable in cash, stock, property or otherwise, with
respect to any of its capital stock, except that (i) any Subsidiary may pay
dividends or make other distributions to World Access or any other Subsidiary
and (ii) World Access or New World Access may adopt a rights plan or "poison
pill";
(c) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly, any of its
capital stock;
(d) sell, transfer, license, sublicense or
otherwise dispose of any material assets having a value in excess of
$10,000,000; or
(e) authorize or enter into any formal or
informal agreement or otherwise make any commitment to do any of the foregoing
or to take any action which would make any of the representations or warranties
of World Access contained in this Agreement untrue or incorrect or prevent World
Access from performing or cause World Access not to perform its covenants
hereunder or result in any of the conditions to the Acquisition set forth herein
not being satisfied.
Section 7.3. Access to Books and Records. Each of the Parties will, and
each of Cherry U.K. and World Access shall use its best efforts to cause each of
its respective Subsidiaries to, permit representatives of the other Parties to
have reasonable access at all reasonable times, and in a manner so as not to
interfere with the normal business operations, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to each of the Parties and their Subsidiaries in accordance with
reasonable procedures required by the Parties that are designed to minimize the
impact on each Party's business. Each of the Parties will treat and hold as such
any Confidential Information it receives from any of the Parties and their
Subsidiaries in the course of the reviews contemplated by this Section, will not
use any of the Confidential Information except in connection with this
Agreement, and, if this Agreement is terminated for any reason whatsoever,
agrees to return all tangible embodiments (and all copies thereof), to whichever
of the Parties that originally disclosed such embodiments, which are in its
possession.
Section 7.4. Preparation of Proxy. In connection with the meeting of its
stockholders to be held to approve the U.S. Merger and the transactions
contemplated hereby, New World Access shall prepare a proxy statement for
submission to its stockholders (the "Proxy Statement"). Cherry U.K. shall
promptly furnish, and Shareholder shall use his best efforts to cause Cherry
U.K. to promptly furnish, to New World Access all information concerning its
business and financial statements and affairs which, in the reasonable judgment
of New World Access or its counsel, may be required or appropriate for inclusion
in the Proxy Statement and shall take such other action as they may reasonably
request in connection with the Proxy Statement.
ARTICLE 8.
ADDITIONAL AGREEMENTS
Section 8.1. Best Efforts; Cooperation. Subject to the terms and conditions
herein provided, each of the Parties agrees to use its best efforts promptly to
take, or cause to be taken, all actions and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations, or
otherwise, including attempting to obtain all necessary Consents, to consummate
and make effective, as soon as practicable, the transactions contemplated by
this Agreement.
Section 8.2. Regulatory Matters
8.2.1. Following the execution and delivery of this Agreement,
World Access, Shareholder and Cherry U.K. shall cause to be prepared and filed
all required applications and filings with the Regulatory Authorities which are
necessary or contemplated for the obtaining of the Consents of the Regulatory
Authorities and the consummation of the Acquisition, including any Consents
required to be obtained under the HSR Act. Such applications and filings shall
be in such form as may be prescribed by the respective government agencies and
shall contain such information as they may require. The Parties hereto will
cooperate with each other and use reasonable efforts to prepare and execute all
necessary documentation, to effect all necessary or contemplated filings and to
obtain all necessary or contemplated Consents of the Regulatory Authorities and
third parties which are necessary or contemplated to consummate the transactions
contemplated by this Agreement, including the stockholders of New World Access.
Each of the Parties shall have the right to review and approve in advance, which
approval shall not be unreasonably withheld, any filing made with, or written
material submitted to, any Regulatory Authority in connection with the
transactions contemplated by this Agreement.
8.2.2. Each Party will furnish the other Parties with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders, as applicable, and such other matters as may be necessary or
advisable in connection with any statement or application made by or on behalf
of any such Party to any governmental body in connection with the transactions,
applications or filings contemplated by this Agreement. Upon request, the
Parties hereto will promptly furnish each other with copies of written
communications received by them or their respective Subsidiaries from, or
delivered by any of the foregoing to, any governmental body in respect of the
transactions contemplated hereby.
Section 8.3. Indemnification Regarding the Proxy Statement
8.3.1. New World Access and World Access agree to indemnify, defend and
hold harmless Shareholder and Cherry U.K. and each of their respective present
and former officers, directors, employees, agents and representatives, as the
case may be, from and against all losses, expenses, claims, damages or
liabilities to which any of them may become subject under applicable laws
(including the Exchange Act), and will reimburse each of them for any legal,
accounting or other expenses reasonably incurred in connection with
investigating or defending any such actions, whether or not resulting in
liability, insofar as such losses, expenses, claims, damages or liabilities
arise out of or are based upon any untrue statement or alleged untrue statement
of material fact provided by the indemnifying Party and contained in the Proxy
Statement or arise out of or are based upon the omission or alleged omission by
the indemnifying Party to state therein a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
8.3.2. Shareholder agrees to indemnify, defend and hold harmless World
Access and New World Access and each of their respective present and former
officers, directors, employees, agents and representatives, as the case may be,
from and against all losses, expenses, claims, damages or liabilities to which
any of them may become subject under applicable laws (including the Exchange
Act), and will reimburse each of them for any legal, accounting or other
expenses reasonably incurred in connection with investigating or defending any
such actions, whether or not resulting in liability, insofar as such losses,
expenses, claims, damages or liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of material fact provided by
Shareholder and contained in the Proxy Statement or arise out of or are based
upon the omission or alleged omission by Shareholder to state therein a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.
8.3.3. Cherry U.K. agrees to indemnify, defend and hold harmless World
Access and New World Access and each of their respective present and former
officers, directors, employees, agents and representatives, as the case may be,
from and against all losses, expenses, claims, damages or liabilities to which
any of them may become subject under applicable laws (including the Exchange
Act), and will reimburse each of them for any legal, accounting or other
expenses reasonably incurred in connection with investigating or defending any
such actions, whether or not resulting in liability, insofar as such losses,
expenses, claims, damages or liabilities arise out of or are based upon any
untrue statement or alleged untrue statement of material fact provided by Cherry
U.K. and contained in the Proxy Statement or arise out of or are based upon the
omission or alleged omission by Cherry U.K. to state therein a material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
Section 8.4. Notice of Development. Each of the Parties will give prompt
written notice to other Parties of any material adverse development that causes
or is likely to cause a material breach of any of its representations and
warranties contained in this Agreement. Such disclosure by any Party pursuant to
this Section shall be deemed to amend or supplement any disclosure contained in
the Schedules attached hereto to prevent or cure any misrepresentation, breach
of warranty, or breach of covenant.
Section 8.5. Notices and Consents. Each of the Parties will give any
notices (and will cause each of the Parties within their control to give any
notices) to third parties, and will use their reasonable efforts to obtain (and
will cause each of the Parties within their control to use their reasonable
efforts to obtain) any third-party consents that may be required to consummate
the transactions contemplated hereby.
Section 8.6. Indemnity. Subject to the provisions of laws of England and
Wales, New World Access shall cause Cherry U.K. to keep in effect provisions of
its memorandum and articles of association and other organizational documents
under the laws of England and Wales providing for exculpation of director and
officer liability and its indemnification of each Person who is now an officer
or director of Cherry U.K. (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties") to the fullest extent permitted under
the provisions of the laws of England and Wales, which provisions shall not be
amended except as required by applicable law or except to make changes permitted
by law that would enlarge the Indemnified Parties' right of indemnification. The
provisions of this Section shall survive the consummation of the Acquisition and
expressly are intended to benefit each of the Indemnified Parties.
Section 8.7. Exclusive Dealing
8.7.1. Shareholder shall not, nor shall Shareholder authorize
or permit Cherry U.K. or any officer, director of employee of, or any attorney
or other advisor or representative of, Cherry U.K. to, (i) solicit or initiate,
or encourage the submission of, any Acquisition Proposal or (ii) except in
connection with fulfilling its duties described in Section 10.8.5 in the U.S.
Merger Agreement, participate in any discussions or negotiations regarding, or
furnish to any Person any information with respect to, or take any other action
to facilitate any inquiries or the making of any proposal that constitutes, or
may reasonably be expected to lead to, any Acquisition Proposal.
8.7.2. Shareholder shall cause the Board of Directors of
Cherry U.K. not to (i) approve or recommend, or propose to approve or recommend,
any Acquisition Proposal or (ii) enter into any type of agreement or letter of
intent with respect to any Acquisition Proposal.
8.7.3. If, (i) prior to the termination of this Agreement,
Cherry U.K. enters into or proposes to enter into an agreement or letter of
intent with respect to any Acquisition Proposal, Shareholder shall concurrently
with Cherry U.K. entering into such agreement or letter of intent or the receipt
of such approval pay, or cause to be paid, in same day funds to World Access,
all of the costs and expenses incurred by World Access in connection with this
Agreement, including fees and expenses of its financial advisors, accountants
and counsel (the "Expenses"), or (ii) an Acquisition Proposal shall have been
made prior to the termination of this Agreement and within one year of such
termination Cherry U.K. enters into an agreement or letter of intent with
respect to, or approves or recommends or takes any action to facilitate such
Acquisition Proposal, Shareholder shall pay, or cause to be paid, in same day
funds upon demand, the Expenses, provided that, so long as Cherry U.K. is not
then in breach of any of its obligations herein, no payment shall be due to
World Access under subpart (ii) above if, (A) at the time of the termination of
this Agreement, Shareholder shall desire in good faith to proceed with the
transactions contemplated hereby, and World Access shall elect not to do so, (B)
any Regulatory Authority prohibits the consummation of the transactions
contemplated hereby or refuses to give any required Consent, or (C) the
conditions to Closing set forth in Article 10 hereof are not satisfied, provided
that Shareholder has used all reasonable efforts to satisfy such conditions, or
the conditions to Closing set forth in Article 13 hereof are not satisfied. The
Parties acknowledge that damages in the event of a breach of this Section 8.7
will be difficult to ascertain and that the Expenses are intended to be full
liquidated damages and such damages represent the Parties' best estimate of such
damages. The parties expressly acknowledge that the foregoing liquidated damages
are intended not as a penalty but as full liquidated damages in the event of a
breach of this Section 8.7, and World Access acknowledges the Expenses are its
sole and exclusive remedy for a breach of this Section 8.7.
8.7.4. In addition to the obligations set forth in Sections
8.7.1, 8.7.2 and 8.7.3 above, Shareholder shall immediately advise World Access
orally and in writing of any request for information or of any Acquisition
Proposal, or any inquiry with respect to or which could lead to any Acquisition
Proposal, the material terms and conditions of such request, Acquisition
Proposal or inquiry, and the identity of the Person making any Acquisition
Proposal or inquiry. Shareholder shall keep World Access fully informed of the
status and details (including amendments or proposed amendments) of any such
request, Acquisition Proposal or inquiry.
Section 8.8. Investment Representations. Shareholder and each Cherry U.K.
Optionholder covenants and agrees that he is (i) acquiring the New World Access
Stock or the New World Access Option (as the case may be) to be issued in
connection herewith for his own account and not with a view to, or for resale in
connection with, any distribution thereof; (ii) understands and acknowledges
that such New World Access Stock or the New World Access Option (as the case may
be) has not been registered under the Securities Act or any state securities
laws by reason of certain exemptions from the registration provisions thereof
which depend upon, among other things, the bona fide nature of his investment
intent as expressed herein; (iii) is able to bear the economic risk of an
investment in such New World Access Stock or the New World Access Option (as the
case may be) and has such knowledge and experience in financial and business
matters that he is capable of evaluating the risks and merits of such New World
Access Stock or the New World Access Option (as the case may be); (iv) has been
provided with all information or been given access to all information with
respect to New World Access which he believes might affect its decision whether
to effect the transactions contemplated hereby; and (v) understands and
acknowledges that such New World Access Stock or New World Access Options issued
pursuant to this Agreement (as the case may be) will be "restricted securities"
(as that term is defined in Rule 144 under the Securities Act) and that the
certificate representing such New World Access Stock or the New World Access
Option (as the case may be) will bear a legend restricting transfer unless (A)
the transfer is exempt from the registration requirements under the Securities
Act and any applicable state securities law and an opinion of counsel reasonably
satisfactory to New World Access that such transfer is exempt therefrom is
delivered to New World Access or (B) the transfer is made pursuant to an
effective registration statement under the Securities Act and any applicable
state securities law. In determining to proceed with the transactions
contemplated hereby, Shareholder and each Cherry U.K. Optionholder has relied
solely on the results of his own independent investigation with respect to World
Access and New World Access and the shares of New World Access Stock or the New
World Access Option (as the case may be), upon the representations and
statements of World Access and New World Access set forth herein and upon the
World Access SEC Reports. Shareholder and each Cherry U.K. Optionholder
acknowledges that the representations and statements to it by World Access and
New World Access set forth herein and by World Access in the World Access SEC
Reports constitute the sole and exclusive representations, warranties, covenants
and statements of World Access and New World Access or any of its officers,
directors, shareholders or other affiliates in connection with the transactions
contemplated hereby, and Shareholder and each Cherry U.K. Optionholder
understands, acknowledges and agrees that all other representations, warranties,
covenants and statements of any kind or nature, whether oral or contained in any
writing other than this Agreement and each of the other documents contemplated
hereby, are specifically disclaimed by World Access and New World Access.
ARTICLE 9.
EFFECTIVE TIME; CLOSING; DELIVERIES AT CLOSING
Section 9.1. Effective Time; Closing Section. The transactions contemplated
by this Agreement shall be effective for all purposes upon the execution and
delivery of this Agreement by all of the Parties and the satisfaction by all
Parties of the terms and conditions of Articles 9 through 12 hereof (the
"Effective Time"). Unless otherwise agreed upon in writing by the Parties, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place at the offices of Rogers & Hardin, 2700 International Tower, 229
Peachtree Street, Atlanta, Georgia 30303, commencing at 10:00 a.m. local time,
as soon as practicable following the satisfaction or waiver of the conditions
set forth in Articles 10 through 12 hereof, but in no event later than two
business days thereafter (the date of such being referred to herein as the
"Closing Date"), unless otherwise mutually agreed to by the Parties.
Section 9.2. Deliveries by Shareholder. At the Closing, Shareholder shall
deliver, or cause Cherry U.K. to deliver, as the case may be, to New World
Access each of the following:
(a) duly executed share transfers in respect of the Shares in
favor of New World Access, or as it may direct, together with the relative share
certificates and any power of attorney or other authority under which such
transfers have been executed;
(b) written resignations and releases executed as Deeds under
hand or under seal, in the agreed form, from the Secretary of Cherry U.K. and
the Directors (except from those persons expressly exempted from this
requirement by New World Access on or before the Closing Date), resigning their
offices and releasing Cherry U.K. and the Subsidiaries from all claims and
rights of action whatsoever, whether in respect of breach of contract,
compensation for loss of office, unfair dismissal, redundancy or in respect of
any loan or other indebtedness, or on any other account whatsoever;
(c) the Common Seal, Certificate of Incorporation and all the
statutory books of Cherry U.K. and the Subsidiaries properly written up to the
day prior to the Closing Date, namely the Register of Members, Register of
Mortgages, Register of Directors and Secretaries, Register of Directors'
Interests, the Books of Account and the Minute Books of Meetings of Cherry U.K.
and the Subsidiaries and of their Boards of Directors;
(d) share certificates in respect of all the issued shares in
the capital of the Subsidiaries and duly executed transfers of any share or
shares in the Subsidiaries not registered in the name of Cherry U.K. or any of
the Subsidiaries in favor of such Persons as New World Access shall direct;
(e) irrevocable powers of attorney (in such form as New World
Access may require) executed by Shareholder in favor of New World Access, or its
nominees, enabling New World Access, or its nominees, pending registration of
the transfers of the Shares, to exercise all voting and other rights attaching
to the Shares and to appoint proxies for such purpose;
(f) The Escrow Agreement;
(g) The Option Escrow Agreement; and
(h) Such other separate instruments or documents that New
World Access may reasonably deem necessary or appropriate in order to consummate
the transactions contemplated by this Agreement, including all regulatory and
contractual consents of third parties.
Section 9.3. Deliveries by New World Access. At the Closing, New World
Access shall deliver to Shareholder each of the following:
(a) Resolutions of the Board of Directors of New World Access
authorizing the execution and delivery of this Agreement and the Ancillary
Documents by New World Access and the performance of its obligations hereunder
and thereunder, certified by the Secretary of New World Access;
(b) A certificate of the Secretary of State of Delaware dated
as of a recent date as to the good standing of New World Access in such state;
(c) A certificate of the Secretary of State of each
jurisdiction of incorporation or organization of each New World Access
Subsidiary dated as of a recent date as to the due organization and existence of
such Subsidiary in each such jurisdiction;
(d) The certificates representing the Share Consideration in
accordance with Section 2.2 hereof and the option agreements representing the
New World Access Options;
(e) The Escrow Agreement;
(f) The Option Escrow Agreement; and
(g) Such other separate instruments or documents that
Shareholder may reasonably deem necessary or appropriate in order to consummate
the transactions contemplated by this Agreement, including all regulatory and
contractual consents of third parties.
ARTICLE 10.
MUTUAL CONDITIONS TO CLOSING
The obligations of the Parties to consummate the transactions provided
for herein shall be subject to the satisfaction of the following conditions,
unless waived as hereinafter provided for:
Section 10.1. Board Meeting of Cherry U.K. and Subsidiaries. Shareholder
shall cause to be duly held a meeting of Cherry U.K. and, where necessary, of
its Subsidiaries and of the Board of Cherry U.K. and of its Subsidiaries validly
to effect or execute or validly to resolve to effect or execute:
(a) the approval of the said transfers of the Shares to New World
Access, its nominees, the issue to New World Access, its nominees of share
certificates in respect of those shares and the registration of New World Access
or its nominees as holders of those shares (subject only to those transfers
being represented duly stamped);
(b) the appointment as Directors and Secretary of Cherry U.K. and the
Subsidiaries of such persons as New World Access may nominate, subject to such
persons consenting to such appointment and not being disqualified in law or
under the Articles of Association of Cherry U.K. or the relevant Subsidiary from
holding such offices;
(c) the revocation of all existing bank mandates and the issue of new
mandates in relation to Cherry U.K. and the Subsidiaries to such bank or banks
and in such form as New World Access may direct;
(d) the sealing of the certificates representing the Shares in favor of
New World Access;
(e) any other business which may be necessary or desirable to give full
and valid effect to the sale and purchase provided for in this Agreement or as
New World Access may reasonably require; and
(f) the Shareholder shall supply duly signed minutes of all such
meetings to New World Access at the Closing.
Section 10.2. Regulatory Approvals. All necessary Consents of the
Regulatory Authorities (including the FCC and the PUCs) shall have been obtained
and all notice and waiting periods required by law (including any waiting period
applicable to the Acquisition under the HSR Act) to pass after receipt of such
Consents shall have been terminated or shall have expired, and all conditions to
consummation of the Acquisition set forth in such Consents shall have been
satisfied. New World Access shall have received all permits or other
authorizations or confirmations as to the availability of exemptions from
registration requirements under all federal, state and foreign securities laws
as may be necessary to issue shares of New World Access Stock pursuant to this
Agreement.
Section 10.3. Litigation. There shall be no actual or threatened causes of
action, investigations or proceedings (a) challenging the validity or legality
of this Agreement or the consummation of the transactions contemplated by this
Agreement; (b) seeking damages in connection with the transactions contemplated
by this Agreement; or (c) seeking to restrain or invalidate the transactions
contemplated by this Agreement, which, in the case of (a) through (c), and in
the reasonable judgment of New World Access and Shareholder, based upon advice
of counsel, would have a material adverse effect with respect to the interests
of New World Access and Shareholder, as the case may be.
Section 10.4. Proxy Statement. The Proxy Statement with respect to the
transaction contemplated hereby and the U.S. Merger shall have been filed with
the SEC and any other Regulatory Authorities for review and comment and shall
have been authorized for mailing, either by notice from the SEC or the lapse of
time for review and comment by the SEC or such Regulatory Authority.
Section 10.5. Consummation of Holding Company Reorganization. The Holding
Company Reorganization shall have been consummated.
Section 10.6. Resignations. New World Access shall have received the
resignations, effective as of the Closing, of each director and officer of
Cherry U.K., other than those whom shall have been agreed upon by the Parties as
specified in writing at least 30 days prior to the Closing.
Section 10.7. Escrow Agreement. The Escrow Agent shall have executed and
delivered the Escrow Agreement.
Section 10.8. Option Escrow Agreement. The Option Escrow Agent shall have
executed and delivered the Option Escrow Agreement.
Section 10.9. Material Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the Acquisition by any Regulatory Authority which, in connection
with the grant of any Consent by any Regulatory Authority, imposes, in the
judgment of the Parties any material adverse requirement upon the Parties, or
any one of them, provided that no such term or condition imposed by any
Regulatory Authority in connection with the grant of any Consent by any
Regulatory Authority shall be deemed to be a material adverse requirement unless
it materially differs from terms and conditions customarily imposed by any such
entity in connection with the acquisition of corporations under similar
circumstances.
Section 10.10. Consents. All Consents of third parties required in
connection with the transactions contemplated hereby shall have been obtained,
except where the failure to obtain such Consents, in the aggregate, would not
reasonably be expected to result in a World Access Material Adverse Effect or a
Cherry U.K. Material Adverse Effect, provided that a Party which has not used
all reasonable efforts to obtain a Consent may not assert this condition with
respect to such Consent.
Section 10.11. NASDAQ Listing. The shares of New World Access Stock to be
issued hereunder shall have been approved upon official notice of issuance for
quotation on NASDAQ or listing on a national securities exchange agreed upon by
the Parties in writing prior to the Closing.
Section 10.12. U.S. Merger Transaction. The U.S. Merger shall have been
consummated.
ARTICLE 11.
CONDITIONS TO THE OBLIGATIONS OF NEW WORLD ACCESS
The obligations of New World Access to consummate the Acquisition are
subject to the fulfillment of each of the following conditions, unless waived by
World Access or New World Access:
Section 11.1. Representations and Warranties. The representations and
warranties of Cherry U.K. set forth in this Agreement and in any certificate or
document delivered pursuant hereto shall be true and correct in all material
respects as of the date of this Agreement and as of all times up to and
including the Effective Time (as though made on and as of the Effective Time
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for changes therein
contemplated by this Agreement).
Section 11.2. Performance of Obligations. Shareholder and Cherry U.K. shall
have performed all covenants, obligations and agreements required to be
performed by them under this Agreement prior to the Effective Time.
Section 11.3. Certificate Representing Satisfaction of Conditions.
Shareholder and Cherry U.K. shall have delivered to New World Access a
certificate dated as of the Closing Date as to the satisfaction of the matters
described in Sections 11.1 and 11.2 hereof, and such certificate shall be deemed
to constitute additional representations, warranties, covenants, and agreements
of Shareholder and Cherry U.K. under this Agreement.
Section 11.4. Tax Opinion. New World Access shall have received an opinion,
dated the Closing Date, from Rogers & Hardin LLP, based upon customary
representations and warranties, to the effect that no gain or loss will be
recognized by New World Access as a result of the transactions contemplated
hereby.
Section 11.5. Material Adverse Change. Since the date of this Agreement,
there shall not have been any Cherry U.K. Material Adverse Effect.
ARTICLE 12.
CONDITIONS TO OBLIGATIONS OF SHAREHOLDER
The obligations of Shareholder to consummate the Acquisition are
subject to the fulfillment of each of the following conditions, unless by
Shareholder:
Section 12.1. Representations and Warranties. The representations and
warranties of the other Parties set forth in this Agreement and in any
certificate or document delivered pursuant hereto shall be true and correct in
all material respects as of the date of this Agreement and as of all times up to
and including the Effective Time (as though made on and as of the Effective Time
except to the extent such representations and warranties are by their express
provisions made as of a specified date and except for changes therein
contemplated by this Agreement).
Section 12.2. Performance of Obligations. New World Access and World Access
shall have performed all covenants, obligations and agreements required to be
performed by them under this Agreement prior to the Effective Time.
Section 12.3. Certificate Representing Satisfaction of Conditions. New
World Access and World Access shall each have delivered to Shareholder a
certificate dated as of the Closing Date as to the satisfaction of the matters
described in Sections 12.1 and 12.2 hereof, and such certificates shall be
deemed to constitute additional representations, warranties, covenants, and
agreements of New World Access and World Access under this Agreement.
Section 12.4. Tax opinion. Shareholder shall have received an opinion,
dated the Closing Date, from Long, Aldridge & Norman, based on customary
representations and warranties, to the effect that no gain or loss will be
recognized by Shareholder as a result of the transactions contemplated hereby.
Section 12.5. Material Adverse Change. Since the date of this Agreement,
there shall not have been any World Access Material Adverse Effect.
ARTICLE 13.
TERMINATION
Section 13.1. Termination of Agreement. This Agreement may be terminated at
any time prior to the Closing:
(a) by mutual written consent duly authorized by the Boards of
Directors of New World Access, World Access and Cherry U.K. and Shareholder at
any time prior to the Effective Time; or
(b) by World Access or New World Access at any time prior to
the Effective Time, if (i) there has been a material breach of a representation,
warranty, covenant or agreement of Shareholder and Cherry U.K., and such breach
has not been cured or is incapable of being cured within 15 days of notice of
such breach; or (ii) either World Access or New World Access determines in their
respective sole good faith judgment, within thirty (30) days of the delivery of
the Shareholder Disclosure Schedule, that the exceptions set forth therein are
materially adversely different from the representations and warranties of
Shareholder and Cherry U.K. in Article 6 hereof, provided that World Access or
New World Access shall inform Cherry U.K. upon such termination as to the
reasons for its determination; or
(c) by Shareholder and Cherry U.K. at any time prior to the
Effective Time, if (i) there has been a material breach of a representation,
warranty, covenant, or agreement of World Access or New World Access, and such
breach has not been cured or is incapable of being cured within 15 days of
notice of such breach; or (ii) Shareholder and Cherry U.K. determine, in their
respective sole good faith judgment, within thirty (30) days of the delivery of
the World Access Disclosure Schedule, that the exceptions set forth therein are
materially adversely different from the representations and warranties of New
World Access and World Access in Article 5 hereof, provided that Shareholder and
Cherry U.K. shall inform New World Access and World Access upon such termination
as to the reasons for its determination; or
(d) by New World Access, World Access or Shareholder if the
Closing has not occurred by November 1, 1998, unless extended by mutual written
consent of New World Access, World Access and Shareholder, duly authorized by
the board of director of New World Access (provided that the right to terminate
this Agreement under this Section shall not be available to any Party whose
failure to perform any material covenant or obligation or whose breach of a
representation or warranty under this Agreement has been the cause of or
resulted in the failure of the Closing to occur on or before such date); or
(e) by New World Access, World Access or Shareholder if the
U.S. Merger is terminated for any reason in accordance with its terms.
Section 13.2. Effect of Termination and Breach. In the event of termination
of this Agreement as provided in Section 13.1, this Agreement and the Ancillary
Documents shall forthwith become void and have no effect, without any liability
or obligation on the part of any Party, other than any liability or obligation
arising under the provisions of this Section 13.2 and Sections 8.7.3, 14.3 and
14.13; provided, however, that in no event shall such termination relieve any
Party of liability for any breach by such Party of any of its covenants and
agreements set forth herein and in the Ancillary Documents, and further
provided, that no Party shall have any liability hereunder for any breach of a
representation or warranty of such Party except to the extent that such breach
shall have been the result of common law fraud, intentional omission, deliberate
concealment or gross negligence.
Section 13.3. Confidentiality Upon Termination. In the event of any
termination of this Agreement for any reason, including any breach by any of the
Parties, each Party shall treat as confidential and shall not disclose, or use
directly or indirectly for their benefit or any third party's benefit or to the
detriment of any other Party in any manner whatsoever, or permit others under
their control to disclose, or to use, Confidential Information concerning the
other Parties obtained pursuant to or in connection with the Acquisition which
is not generally known to the trade or a matter of public knowledge.
Section 13.4. Specific Performance. The Parties hereto agree that money
damages or other remedy at law would not be a sufficient or adequate remedy for
any breach or violation of, or a default under, this Agreement and the Ancillary
Documents by them and that in addition to all other remedies available to them,
each of them shall be entitled to the fullest extent permitted by law to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including specific
performance, without bond or other security being required.
ARTICLE 14.
GENERAL PROVISIONS
Section 14.1. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement shall survive the Effective
Time. This Section shall not limit any covenant or agreement of the Parties
which by its terms contemplates performance after the Effective Time.
Section 14.2. Press Releases and Public Announcements. No Party shall issue
any press release or make any public announcement relating to the subject matter
of this Agreement without the prior written approval of all of the other
Parties; provided, however, that any Party may make any public disclosure it
believes in good faith is required by applicable law (in which case the
disclosing Party will use its best efforts to advise the other Parties at the
earliest possible time prior to making such disclosure).
Section 14.3. No Third-Party Beneficiaries. This Agreement shall not confer
any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; provided, however, that the
provisions in Articles 2, 3, and 4 hereof concerning payment of the
Consideration contemplated by this Agreement and certain additional agreements
are intended for the benefit of the stockholders of New World Access,
Shareholder and the Cherry U.K. Optionholders.
Section 14.4. Entire Agreement. This Agreement (including the Ancillary
Documents) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
Section 14.5. Succession and Assignment. This Agreement and the Ancillary
Documents shall be binding upon and inure to the benefit of the Parties named
herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or the Ancillary Documents or any of its rights,
interests, or obligations hereunder or thereunder without the prior written
approval of all of the other Parties.
Section 14.6. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
Section 14.7. Notices. Notices to be given to Shareholder or Cherry U.K.
hereunder shall be in writing and delivered personally to Shareholder or the
designated officer of Cherry U.K., transmitted by facsimile, or deposited in the
United States mail, certified and return receipt requested, postage prepaid, and
addressed as follows (or to such other address as may be specified by
Shareholder or Cherry U.K. in writing):
Cherry Communications U.K. Limited
c/o Resurgens Communications Group
2210 Resurgens Plaza
945 East Paces Ferry Road
Atlanta, Georgia 30326
Attention: Chief Executive Officer
Telephone: (404) 261-6190
Facsimile: (404) 233-2280
with a copy to (which will not constitute notice to Shareholder or
Cherry U.K.):
Long, Aldridge & Norman
Suite 5300
One Peachtree Center
303 Peachtree Street
Atlanta, Georgia 30308-3201
Attention: Clay C. Long, Esq.
Telephone: (404) 527-4050
Facsimile: (404) 527-4198
Notices to be given to New World Access or World Access hereunder shall
be in writing and delivered personally to the designated officer of New World
Access, transmitted by facsimile, or deposited in the United States mail,
certified and return receipt requested, postage prepaid, and addressed as
follows (or to such other address as may be specified by New World Access or
World Access in writing):
WAXS Inc.
c/o World Access, Inc.
945 E. Paces Ferry Road, Suite 2240
Atlanta, Georgia 30326
Attention: Chief Executive Officer
Telephone: (404) 231-2025
Facsimile: (404) 365-9847
with a copy to (which will not constitute notice to New World Access or
World Access):
Rogers & Hardin LLP
2700 International Tower
229 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: Steven E. Fox, Esq.
Telephone: (404) 420-4603
Facsimile: (404) 525-2224
Notices delivered personally shall be effective upon delivery. Notices
transmitted by facsimile shall be effective when receipt is confirmed. Notices
delivered by mail shall be effective upon the acceptance or rejection by the
Person to whom they are addressed.
Section 14.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic laws of the State of Georgia without
giving effect to any choice or conflict of law provision or rule (whether of the
State of Georgia or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Georgia.
Section 14.9. Amendments and Waivers. The Parties may mutually amend any
provision of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors. No amendment of any
provision of this Agreement shall be valid unless the same shall be in writing
and signed by all of the Parties. No waiver by any Party of any default,
misrepresentation, or breach of warranty or covenant hereunder, whether
intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence. Notwithstanding the foregoing, a Cherry U.K. Optionholder shall
become a Party hereto without the consent of any other Party hereto by executing
and delivering to New World Access a counterpart of the signature page hereto.
Section 14.10. Severability. Any term or provision of this Agreement that
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
Section 14.11. Construction. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties, and no presumption or burden of proof
shall arise favoring or disfavoring any Party by virtue of the authorship of any
of the provisions of this Agreement. Any reference to any federal, state, local
or foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context otherwise requires.
"Herein", "hereby", "hereunder", "hereof", "hereinbefore, "hereinafter" and
other equivalent words refer to this Agreement as a whole and not solely to the
particular Article or Section in which such word is used. When a reference is
made in this Agreement to a Section or Exhibit, such reference shall be to a
Section of, or an Exhibit to, this Agreement unless otherwise indicated. The
table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever any of the words "include", "includes" or "including"
is used in this Agreement, it shall be deemed to be followed by the words
"without limitation".
Section 14.12. Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
Section 14.13. Transaction Costs. Each of the Parties shall be responsible
for its own expenses in connection with the negotiation of this Agreement and
the consummation of the transactions contemplated hereby, including those
expenses incurred in connection with the Proxy Statement, attorneys' fees and
disbursements, accounting fees and disbursements and investment banking fees and
disbursements.
<PAGE>
IN WITNESS WHEREOF, each of the Parties hereto has caused its duly
authorized officer to execute and deliver this Agreement as of the date first
above written.
WORLD ACCESS, INC.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Its: Chairman and CEO
WAXS, INC.
By: /s/ Steven A. Odom
-------------------------------------
Name: Steven A. Odom
Its: Chairman and CEO
Executed as a Deed
By: /s/ John D. Phillips (Director)
-------------------------------------
Name: John D. Phillips
By: /s/ W. Tod Chmar (Director/Secretary)
-------------------------------------
Name: W. Tod Chmar
For and on behalf of
CHERRY COMMUNICATIONS U.K. LIMITED
RENAISSANCE PARTNERS II
By: /s/ John D. Phillips
-------------------------------------
Name: John D. Phillips
Its: Partner
By: /s/ W. Tod Chmar
-------------------------------------
Name: W. Tod Chmar
Its: Partner
CHERRY U.K. OPTIONHOLDERS:
-------------------------------------
-------------------------------------
<PAGE>
Exhibit 99.3
News Release
SUMMARY: WORLD ACCESS, INC. SIGNS DEFINITIVE
AGREEMENTS TO ACQUIRE RESURGENS
COMMUNICATIONS GROUP
CONTACT: Steven A. Odom Chairman & CEO
Hensley E. West President & COO
Mark A. Gergel Exec. VP & CFO
(404) 231-2025
FOR IMMEDIATE RELEASE
ATLANTA, GEORGIA - May 12, 1998 - WORLD ACCESS, INC. (NASDAQ: WAXS), announced
today that it has signed definitive agreements to acquire Cherry Communications
Incorporated, d/b/a Resurgens Communications Group ("RCG"), and Cherry
Communications U.K. Limited ("Cherry U.K.", and together with RCG, "Resurgens").
The agreement to acquire RCG is subject to the approval of the Bankruptcy Court.
Pursuant to the terms of the agreements, the creditors of RCG and the
shareholders of Cherry U.K. will receive approximately 3.7 million shares of
World Access common stock in the aggregate, currently valued at approximately
$140 million. In addition, the RCG creditors and Cherry U.K. shareholders have
the right to receive additional consideration of up to 7.5 million shares of
World Access common stock over the next two and one-half years, contingent upon
the achievement of certain EBITDA levels by Resurgens during this timeframe. The
transaction is subject to, among other things, Resurgens exceeding pre-defined
levels of monthly revenues and gross margin, the receipt of the requisite
corporate and regulatory approvals, the confirmation of RCG's Plan of
Reorganization and the approval of World Access shareholders.
RCG, currently operating under the protection of Chapter 11 of the United States
Bankruptcy Code, and Cherry U.K. are facilities-based providers of international
network access, commonly referred to in the industry as carriers' carrier. In
October 1997, John D. ("Jack") Phillips entered into a series of agreements
whereby, among other things, he became the new Chairman and Chief Executive
Officer of Resurgens. RCG filed for bankruptcy protection shortly thereafter.
WorldCom, Inc. ("WorldCom"), a major customer and vendor of Resurgens, has
subsequently provided Resurgens approximately $26 million of direct financial
support through a debtor in possession facility and additional financial
support, primarily through trade credits. Upon completion of the Resurgens
acquisition, WorldCom is expected to own approximately 15% of World Access on a
fully diluted basis.
Steven A. Odom, Chairman and Chief Executive Officer of World Access, said, "The
acquisition of Resurgens is expected to close in the third quarter and
positively impact World Access earnings and cash flow beginning in the fourth
quarter of 1998. The acquisition uniquely positions the Company to offer its
customers a complete telecommunications network solution, including proprietary
equipment, planning and engineering services and access to international long
distance. The international network access offered by Resurgens is a critical
element of new and expanded networks currently being planned or implemented by
many World Access customers."
"We believe the ability to offer both equipment and network access will provide
World Access with a comprehensive and cost-competitive product offering,
especially for international competitive local exchange providers ("CLECs") and
other providers of phone service in emerging growth markets. We have identified
numerous synergistic opportunities for World Access as a direct result of
Resurgens, including equipment sales to Resurgens customers, joint ventures with
international PTTs and CLECs, carrier service revenues from World Access
equipment customers and significant cost savings for the internal network of
Resurgens."
"We are excited that Jack Phillips has agreed to serve as the Chairman of the
combined company upon consummation of the transaction. He is one of the pioneers
of the U.S alternative long distance business, having built up Advanced
Telecommunications Corporation, which merged with WorldCom in 1992, and
Resurgens Communications Group, Inc., which merged with Metromedia
Communications Corporation and WorldCom in 1993. We are also extremely pleased
that WorldCom, a recognized leader in today's telecommunications industry, will
become the largest shareholder of the combined company."
Mr. Phillips, Chairman and Chief Executive Officer of Resurgens, said "Over the
past six months, we have recruited proven industry professionals into Resurgens
and totally rebuilt the Resurgens operating network. New, reliable billing
systems have been tested and implemented, a 24 hour - 7 day Network Operations
Center is now operational, and competitive, dedicated bandwidth and transit
agreements are in place. We currently expect Resurgens to generate greater than
$25 million in monthly revenues by July."
"Steve Odom and his management team have done a tremendous job over the past
three years of building World Access into a highly respected, fast growing
telecommunications equipment company. Steve will continue to serve as the Chief
Executive Officer of the combined company and I look forward to working with him
as we continue to work towards achieving significant long-term value for World
Access stockholders."
World Access, Inc. develops, manufactures and markets wireline and wireless
switching, transport and access products for the global telecommunications
markets. The Company's products allow telecommunications service providers to
build and upgrade their central office and outside plant networks in order to
provide a wide array of voice, data and video services to their business and
residential customers. The Company offers digital switches, billing and network
telemanagement systems, cellular base stations, fixed wireless local loop
systems, intelligent multiplexers, microwave and millimeterwave radio systems
and other telecommunications network products. To support and complement its
product sales, the Company also provides its customers with a broad range of
design, engineering, manufacturing, testing, installation, repair and other
value-added services.
Except for any historical information contained herein, the matters discussed in
this press release contain forward-looking statements that involve risks and
uncertainties which are described in the Company's SEC reports, including the
Company's Annual Report on Form 10-K, as amended, for the year ended December
31, 1997, and the Company's Registration Statement on Form S-3 (No. 333-43497).
###
