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AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1997 (this
"Agreement"), among WORLDCOM, INC., a Georgia corporation ("WorldCom"), TC
INVESTMENTS CORP., a Delaware corporation and a direct wholly-owned subsidiary
of WorldCom ("Merger Sub"), and MCI COMMUNICATIONS CORPORATION, a Delaware
corporation ("MCI").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of World Com, Merger Sub and
MCI have each determined that the merger of MCI with and into Merger Sub (the
"Merger") is in the best interests of their respective stockholders, and such
Boards of Directors have approved such Merger, upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which (a) each outstanding
share of common stock, par value $.10 per share, of MCI ("Ordinary Common
Stock") issued and outstanding immediately prior to the Effective Time (as
defined in Section 1.3), other than shares owned or held directly or indirectly
by WorldCom or directly by MCI will be converted into the right to receive
shares of common stock, par value $.01 per share of WorldCom ("WorldCom Common
Stock") as set forth in Section 1.8 and (b) each share of Class A common stock,
par value $.10 per share, of MCI ("Class A Common Stock" and, collectively with
the Ordinary Common Stock, the "MCI Common Stock") will be converted into the
right to receive $51 in cash as set forth in Section 1.8;
WHEREAS, WorldCom, Merger Sub and MCI desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to the
transactions contemplated hereby;
WHEREAS, WorldCom, Merger Sub and MCI intend, by approving resolutions
authorizing this Agreement, to adopt this Agreement as a plan of reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations promulgated thereunder;
WHEREAS, MCI, British Telecommunications plc, a public limited company
incorporated under the laws of England and Wales ("BT"), and Tadworth
Corporation, a Delaware corporation and a wholly owned subsidiary of BT, have
entered into the Agreement and Plan of Merger dated as of November 3, 1996, as
amended (the "BT Merger Agreement");
WHEREAS, BT, MCI and WorldCom have entered into an agreement dated as of
the date hereof pursuant to which, among other things, BT has consented to and
agreed to support the Merger and the other transactions contemplated by this
Agreement (the "BT Agreement").
WHEREAS, in the BT Agreement, WorldCom has agreed to pay BT $450 million
and expenses not in excess of $15 million (collectively, the "BT Inducement
Fee") in connection with the plan of reorganization in order to induce BT to
waive its rights waive its rights under, and agree to terminate, the BT Merger
Agreement; andunder, and agree to terminate, the BT Merger Agreement; and
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WHEREAS, the BT Merger Agreement has been terminated by MCI and BT by
mutual agreement pursuant to Section 7.1(a) of the BT Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), MCI shall be merged with and into Merger Sub at
the Effective Time. Following the Merger, the separate corporate existence of
MCI shall cease and Merger Sub shall continue as the surviving corporation (the
"Surviving Corporation") under the name "MCI Communications Corporation".
1.2 Closing. The closing of the Merger (the "Closing") will
take place on the fifth Business Day after the satisfaction or waiver (subject
to applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing Date) set forth in Article VI (the
"Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of Xxxxxxx Xxxxxxx &
Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, 00000, unless another place
is agreed to in writing by the parties hereto.
1.3 Effective Time. As soon as practicable following the
Closing, the parties shall (i) file a certificate of merger (the "Delaware
Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the DGCL and (ii) make all other
filings or recordings required under the DGCL. The Merger shall become effective
at such time as the Delaware Certificate of Merger is duly filed with the
Delaware Secretary of State or at such subsequent time as WorldCom and MCI shall
agree and be specified in the Delaware Certificate of Merger (the date and time
the Merger becomes effective being the "Effective Time").
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1.4 Effects of the Merger. At and after the Effective Time,
the Merger will have the effects set forth in the DGCL. Without limiting the
generality of the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of MCI and Merger Sub shall
be vested in the Surviving Corporation, and all debts, liabilities and duties of
MCI and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.
1.5 Certificate of Incorporation. The certificate of
incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation,
until thereafter changed or amended as provided therein or by applicable law,
except that Article I of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read in its entirety as follows: "The name of
this Corporation is 'MCI Communications Corporation'".
1.6 By-Laws. The by-laws of Merger Sub as in effect at the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.7 Officers and Directors of Surviving Corporation. The
officers of MCI as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be. The directors of Merger Sub as of the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a director or
until their respective successors are duly elected and qualified.
1.8 Effect on Capital Stock. (a) At the Effective Time by
virtue of the Merger and without any action on the part of the holder thereof,
(i) each share of Ordinary Common Stock issued and outstanding immediately prior
to the Effective Time (other than shares of Ordinary Common Stock owned by
WorldCom or Merger Sub or held by MCI, all of which shall be canceled as
provided in Section 1.8(c)) shall be converted into the right to receive that
number of shares of WorldCom Common Stock equal to the Exchange Ratio (as
defined below) (the "Ordinary Common Stock Merger Consideration") and (ii) each
share of Class A Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Class A Common Stock owned by WorldCom or
Merger Sub or held by MCI, all of which shall be canceled as provided in Section
1.8(c)) shall be converted into the right to receive $51 in cash, without
interest thereon (the "Class A Common Stock Merger Consideration", and,
collectively with the Ordinary Common Stock Merger Consideration, the "Merger
Consideration"). "Exchange Ratio" means the quotient (rounded to the nearest
1/10,000) determined by dividing $51.00 by the
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average of the high and low sales prices of WorldCom Common Stock as reported on
The Nasdaq National Market ("NASDAQ") on each of the twenty consecutive trading
days ending with the third trading day immediately preceding the Effective Time
(the "Measurement Period"); provided, that the Exchange Ratio shall not be less
than 1.2439 or greater than 1.7586.
(b) As a result of the Merger and without any action on the
part of the holders thereof, at the Effective Time, all shares of MCI Common
Stock shall cease to be outstanding and shall be canceled and retired and shall
cease to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of MCI Common Stock (a "Certificate")
(other than Merger Sub, WorldCom and MCI) shall thereafter cease to have any
rights with respect to such shares of MCI Common Stock, except the right to
receive the applicable Merger Consideration in accordance with Article II upon
the surrender of such certificate.
(c) Each share of MCI Common Stock issued and owned or held by
WorldCom, Merger Sub or MCI at the Effective Time shall, by virtue of the
Merger, cease to be outstanding and shall be canceled and retired and no stock
of WorldCom or other consideration shall be delivered in exchange therefor.
(d) Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time, shall
remain issued, outstanding and unchanged as validly issued, fully paid and
nonassessable shares of common stock, par value $.01 per share, of the Surviving
Corporation as of the Effective Time.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund. Prior to the Effective Time, WorldCom shall
appoint The Bank of New York, or another commercial bank or trust company having
net capital of not less than $100,000,000, to act as exchange agent hereunder
for the purpose of exchanging Certificates for the Merger Consideration (the
"Exchange Agent"). At or prior to the Effective Time, WorldCom shall deposit
with the Exchange Agent, in trust for the benefit of holders of shares of MCI
Common Stock, certificates representing the WorldCom Common Stock issuable
pursuant to Section 1.8 in exchange for outstanding shares of Ordinary Common
Stock and cash in the amount required to be exchanged for Class A Common Stock
in the Merger pursuant to Section 1.8. WorldCom agrees to make available to the
Exchange Agent from time to time as needed, cash sufficient to pay cash in lieu
of fractional shares pursuant to Section 2.5 and any dividends and other
distributions pursuant to Section 2.3. Any cash and
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certificates of WorldCom Common Stock deposited with the Exchange Agent shall
hereinafter be referred to as the "Exchange Fund".
2.2 Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to mail to each holder of a Certificate (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon delivery of the Certificates to the Exchange
Agent, and which letter shall be in customary form and have such other
provisions as WorldCom may reasonably specify and (ii) instructions for
effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration. Upon surrender of a Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate, if
it is a Certificate for Ordinary Common Stock shall be entitled to receive in
exchange therefor (A) one or more shares of WorldCom Common Stock representing,
in the aggregate, the whole number of shares that such holder has the right to
receive pursuant to Section 1.8 (after taking into account all shares of MCI
Common Stock then held by such holder) and (B) a check in the amount equal to
the cash that such holder has the right to receive pursuant to the provisions of
this Article II, including cash in lieu of any fractional shares of WorldCom
Common Stock pursuant to Section 2.5, or if it is a Certificate for Class A
Common Stock, a check in the amount equal to the cash that such holder has the
right to receive pursuant to the provisions of this Article II, and in each case
the Certificate so surrendered shall forthwith be canceled. No interest will be
paid or will accrue on any cash payable pursuant to Section 1.8, Section 2.3 or
Section 2.5. In the event of a transfer of ownership of MCI Common Stock which
is not registered in the transfer records of MCI, one or more shares of WorldCom
Common Stock evidencing, in the aggregate, the proper number of shares of
WorldCom Common Stock, a check in the proper amount of cash in lieu of any
fractional shares of WorldCom Common Stock pursuant to Section 2.5 and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.3, may be issued with respect to such MCI Common Stock to such a
transferee if the Certificate representing such shares of MCI Common Stock is
presented to the Exchange Agent, accompanied by all documents required to
evidence and effect such transfer and to evidence that any applicable stock
transfer taxes have been paid.
2.3 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect to shares of
WorldCom Common Stock with a record date after the Effective Time shall be paid
to the holder of any unsurrendered Certificate with respect to the shares of
WorldCom Common Stock that such holder would be entitled to receive upon
surrender of
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such Certificate and no cash payment in lieu of fractional shares of WorldCom
Common Stock shall be paid to any such holder pursuant to Section 2.5 until such
holder shall surrender such Certificate in accordance with Section 2.2. Subject
to the effect of applicable laws, following surrender of any such Certificate,
there shall be paid to such holder of shares of WorldCom Common Stock issuable
in exchange therefor, without interest, (a) promptly after the time of such
surrender, the amount of any cash payable in lieu of fractional shares of
WorldCom Common Stock to which such holder is entitled pursuant to Section 2.5
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole shares of WorldCom
Common Stock, and (b) at the appropriate payment date, the amount of dividends
or other distributions with a record date after the Effective Time but prior to
such surrender and a payment date subsequent to such surrender payable with
respect to such shares of WorldCom Common Stock.
2.4 No Further Ownership Rights in MCI Common Stock. All
shares of WorldCom Common Stock issued and cash paid upon conversion of shares
of MCI Common Stock in accordance with the terms of Article I and this Article
II (including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of MCI Common Stock.
2.5 No Fractional Shares of WorldCom Common Stock. (a) No
certificates or scrip or shares of WorldCom Common Stock representing fractional
shares of WorldCom Common Stock shall be issued upon the surrender for exchange
of Certificates and such fractional share interests will not entitle the owner
thereof to vote or to have any rights of a shareholder of WorldCom or a holder
of shares of WorldCom Common Stock.
(b) Notwithstanding any other provision of this Agreement,
each holder of shares of MCI Common Stock exchanged pursuant to the Merger who
would otherwise have been entitled to receive a fraction of a share of WorldCom
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of WorldCom Common
Stock multiplied by (ii) the last sales price per share of WorldCom Common Stock
quoted on NASDAQ on the Closing Date. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of fractional
interests, the Exchange Agent shall so notify WorldCom, and WorldCom shall cause
the Surviving Corporation to deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
interests subject to and in accordance with the terms hereof.
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2.6 Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for twelve
months after the Effective Time shall be delivered to the Surviving Corporation
or otherwise on the instruction of the Surviving Corporation, and any holders of
the Certificates who have not theretofore complied with this Article II shall
thereafter look only to the Surviving Corporation and WorldCom for the Merger
Consideration with respect to the shares of MCI Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.8
and Section 2.2, any cash in lieu of fractional shares of WorldCom Common Stock
to which such holders are entitled pursuant to Section 2.5 and any dividends or
distributions with respect to shares of WorldCom Common Stock to which such
holders are entitled pursuant to Section 2.3. Any such portion of the Exchange
Fund remaining unclaimed by holders of shares of MCI Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Entity (as defined in Section 3.1(c)(iii))) shall, to the extent permitted by
law, become the property of the Surviving Corporation free and clear of any
claims or interest of any Person previously entitled thereto.
2.7 No Liability. None of WorldCom, Merger Sub, MCI, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.8 Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by the Surviving
Corporation on a daily basis. Any interest and other income resulting from such
investments shall promptly be paid to the Surviving Corporation.
2.9 Lost Certificates. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by the Surviving Corporation, the posting by such Person of a bond in
such reasonable amount as the Surviving Corporation may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
MCI Common Stock formerly represented thereby, any cash in lieu of fractional
shares of WorldCom Common Stock, and unpaid dividends and distributions on
shares of WorldCom Common Stock deliverable in respect thereof, pursuant to this
Agreement.
2.10 Withholding Rights. Each of the Surviving
Corporation and WorldCom shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this
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Agreement to any holder of shares of MCI Common Stock such amounts as it is
required to deduct and withhold with respect to the making of such payment under
the Code and the rules and regulations promulgated thereunder, or any provision
of state, local or foreign tax law. To the extent that amounts are so withheld
by the Surviving Corporation or WorldCom, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been paid
to the holder of the shares of MCI Common Stock in respect of which such
deduction and withholding was made by the Surviving Corporation or WorldCom, as
the case may be.
2.11 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of MCI or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of MCI or Merger Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
2.12 Stock Transfer Books. At the close of business, New York
City time, on the day the Effective Time occurs, the stock transfer books of MCI
shall be closed and there shall be no further registration of transfers of
shares of MCI Common Stock thereafter on the records of MCI. From and after the
Effective Time, the holders of Certificates shall cease to have any rights with
respect to such shares of MCI Common Stock formerly represented thereby, except
as otherwise provided herein or by law. On or after the Effective Time, any
Certificates presented to the Exchange Agent or WorldCom for any reason shall be
converted into the Merger Consideration with respect to the shares of MCI Common
Stock formerly represented thereby, any cash in lieu of fractional shares of
WorldCom Common Stock to which the holders thereof are entitled pursuant to
Section 2.5 and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of MCI. Except as set forth
in the MCI Disclosure Schedule delivered by MCI to WorldCom prior to the
execution of this Agreement (the "MCI Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), MCI represents and warrants to
WorldCom as follows:
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(a) Organization, Standing and Power. Each of MCI and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify would
not, either individually or in the aggregate, have a Material Adverse Effect (as
defined in Section 8.11(c)) on MCI. The copies of the certificate of
incorporation and by-laws of MCI which were previously furnished to WorldCom are
true, complete and correct copies of such documents as in effect on the date of
this Agreement.
(b) Capital Structure. (i) As of October 31, 1997, the
authorized capital stock of MCI consisted of (A) 2,000,000,000 shares of
Ordinary Common Stock, of which 565,301,683 shares were outstanding and (B)
500,000,000 shares of Class A Common Stock, of which 135,998,932 shares were
outstanding and (C) 50,000,000 shares of preferred stock, of which 10,000,000
shares of Series E Junior Participating Preferred Stock have been designated and
reserved for issuance upon exercise of the rights (the "Rights") distributed to
the holders of MCI Common Stock pursuant to the Rights Agreement dated as of
September 30, 1994 between MCI and Mellon Bank, N.A., as rights agent, as
amended (the "Rights Agreement"). Since October 31, 1997 to the date of this
Agreement, there have been no issuances of shares of the capital stock of MCI or
any other securities of MCI other than issuances of shares (and accompanying
Rights) pursuant to options or rights outstanding as of October 31, 1997 under
the Benefit Plans (as defined in Section 8.11(i)) of MCI. All issued and
outstanding shares of the capital stock of MCI are duly authorized, validly
issued, fully paid and nonassessable, and no class of capital stock (other than
Class A Common Stock) is entitled to preemptive rights. There were outstanding
as of October 31, 1997 no options, warrants or other rights to acquire capital
stock from MCI other than (v) the Rights, (w) options representing in the
aggregate the right to purchase 75,119,367 shares of MCI Common Stock under
MCI's 1989 Stock Option Plan, MCI's 1988 Directors' Stock Option Plan and MCI's
1979 Stock Option Plan (collectively, the "MCI Stock Option Plans"), (x) rights
to purchase an aggregate of 11,876,569 shares of MCI Common Stock under the MCI
1990 Stock Purchase Plan (the "ESPP"), (y) incentive stock units ("ISUs")
representing the right to receive 5,484,883 shares of MCI Common Stock under
MCI's 1989 Stock Option Plan and (z) rights to purchase an aggregate of
4,482,722 shares of MCI Common Stock under MCI's 401(k) Plan. Other than the
associated Rights issued with the shares issued as described above, no options
or warrants or other rights to acquire capital stock from MCI have
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been issued or granted since October 31, 1997 to the date of this Agreement.
(ii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of MCI having the right to vote on any matters on
which stockholders may vote ("MCI Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b) and
as contemplated by Section 5.7, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which MCI or any of its Subsidiaries
is a party or by which any of them is bound obligating MCI or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of MCI or
any of its Subsidiaries or obligating MCI or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of MCI or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of MCI or any of its Subsidiaries.
(c) Authority; No Conflicts. (i) MCI has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby, subject in the case of the consummation of the
Merger to the adoption of this Agreement by the Required MCI Votes (as defined
in Section 3.1(f)). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of MCI, subject in the case of the
consummation of the Merger to the adoption of this Agreement by the Required MCI
Votes. This Agreement has been duly executed and delivered by MCI and
constitutes a valid and binding agreement of MCI, enforceable against it in
accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally, by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
or by an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the Merger and the other
transactions contemplated hereby will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment, cancellation
or acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge or other encumbrance
on any assets (any such
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conflict, violation, default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "Violation") pursuant to: (A) any provision of
the certificate of incorporation or by-laws of MCI or any Subsidiary of MCI, or
(B) except as would not have a Material Adverse Effect on MCI and, subject to
obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below,
any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit
plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to MCI or any Subsidiary of MCI or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority, including the European
Union (a "Governmental Entity"), is required by or with respect to MCI or any
Subsidiary of MCI in connection with the execution and delivery of this
Agreement by MCI or the consummation of the Merger and the other transactions
contemplated hereby, except for those required under or in relation to (A) the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and Council Regulation (EEC) No. 4064/89 ("Regulation 4064/89"), (B) the
Communications Act of 1934, as amended (the "Communications Act"), and any
rules, regulations, practices and policies promulgated by the Federal
Communications Commission ("FCC"), (C) state securities or "blue sky" laws (the
"Blue Sky Laws"), (D) the Securities Act of 1933, as amended (the "Securities
Act"), (E) the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
(F) the DGCL with respect to the filing of the Delaware Certificate of Merger,
(G) laws, rules, regulations, practices and orders of any state public service
commissions ("PUCs"), foreign telecommunications regulatory agencies or similar
state or foreign regulatory bodies, (H) rules and regulations of NASDAQ, (I)
antitrust or other competition laws of other jurisdictions, and (J) such
consents, approvals, orders, authorizations, registrations, declarations and
filings the failure of which to make or obtain would not have a Material Adverse
Effect on MCI. Consents, approvals, orders, authorizations, registrations,
declarations and filings required under or in relation to any of the foregoing
clauses (A) through (I) are hereinafter referred to as "Required Consents."
(d) Reports and Financial Statements. MCI has filed all
required reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") since
January 1, 1996
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(collectively, including all exhibits thereto, the "MCI SEC Reports"). No
Subsidiary of MCI is required to file any form, report or other document with
the SEC. None of the MCI SEC Reports, as of their respective dates (and, if
amended or superseded by a filing prior to the date of this Agreement or the
Closing Date, then on the date of such filing), contained or will contain any
untrue statement of a material fact or omitted or will omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. Each
of the financial statements (including the related notes) included in the MCI
SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of MCI
and its Subsidiaries as of the respective dates or for the respective periods
set forth therein, all in conformity with United States generally accepted
accounting principles ("U.S. GAAP") consistently applied during the periods
involved except as otherwise noted therein, and subject, in the case of the
unaudited interim financial statements, to normal and recurring year-end
adjustments that have not been and are not expected to be material in amount.
All of such MCI SEC Reports, as of their respective dates (and as of the date of
any amendment to the respective MCI SEC Report), complied as to form in all
material respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
(e) Information Supplied. (i) None of the information supplied
or to be supplied by MCI for inclusion or incorporation by reference in (A) the
registration statement on Form S-4 (as defined in Section 5.1) to be filed with
the SEC by WorldCom in connection with the issuance of the WorldCom Common Stock
in the Merger will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (B) the Joint Proxy Statement/Prospectus
(as defined in Section 5.1) included in the Form S-4 related to the MCI
Stockholders Meeting and the WorldCom Stockholders Meeting (each, as defined in
Section 5.1) and the WorldCom Common Stock to be issued in the Merger will, on
the date it is first mailed to MCI stockholders or WorldCom Stockholders or at
the time of the MCI Stockholders Meeting or the WorldCom Stockholders Meeting,
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 were made, not
misleading.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by MCI with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on
13
information supplied by WorldCom for inclusion or incorporation
by reference therein.
(f) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Ordinary Common Stock and Class A Common
Stock voting together as a single class and, if the Effective Time occurs prior
to October l, 1998, the affirmative vote of the holders of a majority of the
outstanding shares of Class A Common Stock voting separately as a class, in
either case to approve the Merger (the "Required MCI Votes"), are the only votes
of the holders of any class or series of MCI capital stock necessary to adopt
this Agreement and approve the transactions contemplated hereby.
(g) Rights Agreement. The Rights Agreement has been amended so
as to provide that neither WorldCom nor Merger Sub will become an "Acquiring
Person," and that no "Shares Acquisition Date" or "Distribution Date" (as such
terms are defined in the Rights Agreement) will occur, as a result of the
approval, execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(h) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement, except Lazard Freres & Co. LLC
and Xxxxxx Brothers Inc. (collectively, the "Financial Advisors"), whose fees
and expenses will be paid by MCI in accordance with MCI's agreement with such
firms, based upon arrangements made by or on behalf of MCI and previously
disclosed to WorldCom.
(i) Opinions of Financial Advisors. MCI has received the
opinion of each of the Financial Advisors, dated the date of this Agreement, to
the effect that, as of such date, the Merger Consideration is fair, from a
financial point of view, to the holders of Ordinary Common Stock (the "Fairness
Opinions"), a copy of each of which opinions have been made available to
WorldCom.
14
(j) Affiliate Letter. On or prior to the date of the MCI
Stockholder Meeting, MCI will deliver to WorldCom a letter (the "MCI Affiliate
Letter") identifying all persons who are "affiliates" of MCI for purposes of
Rule 145 under the Securities Act ("Rule 145"). On or prior to the Closing Date,
MCI will deliver on behalf of each person identified as an "affiliate" in the
MCI Affiliate Letter (other than BT) a written agreement (an "Affiliate
Agreement") in connection with restrictions on affiliates under Rule 145.
3.2 Representations and Warranties of WorldCom. Except as set
forth in the WorldCom Disclosure Schedule delivered by WorldCom to MCI prior to
the execution of this Agreement (the "WorldCom Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant to the extent specified therein), WorldCom represents and
warrants to MCI as follows:
(a) Organization, Standing and Power. Each of WorldCom and
each of its Subsidiaries is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure so to
qualify or to be in good standing would not, either individually or in the
aggregate, have a Material Adverse Effect on WorldCom. The copies of the
certificate of incorporation and by-laws of WorldCom which were previously
furnished to MCI are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(b) Capital Structure. (i) As of November 5, 1997, the
authorized capital stock of WorldCom consisted of (A) 2,500,000,000 shares of
WorldCom Common Stock of which 908,380,987 shares were outstanding and (B)
50,000,000 shares of Preferred Stock, par value $.01 per share, of which (1)
94,992 shares have been designated Series A 8% Cumulative Convertible Preferred
Stock ("WorldCom Series A Preferred Stock"), of which 94,992 shares were
outstanding, (2) 15,000,000 shares have been designated Series B Preferred Stock
("WorldCom Series B Preferred Stock"), of which 12,441,817 shares were
outstanding and (3) 2,500,000 shares have been designated Series 3 Junior
Participating Preferred Stock and reserved for issuance upon exercise of the
rights (the "Purchase Rights") distributed to the holders of WorldCom Common
Stock pursuant to the Rights Agreement dated as of August 25, 1996 between
WorldCom and Bank of New York, as rights agent (the "WorldCom Rights
Agreement"). Since November 5, 1997 to the date of this Agreement, there have
been no issuances of shares of the capital stock of WorldCom or any
15
other securities of WorldCom other than issuances of shares pursuant to options
or rights outstanding as of November 5, 1997 under the Benefit Plans (as defined
in Section 8.11(h)) of WorldCom. All issued and outstanding shares of the
capital stock of WorldCom are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock is entitled to preemptive rights.
There were outstanding as of November 5, 1997 no options, warrants or other
rights to acquire capital stock from WorldCom other than pursuant to WorldCom's
pending acquisitions as of the date hereof. No options or warrants or other
rights to acquire capital stock from WorldCom have been issued or granted since
November 5, 1997 to the date of this Agreement.
(ii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of WorldCom having the right to vote on any matters
on which stockholders may vote ("WorldCom Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as
of the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any kind
to which WorldCom or any of its Subsidiaries is a party or by which any of them
is bound obligating WorldCom or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of WorldCom or any of its Subsidiaries or
obligating WorldCom or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are no
outstanding obligations of WorldCom or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of WorldCom or any of
its Subsidiaries.
(c) Authority; No Conflicts. (i) WorldCom has all requisite
corporate power and authority to enter into this Agreement and, subject to the
adoption of this Agreement by the Required WorldCom Vote (as defined in Section
3.2(g)), to issue the shares of WorldCom Common Stock to be issued in the Merger
(the "Share Issuance"). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of WorldCom, subject to the
approval by the stockholders of WorldCom of the Share Issuance and the
affirmative vote of a majority of the outstanding voting power of the WorldCom
Stock (as defined in Section 3.2(g)) to amend the Certificate of Incorporation
of WorldCom to change its name as set forth in Section 5.2. This Agreement has
been duly executed and delivered by WorldCom and constitutes a valid and binding
agreement of WorldCom, enforceable against it in accordance with its terms,
except as such enforceability may be limited by
16
bankruptcy, insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally, by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law)
or by an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the Merger and the other
transactions contemplated hereby will not, conflict with, or result in a
Violation pursuant to: (A) any provision of the certificate of incorporation or
by-laws of WorldCom or any Subsidiary of WorldCom, (B) except as would not have
a Material Adverse Effect on WorldCom and, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to WorldCom or
any Subsidiary of WorldCom or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to WorldCom or any Subsidiary of WorldCom in connection with the
execution and delivery of this Agreement by WorldCom or the consummation of the
Merger and the other transactions contemplated hereby, except for the Required
Consents and such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain would not have a
Material Adverse Effect on WorldCom.
(d) Reports and Financial Statements. WorldCom has filed all
required reports, schedules, forms, statements and other documents required to
be filed by it with the SEC since January 1, 1996 (collectively, including all
exhibits thereto, the "WorldCom SEC Reports"). No Subsidiary of WorldCom is
required to file any form, report or other document with the SEC. None of the
WorldCom SEC Reports, as of their respective dates (and, if amended or
superseded by a filing prior to the date of this Agreement or the Closing Date,
then on the date of such filing), contained or will contain any untrue statement
of a material fact or omitted or will omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of the financial
statements (including the related notes) included in the WorldCom SEC Reports
presents fairly, in all material respects, the consolidated financial position
and consolidated results of operations and cash flows of WorldCom and its
Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with U.S. GAAP consistently applied
17
during the periods involved except as otherwise noted therein, and subject, in
the case of the unaudited interim financial statements, to normal and recurring
year-end adjustments that have not been and are not expected to be material in
amount. All of such WorldCom SEC Reports, as of their respective dates (and as
of the date of any amendment to the respective WorldCom SEC Report), complied as
to form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
(e) Information Supplied. (i) None of the information supplied
or to be supplied by WorldCom for inclusion or incorporation by reference in (A)
the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time
it is amended or supplemented or at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) the Joint Proxy Statement/Prospectus
will, on the date it is first mailed to MCI stockholders or WorldCom
Stockholders or at the time of the MCI Stockholders Meeting or the WorldCom
Stockholders Meeting, 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 were
made, not misleading. The Form S-4 and the Joint Proxy Statement/Prospectus will
comply as to form in all material respects with the requirements of the Exchange
Act and the Securities Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by WorldCom with respect to
statements made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by MCI for inclusion or
incorporation by reference therein.
(f) Absence of Certain Changes or Events. Except as disclosed
in the WorldCom SEC Reports filed prior to the date of this Agreement, since
December 31, 1996 until the date hereof, WorldCom and its Subsidiaries have not
incurred any material liability, except in the ordinary course of business
consistent with past practice, nor has there been any change in the business,
financial condition or results of operations of WorldCom or any of its
Subsidiaries or any event involving WorldCom or any of its Subsidiaries which
has had, or is reasonably likely to have, a Material Adverse Effect on WorldCom.
(g) Vote Required. The affirmative vote of holders of shares
of WorldCom Common Stock, WorldCom Series A Preferred Stock and WorldCom Series
B Preferred Stock (collectively, "WorldCom Stock") representing a majority of
the total votes cast
18
at a meeting of the holders of outstanding shares of WorldCom Stock all voting
together as a single class (the "Required WorldCom Vote"), is the only vote of
the holders of any class or series of WorldCom capital stock necessary to
approve the Share Issuance. The affirmative vote of holders of a majority of the
outstanding voting power of the shares of WorldCom Stock, voting together as a
single class (the "Charter Amendment Vote"), is the only vote of holders of any
class or series of WorldCom capital stock necessary to approve the amendment to
WorldCom's Certificate of Incorporation set forth in Section 5.2 (the "Charter
Amendment").
(h) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any broker's
or finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement based upon arrangements made by
or on behalf of WorldCom, except Salomon Brothers Inc, whose fees and expenses
will be paid by WorldCom in accordance with WorldCom's agreement with such firm
based upon arrangements made by or on behalf of WorldCom and previously
disclosed to MCI.
(i) Affiliate Letter. On or prior to the date of the WorldCom
Stockholder Meeting, WorldCom will deliver to MCI a letter (the "WorldCom
Affiliate Letter") identifying all persons who are "affiliates" of WorldCom for
purpose of Rule 145. On or prior to the Closing Date, WorldCom will deliver on
behalf of each person identified as an "affiliate" in the WorldCom Affiliate
Letter an Affiliate Agreement in connection with restrictions on affiliates
under Rule 145.
3.3 Representations and Warranties of WorldCom and Merger Sub.
WorldCom and Merger Sub represent and warrant to MCI as follows:
(a) Organization and Corporate Power. Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware. Merger Sub is a direct wholly-owned subsidiary of WorldCom.
(b) Corporate Authorization. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance by
Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless or whether
19
such enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(c) Non-Contravention. The execution, delivery and performance
by Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby do not and will not contravene or conflict with
the certificate of incorporation or by-laws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
purchase of Ordinary Common Stock in open-market transactions, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of MCI. During the period from the date of this
Agreement and continuing until the Effective Time, MCI agrees as to itself and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on the MCI Disclosure Schedule or as
required by a Governmental Entity of competent jurisdiction or to the extent
that WorldCom shall otherwise consent in writing):
(a) Ordinary Course. (i) MCI and its Subsidiaries shall carry
on their respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore conducted, and
shall use all reasonable efforts to preserve intact their present lines of
business, maintain their rights and franchises and preserve their relationships
with customers, suppliers and others having business dealings with them to the
end that their ongoing businesses shall not be impaired in any material respect
at the Effective Time; provided, however, that no action by MCI or its
Subsidiaries with respect to matters specifically addressed by any other
provision of this Section 4.1 shall be deemed a breach of this Section 4.1(a)(i)
unless such action would constitute a breach of one or more of such other
provisions.
(ii) MCI shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of business or (B) incur
or commit to any capital expenditures other than capital expenditures incurred
or committed to in the ordinary course of business consistent with past practice
and which, together with all such expenditures incurred or committed to during
any fiscal year, are not in excess of 105% of the aggregate amounts set forth in
Section 4.1(a) of the MCI Disclosure Schedule.
20
(b) Dividends; Changes in Share Capital. MCI shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any of
its capital stock, except (A) MCI may continue the declaration and payment of
regular semiannual cash dividends not in excess of $0.025 per share of MCI
Common Stock, in each case with usual record and payment dates for such
dividends in accordance with MCI's past practice and (B) dividends by wholly
owned Subsidiaries of MCI, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock,
except for any such transaction by a wholly owned Subsidiary of MCI which
remains a wholly owned Subsidiary after consummation of such transaction, or
(iii) repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock except for the purchase from time to time by MCI of MCI Common Stock (and
the associated Rights) in the ordinary course of business consistent with past
practice in connection with the MCI Benefit Plans.
(c) Issuance of Securities. Except as set forth in Section
5.7, MCI shall not, and shall not permit any of its Subsidiaries to, issue,
deliver or sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock of any class, any MCI Voting Debt or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares or MCI Voting Debt, or enter into any agreement with
respect to any of the foregoing, other than (i) the issuance of MCI Common Stock
(and the associated Rights) upon the exercise of stock options or in connection
with other stock-based benefits plans outstanding on the date hereof in
accordance with their present terms, (ii) issuances by a wholly owned Subsidiary
of MCI of capital stock to such Subsidiary's parent, (iii) issuances in
accordance with the Rights Agreement or (iv) issuances of shares, options,
rights or other awards and amendments to equity-related awards, in the ordinary
course of business and consistent with past practice pursuant to the MCI Benefit
Plans.
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or required
by the rules and regulations of NASDAQ, MCI and its material Subsidiaries shall
not amend, in the case of Subsidiaries, in any material respect, or propose to
amend their respective certificates of incorporation, by-laws or other governing
documents.
(e) No Acquisitions. Other than acquisitions in existing or
related lines of business of MCI the fair market value of the total
consideration (including the value of indebtedness or other liability acquired
or assumed) for which
21
does not exceed $325 million in the aggregate, MCI shall not, and shall not
permit any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other than
the acquisition of assets used in the operations of the business of MCI and its
Subsidiaries in the ordinary course); provided, however, that the foregoing
shall not prohibit (x) internal reorganizations or consolidations involving
existing Subsidiaries of MCI or (y) the creation of new Subsidiaries of MCI
organized to conduct or continue activities otherwise permitted by this
Agreement.
(f) No Dispositions. Other than (i) internal reorganizations
or consolidations involving existing Subsidiaries of MCI, (ii) dispositions
referred to in MCI SEC Reports filed prior to the date of this Agreement and
(iii) as may be required by or in conformance with law or regulation in order to
permit or facilitate the consummation of the transactions contemplated hereby,
MCI shall not, and shall not permit any Subsidiary of MCI to, sell, lease,
encumber or otherwise dispose of, or agree to sell, lease, encumber or otherwise
dispose of, any of its assets (including capital stock of Subsidiaries of MCI)
which are material, individually or in the aggregate, to MCI.
(g) Indebtedness. MCI shall not, and shall not permit any of
its Subsidiaries to, (i) make any loans, advances or capital contributions to,
or investments in, any other Person, other than by MCI or a Subsidiary of MCI to
or in MCI or any Subsidiary of MCI or (ii) pay, discharge or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than indebtedness, issuances of debt securities,
guarantees, loans, advances, capital contributions, investments, payments,
discharges or satisfactions incurred or committed to in the ordinary course of
business consistent with past practice.
(h) Tax-Free Qualification. MCI shall not, and shall not
permit any of its Subsidiaries to, take any action that would prevent or impede
the Merger from qualifying as a reorganization under Section 368 of the Code.
(i) Other Actions. MCI shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in, except as otherwise permitted by Section 5.5, any of the
conditions to the Merger set forth in Article VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in MCI SEC Reports filed prior to the date of this Agreement, or as
required by a Governmental Entity, MCI shall not
22
change its methods of accounting in effect at December 31, 1996, except as
required by changes in U.S. GAAP as concurred in by MCI's independent auditors.
MCI shall not (i) change its fiscal year or (ii) make any material Tax election,
other than in the ordinary course of business consistent with past practice,
without consultation with WorldCom.
(k) MCI Rights Agreement. Except as provided in Section 5.10,
MCI shall not amend, modify or waive any provision of the MCI Rights Agreement,
and shall not take any action to redeem the Rights or render the Rights
inapplicable to any transaction, other than to permit another transaction that
the MCI Board has determined is a Superior Proposal, to be consummated no
earlier than December 31, 1998.
4.2 Covenants of WorldCom. During the period from the date of
this Agreement and continuing until the Effective Time, WorldCom agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated on the WorldCom Disclosure Schedule
or as required by a Governmental Entity of competent jurisdiction or to the
extent that MCI shall otherwise consent in writing):
(a) Ordinary Course. (i) WorldCom and its Subsidiaries shall
carry on their respective businesses in the usual, regular and ordinary course
in all material respects, in substantially the same manner as heretofore
conducted, and shall use all reasonable efforts to preserve intact their present
lines of business, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having business dealings with
them to the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however, that no action by
WorldCom or its Subsidiaries with respect to matters specifically addressed by
any other provisions of this Section 4.2 shall be deemed a breach of this
Section 4.2(a)(i) unless such action would constitute a breach of one or more of
such other provisions.
(ii) WorldCom shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of business (other than
incidentally as part of a larger acquisition within an existing line of
business) or (B) incur or commit to any capital expenditures other than capital
expenditures incurred or committed to in the ordinary course of business
consistent with past practice.
(b) Dividends; Changes in Share Capital. WorldCom shall not,
and shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any of
its capital stock, except (A) WorldCom may continue the declaration and payment
of regular quarterly cash dividends in amounts consistent with past practice
(including increases in such amounts consistent with
23
past practice) and (B) dividends by wholly owned Subsidiaries of WorldCom, (ii)
split, combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such transaction
by a wholly owned Subsidiary of WorldCom which remains a wholly owned Subsidiary
after consummation of such transaction, (iii) repurchase, redeem or otherwise
acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase from
time to time by WorldCom of WorldCom Common Stock in the ordinary course of
business consistent with past practice in connection with share options, share
incentive schemes, profit sharing schemes or other benefit plans of WorldCom or
repurchases of shares of WorldCom Common Stock in open market or privately
negotiated transactions other than during the Measurement Period.
(c) Issuance of Securities. WorldCom shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any WorldCom Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such shares
or WorldCom Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of WorldCom Common Stock upon the
exercise of stock options, (ii) issuances by a wholly owned Subsidiary of
WorldCom of capital stock to such Subsidiary's parent or another wholly owned
Subsidiary of WorldCom, (iii) issuances of options, awards, and amendments to
equity-related awards pursuant to WorldCom benefit plans as in effect from time
to time, (iv) issuances in accordance with the WorldCom Rights Agreement or (v)
issuances in respect of any acquisitions by WorldCom or its subsidiaries that
are currently pending ("WorldCom Pending Acquisitions") on the date hereof or
are permitted pursuant to Section 4.2(e).
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or required
by the rules and regulations of NASDAQ, WorldCom and its material Subsidiaries
shall not amend, in the case of Subsidiaries, in any material respect, or
propose to amend their respective certificates of incorporation, by-laws or
other governing documents.
(e) No Acquisitions. Other than acquisitions in existing or
related lines of business of WorldCom the fair market value of the total
consideration (including the value of indebtedness or other liability acquired
or assumed) for which does not exceed $525 million in the aggregate and other
than WorldCom Pending Acquisitions, WorldCom, shall not, and shall not permit
any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or
24
by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or agree
to acquire any assets (other than the acquisition of assets used in the ordinary
course); provided, however, that the foregoing shall not prohibit (x) internal
reorganizations or consolidations involving existing Subsidiaries of WorldCom or
(y) the creation of new Subsidiaries of WorldCom organized to conduct or
continue activities otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations
or consolidations involving existing Subsidiaries of WorldCom, (ii) dispositions
referred to in WorldCom SEC Reports filed prior to the date of this Agreement
and (iii) as may be required by or in conformance with law or regulation in
order to permit or facilitate the consummation of the transactions contemplated
hereby, WorldCom shall not, and shall not permit any Subsidiary of WorldCom to,
sell, lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries of WorldCom) which are material, individually or
in the aggregate, to WorldCom.
(g) Indebtedness. WorldCom shall not, and shall not permit any
of its Subsidiaries to, (i) make any loans, advances or capital contributions
to, or investments in, any other Person, other than by WorldCom or a Subsidiary
of WorldCom to or in WorldCom or any Subsidiary of WorldCom or (ii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than indebtedness,
issuances of debt securities, guarantees, loans, advances, capital
contributions, investments, payments, discharges or satisfactions incurred or
committed to in the ordinary course of business consistent with past practice.
(h) Tax-Free Qualification. WorldCom shall not, and shall not
permit any of its Subsidiaries to, take any action that would prevent or impede
the Merger from qualifying as a reorganization under Section 368 of the Code.
(i) Other Actions. WorldCom shall not, and shall not permit
any of its Subsidiaries to, take any action that would, or that could reasonably
be expected to, result in any of the conditions to the Merger set forth in
Article VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in WorldCom SEC Reports filed prior to the date of this Agreement, or
as required by a Governmental Entity, WorldCom shall not change its methods of
accounting in effect at December 31, 1996, except as required by changes in U.S.
GAAP as concurred in by WorldCom's independent auditors. WorldCom shall not (i)
change its fiscal year or (ii) make any material Tax election,
25
other than in the ordinary course of business consistent with past practice,
without consultation with MCI.
(k) Acquisition Proposals. WorldCom shall not, and shall not
permit any of its Subsidiaries to, enter into any agreement with respect to or
consummate any transaction contemplated by an Acquisition Proposal (as defined
in Section 5.5).
(l) WorldCom Rights Agreement. WorldCom shall not amend,
modify or waive any provision of the WorldCom Rights Agreement and shall not
take any action to redeem the WorldCom Rights or render the WorldCom Rights
inapplicable to any transaction.
4.3 Advice of Changes; Governmental Filings. Each party shall
(a) confer on a regular and frequent basis with the other and (b) report (to the
extent permitted by law or regulation or any applicable confidentiality
agreement) on operational matters. MCI and WorldCom shall file all reports
required to be filed by each of them with the SEC (and all other Governmental
Entities) between the date of this Agreement and the Effective Time and shall
(to the extent permitted by law or regulation or any applicable confidentiality
agreement) deliver to the other party copies of all such reports, announcements
and publications promptly after the same are filed. Subject to applicable laws
relating to the exchange of information, each of MCI and WorldCom shall have the
right to review in advance, and will consult with the other with respect to, all
the information relating to the other party and each of their respective
Subsidiaries, which appears in any filings, announcements or publications made
with, or written materials submitted to, any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto agrees to act
reasonably and as promptly as practicable. Each party agrees that, to the extent
practicable and as timely as practicable, it will consult with, and provide all
appropriate and necessary assistance to, the other party with respect to the
obtaining of all permits, consents, approvals and authorizations of all third
parties and Governmental Entities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party apprised of the status of matters relating to completion of the
transactions contemplated hereby.
4.4 Transition Planning. Xxxxxxx X. Xxxxxx, as Chief Executive
Officer of WorldCom, and Xxxxxx X. Xxxxxx, as Chief Executive Officer of MCI,
jointly shall be responsible for coordinating all aspects of transition planning
and implementation relating to the Merger and the other transactions
contemplated hereby. If either such person ceases to be Chief Executive Officer
of his company for any reason, such person's
26
successor shall assume his predecessor's responsibilities under this Section
4.4. During the period between the date of this Agreement and the Effective
Time, Messrs. Xxxxxx and Xxxxxx jointly shall (i) examine various alternatives
regarding the manner in which to best organize and manage the businesses of
WorldCom and MCI after the Effective Time and (ii) coordinate policies and
strategies with respect to regulatory authorities and bodies, in all cases
subject to applicable law and regulation.
4.5 Control of Other Party's Business. Nothing contained in
this Agreement shall give MCI, directly or indirectly, the right to control or
direct WorldCom's operations prior to the Effective Time. Nothing contained in
this Agreement shall give WorldCom, directly or indirectly, the right to control
or direct MCI's operations prior to the Effective Time. Prior to the Effective
Time, each of MCI and WorldCom shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; MCI Stockholders Meeting.
(a) As promptly as practicable following the date hereof, WorldCom shall, in
cooperation with MCI, prepare and file with the SEC preliminary proxy materials
which shall constitute the Joint Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and an amendment to its existing registration
statement on Form S-4 with respect to the issuance of WorldCom Common Stock in
the Merger (the "Form S-4"). The Joint Proxy Statement/Prospectus will be
included in the Form S-4 as WorldCom's prospectus. The Form S-4 and the Joint
Proxy Statement/Prospectus shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder. Each of WorldCom and MCI shall use all
reasonable efforts to have the Form S-4 cleared by the SEC as promptly as
practicable after filing with the SEC and to keep the Form S-4 effective as long
as is necessary to consummate the Merger. WorldCom shall, as promptly as
practicable after receipt thereof, provide copies of any written comments
received from the SEC with respect to the Joint Proxy Statement/Prospectus to
MCI and advise MCI of any oral comments with respect to the Proxy
Statement/Prospectus received from the SEC. WorldCom agrees that none of the
information supplied or to be supplied by WorldCom for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the MCI Stockholders Meeting or the WorldCom Stockholders Meeting, will
27
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. MCI
agrees that none of the information supplied or to be supplied by MCI for
inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus
and each amendment or supplement thereto, at the time of mailing thereof and at
the time of the MCI Stockholders Meeting or the WorldCom Stockholders Meeting,
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. For
purposes of the foregoing, it is understood and agreed that information
concerning or related to WorldCom and the WorldCom Stockholders Meeting will be
deemed to have been supplied by WorldCom and information concerning or related
to MCI and the MCI Stockholders Meeting shall be deemed to have been supplied by
MCI. WorldCom will provide MCI with a reasonable opportunity to review and
comment on any amendment or supplement to the Joint Proxy Statement/Prospectus
prior to filing such with the SEC, and will provide MCI with a copy of all such
filings made with the SEC. No amendment or supplement to the information
supplied by MCI for inclusion in the Joint Proxy Statement/Prospectus shall be
made without the approval of MCI, which approval shall not be unreasonably
withheld or delayed.
(b) MCI shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "MCI Stockholders Meeting") for the purpose of
obtaining the Required MCI Votes with respect to the transactions contemplated
by this Agreement, shall take all lawful action to solicit the adoption of this
Agreement by the Required MCI Votes and the Board of Directors of MCI shall
recommend adoption of this Agreement by the stockholders of MCI. Without
limiting the generality of the foregoing but subject to its rights pursuant to
Sections 5.5 and 7.1(f), MCI agrees that its obligations pursuant to the first
sentence of this Section 5.1(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to MCI of any Acquisition
Proposal.
(c) WorldCom shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "WorldCom Stockholders Meeting") for the
purpose of obtaining the Required WorldCom Vote and the Charter Amendment Vote,
shall take all lawful action to solicit the approval of the Share Issuance and
the Charter Amendment by the Required WorldCom Vote and the Charter Amendment
Vote and the Board of Directors of WorldCom shall recommend approval of the
transactions contemplated by this Agreement by the stockholders of WorldCom.
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5.2 WorldCom Board of Directors; Officers; Headquarters; MCI
Name. (a) WorldCom shall take all necessary action to reconstitute the Board of
Directors of WorldCom as of the Effective Time in accordance with Exhibit 5.2(a)
hereto.
(b) WorldCom shall take all necessary action to cause
Xxxx X. Xxxxxxx, Xx. to be appointed Chairman of WorldCom as of
the Effective Time.
(c) WorldCom shall take all action necessary to cause the
senior management of WorldCom to be as previously agreed between the parties.
(d) As of the Effective Time, WorldCom shall be headquartered
in Jackson, Mississippi and the Surviving Corporation shall be headquartered in
Washington D.C.
(e) WorldCom shall take all action necessary to amend its
Certificate of Incorporation as of the Effective Time to change its name to "MCI
WorldCom".
5.3 Access to Information. Upon reasonable notice, MCI shall
(and shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of WorldCom
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and records
and, during such period, MCI shall (and shall cause its Subsidiaries to) furnish
promptly to WorldCom (a) a copy of each report, schedule, registration statement
and other document filed, published, announced or received by it during such
period pursuant to the requirements of Federal or state securities laws, as
applicable (other than reports or documents which such party is not permitted to
disclose under applicable law), and (b) consistent with its legal obligations,
all other information concerning its business, properties and personnel as such
other party may reasonably request; provided, however, that MCI may restrict the
foregoing access to the extent that (i) a Governmental Entity requires MCI or
any of its Subsidiaries to restrict access to any properties or information
reasonably related to any such contract on the basis of applicable laws and
regulations with respect to national security matters or (ii) any law, treaty,
rule or regulation of any Governmental Entity applicable to MCI requires MCI or
its Subsidiaries to restrict access to any properties or information. The
parties will hold any such information which is non-public in confidence to the
extent required by, and in accordance with, the provisions of the letter dated
October 16, 1997 between MCI and WorldCom (the "Confidentiality Agreement"). Any
investigation by WorldCom or MCI shall not affect the representations and
warranties of MCI or WorldCom, as the case may be.
29
5.4 Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each party will use its best efforts 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 to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable
after the date hereof. In furtherance and not in limitation of the foregoing,
each party hereto agrees to make, to the extent it has not already done so, an
appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby as promptly as practicable
and in any event within five business days of the date hereof and to supply as
promptly as practicable any additional information and documentary material that
may be requested pursuant to the HSR Act and to take all other actions necessary
to cause the expiration or termination of the applicable waiting periods under
the HSR Act as soon as practicable.
(b) Each of WorldCom and MCI shall, in connection with the
efforts referenced in Section 5.4(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Merger Agreement under
the HSR Act or any other Regulatory Law (as defined below), use its best efforts
to (i) cooperate in all respects with each other in connection with any filing
or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party; (ii) promptly inform the
other party of any communication received by such party from, or given by such
party to, the FCC, PUCs, the Antitrust Division of the Department of Justice
(the "DOJ") or any other Governmental Entity and of any material communication
received or given in connection with any proceeding by a private party, in each
case regarding any of the transactions contemplated hereby, and (iii) permit the
other party to review any communication given by it to, and consult with each
other in advance of any meeting or conference with, the FCC, PUCs, the DOJ or
any such other Governmental Entity or, in connection with any proceeding by a
private party, with any other Person, and to the extent permitted by the FCC,
PUCs, the DOJ or such other applicable Governmental Entity or other Person, give
the other party the opportunity to attend and participate in such meetings and
conferences. For purposes of this Agreement, "Regulatory Law" means the Xxxxxxx
Act, as amended, the Xxxxxxx Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, the Federal Communications Act, as amended, and all
other federal, state and foreign, if any, statutes, rules, regulations, orders,
decrees, administrative and judicial doctrines and other laws that are designed
or intended to prohibit, restrict or regulate actions having the purpose or
effect of monopolization or restraint of trade or lessening of competition,
whether in the communications industry or otherwise through merger or
acquisition.
30
(c) In furtherance and not in limitation of the covenants of
the parties contained in Sections 5.4(a) and 5.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of
WorldCom and MCI shall cooperate in all respects with each other and use its
respective best efforts to contest and resist any such action or proceeding and
to have vacated, lifted, reversed or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent, that is in effect
and that prohibits, prevents or restricts consummation of the transactions
contemplated by this Agreement. Notwithstanding the foregoing or any other
provision of this Agreement, nothing in this Section 5.4 shall limit a party's
right to terminate this Agreement pursuant to Section 7.1(b) or 7.1(c) so long
as such party has up to then complied in all respects with its obligations under
this Section 5.4.
(d) If any objections are asserted with respect to the
transactions contemplated hereby under any Regulatory Law or if any suit is
instituted by any Governmental Entity or any private party challenging any of
the transactions contemplated hereby as violative of any Regulatory Law, each of
WorldCom and MCI shall use its best efforts to resolve any such objections or
challenge as such Governmental Entity or private party may have to such
transactions under such Regulatory Law so as to permit consummation of the
transactions contemplated by this Agreement.
(e) Each of WorldCom, Merger Sub and MCI shall use its best
efforts to cause the Merger to qualify and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
5.5 Acquisition Proposals. Each of WorldCom and MCI agrees
that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and use its
best efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate (including by way of
furnishing information) any inquiries or the making of any proposal or offer
with respect to a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving, or any purchase or sale of all or any significant portion
of the assets or 10% or more of the equity securities of, it or any of its
Subsidiaries that, in any such case, could reasonably be expected to interfere
with the completion of the Merger or the other transactions contemplated by this
Agreement
31
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"). Each of WorldCom and MCI further agrees that neither it nor any of
its Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, have any discussion with or provide any confidential
information or data to any Person relating to an Acquisition Proposal, or engage
in any negotiations concerning an Acquisition Proposal, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal or accept an
Acquisition Proposal. Notwithstanding the foregoing, MCI or its Board of
Directors shall be permitted to (A) to the extent applicable, comply with Rule
14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal, (B) in response to an unsolicited bona fide written Acquisition
Proposal by any Person, recommend such an unsolicited bona fide written
Acquisition Proposal to the stockholders of MCI, or withdraw or modify in any
adverse manner its approval or recommendation of this Agreement or (C) engage in
any discussions or negotiations with, or provide any information to, any Person
in response to an unsolicited bona fide written Acquisition Proposal by any such
Person, if and only to the extent that, in any such case as is referred to in
clause (B) or (C), (i) the MCI Stockholders Meeting shall not have occurred,
(ii) the Board of Directors of MCI concludes in good faith that such Acquisition
Proposal (x) in the case of clause (B) above would, if consummated, constitute a
Superior Proposal or (y) in the case of clause (C) above could reasonably be
expected to constitute a Superior Proposal, (iii) prior to providing any
information or data to any Person in connection with an Acquisition Proposal by
any such Person, the MCI Board of Directors receives from such Person an
executed confidentiality agreement on terms substantially similar to those
contained in the Confidentiality Agreement and (iv) prior to providing any
information or data to any Person or entering into discussions or negotiations
with any Person, the Board of Directors of MCI notifies WorldCom immediately of
such inquiries, proposals or offers received by, any such information requested
from, or any such discussions or negotiations sought to be initiated or
continued with, any of its representatives indicating, in connection with such
notice, the name of such Person and the material terms and conditions of any
proposals or offers. MCI agrees that it will keep WorldCom informed, on a
current basis, of the status and terms of any such proposals or offers and the
status of any such discussions or negotiations. Each of WorldCom and MCI agrees
that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Each of WorldCom and MCI agrees that
it will take the necessary steps to promptly inform the individuals or entities
referred to in the first sentence of this Section 5.5
32
of the obligations undertaken in this Section 5.5. Nothing in this Section 5.5
shall (x) permit either WorldCom or MCI to terminate this Agreement (except as
specifically provided in Article VII hereof) or (y) affect any other obligation
of MCI or WorldCom under this Agreement.
5.6 [Intentionally Omitted]
5.7 Stock Options and Other Stock Plans; Employee Benefits
Matters. MCI and WorldCom will agree to provisions with respect to MCI's stock
options and other stock plans and treatment of MCI's officers and employees as
set forth in Exhibit 5.7 hereto.
5.8 Fees and Expenses. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, any and all property or transfer taxes imposed
on MCI or its Subsidiaries and any real property transfer tax imposed on any
holder of shares of capital stock of MCI resulting from the Merger, (b) Expenses
incurred in connection with the filing, printing and mailing of the Joint Proxy
Statement/Prospectus, which shall be shared equally by WorldCom and MCI and (c)
as provided in Section 7.2. As used in this Agreement, "Expenses" includes all
out-of-pocket expenses (including, without limitation, all fees and expenses of
counsel, accountants, investment bankers, experts and consultants to a party
hereto and its affiliates) incurred by a party or on its behalf in connection
with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Joint Proxy
Statement/Prospectus and the solicitation of stockholder approvals and all other
matters related to the transactions contemplated hereby.
5.9 Directors' and Officers' Insurance. The Surviving
Corporation shall cause to be maintained in effect in its certificate of
incorporation and by-laws (i) for a period of six years after the Effective
Time, the current provisions regarding elimination of liability of directors and
indemnification of officers, directors and employees contained in the
certificate of incorporation and by-laws of MCI and (ii) for a period of six
years, the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by MCI (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Time; provided, however, that in no
event shall the Surviving
33
Corporation be required to expend in any one year an amount in excess of 200% of
the annual premiums currently paid by MCI for such insurance; and, provided,
further, that if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
5.10 Rights Agreement. The Board of Directors of MCI shall
take all further action (in addition to that referred to in Section 3.1(g))
necessary (including redeeming the Rights immediately prior to the Effective
Time or amending the Rights Agreement) in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
5.11 Public Announcements. MCI and WorldCom shall use all
reasonable efforts to develop a joint communications plan and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
5.12 Accountants' Letters. Upon reasonable notice from the
other, MCI and WorldCom shall use their respective reasonable best efforts to
cause Price Waterhouse LLP and Xxxxxx Xxxxxxxx LLP, respectively, to deliver to
WorldCom or MCI, as the case may be, a letter, dated within two business days of
the Effective Time of the Form S-4 covering such matters as are requested by
WorldCom or MCI, as the case may be, and as are customarily addressed in
accountant's "comfort" letters. In connection with WorldCom's efforts to obtain
such letter, if requested by Xxxxxx Xxxxxxxx LLP, MCI shall provide a
representation letter to Xxxxxx Xxxxxxxx LLP complying with the statement on
Auditing Standards No. 72 ("SAS 72"), if then required. In connection with MCI's
efforts to obtain such letter, if requested by Price Waterhouse LLP, WorldCom
shall provide a representation letter to Price Waterhouse LLP complying with SAS
72, if then required.
5.13 Listing of Shares of WorldCom Common Stock. WorldCom
shall use its best efforts to cause the shares of WorldCom Common Stock to be
issued in the Merger to be approved for quotation, upon official notice of
issuance, on NASDAQ.
5.14 Voting Trust. If at any time prior to the MCI
Stockholders Meeting a third party shall make an unsolicited tender or exchange
offer to acquire control of MCI, which offer is not recommended by MCI's Board
of Directors, then WorldCom and
34
MCI will use their reasonable best efforts to consummate the transactions
contemplated hereby by implementing a "voting trust" or similar structure
permitting consummation of the transactions contemplated hereby prior to the
receipt of final FCC and PUC approvals.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the
Merger. The obligations of MCI, WorldCom and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. (i) MCI shall have obtained the
Required MCI Votes in connection with the adoption of this Agreement by the
stockholders of MCI and (ii) WorldCom shall have obtained the Required WorldCom
Vote in connection with the approval of the Share Issuance by the stockholders
of WorldCom.
(b) No Injunctions or Restraints, Illegality. No Laws shall
have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect, having the
effect of making the Merger illegal or otherwise prohibiting consummation of the
Merger; provided, however, that the provisions of this Section 6.1(b) shall not
be available to any party whose failure to fulfill its obligations pursuant to
Section 5.4 shall have been the cause of, or shall have resulted in, such order
or injunction.
(c) FCC and Public Utility Commission Approvals. All approvals
for the Merger from the FCC and from the PUCs shall have been obtained other
than those the failure of which to be obtained would not reasonably be expected
to have individually or in the aggregate a Material Adverse Effect on WorldCom
and its Subsidiaries (including the Surviving Corporation).
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(e) EU Antitrust. WorldCom and MCI shall have received in
respect of the Merger and any matters arising therefrom: confirmation by way of
a decision from the Commission of the European Union under Regulation 4064.89
(with or without the initiation of proceedings under Article 6(1)(c) thereof)
that the Merger and any matters arising therefrom are compatible with the common
market.
35
(f) NASDAQ Listing. The shares of WorldCom Common Stock to be
issued in the Merger shall have been approved upon official notice of issuance
for quotation on NASDAQ.
(g) Effectiveness of the Form S-4. The Form S-4 shall have
been declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
6.2 Additional Conditions to Obligations of WorldCom and
Merger Sub. The obligations of WorldCom and Merger Sub to effect the Merger are
subject to the satisfaction of, or waiver by WorldCom, on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of MCI set forth in this Agreement that is
qualified as to materiality shall have been true and correct on the date of this
Agreement, and each of the representations and warranties of MCI that is not so
qualified shall have been true and correct in all material respects on the date
of this Agreement, and WorldCom shall have received a certificate of the chief
executive officer and the chief financial officer of MCI to such effect.
(b) Performance of Obligations of MCI. MCI shall have
performed or complied with all agreements and covenants required to be performed
by it under this Agreement at or prior to the Closing Date that are qualified as
to materiality and shall have performed or complied in all material respects
with all other agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are not so qualified as to
materiality, and WorldCom shall have received a certificate of the chief
executive officer and the chief financial officer of MCI to such effect.
(c) Tax Opinion. WorldCom shall have received from Cravath,
Swaine & Xxxxx, counsel to WorldCom, on the Closing Date, a written opinion
dated as of such date substantially in the form of Exhibit 6.2(c)(1). In
rendering such opinion, counsel to WorldCom shall be entitled to rely upon
representations of officers of WorldCom and MCI substantially in the form of
Exhibits 6.2(c)(3) and 6.2(c)(4).
6.3 Additional Conditions to Obligations of MCI. The
obligations of MCI to effect the Merger are subject to the satisfaction of, or
waiver by MCI, on or prior to the Closing Date of the following additional
conditions:
(a) Representations and Warranties. Each of the
representations and warranties of WorldCom and Merger Sub set forth in this
Agreement that is qualified as to materiality shall
36
have been true and correct on the date of this Agreement, and each of the
representations and warranties of each of WorldCom and Merger Sub that is not so
qualified shall have been true and correct in all material respects on the date
of this Agreement, and MCI shall have received a certificate of the chief
executive officer and the chief financial officer of WorldCom to such effect.
(b) Performance of Obligations of WorldCom. WorldCom shall
have performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality and shall have performed or complied in all material
respects with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are not so qualified as to
materiality, and MCI shall have received a certificate of the chief executive
officer and the chief financial officer of WorldCom to such effect.
(c) Tax Opinion. MCI shall have received from Xxxxxxx Xxxxxxx
& Xxxxxxxx, counsel to MCI, on the Closing Date, a written opinion dated as of
such date substantially in the form of Exhibit 6.2(c)(2). In rendering such
opinion, counsel to MCI shall be entitled to rely upon representations of
officers of WorldCom and MCI substantially in the form of Exhibits 6.2(c)(3) and
6.2(c)(4).
(d) No Material Adverse Change. Since the date of this
Agreement, WorldCom and its Subsidiaries shall not have incurred any material
liability, except in the ordinary course of business consistent with past
practice, nor shall there have been any adverse change, circumstance or effect
that, individually or in the aggregate with all other adverse changes,
circumstances and effects, is or is reasonably likely to be materially adverse
to the business, financial condition or results of operations of WorldCom and
its Subsidiaries taken as a whole, other than any change, circumstance or effect
relating to (i) the economy or securities markets in general or (ii) the
industries in which WorldCom or MCI operate and not specifically relating to
WorldCom or MCI.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, by action taken or authorized by the Board of
Directors of the terminating party or parties, and except as provided below,
whether before or after approval of the matters presented in connection with the
Merger by the stockholders of MCI or WorldCom:
37
(a) By mutual written consent of WorldCom and MCI, by action
of their respective Boards of Directors;
(b) By either MCI or WorldCom if the Effective Time shall not
have occurred on or before December 31, 1998 (the "Termination Date"); provided,
however, that the right to terminate this Agreement under this Section 7.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement (including without limitation Section 5.4) has to any
extent been the cause of, or resulted in, the failure of the Effective Time to
occur on or before the Termination Date;
(c) By either MCI or WorldCom if (x) any Governmental Entity
(i) shall have issued an order, decree or ruling or taken any other action
(which the parties shall have used their best efforts to resist, resolve or
lift, as applicable, in accordance with Section 5.4) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order, decree, ruling or other action shall have become
final and nonappealable or (ii) shall have failed to issue an order, decree or
ruling or to take any other action (which order, decree, ruling or other action
the parties shall have used their best efforts to obtain, in accordance with
Section 5.4), in each case (i) and (ii) which is necessary to fulfill the
conditions set forth in subsections 6.1(c), (d) and (e), as applicable, and such
denial of a request to issue such order, decree, ruling or take such other
action shall have become final and nonappealable; provided, however, that the
right to terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to comply with Section 5.4 has to any
extent been the cause of such action or inaction;
(d) By either MCI or WorldCom if the approval by the
stockholders of MCI or of WorldCom required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the Required MCI
Votes or the Required WorldCom Vote, as the case may be, at a duly held meeting
of stockholders of MCI or WorldCom, as the case may be, or at any adjournment
thereof;
(e) By WorldCom if the Board of Directors of MCI, prior to the
MCI Stockholders Meeting (i) shall withdraw or modify in any adverse manner its
approval or recommendation of this Agreement pursuant to Section 5.5, (ii) shall
approve or recommend a Superior Proposal pursuant to Section 5.5 or (iii) shall
resolve to take any of the actions specified in clauses (i) or (ii) above; or
(f) By MCI at any time prior to the MCI Stockholders Meeting,
upon two Business Days' prior notice to WorldCom, if the Board of Directors of
MCI shall approve a Superior Proposal; provided, however, that (i) MCI shall
have complied with Section 5.5, (ii) the Board of Directors of MCI shall have
concluded in
38
good faith, after giving effect to all concessions which may be offered by
WorldCom pursuant to clause (iii) below, on the basis of the advice of its
financial advisors and outside counsel, that such proposal is a Superior
Proposal and (iii) prior to any such termination, MCI shall, and shall cause its
financial and legal advisors to, negotiate with WorldCom to make such
adjustments in the terms and conditions of this Agreement as would enable
WorldCom to proceed with the transactions contemplated hereby; provided,
however, that it shall be a condition to termination by MCI pursuant to this
Section 7.l(f) that MCI shall have made the payment of the WorldCom Alternative
Transaction Fee to WorldCom required by Section 7.2(b).
Notwithstanding anything else contained in this Agreement, the
right to terminate this Agreement under this Section 7.1 shall not be available
to any party (a) that is in material breach of its obligations hereunder or (b)
whose failure to fulfill its obligations or to comply with its covenants under
this Agreement has been the cause of, or resulted in, the failure to satisfy any
condition to the obligations of either party hereunder.
7.2 Effect of Termination. (a) In the event of termination of
this Agreement by either MCI or WorldCom as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of WorldCom or MCI or their respective officers or
directors except with respect to Section 3.1(h), Section 3.2(h), Section 4.1(k),
the second sentence of Section 5.3, Section 5.8, this Section 7.2 and Article
VIII.
(b) WorldCom and MCI agree that (i) if MCI shall terminate
this Agreement pursuant to Section 7.1(f) or (ii) if (x) MCI or WorldCom shall
terminate this Agreement pursuant to Section 7.1(d) due to the failure of MCI's
stockholders to approve and adopt this Agreement or WorldCom shall terminate
this Agreement pursuant to Section 7.1(e), (y) at the time of the event giving
rise to such termination there shall exist an Acquisition Proposal with respect
to MCI and (z) within 12 months of the termination of this Agreement, MCI enters
into a definitive agreement with any third party with respect to an Acquisition
Proposal or an Acquisition Proposal is consummated, then MCI shall pay to
WorldCom an amount equal to $750 million (the "WorldCom Alternative Transaction
Fee") and shall reimburse WorldCom for the amount of the BT Inducement Fee paid
to BT (such amount, the "Reimbursement Amount").
(c) The WorldCom Alternative Transaction Fee and the
Reimbursement Amount required to be paid pursuant to Section 7.2(b)(i) shall be
made prior to, and shall be a pre-condition to the effectiveness of termination
of this Agreement pursuant to such Section. Any other payment required to be
made pursuant to Section 7.2(b) shall be made to WorldCom not later than two
39
Business Days after the entering into of a definitive agreement with respect to,
or the consummation of, an Acquisition Proposal, as applicable. All payments
under this Section 7.2 and under Section 7.3 shall be made by wire transfer of
immediately available funds to an account designated by the party entitled to
receive payment.
7.3 Payment by WorldCom. WorldCom and MCI agree that if (a)
this Agreement shall be terminated pursuant to (i) Section 7.1(b) and any of the
conditions to the Merger set forth in Section 6.1(b), 6.1(c), 6.1(d), 6.1(e),
6.3(a), 6.3(b) or 6.3(d) has not been satisfied, (ii) Section 7.1(c), or (iii)
Section 7.1(d) solely as a result of the Required WorldCom Vote not being
obtained at a duly called WorldCom Stockholders Meeting or (b) notwithstanding
the satisfaction of all the conditions set forth in Sections 6.1 and 6.2 and the
satisfaction or waiver by MCI of all the conditions set forth in Section 6.3,
WorldCom is not willing to consummate the Merger, then, unless (1) MCI shall not
have complied with Section 5.4 or (2) MCI shall have breached its
representations or warranties or its agreements or covenants hereunder such that
either of the conditions to the Merger set forth in Section 6.2(a) or 6.2(b) has
not been satisfied, WorldCom shall pay to MCI an amount in cash equal to $1.635
billion. The payment required to be made pursuant to this Section 7.3 shall be
made not later than two Business Days after the date of such termination or such
willful failure of WorldCom to close. Notwithstanding anything in this Agreement
(including Section 8.10) to the contrary, the payment of any amount pursuant to
this Section 7.3 (other than pursuant to Section 7.3(a)(i), if due to the
failure of the conditions set forth in Section 6.3(a) or 6.3(b), or Section
7.3(b)) shall constitute liquidated damages in full and complete satisfaction
of, and shall be MCI's sole and exclusive remedy for, any loss, liability,
damage or claim arising out of or in connection with any such termination of
this Agreement or the facts and circumstances resulting in such termination or
otherwise related thereto or otherwise arising out of or in connection with this
Agreement.
7.4 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of MCI and WorldCom, but, after any such
approval, no amendment shall be made which by law or in accordance with the
rules of any relevant stock exchange requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.5 Extension; Waiver. At any time prior to the Effective
Time, the parties hereto, by action taken or authorized by their respective
Boards of Directors, may, to the extent legally allowed, (i) extend the time for
the performance of any
40
of the obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a
written instrument signed on behalf of such party. The failure of any party to
this Agreement to assert any of its rights under this Agreement or otherwise
shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein that by their terms apply or are to be performed in whole or in part
after the Effective Time and this Article VIII. Nothing in this Section 8.1
shall relieve any party for any breach of any representation, warranty, covenant
or other agreement in this Agreement occurring prior to termination.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth Business
Day following the date of mailing if delivered by registered or certified mail,
return receipt requested, postage prepaid. All notices hereunder shall be
delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to WorldCom or Merger Sub, to
WorldCom, Inc.
00000 Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xx. Xxxxx, XX 00000
Attention: P. Xxxxx Xxxxxxxxx, Esq.
General Counsel
Corporate Development
Facsimile No.: 000-000-0000
41
with a copy to
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxxxxx, Esq.
Xxxxxx X. Xxxxxxx, Esq.
Facsimile No.: 212-474-3700
(b) if to MCI to
MCI Communications Corporation
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Executive Vice President
and General Counsel
Facsimile No.: 000-000-0000
with a copy to
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Xxxxxx X. Xxxxxxx III, Esq.
Facsimile No.: 000-000-0000
8.3 Interpretation. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms 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 the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
8.4 Counterparts. This Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the BT Agreement (and the agreement referred to in Section 5.2(c))
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject
42
matter hereof, other than the Confidentiality Agreement, which shall survive the
execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to
the benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement, other
than Section 5.9 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons).
8.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
8.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct wholly owned Subsidiary of
WorldCom without the consent of MCI, but no such assignment shall relieve Merger
Sub of any of its obligations under this Agreement. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
8.9 Submission to Jurisdiction; Waivers. Each of WorldCom and
MCI irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Chancery or other Courts of the State of Delaware, and
each of WorldCom and MCI hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the
43
nonexclusive jurisdiction of the aforesaid courts. Each of WorldCom and MCI
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) the defense of sovereign immunity, (b) any claim that it is
not personally subject to the jurisdiction of the above-named courts for any
reason other than the failure to serve process in accordance with this Section
8.9, (c) that it or its property is exempt or immune from jurisdiction of any
such court or from any legal process commenced in such courts (whether through
service of notice, attachment prior to judgment, attachment in aid of execution
of judgment, execution of judgment or otherwise), and (d) to the fullest extent
permitted by applicable law, that (i) the suit, action or proceeding in any such
court is brought in an inconvenient forum, (ii) the venue of such suit, action
or proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
8.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed that
the parties shall be entitled to specific performance of the terms hereof, this
being in addition to any other remedy to which they are entitled at law or in
equity.
8.11 Definitions. As used in this Agreement:
(a) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(b) "Business Day" means any day on which banks are not
required or authorized to close in the City of New York.
(c) "Material Adverse Effect" means, with respect to any
entity, any adverse change, circumstance or effect that, individually or in the
aggregate with all other adverse changes, circumstances and effects, is or is
reasonably likely to be materially adverse to the business, financial condition
or results of operations of such entity and its Subsidiaries taken as a whole,
other than any change, circumstance or effect relating to (i) the economy or
securities markets in general or (ii) the industries in which WorldCom or MCI
operate and not specifically relating to WorldCom or MCI.
(d) "the other party" means, with respect to MCI, WorldCom and
means, with respect to WorldCom, MCI.
(e) "Person" means an individual, corporation, limited
liability company, partnership, association, trust, unincorporated organization,
other entity or group (as defined in the Exchange Act).
44
(f) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by such
party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(g) "Superior Proposal" means a bona fide written Acquisition
Proposal which the Board of Directors of MCI concludes in good faith (after
consultation with its financial advisors and legal counsel), taking into account
all legal, financial, regulatory and other aspects of the proposal and the
Person making the proposal, (i) would, if consummated, result in a transaction
that is more favorable to MCI's stockholders (in their capacities as
stockholders), from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is reasonably capable of being completed
(provided that for purposes of this definition the term Acquisition Proposal
shall have the meaning assigned to such term in Section 5.5 except that the
reference to "10%" in the definition of "Acquisition Proposal" shall be deemed
to be a reference to "50%" and "Acquisition Proposal" shall only be deemed to
refer to a transaction involving MCI, or with respect to assets (including the
shares of any Subsidiary of MCI) of MCI and its Subsidiaries, taken as a whole,
and not any of its Subsidiaries alone).
(h) "Benefit Plans" means, with respect to any Person, each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any
bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, change in
control and severance plan, program, arrangement and contract) all of the
foregoing in effect on the date of this Agreement, to which such Person is a
party, which is maintained or contributed to by such Person, or with respect to
which such Person could incur material liability under Section 4069, 4201 or
4212(c) of ERISA.
8.12 Other Agreements. The parties hereto acknowledge and
agree that, except as otherwise expressly set forth in this Agreement, the
rights and obligations of MCI and WorldCom under any other agreement between the
parties shall not be affected by any provision of this Agreement.
45
IN WITNESS WHEREOF, WorldCom, MCI and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of November 9, 1997.
WORLDCOM, INC.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
TC INVESTMENTS CORP.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: President and Chief
Executive Officer
MCI COMMUNICATIONS CORPORATION
By: /s/ Xxxx X. Xxxxxxx, Xx.
Name: Xxxx X. Xxxxxxx, Xx.
Title: Chairman
Definition Location of Definition
GLOSSARY DEFINED TERMS
Definition Location of Definition
Acquisition Proposal............................................. 5.5
Affiliate Agreement.............................................. 3.1(j)
Agreement........................................................ Preamble
Benefit Plans.................................................... 8.11(i)
Blue Sky Laws.................................................... 3.1(c)(iii)
Board of Directors............................................... 8.11(a)
BT............................................................... Recitals
BT Agreement..................................................... Recitals
BT Inducement Fee................................................ Recitals
BT Merger Agreement.............................................. Recitals
Business Day..................................................... 8.11(b)
Certificate...................................................... 1.8(b)
Class A Common Stock............................................. Recitals
Class A Common Stock Merger Consideration........................ 1.8(a)
Closing.......................................................... 1.2
Closing Date..................................................... 1.2
Code............................................................. Recitals
Communications Act............................................... 3.1(c)(iii)
Confidentiality Agreement........................................ 5.3
Delaware Certificate of Merger................................... 1.3
DGCL............................................................. 1.1
DOJ.............................................................. 5.4(b)
Effective Time................................................... 1.3
ERISA............................................................ 8.11(i)
ESPP ............................................................ 3.1(b)
Exchange Act..................................................... 3.1(c)(iii)
Exchange Agent................................................... 2.1
Exchange Fund.................................................... 2.1
Exchange Ratio................................................... 1.8(a)
Expenses......................................................... 5.8
Fairness Opinions ............................................... 3.1(i)
FCC.............................................................. 3.1(c)(iii)
Form S-4......................................................... 5.1(a)
Financial Advisors .............................................. 3.1(h)
Governmental Entity ............................................. 3.1(c)(iii)
HSR Act.......................................................... 3.1(c)(iii)
ISUs............................................................. 3.1(b)
Joint Proxy Statement/Prospectus................................. 5.1(a)
Material Adverse Effect.......................................... 8.11(c)
MCI.............................................................. Preamble
MCI Affiliate Letter ............................................ 3.1(j)
MCI Common Stock................................................. Recitals
MCI Disclosure Schedule.......................................... 3.1
MCI SEC Reports.................................................. 3.1(d)
MCI Stockholders Meeting......................................... 5.1(b)
MCI Stock Option Plans........................................... 3.1(b)(i)
MCI Voting Debt.................................................. 3.1(b)(ii)
Merger........................................................... Recitals
Merger Consideration............................................. 1.8(a)
Merger Sub....................................................... Preamble
i
Definition Location of Definition
NASDAQ........................................................... 1.8(a)
Ordinary Common Stock............................................ Recitals
Ordinary Common Stock Merger Consideration....................... 1.8(a)
Person........................................................... 8.11(e)
PUCs............................................................. 3.1(c)(iii)
Purchase Rights.................................................. 3.2(b)
Regulation 4064/89............................................... 3.1(c)(iii)
Regulatory Law................................................... 5.4(b)
Reimbursement Amount............................................. 7.2(b)
Required WorldCom Vote........................................... 3.2(g)
Required Consents................................................ 3.1(c)(iii)
Required MCI Votes............................................... 3.l(f)
Rights........................................................... 3.1(b)(i)
Rights Agreement................................................. 3.1(b)(i)
Rule 145......................................................... 3.1(j)
SAS 72........................................................... 5.12
SEC.............................................................. 3.1(d)
Securities Act................................................... 3.1(c)(iii)
Subsidiary....................................................... 8.11(f)
Superior Proposal................................................ 8.11(g)
Surviving Corporation............................................ 1.1
Tax.............................................................. 8.11(h)(i)
Taxable ......................................................... 8.11(h)(i)
Taxes............................................................ 8.11(h)(i)
Tax Return ...................................................... 8.11(h)(ii)
Termination Date ................................................ 7.1(b)
the other party.................................................. 9.11(d)
U.S. GAAP........................................................ 3.1(d)
Violation........................................................ 3.1(c)(ii)
WorldCom......................................................... Preamble
WorldCom Affiliate Letter........................................ 3.2(i)
WorldCom Alternative Transaction Fee............................. 7.2(b)
WorldCom Common Stock............................................ Recitals
WorldCom Disclosure Schedule..................................... 3.2
WorldCom Rights Agreement........................................ 3.2(b)
WorldCom Series A Preferred Stock................................ 3.2(b)
WorldCom Series B Preferred Stock................................ 3.2(b)
WorldCom Stockholders Meeting.................................... 5.1(c)
WorldCom Voting Debt............................................. 3.2(b)(ii)
WorldCom SEC Reports............................................. 3.2 (d)
ii
TABLE OF CONTENTS
ARTICLE I
THE MERGER.................................................. 2
1.1 The Merger............................................. 2
1.2 Closing................................................ 2
1.3 Effective Time......................................... 2
1.4 Effects of the Merger.................................. 2
1.5 Certificate of Incorporation........................... 3
1.6 By-Laws................................................ 3
1.7 Officers and Directors of Surviving Corporation........ 3
1.8 Effect on Capital Stock................................ 3
ARTICLE II
EXCHANGE OF CERTIFICATES................................... 4
2.1 Exchange Fund........................................... 4
2.2 Exchange Procedures.................................... 4
2.3 Distributions with Respect to Unexchanged Shares....... 5
2.4 No Further Ownership Rights in MCI Common Stock........ 5
2.5 No Fractional Shares of WorldCom Common Stock.......... 5
2.6 Termination of Exchange Fund........................... 6
2.7 No Liability........................................... 6
2.8 Investment of the Exchange Fund........................ 6
2.9 Lost Certificates...................................... 6
2.10 Withholding Rights.................................... 7
2.11 Further Assurances.................................... 7
2.12 Stock Transfer Books.................................. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES.............................. 7
3.1 Representations and Warranties of MCI.................. 7
(a) Organization, Standing and Power................. 8
(b) Capital Structure................................ 8
(c) Authority; No Conflicts.......................... 9
(d) Reports and Financial Statements................. 10
(e) Information Supplied............................. 10
(f) Vote Required.................................... 11
(g) Rights Agreement................................. 11
(h) Brokers or Finders............................... 11
(i) Opinions of Financial Advisors................... 11
(j) Affiliate Letter................................. 12
3.2 Representations and Warranties of WorldCom............. 12
(a) Organization, Standing and Power................. 12
(b) Capital Structure................................ 12
(c) Authority; No Conflicts.......................... 13
(d) Reports and Financial Statements................. 14
(e) Information Supplied............................. 14
(f) Absence of Certain Changes or Events............. 15
(g) Vote Required.................................... 15
(h) Brokers or Finders............................... 15
(i) Affiliate Letter................................. 15
3.3 Representations and Warranties of WorldCom and Merger Sub.. 15
(a) Organization and Corporate Power................. 15
(b) Corporate Authorization.......................... 16
(c) Non-Contravention................................ 16
(d) No Business Activities........................... 16
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS................... 16
4.1 Covenants of MCI....................................... 16
(a) Ordinary Course.................................. 16
(b) Dividends; Changes in Share Capital.............. 17
(c) Issuance of Securities........................... 17
(d) Governing Documents.............................. 17
(e) No Acquisitions.................................. 17
(f) No Dispositions.................................. 18
(g) Indebtedness..................................... 18
(h) Tax-Free Qualification........................... 18
(i) Other Actions.................................... 18
(j) Accounting Methods; Income Tax Elections......... 18
(k) MCI Rights Agreement............................. 18
4.2 Covenants of WorldCom.................................. 19
(a) Ordinary Course.................................. 19
(b) Dividends; Changes in Share Capital.............. 19
(c) Issuance of Securities........................... 19
(d) Governing Documents.............................. 20
(e) No Acquisitions.................................. 20
(f) No Dispositions.................................. 20
(g) Indebtedness..................................... 20
(h) Tax-Free Qualification........................... 21
(i) Other Actions.................................... 21
(j) Accounting Methods; Income Tax Elections......... 21
(k) Acquisition Proposals............................ 21
(l) WorldCom Rights Agreement........................ 21
4.3 Advice of Changes; Governmental Filings................ 21
4.4 Transition Planning.................................... 22
4.5 Control of Other Party's Business...................... 22
ARTICLE V
ADDITIONAL AGREEMENTS....................................... 22
5.1 Preparation of Proxy Statement; MCI Stockholders Meeting... 22
5.2 WorldCom Board of Directors; Officers; Headquarters; MCI Name.23
5.3 Access to Information.................................. 24
5.4 Best Efforts........................................... 24
5.5 Acquisition Proposals.................................. 26
5.6 [Intentionally Omitted]................................ 27
5.7 Stock Options and Other Stock Plans; Employee Benefits Matters.27
5.8 Fees and Expenses...................................... 27
5.9 Directors' and Officers' Insurance..................... 27
5.10 Rights Agreement...................................... 28
5.11 Public Announcements.................................. 28
5.12 Accountants' Letters.................................. 28
5.13 Listing of Shares of WorldCom Common Stock............ 28
5.14 Voting Trust.......................................... 28
ARTICLE VI
CONDITIONS PRECEDENT........................................ 29
6.1 Conditions to Each Party's Obligation to Effect the Merger. 29
(a) Stockholder Approval............................. 29
(b) No Injunctions or Restraints, Illegality......... 29
(c) FCC and Public Utility Commission Approvals...... 29
(d) HSR Act.......................................... 29
(e) EU Antitrust..................................... 29
(f) NASDAQ Listing................................... 29
(g) Effectiveness of the Form S-4.................... 29
6.2 Additional Conditions to Obligations of WorldCom and Merger Sub.30
(a) Representations and Warranties................... 30
(b) Performance of Obligations of MCI................ 30
(c) Tax Opinion...................................... 30
6.3 Additional Conditions to Obligations of MCI............ 30
(a) Representations and Warranties................... 30
(b) Performance of Obligations of WorldCom........... 30
(c) Tax Opinion...................................... 31
(d) No Material Adverse Change....................... 31
ARTICLE VII
TERMINATION AND AMENDMENT................................... 31
7.1 Termination............................................ 31
7.2 Effect of Termination.................................. 32
7.3 Payment by WorldCom.................................... 33
7.4 Amendment.............................................. 33
7.5 Extension; Waiver...................................... 34
ARTICLE VIII
GENERAL PROVISIONS.......................................... 34
8.1 Non-Survival of Representations, Warranties and Agreements.. 34
8.2 Notices................................................ 34
8.3 Interpretation......................................... 35
8.4 Counterparts........................................... 36
8.5 Entire Agreement; No Third Party Beneficiaries......... 36
8.6 Governing Law.......................................... 36
8.7 Severability........................................... 36
8.8 Assignment............................................. 36
8.9 Submission to Jurisdiction; Waivers.................... 37
8.10 Enforcement........................................... 37
8.11 Definitions........................................... 37
8.12 Other Agreements...................................... 38
LIST OF EXHIBITS
Exhibit Title
5.2(a) Reconstitution of the Board of Directors of WorldCom
5.7 Stock Options and Other Stock-Based Plans;
Employee Benefit Matters
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 9, 1997
AMONG
WORLDCOM, INC.
TC INVESTMENTS CORP.
and
MCI COMMUNICATIONS CORPORATION
EXHIBIT 5.2(a) TO THE MERGER AGREEMENT
RECONSTITUTION OF THE BOARD OF DIRECTORS OF WORLDCOM
The Board of Directors of WorldCom, as of the Effective Time, shall consist of
fifteen members, eight of whom shall be designated by WorldCom from among the
directors of WorldCom, five of whom shall be designated by MCI from among the
directors of MCI and two of whom shall be directors designated by WorldCom from
among pending acquisitions of WorldCom; provided that the persons designated by
each party shall be reasonably acceptable to the other party.
Exhibit 5.7
Outline of Employee Benefit Provisions
1. All outstanding equity awards, including all ISUs, all
restricted stock and all option grants will continue to vest
(and be paid out) or become exercisable, as the case may be,
in accordance with their current terms and will not be
further accelerated in any way; provided, however, that if
the Merger is not a pooling transaction, all such equity
grants that have not otherwise previously lapsed or been
forfeited shall vest upon the closing of the Merger. Upon
the Effective Time, any outstanding equity awards will be
converted into shares (and options, as the case may be) of
the Parent on identical terms. Specifically:
On or prior to the Effective Time, MCI shall take all action
necessary to cause each option to purchase shares of MCI
Common Stock (each, an "MCI Stock Option") that was granted
pursuant to the MCI Stock Option Plans prior to the Effective
Time and which remains outstanding immediately prior to the
Effective Time to be converted, at the Effective Time, into an
option to acquire, on the same terms and conditions as were
applicable under the MCI Stock Option, that number of shares
of Parent's common stock determined by multiplying the number
of shares of MCI Common Stock subject to such MCI Stock Option
by the Exchange Ratio, rounded, if necessary, up to the
nearest whole share of Parent's common stock, at a price per
share equal to the per-share exercise price specified in such
MCI Stock Option divided by the Exchange Ratio; provided
however, that in the case of any MCI Stock Option to which
section 421 of the Code applies by reason of its qualification
under section 422 of the Code, the option price, the number of
shares subject to such option and the terms and conditions of
exercise of such option shall be determined in a manner
consistent with the requirements of section 424(a) of the
Code. In addition, all unvested and unpaid MCI restricted
stock and ISUs shall be converted to the number of shares of
Parent common stock or ISUs determined by multiplying such
shares of restricted stock and ISUs by the Exchange Ratio.
2. The employment agreements covering the Senior Executives of MCI will be
revised to:
a. eliminate the limitations on severance pay in the event
of a "Final Year Constructive Termination," as defined
in such contracts; and
b. add minimum bonus provisions to the contracts under
which each executive's annual bonuses could not be less
2
than the average annual bonus earned by the executive in
respect of 1994, 1995 and 1996.
3. The term of MCI's "Executive Severance Policy" will be extended to the third
anniversary of the signing of this Agreement except for those provisions that
would affect the equity rights of a participant in such Policy, to the extent
necessary to preserve pooling.
4. A cash retention award pool of up to $320 million will be created to provide
retention incentives for MCI employees, as determined by the MCI Compensation
Committee as soon as practicable hereafter. The schedule of payment of such
incentives will be subject to the approval of Parent, which will not be
unreasonably withheld; and Parent will be informed as to the other aspects of
the incentives.
5. In addition, awards under the "Management Employee Bonus Program", the "Other
Employee Bonus Program" and the "Retention Bonus Pool" currently maintained by
MCI will be payable not earlier than:
50% on December 1, 1997; and
50% on December 1, 1998;
provided, however that upon the closing date of any Transaction, involving the
sale or other disposition of a majority of MCI's stock or assets, any such
amounts that have not yet been paid will be accelerated and paid out.
6. Executives not covered by employment contracts or the Executive Severance
Policy will participate in a new severance program with a severance formula
based on the guidelines currently used for executive severance but in any event
shall not receive less than they are entitled to under paragraph 7 below. (See
Appendix A).
7. All other employees below the levels set forth in 6. above will receive
severance of three weeks per year of service if terminated in connection with
Merger.
4
Appendix A
Executive Termination Pay Schedule
Director (9-11) Vice President (12-13) Pres. & Sr. VP (14+)
Years of Months of Months of Months of
Severance Severance Severance
1 year or less 4 6 8
over 1 year 5 7 9
over 2 years 5 7 10
over 3 years 6 8 10
over 4 years 7 9 11
over 5 years 7 10 12
6 or more years 8 10 12
