FIRST AMENDMENT
TO THE STOCK PURCHASE AGREEMENT
AMONG
IONEX TELECOMMUNICATIONS, INC.
ADVANCED COMMUNICATIONS GROUP, INC.,
XXXXX LONG DISTANCE SERVICE, INC.,
FIRSTEL, INC.,
TELECOM RESOURCES, INC.
AND
VALU-LINE OF LONGVIEW, INC.
Dated as of November 19, 1999
FIRST AMENDMENT
TO THE STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT TO THE STOCK PURCHASE AGREEMENT (the "Amendment")
made as of November 19, 1999 among IONEX TELECOMMUNICATIONS, INC., a Delaware
corporation (formerly named Compass Telecommunications, Inc.) ("Buyer"), and
XXXXX LONG DISTANCE SERVICE, INC., a Kansas corporation, FIRSTEL, INC., a South
Dakota corporation, TELECOM RESOURCES, INC., a Texas corporation, VALU-LINE OF
LONGVIEW, INC., a Texas corporation, and ADVANCED COMMUNICATIONS GROUP, INC., a
Delaware corporation (the "Seller"), amends the Stock Purchase Agreement dated
as of July 14, 1999 among the parties referenced above (the "Stock Purchase
Agreement"; and as amended hereby, the "Agreement").
P R E A M B L E:
WHEREAS, the parties wish to amend the Stock Purchase Agreement to
enable the parties to close the transactions contemplated therein and to address
related and additional issues arising since the execution of the Stock Purchase
Agreement; and
WHEREAS, all capitalized terms not otherwise defined herein have the
meanings ascribed to them in the Stock Purchase Agreement.
NOW, THEREFORE, in consideration of the premises, the mutual
representations, warranties, covenants and agreements herein contained, and
other consideration, the receipt and sufficiency of which is acknowledged, the
parties hereby agree as follows:
1. REPRESENTATIONS AND WARRANTIES OF SELLER
The Stock Purchase Agreement is hereby amended by inserting a new
Section 3.31, as follows:
3.31 DELAWARE OPINION LETTER. The recitation of facts set forth in the
opinion of Morris, Nichols, Arsht & Xxxxxxx, as described in Section 8.2(m)
hereof, and upon which their opinion is based does not contain any untrue
statement of material fact or omit to state a material fact necessary to make
the statements contained therein not misleading.
2. INDEMNIFICATION
(a) The Stock Purchase Agreement is hereby further amended by
replacing Section 10.2 in its entirety with the following:
10.2 LIMITS ON INDEMNIFICATION. The parties hereto agree that any
indemnification payments to be made pursuant to this Agreement by Seller on the
one hand or Buyer on the other hand (except pursuant to Section 10.3(a), with
respect to the representations and warranties contained in Sections 3.12, 3.20,
3.22 and 3.23 (but only with respect to the Helmsman Publications, Inc. v.
Telecom Resources, Inc. litigation and
the Xxxxxx Xxxxxx and Xxxx Xxxxxx litigation set forth on Schedule 3.23), or
Sections 10.3(b), 10.3(c), 10.3(d), 10.3(f), 10.3(k), 10.3(l), 10.3(m) and
10.3(n) or 10.4(b)) shall be subject to the requirement that no claim may be
made until the aggregate amount of indemnifiable Losses incurred by Seller on
the one hand or Buyer on the other hand exceeds $75,000.00, at which time
such claim for indemnification may be made for the aggregate amount of all
indemnifiable Losses exceeding $75,000.00. Seller's indemnification
obligation under Section 10.3(c) shall be limited in total to One Hundred
Fifty Thousand and No/100s dollars ($150,000.00).
(b) The Stock Purchase Agreement is hereby further amended by
replacing the period at the end of Section 10.3(k) thereof with a
semi-colon and the word "or" and by inserting the following at the end
of Section 10.3:
(l) resulting from the dispute between Valu-Line and MCI/WorldCom
concerning amounts purportedly owed one another prior to and
as of the Closing Date and which arise out of the contract,
dated as of August of 1996, entered into by and between
Valu-Line and MCI Communications Corporation, as amended; or
(m) the failure of Seller to obtain any required Consent prior to
closing from any Governmental Authority to the assignment to a
Telecommunication Subsidiary of the Interconnect Agreements
listed on Schedule 8.2(k), including, but not limited to
consent by the Missouri Public Service Commission to the
Assignment to Xxxxx of the Interconnect Agreement between
Seller and Southwestern Xxxx Telephone (Missouri), and consent
by the North Dakota Public Service Commission to the
assignment to FirsTel of the Interconnect Agreement between
Seller and US West Communications, Inc. (North Dakota); or
(n) failure of Seller to obtain consent to the assignment
to a Telecommunication Subsidiary of, or from a
change of control resulting from the transactions
contemplated by this agreement under, the following
contracts: Carrier Digital Services Agreement, WorldCom
Network Services, Inc.; Classic/Transcend Switched
Services Program Enrollment Terms, WorldCom Network
Services, Inc; Classic/Transcend Switched Services
Telecommunications Services Agreement, WorldCom Network
Services, Inc.; Carrier Agreement Terms and Conditions,
MCI Telecommunications Corporation, as amended (FirsTel,
Inc.); and Carrier Agreement, MCI Telecommunications
Corporation (Valu-Line of Longview, Inc.)
3. CLOSING
The Stock Purchase Agreement is hereby further amended by replacing the
word "and" at the end of Section 8.2(k) with a semi-colon, replacing the period
at the end of Section 8.2(l) with a semi-colon and inserting new Section 8.2(m)
and 8.2(n) as follows:
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First Amendement to the Stock Purchase Agreement
"(m) An opinion in form reasonably satisfactory to Buyer,
dated the Closing Date, of Morris, Nichols, Arsht & Xxxxxxx, as to
Seller's ability to sell the Telecommunications Subsidiaries without
obtaining its shareholders' approval; and
(n) Buyer shall have in place an insurance policy, reasonably
satisfactory to Buyer and Seller, which shall (a) provide coverage to
Buyer for any Loss to Buyer arising out of a breach of the
representation and warranty contained in Section 10.3(a) hereof, (b)
have a benefit of $10 million dollars, (c) have a premium of $310,000
and (d) have a deductible of $400,000."
4. COVENANTS
(a) The Stock Purchase Agreement is hereby further amended by
inserting the following language at the end of Section 5.23:
"For purposes of clarification of the prior sentence, Seller
and Buyer agree that Seller shall accept Buyer's bid as long
as it is equally or more advantageous to Seller in terms of
price, service quality or range of services in comparison to
other bids. Seller shall submit to Buyer the
telecommunications requirements upon which Buyer's bid is to
be based as soon as practicable after the Closing Date."
(b) The Stock Purchase Agreement is further amended by adding
the following sections to Article V:
"5.27 XXXXXXXXX GUARANTEES. Buyer shall use its commercially reasonable
efforts to have Xxxx XxXxxxxxx removed as a personal guarantor of any of TRI's
obligations and agree to indemnify Xxxx XxXxxxxxx for Losses incurred by him as
a result of such personal guarantees of TRI's obligations accruing or arising
after the Closing. Notwithstanding the forgoing, Buyer shall not be obligated to
indemnify Seller for any Losses related to Seller's Guarantees accruing or
arising prior to the Closing."
"5.28 SELLER GUARANTEES. Buyer shall use its commercially reasonable
efforts to have removed Seller as a guarantor or otherwise relieve Seller of its
obligations listed on SCHEDULE 5.28 ("Seller's Guarantees") and agree to
indemnify Seller for any Losses incurred by it as a result of Seller's
Guarantees accruing or arising after the Closing. Notwithstanding the forgoing,
Buyer shall not be obligated to indemnify Seller for any Losses related to
Seller's Guarantees accruing or arising prior to the Closing."
"5.29 INTERCONNECT AGREEMENTS. If any required consent from any
Governmental Authority to the assignment of the Interconnect Agreements listed
on Schedule 8.2(k) has not been obtained by Closing, Seller shall use its best
efforts to obtain within sixty (60) days after the Closing Date any such
required consent from any Governmental Authority to the assignment to a
Telecommunication Subsidiary of the Interconnect Agreements listed on Schedule
8.2(k) not obtained as of the Closing Date, including but not limited to,
consent by the Missouri Public Service commission to the assignment to Xxxxx of
the Interconnect Agreement between Seller and Southwestern Xxxx Telephone
(Missouri),
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First Amendement to the Stock Purchase Agreement
and consent by the North Dakota Public Service Commission to the assignment
to FirsTel of the Interconnect Agreement between Seller and US West
Communications, Inc. (North Dakota). Seller agrees to assign (at not
additional cost to Buyer) any such Interconnect Agreement to Buyer as soon as
practicable following the grant of any such consent."
"5.30 ADDITIONAL FILINGS. As soon as practicable after the Closing
Date, Buyer shall update the following registrations to reflect the consummation
of the transactions contemplated hereby: FirsTel and TRI registrations as toll
resellers in Colorado, FirsTel and TRI registrations as providers of
telecommunications services in Montana; Valu-Line, Xxxxx and TRI registrations
as non-dominant telecommunications carriers in Texas."
"5.31 OKLAHOMA CITY WHITE PAGES ADVERTISING. Seller agrees that it
shall pay to Buyer an amount equal to Buyer's reasonable cost of obtaining eight
white pages of forward text information for the period extending from the
Closing Date until February 18, 2003. At Buyer's option, such advertising shall
contain information provided by Buyer, appear before the "telephone companies"
portion of the forward white pages text, appear in Southwestern Xxxx or
comparative alternative directories and appear in all or any portion of Oklahoma
City and its greater metropolitan area. Payment for such advertising in an
amount equal to $100,000 shall be made by Seller to Buyer at Closing. Within
ninety (90) days of the Closing Date, Buyer shall obtain a quote of the cost of
such advertising for the entire period described in this Section 5.31. If the
cost of this advertising as set forth in such quote exceeds $100,000, Seller
shall pay such excess to Buyer promptly upon receiving Buyer's written demand,
together with reasonable substantiating back-up, for such quote. If the cost of
this advertising is less than $100,000, Buyer shall pay such difference to
Seller promptly after obtaining such quote.
5. SCHEDULES
(a) Schedule 3.23 of the Stock Purchase Agreement is amended by
adding the following:
TELECOM RESOURCES, INC. ("TRI")
HELMSMAN PUBLICATIONS, INC. V. TELECOM RESOURCES, INC.
In Dallas County Court at Law No. 2; Cause No. 98-5003-B: Plaintiff
sued TRI for breach of contract and is seeking approximately $11,000.00 plus
attorneys' fees. TRI counterclaimed, asserting claims for breach of contract and
under the Texas Deceptive Practices Act, and is seeking treble damages and
attorneys' fees. No trial date has been set. By letter dated September 10, 1999,
counsel for plaintiff served upon TRI Plaintiff's Request for Production of
Documents to Defendant. A response was served on or about October 11, 1999.
"XXXXXX XXXXXX AND XXXX XXXXXX
Xxxxxx Xxxxxx and Xxxx Xxxxxx operate a bail bondsmen's business. The
Xxxxxx' transferred their local telecommunications services from a third-party
provider to Valu-Line. Unbeknownst to both the Morrises and Valu-Line the
third-party provider terminated the collect call service available to the
Morrises. Consequently, certain of the Xxxxxx' customers were
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First Amendement to the Stock Purchase Agreement
unable to obtain the Xxxxxx' services. The Morrises have filed a lawsuit
seeking compensation for damages resulting from the interruption of call
collect services and attorneys' fees, totaling approximately $55,000.
Settlement negotiations are underway between counsel for the parties."
(c) Schedule 5.14 of the Stock Purchase Agreement should be
amended by adding the following under the subheading "FirsTel, Inc.":
"Phoenix Warehouse; UCC - 1 successor in interest to an RCC
Finance Group Ltd., UCC-1."
(d) A new SCHEDULE 5.28 shall be added to the Stock Purchase
Agreement as follows:
SCHEDULE 5.28
SELLER GUARANTEES
1. Stock Purchase Agreement (Kinnet IRM) Seller and Liberty
Cellular, Inc.
2. Master Equipment Leases, Phoenix Leasing Incorporated,
Lease Nos: 991053 and 981055, formerly with R.C.C.
Finance Group Ltd. ("R.C.C.")
3. Master Equipment Lease, Xxxxxx Leasing Corp. Lease No.
991066, formerly with R.C.C.
4. Master Equipment Lease, NewCourt Financial U.S.A., Inc., Lease
Nos. 981054 and 981068, formerly with R.C.C.
5. 2/15/96 Lease Agreement with IM Joint Venture (INFOMART).
6. Guaranty of Lease Agreement, ForHim, L.L.C., dated May 25, 1998.
7. Software License Agreement, Xxxxxxx Systems, Inc., dated
September 16, 1998.
6. MISCELLANEOUS
(a) At Closing Buyer shall deduct Thirty Thousand Dollars
($30,000) from the Consideration payable at Closing to reflect the
failure of Seller to assign its competitive local exchange carrier
Telecommunication Authorization in Missouri (as set forth in Schedule
3.15 of the Agreement) to a Telecommunication Subsidiary and the fact
that TRI no longer holds IXC authorization in Arkansas (as set forth on
Schedule 3.15 of the Agreement).
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First Amendement to the Stock Purchase Agreement
(b) At Closing, Buyer shall deduct an amount equal to $150,000
from the Consideration payable at Closing to cover Seller's portion of
the insurance required to be obtained by Section 8.2(n) of the
Agreement.
(c) At Closing, Buyer shall deduct an amount equal to $15,000
from the Consideration payable at Closing to reflect Seller's failure
to convey certain resale agreements to a Telecommunication Subsidiary
prior to Closing.
(d) At Closing, Buyer shall deduct an amount equal to $100,000
from the Consideration payable at Closing to cover the amount payable
by Seller to Buyer, pursuant to Section 5.31 of the Agreement.
(e) As herein amended, the Stock Purchase Agreement shall
remain in full force and effect and is hereby ratified and confirmed in
all respects. After the date hereof, all references in the Stock
Purchase Agreement shall refer to the Stock Purchase Agreement as
herein amended.
(f) This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts, and
each such counterpart shall be deemed to be an original but all such
counterparts shall together constitute one and the same Agreement.
(g) This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of Delaware
without giving effect to the principals of conflicts of law thereof.
THE REMAINDER OF THE PAGE IS LEFT BLANK INTENTIONALLY
[the next page is numbered 9]
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First Amendement to the Stock Purchase Agreement
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the date first above written.
IONEX TELECOMMUNICATIONS, INC. ADVANCED COMMUNICATIONS
GROUP, INC.
By:_____________________________ By: __________________________
Name:___________________________ Name: Xxxxxxx X. X'Xxxx
Title:__________________________ Title: Chairman and Acting Chief
Executive Officer
XXXXX LONG DISTANCE SERVICE, INC.
By:_______________________________
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board
FIRSTEL, INC.
By:_______________________________
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board
TELECOM RESOURCES, INC.
By:_______________________________
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board and
President
VALU-LINE OF LONGVIEW, INC.
By:_______________________________
Name: Xxxxxxx X. X'Xxxx
Title: Chairman of the Board
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First Amendement to the Stock Purchase Agreement
