EXHIBIT 1
SHARE EXCHANGE AGREEMENT
AND PLAN OF REORGANIZATION
dated as of
November 1, 1996
between
NETWORK LONG DISTANCE, INC.
and
UNITED WATS, INC.
and
SHAREHOLDERS
OF
UNITED WATS, INC.
TABLE OF CONTENTS
Page
----
ARTICLE I
TRANSACTION
Section 1.1 Share Exchange 1
ARTICLE II
CLOSING
Section 2.1 Closing 2
Section 2.2 Location of Closing 2
ARTICLE III
CONDITIONS OF CLOSING
Section 3.1 Conditions Precedent to the Closing 2
Section 3.2 Additional Conditions Precedent to the Closing 3
Section 3.3 Legends 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1 Corporate Existence and Power 5
Section 4.2 Authorization; Contravention; Modifications 5
Section 4.3 Approvals 6
Section 4.4 Binding Effect 6
Section 4.5 Financial Information 6
Section 4.6 Taxes 7
Section 4.7 Litigation 7
Section 4.8 Compliance with Laws 7
Section 4.9 Subsidiaries 7
Section 4.10 Debt 7
Section 4.11 No Default 8
Section 4.12 Capitalization 8
Section 4.13 Material Contracts 9
Section 4.14 Investment Intent 10
Section 4.15 Fees for Brokers and Finders 10
Section 4.16 Misstatements 10
Section 4.17 Company Representations 11
Section 4.18 UWI Representations 12
ARTICLE V
TERMINATION
Section 5.1 Termination 13
Section 5.2 Expenses and Fees 13
ARTICLE VI
MISCELLANEOUS
Section 6.1 Notices 14
Section 6.2 No Waivers; Remedies; Specific Performance 14
Section 6.3 Amendments, Etc 14
Section 6.4 Accounting Terms and Determinations 15
Section 6.5 Governing Law 15
Section 6.6 Counterparts; Effectiveness 15
Section 6.7 Severability of Provisions 15
Section 6.8 Headings and References 15
Section 6.9 Survival 15
Section 6.10 Non-Exclusive Jurisdiction 16
Section 6.11 Waiver of Jury Trial 16
Section 6.12 Affiliate 16
Section 6.13 Non-Recourse 16
Section 6.14 Entire Agreement 16
Section 6.15 Attorney's Fees 16
2
ANNEX
Annex A - Definitions
EXHIBITS
Exhibit 3.1(f)(1) - Certificate of Secretary of the Company or UWI
Exhibit 3.1(f)(2) - Certificate of Officer of the Company or UWI
Exhibit 3.1(f)(3) - Opinion of Counsel for the Company
Exhibit 3.1(f)(4) - Opinion of Counsel for UWI
3
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT dated as of November 15, 1996 between
NETWORK LONG DISTANCE, INC., a Delaware corporation (the "Company"), and
UNITED WATS, INC., a Kansas corporation ("UWI") and the SHAREHOLDERS OF
UNITED WATS, INC. (collectively known as the "SHAREHOLDERS").
Terms not otherwise defined in this Share Exchange Agreement have
the meanings stated in Annex A.
The parties agree as follows:
ARTICLE I
TRANSACTIONS
Section 1.1 SHARE EXCHANGE. Subject to the terms and conditions
set forth in this Agreement,
(a) at the Closing,
(1) the Company shall issue, sell and deliver to the Shareholders, in
consideration of the sale and delivery to the Company of the issued and
outstanding UWI Shares, and the Shareholders shall purchase, accept and
acquire from the Company, 2,277,777 shares of the Company's Common Stock
(the "Company Shares").
(2) The Shareholders shall sell and deliver to the Company, in
consideration of the issuance, sale and delivery to them of the Company
Shares, and the Company shall purchase, accept, and acquire from the
Shareholders, 200,000 shares of voting common stock, $.10 par value, of UWI
(the "UWI Shares"), which represent all the issued and outstanding shares
of such common stock; and
(3) The Company shall file, and shall use its best efforts to obtain
effectiveness of, a registration with respect to the Company Shares, with
the Securities and Exchange Commission, in full compliance with all the
applicable rules thereof, within seventy-five (75) days of the Closing
Date, or within the shortest time frame allowed under SEC requirements or
pooling of interests accounting treatment, and maintain a current
registration statement with respect to the Company Shares for a period of
two (2) years from the effective date of the registration statement.
ARTICLE II
CLOSING
Section 2.1 CLOSING. The closing of the transaction subject to
Section 1.1 ( the "Closing Transaction") shall take place (the "Closing")
on or before November 15, 1996 (the "Closing Date").
Section 2.2 LOCATION OF CLOSING. The Closing shall take place
at the corporate offices of the Company at its address stated on the
signature pages of this Share Exchange Agreement or at such other location
as agreed to by the parties.
ARTICLE III
CONDITIONS OF CLOSING
Section 3.1 CONDITIONS PRECEDENT TO THE CLOSING. The
obligations of each party under this Share Exchange Agreement with respect
to the Transaction are subject to the satisfaction of each of the following
conditions, unless such conditions either are required to be satisfied by
such party (for the benefit of the other party) or are waived by the party
for whose benefit such condition is intended at or before the Closing:
(a) each party shall have obtained, if necessary, from each
Governmental Body or other person any Approval necessary or taken all
actions required to be taken in connection with each Approval, for (1) the
due execution and delivery by such party of each Transaction Document to
which it is or may become a party, and (2) the conclusion of the Closing
Transaction;
(b) no Action shall be pending or, to the knowledge of
either party, threatened against such party or any other person that
restricts in any material respect or prohibits (or, if successful, would so
restrict or prohibit) the conclusion of the Closing;
(c) neither party (1) is in violation of or default, in any
material respect, with respect to any Regulation of any Governmental Body
or any decision, ruling, order or award of any arbitrator applicable to it
or its business, properties or operations, (2) would be in violation of or
default, in any material respect, with respect to the same in connection
with or as a result of the conclusion of the Closing, or (3) has received
notice that, in connection with or as a result of the conclusion of the
Closing Transaction, as the case may be, it is or would be in violation of
or default, in any material respect, with respect to the same;
(d) the representations and warranties of the other party
contained in each Transaction Document to which such other party is a party
shall be true and correct in all
2
material respects on and as of the Closing Date, with the same force and
effect as though made on and as of the Closing Date;
(e) the other party shall have performed, in all material
respects, all of the material covenants and other material obligations that
are required by the Transaction Documents to which it is a party to be
performed by such other party at or before the Closing; and
(f) the party shall have received from the other party the
following, each dated the Closing Date, in form and substance reasonably
satisfactory to the receiving party, and upon which the parties have
expressly relied in entering into this Transaction:
(1) a certificate of the Secretary or an Assistant Secretary of
such other party substantially in the form of EXHIBIT 3.1(f)(1), with
respect to (i) the articles of incorporation of such other party, (ii)
the bylaws of such other party, (iii) the resolutions of the Board of
Directors of such other party approving each Transaction Document and
the other documents to be delivered by it under the Transaction
Documents and (iv) the names and true signatures of the officers of
such other party authorized to sign each Transaction Document to which
such other party is a party as of the Closing Date, and the other
documents to be delivered by such other party under such Transaction
Documents;
(2) a certificate of the President or a Vice President of such
other party, substantially in the form of EXHIBIT 3.1(f)(2) to the
effect that (i) the representations and warranties of such other party
contained in the Transaction Documents to which it is a party are true
and correct in all material respects as of the Closing Date, and (ii)
such other party has performed, in all material respects, all
covenants and other obligations required by the Transaction Documents
to which it is a party to be performed by it at or before the Closing;
(3) a certificate of the Secretary of State of each jurisdiction
in which such other party is incorporated, dated as of a recent date,
as to the good standing of and payment of assessments by such other
party and as to the charter documents of such other party on file in
the office of the Secretary of State;
(4) with respect to the Company and UWI, a favorable opinion of
one or more counsel for the Company and UWI, which together are
substantially in the form of EXHIBIT 3.1(f)(3) and EXHIBIT 3.1(f)(4),
respectively, in each case to the extent indicated therein as
applicable to the Closing and as to other matters reasonably requested
by the receiving party.
Section 3.2 ADDITIONAL CONDITIONS PRECEDENT TO THE CLOSING.
The obligations of each party under this Share Exchange Agreement with
respect to the Closing Transaction are
3
also subject to the satisfaction of each of the following conditions at or
before the Closing, unless the conditions either are required to be
satisfied by such party (for the benefit of the other party) or are waived
by the party for whose benefit such condition is intended:
(a) holders of 100% of the UWI Shares shall have duly
approved this Agreement.;
(b) on the Closing Date, the Company shall have duly
executed and delivered to each of the Shareholders of UWI one or more
certificates representing such Shareholder's proportionate share of the
Company Shares;
(c) on the Closing Date, the Shareholders shall have
delivered to the Company one or more certificates representing all of the
UWI Shares, duly endorsed for transfer or together with a stock power duly
executed for transfer;
(d) there shall not have occurred any material adverse
change in the business or prospects of the Company or any suspension of
trading in the Company's Common Stock;
(e) the Shareholders shall have received an opinion of
counsel for the Company that the Transaction qualifies as a tax-free
reorganization to the Shareholders;
(f) the Shareholders shall have received a letter from the
Company's and UWI's respective independent accountants that the Transaction
qualifies for pooling of interests accounting treatment;
(g) Xxxxxxx Xxxxxx shall have been elected to the Board of
Directors of the Company effective as of the Closing; and
Section 3.3 LEGEND.
(a) Each certificate for Company Shares and any certificate
for Company Shares issued in exchange or on conversion or upon transfer,
except certificates for the Company Shares issued in connection with a sale
registered under the Securities Act and except as provided below, shall
bear a standard "restricted" legend similar to or having the following
effect:
(1) "The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended, and may not
be offered, sold, transferred or otherwise disposed of except in
compliance with said Act."
(b) The legend stated in Section 3.3(a)(1) shall be removed
by delivery of one or more substitute certificates without such legend if
the holder thereof shall have
4
delivered to the Company a copy of a letter from the staff of the
Securities and Exchange Commission or an opinion of legal counsel, in form
and substance reasonably satisfactory to the Company, to the effect that
the legend is not required for purposes of the Securities Act or upon the
effectiveness of the registration statement referred to in Section
1.1(a)(3)..
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Each party represents and warrants, with respect to itself as
applicable as follows (the Company or UWI being referred to in this Article
IV as a "Subject Company," as applicable):
Section 4.1 CORPORATE EXISTENCE AND POWER. The representing
party, and the Subject Company each (1) is a corporation duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation, (2) has all necessary corporate power and authority and
all material licenses, authorizations, consents and approvals required to
own, lease, license or use its properties now owned, leased, licensed or
used and proposed to be owned, leased, licensed or used and to carry on its
business as now conducted and proposed to be conducted, (3) is duly
qualified as a foreign corporation under the laws of each jurisdiction in
which both (A) qualification is required either (i) to own, lease, license
or use its properties now owned, leased, licensed and used or (ii) to carry
on its business as now conducted and (B) the failure to be so qualified
could materially and adversely affect either or both of (i) the business,
properties, operations, prospects or condition (financial or otherwise) of
the Subject Company, and (ii) the ability of the representing party or the
Subject Company to perform its obligations under any Transaction Document
to which it is or may become a party and (4) has all necessary corporate
power and authority to execute and deliver each Transaction Document to
which it is or may become a party.
Section 4.2 AUTHORIZATION; CONTRAVENTION; MODIFICATIONS.
Subject to obtaining the Approvals referred to in Section 4.3, the
execution and delivery by the representing party of each Transaction
Document to which the representing party is or may become a party and the
performance by it of its obligations under each such Transaction Document
have been duly authorized by all necessary corporate action and do not and
will not (1) contravene, violate, result in a breach of or constitute a
default under, (A) its articles of incorporation or bylaws, (B) any
Regulation of any Governmental Body or any decision, ruling, order or award
of any arbitrator by which the representing party or any of its properties
may be bound or affected or (C) any agreement, indenture or other
instrument to which the representing party is a party or by which the
representing party or its properties may be bound or affected, (2) except
as contemplated by the Transaction Documents, result in or require the
creation or imposition of any Lien on any of the properties now owned or
acquired prior to the Closing by the representing party.
5
Section 4.3 APPROVALS. No prior approval of any Governmental
Body or other person, except as set forth on the Memorandums of the parties
attached hereto and incorporated herein, is required or advisable on the
part of the representing party for (1) the due execution and delivery by
the representing party of any Transaction Document to which it is or may
become a party, (2) the conclusion of the Closing Transaction, and (3) the
performance by the representing party of its obligations under each
Transaction Document to which it is or may become a party with respect to
the Closing Transaction.
Section 4.4 BINDING EFFECT. Each Transaction Document to which
the representing party is or may become a party is, or when executed and
delivered in accordance with this Share Exchange Agreement will be, the
legally valid and binding obligation of the representing party enforceable
against it in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and general principles
of equity, including, without limitation, concepts of materiality,
reasonableness, good faith and fair dealing and the possible unavailability
of specific performance or injunctive relief, regardless of whether
considered in a proceeding in equity or at law.
Section 4.5 FINANCIAL INFORMATION.
(a) The consolidated balance sheets of the Subject Company
and its Consolidated Subsidiaries, if any, as of the last day of its latest
two (2) fiscal years (the "Balance Sheet Date") and the related
consolidated statements of operations, shareholders' equity and cash flows
for the last day of its latest three (3) years then ended, reported on by
the independent public accountants of the representing party (and, with
respect to the Company, filed with the Securities and Exchange Commission
in the Company's Annual Report on Form 10-K for the year ended March 31,
1996), a true and complete copy of which has been delivered to the other
party, fairly present the consolidated financial position of the Subject
Company and its Consolidated Subsidiaries, if any, as of that date and
their consolidated results of operations and cash flows for the year then
ended, in accordance with GAAP applied on a consistent basis except as
described in the footnotes to such financial statements or as disclosed in
writing to the other party, which writing makes reference to this
Agreement.
(b) The representing party has made available to the other
party copies of each management letter, if any, delivered to the
representing party by the independent public accountants of the
representing party in connection with the financial statements referred to
in this Section 4.5 or relating to any review by them of the internal
controls of the Subject Company and its Consolidated Subsidiaries, if any,
during the three years ended on its Balance Sheet Date or thereafter, and
has made available for inspection all reports and working papers produced
or developed by them or management in connection with their examination of
those financial statements, as well as all such reports and working papers
for prior periods for which any liability of the Subject Company and its
Subsidiaries, if any, for Taxes has not been finally determined or barred
by applicable statutes of limitation.
6
Section 4.6 TAXES. Each of the Subject Company and its
Subsidiaries, if any, has filed all Tax Returns that are required to be
filed with any Governmental Body and has paid all Taxes shown due pursuant
to the Tax Returns or any assessment received by it, except Taxes being
contested in good faith by appropriate proceedings and for which adequate
reserves or other provisions are maintained, and except for the filing of
Tax Returns as to which the failure to file could not, individually or in
the aggregate, have a Material Adverse Effect. No issues that have been
raised in writing by the relevant taxing authority in connection with the
examination of the Tax Returns are currently pending.
Section 4.7 LITIGATION.
(a) Except as previously disclosed to the other party in
writing, which writing makes reference to this Agreement, there is no
Action pending or, to the knowledge of the representing party, threatened
against the Subject Party or any of its Subsidiaries, if any, that (1)
involves the Transaction or (2) individually or in the aggregate, if
determined adversely to any of them, could result in a liability to any of
them in an amount that could have a Material Adverse Effect.
(b) There is no Action pending or, to the knowledge of the
representing party, threatened against the representing party, any of its
Subsidiaries, if any, or any other person that involves the Transaction or
any property owned, leased, licensed or used by the representing party or
such Subsidiary that, individually or in the aggregate, if determined
adversely to any of them, would have a Material Adverse Effect.
Section 4.8 COMPLIANCE WITH LAWS. None of the Subject Company
and its Subsidiaries, if any, is in, and none of them has received notice
of, a violation of or default with respect to, any Regulation of any
Governmental Body or any decision, ruling, order or award of any arbitrator
applicable to it or its business, properties or operations, including
individual products or services sold or provided by it, except for
violations or defaults that, individually or in the aggregate, could not
have a Material Adverse Effect.
Section 4.9 SUBSIDIARIES.
(a) The representing party has previously delivered to the
other party a correct and complete list of the Subsidiaries, if any, of the
Subject Company, which list makes reference to this Agreement, showing the
following as of the date of this Share Exchange Agreement with respect to
each such Subsidiary: (1) the jurisdiction of its incorporation; and (2)
the directors and officers of the Subsidiary as of the Closing Date.
Section 4.10 DEBT. The representing party has previously
disclosed to the other party in writing, which writing makes reference to
this Agreement, a correct and complete description and list of the
following: (1) all credit agreements, indentures, purchase agreements,
Guarantees, Capitalized Leases and other Investments, agreements and other
arrangements
7
presently in effect providing for or relating to individual Debt in any
amount greater than $90,000 with respect to UWI and $250,000 with respect
to the Company; (2) the maximum principal or face amounts of such Debt
outstanding or which may be outstanding under each of those agreements and
other arrangements; and (3) the maturity date or dates of such Debt.
Section 4.11 NO DEFAULT. Except as previously disclosed to the
other party in writing, which writing makes reference to this Agreement,
none of the Subject Company and its Subsidiaries, if any, is in default
with respect of any obligation under any credit agreement, indenture,
purchase agreement, Guarantee, Capitalized Lease and other Investment,
agreement or arrangement referred to in Section 4.10, which default either
alone or together with any other default, entitles another party thereto,
with the giving of notice or the passage of time or both, to terminate or
modify the rights and obligations of the parties thereunder or with respect
thereto or to accelerate, increase or otherwise modify any obligation of
the Subject Company or any of its Subsidiaries, if any, thereunder.
Section 4.12 CAPITALIZATION.
(a) With respect to the Company,
(1) the authorized capital stock of the Company as of June 30,
1996 consisted of (A) 20,000,000 shares, par value $.0001, of Common
Stock, of which 4,489,859 shares were issued and outstanding, and (B)
25,000,000 shares of preferred stock, par value $.01 per share, of
which no shares are issued and outstanding;
(2) the number of shares of Common Stock as of the date hereof
(A) issued and outstanding, (B) held in the treasury of the Company,
(C) reserved for issuance upon exercise of outstanding stock options
(the "Outstanding Options") granted by the Company together with the
exercise prices therefor (D) subject to purchase pursuant to warrants
and the purchase prices therefor, and (E) escrowed or otherwise
subject to vesting or earning as incentives to certain executive
officers, is accurately set forth on and has been previously disclosed
to UWI.
(b) With respect to UWI, the authorized capital stock of
UWI consists of 200,000 shares of voting common stock, $.10 par value, of
which 200,000 shares are issued and outstanding. UWI does not have a class
of preferred stock authorized.
(c) except as set forth above, no Equity Securities of the
Subject Company are issued, reserved for issuance or currently outstanding.
(d) All outstanding shares of capital stock of the Subject
Company are, and all shares that may be issued pursuant to the exercise of
the Outstanding Options, will be, when issued, duly authorized, validly
issued, fully paid and nonassessable and, except as provided in the
Transaction Documents, are not subject to preemptive rights.
8
(e) Except with respect to the Outstanding Options and the
Transaction Documents, there are no outstanding bonds, debentures, notes or
other indebtedness or other securities of the Subject Company having the
right to vote (or convertible into, or exchangeable for, securities having
the right to vote) on any matters on which shareholders of the Subject
Company may vote.
(f) Except with respect to the Outstanding Options and the
Transaction Documents, there is no agreement or arrangement restricting the
voting or transfer of the Equity Securities of the Subject Company.
(g) Except with respect to the Outstanding Options and the
Transaction Documents, there are no outstanding securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which any of the Subject Company and its
Subsidiaries, if any, is a party or by which any of them is bound
obligating the Subject Company or such Subsidiary, if any, to issue,
deliver or sell, or cause to be issued, delivered or sold, additional
shares of capital stock or other Equity Securities of the Subject Company
or such Subsidiary, if any, or obligating the Subject Company or such
Subsidiary, if any, to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking.
(h) Except as previously disclosed to the other party in
writing, which writing makes reference to this Share Exchange Agreement,
there are no outstanding contractual obligations, commitments,
understandings or arrangements of any of the Subject Company and its
Subsidiaries, if any, to repurchase, redeem or otherwise acquire, reacquire
or make any payment in respect of any shares of Equity Securities of the
Subject Company or such Subsidiary, if any.
(i) Except with respect to statutory restrictions of
general application, there are no legal, contractual or other restrictions
on the payment of dividends or other distributions or amounts on or in
respect of any of the Equity Securities of the Subject Company.
(j) Except as contemplated by this Share Exchange Agreement
, there are no agreements or arrangements to which any of the Subject
Company and its Subsidiaries, if any, is a party pursuant to which the
Subject Company is or could be required to register shares of common stock
or other securities under the Securities Act.
(k) Equity Securities of the Subject Company that were
issued and reacquired by the Subject Company were so reacquired (and, if
reissued, so reissued) in compliance with all applicable Regulations, and
the Subject Company has no liability with respect to the reacquisition or
reissuance of the Equity Securities.
Section 4.13 MATERIAL CONTRACTS. The representing party has
previously disclosed to the other party in writing, which writing makes
reference to this Agreement, a
9
correct and complete description and list of the following (collectively,
the "Material Contracts") with respect to any of the Subject Company and
its Subsidiaries, if any:
(a) agreements with investment bankers, brokers, finders,
consultants and advisers engaged by or on behalf of the Subject Company or
such Subsidiary with respect to the Transaction;
(b) agreements with any shareholder having beneficial
ownership of 5.0% or more of the shares of common stock of the Subject
Company then issued and outstanding, director or officer of the Subject
Company or such Subsidiary and all shareholders' agreements and voting
trusts; and
(c) agreements not made in the ordinary course of business
and which are materially adverse to the business of the Subject Company or
such Subsidiary.
Section 4.14 INVESTMENT INTENT.
(a) The representing parties acknowledge that the Company
is issuing the Company Shares and that UWI is selling the UWI Shares, in
each case pursuant to the terms of the Transaction Documents, in reliance
upon the exemption afforded by Section 4(2) of the Securities Act for
transactions by an issuer not involving any public offering and/or
Regulation D adopted thereunder.
(b) The representing party (1) represents that it is
acquiring securities pursuant to Section 1.1 for investment and without any
view toward distribution of any of the securities to any other person and
(2) agrees that it will not sell or otherwise dispose of the securities
except in compliance with the registration requirements or exemption
provisions under the Securities Act.
Section 4.15 FEES FOR BROKERS AND FINDERS. The representing
party and its Subsidiaries, if any, and other Affiliates have not
authorized any person to act as financial advisor, broker, finder or other
intermediary that might be entitled to any fee, commission, expense
reimbursement or other payment of any kind from any of the representing
party, such Subsidiaries, if any, and such other Affiliates upon the
conclusion of or in connection with the Transaction.
Section 4.16 MISSTATEMENTS. Except to the extent revised or
superseded by a subsequent certificate, schedule or report furnished to the
other party, no information, certificate, schedule or report furnished by
or on behalf of the representing party to the other party with respect to
any of the Subject Company and its Subsidiaries, if any, in connection with
the negotiation of any Transaction Document or the satisfaction of any
condition under any Transaction Document contained as of the date thereof
any untrue statement of a material fact
10
or omitted to state a material fact necessary to make the statement
contained therein, in the light of the circumstances under which it was
made, not misleading.
Section 4.17 COMPANY REPRESENTATIONS. With respect to the
Company:
(a) RECOMMENDATIONS. The Board of Directors of the
Company, at a meeting duly called and held, has duly (1) determined that
the Transaction Documents and the Transaction, taken as a whole, are in the
best interests of the Company and its shareholders and (2) approved the
Transaction Documents and the Transaction.
(b) SHAREHOLDER APPROVAL. None of the Closing
Transactions is required to be approved by the holders of shares of any
class of Equity Securities of the Company.
(c) NO RESTRICTION ON THE SHAREHOLDERS. No provision of
the articles of incorporation or bylaws of the Company or any other
agreement, indenture or other instrument to which Company or its properties
are subject (1) directly or indirectly restricts or impairs the right or
ability of any Shareholder to vote, or otherwise to exercise the rights and
receive the benefits of a shareholder with respect to, Equity Securities of
the Company that may be acquired or controlled by UWI, including, without
limitation, restrictions based upon the size of the security holdings of
any Shareholder, the business in which it is engaged or other
considerations applicable to it and not to security holders generally, or
(2) permits any other securityholder of the Company to acquire securities
of the Company on a basis not available to any Shareholder if such
Shareholder were to acquire Equity Securities of the Company.
(d) SEC DOCUMENTS. The Company has filed with the
Securities and Exchange Commission all reports, schedules, forms,
statements and other documents required by the Exchange Act to be filed by
the Company (collectively, and in each case including all exhibits and
schedules thereto and documents incorporated by reference therein, the "SEC
Documents"). The Company has delivered to UWI all SEC Documents. As of
their respective dates, except to the extent revised or superseded by a
subsequent filing with the Securities and Exchange Commission, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Exchange Act, as the case may be, and none of the SEC
Documents (including any and all financial statements included therein) as
of such dates contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading. The consolidated financial
statements of the Company and the Subsidiaries, if any, included in all SEC
Documents, including any amendments thereto (the "SEC Financial
Statements"), comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the
Securities and Exchange Commission with respect thereto.
11
(e) POOLING OF INTERESTS; REORGANIZATION. To the knowledge
of the Company, the Company has not (i) taken any action or failed to take
any action which action or failure to take action would jeopardize the
treatment of the Transaction as a pooling of interests for accounting
purposes or (ii) taken any action or failed to take any action which action
or failure to take action would jeopardize the qualification of the
Transaction as a reorganization within the meaning of the Code. Without
limiting the foregoing: (i) all of the UWI's assets will continue to be
held by the Company immediately after the Closing for a period of at least
two (2) years , (ii) the Company has no plan or intention to sell or
otherwise dispose of any UWI Stock, or to sell or otherwise dispose of
(except in the ordinary course of business or to eliminate duplicate
facilities or excess capacity) any of its assets, (iii) following the
Closing, the Company will continue at least one significant business line
of UWI, or use at least a significant portion of UWI's historic business
assets in a business, in each case within the meaning of Treas. Reg. S.
1.368-1(d), (iv) neither the Company nor any of its Subsidiaries, if any,
own, nor have any of them owned during the past five (5) years, any capital
stock of UWI, and (v) the Company will issue a press release or other form
of public announcement which sets forth the one (1) month financial results
of the combined operations no later than forty five (45) days from the end
of the first full month following the Closing Date.
Section 4.18 UWI REPRESENTATIONS. With respect to UWI:
(a) TAX AUDITS. UWI became a corporation on August 21,
1992. In the event UWI is audited by the IRS prior to the expiration of
the applicable statute of limitations with respect to its business
activities or this Transaction, UWI will so notify the Company. In
addition, UWI agrees to allow Company's accountants to review its 1994 and
1995 federal and state corporation return.
(b) POOLING OF INTERESTS; REORGANIZATION. To the knowledge
of UWI, it has not (i) taken any action or failed to take any action which
action or failure to take action would jeopardize the treatment of the
Transaction as a pooling of interests for accounting purposes or (ii) taken
any action or failed to take any action which action or failure to take
action would jeopardize the qualification of the Transaction as a
reorganization within the meaning of the Code. Without limiting the
foregoing: (i) to the knowledge of the shareholders and executive officers
of UWI, there is no plan or intention on the part of the holders of UWI
Stock to sell, exchange or otherwise dispose of a number of the Company
Shares except as is provided for in this Share Exchange Agreement that
would cause paragraph 2 of Section 7.03 of Rev. Proc. 77-37 (as amplified)
not to be true as applied to the Transaction, (ii) as of the Closing Date
and immediately following the Closing Date, the Company will hold
"substantially all" of UWI's assets within the meaning of the Code and Rev.
Proc. 77-37 (as amplified), (iii) there is no intercorporate indebtedness
between the Company and UWI, and (iv) UWI has no plan or intention to issue
additional shares of its common stock following the Closing.
12
ARTICLE V
TERMINATION
Section 5.1 TERMINATION.
(a) The obligations of the parties under Section 1.1(a) and
Article IV with respect to the Closing may be terminated at any time prior
to the Closing Date, in each case, as the case may be, by:
(1) the mutual consent of the Company and the Shareholders;
(2) the Company, if the conditions to be satisfied by UWI set forth
in Sections 3.1 and 3.2 shall not have been met on the Closing Date;
(3) the Company, if a material representation, warranty or covenant
of UWI set forth in a Transaction Document is breached or violated by UWI
in any material respect;
(4) UWI, if the conditions to be satisfied by the Company set forth
in Sections 3.1 and 3.2 shall not have been met on the Closing Date;
(5) UWI, if a representation, warranty or covenant of the Company set
forth in a Transaction Document is breached or violated by the Company in
any material respect;
(6) Either the Company or UWI if the shareholders of UWI do not
approve the Transaction by November 15, 1996.
(b) Any termination of the obligations of the parties shall
be made by written agreement or by written notice from the terminating
party to the other parties;
(c) The termination of the obligations of the parties under
this Section 5.1 shall not relieve any party of any liability for a breach
of any warranty, covenant or agreement, or for any misrepresentation, under
this Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any breach or
misrepresentation; or
Section 5.2 EXPENSES AND FEES.
(a) EXPENSES AND FEES. Whether or not the Transaction is
concluded, all costs and expenses incurred in connection with the
Transaction Documents and the Transaction shall be paid by the party
incurring such expenses; provided that in the event the Transaction is
terminated by UWI or the Shareholders pursuant to Section 5.1(a)(4) or (5)
then the Company shall reimburse UWI for the legal and accounting fees and
accountable expenses incurred by UWI
13
with respect to the anticipated Transaction. Further, in the event the
Transaction is terminated by the Company pursuant to Section 5.1(a)(2) or
(3) then UWI shall reimburse the Company for the legal and accounting fees
and accountable expenses incurred by the Company with respect to the
anticipated Transaction.
ARTICLE VI
MISCELLANEOUS
Section 6.1 NOTICES. All notices, requests and other
communications to any party or under any Transaction Document shall be in
writing. Communications may be made by telecopy or similar writing. Each
communication shall be given to the party at its address stated on the
signature pages of this Share Exchange Agreement or at any other address as
the party may specify for this purpose by notice to the other party. Each
communication shall be effective (1) if given by telecopy, when the
telecopy is transmitted to the proper address and the receipt of the
transmission is confirmed, (2) if given by mail, 72 hours after the
communication is deposited in the mails properly addressed with first class
postage prepaid or (3) if given by any other means, when delivered to the
proper address and a written acknowledgment of delivery is received by the
sender.
Section 6.2 NO WAIVERS; REMEDIES; SPECIFIC PERFORMANCE.
(a) No failure or delay by any party in exercising any
right, power or privilege under any Transaction Document shall operate as
a waiver of the right, power or privilege. A single or partial exercise of
any right, power or privilege shall not preclude any other or further
exercise of the right, power or privilege or the exercise of any other
right, power or privilege. The rights and remedies provided in the
Transaction Documents shall be cumulative and not exclusive of any rights
or remedies provided by law.
(b) In view of the uniqueness of the Transaction and the
business, properties, operations, prospects and condition (financial and
otherwise) of the Company, UWI and their respective Subsidiaries, if any,
neither party would have an adequate remedy at law for money damages in the
event that any of the Transaction Documents is not performed in accordance
with its terms, and therefore each party agrees that the other party shall
be entitled to specific enforcement of the terms of each Transaction
Document in addition to any other remedy to which it may be entitled, at
law or in equity.
Section 6.3 AMENDMENTS, ETC. No amendment, modification,
termination, or waiver of any provision of any Transaction Document, and no
consent to any departure by a party to a Transaction Document from any
provision of the Transaction Document, shall be effective unless it shall
be in writing and signed and delivered by the other parties to the
14
Transaction Document, and then it shall be effective only in the specific
instance and for the specific purpose for which it is given.
Section 6.4 ACCOUNTING TERMS AND DETERMINATIONS. Unless
otherwise specified, all accounting terms shall be interpreted, all
accounting determinations shall be made, all records and books of account
shall be kept and all financial statements required to be prepared or
delivered shall be prepared in accordance with GAAP applied on a basis
consistent (except for changes approved by the Company's independent public
accountants) with the latest audited financial statements referred to in
Section 4.5.
Section 6.5 GOVERNING LAW. Each Transaction Document shall be
governed by and construed in accordance with the internal laws of the State
of Delaware and the State of Kansas. All rights and obligations of the
Company and UWI shall be in addition to and not in limitation of those
provided by applicable law.
Section 6.6 COUNTERPARTS; EFFECTIVENESS. Each Transaction
Document may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if all signatures were on the same
instrument.
Section 6.7 SEVERABILITY OF PROVISIONS. Any provision of any
Transaction Document that is prohibited or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of the prohibition or unenforceability without invalidating the remaining
provisions of the Transaction Document or affecting the validity or
enforceability of the provision in any other jurisdiction.
Section 6.8 HEADINGS AND REFERENCES. Article and section
headings in any Transaction Document are included in the Transaction
Document for the convenience of reference only and do not constitute a part
of the Transaction Document for any other purpose. References to parties
and articles and sections in any Transaction Document are references to the
parties to or the articles and sections of the Transaction Document, as the
case may be, unless the context shall require otherwise.
Section 6.9 SURVIVAL. Except as otherwise specifically provided
in any Transaction Document, and notwithstanding any investigation or
notice to the contrary or any waiver by any other party of a related
condition precedent to the performance by the other party of an obligation
under the Transaction Document, (1) each representation and warranty of
each party to the Transaction Document contained in or made pursuant to the
Transaction Document shall survive the Closing and remain in full force and
effect until the date that is the first anniversary of the Closing Date and
(2) the other party may assert or commence an Action against the party with
respect to the breach of any such representation or warranty of the party
on or before such date and may maintain any such Action thereafter. Each
covenant or agreement of a party to a Transaction Document required to be
performed on or after a Closing shall remain in full force and effect
thereafter in accordance with its terms.
15
Section 6.10 NON-EXCLUSIVE JURISDICTION. Each party (1) agrees
that any Action with respect to any Transaction Document may be brought in
the courts of the States of Louisiana, Kansas or applicable District Court
of the United States of America, (2) accepts for itself and in respect of
its property, generally and unconditionally, the jurisdiction of those
courts and (3) irrevocably waives any objection, including, without
limitation, any objection to the laying of venue or based on the grounds of
FORUM NON CONVENIENS, which it may now or hereafter have to the bringing of
any Action in those jurisdictions; PROVIDED, HOWEVER, that any party may
assert in an Action in any other jurisdiction or venue each mandatory
defense, third-party claim or similar claim that, if not so asserted in
such Action, may thereafter not be asserted by such party in an original
Action in the courts referred to in clause (1) above.
Section 6.11 WAIVER OF JURY TRIAL. Each party waives any right
to a trial by jury in any Action to enforce or defend any right under any
Transaction Document or any amendment, instrument, document or agreement
delivered, or which in the future may be delivered, in connection with any
Transaction Document and agrees that any Action shall be tried before a
court and not before a jury.
Section 6.12 AFFILIATE. Nothing contained in the Transaction
Documents shall constitute UWI an "affiliate" of any of the Company and its
Subsidiaries, if any, within the meaning of Rule 13e-3 under the Exchange
Act.
Section 6.13 NON-RECOURSE. No recourse under any of the
Transaction Documents shall be had against any "controlling person" (within
the meaning of Section 20 of the Exchange Act) of any party or the
shareholders, directors, officers, employees, agents and Affiliates of the
party or such controlling persons, whether by the enforcement of any
assessment or by any legal or equitable proceeding, or by virtue of any
Regulation, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be
incurred by such controlling person, shareholder, director, officer,
employee, agent or Affiliate, as such, for any obligations of the party
under this Share Exchange Agreement or any other Transaction Document or
for any claim based on, in respect of or by reason of such obligations or
their creation.
Section 6.14 ENTIRE AGREEMENT. Except as otherwise
specifically provided in this Section, the Transaction Documents embody the
entire agreement and understanding of the respective parties and supersede
all prior agreements or understandings with respect to the subject matters
of those documents. All references to this Share Exchange Agreement herein
and in all opinions, certificates and other documents delivered pursuant to
or otherwise delivered in connection with this Share Exchange Agreement
shall be deemed to refer to this Agreement.
Section 6.15 ATTORNEY'S FEES. If an attorney shall be retained
to interpret or enforce the provisions of this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, including any such
fees set by the trial or appellate court upon trial or appeal. A party
shall be considered the prevailing party for the purposes of this section
in the event it
16
is awarded a monetary judgment and/or equitable relief against the other
party by a court of competent jurisdiction, or in the event that a legal
proceeding instituted against it by the other party to interpret or enforce
the provisions of this Share Exchange Agreement is dismissed voluntarily or
by court order, or judgment is entered in favor of the defendant.
IN WITNESS WHEREOF, the parties have executed and delivered this Share
Exchange Agreement as of the date first written above as provided herein.
NETWORK LONG DISTANCE, INC.
By: /s/ XXXXXXX X. XXXX
----------------------------------------
Xxxxxxx X. Xxxx, President
Address: 000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
Telecopy: (000) 000-0000
UNITED WATS, INC.
By: /s/ XXXXXXX X. XXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxx, President
Address: 0000 Xxxxxx, Xxxxx 000
Xxxxxxx, XX 00000
Telecopy: (000) 000-0000
00
XXXXXXXXXXXX XX
XXXXXX XXXX, INC.
/s/ XXXXXXX X. XXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxx
Address: 0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
/s/ XXXXX X. XXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxx
Address: 0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
/s/ XXXXXXX X. XXXXXXXX
----------------------------------------
Xxxxxxx X. Xxxxxxxx
Address: 0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
/s/ XXXXXXXX X. XXXXXX
----------------------------------------
Xxxxxxxx X. Xxxxxx
Address: 0000 Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxx 00000
/s/ XXXXX X. XXXXXXX
----------------------------------------
Xxxxx X. Xxxxxxx
18
DEFINITION ANNEX
"ACTION" against a person means an action, suit, investigation,
complaint or other proceeding pending against or affecting the person or
its property, whether civil or criminal, in law or equity or before any
arbitrator or Governmental Body.
"AFFILIATE" of a person means any other person (1) that directly
or indirectly controls, is controlled by or is under common control with,
the person or any of its Subsidiaries, if any, (2) that directly or
indirectly beneficially owns or holds 5.0% or more of any class of voting
stock of the person or any of its Subsidiaries, if any, or (3) 5.0% or more
of the voting stock of which is directly or indirectly beneficially owned
or held by the person or any of its Subsidiaries, if any. The term
"control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, by contract or
otherwise.
"APPROVAL" means an authorization, consent, approval or waiver
of, clearance by, notice to or registration or filing with, or any other
similar action by or with respect to a Governmental Body or any other
person and the expiration or termination of all prescribed waiting, review
or appeal periods with respect to any of the foregoing.
"BENEFICIAL OWNERSHIP" has the meaning assigned to that term in
Section 13(d) of the Exchange Act.
"BEST EFFORTS" means the use of all reasonable efforts,
including, without limitation, the expenditure of amounts reasonably
related to the objective sought to be achieved, with respect to matters and
actions over which the person has or could reasonably be expected to exert
any control or influence.
"BUSINESS DAY" means any day excluding Saturday, Sunday and any
day which is a legal holiday under the laws of the State of Louisiana or
Kansas or is a day on which banking institutions located in such state are
authorized or required by law or other governmental action to close.
"CAPITALIZED LEASE" means any lease that is or should be
capitalized under GAAP and appear on the balance sheet of the lessee.
"CLOSING DATE" has the meaning stated in Section 2.1 of this
Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning stated in Section 1.1 of this
Agreement.
"COMPANY" means Network Long Distance, Inc., a Delaware
corporation, and its successors.
"COMPANY SHARES" means, collectively, the shares to be issued to
the Shareholders at the Closing.
"CONSOLIDATED" means, as applied to any financial or accounting
term, the term determined on a consolidated basis for a person and its
Subsidiaries, if any, excluding intercompany items and minority interests.
"CONSOLIDATED SUBSIDIARY" of a person at any date means any
Subsidiary of the person or other entity the accounts of which would be
consolidated with those of the person in its consolidated financial
statements as of that date.
"DEBT" of a person at any date means, without duplication, the
sum of (1) all obligations of the person (A) for borrowed money, (B)
evidenced by bonds, debentures, notes or other similar instruments, (C) to
pay the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business, (D) as lessee
under Capitalized Leases, (E) under letters of credit issued for the ac-
count of the person and (F) arising under acceptance facilities, plus (2)
all Debt of others Guaranteed by the person, plus (3) all Debt of others
secured by a Lien on any asset of the person and whether or not such Debt
is assumed by the person.
"DOLLARS" and "$" refer to United States dollars and other lawful
currency of the United States of America from time to time in effect.
"EQUITY SECURITIES" of a person means the capital stock of the
person and all other securities convertible into or exchangeable or
exercisable for any shares of its capital stock, all rights to subscribe
for or to purchase, all options for the purchase of, and all calls,
commitments or claims of any character relating to, any shares of its
capital stock and any securities convertible into or exchangeable or
exercisable for any of the foregoing.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the related rules and regulations thereunder.
"GAAP" means generally accepted accounting principles as in
effect in the United States of America from time to time.
"GOVERNMENTAL BODY" means any agency, bureau, commission, court,
department, official, political subdivision, tribunal or other
instrumentality of any government, whether federal, state, county or local,
domestic or foreign.
"GUARANTEE" by any person means any obligation, contingent or
otherwise, of the person directly or indirectly guaranteeing any Debt of
any other person or in any manner providing for the payment of any Debt of
any other person or the investment of funds in any other person or
otherwise protecting the holder of the Debt against loss (whether by
agreement
2
to indemnify, to lease assets as lessor or lessee, to purchase assets,
goods, securities or services, or to take-or-pay or otherwise), but the
term "Guarantee" does not include endorsements for collection or deposit in
the ordinary course of business. The term "Guarantee" used as a verb has
a correlative meaning.
"KNOWLEDGE" with respect to a representation or warranty of a
party contained in any Transaction Document means, after due inquiry by the
representing party of each of the following persons, the actual knowledge
of any of the officers or other employees of the representing party having
managerial responsibility for the portion of the operations, assets or
liabilities of the representing party and its Subsidiaries, if any, with
respect to which such knowledge of the person is being represented.
"LIEN" means any mortgage, deed of trust, lien (statutory or
otherwise), pledge, hypothecation, charge, deposit arrangement, preference,
priority, security interest or encumbrance of any kind (including, but not
limited to, any conditional sale agreement or other title retention
agreement, any Capitalized Lease or financing lease having substantially
the same economic effect as the foregoing and the filing of or agreement to
give any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction to evidence any of the foregoing).
"MATERIAL ADVERSE EFFECT" means, with respect to a circumstance
or event subject to a representation, warranty, covenant or other agreement
of a person or any of its Subsidiaries, if any, in any Transaction Document
that includes a reference therein to the possible occurrence of a Material
Adverse Effect, whether considered individually or together in the
aggregate with all other circumstances or events that are the subject of
the same representation, warranty, covenant or other agreement, a material
adverse effect on the business, properties, operations, prospects,
condition (financial or otherwise) or capitalization of the person and its
Subsidiaries, if any, taken as a whole, or the ability of the person to
perform its obligations under any Transaction Document to which it is or
may become a party.
"MATERIAL CONTRACT" means an agreement referred to in Section
4.15.
"NASDAQ" means the National Association of Securities Dealers,
Inc. Automated Quotation System.
"PERSON" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a
Governmental Body.
"PROPERTY" means any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"RECOMMENDATIONS" has the meaning set forth in Section 4.19 of
this Agreement.
3
"REGULATION" means (1) any applicable law, rule, regulation,
judgment, decree, ruling, order, award, injunction, recommendation or other
official action of any Governmental Body and (2) any official change in the
interpretation or administration of any of the foregoing by the
Governmental Body or by any other Governmental Body or other person
responsible for the interpretation or administration of any of the
foregoing.
"SEC DOCUMENTS" has the meaning stated in Section 4.17(d) of this
Agreement.
"SEC FINANCIAL STATEMENTS" has the meaning set forth in Section
4.17(d) of this Agreement.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
and the related rules and regulations thereunder.
"STATE" means the State of Louisiana or Kansas, as appropriate.
"SUBSIDIARY" of a person means (i) any corporation or other
entity of which securities or other ownership interests having ordinary
voting power to elect not less than 50% of the board of directors or other
persons performing similar functions are at the time directly or indirectly
owned by the person or (ii) a partnership in which the person or a
Subsidiary of the person is, at the date of determination, a general or
limited partner of such partnership, but only if the person or its
Subsidiary is entitled to receive more than fifty percent of the assets of
such partnership upon its dissolution.
"TAXES" means all taxes, charges, fees, levies, duties, imposts,
withholdings, restrictions, fines, interest, penalties, additions to tax or
other assessments or charges, including, but not limited to, income,
excise, property, withholding, sales, use, gross receipts, value added and
franchise taxes, license recording, documentation and registration fees and
custom duties imposed by any Governmental Body.
"TAX RETURN" means a report, return or other information required
to be filed by a person with or submitted to a Governmental Body with
respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes the person.
"TRANSACTION DOCUMENTS" means, collectively, means this
Agreement, and all other instruments and documents executed and delivered
by any person in connection with the conclusion of one or more of the
transactions contemplated thereby.
"TRANSACTION" means, collectively, the transactions undertaken
pursuant to or otherwise contemplated by, the Transaction Documents,
including, without limitation, the Closing Transaction.
4
"TRANSFER" means a sale, an assignment, a lease, a license, a
grant, a transfer or other disposition of an asset or any interest of any
nature in an asset. The term "transfer" used as a verb has a correlative
meaning.
"UWI" means United Wats, Inc., a Kansas corporation, and
successors.
"UWI SHARES" has the meaning stated in Section 1.1(a)(2) of this
Agreement.
"WHOLLY-OWNED SUBSIDIARY" of a person means any Subsidiary all of
the shares of capital stock or other ownership interests of which, except
directors' qualifying shares, are at the time directly or indirectly owned
by the person.
5
