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SETTLEMENT AGREEMENT AND RELEASE
THIS SETTLEMENT AGREEMENT AND RELEASE ("Release"), entered into this
l8th day of March, 1997, is by and between MIDCOM Communications Inc. a
Washington corporation (the "Company"), on its own behalf, on behalf of
Cel-Tech International Corp., a Washington corporation ("Cel-Tech"); on behalf
of CTI Acquisition Corporation, a Washington corporation ("CTIA"); on behalf of
each of its and their past and present assigns, affiliates, including parents,
subsidiaries, predecessors and successors and their respective officers,
directors, indemnitees, employees, attorneys, partners and agents, including
without limitation, Ashok and Xxxxxx Xxx, husband and wife and the marital
community composed thereof, Xxxx and Xxxx Xxxxx, husband and wife and the
marital community composed thereof, Xxxx and Xxxxxxxx Xxxxxxx, husband and wife
and the marital community composed thereof, Xxxxx X. Xxxxxxxx and Xxxxxx Soo,
wife and husband and the marital community composed thereof; and on behalf of
each and all of his, her, its and their respective heirs, executors, legatees,
representatives, receivers, trustees, transferees, predecessors, successors, and
assigns (all of the foregoing being hereinafter collectively referred to as the
"MIDCOM Group") and Xxxxxxx Xxxx, an unmarried man, on his own behalf and on
behalf of each and all of his heirs, executors, legatees, representatives,
receivers, trustees, transferees, predecessors, successors and assigns (all of
the foregoing being herein referred to as "Xxxx") (Xxxx and the Company are
hereinafter collectively referred to as the "Signators".)
BACKGROUND
A. The Company, Cel-Tech, CTIA and Xxxx previously entered into an
Agreement and Plan of Reorganization dated August 19, 1995, providing for the
merger of CTIA into Cel-Tech with Cel-Tech as the survivor corporation (the
"Agreement") . The merger was effected on September 12, 1995 by the filing of
articles of merger and plan of merger with the Secretary of State of Washington
(the "Merger") . The Agreement was amended upon the execution by the Company,
Cel-Tech, CTIA, and Xxxx of the amendment and modification of agreement and plan
of reorganization dated September 12, 1995 (the "Amendment") (The Agreement, as
amended, together with various schedules referenced therein, is hereinafter
referred to as the "Amended Agreement".)
B. Immediately prior to the consummation Merger, Xxxx was the sole
shareholder of Cel-Tech. Pursuant to the Amended Agreement, one hundred percent
(100%) of Cel-Tech's common stock was converted into and exchanged for shares of
nonregistered common stock of the Company Xxxx received 127,742
SETTLEMENT AGREEMENT AND RELEASE - 1
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shares of non-registered common stock of the Company (the "Merger Shares")
through a certificate dated August 24, 1995. An additional 14,193 shares of
non-registered common stock of the Company (the "Holdback Shares") were subject
to a certain Holdback Agreement between Xxxx and the Company (the "Holdback
Agreement") and were to be issued by the Company to Xxxx upon the occurrence of
certain events.
C. The Merger Shares and Holdback Shares were issued or were to be
issued without registration under the Securities Act of 1933, as amended (the
"Securities Act"), in reliance on certain exemptions from registration that
were based, in part, on the representations of Xxxx made in a Representation
Letter dated September 1, 1995 (the "Representation Letter"). The Company and
Xxxx also entered into a Registration Rights Agreement dated September 12, 1995
(the "Registration Rights Agreement"), which required the Company to register
the Merger Shares and the Holdback Shares (if any so issued to Xxxx) under the
Securities Act on certain terms and conditions set forth therein.
D. The Company and Xxxx entered into an agreement for consulting
services of Xxxx dated September 12, 1995 (the "Consulting Services Agreement"),
providing for payment of a consulting fee to Xxxx of $5,000 per month, plus
ordinary and necessary business expenses, for a period of sixty (60) months in
exchange for Xxxx providing part-time services to the Company and Cel-Tech.
E. John executed a non-competition agreement dated September 12,
1995 (the "Non-Competition Agreement") in favor of the Company for a period of
five (5) years upon the advance payment by the Company of the consideration for
such 60-month period. In the Non-Competition Agreement, Xxxx agreed, inter alia,
to be bound by certain restrictive covenants, including but not limited to, the
non-disclosure of confidential information for such period.
F. The Company, Cel-Tech, CTIA, Xxxx and/or their respective
counsel or agents also executed the following additional documents in connection
with the Merger and pursuant to the Amended Agreement: plan of merger; articles
of merger; MIDCOM opinion letter of counsel; Cel-Tech opinion letter of counsel;
unanimous written consent of MIDCOM; CTIA consent of board of directors; consent
of sole director and shareholder of Cel-Tech; certificate of president of
MIDCOM; certificate of president of CTIA; certificate of President of Cel-Tech.
(All of the contracts and other documents referred to hereinabove in paragraphs
A through F are sometimes collectively referred to hereinafter as the "Closing
Documents".)
G. On September 20, 1996, the Company authorized the release of
12,236 of the Holdback Shares (the "Issued Holdback
SETTLEMENT AGREEMENT AND RELEASE - 2
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Shares") to Xxxx, and the Company claimed offsets pursuant to the Holdback
Agreement and the Amended Agreement for the balance consisting of 1,957 Holdback
Shares.
H. John filed a complaint for damages and rescission of the Merger
against the MIDCOM Group on or about April 30, 1996, a first amended complaint
on or about July 2, 1996, a second amended complaint on July 23, 1996, and a
third amended complaint for damages on or about August 30, 1996, in King County
Superior Court under Cause No. 96-2-11985-7SEA captioned, Xxxxxxx X. Xxxx x.
Midcom Communications, Inc. et al., et ux., (the "Litigation") . The Company
filed a counterclaim in the Litigation against Xxxx for rescission and damages.
I. The MIDCOM Group disputes any and all liability to Xxxx.
J. Contemporaneous with the execution of this Release, Xxxx and the
Company shall enter into amendments to a Revised Registration Rights Agreement
and a revised Representation Letter. In addition, Xxxx shall submit a Selling
Security Holder Information Questionnaire to the Company. At the same time, the
Holdback Agreement and the Consulting Agreement shall be canceled, and Xxxx
shall acknowledge the continuation of his obligations under the Non-Competition
Agreement for its remaining term.
K. Except as provided for herein, each member of each party
identified herein now wishes to release any and all claims it may have against
each member of the other party arising out of or in connection with the Merger
and the Closing Documents.
AGREEMENT
In consideration of the mutual undertakings set forth herein, the
parties hereto do hereby agree to the following:
1. OBLIGATIONS OF THE COMPANY AND XXXX
1.1 Obligations of the Company
1.1.1 PAYMENT OF CONSULTING FEE. Subject to the terms
and conditions contained in this Release, the Company shall pay Xxxx an
aggregate amount equal to the present value with interest accrued at an annual
rate of 10.596 for unpaid payments of $5,000 per month due from July 1, 1996
through the date of this Release, and discounted at 10.5%; for unpaid but not
yet due monthly consulting fee payments through September 1, 2000 (the
"Consulting Agreement Payment The Company shall pay Xxxx fifty percent: (50%) of
the Consulting Agreement Payment within three (3) business days of the execution
of this Release and shall pay the balance in accordance with the terms and
SETTLEMENT AGREEMENT AND RELEASE - 3
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conditions of the Company's Promissory Note essentially in the form attached
hereto as Exhibit 1.
1.1.2 CONSULTING AGREEMENT. The Company agrees that
John's obligations under the Consulting Agreement shall terminate on the
effective date of this Release and the Consulting Agreement is hereby
terminated.
1.1.3 ISSUANCE OF SHARES.
(a) Within three (3) business days of the execution
of this Release, the Company shall issue 7,500 shares of its non-registered
common stock to Xxxx (the "Release Shares").
(b) The term "Trigger Date" shall mean the later
of July 31, 1997, or such other time as the Company's second quarter financial
results are announced for 1997. The Company shall issue to Xxxx additional
shares of non-registered common stock of the Company (the "True Up Shares")
equal to the lesser of (1) 60,000 shares, or (2) the difference between $15.00
and the weighted (by number of shares traded) average closing price per share of
the Company's common stock for five (5) consecutive trading days following the
Trigger Date (the "Average Closing Price"), multiplied times 139,978 and
divided by the Average Closing Price. By way of example only, assume $11/share
represents the Average Closing Price, then:
True Up Shares = ($15.00-$11) x 139,978 = 50,901 shares
----------------------
$11
If the Average Closing Price is equal to or in excess of $15 per share, no True
Up Shares shall be issued to Xxxx. The Company shall issue to Xxxx the True Up
Shares within fifteen (15) days of the Trigger Date.
(c) At such time as Xxxx delivers to the Company the
personal property as defined below, the Company shall issue and deliver to
Xxxx within three (3) days of such tender an additional 1,957 of its
nonregistered common stock which for purposes of this Agreement, the Revised
Registration Rights Agreement and the Representation Letter shall be deemed to
be additional "Release Shares" as defined in subsection 1. 1. 3 (a) , above. The
personal property shall mean the agreement defined in Schedule 1. 1. 3 (c)
attached hereto, together with pre-loaded software, if any, all of which shall
be in normal operating condition, normal wear and tear excepted. Xxxx shall
execute all documents reasonably requested by the Company to transfer or assign
all of his right, title and interest in the personal property to the Company,
including without limitation, assignment of all applicable software licenses.
SETTLEMENT AGREEMENT AND RELEASE - 4
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1.1.4 REVISED REGISTRATION RIGHTS AGREEMENT. The
Company shall issue a Revised Registration Rights Agreement, in
essentially the form attached hereto as Exhibit 2, providing for
inclusion of the True Up Shares, the Issued Holdback Shares, and the
Release Shares in the Company's form S-3 registration statement until
December 31, 1997, and additional demand rights, subject to subsequent
exclusion when shares can be sold under Rule 144 and the Company's right
to suspend sales as set forth more fully in the Revised Registration
Rights Agreement. The original Registration Rights Agreement and
Holdback Agreement shall be null and void as of the effective date
specified in Section 3.1 of this Release.
1.2 Obligations of Xxxx
1.2.1 Non-Compete Agreement. John's obligations under
the Non-Competition Agreement shall continue until its termination date.
1.2.2 Executed Revised Registration Rights Agreement.
Xxxx shall execute a Revised Registration Rights Agreement essentially
in the form attached hereto as Exhibit 2.
1.2.3 Representation Letter. Xxxx shall execute a
revised Representation Letter essentially in the form attached hereto as
Exhibit 3.
1.2.4 Selling Security Holder Information
Questionnaire. Xxxx shall complete and submit to the Company a Selling
Security Holder Information Questionnaire essentially in the form
attached hereto as Exhibit 4.
1.2.5 Certification for Issued Holdback Shares. Xxxx
shall complete and submit to the Company or its stock transfer agent a
notarized affidavit certifying that he has not received a certificate
for the Issued Holdback Shares. The Company or its stock transfer agent
shall issue a substitute certificate to Xxxx for the 12,236 Issued
Holdback Shares within ten (10) days of receipt of said affidavit.
2. Mutual Releases
Except as set forth in this Agreement, the Company hereby fully,
finally and forever releases, acquits and discharges Xxxx, and Xxxx hereby
fully, finally and forever releases, acquits and discharges each member of the
MIDCOM Group from any and all claims, debts, actions, claims or causes of
action, demands, rights, liabilities of any kind or nature at law or equity for
any relief based on statute, code, regulatory or common or case law, whether
known or unknown, asserted or not, arising out of or in any manner related to
(i) the subjects of the complaint in and the settlement of this Litigation, (ii)
SETTLEMENT AGREEMENT AND RELEASE - 5
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all claims that are in any way related to the Closing Documents, or (iii) any
other transaction, agreement or relationship between the parties predating this
Release. The Signators shall promptly upon request execute and or direct their
attorneys to execute any and all instruments reasonably requested for purposes
of dismissing the Litigation with prejudice.
3. CONDITIONS TO RELEASE
3.1 Effective Date
The release of claims by the Company pursuant to Section 2 shall
be effective upon the later of (i) the date of execution of this Release by the
Company, (ii) the first payment and the issuance of the Company's Promissory
Note to Xxxx pursuant to subsection 1.1.1, and (iii) the issuance of the Release
Shares to Xxxx. The release of claims by Xxxx pursuant to Section 2 shall he
effective upon John's execution of this Release and agreements identified in
subsections 1.2.2, 1.2.3, and 1.2.4.
3.2 Exception to Release
Notwithstanding any other term or provision of this Release to
the contrary, Xxxx does not release the Company and the Company does not release
Xxxx from any obligation required to be performed after the date of this Release
or under any executory contract identified herein.
4. UNKNOWN CLAIMS.
Each Signator hereto acknowledges that there is a risk that
subsequent to the execution of this Release it will discover, incur or suffer
claims that were unknown or unanticipated at the time this Release was executed,
and that arose from, or are based upon, or are related to the claims released by
it pursuant to Section 2 hereof, which claims, if known upon execution of this
Release, might have materially affected its, his, or their decision to execute
this Release. Each Signator hereby expressly assumes the risk of such unknown
and unanticipated claims and agrees that this Release applies to all such
claims. The parties expressly waive the rights, benefits and protection afforded
by any state's statutory, common or case law which may exempt from a general
release claims that a creditor does not know or suspect to exist in his favor at
the time of executing the release, which if known by him must have materially
affected his settlement with the debtor.
5. ASSIGNMENTS.
Each Signator represents and warrants to the other that it has
not assigned or otherwise transferred or subrogated
SETTLEMENT AGREEMENT AND RELEASE - 6
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any interest in any claims that are related in any way to the subject matter of
this Release. Each Signator agrees to indemnify, defend and hold the other fully
and completely harmless from any liability, loss, claim, demand, damage, cost,
expense and or attorneys' fees it incurs as a result of any person or entity
asserting such assignment, transfer or subrogation from such Signator.
6. REPRESENTATIONS.
Each Signator acknowledges that no other party or person, nor
any agent or attorney of any party or person, has made any promise,
representation or warranty whatsoever, express or implied, not contained herein
concerning the subject matter hereof, to induce any Signator to execute this
instrument, and each Signator acknowledges that it has not executed this
Release in reliance on any such promise, representation or warranty not
contained herein.
7. NO ADMISSION OF LIABILITY.
Each Signator agrees that this Release is a result of
compromise and shall not be construed as an admission by it of (i) liability to
any person and or entity, or (ii) breach of any agreement, or (iii) violation of
any law or regulation.
8. VOLUNTARY EXECUTION.
In executing this Release, each Signator fully, completely and
unconditionally acknowledges and agrees that (i) it has consulted with, and had
the advice of, counsel of duly licensed and competent attorneys and that it has
executed this Release after independent investigation, voluntarily and without
fraud, duress or undue influence, and (ii) expressly consents that this Release
be given full force and effect according to each and every of its express terms
and provisions.
9. AUTHORITY TO EXECUTE.
Each Signator executing this Release on behalf of another
person or organization represents and warrants to the other Signator that it is
fully authorized to execute and deliver this Release on behalf of such person or
organization. Each Signator warrants to all other Signators that no consent of
any person not a party to this Release is necessary in order for this Release to
be fully and completely binding upon each member of the parties hereto.
10. NOTICE.
Any demand, request or notice that any Signator hereto desires
or may be required to make or deliver to the other shall be in writing and shall
be deemed delivered when personally
SETTLEMENT AGREEMENT AND RELEASE - 7
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delivered, or when delivered by private courier service (such as Federal
Express), or three days after being deposited in the United States Mail, in
registered or certified form, postage prepaid, return receipt requested and
addressed as follows:
To the MIDCOM GROUP:
General Counsel
MIDCOM Communications Inc.
MIDCOM Tower
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
To XXXX:
Xxxxxxx X. Xxxx
00000 Xxxxxxx Xxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000
or to such other single address or person as a Signator may communicate to the
other by like written notice. Each Signator hereby fully, completely and
unconditionally agrees that (i) any notice to any or all of the parties
constituting its group shall be sufficient for any and all purposes hereof if
delivered as aforesaid to the single person and address set forth above or
hereafter designated pursuant to the foregoing provisions of this Section; and
(ii) any party sending notice to any of the group of which it is a part shall
have no obligation whatsoever to send duplicate or concurrent copies of any
notice to the other parties constituting the group.
11. CONFIDENTIALITY; NO RECORDING.
Each Signator hereby agrees that it could be materially injured
if this Release is either recorded or publicly disclosed, and that, accordingly,
this Release is intended to be confidential between all the parties and each
Signator shall use its best efforts to keep the provisions of this Release, and
all exhibits and attachments, confidential. No Signator shall disclose the terms
of this Release to any person, firm, entity or corporation not a party hereto
without the other Signator's prior written consent except (i) within any
Signator's organization for internal purposes, (ii) to Signators' legal counsel
or accountants, (iii) as required in any Signator's credit relationships, or
(iv) in any Judicial or administrative proceedings, where such disclosure is
compelled. Each Signator also agrees not to record this Release or any document
or instrument referring to or arising out of this Release without the prior
written consent of the other Signator, which consent may be withheld in its sole
and absolute discretion of any Signator.
SETTLEMENT AGREEMENT AND RELEASE - 8
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12. MISCELLANEOUS.
12.1 Entire Agreement. This Release (including all exhibits
hereto, the Company's Promissory Note referenced at Subsection 1.1.1, the
agreements referenced at Subsections 1.1.5, 1.2.2, 1.2.3, and the questionnaire
referenced at Subsection 1.2.4, which are all material parts of this Release)
contains the entire understanding between the Signators and supersedes any prior
understandings and agreements between them respecting the subject matter hereof.
There are no other representations, agreements, arrangements or understandings,
oral or written, between and among the parties hereto, or any of them, relating
to the subject matter of this Release. No amendment of or supplement to this
Release shall be valid or effective unless made in writing and executed by the
parties hereto subsequent to the date of this Release.
12.2 Construction. Any titles or captions of paragraphs
contained in this Release are for convenience and reference only and the words
contained in them shall not be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Release. All pronouns and any
variations thereof shall be deemed to refer to the masculine, feminine, neuter,
singular or plural as the identification of the person or persons, firm or
firms, corporation or corporations may require. The locative adverbs "herein,"
"hereunder," "hereto," "hereby," "hereinafter" and the like, wherever the same
appear herein, mean and refer to this Release in its entirety and not to any
specific article, section, subsection, paragraph or subparagraph hereof. The
general rule of construction that an agreement will be construed against the
party who drafted it will not apply to any disputes over the provisions of this
Release. Any reference herein to "days" means consecutive calendar days.
12.3 Attorneys' Fees. In the event of litigation, arbitration or
mediation between any or all members of either party hereto, declaratory or
otherwise, in connection with or arising out of this Release, the prevailing
parties shall recover from the non-prevailing parties all actual costs, actual
damages and actual expenses, including attorneys' fees, paralegals' fees and
other professional or consultants' fees expended or incurred in connection
therewith, including for appeals, which shall be determined and fixed by the
court as part of the judgment.
12.4 Binding. Except as otherwise herein provided, this Release
shall be binding upon and inure to the benefit of each Signator hereto, their
respective heirs, executors, administrators, successors, assigns, and all
persons now or hereafter holding or having all or any part of the interest of a
party herein.
SETTLEMENT AGREEMENT AND RELEASE - 9
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12.5 Severability. The invalidity or unenforceability of any
particular nonmaterial provision in this Release shall not affect the other
material provisions hereof.
12.6 Applicable Law. This Release shall be construed and
interpreted under the laws of the State of Washington.
12.7 Venue. In the event of litigation, arbitration or
mediation, each Signator agrees that exclusive venue for such action shall be in
any court of general jurisdiction located in King County, Washington, and
further agrees that the King County Superior Court shall have jurisdiction over
each Signator.
12.8 Counterparts. This Release may be executed in any number of
counterparts each of which shall be deemed to constitute an original Release,
and all of which shall constitute one Release. The execution of one counterpart
by any Signator shall have the same force and effect as if that Signator had
signed all other counterparts.
12.9 Introduction into Evidence. This Release may not be
offered, introduced or received into evidence for any purpose except in an
action to enforce or interpret the terms hereof.
12.10 No Waiver. The failure of any member of any party hereto
to enforce at any time any provision of this Release shall not be construed to
be a waiver of such a provision, nor in any way to affect the validity of this
Release or any part hereof or the right of any party thereafter to enforce each
and every such provision. No waiver of any breach of this Release shall
constitute or be deemed a waiver of any other breach.
12.11 Ambiguity Not To Be Construed Against Any Party. For the
purpose of construing or interpreting this Release, the Release is deemed to
have been drafted equally by all parties hereto, and shall not be construed
strictly for or against any party.
12.12 Independent Advice of Counsel. Each Signator hereto has
read and understands all the terms and provisions of this Release, has been
given the opportunity to discuss it with its own counsel, and it has not been
influenced to any extent whatsoever in executing this Release by any
representations or statements not expressly recited or referred to in this
Release.
SETTLEMENT AGREEMENT AND RELEASE - 10
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IN WITNESS WHEREOF, the parties to this Release have set forth
their signatures effective the date first set forth above.
XXXX:
By: /s/ XXXXXXX XXXX
-----------------------------------
XXXXXXX XXXX
MIDCOM COMMUNICATIONS INC., a
Washington Corporation
BY: /s/ XXXXXX X. XXXXXXXXXXX
-----------------------------------
Xxxxxx X. Xxxxxxxxxxx
-----------------------------------
ITS: EXECUTIVE VICE PRESIDENT-CFO
-----------------------------------
SETTLEMENT AGREEMENT AND RELEASE - 11
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STATE OF OREGON )
)ss.
COUNTY OF )
I certify that I know or have satisfactory evidence that Xxxxxxx
X. Xxxx is the person who appeared before me, and said person acknowledged that
he signed this instrument and acknowledged it to be his free and voluntary act
for the uses and purposes mentioned in the instrument
Dated:______________________
_______________________________
(Signature of Notary Public)
_______________________________
(Printed Name of Notary Public)
My Appointment expires _____________________
STATE OF WASHINGTON )
)ss.
COUNTY OF KING )
I certify that I know or have satisfactory evidence that Xxxxxx
Xxxxxxxxxxx is the person who appeared before me, and said person acknowledged
that he signed this instrument, on oath stated that he was authorized to execute
the instrument and acknowledged it as the ________________ to be the free and
voluntary act of such party for the uses and purposes mentioned in the
instrument
Dated: March 1997
_______________________________
(Signature of Notary Public)
[SEAL]
_______________________________
(Printed Name of Notary Public)
1/19/96
My Appointment expires _____________________
SETTLEMENT AGREEMENT AND RELEASE - 12
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SCHEDULE 1.1.3(c)
Quantity Item Item Description Price Extension
------------ ----------- ------------------------------------ ------- ---------
1 NOTEBOOK NoteBook computer - Texas Inst. 3995.00 3995.00
1 MODEM PCMCIA 14400 U.S. Robotics Fax Mod. 195.00 195.00
1 VGAMON VGA Monitor 15" KFC non-Int. .28 325.00 325.00
1 KEYBOARD Liteon Keyboard 35.00 35.00
1 SPEAKERS PC Speakers SONY 3 piece system. 175.00 175.00
1 PRINTER Brother HL-645 Laser Printer w/1 1MB 550.00 550.00
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March ___ , 1997
Representation Letter
MIDCOM Communications Inc.
0000 XXXXXX Xxxxx
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Ladies & Gentlemen:
In connection with the closing of that certain Agreement and Plan of
Reorganization (the "Merger Agreement") dated as of August 19, 1995 as Amended
on September 12, 1995 -and the Settlement and Release Agreement of even date
herewith, pursuant to which I will receive up to an additional 69,457 shares of
the voting common stock of MIDCOM Communications Inc., a Washington corporation
(the "Company" or "MIDCOM"), plus 12,236 shares that the Company authorized to
be issued to me on September 20, 1996 from the Holdback Reserve ("Additional
Shares"), the undersigned represents as follows:
(a) I have received or have been given copies of the Company's Annual
Report for 1995, and its Quarterly Financials for the First, Second and Third
Quarters of 1996, and a draft of the Company's Annual Report for 1996 (which I
agree to keep confidential);
(b) I have obtained, to the extent I deem necessary, professional advice
with respect to the risks inherent in investment in the Additional Shares and
the suitability of investment in the Shares in light of my financial condition
and investment needs;
(c) I acknowledge the acquisition of the Additional Shares involves a high
degree of risk, including the possibility of a complete loss of my investment;
(d) I am acquiring the Additional Shares for my own account and not for the
account or on behalf of others, and I am doing so with the intent of retaining
the Additional Shares as an investment;
(e) By virtue of my prior experience and/or the advice available to me
(which advice is furnished by persons who are neither affiliated with nor
directly or indirectly compensated by the Company or any affiliate or agent of
the Company), I have extensive knowledge and experience in financial and
business matters and the capability to evaluate the merits and risks of my
investment in the Additional Shares;
(f) I realize that (i) the acquisition of the Additional Shares is a
long-term investment, (ii) I must bear the economic risk of investment in the
Additional Shares for an indefinite period of time because the Shares have not
been registered under the Securities Act of 1933, as amended, or any state
securities law and, therefore, cannot be sold unless they are subsequently
registered under
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federal and applicable state securities laws or an exemption from such
registration is available, (iii) the Additional Shares may not be resold or
transferred on the official stock transfer records of the Company without
furnishing to the Company an opinion of the undersigned's counsel, concurred in
by counsel for the Company, that such sale or transfer of the Additional Shares
will not violate the registration provisions of federal or state securities
laws; and (iv) certificates representing any of the Additional Shares shall have
endorsed on them a restrictive legend to the effect of this paragraph;
(g) I agree that I will not transfer the Additional Shares in violation of
the provisions of any applicable securities laws;
(h) I have sufficient liquid assets so that the illiquidity associated with
the Additional Shares will not cause undue financial difficulties or affect my
ability to provide for my current needs and possible financial contingencies;
and
(i) I am a citizen of the United States with my sole residence in the State
of Washington. I have no present intention of becoming a resident of any other
state or jurisdiction.
(j) I have read this Representation Letter, the Revised Registration Rights
Agreement, and the Settlement and Release Agreement ("Release") and have
discussed their requirements and other applicable limitations upon my ability to
sell, transfer or otherwise dispose of MIDCOM Common Shares, to the extent I
believe necessary, with my counsel or counsel for MIDCOM. I have completed and
executed the Selling Security Holder Information Questionnaire sent to me by the
Company and to the best of my knowledge believe my responses therein are true
and correct.
(k) I also understand that stop transfer instructions will be given to
MIDCOM's transfer agent with respect to MIDCOM Common Shares and that a legend
will be placed on the certificates for the MIDCOM Common Shares issued to me in
compliance with the Release, or any substitutions therefor, and that any
transfer in contradiction of this agreement will be void ab initio.
(l) I represent and warrant to MIDCOM that the representations set forth
herein are true as of the date hereof and if there is any change I will advise
the Company forthwith.
I UNDERSTAND THE SIGNIFICANCE TO THE COMPANY OF THE FOREGOING
REPRESENTATIONS AND THAT THEY WILL BE RELIED UPON BY THE COMPANY.
Dated: March 19, 1997.
/s/ XXXXXXX X. XXXX XXXXXXX X. XXXX
------------------------------- -------------------------------
Signature Name - Typed or Printed
X.X. Xxx 0000; 00000 Xxxxxxx Xxxxx, Xxxxxxx, XX 00000
-------------------------------------------------------------------
Address
000-000-0000 ###-##-####
------------------------------- -------------------------------
Telephone Number Social Security Number
[SEAL]
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EXHIBIT 1
PROMISSORY NOTE
$125,374.33 Seattle, Washington
March 18, 1997
FOR VALUE RECEIVED, undersigned promises to pay to the order of Xxxxxxx
X. Xxxx, whose address is 00000 Xxxxxxx Xxxxx, X.X. Xxx 0000, Xxxxxxx, XX 00000
the sum of One Hundred Twenty-Five Thousand, Three Hundred Seventy-Four and
33/100 United States Dollars ($125,374.33), on September 19, 1997 ("Due Date")
with interest thereafter computed at the Default Rate identified herein.
The entire balance owing on this Note shall be paid in one payment. In
the event not paid on the Due Date, all payments thereafter shall be applied
first to interest on the unpaid principal balance and the balance to principal
until all principal and interest is fully paid. If any payment is less than the
accrued interest when due, such accrued but unpaid interest shall be added to
and become part of the principal and it shall bear interest therewith.
If undersigned fails to pay on the Due Date or fails to perform any
material obligations under the Settlement Agreement dated concurrently herewith,
the whole sum shall become due and payable at once at the option of the holder
hereof upon three (3) days written notice to the undersigned. If the holder of
this Promissory Note elects to exercise this option, unpaid balance shall
thereafter bear interest at the rate of fifteen percent (15%) per annum
compounded annually, provided that in no event shall interest payable hereunder
exceed an amount equivalent to the highest rate of interest then permitted by
law.
This Promissory Note may be prepaid in whole or in part at any time and
from time to time. All payments hereunder shall be made at the address of payee
set forth above, or at such other place as the holder of this Promissory Note
may from time to time designate in writing.
As a material inducement to payee to accept this Promissory Note,
undersigned warrants the transaction out of which this Note arises is for
business purposes only and is not a transaction with respect to which Washington
law imposes interest limitations.
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In case of suit or if this Note is placed in an attorney's hands for
collection, undersigned shall pay the ordinary, necessary and reasonable costs
of collection and of suit, including ordinary, necessary and reasonable
attorneys' fees incurred by the holder of this Promissory Note.
Undersigned executes this Promissory Note as a principal and not as a
surety. Undersigned covenants, guarantees and warrants that undersigned is
authorized to execute this Promissory Note, and undersigned agrees that all
obligations hereunder are joint and several.
Undersigned hereby waives presentment, demand, protest, notice of
protest, dishonor, and nonpayment of this Promissory Note, all notices of every
kind and filing of suit and diligence in collecting this Promissory Note.
This Promissory Note has been executed for value in Seattle,
Washington, on the date first written above. The rights of the parties shall be
governed and construed in accordance with the law of the State of Washington.
Undersigned agrees that the exclusive venue for any legal action arising out of
this Note shall be the Superior Court for King County, Washington, which shall
have jurisdiction over undersigned.
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND
CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE
NOT ENFORCEABLE UNDER WASHINGTON LAW.
MIDCOM Communications Inc.,
a Washington corporation
By:
-------------------------------------
Its:
---------------------------------
2
18
EXHIBIT 2
REVISED
REGISTRATION RIGHTS AGREEMENT
THIS AGREEMENT made as of the 18th day of March, 1997 by and between
MIDCOM COMMUNICATIONS INC., a Washington corporation ("MIDCOM") and XXXXXXX X.
XXXX ("Holder").
WHEREAS, concurrent with the execution of this Agreement, MIDCOM and
Holder entered into agreements to consummate a settlement of the existing
disputes between Holder and MIDCOM ("Release"); and
WHEREAS, in connection with entering into the Release, MIDCOM has
agreed to issue up to Holder up to 9,457 Common Shares (the "Release Shares")
and up to 60,000 Common Shares (the "True-Up Shares"); and
WHEREAS, MIDCOM authorized the issuance to Xxxx of 12,236 Issued
Holdback Shares on September 20, 1996; that term is as defined in the Release;
and
WHEREAS, MIDCOM is willing to grant certain registration rights to
Holder with respect to the Issued Holdback Shares, the Release Shares and the
True-Up Shares (together called the "Additional Shares");
NOW, THEREFORE, in consideration of the Release and other valuable
consideration, receipt of which is hereby acknowledged, MIDCOM and Holder agree
as follows:
1. Definitions. The following terms shall have the following
respective meanings:
1.1 "Commission" or "SEC" means the United States Securities
and Exchange Commission.
1.2 "Common Shares" means the voting common capital stock,
$.0001 par value, of MIDCOM.
1.3 "Exchange Act" means the Securities Exchange Act of
1934, as amended, or any similar federal statute and the rules and regulations
thereunder, all as the same shall be in effect at the time.
1.4 "Form S-3" means such form under the Securities Act as
is in effect on the date hereof or any registration form under the Securities
Act subsequently adopted by the SEC that similarly permits inclusion or
incorporation of substantial information by reference to other documents filed
by MIDCOM with the SEC.
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1.5 "Holder" shall mean Xxxxxxx X. Xxxx or, in the case of
John's death, his personal representative and successors in interest.
1.6 "Opening Date" means the first date on which MIDCOM is
eligible to make use of Form S-3 or any successor form to register the
Registrable Shares for resale.
1.7 "Registrable Shares" means the Additional Shares
together with any securities issued or issuable as a dividend, stock split or
other distribution directly or indirectly with respect to Additional Shares. Any
Registrable Share shall cease to be a Registrable Share when (i) it has been
disposed of pursuant to an effective Registration Statement, (ii) such time as
all of the Registrable Shares can be sold within three months without compliance
with the registration requirements of the Securities Act pursuant to Rule 144
promulgated thereunder (or any similar provisions then in force) or (iii) it is
no longer beneficially owned by Holder.
1.8 "Registration Statement" means a registration covering
Registrable Shares.
1.9 The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a Registration
Statement in compliance with the Securities Act, and the declaration or ordering
of the effectiveness of such Registration Statement.
1.10 "Resale Shelf" means the registration statement on SEC
Form S-1, SEC file No. 333-16681, filed by MIDCOM with the SEC on November 25,
1996 to register for resale Common Shares held by a number of shareholders of
MIDCOM including any amendments thereto filed from time to time hereafter and
any registration statement on Form S-3 filed in place of such S-1 registration
statement.
1.11 "Securities Act" means the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations
thereunder, all as shall be in effect at the time.
1.12 "Shelf Registration Statement" means the Registration
Statement filed pursuant to Section 2 below.
2. Shelf Registration.
2.1 Not later than April 10, 1997, MIDCOM shall file an
amendment to the Resale Shelf or shall file a separate registration statement on
the least burdensome SEC form then available to MIDCOM to register the
Registrable Shares under the Securities Act for resale, and shall use its
reasonable best efforts to secure the effectiveness of such Registration
Statement as soon as practicable thereafter (the Registration Statement filed
pursuant to this Section referred to herein as the "Shelf Registration
Statement").
2.2 Subject to the conditions and limitations set forth in
subsection 2.3 below, MIDCOM will use its reasonable best efforts to keep the
Shelf Registration Statement effective until the earlier of (A) December 31,
1997, (B) such date as all of the Registrable Shares have been resold or (C)
such time as all of the Registrable Shares can be sold within three months
without
2
20
compliance with the registration requirements of the Securities Act pursuant to
Rule 144 promulgated thereunder.
2.3 If Holder shall propose to sell any Registrable Shares
pursuant to the Shelf Registration Statement, he shall notify MIDCOM in writing
of his intent to do so at least five (5) full business days prior to such sale
(a "Sale Notice:). A Sale Notice shall be deemed to constitute a representation
that any information previously supplied by Holder is accurate as of the date of
such notice. Following receipt of a Sale Notice, and except as set forth in the
following sentence, MIDCOM shall use its commercially reasonable efforts to
amend the Shelf Registration Statement if necessary and to take all other
actions necessary to allow such sale, and shall notify Holder promptly after it
has determined that such sale has become permissible. At any time within the
five (5) business-day period following receipt by MIDCOM of a Sale Notice,
MIDCOM may refuse to permit Holder to resell any Registrable Shares pursuant to
the Shelf Registration Statement for an initial period not to exceed sixty (60)
days; provided, however, that in order to exercise this right, MIDCOM must give
Holder written notice that a delay in such sale is necessary because either (i)
in the good faith judgment of MIDCOM, a sale pursuant to the Shelf Registration
Statement in its then-current form would not be in the best interests of MIDCOM
and its shareholders due to disclosure obligations of MIDCOM or (ii) MIDCOM in
good faith is planning an underwritten registered public offering of Common
Shares which reasonably is expected to be offered within thirty (30) days of
receipt by MIDCOM of the Sale Notice (in either case, a "Permitted Deferral").
Notwithstanding the foregoing, MIDCOM shall not be entitled to exercise its
right to suspend sales pursuant to the Shelf Registration Statement more than
three (3) times or for more than ninety (90) consecutive days. Holder hereby
covenants and agrees that he will not sell any Registrable Shares pursuant to
the Shelf Registration Statement during any Permitted Deferral period. Nothing
in this subsection shall require Holder to give a Sale Notice prior to selling
Registrable Shares pursuant to Rule 144 promulgated under the Securities Act (or
any similar provisions then in force).
3. Form S-3 Demand Rights. At any time after December 31, 1997 and
continuing until the earlier of (i) such time as Holder is entitled to dispose
of all of the Registrable Shares within three months pursuant to Rule 144 or
(ii) December 31, 1998, Holder may make written demand on one occasion for
registration under the Securities Act of Holder's Registrable Shares on Form
S-3, provided that the Registrable Shares requested to be registered in such
Form S-3 Registration Statement have an aggregate expected selling price of at
least $200,000 (a "Demand Notice"). The request pursuant to this Section 3 will
specify the number of Registrable Shares requested to be registered and the
anticipated per share price range for such offering. MIDCOM shall not be
obligated to effect any registration or compliance pursuant to this Section 3
for a period of up to ninety (90) days if MIDCOM shall within twenty (20) days
of its receipt of a Demand Notice give Holder written notice that a delay in
such sale is necessary because either (i) in the good faith judgment of MIDCOM
the filing and/or effectiveness of a registration at that time would not be in
the best interests of MIDCOM and its shareholders due to disclosure obligations
of MIDCOM or (ii) MIDCOM in good faith is planning all underwritten registered
public offering of Common Shares which reasonably is expected to be offered
within thirty (30) days of receipt by MIDCOM of the Demand Notice.
4. Conditions of Obligations to Register Shares. The obligations of
MIDCOM hereunder are subject to the following conditions:
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21
4.1 Holder shall cooperate with MIDCOM in connection with
the preparation of any Registration Statement, and for so long as MIDCOM is
obligated to file and keep effective the Registration Statement, shall provide
to MIDCOM, in writing, for use in the Registration Statement, all such
information regarding Holder as MIDCOM from time to time may reasonably request
to prepare the Registration Statement and any prospectus covering the
Registrable Shares, to maintain the currency and effectiveness thereof and
otherwise to comply with all applicable requirements of law in connection
therewith. Holder covenants that he will promptly notify MIDCOM in writing of
any changes in the information set forth in a Registration Statement regarding
Holder or his plan of distribution of Registrable Shares covered thereby.
4.2 To the extent required by the Securities Act, Holder
shall cause to be furnished to each broker through whom the Registrable Shares
may be offered, or to the offeree if an offer is not made through a broker, such
copies of the prospectus covering the Registrable Shares and any amendment or
supplement thereto and documents incorporated by reference therein as may be
required by law and he shall not bid for or purchase any securities of MIDCOM or
attempt to induce any other person to purchase any securities of MIDCOM other
than as permitted under the Exchange Act.
5. Registration Procedures. If and whenever MIDCOM is required by
the provisions of this Agreement to include any of the Registrable Shares in a
Registration Statement filed under the Securities Act, MIDCOM shall use its
reasonable commercial efforts to effect such registration, and MIDCOM shall, as
expeditiously as possible:
5.1 Prepare and file with the SEC such amendments and
supplements to any such Registration Statement and the prospectus used in
connection therewith as may be necessary to keep such Registration Statement
effective for a period of 30 days from the date of its effectiveness in the case
of a registration pursuant to Section 3 hereof or (unless otherwise required by
the Securities Act) until the Registrable Shares covered thereunder have been
sold, whichever is earlier.
5.2 Furnish to Holder such number of copies of any
prospectus contained in such Registration Statement in conformity with the
requirements of the Securities Act, and such other documents as Holder may
reasonably request in order to facilitate the disposition of the Registrable
Shares, but only while MIDCOM is required under the provisions hereof to cause a
Registration Statement to remain effective.
5.3 Use its commercially reasonable efforts to register or
qualify the Registrable Shares covered by such Registration Statement under the
securities or blue sky laws of such jurisdictions as the selling Holder or the
underwriter for such offering may reasonably request; provided that MIDCOM shall
in no event be required to qualify to do business as a foreign corporation or as
a dealer in any jurisdiction where it is not so qualified, to amend its Articles
of Incorporation or to change the composition of its assets at the time to
conform with the securities or blue sky laws of such jurisdictions, to take any
action that would subject it to service of process in suits other than those
arising out of the offer and sale of the Registrable Shares covered by the
4
22
Registration Statement or to subject itself to taxation in any jurisdiction
where it has not theretofore done so.
5.4 Notify Holder at any time when any prospectus relating
to the Registrable Shares is required to be delivered under the Securities Act
of the happening of an event as a result of which, or upon the discovery that,
the prospectus contained in such Registration Statement, as then in effect,
includes an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances under which they were made.
Holder agrees, upon receipt of such notice, forthwith to cease making offers and
sales of the Registrable Shares pursuant to such registration statement or
deliveries of the prospectus contained therein for any purpose and to return to
MIDCOM, for modification and exchange, the copies of such prospectus not
theretofore delivered by Holder, provided, that MIDCOM shall forthwith prepare
and furnish, after securing such approvals as may be necessary, to Holder a
reasonable number of copies of any supplement to or amendment of such prospectus
that may be necessary so that, as thereafter delivered to the purchasers of such
Registrable Shares, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made.
5.5 Promptly notify Holder of any stop order or similar
proceeding initiated by state or federal regulatory bodies and use its best
efforts to expeditiously remove such stop order or similar proceeding.
5.6 Provide a transfer agent and registrar for all such
Registrable Shares not later than the effective date of such Registration
Statement.
6. Description of Expenses. Except as set forth below, MIDCOM shall
pay all costs and expenses incurred in connection with registration of the
Registrable Shares pursuant to this Agreement including, without limitation, all
registration and filing fees, printing expenses, fees and costs of counsel to
MIDCOM, and blue sky fees and expenses. Notwithstanding the foregoing, Holder
shall pay all fees and disbursements of Holder's attorneys and accountants, as
well as all transfer taxes and brokerage and underwriters' discounts and
commissions attributable to the Registrable Shares offered and sold by Holder.
7. Indemnification; Underwriting Agreements.
7.1 In the event that, pursuant to this Agreement, MIDCOM
registers under the Securities Act any Registrable Shares held by Holder:
7.1.1 MIDCOM agrees to indemnify, defend and hold
harmless Holder against any and all loss, claim, liability or expense (a
"Claim") arising out of or based upon any untrue statement or alleged untrue
statement of a material fact in any related Registration Statement, any omission
or alleged omission of any material fact required to be stated therein or
necessary to make the statements therein not misleading, unless such statement,
alleged statement or omission was made in reliance upon, and in conformity with,
information provided by Holder to MIDCOM expressly for use therein.
5
23
7.1.2 Holder hereby agrees to indemnify and hold
harmless MIDCOM, each person who controls MIDCOM within the meaning of the
Securities Act and the officers, directors, shareholders, employees and agents
of MIDCOM, against any Claim arising out of or based upon any untrue statement
or alleged untrue statement of a material fact in any Registration Statement or
alleged omission of any material fact required to be stated therein or necessary
to make the statements therein not misleading, but only with reference to
statements or omissions made in reliance upon, and in conformity with,
information provided by Holder to MIDCOM expressly for use therein.
7.2 A party required to indemnify another party pursuant to
this Section 7 ("Indemnifying Party") shall not be liable for any settlement of
any action or claim relating to such liability or expense effected without its
consent, but if any settlement is effected with its consent or if a final
judgment for the plaintiff is entered in any such action, such Indemnifying
Party agrees to indemnify and hold harmless the indemnified party from and
against any loss or liability by reason of any such settlement or judgment.
7.3 The obligations of the parties hereto to indemnify one
another pursuant to this Section 7 are expressly conditioned upon the
Indemnifying Party being given written notice of any claim for which
indemnification will be sought within twenty (20) days after the indemnified
party learns thereof and that the Indemnifying Party is given full control over
the defense and settlement of the claim and provided, further, that the
Indemnified Party cooperates fully with the Indemnifying Party in the defense of
such claim.
8. Restrictions on Transferability of Registrable Shares,
Compliance with Securities Act.
8.1 The Registrable Shares are not transferable in the
absence of registration under the Securities Act or an exemption therefrom.
MIDCOM shall be entitled to give stop transfer instructions to its transfer
agent with respect to the Registrable Shares in order to enforce such
restrictions.
8.2 Each certificate representing the Registrable Shares not
previously issued to Holder shall bear substantially the following legends (in
addition to any legends required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT PURPOSES ONLY AND HAVE NOT BEEN REGISTERED UNDER
UNITED STATES FEDERAL OR STATE SECURITIES LAWS AND MAY NOT BE
OFFERED FOR SALE, SOLD, PLEDGED OR OTHERWISE TRANSFERRED OR
ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION,
WITHOUT REGISTRATION OF SUCH SECURITIES UNDER ALL APPLICABLE
FEDERAL AND STATE SECURITIES
6
24
LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY
AN OPINION OF SHAREHOLDER'S COUNSEL, IN FORM ACCEPTABLE TO THE
CORPORATION, THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS
WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.
8.3 Holder hereby covenants with MIDCOM not to make any sale
of the Registrable Shares except either (i) a sale of Registrable Shares in
accordance with a Registration Statement, in which case Holder covenants to
comply with the requirement of delivering a current prospectus, (ii) a sale of
Registrable Shares in accordance with Rule 144, in which case Holder covenants
to comply with Rule 144, or (iii) subject to such conditions as MIDCOM in its
sole discretion shall impose, in accordance with another exemption from the
registration requirements of the Securities Act. Holder further acknowledges and
agrees that the Registrable Shares are not transferable on the books of MIDCOM
unless the certificate submitted to MIDCOM's transfer agent evidencing such
Registrable Shares is accompanied by such additional certification,
documentation or information as MIDCOM shall reasonably require in order to
effect such sale in accordance with a Registration Statement, Rule 144, or such
other exemption from the registration requirements of the Securities Act.
9. Miscellaneous Provisions
9.1 Notices. All notices, demands and other communications
called for or required by this Agreement shall be in writing and shall be
addressed to the parties at their respective addresses stated below or to such
other address as a party may subsequently designate by written notice to the
other parties. Communications hereunder shall be deemed to have been received
(i) upon delivery in person, (ii) the third business day after deposit with the
United States Postal Service for delivery by certified mail, return receipt
requested and postage prepaid, (iii) the first business day after depositing it
with a commercial overnight carrier which provides written verification of
delivery or (iv) the day of transmission by telefacsimile if sent before 2:00
p.m. recipient's time provided that a copy of such notice is sent on the same
day by U.S. certified mail, return receipt requested and postage prepaid, with
an indication that the original was sent by facsimile and the date of its
transmittal.
To: MIDCOM Communications Inc.
Attention: President
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
With copy to:
Law Department
Attn: General Counsel
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25
To: Xxxxxxx X. Xxxx
c/o Xxxxxx X. Xxxxxxx
Xxxxxx, Xxxxxx, Honeywell
Malanca, Xxxxxxxx & Daheim, P.L.L.C.
0000 Xxx Xxxxx Xxxxxx
000 Xxxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
Phone: (000) 000-0000
Fax: (000) 000-0000
9.2 Amendment or Waiver. No amendment of this Agreement or
waiver of any provision contained herein shall be valid unless in writing and
duly executed by MIDCOM and Holder. No evidence of any waiver or amendment shall
be offered or received in evidence in any proceedings, arbitration, or
litigation between the parties hereto arising out of or affecting this
Agreement, or the rights or obligations of the parties hereunder, unless such
waiver or amendment is in writing and duly executed. Waiver of any term or
condition of this Agreement by any party shall not be construed as a waiver of a
subsequent breach or failure of the same term or condition, or a waiver of any
other term or condition of this Agreement.
9.3 Assignment. The rights of the Holder hereunder may not
be assigned without the prior written consent of MIDCOM.
9.4 Governing Law. This Agreement, including all matters of
construction, validity and performance, shall be governed by and construed and
enforced in accordance with the laws of the State of Washington, without regard
to its conflict of law provisions which might otherwise require the application
of the law of any other jurisdiction. The parties agree that the exclusive
jurisdiction and venue of any lawsuit between them arising under this Agreement
or out of the transactions contemplated herein shall be the Superior Court of
Washington for King County, or the United States District Court for the Western
District of Washington at Seattle, and each of the parties hereby irrevocably
agrees, acknowledges and submits itself to the exclusive jurisdiction and venue
of such courts for the purposes of such lawsuit. The terms of this Agreement are
deemed to have been mutually agreed upon by all parties hereto, and
interpretation will not be for or against any party if any ambiguity exists.
9.5 Entire Agreement. This Agreement together with the
Release and all agreements and documents referenced in Section 12.1 of the
Release, contain all of the terms and conditions agreed upon by the parties
relating to the subject matter thereof and supersedes and cancels all prior
agreements, negotiations, correspondence, undertakings, and communications of
the parties, whether oral or written, respecting that subject matter including
the Registration Rights Agreement between MIDCOM and Holder dated September 12,
1995.
8
26
9.6 Execution in 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 a binding agreement when one or more
counterparts have been signed by each of the parties and either original or
facsimile counterparts have been delivered to the other party.
9.7 Captions. The captions in this Agreement are inserted
solely for the purpose of facilitating easy reference and shall not be construed
in any way as part of the text, or as altering the provisions of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Amended Registration
Rights Agreement to be duly executed on the date fast set forth above.
MIDCOM COMMUNICATIONS INC.
By:
-------------------------------
X. X. Xxxxxxx
Its President
XXXXXXX X. XXXX
----------------------------------
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EXHIBIT 4
MIDCOM COMMUNICATIONS INC.
SELLING SECURITY HOLDER INFORMATION QUESTIONNAIRE
NAME:
-----------------------
Heller, Ehrman, White & XxXxxxxxx
0000 Xxxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
Ladies and Gentlemen:
The following information is furnished by the undersigned for use in
connection with the preparation of the Registration Statement on Form S-1 (the
"Registration Statement") for MIDCOM Communications Inc. (the "Company") to be
filed with the Securities and Exchange Commission (the "SEC") for purposes of
registering the public offer and sale of shares of the Company's common stock,
par value $.0001 per share (the "Common Stock") held by the undersigned and
certain other shareholders. The undersigned will promptly notify you of any
changes in such information which may occur subsequent hereto. The undersigned
understands and agrees that this Questionnaire, as completed by the undersigned,
and further communications by the undersigned regarding the matters contemplated
herein, will be relied upon by the Company in connection with preparation of the
Registration Statement. Italicized terms in this Questionnaire have the meanings
set forth on the last two pages of this document.
PLEASE COMPLETE, SIGN, DATE AND RETURN THIS QUESTIONNAIRE TO
XXXXXXX X. XXXXXXX, ESQ. AT THE ADDRESS SET
FORTH ABOVE ON OR BEFORE DECEMBER 13, 1996.
28
PLEASE FEEL FREE TO ATTACH ADDITIONAL PAGES OR ANSWER ON THE BACK, IF NECESSARY.
A. MATERIAL RELATIONSHIPS
1. Positions with the Company and/or Subsidiaries
Describe below all positions and offices (including director) which you
or any associate of yours currently hold or have held with the Company and/or
any subsidiary within the last three years, including the position and the
length of time the position was held:
Time Period Held
(Month and Year)
List of Positions From To
2. (a) Describe below any transaction or series of similar transactions
during the last three years or which are currently proposed which involve the
Company or any of its subsidiaries and in which you or any associate or spouse,
parent, child, sibling, mother- or father-in-law, son- or daughter-in-law,
brother- or sister-in-law of yours had, has or will have any material financial
or other interest, direct or indirect. If any such transaction involved or is to
involve the purchase or sale of assets by or to the company or any of its
subsidiaries, other than in the ordinary course of business, state the cost of
the assets to the purchaser and the cost thereof to the seller if acquired by
the seller within two years prior to the transaction. Note: Include purchases
and sales of property, leases, loans, guarantees, provision of services to the
Company or its subsidiaries, etc. Description should include the dollar value of
any such transaction(s), the name of your relative or associate involved and
nature of your relationship with such relative or associate, if applicable. IF
NONE, SO STATE.
-2-
29
(b) Describe below any material relationship that existed at any time
during the last three years between the Company or any of its subsidiaries and
you or any associate or spouse, parent, child, sibling, mother- or
father-in-law, son- or daughter-in-law, brother- or sister-in-law of yours. IF
NONE, SO STATE.
-3-
30
B. SECURITY OWNERSHIP
3. Ownership of MIDCOM Shares of Common Stock
(a) Furnish below information as to the number of shares of
Common Stock beneficially owned by you as of the date of this Questionnaire. IF
THERE IS ANY CHANGE IN YOUR OWNERSHIP OF SHARES OF COMMON STOCK BETWEEN THE DATE
HEREOF AND THE DATE ON WHICH THE EFFECTIVENESS OF THE REGISTRATION STATEMENT IS
TERMINATED BY THE COMPANY OR ON WHICH YOU NO LONGER HOLD ANY SHARES OF COMMON
STOCK, WHICHEVER OCCURS EARLIER, YOU HEREBY AGREE TO PROMPTLY NOTIFY THE
COMPANY. Include all shares of Common Stock which are (i) registered in your
name, including shares of Common Stock registered in your name as trustee,
executor, custodian, pledgee, agent or nominee, either alone or with others,
(ii) owned beneficially by you or any associate of yours or (iii) registered in
the name of a nominee or in street name, including any such shares held for the
account of any of the above. If your voting and/or investment control over any
Shares of Common Stock is shared, you should so indicate in the Remarks column,
and you should provide a brief description of any arrangement concerning such
shared control.
If you wish to disclaim beneficial ownership of any
shares of Common Stock listed, indicate so by writing the word "Disclaim" in the
Remarks column below. As to any shares of Common Stock for which you disclaim
ownership but over which you have shared or sole voting or investment control,
indicate the nature of such control in the Remarks column and provide a brief
description of any arrangement concerning such shared voting and/or investment
control. In the Registration Statement, an appropriate disclaimer will be
included. If any co-trustee, etc., acting with you is an officer or director of
the Company, set forth his or her name in the Remarks column. If any of the
shares of Common Stock listed are subject to any claim, encumbrance, pledge or
lien, indicate so in the Remarks column.
Number of Registered in the Beneficial Owner
Shares Name of Address and Relationship Remarks
------ ------- ------- ---------------- -------
Description of arrangements concerning shared voting and/or investment control:
-4-
31
(b) Indicate below whether you have the right to acquire
(other than through the exercise of options), beneficial ownership of Common
Stock of the Company:
(i) You have no such right .
(ii) You have such a right . Describe the type of
right (e.g., warrants, power to revoke a trust,
discretionary account or similar arrangement,
etc.) and exercisability, including with respect
to each of the rights described below the date
or dates on which the right becomes or became
exercisable, and the number of shares for which
the right is exercisable on each such date:
Number of Shares
Type of Date(s) for which Right
Right Exercisable is Exercisable
----- ----------- --------------
4. Interest in Subsidiaries
You do not beneficially own any equity securities of any
subsidiary of the Company.
(a) No exception .
(b) Exception . Description of subsidiary securities:
-5-
32
5. Stock Options
The following is a list of all stock options to acquire securities
of the Company held by you as of the date of this Questionnaire including the
date or dates such stock options become or will become exercisable, and the
number of shares for which such stock option is exercisable on such date:
Total Type of
Number Exercise Date Option/
Date of of Dates Price of Name
Grant* Shares Exercisable Per Share Expiration of Plan
------ ------ ----------- --------- ---------- -------
-------
*The extension of the term of an option is deemed to be a grant of a new option.
-6-
33
C. MISCELLANEOUS
6. Indebtedness to the Company.
Except as described below, neither you nor any associate or
parent, child, sibling, mother- or father-in-law, son- or daughter-in-law,
brother- or sister-in-law of yours has, at any time in the last three years,
been indebted to the Company or any of its subsidiaries, except for amounts due
for purchases subject to usual trade terms, for ordinary travel and expense
advances and for other transactions in the ordinary course of business.
(a) No exception .
(b) Exception . Description of such indebtedness:
(i) The name of such person and the nature of your
relationship to such person:
(ii) The largest total amount of indebtedness at any
time during the Company's last fiscal year:
(iii) The nature of the indebtedness and of the
transaction in which it was incurred:
(iv) The amount outstanding as of the end of the
Company"s last fiscal year:
(v) The amount currently outstanding and the date as
of which you determined such amount:
(vi) The rate of interest paid or charged thereon:
-7-
34
7. Do you now owe any amounts to the Company pursuant to Section
16(b) of the Securities Exchange Act of 1934 as a result of profits realized
from any purchase and sale, or sale and purchase, of the Company's shares within
any six-month period made at any time in the past?
None Known _________ .
Yes _________ . If yes, please provide date of purchase, date of
sale, purchase and sale prices, and number of shares involved:
8. Identity of Associates
The full name, form (e.g., partnership, corporation, etc.),
nature of business done by, and principal place of business of each associate of
yours referred to in the answers to this Questionnaire and your relationship
with such associate are as follows, if applicable:
(a) Not applicable
(b) Applicable . Description:
9. Additional Information
Is there any other information concerning your relationship or
dealings with the Company that could be of significance to investors or
shareholders of the Company that you believe should be disclosed in the
Registration Statement?
No .
Yes . Please provide information:
-8-
35
10. Affidavit.
The undersigned understands that this information is furnished
to the Company for use in connection with the Registration Statement filed by
the Company with the Securities and Exchange Commission pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), to register the
public offer and sale of the shares of Common Stock held by the undersigned and
certain other shareholders. The information set forth above is true and accurate
to the best of the undersigned's information and belief.
The undersigned will promptly notify the Company of any changes
in such information that may occur subsequent hereto and prior to the date on
which the effectiveness of the Registration Statement is terminated by the
Company or on which the undersigned no longer holds shares of Common Stock,
whichever occurs earlier. The undersigned understands and agrees that this
Questionnaire and the undersigned's further communications regarding the matters
contemplated herein, will be relied upon by the Company, counsel to the Company,
and representatives of underwriters and their counsel, if any, in connection
with the Preparation of the Registration Statement.
The undersigned confirms that the undersigned will not sell any
shares of Common Stock pursuant to the Registration Statement before it has been
declared effective by the SEC unless the sale is exempt from the registration
requirements of the Securities Act. The undersigned further confirms that, after
the Registration Statement has been declared effective by the SEC, the
undersigned will not sell any shares of Common Stock pursuant to the
Registration Statement except by means of a prospectus meeting the requirements
of Section 10(a) of the Securities Act and except in transactions in the
over-the-counter market, in negotiated transactions, or by a combination of
these methods, at fixed prices that may be changed, at market prices prevailing
at the time of the sale, at prices related to such market prices or at
negotiated prices, and the undersigned will notify the Company in advance of any
transaction by any other method or on any other terms.
-9-
36
IN WITNESS WHEREOF, the undersigned hereby, certifies that the
foregoing answers to each of the foregoing questions are accurate and complete.
FOR INDIVIDUALS
DATED: _________________, 1996.
------------------------------------
(Signature)
------------------------------------
(Printed or Typed Name)
FOR CORPORATIONS OR OTHER ENTITIES
DATED: _________________, 1996. ------------------------------------
(Name of Entity)
------------------------------------
By
Name:
Title:
-10-
37
Definitions
The term "associate" as used throughout this Questionnaire, means (a)
any corporation or organization other than the Company or any of its
subsidiaries of which you are, or were at the time of the event or transaction
in question, an officer, director or partner or of which you are, or were at the
time of the event or transaction in question, directly or indirectly, the
beneficial owner of 5% or more of any class of equity securities, (b) any trust
or other estate in which you have, or had at the time of the event or
transaction in question, a substantial beneficial interest or as to which you
serve as trustee or in a similar capacity, (c) your spouse, (d) any relative of
your spouse or any relative of yours who has, or had at the time of the event or
transaction in question, the same home as you or who is, or was at the time of
the event or transaction in question, a director or officer or key executive of
the Company or any of its subsidiaries, (e) any partner, syndicate member or
person with whom you have agreed to act in concert with respect to the
acquisition, holding, voting or disposition of shares of the Company's
securities.
The term "beneficially", when used in connection with the ownership of
securities, means (a) any interest in a security which entitles you to any of
the rights or benefits of ownership even though you may not be the owner of
record or (b) securities owned by you directly or indirectly, including those
held by you for your own benefit (regardless of how registered) and securities
held by others for your benefit (regardless of how registered), such as by
custodians, brokers, nominees, pledgees, etc., and including securities held by
an estate or trust in which you have an interest as legatee or beneficiary,
securities owned by a partnership of which you are a partner, securities held by
a personal holding company of which you are a shareholder, etc., securities held
in the name of your spouse, minor children and any other family member (sharing
the same home) and securities held by you as trustee for the benefit of family
members (whether or not sharing the same household). A "beneficial owner" of a
security includes any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise has or shares:
(1) voting power which includes the power to vote, or to direct the
voting of, such security; and/or
(2) investment power which includes the power to dispose, or to
direct the disposition, of such security.
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.
38
The term "family relationship" means any relationship by blood,
marriage or adoption, not more remote than first cousin.
The term "material", when used in this questionnaire to qualify a
requirement for the furnishing of information as to any subject, limits the
information required to those matters as to which an average prudent investor
ought reasonably to be informed before purchasing the shares of Common Stock.
Factors to be considered in determining whether an interest in a transaction is
material are: the importance of the interest to the person having the interest,
the relationship of the parties to the transaction with each other and the
amount involved in the transaction.
The term "material relationship" has not been defined by the Securities
and Exchange Commission. However, the Commission has indicated that it will
probably construe as a "material relationship" any relationship which tends to
prevent arms-length bargaining in dealings with a company, whether arising from
a close business connection or family relationship, a relationship of control or
otherwise. It seems prudent, therefore, to consider that you would have such a
relationship, for example, with any organization of which you are an officer,
director, trustee or partner or in which you own, directly or indirectly, 10%
or more of the outstanding voting shares, or in which you have some other
substantial interest, and with any person or organization with whom you have, or
with whom any relative or spouse (or any other person or organization as to
which you have any of the foregoing other relationships) has, a contractual
relationship.
The term "stock options" includes all options, warrants, or rights to
purchase securities of the Company or any of its subsidiaries, other than those
issued to security holders as such on a pro rata basis.
The term "subsidiary" means a corporation controlled by the Company
directly, or indirectly through one or more intermediaries.
-2-
39
SCHEDULE 1.1.3(c)
Quantity Item Description Price Extension
-------- ----- ----------- ----- ---------
1 NOTEBOOK NoteBook computer - Texas Inst. 3995.00 3995.00
1 MODEM PCMCIA 14400 U.S. Robotics Fax Mod. 195.00 195.00
1 COMPEX Ethernet Card PCMCIA Lan Adapter 155.00 155.00
1 VGAMON VGA Monitor 15" KFC Non-Int. .28 325.00 325.00
1 KEYBOARD Liteon Keyboard 35.00 35.00
1 SPEAKERS PC Speakers SONY 3 piece system. 175.00 175.00
1 PRINTER Brother HL-645 Laser Printer w/1MB 550.00 550.00
