1
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 9, 1997
AMONG
WORLDCOM, INC.
TC INVESTMENTS CORP.
and
MCI COMMUNICATIONS CORPORATION
2
TABLE OF CONTENTS
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.6 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.7 Officers and Directors of Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.8 Effect on Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . 4
2.1 Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.2 Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.3 Distributions with Respect to Unexchanged Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.4 No Further Ownership Rights in MCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.5 No Fractional Shares of WorldCom Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.6 Termination of Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Investment of the Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.9 Lost Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.10 Withholding Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.12 Stock Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 9
3.1 Representations and Warranties of MCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
(c) Authority; No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
(d) Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(f) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(g) Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(h) Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(i) Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(j) Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Representations and Warranties of WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(a) Organization, Standing and Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(b) Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
(c) Authority; No Conflicts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(d) Reports and Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(e) Information Supplied . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(f) Absence of Certain Changes or Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(g) Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(h) Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
(i) Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3
3.3 Representations and Warranties of WorldCom and Merger Sub . . . . . . . . . . . . . . . . . . . . . . . 18
(a) Organization and Corporate Power . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Corporate Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Non-Contravention . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(d) No Business Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . . . . . . . 19
4.1 Covenants of MCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Dividends; Changes in Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(e) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(f) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(g) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(h) Tax-Free Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(i) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(j) Accounting Methods; Income Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(k) MCI Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.2 Covenants of WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(a) Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
(b) Dividends; Changes in Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(c) Issuance of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
(d) Governing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(f) No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(g) Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(h) Tax-Free Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(i) Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(j) Accounting Methods; Income Tax Elections . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(k) Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
(l) WorldCom Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.3 Advice of Changes; Governmental Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.4 Transition Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.5 Control of Other Party's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 27
5.1 Preparation of Proxy Statement; MCI Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . 27
5.2 WorldCom Board of Directors; Officers; Headquarters; MCI Name. . . . . . . . . . . . . . . . . . . . . 28
5.3 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.4 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.5 Acquisition Proposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
5.7 Stock Options and Other Stock Plans; Employee Benefits Matters . . . . . . . . . . . . . . . . . . . . 33
5.8 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9 Directors' and Officers' Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.11 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.12 Accountants' Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.13 Listing of Shares of WorldCom Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.14 Voting Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . . 35
6.1 Conditions to Each Party's Obligation to Effect the Merger . . . . . . . . . . . . . . . . . . . . . . 35
(a) Stockholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(b) No Injunctions or Restraints, Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(c) FCC and Public Utility Commission Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(d) HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(e) EU Antitrust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
(f) NASDAQ Listing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(g) Effectiveness of the Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.2 Additional Conditions to Obligations of WorldCom and Merger Sub . . . . . . . . . . . . . . . . . . . . 36
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(b) Performance of Obligations of MCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3 Additional Conditions to Obligations of MCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
(a) Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Performance of Obligations of WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) No Material Adverse Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE VII
TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . . . 37
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Payment by WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.5 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
5
ARTICLE VIII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 41
8.1 Non-Survival of Representations, Warranties and Agreements . . . . . . . . . . . . . . . . . . . . . . 41
8.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.5 Entire Agreement; No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.6 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.8 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
8.9 Submission to Jurisdiction; Waivers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.10 Enforcement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.11 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
8.12 Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
6
LIST OF EXHIBITS
Exhibit Title
5.2(a) Reconstitution of the Board of Directors of WorldCom
5.7 Stock Options and Other Stock-Based Plans; Employee Benefit Matters
6.2(c)(1) Form of WorldCom Tax Opinion
6.2(c)(2) Form of MCI Tax Opinion
6.2(c)(3) Form of WorldCom Representations Letter
6.2(c)(4) Form of MCI Representations Letter
7
GLOSSARY DEFINED TERMS
Definition Location of Definition
Acquisition Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.5
Affiliate Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(j)
Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(i)
Blue Sky Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(a)
BT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
BT Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
BT Inducement Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
BT Merger Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(b)
Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(b)
Class A Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Class A Common Stock Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.2
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Communications Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Confidentiality Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.3
Delaware Certificate of Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
DOJ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4(b)
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.3
ERISA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(i)
ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Exchange Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 2.1
Exchange Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.8
Fairness Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(i)
FCC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Financial Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(h)
Governmental Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
HSR Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
ISUs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)
Joint Proxy Statement/Prospectus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(a)
Material Adverse Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(c)
MCI . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
MCI Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(j)
MCI Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
MCI Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1
MCI SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)
MCI Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(b)
MCI Stock Option Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
MCI Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(ii)
Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Merger Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
NASDAQ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Ordinary Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
8
Definition Location of Definition
Ordinary Common Stock Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
Person . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(e)
PUCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Purchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
Regulation 4064/89 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Regulatory Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4(b)
Reimbursement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(b)
Required WorldCom Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(g)
Required Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Required MCI Votes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.l(f)
Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
Rule 145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(j)
SAS 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.12
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(f)
Superior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(g)
Surviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
Tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(i)
Taxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(i)
Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(i)
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(ii)
Termination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.1(b)
the other party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.11(d)
U.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)
Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(ii)
WorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
WorldCom Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(i)
WorldCom Alternative Transaction Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(b)
WorldCom Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
WorldCom Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2
WorldCom Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
WorldCom Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
WorldCom Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
WorldCom Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(c)
WorldCom Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)(ii)
WorldCom SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2 (d)
9
AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1997 (this
"Agreement"), among WORLDCOM, INC., a Georgia corporation ("WorldCom"), TC
INVESTMENTS CORP., a Delaware corporation and a direct wholly-owned subsidiary
of WorldCom ("Merger Sub"), and MCI COMMUNICATIONS CORPORATION, a Delaware
corporation ("MCI").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of World Com, Merger
Sub and MCI have each determined that the merger of MCI with and into Merger
Sub (the "Merger") is in the best interests of their respective stockholders,
and such Boards of Directors have approved such Merger, upon the terms and
subject to the conditions set forth in this Agreement, pursuant to which (a)
each outstanding share of common stock, par value $.10 per share, of MCI
("Ordinary Common Stock") issued and outstanding immediately prior to the
Effective Time (as defined in Section 1.3), other than shares owned or held
directly or indirectly by WorldCom or directly by MCI will be converted into
the right to receive shares of common stock, par value $.01 per share of
WorldCom ("WorldCom Common Stock") as set forth in Section 1.8 and (b) each
share of Class A common stock, par value $.10 per share, of MCI ("Class A
Common Stock" and, collectively with the Ordinary Common Stock, the "MCI Common
Stock") will be converted into the right to receive $51 in cash as set forth in
Section 1.8;
WHEREAS, WorldCom, Merger Sub and MCI desire to make certain
representations, warranties, covenants and agreements in connection with the
transactions contemplated hereby and also to prescribe various conditions to
the transactions contemplated hereby;
WHEREAS, WorldCom, Merger Sub and MCI intend, by approving
resolutions authorizing this Agreement, to adopt this Agreement as a plan of
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and the regulations promulgated
thereunder;
WHEREAS, MCI, British Telecommunications plc, a public limited
company incorporated under the laws of England and Wales ("BT"), and Tadworth
Corporation, a Delaware corporation and a wholly owned subsidiary of BT, have
entered into the Agreement and Plan of Merger dated as of November 3, 1996, as
amended (the "BT Merger Agreement");
WHEREAS, BT, MCI and WorldCom have entered into an agreement
dated as of the date hereof pursuant to which, among other things, BT has
consented to and agreed to support the Merger and the other transactions
contemplated by this Agreement (the "BT Agreement").
WHEREAS, in the BT Agreement, WorldCom has agreed to pay BT $450
million and expenses not in excess of $15 million (collectively, the "BT
Inducement Fee") in connection with the
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plan of reorganization in order to induce BT to waive its rights under, and
agree to terminate, the BT Merger Agreement; and
WHEREAS, the BT Merger Agreement has been terminated by MCI and
BT by mutual agreement pursuant to Section 7.1(a) of the BT Merger Agreement.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein, and intending to be legally bound hereby, the parties hereto agree as
follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions
set forth in this Agreement, and in accordance with the Delaware General
Corporation Law (the "DGCL"), MCI shall be merged with and into Merger Sub at
the Effective Time. Following the Merger, the separate corporate existence of
MCI shall cease and Merger Sub shall continue as the surviving corporation (the
"Surviving Corporation") under the name "MCI Communications Corporation".
1.2 Closing. The closing of the Merger (the "Closing") will
take place on the fifth Business Day after the satisfaction or waiver (subject
to applicable law) of the conditions (excluding conditions that, by their
terms, cannot be satisfied until the Closing Date) set forth in Article VI (the
"Closing Date"), unless another time or date is agreed to in writing by the
parties hereto. The Closing shall be held at the offices of ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇, unless another place
is agreed to in writing by the parties hereto.
1.3 Effective Time. As soon as practicable following the
Closing, the parties shall (i) file a certificate of merger (the "Delaware
Certificate of Merger") in such form as is required by and executed in
accordance with the relevant provisions of the DGCL and (ii) make all other
filings or recordings required under the DGCL. The Merger shall become
effective at such time as the Delaware Certificate of Merger is duly filed with
the Delaware Secretary of State or at such subsequent time as WorldCom and MCI
shall agree and be specified in the Delaware Certificate of Merger (the date
and time the Merger becomes effective being the "Effective Time").
1.4 Effects of the Merger. At and after the Effective Time, the
Merger will have the effects set forth in the DGCL.
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3
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
MCI and Merger Sub shall be vested in the Surviving Corporation, and all debts,
liabilities and duties of MCI and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.5 Certificate of Incorporation. The certificate of
incorporation of Merger Sub, as in effect immediately prior to the Effective
Time, shall be the certificate of incorporation of the Surviving Corporation,
until thereafter changed or amended as provided therein or by applicable law,
except that Article I of the Certificate of Incorporation of the Surviving
Corporation shall be amended to read in its entirety as follows: "The name of
this Corporation is 'MCI Communications Corporation'".
1.6 By-Laws. The by-laws of Merger Sub as in effect at the
Effective Time shall be the by-laws of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable law.
1.7 Officers and Directors of Surviving Corporation. The
officers of MCI as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be. The directors of Merger Sub as of the
Effective Time shall be the directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a director
or until their respective successors are duly elected and qualified.
1.8 Effect on Capital Stock. (a) At the Effective Time by
virtue of the Merger and without any action on the part of the holder thereof,
(i) each share of Ordinary Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares of Ordinary Common Stock owned
by WorldCom or Merger Sub or held by MCI, all of which shall be canceled as
provided in Section 1.8(c)) shall be converted into the right to receive that
number of shares of WorldCom Common Stock equal to the Exchange Ratio (as
defined below) (the "Ordinary Common Stock Merger Consideration") and (ii) each
share of Class A Common Stock issued and outstanding immediately prior to the
Effective Time (other than shares of Class A Common Stock owned by WorldCom or
Merger Sub or held by MCI, all of which shall be canceled as provided in
Section 1.8(c)) shall be converted into the right to receive $51 in cash,
without interest thereon (the "Class A Common Stock Merger Consideration", and,
collectively with the Ordinary Common Stock Merger Consideration, the "Merger
Consideration"). "Exchange Ratio" means the quotient (rounded to the nearest
1/10,000) determined by dividing $51.00 by the
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average of the high and low sales prices of WorldCom Common Stock as reported
on The Nasdaq National Market ("NASDAQ") on each of the twenty consecutive
trading days ending with the third trading day immediately preceding the
Effective Time (the "Measurement Period"); provided, that the Exchange Ratio
shall not be less than 1.2439 or greater than 1.7586.
(b) As a result of the Merger and without any action on the part
of the holders thereof, at the Effective Time, all shares of MCI Common Stock
shall cease to be outstanding and shall be canceled and retired and shall cease
to exist, and each holder of a certificate which immediately prior to the
Effective Time represented any such shares of MCI Common Stock (a
"Certificate") (other than Merger Sub, WorldCom and MCI) shall thereafter cease
to have any rights with respect to such shares of MCI Common Stock, except the
right to receive the applicable Merger Consideration in accordance with Article
II upon the surrender of such certificate.
(c) Each share of MCI Common Stock issued and owned or held by
WorldCom, Merger Sub or MCI at the Effective Time shall, by virtue of the
Merger, cease to be outstanding and shall be canceled and retired and no stock
of WorldCom or other consideration shall be delivered in exchange therefor.
(d) Each share of common stock, par value $.01 per share, of
Merger Sub issued and outstanding immediately prior to the Effective Time,
shall remain issued, outstanding and unchanged as validly issued, fully paid
and nonassessable shares of common stock, par value $.01 per share, of the
Surviving Corporation as of the Effective Time.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund. Prior to the Effective Time, WorldCom shall
appoint The Bank of New York, or another commercial bank or trust company
having net capital of not less than $100,000,000, to act as exchange agent
hereunder for the purpose of exchanging Certificates for the Merger
Consideration (the "Exchange Agent"). At or prior to the Effective Time,
WorldCom shall deposit with the Exchange Agent, in trust for the benefit of
holders of shares of MCI Common Stock, certificates representing the WorldCom
Common Stock issuable pursuant to Section 1.8 in exchange for outstanding
shares of Ordinary Common Stock and cash in the amount required to be exchanged
for Class A Common Stock in the Merger pursuant to Section 1.8. WorldCom
agrees to make available to the Exchange Agent from time to time as needed,
cash sufficient to pay cash in lieu of fractional
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shares pursuant to Section 2.5 and any dividends and other distributions
pursuant to Section 2.3. Any cash and certificates of WorldCom Common Stock
deposited with the Exchange Agent shall hereinafter be referred to as the
"Exchange Fund".
2.2 Exchange Procedures. As soon as reasonably practicable
after the Effective Time, the Surviving Corporation shall cause the Exchange
Agent to mail to each holder of a Certificate (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to
the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent, and which letter shall be in customary form and have such other
provisions as WorldCom may reasonably specify and (ii) instructions for
effecting the surrender of such Certificates in exchange for the applicable
Merger Consideration. Upon surrender of a Certificate to the Exchange Agent
together with such letter of transmittal, duly executed and completed in
accordance with the instructions thereto, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate,
if it is a Certificate for Ordinary Common Stock shall be entitled to receive
in exchange therefor (A) one or more shares of WorldCom Common Stock
representing, in the aggregate, the whole number of shares that such holder has
the right to receive pursuant to Section 1.8 (after taking into account all
shares of MCI Common Stock then held by such holder) and (B) a check in the
amount equal to the cash that such holder has the right to receive pursuant to
the provisions of this Article II, including cash in lieu of any fractional
shares of WorldCom Common Stock pursuant to Section 2.5, or if it is a
Certificate for Class A Common Stock, a check in the amount equal to the cash
that such holder has the right to receive pursuant to the provisions of this
Article II, and in each case the Certificate so surrendered shall forthwith be
canceled. No interest will be paid or will accrue on any cash payable pursuant
to Section 1.8, Section 2.3 or Section 2.5. In the event of a transfer of
ownership of MCI Common Stock which is not registered in the transfer records
of MCI, one or more shares of WorldCom Common Stock evidencing, in the
aggregate, the proper number of shares of WorldCom Common Stock, a check in the
proper amount of cash in lieu of any fractional shares of WorldCom Common Stock
pursuant to Section 2.5 and any dividends or other distributions to which such
holder is entitled pursuant to Section 2.3, may be issued with respect to such
MCI Common Stock to such a transferee if the Certificate representing such
shares of MCI Common Stock is presented to the Exchange Agent, accompanied by
all documents required to evidence and effect such transfer and to evidence
that any applicable stock transfer taxes have been paid.
2.3 Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made with respect
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6
to shares of WorldCom Common Stock with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate with respect to
the shares of WorldCom Common Stock that such holder would be entitled to
receive upon surrender of such Certificate and no cash payment in lieu of
fractional shares of WorldCom Common Stock shall be paid to any such holder
pursuant to Section 2.5 until such holder shall surrender such Certificate in
accordance with Section 2.2. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to such holder
of shares of WorldCom Common Stock issuable in exchange therefor, without
interest, (a) promptly after the time of such surrender, the amount of any cash
payable in lieu of fractional shares of WorldCom Common Stock to which such
holder is entitled pursuant to Section 2.5 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole shares of WorldCom Common Stock, and (b) at the
appropriate payment date, the amount of dividends or other distributions with a
record date after the Effective Time but prior to such surrender and a payment
date subsequent to such surrender payable with respect to such shares of
WorldCom Common Stock.
2.4 No Further Ownership Rights in MCI Common Stock. All shares
of WorldCom Common Stock issued and cash paid upon conversion of shares of MCI
Common Stock in accordance with the terms of Article I and this Article II
(including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of MCI Common Stock.
2.5 No Fractional Shares of WorldCom Common Stock. (a) No
certificates or scrip or shares of WorldCom Common Stock representing
fractional shares of WorldCom Common Stock shall be issued upon the surrender
for exchange of Certificates and such fractional share interests will not
entitle the owner thereof to vote or to have any rights of a shareholder of
WorldCom or a holder of shares of WorldCom Common Stock.
(b) Notwithstanding any other provision of this Agreement, each
holder of shares of MCI Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of WorldCom
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of WorldCom Common
Stock multiplied by (ii) the last sales price per share of WorldCom Common
Stock quoted on NASDAQ on the Closing Date. As promptly as practicable after
the determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify
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7
WorldCom, and WorldCom shall cause the Surviving Corporation to deposit such
amount with the Exchange Agent and shall cause the Exchange Agent to forward
payments to such holders of fractional interests subject to and in accordance
with the terms hereof.
2.6 Termination of Exchange Fund. Any portion of the Exchange
Fund which remains undistributed to the holders of Certificates for twelve
months after the Effective Time shall be delivered to the Surviving Corporation
or otherwise on the instruction of the Surviving Corporation, and any holders
of the Certificates who have not theretofore complied with this Article II
shall thereafter look only to the Surviving Corporation and WorldCom for the
Merger Consideration with respect to the shares of MCI Common Stock formerly
represented thereby to which such holders are entitled pursuant to Section 1.8
and Section 2.2, any cash in lieu of fractional shares of WorldCom Common Stock
to which such holders are entitled pursuant to Section 2.5 and any dividends or
distributions with respect to shares of WorldCom Common Stock to which such
holders are entitled pursuant to Section 2.3. Any such portion of the Exchange
Fund remaining unclaimed by holders of shares of MCI Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time
as such amounts would otherwise escheat to or become property of any
Governmental Entity (as defined in Section 3.1(c)(iii))) shall, to the extent
permitted by law, become the property of the Surviving Corporation free and
clear of any claims or interest of any Person previously entitled thereto.
2.7 No Liability. None of WorldCom, Merger Sub, MCI, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
2.8 Investment of the Exchange Fund. The Exchange Agent shall
invest any cash included in the Exchange Fund as directed by the Surviving
Corporation on a daily basis. Any interest and other income resulting from such
investments shall promptly be paid to the Surviving Corporation.
2.9 Lost Certificates. If any Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed and, if required by
the Surviving Corporation, the posting by such Person of a bond in such
reasonable amount as the Surviving Corporation may direct as indemnity against
any claim that may be made against it with respect to such Certificate, the
Exchange Agent will deliver in exchange for such lost, stolen or destroyed
Certificate the applicable Merger Consideration with respect to the shares of
MCI Common Stock formerly represented thereby, any cash in lieu of
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fractional shares of WorldCom Common Stock, and unpaid dividends and
distributions on shares of WorldCom Common Stock deliverable in respect
thereof, pursuant to this Agreement.
2.10 Withholding Rights. Each of the Surviving Corporation and
WorldCom shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of MCI
Common Stock such amounts as it is required to deduct and withhold with respect
to the making of such payment under the Code and the rules and regulations
promulgated thereunder, or any provision of state, local or foreign tax law.
To the extent that amounts are so withheld by the Surviving Corporation or
WorldCom, as the case may be, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of
MCI Common Stock in respect of which such deduction and withholding was made by
the Surviving Corporation or WorldCom, as the case may be.
2.11 Further Assurances. At and after the Effective Time, the
officers and directors of the Surviving Corporation will be authorized to
execute and deliver, in the name and on behalf of MCI or Merger Sub, any deeds,
bills of sale, assignments or assurances and to take and do, in the name and on
behalf of MCI or Merger Sub, any other actions and things to vest, perfect or
confirm of record or otherwise in the Surviving Corporation any and all right,
title and interest in, to and under any of the rights, properties or assets
acquired or to be acquired by the Surviving Corporation as a result of, or in
connection with, the Merger.
2.12 Stock Transfer Books. At the close of business, New York
City time, on the day the Effective Time occurs, the stock transfer books of
MCI shall be closed and there shall be no further registration of transfers of
shares of MCI Common Stock thereafter on the records of MCI. From and after
the Effective Time, the holders of Certificates shall cease to have any rights
with respect to such shares of MCI Common Stock formerly represented thereby,
except as otherwise provided herein or by law. On or after the Effective Time,
any Certificates presented to the Exchange Agent or WorldCom for any reason
shall be converted into the Merger Consideration with respect to the shares of
MCI Common Stock formerly represented thereby, any cash in lieu of fractional
shares of WorldCom Common Stock to which the holders thereof are entitled
pursuant to Section 2.5 and any dividends or other distributions to which the
holders thereof are entitled pursuant to Section 2.3.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of MCI. Except as set forth
in the MCI Disclosure Schedule delivered by MCI to WorldCom prior to the
execution of this Agreement (the "MCI Disclosure Schedule") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), MCI represents and warrants to
WorldCom as follows:
(a) Organization, Standing and Power. Each of MCI and each of
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority to own, lease and operate its properties
and to carry on its business as now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such qualification
necessary other than in such jurisdictions where the failure so to qualify
would not, either individually or in the aggregate, have a Material Adverse
Effect (as defined in Section 8.11(c)) on MCI. The copies of the certificate
of incorporation and by-laws of MCI which were previously furnished to WorldCom
are true, complete and correct copies of such documents as in effect on the
date of this Agreement.
(b) Capital Structure. (i) As of October 31, 1997, the
authorized capital stock of MCI consisted of (A) 2,000,000,000 shares of
Ordinary Common Stock, of which 565,301,683 shares were outstanding and (B)
500,000,000 shares of Class A Common Stock, of which 135,998,932 shares were
outstanding and (C) 50,000,000 shares of preferred stock, of which 10,000,000
shares of Series E Junior Participating Preferred Stock have been designated
and reserved for issuance upon exercise of the rights (the "Rights")
distributed to the holders of MCI Common Stock pursuant to the Rights Agreement
dated as of September 30, 1994 between MCI and Mellon Bank, N.A., as rights
agent, as amended (the "Rights Agreement"). Since October 31, 1997 to the date
of this Agreement, there have been no issuances of shares of the capital stock
of MCI or any other securities of MCI other than issuances of shares (and
accompanying Rights) pursuant to options or rights outstanding as of October
31, 1997 under the Benefit Plans (as defined in Section 8.11(i)) of MCI. All
issued and outstanding shares of the capital stock of MCI are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock
(other than Class A Common Stock) is entitled to preemptive rights. There were
outstanding as of October 31, 1997 no
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options, warrants or other rights to acquire capital stock from MCI other than
(v) the Rights, (w) options representing in the aggregate the right to purchase
75,119,367 shares of MCI Common Stock under MCI's 1989 Stock Option Plan, MCI's
1988 Directors' Stock Option Plan and MCI's 1979 Stock Option Plan
(collectively, the "MCI Stock Option Plans"), (x) rights to purchase an
aggregate of 11,876,569 shares of MCI Common Stock under the MCI 1990 Stock
Purchase Plan (the "ESPP"), (y) incentive stock units ("ISUs") representing the
right to receive 5,484,883 shares of MCI Common Stock under MCI's 1989 Stock
Option Plan and (z) rights to purchase an aggregate of 4,482,722 shares of MCI
Common Stock under MCI's 401(k) Plan. Other than the associated Rights issued
with the shares issued as described above, no options or warrants or other
rights to acquire capital stock from MCI have been issued or granted since
October 31, 1997 to the date of this Agreement.
(ii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of MCI having the right to vote on any matters on
which stockholders may vote ("MCI Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b) and
as contemplated by Section 5.7, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements,
arrangements or undertakings of any kind to which MCI or any of its
Subsidiaries is a party or by which any of them is bound obligating MCI or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock or other voting securities of MCI
or any of its Subsidiaries or obligating MCI or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, there are no outstanding obligations of MCI or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of MCI or any of its Subsidiaries.
(c) Authority; No Conflicts. (i) MCI has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby, subject in the case of the consummation
of the Merger to the adoption of this Agreement by the Required MCI Votes (as
defined in Section 3.1(f)). The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of MCI, subject in the
case of the consummation of the Merger to the adoption of this Agreement by the
Required MCI Votes. This Agreement has been duly executed and delivered by MCI
and constitutes a valid and binding agreement of MCI, enforceable against it in
accordance with its terms, except as
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such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and similar laws relating to or affecting creditors generally, by
general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law) or by an implied covenant of
good faith and fair dealing.
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the Merger and the other
transactions contemplated hereby will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of time,
or both) under, or give rise to a right of termination, amendment, cancellation
or acceleration of any obligation or the loss of a material benefit under, or
the creation of a lien, pledge, security interest, charge or other encumbrance
on any assets (any such conflict, violation, default, right of termination,
amendment, cancellation or acceleration, loss or creation, a "Violation")
pursuant to: (A) any provision of the certificate of incorporation or by-laws
of MCI or any Subsidiary of MCI, or (B) except as would not have a Material
Adverse Effect on MCI and, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, any loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license, judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to MCI or any Subsidiary
of MCI or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any supranational, national, state,
municipal or local government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing, importing
or other governmental or quasi-governmental authority, including the European
Union (a "Governmental Entity"), is required by or with respect to MCI or any
Subsidiary of MCI in connection with the execution and delivery of this
Agreement by MCI or the consummation of the Merger and the other transactions
contemplated hereby, except for those required under or in relation to (A) the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and Council Regulation (EEC) No. 4064/89 ("Regulation 4064/89"), (B) the
Communications Act of 1934, as amended (the "Communications Act"), and any
rules, regulations, practices and policies promulgated by the Federal
Communications Commission ("FCC"), (C) state securities or "blue sky" laws (the
"Blue Sky Laws"), (D) the Securities Act of 1933, as amended (the "Securities
Act"), (E) the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), (F) the DGCL with
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respect to the filing of the Delaware Certificate of Merger, (G) laws, rules,
regulations, practices and orders of any state public service commissions
("PUCs"), foreign telecommunications regulatory agencies or similar state or
foreign regulatory bodies, (H) rules and regulations of NASDAQ, (I) antitrust
or other competition laws of other jurisdictions, and (J) such consents,
approvals, orders, authorizations, registrations, declarations and filings the
failure of which to make or obtain would not have a Material Adverse Effect on
MCI. Consents, approvals, orders, authorizations, registrations, declarations
and filings required under or in relation to any of the foregoing clauses (A)
through (I) are hereinafter referred to as "Required Consents."
(d) Reports and Financial Statements. MCI has filed all
required reports, schedules, forms, statements and other documents required to
be filed by it with the Securities and Exchange Commission (the "SEC") since
January 1, 1996 (collectively, including all exhibits thereto, the "MCI SEC
Reports"). No Subsidiary of MCI is required to file any form, report or other
document with the SEC. None of the MCI SEC Reports, as of their respective
dates (and, if amended or superseded by a filing prior to the date of this
Agreement or the Closing Date, then on the date of such filing), contained or
will contain any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the financial statements (including the related notes)
included in the MCI SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations and cash
flows of MCI and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with United States
generally accepted accounting principles ("U.S. GAAP") consistently applied
during the periods involved except as otherwise noted therein, and subject, in
the case of the unaudited interim financial statements, to normal and recurring
year-end adjustments that have not been and are not expected to be material in
amount. All of such MCI SEC Reports, as of their respective dates (and as of
the date of any amendment to the respective MCI SEC Report), complied as to
form in all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations promulgated
thereunder.
(e) Information Supplied. (i) None of the information supplied
or to be supplied by MCI for inclusion or incorporation by reference in (A) the
registration statement on Form S-4 (as defined in Section 5.1) to be filed with
the SEC by WorldCom in connection with the issuance of the WorldCom Common
Stock in the Merger will, at the time the Form S-4 is filed with the SEC, at
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any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 5.1) included in the Form S-4
related to the MCI Stockholders Meeting and the WorldCom Stockholders Meeting
(each, as defined in Section 5.1) and the WorldCom Common Stock to be issued in
the Merger will, on the date it is first mailed to MCI stockholders or WorldCom
Stockholders or at the time of the MCI Stockholders Meeting or the WorldCom
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
(ii) Notwithstanding the foregoing provisions of this Section
3.1(e), no representation or warranty is made by MCI with respect to statements
made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by WorldCom for inclusion or
incorporation by reference therein.
(f) Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Ordinary Common Stock and Class A Common
Stock voting together as a single class and, if the Effective Time occurs prior
to October l, 1998, the affirmative vote of the holders of a majority of the
outstanding shares of Class A Common Stock voting separately as a class, in
either case to approve the Merger (the "Required MCI Votes"), are the only
votes of the holders of any class or series of MCI capital stock necessary to
adopt this Agreement and approve the transactions contemplated hereby.
(g) Rights Agreement. The Rights Agreement has been amended so
as to provide that neither WorldCom nor Merger Sub will become an "Acquiring
Person," and that no "Shares Acquisition Date" or "Distribution Date" (as such
terms are defined in the Rights Agreement) will occur, as a result of the
approval, execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby.
(h) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement, except Lazard
Freres & Co. LLC and ▇▇▇▇▇▇ Brothers Inc. (collectively, the "Financial
Advisors"), whose fees and expenses will be paid by MCI in accordance with
MCI's agreement with such firms, based upon arrangements made by or on behalf
of MCI and previously disclosed to WorldCom.
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(i) Opinions of Financial Advisors. MCI has received the
opinion of each of the Financial Advisors, dated the date of this Agreement, to
the effect that, as of such date, the Merger Consideration is fair, from a
financial point of view, to the holders of Ordinary Common Stock (the
"Fairness Opinions"), a copy of each of which opinions have been made available
to WorldCom.
(j) Affiliate Letter. On or prior to the date of the MCI
Stockholder Meeting, MCI will deliver to WorldCom a letter (the "MCI Affiliate
Letter") identifying all persons who are "affiliates" of MCI for purposes of
Rule 145 under the Securities Act ("Rule 145"). On or prior to the Closing
Date, MCI will deliver on behalf of each person identified as an "affiliate" in
the MCI Affiliate Letter (other than BT) a written agreement (an "Affiliate
Agreement") in connection with restrictions on affiliates under Rule 145.
3.2 Representations and Warranties of WorldCom. Except as set
forth in the WorldCom Disclosure Schedule delivered by WorldCom to MCI prior to
the execution of this Agreement (the "WorldCom Disclosure Schedule") (each
section of which qualifies the correspondingly numbered representation and
warranty or covenant to the extent specified therein), WorldCom represents and
warrants to MCI as follows:
(a) Organization, Standing and Power. Each of WorldCom and each
of its Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority to own, lease and operate
its properties and to carry on its business as now being conducted and is duly
qualified and in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure so
to qualify or to be in good standing would not, either individually or in the
aggregate, have a Material Adverse Effect on WorldCom. The copies of the
certificate of incorporation and by-laws of WorldCom which were previously
furnished to MCI are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(b) Capital Structure. (i) As of November 5, 1997, the
authorized capital stock of WorldCom consisted of (A) 2,500,000,000 shares of
WorldCom Common Stock of which 908,380,987 shares were outstanding and (B)
50,000,000 shares of Preferred Stock, par value $.01 per share, of which (1)
94,992 shares have been designated Series A 8% Cumulative Convertible Preferred
Stock ("WorldCom Series A Preferred Stock"), of which 94,992 shares were
outstanding, (2) 15,000,000 shares have been
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designated Series B Preferred Stock ("WorldCom Series B Preferred Stock"), of
which 12,441,817 shares were outstanding and (3) 2,500,000 shares have been
designated Series 3 Junior Participating Preferred Stock and reserved for
issuance upon exercise of the rights (the "Purchase Rights") distributed to the
holders of WorldCom Common Stock pursuant to the Rights Agreement dated as of
August 25, 1996 between WorldCom and Bank of New York, as rights agent (the
"WorldCom Rights Agreement"). Since November 5, 1997 to the date of this
Agreement, there have been no issuances of shares of the capital stock of
WorldCom or any other securities of WorldCom other than issuances of shares
pursuant to options or rights outstanding as of November 5, 1997 under the
Benefit Plans (as defined in Section 8.11(h)) of WorldCom. All issued and
outstanding shares of the capital stock of WorldCom are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock is
entitled to preemptive rights. There were outstanding as of November 5, 1997
no options, warrants or other rights to acquire capital stock from WorldCom
other than pursuant to WorldCom's pending acquisitions as of the date hereof.
No options or warrants or other rights to acquire capital stock from WorldCom
have been issued or granted since November 5, 1997 to the date of this
Agreement.
(ii) As of the date of this Agreement, no bonds, debentures,
notes or other indebtedness of WorldCom having the right to vote on any matters
on which stockholders may vote ("WorldCom Voting Debt") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as
of the date of this Agreement, there are no securities, options, warrants,
calls, rights, commitments, agreements, arrangements or undertakings of any
kind to which WorldCom or any of its Subsidiaries is a party or by which any of
them is bound obligating WorldCom or any of its Subsidiaries to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of WorldCom or any of its Subsidiaries or
obligating WorldCom or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there are no
outstanding obligations of WorldCom or any of its Subsidiaries to repurchase,
redeem or otherwise acquire any shares of capital stock of WorldCom or any of
its Subsidiaries.
(c) Authority; No Conflicts. (i) WorldCom has all requisite
corporate power and authority to enter into this Agreement and, subject to the
adoption of this Agreement by the Required WorldCom Vote (as defined in Section
3.2(g)), to issue the shares of WorldCom Common Stock to be issued in the
Merger
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(the "Share Issuance"). The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of WorldCom, subject to the
approval by the stockholders of WorldCom of the Share Issuance and the
affirmative vote of a majority of the outstanding voting power of the WorldCom
Stock (as defined in Section 3.2(g)) to amend the Certificate of Incorporation
of WorldCom to change its name as set forth in Section 5.2. This Agreement has
been duly executed and delivered by WorldCom and constitutes a valid and
binding agreement of WorldCom, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors
generally, by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement does not or
will not, as the case may be, and the consummation of the Merger and the other
transactions contemplated hereby will not, conflict with, or result in a
Violation pursuant to: (A) any provision of the certificate of incorporation or
by-laws of WorldCom or any Subsidiary of WorldCom, (B) except as would not have
a Material Adverse Effect on WorldCom and, subject to obtaining or making the
consents, approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit agreement,
note, mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
WorldCom or any Subsidiary of WorldCom or their respective properties or
assets.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required
by or with respect to WorldCom or any Subsidiary of WorldCom in connection with
the execution and delivery of this Agreement by WorldCom or the consummation of
the Merger and the other transactions contemplated hereby, except for the
Required Consents and such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or obtain
would not have a Material Adverse Effect on WorldCom.
(d) Reports and Financial Statements. WorldCom has filed all
required reports, schedules, forms, statements and other documents required to
be filed by it with the SEC since January 1, 1996 (collectively, including all
exhibits thereto, the "WorldCom SEC Reports"). No Subsidiary of WorldCom is
required to file any form, report or other document with the SEC.
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None of the WorldCom SEC Reports, as of their respective dates (and, if amended
or superseded by a filing prior to the date of this Agreement or the Closing
Date, then on the date of such filing), contained or will contain any untrue
statement of a material fact or omitted or will omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in the WorldCom
SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
WorldCom and its Subsidiaries as of the respective dates or for the respective
periods set forth therein, all in conformity with U.S. GAAP consistently
applied during the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to normal
and recurring year-end adjustments that have not been and are not expected to
be material in amount. All of such WorldCom SEC Reports, as of their
respective dates (and as of the date of any amendment to the respective
WorldCom SEC Report), complied as to form in all material respects with the
applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations promulgated thereunder.
(e) Information Supplied. (i) None of the information supplied
or to be supplied by WorldCom for inclusion or incorporation by reference in
(A) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
time it is amended or supplemented or at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) the Joint Proxy Statement/Prospectus
will, on the date it is first mailed to MCI stockholders or WorldCom
Stockholders or at the time of the MCI Stockholders Meeting or the WorldCom
Stockholders Meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section
3.2(e), no representation or warranty is made by WorldCom with respect to
statements made or incorporated by reference in the Form S-4 or the Joint Proxy
Statement/Prospectus based on information supplied by MCI for inclusion or
incorporation by reference therein.
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(f) Absence of Certain Changes or Events. Except as disclosed
in the WorldCom SEC Reports filed prior to the date of this Agreement, since
December 31, 1996 until the date hereof, WorldCom and its Subsidiaries have not
incurred any material liability, except in the ordinary course of business
consistent with past practice, nor has there been any change in the business,
financial condition or results of operations of WorldCom or any of its
Subsidiaries or any event involving WorldCom or any of its Subsidiaries which
has had, or is reasonably likely to have, a Material Adverse Effect on
WorldCom.
(g) Vote Required. The affirmative vote of holders of shares of
WorldCom Common Stock, WorldCom Series A Preferred Stock and WorldCom Series B
Preferred Stock (collectively, "WorldCom Stock") representing a majority of the
total votes cast at a meeting of the holders of outstanding shares of WorldCom
Stock all voting together as a single class (the "Required WorldCom Vote"), is
the only vote of the holders of any class or series of WorldCom capital stock
necessary to approve the Share Issuance. The affirmative vote of holders of a
majority of the outstanding voting power of the shares of WorldCom Stock,
voting together as a single class (the "Charter Amendment Vote"), is the only
vote of holders of any class or series of WorldCom capital stock necessary to
approve the amendment to WorldCom's Certificate of Incorporation set forth in
Section 5.2 (the "Charter Amendment").
(h) Brokers or Finders. No agent, broker, investment banker,
financial advisor or other firm or Person is or will be entitled to any
broker's or finder's fee or any other similar commission or fee in connection
with any of the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of WorldCom, except Salomon Brothers Inc,
whose fees and expenses will be paid by WorldCom in accordance with WorldCom's
agreement with such firm based upon arrangements made by or on behalf of
WorldCom and previously disclosed to MCI.
(i) Affiliate Letter. On or prior to the date of the WorldCom
Stockholder Meeting, WorldCom will deliver to MCI a letter (the "WorldCom
Affiliate Letter") identifying all persons who are "affiliates" of WorldCom for
purpose of Rule 145. On or prior to the Closing Date, WorldCom will deliver on
behalf of each person identified as an "affiliate" in the WorldCom Affiliate
Letter an Affiliate Agreement in connection with restrictions on affiliates
under Rule 145.
3.3 Representations and Warranties of WorldCom and Merger Sub.
WorldCom and Merger Sub represent and warrant to MCI as follows:
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(a) Organization and Corporate Power. Merger Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware. Merger Sub is a direct wholly-owned subsidiary of WorldCom.
(b) Corporate Authorization. Merger Sub has all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and performance
by Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Merger Sub. This Agreement has been duly
executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally, by general equity principles (regardless or whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(c) Non-Contravention. The execution, delivery and performance
by Merger Sub of this Agreement and the consummation by Merger Sub of the
transactions contemplated hereby do not and will not contravene or conflict
with the certificate of incorporation or by-laws of Merger Sub.
(d) No Business Activities. Merger Sub has not conducted any
activities other than in connection with the organization of Merger Sub, the
purchase of Ordinary Common Stock in open-market transactions, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of MCI. During the period from the date of this
Agreement and continuing until the Effective Time, MCI agrees as to itself and
its Subsidiaries that (except as expressly contemplated or permitted by this
Agreement or as otherwise indicated on the MCI Disclosure Schedule or as
required by a Governmental Entity of competent jurisdiction or to the extent
that WorldCom shall otherwise consent in writing):
(a) Ordinary Course. (i) MCI and its Subsidiaries shall carry
on their respective businesses in the usual, regular and ordinary course in all
material respects, in substantially the same manner as heretofore conducted,
and shall use all
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reasonable efforts to preserve intact their present lines of business, maintain
their rights and franchises and preserve their relationships with customers,
suppliers and others having business dealings with them to the end that their
ongoing businesses shall not be impaired in any material respect at the
Effective Time; provided, however, that no action by MCI or its Subsidiaries
with respect to matters specifically addressed by any other provision of this
Section 4.1 shall be deemed a breach of this Section 4.1(a)(i) unless such
action would constitute a breach of one or more of such other provisions.
(ii) MCI shall not, and shall not permit any of its Subsidiaries
to, (A) enter into any new material line of business or (B) incur or commit to
any capital expenditures other than capital expenditures incurred or committed
to in the ordinary course of business consistent with past practice and which,
together with all such expenditures incurred or committed to during any fiscal
year, are not in excess of 105% of the aggregate amounts set forth in Section
4.1(a) of the MCI Disclosure Schedule.
(b) Dividends; Changes in Share Capital. MCI shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any
of its capital stock, except (A) MCI may continue the declaration and payment
of regular semiannual cash dividends not in excess of $0.025 per share of MCI
Common Stock, in each case with usual record and payment dates for such
dividends in accordance with MCI's past practice and (B) dividends by wholly
owned Subsidiaries of MCI, (ii) split, combine or reclassify any of its capital
stock or issue or authorize or propose the issuance of any other securities in
respect of, in lieu of or in substitution for, shares of its capital stock,
except for any such transaction by a wholly owned Subsidiary of MCI which
remains a wholly owned Subsidiary after consummation of such transaction, or
(iii) repurchase, redeem or otherwise acquire any shares of its capital stock
or any securities convertible into or exercisable for any shares of its capital
stock except for the purchase from time to time by MCI of MCI Common Stock (and
the associated Rights) in the ordinary course of business consistent with past
practice in connection with the MCI Benefit Plans.
(c) Issuance of Securities. Except as set forth in Section 5.7,
MCI shall not, and shall not permit any of its Subsidiaries to, issue, deliver
or sell, or authorize or propose the issuance, delivery or sale of, any shares
of its capital stock of any class, any MCI Voting Debt or any securities
convertible into or exercisable for, or any rights, warrants or options to
acquire, any such shares or MCI Voting Debt, or enter into any agreement with
respect to any of the foregoing, other
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than (i) the issuance of MCI Common Stock (and the associated Rights) upon the
exercise of stock options or in connection with other stock-based benefits
plans outstanding on the date hereof in accordance with their present terms,
(ii) issuances by a wholly owned Subsidiary of MCI of capital stock to such
Subsidiary's parent, (iii) issuances in accordance with the Rights Agreement or
(iv) issuances of shares, options, rights or other awards and amendments to
equity-related awards, in the ordinary course of business and consistent with
past practice pursuant to the MCI Benefit Plans.
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or required
by the rules and regulations of NASDAQ, MCI and its material Subsidiaries shall
not amend, in the case of Subsidiaries, in any material respect, or propose to
amend their respective certificates of incorporation, by-laws or other
governing documents.
(e) No Acquisitions. Other than acquisitions in existing or
related lines of business of MCI the fair market value of the total
consideration (including the value of indebtedness or other liability acquired
or assumed) for which does not exceed $325 million in the aggregate, MCI shall
not, and shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial equity
interest in or a substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other business
organization or division thereof or otherwise acquire or agree to acquire any
assets (other than the acquisition of assets used in the operations of the
business of MCI and its Subsidiaries in the ordinary course); provided,
however, that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of MCI or (y) the creation of
new Subsidiaries of MCI organized to conduct or continue activities otherwise
permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of MCI, (ii) dispositions
referred to in MCI SEC Reports filed prior to the date of this Agreement and
(iii) as may be required by or in conformance with law or regulation in order
to permit or facilitate the consummation of the transactions contemplated
hereby, MCI shall not, and shall not permit any Subsidiary of MCI to, sell,
lease, encumber or otherwise dispose of, or agree to sell, lease, encumber or
otherwise dispose of, any of its assets (including capital stock of
Subsidiaries of MCI) which are material, individually or in the aggregate, to
MCI.
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(g) Indebtedness. MCI shall not, and shall not permit any of
its Subsidiaries to, (i) make any loans, advances or capital contributions to,
or investments in, any other Person, other than by MCI or a Subsidiary of MCI
to or in MCI or any Subsidiary of MCI or (ii) pay, discharge or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than indebtedness, issuances of debt
securities, guarantees, loans, advances, capital contributions, investments,
payments, discharges or satisfactions incurred or committed to in the ordinary
course of business consistent with past practice.
(h) Tax-Free Qualification. MCI shall not, and shall not permit
any of its Subsidiaries to, take any action that would prevent or impede the
Merger from qualifying as a reorganization under Section 368 of the Code.
(i) Other Actions. MCI shall not, and shall not permit any of
its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in, except as otherwise permitted by Section 5.5, any of
the conditions to the Merger set forth in Article VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in MCI SEC Reports filed prior to the date of this Agreement, or as
required by a Governmental Entity, MCI shall not change its methods of
accounting in effect at December 31, 1996, except as required by changes in
U.S. GAAP as concurred in by MCI's independent auditors. MCI shall not (i)
change its fiscal year or (ii) make any material Tax election, other than in
the ordinary course of business consistent with past practice, without
consultation with WorldCom.
(k) MCI Rights Agreement. Except as provided in Section 5.10,
MCI shall not amend, modify or waive any provision of the MCI Rights Agreement,
and shall not take any action to redeem the Rights or render the Rights
inapplicable to any transaction, other than to permit another transaction that
the MCI Board has determined is a Superior Proposal, to be consummated no
earlier than December 31, 1998.
4.2 Covenants of WorldCom. During the period from the date of
this Agreement and continuing until the Effective Time, WorldCom agrees as to
itself and its Subsidiaries that (except as expressly contemplated or permitted
by this Agreement or as otherwise indicated on the WorldCom Disclosure Schedule
or as required by a Governmental Entity of competent jurisdiction or to the
extent that MCI shall otherwise consent in writing):
(a) Ordinary Course. (i) WorldCom and its Subsidiaries shall
carry on their respective businesses in the
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usual, regular and ordinary course in all material respects, in substantially
the same manner as heretofore conducted, and shall use all reasonable efforts
to preserve intact their present lines of business, maintain their rights and
franchises and preserve their relationships with customers, suppliers and
others having business dealings with them to the end that their ongoing
businesses shall not be impaired in any material respect at the Effective Time;
provided, however, that no action by WorldCom or its Subsidiaries with respect
to matters specifically addressed by any other provisions of this Section 4.2
shall be deemed a breach of this Section 4.2(a)(i) unless such action would
constitute a breach of one or more of such other provisions.
(ii) WorldCom shall not, and shall not permit any of its
Subsidiaries to, (A) enter into any new material line of business (other than
incidentally as part of a larger acquisition within an existing line of
business) or (B) incur or commit to any capital expenditures other than capital
expenditures incurred or committed to in the ordinary course of business
consistent with past practice.
(b) Dividends; Changes in Share Capital. WorldCom shall not,
and shall not permit any of its Subsidiaries to, and shall not propose to, (i)
declare or pay any dividends on or make other distributions in respect of any
of its capital stock, except (A) WorldCom may continue the declaration and
payment of regular quarterly cash dividends in amounts consistent with past
practice (including increases in such amounts consistent with past practice)
and (B) dividends by wholly owned Subsidiaries of WorldCom, (ii) split, combine
or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for any such transaction by a wholly
owned Subsidiary of WorldCom which remains a wholly owned Subsidiary after
consummation of such transaction, (iii) repurchase, redeem or otherwise acquire
any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase from
time to time by WorldCom of WorldCom Common Stock in the ordinary course of
business consistent with past practice in connection with share options, share
incentive schemes, profit sharing schemes or other benefit plans of WorldCom or
repurchases of shares of WorldCom Common Stock in open market or privately
negotiated transactions other than during the Measurement Period.
(c) Issuance of Securities. WorldCom shall not, and shall not
permit any of its Subsidiaries to, issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital stock of
any class, any WorldCom Voting Debt or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any such shares
or
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WorldCom Voting Debt, or enter into any agreement with respect to any of the
foregoing, other than (i) the issuance of WorldCom Common Stock upon the
exercise of stock options, (ii) issuances by a wholly owned Subsidiary of
WorldCom of capital stock to such Subsidiary's parent or another wholly owned
Subsidiary of WorldCom, (iii) issuances of options, awards, and amendments to
equity-related awards pursuant to WorldCom benefit plans as in effect from time
to time, (iv) issuances in accordance with the WorldCom Rights Agreement or (v)
issuances in respect of any acquisitions by WorldCom or its subsidiaries that
are currently pending ("WorldCom Pending Acquisitions") on the date hereof or
are permitted pursuant to Section 4.2(e).
(d) Governing Documents. Except to the extent required to
comply with their respective obligations hereunder, required by law or required
by the rules and regulations of NASDAQ, WorldCom and its material Subsidiaries
shall not amend, in the case of Subsidiaries, in any material respect, or
propose to amend their respective certificates of incorporation, by-laws or
other governing documents.
(e) No Acquisitions. Other than acquisitions in existing or
related lines of business of WorldCom the fair market value of the total
consideration (including the value of indebtedness or other liability acquired
or assumed) for which does not exceed $525 million in the aggregate and other
than WorldCom Pending Acquisitions, WorldCom, shall not, and shall not permit
any of its Subsidiaries to, acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other
than the acquisition of assets used in the ordinary course); provided, however,
that the foregoing shall not prohibit (x) internal reorganizations or
consolidations involving existing Subsidiaries of WorldCom or (y) the creation
of new Subsidiaries of WorldCom organized to conduct or continue activities
otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of WorldCom, (ii) dispositions
referred to in WorldCom SEC Reports filed prior to the date of this Agreement
and (iii) as may be required by or in conformance with law or regulation in
order to permit or facilitate the consummation of the transactions contemplated
hereby, WorldCom shall not, and shall not permit any Subsidiary of WorldCom to,
sell, lease, encumber or otherwise dispose of, any of its assets (including
capital stock of Subsidiaries of WorldCom) which are material, individually or
in the aggregate, to WorldCom.
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(g) Indebtedness. WorldCom shall not, and shall not permit any
of its Subsidiaries to, (i) make any loans, advances or capital contributions
to, or investments in, any other Person, other than by WorldCom or a Subsidiary
of WorldCom to or in WorldCom or any Subsidiary of WorldCom or (ii) pay,
discharge or satisfy any claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than indebtedness,
issuances of debt securities, guarantees, loans, advances, capital
contributions, investments, payments, discharges or satisfactions incurred or
committed to in the ordinary course of business consistent with past practice.
(h) Tax-Free Qualification. WorldCom shall not, and shall not
permit any of its Subsidiaries to, take any action that would prevent or impede
the Merger from qualifying as a reorganization under Section 368 of the Code.
(i) Other Actions. WorldCom shall not, and shall not permit any
of its Subsidiaries to, take any action that would, or that could reasonably be
expected to, result in any of the conditions to the Merger set forth in Article
VI not being satisfied.
(j) Accounting Methods; Income Tax Elections. Except as
disclosed in WorldCom SEC Reports filed prior to the date of this Agreement, or
as required by a Governmental Entity, WorldCom shall not change its methods of
accounting in effect at December 31, 1996, except as required by changes in
U.S. GAAP as concurred in by WorldCom's independent auditors. WorldCom shall
not (i) change its fiscal year or (ii) make any material Tax election, other
than in the ordinary course of business consistent with past practice, without
consultation with MCI.
(k) Acquisition Proposals. WorldCom shall not, and shall not
permit any of its Subsidiaries to, enter into any agreement with respect to or
consummate any transaction contemplated by an Acquisition Proposal (as defined
in Section 5.5).
(l) WorldCom Rights Agreement. WorldCom shall not amend, modify
or waive any provision of the WorldCom Rights Agreement and shall not take any
action to redeem the WorldCom Rights or render the WorldCom Rights inapplicable
to any transaction.
4.3 Advice of Changes; Governmental Filings. Each party shall
(a) confer on a regular and frequent basis with the other and (b) report (to
the extent permitted by law or regulation or any applicable confidentiality
agreement) on operational matters. MCI and WorldCom shall file all reports
required to be filed by each of them with the SEC (and all other
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Governmental Entities) between the date of this Agreement and the Effective
Time and shall (to the extent permitted by law or regulation or any applicable
confidentiality agreement) deliver to the other party copies of all such
reports, announcements and publications promptly after the same are filed.
Subject to applicable laws relating to the exchange of information, each of MCI
and WorldCom shall have the right to review in advance, and will consult with
the other with respect to, all the information relating to the other party and
each of their respective Subsidiaries, which appears in any filings,
announcements or publications made with, or written materials submitted to, any
third party or any Governmental Entity in connection with the transactions
contemplated by this Agreement. In exercising the foregoing right, each of the
parties hereto agrees to act reasonably and as promptly as practicable. Each
party agrees that, to the extent practicable and as timely as practicable, it
will consult with, and provide all appropriate and necessary assistance to, the
other party with respect to the obtaining of all permits, consents, approvals
and authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and
each party will keep the other party apprised of the status of matters relating
to completion of the transactions contemplated hereby.
4.4 Transition Planning. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Chief Executive
Officer of WorldCom, and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, as Chief Executive Officer of MCI,
jointly shall be responsible for coordinating all aspects of transition
planning and implementation relating to the Merger and the other transactions
contemplated hereby. If either such person ceases to be Chief Executive
Officer of his company for any reason, such person's successor shall assume his
predecessor's responsibilities under this Section 4.4. During the period
between the date of this Agreement and the Effective Time, Messrs. ▇▇▇▇▇▇ and
▇▇▇▇▇▇ jointly shall (i) examine various alternatives regarding the manner in
which to best organize and manage the businesses of WorldCom and MCI after the
Effective Time and (ii) coordinate policies and strategies with respect to
regulatory authorities and bodies, in all cases subject to applicable law and
regulation.
4.5 Control of Other Party's Business. Nothing contained in
this Agreement shall give MCI, directly or indirectly, the right to control or
direct WorldCom's operations prior to the Effective Time. Nothing contained in
this Agreement shall give WorldCom, directly or indirectly, the right to
control or direct MCI's operations prior to the Effective Time. Prior to the
Effective Time, each of MCI and WorldCom shall exercise, consistent with the
terms and conditions of this Agreement, complete control and supervision over
its respective operations.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; MCI Stockholders Meeting.
(a) As promptly as practicable following the date hereof, WorldCom shall, in
cooperation with MCI, prepare and file with the SEC preliminary proxy materials
which shall constitute the Joint Proxy Statement/Prospectus (such proxy
statement/prospectus, and any amendments or supplements thereto, the "Joint
Proxy Statement/Prospectus") and an amendment to its existing registration
statement on Form S-4 with respect to the issuance of WorldCom Common Stock in
the Merger (the "Form S-4"). The Joint Proxy Statement/Prospectus will be
included in the Form S-4 as WorldCom's prospectus. The Form S-4 and the Joint
Proxy Statement/Prospectus shall comply as to form in all material respects
with the applicable provisions of the Securities Act and the Exchange Act and
the rules and regulations thereunder. Each of WorldCom and MCI shall use all
reasonable efforts to have the Form S-4 cleared by the SEC as promptly as
practicable after filing with the SEC and to keep the Form S-4 effective as
long as is necessary to consummate the Merger. WorldCom shall, as promptly as
practicable after receipt thereof, provide copies of any written comments
received from the SEC with respect to the Joint Proxy Statement/Prospectus to
MCI and advise MCI of any oral comments with respect to the Proxy
Statement/Prospectus received from the SEC. WorldCom agrees that none of the
information supplied or to be supplied by WorldCom for inclusion or
incorporation by reference in the Joint Proxy Statement/Prospectus and each
amendment or supplement thereto, at the time of mailing thereof and at the time
of the MCI Stockholders Meeting or the WorldCom Stockholders Meeting, will
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. MCI
agrees that none of the information supplied or to be supplied by MCI for
inclusion or incorporation by reference in the Joint Proxy Statement/Prospectus
and each amendment or supplement thereto, at the time of mailing thereof and at
the time of the MCI Stockholders Meeting or the WorldCom Stockholders Meeting,
will contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading. For
purposes of the foregoing, it is understood and agreed that information
concerning or related to WorldCom and the WorldCom Stockholders Meeting will be
deemed to have been supplied by WorldCom and information concerning or related
to MCI and the MCI Stockholders Meeting shall be deemed to have been supplied
by MCI. WorldCom will
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provide MCI with a reasonable opportunity to review and comment on any
amendment or supplement to the Joint Proxy Statement/Prospectus prior to filing
such with the SEC, and will provide MCI with a copy of all such filings made
with the SEC. No amendment or supplement to the information supplied by MCI
for inclusion in the Joint Proxy Statement/Prospectus shall be made without the
approval of MCI, which approval shall not be unreasonably withheld or delayed.
(b) MCI shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "MCI Stockholders Meeting") for the purpose of
obtaining the Required MCI Votes with respect to the transactions contemplated
by this Agreement, shall take all lawful action to solicit the adoption of this
Agreement by the Required MCI Votes and the Board of Directors of MCI shall
recommend adoption of this Agreement by the stockholders of MCI. Without
limiting the generality of the foregoing but subject to its rights pursuant to
Sections 5.5 and 7.1(f), MCI agrees that its obligations pursuant to the first
sentence of this Section 5.1(b) shall not be affected by the commencement,
public proposal, public disclosure or communication to MCI of any Acquisition
Proposal.
(c) WorldCom shall, as promptly as practicable following the
execution of this Agreement, duly call, give notice of, convene and hold a
meeting of its stockholders (the "WorldCom Stockholders Meeting") for the
purpose of obtaining the Required WorldCom Vote and the Charter Amendment Vote,
shall take all lawful action to solicit the approval of the Share Issuance and
the Charter Amendment by the Required WorldCom Vote and the Charter Amendment
Vote and the Board of Directors of WorldCom shall recommend approval of the
transactions contemplated by this Agreement by the stockholders of WorldCom.
5.2 WorldCom Board of Directors; Officers; Headquarters; MCI
Name. (a) WorldCom shall take all necessary action to reconstitute the Board of
Directors of WorldCom as of the Effective Time in accordance with Exhibit
5.2(a) hereto.
(b) WorldCom shall take all necessary action to cause ▇▇▇▇ ▇.
▇▇▇▇▇▇▇, ▇▇. to be appointed Chairman of WorldCom as of the Effective Time.
(c) WorldCom shall take all action necessary to cause the senior
management of WorldCom to be as previously agreed between the parties.
(d) As of the Effective Time, WorldCom shall be headquartered in
Jackson, Mississippi and the Surviving Corporation shall be headquartered in
Washington D.C.
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(e) [Intentionally Omitted]
(f) WorldCom shall take all action necessary to amend its
Certificate of Incorporation as of the Effective Time to change its name to
"MCI WorldCom".
5.3 Access to Information. Upon reasonable notice, MCI shall
(and shall cause its Subsidiaries to) afford to the officers, employees,
accountants, counsel, financial advisors and other representatives of WorldCom
reasonable access during normal business hours, during the period prior to the
Effective Time, to all its properties, books, contracts, commitments and
records and, during such period, MCI shall (and shall cause its Subsidiaries
to) furnish promptly to WorldCom (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than reports or documents which
such party is not permitted to disclose under applicable law), and (b)
consistent with its legal obligations, all other information concerning its
business, properties and personnel as such other party may reasonably request;
provided, however, that MCI may restrict the foregoing access to the extent
that (i) a Governmental Entity requires MCI or any of its Subsidiaries to
restrict access to any properties or information reasonably related to any such
contract on the basis of applicable laws and regulations with respect to
national security matters or (ii) any law, treaty, rule or regulation of any
Governmental Entity applicable to MCI requires MCI or its Subsidiaries to
restrict access to any properties or information. The parties will hold any
such information which is non-public in confidence to the extent required by,
and in accordance with, the provisions of the letter dated October 16, 1997
between MCI and WorldCom (the "Confidentiality Agreement"). Any investigation
by WorldCom or MCI shall not affect the representations and warranties of MCI
or WorldCom, as the case may be.
5.4 Best Efforts. (a) Subject to the terms and conditions of
this Agreement, each party will use its best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate the Merger and
the other transactions contemplated by this Agreement as soon as practicable
after the date hereof. In furtherance and not in limitation of the foregoing,
each party hereto agrees to make, to the extent it has not already done so, an
appropriate filing of a Notification and Report Form pursuant to the HSR Act
with respect to the transactions contemplated hereby as promptly as practicable
and in any event within five business days of the date hereof and to supply as
promptly as practicable any additional information and documentary material
that may be
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requested pursuant to the HSR Act and to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable.
(b) Each of WorldCom and MCI shall, in connection with the
efforts referenced in Section 5.4(a) to obtain all requisite approvals and
authorizations for the transactions contemplated by this Merger Agreement under
the HSR Act or any other Regulatory Law (as defined below), use its best
efforts to (i) cooperate in all respects with each other in connection with any
filing or submission and in connection with any investigation or other inquiry,
including any proceeding initiated by a private party; (ii) promptly inform the
other party of any communication received by such party from, or given by such
party to, the FCC, PUCs, the Antitrust Division of the Department of Justice
(the "DOJ") or any other Governmental Entity and of any material communication
received or given in connection with any proceeding by a private party, in each
case regarding any of the transactions contemplated hereby, and (iii) permit
the other party to review any communication given by it to, and consult with
each other in advance of any meeting or conference with, the FCC, PUCs, the DOJ
or any such other Governmental Entity or, in connection with any proceeding by
a private party, with any other Person, and to the extent permitted by the FCC,
PUCs, the DOJ or such other applicable Governmental Entity or other Person,
give the other party the opportunity to attend and participate in such meetings
and conferences. For purposes of this Agreement, "Regulatory Law" means the
▇▇▇▇▇▇▇ Act, as amended, the ▇▇▇▇▇▇▇ Act, as amended, the HSR Act, the Federal
Trade Commission Act, as amended, the Federal Communications Act, as amended,
and all other federal, state and foreign, if any, statutes, rules, regulations,
orders, decrees, administrative and judicial doctrines and other laws that are
designed or intended to prohibit, restrict or regulate actions having the
purpose or effect of monopolization or restraint of trade or lessening of
competition, whether in the communications industry or otherwise through merger
or acquisition.
(c) In furtherance and not in limitation of the covenants of the
parties contained in Sections 5.4(a) and 5.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party, is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of
WorldCom and MCI shall cooperate in all respects with each other and use its
respective best efforts to contest and resist any such action or proceeding and
to have vacated, lifted, reversed or overturned any decree, judgment,
injunction or other order, whether temporary, preliminary or permanent, that is
in effect and that prohibits, prevents or restricts consummation of the
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transactions contemplated by this Agreement. Notwithstanding the foregoing or
any other provision of this Agreement, nothing in this Section 5.4 shall limit
a party's right to terminate this Agreement pursuant to Section 7.1(b) or
7.1(c) so long as such party has up to then complied in all respects with its
obligations under this Section 5.4.
(d) If any objections are asserted with respect to the
transactions contemplated hereby under any Regulatory Law or if any suit is
instituted by any Governmental Entity or any private party challenging any of
the transactions contemplated hereby as violative of any Regulatory Law, each
of WorldCom and MCI shall use its best efforts to resolve any such objections
or challenge as such Governmental Entity or private party may have to such
transactions under such Regulatory Law so as to permit consummation of the
transactions contemplated by this Agreement.
(e) Each of WorldCom, Merger Sub and MCI shall use its best
efforts to cause the Merger to qualify and will not (both before and after
consummation of the Merger) take any actions which to its knowledge could
reasonably be expected to prevent the Merger from qualifying, as a
reorganization under the provisions of Section 368 of the Code.
5.5 Acquisition Proposals. Each of WorldCom and MCI agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors of
it or its Subsidiaries shall, and that it shall direct and use its best efforts
to cause its and its Subsidiaries' employees, agents and representatives
(including any investment banker, attorney or accountant retained by it or any
of its Subsidiaries) not to, directly or indirectly, initiate, solicit,
encourage or otherwise facilitate (including by way of furnishing information)
any inquiries or the making of any proposal or offer with respect to a merger,
reorganization, share exchange, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving, or
any purchase or sale of all or any significant portion of the assets or 10% or
more of the equity securities of, it or any of its Subsidiaries that, in any
such case, could reasonably be expected to interfere with the completion of the
Merger or the other transactions contemplated by this Agreement (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal").
Each of WorldCom and MCI further agrees that neither it nor any of its
Subsidiaries nor any of the officers and directors of it or its Subsidiaries
shall, and that it shall direct and use its best efforts to cause its and its
Subsidiaries' employees, agents and representatives (including any investment
banker, attorney or accountant retained by it or any of its Subsidiaries) not
to, directly or indirectly, have any discussion with or provide any
confidential information or data to any Person relating to an Acquisition
Proposal, or engage in
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any negotiations concerning an Acquisition Proposal, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal or accept an
Acquisition Proposal. Notwithstanding the foregoing, MCI or its Board of
Directors shall be permitted to (A) to the extent applicable, comply with Rule
14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
Proposal, (B) in response to an unsolicited bona fide written Acquisition
Proposal by any Person, recommend such an unsolicited bona fide written
Acquisition Proposal to the stockholders of MCI, or withdraw or modify in any
adverse manner its approval or recommendation of this Agreement or (C) engage
in any discussions or negotiations with, or provide any information to, any
Person in response to an unsolicited bona fide written Acquisition Proposal by
any such Person, if and only to the extent that, in any such case as is
referred to in clause (B) or (C), (i) the MCI Stockholders Meeting shall not
have occurred, (ii) the Board of Directors of MCI concludes in good faith that
such Acquisition Proposal (x) in the case of clause (B) above would, if
consummated, constitute a Superior Proposal or (y) in the case of clause (C)
above could reasonably be expected to constitute a Superior Proposal, (iii)
prior to providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, the MCI Board of Directors receives
from such Person an executed confidentiality agreement on terms substantially
similar to those contained in the Confidentiality Agreement and (iv) prior to
providing any information or data to any Person or entering into discussions or
negotiations with any Person, the Board of Directors of MCI notifies WorldCom
immediately of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to
be initiated or continued with, any of its representatives indicating, in
connection with such notice, the name of such Person and the material terms and
conditions of any proposals or offers. MCI agrees that it will keep WorldCom
informed, on a current basis, of the status and terms of any such proposals or
offers and the status of any such discussions or negotiations. Each of
WorldCom and MCI agrees that it will immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any Acquisition Proposal. Each of
WorldCom and MCI agrees that it will take the necessary steps to promptly
inform the individuals or entities referred to in the first sentence of this
Section 5.5 of the obligations undertaken in this Section 5.5. Nothing in this
Section 5.5 shall (x) permit either WorldCom or MCI to terminate this Agreement
(except as specifically provided in Article VII hereof) or (y) affect any other
obligation of MCI or WorldCom under this Agreement.
5.6 [Intentionally Omitted]
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5.7 Stock Options and Other Stock Plans; Employee Benefits
Matters. MCI and WorldCom will agree to provisions with respect to MCI's stock
options and other stock plans and treatment of MCI's officers and employees as
set forth in Exhibit 5.7 hereto.
5.8 Fees and Expenses. Whether or not the Merger is
consummated, all Expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
Expenses, except (a) if the Merger is consummated, the Surviving Corporation
shall pay, or cause to be paid, any and all property or transfer taxes imposed
on MCI or its Subsidiaries and any real property transfer tax imposed on any
holder of shares of capital stock of MCI resulting from the Merger, (b)
Expenses incurred in connection with the filing, printing and mailing of the
Joint Proxy Statement/Prospectus, which shall be shared equally by WorldCom and
MCI and (c) as provided in Section 7.2. As used in this Agreement, "Expenses"
includes all out-of-pocket expenses (including, without limitation, all fees
and expenses of counsel, accountants, investment bankers, experts and
consultants to a party hereto and its affiliates) incurred by a party or on its
behalf in connection with or related to the authorization, preparation,
negotiation, execution and performance of this Agreement and the transactions
contemplated hereby, including the preparation, printing, filing and mailing of
the Joint Proxy Statement/Prospectus and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated
hereby.
5.9 Directors' and Officers' Insurance. The Surviving
Corporation shall cause to be maintained in effect in its certificate of
incorporation and by-laws (i) for a period of six years after the Effective
Time, the current provisions regarding elimination of liability of directors
and indemnification of officers, directors and employees contained in the
certificate of incorporation and by-laws of MCI and (ii) for a period of six
years, the current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by MCI (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or
events that occurred on or before the Effective Time; provided, however, that
in no event shall the Surviving Corporation be required to expend in any one
year an amount in excess of 200% of the annual premiums currently paid by MCI
for such insurance; and, provided, further, that if the annual premiums of such
insurance coverage exceed such amount, the Surviving Corporation shall be
obligated to obtain a policy with the greatest coverage available for a cost
not exceeding such amount.
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5.10 Rights Agreement. The Board of Directors of MCI shall take
all further action (in addition to that referred to in Section 3.1(g))
necessary (including redeeming the Rights immediately prior to the Effective
Time or amending the Rights Agreement) in order to render the Rights
inapplicable to the Merger and the other transactions contemplated by this
Agreement.
5.11 Public Announcements. MCI and WorldCom shall use all
reasonable efforts to develop a joint communications plan and each party shall
use all reasonable efforts (i) to ensure that all press releases and other
public statements with respect to the transactions contemplated hereby shall be
consistent with such joint communications plan, and (ii) unless otherwise
required by applicable law or by obligations pursuant to any listing agreement
with or rules of any securities exchange, to consult with each other before
issuing any press release or otherwise making any public statement with respect
to this Agreement or the transactions contemplated hereby.
5.12 Accountants' Letters. Upon reasonable notice from the
other, MCI and WorldCom shall use their respective reasonable best efforts to
cause Price Waterhouse LLP and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, respectively, to deliver to
WorldCom or MCI, as the case may be, a letter, dated within two business days
of the Effective Time of the Form S-4 covering such matters as are requested by
WorldCom or MCI, as the case may be, and as are customarily addressed in
accountant's "comfort" letters. In connection with WorldCom's efforts to
obtain such letter, if requested by ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP, MCI shall provide a
representation letter to ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP complying with the statement on
Auditing Standards No. 72 ("SAS 72"), if then required. In connection with
MCI's efforts to obtain such letter, if requested by Price Waterhouse LLP,
WorldCom shall provide a representation letter to Price Waterhouse LLP
complying with SAS 72, if then required.
5.13 Listing of Shares of WorldCom Common Stock. WorldCom shall
use its best efforts to cause the shares of WorldCom Common Stock to be issued
in the Merger to be approved for quotation, upon official notice of issuance,
on NASDAQ.
5.14 Voting Trust. If at any time prior to the MCI Stockholders
Meeting a third party shall make an unsolicited tender or exchange offer to
acquire control of MCI, which offer is not recommended by MCI's Board of
Directors, then WorldCom and MCI will use their reasonable best efforts to
consummate the transactions contemplated hereby by implementing a "voting
trust" or similar structure permitting consummation of the transactions
contemplated hereby prior to the receipt of final FCC and PUC approvals.
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ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to Effect the Merger.
The obligations of MCI, WorldCom and Merger Sub to effect the Merger are
subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:
(a) Stockholder Approval. (i) MCI shall have obtained the
Required MCI Votes in connection with the adoption of this Agreement by the
stockholders of MCI and (ii) WorldCom shall have obtained the Required WorldCom
Vote in connection with the approval of the Share Issuance by the stockholders
of WorldCom.
(b) No Injunctions or Restraints, Illegality. No Laws shall
have been adopted or promulgated, and no temporary restraining order,
preliminary or permanent injunction or other order issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect, having the
effect of making the Merger illegal or otherwise prohibiting consummation of
the Merger; provided, however, that the provisions of this Section 6.1(b) shall
not be available to any party whose failure to fulfill its obligations pursuant
to Section 5.4 shall have been the cause of, or shall have resulted in, such
order or injunction.
(c) FCC and Public Utility Commission Approvals. All approvals
for the Merger from the FCC and from the PUCs shall have been obtained other
than those the failure of which to be obtained would not reasonably be expected
to have individually or in the aggregate a Material Adverse Effect on WorldCom
and its Subsidiaries (including the Surviving Corporation).
(d) HSR Act. The waiting period (and any extension thereof)
applicable to the Merger under the HSR Act shall have been terminated or shall
have expired.
(e) EU Antitrust. WorldCom and MCI shall have received in
respect of the Merger and any matters arising therefrom: confirmation by way of
a decision from the Commission of the European Union under Regulation 4064.89
(with or without the initiation of proceedings under Article 6(1)(c) thereof)
that the Merger and any matters arising therefrom are compatible with the
common market.
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(f) NASDAQ Listing. The shares of WorldCom Common Stock to be
issued in the Merger shall have been approved upon official notice of issuance
for quotation on NASDAQ.
(g) Effectiveness of the Form S-4. The Form S-4 shall have been
declared effective by the SEC under the Securities Act. No stop order
suspending the effectiveness of the Form S-4 shall have been issued by the SEC
and no proceedings for that purpose shall have been initiated or threatened by
the SEC.
6.2 Additional Conditions to Obligations of WorldCom and Merger
Sub. The obligations of WorldCom and Merger Sub to effect the Merger are
subject to the satisfaction of, or waiver by WorldCom, on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. Each of the representations
and warranties of MCI set forth in this Agreement that is qualified as to
materiality shall have been true and correct on the date of this Agreement, and
each of the representations and warranties of MCI that is not so qualified
shall have been true and correct in all material respects on the date of this
Agreement, and WorldCom shall have received a certificate of the chief
executive officer and the chief financial officer of MCI to such effect.
(b) Performance of Obligations of MCI. MCI shall have performed
or complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as to
materiality and shall have performed or complied in all material respects with
all other agreements and covenants required to be performed by it under this
Agreement at or prior to the Closing Date that are not so qualified as to
materiality, and WorldCom shall have received a certificate of the chief
executive officer and the chief financial officer of MCI to such effect.
(c) Tax Opinion. WorldCom shall have received from Cravath,
Swaine & ▇▇▇▇▇, counsel to WorldCom, on the Closing Date, a written opinion
dated as of such date substantially in the form of Exhibit 6.2(c)(1). In
rendering such opinion, counsel to WorldCom shall be entitled to rely upon
representations of officers of WorldCom and MCI substantially in the form of
Exhibits 6.2(c)(3) and 6.2(c)(4).
6.3 Additional Conditions to Obligations of MCI. The
obligations of MCI to effect the Merger are subject to the satisfaction of, or
waiver by MCI, on or prior to the Closing Date of the following additional
conditions:
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(a) Representations and Warranties. Each of the representations
and warranties of WorldCom and Merger Sub set forth in this Agreement that is
qualified as to materiality shall have been true and correct on the date of
this Agreement, and each of the representations and warranties of each of
WorldCom and Merger Sub that is not so qualified shall have been true and
correct in all material respects on the date of this Agreement, and MCI shall
have received a certificate of the chief executive officer and the chief
financial officer of WorldCom to such effect.
(b) Performance of Obligations of WorldCom. WorldCom shall have
performed or complied with all agreements and covenants required to be
performed by it under this Agreement at or prior to the Closing Date that are
qualified as to materiality and shall have performed or complied in all
material respects with all agreements and covenants required to be performed by
it under this Agreement at or prior to the Closing Date that are not so
qualified as to materiality, and MCI shall have received a certificate of the
chief executive officer and the chief financial officer of WorldCom to such
effect.
(c) Tax Opinion. MCI shall have received from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇, counsel to MCI, on the Closing Date, a written opinion dated as of
such date substantially in the form of Exhibit 6.2(c)(2). In rendering such
opinion, counsel to MCI shall be entitled to rely upon representations of
officers of WorldCom and MCI substantially in the form of Exhibits 6.2(c)(3)
and 6.2(c)(4).
(d) No Material Adverse Change. Since the date of this
Agreement, WorldCom and its Subsidiaries shall not have incurred any material
liability, except in the ordinary course of business consistent with past
practice, nor shall there have been any adverse change, circumstance or effect
that, individually or in the aggregate with all other adverse changes,
circumstances and effects, is or is reasonably likely to be materially adverse
to the business, financial condition or results of operations of WorldCom and
its Subsidiaries taken as a whole, other than any change, circumstance or
effect relating to (i) the economy or securities markets in general or (ii) the
industries in which WorldCom or MCI operate and not specifically relating to
WorldCom or MCI.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, by action taken or
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authorized by the Board of Directors of the terminating party or parties, and
except as provided below, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of MCI or WorldCom:
(a) By mutual written consent of WorldCom and MCI, by action of
their respective Boards of Directors;
(b) By either MCI or WorldCom if the Effective Time shall not
have occurred on or before December 31, 1998 (the "Termination Date");
provided, however, that the right to terminate this Agreement under this
Section 7.1(b) shall not be available to any party whose failure to fulfill any
obligation under this Agreement (including without limitation Section 5.4) has
to any extent been the cause of, or resulted in, the failure of the Effective
Time to occur on or before the Termination Date;
(c) By either MCI or WorldCom if (x) any Governmental Entity (i)
shall have issued an order, decree or ruling or taken any other action (which
the parties shall have used their best efforts to resist, resolve or lift, as
applicable, in accordance with Section 5.4) permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement, and
such order, decree, ruling or other action shall have become final and
nonappealable or (ii) shall have failed to issue an order, decree or ruling or
to take any other action (which order, decree, ruling or other action the
parties shall have used their best efforts to obtain, in accordance with
Section 5.4), in each case (i) and (ii) which is necessary to fulfill the
conditions set forth in subsections 6.1(c), (d) and (e), as applicable, and
such denial of a request to issue such order, decree, ruling or take such other
action shall have become final and nonappealable; provided, however, that the
right to terminate this Agreement under this Section 7.1(c) shall not be
available to any party whose failure to comply with Section 5.4 has to any
extent been the cause of such action or inaction;
(d) By either MCI or WorldCom if the approval by the
stockholders of MCI or of WorldCom required for the consummation of the Merger
shall not have been obtained by reason of the failure to obtain the Required
MCI Votes or the Required WorldCom Vote, as the case may be, at a duly held
meeting of stockholders of MCI or WorldCom, as the case may be, or at any
adjournment thereof;
(e) By WorldCom if the Board of Directors of MCI, prior to the
MCI Stockholders Meeting (i) shall withdraw or modify in any adverse manner its
approval or recommendation of this Agreement pursuant to Section 5.5, (ii)
shall approve or recommend a Superior Proposal pursuant to Section 5.5 or (iii)
shall resolve to take any of the actions specified in clauses (i) or (ii)
above; or
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(f) By MCI at any time prior to the MCI Stockholders Meeting,
upon two Business Days' prior notice to WorldCom, if the Board of Directors of
MCI shall approve a Superior Proposal; provided, however, that (i) MCI shall
have complied with Section 5.5, (ii) the Board of Directors of MCI shall have
concluded in good faith, after giving effect to all concessions which may be
offered by WorldCom pursuant to clause (iii) below, on the basis of the advice
of its financial advisors and outside counsel, that such proposal is a Superior
Proposal and (iii) prior to any such termination, MCI shall, and shall cause
its financial and legal advisors to, negotiate with WorldCom to make such
adjustments in the terms and conditions of this Agreement as would enable
WorldCom to proceed with the transactions contemplated hereby; provided,
however, that it shall be a condition to termination by MCI pursuant to this
Section 7.l(f) that MCI shall have made the payment of the WorldCom Alternative
Transaction Fee to WorldCom required by Section 7.2(b).
Notwithstanding anything else contained in this Agreement, the
right to terminate this Agreement under this Section 7.1 shall not be available
to any party (a) that is in material breach of its obligations hereunder or (b)
whose failure to fulfill its obligations or to comply with its covenants under
this Agreement has been the cause of, or resulted in, the failure to satisfy
any condition to the obligations of either party hereunder.
7.2 Effect of Termination. (a) In the event of termination of
this Agreement by either MCI or WorldCom as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of WorldCom or MCI or their respective officers or
directors except with respect to Section 3.1(h), Section 3.2(h), Section
4.1(k), the second sentence of Section 5.3, Section 5.8, this Section 7.2 and
Article VIII.
(b) WorldCom and MCI agree that (i) if MCI shall terminate this
Agreement pursuant to Section 7.1(f) or (ii) if (x) MCI or WorldCom shall
terminate this Agreement pursuant to Section 7.1(d) due to the failure of MCI's
stockholders to approve and adopt this Agreement or WorldCom shall terminate
this Agreement pursuant to Section 7.1(e), (y) at the time of the event giving
rise to such termination there shall exist an Acquisition Proposal with respect
to MCI and (z) within 12 months of the termination of this Agreement, MCI
enters into a definitive agreement with any third party with respect to an
Acquisition Proposal or an Acquisition Proposal is consummated, then MCI shall
pay to WorldCom an amount equal to $750 million
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(the "WorldCom Alternative Transaction Fee") and shall reimburse WorldCom for
the amount of the BT Inducement Fee paid to BT (such amount, the "Reimbursement
Amount").
(c) The WorldCom Alternative Transaction Fee and the
Reimbursement Amount required to be paid pursuant to Section 7.2(b)(i) shall be
made prior to, and shall be a pre-condition to the effectiveness of termination
of this Agreement pursuant to such Section. Any other payment required to be
made pursuant to Section 7.2(b) shall be made to WorldCom not later than two
Business Days after the entering into of a definitive agreement with respect
to, or the consummation of, an Acquisition Proposal, as applicable. All
payments under this Section 7.2 and under Section 7.3 shall be made by wire
transfer of immediately available funds to an account designated by the party
entitled to receive payment.
7.3 Payment by WorldCom. WorldCom and MCI agree that if (a)
this Agreement shall be terminated pursuant to (i) Section 7.1(b) and any of
the conditions to the Merger set forth in Section 6.1(b), 6.1(c), 6.1(d),
6.1(e), 6.3(a), 6.3(b) or 6.3(d) has not been satisfied, (ii) Section 7.1(c),
or (iii) Section 7.1(d) solely as a result of the Required WorldCom Vote not
being obtained at a duly called WorldCom Stockholders Meeting or (b)
notwithstanding the satisfaction of all the conditions set forth in Sections
6.1 and 6.2 and the satisfaction or waiver by MCI of all the conditions set
forth in Section 6.3, WorldCom is not willing to consummate the Merger, then,
unless (1) MCI shall not have complied with Section 5.4 or (2) MCI shall have
breached its representations or warranties or its agreements or covenants
hereunder such that either of the conditions to the Merger set forth in Section
6.2(a) or 6.2(b) has not been satisfied, WorldCom shall pay to MCI an amount in
cash equal to $1.635 billion. The payment required to be made pursuant to this
Section 7.3 shall be made not later than two Business Days after the date of
such termination or such willful failure of WorldCom to close. Notwithstanding
anything in this Agreement (including Section 8.10) to the contrary, the
payment of any amount pursuant to this Section 7.3 (other than pursuant to
Section 7.3(a)(i), if due to the failure of the conditions set forth in Section
6.3(a) or 6.3(b), or Section 7.3(b)) shall constitute liquidated damages in
full and complete satisfaction of, and shall be MCI's sole and exclusive remedy
for, any loss, liability, damage or claim arising out of or in connection with
any such termination of this Agreement or the facts and circumstances resulting
in such termination or otherwise related thereto or otherwise arising out of or
in connection with this Agreement.
7.4 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the
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matters presented in connection with the Merger by the stockholders of MCI and
WorldCom, but, after any such approval, no amendment shall be made which by law
or in accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
7.5 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties
hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise shall not constitute a waiver of those
rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties and Agreements.
None of the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time and
this Article VIII. Nothing in this Section 8.1 shall relieve any party for any
breach of any representation, warranty, covenant or other agreement in this
Agreement occurring prior to termination.
8.2 Notices. All notices and other communications hereunder
shall be in writing and shall be deemed duly given (a) on the date of delivery
if delivered personally, or by telecopy or telefacsimile, upon confirmation of
receipt, (b) on the first Business Day following the date of dispatch if
delivered by a recognized next-day courier service, or (c) on the tenth
Business Day following the date of mailing if delivered by registered or
certified mail, return receipt requested, postage prepaid. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
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(a) if to WorldCom or Merger Sub, to
WorldCom, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: P. ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
General Counsel
Corporate Development
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Facsimile No.: 212-474-3700
(b) if to MCI to
MCI Communications Corporation
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
Executive Vice President
and General Counsel
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
with a copy to
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ III, Esq.
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
8.3 Interpretation. When a reference is made in this Agreement
to Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents, glossary of defined terms and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation".
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8.4 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 Entire Agreement; No Third Party Beneficiaries. (a) This
Agreement and the BT Agreement (and the agreement referred to in Section
5.2(c)) constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof, other than the Confidentiality Agreement, which shall
survive the execution and delivery of this Agreement.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right,
benefit or remedy of any nature whatsoever under or by reason of this
Agreement, other than Section 5.9 (which is intended to be for the benefit of
the Persons covered thereby and may be enforced by such Persons).
8.6 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Delaware.
8.7 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or
other provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as
originally contemplated to the greatest extent possible.
8.8 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto, in whole or in part (whether by operation of law or otherwise), without
the prior written consent of the other party, and any attempt to make any such
assignment without such consent shall be null and void, except that Merger Sub
may assign, in its sole discretion, any or all of its rights, interests and
obligations under this Agreement to any direct wholly owned Subsidiary of
WorldCom without the consent of MCI, but no such assignment shall relieve
Merger Sub of any of its
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obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.9 Submission to Jurisdiction; Waivers. Each of WorldCom and
MCI irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Chancery or other Courts of the State of Delaware, and
each of WorldCom and MCI hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of WorldCom and MCI hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or
proceeding with respect to this Agreement, (a) the defense of sovereign
immunity, (b) any claim that it is not personally subject to the jurisdiction
of the above-named courts for any reason other than the failure to serve
process in accordance with this Section 8.9, (c) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior
to judgment, attachment in aid of execution of judgment, execution of judgment
or otherwise), and (d) to the fullest extent permitted by applicable law, that
(i) the suit, action or proceeding in any such court is brought in an
inconvenient forum, (ii) the venue of such suit, action or proceeding is
improper and (iii) this Agreement, or the subject matter hereof, may not be
enforced in or by such courts.
8.10 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms hereof,
this being in addition to any other remedy to which they are entitled at law or
in equity.
8.11 Definitions. As used in this Agreement:
(a) "Board of Directors" means the Board of Directors of any
specified Person and any committees thereof.
(b) "Business Day" means any day on which banks are not required
or authorized to close in the City of New York.
(c) "Material Adverse Effect" means, with respect to any entity,
any adverse change, circumstance or effect that,
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individually or in the aggregate with all other adverse changes, circumstances
and effects, is or is reasonably likely to be materially adverse to the
business, financial condition or results of operations of such entity and its
Subsidiaries taken as a whole, other than any change, circumstance or effect
relating to (i) the economy or securities markets in general or (ii) the
industries in which WorldCom or MCI operate and not specifically relating to
WorldCom or MCI.
(d) "the other party" means, with respect to MCI, WorldCom and
means, with respect to WorldCom, MCI.
(e) "Person" means an individual, corporation, limited liability
company, partnership, association, trust, unincorporated organization, other
entity or group (as defined in the Exchange Act).
(f) "Subsidiary" when used with respect to any party means any
corporation or other organization, whether incorporated or unincorporated, (i)
of which such party or any other Subsidiary of such party is a general partner
(excluding partnerships, the general partnership interests of which held by
such party or any Subsidiary of such party do not have a majority of the voting
interests in such partnership) or (ii) at least a majority of the securities or
other interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(g) "Superior Proposal" means a bona fide written Acquisition
Proposal which the Board of Directors of MCI concludes in good faith (after
consultation with its financial advisors and legal counsel), taking into
account all legal, financial, regulatory and other aspects of the proposal and
the Person making the proposal, (i) would, if consummated, result in a
transaction that is more favorable to MCI's stockholders (in their capacities
as stockholders), from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is reasonably capable of being
completed (provided that for purposes of this definition the term Acquisition
Proposal shall have the meaning assigned to such term in Section 5.5 except
that the reference to "10%" in the definition of "Acquisition Proposal" shall
be deemed to be a reference to "50%" and "Acquisition Proposal" shall only be
deemed to refer to a transaction involving MCI, or with respect to assets
(including the shares of any Subsidiary of MCI) of MCI and its Subsidiaries,
taken as a whole, and not any of its Subsidiaries alone).
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(h) "Benefit Plans" means, with respect to any Person, each
employee benefit plan, program, arrangement and contract (including, without
limitation, any "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and any
bonus, deferred compensation, stock bonus, stock purchase, restricted stock,
stock option, employment, termination, stay agreement or bonus, change in
control and severance plan, program, arrangement and contract) all of the
foregoing in effect on the date of this Agreement, to which such Person is a
party, which is maintained or contributed to by such Person, or with respect to
which such Person could incur material liability under Section 4069, 4201 or
4212(c) of ERISA.
8.12 Other Agreements. The parties hereto acknowledge and
agree that, except as otherwise expressly set forth in this Agreement, the
rights and obligations of MCI and WorldCom under any other agreement between
the parties shall not be affected by any provision of this Agreement.
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IN WITNESS WHEREOF, WorldCom, MCI and Merger Sub have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of November 9, 1997.
WORLDCOM, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
TC INVESTMENTS CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief
Executive Officer
MCI COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇.
Title: Chairman
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EXHIBIT 5.2(a) TO
THE MERGER AGREEMENT
RECONSTITUTION OF THE BOARD OF DIRECTORS OF WORLDCOM
The Board of Directors of WorldCom, as of the Effective Time, shall consist of
fifteen members, eight of whom shall be designated by WorldCom from among the
directors of WorldCom, five of whom shall be designated by MCI from among the
directors of MCI and two of whom shall be directors designated by WorldCom from
among pending acquisitions of WorldCom; provided that the persons designated by
each party shall be reasonably acceptable to the other party.
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Exhibit 5.7
Outline of Employee Benefit Provisions
1. All outstanding equity awards, including all ISUs, all restricted
stock and all option grants will continue to vest (and be paid out) or
become exercisable, as the case may be, in accordance with their
current terms and will not be further accelerated in any way;
provided, however, that if the Merger is not a pooling transaction,
all such equity grants that have not otherwise previously lapsed or
been forfeited shall vest upon the closing of the Merger. Upon the
Effective Time, any outstanding equity awards will be converted into
shares (and options, as the case may be) of the Parent on identical
terms. Specifically:
On or prior to the Effective Time, MCI shall take all action
necessary to cause each option to purchase shares of MCI
Common Stock (each, an "MCI Stock Option") that was granted
pursuant to the MCI Stock Option Plans prior to the Effective
Time and which remains outstanding immediately prior to the
Effective Time to be converted, at the Effective Time, into an
option to acquire, on the same terms and conditions as were
applicable under the MCI Stock Option, that number of shares
of Parent's common stock determined by multiplying the number
of shares of MCI Common Stock subject to such MCI Stock Option
by the Exchange Ratio, rounded, if necessary, up to the
nearest whole share of Parent's common stock, at a price per
share equal to the per-share exercise price specified in such
MCI Stock Option divided by the Exchange Ratio; provided
however, that in the case of any MCI Stock Option to which
section 421 of the Code applies by reason of its qualification
under section 422 of the Code, the option price, the number of
shares subject to such option and the terms and conditions of
exercise of such option shall be determined in a manner
consistent with the requirements of section 424(a) of the
Code. In addition, all unvested and unpaid MCI restricted
stock and ISUs shall be converted to the number of shares of
Parent common stock or ISUs determined by multiplying such
shares of restricted stock and ISUs by the Exchange Ratio.
2. The employment agreements covering the Senior Executives of MCI will
be revised to:
a. eliminate the limitations on severance pay in the event of a
"Final Year Constructive Termination," as defined in such
contracts; and
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b. add minimum bonus provisions to the contracts under which each
executive's annual bonuses could not be less than the average
annual bonus earned by the executive in respect of 1994, 1995
and 1996.
3. The term of MCI's "Executive Severance Policy" will be extended to the
third anniversary of the signing of this Agreement except for those
provisions that would affect the equity rights of a participant in
such Policy, to the extent necessary to preserve pooling.
4. A cash retention award pool of up to $320 million will be created to
provide retention incentives for MCI employees, as determined by the
MCI Compensation Committee as soon as practicable hereafter. The
schedule of payment of such incentives will be subject to the approval
of Parent, which will not be unreasonably withheld; and Parent will be
informed as to the other aspects of the incentives.
5. In addition, awards under the "Management Employee Bonus Program", the
"Other Employee Bonus Program" and the "Retention Bonus Pool"
currently maintained by MCI will be payable not earlier than:
50% on December 1, 1997; and
50% on December 1, 1998;
provided, however that upon the closing date of any transaction,
involving the sale or other disposition of a majority of MCI's stock
or assets, any such amounts that have not yet been paid will be
accelerated and paid out.
6. Executives not covered by employment contracts or the Executive
Severance Policy will participate in a new severance program with a
severance formula based on the guidelines currently used for executive
severance but in any event shall not receive less than they would have
received under paragraph 7 below. (See Appendix A).
7. All other employees below the levels set forth in 6. above will
receive severance of three weeks per year of service if terminated in
connection with Merger.
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Appendix A
Executive Termination Pay Schedule
Director (9-11) Vice President (12-13) Pres. & Sr. VP (14+)
--------------- ---------------------- --------------------
Years of Months of Months of Months of
Service Severance Severance Severance
------- --------- --------- ---------
1 year or less 4 6 8
over 1 year 5 7 9
over 2 years 5 7 10
over 3 years 6 8 10
over 4 years 7 9 11
over 5 years 7 10 12
6 or more years 8 10 12