\nOrdinary Common Stock Merger Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.8(a)
\nPerson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(e)
\nPUCs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
\nPurchase Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
\nRegulation 4064\/89 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
\nRegulatory Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.4(b)
\nReimbursement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(b)
\nRequired WorldCom Vote . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(g)
\nRequired Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
\nRequired MCI Votes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.l(f)
\nRights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
\nRights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(b)(i)
\nRule 145 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(j)
\nSAS 72 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.12
\nSEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)
\nSecurities Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(iii)
\nSubsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(f)
\nSuperior Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(g)
\nSurviving Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 1.1
\nTax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(i)
\nTaxable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(i)
\nTaxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(i)
\nTax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 8.11(h)(ii)
\nTermination Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.1(b)
\nthe other party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 9.11(d)
\nU.S. GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(d)
\nViolation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.1(c)(ii)
\nWorldCom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Preamble
\nWorldCom Affiliate Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(i)
\nWorldCom Alternative Transaction Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 7.2(b)
\nWorldCom Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Recitals
\nWorldCom Disclosure Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2
\nWorldCom Rights Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
\nWorldCom Series A Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
\nWorldCom Series B Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)
\nWorldCom Stockholders Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 5.1(c)
\nWorldCom Voting Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2(b)(ii)
\nWorldCom SEC Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Section 3.2 (d)
\n<\/c><\/s><\/caption>\n<\/table>\n 9
\n AGREEMENT AND PLAN OF MERGER, dated as of November 9, 1997 (this
\n“Agreement”), among WORLDCOM, INC., a Georgia corporation (“WorldCom”), TC
\nINVESTMENTS CORP., a Delaware corporation and a direct wholly-owned subsidiary
\nof WorldCom (“Merger Sub”), and MCI COMMUNICATIONS CORPORATION, a Delaware
\ncorporation (“MCI”).<\/p>\n
W I T N E S S E T H:<\/p>\n
WHEREAS, the respective Boards of Directors of World Com, Merger
\nSub and MCI have each determined that the merger of MCI with and into Merger
\nSub (the “Merger”) is in the best interests of their respective stockholders,
\nand such Boards of Directors have approved such Merger, upon the terms and
\nsubject to the conditions set forth in this Agreement, pursuant to which (a)
\neach outstanding share of common stock, par value $.10 per share, of MCI
\n(“Ordinary Common Stock”) issued and outstanding immediately prior to the
\nEffective Time (as defined in Section 1.3), other than shares owned or held
\ndirectly or indirectly by WorldCom or directly by MCI will be converted into
\nthe right to receive shares of common stock, par value $.01 per share of
\nWorldCom (“WorldCom Common Stock”) as set forth in Section 1.8 and (b) each
\nshare of Class A common stock, par value $.10 per share, of MCI (“Class A
\nCommon Stock” and, collectively with the Ordinary Common Stock, the “MCI Common
\nStock”) will be converted into the right to receive $51 in cash as set forth in
\nSection 1.8;<\/p>\n
WHEREAS, WorldCom, Merger Sub and MCI desire to make certain
\nrepresentations, warranties, covenants and agreements in connection with the
\ntransactions contemplated hereby and also to prescribe various conditions to
\nthe transactions contemplated hereby;<\/p>\n
WHEREAS, WorldCom, Merger Sub and MCI intend, by approving
\nresolutions authorizing this Agreement, to adopt this Agreement as a plan of
\nreorganization within the meaning of Section 368(a) of the Internal Revenue
\nCode of 1986, as amended (the “Code”), and the regulations promulgated
\nthereunder;<\/p>\n
WHEREAS, MCI, British Telecommunications plc, a public limited
\ncompany incorporated under the laws of England and Wales (“BT”), and Tadworth
\nCorporation, a Delaware corporation and a wholly owned subsidiary of BT, have
\nentered into the Agreement and Plan of Merger dated as of November 3, 1996, as
\namended (the “BT Merger Agreement”);<\/p>\n
WHEREAS, BT, MCI and WorldCom have entered into an agreement
\ndated as of the date hereof pursuant to which, among other things, BT has
\nconsented to and agreed to support the Merger and the other transactions
\ncontemplated by this Agreement (the “BT Agreement”).<\/p>\n
WHEREAS, in the BT Agreement, WorldCom has agreed to pay BT $450
\nmillion and expenses not in excess of $15 million (collectively, the “BT
\nInducement Fee”) in connection with the
\n 10
\n 2<\/p>\n
plan of reorganization in order to induce BT to waive its rights under, and
\nagree to terminate, the BT Merger Agreement; and<\/p>\n
WHEREAS, the BT Merger Agreement has been terminated by MCI and
\nBT by mutual agreement pursuant to Section 7.1(a) of the BT Merger Agreement.<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the
\nrespective representations, warranties, covenants and agreements set forth
\nherein, and intending to be legally bound hereby, the parties hereto agree as
\nfollows:<\/p>\n
ARTICLE I<\/p>\n
THE MERGER<\/p>\n
1.1 The Merger. Upon the terms and subject to the conditions
\nset forth in this Agreement, and in accordance with the Delaware General
\nCorporation Law (the “DGCL”), MCI shall be merged with and into Merger Sub at
\nthe Effective Time. Following the Merger, the separate corporate existence of
\nMCI shall cease and Merger Sub shall continue as the surviving corporation (the
\n“Surviving Corporation”) under the name “MCI Communications Corporation”.<\/p>\n
1.2 Closing. The closing of the Merger (the “Closing”) will
\ntake place on the fifth Business Day after the satisfaction or waiver (subject
\nto applicable law) of the conditions (excluding conditions that, by their
\nterms, cannot be satisfied until the Closing Date) set forth in Article VI (the
\n“Closing Date”), unless another time or date is agreed to in writing by the
\nparties hereto. The Closing shall be held at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York, 10017, unless another place
\nis agreed to in writing by the parties hereto.<\/p>\n
1.3 Effective Time. As soon as practicable following the
\nClosing, the parties shall (i) file a certificate of merger (the “Delaware
\nCertificate of Merger”) in such form as is required by and executed in
\naccordance with the relevant provisions of the DGCL and (ii) make all other
\nfilings or recordings required under the DGCL. The Merger shall become
\neffective at such time as the Delaware Certificate of Merger is duly filed with
\nthe Delaware Secretary of State or at such subsequent time as WorldCom and MCI
\nshall agree and be specified in the Delaware Certificate of Merger (the date
\nand time the Merger becomes effective being the “Effective Time”).<\/p>\n
1.4 Effects of the Merger. At and after the Effective Time, the
\nMerger will have the effects set forth in the DGCL.
\n 11
\n 3<\/p>\n
Without limiting the generality of the foregoing, and subject thereto, at the
\nEffective Time all the property, rights, privileges, powers and franchises of
\nMCI and Merger Sub shall be vested in the Surviving Corporation, and all debts,
\nliabilities and duties of MCI and Merger Sub shall become the debts,
\nliabilities and duties of the Surviving Corporation.<\/p>\n
1.5 Certificate of Incorporation. The certificate of
\nincorporation of Merger Sub, as in effect immediately prior to the Effective
\nTime, shall be the certificate of incorporation of the Surviving Corporation,
\nuntil thereafter changed or amended as provided therein or by applicable law,
\nexcept that Article I of the Certificate of Incorporation of the Surviving
\nCorporation shall be amended to read in its entirety as follows: “The name of
\nthis Corporation is ‘MCI Communications Corporation'”.<\/p>\n
1.6 By-Laws. The by-laws of Merger Sub as in effect at the
\nEffective Time shall be the by-laws of the Surviving Corporation until
\nthereafter changed or amended as provided therein or by applicable law.<\/p>\n
1.7 Officers and Directors of Surviving Corporation. The
\nofficers of MCI as of the Effective Time shall be the officers of the Surviving
\nCorporation, until the earlier of their resignation or removal or otherwise
\nceasing to be an officer or until their respective successors are duly elected
\nand qualified, as the case may be. The directors of Merger Sub as of the
\nEffective Time shall be the directors of the Surviving Corporation until the
\nearlier of their resignation or removal or otherwise ceasing to be a director
\nor until their respective successors are duly elected and qualified.<\/p>\n
1.8 Effect on Capital Stock. (a) At the Effective Time by
\nvirtue of the Merger and without any action on the part of the holder thereof,
\n(i) each share of Ordinary Common Stock issued and outstanding immediately
\nprior to the Effective Time (other than shares of Ordinary Common Stock owned
\nby WorldCom or Merger Sub or held by MCI, all of which shall be canceled as
\nprovided in Section 1.8(c)) shall be converted into the right to receive that
\nnumber of shares of WorldCom Common Stock equal to the Exchange Ratio (as
\ndefined below) (the “Ordinary Common Stock Merger Consideration”) and (ii) each
\nshare of Class A Common Stock issued and outstanding immediately prior to the
\nEffective Time (other than shares of Class A Common Stock owned by WorldCom or
\nMerger Sub or held by MCI, all of which shall be canceled as provided in
\nSection 1.8(c)) shall be converted into the right to receive $51 in cash,
\nwithout interest thereon (the “Class A Common Stock Merger Consideration”, and,
\ncollectively with the Ordinary Common Stock Merger Consideration, the “Merger
\nConsideration”). “Exchange Ratio” means the quotient (rounded to the nearest
\n1\/10,000) determined by dividing $51.00 by the
\n 12
\n 4<\/p>\n
average of the high and low sales prices of WorldCom Common Stock as reported
\non The Nasdaq National Market (“NASDAQ”) on each of the twenty consecutive
\ntrading days ending with the third trading day immediately preceding the
\nEffective Time (the “Measurement Period”); provided, that the Exchange Ratio
\nshall not be less than 1.2439 or greater than 1.7586.<\/p>\n
(b) As a result of the Merger and without any action on the part
\nof the holders thereof, at the Effective Time, all shares of MCI Common Stock
\nshall cease to be outstanding and shall be canceled and retired and shall cease
\nto exist, and each holder of a certificate which immediately prior to the
\nEffective Time represented any such shares of MCI Common Stock (a
\n“Certificate”) (other than Merger Sub, WorldCom and MCI) shall thereafter cease
\nto have any rights with respect to such shares of MCI Common Stock, except the
\nright to receive the applicable Merger Consideration in accordance with Article
\nII upon the surrender of such certificate.<\/p>\n
(c) Each share of MCI Common Stock issued and owned or held by
\nWorldCom, Merger Sub or MCI at the Effective Time shall, by virtue of the
\nMerger, cease to be outstanding and shall be canceled and retired and no stock
\nof WorldCom or other consideration shall be delivered in exchange therefor.<\/p>\n
(d) Each share of common stock, par value $.01 per share, of
\nMerger Sub issued and outstanding immediately prior to the Effective Time,
\nshall remain issued, outstanding and unchanged as validly issued, fully paid
\nand nonassessable shares of common stock, par value $.01 per share, of the
\nSurviving Corporation as of the Effective Time.<\/p>\n
ARTICLE II<\/p>\n
EXCHANGE OF CERTIFICATES<\/p>\n
2.1 Exchange Fund. Prior to the Effective Time, WorldCom shall
\nappoint The Bank of New York, or another commercial bank or trust company
\nhaving net capital of not less than $100,000,000, to act as exchange agent
\nhereunder for the purpose of exchanging Certificates for the Merger
\nConsideration (the “Exchange Agent”). At or prior to the Effective Time,
\nWorldCom shall deposit with the Exchange Agent, in trust for the benefit of
\nholders of shares of MCI Common Stock, certificates representing the WorldCom
\nCommon Stock issuable pursuant to Section 1.8 in exchange for outstanding
\nshares of Ordinary Common Stock and cash in the amount required to be exchanged
\nfor Class A Common Stock in the Merger pursuant to Section 1.8. WorldCom
\nagrees to make available to the Exchange Agent from time to time as needed,
\ncash sufficient to pay cash in lieu of fractional
\n 13
\n 5<\/p>\n
shares pursuant to Section 2.5 and any dividends and other distributions
\npursuant to Section 2.3. Any cash and certificates of WorldCom Common Stock
\ndeposited with the Exchange Agent shall hereinafter be referred to as the
\n“Exchange Fund”.<\/p>\n
2.2 Exchange Procedures. As soon as reasonably practicable
\nafter the Effective Time, the Surviving Corporation shall cause the Exchange
\nAgent to mail to each holder of a Certificate (i) a letter of transmittal which
\nshall specify that delivery shall be effected, and risk of loss and title to
\nthe Certificates shall pass, only upon delivery of the Certificates to the
\nExchange Agent, and which letter shall be in customary form and have such other
\nprovisions as WorldCom may reasonably specify and (ii) instructions for
\neffecting the surrender of such Certificates in exchange for the applicable
\nMerger Consideration. Upon surrender of a Certificate to the Exchange Agent
\ntogether with such letter of transmittal, duly executed and completed in
\naccordance with the instructions thereto, and such other documents as may
\nreasonably be required by the Exchange Agent, the holder of such Certificate,
\nif it is a Certificate for Ordinary Common Stock shall be entitled to receive
\nin exchange therefor (A) one or more shares of WorldCom Common Stock
\nrepresenting, in the aggregate, the whole number of shares that such holder has
\nthe right to receive pursuant to Section 1.8 (after taking into account all
\nshares of MCI Common Stock then held by such holder) and (B) a check in the
\namount equal to the cash that such holder has the right to receive pursuant to
\nthe provisions of this Article II, including cash in lieu of any fractional
\nshares of WorldCom Common Stock pursuant to Section 2.5, or if it is a
\nCertificate for Class A Common Stock, a check in the amount equal to the cash
\nthat such holder has the right to receive pursuant to the provisions of this
\nArticle II, and in each case the Certificate so surrendered shall forthwith be
\ncanceled. No interest will be paid or will accrue on any cash payable pursuant
\nto Section 1.8, Section 2.3 or Section 2.5. In the event of a transfer of
\nownership of MCI Common Stock which is not registered in the transfer records
\nof MCI, one or more shares of WorldCom Common Stock evidencing, in the
\naggregate, the proper number of shares of WorldCom Common Stock, a check in the
\nproper amount of cash in lieu of any fractional shares of WorldCom Common Stock
\npursuant to Section 2.5 and any dividends or other distributions to which such
\nholder is entitled pursuant to Section 2.3, may be issued with respect to such
\nMCI Common Stock to such a transferee if the Certificate representing such
\nshares of MCI Common Stock is presented to the Exchange Agent, accompanied by
\nall documents required to evidence and effect such transfer and to evidence
\nthat any applicable stock transfer taxes have been paid.<\/p>\n
2.3 Distributions with Respect to Unexchanged Shares. No
\ndividends or other distributions declared or made with respect
\n 14
\n 6<\/p>\n
to shares of WorldCom Common Stock with a record date after the Effective Time
\nshall be paid to the holder of any unsurrendered Certificate with respect to
\nthe shares of WorldCom Common Stock that such holder would be entitled to
\nreceive upon surrender of such Certificate and no cash payment in lieu of
\nfractional shares of WorldCom Common Stock shall be paid to any such holder
\npursuant to Section 2.5 until such holder shall surrender such Certificate in
\naccordance with Section 2.2. Subject to the effect of applicable laws,
\nfollowing surrender of any such Certificate, there shall be paid to such holder
\nof shares of WorldCom Common Stock issuable in exchange therefor, without
\ninterest, (a) promptly after the time of such surrender, the amount of any cash
\npayable in lieu of fractional shares of WorldCom Common Stock to which such
\nholder is entitled pursuant to Section 2.5 and the amount of dividends or other
\ndistributions with a record date after the Effective Time theretofore paid with
\nrespect to such whole shares of WorldCom Common Stock, and (b) at the
\nappropriate payment date, the amount of dividends or other distributions with a
\nrecord date after the Effective Time but prior to such surrender and a payment
\ndate subsequent to such surrender payable with respect to such shares of
\nWorldCom Common Stock.<\/p>\n
2.4 No Further Ownership Rights in MCI Common Stock. All shares
\nof WorldCom Common Stock issued and cash paid upon conversion of shares of MCI
\nCommon Stock in accordance with the terms of Article I and this Article II
\n(including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to
\nhave been issued or paid in full satisfaction of all rights pertaining to the
\nshares of MCI Common Stock.<\/p>\n
2.5 No Fractional Shares of WorldCom Common Stock. (a) No
\ncertificates or scrip or shares of WorldCom Common Stock representing
\nfractional shares of WorldCom Common Stock shall be issued upon the surrender
\nfor exchange of Certificates and such fractional share interests will not
\nentitle the owner thereof to vote or to have any rights of a shareholder of
\nWorldCom or a holder of shares of WorldCom Common Stock.<\/p>\n
(b) Notwithstanding any other provision of this Agreement, each
\nholder of shares of MCI Common Stock exchanged pursuant to the Merger who would
\notherwise have been entitled to receive a fraction of a share of WorldCom
\nCommon Stock (after taking into account all Certificates delivered by such
\nholder) shall receive, in lieu thereof, cash (without interest) in an amount
\nequal to the product of (i) such fractional part of a share of WorldCom Common
\nStock multiplied by (ii) the last sales price per share of WorldCom Common
\nStock quoted on NASDAQ on the Closing Date. As promptly as practicable after
\nthe determination of the amount of cash, if any, to be paid to holders of
\nfractional interests, the Exchange Agent shall so notify
\n 15
\n 7<\/p>\n
WorldCom, and WorldCom shall cause the Surviving Corporation to deposit such
\namount with the Exchange Agent and shall cause the Exchange Agent to forward
\npayments to such holders of fractional interests subject to and in accordance
\nwith the terms hereof.<\/p>\n
2.6 Termination of Exchange Fund. Any portion of the Exchange
\nFund which remains undistributed to the holders of Certificates for twelve
\nmonths after the Effective Time shall be delivered to the Surviving Corporation
\nor otherwise on the instruction of the Surviving Corporation, and any holders
\nof the Certificates who have not theretofore complied with this Article II
\nshall thereafter look only to the Surviving Corporation and WorldCom for the
\nMerger Consideration with respect to the shares of MCI Common Stock formerly
\nrepresented thereby to which such holders are entitled pursuant to Section 1.8
\nand Section 2.2, any cash in lieu of fractional shares of WorldCom Common Stock
\nto which such holders are entitled pursuant to Section 2.5 and any dividends or
\ndistributions with respect to shares of WorldCom Common Stock to which such
\nholders are entitled pursuant to Section 2.3. Any such portion of the Exchange
\nFund remaining unclaimed by holders of shares of MCI Common Stock five years
\nafter the Effective Time (or such earlier date immediately prior to such time
\nas such amounts would otherwise escheat to or become property of any
\nGovernmental Entity (as defined in Section 3.1(c)(iii))) shall, to the extent
\npermitted by law, become the property of the Surviving Corporation free and
\nclear of any claims or interest of any Person previously entitled thereto.<\/p>\n
2.7 No Liability. None of WorldCom, Merger Sub, MCI, the
\nSurviving Corporation or the Exchange Agent shall be liable to any Person in
\nrespect of any Merger Consideration from the Exchange Fund delivered to a
\npublic official pursuant to any applicable abandoned property, escheat or
\nsimilar law.<\/p>\n
2.8 Investment of the Exchange Fund. The Exchange Agent shall
\ninvest any cash included in the Exchange Fund as directed by the Surviving
\nCorporation on a daily basis. Any interest and other income resulting from such
\ninvestments shall promptly be paid to the Surviving Corporation.<\/p>\n
2.9 Lost Certificates. If any Certificate shall have been lost,
\nstolen or destroyed, upon the making of an affidavit of that fact by the Person
\nclaiming such Certificate to be lost, stolen or destroyed and, if required by
\nthe Surviving Corporation, the posting by such Person of a bond in such
\nreasonable amount as the Surviving Corporation may direct as indemnity against
\nany claim that may be made against it with respect to such Certificate, the
\nExchange Agent will deliver in exchange for such lost, stolen or destroyed
\nCertificate the applicable Merger Consideration with respect to the shares of
\nMCI Common Stock formerly represented thereby, any cash in lieu of
\n 16
\n 8<\/p>\n
fractional shares of WorldCom Common Stock, and unpaid dividends and
\ndistributions on shares of WorldCom Common Stock deliverable in respect
\nthereof, pursuant to this Agreement.<\/p>\n
2.10 Withholding Rights. Each of the Surviving Corporation and
\nWorldCom shall be entitled to deduct and withhold from the consideration
\notherwise payable pursuant to this Agreement to any holder of shares of MCI
\nCommon Stock such amounts as it is required to deduct and withhold with respect
\nto the making of such payment under the Code and the rules and regulations
\npromulgated thereunder, or any provision of state, local or foreign tax law.
\nTo the extent that amounts are so withheld by the Surviving Corporation or
\nWorldCom, as the case may be, such withheld amounts shall be treated for all
\npurposes of this Agreement as having been paid to the holder of the shares of
\nMCI Common Stock in respect of which such deduction and withholding was made by
\nthe Surviving Corporation or WorldCom, as the case may be.<\/p>\n
2.11 Further Assurances. At and after the Effective Time, the
\nofficers and directors of the Surviving Corporation will be authorized to
\nexecute and deliver, in the name and on behalf of MCI or Merger Sub, any deeds,
\nbills of sale, assignments or assurances and to take and do, in the name and on
\nbehalf of MCI or Merger Sub, any other actions and things to vest, perfect or
\nconfirm of record or otherwise in the Surviving Corporation any and all right,
\ntitle and interest in, to and under any of the rights, properties or assets
\nacquired or to be acquired by the Surviving Corporation as a result of, or in
\nconnection with, the Merger.<\/p>\n
2.12 Stock Transfer Books. At the close of business, New York
\nCity time, on the day the Effective Time occurs, the stock transfer books of
\nMCI shall be closed and there shall be no further registration of transfers of
\nshares of MCI Common Stock thereafter on the records of MCI. From and after
\nthe Effective Time, the holders of Certificates shall cease to have any rights
\nwith respect to such shares of MCI Common Stock formerly represented thereby,
\nexcept as otherwise provided herein or by law. On or after the Effective Time,
\nany Certificates presented to the Exchange Agent or WorldCom for any reason
\nshall be converted into the Merger Consideration with respect to the shares of
\nMCI Common Stock formerly represented thereby, any cash in lieu of fractional
\nshares of WorldCom Common Stock to which the holders thereof are entitled
\npursuant to Section 2.5 and any dividends or other distributions to which the
\nholders thereof are entitled pursuant to Section 2.3.
\n 17
\n 9<\/p>\n
ARTICLE III<\/p>\n
REPRESENTATIONS AND WARRANTIES<\/p>\n
3.1 Representations and Warranties of MCI. Except as set forth
\nin the MCI Disclosure Schedule delivered by MCI to WorldCom prior to the
\nexecution of this Agreement (the “MCI Disclosure Schedule”) (each section of
\nwhich qualifies the correspondingly numbered representation and warranty or
\ncovenant to the extent specified therein), MCI represents and warrants to
\nWorldCom as follows:<\/p>\n
(a) Organization, Standing and Power. Each of MCI and each of
\nits Subsidiaries is a corporation duly organized, validly existing and in good
\nstanding under the laws of its jurisdiction of incorporation or organization,
\nhas all requisite power and authority to own, lease and operate its properties
\nand to carry on its business as now being conducted and is duly qualified and
\nin good standing to do business in each jurisdiction in which the nature of its
\nbusiness or the ownership or leasing of its properties makes such qualification
\nnecessary other than in such jurisdictions where the failure so to qualify
\nwould not, either individually or in the aggregate, have a Material Adverse
\nEffect (as defined in Section 8.11(c)) on MCI. The copies of the certificate
\nof incorporation and by-laws of MCI which were previously furnished to WorldCom
\nare true, complete and correct copies of such documents as in effect on the
\ndate of this Agreement.<\/p>\n
(b) Capital Structure. (i) As of October 31, 1997, the
\nauthorized capital stock of MCI consisted of (A) 2,000,000,000 shares of
\nOrdinary Common Stock, of which 565,301,683 shares were outstanding and (B)
\n500,000,000 shares of Class A Common Stock, of which 135,998,932 shares were
\noutstanding and (C) 50,000,000 shares of preferred stock, of which 10,000,000
\nshares of Series E Junior Participating Preferred Stock have been designated
\nand reserved for issuance upon exercise of the rights (the “Rights”)
\ndistributed to the holders of MCI Common Stock pursuant to the Rights Agreement
\ndated as of September 30, 1994 between MCI and Mellon Bank, N.A., as rights
\nagent, as amended (the “Rights Agreement”). Since October 31, 1997 to the date
\nof this Agreement, there have been no issuances of shares of the capital stock
\nof MCI or any other securities of MCI other than issuances of shares (and
\naccompanying Rights) pursuant to options or rights outstanding as of October
\n31, 1997 under the Benefit Plans (as defined in Section 8.11(i)) of MCI. All
\nissued and outstanding shares of the capital stock of MCI are duly authorized,
\nvalidly issued, fully paid and nonassessable, and no class of capital stock
\n(other than Class A Common Stock) is entitled to preemptive rights. There were
\noutstanding as of October 31, 1997 no
\n 18
\n 10<\/p>\n
options, warrants or other rights to acquire capital stock from MCI other than
\n(v) the Rights, (w) options representing in the aggregate the right to purchase
\n75,119,367 shares of MCI Common Stock under MCI’s 1989 Stock Option Plan, MCI’s
\n1988 Directors’ Stock Option Plan and MCI’s 1979 Stock Option Plan
\n(collectively, the “MCI Stock Option Plans”), (x) rights to purchase an
\naggregate of 11,876,569 shares of MCI Common Stock under the MCI 1990 Stock
\nPurchase Plan (the “ESPP”), (y) incentive stock units (“ISUs”) representing the
\nright to receive 5,484,883 shares of MCI Common Stock under MCI’s 1989 Stock
\nOption Plan and (z) rights to purchase an aggregate of 4,482,722 shares of MCI
\nCommon Stock under MCI’s 401(k) Plan. Other than the associated Rights issued
\nwith the shares issued as described above, no options or warrants or other
\nrights to acquire capital stock from MCI have been issued or granted since
\nOctober 31, 1997 to the date of this Agreement.<\/p>\n
(ii) As of the date of this Agreement, no bonds, debentures,
\nnotes or other indebtedness of MCI having the right to vote on any matters on
\nwhich stockholders may vote (“MCI Voting Debt”) are issued or outstanding.<\/p>\n
(iii) Except as otherwise set forth in this Section 3.1(b) and
\nas contemplated by Section 5.7, as of the date of this Agreement, there are no
\nsecurities, options, warrants, calls, rights, commitments, agreements,
\narrangements or undertakings of any kind to which MCI or any of its
\nSubsidiaries is a party or by which any of them is bound obligating MCI or any
\nof its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
\nor sold, additional shares of capital stock or other voting securities of MCI
\nor any of its Subsidiaries or obligating MCI or any of its Subsidiaries to
\nissue, grant, extend or enter into any such security, option, warrant, call,
\nright, commitment, agreement, arrangement or undertaking. As of the date of
\nthis Agreement, there are no outstanding obligations of MCI or any of its
\nSubsidiaries to repurchase, redeem or otherwise acquire any shares of capital
\nstock of MCI or any of its Subsidiaries.<\/p>\n
(c) Authority; No Conflicts. (i) MCI has all requisite
\ncorporate power and authority to enter into this Agreement and to consummate
\nthe transactions contemplated hereby, subject in the case of the consummation
\nof the Merger to the adoption of this Agreement by the Required MCI Votes (as
\ndefined in Section 3.1(f)). The execution and delivery of this Agreement and
\nthe consummation of the transactions contemplated hereby have been duly
\nauthorized by all necessary corporate action on the part of MCI, subject in the
\ncase of the consummation of the Merger to the adoption of this Agreement by the
\nRequired MCI Votes. This Agreement has been duly executed and delivered by MCI
\nand constitutes a valid and binding agreement of MCI, enforceable against it in
\naccordance with its terms, except as
\n 19
\n 11<\/p>\n
such enforceability may be limited by bankruptcy, insolvency, reorganization,
\nmoratorium and similar laws relating to or affecting creditors generally, by
\ngeneral equity principles (regardless of whether such enforceability is
\nconsidered in a proceeding in equity or at law) or by an implied covenant of
\ngood faith and fair dealing.<\/p>\n
(ii) The execution and delivery of this Agreement does not or
\nwill not, as the case may be, and the consummation of the Merger and the other
\ntransactions contemplated hereby will not, conflict with, or result in any
\nviolation of, or constitute a default (with or without notice or lapse of time,
\nor both) under, or give rise to a right of termination, amendment, cancellation
\nor acceleration of any obligation or the loss of a material benefit under, or
\nthe creation of a lien, pledge, security interest, charge or other encumbrance
\non any assets (any such conflict, violation, default, right of termination,
\namendment, cancellation or acceleration, loss or creation, a “Violation”)
\npursuant to: (A) any provision of the certificate of incorporation or by-laws
\nof MCI or any Subsidiary of MCI, or (B) except as would not have a Material
\nAdverse Effect on MCI and, subject to obtaining or making the consents,
\napprovals, orders, authorizations, registrations, declarations and filings
\nreferred to in paragraph (iii) below, any loan or credit agreement, note,
\nmortgage, bond, indenture, lease, benefit plan or other agreement, obligation,
\ninstrument, permit, concession, franchise, license, judgment, order, decree,
\nstatute, law, ordinance, rule or regulation applicable to MCI or any Subsidiary
\nof MCI or their respective properties or assets.<\/p>\n
(iii) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any supranational, national, state,
\nmunicipal or local government, any instrumentality, subdivision, court,
\nadministrative agency or commission or other authority thereof, or any
\nquasi-governmental or private body exercising any regulatory, taxing, importing
\nor other governmental or quasi-governmental authority, including the European
\nUnion (a “Governmental Entity”), is required by or with respect to MCI or any
\nSubsidiary of MCI in connection with the execution and delivery of this
\nAgreement by MCI or the consummation of the Merger and the other transactions
\ncontemplated hereby, except for those required under or in relation to (A) the
\nHart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR
\nAct”), and Council Regulation (EEC) No. 4064\/89 (“Regulation 4064\/89”), (B) the
\nCommunications Act of 1934, as amended (the “Communications Act”), and any
\nrules, regulations, practices and policies promulgated by the Federal
\nCommunications Commission (“FCC”), (C) state securities or “blue sky” laws (the
\n“Blue Sky Laws”), (D) the Securities Act of 1933, as amended (the “Securities
\nAct”), (E) the Securities Exchange Act of 1934, as amended (the “Exchange
\nAct”), (F) the DGCL with
\n 20
\n 12<\/p>\n
respect to the filing of the Delaware Certificate of Merger, (G) laws, rules,
\nregulations, practices and orders of any state public service commissions
\n(“PUCs”), foreign telecommunications regulatory agencies or similar state or
\nforeign regulatory bodies, (H) rules and regulations of NASDAQ, (I) antitrust
\nor other competition laws of other jurisdictions, and (J) such consents,
\napprovals, orders, authorizations, registrations, declarations and filings the
\nfailure of which to make or obtain would not have a Material Adverse Effect on
\nMCI. Consents, approvals, orders, authorizations, registrations, declarations
\nand filings required under or in relation to any of the foregoing clauses (A)
\nthrough (I) are hereinafter referred to as “Required Consents.”<\/p>\n
(d) Reports and Financial Statements. MCI has filed all
\nrequired reports, schedules, forms, statements and other documents required to
\nbe filed by it with the Securities and Exchange Commission (the “SEC”) since
\nJanuary 1, 1996 (collectively, including all exhibits thereto, the “MCI SEC
\nReports”). No Subsidiary of MCI is required to file any form, report or other
\ndocument with the SEC. None of the MCI SEC Reports, as of their respective
\ndates (and, if amended or superseded by a filing prior to the date of this
\nAgreement or the Closing Date, then on the date of such filing), contained or
\nwill contain any untrue statement of a material fact or omitted or will omit to
\nstate a material fact required to be stated therein or necessary to make the
\nstatements therein, in light of the circumstances under which they were made,
\nnot misleading. Each of the financial statements (including the related notes)
\nincluded in the MCI SEC Reports presents fairly, in all material respects, the
\nconsolidated financial position and consolidated results of operations and cash
\nflows of MCI and its Subsidiaries as of the respective dates or for the
\nrespective periods set forth therein, all in conformity with United States
\ngenerally accepted accounting principles (“U.S. GAAP”) consistently applied
\nduring the periods involved except as otherwise noted therein, and subject, in
\nthe case of the unaudited interim financial statements, to normal and recurring
\nyear-end adjustments that have not been and are not expected to be material in
\namount. All of such MCI SEC Reports, as of their respective dates (and as of
\nthe date of any amendment to the respective MCI SEC Report), complied as to
\nform in all material respects with the applicable requirements of the
\nSecurities Act and the Exchange Act and the rules and regulations promulgated
\nthereunder.<\/p>\n
(e) Information Supplied. (i) None of the information supplied
\nor to be supplied by MCI for inclusion or incorporation by reference in (A) the
\nregistration statement on Form S-4 (as defined in Section 5.1) to be filed with
\nthe SEC by WorldCom in connection with the issuance of the WorldCom Common
\nStock in the Merger will, at the time the Form S-4 is filed with the SEC, at
\n 21
\n 13<\/p>\n
any time it is amended or supplemented or at the time it becomes effective
\nunder the Securities Act, contain any untrue statement of a material fact or
\nomit to state any material fact required to be stated therein or necessary to
\nmake the statements therein not misleading and (B) the Joint Proxy
\nStatement\/Prospectus (as defined in Section 5.1) included in the Form S-4
\nrelated to the MCI Stockholders Meeting and the WorldCom Stockholders Meeting
\n(each, as defined in Section 5.1) and the WorldCom Common Stock to be issued in
\nthe Merger will, on the date it is first mailed to MCI stockholders or WorldCom
\nStockholders or at the time of the MCI Stockholders Meeting or the WorldCom
\nStockholders Meeting, contain any untrue statement of a material fact or omit
\nto state any material fact required to be stated therein or necessary in order
\nto make the statements therein, in light of the circumstances under which they
\nwere made, not misleading.<\/p>\n
(ii) Notwithstanding the foregoing provisions of this Section
\n3.1(e), no representation or warranty is made by MCI with respect to statements
\nmade or incorporated by reference in the Form S-4 or the Joint Proxy
\nStatement\/Prospectus based on information supplied by WorldCom for inclusion or
\nincorporation by reference therein.<\/p>\n
(f) Vote Required. The affirmative vote of the holders of a
\nmajority of the outstanding shares of Ordinary Common Stock and Class A Common
\nStock voting together as a single class and, if the Effective Time occurs prior
\nto October l, 1998, the affirmative vote of the holders of a majority of the
\noutstanding shares of Class A Common Stock voting separately as a class, in
\neither case to approve the Merger (the “Required MCI Votes”), are the only
\nvotes of the holders of any class or series of MCI capital stock necessary to
\nadopt this Agreement and approve the transactions contemplated hereby.<\/p>\n
(g) Rights Agreement. The Rights Agreement has been amended so
\nas to provide that neither WorldCom nor Merger Sub will become an “Acquiring
\nPerson,” and that no “Shares Acquisition Date” or “Distribution Date” (as such
\nterms are defined in the Rights Agreement) will occur, as a result of the
\napproval, execution or delivery of this Agreement or the consummation of the
\ntransactions contemplated hereby.<\/p>\n
(h) Brokers or Finders. No agent, broker, investment banker,
\nfinancial advisor or other firm or Person is or will be entitled to any
\nbroker’s or finder’s fee or any other similar commission or fee in connection
\nwith any of the transactions contemplated by this Agreement, except Lazard
\nFreres & Co. LLC and Lehman Brothers Inc. (collectively, the “Financial
\nAdvisors”), whose fees and expenses will be paid by MCI in accordance with
\nMCI’s agreement with such firms, based upon arrangements made by or on behalf
\nof MCI and previously disclosed to WorldCom.
\n 22
\n 14<\/p>\n
(i) Opinions of Financial Advisors. MCI has received the
\nopinion of each of the Financial Advisors, dated the date of this Agreement, to
\nthe effect that, as of such date, the Merger Consideration is fair, from a
\nfinancial point of view, to the holders of Ordinary Common Stock (the
\n“Fairness Opinions”), a copy of each of which opinions have been made available
\nto WorldCom.<\/p>\n
(j) Affiliate Letter. On or prior to the date of the MCI
\nStockholder Meeting, MCI will deliver to WorldCom a letter (the “MCI Affiliate
\nLetter”) identifying all persons who are “affiliates” of MCI for purposes of
\nRule 145 under the Securities Act (“Rule 145”). On or prior to the Closing
\nDate, MCI will deliver on behalf of each person identified as an “affiliate” in
\nthe MCI Affiliate Letter (other than BT) a written agreement (an “Affiliate
\nAgreement”) in connection with restrictions on affiliates under Rule 145.<\/p>\n
3.2 Representations and Warranties of WorldCom. Except as set
\nforth in the WorldCom Disclosure Schedule delivered by WorldCom to MCI prior to
\nthe execution of this Agreement (the “WorldCom Disclosure Schedule”) (each
\nsection of which qualifies the correspondingly numbered representation and
\nwarranty or covenant to the extent specified therein), WorldCom represents and
\nwarrants to MCI as follows:<\/p>\n
(a) Organization, Standing and Power. Each of WorldCom and each
\nof its Subsidiaries is a corporation duly organized, validly existing and in
\ngood standing under the laws of its jurisdiction of incorporation or
\norganization, has all requisite power and authority to own, lease and operate
\nits properties and to carry on its business as now being conducted and is duly
\nqualified and in good standing to do business in each jurisdiction in which the
\nnature of its business or the ownership or leasing of its properties makes such
\nqualification necessary other than in such jurisdictions where the failure so
\nto qualify or to be in good standing would not, either individually or in the
\naggregate, have a Material Adverse Effect on WorldCom. The copies of the
\ncertificate of incorporation and by-laws of WorldCom which were previously
\nfurnished to MCI are true, complete and correct copies of such documents as in
\neffect on the date of this Agreement.<\/p>\n
(b) Capital Structure. (i) As of November 5, 1997, the
\nauthorized capital stock of WorldCom consisted of (A) 2,500,000,000 shares of
\nWorldCom Common Stock of which 908,380,987 shares were outstanding and (B)
\n50,000,000 shares of Preferred Stock, par value $.01 per share, of which (1)
\n94,992 shares have been designated Series A 8% Cumulative Convertible Preferred
\nStock (“WorldCom Series A Preferred Stock”), of which 94,992 shares were
\noutstanding, (2) 15,000,000 shares have been
\n 23
\n 15<\/p>\n
designated Series B Preferred Stock (“WorldCom Series B Preferred Stock”), of
\nwhich 12,441,817 shares were outstanding and (3) 2,500,000 shares have been
\ndesignated Series 3 Junior Participating Preferred Stock and reserved for
\nissuance upon exercise of the rights (the “Purchase Rights”) distributed to the
\nholders of WorldCom Common Stock pursuant to the Rights Agreement dated as of
\nAugust 25, 1996 between WorldCom and Bank of New York, as rights agent (the
\n“WorldCom Rights Agreement”). Since November 5, 1997 to the date of this
\nAgreement, there have been no issuances of shares of the capital stock of
\nWorldCom or any other securities of WorldCom other than issuances of shares
\npursuant to options or rights outstanding as of November 5, 1997 under the
\nBenefit Plans (as defined in Section 8.11(h)) of WorldCom. All issued and
\noutstanding shares of the capital stock of WorldCom are duly authorized,
\nvalidly issued, fully paid and nonassessable, and no class of capital stock is
\nentitled to preemptive rights. There were outstanding as of November 5, 1997
\nno options, warrants or other rights to acquire capital stock from WorldCom
\nother than pursuant to WorldCom’s pending acquisitions as of the date hereof.
\nNo options or warrants or other rights to acquire capital stock from WorldCom
\nhave been issued or granted since November 5, 1997 to the date of this
\nAgreement.<\/p>\n
(ii) As of the date of this Agreement, no bonds, debentures,
\nnotes or other indebtedness of WorldCom having the right to vote on any matters
\non which stockholders may vote (“WorldCom Voting Debt”) are issued or
\noutstanding.<\/p>\n
(iii) Except as otherwise set forth in this Section 3.2(b), as
\nof the date of this Agreement, there are no securities, options, warrants,
\ncalls, rights, commitments, agreements, arrangements or undertakings of any
\nkind to which WorldCom or any of its Subsidiaries is a party or by which any of
\nthem is bound obligating WorldCom or any of its Subsidiaries to issue, deliver
\nor sell, or cause to be issued, delivered or sold, additional shares of capital
\nstock or other voting securities of WorldCom or any of its Subsidiaries or
\nobligating WorldCom or any of its Subsidiaries to issue, grant, extend or enter
\ninto any such security, option, warrant, call, right, commitment, agreement,
\narrangement or undertaking. As of the date of this Agreement, there are no
\noutstanding obligations of WorldCom or any of its Subsidiaries to repurchase,
\nredeem or otherwise acquire any shares of capital stock of WorldCom or any of
\nits Subsidiaries.<\/p>\n
(c) Authority; No Conflicts. (i) WorldCom has all requisite
\ncorporate power and authority to enter into this Agreement and, subject to the
\nadoption of this Agreement by the Required WorldCom Vote (as defined in Section
\n3.2(g)), to issue the shares of WorldCom Common Stock to be issued in the
\nMerger
\n 24
\n 16<\/p>\n
(the “Share Issuance”). The execution and delivery of this Agreement and the
\nconsummation of the transactions contemplated hereby have been duly authorized
\nby all necessary corporate action on the part of WorldCom, subject to the
\napproval by the stockholders of WorldCom of the Share Issuance and the
\naffirmative vote of a majority of the outstanding voting power of the WorldCom
\nStock (as defined in Section 3.2(g)) to amend the Certificate of Incorporation
\nof WorldCom to change its name as set forth in Section 5.2. This Agreement has
\nbeen duly executed and delivered by WorldCom and constitutes a valid and
\nbinding agreement of WorldCom, enforceable against it in accordance with its
\nterms, except as such enforceability may be limited by bankruptcy, insolvency,
\nreorganization, moratorium and similar laws relating to or affecting creditors
\ngenerally, by general equity principles (regardless of whether such
\nenforceability is considered in a proceeding in equity or at law) or by an
\nimplied covenant of good faith and fair dealing.<\/p>\n
(ii) The execution and delivery of this Agreement does not or
\nwill not, as the case may be, and the consummation of the Merger and the other
\ntransactions contemplated hereby will not, conflict with, or result in a
\nViolation pursuant to: (A) any provision of the certificate of incorporation or
\nby-laws of WorldCom or any Subsidiary of WorldCom, (B) except as would not have
\na Material Adverse Effect on WorldCom and, subject to obtaining or making the
\nconsents, approvals, orders, authorizations, registrations, declarations and
\nfilings referred to in paragraph (iii) below, any loan or credit agreement,
\nnote, mortgage, bond, indenture, lease, benefit plan or other agreement,
\nobligation, instrument, permit, concession, franchise, license, judgment,
\norder, decree, statute, law, ordinance, rule or regulation applicable to
\nWorldCom or any Subsidiary of WorldCom or their respective properties or
\nassets.<\/p>\n
(iii) No consent, approval, order or authorization of, or
\nregistration, declaration or filing with, any Governmental Entity is required
\nby or with respect to WorldCom or any Subsidiary of WorldCom in connection with
\nthe execution and delivery of this Agreement by WorldCom or the consummation of
\nthe Merger and the other transactions contemplated hereby, except for the
\nRequired Consents and such consents, approvals, orders, authorizations,
\nregistrations, declarations and filings the failure of which to make or obtain
\nwould not have a Material Adverse Effect on WorldCom.<\/p>\n
(d) Reports and Financial Statements. WorldCom has filed all
\nrequired reports, schedules, forms, statements and other documents required to
\nbe filed by it with the SEC since January 1, 1996 (collectively, including all
\nexhibits thereto, the “WorldCom SEC Reports”). No Subsidiary of WorldCom is
\nrequired to file any form, report or other document with the SEC.
\n 25
\n 17<\/p>\n
None of the WorldCom SEC Reports, as of their respective dates (and, if amended
\nor superseded by a filing prior to the date of this Agreement or the Closing
\nDate, then on the date of such filing), contained or will contain any untrue
\nstatement of a material fact or omitted or will omit to state a material fact
\nrequired to be stated therein or necessary to make the statements therein, in
\nlight of the circumstances under which they were made, not misleading. Each of
\nthe financial statements (including the related notes) included in the WorldCom
\nSEC Reports presents fairly, in all material respects, the consolidated
\nfinancial position and consolidated results of operations and cash flows of
\nWorldCom and its Subsidiaries as of the respective dates or for the respective
\nperiods set forth therein, all in conformity with U.S. GAAP consistently
\napplied during the periods involved except as otherwise noted therein, and
\nsubject, in the case of the unaudited interim financial statements, to normal
\nand recurring year-end adjustments that have not been and are not expected to
\nbe material in amount. All of such WorldCom SEC Reports, as of their
\nrespective dates (and as of the date of any amendment to the respective
\nWorldCom SEC Report), complied as to form in all material respects with the
\napplicable requirements of the Securities Act and the Exchange Act and the
\nrules and regulations promulgated thereunder.<\/p>\n
(e) Information Supplied. (i) None of the information supplied
\nor to be supplied by WorldCom for inclusion or incorporation by reference in
\n(A) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any
\ntime it is amended or supplemented or at the time it becomes effective under
\nthe Securities Act, contain any untrue statement of a material fact or omit to
\nstate any material fact required to be stated therein or necessary to make the
\nstatements therein not misleading, and (B) the Joint Proxy Statement\/Prospectus
\nwill, on the date it is first mailed to MCI stockholders or WorldCom
\nStockholders or at the time of the MCI Stockholders Meeting or the WorldCom
\nStockholders Meeting, contain any untrue statement of a material fact or omit
\nto state any material fact required to be stated therein or necessary in order
\nto make the statements therein, in light of the circumstances under which they
\nwere made, not misleading. The Form S-4 and the Joint Proxy
\nStatement\/Prospectus will comply as to form in all material respects with the
\nrequirements of the Exchange Act and the Securities Act and the rules and
\nregulations of the SEC thereunder.<\/p>\n
(ii) Notwithstanding the foregoing provisions of this Section
\n3.2(e), no representation or warranty is made by WorldCom with respect to
\nstatements made or incorporated by reference in the Form S-4 or the Joint Proxy
\nStatement\/Prospectus based on information supplied by MCI for inclusion or
\nincorporation by reference therein.<\/p>\n
26
\n 18<\/p>\n
(f) Absence of Certain Changes or Events. Except as disclosed
\nin the WorldCom SEC Reports filed prior to the date of this Agreement, since
\nDecember 31, 1996 until the date hereof, WorldCom and its Subsidiaries have not
\nincurred any material liability, except in the ordinary course of business
\nconsistent with past practice, nor has there been any change in the business,
\nfinancial condition or results of operations of WorldCom or any of its
\nSubsidiaries or any event involving WorldCom or any of its Subsidiaries which
\nhas had, or is reasonably likely to have, a Material Adverse Effect on
\nWorldCom.<\/p>\n
(g) Vote Required. The affirmative vote of holders of shares of
\nWorldCom Common Stock, WorldCom Series A Preferred Stock and WorldCom Series B
\nPreferred Stock (collectively, “WorldCom Stock”) representing a majority of the
\ntotal votes cast at a meeting of the holders of outstanding shares of WorldCom
\nStock all voting together as a single class (the “Required WorldCom Vote”), is
\nthe only vote of the holders of any class or series of WorldCom capital stock
\nnecessary to approve the Share Issuance. The affirmative vote of holders of a
\nmajority of the outstanding voting power of the shares of WorldCom Stock,
\nvoting together as a single class (the “Charter Amendment Vote”), is the only
\nvote of holders of any class or series of WorldCom capital stock necessary to
\napprove the amendment to WorldCom’s Certificate of Incorporation set forth in
\nSection 5.2 (the “Charter Amendment”).<\/p>\n
(h) Brokers or Finders. No agent, broker, investment banker,
\nfinancial advisor or other firm or Person is or will be entitled to any
\nbroker’s or finder’s fee or any other similar commission or fee in connection
\nwith any of the transactions contemplated by this Agreement based upon
\narrangements made by or on behalf of WorldCom, except Salomon Brothers Inc,
\nwhose fees and expenses will be paid by WorldCom in accordance with WorldCom’s
\nagreement with such firm based upon arrangements made by or on behalf of
\nWorldCom and previously disclosed to MCI.<\/p>\n
(i) Affiliate Letter. On or prior to the date of the WorldCom
\nStockholder Meeting, WorldCom will deliver to MCI a letter (the “WorldCom
\nAffiliate Letter”) identifying all persons who are “affiliates” of WorldCom for
\npurpose of Rule 145. On or prior to the Closing Date, WorldCom will deliver on
\nbehalf of each person identified as an “affiliate” in the WorldCom Affiliate
\nLetter an Affiliate Agreement in connection with restrictions on affiliates
\nunder Rule 145.<\/p>\n
3.3 Representations and Warranties of WorldCom and Merger Sub.
\nWorldCom and Merger Sub represent and warrant to MCI as follows:
\n 27
\n 19<\/p>\n
(a) Organization and Corporate Power. Merger Sub is a
\ncorporation duly incorporated, validly existing and in good standing under the
\nlaws of Delaware. Merger Sub is a direct wholly-owned subsidiary of WorldCom.<\/p>\n
(b) Corporate Authorization. Merger Sub has all requisite
\ncorporate power and authority to enter into this Agreement and to consummate
\nthe transactions contemplated hereby. The execution, delivery and performance
\nby Merger Sub of this Agreement and the consummation by Merger Sub of the
\ntransactions contemplated hereby have been duly authorized by all necessary
\ncorporate action on the part of Merger Sub. This Agreement has been duly
\nexecuted and delivered by Merger Sub and constitutes a valid and binding
\nagreement of Merger Sub, enforceable against it in accordance with its terms,
\nexcept as such enforceability may be limited by bankruptcy, insolvency,
\nreorganization, moratorium and other similar laws relating to or affecting
\ncreditors generally, by general equity principles (regardless or whether such
\nenforceability is considered in a proceeding in equity or at law) or by an
\nimplied covenant of good faith and fair dealing.<\/p>\n
(c) Non-Contravention. The execution, delivery and performance
\nby Merger Sub of this Agreement and the consummation by Merger Sub of the
\ntransactions contemplated hereby do not and will not contravene or conflict
\nwith the certificate of incorporation or by-laws of Merger Sub.<\/p>\n
(d) No Business Activities. Merger Sub has not conducted any
\nactivities other than in connection with the organization of Merger Sub, the
\npurchase of Ordinary Common Stock in open-market transactions, the negotiation
\nand execution of this Agreement and the consummation of the transactions
\ncontemplated hereby. Merger Sub has no Subsidiaries.<\/p>\n
ARTICLE IV<\/p>\n
COVENANTS RELATING TO CONDUCT OF BUSINESS<\/p>\n
4.1 Covenants of MCI. During the period from the date of this
\nAgreement and continuing until the Effective Time, MCI agrees as to itself and
\nits Subsidiaries that (except as expressly contemplated or permitted by this
\nAgreement or as otherwise indicated on the MCI Disclosure Schedule or as
\nrequired by a Governmental Entity of competent jurisdiction or to the extent
\nthat WorldCom shall otherwise consent in writing):<\/p>\n
(a) Ordinary Course. (i) MCI and its Subsidiaries shall carry
\non their respective businesses in the usual, regular and ordinary course in all
\nmaterial respects, in substantially the same manner as heretofore conducted,
\nand shall use all
\n 28
\n 20<\/p>\n
reasonable efforts to preserve intact their present lines of business, maintain
\ntheir rights and franchises and preserve their relationships with customers,
\nsuppliers and others having business dealings with them to the end that their
\nongoing businesses shall not be impaired in any material respect at the
\nEffective Time; provided, however, that no action by MCI or its Subsidiaries
\nwith respect to matters specifically addressed by any other provision of this
\nSection 4.1 shall be deemed a breach of this Section 4.1(a)(i) unless such
\naction would constitute a breach of one or more of such other provisions.<\/p>\n
(ii) MCI shall not, and shall not permit any of its Subsidiaries
\nto, (A) enter into any new material line of business or (B) incur or commit to
\nany capital expenditures other than capital expenditures incurred or committed
\nto in the ordinary course of business consistent with past practice and which,
\ntogether with all such expenditures incurred or committed to during any fiscal
\nyear, are not in excess of 105% of the aggregate amounts set forth in Section
\n4.1(a) of the MCI Disclosure Schedule.<\/p>\n
(b) Dividends; Changes in Share Capital. MCI shall not, and
\nshall not permit any of its Subsidiaries to, and shall not propose to, (i)
\ndeclare or pay any dividends on or make other distributions in respect of any
\nof its capital stock, except (A) MCI may continue the declaration and payment
\nof regular semiannual cash dividends not in excess of $0.025 per share of MCI
\nCommon Stock, in each case with usual record and payment dates for such
\ndividends in accordance with MCI’s past practice and (B) dividends by wholly
\nowned Subsidiaries of MCI, (ii) split, combine or reclassify any of its capital
\nstock or issue or authorize or propose the issuance of any other securities in
\nrespect of, in lieu of or in substitution for, shares of its capital stock,
\nexcept for any such transaction by a wholly owned Subsidiary of MCI which
\nremains a wholly owned Subsidiary after consummation of such transaction, or
\n(iii) repurchase, redeem or otherwise acquire any shares of its capital stock
\nor any securities convertible into or exercisable for any shares of its capital
\nstock except for the purchase from time to time by MCI of MCI Common Stock (and
\nthe associated Rights) in the ordinary course of business consistent with past
\npractice in connection with the MCI Benefit Plans.<\/p>\n
(c) Issuance of Securities. Except as set forth in Section 5.7,
\nMCI shall not, and shall not permit any of its Subsidiaries to, issue, deliver
\nor sell, or authorize or propose the issuance, delivery or sale of, any shares
\nof its capital stock of any class, any MCI Voting Debt or any securities
\nconvertible into or exercisable for, or any rights, warrants or options to
\nacquire, any such shares or MCI Voting Debt, or enter into any agreement with
\nrespect to any of the foregoing, other
\n 29
\n 21<\/p>\n
than (i) the issuance of MCI Common Stock (and the associated Rights) upon the
\nexercise of stock options or in connection with other stock-based benefits
\nplans outstanding on the date hereof in accordance with their present terms,
\n(ii) issuances by a wholly owned Subsidiary of MCI of capital stock to such
\nSubsidiary’s parent, (iii) issuances in accordance with the Rights Agreement or
\n(iv) issuances of shares, options, rights or other awards and amendments to
\nequity-related awards, in the ordinary course of business and consistent with
\npast practice pursuant to the MCI Benefit Plans.<\/p>\n
(d) Governing Documents. Except to the extent required to
\ncomply with their respective obligations hereunder, required by law or required
\nby the rules and regulations of NASDAQ, MCI and its material Subsidiaries shall
\nnot amend, in the case of Subsidiaries, in any material respect, or propose to
\namend their respective certificates of incorporation, by-laws or other
\ngoverning documents.<\/p>\n
(e) No Acquisitions. Other than acquisitions in existing or
\nrelated lines of business of MCI the fair market value of the total
\nconsideration (including the value of indebtedness or other liability acquired
\nor assumed) for which does not exceed $325 million in the aggregate, MCI shall
\nnot, and shall not permit any of its Subsidiaries to, acquire or agree to
\nacquire by merging or consolidating with, or by purchasing a substantial equity
\ninterest in or a substantial portion of the assets of, or by any other manner,
\nany business or any corporation, partnership, association or other business
\norganization or division thereof or otherwise acquire or agree to acquire any
\nassets (other than the acquisition of assets used in the operations of the
\nbusiness of MCI and its Subsidiaries in the ordinary course); provided,
\nhowever, that the foregoing shall not prohibit (x) internal reorganizations or
\nconsolidations involving existing Subsidiaries of MCI or (y) the creation of
\nnew Subsidiaries of MCI organized to conduct or continue activities otherwise
\npermitted by this Agreement.<\/p>\n
(f) No Dispositions. Other than (i) internal reorganizations or
\nconsolidations involving existing Subsidiaries of MCI, (ii) dispositions
\nreferred to in MCI SEC Reports filed prior to the date of this Agreement and
\n(iii) as may be required by or in conformance with law or regulation in order
\nto permit or facilitate the consummation of the transactions contemplated
\nhereby, MCI shall not, and shall not permit any Subsidiary of MCI to, sell,
\nlease, encumber or otherwise dispose of, or agree to sell, lease, encumber or
\notherwise dispose of, any of its assets (including capital stock of
\nSubsidiaries of MCI) which are material, individually or in the aggregate, to
\nMCI.
\n 30
\n 22<\/p>\n
(g) Indebtedness. MCI shall not, and shall not permit any of
\nits Subsidiaries to, (i) make any loans, advances or capital contributions to,
\nor investments in, any other Person, other than by MCI or a Subsidiary of MCI
\nto or in MCI or any Subsidiary of MCI or (ii) pay, discharge or satisfy any
\nclaims, liabilities or obligations (absolute, accrued, asserted or unasserted,
\ncontingent or otherwise), other than indebtedness, issuances of debt
\nsecurities, guarantees, loans, advances, capital contributions, investments,
\npayments, discharges or satisfactions incurred or committed to in the ordinary
\ncourse of business consistent with past practice.<\/p>\n
(h) Tax-Free Qualification. MCI shall not, and shall not permit
\nany of its Subsidiaries to, take any action that would prevent or impede the
\nMerger from qualifying as a reorganization under Section 368 of the Code.<\/p>\n
(i) Other Actions. MCI shall not, and shall not permit any of
\nits Subsidiaries to, take any action that would, or that could reasonably be
\nexpected to, result in, except as otherwise permitted by Section 5.5, any of
\nthe conditions to the Merger set forth in Article VI not being satisfied.<\/p>\n
(j) Accounting Methods; Income Tax Elections. Except as
\ndisclosed in MCI SEC Reports filed prior to the date of this Agreement, or as
\nrequired by a Governmental Entity, MCI shall not change its methods of
\naccounting in effect at December 31, 1996, except as required by changes in
\nU.S. GAAP as concurred in by MCI’s independent auditors. MCI shall not (i)
\nchange its fiscal year or (ii) make any material Tax election, other than in
\nthe ordinary course of business consistent with past practice, without
\nconsultation with WorldCom.<\/p>\n
(k) MCI Rights Agreement. Except as provided in Section 5.10,
\nMCI shall not amend, modify or waive any provision of the MCI Rights Agreement,
\nand shall not take any action to redeem the Rights or render the Rights
\ninapplicable to any transaction, other than to permit another transaction that
\nthe MCI Board has determined is a Superior Proposal, to be consummated no
\nearlier than December 31, 1998.<\/p>\n
4.2 Covenants of WorldCom. During the period from the date of
\nthis Agreement and continuing until the Effective Time, WorldCom agrees as to
\nitself and its Subsidiaries that (except as expressly contemplated or permitted
\nby this Agreement or as otherwise indicated on the WorldCom Disclosure Schedule
\nor as required by a Governmental Entity of competent jurisdiction or to the
\nextent that MCI shall otherwise consent in writing):<\/p>\n
(a) Ordinary Course. (i) WorldCom and its Subsidiaries shall
\ncarry on their respective businesses in the
\n 31
\n 23<\/p>\n
usual, regular and ordinary course in all material respects, in substantially
\nthe same manner as heretofore conducted, and shall use all reasonable efforts
\nto preserve intact their present lines of business, maintain their rights and
\nfranchises and preserve their relationships with customers, suppliers and
\nothers having business dealings with them to the end that their ongoing
\nbusinesses shall not be impaired in any material respect at the Effective Time;
\nprovided, however, that no action by WorldCom or its Subsidiaries with respect
\nto matters specifically addressed by any other provisions of this Section 4.2
\nshall be deemed a breach of this Section 4.2(a)(i) unless such action would
\nconstitute a breach of one or more of such other provisions.<\/p>\n
(ii) WorldCom shall not, and shall not permit any of its
\nSubsidiaries to, (A) enter into any new material line of business (other than
\nincidentally as part of a larger acquisition within an existing line of
\nbusiness) or (B) incur or commit to any capital expenditures other than capital
\nexpenditures incurred or committed to in the ordinary course of business
\nconsistent with past practice.<\/p>\n
(b) Dividends; Changes in Share Capital. WorldCom shall not,
\nand shall not permit any of its Subsidiaries to, and shall not propose to, (i)
\ndeclare or pay any dividends on or make other distributions in respect of any
\nof its capital stock, except (A) WorldCom may continue the declaration and
\npayment of regular quarterly cash dividends in amounts consistent with past
\npractice (including increases in such amounts consistent with past practice)
\nand (B) dividends by wholly owned Subsidiaries of WorldCom, (ii) split, combine
\nor reclassify any of its capital stock or issue or authorize or propose the
\nissuance of any other securities in respect of, in lieu of or in substitution
\nfor, shares of its capital stock, except for any such transaction by a wholly
\nowned Subsidiary of WorldCom which remains a wholly owned Subsidiary after
\nconsummation of such transaction, (iii) repurchase, redeem or otherwise acquire
\nany shares of its capital stock or any securities convertible into or
\nexercisable for any shares of its capital stock except for the purchase from
\ntime to time by WorldCom of WorldCom Common Stock in the ordinary course of
\nbusiness consistent with past practice in connection with share options, share
\nincentive schemes, profit sharing schemes or other benefit plans of WorldCom or
\nrepurchases of shares of WorldCom Common Stock in open market or privately
\nnegotiated transactions other than during the Measurement Period.<\/p>\n
(c) Issuance of Securities. WorldCom shall not, and shall not
\npermit any of its Subsidiaries to, issue, deliver or sell, or authorize or
\npropose the issuance, delivery or sale of, any shares of its capital stock of
\nany class, any WorldCom Voting Debt or any securities convertible into or
\nexercisable for, or any rights, warrants or options to acquire, any such shares
\nor
\n 32
\n 24<\/p>\n
WorldCom Voting Debt, or enter into any agreement with respect to any of the
\nforegoing, other than (i) the issuance of WorldCom Common Stock upon the
\nexercise of stock options, (ii) issuances by a wholly owned Subsidiary of
\nWorldCom of capital stock to such Subsidiary’s parent or another wholly owned
\nSubsidiary of WorldCom, (iii) issuances of options, awards, and amendments to
\nequity-related awards pursuant to WorldCom benefit plans as in effect from time
\nto time, (iv) issuances in accordance with the WorldCom Rights Agreement or (v)
\nissuances in respect of any acquisitions by WorldCom or its subsidiaries that
\nare currently pending (“WorldCom Pending Acquisitions”) on the date hereof or
\nare permitted pursuant to Section 4.2(e).<\/p>\n
(d) Governing Documents. Except to the extent required to
\ncomply with their respective obligations hereunder, required by law or required
\nby the rules and regulations of NASDAQ, WorldCom and its material Subsidiaries
\nshall not amend, in the case of Subsidiaries, in any material respect, or
\npropose to amend their respective certificates of incorporation, by-laws or
\nother governing documents.<\/p>\n
(e) No Acquisitions. Other than acquisitions in existing or
\nrelated lines of business of WorldCom the fair market value of the total
\nconsideration (including the value of indebtedness or other liability acquired
\nor assumed) for which does not exceed $525 million in the aggregate and other
\nthan WorldCom Pending Acquisitions, WorldCom, shall not, and shall not permit
\nany of its Subsidiaries to, acquire or agree to acquire by merging or
\nconsolidating with, or by purchasing a substantial equity interest in or a
\nsubstantial portion of the assets of, or by any other manner, any business or
\nany corporation, partnership, association or other business organization or
\ndivision thereof or otherwise acquire or agree to acquire any assets (other
\nthan the acquisition of assets used in the ordinary course); provided, however,
\nthat the foregoing shall not prohibit (x) internal reorganizations or
\nconsolidations involving existing Subsidiaries of WorldCom or (y) the creation
\nof new Subsidiaries of WorldCom organized to conduct or continue activities
\notherwise permitted by this Agreement.<\/p>\n
(f) No Dispositions. Other than (i) internal reorganizations or
\nconsolidations involving existing Subsidiaries of WorldCom, (ii) dispositions
\nreferred to in WorldCom SEC Reports filed prior to the date of this Agreement
\nand (iii) as may be required by or in conformance with law or regulation in
\norder to permit or facilitate the consummation of the transactions contemplated
\nhereby, WorldCom shall not, and shall not permit any Subsidiary of WorldCom to,
\nsell, lease, encumber or otherwise dispose of, any of its assets (including
\ncapital stock of Subsidiaries of WorldCom) which are material, individually or
\nin the aggregate, to WorldCom.
\n 33
\n 25<\/p>\n
(g) Indebtedness. WorldCom shall not, and shall not permit any
\nof its Subsidiaries to, (i) make any loans, advances or capital contributions
\nto, or investments in, any other Person, other than by WorldCom or a Subsidiary
\nof WorldCom to or in WorldCom or any Subsidiary of WorldCom or (ii) pay,
\ndischarge or satisfy any claims, liabilities or obligations (absolute, accrued,
\nasserted or unasserted, contingent or otherwise), other than indebtedness,
\nissuances of debt securities, guarantees, loans, advances, capital
\ncontributions, investments, payments, discharges or satisfactions incurred or
\ncommitted to in the ordinary course of business consistent with past practice.<\/p>\n
(h) Tax-Free Qualification. WorldCom shall not, and shall not
\npermit any of its Subsidiaries to, take any action that would prevent or impede
\nthe Merger from qualifying as a reorganization under Section 368 of the Code.<\/p>\n
(i) Other Actions. WorldCom shall not, and shall not permit any
\nof its Subsidiaries to, take any action that would, or that could reasonably be
\nexpected to, result in any of the conditions to the Merger set forth in Article
\nVI not being satisfied.<\/p>\n
(j) Accounting Methods; Income Tax Elections. Except as
\ndisclosed in WorldCom SEC Reports filed prior to the date of this Agreement, or
\nas required by a Governmental Entity, WorldCom shall not change its methods of
\naccounting in effect at December 31, 1996, except as required by changes in
\nU.S. GAAP as concurred in by WorldCom’s independent auditors. WorldCom shall
\nnot (i) change its fiscal year or (ii) make any material Tax election, other
\nthan in the ordinary course of business consistent with past practice, without
\nconsultation with MCI.<\/p>\n
(k) Acquisition Proposals. WorldCom shall not, and shall not
\npermit any of its Subsidiaries to, enter into any agreement with respect to or
\nconsummate any transaction contemplated by an Acquisition Proposal (as defined
\nin Section 5.5).<\/p>\n
(l) WorldCom Rights Agreement. WorldCom shall not amend, modify
\nor waive any provision of the WorldCom Rights Agreement and shall not take any
\naction to redeem the WorldCom Rights or render the WorldCom Rights inapplicable
\nto any transaction.<\/p>\n
4.3 Advice of Changes; Governmental Filings. Each party shall
\n(a) confer on a regular and frequent basis with the other and (b) report (to
\nthe extent permitted by law or regulation or any applicable confidentiality
\nagreement) on operational matters. MCI and WorldCom shall file all reports
\nrequired to be filed by each of them with the SEC (and all other
\n 34
\n 26<\/p>\n
Governmental Entities) between the date of this Agreement and the Effective
\nTime and shall (to the extent permitted by law or regulation or any applicable
\nconfidentiality agreement) deliver to the other party copies of all such
\nreports, announcements and publications promptly after the same are filed.
\nSubject to applicable laws relating to the exchange of information, each of MCI
\nand WorldCom shall have the right to review in advance, and will consult with
\nthe other with respect to, all the information relating to the other party and
\neach of their respective Subsidiaries, which appears in any filings,
\nannouncements or publications made with, or written materials submitted to, any
\nthird party or any Governmental Entity in connection with the transactions
\ncontemplated by this Agreement. In exercising the foregoing right, each of the
\nparties hereto agrees to act reasonably and as promptly as practicable. Each
\nparty agrees that, to the extent practicable and as timely as practicable, it
\nwill consult with, and provide all appropriate and necessary assistance to, the
\nother party with respect to the obtaining of all permits, consents, approvals
\nand authorizations of all third parties and Governmental Entities necessary or
\nadvisable to consummate the transactions contemplated by this Agreement and
\neach party will keep the other party apprised of the status of matters relating
\nto completion of the transactions contemplated hereby.<\/p>\n
4.4 Transition Planning. Bernard J. Ebbers, as Chief Executive
\nOfficer of WorldCom, and Gerald H. Taylor, as Chief Executive Officer of MCI,
\njointly shall be responsible for coordinating all aspects of transition
\nplanning and implementation relating to the Merger and the other transactions
\ncontemplated hereby. If either such person ceases to be Chief Executive
\nOfficer of his company for any reason, such person’s successor shall assume his
\npredecessor’s responsibilities under this Section 4.4. During the period
\nbetween the date of this Agreement and the Effective Time, Messrs. Ebbers and
\nTaylor jointly shall (i) examine various alternatives regarding the manner in
\nwhich to best organize and manage the businesses of WorldCom and MCI after the
\nEffective Time and (ii) coordinate policies and strategies with respect to
\nregulatory authorities and bodies, in all cases subject to applicable law and
\nregulation.<\/p>\n
4.5 Control of Other Party’s Business. Nothing contained in
\nthis Agreement shall give MCI, directly or indirectly, the right to control or
\ndirect WorldCom’s operations prior to the Effective Time. Nothing contained in
\nthis Agreement shall give WorldCom, directly or indirectly, the right to
\ncontrol or direct MCI’s operations prior to the Effective Time. Prior to the
\nEffective Time, each of MCI and WorldCom shall exercise, consistent with the
\nterms and conditions of this Agreement, complete control and supervision over
\nits respective operations.
\n 35
\n 27<\/p>\n
ARTICLE V<\/p>\n
ADDITIONAL AGREEMENTS<\/p>\n
5.1 Preparation of Proxy Statement; MCI Stockholders Meeting.
\n(a) As promptly as practicable following the date hereof, WorldCom shall, in
\ncooperation with MCI, prepare and file with the SEC preliminary proxy materials
\nwhich shall constitute the Joint Proxy Statement\/Prospectus (such proxy
\nstatement\/prospectus, and any amendments or supplements thereto, the “Joint
\nProxy Statement\/Prospectus”) and an amendment to its existing registration
\nstatement on Form S-4 with respect to the issuance of WorldCom Common Stock in
\nthe Merger (the “Form S-4”). The Joint Proxy Statement\/Prospectus will be
\nincluded in the Form S-4 as WorldCom’s prospectus. The Form S-4 and the Joint
\nProxy Statement\/Prospectus shall comply as to form in all material respects
\nwith the applicable provisions of the Securities Act and the Exchange Act and
\nthe rules and regulations thereunder. Each of WorldCom and MCI shall use all
\nreasonable efforts to have the Form S-4 cleared by the SEC as promptly as
\npracticable after filing with the SEC and to keep the Form S-4 effective as
\nlong as is necessary to consummate the Merger. WorldCom shall, as promptly as
\npracticable after receipt thereof, provide copies of any written comments
\nreceived from the SEC with respect to the Joint Proxy Statement\/Prospectus to
\nMCI and advise MCI of any oral comments with respect to the Proxy
\nStatement\/Prospectus received from the SEC. WorldCom agrees that none of the
\ninformation supplied or to be supplied by WorldCom for inclusion or
\nincorporation by reference in the Joint Proxy Statement\/Prospectus and each
\namendment or supplement thereto, at the time of mailing thereof and at the time
\nof the MCI Stockholders Meeting or the WorldCom Stockholders Meeting, will
\ncontain an untrue statement of a material fact or omit to state a material fact
\nrequired to be stated therein or necessary to make the statements therein, in
\nlight of the circumstances under which they were made, not misleading. MCI
\nagrees that none of the information supplied or to be supplied by MCI for
\ninclusion or incorporation by reference in the Joint Proxy Statement\/Prospectus
\nand each amendment or supplement thereto, at the time of mailing thereof and at
\nthe time of the MCI Stockholders Meeting or the WorldCom Stockholders Meeting,
\nwill contain an untrue statement of a material fact or omit to state a material
\nfact required to be stated therein or necessary to make the statements therein,
\nin light of the circumstances under which they were made, not misleading. For
\npurposes of the foregoing, it is understood and agreed that information
\nconcerning or related to WorldCom and the WorldCom Stockholders Meeting will be
\ndeemed to have been supplied by WorldCom and information concerning or related
\nto MCI and the MCI Stockholders Meeting shall be deemed to have been supplied
\nby MCI. WorldCom will
\n 36
\n 28<\/p>\n
provide MCI with a reasonable opportunity to review and comment on any
\namendment or supplement to the Joint Proxy Statement\/Prospectus prior to filing
\nsuch with the SEC, and will provide MCI with a copy of all such filings made
\nwith the SEC. No amendment or supplement to the information supplied by MCI
\nfor inclusion in the Joint Proxy Statement\/Prospectus shall be made without the
\napproval of MCI, which approval shall not be unreasonably withheld or delayed.<\/p>\n
(b) MCI shall, as promptly as practicable following the
\nexecution of this Agreement, duly call, give notice of, convene and hold a
\nmeeting of its stockholders (the “MCI Stockholders Meeting”) for the purpose of
\nobtaining the Required MCI Votes with respect to the transactions contemplated
\nby this Agreement, shall take all lawful action to solicit the adoption of this
\nAgreement by the Required MCI Votes and the Board of Directors of MCI shall
\nrecommend adoption of this Agreement by the stockholders of MCI. Without
\nlimiting the generality of the foregoing but subject to its rights pursuant to
\nSections 5.5 and 7.1(f), MCI agrees that its obligations pursuant to the first
\nsentence of this Section 5.1(b) shall not be affected by the commencement,
\npublic proposal, public disclosure or communication to MCI of any Acquisition
\nProposal.<\/p>\n
(c) WorldCom shall, as promptly as practicable following the
\nexecution of this Agreement, duly call, give notice of, convene and hold a
\nmeeting of its stockholders (the “WorldCom Stockholders Meeting”) for the
\npurpose of obtaining the Required WorldCom Vote and the Charter Amendment Vote,
\nshall take all lawful action to solicit the approval of the Share Issuance and
\nthe Charter Amendment by the Required WorldCom Vote and the Charter Amendment
\nVote and the Board of Directors of WorldCom shall recommend approval of the
\ntransactions contemplated by this Agreement by the stockholders of WorldCom.<\/p>\n
5.2 WorldCom Board of Directors; Officers; Headquarters; MCI
\nName. (a) WorldCom shall take all necessary action to reconstitute the Board of
\nDirectors of WorldCom as of the Effective Time in accordance with Exhibit
\n5.2(a) hereto.<\/p>\n
(b) WorldCom shall take all necessary action to cause Bert C.
\nRoberts, Jr. to be appointed Chairman of WorldCom as of the Effective Time.<\/p>\n
(c) WorldCom shall take all action necessary to cause the senior
\nmanagement of WorldCom to be as previously agreed between the parties.<\/p>\n
(d) As of the Effective Time, WorldCom shall be headquartered in
\nJackson, Mississippi and the Surviving Corporation shall be headquartered in
\nWashington D.C.
\n 37
\n 29<\/p>\n
(e) [Intentionally Omitted]<\/p>\n
(f) WorldCom shall take all action necessary to amend its
\nCertificate of Incorporation as of the Effective Time to change its name to
\n“MCI WorldCom”.<\/p>\n
5.3 Access to Information. Upon reasonable notice, MCI shall
\n(and shall cause its Subsidiaries to) afford to the officers, employees,
\naccountants, counsel, financial advisors and other representatives of WorldCom
\nreasonable access during normal business hours, during the period prior to the
\nEffective Time, to all its properties, books, contracts, commitments and
\nrecords and, during such period, MCI shall (and shall cause its Subsidiaries
\nto) furnish promptly to WorldCom (a) a copy of each report, schedule,
\nregistration statement and other document filed, published, announced or
\nreceived by it during such period pursuant to the requirements of Federal or
\nstate securities laws, as applicable (other than reports or documents which
\nsuch party is not permitted to disclose under applicable law), and (b)
\nconsistent with its legal obligations, all other information concerning its
\nbusiness, properties and personnel as such other party may reasonably request;
\nprovided, however, that MCI may restrict the foregoing access to the extent
\nthat (i) a Governmental Entity requires MCI or any of its Subsidiaries to
\nrestrict access to any properties or information reasonably related to any such
\ncontract on the basis of applicable laws and regulations with respect to
\nnational security matters or (ii) any law, treaty, rule or regulation of any
\nGovernmental Entity applicable to MCI requires MCI or its Subsidiaries to
\nrestrict access to any properties or information. The parties will hold any
\nsuch information which is non-public in confidence to the extent required by,
\nand in accordance with, the provisions of the letter dated October 16, 1997
\nbetween MCI and WorldCom (the “Confidentiality Agreement”). Any investigation
\nby WorldCom or MCI shall not affect the representations and warranties of MCI
\nor WorldCom, as the case may be.<\/p>\n
5.4 Best Efforts. (a) Subject to the terms and conditions of
\nthis Agreement, each party will use its best efforts to take, or cause to be
\ntaken, all actions and to do, or cause to be done, all things necessary, proper
\nor advisable under applicable laws and regulations to consummate the Merger and
\nthe other transactions contemplated by this Agreement as soon as practicable
\nafter the date hereof. In furtherance and not in limitation of the foregoing,
\neach party hereto agrees to make, to the extent it has not already done so, an
\nappropriate filing of a Notification and Report Form pursuant to the HSR Act
\nwith respect to the transactions contemplated hereby as promptly as practicable
\nand in any event within five business days of the date hereof and to supply as
\npromptly as practicable any additional information and documentary material
\nthat may be
\n 38
\n 30<\/p>\n
requested pursuant to the HSR Act and to take all other actions necessary to
\ncause the expiration or termination of the applicable waiting periods under the
\nHSR Act as soon as practicable.<\/p>\n
(b) Each of WorldCom and MCI shall, in connection with the
\nefforts referenced in Section 5.4(a) to obtain all requisite approvals and
\nauthorizations for the transactions contemplated by this Merger Agreement under
\nthe HSR Act or any other Regulatory Law (as defined below), use its best
\nefforts to (i) cooperate in all respects with each other in connection with any
\nfiling or submission and in connection with any investigation or other inquiry,
\nincluding any proceeding initiated by a private party; (ii) promptly inform the
\nother party of any communication received by such party from, or given by such
\nparty to, the FCC, PUCs, the Antitrust Division of the Department of Justice
\n(the “DOJ”) or any other Governmental Entity and of any material communication
\nreceived or given in connection with any proceeding by a private party, in each
\ncase regarding any of the transactions contemplated hereby, and (iii) permit
\nthe other party to review any communication given by it to, and consult with
\neach other in advance of any meeting or conference with, the FCC, PUCs, the DOJ
\nor any such other Governmental Entity or, in connection with any proceeding by
\na private party, with any other Person, and to the extent permitted by the FCC,
\nPUCs, the DOJ or such other applicable Governmental Entity or other Person,
\ngive the other party the opportunity to attend and participate in such meetings
\nand conferences. For purposes of this Agreement, “Regulatory Law” means the
\nSherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal
\nTrade Commission Act, as amended, the Federal Communications Act, as amended,
\nand all other federal, state and foreign, if any, statutes, rules, regulations,
\norders, decrees, administrative and judicial doctrines and other laws that are
\ndesigned or intended to prohibit, restrict or regulate actions having the
\npurpose or effect of monopolization or restraint of trade or lessening of
\ncompetition, whether in the communications industry or otherwise through merger
\nor acquisition.<\/p>\n
(c) In furtherance and not in limitation of the covenants of the
\nparties contained in Sections 5.4(a) and 5.4(b), if any administrative or
\njudicial action or proceeding, including any proceeding by a private party, is
\ninstituted (or threatened to be instituted) challenging any transaction
\ncontemplated by this Agreement as violative of any Regulatory Law, each of
\nWorldCom and MCI shall cooperate in all respects with each other and use its
\nrespective best efforts to contest and resist any such action or proceeding and
\nto have vacated, lifted, reversed or overturned any decree, judgment,
\ninjunction or other order, whether temporary, preliminary or permanent, that is
\nin effect and that prohibits, prevents or restricts consummation of the
\n 39
\n 31<\/p>\n
transactions contemplated by this Agreement. Notwithstanding the foregoing or
\nany other provision of this Agreement, nothing in this Section 5.4 shall limit
\na party’s right to terminate this Agreement pursuant to Section 7.1(b) or
\n7.1(c) so long as such party has up to then complied in all respects with its
\nobligations under this Section 5.4.<\/p>\n
(d) If any objections are asserted with respect to the
\ntransactions contemplated hereby under any Regulatory Law or if any suit is
\ninstituted by any Governmental Entity or any private party challenging any of
\nthe transactions contemplated hereby as violative of any Regulatory Law, each
\nof WorldCom and MCI shall use its best efforts to resolve any such objections
\nor challenge as such Governmental Entity or private party may have to such
\ntransactions under such Regulatory Law so as to permit consummation of the
\ntransactions contemplated by this Agreement.<\/p>\n
(e) Each of WorldCom, Merger Sub and MCI shall use its best
\nefforts to cause the Merger to qualify and will not (both before and after
\nconsummation of the Merger) take any actions which to its knowledge could
\nreasonably be expected to prevent the Merger from qualifying, as a
\nreorganization under the provisions of Section 368 of the Code.<\/p>\n
5.5 Acquisition Proposals. Each of WorldCom and MCI agrees that
\nneither it nor any of its Subsidiaries nor any of the officers and directors of
\nit or its Subsidiaries shall, and that it shall direct and use its best efforts
\nto cause its and its Subsidiaries’ employees, agents and representatives
\n(including any investment banker, attorney or accountant retained by it or any
\nof its Subsidiaries) not to, directly or indirectly, initiate, solicit,
\nencourage or otherwise facilitate (including by way of furnishing information)
\nany inquiries or the making of any proposal or offer with respect to a merger,
\nreorganization, share exchange, consolidation, business combination,
\nrecapitalization, liquidation, dissolution or similar transaction involving, or
\nany purchase or sale of all or any significant portion of the assets or 10% or
\nmore of the equity securities of, it or any of its Subsidiaries that, in any
\nsuch case, could reasonably be expected to interfere with the completion of the
\nMerger or the other transactions contemplated by this Agreement (any such
\nproposal or offer being hereinafter referred to as an “Acquisition Proposal”).
\nEach of WorldCom and MCI further agrees that neither it nor any of its
\nSubsidiaries nor any of the officers and directors of it or its Subsidiaries
\nshall, and that it shall direct and use its best efforts to cause its and its
\nSubsidiaries’ employees, agents and representatives (including any investment
\nbanker, attorney or accountant retained by it or any of its Subsidiaries) not
\nto, directly or indirectly, have any discussion with or provide any
\nconfidential information or data to any Person relating to an Acquisition
\nProposal, or engage in
\n 40
\n 32<\/p>\n
any negotiations concerning an Acquisition Proposal, or otherwise facilitate
\nany effort or attempt to make or implement an Acquisition Proposal or accept an
\nAcquisition Proposal. Notwithstanding the foregoing, MCI or its Board of
\nDirectors shall be permitted to (A) to the extent applicable, comply with Rule
\n14e-2(a) promulgated under the Exchange Act with regard to an Acquisition
\nProposal, (B) in response to an unsolicited bona fide written Acquisition
\nProposal by any Person, recommend such an unsolicited bona fide written
\nAcquisition Proposal to the stockholders of MCI, or withdraw or modify in any
\nadverse manner its approval or recommendation of this Agreement or (C) engage
\nin any discussions or negotiations with, or provide any information to, any
\nPerson in response to an unsolicited bona fide written Acquisition Proposal by
\nany such Person, if and only to the extent that, in any such case as is
\nreferred to in clause (B) or (C), (i) the MCI Stockholders Meeting shall not
\nhave occurred, (ii) the Board of Directors of MCI concludes in good faith that
\nsuch Acquisition Proposal (x) in the case of clause (B) above would, if
\nconsummated, constitute a Superior Proposal or (y) in the case of clause (C)
\nabove could reasonably be expected to constitute a Superior Proposal, (iii)
\nprior to providing any information or data to any Person in connection with an
\nAcquisition Proposal by any such Person, the MCI Board of Directors receives
\nfrom such Person an executed confidentiality agreement on terms substantially
\nsimilar to those contained in the Confidentiality Agreement and (iv) prior to
\nproviding any information or data to any Person or entering into discussions or
\nnegotiations with any Person, the Board of Directors of MCI notifies WorldCom
\nimmediately of such inquiries, proposals or offers received by, any such
\ninformation requested from, or any such discussions or negotiations sought to
\nbe initiated or continued with, any of its representatives indicating, in
\nconnection with such notice, the name of such Person and the material terms and
\nconditions of any proposals or offers. MCI agrees that it will keep WorldCom
\ninformed, on a current basis, of the status and terms of any such proposals or
\noffers and the status of any such discussions or negotiations. Each of
\nWorldCom and MCI agrees that it will immediately cease and cause to be
\nterminated any existing activities, discussions or negotiations with any
\nparties conducted heretofore with respect to any Acquisition Proposal. Each of
\nWorldCom and MCI agrees that it will take the necessary steps to promptly
\ninform the individuals or entities referred to in the first sentence of this
\nSection 5.5 of the obligations undertaken in this Section 5.5. Nothing in this
\nSection 5.5 shall (x) permit either WorldCom or MCI to terminate this Agreement
\n(except as specifically provided in Article VII hereof) or (y) affect any other
\nobligation of MCI or WorldCom under this Agreement.<\/p>\n
5.6 [Intentionally Omitted]
\n 41
\n 33<\/p>\n
5.7 Stock Options and Other Stock Plans; Employee Benefits
\nMatters. MCI and WorldCom will agree to provisions with respect to MCI’s stock
\noptions and other stock plans and treatment of MCI’s officers and employees as
\nset forth in Exhibit 5.7 hereto.<\/p>\n
5.8 Fees and Expenses. Whether or not the Merger is
\nconsummated, all Expenses incurred in connection with this Agreement and the
\ntransactions contemplated hereby shall be paid by the party incurring such
\nExpenses, except (a) if the Merger is consummated, the Surviving Corporation
\nshall pay, or cause to be paid, any and all property or transfer taxes imposed
\non MCI or its Subsidiaries and any real property transfer tax imposed on any
\nholder of shares of capital stock of MCI resulting from the Merger, (b)
\nExpenses incurred in connection with the filing, printing and mailing of the
\nJoint Proxy Statement\/Prospectus, which shall be shared equally by WorldCom and
\nMCI and (c) as provided in Section 7.2. As used in this Agreement, “Expenses”
\nincludes all out-of-pocket expenses (including, without limitation, all fees
\nand expenses of counsel, accountants, investment bankers, experts and
\nconsultants to a party hereto and its affiliates) incurred by a party or on its
\nbehalf in connection with or related to the authorization, preparation,
\nnegotiation, execution and performance of this Agreement and the transactions
\ncontemplated hereby, including the preparation, printing, filing and mailing of
\nthe Joint Proxy Statement\/Prospectus and the solicitation of stockholder
\napprovals and all other matters related to the transactions contemplated
\nhereby.<\/p>\n
5.9 Directors’ and Officers’ Insurance. The Surviving
\nCorporation shall cause to be maintained in effect in its certificate of
\nincorporation and by-laws (i) for a period of six years after the Effective
\nTime, the current provisions regarding elimination of liability of directors
\nand indemnification of officers, directors and employees contained in the
\ncertificate of incorporation and by-laws of MCI and (ii) for a period of six
\nyears, the current policies of directors’ and officers’ liability insurance and
\nfiduciary liability insurance maintained by MCI (provided that the Surviving
\nCorporation may substitute therefor policies of at least the same coverage and
\namounts containing terms and conditions which are, in the aggregate, no less
\nadvantageous to the insured) with respect to claims arising from facts or
\nevents that occurred on or before the Effective Time; provided, however, that
\nin no event shall the Surviving Corporation be required to expend in any one
\nyear an amount in excess of 200% of the annual premiums currently paid by MCI
\nfor such insurance; and, provided, further, that if the annual premiums of such
\ninsurance coverage exceed such amount, the Surviving Corporation shall be
\nobligated to obtain a policy with the greatest coverage available for a cost
\nnot exceeding such amount.
\n 42
\n 34<\/p>\n
5.10 Rights Agreement. The Board of Directors of MCI shall take
\nall further action (in addition to that referred to in Section 3.1(g))
\nnecessary (including redeeming the Rights immediately prior to the Effective
\nTime or amending the Rights Agreement) in order to render the Rights
\ninapplicable to the Merger and the other transactions contemplated by this
\nAgreement.<\/p>\n
5.11 Public Announcements. MCI and WorldCom shall use all
\nreasonable efforts to develop a joint communications plan and each party shall
\nuse all reasonable efforts (i) to ensure that all press releases and other
\npublic statements with respect to the transactions contemplated hereby shall be
\nconsistent with such joint communications plan, and (ii) unless otherwise
\nrequired by applicable law or by obligations pursuant to any listing agreement
\nwith or rules of any securities exchange, to consult with each other before
\nissuing any press release or otherwise making any public statement with respect
\nto this Agreement or the transactions contemplated hereby.<\/p>\n
5.12 Accountants’ Letters. Upon reasonable notice from the
\nother, MCI and WorldCom shall use their respective reasonable best efforts to
\ncause Price Waterhouse LLP and Arthur Andersen LLP, respectively, to deliver to
\nWorldCom or MCI, as the case may be, a letter, dated within two business days
\nof the Effective Time of the Form S-4 covering such matters as are requested by
\nWorldCom or MCI, as the case may be, and as are customarily addressed in
\naccountant’s “comfort” letters. In connection with WorldCom’s efforts to
\nobtain such letter, if requested by Arthur Andersen LLP, MCI shall provide a
\nrepresentation letter to Arthur Andersen LLP complying with the statement on
\nAuditing Standards No. 72 (“SAS 72”), if then required. In connection with
\nMCI’s efforts to obtain such letter, if requested by Price Waterhouse LLP,
\nWorldCom shall provide a representation letter to Price Waterhouse LLP
\ncomplying with SAS 72, if then required.<\/p>\n
5.13 Listing of Shares of WorldCom Common Stock. WorldCom shall
\nuse its best efforts to cause the shares of WorldCom Common Stock to be issued
\nin the Merger to be approved for quotation, upon official notice of issuance,
\non NASDAQ.<\/p>\n
5.14 Voting Trust. If at any time prior to the MCI Stockholders
\nMeeting a third party shall make an unsolicited tender or exchange offer to
\nacquire control of MCI, which offer is not recommended by MCI’s Board of
\nDirectors, then WorldCom and MCI will use their reasonable best efforts to
\nconsummate the transactions contemplated hereby by implementing a “voting
\ntrust” or similar structure permitting consummation of the transactions
\ncontemplated hereby prior to the receipt of final FCC and PUC approvals.
\n 43
\n 35<\/p>\n
ARTICLE VI<\/p>\n
CONDITIONS PRECEDENT<\/p>\n
6.1 Conditions to Each Party’s Obligation to Effect the Merger.
\nThe obligations of MCI, WorldCom and Merger Sub to effect the Merger are
\nsubject to the satisfaction or waiver on or prior to the Closing Date of the
\nfollowing conditions:<\/p>\n
(a) Stockholder Approval. (i) MCI shall have obtained the
\nRequired MCI Votes in connection with the adoption of this Agreement by the
\nstockholders of MCI and (ii) WorldCom shall have obtained the Required WorldCom
\nVote in connection with the approval of the Share Issuance by the stockholders
\nof WorldCom.<\/p>\n
(b) No Injunctions or Restraints, Illegality. No Laws shall
\nhave been adopted or promulgated, and no temporary restraining order,
\npreliminary or permanent injunction or other order issued by a court or other
\nGovernmental Entity of competent jurisdiction shall be in effect, having the
\neffect of making the Merger illegal or otherwise prohibiting consummation of
\nthe Merger; provided, however, that the provisions of this Section 6.1(b) shall
\nnot be available to any party whose failure to fulfill its obligations pursuant
\nto Section 5.4 shall have been the cause of, or shall have resulted in, such
\norder or injunction.<\/p>\n
(c) FCC and Public Utility Commission Approvals. All approvals
\nfor the Merger from the FCC and from the PUCs shall have been obtained other
\nthan those the failure of which to be obtained would not reasonably be expected
\nto have individually or in the aggregate a Material Adverse Effect on WorldCom
\nand its Subsidiaries (including the Surviving Corporation).<\/p>\n
(d) HSR Act. The waiting period (and any extension thereof)
\napplicable to the Merger under the HSR Act shall have been terminated or shall
\nhave expired.<\/p>\n
(e) EU Antitrust. WorldCom and MCI shall have received in
\nrespect of the Merger and any matters arising therefrom: confirmation by way of
\na decision from the Commission of the European Union under Regulation 4064.89
\n(with or without the initiation of proceedings under Article 6(1)(c) thereof)
\nthat the Merger and any matters arising therefrom are compatible with the
\ncommon market.
\n 44
\n 36<\/p>\n
(f) NASDAQ Listing. The shares of WorldCom Common Stock to be
\nissued in the Merger shall have been approved upon official notice of issuance
\nfor quotation on NASDAQ.<\/p>\n
(g) Effectiveness of the Form S-4. The Form S-4 shall have been
\ndeclared effective by the SEC under the Securities Act. No stop order
\nsuspending the effectiveness of the Form S-4 shall have been issued by the SEC
\nand no proceedings for that purpose shall have been initiated or threatened by
\nthe SEC.<\/p>\n
6.2 Additional Conditions to Obligations of WorldCom and Merger
\nSub. The obligations of WorldCom and Merger Sub to effect the Merger are
\nsubject to the satisfaction of, or waiver by WorldCom, on or prior to the
\nClosing Date of the following conditions:<\/p>\n
(a) Representations and Warranties. Each of the representations
\nand warranties of MCI set forth in this Agreement that is qualified as to
\nmateriality shall have been true and correct on the date of this Agreement, and
\neach of the representations and warranties of MCI that is not so qualified
\nshall have been true and correct in all material respects on the date of this
\nAgreement, and WorldCom shall have received a certificate of the chief
\nexecutive officer and the chief financial officer of MCI to such effect.<\/p>\n
(b) Performance of Obligations of MCI. MCI shall have performed
\nor complied with all agreements and covenants required to be performed by it
\nunder this Agreement at or prior to the Closing Date that are qualified as to
\nmateriality and shall have performed or complied in all material respects with
\nall other agreements and covenants required to be performed by it under this
\nAgreement at or prior to the Closing Date that are not so qualified as to
\nmateriality, and WorldCom shall have received a certificate of the chief
\nexecutive officer and the chief financial officer of MCI to such effect.<\/p>\n
(c) Tax Opinion. WorldCom shall have received from Cravath,
\nSwaine & Moore, counsel to WorldCom, on the Closing Date, a written opinion
\ndated as of such date substantially in the form of Exhibit 6.2(c)(1). In
\nrendering such opinion, counsel to WorldCom shall be entitled to rely upon
\nrepresentations of officers of WorldCom and MCI substantially in the form of
\nExhibits 6.2(c)(3) and 6.2(c)(4).<\/p>\n
6.3 Additional Conditions to Obligations of MCI. The
\nobligations of MCI to effect the Merger are subject to the satisfaction of, or
\nwaiver by MCI, on or prior to the Closing Date of the following additional
\nconditions:
\n 45
\n 37<\/p>\n
(a) Representations and Warranties. Each of the representations
\nand warranties of WorldCom and Merger Sub set forth in this Agreement that is
\nqualified as to materiality shall have been true and correct on the date of
\nthis Agreement, and each of the representations and warranties of each of
\nWorldCom and Merger Sub that is not so qualified shall have been true and
\ncorrect in all material respects on the date of this Agreement, and MCI shall
\nhave received a certificate of the chief executive officer and the chief
\nfinancial officer of WorldCom to such effect.<\/p>\n
(b) Performance of Obligations of WorldCom. WorldCom shall have
\nperformed or complied with all agreements and covenants required to be
\nperformed by it under this Agreement at or prior to the Closing Date that are
\nqualified as to materiality and shall have performed or complied in all
\nmaterial respects with all agreements and covenants required to be performed by
\nit under this Agreement at or prior to the Closing Date that are not so
\nqualified as to materiality, and MCI shall have received a certificate of the
\nchief executive officer and the chief financial officer of WorldCom to such
\neffect.<\/p>\n
(c) Tax Opinion. MCI shall have received from Simpson Thacher & Bartlett, counsel to MCI, on the Closing Date, a written opinion dated as of
\nsuch date substantially in the form of Exhibit 6.2(c)(2). In rendering such
\nopinion, counsel to MCI shall be entitled to rely upon representations of
\nofficers of WorldCom and MCI substantially in the form of Exhibits 6.2(c)(3)
\nand 6.2(c)(4).<\/p>\n
(d) No Material Adverse Change. Since the date of this
\nAgreement, WorldCom and its Subsidiaries shall not have incurred any material
\nliability, except in the ordinary course of business consistent with past
\npractice, nor shall there have been any adverse change, circumstance or effect
\nthat, individually or in the aggregate with all other adverse changes,
\ncircumstances and effects, is or is reasonably likely to be materially adverse
\nto the business, financial condition or results of operations of WorldCom and
\nits Subsidiaries taken as a whole, other than any change, circumstance or
\neffect relating to (i) the economy or securities markets in general or (ii) the
\nindustries in which WorldCom or MCI operate and not specifically relating to
\nWorldCom or MCI.<\/p>\n
ARTICLE VII<\/p>\n
TERMINATION AND AMENDMENT<\/p>\n
7.1 Termination. This Agreement may be terminated at any time
\nprior to the Effective Time, by action taken or
\n 46
\n 38<\/p>\n
authorized by the Board of Directors of the terminating party or parties, and
\nexcept as provided below, whether before or after approval of the matters
\npresented in connection with the Merger by the stockholders of MCI or WorldCom:<\/p>\n
(a) By mutual written consent of WorldCom and MCI, by action of
\ntheir respective Boards of Directors;<\/p>\n
(b) By either MCI or WorldCom if the Effective Time shall not
\nhave occurred on or before December 31, 1998 (the “Termination Date”);
\nprovided, however, that the right to terminate this Agreement under this
\nSection 7.1(b) shall not be available to any party whose failure to fulfill any
\nobligation under this Agreement (including without limitation Section 5.4) has
\nto any extent been the cause of, or resulted in, the failure of the Effective
\nTime to occur on or before the Termination Date;<\/p>\n
(c) By either MCI or WorldCom if (x) any Governmental Entity (i)
\nshall have issued an order, decree or ruling or taken any other action (which
\nthe parties shall have used their best efforts to resist, resolve or lift, as
\napplicable, in accordance with Section 5.4) permanently restraining, enjoining
\nor otherwise prohibiting the transactions contemplated by this Agreement, and
\nsuch order, decree, ruling or other action shall have become final and
\nnonappealable or (ii) shall have failed to issue an order, decree or ruling or
\nto take any other action (which order, decree, ruling or other action the
\nparties shall have used their best efforts to obtain, in accordance with
\nSection 5.4), in each case (i) and (ii) which is necessary to fulfill the
\nconditions set forth in subsections 6.1(c), (d) and (e), as applicable, and
\nsuch denial of a request to issue such order, decree, ruling or take such other
\naction shall have become final and nonappealable; provided, however, that the
\nright to terminate this Agreement under this Section 7.1(c) shall not be
\navailable to any party whose failure to comply with Section 5.4 has to any
\nextent been the cause of such action or inaction;<\/p>\n
(d) By either MCI or WorldCom if the approval by the
\nstockholders of MCI or of WorldCom required for the consummation of the Merger
\nshall not have been obtained by reason of the failure to obtain the Required
\nMCI Votes or the Required WorldCom Vote, as the case may be, at a duly held
\nmeeting of stockholders of MCI or WorldCom, as the case may be, or at any
\nadjournment thereof;<\/p>\n
(e) By WorldCom if the Board of Directors of MCI, prior to the
\nMCI Stockholders Meeting (i) shall withdraw or modify in any adverse manner its
\napproval or recommendation of this Agreement pursuant to Section 5.5, (ii)
\nshall approve or recommend a Superior Proposal pursuant to Section 5.5 or (iii)
\nshall resolve to take any of the actions specified in clauses (i) or (ii)
\nabove; or
\n 47
\n 39<\/p>\n
(f) By MCI at any time prior to the MCI Stockholders Meeting,
\nupon two Business Days’ prior notice to WorldCom, if the Board of Directors of
\nMCI shall approve a Superior Proposal; provided, however, that (i) MCI shall
\nhave complied with Section 5.5, (ii) the Board of Directors of MCI shall have
\nconcluded in good faith, after giving effect to all concessions which may be
\noffered by WorldCom pursuant to clause (iii) below, on the basis of the advice
\nof its financial advisors and outside counsel, that such proposal is a Superior
\nProposal and (iii) prior to any such termination, MCI shall, and shall cause
\nits financial and legal advisors to, negotiate with WorldCom to make such
\nadjustments in the terms and conditions of this Agreement as would enable
\nWorldCom to proceed with the transactions contemplated hereby; provided,
\nhowever, that it shall be a condition to termination by MCI pursuant to this
\nSection 7.l(f) that MCI shall have made the payment of the WorldCom Alternative
\nTransaction Fee to WorldCom required by Section 7.2(b).<\/p>\n
Notwithstanding anything else contained in this Agreement, the
\nright to terminate this Agreement under this Section 7.1 shall not be available
\nto any party (a) that is in material breach of its obligations hereunder or (b)
\nwhose failure to fulfill its obligations or to comply with its covenants under
\nthis Agreement has been the cause of, or resulted in, the failure to satisfy
\nany condition to the obligations of either party hereunder.<\/p>\n
7.2 Effect of Termination. (a) In the event of termination of
\nthis Agreement by either MCI or WorldCom as provided in Section 7.1, this
\nAgreement shall forthwith become void and there shall be no liability or
\nobligation on the part of WorldCom or MCI or their respective officers or
\ndirectors except with respect to Section 3.1(h), Section 3.2(h), Section
\n4.1(k), the second sentence of Section 5.3, Section 5.8, this Section 7.2 and
\nArticle VIII.<\/p>\n
(b) WorldCom and MCI agree that (i) if MCI shall terminate this
\nAgreement pursuant to Section 7.1(f) or (ii) if (x) MCI or WorldCom shall
\nterminate this Agreement pursuant to Section 7.1(d) due to the failure of MCI’s
\nstockholders to approve and adopt this Agreement or WorldCom shall terminate
\nthis Agreement pursuant to Section 7.1(e), (y) at the time of the event giving
\nrise to such termination there shall exist an Acquisition Proposal with respect
\nto MCI and (z) within 12 months of the termination of this Agreement, MCI
\nenters into a definitive agreement with any third party with respect to an
\nAcquisition Proposal or an Acquisition Proposal is consummated, then MCI shall
\npay to WorldCom an amount equal to $750 million
\n 48
\n 40<\/p>\n
(the “WorldCom Alternative Transaction Fee”) and shall reimburse WorldCom for
\nthe amount of the BT Inducement Fee paid to BT (such amount, the “Reimbursement
\nAmount”).<\/p>\n
(c) The WorldCom Alternative Transaction Fee and the
\nReimbursement Amount required to be paid pursuant to Section 7.2(b)(i) shall be
\nmade prior to, and shall be a pre-condition to the effectiveness of termination
\nof this Agreement pursuant to such Section. Any other payment required to be
\nmade pursuant to Section 7.2(b) shall be made to WorldCom not later than two
\nBusiness Days after the entering into of a definitive agreement with respect
\nto, or the consummation of, an Acquisition Proposal, as applicable. All
\npayments under this Section 7.2 and under Section 7.3 shall be made by wire
\ntransfer of immediately available funds to an account designated by the party
\nentitled to receive payment.<\/p>\n
7.3 Payment by WorldCom. WorldCom and MCI agree that if (a)
\nthis Agreement shall be terminated pursuant to (i) Section 7.1(b) and any of
\nthe conditions to the Merger set forth in Section 6.1(b), 6.1(c), 6.1(d),
\n6.1(e), 6.3(a), 6.3(b) or 6.3(d) has not been satisfied, (ii) Section 7.1(c),
\nor (iii) Section 7.1(d) solely as a result of the Required WorldCom Vote not
\nbeing obtained at a duly called WorldCom Stockholders Meeting or (b)
\nnotwithstanding the satisfaction of all the conditions set forth in Sections
\n6.1 and 6.2 and the satisfaction or waiver by MCI of all the conditions set
\nforth in Section 6.3, WorldCom is not willing to consummate the Merger, then,
\nunless (1) MCI shall not have complied with Section 5.4 or (2) MCI shall have
\nbreached its representations or warranties or its agreements or covenants
\nhereunder such that either of the conditions to the Merger set forth in Section
\n6.2(a) or 6.2(b) has not been satisfied, WorldCom shall pay to MCI an amount in
\ncash equal to $1.635 billion. The payment required to be made pursuant to this
\nSection 7.3 shall be made not later than two Business Days after the date of
\nsuch termination or such willful failure of WorldCom to close. Notwithstanding
\nanything in this Agreement (including Section 8.10) to the contrary, the
\npayment of any amount pursuant to this Section 7.3 (other than pursuant to
\nSection 7.3(a)(i), if due to the failure of the conditions set forth in Section
\n6.3(a) or 6.3(b), or Section 7.3(b)) shall constitute liquidated damages in
\nfull and complete satisfaction of, and shall be MCI’s sole and exclusive remedy
\nfor, any loss, liability, damage or claim arising out of or in connection with
\nany such termination of this Agreement or the facts and circumstances resulting
\nin such termination or otherwise related thereto or otherwise arising out of or
\nin connection with this Agreement.<\/p>\n
7.4 Amendment. This Agreement may be amended by the parties
\nhereto, by action taken or authorized by their respective Boards of Directors,
\nat any time before or after approval of the
\n 49
\n 41<\/p>\n
matters presented in connection with the Merger by the stockholders of MCI and
\nWorldCom, but, after any such approval, no amendment shall be made which by law
\nor in accordance with the rules of any relevant stock exchange requires further
\napproval by such stockholders without such further approval. This Agreement
\nmay not be amended except by an instrument in writing signed on behalf of each
\nof the parties hereto.<\/p>\n
7.5 Extension; Waiver. At any time prior to the Effective Time,
\nthe parties hereto, by action taken or authorized by their respective Boards of
\nDirectors, may, to the extent legally allowed, (i) extend the time for the
\nperformance of any of the obligations or other acts of the other parties
\nhereto, (ii) waive any inaccuracies in the representations and warranties
\ncontained herein or in any document delivered pursuant hereto and (iii) waive
\ncompliance with any of the agreements or conditions contained herein. Any
\nagreement on the part of a party hereto to any such extension or waiver shall
\nbe valid only if set forth in a written instrument signed on behalf of such
\nparty. The failure of any party to this Agreement to assert any of its rights
\nunder this Agreement or otherwise shall not constitute a waiver of those
\nrights.<\/p>\n
ARTICLE VIII<\/p>\n
GENERAL PROVISIONS<\/p>\n
8.1 Non-Survival of Representations, Warranties and Agreements.
\nNone of the representations, warranties, covenants and other agreements in this
\nAgreement or in any instrument delivered pursuant to this Agreement, including
\nany rights arising out of any breach of such representations, warranties,
\ncovenants and other agreements, shall survive the Effective Time, except for
\nthose covenants and agreements contained herein and therein that by their terms
\napply or are to be performed in whole or in part after the Effective Time and
\nthis Article VIII. Nothing in this Section 8.1 shall relieve any party for any
\nbreach of any representation, warranty, covenant or other agreement in this
\nAgreement occurring prior to termination.<\/p>\n
8.2 Notices. All notices and other communications hereunder
\nshall be in writing and shall be deemed duly given (a) on the date of delivery
\nif delivered personally, or by telecopy or telefacsimile, upon confirmation of
\nreceipt, (b) on the first Business Day following the date of dispatch if
\ndelivered by a recognized next-day courier service, or (c) on the tenth
\nBusiness Day following the date of mailing if delivered by registered or
\ncertified mail, return receipt requested, postage prepaid. All notices
\nhereunder shall be delivered as set forth below, or pursuant to such other
\ninstructions as may be designated in writing by the party to receive such
\nnotice:
\n 50
\n 42<\/p>\n
(a) if to WorldCom or Merger Sub, to<\/p>\n
WorldCom, Inc.
\n 10777 Sunset Office Drive
\n Suite 330
\n St. Louis, MO 63127
\n Attention: P. Bruce Borghardt, Esq.
\n General Counsel
\n Corporate Development
\n Facsimile No.: 314-909-4101<\/p>\n
with a copy to<\/p>\n
Cravath, Swaine & Moore
\n Worldwide Plaza
\n 825 Eighth Avenue
\n New York, New York 10019
\n Attention: Allen Finkelson, Esq.
\n Robert A. Kindler, Esq.
\n Facsimile No.: 212-474-3700<\/p>\n
(b) if to MCI to<\/p>\n
MCI Communications Corporation
\n 1801 Pennsylvania Avenue, NW
\n Washington, D.C. 20006
\n Attention: Michael Salsbury, Esq.
\n Executive Vice President
\n and General Counsel
\n Facsimile No.: 202-887-3353<\/p>\n
with a copy to<\/p>\n
Simpson Thacher & Bartlett
\n 425 Lexington Avenue
\n New York, New York 10017
\n Attention: Richard I. Beattie, Esq.
\n Philip T. Ruegger III, Esq.
\n Facsimile No.: 212-455-2502<\/p>\n
8.3 Interpretation. When a reference is made in this Agreement
\nto Sections, Exhibits or Schedules, such reference shall be to a Section of or
\nExhibit or Schedule to this Agreement unless otherwise indicated. The table of
\ncontents, glossary of defined terms and headings contained in this Agreement
\nare for reference purposes only and shall not affect in any way the meaning or
\ninterpretation of this Agreement. Whenever the words “include”, “includes” or
\n“including” are used in this Agreement, they shall be deemed to be followed by
\nthe words “without limitation”.
\n 51
\n 43<\/p>\n
8.4 Counterparts. This Agreement may be executed in one or more
\ncounterparts, all of which shall be considered one and the same agreement and
\nshall become effective when one or more counterparts have been signed by each
\nof the parties and delivered to the other party, it being understood that both
\nparties need not sign the same counterpart.<\/p>\n
8.5 Entire Agreement; No Third Party Beneficiaries. (a) This
\nAgreement and the BT Agreement (and the agreement referred to in Section
\n5.2(c)) constitute the entire agreement and supersede all prior agreements and
\nunderstandings, both written and oral, among the parties with respect to the
\nsubject matter hereof, other than the Confidentiality Agreement, which shall
\nsurvive the execution and delivery of this Agreement.<\/p>\n
(b) This Agreement shall be binding upon and inure solely to the
\nbenefit of each party hereto, and nothing in this Agreement, express or
\nimplied, is intended to or shall confer upon any other Person any right,
\nbenefit or remedy of any nature whatsoever under or by reason of this
\nAgreement, other than Section 5.9 (which is intended to be for the benefit of
\nthe Persons covered thereby and may be enforced by such Persons).<\/p>\n
8.6 Governing Law. This Agreement shall be governed and
\nconstrued in accordance with the laws of the State of Delaware.<\/p>\n
8.7 Severability. If any term or other provision of this
\nAgreement is invalid, illegal or incapable of being enforced by any law or
\npublic policy, all other terms and provisions of this Agreement shall
\nnevertheless remain in full force and effect so long as the economic or legal
\nsubstance of the transactions contemplated hereby is not affected in any manner
\nmaterially adverse to any party. Upon such determination that any term or
\nother provision is invalid, illegal or incapable of being enforced, the parties
\nhereto shall negotiate in good faith to modify this Agreement so as to effect
\nthe original intent of the parties as closely as possible in an acceptable
\nmanner in order that the transactions contemplated hereby are consummated as
\noriginally contemplated to the greatest extent possible.<\/p>\n
8.8 Assignment. Neither this Agreement nor any of the rights,
\ninterests or obligations hereunder shall be assigned by any of the parties
\nhereto, in whole or in part (whether by operation of law or otherwise), without
\nthe prior written consent of the other party, and any attempt to make any such
\nassignment without such consent shall be null and void, except that Merger Sub
\nmay assign, in its sole discretion, any or all of its rights, interests and
\nobligations under this Agreement to any direct wholly owned Subsidiary of
\nWorldCom without the consent of MCI, but no such assignment shall relieve
\nMerger Sub of any of its
\n 52
\n 44<\/p>\n
obligations under this Agreement. Subject to the preceding sentence, this
\nAgreement will be binding upon, inure to the benefit of and be enforceable by
\nthe parties and their respective successors and assigns.<\/p>\n
8.9 Submission to Jurisdiction; Waivers. Each of WorldCom and
\nMCI irrevocably agrees that any legal action or proceeding with respect to this
\nAgreement or for recognition and enforcement of any judgment in respect hereof
\nbrought by the other party hereto or its successors or assigns may be brought
\nand determined in the Chancery or other Courts of the State of Delaware, and
\neach of WorldCom and MCI hereby irrevocably submits with regard to any such
\naction or proceeding for itself and in respect to its property, generally and
\nunconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
\nEach of WorldCom and MCI hereby irrevocably waives, and agrees not to assert,
\nby way of motion, as a defense, counterclaim or otherwise, in any action or
\nproceeding with respect to this Agreement, (a) the defense of sovereign
\nimmunity, (b) any claim that it is not personally subject to the jurisdiction
\nof the above-named courts for any reason other than the failure to serve
\nprocess in accordance with this Section 8.9, (c) that it or its property is
\nexempt or immune from jurisdiction of any such court or from any legal process
\ncommenced in such courts (whether through service of notice, attachment prior
\nto judgment, attachment in aid of execution of judgment, execution of judgment
\nor otherwise), and (d) to the fullest extent permitted by applicable law, that
\n(i) the suit, action or proceeding in any such court is brought in an
\ninconvenient forum, (ii) the venue of such suit, action or proceeding is
\nimproper and (iii) this Agreement, or the subject matter hereof, may not be
\nenforced in or by such courts.<\/p>\n
8.10 Enforcement. The parties agree that irreparable damage
\nwould occur in the event that any of the provisions of this Agreement were not
\nperformed in accordance with their specific terms. It is accordingly agreed
\nthat the parties shall be entitled to specific performance of the terms hereof,
\nthis being in addition to any other remedy to which they are entitled at law or
\nin equity.<\/p>\n
8.11 Definitions. As used in this Agreement:<\/p>\n
(a) “Board of Directors” means the Board of Directors of any
\nspecified Person and any committees thereof.<\/p>\n
(b) “Business Day” means any day on which banks are not required
\nor authorized to close in the City of New York.<\/p>\n
(c) “Material Adverse Effect” means, with respect to any entity,
\nany adverse change, circumstance or effect that,
\n 53
\n 45<\/p>\n
individually or in the aggregate with all other adverse changes, circumstances
\nand effects, is or is reasonably likely to be materially adverse to the
\nbusiness, financial condition or results of operations of such entity and its
\nSubsidiaries taken as a whole, other than any change, circumstance or effect
\nrelating to (i) the economy or securities markets in general or (ii) the
\nindustries in which WorldCom or MCI operate and not specifically relating to
\nWorldCom or MCI.<\/p>\n
(d) “the other party” means, with respect to MCI, WorldCom and
\nmeans, with respect to WorldCom, MCI.<\/p>\n
(e) “Person” means an individual, corporation, limited liability
\ncompany, partnership, association, trust, unincorporated organization, other
\nentity or group (as defined in the Exchange Act).<\/p>\n
(f) “Subsidiary” when used with respect to any party means any
\ncorporation or other organization, whether incorporated or unincorporated, (i)
\nof which such party or any other Subsidiary of such party is a general partner
\n(excluding partnerships, the general partnership interests of which held by
\nsuch party or any Subsidiary of such party do not have a majority of the voting
\ninterests in such partnership) or (ii) at least a majority of the securities or
\nother interests of which having by their terms ordinary voting power to elect a
\nmajority of the Board of Directors or others performing similar functions with
\nrespect to such corporation or other organization is directly or indirectly
\nowned or controlled by such party or by any one or more of its Subsidiaries, or
\nby such party and one or more of its Subsidiaries.<\/p>\n
(g) “Superior Proposal” means a bona fide written Acquisition
\nProposal which the Board of Directors of MCI concludes in good faith (after
\nconsultation with its financial advisors and legal counsel), taking into
\naccount all legal, financial, regulatory and other aspects of the proposal and
\nthe Person making the proposal, (i) would, if consummated, result in a
\ntransaction that is more favorable to MCI’s stockholders (in their capacities
\nas stockholders), from a financial point of view, than the transactions
\ncontemplated by this Agreement and (ii) is reasonably capable of being
\ncompleted (provided that for purposes of this definition the term Acquisition
\nProposal shall have the meaning assigned to such term in Section 5.5 except
\nthat the reference to “10%” in the definition of “Acquisition Proposal” shall
\nbe deemed to be a reference to “50%” and “Acquisition Proposal” shall only be
\ndeemed to refer to a transaction involving MCI, or with respect to assets
\n(including the shares of any Subsidiary of MCI) of MCI and its Subsidiaries,
\ntaken as a whole, and not any of its Subsidiaries alone).
\n 54
\n 46<\/p>\n
(h) “Benefit Plans” means, with respect to any Person, each
\nemployee benefit plan, program, arrangement and contract (including, without
\nlimitation, any “employee benefit plan,” as defined in Section 3(3) of the
\nEmployee Retirement Income Security Act of 1974, as amended (“ERISA”) and any
\nbonus, deferred compensation, stock bonus, stock purchase, restricted stock,
\nstock option, employment, termination, stay agreement or bonus, change in
\ncontrol and severance plan, program, arrangement and contract) all of the
\nforegoing in effect on the date of this Agreement, to which such Person is a
\nparty, which is maintained or contributed to by such Person, or with respect to
\nwhich such Person could incur material liability under Section 4069, 4201 or
\n4212(c) of ERISA.<\/p>\n
8.12 Other Agreements. The parties hereto acknowledge and
\nagree that, except as otherwise expressly set forth in this Agreement, the
\nrights and obligations of MCI and WorldCom under any other agreement between
\nthe parties shall not be affected by any provision of this Agreement.
\n 55
\n 47<\/p>\n
IN WITNESS WHEREOF, WorldCom, MCI and Merger Sub have caused this
\nAgreement to be signed by their respective officers thereunto duly authorized,
\nall as of November 9, 1997.<\/p>\n
WORLDCOM, INC. <\/p>\n
By: \/s\/ Bernard J. Ebbers
\n Name: Bernard J. Ebbers
\n Title: President and Chief
\n Executive Officer <\/p>\n
TC INVESTMENTS CORP. <\/p>\n
By: \/s\/ Bernard J. Ebbers
\n Name: Bernard J. Ebbers
\n Title: President and Chief
\n Executive Officer <\/p>\n
MCI COMMUNICATIONS CORPORATION<\/p>\n
By: \/s\/ Bert C. Roberts, Jr.
\n Name: Bert C. Roberts, Jr.
\n Title: Chairman
\n 56
\n EXHIBIT 5.2(a) TO
\n THE MERGER AGREEMENT<\/p>\n
RECONSTITUTION OF THE BOARD OF DIRECTORS OF WORLDCOM<\/p>\n
The Board of Directors of WorldCom, as of the Effective Time, shall consist of
\nfifteen members, eight of whom shall be designated by WorldCom from among the
\ndirectors of WorldCom, five of whom shall be designated by MCI from among the
\ndirectors of MCI and two of whom shall be directors designated by WorldCom from
\namong pending acquisitions of WorldCom; provided that the persons designated by
\neach party shall be reasonably acceptable to the other party.
\n 57
\n Exhibit 5.7<\/p>\n
Outline of Employee Benefit Provisions<\/p>\n
1. All outstanding equity awards, including all ISUs, all restricted
\n stock and all option grants will continue to vest (and be paid out) or
\n become exercisable, as the case may be, in accordance with their
\n current terms and will not be further accelerated in any way;
\n provided, however, that if the Merger is not a pooling transaction,
\n all such equity grants that have not otherwise previously lapsed or
\n been forfeited shall vest upon the closing of the Merger. Upon the
\n Effective Time, any outstanding equity awards will be converted into
\n shares (and options, as the case may be) of the Parent on identical
\n terms. Specifically:<\/p>\n
On or prior to the Effective Time, MCI shall take all action
\n necessary to cause each option to purchase shares of MCI
\n Common Stock (each, an “MCI Stock Option”) that was granted
\n pursuant to the MCI Stock Option Plans prior to the Effective
\n Time and which remains outstanding immediately prior to the
\n Effective Time to be converted, at the Effective Time, into an
\n option to acquire, on the same terms and conditions as were
\n applicable under the MCI Stock Option, that number of shares
\n of Parent’s common stock determined by multiplying the number
\n of shares of MCI Common Stock subject to such MCI Stock Option
\n by the Exchange Ratio, rounded, if necessary, up to the
\n nearest whole share of Parent’s common stock, at a price per
\n share equal to the per-share exercise price specified in such
\n MCI Stock Option divided by the Exchange Ratio; provided
\n however, that in the case of any MCI Stock Option to which
\n section 421 of the Code applies by reason of its qualification
\n under section 422 of the Code, the option price, the number of
\n shares subject to such option and the terms and conditions of
\n exercise of such option shall be determined in a manner
\n consistent with the requirements of section 424(a) of the
\n Code. In addition, all unvested and unpaid MCI restricted
\n stock and ISUs shall be converted to the number of shares of
\n Parent common stock or ISUs determined by multiplying such
\n shares of restricted stock and ISUs by the Exchange Ratio.<\/p>\n
2. The employment agreements covering the Senior Executives of MCI will
\n be revised to:<\/p>\n
a. eliminate the limitations on severance pay in the event of a
\n “Final Year Constructive Termination,” as defined in such
\n contracts; and
\n 58
\n 50<\/p>\n
b. add minimum bonus provisions to the contracts under which each
\n executive’s annual bonuses could not be less than the average
\n annual bonus earned by the executive in respect of 1994, 1995
\n and 1996.<\/p>\n
3. The term of MCI’s “Executive Severance Policy” will be extended to the
\n third anniversary of the signing of this Agreement except for those
\n provisions that would affect the equity rights of a participant in
\n such Policy, to the extent necessary to preserve pooling.<\/p>\n
4. A cash retention award pool of up to $320 million will be created to
\n provide retention incentives for MCI employees, as determined by the
\n MCI Compensation Committee as soon as practicable hereafter. The
\n schedule of payment of such incentives will be subject to the approval
\n of Parent, which will not be unreasonably withheld; and Parent will be
\n informed as to the other aspects of the incentives.<\/p>\n
5. In addition, awards under the “Management Employee Bonus Program”, the
\n “Other Employee Bonus Program” and the “Retention Bonus Pool”
\n currently maintained by MCI will be payable not earlier than:<\/p>\n
50% on December 1, 1997; and
\n 50% on December 1, 1998;<\/p>\n
provided, however that upon the closing date of any transaction,
\n involving the sale or other disposition of a majority of MCI’s stock
\n or assets, any such amounts that have not yet been paid will be
\n accelerated and paid out.<\/p>\n
6. Executives not covered by employment contracts or the Executive
\n Severance Policy will participate in a new severance program with a
\n severance formula based on the guidelines currently used for executive
\n severance but in any event shall not receive less than they would have
\n received under paragraph 7 below. (See Appendix A).<\/p>\n
7. All other employees below the levels set forth in 6. above will
\n receive severance of three weeks per year of service if terminated in
\n connection with Merger.
\n 59
\n Appendix A<\/p>\n
Executive Termination Pay Schedule<\/p>\n
\n\n Director (9-11) Vice President (12-13) Pres. & Sr. VP (14+)
\n ————— ———————- ——————–
\n Years of Months of Months of Months of
\n Service Severance Severance Severance
\n ——- ——— ——— ———
\n
\n 1 year or less 4 6 8<\/p>\n over 1 year 5 7 9<\/p>\n
over 2 years 5 7 10
\n over 3 years 6 8 10<\/p>\n
over 4 years 7 9 11
\n over 5 years 7 10 12<\/p>\n
6 or more years 8 10 12
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