ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of February
, 1997, by and among WORLDCOM, INC., a Georgia corporation ("WorldCom"), and ILD
COMMUNICATIONS, INC., a Delaware corporation ("ILD").
WITNESSETH:
In consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF ASSETS
I.1 Purchase and Sale: Purchase Price: Payment Terms,
Liabilities.
A. Subject to the satisfaction or waiver of the conditions set forth in
this Agreement, on the Closing Date (as hereinafter defined), WorldCom shall
sell, convey, transfer, assign and deliver to ILD free and clear of all liens,
claims, charges and encumbrances (except as expressly disclosed on Exhibit
3.3(a) attached hereto), and ILD will purchase, all right, title and interest in
and to those assets of WorldCom's Operator Services U.S. division (hereinafter
referred to as "WorldCom's Operator Services Business") including without
limitation the following assets (collectively, the "Assets"):
(i) all corrections contracts with attendant 1+ and 0+ traffic and
associated hardware, including without limitation the contracts, listed
by customer, set forth on Exhibit l.l(a)(i) (the "Corrections
Contracts");
(ii) all payphone and hospitality contracts and traffic, including the
payphone and hospitality 1+ contracts and traffic as well as the hotel
0+ traffic, including without limitation the contracts, listed by
customer, set forth on Exhibit l.l(a)(ii) which Exhibit l.l(a)(ii)
shows the top one hundred (100) customers under this Subsection (ii)
(the "Other Contracts");
(iii) the EDS Operator Services Agreement dated July 6, 1992, as
amended;
(iv) associated billing and collection assets, operations and customer
contracts, including a nonexclusive limited license to the OPUS
software for a period of twenty-five (25) years from the Closing Date
with access to
the source code and rights to make proprietary modifications and
enhancements;
(v) leases on Operator Call Center facilities with associated leasehold
improvements described on Exhibit l.l(a)(iv), as well as the furniture,
fixtures and equipment therein;
(vi) premises leases for offices solely dedicated to WorldCom's
Operator Services Business described on Exhibit l.l(a)(v),as well as
the furniture, fixtures and equipment therein;
(vii) all trade secrets, customer lists and all other rights and
documents owned, required or incident to the operations of WorldCom's
Operator Services Business, including a three-month limited license to
the trade or service name "WorldCom's Operator Services";
(viii) any other miscellaneous assets (excluding tandem network
switching equipment) of WorldCom used primarily in WorldCom's Operator
Services Business including without limitation computer equipment,
computer software, telephone hardware, electrical equipment, wiring,
supplies, copiers, postage machines, vehicles and other current and
fixed assets of WorldCom's Operator Services Business (certain of such
property is listed on Exhibit 3.3); and
(ix) WorldCom's DEX Switches (600E) located in Los Angeles, California
and Dallas, Texas (subject to Section 8.3 below).
At Closing (as hereinafter defined) WorldCom shall provide ILD with an
OPUS software license agreement and such good and sufficient bills of sale,
assignments, deeds or other documentation as shall be required to effectively
vest in ILD good and marketable title to the Assets (including without
limitation, the Switches described in Subpart (ix) above). At the Closing, ILD
shall assume and agree to pay, perform or otherwise discharge all non-delinquent
liabilities or obligations of WorldCom's Operator Services Business in respect
of the Assets accruing or relating to the period after the Closing Date pursuant
to the agreements, arrangements or commitments assumed by ILD, including without
limitation the EDS Operator Services Agreement described in Subsection (iii)
above (including any take-or-pay revenue commitments, minute commitments, or
other similar commitments contained therein), the premises leases described on
Exhibit l.l(a)(iv) or Exhibit l.l(a)(v) and the operating leases described on
Exhibit 3.3(b). In the event WorldCom is unable to assign any lease described
herein, WorldCom agrees to sublease to ILD such space or equipment under the
same terms and conditions existing under WorldCom's lease. Notwithstanding
anything in this Agreement to the contrary, ILD shall in no event purchase or
receive or be under any obligation with respect to (i) any, assets, equipment or
contracts which are described as "Excluded Operator Services Assets" on
Exhibit 3.3 hereof, (ii) any employee benefit programs, plans or policies of
WorldCom except as otherwise expressly provided in Section 4.8 hereof, or (iii)
any commissions due third parties relating to the period up through the Closing
Date. Further, WorldCom will provide ILD a list of all accounts receivable
existing as of the date of Closing. ILD agrees to use its best efforts in
collecting the accounts receivable (taking into account the terms and conditions
contained in any billing and collection agreements relative to such accounts
receivable which are being assumed by ILD hereunder) and remitting to WorldCom
all amounts it collects within a reasonable time but in no event later than five
(5) business days of receipt of such funds. WorldCom shall be solely responsible
for the remittance of all taxes that may be due which are associated with such
accounts receivable.
B. In full payment for the Assets and in consideration of the Other
Agreements described in Article VIII below, and also in consideration of the
representations, covenants, warranties, agreements and indemnities of WorldCom
contained in this Agreement and the other agreements and documents contemplated
hereby, Seller will pay to WorldCom, and WorldCom will accept at Closing the
following, subject to adjustment as provided in this Agreement:
(i) An amount equal to three (3) times the average monthly
"Correctional Net Revenues" (as defined herein) generated by WorldCom's
Operator Services Business in the three (3) full calendar months
preceding the Closing, plus
(ii) An amount equal to four (4) times the average monthly "Other Net
Revenues" (as defined herein) generated by WorldCom's Operator Services
8usiness in the three (3) full calendar months preceding the Closing,
(iii) Other amounts as agreed to by the parties ("Adjustments for
Prepaids") with respect to prepaid commissions, deposits or similar
type payments under agreements, if any, entered into by WorldCom
pursuant to Section 4.1(d) or Section 4.1(e); plus
(iv) $2,000,000 (the "Fixed Purchase Price").
The Correctional Net Revenues, Other Net Revenues and Adjustments for
Prepaids described above are collectively referred to as the "Adjustable
Purchase Price" and the Fixed Purchase Price and Adjustable Purchase Price are
sometimes collectively referred to as the "Purchase Price". Further, for
purposes hereof, (x) "Correctional Net Revenues" shall be the amount of gross
revenues from Correction Contracts validly assigned to ILD at Closing less
associated unbillables and less any revenues during such period related to
Correction Contracts lost or not renewed by the Closing Date, and (y) "Other Net
Revenue~"
shall be the amount of all gross revenues (which, in addition to operator
services and 1+ revenues, shall include billing and collection data processing
charges of the Operator Services Business) from the Other Contracts validly
assigned to ILD at Closing less associated unbillables and less any revenues
during such period related to Other Contracts lost or not renewed by the Closing
Date. With respect to any customer contracts entered into by WorldCom on or
after December 1, 1996, ILD and WorldCom shall discuss in good faith such
contract's impact on the Purchase Price as follows: (a) customer contracts
entered into between December 1, 1996 and the date of this Agreement shall be
separately listed on Exhibit l.l(a~(i) [Corrections Contracts] or Exhibit 1.1
(a)(ii) [Other Contracts], as the case may be, and the parties shall stipulate
to the extent of any adjustment to Correctional Net Revenues, Other Net Revenues
or Adjustments for Prepaids, and (b) any customer contracts after the date
hereof shall be subject to the consent of ILD as provided for in Section 4.1
hereof, and in connection with the consent process, the parties shall in good
faith seek to agree if and to the extent of any adjustment to Correctional Net
Revenues, Other Net Revenues or Adjustments for Prepaids.
The Adjustable Purchase Price shall be calculated by WorldCom and
submitted to ILD for review at least fourteen (14) days prior to the Closing
Date. Any dispute as to the Adjustable Purchase Price shall be settled in good
faith by the parties hereto. In the event the parties are unable to resolve any
dispute relative to the amount of the Adjustable Purchase Price by the Closing
Date, then such dispute shall be resolved after the Closing by a certified
public accounting firm selected by WorldCom's accounting firm and ILD's
accounting firm and the Adjustable Purchase Price shall be set for the purpose
of Closing at the midpoint between the Adjustable Purchase Price calculated by
WorldCom and the Adjustable Purchase Price designated by ILD. The determination
of the independent certified public accounting firm shall be binding. The costs
for such independent certified public accounting firm shall be borne by the
party whose initial calculation of the Adjustable Purchase Price bears the
greatest disparity to the Adjustable Purchase Price finally designated by the
independent certified public accounting firm.
C. The parties acknowledge that the formula for computing the Purchase
Price set forth in Section l.l.B. above is the result of extended negotiations
between the parties and the revenue multiples set forth therein are not intended
to constitute a designation by the parties as to the fair market value of the
underlying contracts or assets from which such revenues arise.
D. The Purchase Price shall be payable by ILD as follows:
i) One-half of the Adjustable Purchase Price shall be payable in cash
at closing (the "Cash Portion"); provided, however, if the Cash Portion
due at Closing is greater than $12,500,000, then such overage amount
shall be paid on or before 180 days from the Closing Date; and
(ii) The lesser of (a) one-half (~) of the Adjustable Purchase Price,
or (b) $10,500,000 of the Adjustable Purchase Price shall be payable by
the issuance of up to 105,000 shares of ILD's redeemable preferred
stock (in parity to the highest ranking preferred stock of ILD the
"Preferred Stock Portion") which stock shall have the rights and
preferences shown in Exhibit l.l(d) attached hereto which rights and
preferences shall include a stated value of $100 per share, shall bear
an annual dividend rate of eight and one-half percent (8%), and shall
be subject to a put right by WorldCom at any time after the expiration
of five (5) years following the Closing Date upon at least one hundred
and twenty (120) days prior written notice which notice may be given
prior to the end of the five (5) years following the Closing Date);
with
(iii) The balance of the Adjustable Purchase Price payable by the
issuance of ILD's Common Stock (the "Common Stock Portion"), the number
of shares of which will be based upon the "Share Value" (as hereinafter
defined) at the Closing. For purposes hereof, the Share Value of each
share of ILD's Common Stock for purposes of determining the number of
shares constituting the Common Stock Portion shall be based on the
price per share for any common stock sold or issued by ILD to any
founder or insider (excluding any common stock issued pursuant to any
options, warrants or convertible securities of ILD outstanding as of
September 1, 1996 "Founders' Shares") and common stock sold in
connection with raising any capital necessary to pay the Cash Portion
of the Adjustable Purchase Price ("Investor Shares") (determined on a
pro rata basis based on the number of shares outstanding and the number
of Founders' Shares and the number of Investor Shares); and
iv) $1,500,000 of the Fixed Purchase Price shall be payable by
the issuance of ILD's Preferred Stock described in Subsection (ii)
above and
v) $500,000 of the Fixed Purchase Price shall be payable by the
issuance of ILD's Common Stock, the Share Value of which shall be
determined as described in Subsection (iii) above.
(vi) In the event there are any "true-ups" after the date of Closing
relative to amounts out cleared to the local exchange companies for
billing and collecting which relate to amounts for Operator Services or
billing services provided by WorldCom prior to the Closing (the
"True-Up Amounts"), ILD may offset the True-Up Amounts against any
amount it may owe under (a) the WorldCom Services Agreement described
in Section 8.2 below (but in no event less than zero), or (b) the B&C
Agreement described in Section 8.5 below.
E. The parties acknowledge that WorldCom agrees to provide the
Exhibits required under this Agreement within thirty (30) days of the date of
this Agreement. ILD shall have five (5) business days upon receipt from WorldCom
of each Exhibit required hereunder in which to notify WorldCom, in writing, of
its objections to such Exhibit, which notice will specify the reason(s) for
ILD's objections. In such case, the parties shall work together to resolve any
such disputes.
I . 2 Time and Place of Closing. The closing (the "Closing")
shall occur on such date (the "Closing Date") at such time and at such
place as the parties may determine as soon as practicable after all of the
conditions to the obligations of the parties hereto shall have been satisfied or
waived. The target Closing Date shall be June 1, 1997; provided, however,
nothing shall be construed to require WorldCom to close prior to satisfaction or
waiver of all of the conditions to the obligations of the parties.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF ILD
ILD represents and warrants to WorldCom as follows, which
representations and warranties are made as of the date hereof and as of the
Closing Date and shall survive the Closing:
II. Organization. ILD is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
II.2 Authorization. ILD has full legal right, power and authority to
enter into this Agreement and to carry out the transactions contemplated by this
Agreement. The execution, delivery and performance by ILD of this Agreement have
been duly and validly authorized by the Board of Directors of ILD and this
Agreement constitutes the valid and binding agreement of ILD, enforceable in
accordance with its terms, subject to (i) general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at law,
and (ii) bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or affecting
creditors' rights generally.
II.3 Non-Contravention. Neither the execution or delivery of this
Agreement, nor the consummation of the transactions contemplated hereby, will
result in the breach of any term or provision of, or constitute a default under,
the Articles of Incorporation (as to be amended by the Closing) or Bylaws of
ILD.
II.4 Valid Shares. The issuance, sale and delivery of the Preferred
Stock Portion and the Common Stock Portion will have been duly authorized by the
Closing Date by all necessary corporate action on the part of ILD. ILD's
Preferred Stock and Common Stock, when issued pursuant to this Agreement, will
have been duly and validly authorized and issued, will be fully paid and
nonassessable and will not have been issued in violation of the preemptive
rights of any person.
II.5 Capital Structure and Ownership. ILD has
authorized, issued and outstanding the number of shares of stock and other
securities so indicated in Exhibit 2.5 attached hereto. All such outstanding
securities have been duly and validly issued, are fully paid and nonassessable
and have not been issued in violation of the preemptive rights of any person or
applicable federal or state securities laws. No shares of any other class of
capital stock of Seller are outstanding. There are no outstanding options,
warrants or other rights to acquire securities of ILD, nor are there securities
outstanding which are convertible into securities of Seller, except as set forth
in said Exhibit 2.5. The name and residence address of each of the holders of
the securities of ILD and the respective number and percentage of outstanding
shares held by each holder are set forth in Exhibit 2.5. ILD shall provide to
WorldCom as update of Exhibit 2.5 as of the Closing Date based on securities
issued to pay the Cash Portion of the Purchase Price.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF WORLDCOM
WorldCom represents and warrants to ILD as follows, which
representations and warranties are made as of the date hereof and as of the
Closing Date and shall survive the Closing:
III.1 Organization. WorldCom is a corporation duly organized, validly
existing and in good standing under the laws of the State of Georgia, is duly
qualified and in good standing as a foreign corporation in the states set forth
in Exhibit 3.1 attached hereto with full power and authority to own its
properties and assets and to carry on lawfully its Operator Services Business as
currently conducted, and is not required to be qualified to do business as a
foreign corporation in any other jurisdiction.
III.2 Authorization. WorldCom has full legal right, power and authority
to enter into this Agreement and to carry out the transactions contemplated by
this Agreement. The execution, delivery and performance by WorldCom of this
Agreement and the other agreements and documents referred to herein and the
actions contemplated hereby and thereby have been duly and validly authorized by
all necessary corporate action, and this Agreement and such other agreements and
documents constitute valid and binding obligations of WorldCom, enforceable in
accordance with their terms, subject to (i) general principles of equity,
regardless of whether enforcement is sought in a proceeding in equity or at law,
and (ii) bankruptcy, reorganization, insolvency, fraudulent conveyance,
moratorium, receivership or other similar laws relating to or affecting
creditors' rights generally.
III.3 Title to and Condition of Assets and Property. Set forth on
Exhibit 3.3(a) is a list or brief description as of the date of this Agreement
of all real property and material items of personal property owned by
WorldCom in connection with its Operator Services Business. WorldCom has good
and marketable title to the Assets, free and clear of all liens, claims,
charges, security interests, options, or other title defects or encumbrances,
except as set forth in Exhibit 3.6 attached hereto. Exhibit 3.3(b) attached
hereto sets forth a description of all real and personal property currently
leased or otherwise occupied or used but not owned by WorldCom in connection
with the Assets, true, correct and complete copies of which leases and other
agreements have previously been delivered to ILD. All personal property
comprising the Assets is owned by WorldCom and all property owned or leased by
WorldCom is in good operating condition and repair, is suitable for the use to
which the same is customarily put, is free from defects (other than minor
defects which do not interfere with the use or operation thereof) and is
merchantable and is of a quality and quantity presently usable in the ordinary
course of the operation of WorldCom's Operator Services business and is all of
the assets currently used or needed in said business. The buildings, assets and
operations of WorldCom associated with the Assets conform with all applicable
restrictive covenants, deeds, leases, and restrictions and all applicable
federal, state and local laws, ordinances, rules and regulations (including but
not limited to those relating to zoning and working conditions). Upon
consummation of the transactions at the Closing as contemplated by this
Agreement, ILD will acquire title to the Assets free and clear of any liens,
claims, charges, security interests, options or other title defects or
encumbrances, except as expressly disclosed on Exhibit 3.6 attached hereto.
III.4 Environmental Matter. WorldCom's business, operations, assets,
equipment, leaseholds and other facilities associated with the Assets are in
compliance with, the provisions of all federal, state and local environmental,
health and safety laws, codes and ordinances and all rules and regulations
promulgated thereunder, governing (i) air emissions, (ii) discharges to surface
water or ground water, (iii) solid or liquid waste disposal, (iv) the use,
storage, generation, handling, transport, discharge, release, or disposal of
toxic or hazardous substances or wastes, or (v) other environmental health or
safety matters, including without limitation, the Comprehensive Environmental
Response Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Federal Water Pollution Control Act, the Toxic Substance Control Act
and the Clean Air Act. There are no investigations, administrative proceedings,
judicial actions, orders, claims or notices which are pending, anticipated or,
to the knowledge of- WorldCom, threatened against WorldCom relating to the
environment. WorldCom has not received a notice of, and neither knows of nor
suspects, any facts which might constitute a violation of any federal, state or
local environmental, health or safety laws, codes or ordinances, and any rules
or regulations
promulgated thereunder, which relate to the use, ownership or occupancy of
the property or the operation of WorldCom's Operator Services Business.
III.5 Intellectual Property. Except as set forth in Exhibit 3.5(a)
attached hereto, WorldCom does not have any patents, copyrights, trade names,
trademarks, service marks, other such names or marks or applications therefor
and has not conducted its Operator Services business under any corporate, trade
or fictitious name other than its current corporate name. There are no pending
or, to WorldCom's knowledge, threatened claims of infringement upon the rights
to any intellectual property of others or, except as set forth in Exhibit 3.5(b)
attached hereto, any agreements or undertakings with respect to any such rights.
III.6 Liabilities. WorldCom does not have any liabilities or
obligations as of the dates thereof, secured or unsecured (whether accrued,
absolute, contingent or otherwise), including, without limitation, tax
liabilities due or to become due, and WorldCom has not incurred, nor will incur,
any liabilities or obligations since the date of the most recent of the
Financial Statements, except liabilities permitted by this Agreement. Except as
set forth in Exhibit 3.6 attached hereto, WorldCom does not have any obligations
or liabilities, whether direct or indirect, joint or several, absolute or
contingent, matured or unmatured, secured or unsecured, which could be affected
by the execution and delivery of this Agreement or consummation of the
transactions contemplated by this Agreement or which could affect the same.
III.7 Contracts. Except as set forth in Exhibit 3.7 attached hereto or
in any other Exhibit attached hereto and referenced below, true, correct and
complete copies of which referenced items have previously been delivered to ILD
(such items are referred to collectively as the "Contracts" and individually as
a "Contract"), WorldCom is not a party to or bound by any of the following with
respect to its Operator Services Business :
(a) contract for the purchase or sale of services, equipment,
inventory, materials, supplies, or any capital item or items with a value, cost
or payments during the term thereof in excess of $25,000 individually or
$200,000 in the aggregate, or supply agreements with the federal government or
any state or local government or any agency thereof;
(b) collective bargaining agreement or other agreement with any labor
union or labor organization or any employment consulting, severance, bonus,
deferred compensation or similar agreement;
(c) tenancy, lease, license or similar agreement relating to property
except as set forth in Exhibit 3.7 or Exhibit l.l(a)(iv) or Exhibit l.l(a)(v)
attached hereto;
(d) license, lease or other agreement to provide or acquire tele-
communications or otherservices or equipment of any kind;
(e) any instrument or agreement relating to indebtedness by way of
lease-purchase arrangements, conditional sale, guarantee or other undertakings
on which others rely in extending credit, any joint venture agreements or any
chattel mortgages or other security arrangements;
(f) confidentiality, secrecy, standstill or noncompete agreement to
which Seller is bound or which is in its favor; or
(g) any other plans, agreements, contracts, powers of attorney, bids
or proposals.
Except as set forth in Exhibit 3.10(b) attached hereto, WorldCom has
not breached any provisions of, nor is in violation or default under the terms
of, or has caused or permitted to exist any event that with or without due
notice or lapse of time or both would constitute a default or event of default
under, any such Contract. All such Contracts are valid, binding and in full
force and effect and any such Contract to which WorldCom is a party will
continue in full force and effect to the benefit of ILD, if ILD so elects,
without change following the consummation of the transactions contemplated by
this Agreement without obtaining the consent of any other party thereto, except
as set forth in Exhibit 3.10(b) attached hereto, and the execution and delivery
of this Agreement by WorldCom and the consummation of the transactions
contemplated by this Agreement will not violate or cause a default or event of
default under any provision of, or result in the acceleration of any obligation
under, or the termination of, any such Contract.
III.8 Litigation and Compliance. Except as set forth in Exhibit 3.8
attached hereto, there is no pending or, to WorldCom's knowledge, threatened,
claim, investigation, lawsuit or administrative proceeding by or against
WorldCom or the operation of its Operator Services business or any of the Assets
including without limitation any claims from, or disputes with, any of the
landlords (or their management companies) with respect to the real property
leases described in Exhibit l.l(a)(iv) or Exhibit l.l(a)(v). WorldCom's Operator
Services business is not affected by any pending or, to WorldCom's knowledge,
threatened strike or other labor disturbance. WorldCom's operation of its
Operator Services business is in compliance with all federal, state and local
laws and regulations and administrative orders and all tariffs, rules and
regulations of local exchange carriers and inter-exchange carriers applicable
thereto. There is no order, writ, injunction or decree relating to or affecting
the operations or the Operator Service Business of WorldCom or the transactions
contemplated by this Agreement.
III.9 Non-Contravention. Neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby will result in the breach
of any term or provision of, constitute a default under, or accelerate or
augment the performance otherwise required under, any provision of the
Certificate and/or Articles of Incorporation or Bylaws of WorldCom, or any
agreement (including without limitation any loan agreement or promissory note),
indenture, instrument, order, law or regulation to which WorldCom is a party or
by which it is bound, or will result in the creation of any lien or encumbrance
upon the Assets.
III.10 Licenses. Permits and Required Consents. WorldCom has all federal
state and local franchises, tariffs, licenses, ordinances, certifications,
approvals, authorizations and permits necessary to the conduct of its business
as currently conducted. list of such franchises, tariffs, licenses, ordinances,
certifications, approvals, authorizations and permits is set forth in Exhibit
3.10(a) attached hereto, true, correct and complete copies of which have
previously been delivered to ILD. All franchises, tariffs, licenses, ordinances,
certifications, approvals, authorizations and permits relating to WorldCom's
Operator Services business are in full force and effect, no violations have been
made in respect thereof, and no proceeding is pending or, to WorldCom's
knowledge, threatened which could have the effect of revoking or limiting any
such franchises, tariffs, licenses, ordinances, certifications, approvals,
authorizations or permits and the same will not cease to remain in full force
and effect by reason of the transactions contemplated by this Agreement.
Exhibit 3.10(b) attached hereto sets forth all registrations, filings,
applications, notices, transfers, consents, approvals, orders, qualifications,
authorizations, certifications, waivers or other actions of any kind required to
be made, filed, given or obtained by or on behalf of WorldCom to or from any
persons, governmental authorities or other entities in connection with the
consummation of the transactions contemplated by this Agreement.
III.11 Changes. Except as otherwise expressly disclosed on the Exhibits
hereto, since December 13, 1996, there has not been:
(a) any damage, destruction, other casualty loss or other occurrence that could,
individually or in the aggregate, have an adverse effect on the value of the
Assets or WorldCom's Operator Services Business, conditions or prospects of
WorldCom,
(b) any disposition of any asset of WorldCom's Operator Services business other
than in the ordinary course of business;
(c) any amendment, modification or termination of any existing, or entering into
any new, contract, agreement, lease, license, permit or franchise that could,
individually or in the aggregate, have an adverse effect on the value of the
Assets or WorldCom's Operator Services business, condition or prospects of
WorldCom;
(d) any other adverse change in the Assets, WorldCom's Operator Services
Business, condition or prospects of WorldCom.
III.12 Accounts Receivable. The accounts receivable of WorldCom's Operator
Services Business were or will be, as the case may be, validly obtained in the
ordinary course of WorldCom's Operator Services Business.
III.13 No Adverse Action. Except as set forth on Exhibit 3.13. there is no
existing, pending or, to WorldCom's knowledge, threatened termination,
cancellation, limitation, modification or change in the business relationship of
WorldCom with any supplier, customer or other person or entity except as are
immaterial individually and in the aggregate and which are in the ordinary
course of WorldCom's Operator Services Business. For purposes of this Section
3.13, with respect to customers, "material" will be deemed to be any customer
whose annualized revenue is in excess of $200,000.
III.14 Labor Matters. WorldCom does not have any obligations, contingent or
otherwise, under any employment or consulting agreement (except if and as set
forth in Exhibit 3.7 attached hereto), collective bargaining agreement or other
contract with a labor union or other labor or employee group, and WorldCom will
not incur any liability or obligation with respect to any employee, consultant
or agent as a result of or arising out of the consummation of the transactions
contemplated by this Agreement. There are no efforts presently being made or, to
WorldCom's knowledge, threatened by or on behalf of any labor union with respect
to employees in WorldCom's Operator Services business. WorldCom is in
compliance, with all federal, state or other applicable laws, domestic or
foreign, respecting employment and employment practices, terms and conditions of
employment and wages and hours, and have not and are not engaged in any unfair
labor practice; no unfair labor practice complaint against WorldCom is pending
or, to WorldCom's knowledge, threatened before the National Labor Relations
Board; there is no labor strike, dispute, slowdown or stoppage pending or
threatened against or involving WorldCom's Operator Services Business; no
representation question exists respecting employee's in WorldCom's Operator
Services employees; no grievance or internal or informal complaint which might
have an adverse effect upon WorldCom or the conduct of its Operator Services
business exists; no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; no collective bargaining agreement is currently being negotiated by
WorldCom; and WorldCom has not experienced any labor difficulty. There has not
been, and will not be, to WorldCom's knowledge, any adverse change in relations,
with employees in WorldCom's Operator Services Business as a result of any
announcement or consummation of the transactions contemplated by this Agreement.
III.15 Investment Representations. WorldCom represents and warrants to ILD
that WorldCom is acquiring ILD's Stock for investment for its own account and
not, with a view to dividing ILD's Stock with others or participating directly
or indirectly in any resale, distribution or underwriting thereof and will not
offer or sell ILD's Stock in violation of the Securities Act of 1933, as amended
(the "Securities Act") or applicable state securities laws. Unless the shares of
ILD's Stock have been registered under the Securities Act and applicable state
securities laws and are freely tradeable, certificates representing such shares
shall bear an appropriate legend regarding the restrictions on transfer and
WorldCom shall order any transfer agent it may appoint to stop the transfer
thereof absent compliance with such restrictions. WorldCom shall provide such
information and execute such documents as ILD may reasonably request in order to
verify the foregoing. WorldCom acknowledges that it (a) has been provided an
opportunity to ask questions and receive answers from ILD concerning the terms
and conditions of the offering of ILD's Stock and to obtain any additional
information which
ILD possesses or can acquire without unreasonable effort or expense that is
necessary to verify the accuracy of any information furnished in connection with
said offering, (b) understands the businesses and operations of ILD and is
making an informed investment decision, and (c) is an "accredited investor" as
defined in the rules and regulations of the Securities Act.
III.16 Network Performance. The equipment, leasehold improvements,
facilities, software and related telecommunications network comprising a portion
of the Assets to be purchased by ILD hereunder are properly designed to perform
as an integrated network, meet all applicable federal, state, local and industry
promulgated laws, requirements and standards and perform substantially in
conformance with industry averages of parties owning similar networks.
III.17 Bulk Transfer Applicability and Payment of Obligations. The
consummation of the transactions contemplated by this Agreement is not subject
to the provisions of the bulk transfer law, bulk transfer tax law or any similar
law of any jurisdiction. WorldCom will pay all its obligations and liabilities
as and when the same become due and payable.
III.18 Disclosure. No representation, warranty or statement made by or
on behalf of WorldCom in this Agreement or the Exhibits attached hereto or in
the certificates or other materials furnished or to be furnished to ILD or its
representatives or lenders in connection with this Agreement and the
transactions contemplated hereby or thereby, contains or will contain any
materially untrue statement of fact or omits or will omit to state a fact
required to be stated herein or therein or necessary to make the statements
contained herein or therein not materially misleading. All information and
documents provided prior to the date of this Agreement and all information and
documents subsequently provided, to ILD or its representatives or lenders by or
on behalf of WorldCom are or contain, or will be or will contain as to
subsequently provided information or documents, true, accurate and complete
information with respect to the subject matter thereof and are, or will be as to
subsequently provided information or documents, fully responsive to any specific
request made by or on behalf of ILD or its representatives or lenders. Prior to
the Closing, full disclosure shall have been made to ILD of all material facts
with respect to WorldCom's Operator Service Business, assets, operations,
condition and prospects and the transactions contemplated by this Agreement
which a reasonable purchaser would deem relevant. WorldCom shall promptly notify
ILD of any change or event which could adversely affect the Assets or the
operations, business, conditions or prospects of WorldCom's Operator Services
business.
ARTICLE IV
ADDITIONAL AGREEMENTS OF THE PARTIES
IV.1 Ordinary Course. Prior to the Closing, without ILD's written
consent, WorldCom covenants, represents and warrants that it shall not have:
(a) sold, assigned, transferred, leased, mortgaged, pledged or subjected
to lien, or otherwise encumbered, any of the Assets;
(b) managed customer accounts, equipment inventories and other supplies
other than in the ordinary course of WorldCom's Operator Services
Business;
(c) directly or indirectly through any investment banker or other representative
or otherwise, solicited, entertained or negotiated with respect to any inquiries
or proposals from any person relating to the merger or consolidation of
WorldCom's Operator Services business with any person, or entity, or the direct
or indirect acquisition by any person of any of the Assets;
(d) entered into any agreement or transaction in connection with the Operator
Services Business pursuant to which (1) ILD shall bear any financial obligation
with respect to the Operator Services Business after the Closing Date; (2) a
prepaid commission or deposit may exist as of the Closing Date; or (3) which is
not terminable by WorldCom without penalty upon no more than 30 days' notice;
(e) entered into any contracts with customers of WorldCom's Operator Services
Business other than renewals or new agreements with a customer (or an affiliate
entity to such customer) of WorldCom's Operator Services Business on
substantially similar terms as the agreement now in effect with such customer;
(f) made or. authorized any material compensation increase for, or entered into
any employment consulting or similar agreement with, any employee in WorldCom's
Operator Services Business whether such increase relates to base compensation,
commissions, bonuses or benefits, or otherwise (other than in the ordinary
course of business); or
(g) otherwise entered into any transaction or taken other action not in the
ordinary course of WorldCom's Operator Services business.
IV.2 Access Prior to Closing. Upon reasonable notice, WorldCom shall
afford ILD and its representatives (including, without limitation, its
independent public accountants, attorneys and banks' or other lenders'
representatives) reasonable access to, and opportunity to examine, any and all
of the premises, properties, contracts, books, records, business, data,
personnel customers and vendors of or relating to the Assets or WorldCom's
Operator Services Business. WorldCom shall reasonably cooperate in connection
with the foregoing.
IV.3 Regulatory and Other Authorization.
A. WorldCom shall (at no expense to ILD other than WorldCom's direct,
out-of-pocket expenses which have been prior approved by ILD) cooperate fully
with ILD in obtaining or making, all governmental, regulatory and third-party
approvals, orders, qualifications, waivers, consents, filings, authorizations or
certifications or other actions necessary in order to consummate the
transactions
contemplated hereby. The parties hereto will not take any action that will
have the effect of delaying, impairing or impeding the receipt of any of the
foregoing and will use all reasonable efforts to secure the same as promptly as
possible. Provided, all external, third party costs (including ILD's internal
costs) of obtaining any approvals, orders, qualifications, waivers, consents,
authorizations or certifications as described herein will be borne solely by
ILD.
B. ILD and WorldCom shall file as soon as practical after the date hereof, the
notifications required under the Xxxx Xxxxx-Xxxxxx Act (together with the Rules
of the Federal Trade Commission of C.F.R. Parts 800-803, the "HSR Act"). The
filing fee required under the HSR Act shall be paid by WorldCom. ILD and
WorldCom shall cooperate with one another and exchange all information
reasonably necessary for completion of such notifications. In the event the
Federal Trade Commission or the Assistant Attorney General of the United States
requires the submission of additional information or documentary material (a
"Second Request") pursuant to Section 7A(e) of the HSR Act, ILD and WorldCom
shall promptly furnish all such information and material, and shall cooperate
with one another and exchange all information reasonably necessary for the
completion of such Second Request.
IV.4 Further Assurances. At any time and from time to time at or after the
Closing the parties agree to cooperate with each other, to execute and deliver
such other documents, instruments of transfer or assignment, files, books and
records and do all such further acts and things as may be reasonably required to
carry out the transactions contemplated hereby. In furtherance of the foregoing,
WorldCom shall allow, and shall cause Xxxxxx Xxxxxxxx to allow, access to all
financial records and accounting materials (including work papers) with respect
to WorldCom's Operator Services Business solely for the purposes of allowing
ILD's accounting firm, at ILD's sole cost and expense, to reconstruct and issue
such audited financial statements for WorldCom's Operator Services Business as
may be necessary for ILD to undertake an initial public offering of its
securities or for other financing activities.
IV.5 Payment of Taxes. WorldCom shall pay all sales taxes, other property
transfer taxes, all documentary or other stamp taxes and all similar taxes,
including but not limited to income taxes, if any, arising out of or related to
the transactions contemplated by this Agreement.
IV.6 Delivery. The parties shall cause the delivery of the respective
documents required to be delivered or caused to be delivered by them pursuant to
Article VI below.
IV.7 Indemnity.
A. WorldCom agrees to indemnify ILD and its directors, officers,
shareholders, employees, agents, successors and assigns against, and hold each
and every one of the foregoing harmless from any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties, costs or expenses,
whether accrued, absolute, contingent or otherwise, including but not limited to
court costs and attorneys' fees ("Claims"), which any of the foregoing may incur
or to which any of the foregoing may be subjected, arising out of or otherwise
based upon any of the following:
(i) Any misrepresentation or breach of warranty or representation by
WorldCom or any breach or default by WorldCom of or under any of the covenants
or other provisions of this Agreement or
agreements the forms for which are attached as exhibits hereto;
(ii)All liabilities, obligations, and commitments of or claims against, ILD,
including but not limited to those which may accrue by operation of law or
otherwise to ILD or its respective assigns except to the extent such liability
relates to the period after the Closing and has been assumed expressly by ILD
hereunder;
(iii) Any act or omission of WorldCom or any of its agents, servants or
employees in connection with any services performed, any products sold,
delivered or furnished or any contracts or claimed contracts with third parties;
(iv)Failure to comply with any bulk transfer law, bulk transfer tax law or
similar statute of any state or jurisdiction in connection with the transactions
contemplated by this Agreement; or
(v) Any claim or cause of action asserted or commenced by any WorldCom employee
based on or arising out of any of the transactions contemplated by this
Agreement (except to the extent specified as an obligation of ILD under Section
4.8 below).
(vi)Notwithstanding anything to the contrary contained herein, WorldCom's
obligation to indemnify ILD under subsections (i) or (iii) of this Section 4.7
will only be for the amount of any Claim(s) which in the aggregate are in excess
of $100,000.
B. Any person or entity seeking or intending to seek indemnification (the
"Indemnified Party") from another person or entity (the "Indemnified Party")
pursuant to this Agreement shall give the Indemnifying Party prompt written
notice thereof. The failure of the Indemnified Party to give such notice shall
not relieve the Indemnifying Party of any indemnity obligation pursuant to this
Agreement except to the extent such failure prejudices the rights of the
Indemnifying Party. If such matter involves the assertion of a claim by a third
party, the Indemnified Party shall give the Indemnifying Party the opportunity
to undertake the defense thereof pursuant to the provisions hereof at the
expense of the Indemnifying Party through reputable legal counsel selected by
the Indemnifying Party which is reasonably satisfactory to the Indemnified
Party. The Indemnifying Party shall have the right to so assume the defense of
such matter by (a) giving the Indemnified Party written notice thereof within
twenty (20) days after the giving of notice of the matter by the Indemnified
Party or such shorter period as may be reasonably required to avoid any
prejudice to the rights of the Indemnified Party, and (b) thereafter diligently
and timely defending the same. Such a matter may be settled with the claimant on
terms and conditions acceptable to the Indemnifying Party and the Indemnified
Party, which acceptance shall not be unreasonably withheld or delayed. If the
Indemnifying Party so assumes the defense of such matter, the Indemnified Party
shall have the right to employ his, her or its own counsel at his, her or its
expense, and participate in the defense or settlement thereof provided if the
Indemnifying Party does not provide assurances satisfactory to the Indemnified
Party as to the defense and payment of any indemnity obligation, then the
counsel of the Indemnified Party shall have the right to assume the defense at
the expense of the Indemnifying Party. In the event the Indemnifying Party does
not so assume the defense of such matter, the Indemnified Party may engage
counsel and defend or settle the same on such terms and conditions as the
Indemnified Party may determine in his, her or its reasonable discretion. The
Indemnifying Party and the Indemnified Party shall cooperate in good faith with
each other in connection with the defense of any
such matter and shall make available all information necessary or useful to the
defense of any such matter.
C. The foregoing obligations of this Section 4.7 shall survive any
termination of this Agreement. The obligations of this Section 4.7 shall expire
at midnight on the date one (1) year after the Closing Date other than with
respect to the following, as to which said obligations shall survive the Closing
without time limitation other than as provided by applicable law:
(i) matters as to which notice has been given to the Indemnifying Party on or
before said expiration date; or
(ii)matters relating to the provisions of Section 1.1 (Purchase and Sale;
Purchase Price; Payment Terms; Liabilities), the second sentence in Section 3.3
(Title to and Condition of Assets and Property), Section 4.4
(Further Assurances), Section 4.5 (Payment of Taxes), Section 4.7 (Indemnity) to
the extent relative to any provision referenced in this clause (ii), Section
4.10 (Confidentiality).
IV.8 Employee. WorldCom hereby acknowledges that ILD has no obligation
to employ any of WorldCom's employees in its Operator Services Business.
WorldCom shall not make any representation to the contrary to any of such
employees; provided, however, ILD may interview or otherwise contact such
employees regarding any future employment. If and to the extent ILD so requests,
WorldCom will use reasonable efforts to cause employees designated by ILD to
become employees or consultants of ILD with it being understood and agreed that
such employment or engagement shall be with no contractual obligation on the
part of ILD to continue any such employment or engagement, which employment or
engagement shall be upon terms and conditions satisfactory to ILD. WorldCom
agrees to provide ILD a list of the "key" employees of WorldCom's Operator
Services Business. As soon as possible after ILD's receipt of such list (but in
no event later than April 1, 1997), ILD agrees to identify employees from such
list that ILD intends to contact concerning employment with ILD.
ILD agrees not to send any notices or announcements to WorldCom's Operator
Services employees without WorldCom's prior written consent. Further, ILD agrees
to allow a WorldCom representative to be present at any meeting(s) ILD may have
with such employees as a group prior to the date of Closing. ILD agrees to count
the years of service such employees have been with WorldCom in determining
vacation time, plan participation and other employment related matters which
take into account an employee's years of service. WorldCom shall be responsible
for the payment of any severance or accrued vacation due any employees upon
termination of employment prior to the Closing; provided, however, that amounts
accrued for vacation pay to employees of the Operator Services Business who
become employees of ILD as of the Closing, shall be paid by WorldCom to ILD
and ILD shall thereupon honor the accrual for vacation pay to such
employee. With respect to those employees who are subsequently employed by ILD,
WorldCom will only be responsible for paying such employees any employment
benefits which may therwise be due as of the date of Closing; provided, ILD will
be responsible for all employment benefits due such employees after the date of
Closing. ILD agrees to indemnify and hold harmless WorldCom from any damages,
losses, claims, liabilities, demands, charges, suits, penalties, costs or
expenses, including but not limited to court costs and attorneys' fees, which
WorldCom may incur or to which WorldCom may be subjected, arising out of or
otherwise based upon ILD's failure to comply with the Worker Adjustment and
Retraining Notification Act (WARN), if applicable.
IV.9 Continued Relationships. WorldCom shall preserve intact its Operator
Services business and keep available the services of its officers and employees
and maintain good relationships with suppliers, customers and others having
business relations with WorldCom, and shall cause to be taken no change in the
business, condition or results of operations of WorldCom's Operator Services
business which may have an adverse effect on the Assets or the business,
condition or prospects of WorldCom's Operator Services Business.
IV.10 Confidentiality. Except as contemplated by this Agreement, as required
by law or otherwise expressly consented to in writing by WorldCom and ILD, all
information or documents furnished hereunder by any party shall be kept strictly
confidential by the party or parties to whom furnished at all times prior to the
Closing Date, and in the event such transactions are not consummated, each shall
return to the other all documents furnished hereunder and copies thereof upon
request and shall continue to keep confidential all information furnished
hereunder and shall not thereafter use the same for its advantage.
Notwithstanding the foregoing, (a) ILD (or its affiliates) may issue or make a
press release, announcement or other disclosure regarding this Agreement and the
transactions contemplated hereby which it reasonably determines necessary or
desirable under applicable law, and (b) ILD (or its affiliates) may, at any time
after the date of this Agreement, file with the Securities and Exchange
Commission (the "Commission") a Form 8-K pursuant to the Securities Exchange Act
of 1934, as amended (the "Exchange Act") which filing may include a copy of this
Agreement and certain of its exhibits, with respect to the transactions
contemplated by this Agreement and/or file with the Commission a registration
statement under the Securities Act which includes a prospectus containing any
information required to be included therein with respect to the transactions
contemplated by this Agreement and thereafter distribute said prospectus in
connection with the offer and sale of securities of ILD. WorldCom shall
cooperate with ILD and provide such information and documents as may be required
in connection with any such filings.
In the event the Closing is not consummated, each party hereto will hold in
absolute confidence any information obtained from another party except to the
extent (a) such party is required to disclose such information by law or
regulation, (b) disclosure of
such information is necessary in connection with the pursuit or defense of
a claim, (c) such information was known by such party prior to such disclosure
or was thereafter developed or obtained by such party independent of such
disclosure, or (d) suchinformation becomes generally available to the public or
is otherwise no longer confidential. Prior to any disclosure of information
pursuant to the exception in clause (a) or (b) of the preceding sentence, the
party intending to disclose the same shall so notify the party which provided
the same in order that such party may seek a protective order or other
appropriate remedy should it choose to doso .
ARTICLE V
REGISTRATION OF ILD STOCK
V.1 Registration.
A. For purpose of this Section 5.1, "the Company" shall mean ILD, "Shares" shall
mean the Common Stock Portion of the Purchase Price; and "the holders of the
Shares" shall mean WorldCom and/or its permitted assigns or successors. The
Company and the holders of the Shares agree that if at any time after the date
hereof the Company shall propose to file a registration statement with respect
to any of its Common Stock on a form suitable for a secondary offering, it will
give notice in writing to such effect to the registered holder(s) of the Shares
at least thirty (30) days prior to such filing, and, at the written request of
any such registered holder, made within ten (10) days after the receipt of such
notice, will include therein at the Company's cost and expense (including the
fees and expenses of counsel to such holder(s), but excluding underwriting
discounts, commissions and filing fees attributable to the Shares included
therein) such of the Shares as such holder(s) shall request; provided, however,
that if the offering being registered by the Company is underwritten and if the
representative of the underwriters certifies in writing that the inclusion
therein of the Shares would materially and adversely affect the sale of the
securities to be sold by the Company thereunder, then the Company shall be
required to include in the offering only that number of securities, including
the Shares, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among all selling shareholders according to the total
amount of securities entitled to be included therein owned by each selling
shareholder, but in no event shall the total amount of Shares included in the
offering be less than the number of securities included in the offering by any
other single selling shareholder unless all of the Shares are included in the
offering).
B. Whenever the Company undertakes to effect the
registration of any of the Shares, the Company shall, as expeditiously as
reasonably possible:
(i) Prepare and file with the Securities and Exchange Commission (the
"Commission") a registration statement covering such Shares and use its best
efforts to cause such registration statement to be declared effective by the
Commission as expeditiously as possible and to keep such registration effective
until the earlier of (A) the date when all Shares covered by the registration
statement have been sold or (B) a period of at least 90 days after the effective
date of such registration statement or for such longer period, not to
exceed 180 days, as may be required under the plan or plans of distribution
set forth in such registration statement: provided, that before filing a
registration statement or prospectus or any amendment or supplements thereto,
the Company will furnish to each Holder of Sharescovered by such registration
statement and the underwriters, if any, copies of all such documents proposed to
be filed (excluding exhibits, unless any such person shall specifically request
exhibits), which documents will be subject to the review of such Holders and
underwriters, and the Company will not file such registration statement or any
amendment thereto or any prospectus or any supplement thereto (including any
documents incorporated by reference therein) with the Commission if (A) the
underwriters, if any, shall reasonably object to such filing or (B) if
information in such registration statement or prospectus concerning a particular
selling Holder has changed and such Holder or the underwriters, if any, shall
reasonably object.
(ii) Prepare and file with the Commission such amendments and
post-effective amendments to such registration statement as may be necessary to
keep such registration statement effective during the period referred to in
Section 10(b)(i) and to comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by such registration
statement, and cause the prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed with the Commission
pursuant to Rule 424 under the Securities Act.
