ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is made as of February 27,
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 1.1(a)(i) (the "Corrections
Contracts");
(ii) all payphone and hospitality contracts and traffic, including
the pay phone 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 1.1(a)(ii) which Exhibit 1.1(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 non-exclusive 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 1.1(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 1.1(g)(y), 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 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 1.1(a) (iv) or EXHIBIT 1.1(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
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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 Business in the three (3) full calendar months preceding the
Closing, PLUS
(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
Revenues" 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
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this Agreement shall be separately listed on EXHIBIT 1.1(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 1.1.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 (1/2) 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 1.1(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 (81/2%),
and shall be subject to a put right by WorldCom at any time after the
expiration of five (5) years following the
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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 outcleared 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
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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.1 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
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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
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
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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 MATTERS. 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 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
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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
"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 1.1(a)(iv) or EXHIBIT
1.1(a)(v) attached hereto;
(d) license, lease or other agreement to provide or acquire
telecommunications or other services 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
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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 1.1(a)(iv) or EXHIBIT 1,1(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. A 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
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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 ACTIONS. 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
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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 employees 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.
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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;
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(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 AUTHORIZATIONS.
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
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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;
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(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
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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 no 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 EMPLOYEES. 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
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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 otherwise 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
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developed or obtained by such party independent of such disclosure, or (d)
such information 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 do so.
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
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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 Shares covered 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.
(iii) Furnish to the selling Holder(s) such number of copies of
such registration statement, each amendment thereto, the prospectus
included in such registration statement (including each preliminary
prospectus), each supplement thereto and such other documents as
they may reasonably request in order to facilitate the disposition
of the Shares owned by them.
(iv) Use its best efforts to register and qualify under such
other securities laws of such jurisdictions as shall be reasonably
requested by any selling Holder and do any and all other acts and
things which may be reasonably necessary or advisable to enable
such selling Holder to consummate the disposition of the Shares
owned by such Holder, in such jurisdictions; provided, however,
that the Company shall not be required in connection therewith or
as a condition thereto to qualify to transact business or to file a
general consent to service of process in any such states or
jurisdictions.
(v) Promptly notify each selling Holder of the happening of any
event as a result of which the prospectus included in such
registration statement contains an untrue statement of a material
fact or omits any fact necessary to make the statements therein not
misleading and, at the request of any
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such Holder, the Company will prepare a supplement or amendment to
such prospectus so that, as thereafter delivered to the
purchasers of such Shares, such prospectus will not contain an
untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading.
(vi) Provide a transfer agent and registrar for all such Shares
not later than the effective date of such registration statement.
(vii) Enter into such customary agreements (including underwriting
agreements in customary form for a primary offering) and, take all
such other actions as the underwriters, if any, reasonably request
in order to expedite or facilitate the disposition of such Shares
(including, without limitation, effecting a stock split or a
combination of Shares).
(viii) Make available for inspection by any selling Holder or any
underwriter participating in any disposition pursuant to such
registration statement and any attorney, accountant or other agent
retained by any such selling Holder or underwriter, all financial
and other records, pertinent corporate documents and properties of
the Company, and cause the officers, directors, employees and
independent accountants of the Company to supply all information
reasonably requested by any such seller, underwriter, attorney,
accountant or agent in connection with such registration statement.
(ix) Promptly notify the selling Holder(s) and the
underwriters, if any, of the following events and (if requested
by any such person) confirm such notification in writing: (A)
the filing of the prospectus or any prospectus supplement and the
registration statement and any amendment or post-effective
amendment thereto and, with respect to the registration statement
or any post-effective amendment thereto, the declaration of the
effectiveness of such documents, (B) any requests by the
Commission for amendments or supplements to the registration
statement or the prospectus or for additional information, (C)
the issuance or threat of issuance by the Commission of any stop
order suspending the effectiveness of the registration statement
or the initiation of any proceedings for that purpose and (D) the
receipt by the receipt by the Company of any notification with
respect to the suspension of the qualification of the Shares for
sale in any jurisdiction or the initiation or threat of
initiation of any proceeding for such purposes.
(x) Make every reasonable effort to prevent the entry of any
order suspending the effectiveness of the registration statement
and obtain at the earliest possible moment the withdrawal of any
such order, if entered.
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(xi) Cooperate with the selling Holder(s) and the underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing the Shares to be sold and not bearing any
restrictive legends, and enable such Shares to be in such lots and
registered in such names as the underwriters may request at least
two (2) business days prior to any delivery of the Shares to the
underwriters.
(xii) Provide a CUSIP number for all the Shares not later than the
effective date of the registration statement.
(xiii) Prior to the effectiveness of the registration statement and
any post-effective amendment thereto and at each closing of an
underwritten offering, use its best efforts to satisfy all
requirements imposed on the Company (and its agents, attorneys, and
accountants) by the Underwriters as are customarily imposed on
issuers in primary underwritten offerings.
(xiv) Otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally
available to its security holders earnings statements satisfying
the provisions of Section 11(a) of the Securities Act, no later
than forty-five (45) days after the end of any twelve-month period
(or ninety (90) days, if such period is a fiscal year) (A)
commencing at the end of any fiscal quarter in which the Shares are
sold to underwriters in a firm or best efforts underwritten
offering, or (B) if not sold to underwriters in such an offering,
beginning with the first month of the first fiscal quarter of the
Company commencing after the effective date of the registration
statement, which statements shall cover such twelve-month periods.
C. After the date hereof, the Company shall not grant to any holder of
securities of the Company any registration rights which have a priority greater
than those granted to Holders pursuant to this Warrant without the prior written
consent of the Holder(s).
D. The Company's obligations under Article 4.1 above with respect to
each holder of Shares are expressly conditioned upon such holder's furnishing to
the Company in writing such information concerning such holder and the terms of
such holder's proposed offering as the Company shall reasonably request for
inclusion in the registration statement. If any registration statement
including any of the Shares is filed, then the Company shall indemnify each
holder thereof (and each underwriter for such holder and each person, if any,
who controls such underwriter within the meaning of the Securities Act) from any
loss, claim, damage or liability arising out of, based upon or in any way
relating to any untrue statement of a material fact contained in such
registration statement or any omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
except for any such statement or omission based on information furnished in
writing by such holder of the Shares expressly for use in
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connection with such registration statement; and such holder shall indemnify
the Company (and each of its officers and directors who has signed such
registration statement, each director, each person, if any, who controls the
Company within the meaning of the Securities Act, each underwriter for the
Company and each person, if any, who controls such underwriter within the
meaning of the Securities Act) and each other such holder against any loss,
claim, damage or liability arising from any such statement or omission which
was made in reliance upon information furnished in writing to the Company by
such holder of the Shares expressly for use in connection with such
registration statement.
V.2 FEES AND EXPENSES. Except as otherwise prohibited by applicable
law, ILD will pay all fees and expenses in connection with the registration of
the ILD Stock requested pursuant to this Article V except for any underwriting
commissions, transfer taxes, fees and expenses of counsel for WorldCom and the
underwriters' expense allowance, if any, attributable to the sale of WorldCom's
ILD Stock, which shall be borne by WorldCom.
ARTICLE VI
RIGHT OF FIRST REFUSAL
VI.1 OFFERS. If WorldCom at any time and from time to time should
desire to sell the Preferred Stock Portion or the Common Stock Portion, it shall
give ILD notice of such intention setting forth the terms upon which it proposes
to make such sale and give ILD the first right to purchase all of such
securities or such lesser portion as may be selected by ILD. Such purchase
shall be made on the same terms as WorldCom is willing to sell such securities
from any other person. If within twenty (20) days after WorldCom gives its
aforesaid notice, WorldCom does not notify ILD that it desires to purchase all
of the securities which are to be offered, WorldCom may, during a period of
sixty (60) days following the end of such twenty-day period, sell such
securities as to which ILD does not indicate a desire to purchase to another
person upon the same terms and conditions as those set forth in the notice to
ILD.
VI.2 PAYMENT. If ILD gives WorldCom notice of its desire to purchase
any of the securities, ILD shall pay for the securities by check against
delivery of the securities at WorldCom's executive offices within fifteen (15)
days after the expiration of such twenty-day period referred to above.
ARTICLE VII
SHAREHOLDERS AGREEMENT
The parties agree that WorldCom and all holders of ILD common stock will
execute a Shareholders Agreement which will provide, among other things, that
the Board of Directors shall consist of no more than 9 members, one of which
shall be designated by WorldCom and that WorldCom shall provide to ILD and the
other holders of ILD common stock a right of first refusal (with customary
procedures) which would be
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triggered in connection with the disposition or assignment by WorldCom of the
Common Stock Portion of the Purchase Price.
ARTICLE VIII
OTHER AGREEMENTS
VIII.1 ILD SERVICE AGREEMENT. At Closing, the parties shall execute a
services agreement (the "ILD Services Agreement") whereby ILD (or a qualified
subsidiary) shall continue to provide those services which are currently
provided by WorldCom (including without limitation, the processing, completing,
rating, billing and collecting; collectively, "Unbundled Operator Services")
relative to WorldCom's casual 0+ traffic pursuant to WorldCom's applicable
tariffs for a period of five (5) years (the "'Operator Services Term") in
substantially the form as that attached as EXHIBIT 8.1.
By Closing, WorldCom agrees to have transitioned all of WorldCom's operator
services traffic being handled by Century Telephone's operator services center
to one of WorldCom's operator call centers.
VIII.2 WORLDCOM SERVICE AGREEMENT. At Closing, the parties shall execute
a services agreement (the "WorldCom Services Agreement") whereby WorldCom (or a
qualified subsidiary) shall provide certain switched telecommunications services
relative to traffic originated or terminated ILD ("Network Services"). The
rates for Network Services will be mutually agreed to by the parties with each
party's understanding that all such traffic will be converted to WorldCom's DMS
Platform. It is the intent of the parties that the rates for Network Services
billed through WorldCom's existing platform (i.e., the DEX platform) will be at
blended postalized rates per used minute (which domestic Services, i.e.,
excluding international traffic, will be billed in six (6) second increments and
subject to a six (6) second minimum charge (i) utilizing Hardware Answer
Supervision where available, and (ii) with respect to 800 Services, commencing
with Customer's switch wink or answer back), and that the rates will not exceed
$0.081 per minute prior to the effect of any credit mentioned herein. As soon
as possible, WorldCom will convert all of the Network Services to its DMS
Platform and such traffic will be billed at the rates and charges as described
in the TRANSCEND-TM- Telecommunications Services Agreement offered by WorldCom
Network Services, Inc., a wholly owned subsidiary of WorldCom (or any agreement
which supersedes or replaces such TRANSCEND-TM- agreement), in substantially the
form as that attached as EXHIBIT 8.2. WorldCom agrees to provide ILD a credit
(the "Credit") of $85,000 per month during the first twenty-four (24) months of
the WorldCom Services Agreement. Provided ILD is not in material default of the
WorldCom Services Agreement, the Credit will be applied to ILD's invoices from
WorldCom to offset ILD's charges thereunder.
VIII.3 SWITCHES. At Closing, (i) WorldCom agrees to assign and transfer
all of its rights, title and interest in and to WorldCom's DEX switches which
are currently located in Los Angeles, California and Dallas, Texas (the
"'Switches"), and (ii) ILD agrees to grant an exclusive license (the "ILD
License") to WorldCom to operate the Switches for
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and on behalf of ILD and WorldCom until such time as WorldCom is able to
migrate its own, direct traffic off of such Switches. During the term of the
ILD License, WorldCom will maintain the Switches and continue (at WorldCom's
cost) the Maintenance and Service Agreement currently in effect with DSC. As
soon as WorldCom has completed such migration (which is anticipated to be on
or before March 1, 1998), WorldCom will give ILD thirty (30) days' prior
notice of the termination date of the ILD License. Upon the effective date
of the termination of the ILD License (the "License Termination Date"), ILD
will assume complete operational control of the Switches, at which time
WorldCom warrants that each of the Switches will be configured with 5,000
ports and muxes and transmission equipment necessary for ILD to maintain such
Switches in the ordinary course of ILD's business. WorldCom warrants that
the Switches are currently being maintained under DSC maintenance
specifications and agrees to continue maintaining the Switches under such
specifications up through and including the License Termination Date.
WorldCom agrees to reasonably assist ILD in obtaining maintenance and
services agreements directly with DSC. Further, as of the License
Termination Date, ILD will assume the premise leases applicable to each
Switch and WorldCom will assign all of its rights, title and interest under
such leases to ILD and WorldCom will have no further liability or
responsibility with respect to such Switches (including any maintenance with
respect to such Switches). ILD will receive the premises "As Is" and will
not be required to reimburse WorldCom for any build-out or other construction
expenses associated with either premise.
VIII.4 BILLING AND COLLECTION AGREEMENT. At Closing, the parties shall
execute a Billing and Collection Agreement (the "B&C Agreement") which B&C
Agreement will provide terms and conditions pursuant to which ILD will perform
certain billing and collection services for WorldCom through ILD's arrangements
with the various local exchange companies and WorldCom will pay for such
services.
VIII.5 LICENSING AGREEMENT. At Closing, the parties shall execute a
Licensing Agreement whereby WorldCom will grant a non-exclusive limited license
to WorldCom's Opus Software for a period of twenty-five (25) years following the
Closing Date. Such Licensing Agreement will state that ILD shall have access to
the source code attributable to the OPUS Software as well as rights to make
proprietary modifications and enhancements.
VIII.6 CUSTOMER SERVICE AGREEMENT. At Closing, the parties shall execute
a Customer Service Agreement whereby ILD will perform certain customer service
operations and functions for WorldCom at the rates and charges to be mutually
agreed to by the parties.
ARTICLE IX
CONDITIONS TO CLOSING
IX.1 CLOSING CONDITIONS OF WORLDCOM. The obligations of WorldCom under
this Agreement are subject to the satisfaction at or prior to the Closing of
each of the
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following conditions, but compliance with any or all of such conditions may
be waived, in writing, by WorldCom:
(a) The representations and warranties of ILD contained in this
Agreement shall be true and correct in all material respects on the date
hereof and on the Closing Date;
(b) ILD shall have performed and complied with all of the covenants and
agreements in all material respects and satisfied all of the conditions
required by this Agreement to be performed or complied with or satisfied by
ILD at or prior to the Closing;
(c) All required governmental and regulatory approvals, consents and/or
waiting periods shall have been obtained or shall have expired, including
but not limited to those of applicable state public utility or service
commissions;
(d) On the Closing Date, there shall be no injunction, restraining
order or decree of any nature of any court or governmental agency or body
in effect that restrains or prohibits the consummation of the transactions
contemplated by this Agreement;
(e) WorldCom's lenders shall have consented to the transactions
contemplated by this Agreement if and as required;
(f) WorldCom's lenders shall have received such documents and
agreements as WorldCom's lenders may require, provided WorldCom shall use
reasonable efforts to obtain the same; and
(g) WorldCom and WorldCom's lenders shall be satisfied as to all
matters disclosed in or pursuant to this Agreement and the Exhibits hereto
or obtained pursuant to the right of access of WorldCom and its
representatives granted in this Agreement or otherwise and all matters
referenced in any document or instrument so disclosed or obtained; and
(h) All ancillary agreements (including those described in Article 8
above) are approved by the parties on or before March 31, 1997; and
(i) ILD has obtained the necessary funds (or commitments therefor)
described in Subsection 9.2(f) below on or before May 15, 1997.
IX.2 CLOSING CONDITIONS OF ILD. The obligations of ILD under this
Agreement are subject to the satisfaction at or prior to the Closing of each of
the following conditions, but compliance with any or all of such conditions may
be waived, in writing, by ILD:
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(a) The representations and warranties of WorldCom contained in this
Agreement shall be true and correct in all material respects on the date
hereof and on the Closing Date;
(b) WorldCom shall have performed and complied with all the covenants
and agreements in all material respects and satisfied all the conditions
required by this Agreement to be performed or complied with or satisfied by
it at or prior to the Closing;
(c) All required governmental, regulatory and third-party approvals,
consents and/or waiting periods shall have been obtained or shall have
expired, including but not limited to those of applicable state public
utility or service commissions; which regulatory approvals shall include,
without limitation authority to provide Operator Services in the states and
in the manner currently provided by WorldCom;
(d) WorldCom shall have arranged for the continuation and/or provision
of such services, products or facilities provided to or by WorldCom and
contractual arrangements or amendments thereto as ILD reasonably desires,
all on terms and conditions reasonably acceptable to ILD;
(e) ILD shall have reasonable access to applicable books and records
pertaining to WorldCom's Operator Services Business during the thirty (30)
days immediately following the execution of this Agreement;
(f) ILD shall have raised funds in an amount reasonably acceptable to
ILD to consummate the purchase of WorldCom's Operator Services Business as
described herein; provided, ILD agrees to (1) provide WorldCom with status
reports (at least every other week) concerning ILD's fund raising efforts,
and (2) immediately notify WorldCom, in the event of any occurrence which
materially impairs ILD's ability to raise funds necessary to consummate the
purchase as described herein;
(g) The receipt of reasonably adequate assurances from key employees
designated by ILD with respect to their continued employment in the
Operator Services Business following the Closing Date;
(h) No action, suit or proceeding shall have been instituted by any
person or entity, or threatened by any governmental agency or body, before
a court or governmental body, to restrain or prevent the carrying out of
the transactions contemplated by this Agreement or that seeks other
material relief with respect to any of such transactions or that could,
individually or in the aggregate, have a material adverse effect on the
Assets or the Operator Services business or prospects of WorldCom on the
Closing Date, there shall be no injunction, restraining order or decree of
any nature of any court or governmental agency or body in effect that
restrains or prohibits the consummation of the transactions contemplated by
this Agreement;
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(i) There shall not have occurred any material adverse change in the
Assets or the business, condition or prospects of WorldCom's Operator
Services Business; and
(j) ILD's Board of Directors shall have consented to the transactions
contemplated by this Agreement.
ARTICLE X
THE CLOSING
X.1 DELIVERIES BY WORLDCOM. At the Closing, ILD shall receive from
WorldCom the following and WorldCom shall cause the same to be delivered to ILD:
(a) A certificate, dated as of the Closing, signed by a WorldCom
officer to the effect that the conditions specified in Article 8.2. above
(except for clauses (e) through (j) thereof, have been satisfied;
(b) Instruments of transfer and assignment, consents, certificates,
estoppel letters and all other documents and agreements including the AVION
software license in form and substance satisfactory to ILD which ILD may
deem necessary to transfer to and vest in ILD title to and ownership of the
Assets as provided in this Agreement;
(c) An original or photostatic copy duly certified as accurate and
complete of all requisite governmental or regulatory approvals of the
transactions contemplated hereby;
(d) Such other documents and instruments as ILD may reasonably request;
(e) Possession of all the Assets; and
(f) Executed originals of the Other Agreements described in Article
VIII.
X.2 DELIVERIES BY ILD. At the Closing, WorldCom shall receive from ILD
the following and ILD shall cause the same to be delivered to WorldCom:
(a) Certificate of existence from the Secretary of State of the State
of Delaware stating that ILD is a validly existing corporation in good
standing;
(b) A certificate, dated as of the Closing, signed by an officer of ILD
to the effect that the conditions specified in Article 8.1(a) - (b) above,
have been satisfied;
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(c) Copies of duly adopted resolutions of ILD's Board of Directors
approving the execution, delivery and performance of this Agreement
certified by its Secretary;
(d) Payment of the Cash Portion of the Purchase Price pursuant to
Article 1.1(c) above;
(e) Certificates representing the ILD Preferred Stock and ILD Common
Stock registered in the name of WorldCom pursuant to Article 1.1(C) above;
and
(f) Executed originals of the Other Agreements described in Article
VIII.
ARTICLE XI
TERMINATION
XI.1 TERMINATION. Notwithstanding anything in this Agreement to the
contrary, this Agreement may be terminated only (a) by the mutual written
consent of WorldCom and ILD, or (b) by WorldCom or ILD if, for any reason, the
Closing has not occurred on or before July 31, 1997 through no fault of such
party unless said date is mutually extended by the parties in the event one or
more conditions to the obligations of the parties hereunder has not been
satisfied or waived.
XI.2 EFFECT OF TERMINATION. In the event of the termination and
abandonment of this Agreement pursuant to the preceding Article of this
Agreement, this Agreement shall thereafter become void and have no effect, and
without any liability on the part of any party or its shareholders, directors or
officers in respect thereof, except as otherwise provided in this Agreement and
except that nothing herein will relieve any party from liability for any breach
of this Agreement.
ARTICLE XII
MISCELLANEOUS
XII.1 EXPENSES. Except as otherwise provided in this Agreement, WorldCom
and ILD shall bear their own respective expenses, fees and commissions
(including but not limited to, all compensation and expenses of counsel,
financial advisors, brokers, consultants, actuaries and accountants) incurred in
connection with the preparation, negotiation and execution of this Agreement and
consummation of the transactions contemplated hereby. WorldCom represents and
warrants to ILD and ILD represents and warrants to WorldCom that no broker,
agent or other person acting on their or its, respectively, behalf is or will be
entitled to a fee, commission or other payment as a result of or arising out of
this Agreement or the transactions contemplated hereby.
XII.2 GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement shall be
deemed to be made in, and in all respects shall be interpreted, construed and
governed by and in accordance with the internal laws of the State of Mississippi
and the parties hereto
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consent to the jurisdiction of the U.S. District Courts with respect to any
dispute, controversy or other matter relating to or arising out of this
Agreement.
XII.3 NOTICES. Any notices or other communications required under this
Agreement shall be in writing and shall be deemed to have been given when
delivered in person, by telex or telecopier, when delivered to a recognized next
business day courier, or, if mailed, when deposited in the United States mail,
first class, registered or certified, return receipt requested, proper postage
prepaid, addressed as follows or to such other address as notice shall have been
given pursuant hereto:
If to WorldCom: WorldCom, Inc.
Attn: K. Xxxxxxx Xxxxxx, Xx.
000 Xxxx Xxxxx Xxxxxx
Xxxxxxx, XX 00000-0000
Telecopy: (000) 000-0000
If to ILD: ILD Communications, Inc.
Attn: Xxxxxxx X. Xxxxx
13000 Xxxxxxxx Xxxxxxx Xxxxxx, Xxxxx 0
Xxxxx Xxxxx Xxxxx, Xxxxxxx 00000
Telecopy: (000) 000-0000
XII.4 ASSIGNMENT. This Agreement may not be assigned, by operation of
law or otherwise, without the prior written consent of the nonassigning party
which consent may be withheld in such party's sole discretion.
XII.5 SECTION HEADINGS. The section headings contained in this Agreement
are for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
XII.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.
XII.7 AMENDMENT. Except as herein provided, this Agreement may not be
amended except by, a writing signed by the party to be charged.
XII.8 ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
and supersedes all prior agreements and understandings, both written and oral
among the parties with respect to the subject matter hereof.
XII.9 BINDING EFFECT. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, personal
representatives, successors and permitted assigns.
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XII.10 SURVIVAL. The covenants, agreements, indemnities, representations
and warranties of WorldCom and ILD made in or pursuant to this Agreement shall
survive the Closing notwithstanding any investigation made or information
obtained by or on behalf of another party.
XII.11 SEVERABILITY. In case any provision in this Agreement shall be
held invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby unless WorldCom elects otherwise.
XII.12 THIRD PARTIES. Nothing contained in this Agreement or in any
instrument or document executed by any party in connection with the transactions
contemplated hereby shall create any rights in, or be deemed to have been
executed for the benefit of any person or entity that is not a party hereto, a
successor or permitted assign of such a party or a person entitled to
indemnification hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
WORLDCOM, INC. ILD COMMUNICATIONS, INC.
By: /s/ K. Xxxxxxx Xxxxxx, Xx. By: /s/ Xxxxxxx X. Xxxxx
------------------------------- ------------------------------
Name: K. Xxxxxxx Xxxxxx, Xx. Name: Xxxxxxx X. Xxxxx
----------------------------- ----------------------------
Title: VP Corporate Development Title: President
---------------------------- ---------------------------
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