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EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
BETWEEN
CERTAIN ADVENT ENTITIES
AND
LONG DISTANCE INTERNATIONAL INC.
DATED JULY 28, 1997
XXXXX & XXXXXXXX
000 XXXXXXXXXXX XXXXXX, X.X.
XXXXXXXXXX, X.X. 00000
TELEPHONE: (000) 000-0000
FACSIMILE: (000) 000-0000
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STOCK PURCHASE AGREEMENT
THIS AGREEMENT (this "Agreement") made this 28th day of July, 1997, by
and among the entities listed on Schedule 1 hereto (collectively, the "Advent
Entities") and Long Distance International Inc., a Florida corporation with an
address of 000 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxxxxxxxx, XX 00000 ("LDI"
or the "Company") (the Advent Entities and LDI being sometimes collectively
referred to herein as the "Parties").
WITNESSETH:
WHEREAS, LDI is a corporation organized under the laws of Florida;
WHEREAS, each of the Advent Entities is a limited partnership organized
under the laws of Delaware, except for Four Seasons Venture II AS, which is a
limited company organized under the laws of Norway;
WHEREAS, LDI desires to issue and sell to the Advent Entities, and the
Advent Entities desire to purchase from LDI, the following securities on the
terms and conditions set forth herein:
(i) Shares of the Series B Preferred Stock, $0.001 par value, of LDI
("Series B Stock"); and
(ii) Warrants ("Warrants") to purchase shares of common stock, $0.001
par value, of LDI.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises hereinafter set forth, and of other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties,
intending to be legally bound hereby, agree as follows:
ARTICLE I
THE PURCHASE
1.1 Purchase of Securities. LDI hereby agrees to issue, sell and
deliver to the Advent Entities at the Closing (as hereinafter defined) and on
the Post-Closing Adjustment Date (as hereinafter defined) the Securities (as
hereinafter defined), for the consideration set forth and payable in accordance
with the provisions of Article II.
ARTICLE II
PAYMENT FOR THE SECURITIES
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2.1 Consideration. Simultaneously with the execution and delivery of
this Agreement, LDI has issued and sold to the Advent Entities and the Advent
Entities have purchased from LDI 2,400,000 shares of Series B Stock ("Initial
Series B Stock") and Warrants to purchase 9,908,367 shares of Common Stock
("Initial Warrants", and together with the Initial Series B Stock, the "Initial
Securities") for Twenty Four Million US Dollars in cash ($24,000,000) (the
"Initial Cash Consideration"). Payment of the Initial Cash Consideration for the
Initial Securities purchased by the Advent Entities has been made by wire
transfer (to an account of LDI previously designated by it in writing) and LDI
hereby acknowledges receipt from the Advent Entities of payment in full of the
Initial Cash Consideration. Each of the Advent Entities shall have purchased the
Initial Securities for the Initial Cash Consideration as provided on Schedule 1.
2.2 Delivery of Securities.
2.2.1 Delivery of the Initial Securities purchased by the
Advent Entities pursuant to this Agreement has been made at the Closing
by LDI delivering to the duly-authorized representative of the Advent
Entities, against payment of the Initial Cash Consideration therefor,
(i) stock certificates representing the Initial Series B Stock, and
(ii) the Initial Warrants in the form of Exhibit A, with each such
certificate and Warrant respectively being dated the date of this
Agreement and registered in the respective name of each of the Advent
Entities. Each of the Advent Entities has acquired that amount of the
Initial Securities as provided in Schedule 1.
2.2.2 The Initial Securities and the securities delivered by
LDI to the Advent Entities at the Post-Closing Adjustment Date are
hereinafter sometimes referred to collectively as the "Securities".
2.3 Use of Proceeds. The proceeds from the purchase of the
Securities shall be used by LDI to fund (i) capital expenditures, (ii)
expansion costs in Western Europe, (iii) license costs and
capitalization of Subsidiaries, (iv) start up costs for new marketing
methods, (v) Transaction Costs (as hereinafter defined), and (vi)
general working capital purposes.
2.4 Post-Closing Adjustments.
2.4.1 On the Post-Closing Adjustment Date (as defined in
Section 2.4.3 below), LDI shall issue and sell to the Advent Entities,
and the Advent Entities shall purchase from LDI, for an additional cash
consideration (the "Additional Cash Consideration") delivered in
immediately available funds by wire transfer to an account specified by
LDI, amounts of additional shares of Series B Stock (the "Additional
Series B Stock") and additional Warrants (the "Additional Warrants") in
the form of Exhibit A, determined as follows:
(a) If the Preemptive Rights Holders (as defined in
Section 2.4(b) below) do not purchase any of the Securities
under the Preemptive Rights Notice (as defined in Section
2.4.2(a) below), then (x) the number of Additional Series B
Stock shall be
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75,000, (y) subject to subsection 2.4.1(d), the Additional
Warrants shall be Warrants to purchase 309,636 shares of
Common Stock, and (z) the Additional Cash Consideration shall
be Seven Hundred Fifty Thousand US Dollars (US$750,000). In
this event the "Final Advent Percentage" shall be 27.72%.
(b) If the Preemptive Rights Holders tender
subscriptions, together with the cash consideration therefor,
to purchase units of Series B Stock and Warrants in accordance
with the Preemptive Rights Notice and the amount of units to
be issued and sold by LDI in accordance therewith on the Post
Closing Adjustment Date represent in the aggregate less than
75,000 shares of Series B Stock and Warrants to purchase less
than 309,636 shares of the common Stock, then (x) the number
of Additional Series B Stock shall be 75,000, less the number
of shares of Series B Stock issued and sold by LDI to the
Preemptive Rights Holders, (y) subject to subsection 2.4.1(d),
the Additional Warrants shall be Warrants to purchase that
number of shares of Common Stock as shall be equal to the
difference of 309,636, less the initial number of shares of
Common Stock purchasable upon exercise of the Warrants
purchased by the Preemptive Rights Holder, and (z) the amount
of the Additional Cash Consideration shall be equal to the
difference of Seven Hundred Fifty Thousand US Dollars
(US$750,000), less the cash consideration delivered by
Preemptive Rights Holders in exchange for such units. In this
event the "Final Advent Percentage" shall be the percentage
obtained as follows:
Final Advent Percentage =
(2,400,000 + Q)(28)/(2,500,000)%.
Where Q = the number of Additional Series
B Stock determined pursuant to
clause (x) of this subsection.
By way of example, if the Advent Entities receive 50,000
shares of Series B Stock pursuant to this subsection (b), then
the Final Advent Percentage will be:
(2,400,000 + 50,000)(28)/(2,500,000)= 27.44%.
(c) If the Preemptive Rights Holders tender
subscriptions, together with the cash consideration therefor
to purchase units of Series B Stock and Warrants in accordance
with the Preemptive Rights Notice and the amount of the units
to be issued and sold by LDI in accordance therewith on the
Post Closing Adjustment Date represent in the aggregate 75,000
or more shares of Series B Stock and Warrants to purchase
309,636 or more shares of the Common Stock, then (x) the
number of Additional Series B Preferred Stock shall be zero,
(y) subject to subsection 2.4.1(d), the Additional Warrants
shall be Warrants to purchase that number of shares of Common
Stock obtained as follows:
Additional Warrant Shares = (96/97)(0.372872)(C+E)-A
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Where:
A= Number of Shares represented by the
Initial Warrants (i.e., 9,908,367)
C= Number of Shares outstanding as of the
Closing (i.e., 26,540,269)
E= Number of Shares represented by the Warrants
purchased by the Preemptive Rights Holders
(unknown on the date of this Agreement)
and (z) the amount of the Additional Cash Consideration shall
be equal to One US Dollar (US$1). In this event the "Final
Advent Percentage" shall be 26.88%.
(d) In the event that between the Closing and the
Post-Closing Adjustment Date the number of shares of Common
Stock which the Advent Entities may purchase pursuant to the
Initial Warrants is adjusted in accordance with the terms of
the Initial Warrants, then the Additional Warrants shall be
Warrants to purchase that number of shares of Common Stock
that the Additional Warrants would have been warrants to
purchase if the Additional Warrants had been issued on the
Closing Date and adjusted in accordance with the terms thereof
between the Closing and the Post-Closing Adjustment Date.
2.4.2 The first of the following dates shall be the "Post
Closing Determination Date":
(a) The day LDI receives executed signature pages of
the Agreement to Waive Preemptive Right included in the
Preemptive Rights Notice and Request for Waiver of Preemptive
Rights, dated July 7, 1997 (the "Preemptive Rights Notice"),
from all of the shareholders of LDI, other than Messrs.
Xxxxxxxx and Xxxxxxxxx and Island Trading Company (the
shareholders of LDI other than Messrs. Xxxxxxxx and Xxxxxxxxx
and Island Trading Company being referred herein as the
"Preemptive Rights Holders");
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(b) August 18, 1997, provided that none of the
Preemptive Rights Holders exercised their respective
preemptive right on or before such date; and
(c) In the event one or more Preemptive Rights
Holders exercise their respective preemptive rights, the date
on which Preemptive Rights Holders are required to tender
their subscription price to LDI under their respective
subscriptions for up to the number of units consisting of
shares of Series B Stock and Warrants to purchase the number
of shares of Common Stock to which such Preemptive Rights
Holders are eligible to subscribe. as soon as possible. LDI
shall use its commercially reasonable efforts to ensure that
such date is as soon as possible.
2.4.3 Promptly following the Post Closing Determination Date,
LDI shall provide a written notice to the Advent Entities with the
details of the determination of, and calculations for, the Additional
Series B Stock, the Additional Warrants and the Additional Cash
Consideration and stating a date within five business days thereafter
(the "Post Closing Adjustment Date"), as well as a reasonable hour and
place, for the transactions to be consummated on the Post Closing
Adjustment Date.
2.4.4 In connection with the post-Closing adjustment being
made pursuant to this Section 2.4, LDI represents that, as of the date
hereof, pursuant to that certain letter agreement, dated November 6,
1996, between LDI and ARC Limited Partners, and those certain letter
agreements, dated February 25, 1997, and July 28, 1997, between LDI and
Societe Generale Securities Corporation and Xxxxxx & Co., Inc., certain
other purchasers (the "Other Purchasers") have agreed to purchase in
the aggregate 25,000 shares of Series B Stock and Warrants to purchase
in the aggregate 103,212 shares of Common Stock in exchange for cash
consideration of Two Hundred Fifty Thousand US Dollars (US$250,000).
2.4.5 LDI represents and warrants that all Persons entitled to
receive the Preemptive Rights Notice have been sent the Preemptive
Rights Notice by a means reasonably calculated to reach such Persons
without undue delay. LDI further represents, warrants and covenants
that no Person has been sold or shall be sold any of the securities
referred to in the Preemptive Rights Notice except for:
(a) the Advent Entities;
(b) the Other Purchasers, and to them only in the
amounts set forth previously in Section 2.4.4; and
(c) those Preemptive Rights Holders who exercise
their preemptive rights, and to them only to the extent of
such preemptive rights.
2.5 Warrant Series. The Initial Warrants, the Additional Warrants, the
warrants to be issued to the Other Purchasers as described in Section 2.4.4, and
any warrant certificates issued in
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whole or partial replacement or in substitution for any of the foregoing, shall
be warrants in the "ADV" series of warrants issued by the Company. LDI
represents, warrants and covenants that it has issued and will issue no other
securities, warrants, options or other rights to obtain securities of LDI in the
"ADV" series.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LDI
The term "LDI Affiliate" as used in this Agreement means all
corporations, partnerships, and entities of any kind that are controlled by LDI,
directly or indirectly in whole or in part. The terms "to the knowledge of LDI",
"to LDI's knowledge", "to its knowledge" when reference is made to LDI, and
similar terms mean to the actual knowledge of any of Xxxxx Xxxxxxxxx, Xxxxx
Xxxxxxxx, Xxxxxxx Xxxxx and Xxxx Xxxxxxx and that all such persons have made all
due inquiry. The term "Person" as used in this Agreement means an individual,
partnership, company, corporation or other legal entity, as the context
requires.
The representations and warranties contained in this Article III shall
expire on the second anniversary after the Closing, except that the
representations and warranties in Sections 3.1, 3.2, 3.3, 3.7 and 3.26 shall not
expire, and that the representations and warranties in Sections 3.8, 3.12, and
3.16 shall expire on the expiration of the applicable statute of limitations (if
any).
LDI represents and warrants the following to each of the Advent
Entities as of the date hereof and as of the Closing Date:
3.1 Corporate Standing. Each of LDI and each LDI Affiliate is duly
organized, validly existing, and in good standing under the laws of its
jurisdiction of incorporation or organization. Each of LDI and each of the LDI
Affiliates has full corporate authority to own, lease and operate its properties
and businesses, and is in good standing and is qualified to transact business as
a foreign corporation in all states and other jurisdictions in which the nature
of its business or the properties owned by it require it to qualify to transact
business. Schedule 3.1 is a complete and correct list of all the LDI Affiliates.
3.2 Authority. LDI has the full power and authority to enter into,
execute, deliver, and perform this Agreement and each of the documents (the "LDI
Exhibited Documents") set forth as Exhibits to this Agreement to which it is a
party. The execution, delivery and performance of this Agreement and the LDI
Exhibited Documents, and the consummation of all transactions contemplated
herein and therein, have been duly authorized by all necessary corporate and
other actions of LDI and every relevant LDI Affiliate. This Agreement and the
LDI Exhibited Documents, when executed and delivered by the Parties, shall be
valid and binding obligations of LDI, enforceable against it in accordance with
their terms, subject to bankruptcy, insolvency and other similar laws affecting
the rights of creditors generally and except that the remedies of specific
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performance, injunction and other forms of mandatory equitable relief may not be
available. Except as set forth in Schedule 3.2 attached hereto, neither the
execution and delivery of this Agreement nor the execution and delivery of LDI
Exhibited Documents nor the consummation of the transactions contemplated hereby
or thereby by LDI or any LDI Affiliate will (i) conflict with or violate any
provision of the Articles of Incorporation or By-Laws of LDI or of the
constituent or corporate governance documents of any of the LDI Affiliates, (ii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to LDI or any of LDI Affiliates or
their businesses or by which any of their assets is affected, or (iii) conflict
with or result in any breach of or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination or cancellation of, or accelerate the performance
required by or maturity of, or result in the creation of any security interest,
lien, charge or encumbrance on any of LDI's assets or any of the LDI Affiliates'
assets pursuant to any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, permit, license, franchise, lease, contract, or other
instrument or obligation to which LDI or any of the LDI Affiliates is a party or
by which any of their assets is affected. Except as set forth in Schedule 3.2
attached hereto, LDI and the LDI Affiliates are not required to submit any
notice, declaration, report or other filing or registration with any
governmental or regulatory authority or instrumentality, and no approvals or
non-objections are required to be obtained or made by LDI and the LDI Affiliates
in connection with the execution, delivery or performance by LDI of this
Agreement and the LDI Exhibited Documents or the consummation of the
transactions contemplated hereby or thereby.
3.3 Capitalization.
3.3.1 LDI is a Florida corporation having authorized capital
stock consisting of: 100,000,000 shares of common stock, par value
$0.001 per share ("Common Stock"), of which 24,083,713 shares are
issued and outstanding immediately prior to the transactions
contemplated hereby; 2,600,000 shares of Series A Preferred Stock, par
value $0.001 per share ("Series A Stock"), of which 2,456,556 shares
are issued and outstanding immediately prior to the transactions
contemplated hereby; and 5,000,000 shares of Series B Preferred Stock,
par value $0.001 per share ("Series B Stock"), of which no shares are
issued and outstanding immediately prior to the transactions
contemplated hereby. Schedule 3.3.1.A lists all persons or entities
owning of record shares of any class of LDI's capital stock, as well as
the amount and nature of capital stock held by each such person or
entity. Schedule 3.3.1.B lists all persons or entities holding of
record or, to LDI's knowledge, beneficially, options or warrants to
acquire any of LDI's capital stock, as well the amount of capital stock
covered by each such option or warrant and the exercise price therefor.
Except as described in Schedule 3.3.1.C, there are no agreements,
arrangements, warrants, calls, options, convertible rights or other
rights (vested or contingent) to acquire any capital stock of LDI.
There are no Persons which have or are entitled to any preemptive
rights to purchase or acquire any Common Stock, Series A Stock, Series
B Stock, or any other securities of LDI or the LDI Affiliates, except
for the persons listed in Schedule 3.3.1.D along with the date on which
such person's rights expire.
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3.3.2 The rights and preferences of the Common Stock, the
Series A Stock, and the Series B Stock are as defined in the Articles
of Amendment to the Second Restated Articles of Incorporation of LDI
attached hereto in the form of Exhibit B.
3.3.3 The number of shares of Common Stock represented by the
Initial Warrants and the Warrants received pursuant to Section 2.4, if
exercised in accordance with the terms thereof at the close of business
on the Post-Closing Adjustment Date, would constitute that percentage
of the shares of Common Stock issued and outstanding as of the close of
business on that day as equals the Final Advent Percentage. All of the
Series B Stock, when delivered to the Advent Entities at the Closing
Date or the Post-Closing Adjustment Date, as the case may be, will be
validly issued, fully paid and nonassessable, and will be issued by LDI
free and clear of any liens, claims, options, pledges, encumbrances or
restrictions of any nature whatsoever except as contemplated by
Schedule 3.3.3. LDI has the absolute right, power and capacity to issue
and deliver the Securities to the Advent Entities, and at the Closing
Date or Post-Closing Adjustment Date, as the case may be, the Advent
Entities will have good, clean and marketable title to the Securities.
3.3.4 Schedule 3.3.4.A lists all Persons or entities of record
owning shares of any class of capital stock of the LDI Affiliates, as
well as the amount and nature of capital stock held by each such person
or entity of record. Schedule 3.3.4.B lists all persons or entities
holding options or warrants to acquire any capital stock of the LDI
Affiliates, as well the amount of capital stock covered by each such
option or warrant and the exercise price therefor. Except as described
in Schedule 3.3.4.C, there are no agreements, arrangements, warrants,
calls, options, convertible rights or other rights (vested or
contingent) to acquire any capital stock of any LDI Affiliate from such
LDI Affiliate or, to the knowledge of LDI, from any other person.
3.3.5 All of the shares of capital stock of the LDI Affiliates
that are listed in Schedule 3.3.4.A as being owned by LDI are validly
issued, fully paid and nonassessable and all of the options and
warrants to purchase shares of capital stock of the LDI Affiliates
listed on Schedule 3.3.4.B are owned of record and beneficially by LDI
free and clear of any liens, pledges, claims, options, encumbrances or
restrictions of any nature whatsoever except as contemplated by
Schedule 3.3.5.A.
3.4 Operation of the Business. Each of LDI and each of the LDI
Affiliates owns and retains all such assets, tangible or intangible,
contractual, license and leasehold rights necessary for it (i) to operate the
Business (hereinafter defined), and (ii) to utilize the assets and contractual,
license and leasehold rights, in the same manner as they are utilized at the
date of this Agreement. With the exception of those assets used in the Business
of LDI and the LDI Affiliates pursuant to license and leasehold rights in favor
of LDI or the LDI Affiliates (as the case may be), all of the assets used in the
Business of LDI and the LDI Affiliates are owned by LDI or such LDI Affiliate
(as the case may be), and none are owned by any other Person. For purposes of
this Agreement, the
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"Business" means the provision of domestic and international telecommunication
services and products throughout the world.
3.5 No Change. Except as set forth in Schedule 3.5 attached hereto,
there has been no material adverse change since the date of the 1996 Balance
Sheet (as hereinafter defined) in the nature of LDI or any of the LDI Affiliates
and their Business or condition (financial or otherwise), or properties, assets,
liabilities (actual or contingent), operations, or the manner of conducting
their Business, other than changes in the ordinary course of business. Since
December 31, 1996, there has been no event or condition of any character which,
either individually or in the aggregate, might reasonably be expected to affect
in a materially adverse manner the business prospects, operations, properties,
assets, liabilities, earnings or financial condition of LDI or any of the LDI
Affiliates, except no representation or warranty is made in this sentence with
respect to events or conditions of general applicability or generally applicable
to companies engaged in the Business, including, without limitation, those
relating to political, economic, legal, regulatory and technological matters.
Except as set forth in Schedule 3.5 attached hereto, since December 31, 1996,
neither of LDI nor any of the LDI Affiliates have (i) declared or, directly or
indirectly, paid any dividends or made any other distributions or payments of
any kind to their shareholders or partners with respect to their shares of
capital stock, (ii) incurred any indebtedness for borrowed money, (iii) created
or permitted to be created any liens, encumbrances, or adverse charges of any
nature on any of their assets, (iv) discharged, satisfied or paid, in whole or
in part, or permitted to be discharged, satisfied or paid, in whole or in part,
any material obligation or material liability (contingent or absolute) relating
to the Business or the properties of LDI and the LDI Affiliates, other than in
the ordinary course of business, (v) waived or permitted to be waived any right
or claim of any of LDI or any of the LDI Affiliates, or (vi) assigned any
contractual rights to a third person.
3.6 Assets. Except as set forth in Schedule 3.6.A, LDI and each of the
LDI Affiliates has good and marketable title to all of its assets, free and
clear of all mortgages, options, leases, covenants, conditions, agreements,
liens, security interests, adverse claims, restrictions, charges, encumbrances
and rights of others, and there exists no restriction on the use or transfer of
any of the assets of LDI or any of the LDI Affiliates. Schedule 3.6.B sets forth
a list of all machinery or equipment, including without limitation, computer
hardware, used to conduct the Business of LDI and the LDI Affiliates with an
original market value in excess of $10,000 (the "Equipment"), together with the
date of acquisition of each piece of Equipment, and the location of each piece
of Equipment. Schedule 3.6.C sets forth a list of all "Company Software," which
shall include all of LDI's and the LDI Affiliates' software and computer
programs used in their Business, including any software or computer programs not
wholly owned by LDI or the LDI Affiliates ("Third Party Software") embedded
therein, other than off-the-shelf shrink-wrapped software. Except as set forth
in Schedule 3.6.D attached hereto, the tangible assets of LDI and the LDI
Affiliates are in good operating condition and repair, ordinary wear and tear
excepted, and are satisfactory for the purposes for which such assets are being
used in the Business. LDI and the LDI Affiliates do not, and have not since the
date of their formation, owned or have any interest in real estate except as
described in Schedule 3.6.E.
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3.7 Compliance with Laws. Except as listed on Schedule 3.7, the
operation of LDI and the LDI Affiliates and the use of their assets comply with
all applicable federal, state, local and foreign laws, ordinances, rules and
regulations (collectively the "Laws"). LDI and the LDI Affiliates have all
requisite licenses, permits, approvals and certificates from federal, state,
local and foreign governmental and quasi-governmental authorities as may be
necessary to conduct their Business and own and operate their assets (including
without limitation all licenses, permits, approvals and certificates required by
all applicable local, regional and national telecommunication laws, ordinances,
requirements, administrative rules and regulations, including but not limited to
the ordinances and business conditions of the relevant telecommunication
regulatory bodies in the United States and the United Kingdom) and such
licenses, permits, approvals and certificates are valid and in full force and
effect and by their terms, or to LDI's knowledge for any other reason, will not
be terminated or adversely affected by the consummation of the transactions
contemplated hereby. Except as disclosed on Schedule 3.7 attached hereto, LDI
and the LDI Affiliates have not received any written notice alleging any
violations by LDI or any of the LDI Affiliates of any Laws, or of investigations
of LDI or any of the LDI Affiliates initiated by administrative agencies, and,
to the knowledge of LDI, no allegations or investigations are pending or have
been threatened. No organization, governmental authority or public official has
denied or questioned in writing the entitlement of LDI or any of the LDI
Affiliates to operate its business in compliance with the Laws.
3.8 Employee Benefit Plans.
3.8.1 Except as set forth on Schedule 3.8.1.A attached hereto,
with respect to all employees and former employees of LDI and the LDI
Affiliates, LDI, the LDI Affiliates and their ERISA Affiliates (as
defined hereafter) do not maintain, contribute to or have any
liability under:
(a) any bonus, incentive compensation, profit
sharing, retirement, pension, group insurance, death benefit,
group health, medical expense reimbursement, cafeteria,
dependent care, stock option, stock purchase, stock
appreciation rights, savings, deferred compensation,
consulting, severance pay or termination pay, vacation pay,
life insurance, welfare or other employee benefit or fringe
benefit plan, program or arrangement;
(b) any plan, program or arrangement which is an
"employee pension benefit plan" as such term is defined in
Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or an "employee welfare benefit
plan" as defined in Section 3(1) of ERISA.
For purposes of this Agreement, "ERISA Affiliate" shall mean each
person (as defined in Section 3(9) of ERISA) that, together with LDI
and the LDI Affiliates (or any person whose liabilities LDI or any of
the LDI Affiliates have assumed or are otherwise subject to), currently
or in the past would be treated as a single employer under Section
4001(b) of ERISA or that would be deemed to be a member of the same
"controlled group" within the
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meaning of Section 414(b), (c), (m) and (o) of the Internal Revenue
Code of 1986, as amended (the "Internal Revenue Code"). The plans,
programs and arrangements set forth on Schedule 3.8.1.A are herein
referred to as the "Employee Benefit Plans."
3.8.2 With respect to all employees and former employees of
LDI and the LDI Affiliates, LDI, the LDI Affiliates and their ERISA
Affiliates do not maintain, contribute to or have any liability under
any funded or unfunded medical, health or life insurance plan or
arrangement for present or future retirees or present or future
terminated employees except as required by the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended ("COBRA"). LDI and the
LDI Affiliates do not, and the ERISA Affiliates of LDI and the LDI
Affiliates do not, maintain or contribute to a trust, organization or
association described in any of Sections 501(c)(9), 501(c)(17) or
501(c)(20) of the Internal Revenue Code.
3.8.3 The sole Employee Benefit Plan which has ever been
maintained by LDI, the LDI Affiliates and their ERISA Affiliates
complies with the provisions of Section 401(a) of the Internal Revenue
Code and is the Long Distance International Inc. 401(k) Employee
Savings Plan (the "Savings Plan"), which was adopted by LDI, effective
as of January 1, 1997. An application for a determination letter from
the Internal Revenue Service ("IRS") for the Savings Plan has been
prepared, but has not yet been submitted to the IRS. To the knowledge
of LDI, the Savings Plan is in material compliance, both in form and in
operation, with the provisions of Section 401(a) of the Internal
Revenue Code, and LDI intends to take all further reasonable steps
necessary to obtain a positive determination letter from the IRS for
the Savings Plan, including submitting the application for a
determination letter on a timely basis and the adoption of retroactive
amendments requested by the IRS in response to the determination letter
application.
3.8.4 With respect to each Employee Benefit Plan which is
subject to Title I of ERISA, LDI, the LDI Affiliates and their ERISA
Affiliates have complied with all of the applicable reporting,
disclosure or other requirements of ERISA and the Internal Revenue
Code, and there has been no non-exempt "prohibited transaction" as
described in Section 4975 of the Internal Revenue Code or Section 406
of ERISA.
3.8.5 LDI, the LDI Affiliates and their ERISA Affiliates, and
their respective directors, officers, employees and other
"fiduciaries," as such term is defined in Section 3(21) of ERISA, have
no material liability for failure to comply with ERISA or the Internal
Revenue Code for any action or failure to act in connection with the
administration or investment of the Employee Benefit Plans.
3.8.6 With respect to any Employee Benefit Plan which is
subject to Section 412 of the Internal Revenue Code or Section 302 of
ERISA, there has been no "accumulated funding deficiency" within the
meaning of Section 302 of ERISA or Section 412 of the Internal Revenue
Code (whether or not waived). With respect to the Employee Benefit
Plans, all applicable contributions and premium payments for all
periods ending prior to the
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Closing Date (including periods from the first day of the then current
plan year to the Closing Date) have been made, and shall be made prior
to the Closing Date in accordance with past practice and, with respect
to each Employee Benefit Plan subject to Title IV of ERISA, the
recommended contribution in the applicable actuarial report. No
Employee Benefit Plan has any unfunded liability.
3.8.7 The actuarially determined present value of all accrued
benefits under each Employee Benefit Plan subject to Title IV of ERISA
(computed on a plan termination basis) does not exceed the fair market
value of the assets of each such Employee Benefit Plan.
3.8.8 LDI, the LDI Affiliates and their ERISA Affiliates do
not maintain, contribute to or have any liability (including current or
potential withdrawal liability) with respect to any "multiemployer
plan" as such term is defined in Section 3(37) of ERISA.
3.8.9 LDI, the LDI Affiliates and their ERISA Affiliates do
not maintain, and have not maintained, an employee pension benefit plan
that has been the subject of a "reportable event," as that term is
defined in Section 4043 of ERISA, as to which notices would be required
to be filed with the Pension Benefit Guaranty Corporation ("PBGC"), or
of any event requiring disclosure under Section 4063(a) of ERISA. LDI,
the LDI Affiliates and their ERISA Affiliates have not incurred any
outstanding liability under Section 4062 of ERISA to the PBGC. All
premiums or other amounts due and payable to the PBGC have been paid.
LDI, the LDI Affiliates and their ERISA Affiliates have not terminated
any employee pension benefit plan subject to Title IV of ERISA, and no
proceeding by the PBGC to terminate any employee pension benefit plan
pursuant to Title IV of ERISA has ever been instituted or (to their
knowledge) threatened, no notice of any such termination has been
received and no condition exists for the termination of an Employee
Benefit Plan.
3.8.10 There is no pending or threatened legal action,
proceeding or investigation against or involving any Employee Benefit
Plan (other than routine claims for benefits) and, to the knowledge of
LDI, there is no basis for or fact which could give rise to any such
legal action, proceeding or investigation. Any bonding required with
respect to the Employee Benefit Plans in accordance with applicable
provisions of ERISA has been obtained and is in full force and effect.
3.8.11 Except as set forth on Schedule 3.8.11,
(a) None of LDI or any LDI Affiliates is party to any
employment agreement, whether written or oral, or agreement
with change in control or similar provisions, or collective
bargaining agreement or contract with any labor union relating
to any employees or former employees;
(b) LDI and the LDI Affiliates do not have
outstanding loans to any current or former employees, and they
have not guaranteed any such loans;
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(c) No amount payable to an employee or former
employee of LDI and the LDI Affiliates will be an "excess
parachute payment" which is non-deductible under Section 280G
of the Internal Revenue Code.
3.8.12 To the knowledge of LDI, there has been no act or acts
which would result in a disallowance of a deduction or the imposition
of a tax pursuant to Section 4980B, or with regard to plan years
beginning before December 31, 1988, Section 162(i) of the Internal
Revenue Code as in effect immediately prior to the enactment of the
Technical and Miscellaneous Revenue Act of 1988, or any regulations
promulgated thereunder, whether final, temporary or proposed. To the
knowledge of LDI, no event has occurred with respect to which LDI, the
LDI Affiliates or their ERISA Affiliates could be liable for a tax
imposed by any of Sections 4972, 4976, 4977, 4979, 4980 or 4980B of the
Internal Revenue Code, or for a civil penalty under Section 502(c) of
ERISA.
3.8.13 With respect to each of the Employee Benefit Plans, LDI
has delivered to the duly authorized representative of the Advent
Entities true and complete copies of: (i) the plan documents, including
any related trust agreements, insurance contracts or other funding
arrangements, or a written summary of the terms and conditions of the
plan if there is no written plan document; (ii) the most recent
determination letter received from the Internal Revenue Service; (iii)
the most recent IRS Form 5500; (iv) the most recent actuarial
valuation; (v) the most recent financial statement; (vi) all
correspondence with the Internal Revenue Service, the Department of
Labor and the Pension Benefit Guaranty Corporation with respect to the
past three plan years other than IRS Form 5500 filings and PBGC premium
payments; and (vii) the most recent summary plan description.
3.9 Financial Statements. Attached hereto as Schedule 3.9.A is the
consolidated balance sheet with the notes thereto (the "1996 Balance Sheet") of
LDI and the LDI Affiliates, as of and for the year ending December 31, 1996, the
consolidated income statement of LDI, including the LDI Affiliates, for the
twelve (12) months then ended (the "12-month statement") and the consolidated
balance sheet and income statement for the period from January 1, 1997 through
March 31, 1997 (along with the 12-month statement and the 1996 Balance Sheet,
collectively the "Financial Statements") together with the report thereon of
LDI's certified public accountants. The Financial Statements have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis. The assets, liabilities, income and expenses of LDI, including
the LDI Affiliates, are fairly valued in all material respects and accurately
reflected on the Financial Statements.
3.10 Intentionally Omitted.
3.11 Litigation. Other than as listed in Schedule 3.11 attached hereto,
there is no claim, counterclaim, suit, order, proceeding, action, or
investigation pending, written notice of which has been received, or, to their
knowledge, threatened against LDI or the LDI Affiliates or any of their
respective officers, directors, or employees (in such capacity). None of LDI or
any of the LDI
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Affiliates is plaintiff or petitioner in any litigation or proceeding other than
as listed in Schedule 3.11.
3.12 Agreements, Leases and Licenses. LDI has provided true and
accurate copies to the duly-authorized representative of the Advent Entities of
all leases, licenses, contracts and agreements of LDI or any of the LDI
Affiliates with payments to be made or received thereunder in excess of $10,000
per year, including all amendments or modifications thereto (the "Delivered
Contracts"). Schedule 3.12A contains a complete list of the Delivered Contracts.
Other than the Delivered Contracts and the contracts and agreements listed on
Schedule 3.12B, there are no leases, licenses, contracts or agreements necessary
(i) to operate the Business of LDI and the LDI Affiliates as operated at the
date hereof, or (ii) to utilize the assets and contractual, license and
leasehold rights in the same manner as LDI and the LDI Affiliates utilize such
assets and contractual, license and leasehold rights as at the date hereof. (The
agreements, contracts and other items on Schedules 3.12A and 3.12B are
collectively referred to as the "Contracts"). Neither LDI nor any of the LDI
Affiliates is in default under any of the Contracts and, to LDI's knowledge, no
other party to any of the Contracts is in default thereunder. No event has
occurred which with the passage of time or the giving of notice or both that
would constitute a default by LDI or an LDI Affiliate under any of the
Contracts. Each of the Contracts, to LDI's knowledge, is appropriate in nature
and scope of the operation of the Business. Except as set forth on Schedule
3.12C, each of the Contracts is valid, binding and enforceable against LDI and
the LDI Affiliates and to its knowledge each other party thereto in accordance
with its terms without any defenses, setoffs, counterclaims or disputes of any
nature and is in full force and effect. To LDI's knowledge, no purchase
commitment for materials, supplies, component parts or items of inventory of the
business to which LDI or any of the LDI Affiliates is a party is in excess of
the ordinary, normal, usual and current requirements of the Business or at a
price in excess of the current reasonable market price. To LDI's knowledge, no
Contract which relates to the Business obligates LDI or any of the LDI
Affiliates (i) to provide products or services to third Persons which LDI or any
of the LDI Affiliates knows or has reason to believe are at prices which would
result in a net loss on the sale or provision of such products or services, or
which are pursuant to terms or conditions it cannot reasonably expect to satisfy
or fulfill in their entirety, or (ii) to purchase or acquire services,
information, products, inventory or equipment in excess of the normal, ordinary,
usual and current requirements of the Business or at a price in excess of the
current reasonable market price. LDI and the LDI Affiliates have not waived any
right under any Contract, whether by action or inaction or otherwise. LDI and
the LDI Affiliates are not a party to, and their assets are not bound by, any
agreement that is adverse to the Business. LDI and the LDI Affiliates have not
received written notice that any party to any of the Contracts intends to cancel
or terminate any Contract prior to maturity.
3.13 Environmental and Health and Safety Matters.
3.13.1 Set forth on Schedule 3.13.1 attached hereto is a true,
accurate and complete list of all real property, owned, leased and/or
otherwise used or occupied by LDI or any of the LDI Affiliates (the
"Property").
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3.13.2 To the knowledge of LDI, except as set forth in
Schedule 3.13.2, LDI, all the LDI Affiliates, any predecessors related
to the business conducted by LDI or any LDI Affiliate, and the Property
have been at all times and are in material compliance with any
governmental statute, law, ordinance, code, rule, regulation, order or
decree or any decision, conclusion or determination made by a
government official relating to or imposing liability or standards of
conduct regarding any air emission, water discharge or use, storage,
handling, generation or disposal of any Hazardous Substances (as
defined below), including, without limitation, the following all
regulations which have been promulgated thereunder: the Comprehensive
Environmental Response, Compensation and Liability Act, the Clean Air
Act, the Clean Water Act, the Toxic Substances Control Act, the
Resource Conservation and Recovery Act, the Used Oil Recycling Act, the
Occupational Safety and Health Act, the Federal Safe Drinking Water
Act, the Federal Water Pollution Control Act, the Oil Pollution Act,
the Emergency Planning and Community Right-to-Know Act, and all other
federal, state, tribal and local laws, rules and regulations relating
to protection of human health and the environment, reclamation of land,
wetlands and waterways or relating to the use, storage, emissions,
discharge, clean-up or release of Hazardous Substances on or into the
work-place or the environment (including, without limitation, ambient
air, oceans, waterways, wetlands, surface water, ground water
(tributary and nontributary), land surface or subsurface strata) or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transportation or handling of
contaminants (the "Environmental Laws"). For purposes of this
Agreement, the term "Hazardous Substances" shall mean industrial, toxic
or hazardous substances, materials or wastes or other pollutants,
contaminants, petroleum products, asbestos, polychlorinated biphenyls
("PCBs") or chemicals, all as defined and regulated under Environmental
Law.
3.13.3 To the knowledge of LDI, LDI and the LDI Affiliates
have obtained and are in material compliance with all permits, licenses
and other consents or authorizations which are required with respect to
the operation of their businesses under the Environmental Laws,
including without limitation those that are required to (a) operate or
install any equipment or facilities and (b) generate, manufacture,
formulate, store, treat, handle, transport, discharge, emit or dispose
of Hazardous Substances generated by their businesses, a true and
complete list of which is included in Schedule 3.13.3 except for those
Hazardous Substances routinely stored, handled, transported or
discharged in the day to day operations in compliance with applicable
law.
3.13.4 To LDI's knowledge, except as listed in Schedule
3.13.4.A, there are no PCBs, TCE, PCE, or asbestos containing materials
generated, used, treated, stored, maintained, disposed of, or otherwise
deposited in, located on, or related to the Property, the businesses of
LDI or the LDI Affiliates or their predecessors, or any premises at
which the businesses of LDI, the LDI Affiliates or their predecessors
were or are located. Additionally, except as described in Schedule
3.13.4.B, there are and, to LDI's knowledge, were no underground
storage tanks used, stored, maintained, located on or otherwise related
to the Property, the businesses of LDI or the LDI Affiliates or their
predecessors, or any premises
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at which the businesses of LDI or the LDI Affiliates or their
predecessors were or are located. To the knowledge of LDI, LDI and the
LDI Affiliates have removed and properly disposed of all used or other
obsolete materials regulated by environmental, health and safety laws,
including chemical or other hazardous substances or wastes, that are
not used by LDI or the LDI Affiliates. With respect to underground
storage tanks, Schedule 3.13.4.B sets forth all information in the
possession of LDI pertaining to the size, location, construction,
installation date, use and testing history of all such underground
storage tanks (whether or not excluded from regulation under
Environmental Laws), including all underground storage tanks in use,
out of service, closed, abandoned or decommissioned.
3.13.5 To the knowledge of LDI, there has been no unlawful or
material "release" as defined in 42 U.S.C. Section 9601(22) or, threat
of a "release" of any Hazardous Substance on, from or under any
premises from which the operations of LDI or the LDI Affiliates or
their predecessors have been or are being conducted.
3.13.6 To the knowledge of LDI, LDI, the LDI Affiliates and
their predecessors have not received notice that any of them have any
potential liability with respect to the contamination, investigation,
or cleanup of any site at which Hazardous Substances have been or have
alleged to have been generated, treated, stored, released, discharged,
emitted or disposed of, and there are no past or present events, facts,
conditions or circumstances which may interfere with or prevent
compliance by the businesses of LDI or the LDI Affiliates in accordance
with Environmental Laws, or with any order, decree, judgment,
injunction, notice or demand issued, entered, promulgated or approved
thereunder, or which may give risk to any common law or other legal
liability, including, without limitation, liability under any
Environmental Laws, or otherwise form the basis of any claim, action,
demand, suit, proceeding, hearing, notice of violation, study or
investigation, based on or related to the manufacture, process,
distribution, use, treatment, storage, disposal, transport or handling,
or the emission, discharge, release or threatened release into the
environment of Hazardous Substances by LDI or the LDI Affiliates or
their predecessors, as a result of any act or omission of LDI or the
LDI Affiliates or their predecessors.
3.13.7 To the knowledge of LDI, Schedule 3.13.7 contains a
true, correct and complete listing of the methods used by LDI, the LDI
Affiliates and any predecessor (including, but not limited to, a list
of past and present disposal or recycling sites, waste haulers, and
manifest numbers) since January 1, 1980 to dispose of or recycle
Hazardous Substances generated by the operations and activities of LDI,
the LDI Affiliates or their predecessors.
3.13.8 To the knowledge of LDI, except as disclosed in
Schedule 3.13.8, all of LDI's, the LDI Affiliates', and their
predecessors' disposal and recycling practices relating to Hazardous
Substances have been accomplished in accordance with all applicable
Environmental Laws.
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3.14 Intellectual Property. Each of LDI and the LDI Affiliates owns or
has adequate rights to use all patents, trademarks, service marks, trade names,
service names, copyrights, technology, know-how, processes, trade secrets, and
other intellectual property, intangible property and proprietary rights
(collectively, "Intangible Property") used in or necessary for the conduct of
its Business as now conducted and as proposed to be conducted without, to LDI's
knowledge, any infringement of or alleged infringement of the rights or alleged
rights of others. Schedule 3.14.A lists all of the Intangible Property other
than off-the-shelf shrink-wrapped software. To the knowledge of LDI, none of the
Intellectual Property has been held or stipulated to be invalid in any
litigation or proceeding. None of LDI's and the LDI Affiliates' rights to the
Intangible Property has been questioned in any litigation or proceeding that is
currently pending or that (to LDI's or LDI Affiliates' knowledge) has been
threatened, and there exists no basis for a claim against LDI or any of the LDI
Affiliates for infringement of any third Person's Intangible Property. LDI and
the LDI Affiliates have not received written notice to the effect that any
service they perform or sell may infringe any Intangible Property of another.
Except as set forth in Schedule 3.14.B, LDI and the LDI Affiliates have not
entered into or become party to any development, work for hire, license or other
agreement pursuant to which they have secured the right or obligation to use, or
granted others the right or obligation to use, any Intangible Property.
3.15 Related Party Transactions. Since December 31, 1995, no officer,
director, or person in a similar position of LDI or any of the LDI Affiliates or
any affiliate thereof has, directly or indirectly, entered into any transaction
with LDI or any of the LDI Affiliates except for any arrangements which are
either (i) disclosed on the 1996 Balance Sheet, (ii) listed on Schedule 3.15
attached hereto, or (iii) constitute compensation in the ordinary course of
business in an aggregate amount per year less than $50,000. For purposes of this
Section only, the term "affiliate" of LDI or of the LDI Affiliates shall mean
and include any officer or director or shareholder of LDI or any of the LDI
Affiliates or any person related to any such officer, director or shareholder by
blood or by marriage, or any corporation, partnership, proprietorship, trust or
other entity in which such officer, director or shareholder (or any spouse,
ancestor or descendant of the same) has more than a five percent (5%) legal or
beneficial interest, or any corporation, partnership, proprietorship, trust or
other entity which controls, is controlled by or is under common control with
LDI or any of the LDI Affiliates.
3.16 Increases in Salaries and Wages. Except as listed in Schedule 3.16
attached hereto, LDI and the LDI Affiliates have not, since December 31, 1996,
paid any salary, wage, bonus payments or any other benefits to its employees at
rates exceeding the respective rates paid to such employees which were in effect
at December 31, 1996.
3.17 Taxes. Except as otherwise indicated on Schedule 3.17.A, as to any
tax imposed by the Federal government, or any state government or any
subdivision or municipality thereof, or the government of any other country or
political subdivision thereof, including, without limitation, (i) taxes imposed
on or measured by income, (ii) taxes based on employment (including amounts
withheld from employees' compensation), and (iii) any property, franchise,
sales, use or value added tax, which, in each case, relates to or could cause a
lien or encumbrance upon any of the assets or
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the businesses of LDI or any of the LDI Affiliates, LDI and each of the LDI
Affiliates has timely (including any applicable extensions), properly and
lawfully filed all returns and elections necessary to be filed and has paid in
full the applicable taxes due on such returns (other than those being contested
in good faith), no claims for any unpaid taxes, interest or penalties are being
asserted by any governmental authority, for any period, against LDI or any of
the LDI Affiliates or any assets of LDI or any of the LDI Affiliates. LDI and
the LDI Affiliates have not paid and are not required to pay any income taxes to
any country other than those listed on Schedule 3.17.B attached hereto, or to
any state other than those listed on Schedule 3.17.C attached hereto. LDI and
each of the LDI Affiliates pays property, franchise, sales, use or value added
taxes, with respect to their businesses and properties only in those countries,
states or political subdivisions listed on Schedule 3.17.D attached hereto. LDI
and each of the LDI Affiliates has timely filed and paid all estimated taxes due
on or prior to the Closing Date. LDI has furnished the duly authorized
representative of the Advent Entities with true and complete copies of each of
the Federal, state, local and foreign income and excise tax returns, and
franchise, sales, use and value added tax returns, and any amendments thereto,
of LDI and all of the LDI Affiliates, as they relate to taxable periods since
the date of incorporation of LDI and LDI has made available to the Advent
Entities all reports of and communications from the Internal Revenue Service
("IRS") and the corresponding taxing authorities of any other state, local and
foreign governmental agencies who have examined the books and records of LDI or
any of the LDI Affiliates at any time including and since the date of
incorporation of LDI. Except as disclosed on Schedule 3.17.E attached hereto, to
the knowledge of LDI, no audit or examination of LDI or any of the LDI
Affiliates by any taxing authority or agency is now pending or currently in
progress, and LDI and the LDI Affiliates have not received from any taxing
authority or agency any notice of such an audit or examination. No waiver of any
statute of limitations has been given and is in effect in respect to the
assessment of any taxes against LDI or any of the LDI Affiliates.
3.18 Employee Salaries and Benefits. LDI has provided the duly
authorized representative of the Advent Entities with an accurate list of all
salaried employees of LDI and each of the LDI Affiliates, and the current rate
of compensation for each such employee (including a separate statement of
bonuses and fringe benefits). Except as listed on Schedule 3.18, there is no
liability for unpaid salary or wages, bonuses, vacation time, or other employee
benefits due or accrued, nor liability for withheld or deducted amounts from
employees' earnings, for the period ending on or immediately prior to the
Closing Date, including without limitation commission payments to employees,
other than in the ordinary course of business. There are no labor disputes,
strikes, work stoppages or other interruptions in service or performance by
employees, and all relationships between LDI and its employees, and between the
LDI Affiliates and their employees, are generally stable and satisfactory.
3.19 Insurance. Each of LDI and LDI Affiliates maintains in effect, and
since January 1, 1996, has maintained in effect general liability insurance,
workers' compensation insurance, insurance for acts or omissions by employees
and directors, and other insurance covering their businesses and fire and
extended coverage insurance with respect to their properties and assets.
Schedule 3.19 attached hereto is a complete list of all insurance policies
(including the amount of coverage thereunder) in effect at present. All such
insurance policies are owned solely and
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exclusively by LDI or the LDI Affiliates, as the case may be. No event has
occurred that may enable an insurer to rescind any such policies in accordance
with the respective terms of such policies.
3.20 Customer and Supplier Relationships; Warranty Claims. LDI and the
LDI Affiliates have not received any notice that any customer, subscriber,
operator, programmer or supplier of LDI or any of the LDI Affiliates, as of the
date hereof, intends to discontinue or alter the prices or terms of, or
substantially diminish, its relationship with LDI or the LDI Affiliates, except
where such discontinuation, alteration, diminution has not had and is not likely
to have, individually or in the aggregate, a material adverse effect. Other than
as set forth on Schedule 3.20, since the date of incorporation of LDI, there are
no outstanding warranty claims against LDI or any of the LDI Affiliates with
respect to products sold or services rendered by LDI or any of the LDI
Affiliates.
3.21 Accounts Receivable and Notes Receivable. The accounts receivable
and notes receivable of LDI and the LDI Affiliates, other than those listed on
Schedule 3.21, represent bona fide claims which LDI and the LDI Affiliates have
against debtors for sales or services arising on or before the Closing Date, are
not subject to counterclaims, setoffs or deductions of any kind, and are not
subject to additional requirements of performance by LDI or the LDI Affiliates.
The aggregate amount of customer advance payments (i.e., payments in excess of
actual work performed or materials supplied as of the date of such payment)
received by LDI or the LDI Affiliates at or prior to the Closing Date with
respect to such accounts receivable does not exceed $100,000. All of the
accounts receivable and notes receivable have been created since the date of
incorporation of LDI, pursuant to provision of services conforming to the terms
of purchase orders executed by and received from unrelated third Persons in the
normal course of business. Such receivables have been recorded in accordance
with LDI's or the relevant LDI Affiliate's historical revenue recognition policy
and have been collected or are collectable in accordance with their terms at the
full recorded amount thereof no later than 90 days following the Closing.
3.22 Accounts Payable. The accounts payable of LDI and the LDI
Affiliates represent bona fide claims which creditors have against them for
sales or services, are not subject to counterclaims, setoffs or deductions by
them, and are not subject to additional requirements of performance due to them.
All of the accounts payable have been created pursuant to receipt of goods or
services conforming to the terms of purchase orders executed in favor of
unrelated third Persons in the normal course of business.
3.23 Bonds; Guarantees. Other than as listed on Schedule 3.23 or as
specifically described in the Financial Statements, there are no bonds,
guarantees, notes, sureties, letters of credit, or other similar credit
agreements or debt obligations that exist with respect to LDI or the LDI
Affiliates, their Businesses or any of their assets. LDI and the LDI Affiliates
are not in default on the payment of any principal or interest on any
indebtedness for borrowed money, nor are they otherwise in default under any
indemnity, fidelity or contract bond or letter of credit, note, guarantee or
other credit agreement or debt obligation or instrument.
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3.24 Absence of Undisclosed Liabilities. Except as reserved against or
reflected in, or in the notes forming part of, the Financial Statements, or
described in Schedule 3.24, LDI and the LDI Affiliates are not subject to any
liability or financial obligation (known or unknown, direct or indirect,
absolute, contingent, accrued or otherwise), other than liabilities or financial
obligations arising in the ordinary course of business since the date of the
Financial Statements. LDI and the LDI Affiliates do not know of any facts or
circumstances which might reasonably serve as the basis for any liabilities or
financial obligations which are not disclosed in the Schedules, except no
representation or warranty is made with respect to events or conditions of
general applicability or generally applicable to companies engaged in the
Business, including, without limitation, those relating to political, economic,
legal, regulatory and technological matters.
3.25 Intentionally Omitted.
3.26 Charter Documents. LDI has delivered to the duly-authorized
representative of the Advent Entities certified copies of its Second Restated
Articles of Incorporation (which, as amended by the Articles of Amendment
attached as Exhibit B are the currently effective Articles of Incorporation of
LDI) and of its By-Laws and of the constituent and corporate governance
documents of each of the LDI Affiliates, as amended to date (if applicable), as
of the date of this Agreement. Such documents are complete, correct and current.
The minute books, which have been made available for the Advent Entities'
review, contain complete, correct and current records of all meetings and other
corporate actions of the stockholders and Board of Directors of each of LDI and
each of the LDI Affiliates since the date of incorporation of LDI.
3.27 Subsidiaries and Affiliates. Schedule 3.27 lists all subsidiaries
and Affiliates of each of the LDI Affiliates.
3.28 Location of Facilities. Schedule 3.28 is a complete list of all
facilities, together with the locations of such facilities, at which LDI's and
the LDI Affiliates' material assets are situated, together with a description of
the nature of such material assets at each such location.
3.29 Financial Model. LDI has prepared and delivered to the duly
authorized representative of the Advent Entities a financial model attached as
Schedule 3.29 (the "Model") projecting revenues, and operating expenses of the
Business for LDI and the LDI Affiliates. The historical financial data set forth
in the Model, and utilized in preparing the Model, are correct and complete in
all material respects.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF EACH OF THE ADVENT ENTITIES
The representations and warranties contained in this Article IV shall
expire on the second anniversary of the Closing, except that the representations
and warranties in Sections 4.1 and 4.2 shall not expire.
Each of the Advent Entities represent and warrant, severally and not
jointly, the following to LDI as of the date hereof and as of the Closing Date:
4.1 Good Standing. Each of the Advent Entities is a limited partnership
duly organized, validly existing, and in good standing under the laws of
Delaware, except that Four Seasons Venture II AS is a limited company duly
organized, validly existing, and in good standing under the laws of Norway. Each
of the Advent Entities has full authority to own, lease and operate its
properties and businesses, and is in good standing and is qualified to transact
business as a foreign limited partnership or foreign corporation in all states
in which the nature of its business or the properties owned by it require it to
qualify to transact business, except to the extent that the failure to be
qualified or be in good standing would not have a material adverse effect on the
Advent Entities.
4.2 Authority. Each of the Advent Entities has the full power and
authority to enter into, execute, deliver, and perform this Agreement and each
of the documents (the "Advent Exhibited Documents") set forth as Exhibits to
this Agreement to which it is a party. The execution, delivery and performance
of this Agreement and the Advent Exhibited Documents and the consummation of all
transactions contemplated herein and therein, have been duly authorized by all
necessary action of each of the Advent Entities. This Agreement and the Advent
Exhibited Documents, when executed and delivered by the Parties, shall be valid
and binding obligations of each of the Advent Entities, enforceable against it
in accordance with the terms hereof and thereof, subject to bankruptcy,
insolvency and other similar laws affecting the rights of creditors generally
and except that the remedies of specific performance, injunction and other forms
of mandatory equitable relief may not be available. Except as set forth in
Schedule 4.2 attached hereto, neither the execution and delivery of this
Agreement nor the execution and delivery of the Advent Exhibited Documents nor
the consummation of the transactions contemplated hereby or thereby will (i)
conflict with or violate any provision of the constituent documents of any of
the Advent Entities, (ii) conflict with or violate any law, rule, regulation,
ordinance, order, writ, injunction, judgment or decree applicable to any of the
Advent Entities, or its business, or by which any of the Advent Entities' assets
are bound or affected, or (iii) conflict with or result in any breach of or
constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination or
cancellation of, or accelerate the performance required by or maturity of, or
result in the creation of any security interest, lien, charge or encumbrance on
any of the Advent Entities' assets pursuant to any of the terms, conditions or
provisions of, any note, bond, mortgage, indenture, permit, license, franchise,
lease, contract, or other instrument or obligation to which any of the
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Advent Entities is a party or by which any of its assets are bound or affected.
Except as set forth in Schedule 4.2 attached hereto, none of the Advent Entities
is required to submit any notice, declaration, report or other filing or
registration with any governmental or regulatory authority or instrumentality
and no approvals or non-objections are required to be obtained or made by any of
the Advent Entities in connection with the execution, delivery or performance by
such Advent Entity of this Agreement and the Advent Exhibited Documents or the
consummation of the transactions contemplated hereby or thereby.
4.3 Registration. Each of the Advent Entities understands that the
Securities to be purchased by it under this Agreement have not been registered
under the Securities Act of 1933, as amended (the "Act"), in reliance upon
exemptions contained in the Act or interpretations thereof, and cannot be
offered for sale, sold or otherwise transferred unless the Securities being
acquired hereunder subsequently are offered, sold or transferred in a
transaction that is so registered or qualifies for exemption from registration
under the Act.
4.4 Own Account. Each of the Advent Entities is acquiring the
Securities under this Agreement solely for its own account, for investment and
not with a view toward resale or other distribution within the meaning of the
Act. The Securities will not be offered for sale, sold or otherwise transferred
by such Advent Entity without either registration or exemption from registration
under the Act.
4.5 Financial Matters. Each of the Advent Entities has such knowledge
and experience in financial and business matters that such Advent Entity is
capable of evaluating the merits and risks of such Advent Entity's investment in
the Securities being acquired hereunder. Each of the Advent Entities understands
and is able to bear any economic risks associated with such investment
(including, without limitation, the necessity of holding the Securities for an
indefinite period of time, inasmuch as the Securities have not been registered
under the Act).
ARTICLE V
DELIVERIES ON CLOSING DATE BY LDI
At the Closing herein defined, LDI shall deliver to the duly authorized
representative of the Advent Entities the following:
5.1 Officers Certificate. An officers certificate of Xxxxxxxx
Xxxxxxxxx, Chairman, and Xxxxx Xxxxxxxx, President, each dated the Closing Date,
certifying to the best of the knowledge and belief of each such person that each
of LDI's representations and warranties taken as a whole are true and correct in
all material respects as of the Closing Date.
5.2 Good Standing. Certificates of good standing in the state or
country of incorporation for each of the LDI Affiliates.
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5.3 Legal Opinion. A legal opinion from Loeb & Loeb LLP, counsel to
LDI.
5.4 Corporate and Third Party Authorizations. The approval for the
transactions contemplated by this Agreement from the following:
5.4.1 The Board of Directors of LDI; and
5.4.2 The shareholders of LDI.
5.5 Articles of Amendment. Evidence of the filing with the Secretary of
State of Florida of and the effectiveness of, the Articles of Amendment to
Second Restated Articles of Incorporation of LDI attached hereto as Exhibit B.
5.6 Ancillary Agreements. Shareholders Agreement in the form attached
hereto as Exhibit C duly executed by LDI and by Xxxxxxxx Xxxxxxxxx and Xxxxx
Xxxxxxxx, a Registration Rights Agreement in the form attached hereto as Exhibit
D duly executed by LDI; Warrant Certificates in the form attached hereto as
Exhibit A duly executed by LDI; and a Preemptive Rights Agreement in the form
attached hereto as Exhibit E duly executed by LDI, Xxxxxxxx Xxxxxxxxx, and Xxxxx
Xxxxxxxx.
5.7 Directors. Evidence of the election of Xxxxx Xxxxxxxx and Xxxx
Xxxxx as Advent Entities' initial representatives to LDI's Board of Directors as
directors of LDI.
5.8 Stock Option Plan. Evidence of the adoption by the Board of
Directors of the Company of the Stock Option Plan attached hereto as Exhibit F.
5.9 Committees. Evidence of the adoption by the Board of Directors of
the Company of resolutions creating an Audit Committee, an Investment Committee,
and a Compensation Committee.
5.10 Waivers of Preemptive Rights. Waivers of the preemptive rights
described in LDI's notice dated July 7, 1997, attached hereto as Exhibit G,
executed by Xxxxxxxx Xxxxxxxxx, Xxxxx Xxxxxxxx, and Island Trading Company, as
well as waivers of such rights by other shareholders holding in the aggregate at
least 19.5% of the shares of capital stock of LDI immediately before the
Closing.
5.11 Resolutions. A copy of resolutions adopted by the Board of
Directors of LDI and by the shareholders of LDI, certified by the Secretary of
LDI, authorizing or ratifying the execution and delivery of this Agreement and
the Exhibits hereto, and the performance by LDI of its obligations hereunder and
thereunder.
5.12 Undertaking. An undertaking of Xxxxxxxx Xxxxxxxxx and Xxxxx
Xxxxxxxx as directors of LDI with respect to amending the bylaws of LDI to
provide for the committees mentioned in
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Section 5.9 and to provide for the payment of directors' expenses, and not
thereafter voting in favor of any amendment to the bylaws that would eliminate
such provisions.
5.13 Waivers of Series A Rights. Waivers executed by certain of the
holders of record of any shares of the Series A Stock waiving any and all rights
(including without limitation statutory appraisal rights and contractual rights)
created by, or arising as a result of, the amendment to the Second Restated
Articles of Incorporation of LDI as contemplated by this Agreement, attached
hereto as Exhibit B.
ARTICLE VI
DELIVERIES ON CLOSING DATE BY ADVENT
At the Closing, each of the Advent Entities shall deliver to LDI the
following:
6.1 Officers Certificate. A certificate of its duly-authorized
representative dated the Closing Date, certifying to the best of the knowledge
and belief of each such person that such Advent Entity's representations and
warranties taken as a whole are true and correct in all material respects as of
the Closing Date.
6.2 Good Standing. A certificate of good standing in its state of
organization, or similar document for an entity organized outside the United
States of America.
6.3 Legal Opinion. Legal opinions from counsel to the Advent Entities.
6.4 Investment Committee Authorizations. Evidence of the approval for
the transactions contemplated by this Agreement from the Investment Committee.
6.5 Ancillary Agreements. Shareholders Agreement in the form attached
hereto as Exhibit C duly executed by each of the Advent Entities; the
Registration Rights Agreement in the form attached hereto as Exhibit D duly
executed by each of the Advent Entities; and a Preemptive Rights Agreement in
the form attached hereto as Exhibit E duly-executed by each of the Advent
Entities..
ARTICLE VII
CLOSING
The actual consummation of the transactions contemplated by this
Agreement (the "Closing") shall take place on July 28, 1997 (the "Closing
Date"), at the offices of Loeb & Loeb LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, unless otherwise agreed by the Parties.
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ARTICLE VIII
FURTHER ASSURANCES OF THE PARTIES
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LDI and each of the Advent Entities shall, as described below, each
perform the indicated tasks designated to be performed by them:
8.1 Further Assurances of LDI. LDI agrees that, from time to time and
without further consideration, it will:
8.1.1 execute and deliver such further documents and take such
other action as any of the Advent Entities may reasonably require to
implement and effectuate the transactions contemplated in this
Agreement, and
8.1.2 if the Advent Entities so request, and if mutually
agreeable terms therefor can be negotiated between the Parties acting
in good faith, loan to the Advent Entities such funds as may from time
to time be required by the Advent Entities, their affiliates, or some
of the foregoing, for the payment of U.S. income and/or U.S.
withholding taxes relating to the Securities; and
8.1.3 use reasonable efforts to cause all the present holders
of shares of LDI's capital stock to execute and become parties to the
Preemptive Rights Agreement attached hereto as Exhibit E.
8.2 Further Assurances of Advent. Each of the Advent Entities agrees
that, from time to time and without further consideration, it will execute and
deliver such further documents and take such other action as LDI may reasonably
require to implement and effectuate the transactions contemplated in this
Agreement.
ARTICLE IX
EXPENSES WITH RESPECT TO TRANSACTION
9.1 LDI's Costs. LDI will pay all fees, costs and expenses incurred by
it in connection with this transaction, including, without limitation, the fees
and expenses of its attorneys, its accountants, Societe Generale Securities
Corporation, XX Xxxxxx, LLC, ARC Limited Partners, and other persons
(collectively, "Transaction Costs"), and no portion thereof shall be paid by any
of the Advent Entities.
9.2 Advent's Costs.
9.2.1 LDI will pay all fees, costs and expenses incurred by
any of the Advent Entities in connection with this transaction
(including without limitation the reasonable fees and expenses of
attorneys, accountants and other persons) up to a maximum of $275,000
and no portion thereof shall be paid by any of the Advent Entities.
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9.2.2 The Advent Entities shall pay all fees, costs and
expenses incurred by it in connection with this transaction in excess
of the $275,000 to be paid by LDI pursuant to Section 9.2.1.
9.3 Other Costs. In addition to making the payments called for by
Section 9.2, LDI shall pay any and all fees accompanying filings required to be
made to governmental agencies in connection with the transactions contemplated
by this Agreement.
ARTICLE X
BROKERS
Each of the Parties hereby agrees to indemnify and save and hold
harmless the other Party, its shareholders, directors and officers from and
against any and all claims, losses, damages, costs or expenses of any kind or
character (including attorneys' fees) arising out of or resulting from any
agreement, arrangement or understanding alleged to have been made by such Party
with any broker or finder in connection with this Agreement or the transactions
contemplated hereby, and, if so requested by the other Party, to supply at
Closing a letter releasing the other Party from the claims of any such broker or
finder.
ARTICLE XI
INDEMNIFICATION AND RELATED MATTERS
11.1 Indemnification from LDI. From and after the Closing, LDI shall
indemnify and hold harmless each of the Advent Entities and their respective
officers, directors, employees, Affiliates, successors and permitted assigns
from all Losses (as hereinafter defined) resulting from a breach by LDI of any
of its representations, warranties, covenants or obligations under this
Agreement.
11.2 Indemnification from Advent. From and after the Closing, each of
the Advent Entities shall indemnify and hold harmless LDI and its officers,
directors, employees, Affiliates, successors and permitted assigns from all
Losses (as hereinafter defined) resulting from a breach by any of the Advent
Entities of any of their representations, warranties, covenants or obligations
under this Agreement.
11.3 Definitions.
11.3.1 As used herein, the term "Losses" means any and all
claims, demands, costs, losses, damages and liabilities, net of any
insurance proceeds received. The term "Losses" includes reasonable
attorneys' fees and costs incurred in the investigation and defense of
a claim, demand, cost, loss or liability, any Taxes (as hereinafter
defined) of LDI or any of the
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LDI Affiliates that are attributable to the Pre-Closing Tax Period (as
hereinafter defined) and that result from an Adjustment (as hereinafter
defined), and it also includes the decrease or diminution in value of
the Securities of LDI or other capital stock of LDI into which the
Securities are convertible. In the event that a claim for
indemnification shall arise under Section 11.1 or 11.7 and the breach
giving rise to such claim results in a diminution of the value of LDI's
assets, an increase in the amount of LDI's liabilities, or a payment by
LDI net of any insurance proceeds, the term "Losses" includes an amount
equal to the Final Advent Percentage of such net diminution, increase,
or payment.
11.3.2 As used herein, the term "Indemnifying Party" shall
mean the person or persons against whom a Party (the "Indemnified
Party") makes a claim for indemnification hereunder.
11.4 Certain Limitations on Losses.
11.4.1 No claim for indemnification shall be brought by any of
the Advent Entities under this Article XI until the aggregate amount of
Losses of the Advent Entities exceeds the Threshold Amount, and then
only to the extent of such excess. The "Threshold Amount" is the
quotient whose numerator is $100,000 and whose denominator is the Final
Advent Percentage expressed as a decimal. By way of example, if Section
2.4.1(a) applies, the Threshold Amount equals ($100,000 / 0.2772 =)
$360,750.36.
11.4.2 It shall be a condition to the right of an Indemnified
Party to indemnification pursuant to this Article XI for breach of a
representation or warranty that such Indemnified Party shall assert a
claim for such indemnification on or before the expiration date of such
representation or warranty, provided, however, that the foregoing shall
not be construed as requiring an Indemnified Party, before such
expiration date, to specify the full amount to which it seeks
indemnification or to specify every basis on which it claims
indemnification.
11.5 Advent Notice. The Advent Entities shall give LDI prompt notice of
any third-party claim, investigation, action, suit, hearing or proceeding with
respect to which the Advent Entities seek indemnification pursuant to Article
XI, but the failure to give such notice shall not impair any of the rights or
benefits of Advent Entities except to the extent such failure materially affects
LDI's ability to defend such claim or increases the amount of such liability. In
the case of any third-party claims as to which indemnification is sought by any
of the Advent Entities, the Advent Entities shall be entitled, at the sole
expense and liability of LDI, to exercise full control of the defense,
compromise or settlement of any third-party claim, investigation, action, suit,
hearing or proceeding, unless LDI, within a reasonable time after the giving of
such notice by the Advent Entities, shall: (i) deliver a written confirmation to
the Advent Entities that indemnification is applicable to such claim,
investigation, action, suit, hearing or proceeding and that LDI will indemnify
each of the Advent Entities in respect of such claim, investigation, action or
proceeding pursuant to the terms of this Article XI without asserting any
challenge, defense, counterclaim or offset, (ii) notify the Advent Entities in
writing of the intention of LDI to assume the defense thereof, and (iii) retain
legal
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counsel reasonably satisfactory to the Advent Entities to conduct the defense of
such claim, investigation, action, suit, hearing or proceeding. If LDI so
assumes the defense of any such claim, investigation, action, suit, hearing or
proceeding in accordance herewith, then the Advent Entities shall cooperate with
LDI in any manner reasonably requested in connection with the defense,
compromise or settlement thereof. If LDI so assumes the defense of any such
claim, investigation, action, suit, hearing or proceeding, the Advent Entities
shall have the right to employ separate counsel and to participate in (but not
control) the defense, compromise, or settlement thereof, but the fees and
expenses of such counsel employed by the Advent Entities shall be at the expense
of the Advent Entities unless (i) LDI has agreed to pay such fees and expenses,
(ii) any relief other than the payment of money damages is sought against the
Advent Entities or (iii) the named parties to any such claim, investigation,
action, suit, hearing or proceeding (including any impleaded Persons) include
any of the Advent Entities and LDI and any of the Advent Entities shall have
been advised by its counsel that there is a conflict of interest between such
Advent Entity and LDI in the conduct of the defense thereof, and in any such
case the reasonable fees and expenses of such separate counsel shall be borne by
LDI. If LDI elects to direct the defense of any such claim, investigation,
action, suit, hearing or proceeding, the Advent Entities shall not pay, or
permit to be paid, any part of any claim or demand arising from such asserted
liability unless LDI withdraws from the defense of such asserted liability, or
unless a final judgment from which no appeal may be taken by or on behalf of any
of the Advent Entities is entered against any such Advent Entity for such
liability. If LDI does not elect to defend, or if, after commencing or
undertaking any such defense, LDI fails to prosecute or withdraws from such
defense, the Advent Entities shall have the right to undertake the defense or
settlement thereof, at LDI's expense. If the Advent Entities assume the defense
of any such claim, investigation, action, suit, hearing or proceeding pursuant
to this Article XI and propose to settle the same prior to a final judgment
thereon or to forgo appeal with respect thereto, then the Advent Entities shall
give LDI prompt written notice thereof and LDI shall have the right to
participate in the settlement, assume or reassume the defense thereof or
prosecute such appeal, in each case at LDI's expense. LDI shall not, without
written consent of any of the Advent Entities, settle or compromise or consent
to entry of any judgment with respect to any such claim, investigation, action,
suit, hearing or proceeding (i) in which any relief other than the payment of
money damages is or may be sought against any of the Advent Entities or (ii)
which does not include as an unconditional term thereof the giving by the
claimant, Person conducting such investigation or initiating such hearing,
plaintiff, petitioner, cross- or counterplaintiff, or cross- or counterclaimant
to any of the Advent Entities of a release from all liability with respect to
such claim, investigation, action, suit or proceeding and all other claims or
causes of action (known or unknown) arising or which might arise out of the same
facts. The Advent Entities shall be kept fully informed concerning any matter
addressed in this Section 11.4 at all stages thereof whether or not they are
represented by their own counsel.
11.6 LDI Notice. LDI shall give the Advent Entities prompt notice of
any third-party claim, investigation, action, suit, hearing or proceeding with
respect to which LDI seeks indemnification pursuant to Article XI, but the
failure to give such notice shall not impair any of the rights or benefits of
LDI except to the extent such failure adversely affects the Advent Entities'
ability to defend such claim or increases the amount of such liability. In the
case of any third-party
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claims as to which indemnification is sought by LDI, LDI shall be entitled, at
the sole expense and liability of the Advent Entities, to exercise full control
of the defense, compromise or settlement of any third-party claim,
investigations, action, suit, hearing or proceeding unless the Advent Entities,
within a reasonable time after the giving of such notice by LDI, shall: (i)
deliver a written confirmation to LDI that the indemnification is applicable to
such claim, investigation, action, suit, hearing or proceeding and that the
Advent Entities will indemnify in respect of such claim, investigation, action
or proceeding pursuant to the terms of this Article without asserting any
challenge, defense, counterclaim or offset, (ii) notify LDI in writing of the
intention of the Advent Entities to assume the defense thereof, and (iii) retain
legal counsel reasonably satisfactory to LSI to conduct the defense of such
claim, investigation action, suit, hearing or proceeding. If the Advent Entities
so assume the defense of any such claim, investigation, action, suit, hearing or
proceeding in accordance herewith, then LDI shall cooperate with the Advent
Entities in any manner reasonably requested in connection with the defense,
compromise or settlement thereof. If the Advent Entities so assume the defense
of any such claim, investigation, action, suit, hearing or proceeding, LDI shall
have the right to employ separate counsel and to participate in (but not
control) the defense, compromise, or settlement thereof, but the fees and
expenses of such counsel employed by LDI shall be at the expense of LDI unless
(i) the Advent Entities have agreed to pay such fees and expenses, (ii) any
relief other than the payment of money damages is sought against LDI or (iii)
the named parties to any such claim, investigation, action, suit, hearing or
proceeding (including any impleaded Persons) include LDI and the Advent Entities
and LDI shall have been advised by its counsel that there is a conflict of
interest between LDI and any of the Advent Entities in the conduct of the
defense thereof, and in any such case the reasonable fees and expenses of such
separate counsel shall be borne by the Advent Entities. If the Advent Entities
elect to direct the defense of any such claim, investigation, action, suit,
hearing or proceeding, LDI shall not pay, or permit to be paid, any part of any
claim or demand arising from such asserted liability unless the Advent Entities
withdraws from the defense of such asserted liability, or unless a final
judgment from which no appeal may be taken by or on behalf of LDI is entered
against LDI for such liability. If the Advent Entities do not elect to defend,
or if, after commencing or undertaking any such defense, the Advent Entities
fail to prosecute or withdraws from such defense, LDI shall have the right to
undertake the defense or settlement thereof, at the Advent Entities' expense. If
LDI assumes the defense of any such claim, investigation, action, suit, hearing
or proceeding pursuant to this Article XI and proposes to settle the same prior
to a final judgment thereon or to forgo appeal with respect thereto, then LDI
shall give the Advent Entities prompt written notice thereof and the Advent
Entities shall have the right to participate in the settlement, assume or
reassume the defense thereof or prosecute such appeal, in each case at the
Advent Entities' expense. The Advent Entities shall not, without the written
consent of LDI, settle or compromise or consent to entry of any judgment with
respect to any such claim, investigation, action, suit, hearing or proceeding
(i) in which any relief other than the payment of money damages is or may be
sought against LDI or (ii) which does not include as an unconditional term
thereof the giving by the claimant, Person conducting such investigation or
initiating such hearing, plaintiff, petitioner, cross- or counterplaintiff, or
cross- or counterclaimant to LDI of a release from all liability with respect to
such claim, investigation, action, suit or proceeding and all other claims or
causes of action (known or unknown) arising or which might arise out of the same
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fact. LDI shall be kept fully informed concerning any matter addressed in this
Section 11.5 at all stages thereof whether or not it is represented by its own
counsel.
11.7 Tax Indemnification. Notwithstanding any other provision of this
Agreement, LDI agrees that it shall indemnify and hold each of the Advent
Entities harmless, pursuant to the terms and conditions contained in this
Article XI, for any Taxes of LDI or any of the LDI Affiliates that are
attributable to the Pre-Closing Tax Period and that result from an Adjustment.
For purposes of this Section, the following terms shall have the following
meanings:
11.7.1 "Adjustments" means an adjustment to any Tax Return as
a result of or in settlement of any audit, other administrative
proceeding or judicial proceeding or as a result of the filing of an
amended Tax Return to reflect the consequences of any determination
made in connection with any such audit or proceeding.
11.7.2 "Pre-Closing Tax Period" means taxable years or periods
ending on or before the Closing Date and, in the case of taxable years
or periods beginning before and ending after the Closing Date, the
portion of such years or periods ending at the close of business on the
Closing Date.
11.7.3 "Tax" or "Taxes" means all federal, foreign, state or
local net or gross income, gross receipts, sales, use, ad valorem,
value-added, franchise, business, withholding, "tollgate," payroll,
employment, excise, capital, property or similar taxes, assessments,
duties, fees, levies or other governmental charges together with any
interest thereon, penalties, additions to tax or additional amounts
with respect thereto and any interest in respect of such penalties,
additions or additional amounts.
11.7.4 "Tax Return" means any return, including any
informational return, pertaining to Taxes filed by or on behalf of LDI
or any of the LDI Affiliates or any related persons in their capacities
as tax payers or shareholders or recipients, holders or payers of money
or property or otherwise with any federal, foreign, state or local
taxing authority.
11.8 Rescission. In the event that, as a result of the consummation of
the transactions contemplated by this Agreement, governmental authorities in the
United Kingdom terminate or revoke either the International Facilities License
currently held by LDI Communications Limited or the International Simple Resale
License currently held by Long Distance International Limited (or both of them),
all but not less than all of the Advent Entities may rescind this Agreement and
the transactions contemplated by this Agreement and, upon tendering to LDI any
Securities received by the Advent Entities pursuant to this Agreement, require
LDI to refund to Advent the consideration paid by Advent pursuant to this
Agreement.
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ARTICLE XII
NOTICES
12.1 Notice. All notices required to be given under the terms of this
Agreement or which any of the Parties may desire to give hereunder shall be in
writing and delivered personally or sent by express delivery, or by facsimile,
or by registered or certified mail, with proof of receipt, postage and expenses
prepaid, return receipt requested, addressed as follows:
12.1.1 As to any or all of the Advent Entities, addressed to:
Advent International Corporation, 000 Xxxxxxx Xxxxxx, Xxxxxx,
Xxxxxxxxxxxxx 00000; facsimile: (617) 443- 0322, Attention: Xxxx X.
Xxxxx; with a copy thereof addressed to Xxxxx & XxXxxxxx, 000
Xxxxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000-0000; facsimile: (202)
452-7074, Attention: Xxxx X. Xxxx, Esq.; or to such other address or
addresses and to the attention of such other person or persons as the
Advent Entities may from time to time designate in writing to LDI; and
12.1.2 As to LDI, addressed to: Long Distance International
Inc., 000 X. Xxxxxxx Xxxxxx, Xxxxx 000, Xx. Xxxxxxxxxx, XX 00000,
facsimile: (000) 000-0000, Attention: Xxxxx Xxxxxxxx; with a copy
thereof addressed to Loeb & Loeb LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, XX
00000, facsimile (000) 000-0000, Attention: Xxxxx X. Xxxxxxxx, Esq.; or
to such other address or addresses and to the attention of such other
person or persons as LDI may from time to time designate in writing to
the Advent Entities.
12.2 Receipt of Notice. Any notice given in accordance with this
Article XII shall be deemed to have been given when delivered personally, or
when received if sent via express delivery, facsimile, or registered or
certified mail, postage prepaid and return receipt requested.
ARTICLE XIII
EFFECTIVENESS AND ASSIGNABILITY OF AGREEMENT
This Agreement shall become effective when executed and delivered by
the Parties hereto, and shall be binding in all respects upon the respective
successors and permitted assigns of each of the Parties hereto. No Party hereto
may assign this Agreement in whole or in part without first obtaining the
written consent of the other Party, except that the Advent Entities may assign
this Agreement to any Affiliate of any of the Advent Entities.
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ARTICLE XIV
ANNOUNCEMENT OF TRANSACTION
No Party hereto shall make a public announcement of any of the
transactions contemplated by this Agreement without approval of the other Party,
which approval shall not be unreasonably withheld or delayed, unless required by
law or by applicable stock exchange requirements, and in any event such person
shall provide notice accompanied by a copy of all proposed announcements to the
other Party.
ARTICLE XV
COMPLETENESS OF AGREEMENT
The Exhibits and Schedules hereto are incorporated into this Agreement
by reference, and in this Agreement, references to this "Agreement" include
references to the Schedules and Exhibits hereto. This Agreement and the Closing
documents represent the entire contract between the Parties with respect to the
subject matter hereof and supersede all offers, proposals, statements,
representations and agreements with respect to the subject matter hereof,
including but not limited to those letters of intent dated May 7, 1997 and May
9, 1997, as amended on June 25, 1997, and that certain Draft Summary of Terms
dated May 1, 1997. This Agreement may not be amended except in an instrument in
writing signed on behalf of each of the Parties hereto.
ARTICLE XVI
CAPTIONS
The captions to the Articles and Sections contained in this Agreement
are for reference only, do not form a substantive part of this Agreement and
shall not restrict nor enlarge any substantive provision of this Agreement.
ARTICLE XVII
APPLICABLE LAW
This Agreement, the Schedules and Exhibits, and all other documents
given in connection herewith, shall be construed in accordance with the laws of
the State of New York, without regard to the principles of conflicts of laws.
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ARTICLE XVIII
CHOICE OF FORUM; VENUE; SERVICE OF PROCESS
Any claim, suit, action, or proceeding among any or all of the Parties
hereto relating to this Agreement, to any document, instrument, or agreement
delivered pursuant hereto, referred to herein, or contemplated hereby, or in any
other manner arising out of or relating to the transactions contemplated by or
referenced in this Agreement, shall be commenced and maintained exclusively in
the United States District Court for the Southern District of New York, or, if
such Court lacks jurisdiction over the subject matter, in a state court of
competent subject-matter jurisdiction sitting in the State of New York. The
Parties hereby submit themselves unconditionally and irrevocably to the personal
jurisdiction of such courts. The Parties further agree that venue shall be
exclusively in New York County, New York. The Parties irrevocably waive any
objection to such personal jurisdiction or venue including, but not limited to,
the objection that any suit, action, or proceeding brought in the State of New
York or in New York County has been brought in an inconvenient forum. The
Parties irrevocably agree that process issuing from such courts may be served on
them, either personally or by certified mail, return receipt requested, at the
addresses given in Article XII hereof; and further irrevocably waive any
objection to service of process made in such manner and at such addresses,
including without limitation any objection that service in such manner and at
such addresses is not authorized by the local or procedural laws of the State of
New York.
ARTICLE XIX
COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of
which shall be considered an original but all of which shall constitute but one
and the same Agreement by and among the Parties.
ARTICLE XX
NO THIRD PARTY BENEFICIARY
This Agreement is intended to inure to the benefit of LDI and the
Advent Entities only; and no third Person shall have any rights, express or
implied, by reason of this Agreement.
ARTICLE XXI
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36
UNILATERAL RIGHT TO WAIVE FAILURES OF OTHER PARTIES
21.1 Waiver. Either of the Parties may:
21.1.1 Extend in writing the time for the performance of any
of the obligations herein contained to be performed for the benefit of
such Party;
21.1.2 Waive in writing any inaccuracies in the
representations and warranties made to it contained in this Agreement
or any Schedule or Exhibit hereto or any certificate or certificates
delivered by the other Party to this Agreement;
21.1.3 Waive in writing the failure in performance of any of
the conditions herein expressed for its benefit; and
21.1.4 Waive in writing compliance with any of the covenants
herein contained for its benefit.
21.2 Effect of Waiver. No such waiver or extension shall be valid
unless in writing and signed by the Party granting the waiver or extension, and
no such waiver or extension shall be construed to excuse or mitigate any
subsequent breach or violation of this Agreement not specifically covered by
such waiver.
ARTICLE XXII
SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the other provisions hereof, and the Agreement shall be
construed in all respects as if such invalid or unenforceable provisions were
omitted. Furthermore, upon the request of either Party hereto, the Parties to
this Agreement shall add, in lieu of such invalid or unenforceable provisions,
provisions as similar in terms to such invalid or unenforceable provisions as
may be possible and legal, valid and enforceable.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed as of the day and year first above written.
[Signatures begin on the next page.]
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37
GLOBAL PRIVATE EQUITY III L.P., a
Delaware limited partnership
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
GLOBAL PRIVATE EQUITY III-A L.P., a
Delaware limited partnership
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
GLOBAL PRIVATE EQUITY III-B L.P., a
Delaware limited partnership
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
38
GLOBAL PRIVATE EQUITY III-C L.P., a
Delaware limited partnership
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
ADVENT PGGM GLOBAL L.P., a Delaware
limited partnership
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
ADVENT EURO-ITALIAN DIRECT
INVESTMENT PROGRAM L.P., a Delaware
limited partnership
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
39
ADVENT GLOBAL GECC III L.P., a Delaware
limited partnership
By: Advent Global Management L.P., General
Partner
By: Advent International L.P., General Partner
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
ADVENT PARTNERS (NA) GPE III L.P., a
Delaware limited partnership
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
ADVENT PARTNERS GPE III L.P., a Delaware
limited partnership
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
40
ADVENT PARTNERS L.P., a Delaware limited
partnership
By: Advent International Corporation, General
Partner
By: _____________________________
Its: _____________________________
FOUR SEASONS VENTURE II AS, a Norwegian
limited company
By: _____________________________
Pursuant to a Power of Attorney
LONG DISTANCE INTERNATIONAL INC., a
Florida corporation
By: _____________________________
Its: _____________________________
41
SCHEDULE 4.2
ADVENT ENTITIES' CONFLICTS AND CONSENTS
(None)
