<PAGE>
AS FILED WITH THE SECURITIES EXCHANGE COMMISSION ON MAY 14, 1996
REGISTRATION NO. 0-
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(B) OR 12(G) OF
THE SECURITIES EXCHANGE ACT OF 1934
------------------------
BILLING INFORMATION CONCEPTS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 74-2781950
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9311 SAN PEDRO, SUITE 400,
SAN ANTONIO, TEXAS 78216
(Address of principal executive offices) (Zip Code)
</TABLE>
(210) 348-8188
Registrant's Telephone Number, Including Area Code
------------------------
Securities to be Registered Pursuant to Section 12(b) Of the Act:
<TABLE>
<S> <C>
Name of each exchange on which
Title of each class to be registered: each class is to be registered:
NONE NOT APPLICABLE
</TABLE>
Securities to be Registered Pursuant to Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class)
SERIES A JUNIOR PARTICIPATING
PREFERRED STOCK PURCHASE RIGHTS
(INITIALLY CARRIED AND TRADED WITH THE COMMON STOCK)
(Title of Class)
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<PAGE>
BILLING INFORMATION CONCEPTS, CORP.
CROSS REFERENCE SHEET BETWEEN INFORMATION STATEMENT
AND ITEMS OF FORM 10
ITEM 1. BUSINESS
The information required by this item is contained under "Summary";
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"; and "Business" of the Information Statement (the "Information
Statement") attached hereto as Exhibit 99.1. Those sections are incorporated
herein by reference.
ITEM 2. FINANCIAL INFORMATION
The information required by this item is contained under "Summary"; "Pro
Forma Condensed Consolidated Balance Sheet"; "Selected Historical Financial
Data"; and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" of the Information Statement. Those sections are
incorporated herein by reference.
ITEM 3. PROPERTIES
The information required by this item is contained under "Business" of the
Information Statement. That section is incorporated herein by reference.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is contained under "Security Ownership
of Certain Beneficial Owners and Management" of the Information Statement. That
section is incorporated herein by reference.
ITEM 5. DIRECTORS AND EXECUTIVE OFFICERS
The information required by this item is contained under "Management" and
"Liability and Indemnification of Officers and Directors" of the Information
Statement. Those sections are incorporated herein by reference.
ITEM 6. EXECUTIVE COMPENSATION
The information required by this item is contained under "Executive
Compensation" of the Information Statement. That section is incorporated herein
by reference.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is contained under "Summary"; "The
Distribution"; "Preliminary Transactions"; "Relationship Between Billing and
USLD After the Distribution"; "Management"; "Executive Compensation"; and
"Liability and Indemnification of Officers and Directors" of the Information
Statement. Those sections are incorporated herein by reference.
ITEM 8. LEGAL PROCEEDINGS
The information required by this item is contained under "Business" of the
Information Statement. That section is incorporated herein by reference.
ITEM 9. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
The information required by this item is contained under "Summary"; "The
Distribution"; and "Description of Capital Stock" of the Information Statement.
Those sections are incorporated herein by reference.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
The only securities of Billing Information Concepts Corp. ("Billing") that
are outstanding were issued to U.S. Long Distance Corp. ("USLD") in connection
with the organization of Billing and the Preliminary Transactions in reliance
upon the exemption from registration set forth in Section 4(2) of the Securities
Act of 1933, as amended. Certain information required by this item is contained
under "Preliminary Transactions."
R-2
<PAGE>
ITEM 11. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The information required by this item is contained under "Description of
Capital Stock" and "Purposes and Anti-Takeover Effects of Certain Provisions of
Billing's Certificate and Bylaws and Delaware Law" of the Information Statement.
Those sections are incorporated herein by reference.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The information required by this item is contained under "Liability and
Indemnification of Officers and Directors" of the Information Statement. That
section is incorporated herein by reference.
ITEM 13. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained under "Summary"; "Pro
Forma Condensed Consolidated Balance Sheet"; "Selected Historical Financial
Data"; "Management's Discussion and Analysis of Financial Condition and Results
of Operations"; and "Index to Financial Statements" of the Information
Statement. Those sections are incorporated herein by reference.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The information required by this item is not applicable.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) See "Index to Financial Statements" on page F-1 of the Information
Statement
(1) Financial Statement Schedules:
None
(b) Exhibits
(1) See "Index to Exhibits" on page R-6 of this Form 10
R-3
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized.
BILLING INFORMATION CONCEPTS CORP.
(Registrant)
By: /s/ ALAN W. SALTZMAN
-----------------------------------
Alan W. Saltzman, President
Date: May 13, 1996
R-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
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<S> <C> <C> <C>
3.1 -- Form of Amended and Restated Certificate of Incorporation of Billing (filed herewith)
3.2 -- Form of Bylaws of Billing (filed herewith)
4.1 -- Form of Stock Certificate of Common Stock (See also Exhibits 3.1 and 3.2)*
8.1 -- Form of the Tax Opinion of Arter & Hadden (filed herewith)
10.1 -- Form of Distribution Agreement between USLD and Billing (filed herewith)
10.2 -- Form of Tax Sharing Agreement between USLD and Billing (filed herewith)
10.3 -- Form of Benefit Plans and Employment Matters Allocation Agreement between USLD and
Billing (filed herewith)
10.4 -- Form of Transitional Services and Sublease Agreement between USLD and Billing*
10.5 -- Form of Zero Plus -- Zero Minus Billing and Information Management Services Agreement
between USLD and Billing (filed herewith)
10.6 -- Form of Expense Sharing Agreement between USLD and Billing*
10.7 -- Form of Telecommunications Agreement between USLD and Billing (filed herewith)
10.8 -- Form of Billing's 1996 Employee Comprehensive Stock Plan (filed herewith)
10.9 -- Form of Billing's 1996 Non-Employee Director Plan (filed herewith)
10.10 -- Form of Billing's 1996 Employee Stock Purchase Plan (filed herewith)
10.11 -- Form of Billing's 401(k) Retirement Plan*
10.12 -- Form of Billing's Executive Compensation Deferral Plan (filed herewith)
10.13 -- Form of Billing's Director Compensation Deferral Plan (filed herewith)
10.14 -- Form of Billing's Executive Qualified Disability Plan (filed herewith)
10.15 -- Form of Employment Agreement to be entered into between Billing and Parris H. Holmes,
Jr.*
10.16 -- Form of Employment Agreement to be entered into between Billing and Alan W. Saltzman*
10.17 -- Form of Employment Agreement to be entered into between Billing and Kelly E. Simmons*
10.18 -- Amended and Restated Loan and Security Agreement dated May 22, 1991 between Zero Plus
Dialing Inc. ("ZPDI"), U.S. Long Distance, Inc. ("USLDI"), U.S. Long Distance Corp.
("USLD") and Bell Atlantic Capital Corp. (f/k/a Bell Atlantic -- Tricon Leasing
Corporation and currently FINOVA Capital Corporation) ("Lender"); Revolving Credit Note
dated May 24, 1991 payable by ZPDI to the order of Lender; Replacement Term Note dated
May 24, 1991 payable by USLDI to the order of Lender; First Amendment and Joinder to
Amended and Restated Loan and Security Agreement dated December 28, 1992 among ZPDI,
USLD, USLDI, U.S. Billing, Inc. ("USBI") and Lender; Second Amendment to Amended and
Restated Loan and Security Agreement dated April 2, 1993 among ZPDI, USLD, USLDI, USBI
and Lender; Third Amendment to Amended and Restated Loan and Security Agreement dated
October 15, 1993 among ZPDI, USLD, USLDI, USBI and Lender; Fourth Amendment and Joinder
to
</TABLE>
R-5
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF EXHIBITS PAGE
- - ---------- --------------------------------------------------------------------------------------- ---------------
Amended and Restated Loan and Security Agreement dated October 1, 1993 among ZPDI,
USLD, USLDI, USBI, USLD Acquisition Corp. ("USAcq") and Lender; Fifth Amendment and
Joinder to Amended and Restated Loan and Security Agreement dated November 16, 1993
among ZPDI, USLD, USLDI, USBI, USAcq, STS Telecommunications, Inc. ("STS") and Lender;
Sixth Amendment to Amended and Restated Loan and Security Agreement dated December 7,
1993 among ZPDI, USLD, USLDI, USBI, USAcq, STS and Lender; Seventh Amendment to Amended
and Restated Loan and Security Agreement dated March 17, 1994 among ZPDI, USLD, USLDI,
USBI, USAcq, STS, Enhanced Services Billing, Inc. ("ESBI"), California Acquisition
Corp. ("CAC") and Lender; Corporate Guaranty dated May 24, 1991 executed by USLD for
the benefit of Lender; Corporate Guaranty dated May 24, 1991 executed by USLDI for the
benefit of Lender; Corporate Guaranty dated May 24, 1991 executed by ZPDI for the
benefit of Lender; Corporate Guaranty dated May 24, 1991 executed by USLD for the
benefit of Lender; Corporate Guaranty dated October 1993 executed by USAcq for the
benefit of Lender; Corporate Guaranty dated November 1993 executed by STS for the
benefit of Lender; Corporate Guaranty executed by Telecom Acquisition Corp. for the
benefit of Lender; Corporate Guaranty executed by ESBI for the benefit of Lender;
Corporate Guaranty executed by CAC for the benefit of Lender; Escrow and Disbursing
Agreement dated May 24, 1991 among ZPDI, Lender and Texas Commerce Bank, N.A. (filed
herewith)
<S> <C> <C> <C>
21.1 -- List of Subsidiaries (filed herewith)
23.1 -- Consent of Arter & Hadden (to be included in their opinion to be filed as Exhibit 8.1)
27.1 -- Financial Data Schedule (filed herewith)
99.1 -- Schedule 14C Information Statement of U.S. Long Distance Corp. (filed herewith)
</TABLE>
- - ------------------------
* To be filed by amendment
R-6
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BILLING INFORMATION CONCEPTS CORP.
This document constitutes an amendment and restatement of the original
Certificate of Incorporation of BILLING INFORMATION CONCEPTS CORP. which was
filed with the Secretary of State of Delaware on April 26, 1996. This Amended
and Restated Certificate of Incorporation was duly adopted in accordance with
the provisions of Section 245(c) of the Delaware General Corporation Law and
shall become effective at midnight on ________________, 1996.
ARTICLE I.
NAME
The name of the corporation (the "corporation") is BILLING INFORMATION
CONCEPTS CORP.
ARTICLE II.
ADDRESS OF REGISTERED OFFICE, NAME OF REGISTERED AGENT
The address, including street, number, city and county, of the
registered office of the corporation in the State of Delaware is One Rodney
Square, 10th Floor, Tenth and King Streets, in the City of Wilmington, County of
New Castle 19801; and the name of the registered agent of the corporation in the
State of Delaware at such address is RL&F Service Corp.
ARTICLE III.
PURPOSE AND POWERS
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law. It shall have all powers that may now or hereafter be
lawful for a corporation to exercise under the Delaware General Corporation Law.
ARTICLE IV.
CAPITAL STOCK
4.1 TOTAL NUMBER OF SHARES OF STOCK. The total number of shares of
all classes of stock which the corporation shall have authority to issue is
seventy million (70,000,000). Of such shares, (i) sixty million (60,000,000)
shall be common stock, par value $0.01 per share ("Common Stock"), and (ii) ten
million (10,000,000) shall be preferred stock, par value $0.01 per share
("Preferred Stock").
<PAGE>
4.2 PREFERRED STOCK. Preferred Stock may be issued in one or more
series. To the fullest extent permitted by law, the board of directors shall
have the authority, by resolution, to create and issue such series of Preferred
Stock and to fix with respect to any such series the number of shares of
Preferred Stock comprising such series and the powers, designations, preferences
and rights (and the qualifications, limitations and restrictions thereof) of the
shares, of such series including, without limitation, the following:
(a) the number of shares constituting that series and the
distinctive designation of that series;
(b) the dividend rate of the shares of that series, whether
dividends shall be cumulative, and, if so, from which date or dates, and
the relative rights of priority, if any, of payment of dividends on shares
of that series;
(c) whether that series shall have voting rights, in addition to
the voting rights provided by law, and, if so, the terms of such voting
rights;
(d) whether that series shall have conversion privileges, and, if
so, the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the board of directors
shall determine;
(e) whether or not the shares of such series shall be redeemable,
and, if so, the terms and conditions of such redemptions, including the
date or dates upon or after which they shall be redeemable, and the amount
per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(f) whether that series shall have a sinking fund for the
redemption or purchase of shares of that series, and, if so, the terms and
amount of such sinking fund;
(g) the rights of the shares of that series in the event of
voluntary liquidation, dissolution or winding up of the corporation, and
relative rights of priority, if any, of payments of such shares of that
series; and
(h) any other relative rights, preferences and limitations of
that series.
4.3 DESIGNATION OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK.
There is hereby established from among the Preferred Stock authorized above
Series A Junior Participating Preferred Stock ("Series A Preferred Stock"). The
designation and number of shares, and the relative rights, preferences and
limitations of the Series A Preferred Stock is as follows:
(a) DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock") and the
number of shares constituting the Series A Preferred Stock shall be 5,000.
Such number of shares may be increased or decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of
shares of Series A Preferred Stock to a number less than the number of
shares then outstanding plus the number of shares reserved for issuance
upon the exercise of outstanding options, rights or warrants or upon the
conversion of any outstanding securities issued by the corporation
convertible into Series A Preferred Stock.
2
<PAGE>
(b) DIVIDENDS AND DISTRIBUTIONS.
(i) Subject to the rights of the holders of any shares
of any other series of Preferred Stock (or any similar stock) of the
corporation, the holders of shares of Series A Preferred Stock, in
preference to the holders of Common Stock of the corporation, and of
any other junior stock, shall be entitled to receive, when, as and
if declared by the Board of Directors out of funds legally available
for the purpose, cumulative preferential dividends, payable in cash
on the first day of January, April, July and October in each year
(each such date, a "Quarterly Dividend Payment Date"), commencing on
the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Preferred Stock, at a
rate per annum (rounded to the nearest cent) equal to the greater of
(a) $1.00 per share, or (b) subject to the provision for adjustment
hereinafter set forth, 10,000 times the aggregate per share amount
of all cash dividends, and 10,000 times the aggregate per share
amount (payable in kind) of all noncash dividends or other
distributions (other than a dividend payable in shares of Common
Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise)), declared on the Common Stock during
the immediately preceding fiscal year. In the event the corporation
shall at any time after ________, 1996 declare or pay any dividend
on the Common Stock payable in shares of Common Stock, or effect a
subdivision (by reclassification or otherwise than by payment of a
dividend in shares of Common Stock) or combination or consolidation
of the outstanding shares of Common Stock into a greater or lesser
number of shares of Common Stock, then in each such case the amount
to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of the preceding
sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(ii) Dividends shall begin to accrue and be cumulative
on outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issuance of such
shares, unless the date of issue of such shares is prior to the
record date for the first Quarterly Dividend Payment Date, in which
case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for
determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends
shall begin to accrue and be cumulative from such Quarterly Dividend
Payment Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an
amount less than the total amount of such dividends at the time
accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination
of holders of shares of Series A Preferred Stock entitled to receive
payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the
payment thereof.
3
<PAGE>
(c) VOTING RIGHTS.
The holders of shares of Series A Preferred Stock shall have the
following voting rights:
(i) Each share of Series A Preferred Stock shall
entitle the holder thereof to 10,000 votes on all matters
submitted to a vote of the stockholders of the corporation.
In the event the corporation shall at any time after
___________, 1996 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a
subdivision (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) or combination or
consolidation of the outstanding shares of Common Stock into a
greater or lesser number of shares of Common Stock, then in
each such case the number of votes to which holders of shares
of Series A Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a
fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(ii) Except as otherwise provided herein, in any other
Certificate of Designation, Preferences and Rights in respect
of a series of preferred stock (or any similar stock) of the
corporation, in the Amended and Restated Certificate of
Incorporation of the corporation, or by law, the holders of
shares of Series A Preferred Stock and the holders of shares
of Common Stock and any other capital stock of the corporation
having general voting rights shall vote together as one class
on all matters submitted to a vote of stockholders of the
corporation.
(iii) Except as set forth herein, in the Amended and
Restated Certificate of Incorporation of the corporation or as
otherwise provided by law, holders of Series A Preferred Stock
shall have no special voting rights and their consent shall
not be required (except to the extent they are entitled to
vote with holders of Common Stock as set forth herein) for
taking any corporate action.
(d) CERTAIN RESTRICTIONS.
(i) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as
provided in Section 4.3(b) are in arrears, thereafter and
until all accrued and unpaid dividends and distributions,
whether or not declared, on shares of Series A Preferred Stock
outstanding shall have been paid in full, the corporation
shall not:
(1) declare or pay dividends, or make any other
distributions, on any shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Preferred Stock;
4
<PAGE>
(2) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a
parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A
Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares
are then entitled;
(3) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either
as to dividends or upon liquidation, dissolution or
winding up) to the Series A Preferred Stock, provided
that the corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the corporation
ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) to the Series A
Preferred Stock; or
(4) purchase or otherwise acquire for
consideration any shares of Series A Preferred Stock, or
any shares of stock ranking on a parity with the Series
A Preferred Stock, except in accordance with a purchase
offer made in writing or by publication (as determined
by the Board of Directors) to all holders of such shares
upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates
and other relative rights and preferences of the
respective series and classes, shall determine in good
faith will result in fair and equitable treatment among
the respective series or classes.
(ii) The corporation shall not permit any subsidiary of
the corporation to purchase or otherwise acquire for
consideration any shares of stock of the corporation unless
the corporation could, under paragraph (e) of this Section
4.3, purchase or otherwise acquire such shares at such time
and in such manner.
(e) REACQUIRED SHARES.
Any shares of Series A Preferred Stock redeemed, purchased or
otherwise acquired by the corporation in any manner whatsoever shall be
retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares
of Preferred Stock without designation as to series and may be reissued as
part of a new series of Preferred Stock subject to the conditions and
restrictions on issuance set forth herein, in the Amended and Restated
Certificate of Incorporation, or in any other Certificate of Designation,
Preferences and Rights in respect of a series of preferred stock (or any
similar stock) of the corporation, or as otherwise required by law.
5
<PAGE>
(f) LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the corporation,
no distribution shall be made to (1) the holders of shares of Common Stock
or any other stock ranking junior to the Series A Preferred Stock upon
liquidation, distribution or winding up, unless, prior thereto, the
holders of shares of Series A Preferred Stock shall have received $1.00
per share, plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of such
payment; provided that the holders of shares of Series A Preferred Stock
shall be entitled to receive an aggregate amount per share, subject to the
provision for adjustment hereinafter set forth, equal to 10,000 times the
aggregate amount to be distributed per share to holders of shares of
Common Stock, or (2) to the holders of shares of stock ranking on a parity
with the Series A Preferred Stock upon liquidation, dissolution or winding
up, except distributions made ratably on the Series A Preferred Stock and
all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution
or winding up. In the event the corporation shall at any time after
________, 1996 declare or pay any dividend on the Common Stock payable in
shares of Common Stock, or effect a subdivision (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) or
combination or consolidation of the outstanding shares of Common Stock
into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the
proviso in clause (1) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such event
and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(g) CONSOLIDATION, MERGER, ETC.
In the event the corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common
Stock are exchanged for or converted or changed into other stock or
securities, cash and/or any other property, then in any such event proper
provision shall be made so that each share of Series A Preferred Stock
shall at the same time be similarly exchanged for or converted or changed
into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 10,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as
the case may be, for which or into which each share of Common Stock is
exchanged for or converted or changed. In the event the corporation shall
at any time after ________, 1996 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) or combination or consolidation of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock,
then in each such event the amount set forth in the preceding sentence
with respect to the exchange or conversion or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately
prior to such event.
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<PAGE>
(h) NO REDEMPTION.
Shares of the Series A Preferred Stock shall not be redeemable.
(i) AMENDMENT.
This Section 4.3 shall not be amended in any manner that would
materially alter or change the powers, preferences or special rights of
the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series A Preferred Stock, voting together as a single class.
4.4 COMMON STOCK. The shares of Common Stock of the corporation shall
be identical in all respects and shall have equal rights and privileges. The
holders of Common Stock shall have one vote per share of Common Stock on all
matters on which holders of Common Stock are entitled to vote.
4.5 NO PREEMPTIVE RIGHTS. No holder of stock of any class of the
corporation, whether now or hereafter authorized or issued, shall be entitled as
such, as a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class whatsoever, or of any securities
convertible into stock of any class, or any character or to which are attached
or with which are issued warrants or rights to purchase any such stock, whether
now or hereafter authorized, issued or sold, or whether issued for money,
property or services, or by way of dividend or otherwise, or any right or
subscription to any thereof, other than such, if any, as the board of directors
in its direction may from time to time fix, pursuant to authority hereby
conferred upon it; and any shares of stock or convertible obligations with
warrants or rights to purchase any such stock, which the board of directors may
determine to offer for subscription, may be sold without being first offered to
any of the holders of the stock of the corporation of any class or classes or
may, as such board of directors shall determine, be offered to holders of any
class or classes of stock exclusively or to the holders of all classes of stock,
and if offered to more than one class of stock, in such proportions as between
such classes of stock as the board of directors, in its discretion, may
determine.
ARTICLE V.
PLACE OF BOOKS AND RECORDS;
STOCKHOLDER INSPECTION RIGHTS
5.1 PLACE OF BOOKS AND RECORDS. The stockholders and directors shall
have power to hold their meetings and keep the books, documents and papers of
the corporation outside the State of Delaware, at such places as may be from
time to time designated by the Bylaws or by resolution of the stockholders or
directors.
5.2 STOCKHOLDER INSPECTION RIGHTS. The Bylaws shall determine whether
and to what extent the accounts and books of this corporation, or any of them,
shall be open to the inspection of the stockholders; and no stockholder shall
have any right of inspecting any account, book, or document of this corporation,
except as conferred by law or the Bylaws, or by resolution of the stockholders
or directors.
7
<PAGE>
ARTICLE VI.
EXISTENCE
The corporation is to have perpetual existence.
ARTICLE VII.
LIMITED LIABILITY OF SHAREHOLDERS
The private property of the stockholders shall not be subject to the
payment of the corporate debts to any extent whatsoever.
ARTICLE VIII.
BOARD OF DIRECTORS
8.1 NUMBER OF DIRECTORS. Except as otherwise fixed by or pursuant to
the provisions of Article IV hereof relating to the rights of the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, the number of the directors of the corporation shall be fixed
from time to time by or pursuant to the Bylaws of the corporation.
8.2 CLASSIFIED BOARD OF DIRECTORS. The directors, other than those who
may be elected by the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, shall be
classified, with respect to the time for which they severally hold office, into
three classes, as nearly equal in number as possible, as shall be provided in
the manner specified in the Bylaws of the corporation, one class to be
originally elected for a term expiring at the annual meeting of stockholders to
be held in 1997, another class to be originally elected for a term expiring at
the annual meeting of stockholders to be held in 1998, and another class to be
originally elected for a term expiring at the annual meeting of stockholders in
1999, with each class to hold office until its successor is elected and
qualified. At each annual meeting of the stockholders of the corporation, the
successors of the class of directors whose term expires at that meeting shall be
elected to hold office for a term expiring at the annual meeting of stockholders
held in the third year following the year of their election.
8.3 ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS. Advance notice of
stockholder nominations for the election of directors shall be given in the
manner provided in the Bylaws of the corporation.
8.4 INCREASE IN NUMBER OF DIRECTORS; VACANCIES. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article IV hereof
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, newly created directorships resulting
from any increase in the number of directors and any vacancies on the board of
directors resulting from death, resignation, disqualification, removal or other
cause shall be filled by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the board of
directors. Any directors elected in accordance with the preceding sentence
shall hold office for the remainder of the full term of the class of directors
in which the new directorship was created or the vacancy occurred and until such
director's successor shall have been elected and qualified. No decrease in the
number of directors constituting the board of directors shall shorten the term
of any incumbent director.
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8.5 REMOVAL OF DIRECTORS. Subject to the rights of any class or series
of stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified circumstances, any director may
be removed from office, with or without cause and only by the affirmative vote
of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class.
8.6 AMENDMENT OF ARTICLE VIII. Notwithstanding anything contained in
this Amended and Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
voting (66 2/3%) of the voting power of all the shares of the corporation
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or adopt any provisions inconsistent with or repeal
this Article VIII.
8.7 WRITTEN BALLOTS. Election of directors need not be by written
ballot unless the Bylaws of the corporation shall so provide.
ARTICLE IX.
COMPROMISE
Whenever a compromise or arrangement is proposed between this
corporation or its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of the Delaware General Corporation Law or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 of the Delaware General
Corporation Law, order a meeting of the creditors or class of creditors, and/or
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing seventy five percent (75%) in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agrees to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ARTICLE X.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
The corporation may enter into contracts or transact business with one
or more of its officers or directors, or with any firms of which one or more of
its directors is a member, or may invest its funds in the securities of and may
enter into contracts, or transact business with any corporation or association
in which any one or more of its officers or directors is a stockholder, officer
or director, and in the absence of bad faith, or unfair dealing, such contract
or transaction or investment shall not be invalidated or to any extent affected
by the fact that any such officer or officers or any such director or directors
has or may have interests that are or might be adverse to the interests of the
corporation, provided that the remaining directors are sufficient in number to
ratify and approve the transaction.
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ARTICLE XI.
INDEMNIFICATION
Every director, officer or employee of the corporation shall be
indemnified by the corporation against all expenses and liabilities, including
counsel fees, reasonably incurred by or imposed upon him in connection with any
proceeding to which he may be made a party, or in which he may become involved,
by reason of his being or having been a director, officer or employee of the
corporation, or any settlement thereof, whether or not he is a director, officer
or employee at the time such expenses are incurred or liability incurred, except
in such cases where the director, officer or employee is adjudged guilty of
willful misfeasance or malfeasance in the performance of his duties; provided
that in the event of a settlement the indemnification herein shall apply only
when the board of directors approves such settlement and reimbursement as being
for the best interests of the corporation. The foregoing right of
indemnification shall be in addition to and not exclusive of all other rights to
which such director, officer or employee may be entitled.
ARTICLE XII.
REQUIRED VOTE FOR CERTAIN TRANSACTIONS
The affirmative vote of the holders of shares representing not less than
sixty-six and two-thirds percent (66 2/3%) of the voting power of the
corporation shall be required for the approval of any proposal for the
corporation to reorganize, merge, or consolidate with any other corporation,
or sell, lease, or exchange substantially all of its assets or business. The
amendment, alteration or repeal of this Article XII, or any portion hereof,
shall require the approval of the holders of shares representing at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of the
corporation.
ARTICLE XIII.
LIMITATION ON STOCKHOLDER ACTION BY WRITTEN CONSENT
Notwithstanding the provisions of Article XII, any action required or
permitted to be taken by the stockholders of the corporation must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing by such holders, except that an amendment to this
Certificate of Incorporation in order to change the name of the corporation may
be approved without a meeting, by consent in writing of the holders of the
outstanding stock of the corporation having not less than the minimum number of
votes that would be necessary to approve such amendment at a meeting at which
all shares entitled to vote thereon were present and voted pursuant to the
provisions of Section 228 of the Delaware General Corporation Law. Except as
otherwise required by law and subject to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, special meetings of stockholders of the corporation may be
called only by the board of directors pursuant to a resolution approved by a
majority of the entire board of directors. Notwithstanding anything contained
in this Amended and Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
entitled to vote (66 2/3%) of the voting power of all the shares of the
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or adopt any provision inconsistent with or repeal
this Article XIII.
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ARTICLE XIV.
AMENDMENTS
14.1 CERTIFICATE OF INCORPORATION.This corporation reserves the right to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or hereafter set forth
herein or, in the absence of specific provision herein, in the manner prescribed
in the statutes of the State of Delaware, and all rights conferred on officers,
directors and stockholders herein are granted subject to this reservation.
14.2 AMENDMENT OF BYLAWS. The board of directors shall have power to
make, alter, amend and repeal the Bylaws of the corporation (except insofar as
the Bylaws of the corporation adopted by the stockholders shall otherwise
provide). Any Bylaws made by the directors under the powers conferred hereby
may be altered, amended or repealed by the directors or by the stockholders.
Notwithstanding the foregoing and anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend or adopt any provision inconsistent with or repeal this Article
XIV.
ARTICLE XV.
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director;
provided, however, that the foregoing shall not eliminate or limit the liability
of a director (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended hereafter to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any amendment, repeal or modification of this Article XV shall not adversely
affect any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to such amendment,
repeal or modification.
ARTICLE XVI.
SEVERABILITY
In the event that any of the provisions of this Amended and Restated
Certificate of Incorporation (including any provision within a single section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are severable
and shall remain enforceable to the full extent permitted by law.
THE UNDERSIGNED, being the Chairman of the Board of Directors of the
corporation, for the purpose of amending and restating the Certificate of
Incorporation of the corporation pursuant to the Delaware General Corporation
Law, does make this Certificate, hereby declaring and certifying that this
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is the act and deed of the corporation and that the facts herein stated are
true, and accordingly have hereunto set my hand as of this ___________ day of
_____________, 1996.
----------------------------------------
Parris H. Holmes, Jr., Chairman
ATTEST:
----------------------------------------
, Secretary
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BYLAWS
OF
BILLING INFORMATION CONCEPTS CORP.
(a Delaware corporation)
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>
BYLAWS
OF
BILLING INFORMATION CONCEPTS CORP.
(a Delaware Corporation)
__________________________________
ARTICLE I.
OFFICES
1.1 The registered office shall be in the City of Wilmington, County of
New Castle, State of Delaware.
1.2 The Corporation may also have offices at such other places both
within and without the State of Delaware as the board of directors may from time
to time determine or the business of the Corporation may require.
ARTICLE II.
STOCKHOLDER MEETINGS
2.1 The annual meeting shall be held on the date and at the time fixed,
from time to time, by the directors, provided, that the first annual meeting
shall be held on a date within thirteen months after the organization of the
Corporation, and each successive annual meeting shall be held on a date within
thirteen months after the date of the preceding annual meeting. A special
meeting shall be held on the date and at the time fixed by the directors.
2.2 All meetings of the stockholders for the election of directors shall
be held at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meetings or in a duly executed waiver of notice thereof.
2.3 Annual meetings may be called by the directors or by any officer
instructed by the directors to call the meeting. Special meetings may be called
only as provided by Section 10.1 of Article X of these Bylaws.
2.4 Written notice of all meetings shall be given, stating the place,
date and hour of the meeting and stating the place within the city or other
municipality or community at which the list of stockholders of the Corporation
may be examined. The notice of an annual meeting shall state that the meeting
is called for the election of directors and for the transaction of other
business that may properly come before the meeting, and shall (if any other
action which could be taken at a special meeting is to be taken at such annual
meeting) state the purpose or
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purposes. The notice of a special meeting shall in all instances state the
purpose or purposes for which the meeting is called. The notice of any meeting
shall also include, or be accompanied by, any additional statements,
information, or documents prescribed by the Delaware General Corporation Law.
Except as otherwise provided by the Delaware General Corporation Law, a copy of
the notice of any meeting shall be given, personally or by mail, not less than
ten days nor more than sixty days before the date of the meeting, unless the
lapse of the prescribed period of time shall have been waived, and directed to
each stockholder at his record address or at such other address that he may have
furnished by request in writing to the Secretary of the Corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice need not be given to
any stockholder who submits a written waiver signed by him or her before or
after the time stated therein. Attendance of a stockholder at a meeting of
stockholders shall constitute a waiver of notice of such meeting, except when
the stockholder attends the meeting for the express purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the meeting
is not lawfully called or convened. Neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the stockholders need be
specified in any written waiver of notice.
2.5 Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
2.6 The officer who has charge of the stock ledger of the Corporation
shall prepare and make, at least ten days before every meeting of stockholders,
a complete list of the stockholders, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city or other municipality or community where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
Corporation, or to vote at any meeting of stockholders.
2.7 Meetings of the stockholders shall be presided over by one of the
following officers in the order of seniority and if present and acting - the
Chairperson of the Board, if any, the Vice-Chairperson of the Board, if any, the
Chief Executive Officer, the President, a Vice-President, or, if none of the
foregoing is in office and present and acting, by a chairperson to be chosen by
the stockholders. The Secretary of the Corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the chairperson of the meeting
shall appoint a secretary of the meeting.
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2.8 Every stockholder may authorize another person or persons to act for
him by proxy in all matters in which a stockholder is entitled to participate,
whether by waiving notice of any meeting, voting or participating at a meeting,
or expressing consent or dissent without a meeting. Every proxy must be signed
by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted
upon after three years from its date unless such proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it means that it is
irrevocable and, if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
2.9 The directors, in advance of any meeting, may, but need not, appoint
one or more inspectors of election to act at the meeting or any adjournment
thereof. If an inspector or inspectors are not appointed, the person presiding
at the meeting may, but need not, appoint one or more inspectors. In case any
person who may be appointed as an inspector fails to appear or act, the vacancy
may be filled by appointment made by the directors in advance of the meeting or
at the meeting by the person presiding thereat. Each inspector, if any, before
entering upon the discharge of his duties, shall take and sign an oath
faithfully to execute the duties of inspectors at such meeting with strict
impartiality and according to the best of his ability. The inspectors, if any,
shall determine the number of shares of stock outstanding and the voting power
of each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots or
consents, hear and determine all challenges and questions arising in connection
with the right to vote, count and tabulate all votes, ballots or consents,
determine the result, and do such acts as are proper to conduct the election or
vote with fairness to all stockholders. On request of the person presiding at
the meeting, the inspector or inspectors, if any, shall make a report in writing
of any challenge, question or matter determined by him, her or them and execute
a certificate of any fact so found.
2.10 The holders of a majority of the outstanding shares of stock
entitled to vote at the meeting, present in person or represented by proxy,
shall constitute a quorum at a meeting of stockholders for the transaction of
any business. The stockholders present may adjourn the meeting despite the
absence of a quorum.
2.11 When a quorum is present at any meeting, the vote of the holders of
a majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the statutes or of the Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
ARTICLE III.
DIRECTORS
3.1 The business of the Corporation shall be managed by its board of
directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are
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not by statute or by the Certificate of Incorporation or by these Bylaws
directed or required to be exercised or done by the stockholders. The use of
the phrase "whole board of directors" herein refers to the total number of
directors that the Corporation would have if there were no vacancies.
3.2 A director need not be stockholder, a citizen of the United States,
or a resident of the State of Delaware. Except as otherwise fixed by or
pursuant to the provisions of Article IV of the Certificate of Incorporation
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
additional directors under specified circumstances, the number of the directors
of the Corporation shall be fixed from time to time by the board of directors,
but shall not be less than three.
The directors, other than those who may be elected by the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as determined by the board of directors of the Corporation, one
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1997, another class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in 1998, and
another class to be originally elected for a term expiring at the annual meeting
of stockholders to be held in 1999, with each class to hold office until its
successors is elected and qualified. At each annual meeting of the stockholders
of the Corporation, the successors of the class of directors whose term expires
at that meeting shall be elected to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election. Advance notice of stockholder nominations for the election of
directors shall be given in the manner provided in Section 3.13 of this Article
III of these Bylaws.
3.3 Except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to elect directors under
specified circumstances, newly created directorships resulting from any increase
in the number of directors and any vacancies on the board of directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the board of directors. Any directors
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of directors constituting the board of directors shall shorten the term of any
incumbent director. Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation to
elect directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of all the
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
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3.4 The board of directors shall choose from among the directors a
Chairperson of the Board and a Vice-Chairperson of the Board. Unless otherwise
provided in the resolution choosing him or her, the Chairperson of the Board and
the Vice-Chairperson of the Board shall be chosen for a term that shall continue
until the meeting of the board of directors following the next annual meeting of
stockholders and until his or her successor shall have been chosen and
qualified.
THE CHAIRPERSON OF THE BOARD
3.5 The Chairperson of the Board shall preside at all meetings of
stockholders and directors.
THE VICE-CHAIRPERSON OF THE BOARD
3.6 The Vice-Chairperson of the Board shall preside at meetings of
stockholders and directors if the Chairperson of the Board is absent or unable
to serve as chairperson at any such meeting.
MEETINGS OF DIRECTORS
3.7 Meetings shall be held at such time as the board of directors shall
fix, except that the first meeting of a newly elected board of directors shall
be held as soon after its election as the directors may conveniently assemble.
3.8 Meetings shall be held at such place within or without the State of
Delaware as shall be fixed by the board of directors.
3.9 No call shall be required for regular meetings for which the time
and place have been fixed. Special meetings may be called by or at the
direction of the Chairperson of the Board, if any, the Vice-Chairman of the
Board, if any, of the President, or of the Secretary on the written request of
any two directors. Notice thereof stating the place, date and hour of the
meeting shall be given to each director either by mail not less than forty-eight
(48) hours before the date of the meeting, by telephone or telegraph not less
than twenty-four (24) hours notice before the date of the meeting, or on such
shorter notice as the person or persons calling such meeting may deem necessary
or appropriate in the circumstances.
3.10 No notice shall be required for regular meetings for which the time
and place have been fixed. Notice need not be given to any director or to any
member of a committee of directors who submits a written waiver of notice signed
by him before or after the time stated therein. Attendance of any such person
at a meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
notice or written waiver of notice.
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3.11 A majority of the whole board of directors shall constitute a quorum
except when a vacancy or vacancies prevents such majority, whereupon a majority
of the directors in office shall constitute a quorum, provided, that such
majority shall constitute at least one third of the whole board of directors. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as otherwise specifically
provided herein or in the Certificate of Incorporation, and except as otherwise
provided by the Delaware General Corporation Law, the vote of the majority of
the directors present at a meeting at which a quorum is present shall be the act
of the board of directors. The quorum and voting provisions herein stated shall
not be construed as conflicting with any provisions of the Delaware General
Corporation Law or these Bylaws which govern a meeting of directors held to fill
vacancies and newly created directorships in the board of directors or action of
disinterested directors.
Any member or members of the board of directors, or of any committee
designated by the board of directors, may participate in a meeting of the board
of directors, or any such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
3.12 The Chairperson of the Board, if any and if present and acting,
shall preside at all meetings. Otherwise, the Vice-Chairperson of the Board, if
any and if present and acting, or the President, if present and acting, or any
other director chosen by the board of directors, shall preside.
COMMITTEES
3.13 Any action required or permitted to be taken at any meeting of the
board of directors or any committee thereof may be taken without a meeting if
all members of the board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.
3.14 The board of directors may, by resolution passed by a majority of
the whole board of directors, designate one or more committees, each committee
to consist of one or more of the directors of the Corporation. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise the powers and authority of the board of directors
in the management of the business and affairs of the Corporation with the
exception of any authority the delegation of which is prohibited by Section 141
of the Delaware General Corporation Law, and may authorize the seal of the
Corporation to be affixed to all papers that may require it.
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COMPENSATION
3.15 The directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors and/or a stated salary or
other compensation as director. No such payment shall preclude any director
from serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
NOMINATION
3.16 Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the board of directors
or a proxy committee appointed by the board of directors or by any stockholder
entitled to vote in the election of directors. However, any stockholder
entitled to vote in the election of directors at a meeting may nominate a
director only if written notice of such stockholder's intent to make such
nomination or nominations has been given, either by personal delivery or by
United States mail, postage prepaid, to the Secretary of the Corporation not
later than (i) with respect to an election to be held at an annual meeting of
stockholders, ninety days in advance of the date established by the Bylaws for
the holding of such meeting, and (ii) with respect to an election to be held at
a special meeting of stockholders for the election of directors, the close of
business on the seventh day following the date on which notice of such meeting
is first given to stockholders. Each such notice shall set forth (a) the name
and address of the stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that the stockholder is
a holder of record of stock of the Corporation entitled to vote at each meeting
and intends to appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description of all arrangements
or understandings between the stockholder and each nominee and any other person
or person (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would be required to be
included in a proxy statement filed pursuant to the proxy rules of the
Securities and Exchange Commission, had the nominee been nominated or intended
to be nominated, by the board of directors; and (e) the consent of each nominee
to serve as a director of the Corporation if so elected. The chairperson of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
STOCKHOLDER PROPOSAL
3.17 Any stockholder entitled to vote in the election of directors and
who/which meets the requirements of the proxy rules under the Securities
Exchange Act of 1934, as amended, may submit to the directors proposals to be
considered for submission to the stockholders of the Corporation for their vote.
The introduction of any stockholder proposal that the directors decide should be
voted on by the stockholders of the Corporation shall be made by notice in
writing delivered or mailed by first-class United States mail, postage prepaid,
to the Secretary of the Corporation, and received by the Secretary not less than
(i) with respect to any proposal
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to be introduced at an annual meeting of stockholders, one hundred and twenty
days in advance of the date of the Corporation's proxy statement released to
stockholders in connection with the previous year's annual meeting, and (ii)
with respect to any proposal to be introduced at a special meeting of
stockholders, the close of business on the seventh day following the date on
which notice of such meeting is first given to stockholders. Each such notice
shall set forth: (a) the name and address of the stockholder who intends to make
the proposal and the text of the proposal to be introduced; (b) the class and
number of shares of stock held of record, owned beneficially and represented by
proxy by such stockholder as of the record date for the meeting (if such date
shall then have been made publicly available) and as of the date of such notice;
and (c) a representation that the stockholder intends to appear in person or by
proxy at the meeting to introduce the proposal or proposals, specified in the
notice. The Chairperson of the meeting may refuse to acknowledge the
introduction of any stockholder proposal not made in compliance with the
foregoing procedure.
ARTICLE IV.
NOTICES
4.1 Whenever, under the provisions of the statutes or of the Certificate
of Incorporation or of these Bylaws, notice is required to be given to any
director or stockholder, it shall not be construed to mean personal notice, but
such notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
4.2 Whenever any notice is required to be given under the provisions of
the statutes or of the Certificate of Incorporation or of these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
ARTICLE V.
OFFICERS
5.1 The officers of the Corporation shall consist of a Chief Executive
Officer, a President, a Secretary, a Treasurer, and, if deemed necessary,
expedient, or desirable by the board of directors, an Executive Vice-President,
one or more other Vice-Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers with such titles as the
resolution of the board of directors choosing them shall designate. Any number
of offices may be held by the same person, as the directors may determine.
5.2 Unless otherwise provided in the resolution choosing him or her,
each officer shall be chosen for a term that shall continue until the meeting of
the board of directors following the
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next annual meeting of stockholders and until his or her successor shall have
been chosen and qualified.
5.3 All officers of the Corporation shall have such authority and
perform such duties in the management and operation of the Corporation as shall
be prescribed in the resolutions of the board of directors designating and
choosing such officers and prescribing their authority and duties, and shall
have such additional authority and duties as are incident to their office except
to the extent that such resolutions may be inconsistent therewith. The
Secretary or an Assistant Secretary of the Corporation shall record all of the
proceedings of all meetings and actions in writing of stockholders, directors
and committees of directors, and shall exercise such additional authority and
perform such additional duties as the board of directors shall assign to him or
her. Any officer may be removed, with or without cause, by the board of
directors. Any vacancy in any office may be filled by the board of directors.
CHIEF EXECUTIVE OFFICER
5.4 The Chief Executive Officer shall be the head of the Corporation
and shall have general and active supervision of the business of the Corporation
and shall see that all orders and resolutions of the board of directors are
carried into effect and shall be responsible to the board of directors for the
execution of such duties and powers. The Chief Executive Officer shall, in the
absence or inability to act of the Chairperson of the Board and Vice-Chairperson
of the Board, assume and carry out all responsibilities set forth with respect
to such Chairperson of the Board and Vice-Chairperson of the Board.
THE PRESIDENT
5.5 The President shall be the chief operating officer of the
Corporation. The President shall, in the absence or inability to act of the
Chief Executive Officer, assume and carry out all responsibilities set forth
with respect to such Chief Executive Officer.
5.6 The Chief Executive Officer or the President shall execute bonds,
mortgages, and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the Corporation.
THE VICE PRESIDENTS
5.7 Executive Vice Presidents, Senior Vice Presidents, Vice Presidents,
and Assistant Vice Presidents shall have duties and powers as the board of
directors may designate.
THE SECRETARY AND ASSISTANT SECRETARIES
5.8 The Secretary shall attend all meetings of the board of
directors and all meetings of the stockholders and record all the proceedings of
the meetings of the Corporation and of the board of directors in a book to be
kept for that purpose and shall perform like duties
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for the standing committees when required. The Secretary shall give, or cause
to be given, notice of all meetings of the stockholders and special meetings of
the board of directors, and shall perform such other duties as may be prescribed
by the board of directors or President, under whose supervision the Secretary
shall be. The Secretary shall have custody of the corporate seal of the
Corporation and the Secretary, or an Assistant Secretary, shall have authority
to affix the same to any instrument requiring it and when so affixed, it may be
attested by his or her signature or by the signature of such assistant. The
board of directors may give general authority to any other officer to affix the
seal of the Corporation and to attest the affixing by his or her signature.
5.9 The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the board of directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
person as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
5.10 The Treasurer shall have the custody of the corporate funds and
securities and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the board of directors.
5.11 The Treasurer shall have the authority to invest the normal funds of
the Corporation in the purchase and acquisition and to sell and otherwise
dispose of these investments upon such terms as the Treasurer may deem desirable
and advantageous, and shall, upon request, render to the President and the
directors an accounting of all such normal investment transactions.
5.12 The Treasurer shall disburse the funds of the Corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the President and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
5.13 If required by the board of directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his death, resignation, retirement,
or removal from office, of all books, papers, vouchers, money, and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
5.14 The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the board of directors, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
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5.15 The controller shall keep the Corporation's accounting records and
shall prepare accounting reports of the operating results as required by the
board of directors and governmental authorities. The controller shall establish
systems of internal control and accounting procedures for the protection of the
Corporation's assets and funds.
ARTICLE VI.
CERTIFICATES OF STOCK
6.1 Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of the Corporation by, the Chief Executive
Officer, or the President or a Vice-President, and by the Secretary or an
Assistant Secretary, or by the Treasurer or an Assistant Treasurer of the
Corporation, certifying the number of shares owned by him in the Corporation.
All certificates shall also be signed by a transfer agent and by a registrar.
6.2 All signatures that appear on the certificate may be facsimile
including, without limitation, signatures of officers of the Corporation or the
signatures of the stock transfer agent or registrar. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
6.3 If the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the designations, preferences,
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock; provided, however, that except as otherwise
provided in Section 202 of the Delaware General Corporation Law, in lieu of the
foregoing requirements, there may be set forth on the face or back of the
certificate which the Corporation shall issue to represent such class or series
of stock, a statement that the Corporation will furnish without charge, to each
stockholder who so requests, the designations, preferences, and relative,
participating, optional or other special rights of each class of stock or series
thereof and the qualifications, limitations or restrictions of such preferences
and/or rights.
LOST CERTIFICATES
6.4 The board of directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the Corporation alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming the certificate of stock to
be lost, stolen or destroyed. When authorizing such issue of a new certificate
or certificates, the board of directors may, in its discretion and as a
condition precedent to the issuance thereof, require the owner of such lost,
stolen or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against
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any claim that may be made against the Corporation with respect to the
certificate alleged to have been lost, stolen or destroyed.
TRANSFERS OF STOCK
6.5 Transfers of stock shall be made on the books of the Corporation
only by direction of the person named in the certificate or such person's
attorney, lawfully constituted in writing, and only upon the surrender of the
certificate therefor and a written assignment of the shares evidenced thereby,
which certificate shall be cancelled before the new certificate is issued.
FIXING RECORD DATE
6.6 In order that the Corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders or any
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the board of directors may fix, in advance, a record date,
which shall not be less than ten days before the date of such meeting, nor more
than sixty days prior to any other action. A determination of stockholders of
record entitled to notice of or to vote at a meeting of stockholders shall apply
to any adjournment of the meeting; provided, however, that the board of
directors may fix a new record date for the adjourned meeting. In order that
the Corporation may determine the stockholders entitled to consent to corporate
action in writing without a meeting, the board of directors may fix a record
date, which record date shall not precede the date upon which the resolution
fixing the record date is adopted by the board of directors, and which date
shall not be more than ten days after the date upon which the resolution fixing
the record date is adopted by the board of directors. If no record date has
been fixed by the board of directors, the record date for determining the
stockholders entitled to consent to corporate action in writing without a
meeting, when no prior action by the board of directors is required by the
Delaware General Corporation Law, shall be the first date on which a signed
written consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in the State
of Delaware, its principal place of business, or an officer or agent of the
Corporation having custody of the book in which proceedings of meetings of
stockholders are recorded. Delivery made to the corporation's registered office
shall be by hand or by certified or registered mail, return receipt requested.
If no record date has been fixed by the board of directors and prior action by
the board of directors is required by the Delaware General Corporation Law, the
record date for determining stockholders entitled to consent to corporate action
in writing without a meeting shall be at the close of business on the day on
which the board of directors adopts the resolution taking such prior action. In
order that the Corporation may determine the stockholders entitled to receive
payment of any dividend or other distribution or allotment of any rights or the
stockholders entitled to exercise any rights in respect of any change,
conversion or exchange of stock, or for the purpose of any other lawful action,
the board of directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted,
and which record date shall be not more than sixty days nor less than ten days
prior to such action. If no record date is
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fixed, the record date for determining stockholders for any such purpose shall
be at the close of business on the day on which the board of directors adopts
the resolution relating thereto.
REGISTERED STOCKHOLDERS
6.7 The Corporation shall be entitled to recognize the exclusive right
of a person registered on its books as the owner of shares to receive dividends,
and to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
MEANING OF CERTAIN TERMS
6.8 As used herein in respect of the right to notice of a meeting of
stockholders or a waiver thereof or to participate or vote thereat or to consent
or dissent in writing in lieu of a meeting, as the case may be, the term "share"
or "shares" or "share of stock" or "shares of stock" or "stockholder" or
"stockholders" refers to an outstanding share or shares of stock and to a holder
or holders of record of outstanding shares of stock when the Corporation is
authorized to issue only one class of shares of stock, and said reference is
also intended to include any outstanding share or shares of stock and any holder
or holders of record of outstanding shares of stock of any class upon which or
upon whom the Certificate of Incorporation confers such rights where there are
two or more classes or series of shares of stock or upon which or upon whom the
Delaware General Corporation Law confers such rights notwithstanding that the
Certificate of Incorporation may provide for more than one class or series of
shares of stock, one or more of which are limited or denied such rights
thereunder; provided, however, that no such right shall vest in the event of an
increase or a decrease in the authorized number of shares of stock of any class
or series which is otherwise denied voting rights under the provisions of the
Certificate of Incorporation, except as any provision of law may otherwise
require.
ARTICLE VII.
GENERAL PROVISIONS
DIVIDENDS
7.1 Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the capital stock,
subject to the provisions of the Certificate of Incorporation.
7.2 Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing
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dividends, or for repairing or maintaining any property of the Corporation, or
for such other purpose as the directors shall think conducive to the interest of
the Corporation, and the directors may modify or abolish any such reserve in the
manner in which it was created.
ANNUAL STATEMENT
7.3 The board of directors shall present at each annual meeting and at
any special meeting of the stockholders when called for by vote of the
stockholders a full and clear statement of the business and condition of the
Corporation.
CHECKS
7.4 All checks or demands for money and notes of the Corporation shall
be signed by such officer or officers or such other person or persons as the
board of directors may from time to time designate.
CORPORATE SEAL
7.5 The corporate seal shall be in such form as the board of directors
shall prescribe.
FISCAL YEAR
7.6 The fiscal year of the Corporation shall end on September 30.
ARTICLE VIII.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
8.1 The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner that such person reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was unlawful.
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8.2 The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its favor
by reason of the fact that such person is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person in
connection with the defense or settlement of such action or suit if such person
acted in good faith and in a manner such person reasonably believed to be in or
not opposed to the best interests of the Corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability, but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
8.3 To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 8.1 and 8.2 of this Article
VIII, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith. For purposes of determining
the reasonableness of any such expenses, a certification to such effect by any
member of the Bar of the State of Delaware, which member of the Bar may have
acted as counsel to any such director, officer or employee, shall be binding
upon the Corporation unless the Corporation establishes that the certification
was made in bad faith.
8.4 Any indemnification under Sections 8.1 and 8.2 of this Article VIII
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because any such
person has met the applicable standard of conduct set forth in Sections 8.1 and
8.2 of this Article VIII. Such determination shall be made (1) by the board of
directors, by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
8.5 Expenses (including attorneys' fees) incurred by an officer,
director, employee or agent of the Corporation in defending any civil, criminal,
administrative or investigative action, suit or proceeding, shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that any such person is not entitled to be indemnified by the
Corporation as authorized by this Article VIII.
8.6 The indemnification and advancement of expenses provided by, or
granted pursuant to, the other sections of this Article VIII shall not be deemed
exclusive of any other
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rights to which any person seeking indemnification or advancement of expenses
may be entitled under any bylaw, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in such person's
official capacity and as to action in another capacity while holding such
office.
8.7 The Corporation may but shall not be required to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any capacity, or
arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under this
Article VIII.
8.8 For purposes of this Article VIII, references to "the Corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and employees
or agents, so that any person who is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under this Article VIII with respect to the
resulting or surviving corporation as such person would have with respect to
such constituent corporation if its separate existence had continued.
8.9 For purposes of this Article VIII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries, and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
8.10 The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
8.11 This Article VIII shall be interpreted and construed to accord, as a
matter of right, to any person who is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, the full measure of indemnification
and advancement of expenses permitted by Section 145 of the Delaware General
Corporation Law.
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8.12 Any person seeking indemnification or advancement of expenses by
virtue of such person being or having been a director, officer, employee or
agent of the Corporation may seek to enforce the provisions of this Article VIII
by an action in law or equity in any court of the United States or any state or
political subdivision thereof having jurisdiction of the parties. Without
limitation of the foregoing, it is specifically recognized that remedies
available at law may not be adequate if the effect thereof is to impose delay on
the immediate realization by any such person of the rights conferred by this
Article VIII. Any costs incurred by any person in enforcing the provisions of
this Article VIII shall be an indemnifiable expense in the same manner and to
the same extent as other indemnifiable expenses under this Article VIII.
8.13 No amendment, modification or repeal of this Article VIII shall have
the effect of or be construed to limit or adversely affect any claim to
indemnification or advancement of expenses made by any person who is or was a
director, officer, employee or agent of the Corporation with respect to any
statement of facts that existed prior to the date of such amendment,
modification or repeal. Accordingly, any amendment, modification or repeal of
this Article VIII shall be deemed to have prospective application only and shall
not be applied retroactively.
ARTICLE IX.
BYLAW AMENDMENTS
9.1 Subject to the provisions of the Certificate of Incorporation, these
Bylaws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these Bylaws, the board of directors may by majority vote of
those present at any meeting at which a quorum is present amend these Bylaws, or
enact such other Bylaws as in their judgment may be advisable for the regulation
of the conduct of the affairs of the Corporation, except that Sections 3.3 and
3.13 of Article III and Articles IX and X of the Bylaws may be amended only by
the affirmative vote of the holders of at least sixty-six and two-thirds percent
(66 2/3%) of the voting power of all the shares of the Corporation entitled to
vote generally in the election of directors, voting together as a single class.
ARTICLE X.
STOCKHOLDER ACTION
10.1 Any action required or permitted to be taken by the stockholders of
the Corporation must be effected at a duly called annual or special meeting of
such holders and may not be effected by any consent in writing by such holders,
except that an amendment to the Certificate of Incorporation of the Corporation
in order to change the name of the Corporation may be approved without a
meeting, by consent in writing of the holders of the outstanding
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stock of the Corporation having not less than the minimum number of votes that
would be necessary to approve such amendment at a meeting at which all shares
entitled to vote thereon were present and voted pursuant to the provisions of
Section 228 of the Delaware General Corporation Law. Except as otherwise
required by law and subject to the rights of the holders of any class or series
of stock having a preferences over the Common Stock as to dividends or upon
liquidation, special meetings of stockholders of the Corporation may be called
only by the board of directors pursuant to a resolution approved by a majority
of the entire board of directors.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of
the Bylaws of BILLING INFORMATION CONCEPTS CORP., a Delaware corporation, as in
effect on the date hereof.
WITNESS my hand and seal of the Corporation.
Dated: , 1996 --------------------------------
----------- SECRETARY of BILLING INFORMATION
CONCEPTS CORP.
(SEAL)
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Writer's Direct Dial Number:
(216) 696-2487
______, 1996
U.S. Long Distance Corp.
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Billing Information Concepts Corp.
9311 San Pedro, Suite 400
San Antonio, Texas 78216
Ladies and Gentlemen:
You have requested our opinion regarding the federal income tax
consequences of the distribution (the "Distribution") by U.S. Long Distance
Corp. ("USLD") of 100% of the outstanding capital stock (the "Billing Stock") of
Billing Information Concepts Corp., a wholly-owned subsidiary of USLD
("Billing"), to the holders of outstanding shares of common stock of USLD ("USLD
Stock"). Specifically, you have requested our opinion whether for federal
income tax purposes any income, gain or loss will be recognized by USLD,
Billing, or the USLD stockholders solely as a result of such Distribution.
Subject to the qualifications and limitations described below, it is our
opinion that the Distribution will be a distribution of stock within the meaning
of section 355(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and, if challenged by the Internal Revenue Service, it is more likely than not
that a court would so hold. Accordingly, it is our opinion that for federal
income tax purposes:
(1) No gain or loss will be recognized by USLD or by Billing as a result
of the Distribution;
(2) No gain or loss will be recognized by, and no amount will be required
to be included in the income of, the USLD stockholders as a result of the
receipt of the Billing Stock in the Distribution;
(3) The tax basis of the USLD Stock held by a USLD stockholder immediately
before the Distribution will be allocated
<PAGE>
between the USLD Stock and the Billing Stock received by such stockholder in the
Distribution based upon the relative fair market values of the USLD Stock and
the Billing Stock as of the date of the Distribution; and
(4) The holding period of the Billing Stock in the hands of a USLD
stockholder will include the period during which such stockholder held the USLD
Stock, provided the USLD Stock is held as a capital asset by such stockholder on
the date of the Distribution.
In connection with rendering this opinion, we have examined and are relying
upon (without any independent investigation or review thereof) the truth and
accuracy, at all relevant times, of the statements, covenants, representations
and warranties contained in the following documents:
1. The Registration Statement on Form 10 of Billing (including
Exhibits thereto) dated as of __________, 1996 and filed with the
United States Securities and Exchange Commission ("SEC") ("Form
10 Registration Statement");
2. The Information Statement on Schedule 14C of USLD filed with the
SEC (including the Annexes and Exhibits thereto);
3. The Distribution Agreement between USLD and Billing dated
_____________,1996;
4. Representations made to us by USLD and Billing as set forth in
Officers' Certificates from Michael E. Higgins, Senior Vice
president and Chief Financial Officer of USLD and Alan W.
Saltzman, President of Billing (the "Officers' Certificates");
5. A "Best Interest of Shareholders" Opinion to the Board of
Directors of USLD by Chicago Corporation dated _________, 1996;
and
6. Such other instruments and documents related to the Distribution
as we have deemed necessary or appropriate.
In rendering the opinion, we have been advised of (and are specifically
relying upon) the following representations:
(1) Neither USLD nor Billing is under the jurisdiction of a court in a
Title 11 or similar case within the meaning of section 368(a)(3)(A) of the Code.
<PAGE>
(2) Each of USLD and Billing and the USLD stockholders will pay their own
expenses, if any, incurred in connection with the Distribution.
(3) After the Distribution, the same individuals will not serve as
officers of both USLD and Billing. The Chairman of the Board of Directors of
USLD will not be an officer of USLD, but will be Chairman of the Board and Chief
Executive Officer of Billing(the position of Chairman of the Board is not an
officer position in either corporation). A majority of the members of the Board
of Directors of each of USLD and Billing will not be members of the other
corporation's Board.
(4) Immediately following the Distribution, USLD and Billing or their
respective subsidiaries will continue the conduct of their respective active
businesses, independently and with their own employees except as described in
the Officers' Certificates. Each such active business will have been
continuously conducted for at least a five-year period ending on the date of the
Distribution and will not have been acquired within such five-year period in a
transaction in which gain or loss was recognized in whole or in part.
(5) Following the Distribution, at least 90% of the fair market value of
the gross assets of each of USLD and Billing will consist of (i) stock in
controlled corporations, which controlled corporations are engaged in the active
conduct of a trade or business or (ii) assets that are used in the active
conduct of a trade or business.
(6) There will be no indebtedness between USLD or its affiliates and
Billing or its affiliates immediately after the Distribution except as described
in the Officers' Certificates. Any indebtedness between the two corporate
groups owned by USLD and Billing respectively after the Distribution will be
incurred only in the ordinary course of business and on an arm's length basis.
(7) Neither USLD nor Billing fit the description of an investment company
as set forth in section 368(a)(2)(F)(iii) and (iv) of the Code.
(8) The financial information contained in USLD's most recent Form 10-Q
and in the Form 10 Registration Statement is representative of the respective
business operations of USLD and Billing, and there have been no substantial
operational changes since the dates thereof.
(9) There is no current plan or intention on the part of USLD or Billing,
as applicable, to (i) liquidate USLD (or any of its subsidiaries) or Billing (or
any of its subsidiaries) subsequent to
<PAGE>
the Distribution, (ii) merge any of these corporations with another corporation
subsequent to the Distribution, or (iii) sell or otherwise dispose of their
respective assets or the stock or substantially all of the assets of their
respective subsidiaries subsequent to the Distribution, except, in each case, in
the ordinary course of business.
(10) No part of the Billing Stock to be distributed by USLD in the
Distribution will be received by a USLD stockholder as a creditor or employee or
in any capacity other than that of a stockholder of USLD.
(11) To the best knowledge of the management of USLD, the USLD stockholders
have no current plan or intent to sell, exchange, transfer by gift, or otherwise
dispose of, subsequent to the Distribution, any of their USLD Stock held as of
the date of the Distribution or any of their Billing Stock to be received in the
Distribution. To the best knowledge of management of USLD, there is no person
who is directly or indirectly, or together with related persons, the owner of
five percent or more of any class of USLD stock and who actively participates in
the management or operations of USLD or Billing.
(12) Payments made in connection with all continuing transactions between
USLD (or any of its subsidiaries) and Billing (or any of its subsidiaries) will
be for fair market value based upon terms and conditions arrived at by the
parties bargaining at arm's length.
(13) Following the Distribution, it is anticipated that Billing will derive
no more than _________ percent (__%) of its gross revenues from the rendering of
services to or other transactions with USLD and/or any of USLD's affiliates.
(14) Immediately prior to the Distribution, USLD will not have an excess
loss account (within the meaning of Treasury Regulation Section 1.1502-19(a)(2))
with respect to the Billing Stock that it then holds. In addition, there are no
deferred intercompany transactions or deemed intercompany transactions as
described in Treasury Regulations issued under Code section 1502 (dealing with
consolidated federal income tax returns) which would trigger the recognition of
income for federal income tax purposes as a result of the Distribution.
(15) The Board of Directors of USLD (the "Board") has considered the
Distribution and explored alternatives that might achieve the corporate business
purposes of USLD for undertaking the Distribution, and, after due consideration
and in accordance with advice received from third-party advisors, the Board has
determined that the business purposes of USLD cannot be achieved through an
<PAGE>
alternative nontaxable transaction which is neither impractical nor unduly
expensive and, accordingly, has approved the Distribution as the best means of
achieving such corporate business purposes.
In addition to the representations and assumptions set forth above, this
opinion is subject to the exceptions, limitations and qualifications set forth
below.
To be tax-free under the Internal Revenue Code, the Distribution must be
motivated by one or more corporate business purposes of USLD. This means that
USLD must have identified one or more business purposes, germane to it (as
opposed to its stockholders) for the Distribution and that such business
purposes create an immediate need for the Distribution and cannot be achieved
through any suitable, nontaxable alternative arrangement.
USLD has identified several business purposes for the Distribution. These
include among others described in the Form 10 Registration Statement:
(1) addressing concerns from Billing's customers regarding the
current relationship between USLD and Billing;
(2) better access to capital markets for Billing; and
(3) enhancing stockholder value for both USLD stockholders and, post
Distribution, Billing stockholders.
Concerns of key customers and better access to capital markets have been
recognized by the Internal Revenue Service as legitimate business purposes but
enhancement of stockholder value has not been so recognized. However, the Board
of USLD received an opinion from The Chicago Corporation, dated ______, 1996, to
the effect that the Distribution is in the best interest of USLD stockholders
from a financial point of view. In light of this opinion, USLD has identified
the enhancement of stockholder value as one of the business purposes for the
Distribution. We believe it is more likely than not that if challenged by the
Internal Revenue Service, USLD would prevail in its assertion that enhancement
of stockholder value is a legitimate corporate business purpose for the
Distribution. In light of the foregoing, the fact that the Internal Revenue
Service does not consider the enhancement of stockholder value a corporate
business purpose does not alter our opinion expressed above concerning the tax
consequences of the Distribution.
<PAGE>
On April 21, 1996 the Internal Revenue Service issued Revenue Procedure 96-
30 setting forth guidelines for obtaining an advance ruling that a spin-off
transaction meets the standards for tax-free treatment under Code section 355.
Included in the Revenue Procedure are detailed requirements for supporting
certain specified corporate business purposes (including customer concerns and
capital market access) for a spin-off transaction for purposes of obtaining an
advance ruling. Neither USLD nor Billing have sought an advance ruling from the
Internal Revenue Service and the requirements set forth in Revenue Procedure 96-
30 are procedural guidelines for advance ruling purposes only and are not
substantive law requirements to establish a business purpose where a ruling is
not requested. In addition, Appendix A to the Revenue Procedure states that the
failure of a transaction to meet these guidelines does not, in and of itself,
mean there is not a valid business purpose. Therefore, while offering no
opinion on whether or not any specific requirements of the Revenue Procedure
would be met with respect to the Distribution, we have concluded that the
issuance of Revenue Procedure 96-30 does not affect or alter our opinion
expressed above concerning the tax consequences of the Distribution.
This opinion represents and is based upon our best judgment regarding the
application of federal income tax laws, existing judicial decisions,
administrative regulations and published rulings and procedures as published as
of _____, 1996. Our opinion is not binding upon the Internal Revenue Service or
the courts, and the Internal Revenue Service is not precluded from successfully
asserting a contrary position. Only an advance ruling from the Internal Revenue
Service will give a taxpayer assurance as to the tax consequences of a
transaction such as the Distribution. Furthermore, no assurance can be given
that future legislative, judicial or administrative changes, on either a
prospective or retroactive basis, would not adversely affect the accuracy of the
conclusions stated herein. Nevertheless, we undertake no responsibility to
advise you of any new developments in the application or interpretation of the
federal income tax laws subsequent to _____, 1996.
This opinion addresses only the specific tax consequences set forth above,
and does not address any other federal, state, local or foreign tax consequences
that may result from the Distribution or any other transaction (including any
transaction undertaken in connection with the Distribution). In particular, we
express no opinion regarding (i) the survival and/or availability, after the
Distribution, of any of the federal income tax attributes or elections of USLD
or Billing; and (ii) the tax consequences of any transaction in which an option
or other right to (a) acquire Billing stock was received or adjusted or (b)
acquire USLD stock was received or adjusted.
<PAGE>
No opinion is expressed as to any transaction other than the Distribution.
No opinion is expressed as to any transaction whatsoever, including the
Distribution, if all the transactions described in the Billing Registration
Statement on Form 10 are not consummated in accordance with the terms thereof
and without departure from any material provision thereof or if all of the
representations, warranties, statements and assumptions upon which we have
relied are not true and accurate at all relevant times. In the event any one of
the statements, representations, warranties or assumptions upon which we have
relied to issue this opinion is incorrect, our opinion might be adversely
affected and, therefore, may not be relied upon.
This opinion is intended solely for your benefit. It may not be relied
upon for any other purpose or by any other person or entity, and may not be made
available to any other person or entity without our prior written consent. We
hereby consent to the inclusion of this opinion as an exhibit in the Billing
Registration Statement on Form 10 and to the references to our name therein in
the discussions entitled "Summary-Tax Consequences, Special Factors-Uncertainty
of Tax Consequences" or "Certain Federal Income Tax Consequences of the
Distribution" or in the summary thereof.
We are members of the Bar of the State of Texas and, for purposes of this
opinion, we do not purport to be experts on the law of any jurisdiction other
than Texas and the United States of America. We call your attention to the fact
that the opinion set forth in this letter is an expression of professional
judgment and not a guarantee of a result.
Very truly yours,
ARTER & HADDEN
<PAGE>
DISTRIBUTION AGREEMENT
between
U.S. LONG DISTANCE CORP.
and
BILLING INFORMATION CONCEPTS CORP.
dated as of
_________, 1996
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I. DEFINITIONS..................................................... 1
Section 1.01. General.............................................. 1
Section 1.02. Terms Defined Elsewhere in Agreement................. 9
ARTICLE II. PRELIMINARY TRANSFERS.......................................... 9
Section 2.01. Preliminary Transfers................................ 9
Section 2.02. Transfers of Assets from Billing Group Subsidiaries
to USLD or Telecommunications Group Subsidiaries... 10
Section 2.03. Transfers Not Effected Prior to the Distribution..... 10
Section 2.04. Cooperation Regarding Assets......................... 10
Section 2.05. No Representations or Warranties; Consents........... 11
Section 2.06. Preliminary Transfer................................. 11
Section 2.07. Cash Allocation; Cash Management..................... 12
Section 2.08. Cancellation of Net USLD Intercompany Payable........ 13
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES.................... 13
Section 3.01. Assumption and Satisfaction of Liabilities........... 13
Section 3.02. USLD and Billing Guarantees.......................... 13
ARTICLE IV. [RESERVED]..................................................... 14
ARTICLE V. OBLIGATIONS FOR NON-PLAN OPTIONS................................ 14
Section 5.01. Non-Plan Options Obligations......................... 14
Section 5.02. Adjustment of Exercise Price......................... 14
Section 5.03. Adjustment to Non-Plan Options Obligations........... 14
Section 5.04. Amendment to Non-Plan Option Agreement............... 14
ARTICLE VI. THE DISTRIBUTION............................................... 14
Section 6.01. Cooperation Prior to the Distribution................ 14
Section 6.02. USLD Board Action; Conditions Precedent to the
Distribution....................................... 15
Section 6.03. The Distribution..................................... 16
Section 6.04. Securities Filings................................... 16
ARTICLE VII. INDEMNIFICATION............................................... 16
Section 7.01. Indemnification by USLD.............................. 16
Section 7.02. Indemnification by Billing........................... 17
Section 7.03. Insurance Proceeds................................... 17
Section 7.04. Procedure for Indemnification........................ 17
Section 7.05. Remedies Cumulative.................................. 19
Section 7.06. Survival of Indemnities.............................. 19
(i)
<PAGE>
ARTICLE VIII. CERTAIN ADDITIONAL MATTERS................................... 19
Section 8.01. Billing Board........................................ 19
Section 8.02. Resignations; USLD Board............................. 20
Section 8.03. Certificate and Bylaws............................... 20
Section 8.04. Certain Post-Distribution Transactions............... 20
Section 8.05. Billing Rights Plan.................................. 21
Section 8.06. Use of the "USLD" Name and the USLD Logo............. 21
Section 8.07. Noncompetition Agreement............................. 21
ARTICLE IX. ACCESS TO INFORMATION AND SERVICES............................. 22
Section 9.01. Provision of Corporate Records....................... 22
Section 9.02. Access to Information................................ 23
Section 9.03. Production of Witnesses.............................. 23
Section 9.04. Reimbursement........................................ 23
Section 9.05. Retention of Records................................. 24
Section 9.06. Confidentiality...................................... 24
Section 9.07. Privileged Matters................................... 24
ARTICLE X. INSURANCE....................................................... 26
Section 10.01. Policies and Rights Included Within the Billing
Group Assets....................................... 26
Section 10.02. Post-Distribution Date Claims........................ 26
Section 10.03. Administration and Reserves.......................... 27
Section 10.04. Agreement for Waiver of Conflict and Shared Defense.. 27
ARTICLE XI. MISCELLANEOUS.................................................. 28
Section 11.01. Complete Agreement; Construction..................... 28
Section 11.02. Expenses............................................. 28
Section 11.03. Governing Law........................................ 28
Section 11.04. Notices.............................................. 28
Section 11.05. Amendments........................................... 29
Section 11.06. Successors and Assigns............................... 29
Section 11.07. Termination.......................................... 29
Section 11.08. Subsidiaries......................................... 29
Section 11.09. No Third-Party Beneficiaries......................... 29
Section 11.10. Titles and Headings.................................. 29
Section 11.11. Exhibits and Schedules............................... 29
Section 11.12. Legal Enforceability................................. 29
Section 11.13. Arbitration of Disputes.............................. 29
Section 11.14. Prompt Action........................................ 30
Section 11.15. Applicability to Related Agreements.................. 30
INDEX OF EXHIBITS AND SCHEDULES............................................ 32
(ii)
<PAGE>
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this ____ day
of _____________, 1996, between U.S. Long Distance Corp., a Delaware corporation
("USLD"), and Billing Information Concepts Corp., a Delaware corporation and
wholly-owned subsidiary of USLD ("Billing").
RECITALS
WHEREAS, USLD, through its subsidiaries, (i) provides direct dial long
distance services, primarily to commercial customers, and operator services for
the hospitality and private pay phone industries (the "Telecommunications
Group") and (ii) provides billing clearinghouse and information management
services for other direct dial long distance and operator services companies and
for information providers, equipment suppliers and other telecommunication
services providers (the "Billing Group").
WHEREAS, the Board of Directors of USLD has determined that it is in the
best interests of USLD and the stockholders of USLD to separate the
Telecommunications Group and the Billing Group, and, in order to effect such
separation, to cause certain USLD subsidiaries conducting the business of the
Billing Group to merge with and into two wholly owned subsidiaries of Billing
and for the Telecommunications Group to transfer to Billing certain assets and
liabilities relating principally to the Billing Group, and for the Billing Group
to transfer to USLD and/or the Telecommunications Group certain assets and
liabilities not relating principally to the Billing Group (the "Preliminary
Transfers"), and thereafter to distribute all of the outstanding shares of
common stock, par value $.01 per share, of Billing to the holders of USLD Common
Stock (the "Distribution");
WHEREAS, in connection with the Distribution, Billing and USLD have
determined that it is necessary and desirable to set forth the principal
transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. GENERAL. As used in this Agreement, the following terms
shall have the following meanings.
1
<PAGE>
ACTION: Any action, claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any government or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: Means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings correlative to
the foregoing. Notwithstanding the foregoing, (i) the Affiliates of USLD shall
not include Billing, the Billing Group Subsidiaries or any other Person that
otherwise would be an Affiliate of USLD by reason of USLD's ownership of the
capital stock of Billing prior to the Distribution or the fact that any officer
or director of Billing or any of the Billing Group Subsidiaries shall also serve
as an officer or director of USLD or any of the Telecommunications Group
Subsidiaries, and (ii) the Affiliates of Billing shall not include USLD, the
Telecommunications Group Subsidiaries or any other Person that otherwise would
be an Affiliate of Billing by reason of USLD's ownership of the capital stock of
Billing prior to the Distribution or the fact that any officer or director of
Billing or any of the Billing Group Subsidiaries shall also serve as an officer
or director of USLD or any of the Telecommunications Group Subsidiaries.
AGENT: Montreal Trust Company of Canada, as distribution agent
appointed by USLD to distribute the Billing Common Stock pursuant to the
Distribution.
BENEFIT PLANS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT: The
Benefit Plans and Employment Matters Allocation Agreement between Billing and
USLD, which agreement shall be entered into on or prior to the Distribution Date
in substantially the form of EXHIBIT A attached hereto.
BILLING BOARD: The Board of Directors of Billing.
BILLING BOOKS AND RECORDS: The books and records (including
computerized records) of Billing and the Billing Group Subsidiaries and any
other books and records of USLD's Subsidiaries that relate principally to the
Billing Group, are necessary to conduct the Billing Group Business, or are
required by law to be retained by Billing or a Billing Group Subsidiary,
including, without limitation, all such books and records relating to Billing
Group Employees, all files relating to any Action being assumed by Billing as
part of the Billing Group Liabilities, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to Billing, the Billing Group Subsidiaries or
the Billing Group Business (but not including the USLD Books and Records,
provided that Billing shall have access to, and have the right to obtain
duplicate copies of, the USLD Books and Records that pertain to the Billing
Group Business in accordance with the provisions of this Agreement).
2
<PAGE>
BILLING BYLAWS: The Bylaws of Billing, substantially in the form
of EXHIBIT B, to be in effect at the Distribution Date.
BILLING CERTIFICATE: The Amended and Restated Certificate of
Incorporation of Billing, substantially in the form of EXHIBIT C, to be in
effect at the Distribution Date.
BILLING COMMON STOCK: The common stock, par value $.01 per
share, of Billing (together with any rights issued pursuant to the Billing
Rights Plan).
BILLING GROUP: Billing and the Billing Group Subsidiaries,
collectively.
BILLING GROUP AGREEMENTS: All agreements to which USLD or any of
the Telecommunications Group Subsidiaries is a party relating principally to the
Billing Group Business.
BILLING GROUP ASSETS: (i) The Billing Group Subsidiaries' Stock;
(ii) the Transferred Intellectual Property; (iii) the Billing Books and Records;
(iv) the Billing Group Agreements; (v) all other assets, absolute or contingent,
expressly to be assigned or allocated to Billing or the Billing Group
Subsidiaries under this Agreement or the Related Agreements; and (vi) any other
assets of USLD and its Subsidiaries used principally in the Billing Group
Business and not held by Billing or one of the Billing Group Subsidiaries, but
excluding any assets related to the USLD Group's direct billing function for the
billing of direct dial long distance charges.
BILLING GROUP BUSINESS: The business conducted by the Billing
Group, as referenced in the recitals to this Agreement.
BILLING GROUP EMPLOYEES: The meaning specified in the Benefit
Plans and Employment Matters Allocation Agreement.
BILLING GROUP LIABILITIES: (i) All of the Liabilities of the
Billing Group under, or to be retained or assumed by Billing or any of the
Billing Group Subsidiaries pursuant to, this Agreement or any of the Related
Agreements; (ii) all Liabilities for payment, after the Distribution Date, of
outstanding drafts of USLD and its Subsidiaries existing as of the Distribution
Date attributable to the conduct of the Billing Group Businesses by the Billing
Group; (iii) all Liabilities of the Billing Group Subsidiaries, other than
Liabilities transferred to USLD or to any Telecommunications Group Subsidiary as
part of the Preliminary Transfers; and (iv) all other Liabilities arising out
of, or in connection with, any of the Billing Group Assets or the Billing Group
Business, including common area maintenance or other adjustments under
applicable lease agreements, but excluding any liabilities related to the USLD
Group's direct billing function for the billing of direct dial long distance
charges; PROVIDED, HOWEVER, that the Billing Group Liabilities shall not
include any Financing Obligations of USLD or the Telecommunications Group
Subsidiaries, except to the extent otherwise set forth above or reflected in the
Billing Pro Forma Balance Sheet.
3
<PAGE>
BILLING GROUP POLICIES: All Policies, current or past, which are
owned or maintained by or on behalf of USLD or any of its Affiliates or
predecessors, which relate to the Billing Group Business and the
Telecommunications Group Business, and which Policies are to be assigned to the
Billing Group.
BILLING GROUP SUBSIDIARIES: The Subsidiaries identified on
SCHEDULE 1.01(a) and directly or indirectly controlled by Billing at the time
of the Distribution.
BILLING GROUP SUBSIDIARIES' STOCK: All of the issued and
outstanding capital stock of the Billing Group Subsidiaries.
BILLING GUARANTEE: (a) Any guarantee by Billing or any Billing
Group Subsidiary of the performance or obligation of USLD or any
Telecommunications Group Subsidiary under any agreement or obligation to which
USLD or any Telecommunications Group Subsidiary is a party and (b) any
continuing liability of Billing under any Billing Group Agreement transferred to
USLD or any Telecommunications Group Subsidiary pursuant to this Agreement or
retained by Billing and held by Billing in trust for USLD pursuant to Section
2.03 of this Agreement.
BILLING PRO FORMA BALANCE SHEET: The Pro Forma Consolidated
Balance Sheet of Billing as of ____________, 1996, attached hereto as EXHIBIT
D.
CREDIT SUPPORT FEE: A fee equal to one percent (1%) per annum of
the monthly average guaranteed rental, performance and other obligations to
which the credit support applies.
CUT OFF DATE: The day preceding the Record Date.
DISTRIBUTION DATE: The date determined by the USLD Board as the
date on which Distribution shall be effected, which Distribution Date is
contemplated by the USLD Board to occur on or about __________________, 1996.
DISTRIBUTION RECORD DATE: The date established by the USLD Board
as the date for taking a record of the Holders of USLD Common Stock entitled to
participate in the Distribution, which Distribution Record Date has been
established as ________________, 1996, subject to the fulfillment on or before
_____________, 1996 of certain conditions to the Distribution as provided in
Section 6.02.
EXERCISE PRICE SPREAD: The difference between the exercise price
of a Non-Plan Option or Billing Non Plan Option, as applicable, and the USLD
Closing Stock Price on the Cut-Off Date.
EXPENSE SHARING AGREEMENT: The Expense Sharing Agreement between
USLD and Billing, pursuant to which USLD and Billing will agree to pay
certain usage charges and share certain expenses relating to the operation of
an airplane, which agreement shall be entered into on or prior to the
Distribution Date in substantially the form of EXHIBIT E attached hereto.
FINANCING OBLIGATIONS: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to
4
<PAGE>
letters of credit or similar arrangements, and (v) obligations to guarantee,
directly or indirectly, any of the foregoing types of obligations on behalf of
others.
HOLDERS: The holders of record of USLD Common Stock as of the
Distribution Record Date.
INFORMATION STATEMENT: The Information Statement dated
___________, 1996 provided to holders of USLD Common Stock in connection with
the Distribution.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectibility or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
IRS: The Internal Revenue Service.
LIABILITIES: Any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including, without limitation, those debts,
liabilities and obligations arising under any law, rule, regulation, Action,
threatened Action, order or consent decree of any governmental entity or any
award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
NET USLD INTERCOMPANY PAYABLE: The net intercompany account
payable owed by USLD to Billing which results from offsetting the USLD
Intercompany Receivable against the USLD Intercompany Payable.
PERSON: Any individual, corporation, partnership, association,
trust, estate or other entity or organization, including any governmental entity
or authority.
POLICIES: Insurance policies and insurance contracts of any kind
relating to the Billing Group Business or the Telecommunications Group Business
as conducted prior to the Distribution Date, including without limitation
primary and excess policies, comprehensive general liability policies,
automobile, aircraft and workers' compensation insurance policies, and
self-insurance arrangements, together with the rights and benefits thereunder.
POST DISTRIBUTION BILLING CLOSING STOCK PRICE: The per share price
equal to the average of the Billing Closing Stock Price for each of the ten
consecutive trading days beginning on and including the Distribution Date.
POST DISTRIBUTION USLD CLOSING STOCK PRICE: The per share price
equal to the average of the USLD Closing Stock Price for each of the ten
consecutive trading days beginning on and including the Distribution Date.
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PRELIMINARY TRANSFER INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
PRIVILEGES: All privileges that may be asserted under applicable
law including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
PRIVILEGED INFORMATION: All information to which USLD, Billing or
any of their respective Subsidiaries are entitled to assert the protection of a
Privilege.
BILLING RESTRUCTURING COSTS: All cash costs incurred or to be
incurred by Billing or its Subsidiaries (i) directly related to establishing,
restructuring or realigning the Billing Group, or (ii) for tax planning for the
Billing Group regardless of whether any of these items are treated as expenses
under generally accepted accounting principles.
RELATED AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements set forth in writing, which
are entered into in connection with the transactions contemplated hereby,
including, without limitation, the Preliminary Transfer Agreements, the Benefit
Plans and Employment Matters Allocation Agreement, the Tax Sharing Agreement,
and the Transitional Services and Sublease Agreement and the Expense Sharing
Agreement.
SHARED POLICIES: All Policies, current or past, that are owned or
maintained by or on behalf of USLD or any of its Subsidiaries or their
respective predecessors, which relate to both the Telecommunications Group
Business and the Billing Group Business.
SUBSIDIARY: With respect to any Person, (a) any corporation of
which at least a majority in interest of the outstanding voting stock (having by
the terms thereof voting power under ordinary circumstances to elect a majority
of the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any corporate or non-corporate entity in which such Person
and/or one or more Subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has an ownership interest and which is included
in the consolidated financial reports of such Person consistent with generally
accepted accounting principles.
SUPPLEMENTAL NON-PLAN OPTION AGREEMENTS: The Amendments to the
Non-Plan Options executed by USLD and dated as of the Distribution Date
reflecting the adjustments to the Non-Plan Options necessary to implement the
agreements set forth in Article V.
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TAX OPINION: The Tax Opinion given by Arter & Hadden in
connection with the Distribution.
TAX SHARING AGREEMENT: The Tax Sharing Agreement between Billing
and USLD, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of EXHIBIT F attached hereto.
TELECOMMUNICATIONS GROUP AGREEMENTS: All agreements to which USLD
or any of the Telecommunications Group Subsidiaries is a party relating
principally to the Telecommunications Group Business.
TELECOMMUNICATIONS GROUP ASSETS: The assets of USLD and the
Telecommunications Group Subsidiaries including without limitation: (i) the
capital stock of the Telecommunications Group Subsidiaries; (ii) the USLD Books
and Records; (iii) all of the assets expressly to be retained by, or assigned or
allocated to, USLD or any of the Telecommunications Group Subsidiaries under
this Agreement or the Related Agreements, including assets relating to the USLD
Group's direct billing function for the billing of direct dial long distance
charges; and (iv) any other assets, absolute or contingent, of USLD and its
Subsidiaries not comprising Billing Group Assets.
TELECOMMUNICATIONS GROUP BUSINESS: The business conducted by the
Telecommunications Group, as referenced in the recitals to this Agreement.
TELECOMMUNICATIONS GROUP EMPLOYEES: The meaning specified in the
Benefit Plans and Employment Matters Allocation Agreement.
TELECOMMUNICATIONS GROUP LIABILITIES: (i) all of the Liabilities
of USLD under, or to be retained or assumed by USLD or any of the
Telecommunications Group Subsidiaries pursuant to, this Agreement or any of the
Related Agreements; (ii) any Financing Obligations of USLD and its Subsidiaries
not constituting Billing Group Liabilities; (iii) all Liabilities for payment of
outstanding drafts of USLD attributable to the conduct of the Telecommunications
Group or to the Billing Group (to the extent not considered a Billing Group
Liability) existing as of the Distribution Date; (iv) all Liabilities
transferred to USLD or the Telecommunications Group Subsidiaries in the
Preliminary Transfers; (v) all other Liabilities arising out of, or in
connection with, any of the Telecommunications Group Assets or the
Telecommunications Group Business, including liabilities relating to the USLD
Group's direct billing function for the billing of direct dial long distance
charges; and (vi) all other Liabilities of USLD and its Subsidiaries not
constituting Billing Group Liabilities, if any, as defined herein, whether past
or present.
TELECOMMUNICATIONS GROUP SUBSIDIARIES: All Subsidiaries of USLD,
except Billing and the Billing Group Subsidiaries.
TRANSFERRED INTELLECTUAL PROPERTY: The intangible properties and
rights listed on Schedule 1.01(b) hereto to be conveyed by USLD to Billing in
connection with the Distribution.
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TRANSITIONAL SERVICES AND SUBLEASE AGREEMENT: The Transitional
Services and Sublease Agreement by and between USLD and Billing pursuant to
which such parties will provide to the other certain transitional services after
consummation of the Distribution, substantially in the form attached hereto as
EXHIBIT G.
USLD BOARD: The Board of Directors of USLD as it is constituted
prior to the Distribution Date.
USLD BOOKS AND RECORDS: The books and records (including
computerized records) of USLD and the Telecommunications Group Subsidiaries and
any other books and records of USLD's Subsidiaries that relate principally to
the Telecommunications Group, are necessary to operate the Telecommunications
Group, or are required by law to be retained by USLD or a Telecommunications
Group Subsidiary, including, without limitation, all books and records relating
to Telecommunications Group Employees, all files relating to any Action
pertaining to the Telecommunications Group Liabilities, original corporate
minute books, stock ledgers and certificates and corporate seals, and all
licenses, leases, agreements and filings, relating to USLD, the
Telecommunications Group Subsidiaries or the Telecommunications Group Business
(but not including the Billing Books and Records, provided that USLD shall have
access to, and shall have the right to obtain duplicate copies of, the Billing
Books and Records in accordance with the provisions of this Agreement.)
USLD CLOSING STOCK PRICE: The Nasdaq Stock Market's National
Market closing price per share for USLD Common Stock on the applicable date,
trading regular way.
USLD COMMON STOCK: The common stock, par value $.01 per share, of
USLD.
USLD GROUP: USLD and the Telecommunications Group Subsidiaries,
collectively.
USLD GUARANTEE: (a) Any guarantee by USLD or any
Telecommunications Group Subsidiary of the performance or obligation of Billing
or any Billing Group Subsidiary under any agreement or obligation to which
Billing or any Billing Group Subsidiary is a party and (b) any continuing
liability of USLD under any Telecommunications Group Agreement transferred to
Billing or any Billing Group Subsidiary pursuant to this Agreement or retained
by USLD and held by USLD in trust for Billing pursuant to Section 2.03 of this
Agreement.
USLD INTERCOMPANY PAYABLE: The intercompany account payable that
is owed by USLD to Billing.
USLD INTERCOMPANY RECEIVABLE: The intercompany account receivable
that is owed by Billing to USLD.
USLD PRO FORMA BALANCE SHEET: The Pro Forma Consolidated Balance
Sheet of USLD as of March 31, 1996, attached hereto as EXHIBIT H.
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Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT. Each of the
following terms is defined in the Section set forth opposite such term:
TERM SECTION
Billing............................................... Recitals
Billing Group......................................... Recitals
Billing Indemnifiable Loss............................ 7.01
Billing Indemnitees................................... 7.01
Billing Non-PLan Option............................... 5.02
USLD Initial Cash Balance............................. 2.07
Billing Rights........................................ 8.05
Billing Rights Plan................................... 8.05
Cash.................................................. 2.07
Consents.............................................. 6.01
Distribution.......................................... Recitals
Exchange Act ......................................... 6.02
Indemnifiable Loss.................................... 7.02
Indemnifying Party.................................... 7.03
Indemnitee............................................ 7.03
Information........................................... 9.02
Non-Plan Options...................................... 5.01
Non-Plan Option Adjustment............................ 5.01
Preliminary Transfers................................. Recitals
Telecommunications Group.............................. Recitals
Third-Party Claim..................................... 7.04
USLD.................................................. Recitals
USLD Indemnifiable Loss............................... 7.02
USLD Indemnitees...................................... 7.02
ARTICLE II.
PRELIMINARY TRANSFERS
Section 2.01. PRELIMINARY TRANSFERS. Prior to the Distribution Date,
USLD shall take or cause to be taken all actions necessary (i) to contribute two
of its wholly owned subsidiaries (U.S. Billing Management Corp. and U.S.
Billing, Inc.) to Billing, (ii) to cause MegaPlus Dialing, Inc., its wholly
owned subsidiary to sell to USLD for $8,125,000 all of the preferred and common
shares of ZeroPlus Dialing, Inc. that it owns and then to dissolve, (iii) to
cause ZeroPlus Dialing, Inc. to redeem all the preferred and common shares
previously sold by MegaPlus Dialing, Inc. to USLD, (iv) cause its two
subsidiaries engaged in the Billing Group Business (ZeroPlus Dialing, Inc. and
Enhanced Billing Services, Inc.) to be merged with and into these two inactive
subsidiaries of Billing, with ZeroPlus Dialing, Inc. and Enhanced Billing
Services, Inc. surviving, and ZeroPlus Dialing, Inc. changing its name to
Billing Management Corporation and (v) to cause the transfer, assignment,
delivery and conveyance to Billing or any
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Billing Group Subsidiary of all of USLD's and its Subsidiaries' right, title and
interest in the remaining Billing Group Assets.
Section 2.02. TRANSFERS OF ASSETS FROM BILLING GROUP SUBSIDIARIES TO
USLD or Telecommunications Group Subsidiaries. Prior to the Distribution
Date, Billing shall take or cause to be taken all action necessary to cause the
transfer, assignment, delivery and conveyance to USLD or any Telecommunications
Group Subsidiary of all of Billing's and its Subsidiaries' right, title and
interest in the Telecommunications Group Assets.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION. To
the extent that any transfers required and legally made by this Article II shall
not have been fully effected on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; PROVIDED, HOWEVER, that
USLD and Billing and their respective Subsidiaries and Affiliates shall
cooperate in seeking to obtain any necessary consents or approvals for the
transfer of all assets and Liabilities contemplated to be transferred pursuant
to this Article II. In the event that any such transfer of assets or
Liabilities has not been consummated effective as of the Distribution Date, the
party retaining such asset or Liability shall thereafter hold such asset in
trust for the use and benefit of the party entitled thereto (at the expense of
the party entitled thereto) and retain such Liability for the account of the
party by whom such Liability is to be assumed pursuant hereto, and take such
other actions as may be reasonably required in order to place the parties,
insofar as reasonably possible, in the same position as would have existed had
such asset been transferred or such Liability been assumed as contemplated
hereby. As and when any such asset or Liability becomes transferable, such
transfer and assumption shall be effected forthwith. The parties agree that,
except as set forth in this Section 2.03, as of the Distribution Date, each
party hereto shall be deemed to have acquired complete and sole beneficial
ownership over all of the assets, together with all rights, powers and
privileges incidental thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement all of the Liabilities, and all duties,
obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04. COOPERATION REGARDING ASSETS. In the case that at any
time after the Distribution Date, Billing reasonably determines that any of the
Telecommunications Group Assets are essential for the conduct of the Billing
Group Business, or USLD reasonably determines that any of the Billing Group
Assets are essential for the conduct of the Telecommunications Group Business,
and the nature of such assets makes it impracticable for Billing or USLD, as the
case may be, to obtain substitute assets or to make alternative arrangements on
commercially reasonable terms to conduct their respective businesses, and
reasonable provisions for the use thereof are not already included in the
Related Agreements, then Billing (with respect to the Billing Group Assets) and
USLD (with respect to the Telecommunications Group Assets) shall cooperate to
make such assets available to the other party on commercially reasonable terms,
as may be reasonably required for such party to maintain normal business
operations (provided that such assets shall be required to be made
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available only until such time as the other party may reasonably obtain
substitute assets or make alternative arrangements on commercially reasonable
terms to permit it to maintain normal business operations.)
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Each of the
parties hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement, or otherwise, representing or warranting in
any way (i) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party, or (ii) as to the legal sufficiency to
convey title to any asset transferred pursuant to this Agreement or any Related
Agreement. It is also agreed and understood that there are no warranties,
express or implied, as to the merchantability or fitness of any of the assets
either transferred to or retained by the parties, as the case may be, and all
such assets shall be "as is, where is" and "with all faults"; provided, however,
that the absence of warranties shall have no effect upon the allocation of
Liabilities under this Agreement and provided further that Billing represents
and warrants that, prior to the Distribution Date, Billing and the Billing Group
have maintained their cash balances, accounts payable, accounts receivable and
borrowings under their line of credit with FINOVA Capital Corporation in a
manner consistent with the customary practices of the Billing Group Business.
Each party hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement or otherwise, representing or warranting in
any way that the obtaining of any consents or approvals, the execution and
delivery of any amendatory agreements and the making of any filings or
applications contemplated by this Agreement, any Related Agreement or otherwise
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets. Notwithstanding the
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications that may be reasonably required for the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, and shall take all such further reasonable actions as shall be
reasonably necessary to preserve for each of the Billing Group and the USLD
Group, to the greatest extent feasible, the economic and operational benefits of
the allocation of assets and Liabilities provided for in this Agreement. In
case at any time after the Distribution Date any further action is necessary or
desirable to carry out the purposes of this Agreement, proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action.
Section 2.06. PRELIMINARY TRANSFER INSTRUMENTS. In connection with
the Preliminary Transfers, the merger of USLD's subsidiaries engaged in the
Billing Group Business with wholly owned subsidiaries of Billing, the assignment
of assets and the assumption of Liabilities and other related transactions
contemplated by this Agreement and any Related Agreements, the parties shall
execute, or cause to be executed by the appropriate entities, the Preliminary
Transfer Instruments in such forms as the parties shall reasonably agree. All
transactions involving capital stock shall be effected by means of delivery of
stock certificates and executed stock powers and notation on the stock record
books of the corporation or other legal entities and, to the extent required by
applicable law, by notation on public registries.
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Section 2.07. CASH ALLOCATION; CASH MANAGEMENT.
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. As of the close of
business on the Distribution Date, Billing shall transfer to USLD out of the
cash bank balances and short-term investments ("Cash") that it and the
Billing Group Subsidiaries then holds Cash in an amount necessary for USLD's
working capital to be approximately $21,500,000 after taking into account
direct costs of the Distribution ("USLD Initial Cash Balance"), and Billing
shall retain all other Cash. The calculation of the cash amount to be
transferred will be based on current assets and current liabilities as
reported on the USLD balance sheet at the month-end date immediately
preceeding the Distribution. To the extent practicable, the parties shall use
their reasonable best efforts to take all necessary action to cause the Cash
balances of the USLD Group immediately prior to consummation of the
Distribution to equal the USLD Initial Cash Balance. In the event the actual
Cash balances of the USLD Group as of the Distribution are less than the USLD
Initial Cash Balance, the amount of the deficiency shall be recorded in the
accounts of USLD and Billing as of the Distribution Date as a payable from
Billing to USLD (which payable will be paid as promptly as practicable
following the Distribution); and in the event the actual Cash balances of the
USLD Group as of the Distribution Date exceeds the USLD Initial Cash Balance,
the amount of such excess shall be recorded in the accounts of USLD and
Billing as of the Distribution Date as a payable from USLD to Billing (which
payable will be paid as promptly as practicable following the Distribution).
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. Billing shall
establish and maintain a separate cash management system and accounting records
with respect to the Billing Group effective as of 12:01 a.m. on the day
following the Distribution Date. Thereafter, (i) any payments by USLD or the
Telecommunications Group Subsidiaries on behalf of Billing or the Billing Group
Subsidiaries in connection with the Billing Group (including, without
limitation, any such payments in respect of Liabilities or other obligations of
Billing or the Billing Group Subsidiaries under this Agreement and the Related
Agreements) shall be recorded in the accounts of the Billing Group as a payable
from the Billing Group to the USLD Group; (ii) any payments by Billing or the
Billing Group Subsidiaries on behalf of USLD or the Telecommunications Group
Subsidiaries in connection with the Telecommunications Group Business
(including, without limitation, any such payments in respect of Liabilities or
other obligations of USLD or the Telecommunications Group Subsidiaries under
this Agreement and the Related Agreements) shall be recorded in the accounts of
the USLD Group as a payable from the USLD Group to the Billing Group; (iii) any
cash payments received by USLD and the Telecommunications Subsidiaries relating
to the Billing Group Business shall be recorded in the accounts of the USLD
Group as a payable from the USLD Group to the Billing Group; (iv) any cash
payments received by Billing or the Billing Group Subsidiaries relating to the
Telecommunications Group Business shall be recorded in the accounts of the
Billing Group as a payable from the Billing Group to the USLD Group; (v) Billing
and USLD shall make adjustments for late deposits, checks returned for not
sufficient funds and other post-Distribution Date transactions as shall be
reasonable under the circumstances consistent with the purpose and intent of
this Agreement and the Related Agreements; and (vi) the net balance due to the
USLD Group or the Billing Group, as the case may be, in respect of the aggregate
amounts of clauses (i), (ii), (iii), (iv) and (v) shall be paid by Billing or
USLD, as appropriate, as promptly as practicable. For purposes of this Section
2.07(b), the parties contemplate that the Telecommunications Group Business and
the Billing Group Business, including, but not limited to, the respective
parties' administration of accounts payable and accounts receivable, will be
conducted in the normal course.
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Section 2.08. CANCELLATION OF NET USLD INTERCOMPANY PAYABLE. Prior to
the Distribution Date, the Net USLD Intercompany Payable in the amount of
approximately $______, including any interest accrued thereon, shall be netted
against USLD's stockholder equity. Billing acknowledges that it will not
receive any independent consideration for such Net USLD Intercompany Payable
other than the mutual promises contained herein and in the Related Agreements.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as
set forth in the Benefit Plans and Employment Matters Allocation Agreement, the
Tax Sharing Agreement, the Transition Services and Sublease Agreement, the
Expense Sharing Agreement or other Related Agreements, effective as of and after
the Distribution Date, (a) Billing shall, and/or shall cause the Billing Group
Subsidiaries to, assume, pay, perform and discharge in due course all of the
Billing Group Liabilities, and (b) USLD shall, and/or shall cause the
Telecommunications Group Subsidiaries, to assume, pay, perform and discharge in
due course all of the Telecommunications Group Liabilities.
Section 3.02. USLD AND BILLING GUARANTEES. (a) Billing shall use its
reasonable best efforts to obtain the release of any USLD Guarantee existing on
and after the Distribution Date. USLD shall use its best efforts to obtain the
release of any Billing Guarantee existing on and after the Distribution Date.
(b) Commencing on the first business day of calendar year 1997 after the
Distribution, and on the first business day of each calendar year thereafter,
Billing shall become obligated to pay to USLD, in cash, a Credit Support Fee in
respect of each USLD Guarantee that was outstanding at any date during the
immediately preceding calendar year and USLD shall become obligated to pay to
Billing, in cash, a Credit Support Fee in respect of each Billing Guarantee that
was outstanding at any date during the immediately preceding calendar year. The
Credit Support Fee payable with respect to any USLD Guarantee or Billing
Guarantee, as the case may be, shall be an amount equal to the Credit Support
Fee times the average outstanding monthly balance of the principal amount of
indebtedness for the applicable calendar year (and for calendar 1996 from the
Distribution Date through December 31, 1996), the payment of which
is guaranteed pursuant to the applicable USLD Guarantee or Billing Guarantee.
The aggregate amount of any such Credit Support Fee shall be paid by January 31,
of the applicable year.
ARTICLE IV.
[RESERVED]
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ARTICLE V.
OBLIGATIONS FOR NON-PLAN OPTIONS
Section 5.01. NON-PLAN OPTIONS OBLIGATIONS. (a) USLD has issued
certain stock options (the "Non-Plan Options"), of which Non-Plan Options to
purchase approximately _______ shares of USLD Common Stock were outstanding
and unexercised as of the date of this Agreement. The Board of Directors of
USLD has determined in connection with the Distribution to adjust the
exercise price of and, if necessary, the number of shares outstanding under
each Non-Plan Option to preserve the current spread between the exercise
price of each Non-Plan Option and the price of the USLD Common Stock as of
the Cut-Off Date.
(b) For purposes of determining the adjusted exercise price of each
Non-Plan Option, the following formula (the "Non-Plan Option Adjustment")
shall be used to maintain the holder's Exercise Price Spread on each Non-Plan
Option. The Exercise Price Spread shall be maintained by setting the
exercise price for each Non-Plan Option so that the difference between (a)
the Post Distribution USLD Closing Stock Price and (b) the adjusted exercise
price of the Non-Plan Option shall be equal to the difference between (y) the
USLD Closing Stock Price on the Cut Off Date and (z) the exercise price of
the Non-Plan Option on the Cut Off Date, provided, however, that if the
difference between (a) the Post Distribution USLD Closing Stock Price and (b)
the adjusted exercise price, as fully adjusted, is less than the difference
between (y) the USLD Closing Stock Price on the Cut-Off Date and (z) the
exercise of the Non-Plan Option on the Cut-Off Date, additional shares of USLD
Common Stock shall be added to the Non-Plan Option until the difference
between (a) and (b) above is equal to the difference of (y) and (z) above.
(c) The obligation of USLD to issue USLD Common Stock upon the exercise
of a Non-Plan Option shall be adjusted in accordance with the Non-Plan Option
Adjustment. Except for the Non-Plan Option Adjustment, the terms of each
Non-Plan Options will be the same as those in effect prior to the
Distribution.
(d) USLD agrees to execute and deliver to the Non-Plan Options holders
following the Distribution the Supplemental Non-Plan Option Agreements.
Section 5.02 GRANT OF NON-PLAN BILLING OPTION. (a) Billing agrees to
grant to a former USLD Director who has agreed to join the Board of Directors
of Billing, in consideration of his joining the Billing Board of Directors
and to replace an unvested option for 5,000 of USLD Common Stock, a
non-qualified stock option of Billing to purchase 5,000 shares of Billing
Common Stock ("Billing Non-Plan Option") at an exercise price that preserves
the current spread between the exercise price of the USLD unvested option and
the price of the USLD Common Stock as of the Cut-Off Date.
(b) For purposes of determining the exercise price of the Billing
Non-Plan Option, the following formula shall be used to maintain the holder's
Exercise Price Spread on the Billing Non-Plan Option. The Exercise Price
Spread shall be maintained by setting the exercise price for the Billing
Non-Plan Option so that the differences between (a) the Post Distribution
Billing Closing Stock Price and (b) the adjusted price of the Billing
Non-Plan Option shall be equal to the difference between (y) the USLD Closing
Price on the Cut-Off Date and (z) the exercise price of the former Director's
USLD unvested option on the Cut-Off Date.
(c) The obligation of Billing to issue Billing Common Stock upon the
exercise of the Billing Non-Plan Option shall be adjusted in accordance with
paragraph 5.02(b). Except for that adjustment, the terms of the Billing
Non-Plan Option will be the same as those in effect for the USLD unvested
option prior to the Distribution.
(d) Billing agrees to execute and deliver to the Billing Non-Plan
Option holder following the Distribution the Billing Non-Plan Option
agreement.
ARTICLE VI.
THE DISTRIBUTION
Section 6.01. COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Billing and USLD shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof that are appropriate to reflect the establishment of, or
amendments to, any employee benefits plans and other plans contemplated by the
Benefit Plans and Employment Matters Allocation Agreement.
(b) Billing and USLD shall take all such actions as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
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(c) Billing and USLD shall use all reasonable efforts to obtain any
third-party consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").
(d) Billing and USLD will use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
or desirable under applicable law, to consummate the transactions contemplated
under this Agreement and the Related Agreements.
Section 6.02. USLD BOARD ACTION; CONDITIONS PRECEDENT TO THE
Distribution. The USLD Board shall, in its discretion, establish any
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions have been satisfied:
(i) the transactions contemplated by Section 2.01 shall have been
consummated in all material respects;
(ii) the Billing Board, comprised as contemplated by Section 8.01,
shall have been elected by USLD, as sole stockholder of Billing, and the Billing
Certificate and Billing Bylaws shall have been adopted and shall be in effect;
(iii) USLD shall have received the opinion of The Chicago
Corporation substantially in the Form of EXHIBIT I and such opinion shall not
have been withdrawn;
(iv) USLD shall have received the opinion of Houlihan Lokey
substantially in the form of EXHIBIT J and such opinion shall not have been
withdrawn;
(v) USLD shall have received the Tax Opinion of Arter & Hadden
substantially in the form of EXHIBIT K and such opinion shall not have been
withdrawn;
(vi) the Registration Statement on Form 10 under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), filed by Billing shall have
been declared effective by the Commission;
(vii) Billing and USLD shall have entered into the Related
Agreements;
(viii)Billing's application to effect the listing of the Billing
Common Stock on the Nasdaq National Market shall have become effective;
(ix) the transactions contemplated hereby shall be in compliance
with applicable federal and state securities laws and USLD shall have received a
satisfactory "no action letter" from the Commission with regard to exemptions
from registration of the Distribution and related matters;
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(x) USLD shall have received such consents, and shall have
received executed copies of such agreements and amendments of agreements, as it
shall deem necessary in connection with the completion of the transactions
contemplated by this Agreement;
(xi) no legal proceedings affecting or otherwise arising out of the
transactions contemplated hereby or which could otherwise affect USLD or Billing
in a materially adverse manner shall have been commenced or threatened against
USLD, Billing or the directors or officers of either USLD or Billing; and
(xii) no material adverse change shall have occurred with respect to
USLD or Billing, the securities markets or general economic or financial
conditions which shall, in the reasonable judgment of USLD and Billing, make the
transactions contemplated by this Agreement inadvisable.
PROVIDED, HOWEVER, that (x) any such condition may be waived by the USLD
Board in its sole discretion, and (y) the satisfaction of such conditions shall
not create any obligation on the part of USLD or any other party hereto to
effect the Distribution or in any way limit USLD's power of termination set
forth in Section 11.07 or alter the consequences of any such termination from
those specified in such Section.
Section 6.03. THE DISTRIBUTION. On the Distribution Date, subject to
the conditions and rights of termination set forth in this Agreement, USLD shall
deliver to the Agent a share certificate representing all of the then
outstanding shares of Billing Common Stock owned by USLD and shall instruct the
Agent to distribute, on or as soon as practicable following the Distribution
Date, such Billing Common Stock to the Holders. Billing agrees to provide all
share certificates that the Agent shall require in order to effect the
Distribution.
Section 6.04. SECURITIES FILINGS. For a period of five years after
the Distribution Date, each of USLD and Billing shall provide to the other,
promptly following such time at which such documents shall be filed with the
Commission, copies of all documents which shall be publicly filed with the
Commission pursuant to the periodic and interim reporting requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder.
ARTICLE VII.
INDEMNIFICATION
Section 7.01. INDEMNIFICATION BY USLD. Except as otherwise expressly
set forth in a Related Agreement, USLD shall indemnify, defend and hold harmless
Billing and each of the Billing Group Subsidiaries, and each of their respective
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing (the "Billing
Indemnitees") from and against the Telecommunications Group Liabilities and any
and all losses, Liabilities, damages including without limitation, the costs and
expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and
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compromises relating thereto and attorneys' fees and any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any such Actions or threatened Actions (collectively, "Billing Indemnifiable
Losses" and, individually, a "Billing Indemnifiable Loss") of the Billing
Indemnitees arising out of or due to the failure or alleged failure of USLD, any
Telecommunications Group Subsidiary, or any of their respective Affiliates to
(i) pay, perform or otherwise discharge in due course any of the
Telecommunications Group Liabilities, or (ii) comply with the provisions of
Section 7.04. To the extent that counsel is provided to Billing under this
indemnification, such counsel shall be selected by USLD and such counsel may
include its in-house corporate counsel.
Section 7.02. INDEMNIFICATION BY BILLING. Except as otherwise
expressly set forth in a Related Agreement, Billing shall indemnify, defend and
hold harmless USLD and each of the Telecommunications Group Subsidiaries, and
each of their respective directors, officers, employees, agents and Affiliates
and each of the heirs, executors, successors and assigns of any of the foregoing
(the "USLD Indemnitees") from and against the Billing Group Liabilities and any
and all losses, Liabilities, damages, including, without limitation, the costs
and expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions (collectively, "USLD
Indemnifiable Losses" and, individually, a "USLD Indemnifiable Loss") of the
USLD Indemnitees arising out of or due to the failure or alleged failure of
Billing, any Billing Group Subsidiaries, or any of their respective Affiliates
to (i) pay, perform or otherwise discharge in due course any of the Billing
Group Liabilities or (ii) comply with the provisions of Section 7.04. The
"Billing Indemnifiable Losses" and the "USLD Indemnifiable Losses" are
collectively referred to as the "Indemnifiable Losses." To the extent that
counsel is provided to USLD under this Indemnification, such counsel shall be
selected by Billing and such counsel may include its in-house corporate counsel.
Section 7.03. INSURANCE PROCEEDS. The amount that any party (an
"Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnitee") pursuant to Section 7.01 or Section 7.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in reduction
of the related Indemnifiable Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received.
Section 7.04. PROCEDURE FOR INDEMNIFICATION. (a) Except as may be
set forth in a Related Agreement, if an Indemnitee shall receive notice or
otherwise learn of the assertion by a Person (including, without limitation, any
governmental entity) who is not a party to this Agreement or to any of the
Related Agreements of any claim or of the commencement by any such Person of any
Action with respect to which an Indemnifying Party may be obligated to provide
indemnification pursuant to this Agreement (a "Third-Party Claim"), such
Indemnitee shall give such Indemnifying Party written notice thereof promptly
after becoming aware of such
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Third-Party Claim; PROVIDED, that the failure of any Indemnitee to give notice
as required by this Section 7.04 shall not relieve the Indemnifying Party of its
obligations under this Article VII, except to the extent that such Indemnifying
Party is prejudiced by such failure to give notice. Such notice shall describe
the Third-Party Claim in reasonable detail, and shall indicate the amount
(estimated if necessary) of the Indemnifiable Loss that has been or may be
sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnitee is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 20 days
of the receipt of notice from an Indemnitee in accordance with Section 7.04(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility for such Third-Party Claim (provided that if the Indemnifying
Party does not so notify the Indemnitee of its election within 20 days after
receipt of such notice from the Indemnitee, the Indemnifying Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such Indemnitee shall cooperate in the defense or settlement or compromise
of such Third-Party Claim. After notice from an Indemnifying Party to an
Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article VII for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED, that if the defendants in any
such claim include both the Indemnifying Party and one or more Indemnitees and
in such Indemnitees' reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim (which election may be made only in the
event of a good faith dispute that a claim was inappropriately tendered under
Section 7.01 or 7.02, as the case may be) such Indemnitee may defend or (subject
to the following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnitee may not settle or compromise any
claim without prior written notice to the Indemnifying Party, which shall have
the option within 10 days following the receipt of such notice (i) to disapprove
the settlement and assume all past and future responsibility for the claim,
including reimbursing the Indemnitee for prior expenditures in connection with
the claim, or (ii) to disapprove the settlement and continue to refrain from
participation in the defense of the claim, in which event the Indemnifying Party
shall have no further right to contest the amount or reasonableness of the
settlement if the Indemnitee elects to proceeds therewith, or (iii) to approve
the amount of the settlement, reserving the Indemnifying Party's right to
contest the Indemnitee's right to indemnity, or (iv) to approve and agree to pay
the settlement. In the event the Indemnifying Party makes no response to such
written notice from the Indemnitee, the Indemnifying Party shall be deemed to
have elected option (ii).
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(c) If an Indemnifying Party chooses to defend or to seek to compromise
any Third-Party Claim, the Indemnitee shall make available to such Indemnifying
Party any personnel and any books, records or other documents within its control
or which it otherwise has the ability to make available that are necessary or
appropriate for such defense.
(d) Any claim on account of an Indemnifiable Loss that does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
(e) In addition to any adjustments required pursuant to Section 7.03, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(f) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third-Party Claim against any claimant or plaintiff asserting
such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
Section 7.05. REMEDIES CUMULATIVE. The remedies provided in this
Article VII shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 7.06. SURVIVAL OF INDEMNITIES. The obligations of each of
Billing and USLD under this Article VII shall survive the sale or other transfer
by it of any assets or businesses or the assignment by it of any Liabilities,
with respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
ARTICLE VIII.
CERTAIN ADDITIONAL MATTERS
Section 8.01. BILLING BOARD. Billing and USLD shall take all actions
which may be required to constitute, effective as of the Distribution Date, the
following persons as the directors
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of Billing: Parris H. Holmes, Jr., Alan W. Saltzman, Lee Cooke,
_______________, and __________________.
Section 8.02. RESIGNATIONS; USLD BOARD. Billing shall cause all of
its directors and Billing Group Employees to resign, effective as of the
Distribution Date, from all boards of directors or similar governing bodies of
USLD or any of its Subsidiaries on which they serve, and from all positions as
officers or employees of USLD or any of its Subsidiaries in which they serve,
except that Parris H. Holmes, Jr. shall serve as a director of both Billing and
USLD and as Chairman of both the USLD Board and the Billing Board. USLD shall
cause all of its directors and the Telecommunications Group Employees to resign
from all boards of directors or similar governing bodies of Billing or any of
its Subsidiaries on which they serve, and from all positions as officers or
employees of Billing or any of its Subsidiaries in which they serve, except that
Parris H. Holmes, Jr. shall serve as a director of both Billing and USLD and as
Chairman of both the USLD Board and the Billing Board and as Chief Executive
Officer of Billing.
Section 8.03. CERTIFICATE AND BYLAWS. On or prior to the Distribution
Date, Billing shall adopt the Billing Certificate and the Billing Bylaws, and
shall file the Billing Certificate with the Secretary of State of the State of
Delaware. USLD shall provide all necessary stockholder approvals for the
Billing Certificate prior to the filing of the Billing Certificate with the
Secretary of State of the State of Delaware.
Section 8.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS.
(a) BILLING. (i) Billing shall, and shall cause each of the Billing
Group Subsidiaries to, comply with each representation and statement made, or to
be made, to any Person in connection with the Tax Opinion with respect to any
transaction contemplated by this Agreement, and (ii) until the second
anniversary of the Distribution Date, neither Billing nor any of its
Subsidiaries shall (a) make a material disposition, by means of a sale or
exchange of assets or capital stock, a distribution to stockholders or
otherwise, of any substantial portion of its assets, (b) repurchase or issue any
Billing capital stock (other than stock issued pursuant to employee plans or
outstanding options or Warrants), or (c) in the case of Billing, cease the
active conduct of a material portion of its business independently, with its own
employees and without material change, unless, in each of cases (a), (b) and
(c), in the opinion of counsel to Billing, which opinion shall be reasonably
satisfactory to USLD, or pursuant to a favorable IRS letter ruling or tax
opinion reasonably satisfactory to USLD, such act or omission would not
adversely affect the tax consequences of the Distribution to USLD or the
stockholders of USLD, as set forth in any ruling issued by any taxing authority
or tax opinion; and Billing has no present intention to take any such actions.
(b) USLD. (i) USLD shall, and shall cause each of the
Telecommunications Group Subsidiaries to comply with each representation and
statement made, or to be made, to any Person in connection with the Tax Opinion
with respect to any transaction contemplated by this Agreement; and (ii) until
the second anniversary of the Distribution Date, neither USLD nor any of its
Subsidiaries shall (a) make a material disposition, by means of a sale or
exchange of
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assets or capital stock, a distribution to stockholders or otherwise, of any
substantial portion of its assets (other than Billing Group Assets in connection
with the Distribution or transactions effected in contemplation thereof), (b)
repurchase any capital stock of USLD (other than stock issued pursuant to
employee plans or outstanding options or Warrants), or (c) in the case of USLD,
cease the active conduct of a material portion of its business independently,
with its own employees and without material change, unless, in each of cases
(a), (b) and (c), in the opinion of counsel to USLD, which opinion shall be
reasonably satisfactory to Billing, or pursuant to a favorable IRS letter ruling
or tax opinion reasonably satisfactory to Billing, such act or omission would
not adversely affect the tax consequences of the Distribution to Billing or the
stockholders of Billing, as set forth in any ruling issued by any taxing
authority or tax opinion; and USLD has no present intention to take any such
actions.
Section 8.05. BILLING RIGHTS PLAN. Prior to the Distribution Date,
the Billing Board may elect, in its sole discretion, to recommend that Billing
adopt a stockholder rights plan (the "Billing Rights Plan"). The Billing Rights
Plan will be substantially similar to the USLD Rights Plan and will provide for
the distribution of preferred share purchase rights ("Billing Rights") with
respect to each share of Billing Common Stock. The Billing Rights will be
attached to the Billing Common Stock and will not be exercisable, or
transferrable apart from the Billing Common Stock, unless and until certain
events occur. If certain events occur relating to the acquisition by an
acquiring person of Billing Common Stock, or a merger or other combination of
Billing with an acquiring person, the Billing Rights will entitle holders (other
than the acquiring person) to purchase either Billing Common Stock or common
stock of the acquiring person at a discount. The specific terms of the Billing
Rights will be determined by the Board of Directors of Billing consistent with
the description thereof in the Information Statement.
Section 8.06. USE OF THE "USLD" NAME AND THE USLD LOGO.
Notwithstanding anything to the contrary in this Agreement (including the
conveyance to Billing of the Transferred Intellectual Property) or in any
Related Agreement, the parties hereto agree that USLD shall retain the exclusive
right to use the mark "USLD" without limitation or expiration and the right to
use the USLD Logo following the Distribution.
Section 8.07. NONCOMPETITION AGREEMENT; RESTRICTED TRANSACTIONS. (a)
Each USLD and Billing agrees that for a period of one (1) year after the
Distribution Date, whether a breach of this Agreement or any Related Agreement
is alleged or not, neither USLD nor Billing will, without the prior written
consent of the other, which consent may be withheld in the sole discretion of
each, engage, whether for compensation or not, as an owner, partner,
stockholder, investor or in any other capacity whatsoever in any activity or
endeavor that competes directly or indirectly with the business of the other as
engaged in, or proposed to be engaged in, as of the Distribution Date; provided,
however, that nothing contained herein shall prohibit either USLD or Billing
from engaging in a merger, consolidation or other business combination with
another person or entity with departments or divisions that competes with either
USLD or Billing, as the case may be. Such restriction applies worldwide.
(b) Each USLD and Billing further agrees for a period of six (6) months
after the Distribution Date, notwithstanding any allegation of breach of this
Agreement or any Related
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Agreement, not, without the prior written consent of the other, to solicit,
influence or attempt to influence any employee of the other to terminate his or
her employment or other contractual relationship with his or her respective
employer for any reason including, without limitation, working for such
soliciting party. Either Billing or USLD may elect to pay to the other fifty
percent (50%) of the total previous 12 months salary and bonus of any employee
of the other for the privilege of soliciting the employment of such employee
without the necessity of obtaining the consent of the employing party.
(c) The covenants of USLD and Billing contained in Section 8.07 will be
construed as independent of any other provision in this Agreement; and the
existence of any claim or cause of action by USLD or Billing against the other
will not constitute a defense to the enforcement of said covenants. Each USLD
and Billing further agrees and acknowledges that this Section 8.07 (1) is
reasonable as to length of time, scope and geographic area for purposes of
protecting the commercial advantages enjoyed by each USLD and Billing, (2) does
not impose a greater restraint than is necessary to protect the goodwill or
business interests of each USLD and Billing and (3) is more than adequately paid
for in the consideration derived by each USLD and Billing under this Agreement.
Each of USLD and Billing also agree that the arbitrators (under Section 11.13)
have jurisdiction to modify any provisions of this Section 8.07 in accordance
with the court's or arbitrators' respective ruling as to reasonableness or scope
of application and that this Agreement shall remain enforceable as modified or
amended in the jurisdiction where this Agreement is so modified or amended.
ARTICLE IX.
ACCESS TO INFORMATION AND SERVICES
Section 9.01. PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in a Related Agreement, USLD
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Billing's cost) to Billing of the
Billing Books and Records in USLD's possession, except to the extent such items
are already in the possession of Billing or a Billing Subsidiary. The Billing
Books and Records shall be the property of Billing, but shall be available to
USLD for review and duplication until USLD shall notify Billing in writing that
such records are no longer of use to USLD.
(b) Except as otherwise provided in a Related Agreement, Billing shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at USLD's cost) to USLD of the USLD Books
and Records in Billing's possession, except to the extent such items are already
in the possession of USLD. The USLD Books and Records shall be the property of
USLD, but the USLD Books and Records that reasonably relate to the Billing Group
Business shall be available to Billing for review and duplication until Billing
shall notify USLD in writing that such records are no longer of use to Billing.
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Section 9.02. ACCESS TO INFORMATION.
Except as otherwise provided in a Related Agreement, from and after the
Distribution Date, USLD shall afford to Billing and its authorized accountants,
counsel and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information relating to
pre-Distribution operations (collectively, "INFORMATION") within USLD's
possession insofar as such access is reasonably required by Billing for the
conduct of its business, subject to appropriate restrictions for classified or
Privileged Information. Similarly, except as otherwise provided in a Related
Agreement, Billing shall afford to USLD and its authorized accountants, counsel
and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within
Billing's possession, insofar as such access is reasonably required by USLD for
the conduct of its business, subject to appropriate restrictions for classified
or Privileged Information. Information may be requested under this Article IX
for the legitimate business purposes of either party, including without
limitation, audit, accounting, claims (including claims for indemnification
hereunder), litigation and tax purposes, as well as for purposes for fulfilling
disclosure and reporting obligations and for performing this Agreement and the
transactions contemplated hereby. The parties hereby agree that Billing shall
also grant to USLD reasonable access to data maintained by Billing after the
Distribution that contain data and other information reasonably related to the
Telecommunications Group Assets or the Telecommunications Group Business, for
purposes of review and retrieval of such data (including the generation of
reports containing such data). USLD agrees to reimburse Billing for the
reasonable costs of the use of such computer systems. The parties also agree
that USLD shall grant to Billing reasonable access to data maintained by USLD
after the Distribution that certain data and other information reasonably
related to the Billing Group Assets or the Billing Group Business, for purposes
of review and retrieval of such data (including the generation of reports
containing such data). Billing agrees to reimburse USLD for the reasonable
costs of the use of such computer systems.
Section 9.03. PRODUCTION OF WITNESSES. At all times from and after
the Distribution Date, each of Billing and USLD shall use reasonable efforts to
make available to the other, upon written request, its and its Subsidiaries'
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any Action.
Section 9.04. REIMBURSEMENT. Except to the extent otherwise
contemplated in any Related Agreement, a party providing Information or witness
services to the other party under this Article IX shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(at cost) and direct and indirect expenses of employees who are witnesses or
otherwise furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witness services.
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Section 9.05. RETENTION OF RECORDS. Except as otherwise required by
law or agreed to in a Related Agreement or otherwise in writing, each of Billing
and USLD may destroy or otherwise dispose of any of the Information, which is
material Information and is not contained in other Information retained by USLD
or Billing, as the case may be, at any time after the tenth anniversary of this
Agreement, provided that, prior to such destruction or disposal, (a) it shall
provide no less than 90 or more than 120 days prior written notice to the other,
specifying in reasonable detail the Information proposed to be destroyed or
disposed of and (b) if a recipient of such notice shall request in writing prior
to the scheduled date for such destruction or disposal that any of the
Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of the party requesting such Information.
Section 9.06. CONFIDENTIALITY. Each of USLD and its Subsidiaries on
the one hand, and Billing and its Subsidiaries on the other hand, shall hold,
and shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the other or
the other's representatives pursuant to this Agreement or the Related Agreements
(except to the extent that such Information has been (i) in the public domain
through no fault of such party or (ii) later lawfully acquired from other
sources by such party), and each party shall not release or disclose such
Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers or other consultants and advisors, unless
compelled to disclose by judicial or administrative process, or as reasonably
advised by its counsel or by other requirements of law, or unless such
Information is reasonably required to be disclosed in connection with (x) any
litigation with any third-parties or litigation between the USLD Group and the
Billing Group, (y) any contractual agreement to which the USLD Group or the
Billing Group are currently parties, or (z) in exercise of either party's rights
hereunder or under any Related Agreement.
Section 9.07. PRIVILEGED MATTERS. Billing and USLD recognize that
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of both
the USLD Group and the Billing Group and that both the USLD Group and the
Billing Group should be deemed to be the client for the purposes of asserting
all Privileges. To allocate the interests of each party in the Privileged
Information, the parties agree as follows:
(a) USLD shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information that relates
solely to the Telecommunications Group, whether or not Privileged Information is
in the possession of or under the control of USLD or Billing. USLD shall also
be entitled, in perpetuity, to control the assertion or waiver of all Privileges
in connection with Privileged Information that relates solely to the subject
matter of any claims constituting Telecommunications Group Liabilities, now
pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated against or by USLD, whether or not the Privileged
Information is in the possession of or under the control of USLD or Billing.
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(b) Billing shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information that
relates solely to the Billing Group, whether or not the Privileged Information
is in the possession of or under the control of USLD or Billing. Billing shall
also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting Billing Group Liabilities, now pending
or which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by Billing, whether or not the Privileged Information is in
the possession of Billing or under the control of USLD or Billing.
(c) Billing and USLD agree that they shall have a shared Privilege, with
equal right to assert or waive, subject to the restrictions in this Section
9.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 9.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters that involve both Billing and USLD in
respect of which Billing and USLD retain any responsibility or liability under
this Agreement or any Related Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege that could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within 20 days after notice upon the other party
requesting such consent.
(e) In the event of any litigation or dispute between a member of the
USLD Group and a member of the Billing Group, either party may waive a Privilege
in which the other party has a shared Privilege, without obtaining the consent
of the other party, provided that such waiver of a shared Privilege shall be
effective only as to the use of Information with respect to the litigation or
dispute between the USLD Group and the Billing Group, and shall not operate as a
waiver of the shared Privilege with respect to third-parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party.
Each party specifically agrees that it will not withhold consent to waiver for
any purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other
request that arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which the other party has the sole right
hereunder to assert a Privilege, or if any party obtains knowledge that any of
its current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests that arguably calls for the production or
disclosure of such Privileged Information, such party shall promptly notify the
other party of the existence of the request and shall provide the other party a
reasonable opportunity to review the
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Information and to assert any rights it may have under this Section 9.07 or
otherwise to prevent the production or disclosure of such Privileged
Information.
(h) The transfer of the Billing Books and Records and the USLD Books and
Records and other Information between USLD and its Subsidiaries and Billing and
its Subsidiaries, is made in reliance on the agreement of Billing and USLD, as
set forth in Sections 9.06 and 9.07, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable Privileges.
The access to information being granted pursuant to Sections 9.01 and 9.02
hereof, the agreement to provide witnesses and individuals pursuant to Section
9.03 hereof and the transfer of Privileged Information between USLD and its
Subsidiaries and Billing and its Subsidiaries pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted under
this Agreement or otherwise.
ARTICLE X.
INSURANCE
Section 10.01. POLICIES AND RIGHTS INCLUDED WITHIN THE BILLING GROUP
Assets. Without limiting the generality of the definition of the Billing Group
Assets set forth in Section 2.01 or the effect of Section 2.01, the Billing
Group Assets shall include (a) any and all rights of an insured party under each
of the Shared Policies, specifically including rights of indemnity and the right
to be defended by or at the expense of the insurer, with respect to all
injuries, losses, liabilities, damages and expenses incurred or claimed to have
been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Billing Group or, to the extent any claim is
made against Billing or any of its Subsidiaries, the Telecommunications Group,
and which injuries, losses, liabilities, damages and expenses may arise out of
insured or insurable occurrences or events under one or more of the Shared
Policies; PROVIDED, HOWEVER, that nothing in this clause shall be deemed
to constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to Billing and (b) the Billing Group Policies.
Section 10.02. POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the
Distribution Date, any person, corporation, firm or entity shall assert a claim
against Billing or any of its Subsidiaries with respect to any injury, loss,
liability, damage or expense incurred or claimed to have been incurred prior to
the Distribution Date in, or in connection with, the conduct of the Billing
Group Business or, to the extent any claim is made against Billing or any of its
Subsidiaries, the Telecommunications Group Business, and which injury, loss,
liability, damage or expense may arise out of insured or insurable occurrences
or events under one or more of the Shared Policies, USLD shall at the time such
claim is asserted be deemed to assign, without need of further documentation, to
Billing any and all rights of an insured party under the applicable Shared
Policy with respect to such asserted claim, specifically including rights of
indemnity and the right to be defended by or at the expense of the insurer;
PROVIDED, HOWEVER, that nothing in this sentence shall be deemed to
constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to Billing.
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Section 10.03. ADMINISTRATION AND RESERVES. (a) Notwithstanding the
provisions of Article III, but subject to any contrary provisions of any Related
Agreement, from and after the Distribution Date:
(i) Billing shall be entitled to any reserves established by USLD
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Billing Group Liabilities; and
(ii) USLD shall be entitled to any reserves established by USLD or
any of its Subsidiaries, or the benefit of reserves held by any insurance
carrier, with respect to the Telecommunications Group Liabilities.
(b) INSURANCE PREMIUMS. Billing shall have the right but not the
obligation to pay the premiums, to the extent that USLD does not pay premiums
with respect to Telecommunications Group Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies and the Billing Group Policies, as
required under the terms and conditions of the respective Policies, whereupon
USLD shall forthwith reimburse Billing for that portion of such premiums paid by
Billing as are attributable to the Telecommunications Group Liabilities. USLD
shall provide continued coverage under its director and officer liability
insurance policy for a period of not less than five years for acts that took
place or were alleged to have taken place prior to the Distribution Date
covering persons who were directors and officers of USLD prior to the
Distribution Date. Fifty percent of the additional premiums, if any, for such
coverage shall be reimbursed by Billing within 15 days of the Distribution Date.
Such coverage for director and officer liability insurance shall not be
discontinued by USLD without the consent of Billing, which consent shall not be
unreasonably withheld.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received
with respect to claims, costs and expenses under the Policies shall be paid to
Billing with respect to the Billing Group Liabilities and to USLD with respect
to the Telecommunications Group Liabilities. Payment of the allocable portions
of indemnity costs of Insurance Proceeds resulting from the liability policies
will be made to the appropriate party upon receipt from the insurance carrier.
In the event that the aggregate limits on any Shared Policies are exceeded, the
parties agree to provide an equitable allocation of Insurance Proceeds received
after the Distribution Date based upon their respective bona fide claims. The
parties agree to use their best efforts to cooperate with respect to insurance
matters.
Section 10.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE. In
the event that Insured Claims of both Billing and USLD exist relating to the
same occurrence, Billing and USLD agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this paragraph shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
27
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ARTICLE XI.
MISCELLANEOUS
Section 11.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement,
including the Schedules and Exhibits and the Related Agreements and other
agreements and documents referred to herein, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter. Notwithstanding any other provisions in
this Agreement to the contrary, in the event and to the extent that there shall
be a conflict between the provisions of this Agreement and the provisions of the
Related Agreements, then the Related Agreements shall control.
Section 11.02. EXPENSES. Except as otherwise set forth in this
Agreement or any Related Agreement, all costs and expenses in connection with
the preparation, execution, delivery and implementation of this Agreement, the
Distribution and with the consummation of the transactions contemplated by this
Agreement shall be charged to the party for whose benefit the expenses are
incurred, with any expenses that cannot be allocated on such basis to be split
equally between the parties.
Section 11.03. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
the principles of conflicts of laws thereof.
Section 11.04. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered by hand or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and shall be deemed given on the date on which such notice is received:
To Billing:
Billing Information Concepts Corp.
9311 San Pedro, Suite 400
San Antonio, Texas 78216
Attention: President
To USLD:
U.S. Long Distance Corp.
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Attention: President
28
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Section 11.05. AMENDMENTS. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 11.06. SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 11.07. TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the USLD Board without the approval of Billing or of USLD's
stockholders. In the event of such termination, no party shall have any
liability to any other party pursuant to this Agreement.
Section 11.08. SUBSIDIARIES. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
Section 11.09. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third-parties any remedy,
claim, Liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 11.10. TITLES AND HEADINGS. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
Section 11.11. EXHIBITS AND SCHEDULES. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 11.12. LEGAL ENFORCEABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 11.13. ARBITRATION OF DISPUTES. (a) Any controversy or claim
arising out of this Agreement or any Related Agreement, or any breach of this
Agreement or any Related Agreement, including any controversy relating to a
determination of whether specific assets constitute Billing Group Assets or
Telecommunications Group Assets or whether specific Liabilities constitute
Billing Group Liabilities or Telecommunications Group Liabilities, but excluding
any controversy relating to the matters set forth in Section 2.06, shall be
settled by
29
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arbitration in accordance with the rules of the American Arbitration Association
then in effect, as modified by this Section 11.13 or by the further agreement of
the parties.
(b) Such arbitration shall be conducted in Bexar County, Texas.
(c) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement or the
Related Agreements.
(d) Nothing contained in this Section 11.13 shall limit or restrict in
any way the right or power of a party at any time to seek injunctive relief in
any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain the other party from breaching this
Agreement or (ii) for specific enforcement of this Section 11.13. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 11.13 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this Section
11.13.
(e) The Parties hereby consent to the jurisdiction of the federal courts
located in the State of Texas for all purposes under this Agreement.
(f) Neither party nor the arbitrators may disclose the existence or
results of any arbitration under this Agreement or any Related Agreement or any
evidence presented during the course of the arbitration without the prior
written consent of both parties, except as required to fulfill applicable
disclosure and reporting obligations, or as otherwise required by law.
(g) Each party shall bear its own costs incurred in the arbitration. If
either party refuses to submit to arbitration any dispute required to be
submitted to arbitration pursuant to this Section 11.13, and instead commences
any other proceeding, including, without limitation, litigation, then the party
who seeks enforcement of the obligation to arbitrate shall be entitled to its
attorneys' fees and costs incurred in any such proceeding.
Section 11.14. PROMPT ACTION. Where the terms of this Agreement
require payment or action "as promptly as possible," "as soon as practicable,"
or "as soon as possible" such payment or action shall be made or taken, as the
case may be, within five (5) business days.
Section 11.15. APPLICABILITY TO RELATED AGREEMENTS. To the extent that
an issue or question arises under a Related Agreement and such issue or question
is not specifically addressed in the Related Agreement (i.e. indemnification;
access to information, confidentiality, etc.), such issue or question shall be
governed by the applicable provisions in this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
U.S. LONG DISTANCE CORP.
By:
--------------------------------
Title:
-----------------------------
BILLING INFORMATION CONCEPTS CORP.
By:
--------------------------------
Title:
-----------------------------
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<PAGE>
INDEX OF EXHIBITS AND SCHEDULES
REFERENCED
ON
EXHIBITS PAGE
Exhibit A
Benefit Plans and Employment Matters Allocation Agreement.......... 2
Exhibit B
Billing Bylaws..................................................... 3
Exhibit C
Amended and Restated Certificate of Incorporation of Billing....... 3
Exhibit D
Billing Pro Forma Consolidated Balance Sheet....................... 4
Exhibit E
Expense Sharing Agreement.......................................... 4
Exhibit F
Tax Sharing Agreement.............................................. 7
Exhibit G
Transitional Services and Sublease Agreement....................... 8
Exhibit H
USLD Pro Forma Consolidated Balance Sheet.......................... 8
Exhibit I
Opinion of The Chicago Corporation................................ 15
Exhibit J
Opinion of Houlihan Lokey......................................... 15
32
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Exhibit K
Opinion of Arter & Hadden......................................... 15
SCHEDULES
1.01(a) Billing Group Subsidiaries..................................... 7
1.01(b) Transferred Intellectual Property ............................. 7
33
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SCHEDULE 1.01(a)
BILLING GROUP SUBSIDIARIES
Billing Information Concepts, Inc., a Delaware corporation (100%)
Enhanced Services Billing, Inc. a Texas corporation (100%)
34
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SCHEDULE 1.01(b)
TRANSFERRED INTELLECTUAL PROPERTY
NONE
35
<PAGE>
TAX SHARING AGREEMENT
by and among
U.S. LONG DISTANCE CORP.,
and
BILLING INFORMATION CONCEPTS CORP.
dated as of
__________________, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Definitions.................................................... 1
1.1 Affiliate...................................................... 1
1.2 Affiliated Group............................................... 1
1.3 Billing........................................................ 1
1.4 Billing Group.................................................. 2
1.5 Billing Member................................................. 2
1.6 Closing........................................................ 2
1.7 Closing Date................................................... 2
1.8 Code........................................................... 2
1.9 Combined Jurisdiction.......................................... 2
1.10 Distribution Agreement......................................... 2
1.11 Final Determination............................................ 2
1.12 Information Return(s).......................................... 2
1.13 IRS............................................................ 2
1.14 Net Tax(es).................................................... 2
1.15 Overdue Rate................................................... 2
1.16 Post-Closing Straddle Period................................... 2
1.17 Post-Closing Taxable Period.................................... 3
1.18 Pre-Closing Straddle Period.................................... 3
1.19 Pre-Closing Taxable Period..................................... 3
1.20 Pre-Spin-Off Affiliate......................................... 3
1.21 Pre-Spin-Off Group............................................. 3
1.22 Pre-Spin-Off Member............................................ 3
1.23 Representative................................................. 3
1.24 Separate Return Basis.......................................... 3
1.25 Spin-Off....................................................... 3
1.26 Straddle Period................................................ 3
1.27 Tax(es)........................................................ 3
1.28 Taxable Period................................................. 3
1.29 Taxable Year................................................... 4
1.30 Tax Benefit(s)................................................. 4
1.31 Taxing Authority............................................... 4
1.32 Tax Practices.................................................. 4
1.33 Tax Return(s).................................................. 4
1.34 USLD........................................................... 4
1.35 USLD Group..................................................... 4
1.36 USLD Member.................................................... 4
Section 2. Obligations, Responsibilities and Rights of USLD and Billing... 5
2.1 Preparation and Filing of Tax Returns.......................... 5
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2.2 Provision of Filing Information................................ 5
2.3 Taxable Year................................................... 5
2.4 Straddle Period Taxes.......................................... 6
2.5 Payment of Taxes............................................... 6
2.6 Amendments to Tax Returns...................................... 6
2.7 Refund of Taxes................................................ 6
2.8 Carrybacks..................................................... 7
Section 3. Indemnification................................................ 7
3.1 By USLD........................................................ 7
3.2 By Billing..................................................... 7
3.3 Certain Reimbursements......................................... 8
3.4 Other Indemnification.......................................... 8
Section 4. Method, Timing and Character of Payments Required by This
Agreement.................................................... 8
4.1 Payment in Immediately Available Funds; Interest............... 8
4.2 Characterization of Payments................................... 8
Section 5. Tax Returns; Cooperation; Document Retention; Confidentiality.. 8
5.1 Provision of Cooperation, Documents and Other Information...... 8
5.2 Retention of Books and Records................................. 9
5.3 Status and Other Information Regarding Audits and Litigation... 9
5.4 Confidentiality of Documents and Information................... 9
Section 6. Contests and Audits............................................ 10
6.1 Notification of Audits or Disputes............................. 10
6.2 Control and Settlement......................................... 10
6.3 Delivery of Powers of Attorney and Other Documents............. 10
Section 7. Miscellaneous.................................................. 10
7.1 Effectiveness.................................................. 10
7.2 Entire Agreement............................................... 10
7.3 Guarantees of Performance...................................... 10
7.4 Severability................................................... 11
7.5 Indulgences, etc............................................... 11
7.6 Governing Law.................................................. 11
7.7 Notices........................................................ 11
7.8 Modification or Amendment...................................... 11
7.9 Successors and Assigns......................................... 11
7.10 No Third-Party Beneficiaries................................... 11
7.11 Other.......................................................... 12
7.12 Predecessors and Successors.................................... 12
7.13 Tax Elections.................................................. 12
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7.14 Injunctions.................................................... 12
7.15 Further Assurances............................................. 12
7.16 Setoff......................................................... 12
7.17 Costs and Expenses............................................. 13
7.18 Rules of Construction.......................................... 13
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TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT is entered into by and among U.S. Long Distance
Corp., a Delaware corporation ("USLD"), Billing Information Concepts Corp., a
Delaware corporation ("Billing"), and their respective direct and indirect
subsidiaries. References herein to a "party" (or "parties") to this Agreement,
shall refer to USLD, Billing, and where appropriate and the context so requires,
their respective subsidiaries.
RECITALS
A. USLD and its subsidiaries have joined in filing consolidated federal
Tax Returns and certain consolidated, combined or unitary state, local or
foreign Tax Returns.
B. USLD and Billing have entered into that certain Distribution
Agreement, dated as of the date hereof (the "Distribution Agreement"), pursuant
to which USLD will distribute all of the outstanding common stock in Billing to
USLD's stockholders in a transaction intended to qualify for tax-free treatment
under Code Section 355 (the "Spin-Off").
C. Pursuant to the Spin-Off, Billing and its subsidiaries will leave
the Pre-Spin-Off Group.
D. The parties hereto wish to provide for (i) allocations of, and
indemnifications against, certain liabilities for Taxes, (ii) the preparation
and filing of Tax Returns on a basis consistent with prior practice and the
payment of Taxes with respect thereto, and (iii) certain related matters.
NOW THEREFORE, in consideration of the foregoing and their mutual
promises, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. When used herein the following terms shall
have the following meanings:
1.1 "AFFILIATE" - with respect to any corporation (the "given
corporation"), each person, corporation, partnership or other entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the given corporation. For
purposes of this definition, "control" means the possession, directly or
indirectly, of 50% or more of the voting power or value of outstanding voting
interests.
1.2 "AFFILIATED GROUP" - an affiliated group of corporations within
the meaning of Code Section 1504(a) for the Taxable Period or, for purposes of
any state income tax matters, any consolidated, combined or unitary group of
corporations within the meaning of the corresponding provisions of tax law for
the state in question.
1.3 "BILLING" - as defined in the recitals to this Agreement.
<PAGE>
1.4 "BILLING GROUP" - Billing and each corporation that joins with
Billing in filing a consolidated federal income tax return for any Post-Closing
Taxable Period. For purposes of this Agreement, the Billing Group shall exist
from the beginning of the day immediately after the Closing Date.
1.5 "BILLING MEMBER" - a corporation that was a Pre-Spin-Off Member
and becomes a member of the Billing Group at the beginning of the day
immediately after the Closing Date.
1.6 "CLOSING" - the time at which the Spin-Off shall become effective
on the Closing Date.
1.7 "CLOSING DATE" - the date on which the Spin-Off is effected by
USLD.
1.8 "CODE" - the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the Taxable Year in question.
1.9 "COMBINED JURISDICTION" - for any Taxable Period, any state, local
or foreign jurisdiction in which USLD or a USLD Affiliate is included in a
consolidated combined, unitary or similar return with Billing or any Billing
Affiliate for state, local or foreign Tax purposes.
1.10" DISTRIBUTION AGREEMENT" - as defined in the recitals to this
Agreement.
1.11 "FINAL DETERMINATION" - (i) a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable; (ii) a closing agreement or accepted offer in compromise under
Code Sections 7121 or 7122, or comparable agreements or accepted offers under
the laws of other jurisdictions; (iii) any other final settlement with the IRS
or other Taxing Authority; or (iv) the expiration of an applicable statute of
limitations.
1.12 "INFORMATION RETURN(s)" - with respect to any corporation or
Affiliated Group, any and all reports, returns, declarations or other filings
(other than Tax Returns) required to be supplied to any Tax Authority.
1.13 "IRS" - the Internal Revenue Service.
1.14 "NET TAX(ES)" - Taxes (as defined herein) less any related
interest or penalty attributed to such Taxes.
1.15 "OVERDUE RATE" - a rate of interest per annum that equals the
prime or base lending rate of ______ plus ______ basis points.
1.16 "POST-CLOSING STRADDLE PERIOD" - with respect to any Straddle
Period, the period beginning on the day after the Closing Date and ending on the
last day of such Taxable Year.
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1.17 "POST-CLOSING TAXABLE PERIOD" - a Taxable Year that begins on or
after the day immediately after the Closing Date.
1.18 "PRE-CLOSING STRADDLE PERIOD" - with respect to any Straddle
Period, the period beginning on the first day of such Taxable Year and ending on
the close of business on the Closing Date.
1.19 "PRE-CLOSING TAXABLE PERIOD" - a Taxable Year that ends at or
before the close of business on the Closing Date.
1.20 "PRE-SPIN-OFF AFFILIATE" - any Affiliate of any Pre-Spin-Off
Member.
1.21 "PRE-SPIN-OFF GROUP" - USLD and each corporation that joined with
USLD in filing a consolidated federal income tax return for any Pre-Closing
Taxable Period. For purposes of this Agreement, the Pre-Spin-Off Group shall
terminate at the close of business on the Closing Date.
1.22 "PRE-SPIN-OFF MEMBER" - a corporation that was a member of the
Pre-Spin-Off Group immediately prior to the close of business on the Closing
Date.
1.23 "REPRESENTATIVE" - with respect to any person or entity, any of
such person's or entity's directors, officers, employees, agents, consultants,
accountants, attorneys and other advisors.
1.24 "SEPARATE RETURN BASIS" - the Tax liability for the Billing Group
(or any Billing Member) calculated with Billing as the common parent of the
Affiliated Group and without regard to any USLD Member.
1.25 "SPIN-OFF" - as defined in the Recitals to this Agreement.
1.26 "STRADDLE PERIOD" - any Taxable Year beginning before and ending
after the close of business on the Closing Date.
1.27 "TAX(ES)" - with respect to any corporation or group of
corporations, any and all U.S. and foreign taxes based or measured by net
income, gross income, gross receipts (when levied in lieu of an income tax)
alternative minimum taxable income, capital surplus, payroll or fixed assets
regardless of whether denominated as an "income tax," a "franchise tax"
sales/use tax, local utility tax, Public Utility Commission (PUC) regulatory
tax, property tax or otherwise, imposed by any Taxing Authority, whether any
such tax is imposed directly or through withholding, together with any interest
and any penalty, addition to tax resulting from a tax deficiency or additional
amount.
1.28 "TAXABLE PERIOD" - a Pre-Closing Taxable Period, a Post-Closing
Taxable Period or a Straddle Period.
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1.29 "TAXABLE YEAR" - a taxable year (which may be shorter than a full
calendar or fiscal year), year of assessment or similar period with respect to
which any Tax may be imposed.
1.30 "TAX BENEFIT(S)" - (i) in the case of a Tax for which a
consolidated federal, or a consolidated, combined or unitary state or other, Tax
Return is filed, the amount by which the Tax liability of the Affiliated Group
or other relevant group of corporations is actually reduced on a "with and
without" basis (by deduction, entitlement to refund, credit, offset or
otherwise, whether available in the current Taxable Year, as an adjustment to
taxable income in any other Taxable Year or as a carryforward or carryback, and
including the effect of such reduction on other Taxes), plus any interest
received with respect to any related Tax refund, and (ii) in the case of any
other Tax, the amount by which the Tax liability of a corporation is actually
reduced on a "with and without" basis (by deduction, entitlement to refund,
credit offset or otherwise, whether available in the current Taxable Year, as an
adjustment to taxable income in any other Taxable Year or as a carryforward or
carryback, and including the effect of such reduction on other Taxes), plus any
interest received with respect to any related Tax refund.
1.31 "TAXING AUTHORITY" - the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
1.32 "TAX PRACTICES" - the most recently applied policies, procedures
and practices employed by the Pre-Spin-Off Group in the preparation and filing
of, and positions taken on, any Tax Returns of USLD or any Pre-Spin-Off Member
or Pre-Spin-Off Affiliate for any Pre-Closing Taxable Period.
1.33 "TAX RETURN(S)" - with respect to any corporation or Affiliated
Group, all returns, reports, estimates, information statements, including forms
necessary to be filed to withdraw a company's authorization to do business in
any state or locality, declarations and other filings relating to, or required
to be filed in connection with, the payments or refund of any Tax for any
Taxable Period.
1.34 "USLD" - as defined in the recitals to this Agreement.
1.35 "USLD GROUP" - USLD and each corporation that joins with USLD in
filing a consolidated federal income tax return for any Post-Closing Taxable
Period. For purposes of this Agreement, the USLD Group shall exist from the
beginning of the day immediately after the Closing Date.
1.36 "USLD MEMBER" - a corporation that was immediately before the
Spin-Off a Pre-Spin-Off Member and becomes a member of the USLD Group at the
beginning of the day immediately after the Closing Date.
4
<PAGE>
SECTION 2. OBLIGATIONS, RESPONSIBILITIES AND RIGHTS OF USLD AND BILLING.
2.1 PREPARATION AND FILING OF TAX RETURNS.
(a) BY USLD. USLD shall prepare and timely file (or cause to be
prepared and timely filed):
(1) all U.S. and foreign Tax and Information Returns of the
Pre-Spin-Off Group and any Pre-Spin-Off Member that are required to be filed for
periods ending on or before the Closing Date;
(2) all U.S. and foreign Tax and Information Returns of the
Pre-Spin-Off Group and any Pre-Spin-Off Member for all Pre-Closing Taxable
Periods that are not required to be filed for periods ending on or before the
Closing Date;
(3) all U.S. and foreign Tax and Information Returns of the
USLD Group and any USLD Member for all Straddle Periods and Post-Closing Taxable
Periods; and
(4) all U.S. and foreign Tax and Information Returns not
otherwise required to be filed by USLD or Billing pursuant to this Section
2.1(a) and Section 2.1(b).
(b) BY BILLING. Billing shall prepare and timely file (or cause
to be prepared and timely filed) all Tax and Information Returns of the Billing
Group and any Billing Member for all Straddle Periods and Post-Closing Taxable
Periods.
2.2 PROVISION OF FILING INFORMATION. Each party shall cooperate and
assist the other party in the preparation and filing of all Tax and Information
Returns subject to Section 2.1 and submit to the other party (i) all necessary
filing information in a manner consistent with past Tax Practices and (ii) all
other information reasonably requested by the other party in connection with the
preparation of such Tax and Information Returns promptly after such request.
2.3 TAXABLE YEAR. Billing and USLD agree that, for Tax purposes, (i)
for the period ending on the Closing Date, the Billing Member shall be included
in the consolidated federal Tax Return of the Pre-Spin-Off Group for the Taxable
Year that ends at the close of business on September 30, 1996 (and in all
corresponding consolidated, combined or unitary state or other Tax Returns of
the Pre-Spin-Off Group) and (ii) for the period beginning the day after the
Closing Date, the Billing Group and each Billing Member shall begin a new short
period Taxable Year for purposes of such federal and, to the extent permitted by
law, state Taxes on the day after the Closing Date. The parties further agree
that, to the extent permitted by applicable law, all federal, state or other Tax
Returns shall be filed consistently with this position.
5
<PAGE>
2.4 STRADDLE PERIOD TAXES.
(a) For purposes of this Agreement, Taxes shall be allocated
between the Pre- and Post-Closing Straddle Periods, in USLD's reasonable
judgment with the consent of the appropriate Billing personnel, which shall not
be unreasonably withheld, in the following manner: (A) to the extent not
impractical, Taxes shall be allocated on the basis of the actual taxable income
for each such period, determined by closing the books of the Pre-Spin-Off Group
at the close of business on the Closing Date; and (B) to the extent that such an
allocation based on a closing of the books is impractical, USLD shall be
authorized to allocate Taxes based on rounding to the next nearest accounting
period-end.
(b) USLD shall pay to Billing within fourteen (14) days after
receipt of an executed Straddle Period Tax Return prepared by Billing pursuant
to Section 2.1(b), the excess of any amount so allocated (based on the amount of
Tax shown on such Tax Return) to the Pre-Closing Straddle Period over the amount
of any estimated Taxes previously paid by any Pre-Spin-Off Member to the
relevant Taxing Authority prior to the Closing Date; or Billing shall pay to
USLD within fourteen (14) days after the filing of such Tax Return the excess of
the amount of any estimated Taxes previously paid by any Pre-Spin-Off Member to
the relevant Taxing Authority prior to the Closing Date over the amount so
allocated to such Period.
2.5 PAYMENT OF TAXES. USLD shall pay (i) all Taxes shown to be due
and payable on all Tax Returns filed by (A) USLD pursuant to Section 2.1(a)
hereof and (ii) subject to Section 3, all Taxes that shall thereafter become due
and payable with respect to all Tax Returns filed pursuant to Sections 2.1(a) as
a result of a Final Determination; PROVIDED, HOWEVER, that Billing shall
reimburse USLD within fourteen (14) days of receipt of notification from USLD
for the amount of Net Taxes that are attributable to any Billing Member on a
Separate Return Basis for all Pre-Closing Taxable Periods that shall thereafter
become due and payable as a result of a Final Determination. Billing shall pay
all Taxes attributable to all Tax Returns filed by Billing pursuant to Section
2.1(b) hereof.
2.6 AMENDMENTS TO TAX RETURNS. No Tax Returns for any Pre-Closing
Taxable Periods filed by USLD may be amended without USLD's and Billing's
consent, which shall not be unreasonably withheld.
2.7 REFUND OF TAXES.
(a) USLD shall be entitled to any refund of Taxes and any Tax
Benefits realized as a result of a Final Determination with respect to all Tax
Returns filed by USLD pursuant to Section 2.1(a); provided, however, that USLD
shall reimburse Billing for the amount of any Tax Benefit attributable to any
Billing Member for all Pre-Closing Taxable Periods which arises as a result of a
Final Determination. (Any refund resulting from the application of a net
operating loss carryback is deemed attributable to the corporation generating
such net operating loss.) Billing shall be entitled to any refund with respect
to all Tax Returns filed by Billing pursuant to Section 2.1(b). Any such
refunds attributable to a Straddle Period shall be allocated
6
<PAGE>
between the Pre-Closing Straddle Period and Post-Closing Straddle Period on a
basis consistent with the method used to allocated the Tax liability for such
Straddle Period. With respect to Straddle Period Tax Returns prepared by
Billing pursuant to Section 2.1(b), USLD shall be entitled to any refund
attributable to a Pre-Closing Straddle Period.
(b) If USLD or any USLD Member receives a Tax refund or Tax
Benefit to which Billing or any Billing Member is entitled pursuant to this
Agreement, USLD shall pay (in accordance with Section 4) the amount of such Tax
refund or Tax Benefit to Billing within fourteen (14) days of receipt thereof.
(c) Except as otherwise provided in this Agreement, if Billing or
any Billing Member receives a Tax refund or Tax Benefit to which USLD or any
USLD Member is entitled pursuant to this Agreement, Billing shall pay (in
accordance with Section 4) the amount of such Tax refund or Tax Benefit
(including any interest received thereon) to USLD within fourteen (14) days of
receipt thereof.
2.8 CARRYBACKS. Neither Billing nor USLD shall file any carryback
claim for federal Taxes or state, local or foreign Taxes in a Combined
Jurisdiction for the Billing Group or any Billing Member or the USLD Group or
any USLD Member into a Pre-Closing Taxable Period without the prior written
consent of USLD or Billing, as applicable, which shall not be unreasonably
withheld.
SECTION 3. INDEMNIFICATION.
3.1 BY USLD.
(a) TAXES. Except as provided in Section 3.2, USLD shall
indemnify and hold Billing and Billing Members harmless against any and all (A)
Taxes attributable to all Tax Returns filed by USLD pursuant to Section 2.1(a),
(including specifically any tax liability arising from the liquidation of Mega
Plus Dialing, Inc.) and (B) with respect to Straddle Period Tax Returns prepared
by Billing pursuant to Section 2.1(b), Taxes attributable to Pre-Closing
Straddle Periods as shown on such Tax Returns.
(b) MEMBER LIABILITY. Except as provided in Sections 3.1(a) and
3.2, USLD shall indemnify and hold Billing and the Billing Members harmless
against each and every liability for Taxes of the Pre-Spin-Off Group under
Treasury Regulation Section 1.1502-6 or any similar law, rule or regulation
administered by any Taxing Authority.
3.2 BY BILLING. Billing shall indemnify and hold USLD and USLD
Members harmless against any and all (i) Taxes attributable to all Tax Returns
filed by Billing pursuant to Section 2.1(b) (but excluding Taxes attributable to
Pre-Closing Straddle Periods that are shown on any Straddle Period Tax Returns),
and (ii) all Net Taxes attributable to any Billing Member on a Separate Return
Basis for all Pre-Closing Taxable Periods that shall thereafter become due and
payable as a result of a Final Determination.
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<PAGE>
3.3 CERTAIN REIMBURSEMENTS. Billing (or USLD, as the case may be)
shall notify USLD (or Billing) of any Taxes paid by the Billing Group or any
Billing Member (or the USLD Group or any USLD Member) which are subject to
indemnification under this Section 3. To the extent not otherwise provided in
this Section 3, any other notification contemplated by this Section 3.3 shall
include a detailed calculation (including, if applicable, separate allocations
of such Taxes between Pre- and Post-Closing Taxable Periods and Pre- and
Post-Closing Straddle Periods and supporting work papers) and a brief
explanation of the basis for indemnification hereunder. Whenever a notification
described in this Section 3.3 is given, the notified party shall pay the amount
requested in such party notice to the notifying party in accordance with Section
4, but only to the extent that the notified party agrees with such request. To
the extent the notified party disagrees with such request, it shall, within
fourteen (14) days, so notify the notifying party, whereupon the parties shall
use their best efforts to resolve any such disagreement. Any payment after such
fourteen (14)day period shall include interest at the Overdue Rate from the date
such payment would have been made under Section 4 based upon the original notice
given by the notifying party.
3.4 OTHER INDEMNIFICATION. Notwithstanding the foregoing, the
indemnification provisions in this Agreement shall not restrict the scope of any
other indemnification provisions between any USLD Member and any Billing Member
as set forth in any other intercompany agreements entered into in connection
with the Spin-Off.
SECTION 4. METHOD, TIMING AND CHARACTER OF PAYMENTS REQUIRED BY THIS
AGREEMENT.
4.1 PAYMENT IN IMMEDIATELY AVAILABLE FUNDS; INTEREST. All payments
made pursuant to this Agreement shall be made in immediately available funds.
Except as otherwise provided herein, any payment not made within fourteen (14)
days of when due shall thereafter bear interest at the Overdue Rate from the
date such payment was due.
4.2 CHARACTERIZATION OF PAYMENTS. Any payments including future
reimbursements related to refunds or deficiencies (other than interest thereon)
made hereunder by USLD to Billing or by Billing to USLD shall be treated by all
parties for Tax purposes to the extent permitted by law, and for accounting
purposes to the extent permitted by generally accepted accounting principles, as
non-taxable dividend distributions or capital contributions made prior to the
close of business on the Closing Date.
SECTION 5. TAX RETURNS; COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
5.1 PROVISION OF COOPERATION, DOCUMENTS AND OTHER INFORMATION. Upon
the reasonable request of any party to this Agreement, USLD and Billing shall
provide (and shall cause the members of their respective Affiliated Groups to
provide) the requesting party, promptly upon request, with such cooperation and
assistance, documents, and other information, without charge, as may reasonably
be requested by such party in connection with (i) the preparation and filing of
any original or amended Tax Return, (ii) the conduct of any audit or
8
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other examination or any judicial or administrative proceeding involving to any
extent Taxes or Tax Returns within the scope of this Agreement, or (iii) the
verification by a party of an amount payable hereunder to, or receivable
hereunder from, another party. Such cooperation and assistance shall include,
without limitation: (i) the provision on demand of books, records, Tax Returns,
documentation or other information relating to any relevant Tax Return; (ii) the
execution of any document that may be necessary or reasonably helpful in
connection with the filing of any Tax Return, or in connection with any audit,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations, with respect to Tax Returns
which USLD may be obligated to file on behalf of Billing Members pursuant to
Section 2.1; (iii) the prompt and timely filing of appropriate claims for
refund; and (iv) the use of reasonable best efforts to obtain any documentation
from a governmental authority or a third party that may be necessary or helpful
in connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
5.2 RETENTION OF BOOKS AND RECORDS. USLD, each USLD Member, Billing
and each Billing Member shall retain or cause to be retained all Tax Returns,
and all books, records, schedules, workpapers, and other documents relating
thereto, until the expiration of the later of (i) all applicable statutes of
limitations (including any waivers or extensions thereof), and (ii) any
retention period required by law or pursuant to any record retention agreement.
The parties hereto shall notify each other in writing of any waivers, extensions
or expirations of applicable statutes of limitations. The parties shall provide
written notice of any intended destruction of the documents referred to in this
subsection. A party giving such a notification shall not dispose of any of the
foregoing materials without first offering to transfer possession thereof to all
notified parties.
5.3 STATUS AND OTHER INFORMATION REGARDING AUDITS AND LITIGATION. Each
party shall use reasonable best efforts to keep the other party advised, as
to the status of Tax audits and litigation involving any issue relating to
any Taxes, Tax Returns or Tax Benefits subject to indemnification under this
Agreement. To the extent relating to any such issue, each party shall
promptly furnish the other party copies of any inquiries or requests for
information from any Taxing Authority or any other administrative, judicial
or other governmental authority as well as copies of any revenue agent's
report or similar report, notice of proposed adjustment or notice of
deficiency.
5.4 CONFIDENTIALITY OF DOCUMENTS AND INFORMATION. Except as required
by law or with the prior written consent of the other party, all Tax Returns,
documents, schedules, work papers and similar items and all information
contained therein, which Tax Returns and other materials are within the scope of
this Agreement, shall be kept confidential by the parties hereto and their
Representatives, shall not be disclosed to any other person or entity and shall
be used only for the purposes provided herein.
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<PAGE>
SECTION 6. CONTESTS AND AUDITS.
6.1 NOTIFICATION OF AUDITS OR DISPUTES. Upon the receipt by a party
of notice of any pending or threatened Tax audit or assessment which may affect
the liability for Taxes that are subject to indemnification hereunder, such
party shall promptly notify the other party in writing of the receipt of such
notice.
6.2 CONTROL AND SETTLEMENT. USLD shall have the right and obligation
to control, and to represent the interests of all affected taxpayers in, any Tax
audit or administrative, judicial or other proceeding relating, in whole or in
part, to any Pre-Closing Taxable Period or any other Taxable Period for which
USLD is responsible, in whole or in part, for Taxes under Sections 2.5 and 3,
and to employ counsel of its choice. However, that, with respect to such issues
that may exclusively impact Billing or any Billing Member for any such Taxable
Period, USLD shall have the right and obligation to assign responsibility to
Billing as to the handling and disposition of such issues. To the extent that
both Billing and USLD have joint liability with respect to tax deficiencies,
USLD shall in good faith consult with Billing as to the handling and disposition
of such issues and shall not enter into any settlement that impacts Billing or
any Billing Member without the written consent of Billing, which shall not be
unreasonably withheld; and provided, further, that Billing's Tax Director shall
hand deliver to USLD's Chief Financial Officer a written response to any
notification by USLD of a proposed settlement within ten (10) days of the
receipt of such notification. If Billing's Tax Director fails to so respond
within such ten day period, Billing shall be deemed to have consented to the
proposed settlement.
SECTION 7. MISCELLANEOUS.
7.1 EFFECTIVENESS. This Agreement shall be effective from and after
the Closing Date and shall survive until the expiration of any applicable
statute of limitations; provided, however, that this Agreement shall terminate
immediately upon a termination of the Distribution Agreement.
7.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof. This
Agreement terminates and supersedes, on a prospective basis only, any and all
other sharing or allocation agreements with respect to Taxes in effect at the
time between the Pre-Spin-Off Group and the Billing Members, but shall not
affect any such agreement to the extent applicable only among USLD Members.
7.3 GUARANTEES OF PERFORMANCE. USLD and Billing hereby guarantee the
complete and prompt performance by the members of their respective Affiliated
Groups of all of their obligations and undertakings pursuant to this Agreement.
If, subsequent to the close of business on the Closing Date, either USLD or
Billing shall be acquired by another entity such that 50% or more of its common
stock is in common control, such acquirer shall, by making such acquisition,
simultaneously agree to jointly and severally guarantee the complete and prompt
10
<PAGE>
performance by the acquired corporation and any Affiliate of the acquired
corporation of all of their obligations and undertakings pursuant to this
Agreement.
7.4 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions hereof without including any of such
which may hereafter be declared invalid, void or unenforceable. In the event
that any such term, provision, covenant or restriction is hereafter held to be
invalid, void or unenforceable, the parties hereto agree to use their best
efforts to find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.
7.5 INDULGENCES, ETC. Neither the failure nor any delay on the part
of any party hereto to exercise any right under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver of
such right with respect to any other occurrence.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas without regard to the
conflict of law principles thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
7.7 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be made in writing and shall be
delivered by hand or mailed by registered or certified mail (return receipt
requested) to the designated representative of the tax department of each party
and confirmed by a copy thereof directed to the [General Counsel] by each party.
7.8 MODIFICATION OR AMENDMENT. This Agreement may be amended at any
time by written agreement executed and delivered by duly authorized officers of
Billing and USLD.
7.9 SUCCESSORS AND ASSIGNS. A party's rights and obligations under
this Agreement may not be assigned without the prior written consent of the
other party. All of the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, and shall survive any acquisition, disposition or other
corporate restructuring or transaction involving either party.
7.10 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties to this Agreement and their respective Affiliates and
should not be deemed to confer upon
11
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third parties any remedy, claim, liability, reimbursement, claim of action or
other right in excess of those existing without this Agreement.
7.11 OTHER. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all of such counterparts shall together constitute one and the same
instrument. The section numbers and captions herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
7.12 PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation,
Affiliated Group or member of an Affiliated Group shall also include any
predecessors or successors thereto, by operation of law or otherwise.
7.13 TAX ELECTIONS. Nothing in this Agreement is intended to change or
otherwise affect any previous tax election made by or on behalf of the
Pre-Spin-Off Group. USLD, as common parent of the USLD Group, shall continue to
have discretion, reasonably exercised, to make any and all elections with
respect to all members of the Pre-Spin-Off Group for all Pre-Closing Taxable
Periods for which it is obligated to file Tax or Information Returns under
Section 2.1(a).
7.14 INJUNCTIONS. The parties acknowledge that irreparable damage
would incur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. The
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches hereto and to enforce specifically the terms and provisions hereof in
any court having jurisdiction; such remedy shall be in addition to any other
remedy available at law or in equity.
7.15 FURTHER ASSURANCES. Subject to the provisions hereof, the parties
hereto shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. Subject to the provisions hereof, each party
shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other party with all such information as it
may reasonably request in order to be able to comply with the provisions of this
sentence.
7.16 SETOFF. All payments to be made by any party under this Agreement
shall be made without setoff, counterclaim or withholding, all of which are
expressly waived.
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7.17 COSTS AND EXPENSES. Unless otherwise specifically provided
herein, each party agrees to pay its own costs and expenses resulting from the
fulfillment of its respective obligations hereunder.
7.18 RULES OF CONSTRUCTION. Any ambiguities shall be resolved without
regard to which party drafted the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on their respective behalf by this respective officers thereunto duly
authorized, as of the day and year above written.
U.S. LONG DISTANCE CORP. AND
SUBSIDIARIES
By:________________________________
Name:______________________________
Title:_____________________________
BILLING INFORMATION CONCEPTS CORP.
AND SUBSIDIARIES
By:________________________________
Name:______________________________
Title:_____________________________
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<PAGE>
BENEFIT PLANS AND
EMPLOYMENT MATTERS ALLOCATION AGREEMENT
between
U.S. LONG DISTANCE CORP.
and
BILLING INFORMATION CONCEPTS CORP.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.............................................. 1
1.1 DEFINITIONS.................................................... 1
Billing Business............................................... 1
Billing Stock Option........................................... 1
Code........................................................... 1
Commission..................................................... 1
Common Stock................................................... 2
(i) BILLING COMMON STOCK............................... 2
(ii) EMPLOYER COMMON STOCK.............................. 2
(iii) USLD COMMON STOCK.................................. 2
Company Contribution........................................... 2
Current Plan Year.............................................. 2
Cutoff Date.................................................... 2
Deferred Compensation Plan..................................... 2
(i) USLD EXECUTIVE COMPENSATION DEFERRAL PLAN.......... 2
(ii) USLD DIRECTOR COMPENSATION DEFERRAL PLAN........... 2
(iii) BILLING EXECUTIVE COMPENSATION DEFERRAL PLAN....... 2
(iv) BILLING DIRECTOR COMPENSATION DEFERRAL PLAN........ 3
Distribution Agreement......................................... 3
Distribution Date.............................................. 3
Employee....................................................... 3
(i) USLD TERMINEE...................................... 3
(ii) RETAINED EMPLOYEE.................................. 3
(iii) RETAINED INDIVIDUAL................................ 3
(iv) BILLING TERMINEE................................... 3
(v) BILLING EMPLOYEE................................... 3
(vi) BILLING INDIVIDUAL................................. 3
ERISA.......................................................... 3
Existing USLD Stock Option..................................... 4
401(k) Retirement.............................................. 4
(i) USLD 401(k) RETIREMENT PLAN........................ 4
(ii) BILLING 401(k) RETIREMENT PLAN..................... 4
IRS............................................................ 4
Medical/Dental Plan............................................ 4
(i) USLD MEDICAL/DENTAL PLANS.......................... 4
(ii) BILLING MEDICAL/DENTAL PLANS....................... 4
Nonqualified Award............................................. 4
Plan........................................................... 4
Post-Conversion Stock Price.................................... 4
Qualified Beneficiary.......................................... 5
(i) USLD FUTURE QUALIFIED BENEFICIARY.................. 5
(ii) USLD CURRENT QUALIFIED BENEFICIARY................. 5
(iii) BILLING FUTURE QUALIFIED BENEFICIARY............... 5
Retained Business.............................................. 5
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Service Credit................................................. 5
Stock Plans.................................................... 5
(i) USLD 1990 EMPLOYEE STOCK OPTION PLAN............... 5
(ii) USLD 1993 NON-EMPLOYEE DIRECTOR PLAN............... 5
(iii) USLD 1995 EMPLOYEE RESTRICTED STOCK PLAN........... 5
(iv) BILLING 1996 EMPLOYEE COMPREHENSIVE STOCK PLAN..... 6
(v) BILLING NON-EMPLOYEE DIRECTOR PLAN................. 6
Stock Purchase Plan............................................ 6
Subsidiary..................................................... 6
(i) RETAINED SUBSIDIARY................................ 6
(ii) BILLING SUBSIDIARY................................. 6
USLD........................................................... 6
Welfare Plan................................................... 6
1.2 CERTAIN CONSTRUCTIONS.......................................... 6
1.3 SCHEDULES; SECTIONS............................................ 6
1.4 SURVIVAL....................................................... 6
ARTICLE 2 EMPLOYEE BENEFITS........................................ 7
2.1 EMPLOYMENT..................................................... 7
(a) ALLOCATION OF RESPONSIBILITIES ON DISTRIBUTION DATE...... 7
(b) SERVICE CREDITS.......................................... 7
(i) DISTRIBUTION DATE TRANSFERS........................ 7
(ii) POST-DISTRIBUTION DATE TERMINATIONS................ 7
2.2 401(k) RETIREMENT PLANS........................................ 7
(a) CONTINUATION OF USLD 401(k) RETIREMENT PLAN.............. 7
(b) ESTABLISHMENT OF THE BILLING 401(k) RETIREMENT PLAN...... 7
(c) OBLIGATION TO MAKE COMPANY CONTRIBUTION.................. 8
(d) ADJUSTMENT MADE TO ACCOUNT BALANCES...................... 8
(e) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES.............. 8
(f) USLD TO PROVIDE INFORMATION.............................. 8
(g) REGULATORY FILINGS....................................... 8
2.3 COMPENSATION DEFERRAL PLANS.................................... 9
(a) USLD COMPENSATION DEFERRAL PLANS......................... 9
(b) BILLING COMPENSATION DEFERRAL PLANS...................... 9
2.4 STOCK PLANS.................................................... 9
(a) USLD STOCK OPTION PLAN AND RESTRICTED STOCK PLAN......... 9
(b) BILLING COMPREHENSIVE STOCK PLAN AND NON-EMPLOYEE
DIRECTOR PLAN.......................................... 10
(c) EFFECT OF THE DISTRIBUTION ON GRANTS AND AWARDS MADE
PRIOR TO THE CUTOFF DATE................................ 10
(i) RESTRICTED STOCK................................... 10
(ii) GRANT OF STOCK OPTIONS............................. 10
(iii) ADJUSTMENT AND SETTING OF EXERCISE PRICES.......... 11
(d) COMMUNICATION REGARDING TERMINATION OF EMPLOYMENT,
VESTING AND LAPSE OF RESTRICTIONS...................... 11
2.5 STOCK PURCHASE PLAN............................................ 11
(a) USLD STOCK PURCHASE PLAN................................. 11
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<PAGE>
(b) BILLING STOCK PURCHASE PLAN.............................. 11
2.6 MEDICAL/DENTAL PLAN LIABILITY AND COVERAGE..................... 12
(a) USLD..................................................... 12
(b) BILLING. ................................................ 12
(c) CONTINUATION COVERAGE ADMINISTRATION..................... 12
2.7 VACATION AND SICK PAY LIABILITIES.............................. 13
(a) DIVISION OF LIABILITIES.................................. 13
(b) FUNDED RESERVES.......................................... 13
2.8 PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS.............. 13
2.9 NOTICE......................................................... 13
2.10 PAYROLL REPORTING AND WITHHOLDING.............................. 14
(a) FORM W-2 REPORTING....................................... 14
(b) FORMS W-4 AND W-5........................................ 14
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, QUALIFIED
MEDICAL CHILD SUPPORT ORDERS AND WAGE ASSIGNMENTS........ 14
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS.................... 14
ARTICLE 3 LABOR AND EMPLOYMENT MATTERS............................. 15
3.1 SEPARATE EMPLOYERS............................................. 15
3.2 EMPLOYMENT POLICIES AND PRACTICES.............................. 15
3.3 CLAIMS......................................................... 15
(a) SCOPE.................................................... 15
(b) EMPLOYMENT-RELATED CLAIMS................................ 15
(c) OBLIGATION TO INDEMNIFY.................................. 15
(d) PRE-DISTRIBUTION CLAIMS.................................. 16
(e) DISTRIBUTION AND OTHER JOINT LIABILITY CLAIMS............ 16
(f) POST-DISTRIBUTION EMPLOYMENT-RELATED CLAIMS.............. 16
3.4 FUNDING OF PLANS............................................... 16
3.5 NOTICE OF CLAIMS............................................... 16
3.6 ASSUMPTION OF EMPLOYMENT TAX RATES............................. 16
3.7 INTERCOMPANY SERVICE CHARGE.................................... 17
3.8 WARN CLAIMS.................................................... 17
3.9 EMPLOYEES ON LEAVE OF ABSENCE.................................. 17
3.10 NO THIRD-PARTY BENEFICIARY RIGHTS.............................. 17
3.11 ATTORNEY-CLIENT PRIVILEGE...................................... 17
ARTICLE 4 DEFAULT.................................................. 17
4.1 DEFAULT........................................................ 17
4.2 FORCE MAJEURE.................................................. 17
ARTICLE 5 MISCELLANEOUS............................................ 18
5.1 RELATIONSHIP OF PARTIES........................................ 18
5.2 ACCESS TO INFORMATION; COOPERATION............................. 18
5.3 ASSIGNMENT..................................................... 18
5.4 HEADINGS....................................................... 18
5.5 SEVERABILITY OF PROVISIONS..................................... 18
5.6 PARTIES BOUND.................................................. 18
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5.7 NOTICES........................................................ 18
5.8 FURTHER ACTION................................................. 19
5.9 WAIVER......................................................... 19
5.10 GOVERNING LAW.................................................. 19
5.11 CONSENT TO JURISDICTION........................................ 19
5.12 ENTIRE AGREEMENT............................................... 19
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<PAGE>
BENEFIT PLANS AND
EMPLOYMENT MATTERS ALLOCATION AGREEMENT
THIS BENEFIT PLANS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT
("Agreement") is made and entered into as of _____________, 1996, by and between
U.S. LONG DISTANCE CORP., a Delaware corporation ("USLD"), and BILLING
INFORMATION CONCEPTS CORP., a Delaware corporation ("Billing").
R E C I T A L S:
WHEREAS, subject to certain conditions, USLD intends to pay a special
dividend to the holders of USLD Common Stock on a one share-for-one share basis,
consisting of all outstanding shares of Billing Information Concepts Corp.
common stock (the "Distribution"); and
WHEREAS, in connection with this special dividend, USLD and Billing have
entered into a Distribution Agreement (the "Distribution Agreement") dated as of
____________, 1996; and
WHEREAS, pursuant to the aforesaid Distribution Agreement, USLD and
Billing have agreed to enter into an agreement allocating responsibilities with
respect to employee compensation, benefit plans, labor and certain other
employment matters pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, USLD and Billing agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
BILLING BUSINESS. Any business or operation of USLD or its Subsidiaries
that is, pursuant to the Distribution Agreement, defined as the Billing Group
Business, or which is to be conducted, following the Distribution, by Billing or
any Billing Subsidiary.
BILLING STOCK OPTION. An option to acquire Billing Common Stock granted
under the Billing 1996 Employee Comprehensive Stock Plan or Billing Non-Employee
Director Plan.
CODE. The Internal Revenue Code of 1986, as amended, or any successor
legislation.
COMMISSION. The Securities and Exchange Commission.
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COMMON STOCK. The common stock of USLD or Billing, as more specifically
described below:
(i) BILLING COMMON STOCK. The common stock, par value $.01 per
share, of Billing;
(ii) EMPLOYER COMMON STOCK. USLD Common Stock in the case of
Retained Employees and USLD Terminees and Billing Common Stock in the case
of Billing Employees; or
(iii) USLD COMMON STOCK. The common stock, par value $.01 per
share, of USLD.
COMPANY CONTRIBUTION. The Company Contribution of USLD under the USLD
401(k) Retirement Plan (as provided in the USLD 401(k) Retirement Plan
document), as may be supplemented in the sole and absolute discretion of the
USLD Board of Directors.
CURRENT PLAN YEAR. The plan year or fiscal year, whichever is
applicable with respect to any Plan, during which the Distribution occurs.
CUTOFF DATE. The date immediately preceding the Distribution Date.
DEFERRED COMPENSATION PLAN. A plan of deferred compensation that is not
tax-qualified under Section 401(a) of the Code and that is maintained for
Employees of USLD or Billing and their beneficiaries, as described below:
(i) USLD EXECUTIVE COMPENSATION DEFERRAL PLAN. The current USLD
Executive Compensation Deferral Plan, restated as of December 12, 1995,
through which eligible executives of USLD may defer current compensation
for retirement or other purposes, and that serves as the means by which
amounts that would otherwise exceed certain limitations for contributions
to the tax-qualified USLD 401(k) Retirement Plan are credited and
automatically deferred;
(ii) USLD DIRECTOR COMPENSATION DEFERRAL PLAN. The current USLD
Director Compensation Deferral Plan, restated as of December 19, 1995,
through which members of USLD's Board of Directors may defer current
compensation for retirement or other purposes, and that serves as a means
by which amounts that would otherwise exceed certain limitations for
contributions to tax qualified retirement plans are credited and
automatically deferred;
(iii) BILLING EXECUTIVE COMPENSATION DEFERRAL PLAN. The Billing
Executive Compensation Deferral Plan, adopted as of ____________, 1996,
but effective as of the Distribution Date, through which eligible
executives of Billing may defer current compensation for retirement or
other purposes, and that serves as the means by which amounts that would
otherwise exceed certain limitations for contributions to the
tax-qualified Billing 401(k) Retirement Plan are credited and
automatically deferred; or
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(iv) BILLING DIRECTOR COMPENSATION DEFERRAL PLAN. The Billing
Director Compensation Deferral Plan, adopted as of __________, 1996, but
effective as of the Distribution Date, through which members of Billing's
Board of Directors may defer current compensation for retirement or other
purposes, and that serves as a means by which amounts that would otherwise
exceed certain limitations for contributions to tax qualified retirement
plans are credited and automatically deferred.
DISTRIBUTION AGREEMENT. The agreement described in the second recital
of this Agreement.
DISTRIBUTION DATE. The date on which the Distribution occurs.
EMPLOYEE. An individual who, on the Distribution Date, is identified as
being in any of the following categories:
(USLD CATEGORIES OF EMPLOYEES)
(i) USLD TERMINEE. Any individual formerly employed in any
Retained Business of USLD or of any Subsidiary of USLD who terminated such
employment prior to the Distribution Date, including, but not limited to,
any USLD Employee who has retired from a Retained Business prior to the
Distribution Date;
(ii) RETAINED EMPLOYEE. Any individual who is an Employee of
USLD or any Retained Subsidiary on the Distribution Date; or
(iii) RETAINED INDIVIDUAL. Any individual who (i) is a Retained
Employee, or (ii) is, as of the Cutoff Date, a USLD Terminee whose last
employment with USLD or a Retained Subsidiary was with a Retained Business
or any Retained Subsidiary, or (iii) is a beneficiary of any individual
described in clause (i) or (ii).
(BILLING CATEGORIES OF EMPLOYEES)
(iv) BILLING TERMINEE. Any individual formerly employed by any
Billing Business or any Subsidiary of USLD who terminated such employment
prior to the Distribution Date, including, but not limited to, any Billing
Employee who has retired from a Billing Business prior to the Distribution
Date;
(v) BILLING EMPLOYEE. Any individual who is an Employee of
Billing or any Billing Subsidiary on the Distribution Date; or
(vi) BILLING INDIVIDUAL. Any individual who (i) is a Billing
Employee, or (ii) is, as of the Cutoff Date, a Billing Terminee whose last
employment with USLD or a Retained Subsidiary was with a Billing Business
or any Billing Subsidiary, or (iii) is a beneficiary of any individual
specified in clause (i) or (ii).
ERISA. The Employee Retirement Income Security Act of 1974, as amended,
or any successor legislation.
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EXISTING USLD STOCK OPTION. An unexercised option to purchase USLD
Common Stock held by a grantee on the Cutoff Date pursuant to the USLD 1990
Employee Stock Option Plan or USLD 1993 Non-Employee Director Plan.
401(k) RETIREMENT PLAN. A defined contribution plan maintained pursuant
to Section 401(k) or 401(a) of the Code for Employees and their beneficiaries,
as specifically identified using one of the categories described below:
(i) USLD 401(k) RETIREMENT PLAN. The USLD Employees' 401(k)
Retirement Plan and Trust, as in effect prior to the Distribution Date; or
(ii) BILLING 401(k) RETIREMENT PLAN. The Billing Employees'
401(k) Retirement Plan and Trust to be adopted by Billing and to become
effective on the Distribution Date.
IRS. The Internal Revenue Service.
MEDICAL/DENTAL PLAN. A Welfare Plan providing health benefits to
Employees of USLD and their dependents, or to Employees of Billing and their
dependents, as described below:
(i) USLD MEDICAL/DENTAL PLANS. The existing USLD Medical/Dental
Plans maintained prior to the Distribution primarily for the benefit of
Retained Employees and Billing Employees and continued by USLD after the
Distribution Date pursuant to Section 2.6; or
(ii) BILLING MEDICAL/DENTAL PLANS. The Medical/Dental Plans to
be established by Billing in accordance with Section 2.6.
NONQUALIFIED AWARD. An award under the USLD 1990 Employee Stock Option
Plan, the USLD Non-Employee Director Plan or the Billing 1996 Employee
Comprehensive Stock Plan of a stock option that is not qualified as an incentive
stock option under Code Section 422.
PLAN. Any plan, policy, arrangement, contract or agreement providing
compensation or benefits for any group of Employees or former employees or for
any individual Employee or former employee or the dependents or beneficiaries of
any such Employee or former employee, whether formal or informal or written or
unwritten, and including, without limitation, any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
Employee or former employee or the beneficiaries of any such Employee or former
employee. The term "Plan" as used in this Agreement does not include any
contract, agreement or understanding entered into by USLD prior to the
Distribution or by USLD or Billing after the Distribution and relating to
settlement of actual or potential employee-related litigation claims.
POST-CONVERSION STOCK PRICE. The per share price of USLD Common Stock
or Billing Common Stock, as applicable, equal to the average of the closing
sales price per share of that Common Stock on the Nasdaq National Market for
each of ten consecutive trading days beginning with and including the
Distribution Date.
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QUALIFIED BENEFICIARY. An individual (or dependent thereof) who either
(1) experiences a "qualifying event" (as that term is defined in Code Section
4980B(f)(3) and ERISA 603) while a participant in any Medical/Dental Plan, or
(2) becomes a "qualified beneficiary" (as that term is defined in Code Section
4980B(g)(1) and ERISA 607(3)) under any Medical/Dental Plan, and who is included
in any one of the following categories:
(i) USLD FUTURE QUALIFIED BENEFICIARY. Any person who becomes a
Qualified Beneficiary on or after the Distribution Date under any USLD
Medical/Dental Plan;
(ii) USLD CURRENT QUALIFIED BENEFICIARY. Any USLD Terminee who
on or before the Cutoff Date, was a Qualified Beneficiary under any USLD
Medical/Dental Plan;
(iii) BILLING FUTURE QUALIFIED BENEFICIARY. Any person who
becomes a Qualified Beneficiary after the Cutoff Date under any Billing
Medical/Dental Plan; or
(iv) BILLING CURRENT QUALIFIED BENEFICIARY. Any Billing Terminee
who on or before the Cutoff Date was a Qualified Beneficiary under any
USLD Medical/Dental Plan.
RETAINED BUSINESS. Any business or operation of USLD or its
Subsidiaries that is, pursuant to the Distribution Agreement, defined as the
Telecommunications Group Business, or that is to be conducted, following the
Distribution, by USLD or any Retained Subsidiary.
SERVICE CREDIT. The period taken into account under any Plan for
purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
STOCK PLANS. Stock based incentive Plans maintained for Employees and
Non-Employee Directors of USLD or Billing and their respective beneficiaries, as
described below:
(i) USLD 1990 EMPLOYEE STOCK OPTION PLAN. A stock-based
incentive compensation Plan providing for awards of stock options
maintained for employees of USLD and its subsidiaries, and their
beneficiaries, adopted in 1990 and continued by USLD pursuant to Section
2.4(a);
(ii) USLD 1993 NON-EMPLOYEE DIRECTOR PLAN. A stock-based
incentive compensation Plan providing for awards of stock options
maintained for non-employee directors of USLD and its subsidiaries, and
their beneficiaries, adopted in 1993 (which incorporated and expanded a
1991 non-employee director plan) and continued pursuant to Section 2.4(a);
(iii) USLD 1995 EMPLOYEE RESTRICTED STOCK PLAN. A stock-based
incentive compensation Plan providing for awards of restricted stock
maintained for employees of USLD and its subsidiaries, and their
beneficiaries, adopted in 1995 and continued by USLD pursuant to Section
2.4(a);
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(iv) BILLING 1996 EMPLOYEE COMPREHENSIVE STOCK PLAN. A
stock-based incentive compensation Plan providing for awards of stock
options and restricted stock maintained for employees of Billing, its
parent and subsidiaries, and their beneficiaries, adopted by USLD as sole
stockholder of Billing on ____________, 1996, but effective as of the
Distribution Date, and continued by Billing pursuant to Section 2.4(b); or
(v) BILLING NON-EMPLOYEE DIRECTOR PLAN. A stock-based incentive
compensation Plan providing for awards of stock options to non-employee
directors of Billing, its parent and subsidiaries, adopted by USLD as the
sole stockholder of Billing on ___________, 1996, but effective as of the
Distribution Date, and continued by Billing pursuant to Section 2.4(b).
STOCK PURCHASE PLAN. A stock-based Plan meeting the requirements of
Section 423 of the Code, maintained for Employees of USLD or Billing.
SUBSIDIARY. Any corporation, including each of the following
categories:
(i) RETAINED SUBSIDIARY. Any subsidiary of USLD except Billing
and the Billing Subsidiaries; or
(ii) BILLING SUBSIDIARY. Each of the Billing Group Subsidiaries
as defined in the Distribution Agreement and all other Subsidiaries of
Billing as defined in the Distribution Agreement at the time of the
Distribution.
USLD. U.S. Long Distance Corp., a Delaware corporation.
WELFARE PLAN. Any Plan that provides medical, health, disability,
accident, life insurance, death, dental or any other welfare benefit, including,
without limitation, any post-employment benefit.
1.2 CERTAIN CONSTRUCTIONS. References to the singular in this
Agreement shall refer to the plural and vice-versa and references to the
masculine shall refer to the feminine and vice-versa.
1.3 SCHEDULES; SECTIONS. References to a "Schedule" are, unless
otherwise specified, to one of the Schedules attached to this Agreement, and
references to a "Section" are, unless otherwise specified, to one of the
Sections of this Agreement.
1.4 SURVIVAL. Obligations described in this Agreement shall remain in
full force and effect and shall survive the Distribution Date.
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ARTICLE 2
EMPLOYEE BENEFITS
2.1 EMPLOYMENT.
(a) ALLOCATION OF RESPONSIBILITIES ON DISTRIBUTION DATE. On the
Distribution Date, except to the extent retained or assumed by USLD under this
Agreement or any other agreement related to the Distribution, Billing shall
retain or assume, as the case may be, responsibility as employer for the Billing
Employees. On the Distribution Date, except to the extent retained or assumed
by Billing under this Agreement or any other agreement relating to the
Distribution, USLD shall retain or assume, as the case may be, responsibility as
employer for the Retained Employees. The assumption or retention of
responsibility as employer by USLD or Billing described in this Section 2.1
shall not, of itself, constitute a severance or a termination of employment
under any plan of severance, of income or other Plan extension maintained by
USLD or Billing, and no such severance, separation or termination shall be
deemed to occur.
(b) SERVICE CREDITS.
(i) DISTRIBUTION DATE TRANSFERS. On the Distribution Date, for
purposes of determining Service Credits under any Plans, USLD shall credit
each Retained Employee and Billing shall credit each Billing Employee with
such Employee's Service Credits and original hire date as are reflected in
the USLD payroll system records. Such Service Credits and hire date shall
continue to be maintained as described herein for as long as the Employee
does not terminate employment.
(ii) POST-DISTRIBUTION DATE TERMINATIONS. Subject to the
provisions of ERISA, USLD may, in the case of Retained Employees, and
Billing may, in the case of Billing Employees, each in its sole
discretion, make such decisions as it deems appropriate with respect to
determining Service Credits for such Employees who terminate employment
from the other company after the Distribution Date.
2.2 401(k) RETIREMENT PLANS.
(a) CONTINUATION OF USLD 401(k) RETIREMENT PLAN. Effective as of the
Distribution Date, USLD shall continue sponsorship of the USLD 401(k) Retirement
Plan.
(b) ESTABLISHMENT OF THE BILLING 401(k) RETIREMENT PLAN. Effective as
of the Distribution Date, Billing shall take, or cause to be taken, all action
necessary and appropriate to establish and administer a new Plan named the
Billing 401(k) Retirement Plan and Trust in the form approved by the Billing
Board of Directors. Billing shall provide benefits under such Billing 401(k)
Retirement Plan after the Distribution Date for all Billing Employees who,
immediately prior to the Distribution Date, were participants in or otherwise
entitled to benefits under the USLD 401(k) Retirement Plan. The Billing 401(k)
Retirement Plan shall be intended to qualify for tax-favored treatment under
Section 401(a) and 401(k) of the Code and to be in compliance with the
requirements of ERISA. All Billing Employees who wish to participate in
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the Billing 401(k) Retirement Plan will be required to enroll in the Billing
401(k) Retirement Plan as provided by such Plan.
(c) OBLIGATION TO MAKE COMPANY CONTRIBUTION. USLD is responsible for
USLD's obligation to make payment of Company Contributions under the USLD 401(k)
Retirement Plan in accordance with the terms and conditions of the USLD 401(k)
Retirement Plan for the period up to and including the Cutoff Date. The Company
Contribution to the Billing 401(k) Retirement Plan for the remainder of the
Current Plan Year shall be paid by Billing in accordance with the provisions of
the Billing 401(k) Retirement Plan document and applicable law.
(d) ADJUSTMENT MADE TO ACCOUNT BALANCES. As of the Distribution Date,
the plan administrator of the USLD 401(k) Retirement Plan shall adjust the
account balances of all participants entitled under such Plan to Company
Contributions and forfeitures for the Current Plan Year to reflect such Company
Contributions and forfeitures.
(e) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES. As soon as
practicable after the Distribution Date, USLD shall cause the trustees of the
USLD 401(k) Retirement Plan to transfer to the trustee or other funding agent of
the Billing 401(k) Retirement Plan the amounts (in cash, securities, other
property, plan loans, or a combination thereof) acceptable to the Billing
administrator or trustee of the Billing 401(k) Retirement Plan representing the
account balances of all Billing Individuals, and Billing shall credit the
accounts of such individuals under the Billing 401(k) Retirement Plan with said
amounts. Each such transfer shall comply with Section 414(l) of the Code and
the requirements of ERISA and the regulations promulgated thereunder. Billing
shall cause the trustees or other funding agent of the Plan to accept the
plan-to-plan transfer from the USLD 401(k) Retirement Plan trustees, and to
credit the accounts of such Billing Individuals under the Billing 401(k)
Retirement Plan with amounts transferred on their behalf.
(f) USLD TO PROVIDE INFORMATION. USLD shall provide Billing, as soon
as practicable after the Distribution Date (with the cooperation of Billing to
the extent that relevant information is in the possession of Billing or a
Billing Subsidiary, and in accordance with Section 5.2), with a list of Billing
Individuals who, to the best knowledge of USLD, were participants in or
otherwise entitled to benefits under the USLD 401(k) Retirement Plan on the
Cutoff Date, together with a listing of each participant's Service Credits under
the USLD 401(k) Retirement Plan and a listing of each such Billing Individual's
account balance thereunder. USLD shall, as soon as practicable after the
Distribution Date and in accordance with Section 5.2, provide Billing with such
additional information in the possession of USLD or a Retained Subsidiary (and
not already in the possession of Billing or a Billing Subsidiary) as may be
reasonably requested by Billing and necessary for Billing to administer
effectively the Billing 401(k) Retirement Plan.
(g) REGULATORY FILINGS. Billing and USLD shall, in connection with
the plan-to-plan transfer described in Section 2.2(e), cooperate in making any
and all appropriate filings required by the Commission or the IRS, or required
under the Code, ERISA, or any applicable securities laws and the regulations
thereunder, and take all such action as may be necessary and appropriate to
cause such plan-to-plan transfer to take place as soon as practicable after the
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Distribution Date or otherwise when required by law. Further, Billing shall
seek a favorable IRS determination letter to the effect that the Billing 401(k)
Retirement Plan, as organized, satisfies all qualification requirements under
Section 401(a) and 401(k) of the Code, and the transfers described in Section
2.2(e) shall take place as soon as practicable. Such transfers may take place
pending issuance of a favorable determination letter, upon receipt of an opinion
of counsel reasonably satisfactory to both USLD and Billing that the Billing
Plan so qualifies, or can be made to so qualify by retroactive amendment, and
that the transfer will not adversely affect the qualified status of either Plan
or decrease the accrued benefits of any participant.
2.3 COMPENSATION DEFERRAL PLANS.
(a) USLD COMPENSATION DEFERRAL PLANS. USLD shall continue sponsorship
of the USLD Executive Compensation Deferral Plan and USLD Director Compensation
Deferral Plan and to provide future deferred compensation benefits thereunder
accruing after the Cutoff Date for all Retained Employees and outside directors
of USLD, as the case may be, who are admitted to participation in such
respective Plans on or after the Distribution Date. USLD shall be responsible
for all liabilities and obligations of USLD relating to Retained Individuals and
such outside directors of USLD, as the case may be, accrued through the Cutoff
Date with respect to the USLD Executive Compensation Deferral Plan and USLD
Director Compensation Deferral Plans, respectively, along with earnings required
to be credited to account balances included therein.
(b) BILLING COMPENSATION DEFERRAL PLANS. Billing shall adopt new
plans named the Billing Executive Compensation Deferral Plan and Billing
Director Compensation Deferral Plan. Billing shall thereafter (1) provide
similar deferred compensation opportunities to Billing Individuals and outside
directors of Billing as shall have been provided to participants in the USLD
Executive Compensation Deferral Plan and USLD Director Compensation Deferral
Plan, respectively, prior to the Distribution Date; and (2) shall assume all
liabilities and obligations of USLD relating to Billing Individuals and outside
directors of Billing accrued through the Cutoff Date with respect to the USLD
Executive Compensation Deferral Plan and USLD Director Compensation Deferral
Plan, respectively, along with earnings required to be credited to account
balances included in such Plans. The foregoing shall be subject to the
requirements of ERISA and the Code. All Billing Employees who wish to
participate in the Billing Executive Compensation Deferral Plan or Director
Deferral Plan, as applicable, must so elect as provided by such Plan.
2.4 STOCK PLANS.
(a) USLD STOCK OPTION PLAN AND RESTRICTED STOCK PLAN. USLD shall
continue the USLD 1990 Employee Stock Option Plan, the USLD 1993 Non-Employee
Director Plan and the USLD 1995 Employee Restricted Stock Plan. All awards
under these Plans will continue to be denominated in USLD Common Stock. USLD
shall continue to reserve those shares already reserved under the USLD 1990
Employee Stock Option Plan, the USLD 1993 Non-Employee Director Plan and the
USLD 1995 Employee Restricted Stock Plan. Additionally, USLD, after the
Distribution, will cause to be reserved any additional shares identified for
reservation thereunder to the extent authorized by the stockholders.
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(b) BILLING COMPREHENSIVE STOCK PLAN AND NON-EMPLOYEE DIRECTOR PLAN.
As soon as practicable after the date hereof, Billing shall take, or cause to be
taken, all action necessary and appropriate (i) to ratify the adoption of the
Billing 1996 Employee Comprehensive Stock Plan and the Billing Non-Employee
Director Plan, and (ii) to present such Plans to USLD, as the sole stockholder
of Billing, for its approval of these Plans. All awards of options under the
Billing 1996 Employee Comprehensive Stock Plan and the Billing Non-Employee
Director Plan will be denominated in Billing Common Stock. To the extent
authorized by USLD, its sole stockholder, prior to the Distribution Date,
Billing will reserve as shares under the Billing 1996 Employee Comprehensive
Stock Plan and the Billing Non-Employee Director Plan ________ shares and
_______ shares, respectively, of Billing Common Stock, identified for
reservation thereunder. Any such shares not used to grant Billing Stock Options
or restricted share awards pursuant to Section 2.4(c) will be available for
future awards to Billing Individuals. Billing shall administer all grants of
Billing Stock Options and awards of restricted shares of Billing Common Stock
under the Billing 1996 Employee Comprehensive Stock Plan and all grants of
Billing Stock Options under the Billing Non-Employee Director Plan under the
terms of such Plans governing such grants or awards.
(c) EFFECT OF THE DISTRIBUTION ON GRANTS AND AWARDS MADE PRIOR TO THE
CUTOFF DATE.
(i) RESTRICTED STOCK. On the Distribution Date, the grantee of
each restricted share of USLD Common Stock awarded under the USLD 1995 Employee
Restricted Stock Plan shall retain such share and shall receive as part of the
Distribution one restricted share of Billing Common Stock under the Billing 1996
Comprehensive Stock Plan for each restricted share of USLD Common Stock awarded
under the USLD 1995 Employee Restricted Stock Plan as of the record date for the
Distribution. For the Retained Employees and USLD Terminees, the restricted
shares of Billing Common Stock will be held by Billing and will be subject to
restrictions identical to those applicable to the underlying restricted shares
of USLD Common Stock, which are and will continue to be held by USLD. For
Billing Employees and Billing Terminees, their restricted shares of USLD Common
Stock will continue to be held by USLD under the 1995 Employee Restricted Stock
Plan, the Billing Common Stock will be subject to restrictions for the benefit
of Billing identical to the restrictions for the benefit of USLD that are
applicable to the underlying shares of USLD Common Stock and Billing will hold
the restricted shares of Billing Common Stock under the Billing 1996
Comprehensive Stock Plan. Restricted shares of Billing Common Stock awarded as
part of the Distribution shall be released by Billing from restrictions at the
same time and on the same schedule as the restricted shares of USLD Common Stock
retained, under the terms of the restrictions to which the grantee's award under
the USLD 1995 Employee Restricted Stock Plan were subject. The Distribution
shall not be deemed a termination of employment by any Retained Employee or
Billing Employee for purposes of the USLD 1995 Restricted Stock Plan.
(ii) GRANT OF STOCK OPTIONS. As soon as practicable after the
date hereof and prior to the Distribution Date, Billing shall grant to (1) each
Retained Employee or Billing Employee that is a grantee of a Nonqualified Award
of an Existing USLD Stock Option under the USLD 1990 Employee Stock Option Plan,
a Nonqualified Award of a Billing Stock Option to purchase a number of shares of
Billing Common Stock under the Billing 1996 Comprehensive Stock Plan equal to
the number of shares of USLD Common Stock purchasable under the Existing USLD
Stock Option and (2) each non-employee director of USLD that is a grantee of
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an Existing USLD Stock Option under the USLD 1993 Non-Employee Director Plan, a
Billing Stock Option to purchase a number of shares of Billing Common Stock
under the Billing 1996 Comprehensive Stock Plan equal to the number of shares of
USLD Common Stock purchasable under the Existing USLD Stock Option. The Billing
Stock Options will be subject to the same terms and conditions of the
corresponding Existing USLD Stock Options, except that the exercise price of the
Billing Stock Options shall be set as described in paragraph 2.4(c)(iii) and the
Distribution shall not be deemed a termination of employment of any Retained
Employee or Billing Employee for purposes of the USLD 1990 Employee Stock Option
Plan or the Billing 1996 Comprehensive Stock Plan. The Existing USLD Stock
Options shall remain in effect with the same terms and conditions, including
that the same number of shares of USLD Common Stock shall be purchasable upon
exercise thereof, except that the exercise price of the Existing USLD Stock
Options shall be adjusted pursuant to paragraph 2.4(c)(iii).
(iii) ADJUSTMENT AND SETTING OF EXERCISE PRICES. The adjusted exercise
price (the "Adjusted USLD Option Exercise Price") of each Existing USLD Stock
Option and the exercise price of the related Billing Stock Option shall be as
follows. The Adjusted USLD Option Exercise Price shall equal the product of (1)
the exercise price of the Existing USLD Stock Option multiplied by (2) the ratio
of (a) the Post Conversion Stock Price of USLD Common Stock to (b) the sum of
(x) the Post Conversion Stock Price of the USLD Common Stock plus (y) the Post
Conversion Stock Price of the Billing Common Stock. The exercise price of the
related Billing Stock Option shall equal the product of (1) the exercise price
of the related Existing USLD Stock Option multiplied by (2) the ratio of (a) the
Post Conversion Stock Price of Billing Common Stock to (b) the sum of (x) the
Post Conversion Stock Price of the Billing Common Stock plus (y) the Post
Conversion Stock Price of the USLD Common Stock.
(d) COMMUNICATION REGARDING TERMINATION OF EMPLOYMENT, VESTING AND
LAPSE OF RESTRICTIONS. USLD shall promptly notify Billing of the termination
of employment of any Retained Employee holding Billing Stock Options or
restricted shares of Billing Common Stock and of any amendment to an Existing
USLD Stock Option held by a Retained Employee holding a related Billing Stock
Option. Billing shall promptly notify USLD of the termination of employment
of any Billing Employee holding an Existing USLD Stock Option or restricted
shares of USLD Common Stock and of any amendment to a Billing Stock Option
held by a Billing Employee holding a related Existing USLD Stock Option.
Such notices with respect to termination shall specify the date of
termination, the reason for termination (e.g. for cause, without cause, upon
a change of control, etc.), whether the termination is with or without
written consent and that the impact that such termination has on any
outstanding grant or award of options on restricted shares. Such notices
with respect to amendments to an Existing USLD Stock Option or Billing Stock
Option shall specify the amendment, the name of the Retained Employee or
Billing Employee, as applicable, and such other information as the other
party shall reasonably require. USLD agrees that each Existing USLD Stock
Option held by a Billing Employee whose related Billing Stock Option is
amended following the Distribution Date shall be deemed amended and shall be
amended to the same extent as the related Billing Stock Option is amended
without further action. Billing agrees that each Billing Stock Option held by
a Retained Employee whose related Existing USLD Stock Option is amended
following the Distribution Date shall be deemed amended and shall be amended
to the same extent as the related Existing USLD Stock Option is amended
without further action.
(e) CHANGE IN CONTROL. Each Existing USLD Stock Option agreement
provides, and each related Billing Stock Option agreement will provide, that
upon a change of control (as defined in the applicable stock option agreement)
of either USLD or Billing, all nonvested Existing USLD Stock Options and all
nonvested Billing Stock Options shall immediately vest, whether held by a
Retained Employee or a Billing Employee.
(f) DETERMINATION OF CONSENT TO TERMINATION OF EMPLOYMENT OF BILLING
EMPLOYEES UNDER USLD EMPLOYEE STOCK PLAN. USLD agrees that with respect to
Billing Employees who hold USLD Stock Options under the USLD 1990 Employee
Stock Plan, for purposes of Section 14 of the USLD 1990 Employee Stock Plan,
the giving or withholding of consent to the termination of employment of a
Billing Employee shall be as determined by Billing and stated in the notice
of termination provided by Billing to USLD as required by Section 2.4(d)
above.
2.5 STOCK PURCHASE PLAN.
(a) USLD STOCK PURCHASE PLAN. The current six-month enrollment period
for the USLD Stock Purchase Plan shall close early on June 30, 1996, or such
other date preceding the Distribution Date as the Plan administrator shall
specify, and shares of USLD Common Stock shall be purchased for all eligible
Plan participants so as to allow Plan participants to participate in the
Distribution of the shares of Billing Common Stock. The next six-month
enrollment period for the USLD Stock Purchase Plan shall begin on August 1,
1996, or such other date as the Plan Administrator shall specify following the
Distribution Date.
(b) BILLING STOCK PURCHASE PLAN. The Billing Stock Purchase Plan,
approved by USLD in its role as sole stockholder of Billing on _________, 1996,
but effective as of the Distribution Date, shall begin its initial enrollment
period on August 1, 1996, or such other date
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as Plan administrator shall specify following the Distribution Date. All
Billing Employees who wish to participate in the Billing Stock Purchase Plan
must so elect as provided by such Plan.
2.6 MEDICAL/DENTAL PLAN LIABILITY AND COVERAGE.
(a) USLD. USLD shall sponsor and continue the existing USLD
Medical/Dental Plans and be responsible for providing medical/dental coverage,
including appropriate stop-loss insurance, and assuming responsibility for the
associated liabilities and accrued obligations of these plans relating to
Retained Employees and Retained Individuals. The medical/dental plans to be
sponsored and continued by USLD are listed on Schedule 2.6(a) attached to and
incorporated into this Agreement.
(b) BILLING. After the Distribution Date, Billing shall be
responsible for providing medical/dental coverage and assuming responsibility
for the associated liabilities and accrued obligations of and relating to all
Billing Employees and their eligible dependents who will be offered
participation in the Billing Medical/Dental Plan or plans on terms and
conditions deemed appropriate by Billing. Billing Employees shall have no
preexisting condition limitation imposed other than that which is or was imposed
under their existing plan or plans, and they will be credited with any expenses
incurred toward deductibles, out-of-pocket expenses, maximum benefit payments,
and any benefit usage toward plan limits that would have been applicable to the
plan in which they were enrolled prior to the Distribution. The medical/dental
plans to be sponsored and continued by Billing are listed on Schedule 2.6(b)
attached to and incorporated into this Agreement.
(c) CONTINUATION COVERAGE ADMINISTRATION. As of the Distribution
Date, USLD or a Retained Subsidiary shall assume or retain and shall be solely
responsible for, or cause its insurance carriers (including for this purpose
HMOs and PPOs providing coverage) to be responsible for, the administration of
the continuation coverage requirements imposed by Code Section 4980B and ERISA
Sections 601 through 608 as they relate to any USLD Current Qualified
Beneficiary or any USLD Future Qualified Beneficiary. As of the Distribution
Date, USLD or a Retained Subsidiary shall assume or retain and shall be
responsible for, or cause its insurance carriers (including for this purpose
HMOs and PPOs providing coverage) to be responsible for, all liabilities and
obligations in connection with coverage to be provided, claims incurred and
premiums owed on or after the Cutoff Date under any USLD Medical/Dental Plan in
respect of any USLD Current Qualified Beneficiary or any USLD Future Qualified
Beneficiary. As of the Distribution Date, Billing or a Billing Subsidiary shall
assume or retain and shall be solely responsible for, or cause it insurance
carriers (including for this purpose HMOs and PPOs providing coverage) to be
responsible for, the administration of the continuation coverage requirements
imposed by Code Section 4980B and ERISA Sections 601 through 608 as they relate
to any Billing Current Qualified Beneficiary or any Billing Future Qualified
Beneficiary. As of the Distribution Date, Billing or a Billing Subsidiary shall
assume or retain and shall be responsible for, or cause its insurance carriers
(including for this purpose HMOs and PPOs providing coverage) to be responsible
for, all liabilities and obligations in connection with coverage to be provided,
claims incurred and premiums owed on or after the Cutoff Date under any Billing
Medical/Dental Plan in respect of any Billing Current Qualified Beneficiary or
any Billing Future Qualified Beneficiary.
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(d) In the event that subsequent to the Distribution Date, refunds are
received from or additional premium adjustments become payable to carriers
providing health or medical insurance where such amounts are the result of
actual experience differing from that used to compute premiums for any periods
prior to the Distribution Date, such refunds or obligations will be shared
between USLD and Billing based on the following formula. Billings share will
equal the percentage represented by the average number of Billing employees
during the period to which the refund or obligation relates divided by the
average total of Billing and USLD employees during such period. USLD's share
will equal the percentage represented by the average number of USLD employees
during the period to which the refund or obligation relates divided by the
average total of Billing and USLD employees during such period.
2.7 VACATION AND SICK PAY LIABILITIES.
(a) DIVISION OF LIABILITIES. Effective on the Distribution Date, USLD
shall retain, as to the Retained Employees, and, Billing shall assume, as to the
Billing Employees, all accrued liabilities (whether vested or unvested, and
whether funded or unfunded) for vacation and sick leave in respect of such
employees as of the Cutoff Date. USLD shall be solely responsible for the
payment of such vacation or sick leave to Retained Employees after the Cutoff
Date and Billing shall be solely responsible for the payment of such vacation or
sick leave to Billing Employees after the Cutoff Date. Each party shall provide
to its own Employees on the Distribution Date the same vested and unvested
balances of vacation and sick leave as credited to such Employee on the USLD
payroll systems on the Cutoff Date. The preceding sentence shall not be
construed as in any way limiting the right of either USLD or Billing to change
its vacation or sick leave policies as it deems appropriate.
(b) FUNDED RESERVES. Assets attributable to funded reserves for the
vacation or sick leave liabilities being divided in accordance with Section
2.7(a) (whether held in a trust, a voluntary employees beneficiary association,
or any other funding vehicle) shall be allocated in an appropriate and equitable
manner between USLD and Billing.
2.8 PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS. Except as
otherwise expressly provided in Article 2, no provisions of this Agreement,
including, without limitation, the agreement of USLD or Billing, or any Retained
Subsidiary or Billing Subsidiary, to make a contribution or payment to or under
any Plan herein referred to for any period, shall be construed as a limitation
on the right of USLD or Billing or any Retained Subsidiary or Billing Subsidiary
to amend such Plan or terminate its participation therein which USLD or Billing
or any Retained Subsidiary or Billing Subsidiary would otherwise have under the
terms of such Plan or otherwise. No provision of this Agreement shall be
construed to create a right in any employee or former employee, or dependent or
beneficiary of such employee or former employee, under a Plan which such person
would not otherwise have under the terms of the Plan itself.
2.9 NOTICE. USLD and Billing acknowledge that USLD and the Retained
Subsidiaries, on the one hand, and Billing and the Billing Subsidiaries, on the
other hand, may incur costs and expenses, including, but not limited to,
contributions to Plans and the payment of insurance premiums arising from or
related to any of the Plans that are, as set forth in this Agreement, the
responsibility of the other party hereto. Accordingly, USLD (and any Retained
Subsidiary
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responsible therefor) and Billing (and any Billing Subsidiary responsible
therefor) shall (i) give notice to the other party of the costs to be incurred
prior to payment and (ii) demand that the other party which has the obligation
to pay shall pay the cost and expense.
2.10 PAYROLL REPORTING AND WITHHOLDING.
(a) FORM W-2 REPORTING. Billing and USLD hereby adopt the
"alternative procedure" for preparing and filing IRS Forms W-2 (Wage and Tax
Statements), as described in Section 5 of Revenue Procedure 84-77, 1984-2 IRS
Cumulative Bulletin 753 ("Rev. Proc. 84-77"). Under this procedure Billing as
the successor employer shall provide all required Forms W-2 to all Billing
Individuals reflecting all wages paid and taxes withheld by both USLD as the
predecessor and Billing as the successor employer for the entire year during
which the Distribution takes place. USLD shall provide all required Forms W-2
to all Retained Individuals reflecting all wages and taxes paid and withheld by
USLD before, on and after the Distribution Date. In connection with the
aforesaid agreement under Rev. Proc. 84-77, each business unit or business
operation of USLD shall be assigned to either USLD or Billing, depending upon
whether it is a Retained Business or a Billing Business, and each Retained
Individual or Billing Individual associated with such business unit or business
operation shall be assigned for payroll reporting purposes to USLD or Billing,
as the case may be.
(b) FORMS W-4 AND W-5. Billing and USLD agree to adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms W-4
(Employee's Withholding Allowance Certificate) and W-5 (Earned Income Credit
Advance Payment Certificate). Under this procedure USLD shall provide to
Billing as the successor employer all IRS Forms W-4 and W-5 on file with respect
to each Billing Individual, and Billing will honor these forms until such time,
if any, that such Billing Individual submits a revised form.
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, QUALIFIED MEDICAL
CHILD SUPPORT ORDERS AND WAGE ASSIGNMENTS. With respect to Employees with
garnishments, tax levies, child support orders, qualified medical child support
orders, and wage assignments in effect with USLD on the Cutoff Date, Billing
with respect to each Billing Individual shall honor such payroll deduction
authorizations or court or governmental orders applicable to Billing Plans, and
will continue to make payroll deductions and payments to any authorized payee,
as specified by the court or governmental order that was filed with USLD.
Likewise, USLD with respect to each Retained Individual shall honor such payroll
deduction authorization or court or governmental orders applicable to USLD Plans
and will continue to make payroll deductions and payments to any authorized
payee, as specified by the court or governmental order that was filed with USLD.
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS. Unless otherwise
prohibited or provided by this Agreement or another agreement entered into in
connection with the Distribution, or by a Plan document, with respect to
Employees with authorizations for payroll deductions in effect with USLD on the
Cutoff Date, Billing as the successor employer will honor such payroll deduction
authorizations relating to each Billing Individual, including, without
limitation, scheduled loan repayments to the 401(k) Retirement Plan and direct
deposit of payroll, bonus advances and types of authorized company receivables
usually collectible through payroll
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deductions, and shall not require that such Billing Individual submit a new
authorization to the extent that the type of deduction by Billing does not
differ from that made by USLD.
ARTICLE 3
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other
Agreement between USLD and Billing to the contrary, USLD and Billing understand
and agree that:
3.1 SEPARATE EMPLOYERS. After the Distribution Date and the
separation of Employees into their respective companies, USLD and Billing will
be separate and independent employers.
3.2 EMPLOYMENT POLICIES AND PRACTICES. USLD and Billing may adopt,
continue, modify or terminate such employment policies, compensation practices,
retirement plans, welfare benefit plans, and other employee benefit plans or
policies of any kind or description, as each may determine, in its sole
discretion, are necessary and appropriate.
3.3 CLAIMS.
(a) SCOPE. This section is intended to allocate all liabilities for
employment-related claims involving USLD or Billing including, but not limited
to, claims against either or both USLD and Billing and their respective
officers, directors, agents and employees, or against or by their respective
employee benefit plans and plan administrators and fiduciaries; provided,
however, that this section shall not apply to any indemnification between the
parties for matters and services contemplated in that certain Transitional
Services and Sublease Agreement between the parties dated ______, 1996 and
effective as of the Distribution Date.
(b) EMPLOYMENT-RELATED CLAIMS. An employment-related claim shall
include any actual or threatened lawsuit, arbitration, ERISA claim, or federal,
state or local judicial or administrative proceeding of whatever kind involving
a demand by or on behalf of or relating to Retained Individuals or Billing
Individuals, or by or relating to any federal, state or local government agency
alleging liability against USLD or Billing, or against any employee health,
welfare, deferred compensation or other benefit plan and/or their respective
officers, directors, agents, employees, administrators, trustees and
fiduciaries.
(c) OBLIGATION TO INDEMNIFY. The duty of a party to indemnify, defend
and hold harmless the other party under this Section 3.3 shall include the
following obligations of the party having such duty: to provide a legal defense
and incur all attorneys' fees and litigation costs that may be associated with
such a defense; to pay all costs of settlement or judgment where the
indemnifying party has the full duty to do so or to pay the full percentage of
the party's share when the duty is only a percentage of the full settlement or
judgment; and to hold harmless from all claims and costs that may be asserted
with or arising from the duty of the indemnifying party to defend and indemnify.
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(d) PRE-DISTRIBUTION CLAIMS.
(i) USLD shall indemnify, defend and hold harmless Billing from
any employment-related claims of a Retained Individual arising from acts
occurring on or before the Cutoff Date.
(ii) Billing shall indemnify, defend and hold harmless USLD from
any employment-related claims of a Billing Individual arising from acts
occurring on or before the Cutoff Date.
(e) DISTRIBUTION AND OTHER JOINT LIABILITY CLAIMS. Where
employment-related claims alleging or involving joint and several liability
asserted against USLD and Billing are not separately traceable to liabilities
relating to Retained Individuals or Billing Individuals, any liability shall be
appointed between USLD and Billing in accordance with the percentage that each
party's Employees represents of the combined total number of Employees of both
parties, as described below. The percentage of the liability assumed by USLD
shall equal the ratio of (i) the total number of Retained Employees on the
Distribution Date to (ii) the combined total number of Retained Employees and
Billing Employees on such date. The percentage of the liability assumed by
Billing shall equal the ratio of (i) the total number of Billing Employees on
the Distribution Date, to (ii) the combined total number of Retained Employees
and Billing Employees on such date. Each party will indemnify, defend and hold
harmless the other to the extent of the indemnifying party's apportioned
percentage determined in accordance herewith.
(f) POST-DISTRIBUTION EMPLOYMENT-RELATED CLAIMS. Employment related
claims arising from acts occurring after the Distribution and division of the
Employees between the parties and not relating to, arising from, or in
connection with the Distribution will be the sole responsibility of USLD as to
Retained Individuals and of Billing as to Billing Individuals. Each Company
will indemnify, defend, and hold harmless the other from employment-related
claims of the other company.
3.4 FUNDING OF PLANS. Without limitation to the scope and application
of Section 3.3, any claims by or on behalf of Employees or any federal, state or
local government agency for alleged underfunding of, or failure to make payments
to, health and welfare funds based on acts or omissions occurring on or before
the Cutoff Date or arising from or in connection with the Distribution, will be
the sole responsibility of each party as to its own employees (i.e., USLD with
respect to Retained Individuals and Billing with respect to Billing
Individuals), and the responsible party will indemnify, defend, and hold
harmless the other from any such claims.
3.5 NOTICE OF CLAIMS. Without limitation to the scope and application
to each party in the performance of its duties under Section 3.3 and 3.4 herein,
each party will notify in writing and consult with the other party prior to
making any settlement of an employee claim, for the purpose of avoiding any
prejudice to such other party arising from the settlement.
3.6 ASSUMPTION OF EMPLOYMENT TAX RATES. Changes in state unemployment
tax experience as of the Cutoff Date shall be handled as follows: In the event
an option exists to allocate state unemployment tax experience of USLD, the USLD
experience shall be transferred to Billing if this results in the lowest
aggregate unemployment tax costs for both USLD and
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Billing combined, and the USLD experience shall be retained by USLD if this
results in the lowest aggregate unemployment tax costs for USLD and Billing
combined.
3.7 INTERCOMPANY SERVICE CHARGE. Legal, professional, managerial,
administrative, clerical, consulting and support or production services provided
to one party by personnel of the other party, upon the request of the first
party or when such services are otherwise required by this Agreement between
Billing and USLD, shall be charged to the party receiving such services on
commercially reasonable terms to be negotiated (or in accordance with the
provisions of any applicable agreement between the parties).
3.8 WARN CLAIMS. Before and after the Distribution Date, each party
shall comply in all material respects with the Worker Adjustment and Retraining
Act ("WARN"). USLD shall be responsible for WARN claims relating to Retained
Individuals or to Employees who prior to the Distribution Date were employed in
a Retained Business. Billing shall be responsible for WARN Claims relating to
Billing Individuals or to Employees who prior to the Distribution Date were
employed in a Billing Business. Each party shall indemnify, defend and hold
harmless the other in connection with WARN Claims for which the indemnitor is
responsible and which are brought against the indemnitee.
3.9 EMPLOYEES ON LEAVE OF ABSENCE. After the Distribution Date, USLD
shall assume responsibility, if any, as employer for all Employees returning
from an approved leave of absence who prior to the Distribution Date were
employed in a Retained Business. After the Distribution Date, Billing shall
assume responsibility, if any, as employer for all Employees returning from an
approved leave of absence who prior to the Distribution Date were employed in a
Billing Business.
3.10 NO THIRD-PARTY BENEFICIARY RIGHTS. Neither this Agreement nor any
other intercompany agreement between Billing and USLD is intended to nor does it
create any third party contractual or other common law rights. No person shall
be deemed a third-party beneficiary of the agreement between Billing and USLD.
3.11 ATTORNEY-CLIENT PRIVILEGE. Consistent with the provisions of the
Distribution Agreement, the provisions herein requiring either party to this
Agreement to cooperate shall not be deemed to be a waiver of the attorney/client
privilege for either party or shall it require either party to waive its
attorney/client privilege.
ARTICLE 4
DEFAULT
4.1 DEFAULT. If either party materially defaults hereunder, the
nondefaulting party shall be entitled to all remedies provided in the
Distribution Agreement, including the arbitration of disputes set forth in
Section 11.13.
4.2 FORCE MAJEURE. Billing and USLD shall incur no liability to each
other due to a default under the terms and conditions of this Agreement
resulting from fire, flood, war, strike, lock-out, work stoppage or slow-down,
labor disturbances, power failure, major equipment
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breakdowns, construction delays, accident, riots, acts of God, acts of United
States' enemies, laws, orders or at the insistence or result of any governmental
authority or any other delay beyond each other's reasonable control.
ARTICLE 5
MISCELLANEOUS
5.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
5.2 ACCESS TO INFORMATION; COOPERATION. USLD and Billing and their
authorized agents will be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other party,
including in the custody of any agent, contractor, subcontractor, agent or any
other person or entity under contract by such party. The parties will provide
one another with such information within the scope of this Agreement as is
reasonably necessary to administer each party's Plans and to otherwise carry out
the provisions of this Agreement. The parties will cooperate with each other to
minimize the disruption caused by and such access and providing of information.
5.3 ASSIGNMENT. Neither party shall, without the prior written
consent of the other, have the right to assign any rights or delegate any
obligations under this Agreement.
5.4 HEADINGS. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define or limit the
scope or intent of any provision or part hereof.
5.5 SEVERABILITY OF PROVISIONS. Neither USLD nor Billing intends to
violate statutory or common law or existing contractual obligations by executing
this Agreement. If any section, sentence, paragraph, clause or combination of
provisions in this Agreement is in violation of any law, such sections,
sentences, paragraphs, clauses or combinations shall be inoperative and the
remainder of this Agreement shall remain in full force and effect and shall be
binding upon the parties.
5.6 PARTIES BOUND. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Nothing herein, expressed or implied, shall be construed to give any
other person any legal or equitable rights hereunder.
5.7 NOTICES. All notices, consents, approvals and other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given when delivered personally or by overnight courier
or three days after being mailed by registered or certified mail (postage
prepaid, return receipt requested) to the named representatives of the
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parties at the following addresses (or at such other address for a party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):
(a) if to USLD:
U.S. Long Distance Corp.
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Attention: W. Audie Long, General Counsel
(b) if to Billing:
Billing Information Concepts Corp.
9311 San Pedro, Suite 400
San Antonio, Texas 78216
Attention: _________________
Billing agrees that, upon the request of USLD, Billing will give copies of
all of its notices, consents, approvals and other communications hereunder to
any lender to USLD or other person specified by USLD.
5.8 FURTHER ACTION. Billing and USLD each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
5.9 WAIVER. Billing and USLD each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute a
waiver of any subsequent default or nullify the effectiveness of that term or
condition. All waivers must be in writing and must be signed by the party
against whom the waiver is sought to be enforced.
5.10 GOVERNING LAW. All controversies and disputes arising out of or
under this Agreement shall be determined pursuant to the laws of the State of
Texas regardless of the laws that might be applied under applicable principles
of conflicts of law.
5.11 CONSENT TO JURISDICTION. The parties irrevocably submit to the
exclusive jurisdiction of (a) the courts of the State of Texas in Bexar County,
or (b) any federal district court where there is federal jurisdiction for the
purpose of any suit, action or other court proceeding arising out of this
Agreement. The parties hereby irrevocably designate, appoint and empower the
President of USLD or Billing, as the case may be, as its true and lawful agent
and attorney-in-fact in its name, place and stead to receive on its behalf
service of process in any action, suit, or proceeding with respect to any
matters as to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence.
5.12 ENTIRE AGREEMENT. This Agreement and the Distribution Agreement
constitute the entire understanding between the parties hereto, and supersede
all prior written or oral communications, relating to the subject matter covered
by said agreements. No amendment, modification, extension or failure to enforce
any condition of this Agreement by either party
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shall be deemed a waiver of any of its rights herein. This Agreement shall not
be amended except by a writing executed by the parties.
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IN WITNESS HEREOF, the parties have executed this Agreement as of the date
first above written.
U.S. LONG DISTANCE CORP.,
a Delaware corporation
By:
----------------------------
Larry M. James
President
BILLING INFORMATION
CONCEPTS CORP.,
a Delaware corporation
By:
----------------------------
Alan W. Saltzman
President
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SCHEDULE 2.6(a)
Medical/Dental Plans to be Sponsored and Continued by USLD
[Add List]
<PAGE>
SCHEDULE 2.6(b)
Medical/Dental Plans to be Sponsored and Established by Billing
[Add List]
<PAGE>
ZERO PLUS - ZERO MINUS
BILLING AND INFORMATION MANAGEMENT
SERVICES AGREEMENT
This Zero Plus - Zero Minus Billing and Information Management Services
Agreement (the "Agreement") is entered into this ____ day of ___________ 1996,
by and between BILLING INFORMATION CONCEPTS INC., a Delaware corporation
("BMC"), and U.S. LONG DISTANCE, INC., a Texas corporation ("Customer").
W I T N E S S E T H:
WHEREAS, Customer is engaged in the business of providing certain "zero plus" or
"zero minus" telecommunication services for which Customer desires to bill and
collect for these services through the local exchange companies (LECs); and
WHEREAS, BMC has entered into billing and collection agreements with certain
LECs which allow BMC to provide billing and information management services for
qualifying "zero plus" and "zero minus" Message Telephone Service ("MTS") calls
on behalf of BMC's customers; and
WHEREAS, BMC has the ability through its computer hardware, computer software
and accounting systems to provide billing and information management services
for qualifying MTS calls for Customer, and Customer desires to obtain such
billing and information management services from BMC on the terms and conditions
contained herein:
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants and
agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, do hereby agree as
follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set forth
below, unless the context otherwise requires:
BAD DEBT: See Uncollectible Amounts and Written-Off Accounts.
BILLING TELEPHONE COMPANY (BTC): See Local Exchange Carrier.
BOC: Bell Operating Company.
BUSINESS DAY: A day other than Saturday and Sunday on which
commercial banks are open in the State of Texas.
CLAIM: Claim, loss, liability, damage, cost, correction and expense,
and whether ordinary, special, consequential or otherwise.
CONFIDENTIAL INFORMATION: See Section 8.
<PAGE>
EMI BILLING RECORDS: Computer readable records containing the
billing data for Customer's qualifying MTS calls, in the Bellcore EMI
(electronic message interface) format, for which each LEC has the
capability of processing through its billing and collection systems.
END USER: A natural person, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental agency or instrumentality, or other entity that subscribes to
or uses Customer's services.
FCC: The Federal Communications Commission.
FOREIGN INTRASTATE TAXES: Those applicable Taxes for MTS calls
originating and terminating in the same state but billed in another state
as described in Section 9 herein.
INDEPENDENT TELEPHONE COMPANIES: Those LECs that are not BOCs, which
presently include, subject to revision by BMC from time to time: General
Telephone Operating Companies (GTOCs), United Telecommunications Operating
Companies (United), Alltel, the alliance of Independent Telephone
Companies through Independent NECA Services, and U. S. Intelco.
INTEREXCHANGE CARRIER (IXC): Those telephone companies, other than
the LECs, that can provide intraLATA (where applicable), interLATA,
interstate and international telecommunications service.
LEC PROCESSING FEES: As described in paragraph 4.(c)(i) and 4.(f).
LOCAL EXCHANGE CARRIER (LEC): Any one of the local telephone
companies, as listed on Exhibit A hereto, providing intraLATA exchange
telephone services or issuing calling cards and with whom BMC has entered
into a billing and collection agreement.
MTS (MESSAGE TELEPHONE SERVICES): Direct dialed or operator assisted
station-to-station or person-to-person telephone calls billed: (i) to the
originating telephone number, (ii) collect to the terminating telephone
number, (iii) to a third telephone number other than the originating or
terminating telephone number, or (iv) to a LEC or IXC calling card.
"ENHANCED TELECOMMUNICATIONS SERVICES" OR "INFORMATION SERVICES" ARE NOT
CONSIDERED MTS CALLS HEREIN AND CANNOT BE BILLED UNDER THIS AGREEMENT.
POST-BILLING ADJUSTMENT OR CREDIT: Credits or rate adjustments
applied to an End User's account by the LEC or by BMC.
RBOCS: Regional Bell Operating Companies.
SUBMISSION DATE: As Described in paragraph 3.(a).
TARIFFS: The rates, terms and conditions for providing intraLATA,
interLATA (intrastate), interstate and international telecommunication
services as authorized and filed with the FCC, or with state or local
regulatory authorities.
2
<PAGE>
TAXES: The word "Taxes" shall mean all those taxes and tax-like
surcharges described in paragraph 9.(a) herein.
UNBILLABLE RECORDS: Those EMI Billing Records that pass BMC's edits
and screens and are submitted to the LECs for billing and collection but
subsequently fail the LEC's edits and screens and are not posted to an End
User's account by the LECs.
UNCOLLECTIBLE AMOUNTS: Those amounts that are billed to an End User's
account for Customer's Valid EMI Billing Records but are not collected due
to the End User receiving a Post-Billing Adjustment or Credit to its bill
or the End User failing to pay its bill to the LEC and the account
subsequently being written off as Bad Debt by the LEC.
VALID EMI BILLING RECORDS: As described in paragraph 3.(b).
WRITTEN-OFF ACCOUNTS: Those End Users' accounts that are not paid by
the End Users and are subsequently written off as Bad Debt by the LECs.
BMC REJECTED RECORDS: Those EMI Billing Records that fail BMC's edits
and screens and are returned to Customer and not submitted to the LECs for
billing and collection.
SECTION 2. SCOPE OF AGREEMENT.
Customer hereby agrees to purchase from BMC the services described in Section 3
herein, and BMC agrees to provide such services at the time and in the manner,
and subject to the terms and upon the conditions, set forth herein. Customer
agrees that BMC shall be the EXCLUSIVE source for LEC billing and information
management services in the United States and Canada for the billing telephone
companies listed in Exhibit A, attached hereto. However, nothing contained
herein shall be interpreted to prohibit Customer from contracting directly with
any LEC for its own direct LEC billing and collection agreement, provided that
Customer shall notify BMC of its intent at least sixty (60) days prior to
activation of such agreement. As BMC enters into billing and collection
arrangements with additional LECs, BMC will provide billing and information
management services to Customer for such LECs on the same terms and conditions
as contained herein.
SECTION 3. BILLING SERVICES.
(a) SUBMISSION OF EMI BILLING RECORDS. Customer shall submit to BMC
its EMI Billing Records for its qualifying MTS calls for BMC to submit to each
LEC under contract with BMC. Customer shall be responsible for submitting to
BMC EMI Billing Records that contain adequate information so that BMC and the
LECs can process such EMI Billing Records. Customer shall submit these EMI
Billing Records to BMC once per week, except when Customer cannot satisfy BMC's
minimum volume requirements as described in paragraph 7.(f), in which case
Customer shall submit its EMI Billing Records at least once per month. The cost
of these submissions shall be borne by Customer. The date BMC receives
Customer's EMI Billing Records will be, for those records, the "Submission
Date."
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(b) BMC'S EDITS AND SCREENS. Upon receipt of Customer's EMI Billing
Records, BMC will promptly process Customer's EMI Billing Records through BMC's
computer edits and screens. Those EMI Billing Records that pass BMC's edits and
screens shall be "Valid EMI Billing Records." Those EMI Billing Records that do
NOT pass BMC's edits and screens shall be "BMC Rejected Records," and shall be
returned to Customer.
(c) SUBMISSION TO LECS. Promptly after receipt of Customer's EMI
Billing Records (within five (5) Business Days after such receipt for the RBOCs
and GTE, or within ten (10) Business Days after such receipt for Independent
Telephone Companies), BMC will submit Customer's Valid EMI Billing Records to
the appropriate LECs.
(d) PURCHASE BY LEC. Each LEC shall be responsible, to the extent
required by its agreement with BMC, to purchase Customer's Valid EMI Billing
Records.
(e) BILLING AND COLLECTION BY LEC. Each LEC shall be responsible, for
such Valid EMI Billing Records purchased by the LEC, for the billing and
collection of the revenue, for Customer's qualifying MTS calls, from End Users
residing within the applicable billing area of such LEC.
(f) PRINTING OF CUSTOMER'S NAME ON END USER'S LEC TELEPHONE BILL:
Wherever possible, BMC will use its best efforts to cause each Billing Telephone
Company to print Customer's name, along with the associated Valid EMI Billing
Records, on each End User's telephone bill. Customer acknowledges that where
the Billing Telephone Companies do not provide this service, Customer's name
shall not appear on the End User's telephone bill.
SECTION 4: LEC PAYMENTS, FEES AND CHARGES:
(a) PAYMENT BY LECS: Each LEC shall make payments to BMC for Valid
EMI Billing Records purchased from Customer in accordance with the LEC's billing
and collection agreement with BMC.
(b) AMOUNT PAID BY LECS: The LEC shall pay to BMC the gross amount of
Valid EMI Billing Records purchased by the LEC LESS the then-applicable fees,
charges, charge backs, credits and adjustments as prescribed in its billing and
collection agreement with BMC.
(c) LEC FEES, CHARGES, CHARGE BACKS, CREDITS AND ADJUSTMENTS:
Customer acknowledges and understands that BMC is and will be bound by the terms
of its billing and collection agreement with each LEC with respect to each LEC's
right to deduct or to reduce its collectible funds for: (i) the amount charged
by each LEC for processing, billing and collecting Customer's Valid EMI Billing
Records ("LEC Processing Fees"), (ii) any Unbillable Records, (iii) any
Post-Billing Adjustments or Credits provided to End Users, (iv) any reserve for
anticipated Uncollectible Amounts ("Bad Debt Holdback Reserve"), and (v) any LEC
Bad Debt "true-ups" (i.e. periodic true-ups between the Bad Debt Holdback
Reserve and the actual Uncollectible Amounts realized by the LECs). In
addition, Customer shall be responsible for any data transmission and
distribution fees for delivering or receiving Customer's EMI Billing Records and
for any other LEC charges specifically related to billing and collecting
Customer's EMI Billing Records. Customer further agrees that payment of all
amounts described in this paragraph 4.(c)
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shall be its sole responsibility and that BMC may withhold such amounts from
payments to Customer. Should such amounts exceed the amounts due to Customer,
such amounts shall be due and payable by Customer to BMC within ten (10)
Business Days of notification by BMC of any amounts due. A schedule setting
forth BMC's contractual average LEC Processing Fees for each LEC is attached
hereto as Exhibit B hereto.
(d) BAD DEBT HOLDBACK RESERVE: BMC will holdback or cause the LECs to
holdback an amount estimated to be sufficient to set-off any Uncollectible
Amounts that may be determined after the date BMC makes its final payment to
Customer for Customer's Valid EMI Billing Records billed and collected by the
LEC. Any Bad Debt Holdback Reserve withheld by the LEC shall be passed through
to Customer on the same percentage or the same amount as BMC was assessed by the
individual LECs. However, once sufficient data becomes available to BMC from
the LECs to enable BMC to determine a specific Bad Debt history attributable to
Customer, the Bad Debt Holdback Reserve rate shall be based on Customer's
specific historical Uncollectible Amounts. A schedule setting forth the past
twelve months' average Bad Debt Holdback Reserve withheld by each LEC is
attached hereto, for your reference, as Exhibit G.
(e) MONTHLY LEC BAD DEBT TRUE-UP. Between six and eighteen (6 - 18)
months after BMC submits Customer's EMI Billing Records to the LECs for billing
and collection, the LECs will determine the actual amounts collected from the
End Users and true-up the difference between this amount and the face amount of
Customer's Valid EMI Billing Records purchased by the LEC. BMC will provide
Customer monthly reports on Bad Debt true-ups for these differences. If the
amount of these true-ups is "in favor" (positive) of Customer, BMC will remit
such amount to Customer when BMC receives the true-up amount from the LECs. If
the amount of these true-ups is "not in favor" (negative) of Customer, BMC will
withhold such amounts from the next scheduled payment due to Customer. If the
amounts due to Customer are not sufficient to satisfy such true-up amounts, such
amounts shall be due and payable by Customer to BMC within ten (10) Business
Days of notification by BMC of any amounts due.
(f) LEC PROCESSING FEE CALCULATION. Each calendar month BMC will
determine the number of End User bills (renderings) that were or will be
required to bill all of BMC's similarly situated customer's Valid EMI Billing
Records submitted to BMC during that month and the average number of Valid EMI
Billing Records contained on each End User's bill. BMC will then multiply these
quantities by its contractual LEC Processing Fee schedules for each LEC to
calculate the "Average LEC Processing Fees" for each LEC. Exhibit B, attached
hereto, contains the Average LEC Processing Fees for each LEC for the date
thereof. BMC will then multiply this Average LEC Processing Fee for each LEC by
the number of Customer's Valid EMI Billing Records submitted to each LEC to
calculate Customer's LEC Processing Fees. These Average LEC Processing Fees
will also include any data transmission fees, distribution fees, programming
fees and any other charges directly associated with billing Customer's Valid EMI
Billing Records.
(g) END USER INQUIRY AND REBATE. Primary End User inquiry,
investigation and rebate policies are set forth in Exhibit F attached hereto.
Customer shall be responsible for payment of all Post-Billing Adjustments and
Credits provided to End Users by either the LEC or BMC. Such amounts may be
deducted weekly from the amounts due to Customer. If the amount due to Customer
is not sufficient to satisfy these amounts, then Customer shall pay BMC such
amount
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as is required to satisfy these amounts within ten (10) Business Days of
notification by BMC of any amounts due.
(h) REJECTED RECORDS. Those EMI Billing Records that fail BMC's edits
and screens and not submitted to the LECs for billing and collection, BMC
Rejected Records, shall be returned to Customer at no charge. Unbillable
Records rejected by the LEC, through no fault of BMC, shall be charged the same
BMC Processing Fees as described in Exhibit C attached hereto.
(i) RESUBMITTED EMI BILLING RECORDS: Unbillable Records which are
resubmitted to the LECs for billing and collection shall be charged the standard
BMC Processing Fees as described in Exhibit C attached hereto.
SECTION 5. BMC BILLING SERVICE FEES, CHARGES AND CHARGE BACKS.
In addition to the LEC Processing Fees, charges, charge backs, credits and
adjustments set forth in Section 4, Customer agrees to pay to BMC and BMC may
deduct from amounts collected by the LECs on behalf of Customer and paid to BMC,
the following BMC billing service fees, charges, charge backs, credits and
assessments:
(a) A billing and information management service fee, the BMC Processing
Fee, for each Valid EMI Billing Record submitted to the LECs for billing and
collection by BMC, as specified in Exhibit C attached hereto;
(b) An End User inquiry, investigation and rebate fee for each Valid EMI
Billing Record submitted to the LECs for billing and collection by BMC, as
specified in Exhibit C attached hereto;
(c) Any Post-Billing Adjustment or Credit amounts refunded to End Users
by BMC's customer service inquiry and investigation activities, along with any
LEC charges associated with making such refunds to End Users;
(d) A charge, as specified in Exhibit C attached hereto, for any
submission of EMI Billing Records that contains less than the minimum volume
requirements of BMC for each "library code";
(e) An additional End User inquiry, investigation and rebate fee, as
described in Exhibit C attached hereto, for each inquiry that exceeds one
percent (1%) of the number of Valid EMI Billing Records for each library code
processed by BMC on behalf of Customer each month; and
(f) ACCOUNTS RECEIVABLE RECONCILIATION SYSTEM - FASTRACK: Customer
shall pay to BMC an initial, one-time fee, as described in Exhibit C attached
hereto, for BMC's accounts receivable reconciliation system known as FASTRACK.
As collateral for all obligations now existing or hereafter arising from
Customer to BMC, Customer hereby grants to BMC a security interest in all the
following property of Customer, whether now owned or hereafter acquired or
created, and all proceeds and products thereof:
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(a) All amounts paid, and all amounts owing, by each LEC to BMC on
accounts for Customer's EMI Billing Records;
(b) All accounts owing from an End User to Customer arising from
services which give rise to Customer's EMI Billing Records;
(c) All amounts deposited by Customer with BMC pursuant to paragraph
13.(b) hereof; and
(d) all amounts owing and all amounts to be owing from BMC to Customer.
SECTION 6. PAYMENTS TO CUSTOMER.
(a) DETERMINATION OF AMOUNT DUE TO CUSTOMER. BMC will determine the
amount collected by each LEC for Customer's Valid EMI Billing Records and deduct
the then-applicable fees, charges, charge backs, credits and adjustments of the
LECs and BMC. If the amount due to Customer is not sufficient to satisfy these
fees, charges, charge backs, credits and adjustments, then Customer shall pay
this difference to BMC within ten (10) Business Days of notification by BMC of
any amounts due.
(b) RESERVES AND TRUE-UPS FOR UNBILLABLE RECORDS: BMC will reserve an
amount, from one month to the next, that is equal to Customer's prior history
for Unbillable Records. BMC will recalculate Customer's historical experience
quarterly from its prior three months results. Until such history can be
determined for Customer, BMC will reserve two and one-half percent (2.5%) from
the amount due to Customer. BMC will true-up this reserve each month when the
information becomes available from the LECs. BMC will then return excess
amounts to Customer or withhold additional amounts as may be required to satisfy
these liabilities from the amounts due to Customer.
(c) PAYMENT SCHEDULES: BMC will advance to Customer the estimated
amount determined under paragraph 6.(a) above within seven (7) Business Days of
receipt by BMC of any funds from a LEC for Customer's EMI Billing Records;
PROVIDED, HOWEVER, that if Customer has ceased doing business for five (5)
Business Days, is the subject of a bankruptcy proceeding, or a receiver, trustee
or custodian is appointed over substantially all of Customer's assets, or if
Customer fails to make any deposit required under paragraph 13.(b), or if BMC
has reasonable grounds to believe that the fees, charges, charge backs, credits
and adjustments to Customer may exceed any amount owing or to become owing from
BMC to Customer, BMC may withhold payments to Customer until all such amounts
have been determined and deducted from the amount owing to Customer. If the
amount owing to Customer is determined not sufficient to satisfy these fees,
charges, charge backs, credits and adjustments, then Customer shall pay the
difference to BMC within ten (10) Business Days of notification by BMC of any
amount due.
(d) METHOD OF PAYMENT: BMC will make all advance payments and final
payments due to Customer, using ACH wire transfer, each Tuesday or the first
Business Day following Tuesday should Tuesday not fall on a Business Day based
on the schedule described in paragraph 6.(c) herein.
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(e) ACCOUNTING FOR FUNDS: Funds received from the LECs for Customer's
Valid EMI Billing Records, less applicable fees, charges, charge backs, credits
and adjustments, shall be deposited and held by BMC in a common account until
such time as the amount determined to be due Customer is paid to Customer. BMC
will maintain an accounting of the balance owing or to be owing by BMC to
Customer of such amounts deposited and held by BMC.
SECTION 7. CUSTOMER'S OBLIGATIONS.
The Customer agrees as follows:
(a) COOPERATION BY CUSTOMER. Customer agrees to cooperate with BMC to
the fullest extent possible and to the best of Customer's ability to facilitate
the provisioning of services described in Section 3 herein. Such cooperation
shall include, but not be limited to, the following:
(i) Supplying BMC with Customer's identification codes, any and
all certifications of regulatory authority necessary for Customer to offer
its services, and any other information and documents necessary or helpful
to BMC; and
(ii) Supplying BMC with all technical information and assistance
with testing that may be necessary or helpful to BMC in providing its
services herein.
(b) APPLICABLE APPROVALS AND COMPLIANCE WITH LAW. Customer shall
obtain and keep current all applicable federal, state and local licenses,
certifications and approvals and shall fully comply with all other applicable
federal, state and local regulations, laws, rules and Tariffs. Customer agrees
that BMC shall assume and will assume no responsibility for such compliance
whatsoever. Customer acknowledges and understands that certain LEC billing
systems contain edits and screens that "block" Customer's EMI Billing Records
from being billed to End Users until BMC can demonstrate to such LECs that
Customer has proper authority for providing its services to the End User.
Customer further acknowledges and understands that it may take as long as sixty
(60) days after notification to the LECs of such authority before the LECs will
begin billing Customer's EMI Billing Records. Therefore, BMC will not be
responsible for billing Customer's EMI Billing Records for services provided
prior to the LECs removing their regulatory edits and screens from their billing
systems.
(c) VALIDATION. Customer shall validate all collect, third party and
calling card billed MTS calls using the LECs' LIDBs (line information data
bases) or some other alternative validation method that is acceptable to the
LECs and to BMC.
(d) COMPLETED CALLS. Customer acknowledges and agrees that where
required, Customer shall be in compliance with the FCC's order to determine call
connection using hardware or software "answer detection." Customer further
agrees that it will submit to BMC only those EMI Billing Records for calls that
represent valid, completed calls as defined in Exhibit D attached hereto.
(e) AGED EMI BILLING RECORDS. Customer shall not submit EMI Billing
Records to BMC that are more than ninety (90) days old or that exceed the "age
of toll" acceptable by the LECs, whichever is less.
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(f) MINIMUM TRANSMISSION VOLUMES. Customer shall not submit to BMC
fewer than five thousand (5,000) EMI Billing Records per "library code" in any
transmission of its EMI Billing Records. The minimum BMC Processing Fee, as set
forth in Exhibit C attached hereto, shall apply if the minimum volume per
transmission is not met.
(g) OBJECTIONABLE CONTENT. Customer agrees, as a condition of BMC's
performance under this Agreement, that BMC will not provide billing and
information management services which BMC deems harmful, damaging or against
public policy, including, but not limited to:
(i) Services which explicitly or implicitly refer to sexual
conduct;
(ii) Services which contain indecent, obscene or profane language;
(iii) Services which allude to bigotry, racism, sexism or other
forms of discrimination;
(iv) Services which through advertising, content or delivery are
deceptive, or that may take unfair advantage of minors or the general
public;
(v) Services which are publicly accessible, multi-party
connections commonly known as "gab" or "chat" services;
(vi) Services which are prohibited by Federal, state, or local laws
or Tariffs; or
(vii) Services which individual LECs exclude from the "types" of
services or products for which their policies permit them to bill and
collect.
(h) NO OTHER BILLING ARRANGEMENT: Customer warrants that the EMI
Billing Records submitted and to be submitted by Customer to BMC pursuant to
this Agreement are NOT and will NOT be subject to any other valid or
existing billing and collection agreement, have NOT been billed previously and
will NOT be billed by another party following their submission by Customer to
BMC.
SECTION 8. PROTECTION OF CONFIDENTIAL INFORMATION.
As used herein, "Confidential Information" shall mean (a) proprietary
information, (b) information marked or designated as confidential, (c)
information otherwise disclosed in a manner consistent with its confidential
nature, (d) information of one party, whether or not in written form and whether
or not designated as confidential, that is known or should reasonably be known
by the other party as being treated as confidential, and (e) information
submitted by one party to the second party where the second party knows or
reasonably should know that the first party is obligated to keep the information
confidential. The parties hereto expressly recognize and acknowledge that, as
result of the provision of services pursuant to this Agreement, Confidential
Information which may be proprietary to each party must or may be disclosed to
the other. Each party hereby agrees that it will make no disclosure of
Confidential Information provided under this Agreement without the prior written
consent of the other party. Additionally, each party shall restrict disclosure
of said information to its own employees, agents or independent contractors to
whom disclosure is necessary and who have agreed to be bound by the obligations
of confidentiality hereunder. Such employees, agents or independent contractors
shall use reasonable care, but not less care than they use with respect to their
own information of like character, to prevent disclosure of any Confidential
Information. Nothing contained in this Agreement shall be considered as
granting or conferring rights by license or otherwise in any Confidential
Information disclosed.
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SECTION 9. TAXES.
(a) CALCULATION OF TELECOMMUNICATIONS TAXES: BMC will be responsible
for calculating or will use its best efforts to cause the LECs to calculate the
following taxes applicable to each MTS call and allow them to be passed through
to the End User, such taxes being referred to herein collectively as "Taxes":
Federal excise tax, any state and local sales taxes or tax-like charges, or any
Foreign Intrastate Taxes or foreign tax-like charges. Notwithstanding the
foregoing, Customer acknowledges and agrees it is responsible for compliance
with all taxing requirements; therefore, Customer shall promptly notify BMC of
any tax or tax-like surcharges and the associated rates that apply to Customer's
MTS calls in any specific jurisdiction.
(b) BILLING AND COLLECTION OF TAXES: BMC will, for the benefit of and
on behalf of Customer, use its best efforts to cause the LECs to bill End Users
for all Taxes. Customer acknowledges and agrees that BMC is acting merely as
Customer's agent with respect to arranging for the billing and collection of
Taxes, and in no event shall BMC be entitled to retain or receive from Customer,
or from any End User, any statutory fee or share of Taxes to which the person
collecting the same may be entitled under applicable law.
(c) TAX EXEMPT STATUS FOR END USERS: BMC will have the authority, on
behalf of Customer, to authorize the LECs to calculate Taxes in the same manner
as the LECs calculate Taxes for their End Users and to authorize the LECs to
establish the tax exempt status of End Users in the same manner as the LECs
establish such status for their End Users. If Customer's MTS calls are exempt
from federal, state and local Taxes or tax-like charges, Customer shall so
indicate on each EMI Billing Record submitted to BMC.
(d) FILING AND PAYMENT OF TAXES: Based upon the information
calculated by BMC and/or received from the LECs with respect to Taxes assessed,
billed and collected by the LECs, BMC will, on behalf of Customer, prepare and
file in a timely manner with the applicable taxing authorities all returns
covering Taxes, and will, on behalf of Customer, but only to the extent of
amounts otherwise owing from BMC to Customer, pay in full and promptly remit to
such taxing authorities all Taxes owed thereto. Upon written request, BMC will
provide to Customer copies of any and all tax returns and other applicable
information relating to the payment of Taxes by BMC within thirty (30) days
after being filed and paid by BMC.
(e) HOLD HARMLESS: Customer shall indemnify and hold BMC and its
employees, agents and representatives free and harmless from and against any
Claim (including, without limitation, reasonable attorneys' fees and court
costs) relating to or arising out of any Taxes, penalties, interest, additions
to tax, surcharge or other amounts to which BMC may be subject or incur,
relating to or arising out of (i) BMC's reliance upon any calculations,
determinations or other directives, or lack thereof, given by Customer to BMC
with respect to the calculation, assessment, billing and/or collection of any
Taxes contemplated by this Agreement; or (ii) a determination by the Internal
Revenue Service or any other taxing authority that any amount paid by BMC
pursuant to paragraph 9.(d) above with respect to Taxes was insufficient, except
in the event such insufficiency was the result of gross negligence on the part
of BMC; provided, however, that Customer shall not be required to indemnify BMC
or the employees, agents and
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representatives thereof for any loss, damage, Claim, cause of action or other
liability to the extent, but only to the extent, caused by the gross negligence
or willful misconduct of BMC.
(f) BILLED TAXES: Customer shall be responsible for the payment of
any additional Taxes or tax-like charges assessed against BMC based on the
revenues collected by BMC from Customer's Valid EMI Billing Records, "Billed
Taxes" under this Agreement, excluding Federal and state income Taxes.
SECTION 10. FORCE MAJEURE.
BMC shall not be held liable for any delay or failure in performance of any part
of this Agreement or Exhibits attached hereto from any cause beyond its control
and without its fault or negligence, such as acts of God, acts of civil or
military authority, government regulations, embargoes, epidemics, war, terrorist
acts, riots, insurrections, fires, explosions, earthquakes, nuclear accidents,
floods, strikes, power blackouts, volcanic action, other major environmental
disturbances, unusually severe weather conditions, inability to secure products
or services of other persons or transportation facilities, or acts or omissions
of transportation common carriers.
SECTION 11. LIMITATION OF LIABILITY.
(a) BMC will use its best efforts at all times to provide prompt and
efficient service; however, BMC makes no warranties or representations regarding
the services except as specifically stated in this paragraph 11.(a). BMC will
use due care in processing all work submitted to it by Customer and agrees that
it will, at its expense, correct any errors which are due solely to malfunction
of BMC's computers, operating systems or programs or errors by BMC's employees
or agents. Correction shall be limited to reprocessing Customer's EMI Billing
Records. BMC will not be responsible in any manner for failures of, or errors
in, proprietary systems and programs other than those of BMC, nor shall BMC be
liable for errors or failures of Customer's software or operational systems.
THIS WARRANTY IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER WARRANTIES, AND CUSTOMER
HEREBY WAIVES ALL OTHER WARRANTIES, EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING,
BUT NOT LIMITED TO, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR USE FOR A
PARTICULAR PURPOSE. Should there be any failure in performance or errors or
omissions by BMC with respect to the information being processed and being
submitted to the LECs for billing and collection, BMC's liability shall be
limited to using its best efforts to correct such failure. In no event, except
as specifically set forth herein, shall BMC be liable to Customer or any third
parties (including Customer's customers) for any Claim even if BMC has been
advised of the possibility of such Claim.
(b) Due to the nature of the services being performed by BMC, Customer
agrees that in no event will BMC be liable for any Claim caused by BMC's
performance or failure to perform hereunder which is not reported by Customer in
writing to BMC within thirty (30) days of such performance or failure to
perform.
(c) Customer shall indemnify and save harmless BMC from and against any
Claim asserted against BMC by third parties and arising out of Customer's use of
the services provided
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under this Agreement, unless such Claim arises out of the willful misconduct or
gross negligence of BMC.
(d) Liability of BMC in any and all categories and for any and all
Claims arising out of this Agreement or out of any act or omission relating
thereto shall, in the aggregate, not exceed one (1) month's average of BMC's
Processing Fees to Customer over the twelve (12) months preceding such date in
which the damage or injury is alleged to have occurred, but if this Agreement
has not been in effect for twelve (12) months preceding such date, then over
such fewer number of preceding months that this Agreement has been in effect.
SECTION 12. TERM OF AGREEMENT.
The initial term of this Agreement shall begin on the date on page 1 of this
Agreement or the date Customer begins submitting its EMI Billing Records to BMC,
whichever is later, and continue in full force and effect for a minimum period
of one (1) year from such date unless terminated in accordance with paragraph
14.(b)(i) and shall automatically renew for successive periods of one (1) year
unless terminated by written notice from either party at least sixty (60) days
prior to the scheduled expiration date.
Notwithstanding anything to the contrary contained herein, if Customer is
currently billing more than twenty-five thousand (25,000) EMI Billing Records
per month, Customer may elect an initial term for this Agreement of two (2) or
three (3) years. Should Customer elect to extend the initial term of this
Agreement, Customer shall pay BMC a minimum Processing Fee, as described in
Exhibit C attached hereto, each month for the entire term of this Agreement. In
consideration for such, BMC will charge Customer a reduced billing services fee
for the term selected which coincides with the BMC fee schedule as presented in
Exhibit C, attached hereto.
SECTION 13. EXPIRATION OR TERMINATION.
(a) PAYMENT UPON EXPIRATION OR TERMINATION: Upon the expiration or
termination of this Agreement for any reason, Customer agrees to satisfy, when
or before due, any and all of its obligations arising under this Agreement.
(b) DEPOSIT FOR CHARGES: In addition, Customer acknowledges and
understands that certain LEC charges for Uncollectible Amounts, Bad Debt
true-ups and Post-Billing Adjustments and Credits which are not determined by
the LECs or provided to BMC for a period of up to eighteen (18) months after the
final processing of Customer's EMI Billing Records by BMC on behalf of Customer.
Customer further acknowledges and agrees that payment of these amounts shall be
its sole responsibility. To ensure such payments, Customer shall, at the
expiration or termination of this Agreement for any reason, deposit with BMC an
amount equal to two and one-half percent (2.5%) of the face amount of Customer's
gross billings for the prior twelve (12) months, or such other amount as is
estimated by BMC, based on Customer's prior history, necessary to satisfy such
charges. Such deposited amount shall be used by BMC to pay Uncollectible
Amounts, Bad Debt true-ups, Post-Billing Adjustments and Credits and other
charges incurred on behalf of Customer for billing and collecting Customer's EMI
Billing Records submitted by Customer to BMC during the term of this Agreement.
Each quarter BMC will re-examine the amount of funds deposited and make such
adjustments as BMC estimates may
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be necessary to satisfy the aforementioned charges. BMC will provide Customer
with proper documentation to substantiate charges attributable to Customer on
the same and consistent method as BMC determines such charges for all of its
customers. At the end of eighteen (18) months from the expiration or
termination date, BMC will return all unused amounts to Customer.
(c) REMAINING LIABILITY: Notwithstanding the foregoing, the deposit
of such amounts does not relieve or waive Customer's responsibility and
obligation to pay its obligations to BMC including, without limitations, any and
all fees, charges, charge backs, credits and adjustments associated with billing
and collecting its EMI Billing Records. In the event such associated fees,
charges, charge backs, credits and adjustments exceed the amount of the deposit
described in paragraph 13.(b), Customer shall remit to BMC such additional
amounts as are required to satisfy Customer's obligations under this Agreement
to BMC within ten (10) Business Days of notification by BMC of any such amounts
due.
(d) SAVINGS CLAUSE: Except as otherwise provided herein, expiration
or termination of this Agreement under this Section 13 shall terminate all
further rights and obligations of the parties hereunder, provided that:
(i) Neither BMC nor Customer shall be relieved of its respective
obligations to pay any sums of money due or to become due or payable or
accrued under this Agreement;
(ii) If such expiration or termination is a result of a default
hereunder or a breach hereof by a party hereto, the other party shall be
entitled to pursue any and all rights and remedies it has to redress such
default or breach in law or equity, subject to Sections 11, 14 and 24
hereof; and
(iii) The provisions of Sections 8 and 9 hereof, except paragraph
9.(b), shall survive the expiration or termination of this Agreement.
(e) EARLY TERMINATION OF EXTENDED TERM AGREEMENT: If Customer elects
to extend the initial term of this Agreement and should Customer terminate or
breach this Agreement before the expiration of the full initial term elected by
Customer upon execution hereof, BMC will recalculate and Customer shall pay to
BMC a processing fee for all EMI Billing Records processed under this Agreement
based on the current processing fee schedule at the one (1) year rate, attached
hereto as Exhibit C, plus ten percent (10%) for each EMI Billing Record
processed under this Agreement, at Customer's monthly volume levels.
SECTION 14. DEFAULT AND REMEDIES.
(a) DEFAULT: Either Party shall be in default hereunder if it:
(i) Fails to make any payment specified hereunder when or before
due and such failure continues for five (5) Business Days after written
notice;
(ii) Breaches any other material covenant or undertaking contained
in this Agreement and fails to remedy such breach within thirty (30)
Business Days after written notice thereof from the non-defaulting party;
or
(iii) Files, or there is filed against it, any voluntary or
involuntary proceeding under the Bankruptcy Code, or makes an assignment
for the benefit of creditors, dissolves, ceases to conduct business for
three (3) Business Days, resorts to any insolvency law, declares that it
is unable to pay its debts as they mature or if a receiver, trustee or
13
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custodian is appointed over, or an execution, attachment, or levy is made
upon, all or any material part of the property of such party.
(b) REMEDIES: Time is of the essence of this Agreement. In the event
of any default hereunder, the non-defaulting party shall have the following
rights and remedies:
(i) To terminate or cancel this Agreement, subject to the
provisions of paragraph 13.(d), by giving written notice thereof to the
defaulting party;
(ii) To declare all amounts due under this Agreement from the
defaulting party to the non-defaulting party to be immediately due and
payable;
(iii) To withhold, setoff, and retain, until all obligations of
Customer to BMC have been satisfied in full, any and all amounts which may
otherwise be due and payable to Customer under this Agreement and apply
such amounts to any balance due or to become due from Customer to BMC;
(iv) All rights and remedies allowed by the applicable Uniform
Commercial Code;
(v) All other rights and remedies allowed by this Agreement and
under applicable law; and
(vi) All rights and remedies shall be cumulative and can be
exercised separately or concurrently.
SECTION 15. AMENDMENTS; WAIVERS.
No modification, amendment or waiver of any provision of this Agreement, and no
consent to any default under this Agreement, shall be effective unless the same
shall be in writing and signed by or on behalf of the party against whom such
modification, amendment, waiver or consent is claimed. In addition, no course
of dealing or failure of any party to strictly enforce any term, right or
condition of this Agreement shall be construed as a waiver or such term, right
or condition.
SECTION 16. ASSIGNMENT.
(a) BY CUSTOMER OR BMC. Assignment by Customer or BMC of any right,
obligation or duty or of any other interest hereunder, in whole or in part,
shall require consent by both parties. Such consent shall not be unreasonably
withheld by either party.
(b) GENERALLY. All rights, obligations, duties and interests of any
party under this Agreement shall inure to the benefit of and be binding on all
successors in interest and assigns of such party and shall survive any
acquisition, merger, reorganization or other business combination to which it is
a party.
SECTION 17. NOTICES AND DEMANDS.
(a) HOW NOTICE GIVEN: Except as otherwise provided under this
Agreement, all notices, demands and requests which may be given by any party to
the other party shall be in writing and shall be: (i) delivered in person; (ii)
mailed, postage prepaid, registered or certified mail, return receipt requested;
(iii) placed in the hands of a national overnight delivery service
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<PAGE>
or (iv) sent by facsimile transmission to the recipient's facsimile machine,
with an extra copy immediately following by first class mail; and addressed as
follows:
IF TO BMC, TO IT AT:
BILLING INFORMATION CONCEPTS CORP.
ATTENTION: MR. AUDIE LONG
9311 SAN PEDRO, SUITE 300
SAN ANTONIO, TEXAS 78216
TELEPHONE: (210) 525-8912
FAX: (210) 525-0511
_________________________________________________________________
IF TO CUSTOMER, TO IT AT:
U.S. LONG DISTANCE, INC.
ATTENTION: _____________________
9311 SAN PEDRO, SUITE 100
SAN ANTONIO, TEXAS 78216
TELEPHONE: (210) 525-9009
FAX: (210) 525-__________
If personal delivery is selected as the method of giving notice under this
Section, a receipt for such delivery shall be obtained. The address to which
such notices, demands, requests, elections or other communications may be given
by either party may be changed by written notice given by such party to the
other party pursuant to this Section 17.
(b) WHEN NOTICE EFFECTIVE: Except as otherwise expressly provided
herein, all such notices shall be effective upon receipt if delivered by hand,
facsimile, national overnight delivery service, certified or registered mail and
otherwise five (5) Business Days after placement in the U.S. mails.
SECTION 18. NO THIRD-PARTY BENEFICIARIES.
This Agreement shall not provide any person not a party to this Agreement with
any remedy, claim, liability, reimbursement, cause of action or other right in
excess of those existing without reference to this Agreement.
SECTION 19. GOVERNING LAW.
This Agreement shall be deemed to be a contract made under the laws of the State
of Texas, and the construction, interpretation and performance of this Agreement
and all transactions hereunder shall be governed by the domestic laws of such
State without regard to conflict of law principles.
SECTION 20. ENTIRE AGREEMENT.
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<PAGE>
This Agreement constitutes the entire and exclusive Agreement between the
parties and supersedes all prior or contemporaneous agreements, and oral or
written representations, between them.
SECTION 21. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same document.
SECTION 22. HEADINGS.
The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the meaning or
interpretation of this Agreement.
SECTION 23. MOST FAVORED CUSTOMER.
It is the intent of the parties hereto that Customer shall be considered by BMC
as one of its most favored customers under this Agreement. By virtue of this
consideration, Customer shall not pay a greater BMC Processing Fee per call, or
in the alternative, receive a lesser number of out-cleared messages for the same
or lesser BMC Processing Fee, than any other similarly situated customer of BMC
under this Agreement. BMC will promptly reduce Customer's monthly BMC
Processing Fee and minimum revenue guarantees if it should grant a lower rate
per call or provide a greater number of out-cleared messages for the same or
lesser BMC Processing Fee to any customer of BMC under this Agreement, similarly
situated to Customer. Regardless of the mechanics of the aforementioned, it is
the intent of this clause and the principle hereunder that Customer be treated
as well as or better than the most favorably treated customer of BMC under this
Agreement.
SECTION 24. ARBITRATION
Any controversy, dispute or Claim arising out of or in connection with this
Agreement, or the breach, termination or validity hereof, shall be settled by
final and binding arbitration to be conducted by an arbitration tribunal in San
Antonio, Texas, pursuant to the rules of the American Arbitration Association.
In the event of any procedural matter not covered by the aforesaid rules, the
procedural law of the State of Texas shall govern. The arbitration tribunal
shall consist of three arbitrators. The party initiating arbitration shall
nominate one arbitrator in the request for arbitration and the other party shall
nominate a second in the answer thereto within 15 days of receipt of the
request. The two arbitrators so named will then jointly appoint the third
arbitrator. If the answering party fails to nominate its arbitrator within the
fifteen day period, or if the arbitrators named by the parties fail to agree on
the third arbitrator within thirty days, the Office of the American Arbitration
Association in Dallas, Texas shall make the necessary appointments of such
arbitrator(s). The arbitrator shall only have authority to award compensatory
damages and shall not have authority to award punitive damages, other
non-compensatory damages or any other form of relief: the parties hereby waive
all rights to and claims for relief other than compensatory damages. The
decision or award of the arbitration tribunal (by a majority determination, or
if there is no majority, then by the determination of the third arbitrator, if
any) shall be final, and judgment upon such decision or award may be entered in
the courts of the
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<PAGE>
State of Texas or the United States of America for the Western District of the
State of Texas. By execution and delivery of this Agreement, each of the
parties hereto accepts for itself and in respect of its property, generally and
unconditionally , the jurisdiction of the aforesaid courts.
The initial term of this Agreement shall be for a period of ___________ (one,
two or three) years from the date hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first
set forth above.
BILLING INFORMATION CONCEPTS INC.:
By:________________________________
Alan W. Saltzman
President and
Chief Operating Officer
Date:______________________________
CUSTOMER:
U.S. LONG DISTANCE, INC.
By:________________________________
Name:______________________________
(print)
Its:_______________________________
Date:______________________________
______________________________
Account Representative
17
<PAGE>
TELECOMMUNICATIONS AGREEMENT
This Agreement is entered into this _____ of _______, 1996, by and between
U. S. LONG DISTANCE, INC., a Texas corporation with its principal office at 9311
San Pedro, Suite 100, San Antonio, Texas 78216 ("USLD"), and BILLING INFORMATION
CONCEPTS INC., a Delaware corporation with its principal office at 9311 San
Pedro, Suite 400, San Antonio, Texas 78216 ("Customer").
WITNESSETH:
WHEREAS, USLD is in the business of providing telecommunications services;
and
WHEREAS, Customer desires to purchase telecommunications services from
USLD:
NOW, THEREFORE, in consideration of the mutual promises and convenants
contained herein, and for other good and valuable consideration, the parties do
hereby contract and agree as follows:
1. USLD agrees to furnish to Customer, and Customer agrees to purchase
from USLD, the telecommunication services as set forth in EXHIBIT "A" attached
hereto and made a part of this Agreement as if set forth verbatim herein.
2. This Agreement shall commence on the _______day of ___________, 1996
(the "Commencement Date") and continue for a period of three (3) years.
This Agreement shall be extended, on the same terms and conditions, for an
additional period of _______________ unless either party notifies the other
party in writing not less than sixty (60) days prior to the termination date of
its desire to terminate this Agreement.
3. During the term of this Agreement, USLD shall charge for the
telecommunication services, and Customer shall pay for such telecommunication
services, that amount as determined by using the rates set out in EXHIBIT "A."
4. USLD shall give Customer at least forty-five (45) days' notification
in the event any service rate in EXHIBIT "A" is modified. Upon such
notification, Customer will have the right to terminate this Agreement without
penalty by providing USLD written notice within thirty (30) days of Customer's
intent to cancel service sixty (60) days from notice.
5. Customer hereby acknowledges that USLD's charges for the provision
of its telecommunication services will be billed on a monthly basis and that
payment for such services is due and payable fifteen (15) days from the invoice
date. Late payments will be assessed a late charge of 1.5% per month. Payments
not received within thirty (30) days of the invoice date will result in the
right of USLD to cancel and terminate the services provided herein, after
providing Customer with written notice, via facsimile, of such intent to
terminate service and allowing Customer ten (10) working days to cure the
deficiency.
6. Should Customer dispute any of the monthly charges on its monthly
invoice, it shall notify USLD of the disputed charges not later than ten (10)
days from the date of invoice. This notice shall set forth in writing all
details concerning the disputed charges. In the event of a dispute, Customer
shall pay the entire invoice in accordance with the payment terms set forth
therein. After resolution of the disputed portion of the invoice, the
adjustment, if any, shall be immediately credited to Customer's account.
7. Should Customer claim any exemption of any sales, use or other tax,
then Customer shall provide documentation regarding such exemption to USLD.
USLD will be allowed to maintain a copy of such
<PAGE>
documentation in its offices in San Antonio, Texas. It will be the
responsibility of Customer to make sure that its proof of exempt status remains
current.
8. No term or provision of this Agreement shall be deemed waived, and
no breach shall be deemed excused, unless such waiver or consent shall be in
writing and signed by the party claimed to have waived or consented. No consent
by any party to, or waiver of, a breach or default by the other, whether
expressed or implied, shall constitute a consent to, waiver of or excuse for any
different or subsequent breach or default.
9. Neither USLD nor Customer shall be liable to the other for any
consequential, indirect, special or incidental damages whatsoever, including,
without limitation, any loss of revenue, goodwill, or profits or claims by third
parties or otherwise in connection with or related to any of the services
provided pursuant to this Agreement.
10. USLD warrants that the equipment used in providing the services to
Customer pursuant to this Agreement is suitable for the uses intended, and
Customer warrants and represents that it is fully authorized to contract for the
services under this Agreement.
USLD MAKES NO OTHER WARRANTIES, EITHER EXPRESSED OR IMPLIED.
11. This Agreement authorizes USLD to start provisioning of
telecommunications services, as set forth herein, to Customer on the
Commencement Date. This Agreement also authorizes USLD to act as Customer's
agent in placing orders with other carriers in order to provide
telecommunications services, if requested.
12. If the performance of the respective obligations of USLD or Customer
shall be prevented or interfered with by reason of any fire, flood, epidemic,
earthquake or any other act of God, explosion, strike or other disputes, riot or
civil disturbance, war (whether declared or undeclared) or armed conflict, any
municipal ordinance or state or federal law, governmental order or regulation or
order of any court of competent jurisdiction, or other similar forces not within
the control of USLD nor Customer, as the case may be, then Customer and/or USLD,
as the case may be, shall not be liable to the other for its failure to perform
such obligations hereunder.
13. If any term or provision of this Agreement shall be found to be
illegal or unenforceable, then, notwithstanding such illegality or
unenforceability, this Agreement shall remain in full force and effect and such
term or provision shall be deemed to be deleted. In addition, this Agreement
shall be terminated upon the determination of a governmental entity having
jurisdiction over the services provided under this Agreement.
14. Except as otherwise provided herein, the remedies provided for in
this Agreement are in addition to any other remedies available at law or in
equity, by statute or otherwise.
15. Should it be necessary for either party to this Agreement to retain
the services of an attorney to enforce its rights under this Agreement, and
should any suit be necessary to enforce said rights, then the prevailing party
shall be entitled to receive reasonable attorney's fees from the other party.
16. This Agreement shall be governed by the substantive laws of the
State of Texas, without regard to conflict of law principles, with venue at San
Antonio, Texas.
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<PAGE>
17. This Agreement shall be binding upon and inure to the benefit of
USLD and Customer and their respective successors and assigns. USLD retains the
right to assign all or part of this Agreement. This Agreement may not be
assigned by Customer without the prior written consent of USLD. USLD reserves
the right to obtain necessary credit information or require additional security
deposits from successors and assigns.
18. This Agreement, including the exhibits hereto and the documents and
instruments referred to therein, embodies the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement, and any documents and instruments contemplated hereby, supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
19. This Agreement may be amended, modified or supplemented only by an
instrument in writing executed by the party against which enforcement of the
amendment, modification or supplement is sought.
20. This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original. It shall not be necessary in making proof
of this Agreement to produce or account for more than one (1) of such
counterparts.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day
and year first above written, and the individuals signing below warrant that
they have authority to sign for and on behalf of the respective parties.
U. S. LONG DISTANCE, INC. BILLING INFORMATION CONCEPTS INC.
By: By:
---------------------------- -------------------------------
Name: Name:
---------------------------- -------------------------------
Title: Title:
---------------------------- -------------------------------
Date: Date:
---------------------------- -------------------------------
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<PAGE>
BILLING INFORMATION CONCEPTS CORP.
1996 EMPLOYEE COMPREHENSIVE STOCK PLAN
1. PURPOSE. The purpose of this 1996 Employee Comprehensive Stock
Plan (the "Plan") is to further the success of Billing Information Concepts
Corp., a Delaware corporation (the "Company"), and certain of its affiliates
by making available Common Stock of the Company to certain officers and
employees of the Company and its affiliates, and thus to provide an
additional incentive to such individuals to continue in the service of the
Company or its affiliates and to give them a greater interest as stockholders
in the success of the Company. Subject to compliance with the provisions of
the Plan and the Code, Incentive Stock Options as authorized by Section 422
of the Code and stock options which do not qualify under Section 422 of the
Code are authorized and may be granted under the Plan. Further, the Company
may grant Restricted Stock, as defined below.
2. DEFINITIONS. As used in this Plan the following terms shall have
the meanings indicated as follows:
(a) "Award" means an award of stock options (including Incentive
Stock Options) or Restricted Stock, on a stand alone, combination or tandem
basis, as described in or granted under this Plan.
(b) "Award Agreement" means a written agreement setting forth the
terms of an Award, in the form prescribed by the Committee.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" shall mean, in the context of the termination of a
Participant, as determined by the Board, in the reasonable exercise of its
business judgment the occurrence of one of the following events: (i)
conviction of or a plea of NOLO CONTENDERE to a charge of a felony (which,
through lapse of time or otherwise, is not subject to appeal); (ii) willful
refusal without proper legal cause to perform, or gross negligence in
performing, Participant's duties and responsibilities; (iii) material
breach of fiduciary duty to the Company through the misappropriation of
Company funds or property or otherwise; or (iv) the unauthorized absence of
Participant from work (other than for sick leave or disability) for a
period of thirty working days or more during any period of forty-five
working days; provided, further, within one year following a Change of
Control, "Cause" shall be limited to the conviction of or a plea of NOLO
CONTENDERE to the charge of a felony (which, through lapse of time or
otherwise, is not subject to an appeal), or a material breach of fiduciary
duty to the Company through the misappropriation of Company funds or
property or otherwise.
(e) "Change of Control" shall be deemed to have occurred if (i) any
"Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined voting power of the Company's
then outstanding voting securities, or (ii) at any time during the 24-month
<PAGE>
period after a tender offer, merger, consolidation, sale of assets or
contested election, or any combination of such transactions, at least a
majority of the Board shall cease to consist of "continuing directors"
(meaning directors of the Company who either were directors prior to such
transaction or who subsequently became directors and whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least two thirds of the directors then still in office who were
directors prior to such transaction), or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 70% of
the total voting power represented by the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement of sale or disposition
by the Company of all or substantially all of the Company's assets.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Committee administering the Plan described
in Section 3 hereof.
(h) "Common Stock" means the Company's common stock, par value $.01
per share.
(i) "Continuous Status as an Employee" means that the employment
relationship with any one or more of (i) the Company, (ii) any Parent,
(iii) any Subsidiary or (iv) USLD has not been terminated or interrupted.
(j) "Date of Grant" means the date on which an Award is granted under
an Award Agreement executed by the Company and a Participant pursuant to
the Plan.
(k) "Disinterested Person" means a "disinterested person" as such
term is defined in Rule 16b-3 promulgated under the Exchange Act or any
successor provision.
(l) "Effective Date" means the effective date of this Plan specified
in Section 14 hereof.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as it
may be amended from time to time.
(n) "Good Reason" shall mean the occurrence of any of the following
events: (a) removal from the principal office held by the Participant on
the date of the most recent Award, or a material reduction in the
Participant's authority or responsibility, including, without limitation,
involuntary removal from the Board, but not including termination of the
Participant for Cause; or (b) the Company otherwise commits a material
breach of this Plan, or the Participant's employment agreement, if
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<PAGE>
applicable; provided, however, that within one year following a Change of
Control, "Good Reason" shall mean (i) removal from the principal office
held by the Participant on the date of the most recent Award, (ii) a
material reduction in the Participant's authority or responsibility,
including, without limitation, involuntary removal from the Board, (iii)
relocation of the Company's headquarters from the San Antonio, Texas
metropolitan area but not including termination of the Participant for
cause, (iv) a material reduction in the Participant's compensation, or (v)
the Company otherwise commits a material breach of this Plan, or the
Participant's employment agreement, if applicable.
(o) "Incentive Stock Option" means an option qualifying under Section
422 of the Code.
(p) "Parent" means a parent corporation of the Company as defined in
Section 424(e) of the Code.
(q) "Participants" means the employees and officers of the Company,
its Subsidiaries and its Parent (including those directors of the Company
who are also employees of the Company, its Parent or one or more of its
Subsidiaries). "Participants" includes the USLD Participants.
(r) "Restricted Period" shall mean the period designated by the
Committee during which Restricted Stock may not be sold, assigned,
transferred, pledged, or otherwise encumbered, which period shall not be
less than one year nor more than two years from the Date of Grant.
(s) "Restricted Stock" shall mean those shares of Common Stock issued
pursuant to an Award that remain subject to the Restricted Period.
(t) "Retained Distributions" shall mean any securities or other
property (other than cash dividends) distributed by the Company or
otherwise received by the holder in respect of Restricted Stock during any
Restricted Period.
(u) "Retirement" shall mean retirement of a Participant from the
employ of the Company, its Parent, its Subsidiaries or USLD, as the case
may be, in accordance with the then existing employment policies of any
such employer.
(v) "Subsidiary" means a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.
(w) "USLD" means U.S. Long Distance Corp. and its Subsidiaries and
any Parent of USLD.
(x) "USLD Participants" means the employees and officers of USLD who
are or were employees and officers of USLD prior to and immediately following
the distribution of the Company Common Stock by USLD to the stockholders of
USLD.
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<PAGE>
3. ADMINISTRATION OF THE PLAN. The Board shall appoint a committee
(the "Committee") comprised of two or more directors to administer the Plan.
Only directors who are Disinterested Persons shall be eligible to serve as
members of the Committee. The Committee shall report all action taken by it
to the Board, which shall review and ratify or approve those actions that are
by law required to be so reviewed and ratified or approved by the Board. The
Committee shall have full and final authority in its discretion, subject to
the provisions of the Plan, to make determinations with respect to the
participation of Participants in this Plan, to prescribe the form of Award
Agreements embodying Awards made under the Plan, and, except as otherwise
required by law or this Plan, to set the size and terms of Awards (which need
not be identical or consistent with respect to each Participant) including
vesting schedules, price, whether stock options granted hereunder shall
constitute an Incentive Stock Option, restriction or option period,
post-retirement and termination rights, payment alternatives such as cash,
stock or other means of payment consistent with the purposes of this Plan,
and such other terms and conditions as the Committee deems appropriate.
Except as otherwise required by this Plan, the Committee shall have authority
to interpret and construe the provisions of this Plan and the Award
Agreements, to correct any defect or supply any omission or reconcile any
inconsistency in the Plan or in any Award Agreement in the manner the
Committee deems advisable for the administration of the Plan and make
determinations pursuant to any Plan provision or Award Agreement, which shall
be final and binding on all persons. The Committee may authorize any one or
more of their number or any officer of the Company to execute and deliver
documents on behalf of the Committee.
4. COMMON STOCK SUBJECT TO PROVISIONS OF THIS PLAN. The Common Stock
subject to the provisions of this Plan shall either be shares of authorized but
unissued Common Stock, shares of Common Stock held as treasury stock or
previously issued shares of Common Stock reacquired by the Company, including
shares purchased in the open market. Subject to adjustment in accordance with
the provisions of Section 11, the aggregate number of shares of Common Stock
available for grant of Awards (including, without limitation, Awards of
Restricted Stock) shall not exceed Three Millon Five Hundred Thousand
(3,500,000). If any part of an Award under this Plan shall be forfeited, the
shares of Common Stock subject to the forfeited portion of such Award shall
again be available for grant under the Plan.
5. ELIGIBILITY. Except as hereinafter provided, Awards may be granted to
any Participant as the Committee shall determine from time to time. In
determining the Participants to whom options shall be granted and the number of
shares to be covered by each such option, the Committee may take into account
the nature of the services rendered by the respective Participants, their
present and potential contributions to the Company's success and such other
factors as the Committee in its sole discretion shall deem relevant. A
Participant who has been granted an option under the Plan may be granted an
additional option or options under the Plan, in the Committee's sole discretion.
6. AWARDS UNDER THIS PLAN. The Committee, in its sole discretion, may
make Awards of stock options (including Incentive Stock Options and stock
options that do not qualify as Incentive Stock Options) as described in Sections
7 and 8 hereof, and of Restrictive Stock, as described in Section 10 hereof.
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<PAGE>
7. OPTIONS AUTHORIZED. The options subject to Award under this Plan may
be Incentive Stock Options or stock options that do not qualify as Incentive
Stock Options (sometimes referred to herein as "nonqualified options" or
"nonqualified stock options"). The Committee shall have the full power and
authority to (i) determine which options shall be nonqualified stock options and
which shall be Incentive Stock Options, (ii) grant only Incentive Stock Options
or, alternatively, only nonqualified stock options, and (iii) in its sole
discretion, grant to the holder of an outstanding option, in exchange for the
surrender and cancellation of such option, a new option having a purchase price
lower than that provided in the option so surrendered and cancelled and/or
containing such other terms and conditions as the Committee may prescribe in
accordance with the provisions of the Plan. Under no circumstances may
nonqualified stock options be granted where the exercise of such nonqualified
stock options may affect the exercise of Incentive Stock Options granted
pursuant to the Plan. No options may be granted under the Plan prior to the
Effective Date. In addition to any other limitations set forth herein, (1) no
Participant shall receive any grant of options, whether Incentive Stock Options
or nonqualified stock options, exercisable for more than one hundred fifty
thousand (150,000) shares of Common Stock during any one fiscal year of the
Company and (2) the aggregate fair market value (determined in accordance with
Paragraph 8(a) of the Plan as of the time the option is granted) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by a Participant in any calendar year (under all plans of the Company
and of any Parent or Subsidiary) shall not exceed $100,000.
8. TERMS AND CONDITIONS OF OPTIONS. The grant of an option under the
Plan shall be evidenced by an Award Agreement executed by the Company and the
applicable Participant and shall contain such terms and be in such form as the
Committee may from time to time approve, subject to the following limitations
and conditions:
(a) OPTION PRICE. The option exercise price per share with respect
to each option shall be determined by the Committee, but shall in no instance be
less than the par value of the shares subject to the option. In addition, the
option exercise price per share with respect to Incentive Stock Options granted
hereunder shall in no instance be less than the fair market value of the shares
subject to the option as determined by the Committee. For the purposes of this
Paragraph 8(a), fair market value shall be, where applicable, the closing price
of the Common Stock on the Date of Grant of such option as reported on any
national securities exchange on which the Common Stock may be listed. If the
Common Stock is not listed on a national securities exchange but is publicly
traded on the Nasdaq Stock Market's National Market or on another automated
quotation system, the fair market value shall be the closing price of the Common
Stock on the Date of Grant, or if traded on the Nasdaq Small Cap or Nasdaq Over-
The-Counter market, the fair market value shall be the mean between the bid and
ask prices on any such system or market. If the Common Stock was not traded on
the Date of Grant of such option, the nearest preceding date on which there was
a trade shall be substituted. Notwithstanding the foregoing, however, fair
market value shall be determined consistent with Code Section 422(b)(4) or any
successor provisions. The Committee may permit the option exercise price to be
payable by transfer to the Company of Common Stock owned by the option holder
with a fair market value at the time of the exercise equal to the option
exercise price.
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(b) PERIOD OF OPTION. The expiration date of each option shall be
fixed by the Committee, but notwithstanding any provision of the Plan to the
contrary, such expiration date shall not be more than ten (10) years from the
Date of Grant of the option.
(c) VESTING OF STOCKHOLDER RIGHTS. Neither the optionee nor his
successor in interest shall have any of the rights of a stockholder of the
Company until the shares relating to the option hereunder are issued by the
Company and are properly delivered to such optionee, or successor.
(d) EXERCISE OF OPTION. Each option shall be exercisable from time
to time (but not less than six (6) months after the Date of Grant) over such
period and upon such terms and conditions as the Committee shall determine, but
not at any time as to less than twenty-five (25) shares unless the remaining
shares that have become so purchasable are less than twenty-five (25) shares.
After the death of the optionee, an option may be exercised as provided in
Section 9(c) hereof.
(e) DISQUALIFYING DISPOSITION. The Award Agreement evidencing any
Incentive Stock Options granted under this Plan shall provide that if the
optionee makes a disposition, within the meaning of Section 424(c) of the Code
and regulations promulgated thereunder, of any share or shares of Common Stock
issued to him or her pursuant to exercise of the option within the two-year
period commencing on the day after the Date of Grant of such option or within
the one-year period commencing on the day after the date of issuance of the
share or shares to him or her pursuant to the exercise of such option, he or she
shall, within ten (10) days of such disposition date, notify the Company of the
sales price or other value ascribed to or used to measure the disposition of the
share or shares thereof and immediately deliver to the Company any amount of
federal income tax withholding required by law.
(f) LIMITATION ON GRANTS TO CERTAIN STOCKHOLDERS. An Incentive Stock
Option may be granted to a Participant only if such Participant, at the time the
option is granted, does not own, after application of the attribution rules of
Code Section 424, stock possessing more than ten percent (10%) of the total
combined voting power of all classes of Common Stock of the Company or of its
Parent or Subsidiary. The preceding restrictions shall not apply if at the time
the option is granted the option price is at least one hundred ten percent
(110%) of the fair market value (as defined in Section 8(a) above) of the Common
Stock subject to the option and such option by its terms is not exercisable
after the expiration of five (5) years from the Date of Grant.
(g) RESTRICTION ON ISSUING SHARES. The exercise of each option shall
be subject to the condition that if at any time the Company shall determine in
its discretion that the satisfaction of withholding tax or other withholding
liabilities, or that the listing, registration, or qualification of any shares
otherwise deliverable upon such exercise upon any securities exchange or under
any state or federal law, or that the consent or approval of any regulatory
body, is necessary or desirable as a condition of, or in connection with, such
exercise or the delivery or purchase of shares pursuant thereto, then in any
such event, such exercise shall not be effective unless such withholding,
listing, registration, qualification, consent, or approval shall have been
effected or obtained free of any conditions not acceptable to the Company.
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(h) CONSISTENCY WITH CODE. Notwithstanding any other provision in
this Plan to the contrary, the provisions of all Award Agreements relating to
Incentive Stock Options pursuant to the Plan shall not violate the requirements
of the Code applicable to the Incentive Stock Options authorized hereunder.
9. EXERCISE OF OPTION.
(a) Any option granted hereunder shall be exercisable according to
the terms of the Plan and at such times and under such conditions as determined
by the Committee and set forth in the Award Agreement. An option shall be
deemed exercised when (i) the Company has received written notice of such
exercise in accordance with the terms of the Award Agreement, (ii) full payment
of the aggregate option exercise price of the shares as to which the option is
exercised has been made and (iii) arrangements that are satisfactory to the
Committee in its sole discretion have been made for the Participant's payment to
the Company of the amount, if any, that the Committee determines to be necessary
for the Company to withhold in accordance with applicable federal or state
income tax withholding requirements.
(b) Upon Retirement or other termination of the Participant's
Continuous Status as an Employee, other than (a) a termination that is either
(i) for Cause or (ii) voluntary on the part of a Participant and without the
written consent of the Company, a Parent, any Subsidiary or USLD or (b) a
termination by reason of death, the Participant may (unless otherwise provided
in his Award Agreement) exercise his option at any time within three (3) months
after such termination of the Participant's Continuous Status as an Employee (or
within one (1) year after termination of the Participant's Continuous Status as
an Employee due to permanent and total disability within the meaning of Code
Section 22(e)(3)), or within such other time as the Committee shall authorize,
but in no event may the Participant exercise his Option after ten (10) years
from the Date of Grant thereof (or such lesser period as may be specified in the
Award Agreement), and only to the extent of the number of shares for which his
options were exercisable by him at the date of the termination of the
Participant's Continuous Status as an Employee. In the event of the termination
of the Continuous Status as an Employee of a Participant to whom an option has
been granted under the Plan that is either (i) for Cause or (ii) voluntary on
the part of the Participant and without written consent, any option held by him
under the Plan, to the extent not previously exercised, shall forthwith
terminate on the date of such termination of the Participant's Continuous Status
as an Employee. Options granted under the Plan shall not be affected by any
change of employment so long as the holder continues to be an employee of the
Company, a Subsidiary or a Parent, or with respect to a USLD Participant, USLD.
The Award Agreement may contain such provisions as the Committee shall approve
with respect to the effect of approved leaves of absence.
(c) In the event a Participant to whom an option has been granted
under the Plan dies during, or within three (3) months after the Retirement or
other termination of, the Participant's Continuous Status as an Employee, such
option (unless it shall have been previously terminated pursuant to the
provisions of the Plan or unless otherwise provided in his Award Agreement) may
be exercised (to the extent of the entire number of shares covered by the option
whether or not purchasable by the Participant at the date of his death) by the
executor or administrator of the optionee's estate or by the person or persons
to whom the optionee shall have transferred such option by will or by the laws
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of descent and distribution, at any time within a period of one (1) year after
his death, but not after the exercise termination date set forth in the relevant
Award Agreement.
(d) If as of the date of termination of the Participant's Continuous
Status as an Employee (other than as a result of the Participant's death) the
Participant is not entitled to exercise his or her entire options, the shares of
Common Stock covered by the unexercisable portion of the option shall revert to
the Plan. If the Participant (or his or her designee or estate as provided in
Section 9(c) above) does not exercise his or her options within the time
specified in the Plan and the Award Agreement, the unexercised options shall
terminate and the shares of Common Stock covered by such options shall revert to
the Plan.
10. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.
(a) GENERAL. The Committee, in its sole discretion, may make Awards
of Restricted Stock to selected Participants, which Awards shall be evidenced by
an Award Agreement that contains such terms and conditions, including vesting,
as the Committee may determine. As a condition to any Award of Restricted Stock
hereunder, the Committee may require a Participant to pay to the Company the
amount (such as the par value of such shares) required to be received by the
Company in order to assure compliance with applicable state law. Any Award of
Restricted Stock for which such requirement is established shall automatically
expire if not purchased in accordance with the Committee's requirements within
sixty (60) days after the Date of Grant.
Subject to the terms and conditions of the respective Award Agreement, the
Participant, as the owner of the Common Stock issued as Restricted Stock and any
Retained Distributions with respect thereto, shall have the rights of a
stockholder, including, but not limited to, voting rights as to such Common
Stock and the right to receive cash dividends or distributions thereon when, as
and if paid.
Within the limits set forth in the Plan, an Award of Restricted Stock may
be subject to such vesting requirements as may be fixed by the Committee.
Vesting may be accelerated by a Change of Control. Vesting may also be
accelerated upon death, permanent disability or Retirement.
Unless otherwise provided in the Award Agreement, in the event that an
Award of Restricted Stock is made to a Participant whose employment or service
is subsequently terminated by reason of death, permanent disability or
Retirement or for such other reason as the Committee may provide, such
Participant (or his or her estate or beneficiary) will be entitled to receive
such additional portion of his or her Restricted Stock and any Retained
Distributions with respect thereto that the Participant would have received had
the Participant remained in the employment of the Company, Parent, Subsidiary or
USLD, as applicable, through the date on which the next portion of the shares of
unvested Restricted Stock subject to the Award of Restricted Shares would have
vested.
Unless otherwise provided in the Award Agreement, in the event an Award of
Restricted Shares is made to a Participant whose employment with the Company,
Parent, Subsidiary or USLD, as applicable, is subsequently terminated by the
Participant for Good Reason or by the Company, Parent, Subsidiary or USLD, as
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<PAGE>
applicable, other than for Cause, then in any such event, the Participant will
be entitled to receive such additional portion of his or her shares of
Restricted Stock and any Retained Distributions with respect thereto that the
Participant would have received had the Participant remained in the employment
of the Company, Parent, Subsidiary or USLD, as applicable, through the date on
which the next portion of the shares of unvested Restricted Stock subject to the
Award of Restricted Shares would have vested.
Unless otherwise provided in the Award Agreement, in the event that an
Award of Restricted Shares is made to a Participant who subsequently voluntarily
resigns or whose employment is terminated for Cause, then all such Restricted
Stock and any Retained Distributions with respect thereto as to which the
Restricted Period still applies shall be forfeited by such Participant and shall
again become available for grant under the Plan.
(b) TRANSFERABILITY. Restricted Stock and any Retained Distributions
with respect thereto may not be sold, assigned, transferred, pledged, or
otherwise encumbered during the Restricted Period, which shall be determined by
the Committee and shall not be less than one year nor more than two years from
the date such Restricted Stock was awarded. The Committee may, at any time,
reduce the Restricted Period with respect to any outstanding shares of
Restricted Stock and any Retained Distributions with respect thereto awarded
under the Plan.
Shares of Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the Participant to whom
such Restricted Stock shall have been granted and shall bear a restrictive
legend to the effect that ownership of such Restricted Stock (and any related
Retained Distributions), and the enjoyment of all rights appurtenant thereto are
subject to the restrictions, terms, and conditions provided in the Plan and the
applicable Award Agreement. Each certificate shall be deposited by the
Participant with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to the Company of
all or any portion of the Restricted Stock and any securities constituting
Retained Distributions that shall be forfeited or that shall not become vested
in accordance with the respective Award Agreement. The certificate or
certificates issued for the Restricted Stock may bear such legend or legends as
the Committee may, from time to time, deem appropriate to reflect the
restrictions under the Plan for such Restricted Stock.
(c) STOCK CERTIFICATES; ADDITIONAL RESTRICTIONS. Shares of
Restricted Stock shall constitute issued and outstanding shares of Common Stock
for all corporate purposes. Each Participant will have the right to vote the
Restricted Stock held by such Participant, to receive and retain all cash
dividends and distributions thereon and exercise all other rights, powers and
privileges of a holder of Common Stock with respect to such Restricted Stock,
with the exception that:
(i) the Participant will not be entitled to delivery of the
stock certificate or certificates representing such Restricted Stock
until the Restricted Period applicable to such shares or portion
thereof shall have expired and unless all other vesting requirements
with respect thereto shall have been fulfilled;
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(ii) other than cash dividends and distributions and rights to
purchase stock which might be distributed to stockholders of the
Company, the Company will retain custody of all Retained Distributions
made, paid, declared or otherwise received by the holder thereof with
respect to Restricted Stock (and such Retained Distributions will be
subject to the same restrictions, terms and conditions as are
applicable to the Restricted Stock with respect to which they were
made, paid or declared) until such time, if ever, as the Restricted
Period applicable to the shares with respect to which such Retained
Distributions shall have been made, paid, declared or received shall
have expired, and such Retained Distributions shall not bear interest
or be segregated in separate accounts; and
(iii) upon the breach of any restrictions, terms or conditions
provided in the Plan or the respective Award Agreement or otherwise
established by the Committee with respect to any Restricted Stock or
Retained Distributions, such Restricted Stock and any related Retained
Distributions shall thereupon be automatically forfeited.
(d) MERGERS AND OTHER CORPORATE CHANGES. Unless otherwise provided
in the Award Agreement, upon the occurrence of a Change of Control, all
restrictions imposed on the Participant's Restricted Stock and any Retained
Distributions shall automatically terminate and lapse and the Restricted Period
shall automatically terminate; provided, however, that if the Change of Control
occurs within six months of the Date of Grant the restrictions and Restricted
Period shall terminate on the six month anniversary of the Date of Grant.
11. ADJUSTMENTS. The Committee, in its discretion, may make such
adjustments in the option price, the number or kind of shares and other
appropriate provisions covered by outstanding Awards that are required to
prevent any dilution or enlargement of the rights of the holders of such
options that would otherwise result from any reorganization,
recapitalization, stock split, stock dividend, combination of shares, merger,
consolidation, issuance of rights or any other change in the capital
structure of the Company. The Committee, in its discretion, may also make
such adjustments in the aggregate number and class of shares that may be the
subject of Awards which are appropriate to reflect any transaction or event
described in the preceding sentence.
12. AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN. The Board may at
any time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board may deem advisable in order that the Awards granted
thereunder may conform to any changes in the law or in any other respect that
the Board may deem to be in the best interests of the Company; provided,
however, that without approval by the stockholders of the Company voting the
proper percentage of its voting power, no such amendment shall make any change
in the Plan for which stockholder approval is required in order to comply with
(i) Rule 16b-3, as amended, promulgated under the Exchange Act, (ii) the Code or
regulatory provisions dealing with Incentive Stock Options, (iii) any rules for
listed companies promulgated by any national stock exchange on which the
Company's Common Stock is traded or (iv) any other applicable rule or law.
Unless sooner terminated hereunder, the Plan shall terminate ten (10) years
after the Effective Date. No amendment, suspension, or termination of the Plan
shall, without a Participant's consent, impair or negate any of the rights or
obligations under any Award theretofore granted to such Participant under the
Plan.
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13. TAX WITHHOLDING. The Company shall have the right to withhold from
any payments made under this Plan, or to collect as a condition of payment, any
taxes required by law to be withheld. At any time when a Participant is
required to pay to the Company an amount required to be withheld under
applicable income tax laws in connection with a distribution of shares of Common
Stock pursuant to this Plan, the Participant may satisfy this obligation in
whole or in part by electing to have the Company withhold from such distribution
shares of Common Stock having a value equal to the amount required to be
withheld. The value of the shares of Common Stock to be withheld shall be based
on the fair market value, as determined pursuant to Section 8(a) hereof, of the
Common Stock on the date that the amount of tax to be withheld shall be
determined (the "Tax Date"). Any such election is subject to the following
restrictions: (i) the election must be made on or prior to the Tax Date; (ii)
the election must be irrevocable; and (iii) the election must be subject to the
disapproval of the Committee. To the extent required to comply with rules
promulgated under Section 16 of the Exchange Act, elections by Participants who
are subject to Section 16 of the Exchange Act are subject to the following
additional restrictions: (i) no election shall be effective for a Tax Date which
occurs within six months of the grant of the Award; and (ii) the election must
be made either (a) six months or more prior to the Tax Date or (b) during the
period beginning on the third business day following the date of release for
publication for the Company's quarterly or annual summary statements of sales
and earnings and ending on the twelfth business day following such date.
14. EFFECTIVE DATE OF THE PLAN. This Plan shall become effective on the
date (the "Effective Date") of the last to occur of (i) the adoption of the Plan
by the Board and (ii) the approval, within twelve (12) months of such adoption,
by a majority (or such other proportion as may be required by state law) of the
outstanding voting shares of the Company, voted either in person or by proxy, at
a duly held stockholders meeting or by written stockholder consent.
15. SPECIAL PROVISIONS REGARDING CHANGE OF CONTROL. The Board or the
Committee may, from time to time, make special provisions for one or more
Participants respecting a possible Change of Control of the Company, a
Subsidiary, Parent or USLD, and, to the extent that any such special provisions
made with the consent of the affected employee may have the effect of
accelerating vesting of stock options granted under the Plan or removal of
restrictions on Restricted Stock allotted under the Plan or the effect of
preventing a termination or dilution of benefits, such special provisions shall
be controlling over and shall be deemed to be an amendment of any inconsistent
terms of the applicable Award Agreement.
16. MISCELLANEOUS PROVISIONS.
(a) If approved by the Board, the Company or any Parent or Subsidiary
may lend money or guarantee loans by third parties to an individual to finance
the exercise of any option granted under the Plan to continue to hold Common
Stock thereby acquired. No such loans to finance the exercise of an Incentive
Stock Option shall have an interest rate or other terms that would cause any
part of the principal amount to be characterized as interest for purposes of the
Code.
(b) This Plan is intended and has been drafted to comply in all
respects with Rule 16b-3, as amended, under the Exchange Act ("Rule 16b-3"). If
any provision of this Plan does not comply with Rule 16b-3, this Plan shall be
automatically amended to comply with Rule 16b-3.
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<PAGE>
(c) No person shall have any claim or right to be granted an Award,
and the grant of an Award shall not be construed as giving a Participant the
right to be retained in the employ of the Company, a Parent, a Subsidiary or
USLD. Nothing in this Plan shall interfere with or limit in any way the right
of the Company, a Parent, any Subsidiary or USLD to terminate any Participant's
employment at any time, nor confer upon any Participant any right to continue in
the employ of the Company, a Parent, any Subsidiary or USLD.
(d) To the extent that federal laws do not otherwise control, this
Plan shall be construed in accordance with and governed by the laws of the State
of Delaware or the property laws of any particular state.
(e) In case any one or more of the provisions of this Plan shall be
held invalid, illegal or unenforceable in any respect under applicable law and
regulation (including Rule 16b-3), the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and the invalid, illegal or unenforceable provisions shall be deemed null and
void; however, to the extent permissible by law, any provision which could be
deemed null and void shall first be construed, interpreted or revised
retroactively to permit this Plan to be construed in compliance with all
applicable laws (including Rule 16b-3) so as to foster the intent of this Plan.
Notwithstanding anything in this Plan to the contrary, the Committee, in its
sole and absolute discretion, may bifurcate this Plan so as to restrict, limit
or condition the use of any provision of this Plan to Participants who are
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning this Plan with respect to other Participants.
(f) None of a Participant's rights or interests under the Plan may be
assigned or transferred in whole or in part, either directly or by operation of
law or otherwise (except pursuant to a qualified domestic relations order or, in
the event of a Participant's death, by will or the laws of descent and
distribution), including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner, and no such
right or interest of any Participant in the Plan shall be subject to any
obligation or liability of such individual.
(g) No Restricted Stock or any Retained Distributions shall be issued
hereunder unless counsel for the Company shall be satisfied that such issuance
will be in compliance with applicable federal, state, or other securities laws.
(h) The expenses of the Plan shall be borne by the Company.
(i) By accepting any Award under the Plan, each Participant or
beneficiary claiming under or through him or her shall be conclusively deemed to
have indicated his or her acceptance and ratification of, and consent to, any
action taken under the Plan by the Company, the Committee or the Board.
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<PAGE>
(j) Awards granted under the Plan shall be binding upon the Company,
its successors and assigns.
(k) The appropriate officers of the Company shall cause to be filed
any reports, returns, or other information regarding Awards hereunder or any
Common Stock issued pursuant hereto as may be required by Section 13 or 15(d) of
the Exchange Act, or any other applicable statute, rule, or regulation.
(l) Nothing contained in this Plan shall prevent the Board of
Directors from adopting other or additional compensation arrangements, subject
to stockholder approval if such approval is required.
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1996 NON-EMPLOYEE DIRECTOR PLAN OF
BILLING INFORMATION CONCEPTS CORP.
1. PURPOSE. The purpose of this Plan is to advance the interests of
Billing Information Concepts Corp., a Delaware corporation (the "Company"), by
providing an additional incentive to attract and retain qualified and competent
directors, upon whose efforts and judgment the success of the Company is largely
dependent, through the encouragement of stock ownership in the Company by such
persons.
2. DEFINITIONS. As used herein, the following terms shall have the
meaning indicated:
(a) "Annual Director Fee" shall mean a fee payable annually to
each Eligible Person on the business day on or immediately after December 15 of
each year ("Payment Date"), at the election of the Eligible Person, in either
cash of $15,000 or an Option granted pursuant to Section 5 or partly in cash and
partly in an Option granted pursuant to Section 5.
(b) "Board" shall mean the Board of Directors of Billing
Information Concepts Corp.
(c) "Committee" shall mean the committee, if any, appointed by the
Board pursuant to Section 12 hereof.
(d) "Date of Grant" shall mean the date on which an Option is
granted to an Eligible Person pursuant to Section 4 or Section 5 hereof.
(e) "Director" shall mean a member of the Board or a member of the
board of directors of a Parent on the date of adoption of the Plan.
(f) "Eligible Person(s)" shall mean those persons who are
Directors of the Company or a Parent other than U.S. Long Distance Corp. and who
are not employees of the Company or a Subsidiary.
(g) "Fair Market Value" of a Share on any date of reference shall
be the closing price on the business day immediately preceding such date. For
this purpose, the closing price of the Shares on any business day shall be (i)
if the Shares are listed or admitted for trading on any United States national
securities exchange, the last reported sale price of Shares on such exchange, as
reported in any newspaper of general circulation, (ii) if actual transactions in
the Shares are included in the Nasdaq National Market or are reported on a
consolidated transaction reporting system, the closing sales price of the Shares
on such system, (iii) if Shares are otherwise quoted on the Nasdaq system, or
any similar system of automated dissemination of quotations of securities prices
in common use, the mean between the closing high bid and low asked quotations
for such day of Shares on such system, (iv) if none of clause (i), (ii) or (iii)
is applicable, the mean between the high bid and low asked quotations for Shares
as reported by the National Daily Quotation Service if at least two securities
dealers have inserted both bid and asked quotations for Shares on at least five
(5) of the ten (10) preceding days.
(h) "Internal Revenue Code" or "Code" shall mean the Internal
Revenue Code of 1986, as it now exists or may be amended from time to time.
(i) "Nonqualified Stock Option" shall mean an option that is not
an incentive stock option as defined in Section 422 of the Internal Revenue
Code.
(j) "Option" shall mean any option granted under Section 4 or 5 of
this Plan.
(k) "Optionee" shall mean a person to whom an Option is granted
under this Plan or any successor to the rights of such person under this Plan by
reason of the death of such person.
<PAGE>
(l) "Parent" shall mean a parent corporation of the Company as
defined in Section 424(e) of the Code and U.S. Long Distance Corp.
(m) "Payment Date" shall have the meaning set forth in Section
2(a).
(n) "Plan" shall mean this 1996 Non-Employee Director Plan of
Billing Information Concepts Corp.
(o) "Prior Plan" shall mean the 1993 Non-Employee Director Plan of
U.S. Long Distance Corp.
(p) "Share(s)" shall mean a share or shares of the common stock,
par value one cent ($0.01) per share, of the Company.
(q) "Subsidiary" shall mean a subsidiary corporation of the
Company as defined in Section 424(f) of the Code.
3. SHARES AND OPTIONS. The maximum number of Shares to be issued
pursuant to Options under this Plan shall be FOUR HUNDRED THOUSAND (400,000)
Shares. Shares issued pursuant to Options granted under this Plan may be issued
from Shares held in the Company's treasury or from authorized and unissued
Shares. If any Option granted under this Plan shall terminate, expire, or be
cancelled or surrendered as to any Shares, new Options may thereafter be granted
covering such Shares. Any Option granted hereunder shall be a Nonqualified
Stock Option.
4. AUTOMATIC GRANT OF OPTIONS. (a) Options shall automatically be
granted to Directors as provided in this Section 4. Each Option shall be
evidenced by an option agreement (an "Option Agreement") and shall contain such
terms as are not inconsistent with this Plan or any applicable law. Any person
who files with the Committee, in a form satisfactory to the Committee, a written
waiver of eligibility to receive any Option under this Plan shall not be
eligible to receive any Option under this Plan for the duration of such waiver.
(b) The Options automatically granted to Directors under this Plan
shall be in addition to regular director's fees and other benefits with respect
to the Director's position with the Company or its Subsidiaries. Neither the
Plan nor any Option granted under the Plan shall confer upon any person any
right to continue to serve as a Director.
(c) Options shall be automatically granted as follows:
(i) Each Director who holds one or more unexercised options
under the Prior Plan (an "Unexercised Option") will automatically receive
an Option for such number of Shares as is equal to the number of shares of
U.S. Long Distance Corp. common stock, $.01 per share, subject to his
Unexercised Options. Such Option will vest at the same time that his
Unexercised Options vest (assuming that his Unexercised Options remain
outstanding and exercisable);
(ii) Each Director who is an Eligible Person shall
automatically receive an Option for FIFTEEN THOUSAND (15,000) Shares on
the date such Eligible Person is initially appointed or elected a Director
of the Company, and such Option will vest as to FIVE THOUSAND (5,000)
Shares on each of the first three anniversaries of the Date of Grant; and
(iii) Each Director who is an Eligible Person will receive, on
the first business date after the date of each annual meeting of
stockholders of the Company, commencing with the annual meeting of
stockholders immediately following the full vesting of any Option
previously granted under this Section 4, an option to purchase FIFTEEN
THOUSAND (15,000) Shares, and such Option will vest as to FIVE THOUSAND
(5,000) Shares on each of the first three anniversaries of the Date of
Grant.
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For purposes of Section 4(c)(i), a Director's service with a Parent shall
be considered service with the Company.
(d) Any Option that may be granted pursuant to subparagraph (c) of
this Section 4 prior to the approval of this Plan by the stockholders of the
Company may be exercised on or after the Date of Grant subject to the approval
of this Plan by the stockholders of the Company within twelve (12) months after
the effective date of this Plan. If any Optionee exercises an Option prior to
such stockholder approval, the Optionee must tender the exercise price at the
time of exercise and the Company shall hold the Shares to be issued pursuant to
such exercise until the stockholders approve this Plan. If this Plan is
approved by the stockholders, the Company shall issue and deliver the Shares as
to which the Option has been exercised. If this Plan is not approved by the
stockholders, the Company shall return the exercise price to the Optionee.
(e) Except for the automatic grants of Options under subparagraph
(c) of this Section 4 and grants of Options to Eligible Persons under Section 5
below, no Options shall otherwise be granted hereunder, and neither the Board
nor the Committee, if any, shall have any discretion with respect to the grant
of Options within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
5. ELECTION WITH RESPECT TO ANNUAL DIRECTOR FEE. Each Eligible
Person may elect to receive the Annual Director Fee in cash or in an Option, or
partly in cash and partly in an Option. Any election to receive an Option shall
be in writing and must be made not later than June 15, 1996, even if prior to
the effective date of the Plan, for Options to be granted for the Payment Date
in 1996, and thereafter such election shall be made not later than December 31
of each year with respect to the Annual Director Fee to be made on the Payment
Date in the subsequent year. The election may not be revoked or changed after
it is made. For purposes of this election and subject to Section 9, in lieu of
receipt of the Annual Director Fee in cash, as elected by the Eligible Person,
each $2 of cash compensation shall be converted into an Option, granted as of
the Payment Date, to purchase one (1) share of Common Stock. If an Eligible
Person so elects to receive an Option, the Company shall promptly deliver to
such Eligible Person an Option Agreement. To be eligible to receive the Annual
Director Fee, for any year, the Eligible Person must be a Director on the
Payment Date for that Annual Director Fee. Any person who files with the
Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.
6. OPTION PRICE. The Option price per Share of any Option granted
pursuant to this Plan shall be one hundred percent (100%) of the Fair Market
Value per Share on the Date of Grant.
7. EXERCISE OF OPTIONS. Options may be exercised at any time after
the date on which the Options, or any portion thereof, are vested until the
Option expires pursuant to Section 8; provided, however, that no Option shall be
exercisable prior to six (6) months from the Date of Grant. An Option shall be
deemed exercised when (i) the Company has received written notice of such
exercise in accordance with the terms of the Option Agreement, (ii) full payment
of the aggregate Option price of the Shares as to which the Option is exercised
has been made and (iii) arrangements that are satisfactory to the Committee in
its sole discretion have been made for the Optionee's payment to the Company of
the amount, if any, that the Committee determines to be necessary for the
Company to withhold in accordance with applicable federal or state income tax
withholding requirements. Pursuant to procedures approved by the Committee, tax
withholding requirements, at the option of an Optionee, may be met by
withholding Shares otherwise deliverable to the Optionee upon the exercise of an
Option. Unless further limited by the Committee in any Option Agreement, the
Option price of any Shares purchased shall be paid solely in cash, by certified
or cashier's check, by money order, with Shares (but with Shares only if
permitted by the Option Agreement or otherwise permitted by the Committee in its
sole discretion at the time of exercise) or by a combination of the above;
provided, however, that the Committee in its sole discretion may accept a
personal check in full or partial payment of any Shares. If the exercise price
is paid in whole or in part with Shares, the value of the Shares surrendered
shall be their Fair Market Value on the date the Shares are received by the
Company.
8. TERMINATION OF OPTION PERIOD. The unexercised portion of an
Option shall automatically and without notice terminate and become null and void
at the time of the earliest to occur of the following:
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(a) with respect to Options granted automatically pursuant to
Section 4(c), thirty (30) days after the date that an Optionee ceases to
be a Director (including for this purpose a Director of a Parent)
regardless of the reason therefor other than as a result of such
termination by death of the Optionee;
(b) with respect to Options granted automatically pursuant to
Section 4(c), (y) one (1) year after the date that an Optionee ceases to
be a Director (including for this purpose a Director of a Parent) by
reason of death of the Optionee or (z) six (6) months after the Optionee
shall die if that shall occur during the thirty-day period described in
Subsection 8(a); or
(c) the fifth (5th) anniversary of the Date of Grant of the
Option.
9. ADJUSTMENT OF SHARES. (a) If at any time while this Plan is in
effect or unexercised Options are outstanding, there shall be any increase or
decrease in the number of issued and outstanding Shares through the declaration
of a stock dividend or through any recapitalization resulting in a stock
split-up, combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum
number of Shares then subject to being optioned under this Plan, so
that the same proportion of the Company's issued and outstanding
Shares shall continue to be subject to being so optioned; and
(ii) appropriate adjustment shall be made in the number of
Shares and the exercise price per Share thereof then subject to any
outstanding Option, so that the same proportion of the Company's
issued and outstanding Shares shall remain subject to purchase at
the same aggregate exercise price.
In addition, the Committee shall make such adjustments in the Option price
and the number of shares covered by outstanding Options that are required to
prevent dilution or enlargement of the rights of the holders of such Options
that would otherwise result from any reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, issuance of
rights, spin-off or any other change in capital structure of the Company.
(b) Except as otherwise expressly provided herein, the issuance by
the Company of shares of its capital stock of any class, or securities
convertible into shares of capital stock of any class, either in connection with
a direct sale or upon the exercise of rights or warrants to subscribe therefor,
or upon conversion of shares or obligations of the Company convertible into such
shares or other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number of or exercise price of Shares
then subject to outstanding Options granted under this Plan.
(c) Without limiting the generality of the foregoing, the
existence of outstanding Options granted under this Plan shall not affect in any
manner the right or power of the Company to make, authorize or consummate (i)
any or all adjustments, recapitalizations, reorganizations or other changes in
the Company's capital structure or its business; (ii) any merger or
consolidation of the Company; (iii) any issue by the Company of debt securities,
or preferred or preference stock that would rank above the Shares subject to
outstanding Options; (iv) the dissolution or liquidation of the Company; (v) any
sale, transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. TRANSFERABILITY OF OPTIONS. Each Option Agreement shall provide
that such Option shall not be transferable by the Optionee otherwise than by
will or the laws of descent and distribution or pursuant to a qualified domestic
relations order and that, so long as an Optionee lives, only such Optionee or
his or her guardian or legal representative shall have the right to exercise the
related Option.
11. ISSUANCE OF SHARES. No person shall be, or have any of the rights
or privileges of, a stockholder of the Company with respect to any of the Shares
subject to an Option unless and until certificates representing such
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Shares shall have been issued and delivered to such person. As a condition of
any transfer of the certificate for Shares, the Committee may obtain such
agreements or undertakings, if any, as it may deem necessary or advisable to
assure compliance with any provision of this Plan, any Option Agreement or any
law or regulation, including, but not limited to, the following:
(i) A representation, warranty or agreement by the Optionee
to the Company, at the time any Option is exercised, that he or she
is acquiring the Shares to be issued to him or her for investment
and not with a view to, or for sale in connection with, the
distribution of any such Shares; and
(ii) A representation, warranty or agreement to be bound by
any legends that are, in the opinion of the Committee, necessary or
appropriate to comply with the provisions of any securities law
deemed by the Committee to be applicable to the issuance of the
Shares and are endorsed upon the Share certificates.
Share certificates issued to an Optionee who is a party to any stockholder
agreement or a similar agreement shall bear the legends contained in such
agreements.
12. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered
by a stock option committee (the "Committee") consisting of not fewer than two
(2) members of the Board; provided, however, that if no Committee is appointed,
the Board shall administer this Plan and in such case all references to the
Committee shall be deemed to be references to the Board. The Committee shall
have all of the powers of the Board with respect to this Plan. Any member of
the Committee may be removed at any time, with or without cause, by resolution
of the Board, and any vacancy occurring in the membership of the Committee may
be filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and
regulations for carrying out the purposes of this Plan. The determinations and
the interpretation and construction of any provision of this Plan by the
Committee shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall
be made either (i) by a majority vote of the members of the Committee at a
meeting or (ii) without a meeting by the written approval of a majority of the
members of the Committee.
(d) This Plan is intended and has been drafted to comply with Rule
16b-3, as amended, under the Securities Exchange Act of 1934, as amended. If
any provision of this Plan does not comply with Rule 16b-3, as amended, this
Plan shall be automatically amended to comply with Rule 16b-3, as amended.
(e) This Plan shall not be amended more than once every six (6)
months, other than to comport with applicable changes to the Internal Revenue
Code, the Employee Retirement Income Security Act of 1974, as amended, or the
rules thereunder.
13. INTERPRETATION. (a) If any provision of this Plan is held invalid
for any reason, such holding shall not affect the remaining provisions hereof,
but instead this Plan shall be construed and enforced as if such provision had
never been included in this Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE EXCEPT TO THE EXTENT SUPERSEDED BY THE LAWS OF THE UNITED STATES OR THE
PROPERTY LAWS OF ANY STATE.
(c) Headings contained in this Plan are for convenience only and
shall in no manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine or neuter gender
shall be a reference to such other gender as is appropriate.
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14. SECTION 83(b) ELECTION. If as a result of exercising an Option an
Optionee receives Shares that are subject to a "substantial risk of forfeiture"
and are not "transferable" as those terms are defined for purposes of Section
83(a) of the Code, then such Optionee may elect under Section 83(b) of the Code
to include in his gross income, for his taxable year in which the Shares are
transferred to such Optionee, the excess of the Fair Market Value of such Shares
at the time of transfer (determined without regard to any restriction other than
one which by its terms will never lapse), over the amount paid for the Shares.
If the Optionee makes the Section 83(b) election described above, the Optionee
shall (i) make such election in a manner that is satisfactory to the Committee,
(ii) provide the Company with a copy of such election, (iii) agree to promptly
notify the Company if any Internal Revenue Service or state tax agent, on audit
or otherwise, questions the validity or correctness of such election or of the
amount of income reportable on account of such election, and (iv) agree to such
withholding as the Committee may reasonably require in its sole and absolute
discretion.
15. EFFECTIVE DATE AND TERMINATION DATE. This Plan is adopted as of
June __, 1996, but shall only become effective on the Distribution Date as
defined in the Distribution Agreement between the Company and U.S. Long Distance
Corp. dated ____________, 1996. The effective date of any amendment to the Plan
is the date on which the Board adopted such amendment; provided, however, if
this Plan is not approved by the stockholders of the Company within twelve (12)
months after the effective date, then, in such event, this Plan and all Options
granted pursuant to this Plan shall be null and void. This Plan shall terminate
on _____________, 2001, and any Option outstanding on such date will remain
outstanding until it has either expired or has been exercised.
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BILLING INFORMATION CONCEPTS CORP.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Billing Information Concepts Corp. Employee Stock Purchase Plan (the
"Plan") is designed to encourage employees of Billing Information
Concepts Corp. ("Billing") and its participating Subsidiaries
(collectively, the "Company"), where permitted by applicable laws and
regulations, to acquire an equity interest in Billing through the purchase
of shares of the common stock, par value $0.01 per share, of Billing
("Common Stock"). These purchases are intended to establish a closer
identification of employee, Company and stockholder interests and to
provide employees with a direct means of participating in the Company's
growth and earnings. It is anticipated that Plan participation will
motivate employees to remain in the employ of the Company and give greater
efforts on behalf of the Company. This Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS
The following words or terms, when used herein, shall have the following
respective meanings:
"Closing Market Price" refers to the reported closing sales price for
shares of the Common Stock as so reported in The Wall Street Journal for
that day.
"Committee" shall refer to the committee appointed by the Billing Board of
Directors to administer this Plan.
"Designated Broker" refers to the securities brokerage company that will
assist Billing in administering the Plan and which may be designated from
time to time by the Committee. Initially the Designated Broker is Merrill
Lynch & Co.
"Effective Date" means August 1, 1996, the first Enrollment Date under the
Plan.
"Employee" refers to all full-time and part-time employees, employed by
Billing or a Subsidiary on a continuous basis.
"Employee Contribution Amounts" refers to the amounts contributed by
employees via payroll deduction.
"Enrollment Date" refers to August 1, 1996, the first Enrollment Date
under the Plan, the first day of the initial six-month Participation
Period ending January 31, 1997, and after that latter date, refers to
February 1 and August 1, the first day of the succeeding six-month
Participation Periods which continue thereafter.
<PAGE>
"Enrollment Period" refers to the designated period that precedes each
Enrollment Date during which employees eligible to participate are
provided the opportunity to enroll in the Plan. The Enrollment Period is
approximately two weeks in duration and, generally, will expire
approximately 10 to 14 days prior to the Enrollment Date. The exact dates
for each Enrollment Period will be communicated to all eligible employees
prior to the Enrollment Period.
"Exercise Date" refers to the last stock trading day in a Participation
Period.
"Fair Market Value" refers to the Closing Market Price on either the first
or last stock trading day in the Participation Period as determined in
accordance with Section 9.
"Participant" refers to any employee meeting the eligibility requirements
specified in Section 5 who has enrolled in the Plan.
"Participation Period" refers to the six-month period from the Effective
Date through January 31, 1997, and after that latter date refers to
periods of February 1 through July 31 and August 1 through January 31,
during which periods payroll deductions will be made to purchase stock
under the Plan, or such other period as the Committee may at any time
prescribe.
"Plan" shall refer to this Billing Information Concepts Corp. Employee
Stock Purchase Plan.
"Prior Plan" refers to the U.S. Long Distance Corp. Stock Purchase Plan,
the stock purchase plan of Billing's former parent.
"Subsidiary" refers to any present or future corporation that is a
"subsidiary corporation" of the Company within the meaning of Section 424
of the Code.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Employee Stock Purchase Plan
Committee (the "Committee") appointed by the Board of Directors of Billing
(the "Board"), which Committee shall consist of at least three (3)
persons, who need not be members of the Board. The members of the
Committee shall supervise the administration and enforcement of the Plan
according to its terms and provisions and shall have all powers necessary
to accomplish these purposes and discharge its duties hereunder including,
but not limited to, the power to interpret the Plan, to make factual
determinations and resolve issues of eligibility, stock price
determination, or any other issues arising under the Plan or as a result
of participation of Participants in the Plan.
The Committee may act by majority decision of its members at a regular or
special meeting of the Committee or by decision reduced to writing and
signed by all members of the Committee without holding a formal meeting.
Vacancies in the membership of
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the Committee arising from death, resignation or other inability to serve
shall be filled by appointment by the Board as soon as possible. All
decisions by the Committee shall be final and conclusive and binding upon
all Participants and the Company.
4. NATURE AND NUMBER OF SHARES
The Common Stock subject to issuance under the terms of the Plan shall be
shares of Billing's authorized but unissued shares. The aggregate number
of shares that may be issued under the Plan shall not exceed one million
(1,000,000) shares of Common Stock. If the total number of shares that
Employees elect to purchase under the Plan exceeds the shares available,
the Committee will allot shares among Employees.
In the event of any reorganization, recapitalization, stock split, reverse
stock split, stock dividend, spin-off, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of Billing, the Committee may make such adjustment, if any, as
it deems appropriate in the number, kind and purchase price of the shares
available for purchase under the Plan, in the maximum number of shares
that may be issued under the Plan and in the Participation Periods,
subject to the approval of the Board and in accordance with Section 20 of
the Plan.
If Billing is acquired in a transaction whereby it is not the surviving
entity or all or substantially all of Billing's assets are acquired, the
Committee shall determine a Plan termination date. This date shall
precede the expected effective date of such acquisition by not more than
sixty (60) days. Employee Contribution Amounts accumulated during the
period between the most recent Enrollment Date and Plan termination date
shall be used to purchase shares for Participants in the manner provided
in Section 9 utilizing the Plan termination date as the Exercise Date for
determining the purchase price for shares of Common Stock. In the event
the Plan is terminated and the acquisition transaction is not consummated,
the Plan may be reactivated on a date determined by the Committee.
5. ELIGIBILITY REQUIREMENTS
Each Employee, except as described in the next following paragraph, shall
become eligible to participate in the Plan in accordance with this Section
5 on the first Enrollment Date following employment by the Company.
Participation in the Plan is voluntary.
The following Employees are not eligible to Participate in the Plan:
i) Employees who have not completed at least six (6) months of
continuous service with the Company as of the Enrollment Date; and
ii) Employees who would, immediately upon enrollment in the Plan, own
directly or indirectly, or hold options or rights to acquire, an
aggregate of five percent (5%) or more of the total combined voting
power or value of all outstanding shares of all classes of Billing
or any Subsidiary.
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Employees of any corporation that may become a Subsidiary after the
Effective Date shall automatically be deemed to be eligible for
participation under this Plan effective as of the Enrollment Date
following the date (1) the corporation became a Subsidiary and (2) the
Employees satisfied the continuous service requirements described above.
All service with the former parent corporation of Billing or a subsidiary
of such former parent will be taken into account as continuous service for
purposes of this Section 5.
6. ENROLLMENT
Each eligible Employee of the Company as of the Effective Date will become
an eligible Employee in the Plan on the Effective Date if immediately
prior to the Effective Date he or she was eligible to participate in the
Prior Plan. Each other Employee of the Company who thereafter becomes
eligible to participate may enroll in the Plan on the February 1 and
August 1 Enrollment Dates following the date he or she first meets the
eligibility requirements of Section 5 of the Plan. Any eligible Employee
not enrolling in the Plan when first eligible may enroll in the Plan on
the next succeeding February 1 or August 1 Enrollment Date. In order to
enroll, an eligible Employee must complete, sign and submit the
appropriate forms during the Enrollment Period to Billing's Human
Resources Department. Continued enrollment in subsequent periods shall be
automatic and no additional documentation is required, unless a
Participant desires to revise the Employee Contribution Amount for the
subsequent Participation Period. Employee Contribution Amounts shall
remain constant if not changed at the Employee's request during an
Enrollment Period. In order to terminate Plan participation, at any time,
or change Employee Contribution Amounts during an Enrollment Period, the
participant must complete, sign and submit the appropriate forms to
Billing's Human Resources Department.
7. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will
constitute the grant by Billing to the Participant of the right to
purchase shares of Common Stock under the Plan. Re-enrollment or
continued enrollment by a Participant in the Plan will constitute a grant,
on the Enrollment Date on which such re-enrollment or continued enrollment
occurs, by Billing to the Participant of a new right to purchase shares of
Common Stock. A Participant who has not terminated employment shall have
shares of Common Stock automatically purchased for him or her on the
applicable Exercise Date. The participant shall automatically be
re-enrolled in the Plan for subsequent Participation Periods at the same
Employee Contribution Amount, unless the Participant notifies Billing's
Human Resources Department on the appropriate forms that he or she elects
not to re-enroll or desires to change his or her Employee Contribution
Amount. A Participant who has suspended payroll deductions during any
Participation Period must re-enroll on the appropriate forms to
participate in the Plan in any future Participation Periods.
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Each right to purchase shares of Common Stock under the Plan during any
participation Period shall have the following terms:
i) the right to purchase shares of Common Stock during any
Participation Period shall expire on the earlier of (a) the
completion of the purchase of shares on the Exercise Date or (b) the
date on which the Participant terminates employment;
ii) in no event shall the right to purchase shares of Common Stock
during any Participation Period extend beyond twenty-seven (27)
months from the Enrollment Date;
iii) payment for shares purchased shall be made only with amounts
contributed through payroll deductions;
iv) purchase of shares shall be accomplished only in accordance with
Section 9;
v) the price per share shall be determined as provided in Section 9;
vi) the right to purchase shares of Common Stock (taken together with
all other such rights then outstanding under this Plan and under all
other similar stock purchase plans of Billing or any Subsidiary)
will in no event give the Participant the right to purchase a number
of shares of Common Stock during a Participation Period in excess of
the number of shares of Common Stock derived by dividing $12,500.00
by the Fair Market Value of the Common Stock on the applicable Grant
Date, as defined in Section 9, determined in accordance with Section
9; and
vii) the right to purchase shares of Common Stock shall in all respects
be subject to the terms and conditions of the Plan, as interpreted
by the Committee from time to time.
8. METHOD OF PAYMENT
Payment of shares of Common Stock shall be made as of the applicable
Exercise Date with amounts contributed through payroll deductions
collected over the Plan's designated Participation Period, with the first
such deduction commencing with the payroll period ending after the
Enrollment Date. Each Participant will authorize such deductions from his
or her pay for each month during the Participation Period. No changes in
monthly deduction amounts are permitted subsequent to the Enrollment
Period other than ceasing ongoing payroll deductions for the remainder of
the Participation Period. Payroll deductions will be made in equal
installments on each of the first two payrolls of each month during the
Participation Period. No lump sum or prepayments are permitted.
Employees may select any monthly Employee Contribution Amount as long as
the following requirements are met:
i) at least $10.00 is deducted each month;
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<PAGE>
ii) amount selected is a multiple of $5.00;
iii) total amount deducted does not exceed Employee's net pay of their
base salary; and
iv) the aggregate of monthly deduction amounts does not exceed
$10,625.00 in any Participation Period (under this Plan and under
all other similar stock purchase plans of Billing or any
Subsidiary). If for any reason a Participants's contributions to
the Plan exceed $10,625.00 during any Participation Period, such
excess amounts shall be refunded to the Participant as soon as
practicable after such excess has been determined to exist.
A Participant may suspend payroll deductions at any time during a
Participation Period by given written notice to Billing's Human Resources
Department on the appropriate forms, which will be processed effective for
the first payroll period that is administratively feasible. In such case,
the Participant's account balance shall still be used to purchase Common
Stock at the end of the Participation Period. Any Participant who
suspends payroll deductions during any Participation Period cannot resume
payroll deductions during such period and must re-enroll in the Plan
during a subsequent Enrollment Period in order to participate in any
future Participation Periods.
Except in the case of termination of employment, the amount in a
Participant's account at the end of any Participation Period shall be
applied to the purchase of shares, as provided in Section 9.
9. PURCHASE OF SHARES
The right to purchase shares of Common Stock granted by the Company under
the Plan is for the term of a Participation Period. The price to be paid
for the Common Stock to be purchased at the expiration of such
Participation Period shall be determined as the lower of: (a) 85% of the
Closing Market Price on the first trading day of the Participation Period
(Grant Date) or (b) 85% of the Closing Market Price on the last trading
day in the Participation Period (Exercise Date). These dates constitute
the date of grant and the date of exercise for valuation purposes under
Section 423 of the Code.
The number of shares of Common Stock, including fractional shares,
purchased on behalf of a Participant shall be recorded in the Designated
Broker stock trading account established for each Participant as soon as
administratively feasible, but no later than five (5) business days
following the last business day of the preceding Participation Period.
The number of shares purchased shall be computed by dividing the aggregate
Employee Contribution Amount by the price for the Common Stock determined
in the manner described in the preceding paragraph. Participants shall be
treated as the record owners of the shares, with all rights of a
stockholder, effective as of the date the shares are posted to the
Participant's stock trading account. Any fees associated with maintaining
these stock trading accounts shall be the obligation of the Company.
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10. WITHDRAWAL OF SHARES
The record of shares of Common Stock purchased shall be maintained in an
individual stock trading account established at the Designated Broker on
behalf of the Participant until the shares are either withdrawn or sold.
A Participant may elect to withdraw all shares held in his or her account
at any time (without withdrawing from the Plan) by giving notice to the
Designated Broker. Upon receipt of such notice, the Designated Broker
will arrange for either (a) the issuance and delivery of all shares held
in the Participant's account as soon as administratively feasible or (b)
the sale of the shares, as described by the Participant.
Certificates shall be issued only in the following situations:
i) if the Participant requests a certificate; or
ii) if the Participant terminates employment with the Company and
requests a certificate.
In both of these cases, the Participant will be required to notify the
Designated Broker and pay an issuance fee. The share certificate will be
issued to the Participant as soon as administratively feasible after the
receipt by the Designated Broker of the required form and payment of the
issuance fee.
Fractional shares shall be handled as follows: For share withdrawals,
only whole shares will be certified and issued to Participants. A payment
will be made to the Participant for any fractional shares owned by the
Participant. This payment shall be computed using the Closing Market
Price of a share of Common Stock on the date the withdrawal is processed
by the Designated Broker. For shares sold, Participants shall receive
credit for all whole and fractional shares at the actual price for which
the shares were sold.
11. INCOME TAX OBLIGATIONS
Participants shall be responsible for all personal income tax obligations
associated with selling shares of Common Stock purchased through this
Plan. The Committee recommends that each Participant seek competent,
professional tax advice prior to enrolling in the Plan to ensure he or she
fully understands the tax consequences resulting from stock sales.
12. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by Billing or any Subsidiary. Employee
Contribution Amounts collected prior to the date of termination of
employment shall be paid in cash. The cash shall be delivered to the
Participant as soon as administratively feasible following the end of the
Participation Period in which the Participant's employment terminates.
Employee
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Contribution Amounts for Participants who are on a Leave of Absence will
be used to purchase Common Stock at the conclusion of the Participation
Period in accordance with Section 9.
13. DEATH OF A PARTICIPANT
As soon as administratively feasible after receiving notification of the
death of a Participant, Employee Contribution Amounts collected prior to
the date of termination of employment shall be paid in cash to the
Participant's estate. No additional shares of Common Stock may be
purchased on behalf of a Participant after notification of death is
received. All assets in a Participant's stock trading account will
remain in the Participant's account until the person whom the Participant
has elected a joint tenant, with or without right of survivorship, or the
representative of the Participant's estate requests delivery thereof from
the Designated Broker and submits such documentation as the Designated
Broker may require to show proof of entitlement thereto.
14. ASSIGNMENT
The rights of a Participant under the Plan shall not be assignable or
otherwise transferable by the Participant except by will or the laws of
descent and distribution or pursuant to a qualified domestic relations
order . No purported assignment or transfer of any rights of a
Participant under the Plan, whether voluntary or involuntary, by operation
of law or otherwise, shall vest in the purported assignee or transferee
any interest or right therein whatsoever, but immediately upon such
assignment or transfer, or any attempt to make the same, such rights shall
terminate and become of no further effect. If the foregoing provisions of
this Section 14 are violated, the Participant's election to purchase
Common Stock shall terminate and the only obligation of the Company
remaining under the Plan shall be to pay the person entitled thereto the
Employee Contribution Amount then credited to the Participant's account.
No Participant may create a lien on any funds, securities, rights or other
property held for the account of the Participant under the Plan, except to
the extent permitted by will or the laws of descent and distribution if
beneficiaries have not been designated. A Participant's right to purchase
shares of Common Stock under the Plan shall be exercisable only during the
Participant's lifetime and only by him or her.
15. COSTS
Billing will pay all expenses incident to establishing and administering
the Plan. Expenses to be incurred by Participants shall be limited to
brokerage fees relating to sales of stock from the Participant's account
(as described herein), issuance fees (as described in Section 10) and any
personal income tax obligations.
16. REPORTS
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At least annually, the Company shall provide or cause to be provided to
each Participant a report of their Employee Contribution Amounts and the
shares of Common Stock purchased with such Employee Contribution Amounts
by that Participant on each Exercise Date.
17. EQUAL RIGHTS AND PRIVILEGES
All eligible Employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase
plan" within the meaning of Section 423 or any successor provision of the
Code and related regulations. Any provision of the Plan that is
inconsistent with Section 423 or any successor provision of the Code shall
without further act or amendment by the Company be reformed to comply with
the requirements of Section 423. This Section 17 shall take precedence
over all other provisions in the Plan.
18. RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder under his or her
rights to purchase Common Stock until he or she becomes a stockholder as
herein provided. A Participant will become a stockholder with respect to
shares for which payment has been completed as provided in Section 9
effective as of the date the shares are posted to the Participant's stock
trading account.
19. MODIFICATION AND TERMINATION
The Board may amend or terminate the Plan at any time as permitted by law,
with the exception that the provisions of the Plan (including, without
limitation, the provisions of Sections 8 and 9) that constitute a formula
award for purposes of Rule 16b-3 promulgated by the Securities and
Exchange Commission under the Securities Exchange Act of 1934, as amended
("Rule 16b-3"), may not be amended more than once every six (6) months,
other than to comply with changes in the Code, or the rules thereunder.
No amendment shall be effective unless within one (1) year after the
change is adopted by the Board it is approved by the holders of a majority
of the voting power of Billing's outstanding shares:
i) if and to the extent such amendment is required to be approved
by stockholders to continue the exemption provided for in Rule
16b-3 (or any successor provision); or
ii) if such amendment would cause the rights granted under the
Plan to purchase shares of Common Stock to fail to meet the
requirements of Section 423 of the Code (or any successor
provision).
20. BOARD AND STOCKHOLDER APPROVAL; EFFECTIVE DATE
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The Plan was approved by the Board and by the sole stockholder of Billing
on __________, 1996. The Plan will become effective as of August 1, 1996.
21. GOVERNMENTAL APPROVALS OR CONSENTS
The Plan and any offering or sale made to Employees under the Plan are
subject to any governmental approvals or consents that may be or become
applicable in connection therewith. Subject to the provisions of Section
19, the Board may make such changes in the Plan and include such terms in
any offering under the Plan as may be desirable to comply with the rules
or regulations of any governmental authority.
22. USE OF FUNDS
All Employee Contribution Amounts received or held by the Company under
this Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such amounts.
23. NO ADDITIONAL PURCHASE RIGHTS OR EMPLOYMENT RIGHTS
Other than for rights to purchase Common Stock under the Plan, the Plan
does not, directly or indirectly, create any right for the benefit of any
Employee or class of Employee to purchase any shares under the Plan, or
create in any Employee or class of Employee any right with respect to
continuance of employment with the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise
modify, any Employee's employment at any time.
24. EFFECT OF PLAN
The provisions of the Plan shall, in accordance with its terms, be binding
upon, and inure to the benefit of, all successors of each Employee
participating in the Plan, including, without limitation, such Employee's
estate and the executors, administrators or trustees thereof, heirs and
legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such Employee.
25. GOVERNING LAW
The laws of the State of Delaware will govern all matters relating to the
Plan except to the extent superseded by the laws of the United States or
the property laws of any particular state.
26. NO PAYMENT OF INTEREST
No interest will be paid or allowed on any Employee Contribution Amounts
or amounts credited to the account of any Participant.
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27. OTHER PROVISIONS
The agreement to purchase shares of Common Stock under the Plan shall
contain such other provisions as the Committee and the Board shall deem
advisable, provided that no such provision shall in any way conflict with
the terms of the Plan.
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BILLING INFORMATION CONCEPTS CORP.
EXECUTIVE COMPENSATION DEFERRAL PLAN
(With Company Matching Contribution)
PLAN DOCUMENT
THE BILLING INFORMATION CONCEPTS CORP. EXECUTIVE COMPENSATION DEFERRAL
PLAN (the "Plan") is hereby adopted effective the _____ day of ,
1996 (the "Effective Date"). The Plan is established and maintained by Billing
Information Concepts Corp. (the "Company") solely for the purpose of permitting
a select group of management and/or highly compensated employees to defer all or
a portion of their Eligible Compensation and to provide for a partial Company
Matching Contribution.
Accordingly, Billing Information Concepts Corp. hereby adopts the Plan
pursuant to the terms and provisions hereinafter set forth, and designates the
Company as Plan Administrator of this Plan.
ARTICLE I
DEFINITIONS
Whenever used herein, the following terms shall have the meanings as set
forth in this Article:
1.1 "Beneficiary" or "Beneficiaries" means the individual or individuals
designated by a Participant on a Beneficiary Form filed with the Company
to receive the amount of benefit specified in Section 6.1 in the event of
the Participant's death prior to Retirement, Disability, or other lifetime
termination of employment, or to receive the death benefit as provided in
Section 6.5 in the event of the Participant's death while receiving
installment payments after the occurrence of one of such events. If a
Participant has not designated any beneficiary, or if no designated
beneficiary is living on the date of distribution, then such amounts shall
be paid to the Participant's spouse, or if the Participant's spouse is not
then living or if the Participant is unmarried or action for divorce or
annulment has been filed at the time of death, then, unless the provisions
of Section 9.8 apply, such amounts shall be paid to the Participant's
estate.
1.2 "Board" means the Board of Directors of the Company, or any committee of
the Board authorized to act in its behalf in connection with the Plan.
1.3 "Change of Control" shall mean change in at least 51% ownership interest
in the Company by sale, merger or liquidation, dissolution or
reorganization.
1.4 "Company" means BILLING INFORMATION CONCEPTS CORP., a Delaware
corporation, or, to the extent provided in Section 9.7, any successor
corporation or other entity resulting
<PAGE>
from a merger or consolidation into or with the Company or from a transfer
or sale of substantially all of the assets of the Company.
1.5 "Company Matching Contribution" means the contribution made by the Company
out of its own funds in behalf of a Plan Participant during any Plan Year
pursuant to Article IV.
1.6 "Deferred Compensation Accounts" means the Accounts established in the
name of a Plan Participant pursuant to Article V. One of such Accounts
shall be designated as the "Eligible Compensation Deferral Account" and
the other Account shall be designated as the "Company Matching
Contribution Account."
1.7 "Disability" means that the Participant is unable to perform the usual and
customary duties of his or her regular job and is unable to work elsewhere
in the Company in a capacity for which the Participant is suited by
education, training, or experience, for a period of six (6) months as a
result of illness or injury.
1.8 "Eligible Compensation" means the base compensation payable to a
Participant by the Company for individual performance.
1.9 "Eligible Compensation Deferral Contribution" means the contribution
credited to a Participant's Eligible Compensation Deferral Account
resulting from a deferral from Eligible Compensation under and in
accordance with the terms of the Plan during any Plan Year.
1.10 "Enrollment Form" means the Enrollment Form completed by each Eligible
Employee, substantially in the form of Exhibit A hereto, pursuant to which
an Eligible Employee elects to participate in the Plan, makes an annual
deferral election and elects a payment timing option from the Plan.
1.11 "Interest Crediting Rate" means the interest rate declared by the Company
which will be credited at least annually to a Participant's Deferred
Compensation Accounts. For the first Plan Year, the interest rate shall
be declared by the Company at the inception of the Plan and shall apply
until the end of that year. Thereafter, the interest rate shall be
declared by the Company by December 15th of each year for the following
Plan Year. If it is not declared by that time, the rate for the following
year shall be the prime rate of interest declared by the Frost National
Bank of San Antonio plus two percent (2%), determined as of December 15th.
1.12 "Participant" means an employee of the Company who qualifies to
participate in the Plan under the eligibility requirements set forth in
Article II and who elects to participate in the Plan by filing with the
Company an Enrollment Form.
1.13 "Plan" means the Executive Compensation Deferral Plan provided for herein
for selected management and/or highly compensated employees of the
Company.
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1.14 "Plan Entry Date" shall mean the Effective Date, the date an Employee
first becomes an Eligible Employee (as defined in Article II), and each
January 1st thereafter.
1.15 "Plan Year" means each 12-month calendar year, except that the first Plan
Year shall be a short Plan Year beginning on the Effective Date and ending
on December 31st of that calendar year.
1.16 "Prior Plan" means the U.S. Long Distance Corp. Executive Compensation
Deferral Plan, as in effect prior to the Effective Date.
1.17 "Retirement" means either (i) a Participant's actual early, normal or late
retirement from employment with the Company, whether under the terms of
the Company's qualified retirement plan or otherwise, or (ii) the
Participant's attainment of age 65 if later than actual retirement, as
elected by the Participant on the Enrollment Form filed at the time of
the Participant's initial election to defer Eligible Compensation under
the Plan.
1.18 "Termination for cause" shall mean an employee's termination of employment
by the Board of Directors for fraud, embezzlement, or such other egregious
and serious act against the Company that warrants immediate termination.
1.19 Words in the masculine gender shall include the feminine, and the singular
shall include the plural, and vice versa, unless otherwise required by
context. Any headings used herein are for ease of reference only and are
not to be construed as to alter the meaning of the substantive provisions
of the Plan.
ARTICLE II
ELIGIBILITY
Selected employees occupying management positions with the Company or its
subsidiaries who are determined by the Board from time to time to be eligible to
participate in the Plan ("Eligible Employees") shall be eligible to participant
hereunder. All Eligible Employees may thereafter participate in the Plan
beginning on the effective date of the Plan or any Plan Entry Date thereafter.
Each Eligible Employee shall complete and deliver to the Company an Enrollment
Form.
ARTICLE III
ELIGIBLE COMPENSATION DEFERRAL ELECTION
3.1 AMOUNT OF ELIGIBLE COMPENSATION DEFERRAL. An Eligible Employee may elect
effective on a Plan Entry Date to defer all or a portion of his or her
Eligible Compensation for a Plan Year by filing with the Company an
Enrollment Form prior to the Plan Year to which such election relates;
provided, however, that (i) for employees who are eligible to participate
in the Plan upon adoption of the Plan, the election for the first Plan
Year
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may be made within the 30-day period immediately after adoption of the
Plan, and (ii) for employees who become eligible to participate in the
Plan thereafter, the election for the Plan Year during which they first
become eligible may be made within the first pay period immediately after
becoming eligible. Deferrals from Eligible Compensation shall be made in
equal monthly amounts up to 100% of a Participant's Eligible Compensation.
3.2 VESTING OF ELIGIBLE COMPENSATION DEFERRAL. All amounts credited to a
Participant's Eligible Compensation Deferral Account are 100% vested,
unless the Participant's employment terminates as a result of Termination
for cause, in which case all amounts credited to the Participant's
Eligible Compensation Deferral Account shall be forfeited.
ARTICLE IV
COMPANY MATCHING CONTRIBUTIONS
4.1 AMOUNT OF COMPANY MATCHING CONTRIBUTIONS. In addition to a Participant's
deferral from Eligible Compensation, the Company intends, each Plan Year,
to contribute out of its own funds, on behalf of each Participant, an
amount equal to the lesser of (a) 100% of the amount of such Participant's
Eligible Compensation Deferral Contribution for such Plan Year or (b) an
amount which when combined with the Eligible Compensation Deferral
Contribution which actuarily determined would yield a 10-year annuity
equal to 50% of the Participant's Eligible Compensation payable at age 65.
The amount described in (b) shall in no event be less than $3,000.
Further, the interest rate used for purposes of determining the amount
required to provide the annuity described in (b) above shall be the
Interest Crediting Rate declared by the Company for the same Plan Year
pursuant to Section 5.2. Notwithstanding anything contained in this
paragraph, the Company in its sole discretion, reserves the right at any
time for any Plan Year, either (i) not to provide such Company Matching
Contribution altogether, or (ii) to make a Company Matching Contribution
of a different amount, in either case by giving written notice to each
affected Participant by December 15th of the prior Plan Year. Any such
skipped or reduced Company Matching Contribution shall not be required to
be made up in future Plan Years.
4.2 VESTING OF COMPANY MATCHING CONTRIBUTIONS. The portion of the Company
Matching Contribution Account established for a Participant pursuant to
Article V to which the Participant or the Participant's Beneficiary or
Beneficiaries shall be entitled upon the occurrence of one of the payment
events specified in Section 6.2 shall be based upon the number of full
years of employment with the Company completed by the Participant as of
the last day of the plan year prior to the date payment is due under this
Plan. For purposes of this Section 4.2, a Participant's service with the
former parent corporation of the Company or a subsidiary of such former
parent shall be considered service with the Company. Such vested portion
shall be determined in accordance with the following schedule:
YEARS OF SERVICE VESTED PORTION
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Less than 1 year 0.00%
More than 1 and less than 2 33.33%
More than 2 and less than 3 66.66%
3 years or more 100.00%
Change of Control of Company 100.00%
Termination for Cause 0.00%
ARTICLE V
DEFERRED COMPENSATION ACCOUNTS
5.1 ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS. The Company shall
establish and maintain in the name of each Plan Participant two separate
accounts (the "Participant's Accounts") designated, respectively, as the
"Eligible Compensation Deferral Account" and the "Company Matching
Contribution Account." Such Accounts shall be segregated from other
accounts on the books and records of the Company and shall together be
carried as a contingent liability of the Company to the Participant.
(a) ELIGIBLE COMPENSATION DEFERRAL ACCOUNT. The Company shall credit
to the Eligible Compensation Deferral Account (the "Deferral
Account") the amount of each deferral from Eligible Compensation
which the Participant elects to make on a timely filed Enrollment
Form. Such amount shall be credited to the Deferral Account on the
day such Eligible Compensation would otherwise be payable to the
Participant.
(b) COMPANY MATCHING CONTRIBUTION ACCOUNT. The Company shall credit to
the Company Matching Contribution Account (the "Matching Account")
the amount of each Company Matching Contribution. Such amount shall
be credited to the Matching Account on the same day as the
Participant's deferral from Eligible Compensation to which it
relates is credited to the Participant's Deferral Account.
(c) PRIOR PLAN ACCOUNT. The Company shall credit to the Deferral
Account and the Matching Account of each Participant who, as of the
Effective Date, was a participant in the Prior Plan the amounts so
credited to such Participant's deferral account and matching account
under the Prior Plan.
5.2 CREDITING OF INTEREST. From time to time, the Company shall credit each
of the Participant's Accounts with interest at the Interest Crediting Rate
declared by the Company for that year. Interest on amounts in an Account
for less than a full calendar year shall be appropriately prorated based
upon the number of days within the calendar year such amounts have been in
such Account. Interest shall continue to be credited to a Participant's
Account in the foregoing manner as long as the Participant is an employee
with the Company and not disabled or deceased. Thereafter, the Company
shall credit the Participant's Deferral Account and the vested Matching
Account with the rate of
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interest earned on federally insured passbook savings accounts at Frost
National Bank of San Antonio, Texas.
ARTICLE VI
BENEFIT OF PAYMENT
6.1 AMOUNT OF BENEFIT. The benefit payable to a Participant or a
Participant's Beneficiary or Beneficiaries shall be equal to 100% of the
value of such Participant's Deferral Account, unless terminated for cause,
plus the vested percentage of the value of such Participant's Matching
Account, "value" in each case to be determined in accordance with Article
V as of the date of the applicable payment event specified in Section 6.2,
except, in the event of a Participant's death, the Participant's
Beneficiary or Beneficiaries shall be entitled to a minimum benefit equal
to twelve (12) times the monthly Eligible Compensation which the
Participant received as of the month prior to the Participant's death.
6.2 PAYMENT EVENTS. Benefits shall become due and payable to a Participant
or a Participant's Beneficiary or Beneficiaries upon the occurrence of the
first to occur of the following events:
(a) Retirement of the Participant as defined in Section 1.17;
(b) Disability of the Participant as defined in Section 1.7, except that
the Company may, in its sole discretion, commence benefit payments
prior to the date specified in Section 1.7 if the Participant is
unable to work for the Company as a result of illness or injury;
(c) The later of any termination of employment or termination of the
written employment contract of the Participant;
(d) Death of the Participant prior to the occurrence of any of the other
events specified in this Section 6.2;
6.3 TIME AND MANNER OF PAYMENT OF BENEFITS. Benefits payable upon the
occurrence of an event specified in Section 6.2 shall be paid, or
installment payments shall commence, on the first day of the month next
following the occurrence of the event, or as soon thereafter as may
reasonably be practicable. Benefits payable upon the occurrence of an
event specified in Section 6.2 shall be paid in a lump sum, except that
elections of payment in installments with interest over a period of five
(5) or ten (10) years signed prior to December 12, 1995 with respect to
amounts credited to a Participant's Account pursuant to Section 5.1(c),
and not subsequently revoked shall be honored. The Retirement of a
Participant under Section 1.17 may be changed at any time by means of
execution and filing of a new Enrollment Form, but any new Enrollment
Form shall not become effective until the date that is two calendar years
following the date of the
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<PAGE>
new election. In addition, a Participant who has elected payment of
benefits in installment form prior to December 12, 1995 with respect to
amounts credited to a Participant's Account pursuant to Section 5.1(c),
may subsequently elect payment in lump sum form, but such election shall
not become effective until two calendar years following the date of the
election.
6.4 DEATH AFTER THE COMMENCEMENT OF INSTALLMENT BENEFITS PAYMENTS. If a
Participant dies after the commencement of installment benefit payments
but before distribution of the full amount specified in Section 6.1,
either (i) such payments shall continue to be paid to the Participant's
Beneficiary or Beneficiaries, or (ii) the balance due shall be paid to
such Beneficiary or Beneficiaries in a lump sum, as elected by the
Participant on the Enrollment Form filed with the Company.
6.5 PAYMENT OF BENEFITS FROM GENERAL ASSETS; UNSECURED CREDITOR STATUS OF
Participants. All benefits payable under the Plan to or in behalf of any
Participant shall be paid from the general assets of the Company. The
Company shall set aside funds with which to discharge its obligations
hereunder, and may if it chooses to do so by the purchase of Corporate
Owned Life Insurance (COLI) policies on the lives of the Participants or
otherwise. Any and all funds which may be so set aside shall remain
subject to the claims of the present and future general creditors of the
Company in the event of insolvency or bankruptcy, and any recipient of
benefits hereunder shall not have any security or other interest in such
funds. Neither any Participant, his or her Beneficiary or Beneficiaries,
nor any other person shall, under any circumstances, have any interest
whatsoever in any particular property or assets of the Company by virtue
of the Plan, and the rights of the Participant and his or her Beneficiary
or Beneficiaries under the Plan shall be no greater than the rights of a
general unsecured creditor of the Company. The right of a Participant or
his or her Beneficiary or Beneficiaries to receive a benefit payment
hereunder shall be an unsecured claim against the general assets of the
Company, and neither the Participant nor his or her Beneficiary or
Beneficiaries shall have any rights in, to or against any specific assets
of the Company. All amounts credited to the Deferred Compensation
Accounts of a Participant shall constitute general assets of the Company
and, subject to any trust agreement established to hold assets pursuant to
this Plan, may be disposed of by the Company at such time and for such
purposes as it may deem appropriate in the event of bankruptcy or
insolvency.
ARTICLE VII
ADMINISTRATION
7.1 ADMINISTRATION BY THE COMPANY. The Company shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any actuary, accountant, controller, counsel, or
other person employed or engaged by the Company with respect to the Plan.
The Company shall have full power and discretion to administer the Plan in
all of its details, and its decision shall be binding. For this
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<PAGE>
purpose, the Company's powers shall include, but shall not be limited to,
the following authority, in addition to all other powers provided
hereunder:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to
be final and conclusive on all persons claiming benefits under the
Plan;
(c) To decide all questions concerning the Plan (including questions of
fact) and the eligibility of any person to participate in the Plan;
(d) To appoint such agents, counsel, accountants, consultants and other
persons as may be required to assist in administering the Plan; and
(e) To allocate and delegate its responsibilities under the plan and to
designate other persons or an administrative committee to carry out
any of its responsibilities under the Plan, any such allocation,
delegation or designation to be in writing.
ARTICLE VIII
AMENDMENT OR TERMINATION
8.1 AMENDMENT OR TERMINATION. The Company intends the Plan to be permanent,
but reserves the right to amend or terminate the Plan when, in the sole
opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of
the Board and shall be effective as of the date specified in such
resolution.
8.2 EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of the
Plan shall directly or indirectly reduce the value of any Deferred
Compensation Account held hereunder as of the effective date of such
amendment or termination.
ARTICLE IX
GENERAL PROVISIONS
9.1 NO GUARANTEE OF BENEFITS. Nothing contained in the Plan shall constitute
a guarantee by the Company or by any other person or entity that the
assets of the Company will be sufficient to pay any benefits thereunder.
9.2 NO ENLARGEMENT OF EMPLOYEE RIGHTS. No Participant shall have any right
to receive a benefit payment under the Plan except in accordance with the
terms of the Plan. Establishment of the Plan shall not be construed to
give any Participant the right to be retained in the service of the
Company.
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<PAGE>
9.3 SPENDTHRIFT PROVISION. No interest of any person or entity in, or right
to receive a benefit payment under, the Plan shall be subject in any
manner to sale, transfer, assignment, pledge, attachment, garnishment or
other alienation or encumbrance of any kind; nor may any such interest or
right to receive a benefit payment be taken, either voluntarily or
involuntarily, for the satisfaction of the debts of, or other obligations
or claims against, such person or entity, including claims for alimony,
support or separate maintenance, or claims in bankruptcy proceedings.
9.4 APPLICABLE LAW. The Plan shall be construed and administered under the
laws of the State of Texas.
9.5 INCAPACITY OF RECIPIENT. If any person entitled to a benefit payment
under the Plan is deemed by the Company to be incapable of personally
receiving and giving a valid receipt for, such payment, then, unless and
until claim therefor shall have been made by a duly appointed guardian,
conservator or other legal representative of such person, the Company may
provide for such payment or any part thereof to be made to any other
person or institution then contributing toward or providing for the care
and maintenance of such person. Any such payment shall be a payment for
the account of such person and shall constitute a complete discharge of
any liability of the Company and the Plan therefor.
9.6 CORPORATE SUCCESSORS. The Plan shall not be automatically terminated by
a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other
entity, but the Plan shall be continued after such sale, merger, or
consolidation only if and to the extent that the transferee, purchaser or
successor entity agrees to continue the Plan. In the event that the Plan
is not continued by the transferee, purchaser or successor entity, then
the Plan shall terminate subject to the provisions of Section 8.2.
9.7 UNCLAIMED BENEFITS. Each Participant shall keep the Company informed of
his or her current address and the current address of his or her
Beneficiary or Beneficiaries. The Company shall not be obligated to
search for the whereabouts of any person. If the location of a
Participant is not made known to the Company within three (3) years after
the date on which payment of the Participant's benefit may first be made,
payment may be made as though the Participant had died at the end of the
three-year period, provided that proof of death satisfactory to the Plan
Administrator is provided. If, within one additional year after such
three-year period has elapsed, or within three years after the actual
death of a Participant, the Company is unable to locate any Beneficiary or
Beneficiaries of the Participant, and is further unable to locate a
spouse, dependent or descendant of the Participant, then the Company shall
have no further obligation to pay any benefit hereunder to or in behalf of
such Participant or Beneficiary, and such benefits shall be irrevocably
forfeited.
9.8 LIMITATIONS ON LIABILITY. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as
employee or agent of the Company
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shall be liable to any Participant, former Participant, Beneficiary, or
other person for any claim, loss, liability or expense incurred in
connection with the Plan.
ARTICLE X
CLAIM FOR BENEFITS
10.1 CLAIMS PROCEDURE. The Plan Administrator shall make all determinations
as to the right of a Participant or Beneficiary to a benefit under the
Plan. If any person does not receive the benefit to which he or she
believes he or she is entitled under this Plan, said person may file a
claim for benefits in writing which shall be signed by the Participant,
Beneficiary or legal representative of a Participant or Beneficiary.
Claims shall be granted or denied within 30 days after receipt unless
additional time is required because of special circumstances. If
additional time is required, the claimant will be notified in writing
before the expiration of 30 days from the receipt of the claim. In no
event shall the time for reaching a decision with respect to a claim be
extended beyond 180 days after receipt of the claim.
In the event that the Plan Administrator denies a claim for benefits, the
claimant will be notified in writing. Such notice shall set forth the
specific reasons for the denial, the specific provisions of this Plan on
which the denial is based, a description of any additional materials or
information necessary to perfect the claim along with an explanation of
why such material or information is necessary, and an explanation of the
claim review procedure.
If no action is taken by the Plan Administrator on a claim within 30 days
after its receipt, or, if the period for considering the claim has been
extended, then if no action is taken within 180 days after receipt of the
claim, the claim shall be deemed to be denied for purposes of the
following review procedure.
10.2 REVIEW PROCEDURE. If a claim is denied in whole or in part, the
claimant may request the Board to review the decision with the Plan
Administrator, neither body to include the claimant. This request must be
made in writing within 30 days after the claim has been denied or is
deemed to be denied under Section 10.1 and must set forth all of the
grounds upon which the request is based, any facts in support of the
request, and any issues or comments which the claimant considers relevant
to the review. In preparing a request for review, the claimant will be
entitled to review any documents which are pertinent to his or her claim
at the office of the Company during regular business hours.
The Board of Directors shall act upon each request as soon as possible but
not later than 60 days after the request for review is received. No
Director shall participate in any Board action taken with respect to his
or her own claim.
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<PAGE>
The Board of Directors shall make an independent determination concerning
the claim for benefits under this Plan and shall give written notice of
its decision to the claimant. The decision of the Board of Directors on
any claim review shall be final.
If the Board of Directors fails to deliver a decision within 60 days after
receipt of the request for review, the claim shall be deemed denied on
review.
IN WITNESS WHEREOF, BILLING INFORMATION CONCEPTS CORP. has caused this
instrument to be executed by its duly authorized officer this ____ day of
_________________, 1996, effective as of the ____ day of _______________, 1996.
BILLING INFORMATION CONCEPTS CORP.
ATTEST:
By:
- - --------------------------- -------------------------------------
Name:
----------------------
Title:
----------------------
145340.1A (4/25/96 Compare Version)
145338.1A (4/25/96 Clean Version)
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<PAGE>
EXHIBIT A
BILLING INFORMATION CONCEPTS CORP.
EXECUTIVE COMPENSATION DEFERRAL PLAN
ENROLLMENT FORM
Name: ________________________________________ Date:__________________
Social Security #: ______________________________ Plan Year:_____________
- - -----------------------------------------------------------------------------
ANNUAL DEFERRAL ELECTION
- - -----------------------------------------------------------------------------
I have received information about the Billing Information Concepts Corp.
Executive Compensation Deferral Plan, and I elect to participate in the Plan at
this time.
I understand that the Plan permits elective deferrals from compensation not yet
earned, during the current year and during each year the Plan is in effect.
This annual Enrollment Form indicates the amount of compensation I elect to
defer for the Plan Year stated above. The election made cannot be revoked for
the Plan Year. This election will remain in effect for future Plan Years unless
otherwise changed or revoked by me by the prior December 31st. If the amount I
designate exceeds my base compensation for the Plan Year, my actual deferral
amount will be equal to my base compensation. I understand that this election
does not guarantee me any compensation.
I understand further that amounts deferred by me under the Plan will earn
interest at a rate determined annually by the interest rates declared by the
Company.
As a participant in the Billing Information Concepts Corp. Executive
Compensation Deferral Plan, I hereby elect to defer the following amount of base
compensation otherwise payable to me in the Plan Year indicates above:
Monthly Deferral Amount _________
The deferral election I am choosing is effective beginning_______________.
- - -----------------------------------------------------------------------------
PAYMENT OF BENEFIT
- - -----------------------------------------------------------------------------
As a Participant in the Billing Information Concepts Corp. Executive
Compensation Deferral Plan, I understand that the payment of my accumulated
account balance will be made as a lump sum, unless I have previously elected
payment in installments under the U.S. Long Distance Executive Compensation
Deferral Plan and such election was made and signed prior to December 12, 1995,
and not subsequently revoked. Additionally, I elect the choice checked below
regarding the time of payment:
_______Actual Retirement
_______Age 65 if Later Than Actual Retirement
I also understand that the foregoing election regarding the time of payment of
benefits under the Plan is revocable up until December 31st two years prior to
the year the payments are payable under the Plan and thereafter may not be
changed. I understand further the foregoing election applies to all deferrals
made by me under the Plan and to all interest credited thereto.
I HAVE READ AND UNDERSTAND THE FOREGOING MATERIAL. I AGREE TO BE BOUND BY THE
TERMS OF THIS ELECTION AND THE REQUIREMENTS, CONDITIONS, AND TERMS OF THE
BILLING INFORMATION CONCEPTS CORP. EXECUTIVE COMPENSATION DEFERRAL PLAN.
EMPLOYEE SIGNATURE: _______________________________________________________
- - -----------------------------------------------------------------------------
WAIVER OF PARTICIPATION
I have received information about the Billing Information Concepts Corp.
Executive Compensation Deferral Plan, and I elect not to participate in the Plan
at this time.
Employee Signature ___________________________________Date:_________________
<PAGE>
BILLING INFORMATION CONCEPTS CORP.
DIRECTOR COMPENSATION DEFERRAL PLAN
(With Company Matching Contribution)
PLAN DOCUMENT
The Billing Information Concepts Corp. DIRECTOR COMPENSATION DEFERRAL PLAN (the
"Plan") is hereby adopted effective the ________ day of ____________, 1996 (the
"Effective Date"). The Plan is established and maintained by Billing
Information Concepts Corp. (the "Company") solely for the purpose of permitting
a group of outside directors of the Company to defer all or a portion of their
director's fees and to provide for a partial Company Matching Contribution.
Accordingly, Billing Information Concepts Corp. hereby adopts the Plan pursuant
to the terms and provisions hereinafter set forth and designates the Company as
Plan Administrator of this Plan.
ARTICLE I
DEFINITIONS
Whenever used herein, the following terms shall have the meanings as set forth
in this Article:
1.1 "Beneficiary" or "Beneficiaries" means the individual or individual
designated by a Participant on a Beneficiary Form filed with the Company
to receive the amount of benefit specified in Section 6.1 in the event of
the Participant's death prior to Retirement, Disability, or other lifetime
termination of employment, or to receive the death benefit as provided in
Section 6.5 in the event of the Participant's death while receiving
installment payments after the occurrence of one of such events. If a
Participant has not designated any beneficiary, or if no designated
beneficiary is living on the date of distribution, then such amounts shall
be paid to the Participant's spouse, or if the Participant's spouse is not
then living or if the Participant is unmarried or action for divorce or
annulment has been filed at the time of death, then, unless the provisions
of Section 9.8 apply, such amounts shall be paid to the Participant's
estate.
1.2 "Board" means the Board of Directors of the Company, or any committee of
the Board authorized to act in its behalf in connection with the Plan.
1.3 "Change of Control" shall mean change in at least 51% ownership interest
in the Company by sale, merger or liquidation, dissolution or
reorganization.
1.4 "Company" means BILLING INFORMATION CONCEPTS CORP., a Delaware
corporation, or, to the extent provided in Section 9.7, any successor
corporation or other
<PAGE>
entity resulting from a merger or consolidation into or with the Company
or from a transfer or sale of substantially all of the assets of the
Company.
1.5 "Company Matching Contribution" means the contribution made by the Company
out of its own funds in behalf of a Plan Participant during any Plan Year
pursuant to Article IV.
1.6 "Deferred Compensation Accounts" means the Accounts established in the
name of a Plan Participant pursuant to Article V. One of such Accounts
shall be designated as the "Eligible Compensation Deferral Account" and
the other Account shall be designated as the "Company Matching
Contribution Account."
1.7 "Disability" means that the Participant is unable to perform the usual and
customary duties of his or her regular job and is unable to work elsewhere
in the Company in a capacity for which the Participant is suited by
education, training, or experience, for a period of six (6) months as a
result of illness or injury.
1.8 "Eligible Compensation" means the base fees payable to a Participant by
the Company for services as a Director of the Company.
1.9 "Eligible Compensation Deferral Contribution" means the contribution
credited to a Participant's Eligible Compensation Deferral Account
resulting from a deferral from Eligible Compensation under and in
accordance with the terms of the Plan during any Plan Year.
1.10 "Enrollment Form" means the Enrollment Form completed by each Eligible
Director, substantially in the form of Exhibit A hereto, pursuant to which
an Eligible Director elects to participate in the Plan, makes an annual
deferral election and elects a payment timing option from the Plan.
1.11 "Interest Crediting Rate" means the interest rate declared by the Company
which will be credited at least annually to a Participant's Deferred
Compensation Accounts. For the first Plan Year, the interest rate shall
be declared by the Company at the inception of the Plan and shall apply
until the end of that year. Thereafter, the interest rate shall be
declared by the Company by December 15th of each year for the following
Plan Year. If it is not declared by that time, the rate for the following
year shall be the prime rate of interest declared by the Frost National
Bank of San Antonio plus two percent (2%), determined as of December 15th.
1.12 "Outside Directors" shall mean those Directors of the Company that are not
employed by the Company on a full time basis.
1.13 "Participant" means an individual who qualifies to participate in the Plan
under the eligibility requirements set forth in Article II and who elects
to participate in the Plan by filing with the Company an Enrollment Form.
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<PAGE>
1.14 "Plan" means the Director Compensation Deferral Plan provided for herein
for selected Directors of the Company.
1.15 "Plan Entry Date" shall mean the Effective Date, the date a Director first
becomes an Eligible Director (as defined in Article II), and each January
1st thereafter.
1.16 "Plan Year" means each 12-month calendar year, except that the first Plan
Year shall be a short Plan Year beginning on the date of adoption of the
Plan and ending on December 31st of that calendar year.
1.17 "Prior Plan" means the U.S. Long Distance Corp. Director Compensation
Deferral Plan, as in effect prior to the Effective Date.
1.18 "Retirement" means either (i) a Participant's actual retirement from
service with the Company, whether under the terms of the Company's regular
retirement plan or otherwise, or (ii) the Participant's attainment of age
65 if later than actual retirement, as elected by the Participant on the
Enrollment Form filed at the time of the Participant's initial election to
defer Eligible Compensation under the Plan.
1.19 "Termination for cause" shall mean a Participant's removal from the Board
of Directors by the Board of Directors for fraud, embezzlement, or such
other egregious and serious act against the interests of the Company that
warrants immediate removal.
1.20 Words in the masculine gender shall include the feminine, and the singular
shall include the plural, and vice versa, unless otherwise required by
context. Any headings used herein are for the ease of reference only and
are not to be construed as to alter the meaning of the substantive
provisions of the Plan.
ARTICLE II
ELIGIBILITY
Selected individuals occupying positions as Outside Directors of the Company who
are determined by the Board from time to time to be eligible to participate in
the Plan ("Eligible Director"). All Eligible Directors may thereafter
participate in the Plan beginning on the effective date of the Plan or any Plan
Entry Date thereafter. Each Eligible Director shall complete and deliver to the
Company an Enrollment Form.
ARTICLE III
ELIGIBLE COMPENSATION DEFERRAL ELECTION
3.1 AMOUNT OF ELIGIBLE COMPENSATION DEFERRAL. An Eligible Director of the
Company may elect effective on a Plan Entry Date to defer all or a portion
of his or her Eligible Compensation for a Plan Year by filing with the
Company an Enrollment Form prior to the Plan Year to which such election
relates; provided, however, that (i) for Directors
-3-
<PAGE>
who are eligible to participate in the Plan upon adoption of the Plan, the
election for the first Plan Year may be made within the 30-day period
immediately after adoption of the Plan, and (ii) for Directors who become
eligible to participate in the Plan thereafter, the election for the Plan
Year during which they first become eligible may be made within the first
pay period immediately after becoming eligible. Deferrals from Eligible
Compensation may be made up to 100% of a Participant's Eligible
Compensation.
3.2 VESTING OF ELIGIBLE COMPENSATION DEFERRAL. All amounts credited to a
Participant's Eligible Compensation Deferral Account are 100% vested,
unless the Participant is removed for cause, in which case all amounts
credited to the Eligible Compensation Deferral Account shall be forfeited.
ARTICLE IV
COMPANY MATCHING CONTRIBUTIONS
4.1 AMOUNT OF COMPANY MATCHING CONTRIBUTION. In addition to a Participant's
deferral from Eligible Compensation, the Company intends, each Plan Year,
to contribute out of its own funds, on behalf of each Participant, an
amount equal to thirty three (33%) percent of the amount of such
Participant's Eligible Compensation Deferral Contribution for such Plan
Year, provided, however, that the Company, in its sole discretion,
reserves the right at any time for any Plan Year, either (i) not to
provide such Company Matching Contribution altogether, or (ii) to make a
Company Matching Contribution of a different amount, in either case by
giving written notice to each affected Participant by December 15th of the
prior Plan Year. Any such skipped or reduced Company Matching
Contribution shall not be required to be made up in future Plan Years.
4.2 VESTING OF COMPANY MATCHING CONTRIBUTIONS. The portion of the Company
Matching Contribution Account established for a Participant pursuant to
Article V to which the Participant or the Participant's Beneficiary or
Beneficiaries shall be entitled upon the occurrence of one of the payment
events specified in Section 6.2 shall be based upon the number of full
years of service with the Company completed by the Participant as of the
last day of the plan year prior to the date payment is due under this
Plan. For purposes of this Section 4.2, a Participant's service with the
former parent corporation of the Company or a subsidiary of such former
parent shall be considered service with the Company. Such vested portion
shall be determined in accordance with the following schedule:
YEARS OF SERVICE VESTED PORTION
Less than 1 year 0.00%
More than 1 and less than 2 33.33%
More than 2 and less than 3 66.66%
3 years or more 100.00%
Change of Control of Company 100.00%
Termination for Cause 0.00%
-4-
<PAGE>
ARTICLE V
DEFERRED COMPENSATION ACCOUNTS
5.1 ESTABLISHMENT OF DEFERRED COMPENSATION ACCOUNTS. The Company shall
establish and maintain in the name of each Plan Participant two separate
accounts (the "Participant's Accounts") designated, respectively, as the
"Eligible Compensation Deferral Account" and the "Company Matching
Contribution Account". Such Accounts shall be segregated from other
accounts on the books and records of the Company and shall together be
carried as a contingent liability of the Company to the Participant.
(a) Eligible Compensation Deferral Account. The Company shall credit to
the Eligible Compensation Deferral Account (the "Deferral Account")
the amount of each deferral from Eligible Compensation which the
Participant elects to make on a timely filed Enrollment Form. Such
amounts shall be credited to the Deferral Account on the day such
Eligible Compensation would otherwise be payable to the Participant.
(b) Company Matching Contribution Account. The Company shall credit to
the Company Matching Contribution Account (the "Matching Account")
the amount of each Company Matching Contribution. Such amount shall
be credited to the Matching Account on the same day as the
Participant's deferral from Eligible Compensation to which it
relates is credited to the Participant's Deferral Account.
(c) Prior Plan Account. The Company shall credit to the Deferral
Account and the Matching Account of each Participant who, as of the
Effective Date, was a participant in the Prior Plan the amounts so
credited to such Participant's deferral account and matching account
under the Prior Plan.
5.2 CREDITING OF INTEREST. From time to time, the Company shall credit each
of the Participant's Accounts with interest at the Interest Crediting Rate
declared by the Company for that year. Interest on amounts in an Account
for less than a full calendar year shall be appropriately prorated based
upon the number of days within the calendar year such amounts have been in
such Account. Interest shall continue to be credited to a Participant's
Account in the foregoing manner as long as the Participant is a Director
of the Company and not disabled or deceased. Thereafter, the Company
shall credit the Participant's Deferral Account and the vested Matching
Account with the rate of interest earned on federally insured passbook
savings accounts at Frost National Bank of San Antonio, Texas.
ARTICLE VI
BENEFIT OF PAYMENT
6.1 AMOUNT OF BENEFIT. The benefit payable to a Participant or a
Participant's Beneficiary or Beneficiaries shall be equal to 100% of the
value of such Participant's Deferral
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<PAGE>
Account, unless terminated for cause, plus the vested percentage of the
value of such Participant's Matching Account, "Value" in each case to be
determined in accordance with Article V as of the date of the applicable
payment event specified in Section 6.2, except, in the event of a
Participant's death, the Participant's Beneficiary or Beneficiaries shall
be entitled to a minimum amount equal to the annual standard fee which the
Participant received as of the year prior to the Participant's death.
6.2 PAYMENT EVENTS. Benefits shall become due and payable to a Participant
or a Participant's Beneficiary or Beneficiaries upon the occurrence of the
first to occur of the following events:
(a) Retirement of the Participant as defined in Section 1.18;
(b) Disability of the Participant as defined in Section 1.7, except that
the Company may, in its sole discretion, commence benefit payments
prior to the date specified in Section 1.7 if the Participant is
unable to serve the Company as a result of illness or injury;
(c) Termination of service;
(d) Death of the Participant prior to the occurrence of any of the other
events specified in this Section 6.2;
6.3 TIME AND MANNER OF PAYMENT OF BENEFITS. Benefits payable upon the
occurrence of an event specified in Section 6.2 shall be paid, or
installment payments shall commence, on the first day of the month next
following the occurrence of the event, or as soon thereafter as may
reasonably be practicable. Benefits payable upon the occurrence of an
event specified in Section 6.2 shall be paid in a lump sum, except that
elections of payment in installments with interest over a period of five
(5) or ten (10) years signed prior to December 19, 1995 with respect to
amounts credited to a Participant's Account pursuant to Section 5.1(c),
and not subsequently revoked shall be honored. The Retirement of a
Participant under Section 1.18 may be changed at any time by means of
execution and filing of a new Enrollment Form, but any new Enrollment
Form shall not become effective until the date that is two calendar years
following the date of the new election. In addition, a Participant who
has elected payment of benefits in installment form prior to December 19,
1995 with respect to amounts credited to a Participant's Account pursuant
to Section 5.1(c) may subsequently elect payment in lump sum form, but
such election shall not become effective until two calendar years
following the date of the election.
6.4 DEATH AFTER THE COMMENCEMENT OF INSTALLMENT BENEFIT PAYMENTS. If a
Participant dies after the commencement of installment benefit payments
but before distribution of the full amount specified in Section 6.1,
either (i) such payments shall continue to be paid to the Participant's
Beneficiary or Beneficiaries, or (ii) the balance due shall be paid to
such Beneficiary or Beneficiaries in a lump sum, as elected by the
Participant on the Enrollment Form filed with the Company.
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<PAGE>
6.5 PAYMENT OF BENEFITS FROM GENERAL ASSETS; UNSECURED CREDITOR STATUS OF
Participants. All benefits payable under the Plan to or in behalf of any
Participant shall be paid from the general assets of the Company. The
Company shall set aside funds with which to discharge its obligations
hereunder, and may if it chooses to do so by the purchase of Corporate
Owned Life Insurance (COLI) policies on the lives of the Participants or
otherwise. Any and all funds which may be so set aside shall remain
subject to the claims of the present and future general creditors of the
Company in the event of insolvency or bankruptcy, and any recipient of
benefits hereunder shall not have any security or other interest in such
funds. Neither any Participant, his or her Beneficiary or Beneficiaries,
nor any other person shall under any circumstances, have any interest
whatsoever in any particular property or assets of the Company by virtue
of the Plan, and the rights of the Participant and his or her Beneficiary
or Beneficiaries under the Plan shall be no greater than the rights of a
general unsecured creditor of the Company. The right of a Participant or
his or her Beneficiary or Beneficiaries to receive a benefit payment
hereunder shall be an unsecured claim against the general assets of the
Company, and neither the Participant nor his or her Beneficiary or
Beneficiaries shall have any rights in, to or against any specific assets
of the Company. All amounts credited to the Deferred Compensation
Accounts of a Participant shall constitute general assets of the Company
and, subject to any trust agreement established to hold assets pursuant to
this Plan, may be disposed of by the Company at such time and for such
purposes as it may deem appropriate in the event of bankruptcy or
insolvency.
ARTICLE VII
ADMINISTRATION
7.1 ADMINISTRATION BY THE COMPANY. The Company shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and
reports furnished by any actuary, accountant, controller, counsel, or
other person employed or engaged by the Company with respect to the Plan.
The Company shall have full power and discretion to administer the Plan in
all of its details, and its decision shall be binding. For this purpose,
the Company's powers shall include, but shall not be limited to, the
following authority, in addition to all other powers provided hereunder:
(a) To make and enforce such rules and regulations as it deems necessary
or proper for the efficient administration of the Plan;
(b) To interpret the Plan, its interpretation thereof in good faith to
be final and conclusive on all persons claiming benefits under the
Plan;
(c) To decide all questions concerning the Plan (including questions of
fact), and the eligibility of any person to participant in the Plan;
(d) To appoint such agents, counsel, accountants, consultants and other
persons as may be required to assist in administering the Plan; and
-7-
<PAGE>
(e) To allocate and delegate its responsibilities under the Plan and to
designate other persons or an administrative committee to carry out
any of its responsibilities under the Plan, any such allocation,
delegation or designation to be in writing.
ARTICLE VIII
AMENDMENT OR TERMINATION
8.1 AMENDMENT OR TERMINATION. The Company intends the Plan to be permanent,
but reserves the right to amend or terminate the Plan when, in the sole
opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of
the Board and shall be effective as of the date specified in such
resolution.
8.2 EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of the
Plan shall directly or indirectly reduce the value of any Deferred
Compensation Account held hereunder as of the effective date of such
amendment or termination.
ARTICLE IX
GENERAL PROVISIONS
9.1 NO GUARANTEE OF BENEFITS. Nothing contained in the Plan shall constitute
a guarantee by the Company or by any other person or entity that the
assets of the Company will be sufficient to pay any benefits hereunder.
9.2 NO ENLARGEMENT OF DIRECTOR RIGHTS. No Participant shall have any right
to receive a benefit payment under the Plan except in accordance with the
terms of the Plan. Establishment of the Plan shall not be construed to
give any Participant the right to be retained in the service of the
Company.
9.3 SPENDTHRIFT PROVISION. No interest of any person or entity in, or right
to receive a benefit payment under, the Plan shall be subject in any
manner to sale, transfer, assignment, pledge, attachment, garnishment or
other alienation or encumbrance of any kind; nor may any such interest or
right to receive a benefit payment be taken, either voluntarily or
involuntarily, for the satisfaction of the debts or, or other obligations
or claims against, such person or entity, including claims for alimony,
support or separate maintenance, or claims in bankruptcy proceedings.
9.4 APPLICABLE LAW. The Plan shall be construed and administered under the
laws of the State of Texas.
9.5 INCAPACITY OF RECIPIENT. If any person entitled to a benefit payment
under the Plan is deemed by the Company to be incapable of personally
receiving, and giving a valid receipt for, such payment, then, unless and
until claim therefor shall have been made by a duly appointed guardian,
conservator or other legal representative of such person, the
-8-
<PAGE>
Company may provide for such payment or any part thereof to be made to any
other person or institution then contributing toward or providing for the
care and maintenance of such person. Any such payment shall be a payment
for the account of such person and shall constitute a complete discharge
of any liability of the Company and the Plan therefor.
9.6 CORPORATE SUCCESSORS. The Plan shall not be automatically terminated by
a transfer or sale of assets of the Company or by the merger or
consolidation of the Company into or with any other corporation or other
entity, but the Plan shall be continued after such sale, merger, or
consolidation only if and to the extent that the transferee, purchaser or
successor entity agrees to continue the Plan. In the event that the Plan
is not continued by the transferee, purchaser or successor entity, then
the Plan shall terminate subject to the provisions of Section 8.2
9.7 UNCLAIMED BENEFITS. Each Participant shall keep the Company informed of
his or her current address and the current address of his or her
Beneficiary or Beneficiaries. The Company shall not be obligated to
search for the whereabouts of any person. If the location of a
Participant is not made known to the Company within three (3) years after
the date on which payment of the Participant's benefit may first be made,
payment may be made as though the Participant had died at the end of the
three-year period, provided that proof of death satisfactory to the Plan
Administrator is provided. If, within one additional year after such
three-year period has elapsed, or, within three years after the actual
death of a Participant, the Company is unable to locate any Beneficiary or
Beneficiaries of the Participant, and is further unable to locate a
spouse, dependent or descendant of the Participant, then the Company shall
have no further obligation to pay any benefit hereunder to or in behalf of
such Participant or Beneficiary, and such benefits shall be irrevocably
forfeited.
9.8 LIMITATIONS OF LIABILITY. Notwithstanding any of the preceding
provisions of the Plan, neither the Company nor any individual acting as
employee or agent of the Company shall be liable to any Participant,
former Participant, Beneficiary, or other person for any claim, loss,
liability or expense incurred in connection with the Plan.
ARTICLE X
CLAIM FOR BENEFITS
10.1 CLAIMS PROCEDURE. The Plan Administrator shall make all determinations
as to the right of a Participant or Beneficiary to a benefit under the
Plan. If any person does not receive the benefit to which he or she
believes he or she is entitled under this Plan, said person may file a
claim for benefits in writing which shall be signed by the Participant,
Beneficiary or legal representative of a Participant or Beneficiary.
Claims shall be granted or denied within 30 days after receipt unless
additional time is required because of special circumstances. If
additional time is required, the claimant will be notified in writing
before the expiration of 30 days from the receipt of the claim. In no
event shall
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<PAGE>
the time for reaching a decision with respect to a claim be extended
beyond 180 days after receipt of the claim.
In the event that the Plan Administrator denies a claim for benefits, the
claimant will be notified in writing. Such notice shall set forth the
specific reasons for the denial, the specific provisions of this Plan on
which the denial is based, a description of any additional materials or
information necessary to perfect the claim along with an explanation of
why such material or information is necessary, and an explanation of the
claim review procedure.
If no action is taken by the Plan Administrator on a claim within 30 days
after its receipt, or, if the period for considering the claim has been
extended, then if no action is taken within 180 days after receipt of the
claim, the claim shall be deemed to be denied for purposes of the
following review procedure.
10.2 REVIEW PROCEDURE. If a claim is denied in whole or in part, the claimant
may request the Board to review the decision with the Plan Administrator,
neither body to include the claimant. This request must be made in
writing within 30 days after the claim has been denied or is deemed to be
denied under Section 10.1 and must set forth all of the grounds upon which
the request is based, any facts in support of the request, and any issues
or comments which the claimant considers relevant to the review. In
preparing a request for review, the claimant will be entitled to review
any documents which are pertinent to his or her claim at the office of the
Company during regular business hours.
The Board of Directors shall act upon each request as soon as possible but
not later than 60 days after the request for review is received. No
Director shall participate in any Board action taken with respect to his
or her own claim.
The Board of Directors shall make an independent determination concerning
the claim for benefits under this Plan and shall give written notice of
its decision to the claimant. The decision of the Board of Directors on
any claim review shall be final.
If the Board of Directors fails to deliver a decision within 60 days after
receipt of the request for review, the claim shall be deemed denied on
review.
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<PAGE>
IN WITNESS WHEREOF, Billing Information Concepts Corp. has caused this
instrument to be executed by its duly authorized officer this __________ day of
________________, 19____, effective as of the _________ day of ________________,
19____.
BILLING INFORMATION CONCEPTS CORP.
ATTEST:
_______________________ By ___________________________________
Name ______________________________
Title _____________________________
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EXHIBIT A
BILLING INFORMATION CONCEPTS CORP.
DIRECTOR COMPENSATION DEFERRAL PLAN
ENROLLMENT FORM
Name: ________________________________________ Date:___________________
Social Security #: ______________________________ Plan Year:______________
- - -----------------------------------------------------------------------------
ANNUAL DEFERRAL ELECTION
- - -----------------------------------------------------------------------------
I have received information about the Billing Information Concepts Corp.
Director Compensation Deferral Plan, and I elect to participate in the Plan at
this time.
I understand that the Plan permits elective deferrals from compensation not yet
earned, during the current year and during each year the Plan is in effect.
This annual Enrollment Form indicates the amount of compensation I elect to
defer for the Plan Year stated above. The election made cannot be revoked for
the Plan Year. This election will remain in effect for future Plan Years unless
otherwise changed or revoked by me by the prior December 31st. If the amount I
designate exceeds my base compensation for the Plan Year, my actual deferral
amount will be equal to my base compensation. I understand that this election
does not guarantee me any compensation.
I understand further that amounts deferred by me under the Plan will earn
interest at a rate determined annually by the interest rates declared by the
Company.
As a participant in the Billing Information Concepts Corp. Director Compensation
Deferral Plan, I hereby elect to defer the following amount of base compensation
otherwise payable to me in the Plan Year indicates above:
Deferral Percentage _________
The deferral election I am choosing is effective beginning____________.
- - -----------------------------------------------------------------------------
PAYMENT OF BENEFIT
- - -----------------------------------------------------------------------------
As a Participant in the Billing Information Concepts Corp. Director Compensation
Deferral Plan, I understand that the payment of my accumulated account balance
will be made as a lump sum, unless I have previously elected payment in
installments under the U.S. Long Distance Director Compensation Deferral Plan
and such election was made and signed prior to December 19, 1995, and not
subsequently revoked. Additionally, I elect the choice checked below regarding
the time of payment:
_______Actual Retirement
_______Age 65 if Later Than Actual Retirement
I also understand that the foregoing election regarding the time of payment of
benefits under the Plan is revocable up until December 31st two years prior to
the year the payments are payable under the Plan and thereafter may not be
changed. I understand further the foregoing election applies to all deferrals
made by me under the Plan and to all interest credited thereto.
I HAVE READ AND UNDERSTAND THE FOREGOING MATERIAL. I AGREE TO BE BOUND BY THE
TERMS OF THIS ELECTION AND THE REQUIREMENTS, CONDITIONS, AND TERMS OF THE
BILLING INFORMATION CONCEPTS CORP. DIRECTOR COMPENSATION DEFERRAL PLAN.
Director Signature: _________________________________________________________
- - -----------------------------------------------------------------------------
WAIVER OF PARTICIPATION
I have received information about the Billing Information Concepts Corp.
Director Compensation Deferral Plan, and I elect not to participate in the Plan
at this time.
Director Signature ______________________________________Date:_______________
- - -----------------------------------------------------------------------------
- 12 -
<PAGE>
BILLING INFORMATION CONCEPTS CORP.
EXECUTIVE QUALIFIED DISABILITY PLAN
1. Purpose: The purpose of this Plan is to help provide income during
disability for each participating employee. It is the intention of the Company
that this Plan qualify as an accident and health plan within the meaning of
Section 105(a) of the Internal Revenue Code of 1986, as amended (the "Code"),
and that the benefits payable under the Plan not be eligible for exclusion from
gross income under that section of the Code.
2. Eligibility: The following specified classes of employees of the
Company shall be eligible to participate in this Plan:
Vice Presidents and above of the Company and its subsidiaries.
3. Participation: Each eligible employee shall become a participant in
the Plan (a "participant") on the effective date of the Plan. Each future
eligible employee shall become a participant upon being covered by the insurance
policy providing the base plan benefits.
4. Benefits: The benefits provided under this Plan are provided in part
by disability insurance coverage issued by the Company's Long-Term Disability
insurance carrier (the "base plan benefits") and in part by Company funded
payments. During the first 90 days of disability, a participant shall receive
100% of his or her wages reduced by benefits, if any, received from Social
Security, Workers' Compensation, State Disability Plan or other similar
governmental plan or other plan (e.g., group insurance) paid for by the Company.
The benefits during the first 90 days of disability will be provided directly by
the Company based on definitions contained in the insurance policies providing
base plan benefits.
<PAGE>
After 90 days of disability, the participant shall receive 70% of his or
her wages (up to an $8,000 monthly maximum, assuming the participant has
purchased LTD Plan II benefit option, and if not, 60% of his or her wages up to
a $1,000 monthly maximum) from the Company's Long-Term Disability insurance
carrier and 30% of his or her wages from the Company, based on definitions of
disability contained in the Company's Long-Term Disability insurance policy, for
up to one year. If the disability continues after one year, the participant
will continue to receive 70% or 60% of wages (as capped and discussed above)
from the Long-Term Disability insurance carrier until age 65 or until no longer
disabled, whichever comes first. All benefits received from the Long-Term
Disability insurer will be reduced by any benefits received from Social
Security, Workers' Compensation State Disability Plan or other similar
governmental plan or any other plan (e.g. group insurance) paid for by the
Company.
5. Funding: The Company shall pay the entire premium for the base plan
benefits so long as the participant remains employed by the Company and eligible
for participation in the Plan. In addition, the Company shall pay amounts not
covered by base plan benefits as described in Paragraph 4.
6. Claims Procedures: Claims for benefits under any insurance policy
shall be made on forms furnished by the insurer.
7. Review Procedure: If any claim for insurance benefits under this Plan
is denied in whole or in part, the claimant shall be furnished promptly by the
insurer with a written notice (a) setting forth the reasons for the denial, (b)
making reference to pertinent policy provisions, (c) describing any additional
material or information from the claimant which is necessary and the reasons
therefor, and (d) explaining the claim review procedure set forth herein.
Failure by the insurer to respond to a claim within a reasonable time shall be
deemed a denial. Within 60
2
<PAGE>
days after denial of any claim for benefits under this Plan, the claimant may
request in writing a review of the denial.
Any claimant seeking review hereunder is entitled to examine all pertinent
documents, and to submit issues and comments in writing. The insurer shall
render a decision on review of a claim no later than 60 days after receipt of a
request for review hereunder. The decision of the insurer on review shall be in
writing and shall state the reason for the decisions, referring to the policy
provisions upon which it is based.
Similar rules will apply to benefits provided under the Plan not covered by
an insurance policy. In such case, claims for benefits shall be made to the
Company.
8. Administration: The Company shall have authority and responsibility
to control and manage the operation and administration of this Plan.
9. Amendment; Termination: This Plan may be amended or terminated at any
time by the Company; provided, however, that termination shall not affect the
right of any participant to reimbursement for any disability incurred prior to
any amendment or termination.
10. Miscellaneous: This Plan shall not be deemed to constitute a contract
between the Company and any participant or to be a consideration or an
inducement for the employment of any employee, nor is any provision of this Plan
deemed to give any employee the right to continued employment with the Company
or to interfere in any way with the right of the Company to discharge any
employee at any time.
3
<PAGE>
10.18 Amended and Restated Loan and Security Agreement dated May 22, 1991
between Zero Plus Dialing Inc. U.S. Long Distance, Inc. ("USLDI"),
U.S. Long Distance Corp. ("USLD") and Bell Atlantic Capital Corp.
(f/k/a Bell Atlantic - Tricon Leasing Corporation and currently FINOVA
Capital Corporation) ("Lender"); Revolving Credit Note dated May 24,
1991 payable by ZPDI to the order of Lender; Replacement Term Note
dated May 24, 1991 payable by USLDI to the order of Lender; First
Amendment and Joinder to Amended and Restated Loan and Security
Agreement dated December 28, 1992 among ZPDI, USLD, USLDI, U.S
Billing, Inc. ("USBI") and Lender; Second Amendment to Amended and
Restated Loan and Security Agreement dated April 2, 1993 among ZPDI,
USLD, USLDI, USBI and Lender; Third Amendment to Amended and Restated
Loan and Security Agreement dated October 15, 1993 among ZPDI, USLD,
USLDI, USBI and Lender; Fourth Amendment and Joinder to Amended and
Restated Loan and Security Agreement dated October 1, 1993 among ZPDI,
USLD, USLDI, USBI, USLD Acquisition Corp. ("USAcq") and Lender; Fifth
Amendment and Joinder to Amended and Restated Loan and Security
Agreement dated November 16, 1993 among ZPDI, USLD, USLDI, USBI,
USAcq, STS Telecommunications, Inc. ("STS") and Lender; Sixth
Amendment to Amended and Restated Loan and Security Agreement dated
December 7, 1993 among ZPDI, USLD, USLDI, USBI, USAcq, STS and Lender;
Seventh Amendment to Amended and Restated Loan and Security Agreement
dated March 17, 1994 among ZPDI, USLD, USLDI, USBI, USAcq, STS,
Enhanced Services Billing, Inc. ("ESBI"), California Acquisition
Corp. ("CAC") and Lender; Corporate Guaranty dated May 24, 1991
executed by USLD for the benefit of Lender; Corporate Guaranty dated
May 24, 1991 executed by USLDI for the benefit of Lender; Corporate
Guaranty dated May 24, 1991 executed by ZPDI for the benefit of
Lender; Corporate Guaranty dated May 24, 1991 executed by USLD for the
benefit of Lender; Corporate Guaranty dated October , 1993 executed
by USAcq for the benefit of Lender; Corporate Guaranty dated
November , 1993 executed by STS for the benefit of Lender; Corporate
Guaranty executed by Telecom Acquisition Corp. for the benefit of
Lender; Corporate Guaranty executed by ESBI for the benefit of Lender;
Corporate Guaranty executed by CAC for the benefit of Lender; Escrow
and Disbursing Agreement dated May 24, 1991 among ZPDI, Lender and
Texas Commerce Bank, N.A.
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
BETWEEN
ZERO PLUS DIALING INC.
("BORROWER")
AND
BELL ATLANTIC-TRICON LEASING CORPORATION
("LENDER")
May 22, 1991
<PAGE>
TABLE OF CONTENTS
PAGE
NUMBER
------
SECTION 1. GENERAL DEFINITIONS 1
1.1. Defined Terms 1
1.2. Accounting Terms 14
1.3. Other Terms 14
1.4. Certain Matters of Construction 14
SECTION 2. CREDIT FACILITY 14
2.1. Revolving Credit Loans 15
2.2. Manner of Borrowing 15
2.3. Term Loan Facility 16
2.4. All Loans to Constitute One Obligation 17
2.5. Loan Account 17
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT 17
3.1. Interest and Charges 17
3.2 Fees 18
3.3. Term of Agreement 19
3.4. Termination 19
3.5. Payments 20
3.6. Application of Payments and Collections 21
3.7. Statements of Account 21
SECTION 4. COLLATERAL: GENERAL TERMS 21
4.1. Security Interest in Collateral 21
4.2 Consent to Sale 22
4.3. Representations, Warranties and Covenants -
Collateral 23
4.4. Financing Statements 23
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PAGE
NUMBER
------
4.5. Location of Collateral 24
4.6. Insurance of Property 24
4.7. Protection of Collateral 24
SECTION 5. PROVISIONS RELATING TO ACCOUNTS 25
5.1. Representations, Warranties and Covenants 25
5.2. Assignments, Records and Schedules of Accounts 27
5.3. Administration of Accounts 27
5.4. Collection of Accounts 28
SECTION 6. REPRESENTATIONS AND WARRANTIES 30
6.1. General Representations and Warranties 30
6.2. Reaffirmation 36
6.3. Survival of Representations and Warranties 36
SECTION 7. COVENANTS AND CONTINUING AGREEMENTS 36
7.1. Affirmative Covenants 36
7.2. Negative Covenants 41
SECTION 8. CONDITIONS PRECEDENT 44
8.1. Documentation 45
8.2. Other Conditions 46
SECTION 9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON
DEFAULT 47
9.1. Events of Default 47
9.2. Acceleration of the Obligations 49
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<PAGE>
TABLE OF CONTENTS
PAGE
NUMBER
------
9.3. Remedies 50
9.4. Remedies Cumulative; No Waiver 51
SECTION 10. MISCELLANEOUS 51
10.1. Power of Attorney 51
10.2. Indemnity 52
10.3. Modification of Agreement; Sale of Interest 53
10.4. Reimbursement of Expenses 53
10.5. Indulgences Not Waivers 54
10.6. Severability 54
10.7. Successors and Assigns 54
10.8. Cumulative Effect; Conflict of Terms 54
10.9. Execution in Counterparts 55
10.10. Notices 55
10.11. Lender's Consent 56
10.12 Regulated Activities of Lender 57
10.13. Time of Essence 57
10.14. Entire Agreement 57
10.15 Consent to Advertising and Publicity 57
10.16. GOVERNING LAW; CONSENT TO FORUM 57
10.17. WAIVERS BY BORROWER AND GUARANTORS 58
10.18 Section Titles 58
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<PAGE>
EXHIBITS
SECTION
REFERENCE
---------
Carrier Contract 1.1
Revolving Credit Note 2.1
Disbursing Letter 2.2 (A)
OSP Wire Confirmation Letter 2.2 (B)
Term Note 2.3 (A)
Acknowledgement and Acceptance Certificate 2.3 (B)
Chief Executive Office and Principal
Place of Business 4.4
Jurisdictions Qualified 6.1 (A)
Corporate Tradenames; Mergers 6.1 (B)
General Intangibles; Patents, Trademarks 6.1 (H)
Corporate Structure; Subsidiaries; Securities 6.1 (I)
Restrictive Agreements 6.1 (J)
Litigation 6.1 (K)
Taxes 6.1 (P)
Labor Contracts 6.1 (Q)
Surety Obligations 6.1 (S)
No Defaults 6.1 (T)
Business Locations 6.1 (V)
Trade Relations 6.1 (W)
Capitalized and Operating Leases 6.1 (X)
Billing Contracts 6.1 (Y)
List of Carriers and Credit Limits 6.1 (Z)
Escrow and Disbursing Agreement 8.1 (I)
-iv-
<PAGE>
OSP Background Form 8.1 (K)
Class 1 OSP Certification Form 8.1 (N)
Collateral and Credit Criteria Lists 8.1 (O)
-v-
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT is made this ____ day of
May, 1991 by and between BELL ATLANTIC-TRICON LEASING CORPORATION ("Lender"), a
Delaware corporation with a place of business at 1060 First Avenue, King of
Prussia, PA 19406, ZERO PLUS DIALING INC. ("Borrower"), a Delaware corporation
with its chief executive office and principal place of business at 9311 San
Pedro, Suite 300, San Antonio, Texas 78216, U.S. LONG DISTANCE CORP., a Delaware
corporation with its chief executive office and principal place of business at
9311 San Pedro, Suite 300, San Antonio, TX 78216 and U.S. LONG DISTANCE, INC., a
Texas corporation with its chief executive office and principal place of
business at 9311 San Pedro, Suite 300, San Antonio, Texas 78216.
BACKGROUND
A. Borrower entered into a certain Loan and Security Agreement on
March 20, 1990 (the "Loan and Security Agreement") whereby Borrower desired to
borrow funds from Lender from time to time pursuant to a revolving credit
facility subject to the terms and conditions set forth therein.
B. Borrower and Lender entered into a certain Amendment to Loan and
Security Agreement on June 18, 1990 (the "Loan Amendment") whereby Borrower and
Lender amended certain terms and provisions of the Loan and Security Agreement.
C. By and through this Amended and Restated Loan and Security
Agreement (the "Agreement"), Borrower and Lender intend to further amend the
Loan and Security Agreement and amend the Loan Amendment, both of which shall be
amended and restated through this Agreement and intend to establish a certain
term loan facility whereby funds shall be borrowed by U.S. Long Distance, Inc.,
as set forth herein.
SECTION 1. GENERAL DEFINITIONS
1.1. DEFINED TERMS. When used herein, the following terms shall have the
following meanings (terms defined in the singular to have the same meaning when
used in the plural and vice versa):
ACCOUNTS - all accounts, contract rights (as defined in the Code as
now or previously in effect including but not limited to all rights of Borrower
relating to the Billing Contracts) chattel paper, instruments and documents, all
LEC Receivables and all End User Accounts whether now owned or hereafter created
or acquired by Borrower or Guarantors or in which Borrower or Guarantors now
have or hereafter acquire any interest.
<PAGE>
ACCOUNT DEBTOR - any Person, including any End User or LEC, who is or
may become obligated under or on account of an Account.
AFFILIATE - a Person (other than a Subsidiary): (i) which directly or
indirectly through one or more intermediaries controls, or is controlled by, or
is under common control with, Borrower; (ii) which beneficially owns or holds
10% or more of any class of Voting Stock of Borrower; or (iii) 10% or more of
the Voting Stock (or in the case of a Person which is not a corporation, 10% or
more of the equity interest) of which is beneficially owned or held by Borrower
or a Subsidiary of Borrower. For purposes hereof, "control" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of fifty-one percent (51%) of the Voting Stock or by written contract
providing for such power.
AGREEMENT - this Amended and Restated Loan and Security Agreement, as
the same may be modified or amended from time to time.
APPROVED CARRIER - any operator service provider or interexchange
carrier (collectively the "OSP") which meets each of the following requirements
to Lender's satisfaction in the exercise of its sole discretion: (i) the OSP has
a minimum period of operating history acceptable to Lender; (ii) Lender shall
have reviewed the dilution applicable to such OSP?s Accounts and determined that
such dilution rates are acceptable to Lender; (iii) the OSP has management
background and experience acceptable to Lender, and experience in the
telecommunications industry which is also acceptable to Lender; (iv) such OSP
shall have executed and delivered the Carrier Contract and the Addendum thereto,
and UCC-1 financing statements to perfect Borrower's interests in the Accounts
being purchased, which financing statements shall also indicate that Lender is
the assignee thereof; (v) Lender shall have received copies of a Uniform
Commercial Code searches; and judgment and federal tax lien searches against
such OSP where such OSP's principle pace of business is located, indicating that
there are no liens against any of the Accounts of such OSP; (vi) Lender shall
have the right, as assignee of Borrower's rights under the Carrier Contract and
the Addendum thereto, to at any time conduct an examination of such OSP's
financial condition, the results of which must be acceptable to Lender; and
(vii) Lender shall have approved in writing the financing of such OSP's Accounts
under the Revolving Credit Facility; (viii) Borrower shall have submitted all
information and met all conditions on the appropriate Collateral and Credit
Criteria List and shall have submitted a completed OSP Background Form for such
OSP, both in
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<PAGE>
form and substance satisfactory to Lender in its sole discretion.
Approved Carriers shall be divided into Class 1 Approved Carriers, Class 2
Approved Carriers and Class 3 Approved Carriers based on the requirements for
Approved Carriers listed on the Collateral and Credit Criteria Lists (attached
hereto as Exhibit 8.2(L)) for each class of approved carriers. Borrower shall
submit duly executed Class 1 OSP Certification Forms (attached hereto as Exhibit
8.2(O)) for each Class 1 Approved Carrier certifying that all preconditions for
borrowing based upon Eligible Accounts from such Class 1 Approved Carrier have
been met. A Class 1 Carrier shall be deemed an Approved Carrier upon receipt by
Lender of the Class 1 OSP Certification Form and all of the information set
forth on the Class 1 Collateral and Credit Criteria List, provided that Borrower
shall resolve any issues in the credit criteria information within thirty (30)
days notice of such issues from Lender to Borrower.
BASE RATE - that highest rate of interest on any Business Day for
corporate loans at large United States money center commercial banks as quoted
in the Wall Street Journal under the caption "Prime Rate" in the section
entitled "Money Rates".
BORROWING BASE - as at any date of determination thereof, an amount
equal to the sum of eighty percent (80%), or such amount as Lender may establish
for any Approved Carrier and which advance rate shall at no time exceed the
actual advance rate from Borrower to the Approved Carrier (the "Advance Rate"),
of the gross amount of Eligible Accounts outstanding at such date for Approved
Carriers, less any reserves; provided however that (i) Lender may, in its sole
discretion and as reviewed on a quarterly basis, adjust the advance rate as
follows: if the Dilution Factor exceeds seven percent (7%), the Advance Rate may
be reduced by Lender to seventy-five percent (75%), if the Dilution Factor
exceeds ten percent (10%), the Advance Rate may be reduced by Lender to seventy
percent (70%), if the Dilution Factor exceeds fifteen percent (15%), the Advance
Rate may be reduced by Lender two (2) percentage points for each one (1)
percentage point increase in the Dilution Factor over fifteen percent (15%), if
the Dilution Factor exceeds fifty percent (50%), the Advance Rate may be reduced
by Lender to zero; (ii) advances against Eligible Accounts for any Class 1
Approved Carrier shall not exceed Two Hundred Fifty Thousand Dollars
($250,000.00) for each Class 1 Approved Carrier and shall not exceed Two Million
Dollars ($2,000,000.00) in the aggregate for all Class 1 Approved Carriers,
which credit limits shall be reviewed by Lender on a semi-annual basis; (iii)
advances against Eligible Accounts for all Class 1 and Class 2 Approved Carriers
shall not exceed at any one time in the aggregate for all Class 1
-3-
<PAGE>
and Class 2 Approved Carriers the sum of Fifteen Million Dollars
($15,000,000.00); (iv) advances against Eligible Accounts for any Class 3
Approved Carrier shall not exceed the limit established in writing by Lender
in its sole discretion for such Class 3 Approved Carrier; and (v) advances
against Eligible Accounts of US Long Distance, Inc. (which shall be treated
as a Class 2 Approved Carrier) shall not exceed Three Million Dollars
($3,000,000.00) at any time in the aggregate.
For purposes hereof, the gross amount of Eligible Accounts at any time
shall be the face amount of such Eligible Accounts without deducting any
discounts, credits, unbillability or uncollectibility, whether or not due to
fraud and allowances of any nature at any time, but not including any excise
taxes owing in connection with such Accounts.
BILLING CONTRACT - shall mean any agreement for billing and/or
collection services by and between any LEC and Borrower, and any tariff of any
LEC for billing and/or collection services pursuant to which Borrower receives
billing and/or collection services.
BUSINESS DAY - a day on which the Federal Reserve Bank of Philadelphia
is open for business in Philadelphia, Pennsylvania.
CAPITAL EXPENDITURES - expenditures made and liabilities incurred for
the acquisition of any fixed assets or improvements, replacements, substitutions
or additions thereto which have a useful life of more than one year, in
accordance with GAAP.
CAPITALIZED LEASE OBLIGATION - any Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
CARRIER - any person listed on EXHIBIT 6.1(Z) which as of the date
hereof has executed the Carrier Contract, or which shall after the date hereof
execute and deliver to Borrower the Carrier Contract.
CARRIER CONTRACT(S) - the Billing and Collection Services Agreement and the
Addendum thereto in the form of EXHIBIT 1.1 attached hereto which is executed
and delivered by each Carrier and which form shall not be materially changed or
amended without the prior written consent of Lender which consent
-4-
<PAGE>
shall not be unreasonably withheld. Lender Agrees to respond to Borrower's
requests hereunder within five (5) business days.
CLASS 1 OSP CERTIFICATION FORM - certification provided by Borrower to
Lender for each Class 1 Approved Carrier substantially in the form attached
hereto as Exhibit 8.1(N).
CLEARING ACCOUNT - the bank account to which all payments are first
deposited by the Escrow Agent and to which the Escrow Agent shall have sole
access, as more fully set forth in the Escrow and Disbursing Agreement.
CLOSING DATE - the date on which all of the conditions precedent in Section
8 are satisfied and the initial Loan is made hereunder.
CREDIT LINE - as at any date of determination thereof, the total amount
available to Borrower under the Revolving Credit Facility which is the sum of
(A) Fifteen Million Dollars ($15,000,000.00) and (B) the aggregate amount of the
credit limit as requested by Borrower and approved in writing by Lender for all
Class 3 Approved Carriers. The credit limits for each Class 3 Approved Carrier
as of the date hereof are listed on Exhibit 6.1(Z).
CODE - the Uniform Commercial Code as adopted and in force in the
Commonwealth of Pennsylvania, as from time to time in effect.
COLLATERAL - all of the Property and interests in Property described in
Section 4 hereof, and all other Property and interests in Property that now or
hereafter secure the payment and performance of any of the Obligations.
COLLATERAL AND CREDIT CRITERIA LIST - Collateral and credit information
provided by Borrower to Lender for each Carrier submitted for approval,
substantially in the forms attached hereto as Exhibit 8.1(O) for each class of
Approved Carriers.
DEFAULT - an event or condition the occurrence of which would, with the
lapse of time or the giving of notice, or both, become an Event of Default.
DEFAULT RATE - as defined in Section 3.1(B) of this Agreement.
DILUTION FACTOR - an average of the aggregate dilution factors charged by
each LEC to Borrower for all receivables processed by Borrower and transmitted
to the LEC for all
-5-
<PAGE>
Carriers, calculated as a percentage, (a) the numerator of which is the sum
of the following adjustments which the applicable LEC makes to gross
billings: (i) pre-billing adjustments, including but not limited to LEC
reject edits, formatting edits, unbillable calls, upfront edits, other
miscellaneous items as may be appropriate, (ii) post-billing adjustments
(including but not limited to adjustments or credits issued and accruals for
such adjustments), (iii) bad debt adjustments and true-up settlements; and
(iv) miscellaneous and other adjustments as determined to be appropriate by
Lender (b) and the denominator of which is equal to gross billings. Lender
shall have sole discretion to determine the time period over which the above
adjustments shall be considered in computing the Dilution Factor. Such
formula shall be subject to change in Lender's reasonable discretion.
DISBURSING LETTER - a letter of instruction to be provided by Borrower to
Lender and accompanying each request in accordance with the terms of this
Agreement substantially in the form attached hereto as Exhibit 2.2(A).
DISTRIBUTION - the payment of money or transfer of assets of Borrower or
any Guarantor to any Person.
DOMINION ACCOUNT - a special joint account of Lender and Borrower
established by Borrower pursuant to this Agreement and the Escrow and Disbursing
Agreement at a bank selected by Borrower, but acceptable to Lender, in its sole
discretion, and over which Lender shall have sole and exclusive authority to
authorize all disbursements consisting of proceeds of the Collateral and shall
have joint authority with Borrower for disbursements of other proceeds, all as
more fully set forth in the Escrow and Disbursing Agreement.
END USERS - Persons to whom a Carrier renders telecommunication services.
END USER ACCOUNTS - Accounts arising from services rendered by Carriers to
End Users of telecommunications services, which have been processed and
formatted for billing on a billing tape. Each End User Account shall cease to
be an End User Account and become a LEC Receivable upon its sale, assignment or
transfer by Borrower to a LEC for billing and collection pursuant to a Billing
Contract.
ELIGIBLE ACCOUNT - a LEC Receivable arising in the ordinary course of
business which Lender, in its reasonable judgment, deems to be an Eligible
Account.
No LEC Receivable shall be an Eligible LEC Receivable if: (i) such
Account arises out of a sale made by an
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<PAGE>
Approved Carrier to a Subsidiary or an Affiliate of such Approved Carrier or
of Borrower (except Accounts arising out of sales by Borrower to its
Affiliates National Telephone Exchange, Inc. (provided that the pending
acquisition is consummated) and U.S. Long Distance, Inc.) or to a Person
controlled by an Affiliate of such Approved Carrier or of Borrower; or (ii)
such Account is unpaid more than ninety (90) days after the date of the
applicable billing tape or transmission date; or (iii) fifty percent (50%) or
more of the LEC Receivables from a LEC are not deemed Eligible Accounts
hereunder; or (iv) any covenant, representation or warranty contained in this
Agreement with respect to such Account has been breached; or (v) the LEC has
disputed liability with respect to a LEC Receivable, or has made any claim
with respect to any other LEC Receivable due from the LEC to Borrower, to the
extent of any dispute or claim; or (vi) the LEC has commenced a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a court having jurisdiction over the LEC
in an involuntary case under the federal bankruptcy laws, as now constituted
or hereafter amended, or any other petition or other application for relief
under the federal bankruptcy laws has been filed against the LEC, or if the
LEC has failed, suspended business, ceased to be Solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for it
or for all or a significant portion of its assets or affairs; or (vii) Lender
believes, in its reasonable judgment, that collection of such LEC Receivable
is insecure or that payment thereof is doubtful or will be delayed by reason
of the LEC's financial condition; or (viii) the LEC Receivable is subject to
a Lien; or (ix) more than thirty-five percent (35%) of Borrower's total
Accounts consist of LEC Receivables from the LEC; or (x) the LEC Receivable
is evidenced by chattel paper or an instrument of any kind, or has been
reduced to judgment; or (xi) Borrower has made any agreement with a LEC for
any deduction therefrom, except for post-billing adjustments which are made
in the ordinary course of business and except as provided in the applicable
Billing Contract; (xii) Borrower has made an agreement with the LEC to extend
the time of payment thereof, unless notwithstanding such agreement payment is
made within ninety (90) days of the billing tape date or transmission date;
(xiii) such LEC Receivable does not arise from the purchase by Borrower from
the Approved Carrier originating the End User Account which has been sold,
assigned or transferred to a LEC to create such LEC Receivable pursuant to
the terms set forth in the Carrier Contract in the form attached hereto as
EXHIBIT 1.1; or (xiv) call records for such account have not been subjected
to validation acceptable to Lender or have dilution rates which are
unacceptable to Lender.
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Lender has financed, and may continue in the future to finance Persons in
the same or similar business as Borrower, which loans are, and shall be, secured
by LEC Receivables of various Persons (the "LEC Loan Program"). Borrower
acknowledges that Lender's LEC Loan Program (which shall include Lender's loans
under this Agreement to Borrower) limits Lender's aggregate loans to all
borrowers thereunder which are secured by LEC Receivables as follows: (i) the
aggregate Accounts due from any single Bell Operating Telephone Company (each, a
"BOC") which secure loans under the LEC Loan Program shall not exceed at any one
time in the aggregate for all Persons Twenty Five Million Dollars
($25,000,000.00), (ii) the aggregate Accounts due from any single telephone
company unit of GTE, United Telephone, and Centel which secure loans under the
LEC Loan Program shall not exceed at any one time in the aggregate for all
Persons Fifteen Million Dollars ($15,000,000.00), and (iii) the aggregate
Accounts due from any other single LEC which is not a BOC which secure loans
under the LEC Loan Program shall not exceed such lesser ceilings as may be
established by Lender from time to time on a case by case basis. Borrower
acknowledges that Lender may from time to time in its sole discretion increase
or decrease the above per BOC and per LEC ceilings. Due to the above stated
restrictions on the LEC Loan Program, Lender may from time to time exclude
certain Eligible Accounts from the respective Borrowing Bases of borrowers under
the LEC Loan Program (even though such Accounts are otherwise Eligible) to the
extent that the aggregate outstanding amount of all Accounts due from all BOCs
and LECs which secure loans under the LEC Loan Program exceed the ceilings set
forth above, as such ceilings may from time to time be increased or decreased by
Lender. Lender shall provide Borrower with prompt notice of Lender's becoming
aware that Lender has reached ninety percent (90%) of its limit for a specific
LEC.
ENVIRONMENTAL LAWS - all federal, state and local laws, rules, regulations,
ordinances, programs, permits, guidances, orders and consent decrees relating to
health, safety and environmental matters, including, but not limited to, the
Resource Conservation and Recovery Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Toxic Substances Control
Act, the Clean Water Act, the Clean Air Act, the Superfund Amendments and
Reauthorization Act of 1986, and similar state and federal environmental cleanup
laws, and U.S. Department of Transportation regulations.
EQUIPMENT - all of Borrower's and Guarantors' machinery, apparatus,
equipment, fittings, furniture, fixtures, motor vehicles and other tangible
personal Property of every kind and description used or useful in Borrower's
operations or owned by Borrower or Guarantors or in which Borrower or Guarantors
have an
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interest, whether now owned or hereafter acquired by Borrower or
Guarantors and wherever located, and all parts, accessories and special tools
and increases and access ions thereto and substitutions and replacements
thereof, including, without limitation, all XACT telephone call accounting
computers manufactured by XETA Corporation, but shall not include switches,
dialers and other equipment used directly and exclusively in providing long
distance telephone services.
ERISA - the Employee Retirement Income Security Act of 1974, as amended
from time to time, and all rules and regulations from time to time promulgated
thereunder.
ESCROW AGENT - the bank designated as Escrow Agent for Lender in the Escrow
and Disbursing Agreement.
ESCROW AND DISBURSING AGREEMENT - agreement among Lender, Borrower and
Escrow Agent dated the date hereof pursuant to which collections and
disbursements into and out of the Dominion Account shall be governed
substantially in the form attached hereto as Exhibit 8.1(I).
EVENT OF DEFAULT - as defined in Section Il.l of this Agreement.
GAAP - Generally Accepted Accounting Principles in the United States of
America in effect from time to time.
GENERAL INTANGIBLES - all general intangibles of Borrower or Guarantors,
whether now owned or hereafter created or acquired by Borrower or Guarantors,
including, without limitation, all choses in action, causes of action, corporate
or other business records, deposit accounts, inventions, designs, patents,
patent applications, trademarks, trade names, trade secrets, goodwill,
copyrights, registrations, licenses, franchises, customer lists, tax refund
claims, computer programs, Carrier Contracts and any addenda thereto, Billing
Contracts, all claims under guaranties, security interests or other security
held by or granted to Borrower to secure payment of any of the LEC Receivables
and payments pursuant to the Carrier Contracts and the Billing Contracts, all
rights to indemnification and all other intangible property of every kind and
nature.
GUARANTORS - U.S. Long Distance Corp. and U.S. Long Distance, Inc.
(hereinafter jointly and severally referred to as "Guarantors").
GUARANTY AGREEMENTS - the guaranty agreements which are to be executed by
each Guarantor and by which each Guarantor shall unconditionally guarantee
payment of the Obligations.
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INDEBTEDNESS - as applied to a Person means, without duplication (i) all
items which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of such Person as
at the date as of which Indebtedness is to be determined, including, without
limitation, Capitalized Lease Obligations, (ii) all obligations of other Persons
which such Person has guaranteed and (iii) in the case of Borrower (without
duplication), the Obligations.
LEC - shall mean any regional Bell Operating Company, Bell Operating
Company, independent local exchange company, credit card company or provider of
local telephone services which is a party to any Billing Contract.
LEC RECEIVABLES - shall mean all accounts receivable, debts and any other
amounts payable to Borrower by any LEC pursuant to any Billing Contract.
LIEN - any interest in Property securing an obligation owed to, or a claim
by, a Person other than the owner of the Property, whether such interest is
based on the common law, statute or contract, and including, but not limited to,
the security interest, security title or lien arising from a security agreement,
mortgage, deed of trust, deed to secure debt, encumbrance, pledge, conditional
sale or trust receipt or a lease, consignment or bailment for security purposes.
For the purpose of this Agreement, Borrower or Guarantors shall be deemed to be
the owner of any Property which it has acquired or holds subject to a
conditional sale agreement or other arrangement pursuant to which title to the
Property has been retained by or vested in some other Person for security
purposes.
LOAN ACCOUNT - the loan account established on the books of Lender pursuant
to Section 2.4 hereof and in which Lender will record all Loans, payments made
on such Loans and other appropriate debits and credits as provided by this
Agreement.
LOAN DOCUMENTS - this Agreement, the Other Agreements and the Security
Documents.
LOANS - all loans and advances made by Lender pursuant to this Agreement,
including, without limitation, all Revolving Credit Loans and Term Loans.
MONEY BORROWED - as applied to Indebtedness, means (i) Indebtedness for
borrowed money; (ii) Indebtedness, whether or not in any such case the same was
for borrowed money, (A) which is represented by notes payable or drafts accepted
which evidence extensions of credit, (B) which constitute obligations evidenced
by bonds, debentures, notes or similar instruments, or (C) upon
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which interest charges are customarily paid (other than accounts payable) or
which are issued or assumed as full or partial payment for Property; (iii)
Indebtedness that constitutes a Capitalized Lease Obligation; and (iv)
Indebtedness under any guaranty of obligations that would constitute
Indebtedness for Money Borrowed under clauses (i) through (iii) hereof.
MULTIEMPLOVER PLAN - has the meaning set forth in Section 4001(a) (3) of
ERISA.
NOTE - the Revolving Credit Note.
OBLIGATIONS - all Loans and all other advances, debts, liabilities,
obligations, covenants and duties owing, arising, due or payable from Borrower
or Guarantors to Lender of any kind or nature, present or future, whether or not
evidenced by any note, guaranty or other instrument, whether arising under this
Agreement or any of the other Loan Documents or otherwise and whether direct or
indirect (including those acquired by assignment), absolute or contingent,
primary or secondary, due or to become due, now existing or hereafter arising
and however acquired. The term includes, without limitation, all interest,
charges, expenses, fees, attorney's fees and any other sums chargeable to
Borrower or Guarantors under any of the Loan Documents.
ORIGINAL TERM - as defined in Section 3.3 of this Agreement.
OSHA - the Occupational Safety and Health Act, as amended from time to
time, and all rules and regulations from time to time promulgated thereunder.
OTHER AGREEMENTS - any and all agreements, instruments and documents (other
than this Agreement and the Security Documents), heretofore, now or hereafter
executed by Borrower or delivered to Lender in connection with the execution of
this Agreement.
OSP BACKGROUND FORM - document prepared by Carrier and presented by
Borrower to Lender for each Carrier submitted for approval, substantially in the
form attached hereto as Exhibit 8.1(K) as may be modified by Lender from time to
time.
PARTICIPATING LENDER - shall mean each Person who shall be granted the
right by Lender to participate in any of the Loans described in this Agreement
and who shall have entered into a participation agreement in form and substance
satisfactory to Lender.
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PERMITTED PURCHASE MONEY INDEBTEDNESS - Purchase Money Indebtedness of
Borrower incurred after the date hereof which is secured by a Purchase Money
Lien.
PERMITTED LIENS - any Lien of a kind specified in sub-paragraphs (i)
through (x) of Section 7.2(H) of this Agreement.
PERSON - an individual, partnership, corporation, joint stock company,
trust or unincorporated organization, or a government or agency or political
subdivision thereof.
PLAN - an employee benefit plan now or hereafter maintained for employees
of Borrower that is covered by Title IV of ERISA.
PROHIBITED TRANSACTION - any transaction set forth in Section 406 of ERISA
or Section 4975 of the Internal Revenue Code of 1986, as amended from time to
time.
PROPERTY - any interest in any kind of property or asset, whether real,
personal or mixed, or tangible or intangible.
PURCHASE MONEY INDEBTEDNESS - means and includes (i) Indebtedness for the
payment of all or any part of the purchase price of any fixed assets, (ii) any
Indebtedness incurred at the time of or within ten (10) days prior to or after
the acquisition of any fixed assets for the purpose of financing all or any part
of the purchase price thereof, and (iii) any renewals, extensions or
refinancings thereof, but not any increases in the principal amounts thereof
outstanding at the time.
PURCHASE MONEY LIEN - a Lien upon fixed assets which secures Purchase Money
Indebtedness, but only if such Lien shall at all times be confined solely to the
fixed assets the purchase price of which was financed through the incurrence of
the Purchase Money Indebtedness secured by such Lien.
RENEWAL TERMS - as defined in Section 3.3 of this Agreement.
REPORTABLE EVENT - any of the events set forth in Section 4043(b) of ERISA
as to which the thirty (30) day notice requirement of Section 4043(a) of ERISA
has not been waived by the Pension Benefit Guaranty Corporation.
RESTRICTED INVESTMENT - any investment in cash or by delivery of Property
to any Person, whether by acquisition of stock, Indebtedness or other obligation
or Security, or by loan, advance or capital contribution, or otherwise, or in
any Property except the following: (i) Property to be used in the ordinary
course of business; (ii) Current Assets arising from the sale of goods and
services in the ordinary course of business of
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Borrower; (iii) investments in direct obligations of the United States of
America, or any agency thereof or obligations guaranteed by the United States
of America, provided that such obligations mature within one year from the
date of acquisition thereof; (iv) investments in certificates of deposit
maturing within one year from the date of acquisition issued by a bank or
trust company organized under the laws of the United States or any state
thereof having capital surplus aggregating at least $100,000,000; and (v)
investments in commercial paper given the highest rating by a national credit
rating agency and maturing not more than two hundred seventy (270) days from
the date of creation thereof.
REVOLVING CREDIT FACILITY - the revolving credit line described in Section
2.1 of this Agreement.
REVOLVING CREDIT LOAN - a Loan made by Lender as provided in Section 2.1 of
this Agreement.
REVOLVING CREDIT NOTE - the promissory note to be executed and delivered by
Borrower substantially in the form of Exhibit 2.1 to this Agreement, as the same
may hereafter be modified, replaced, or supplemented.
SECURITY - shall have the same meaning as in Section 2(l) of the Securities
Act of 1933, as amended.
SECURITY DOCUMENTS - all instruments and agreements now or at any time
hereafter securing the whole or any part of the Obligations.
SERVICE CONTRACT - any contract pursuant to which a Carrier provides
service to any Person.
SOLVENT - as to any Person, such Person (i) owns Property whose fair
saleable value is greater than the amount required to pay all of such Person's
Indebtedness (including contingent debts), (ii) is able to pay all of its
Indebtedness as such Indebtedness matures and (iii) has capital sufficient to
carry on its business and transactions and all business transactions in which it
is about to engage.
TERM LOAN FACILITY - an amount not exceeding One Million Five Hundred
Thousand Dollars ($1,500,000.00) to be advanced for the purchase of certain XETA
telephone equipment to be installed at certain hotels with which U.S. Long
Distance, Inc. has agreements, which shall be evidenced by Term Notes, all as
more fully set forth in Section 2.3(B) hereof.
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TERM NOTES - the promissory notes to be executed and delivered by U.S. Long
Distance, Inc. substantially in the form of Exhibit 2.3(A) of this Agreement, as
the same may hereinafter be modified, replaced, or supplemented in Lender's sole
discretion.
TERM LOAN - a loan made pursuant to Section 2.3 hereof and the existing
Term Loan dated ___________________ between Source, Inc. and U.S. Long Distance,
Inc. in the principal amount of Three Hundred and Twenty Thousand Dollars
($320,000.00).
VOTING STOCK - Securities of any class or classes of a corporation the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
WORKING CAPITAL - at any date means Current Assets minus Current
Liabilities.
1.2. ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with that applied
in preparation of the financial statements referred to in Section 7.1(M), and
all financial data pursuant to the Agreement shall be prepared in accordance
with such principles.
1.3. OTHER TERMS. All other terms contained in this Agreement shall have,
when the context so indicates, the meanings provided for by the Code to the
extent the same are used or defined therein.
1.4. CERTAIN MATTERS OF CONSTRUCTION. The terms "herein", "hereof" and
"hereunder" and other words of similar import refer to this Agreement as a whole
and not to any particular section, paragraph or subdivision. Any pronoun used
shall be deemed to cover all genders. The section titles, table of contents and
list of exhibits appear as a matter of convenience only and shall not affect the
interpretation of this Agreement.
SECTION 2. CREDIT FACILITY
Subject to the terms and conditions of, and in reliance upon the
representations and warranties made in, this Agreement and the other Loan
Documents, Lender agrees to make a total credit facility available upon
Borrower's request for Loans thereunder, as follows:
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2.1. REVOLVING CREDIT LOANS.
(A) Pursuant to the terms and subject to the conditions of this
Agreement, Lender agrees for so long as no Default or Event of Default exists,
to make Revolving Credit Loans to Borrower up to a maximum principal amount at
any time outstanding equal to the Borrowing Base at such time. The Revolving
Credit Loans shall be evidenced by the Revolving Credit Note substantially in
the form attached as EXHIBIT 2.1 to this Agreement. If the unpaid balance of
the Revolving Credit Loans should exceed the Borrowing Base or any other
limitation set forth in this Agreement, such Revolving Credit Loans shall
nevertheless constitute Obligations that are secured by the Collateral and
entitled to all the benefits thereof. Notwithstanding the foregoing provisions
of this Section 2.1(A), Lender shall have the right to establish reserves in
such amounts, and with respect to such matters, as Lender shall deem necessary
or appropriate, against the amount of the Borrowing Base, including, without
limitation, with respect to (i) past due federal excise and payroll taxes; (ii)
billing and collection charges payable to the LECs, unless Borrower has provided
a Letter of Credit to Lender, in form and from an institution acceptable to
Lender, in its sole discretion; (iii) other sums chargeable against Borrower's
Loan Account as Revolving Credit Loans under any section of this Agreement; and
(iv) such other matters, events, conditions or contingencies as to which Lender,
in its reasonable credit judgment determines reserves should be established from
time to time hereunder, provided, however, Lender shall not create reserves with
respect to items included in the numerator of the Dilution Factor calculation.
(B) The Revolving Credit Loans shall be used by Borrower to purchase
certain End User Accounts of Approved Carriers to the extent not inconsistent
with the provisions of this Agreement. Lender shall have a maximum of twenty
(20) days from the point at which all relevant credit information is received in
order to consider requests and advise Borrower of its determination for approval
of a Carrier or an increase of credit for an Approved Carrier. Lender shall use
its best efforts to promptly inform Borrower of any additional information it
deems necessary to consider such a request. Upon approval of a Carrier or an
increase of credit for an Approved Carrier, Lender shall provide Borrower with
written notification thereof within five (5) Business Days.
2.2. MANNER OF BORROWING. Borrowings under the Revolving Credit
Facility established pursuant to Section 2.1 shall be as follows:
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(A) A request for a Loan shall be made, or shall be deemed to be made,
in the following manner: (i) the chief financial officer of Borrower and/or his
designee (which designee shall be indicated to Lender in writing) shall be the
sole representative of Borrower authorized to give Lender telephonic, facsimile
or written notice of Borrower's intention to borrow, in which notice Borrower
shall specify the amount of the proposed borrowing and the proposed borrowing
date and other information as required in the Disbursing Letter; (ii) the
becoming due of any amount required to be paid under this Agreement as interest
shall be deemed irrevocably to be a request for a Loan on the due date in the
amount required to pay such interest; and (iii) the becoming due of any other
Obligations shall be deemed irrevocably to be a request for a Loan on the due
date in the amount then so due.
(B) Borrower hereby irrevocably authorizes Lender to disburse the
proceeds of each Loan requested, or deemed to be requested, pursuant to this
Section 2.2 as follows: the proceeds of each Loan requested under Section 2.2(A)
(i) shall be disbursed once daily by Lender in lawful money of the United States
of America in immediately available funds, in accordance with the terms of
Borrower's Disbursing Letter, by wire transfer to an account belonging to
Borrower as may be satisfactory to Lender from time to time, or Lender, upon
notice by Borrower, may agree to advance funds directly to an Approved Carrier.
Within twenty-four (24) hours of a transfer to Borrower's account, Borrower
shall supply Lender with written confirmation acceptable to Lender
(substantially in the form attached hereto as Exhibit 2.2(B)) that the proceeds
of the transfer have been distributed to the Approved Carrier. Any amounts
subject to written confirmation not received by Lender within twenty-four (24)
hours shall be subject to reserve by Lender. Following an initial advance,
Lender shall not make any subsequent advances for an Approved Carrier until
stamped, certified copies of UCC-l financing statements are received by Lender
for such Approved Carrier. The proceeds of each Loan requested under Section
2.2(A) (ii) or (iii) shall be disbursed by Lender by way of direct payment of
the relevant Obligation. Lender agrees to fund each Loan Request within one
Business Day after Lender's receipt of such Loan Request for that portion of the
Loan Request which meets with Lender's satisfaction.
2.3. TERM LOAN FACILITY.
(A) Pursuant to the terms and subject to the conditions of this
Agreement, Lender agrees for a one (1) year period from the date of this
Agreement, as long as no Default or Event of Default exists, to make term loans
to U.S. Long Distance, Inc. in an amount not exceeding ?ne Million Five Hundred
Thousands Dollars ($1,500,000.00) in the aggregate, to be
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used by U.S. Long Distance, Inc. to purchase certain XETA telephone equipment
and which term loans shall be evidenced by the Term Notes and shall be repaid
in twenty-four (24) monthly equal principal installments, plus interest. The
amount of each Term Loan shall not exceed eighty percent (80%) of the
purchase price of XETA telephone equipment as set forth on the invoice.
(B) A request for a Term Loan shall be made, or shall be deemed to be
made when the chief executive officer of U.S. Long Distance, Inc. or his
designee shall supply Lender with the following: (i) an invoice for the purchase
of the XETA telephone equipment; (ii) an Acknowledgment and Acceptance
Certificate, substantially in the form of Exhibit 2.3(B) attached hereto,
executed by the recipient the XETA telephone equipment; (iii) a duly executed
Term Loan Note; and (iv) UCC-1 financing statements filed in the appropriate
jurisdiction or jurisdictions where the XETA telephone equipment is located,
evidencing Lender's lien in such equipment.
2.4. ALL LOANS TO CONSTITUTE ONE OBLIGATION. All Loans shall
constitute one general obligation of Borrower and Guarantors and shall be
secured by Lender's security interest in and Lien upon all of the Collateral,
and by all other security interests and Liens heretofore, now or at any time or
times hereafter granted by Borrower or Guarantors to Lender.
2.5. LOAN ACCOUNT. Lender shall enter all Loans as debits to the Loan
Account and shall also record in the Loan Account all payments made by Borrower
on Revolving Credit Loans and all proceeds of Collateral which are finally paid
to Lender as credits, and may record therein all charges and expenses properly
chargeable to Borrower hereunder. Lender may charge all amounts advanced to or
for the benefit of Borrower pursuant to the terms of this Agreement (including,
without limitation, any amounts due Lender under Section 3 below, any principal
amounts due Lender, and/or any amounts due Lender pursuant to any other
provision of this Agreement) to Borrower's Loan Account.
SECTION 3. INTEREST, FEES, TERM AND REPAYMENT
3.1. INTEREST AND CHARGES.
(A) Interest shall accrue on the principal amount of the
Revolving Credit Loans outstanding at the end of each day at a fluctuating rate
per annum equal to one and one-eighth percent (1-1/8%) above the Base Rate in
effect on such day. Interest shall accrue on the principal amount of the Term
Loans outstanding at the end of each day such Term Loans are outstanding at a
fluctuating rate equal to one and three quarters percent (l 3/4%) above the Base
Rate in effect on such day. After the date
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hereof, the foregoing rates of interest shall be increased or decreased, as
the case may be, by an amount equal to any increase or decrease in the Base
Rate, with such adjustments to be effective as of the opening of business on
the day that any such change in the Base Rate becomes effective. The Base
Rate in effect on the date hereof shall be the Base Rate effective as of the
opening of business on the date hereof, but if this Agreement is executed on
a day that is not a Business Day, the Base Rate in effect on the date hereof
shall be the Base Rate effective as of the opening of business on the last
Business Day immediately preceding the date hereof. Interest shall be
calculated on a daily basis (computed on the actual number of days elapsed
over a year of 360 days), commencing on the date hereof, and shall be payable
monthly, in arrears, on the first Business day of each month.
(B) Upon and after the occurrence of an Event of Default, and
during the continuation thereof, the principal amount of the Obligations shall
bear interest, calculated daily (computed on the actual days elapsed over a year
of 360 days), at a fluctuating rate per annum equal to six percent (6%) above
the Base Rate (the "Default Rate").
(C) In no contingency or event whatsoever shall the aggregate of
all amounts deemed interest hereunder and charged or collected pursuant to the
terms of this Agreement exceed the highest rate permissible under any law which
a court of competent jurisdiction shall, in a final determination, deem
applicable hereto. In the event that such a court determines that Lender has
charged or received interest hereunder in excess of the highest applicable rate,
Lender shall promptly refund such excess interest to Borrower and such rate
shall automatically be reduced to the maximum rate permitted by such law.
3.2 FEES.
(A) Borrower shall pay to Lender on the date hereof a loan
origination fee equal to three quarters of one percent (.75%) of the Credit Line
as of the date hereof which fee shall be deemed to have been earned and shall be
payable in full on the date hereof.
(B) U.S. Long Distance, Inc. shall pay to Lender a term loan
facility fee equal to one half of one percent (.50%) of the maximum Term Loan
Facility payable on the date hereof.
(C) Borrower shall pay to Lender on the date of any increase in
the Credit Line due to either the addition of any new Class 3 Approved Carrier
or any increase in the credit limit for any existing Class 3 Approved Carrier an
additional loan
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origination fee equal to one half of one percent (.50%) per annum of the
amount of such increase which fee shall be prorated for the number of days
remaining until the next one year anniversary and shall be deemed to be
earned and shall be payable on the date such increase of new approval is made
by Lender.
(D) Borrower shall pay to Lender on each one year anniversary of
this Agreement an annual commitment fee equal to one half of one percent (.50%)
of the Credit Line as determined on each one year anniversary of this Agreement.
(E) Borrower shall pay to Lender quarterly an unused facility fee
equal to one half of one percent (.50%) per annum multiplied by the difference
between the average outstanding daily loan balance of the Revolving Line of
Credit and the average amount of the Credit Line for the preceding three month
period, which fee shall be payable quarterly from the date hereof on the first
Business Day after the end of Borrower's fiscal quarter until the end of the
Original Term or any Renewal Term.
(F) Lender agrees to review the amount of the fees set forth in
Sections 3.2 (C), (D) and (E) above on an annual basis upon written request from
Borrower; however, Lender shall have no obligation whatsoever to make any
adjustment to any such fees and the nature, basis and extent of any review by
Lender shall be in Lender's sole determination.
3.3. TERM OF AGREEMENT. Subject to Lender's right to cease making
Loans to Borrower at any time upon or after the occurrence of any Default or
Event of Default, the provisions of this Agreement shall be in effect for a
period of three (3) years from the date hereof, through and including May 21,
1994 (the "Original Term"), unless terminated as provided in Section 3.4 hereof
and may be extended by the written consent of Lender and Borrower (the "Renewal
Term").
3.4. TERMINATION.
(A) Upon at least sixty (60) days prior written notice to Lender,
Borrower may, at its option, terminate this Agreement at the end of the Original
Term or any Renewal Term ; PROVIDED, HOWEVER, no such termination shall be
effective until Borrower has paid all of the Obligations in immediately
available funds. Any termination under this Section 3.4(A) shall be deemed a
termination of the entire Agreement.
(B) Lender may terminate this Agreement upon sixty (60) days
prior written notice to Borrower at the end of the Original Term or any Renewal
Term, or at any time without notice to Borrower upon or after the occurrence of
an Event of Default.
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(C) All of the Obligations shall be forthwith due and payable upon
any termination of this Agreement. Except as otherwise expressly provided
for in this Agreement or the other Loan Documents, no termination or
cancellation (regardless of cause or procedure) of this Agreement or any of
the other Loan Documents shall in any way affect or impair the powers,
obligations, duties, rights, and liabilities of Borrower or Lender in any way
relating to (i) any transaction or event occurring prior to such termination
or cancellation, or (ii) any of the undertakings, agreements, covenants,
warranties or representations of Borrower contained in this Agreement or any
of the other Loan Documents. All such undertakings, agreements, covenants,
warranties and representations shall survive such termination or cancellation
and Lender shall retain its Liens in the Collateral and all of its rights and
remedies under this Agreement and the other Loan Documents notwithstanding
such termination or cancellation, until all of the Obligations have been paid
in full, in immediately available funds.
3.5. PAYMENTS. Except where evidenced by notes or other
instruments issued or made by Borrower to Lender specifically containing
payment provisions which are in conflict with this Section 3.5 (in which
event the conflicting provisions of said notes or other instruments shall
govern and control), that portion of the Obligations consisting of:
(A) Principal, payable on account of Revolving Credit Loans
made by Lender to Borrower pursuant to Section 2.1 of this Agreement shall be
payable by Borrower to Lender immediately upon the earliest of (i) the
receipt by Lender or Borrower of any proceeds of any of the Collateral, to
the extent of said proceeds, (ii) the occurrence of an Event of Default in
consequence of which Lender elects to accelerate the maturity and payment of
such Loans, (iii) the end of the Original Term or any Renewal Term; or (iv)
termination of this Agreement pursuant to Section 3.3 hereof, provided,
however, that if the principal balance of Revolving Credit Loans outstanding
at any time shall exceed the Borrowing Base at such time, Borrower shall, on
demand, repay the Revolving Credit Loans in an amount sufficient to reduce
the aggregate unpaid principal amount of such Loans by an amount equal to
such excess;
(B) Interest accrued on the Obligations shall be due on the
earliest of (i) the first Business Day of each month (for the immediately
preceding month), computed through the last calendar day of the preceding
month, (ii) the occurrence of an Event of Default in consequence of which
Lender elects to accelerate the maturity and payment of the Obligations or
(iii) termination of this Agreement pursuant to Section 3.3 hereof; PROVIDED,
HOWEVER, that Borrower hereby irrevocably authorizes Lender, in Lender's
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sole discretion, to advance to Borrower, and to charge to Borrower's Loan
Account in the event that an invoice has not been paid within one (l) day of
such invoice hereunder as a Revolving Credit Loan, a sum sufficient each
month to pay all interest accrued on the Obligations during the immediately
preceding month;
(C) Costs, fees and expenses payable pursuant to this
Agreement shall be payable by Borrower, on demand, to Lender or to any other
Person designated by Lender in writing provided, however, that upon ten (10)
days after receipt of an invoice from Lender and immediately upon the
occurrence of an Event of Default, Borrower hereby irrevocably authorizes
Lender, in Lender's sole discretion, to advance to Borrower, and to charge to
Borrower's Loan Account hereunder as a Revolving Credit Loan, a sum
sufficient each month to pay all costs, fees and expenses incurred by Lender;
and
(D) The balance of the Obligations requiring the payment of
money, if any, shall be payable by Borrower to Lender as and when provided in
this Agreement, the Other Agreements or the Security Documents, or on demand,
whichever is earlier.
3.6. APPLICATION OF PAYMENTS AND COLLECTIONS. Borrower irrevocably
waives the right to direct the application of any and all payments and
collections at any time or times hereafter received by Lender from or on
behalf of Borrower, and Borrower hereby irrevocably agrees that Lender shall
have the continuing exclusive right to apply and reapply any and all such
payments and collections received at any time or times hereafter by Lender or
its agent against the Obligations, in such manner as Lender may deem
advisable, notwithstanding any entry by Lender upon any of its books and
records.
3.7. STATEMENTS OF ACCOUNT. Lender will account to Borrower
monthly with a statement of Loans, charges and payments made pursuant to this
Agreement, and such account rendered by Lender shall be deemed final, binding
and conclusive upon Borrower unless Lender is notified by Borrower in writing
to the contrary within Forty-five (45) days after the last day of the period
covered by the statement as provided in Section 10.10 hereof. Such notice
shall only be deemed an objection to those items specifically objected to
therein.
SECTION 4. COLLATERAL: GENERAL TERMS
4.1. SECURITY INTEREST IN COLLATERAL. To secure the prompt payment
and performance to Lender of the Obligations, Borrower and Guarantors hereby
grant to Lender a continuing security
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interest in and Lien upon all of the following Property and interests in
Property of Borrower and Guarantors whether now owned or existing or
hereafter created, acquired or arising and wheresoever located:
(A) Accounts;
(B) General Intangibles;
(C) LEC Receivables;
(D) End User Accounts;
(E) Equipment;
(F) All rights of Borrower or Guarantors pursuant to or relating to
a Carrier Contract (as the same may hereafter be amended or replaced), all
rights and claims now or hereafter arising under any Carrier Contract, as
well as all rights and claims now or hereafter arising under any guarantees
now or hereafter given to Borrower or Guarantors in connection with any
Carrier Contract, and all rights of Borrower or Guarantors pursuant to or
arising out of the Escrow and Disbursing Agreement.
(G) All monies and other Property of any kind, now or at any time
or times hereafter, in the possession or under the control of Lender or a
bailee of Lender;
(H) All accessions to, substitutions for and all replacements,
products and cash and non-cash proceeds of (A), (B), (C), (D), (E) and (F)
above, including, without limitation, proceeds of and unearned premiums with
respect to insurance policies insuring any of the Collateral; and
(I) All books and records (including, without limitation, customer
lists, credit files, billing tapes, whether processed or unprocessed,
computer programs, printouts, and other computer materials and records) of
Borrower or Guarantors pertaining to any of (A), (B), (C), (D), (E), (F) and
(G).
All liens granted in the collateral under the Loan and
Security Agreement survive the execution of this Agreement and shall remain
liens under this Agreement. The grant of a security interest in the
Collateral hereunder restates and expands, but in no manner extinguishes, the
grant of the security interest in the collateral under the Loan and Security
Agreement.
4.2 CONSENT TO SALE. Lender consents to the sale of End User
Accounts to LECs to enable such LECs to bill for and collect
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such End User Accounts from the End User, provided however that such consent
is expressly conditioned on the sale being subject to Lender's Lien
continuing on such End User Accounts sold. Upon any such sale of an End User
Account to a LEC, Lender agrees that its Lien shall be subject to and
subordinate in all respects to the right, title and interest in such End User
Account purchased by the LEC and Lender further agrees that for so long as
the LEC has not transferred, whether voluntarily or involuntarily, such End
User Account back to Borrower, Lender shall take no action to collect such
End User Account.
4.3. REPRESENTATIONS, WARRANTIES AND COVENANTS - COLLATERAL. To
induce Lender to enter into this Agreement, Borrower and Guarantors
represent, warrant, and covenant to Lender:
(A) The Collateral is now and, so long as any Obligations are
outstanding, will continue to be owned solely by Borrower or Guarantor. No
other Person has or will have any right, title, interest, claim, or Lien
therein, thereon or thereto other than a Permitted Lien.
(B) Except as specifically consented to in writing by Lender, the
Liens granted to Lender shall be first and prior on the Collateral and as to
the Accounts and proceeds, including insurance proceeds, resulting from the
sale, disposition, or loss thereof. No further action need be taken to
perfect the Liens granted to Lender, other than the filing of financing and
continuation statements under the Code or other applicable law, continued
possession by Lender of that portion of the Collateral constituting monies,
instruments or documents, notation of Lender as loss payee under insurance
policies to the extent provided for in Section 4.6 hereof.
4.4. FINANCING STATEMENTS. (a) Borrower and Guarantors agree to
execute the financing statements provided for by the Code together with any
and all other instruments, assignments or documents and shall take such other
action as may be required to perfect or to continue the perfection of
Lender's security interest in the Collateral. Unless prohibited by
applicable law, Borrower and Guarantors hereby authorize Lender to execute
and file any such financing statement on Borrower's or Guarantors behalf.
The parties agree that a carbon, photographic or other reproduction of this
Agreement shall be sufficient as a financing statement and may be filed in
any appropriate office in lieu thereof to the extent permitted by applicable
laws.
(b) Borrower and Guarantors agree to file the financing statements
provided for by the Code together with any and all other instruments,
assignments or documents, and shall take such other action as may be required
to perfect, and
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continue the perfection, of Borrower's security interest in the End User
Accounts granted to Borrower by each Carrier. Lender shall be noted on each
such financing statement as the assignee of all security interests of
Borrower thereunder.
4.5. LOCATION OF COLLATERAL. Borrower and Guarantors will maintain
their chief executive offices and principal places of business and the
locations at which records regarding the Accounts are maintained, at the
locations set forth in EXHIBIT 4.5 and shall not move such locations, except
as permitted pursuant to Section 7.2(J) of this Agreement. Borrower and
Guarantors will not change the location of any of the Equipment without sixty
(60) days prior written notice to Lender, except for XACT call accounting
equipment which shall not be moved without ten (10) days prior written notice
to Lender.
4.6. INSURANCE OF PROPERTY. Borrower and Guarantors agrees to
maintain and pay for insurance upon all Property wherever located, in such
amounts and with such insurance companies as shall be reasonably satisfactory
to Lender, including business interruption insurance and insurance covering
the cost of recreating any books and records damaged by fire or other
casualty. At Lender's request, Borrower and Guarantors shall deliver the
copies of such policies to Lender and to the extent Lender has an insurable
interest will obtain and deliver to Lender a Lender's loss payable
endorsement naming Lender loss payee. At Lender's request, Borrower and
Guarantors agree to deliver to Lender, promptly as rendered, true copies of
all reports made in any reporting forms to insurance companies. Borrower and
Guarantors Will maintain, with financially sound and reputable insurers,
insurance with respect to their Properties and businesses against such
casualties and contingencies of such type and in such amounts as is customary
in the businesses of Borrower and Guarantors.
4.7. PROTECTION OF COLLATERAL. Lender may, at any time or times,
in its reasonable judgment upon notice to Borrower or Guarantors, without
waiving or releasing any obligations, liability or duty of Borrower and
Guarantors under this Agreement or the Other Agreements, or any Event of
Default, pay when due, acquire or accept an assignment of any Lien or claim
asserted by any Person against any of the Collateral. All sums paid by
Lender in respect thereof and all costs, fees and expenses, including,
without limitation, attorney's fees and court costs, which are incurred by
Lender on account thereof, shall be payable, upon demand, by Borrower and
Guarantors to Lender together with interest accruing at the Default Rate, if
applicable to the Loans, and shall be secured by the Collateral. Lender shall
not be liable or responsible in any way for the safekeeping of any of the
Collateral or for any loss or damage
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thereto (except for reasonable care in the custody thereof while any
Collateral is in Lender's actual possession).
SECTION 5. PROVISIONS RELATING TO ACCOUNTS
5.1. REPRESENTATIONS, WARRANTIES AND COVENANTS. With respect to
the following, Borrower and Guarantors represent and warrant to Lender that
Lender may rely, in determining which Accounts are Eligible Accounts, on all
of the following statements and representations made by Borrower and
Guarantors with respect to any Account or Accounts, and, unless otherwise
indicated in writing to Lender, as follows:
(A) With respect to each LEC Receivable:
(l) It is genuine and in all respects what it purports to be,
and it is not evidenced by a judgment;
(2) It arises out of the sale, assignment, transfer or delivery
of End User Accounts by the Borrower to a LEC in the ordinary course of its
business and in accordance with the terms and conditions of any Billing
Contracts or other documents relating thereto;
(3) It is for a specific amount due and owing reflected on the
billing tape covering the applicable LEC Receivable, a copy of which is
available to Lender;
(4) Such Account, and Lender's security interest therein, is
not subject to any offset, Lien, deduction, defense, dispute, counterclaim or
any other adverse condition, and each such LEC Receivable is absolutely owing
to Borrower and is not contingent in any respect or for any reason, except as
otherwise provided in the Billing Contract relating only to billing and
collection services for such LEC Receivable;
(5) Borrower has made no agreement with regard to any Account
for any deduction therefrom, except discounts, credits or allowances which
are granted by Borrower in the ordinary course of business;
(6) There are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the amount reflected on the billing tape or billing
transmission therefor;
(7) To the best of Borrower's and Guarantors' knowledge, the
LEC thereunder (i) had the capacity to contract at the time any contract or
other document giving rise to the Account was executed and (ii) such LEC is
Solvent;
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(8) Borrower or Guarantors have no knowledge of any fact or
circumstance which would impair the validity or collectibility by Borrower of
the LEC Receivable, and to the best of Borrower's or Guarantors' knowledge
there are no proceedings or actions which are threatened or pending against
any LEC thereunder which might result in any material adverse change in such
LEC's financial condition or the collectibility of such LEC Receivable;
(9) All supporting documents and other evidence of LEC
Receivables, if any, delivered to Lender are complete and correct and valid
and enforceable in accordance with their terms, and all signatures and
endorsements that appear thereon are genuine, and all signatories and
endorsers have full capacity to contract; and
(10) The LEC Receivable is not subject to any prohibition or
limitation upon assignment except as may be set forth in the applicable
Billing Contract.
(B) With respect to each End User Account:
(1) It is genuine and in all respects what it purports to be,
and is not evidenced by a judgment;
(2) It arises out of the completed delivery of telephone
services in the ordinary course of a Carrier's business in the name of such
Carrier, unless otherwise approved by Lender, which approval shall not be
unreasonably withheld, and in accordance with the terms and conditions of any
contracts or other documents relating thereto;
(3) It is for a specific amount due and owing as reflected on
the billing tapes or billing transmissions covering such End User Account;
(4) Such End User Account is not subject to any offset, Lien,
deduction, defense, dispute, counterclaim or any other adverse condition, and is
absolutely owing to Borrower and is not contingent in any respect or for any
reason except for matters for which discounts, credits or allowances are granted
by Borrower in the ordinary course of business consistent with past practices;
(5) Neither Borrower nor the applicable Carrier has made any
agreement with any End User thereunder for any deduction therefor, except
discounts, credits or allowances which are granted by such Carrier in the
ordinary course of business;
(6) There are no facts, events or occurrences which in any way
impair the validity or enforceability thereof or tend to reduce the amount
payable thereunder from the amount reflected on the billing tape therefor;
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(7) The Account Debtor thereunder (i) had the capacity to
contract at the time any contract or other document relating to the End User
Account was executed and (ii) to the best of Borrower's and Guarantors'
knowledge, such Account Debtor is Solvent;
(8) Borrower or Guarantors have no knowledge of any fact or
circumstance which would impair the validity or collectibility by Borrower of
the End User Account and to the best of Borrower's and Guarantors' knowledge,
there are no proceedings or actions which are threatened or pending against
the Account Debtor thereunder which might result in any material adverse
change in such Account Debtor's financial condition or the collectibility of
such End User Account;
(9) All supporting documents and other evidence of End User
Accounts, if any, delivered to Lender are complete and correct and valid and
enforceable in accordance with their terms, and all signatures and
endorsements that appear thereon are genuine, and all signatories and
endorsers have full capacity to contract; and
(10) The End User Account is not subject to any prohibition or
limitation upon assignment except as provided in the applicable Billing
Contract.
5.2. ASSIGNMENTS, RECORDS AND SCHEDULES OF ACCOUNTS. Borrower shall
execute and deliver to Lender formal written assignments as security for the
payment of the Obligations of all of its LEC Receivables daily, which shall
include all that have been created since the date of the last assignment, and
if requested by Lender together with copies of confirmations of other
statements related thereto, if any. Borrower shall keep accurate and
complete records of its Accounts and all payments and collections thereon and
shall submit to Lender on a daily basis a sales and collections report for
the preceding day, in form satisfactory to Lender. Upon Lender's request
therefor, copies of proof of delivery and the original copy of all documents
maintained by Borrower in the ordinary course of business, including, without
limitation, any repayment histories and present status reports relating to
the LEC Receivables so scheduled and such other matters and information
relating to the status of then existing LEC Receivables as Lender shall
reasonably request.
5.3. ADMINISTRATION OF ACCOUNTS.
(A) Upon and after the occurrence of an Event of Default, Lender
shall have the right to settle or adjust all disputes and
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claims directly with the Account Debtor and to compromise the amount or
extend the time for payment of the Accounts upon such terms and conditions as
Lender may deem advisable, and to charge the deficiencies, costs and expenses
thereof, including attorney's fees, to Borrower.
(B) If an Account includes a charge for any tax payable to any
governmental taxing authority, including but not limited to excise taxes,
upon the occurrence of an Event of Default, Lender is authorized, in its sole
discretion, to pay the amount thereof to the proper taxing authority for the
account of Borrower and to charge the Loan Account therefor, except taxes
being diligently contested in good faith for which adequate reserves have
been established in accordance with GAAP. Borrower shall notify Lender if
any Account includes any material tax due beyond the applicable payment due
date to any governmental taxing authority and as between Lender and Borrower,
Lender shall have the right to retain the full proceeds of the Account and
shall not be liable for any taxes to any governmental taxing authority that
may be due by Borrower by reason of the sale and delivery creating the LEC
Receivable.
(C) Any of Lender's officers, employees or agents shall have the
right, at any time or times, in the name of Lender, any designee of Lender or
Borrower, to verify the validity, amount.or any other matter relating to any
Account by mail, telephone, telegraph or otherwise. Borrower shall cooperate
fully with Lender in an effort to facilitate and promptly conclude any such
verification process.
5.4. COLLECTION OF ACCOUNTS.
(A) Borrower shall have notified all LECs to send all payments owed
to Borrower directly to a lockbox whereby all such payments will be
transferred directly to the Clearing Account or to wire such payments
directly to the Clearing Account (as set forth in the Escrow Disbursing
Agreement). All amounts in the Clearing Account shall be automatically
transferred daily to the Dominion Account and neither Borrower nor Lender
shall have access to the Clearing Account. To expedite collection, Borrower
shall endeavor in the first instance to facilitate collection of the Accounts
for Lender. Any remittances received directly by Borrower on account of
Accounts shall be held as Lender's property by Borrower as trustee of an
express trust for Lender's benefit and Borrower shall immediately deposit
same in the Dominion Account. Upon the occurrence of a Default or an Event
of Default, Lender has the right to notify Account Debtors that Accounts have
been assigned to Lender and to collect Accounts directly in its own name and
to charge the collection costs and expenses, including attorneys' fees to
Borrower. Lender has no
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duty to protect, insure, collect or realize upon the Accounts. For the
purpose of computing interest hereunder, all items of payment received by
Lender shall be deemed applied by Lender on account of the Obligations
(subject to final payment of such items) on the second Business Day after
receipt by Lender of such items of payment.
(B) Borrower shall cause all proceeds of the Collateral including
all LEC remittances to be deposited in kind in the Clearing Account pursuant
to a lockbox arrangement with such bank(s) as may be selected by Borrower and
be acceptable to Lender. Borrower shall issue to any such bank(s) an
irrevocable letter of instruction directing such bank(s) to deposit all
payments or other remittances received in the lockbox to the Clearing
Account, which collected remittances shall be deposited on a daily basis in
the Dominion Account for application on account of the Obligations in
accordance with the terms of the Escrow and Disbursing Agreement. All funds
deposited in the Dominion Account which are proceeds of the Collateral shall
immediately become the property of Lender. Borrower shall obtain the
agreement by such bank(s) to waive any offset rights against the funds so
deposited. Lender assumes no responsibility for such lockbox arrangement,
including, without limitation, any claim of accord and satisfaction or
release with respect to deposits accepted by any bank thereunder.
(C) Borrower shall advise Lender of the allocation between Approved
Carriers and all other Carriers for all proceeds deposited into the Dominion
Account. Upon what Lender, in its sole discretion, deems to be sufficient
confirmation of such allocation, Lender and Borrower shall jointly notify the
Escrow Agent to transfer that portion of the proceeds which are attributed to
Carriers other than Approved Carriers to a bank account designated by
Borrower. If Borrower and Lender are unable to agree on the allocation of
proceeds in the Dominion Account, the amount of disputed proceeds (the
"Disputed Amount") shall remain in the Dominion Account. Upon five (5) days
after the occurrence thereof, if Borrower has been unable to adequately
justify its purported allocation of the Disputed Amount to Lender's
satisfaction, Lender may notify the Escrow Agent to transfer directly to
Lender that portion of the Disputed Amount which Lender, in its sole
discretion, deems to be proceeds of Lender's Collateral, in the manner set
forth in the Escrow and Disbursing Agreement. After the occurrence of an
Event of Default (as defined in Section 9 hereof), upon notice from Lender to
the Escrow Agent thereof, the Escrow Agent shall make disbursements from the
Dominion Account in accordance with Lender's instructions as more fully set
forth in the Escrow and Disbursing Agreement.
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SECTION 6. REPRESENTATIONS AND WARRANTIES
6.1. GENERAL REPRESENTATIONS AND WARRANTIES. To induce Lender to
enter into this Agreement and to make advances here-under, Borrower and
Guarantors warrant, represent and covenant to Lender that:
(A) ORGANIZATION AND QUALIFICATION. Borrower and Guarantors are
corporations duly organized, validly existing and in good standing under the
laws of their jurisdictions of incorporation. Borrower and Guarantors have
been duly qualified to do business and are in good standing as foreign
corporations in each state or jurisdiction listed on EXHIBIT 6.1(A) attached
hereto and made a part hereof except to the extent and subject to the
qualifications set forth in such Exhibit 6.1(A).
(B) TRADE NAMES. During the preceding seven (7) years, Borrower
and Guarantors have not been known as or used any fictitious or trade names
except as disclosed on EXHIBIT 6.1(B) attached hereto and made a part hereof.
Except as set forth on EXHIBIT 6.1(B), Borrower and Guarantors have not
during the preceding seven (7) years, acquired all or substantially all of
the assets of any Person.
(C) CORPORATE POWER AND AUTHORITY. Borrower and Guarantors have
the right and power and are duly authorized and empowered to enter into,
execute, deliver and perform this Agreement and each of the other Loan
Documents to which any or all of them are a party. The execution, delivery
and performance of this Agreement and each of the other Loan Documents have
been duly authorized by all necessary corporate action and do not and will
not (i) require any consent or approval of the shareholders of Borrower or
Guarantors; (ii) contravene Borrower's or Guarantors' charter, articles of
incorporation or by-laws (iii) violate, or cause Borrower or Guarantors to be
in default under, any provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award in effect having
applicability to Borrower or Guarantors; (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement which
would permit the acceleration of the Indebtedness thereunder, or any other
material breach of an agreement, lease or instrument to which Borrower or
Guarantors are a party or by which it or its Properties may be bound or
affected except for such restrictions on assignment as may appear in any
Billing Contract; or (v) result in, or require, the creation or imposition of
any Lien (other than Permitted Liens) upon or with respect to any of the
Properties now owned or hereafter acquired by Borrower or Guarantors.
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(D) LEGALLY ENFORCEABLE AGREEMENT. This Agreement is, and each of
the other Loan Documents when delivered under this Agreement will be, a
legal, valid and binding obligation of Borrower and Guarantors enforceable
against it in accordance with their respective terms.
(E) USE OF PROCEEDS. Borrower's uses of the proceeds of any
advances made by Lender to Borrower pursuant to this Agreement are, and will
continue to be, legal and proper corporate uses, duly authorized by its Board
of Directors and such uses are consistent with all applicable laws and
statutes, as in effect as of the date hereof.
(F) MARGIN STOCK. Borrower and Guarantors are not engaged
principally, or as one of its important activities, in the business of
purchasing or carrying "margin stock" (within the meaning of Regulation G or
U of the Board of Governors of the Federal Reserve System), and no part of
the proceeds of any Loans to Borrower will be used to purchase or carry any
margin stock or to extend credit to others for the purpose of purchasing or
carrying any margin stock, or be used for any purpose which violates or is
inconsistent with the provisions of Regulation X of said Board of Governors.
(G) GOVERNMENTAL CONSENTS. Borrower and Guarantors have been, and
are in good standing with respect to, all material governmental consents,
approvals, authorizations, permits, certificates, inspections, and franchises
necessary to continue to conduct their businesses as heretofore or proposed
to be conducted by it and to own or lease and operate their Properties as now
owned or leased by them.
(H) PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES. Except as
otherwise noted on Exhibit 6.1(H) attached hereto and made a part hereof,
Borrower or Guarantors own or possess all the material patents, trademarks,
service marks, trade names, copyrights and license necessary for the present
and planned future conduct of their businesses without any known conflict
with the rights of others. All such patents, trademarks, service marks,
tradenames, copyrights, licenses and other similar rights are listed on
EXHIBIT 6.1(H) attached hereto and made a part hereof.
(I) CAPITAL STRUCTURE. EXHIBIT 6.1(I) attached hereto and made a
part hereof states (a) the correct name of each Subsidiary of Borrower and/or
Guarantors, the jurisdictions of incorporation and the percentage of its
Voting Stock owned by Borrower and/or Guarantors, (b) the number, nature and
holder of all outstanding Securities of Borrower and/or Guarantors, and (c)
the number of authorized, issued and treasury shares of Borrower and/or
Guarantors and each subsidiary of Borrower and/or Guarantors.
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All such shares have been duly issued and are fully paid and non-assessable.
Except as otherwise set forth on EXHIBIT 6.1(I) hereto and made a part
hereof, to the best of Borrower's and/or Guarantors' knowledge, there are not
outstanding any options to purchase, or any rights to subscribe for, or any
commitments or agreements to issue or sell, or any obligations convertible
into, or any powers of attorney relating to, shares of the capital stock of
Borrower and/or Guarantors and there are not outstanding any agreements or
instruments binding upon any of Borrower's and/or Guarantors' shareholders
relating to the ownership of its shares of capital stock.
(J) RESTRICTIONS. Neither Borrower nor Guarantors are a party or
subject to any contract, agreement, or charter or other corporate
restriction, which materially and adversely affects their businesses or the
use or ownership of any of their Properties. Neither Borrower nor Guarantors
are a party or subject to any contract or agreement which restricts their
rights or abilities to incur Indebtedness, other than as set forth on EXHIBIT
6.1(J) attached hereto, none of which prohibit the execution of or compliance
with this Agreement by Borrower or Guarantors. Neither Borrower nor
Guarantors have agreed or consented to cause or permit in the future (upon
the happening of a contingency or otherwise) any of its Collateral, whether
now owned or hereafter acquired, to be subject to a Lien that is not a
Permitted Lien.
(K) LITIGATION. Except as set forth on EXHIBIT 6.1(K) attached
hereto and made a part hereof, there are no actions, suits, proceedings or
investigations which might lend to a judgment or settlement in excess of One
Hundred Thousand Dollars ($100,000.00) to which Borrower or Guarantors are a
party or to the knowledge of Borrower or Guarantors, are pending or
threatened, against or affecting Borrower or Guarantors, or the business,
operations, Properties, prospects, profits or condition of Borrower or
Guarantors, in any court or before any governmental authority or arbitration
board or tribunal, and no action, suit, proceeding or investigation shown on
EXHIBIT 6.1(K) involves the possibility of materially and adversely affecting
the Properties, business, prospects, profits or condition (financial or
otherwise) of Borrower or Guarantors or the ability of Borrower or Guarantors
to perform this Agreement. Neither Borrower nor Guarantors are in material
default with respect to any order, writ, injunction, judgment, decree or rule
of any court, governmental authority or arbitration board or tribunal.
(L) TITLE TO PROPERTIES. Borrower and Guarantors have good,
indefeasible and marketable title to and fee simple ownership of, or valid and
subsisting leasehold interests in, all of their real
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Property, and good title to all of their other Property, in each case, free
and clear of all Liens except Permitted Liens.
(M) FINANCIAL STATEMENTS. The balance sheets of Borrower and
Guarantors and such other Persons described therein as of March 31, 1991 and
the related statements of income, changes in stockholder's equity, and
statement of cash flow for the periods ended on such dates, have been
prepared in accordance with GAAP (except for changes in application in which
Borrower's or Guarantors' independent certified public accountants concur),
and present fairly the financial positions of Borrower and Guarantors at such
dates and the results of Borrower's and Guarantors' operations for such
periods. Since March 31, 1991, there has been no material change in the
condition, financial or otherwise, of Borrower and Guarantors and such other
Persons as shown on the balance sheet as of such date and no change in the
aggregate value of Property owned by Borrower or such other Persons, except
changes in the ordinary course of business, none of which individually or in
the aggregate has been materially adverse.
(N) FULL DISCLOSURE. The financial statements referred to in
Section 6.1(M) above, do not, nor does this Agreement or any other written
statement of Borrower or Guarantors to Lender contain any untrue statement of
a material fact or omit a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact which Borrower
or Guarantors have failed to disclose to Lender in writing which materially
affects adversely or, so far as Borrower or Guarantors can now foresee, will
materially affect adversely the Properties, business, prospects, profits, or
condition (financial or otherwise) of Borrower or Guarantors or the ability
of Borrower or Guarantors to perform this Agreement.
(O) PENSION PLANS. Neither Borrower nor Guarantors have a Plan.
Neither Borrower nor Guarantors have received any notice from any agency of
the United States government to the effect that they are not in material
compliance with any of the requirements of ERISA and the regulations
promulgated thereunder with respect to any Plan. No Reportable Event with
respect to any Plan or Prohibited Transaction exists in connection with any
Plan. Neither Borrower nor Guarantors have withdrawal liability in
connection with a Multiemployer Plan.
(P) TAXES. Borrower's and Guarantors' federal tax identification
numbers are as follows: 74-2467147 (Borrower), 74-2522103, (U.S. Long
Distance Corp.), and 74-2430984, (U.S. Long Distance, Inc.), respectively.
Except as otherwise set forth on EXHIBIT 6.1(P) attached hereto and made a
part hereof, Borrower and Guarantors have filed all federal, state and local
tax returns and other reports it is required by law to file and
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has paid, or made provision for the payment of, all taxes, assessments, fees
and other governmental charges that are due and payable, except such taxes,
if any, as are being actively contested in good faith and as to which
adequate reserves have been provided in accordance with GAAP and with the
exception of taxes owed other than to federal and state authorities which do
not exceed Twenty Thousand Dollars ($20,000.00) for any single entity and Two
Hundred and Fifty Thousand Dollars ($250,000.00) for all entities, in the
aggregate. Except as otherwise set forth on EXHIBIT 6.1(P) attached hereto
and made a part hereof, the provision for taxes on the books of Borrower are
adequate for all years not closed by applicable statutes, and for its current
fiscal year.
(Q) LABOR RELATIONS. Except as described on EXHIBIT 6.1(Q) attached
hereto and made a part hereof, neither Borrower nor Guarantors are a party to
any collective bargaining agreement, and there are no material grievances,
disputes or controversies with any union or any other organization of
Borrower's employees, or threats of strikes, work stoppages or any asserted
pending demands for collective bargaining by any union or organization.
(R) COMPLIANCE WITH LAWS. Borrower and Guarantors have duly
complied in all material respects with, and its Properties, business
operations and leaseholds are in compliance in all material respects with,
the provisions of all federal, state and local laws, rules and regulations
applicable to Borrower and Guarantors, its Properties or the conduct of its
business, including, without limitation, OSHA and all Environmental Laws, and
there have been no citations, notices or orders of noncompliance issued to
Borrower or Guarantors or any of their Subsidiaries under any such law, rule
or regulation.
(S) SURETY OBLIGATIONS. Except as otherwise set forth on EXHIBIT
6.1(S) attached hereto and made a part hereof, neither Borrower nor
Guarantors are obligated as surety or indemnitor under any surety or similar
bond or other contract issued and have not entered into any agreement to
assure payment, performance or completion of performance of any undertaking
or obligation of any Person.
(T) NO DEFAULTS. No event has occurred and no condition exists
which would, upon the execution and delivery of this Agreement or Borrower's
or Guarantors' performance hereunder, constitute a Default or an Event of
Default. Except as otherwise set forth on EXHIBIT 6.1(T) attached hereto and
made a part hereof, neither Borrower nor Guarantors are in default, and no
event has occurred and no condition exists which constitutes, or which with
the passage of time or the giving of notice or both
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would constitute, a default in the payment of any Indebtedness of Borrower or
Guarantors to any Person for Money Borrowed.
(U) BROKERS. There are no claims for brokerage commissions,
finder's fees or investment banking fees in connection with the transactions
contemplated by this Agreement.
(V) BUSINESS LOCATIONS; AGENT FOR PROCESS. During the preceding
seven (7) year period, neither Borrower nor Guarantors have had any office or
place of business located in any state or county other than as shown on
EXHIBIT 6.1(V) attached hereto and made a part hereof.
(W) TRADE RELATIONS. Except as set forth on EXHIBIT 6.1(W)
attached hereto and made a part hereof, there exists no actual or threatened
termination, cancellation or limitation of, or any modification or change in,
the business relationship between Borrower or Guarantors and any customer or
any group of customers whose purchases individually or in the aggregate are
material to the business of Borrower or Guarantors, or with any material
supplier, and there exists no present condition or state of facts or
circumstances which would materially adversely affect Borrower or Guarantors
or prevent Borrower or Guarantors from conducting such business after the
consummation of the transactions contemplated by this Agreement in
substantially the same manner in which it has heretofore been conducted.
(X) LEASES. EXHIBIT 6.1(X) attached hereto is a complete listing
of all capitalized leases and all operating leases of Borrower.
(Y) BILLING CONTRACTS. EXHIBIT 6.1(Y) attached hereto is a list of
all of the Billing Contracts which exist as of the date hereof setting forth
the date of and the parties to each such Billing Contract, and indicates
whether any such Billing Contract contains (i) any provision which purports
to limit, restrict or prohibit the assignment or the creation of a security
interest in all or any part of such Billing Contract or Borrower's rights
thereunder or in any LEC Receivable or End User Receivable and (ii) any
provision which permits, restricts or prohibits the netting of LEC
Receivables due to Borrower against amounts due to the LEC.
(Z) CARRIERS; CARRIER CONTRACTS. EXHIBIT 6.1(Z) attached hereto is
a complete listing of each Carrier with which Borrower does business as of
the date hereof, each Carrier Contract for each Approved Carrier executed and
delivered to Borrower by such Carrier which is the legal, valid and binding
obligation of the parties thereto, enforceable in accordance with its terms
and each Class 3 Approved Carrier and its respective credit limit.
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6.2. REAFFIRMATION. Each request for a Loan made by Borrower
pursuant to this Agreement or any of the other Loan Documents shall
constitute (i) an automatic representation and warranty by Borrower and
Guarantors to Lender that there does not then exist any Default or Event of
Default and (ii) a reaffirmation as of the date of said request of all of the
representations and warranties of Borrower and Guarantors contained in this
Agreement and the other Loan Documents.
6.3. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Borrower and
Guarantors covenant, warrant and represent to Lender that all representations
and warranties of Borrower and Guarantors contained in this Agreement or any
of the other Loan Documents shall be true at the time of Borrower's and
Guarantors' execution of this Agreement and the other Loan Documents, and
shall survive the execution, delivery and acceptance thereof by Lender and
the parties thereto and the closing of the transactions described therein or
related thereto.
SECTION 7. COVENANTS AND CONTINUING AGREEMENTS
7.1. AFFIRMATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower and
Guarantors (where applicable) covenant that, unless otherwise consented to by
Lender in writing, they shall:
(A) TAXES AND LIENS. Pay and discharge all material taxes,
assessments and governmental charges upon it, its income and Properties as
and when such taxes, assessments and charges are due and payable, except a;id
to the extent only that such taxes, assessments and charges are being
actively contested in good faith and by appropriate proceedings, and maintain
adequate reserves on its books therefor in accordance with GAAP if the
nonpayment of such taxes, assessments and charges shall not result in a Lien
upon any Collateral of Borrower or Guarantors other than a Permitted Lien.
Borrower and Guarantors shall also pay and discharge any lawful claims which,
if unpaid, might become a Lien against any of the Collateral except for
Permitted Liens.
(B) TAX RETURNS. File all federal, state and local tax returns and
other reports Borrower or Guarantors are required by law to file and maintain
adequate reserves in accordance with GAAP for the payment of all taxes,
assessments, governmental charges, and levies imposed upon them, their
income, or their profits, or upon any Property belonging to them.
(C) PAYMENT OF BANK CHARGES. Pay to Lender, on demand, any and all
reasonable fees, costs or expenses which Lender or any Participating Lender pays
to a bank or other similar institution
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(including, without limitation, any fees paid by the Lender to any
Participating Lender) arising out of or in connection with (i) the forwarding
to Borrower or any other Person on behalf of Borrower, by Lender or any
Participating Lender, of proceeds of Loans made by Lender to Borrower
pursuant to this Agreement and (ii) the depositing for collection, by Lender
or any Participating Lender, of any check or item of payment received or
delivered to Lender or any Participating Lender on account of the Obligations.
(D) BUSINESS AND EXISTENCE. Preserve and maintain their separate
corporate existences and all rights, privileges, and franchises in connection
therewith, and maintain their qualification and good standing in all states
in which the failure to be so qualified might have a material adverse effect
on the financial condition, business or Properties of Borrower or Guarantors.
(E) MAINTAIN PROPERTIES. Maintain their Properties in good
condition and make all necessary renewals, repairs, replacements, additions
and improvements thereto.
(F) COMPLIANCE WITH LAWS. Comply with all laws, ordinances,
governmental rules and regulations to which they are subject, including,
without limitation, all Environmental Laws, and obtain and keep in force any
and all licenses, permits, franchises, or other governmental authorizations
necessary to the ownership of their Properties or to the conduct of their
businesses, which failure to comply with, or obtain, or keep in force might
materially and adversely affect the businesses, prospects, profits,
Properties, or condition (financial or otherwise) of Borrower or Guarantors.
(G) ERISA COMPLIANCE. (i) At all times make prompt payment of
contributions required to meet the minimum funding standards set forth in
ERISA with respect to each Plan; (ii) promptly after the filing thereof,
furnish to Lender copies of any annual report required to be filed pursuant
to ERISA in connection with each Plan and any other employee benefit plan of
it and its Affiliates subject to said Section; (iii) notify Lender as soon as
practicable of any Reportable Event and of any additional act or condition
arising in connection with any Plan which Borrower believes might constitute
grounds for the termination thereof by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States district
court of a trustee to administer the Plan; and (iv) furnish to Lender,
promptly upon Lender's request therefor, such additional information
concerning any Plan or any other such employee benefit plan as may be
reasonably requested.
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(H) BUSINESS RECORDS. Keep adequate records and books of account with
respect to their business activities in which proper entries are made in
accordance with GAAP reflecting all its financial transactions.
(I) VISITS AND INSPECTIONS. Permit representatives of Lender, from
time to time as often as may be requested, to visit and inspect the Properties
of Borrower, Guarantors or any Carrier, inspect and make extracts from their
books and records, and discuss with their officers, their employees and their
independent accountants, the business, assets, liabilities, financial condition,
business prospects and results of operations. The cost of field examinations of
Borrower's and Guarantors' premises shall be paid by Borrower at a rate of Five
Hundred Dollars ($500.00) per field examiner per day plus all expenses. The
cost of not more than one (1) annual visit to any Carrier's premises shall be
paid by Borrower at a rate of Seven Hundred Fifty Dollars ($750.00) per person
per day plus all expenses.
(J) FINANCIAL STATEMENTS. Cause to be prepared and furnished to
Lender the following (all to be kept and prepared in accordance with GAAP
applied on a consistent basis, unless Borrower's and/or Guarantors' certified
public accountants concur in any change therein and such change is disclosed to
Lender and is consistent with GAAP):
(i) as soon as possible, but not later than ninety (90) days
after the close of each fiscal year of Borrower, audited financial statements of
Borrower and Guarantors, on a consolidated and a consolidating basis as of the
end of such year certified, in a manner and with an unqualified report without
explanatory paragraphs, by a firm of independent certified public accountants of
recognized national standing or otherwise acceptable to Lender.
(ii) as soon as possible, but not later than sixty (60) days
after the close of each of the first three (3) fiscal quarters of each fiscal
year of Borrower, unaudited financial statements of Borrower and Guarantors as
of the end of such quarter on a consolidated basis, together with consolidating
financial information, all certified by the chief financial officer of Borrower
and Guarantors as prepared in accordance with GAAP (with the exception of the
omission of footnotes therefrom) and fairly presenting the financial position
and the results of operations of Borrower and Guarantors for such month and
period;
(iii) promptly after the sending or filing thereof, as the case
may be, copies of any proxy statements, financial statements or reports which
Borrower and Guarantors have made
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available to any Persons and copies of any regular, periodic and special
reports which Borrower and Guarantors file with any governmental authority;
(iv) no later than the tenth of each month, monthly accounts
receivable aging reports prepared (a) by Carrier, (b) by LEC, and (c) by Carrier
by LEC; and duplicate copies of all validated federal excise tax deposit
receipts;
(v) a daily remittance report that breaks out by Approved
Carrier and by LEC detailing taxes, billing and collection costs, unapplied
cost, the amount of accounts receivable originally transmitted and the
application of the amounts received;
(vi) as soon as possible but not later than fifteen
(15) days after the end of each month, a written report indicating those
Billing Contracts which are within forty-five
(45) days of expiration; and
(vii) such other data and information (financial and otherwise)
as Lender, from time to time, may reasonably request, bearing upon or related to
the Collateral, Borrower's financial condition or results of operations,
including, without limitation, weekly ACS reports, weekly accounts receivable
file reports, weekly PAR report summaries, monthly flash reports, federal income
tax returns of Borrower, accounts payable ledgers, bank statements and any
information relating to the payment of excise taxes and payroll taxes.
Concurrently with the delivery of the financial statements described
in clause (i) of this Section 7.1(J), Borrower and Guarantors shall cause to be
prepared and furnish to Lender a certificate of the aforesaid certified public
accountants certifying to Lender that, based upon their examination of the
financial statements of Borrower and Guarantors performed in connection with
their examination of said financial statements, they are not aware of any
Default or Event of Default, or, if they are aware of such Default or Event of
Default, specifying the nature thereof. Concurrently with the delivery of the
financial statements described in clauses (i) and (ii) of this Section 7.1(J),
Borrower and Guarantors shall cause to be prepared and furnished to Lender a
certificate from the chief financial officer of Borrower certifying to Lender
that to the best of his knowledge, Borrower and Guarantors have kept, observed,
performed and fulfilled each and every covenant, obligation and agreement
binding upon Borrower and Guarantors in this Agreement and the other Loan
Documents and that no Default or Event of Default has occurred, or, if such
Default or Event of Default has occurred, specifying the nature thereof.
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(K) NOTICES TO LENDER. Notify Lender in writing: (i) promptly
after Borrower's or Guarantors' learning thereof, of the commencement of any
litigation affecting Borrower or Guarantors or any of their Properties which
might lead to a judgment or settlement in excess of One Hundred Thousand Dollars
($100,000.00) and of the institution of any administrative proceeding, which may
materially and adversely affect Borrower's or Guarantors' operations, financial
condition, Properties or business or Lender's Lien upon any of the Collateral;
(ii) at least ten (10) days prior thereto, of Borrower's or Guarantors' opening
of any new office or place of business or Borrower's or Guarantors' closing of
any existing office or place of business; (iii) promptly after Borrower's or
Guarantors' learning thereof, of any material labor dispute to which Borrower or
Guarantors may become a party, any strikes or walkouts relating to any of its
plants or other facilities, and the expiration of any labor contract to which
either Borrower or Guarantors are a party or by which they are bound; (iv)
promptly after Borrower's or Guarantors' learning thereof, of any material
default by Borrower or Guarantors under any note, indenture, loan agreement,
mortgage, lease, deed, guaranty or other similar agreement relating to any
Indebtedness of Borrower or Guarantors; (v) promptly after the occurrence
thereof, of any Default or Event of Default; (vi) promptly after the occurrence
thereof, of any material default by any obligor under any note or other evidence
of Indebtedness payable to Borrower or Guarantors; and (vii) promptly after the
rendition thereof, of any judgment rendered against Borrower.
(L) SUBORDINATIONS. Provide Lender with a debt subordination
agreement executed by Borrower or Guarantors and any Person who is an Affiliate
of Borrower or Guarantors to whom Borrower or Guarantors are indebted for Money
Borrowed, subordinating in right of payment and claim all of such Indebtedness
and any future advances thereon to the full and final payment and performance of
the Obligations on terms and conditions acceptable to Lender.
(M) NEW BILLING CONTRACTS. With respect to each Billing
Contract entered into after the date hereof, provide Lender within thirty (30)
days of the date of such new Billing Contract, a copy of such new Billing
Contract.
(N) FURTHER ASSURANCES. At Lender's request, promptly execute
or cause to be executed and deliver to Lender any and all documents, instruments
and agreements deemed necessary by Lender to perfect or to continue the
perfection of Lender's Liens, to facilitate the collection of the Collateral or
otherwise to give effect to or carry out the terms or intent of this Agreement
or any of the other Loan Documents.
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7.2. NEGATIVE COVENANTS. During the term of this Agreement, and
thereafter for so long as there are any Obligations to Lender, Borrower and
Guarantors covenant that, unless Lender has first consented thereto in writing,
neither Borrower nor Guarantors will:
(A) MERGERS; CONSOLIDATIONS; ACQUISITIONS. Merge or consolidate
with any Person other than National Telephone Exchange, Inc., nor acquire all or
any substantial part of the Properties of any Person.
(B) LOANS. Make any loans or other advances of money exceeding
Five Hundred Thousand Dollars ($500,000.00) in the aggregate (other than for
salary, travel advances, advances against commissions and other similar advances
in the ordinary course of business) to any Person except for advances by
Borrower in connection with the purchase of End User Accounts from Lender
Approved Carriers and Borrower Approved Carriers as contemplated by the Carrier
Contracts.
(C) TOTAL INDEBTEDNESS. Create, incur, assume, or suffer to
exist any Indebtedness, except: (i) Obligations owing to Lender; (ii) accounts
payable to trade creditors and current operating expenses (other than for Money
Borrowed), in each case incurred in the ordinary course of business, (iii) other
Permitted Purchase Money Indebtedness, and (iv) that related to the acquisition
of National Telephone Exchange, Inc.
(D) AFFILIATE TRANSACTIONS. Enter into any transaction with any
Affiliate, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's or Guarantors' business and upon fair and reasonable
terms which are no less favorable to Borrower or Guarantors than Borrower or
Guarantors would obtain in a comparable arm's length transaction with a Person
not an Affiliate of Borrower or Guarantors.
(E) PARTNERSHIPS OR JOINT VENTURES. Become or agree to become a
general or limited partner in any general or limited partnership or a joint
venturer in any joint venture.
(F) ADVERSE TRANSACTIONS. Enter into any transaction which
materially and adversely affects or may materially and adversely affect the
Collateral or Borrower's or Guarantors' ability to repay the Obligations or
permit or agree to any material extension, compromise or settlement or make any
material change or modification of any kind or nature with respect to any
Account, including any of the terms relating thereto, other than discounts,
credits and allowances in the ordinary course of business, all of which shall be
reflected in the monthly
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reporting submitted to Lender pursuant to Section 7.1(J) of this Agreement.
(G) GUARANTIES. Guarantee, assume, endorse or otherwise, in any
way, become directly or contingently liable with respect to the Indebtedness of
any Person other than Affiliates (including National Telephone Exchange, Inc.
provided that the pending acquisition is consummated) except by endorsement of
instruments or items of payment for deposit or collection.
(H) LIMITATION ON LIENS. Create or suffer to exist any Lien upon
any of the Collateral, income or profits, whether now owned or hereafter
acquired, except: (i) Liens at any time granted in favor of Lender; (ii) Liens
for taxes (excluding any Lien imposed pursuant to any of the provisions of
ERISA) not yet due or being contested as permitted by Section 7.1(A) hereof, but
only if such Lien does not materially adversely affect Lender's rights or the
priority of Lender's Lien in the Collateral; (iii) Liens securing the claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
like Persons for labor, materials, supplies or rentals incurred in the ordinary
course of Borrower's business (but only if the payment thereof is not at the
time required); (iv) Liens resulting from deposits made in the ordinary course
of business in connection with workmen's compensation, unemployment insurance,
social security and other like laws; (v) attachment, judgment and other similar
non-tax Liens arising in connection with court proceedings, but only if and for
so long as the execution or other enforcement of such Liens is and continues to
be effectively stayed and bonded on appeal in a manner satisfactory to Lender
for the full amount thereof, the validity and amount of the claims secured
thereby are being actively contested in good faith and by appropriate lawful
proceedings and such Liens do not, in the aggregate, materially detract from the
value of the Property of Borrower or materially impair the use thereof in the
operation of Borrower's business; and (vi) Purchase Money Liens securing
Permitted Purchase Money Indebtedness.
(I) DISTRIBUTIONS. Declare or make any Distributions.
(J) BUSINESS LOCATIONS. Transfer its principal place of business
or chief executive office, or maintain records with respect to Accounts, to or
at any locations other than those at which the same are presently kept or
maintained, as set forth on EXHIBIT 4.4 hereto, except upon at least thirty (30)
days prior written notice to Lender and after the delivery to Lender of
financing statements, if required by Lender, in form satisfactory to Lender to
perfect or continue the perfection of Lender's Lien and security interest
hereunder.
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(K) CHANGE OF BUSINESS. Enter into any new business or make any
material change in any of Borrower business objectives, purposes and operations.
(L) CHANGE OF COMPUTER SYSTEM. Make any material changes to the
computer system which would effect the processing of Accounts, without the prior
written consent of Lender.
(M) DISPOSITION OF ASSETS. Sell, lease or otherwise dispose of
any of the Collateral with a value in excess of Five Thousand Dollars
($5,000.00), including any disposition of the Collateral as part of a sale and
leaseback transaction, to or in favor of any Person, or dispositions expressly
authorized by this Agreement with respect to sales, assignments, transfers or
deliveries of End User Accounts to LEC's pursuant to Billing Contracts.
(N) NAME OF BORROWER AND GUARANTORS. Use any name (other than
its own) or any fictitious name, tradename, tradestyle or "d/b/a" except for the
names disclosed on EXHIBIT 6.1(B) attached hereto and such other names of which
Borrower and Guarantors have given Lender fifteen (15) days prior written
notice.
(O) USE OF LENDER'S NAME. Without the prior written consent of
Lender, use the name of Lender or the name of any Affiliates of Lender in
connection with any of Borrower's or Guarantors' businesses or activities,
except in connection with internal business matters, as required in dealings
with governmental agencies and financial institutions and to trade creditors or
potential customers of Borrower solely for credit reference purposes.
(P) MARGIN SECURITIES. Own, purchase or acquire (or enter into
any contract to purchase or acquire) any "margin security" as defined by any
regulation of the Federal Reserve Board as now in effect or as the same may
hereafter be in effect unless, prior to any such purchase or acquisition or
entering into any such contract, Lender shall have received an opinion of
counsel satisfactory to Lender to the effect that such purchase or acquisition
will not cause this Agreement to violate Regulations G or U or any other
regulation of the Federal Reserve Board then in effect.
(Q) RESTRICTED INVESTMENT. Make or have any Restricted
Investment.
(R) FISCAL YEAR. Change its fiscal year or permit any
Subsidiary to have a fiscal year different from that of Borrower.
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(S) STOCK OF SUBSIDIARY, ETC. Sell or otherwise dispose of
any shares of capital stock of any Subsidiary.
(T) BILLING AND COLLECTION PAYABLES. Permit any amounts owed by
Borrower to any LEC for billing and collection Services to remain outstanding
for more than thirty (30) days past when such amounts are due.
7.3 LENDER'S COVENANTS. During the term of this Agreement, Lender
covenants that it shall:
(A) REVIEW OF LOAN REQUESTS. As set forth in Section 2.1(B)
hereof and with the understanding that timing is of the essence, use its best
efforts to review credit information supplied to Lender by Borrower once such
information is complete, in a timely manner in making Lender's determination of
the approval of a Carrier or the increase in credit of an Approved Carrier.
(B) FUNDING OF LOAN REQUESTS. Fund each Loan Request from
Borrower by wire transfer within one (l) Business Day following Lender's receipt
of such Loan Request in the amount that Lender deems appropriate, and notify
Borrower within such one (l) Business Day of the reasoning for any discrepancy
between the amount of the Loan Request and the amount of the wire transfer.
(C) REVIEW APPROVED CARRIER LIMITS. Upon request from Borrower,
but not more often than on a quarterly basis, review the credit limits, both
individually and in the aggregate for Class 1 Approved Carriers. Lender shall
review the Borrower's fees and credit limits for Class 2 and Class 3 Approved
Carriers upon request by Borrower. Nothing contained in this paragraph 7.3(C)
shall obligate Lender to increase the credit limits for any Approved Carriers
and the nature, basis, and extent of any review by Lender shall be in Lender's
sole determination.
SECTION 8. CONDITIONS PRECEDENT
Notwithstanding any other provision of this Agreement or any of the
other Loan Documents, and without affecting in any manner the rights of Lender
under the other Sections of this Agreement, it is understood and agreed that
Lender will not make the initial Loan under Section 2 of this Agreement unless
and until each of the conditions set forth in Subsection 8.1 below has been and
continues to be satisfied, all in form and substance satisfactory to Lender and
its counsel and that Lender will not make any subsequent Loans under Section 2
of this Agreement unless and until each of the conditions set forth in
Subsection 8.2 has been and continues to be satisfied:
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8.1. DOCUMENTATION. Lender shall have received the following
documents, each to be in form and substance satisfactory to Lender and its
counsel:
(A) The Loan Documents duly executed, accepted and acknowledged
by or on behalf of Borrower and each of the signatories thereto;
(B) Certificate of insurance evidencing Borrower's casualty
insurance coverage;
(C) Copies of all filing receipts or acknowledgments issued by
any governmental authority to evidence any filing or recordation necessary to
perfect (i) the Liens of Borrower in the End User Accounts, and (ii) the Liens
of Lender in the Collateral, and evidence in a form acceptable to Lender that
such Liens constitute valid and perfected security interests and Liens, having
the Lien priority specified in Section 4.3(B) hereof; (iii) the assignment of
Borrower's Liens in the End User Accounts to Lender; and (iv) the Liens of
Lender in the assets of Guarantor.
(D) A copy of the Certificate of Incorporation of Borrower and
Guarantors, and all amendments thereto, certified by the Secretary of State or
other appropriate official of its jurisdiction of formation;
(E) Good standing certificates for Borrower and Guarantors,
issued by the Secretary of State of Borrower's and Guarantor's jurisdictions of
formation;
(F) A closing certificate signed by the President and Chief
Financial Officer of Borrower and Guarantors dated as of the date hereof,
stating that (i) the representations and warranties set forth in Section 8
hereof are true and correct on and as of such date, (ii) Borrower and Guarantors
are on such date in compliance with all the terms and provisions set forth in
this Agreement and (iii) on such date no Default or Event of Default has
occurred or is continuing;
(G) The favorable, written opinion of counsel to Borrower and
Guarantors, regarding Borrower and Guarantors, the Loan Documents and the
transactions contemplated by this Agreement and any of the other Loan Documents,
to be in form and content acceptable to Lender and its counsel;
(H) Written instructions from Borrower directing the application
of proceeds of the initial Loan made pursuant to this Agreement, and an initial
Borrowing Base Certificate from Borrower reflecting that Borrower has Eligible
LEC Receivables in
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amounts sufficient in value and amount to support Loans in
the amount requested by Borrower on the date of such certificate;
(I) Duly executed Escrow and Disbursing Agreement establishing
the Dominion Account with a financial institution acceptable to Lender for the
collection or servicing of the Accounts;
(J) Duly executed copies of each Carrier Contract and the
Addendum thereto for each Carrier;
(K) Completed OSP Background Forms for each Approved Carrier;
(L) Executed Guaranty Agreements from each of the Guarantors for
the Revolving Credit Facility and Borrower and U.S. Long Distance Corp. for the
Term Loan Facility;
(M) Payment of the loan origination fee and term loan facility
fee as set forth in Section 3.2;
(N) Duly executed Class 1 OSP Certification Forms for each Class
1 Approved Carriers, certifying that all preconditions for borrowing based upon
Eligible Accounts from such Class 1 Approved Carrier have been met;
(O) Information on the applicable Collateral and Credit Criteria
List for each Approved Carrier; and
(P) Such other documents, instruments and agreements as Lender
shall reasonably request in connection with the foregoing matters.
8.2. OTHER CONDITIONS. The following conditions have been and
shall continue to be satisfied, in the sole discretion of Lender:
(A) No Default or Event of Default shall exist;
(B) Each of the conditions precedent set forth in the other Loan
Documents shall have been satisfied;
(C) Since March 31, 1991, except for changes which are reflected
on the March 31, 1991 financial statements prepared by management and submitted
to Lender, there shall not have occurred any material adverse change in the
business, financial condition or results of operations of Borrower or
Guarantors, or the existence or value of any Collateral, or any event, condition
or state of facts which would reasonably be expected materially and
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adversely to affect the business, financial condition or results of
operations of Borrower or Guarantors; and
(D) No action, proceeding, criminal investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain or prohibit, or to
obtain damages in respect of, or which is related to or arises out of this
Agreement or the consummation of the transactions contemplated hereby or which,
in Lender's reasonable judgment, would make it inadvisable to consummate the
transactions contemplated by this Agreement or any of the other Loan Documents.
SECTION 9. EVENTS OF DEFAULT; RIGHTS AND REMEDIES ON DEFAULT
9.1. EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(A) PAYMENT OF NOTE. Borrower shall fail to pay any installment
of principal owing on the Note due date or shall fail to pay any interest or
premium owing on the Note when due.
(B) PAYMENT OF OBLIGATIONS. Borrower shall fail to pay any of
the Obligations that are not evidenced by the Note within ten (10) days after
Borrower's receipt of notice of non-payment thereof from Lender, provided that
such Obligation has been presented for payment (whether due at stated maturity,
on demand, upon acceleration or otherwise).
(C) MISREPRESENTATIONS. Any warranty, representation, or other
statement made or furnished to Lender by or on behalf of Borrower or Guarantors
or in any instrument, certificate or financial statement furnished in compliance
with or in reference to this Agreement or any of the other Loan Documents proves
to have been false or misleading in any material respect when made or furnished,
unless such warranty, representation or other statement is true or no longer
misleading ten (10) days after Lender has provided Borrower with notice thereof.
(D) BREACH OF COVENANTS. Borrower or Guarantors shall fail or
neglect to perform, keep or observe (i) any covenant contained in Section 5.1 of
this Agreement, unless such breach is cured within three (3) days after
telephonic notice of such breach from Lender to Borrower, or (ii) any other
covenant contained in this Agreement (other than a covenant, a default in the
performance or observance of which is dealt with specifically elsewhere in this
Section 9.1) and the breach of such other covenant is not cured to Lender's
satisfaction within ten (10) days after Borrower's receipt of notice from Lender
of a breach of any such covenant in this Agreement.
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(E) DEFAULT UNDER OTHER AGREEMENTS. Any event of default shall
occur under, or Borrower or Guarantors shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Other Agreements and such default shall continue beyond any applicable
period of grace and shall continue ten (10) days after Lender has provided
Borrower with notice thereof.
(F) DEFAULT UNDER SECURITY DOCUMENTS. Any event of default
shall occur under, or Borrower or Guarantors shall default in the performance or
observance of any term, covenant, condition or agreement contained in, any of
the Security Documents and such default shall continue beyond any applicable
period of grace and shall continue ten (10) days after Lender has provided
Borrower with notice thereof.
(G) OTHER DEFAULTS. There shall occur any default or event of
default on the part of Borrower or Guarantors which shall continue beyond any
applicable period of grace (including specifically, but without limitation, due
to non-payment) under any material agreement, document or instrument to which
Borrower or Guarantors are a party or by which Borrower or Guarantors or any of
their Property is bound, creating or relating to any Indebtedness for Money
Borrowed if the payment or maturity of such Indebtedness is accelerated in
consequence of such event of default.
(H) UNINSURED LOSSES; UNAUTHORIZED DISPOSITIONS. Any material
loss, theft, damage or destruction not fully covered by insurance (as required
by this Agreement and subject to such deductibles as Lender shall have agreed to
in writing), or sale, lease or encumbrance of any of the Collateral, other than
the sale of End User Accounts to LEC's pursuant to Billing Contracts, or the
making of any levy, seizure, or attachment thereof or thereon except in all
cases as may be specifically permitted by other provisions of this Agreement.
(I) ADVERSE CHANGES. There shall occur any material adverse
change in the financial condition or business prospects of Borrower or
Guarantors, which in the reasonable judgment of Lender, threatens Borrower's or
Guarantors' ability to perform the Obligations under this Agreement.
(J) BANKRUPTCY, ETC. Borrower or Guarantors shall suffer the
appointment of a receiver, trustee, custodian or similar fiduciary, or shall
make an assignment for the benefit of creditors, or any petition for an order
for relief shall be filed by or against Borrower or Guarantors under the
Bankruptcy Code, unless any such involuntary petition is dismissed within thirty
(30) days or Borrower or Guarantors shall make any offer of
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settlement, extension or composition to its unsecured creditors generally.
(K) BUSINESS DISRUPTION; CONDEMNATION. There shall occur a
cessation of a substantial part of the business of Borrower or Guarantors for a
period which significantly affects Borrower's or Guarantors's capacity to
continue their businesses, or Borrower or Guarantors shall suffer the loss or
revocation of any material license or permit now held or hereafter acquired by
Borrower or Guarantors which is necessary to the continued or lawful operation
of a substantial part of their businesses; or Borrower or Guarantors shall be
enjoined, restrained or in any way prevented by court, governmental or
administrative order from conducting all or any material part of their business
affairs; or any material lease or agreement pursuant to which Borrower or
Guarantors lease, use or occupy any Property material to Borrower's or
Guarantors' capacity to continue their businesses shall be canceled or
terminated by the other party to such lease or agreement prior to the expiration
of its stated term; or any material part of the Collateral shall be taken
through condemnation or the value of such Collateral shall be impaired
materially through condemnation.
(L) ERISA. A Reportable Event shall occur which Lender, in its
sole discretion, shall determine in good faith constitutes grounds for the
termination by the Pension Benefit Guaranty Corporation of any Plan or for the
appointment by the appropriate United States district court of a trustee for any
Plan, or if any Plan shall be terminated or any such trustee shall be requested
or appointed, or if Borrower or Guarantors are in "default" (as defined in
Section 4219(c) (5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from Borrower's or Guarantors' complete or partial withdrawal from
such Plan and shall continue ten (10) days after Lender has provided Borrower
with notice thereof.
(M) LITIGATION. Borrower, Guarantors or any Affiliate shall
challenge or contest in any action, suit or proceeding the validity or
enforceability of this Agreement or any of the other Loan Documents, the
legality or enforceability of any of the Obligations or the perfection or
priority of any Lien granted to Lender.
9.2. ACCELERATION OF THE OBLIGATIONS. Without in any way limiting
the right of Lender to demand payment of any portion of the Obligations payable
on demand in accordance with Section 3.5 hereof, upon and after the occurrence
of an Event of Default as above provided, all or any portion of the Obligations
due or to become due from Borrower or Guarantors to Lender, whether under this
Agreement, or any of the other Loan Documents or otherwise,
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shall, at the option of Lender and without notice or demand by Lender, become
at once due and payable and Borrower and/or Guarantors shall forthwith pay to
Lender, in addition to any and all sums and charges due, the entire principal
of and interest accrued on the Obligations.
9.3. REMEDIES. Upon and after the occurrence of an Event of
Default, Lender shall have and may exercise from time to time the following
rights and remedies:
(A) All of the rights and remedies of a secured party under the
Code or under other applicable law, and all other legal and equitable rights to
which Lender may be entitled, all of which rights and remedies shall be
cumulative, and none of which shall be exclusive, and shall be in addition to
any other rights or remedies contained in this Agreement or any of the other
Loan Documents.
(B) Borrower and Guarantors agree that ten (10) days written
notice to Borrower or Guarantors of any public or private sale or other
disposition of such Collateral shall be reasonable notice thereof, and such sale
shall be at such locations as Lender may designate in said notice. Lender shall
have the right to conduct such sales on Borrower's or Guarantors' premises,
without charge therefor, and such sales may be adjourned from time to time in
accordance with applicable law. Lender shall have the right to sell or
otherwise dispose of such Collateral, or any part thereof, for cash, credit or
any combination thereof, and Lender may purchase all or any part of such
Collateral at public or, if permitted by law, private sale and, in lieu of
actual payment of such purchase price, may set off the amount of such price
against the Obligations.
(C) Lender is hereby granted a license or other right to use,
without charge, Borrower's and Guarantors' labels, patents, copyrights, rights
of use of any name, trade secrets, tradenames, trademarks and advertising
matter, or any Property of a similar nature, as it pertains to the Collateral,
in advertising for sale and selling any Collateral and Borrower's rights under
all licenses and all franchise agreements shall inure to Lender's benefit.
(D) The proceeds realized from the collection or sale of any
Collateral may be applied, after allowing two (2) Business Days for collection,
first to the reasonable costs, expenses and attorneys' fees and expenses
incurred by Lender for collection and for acquisition, completion, protection,
removal, storage, sale and delivery of the Collateral; secondly, to interest due
upon any of the Obligations; and thirdly, to the principal of the
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Obligations. If any deficiency shall arise, Borrower and Guarantors shall
remain liable to Lender therefor.
9.4. REMEDIES CUMULATIVE; NO WAIVER. All covenants, conditions,
provisions, warranties, guaranties, indemnities, and other undertakings of
Borrower and Guarantors contained in this Agreement and the other Loan
Documents, or in any document referred to herein or contained in any agreement
supplementary hereto or in any schedule given to Lender or contained in any
other agreement between Lender and Borrower or Lender and Guarantors,
heretofore, concurrently, or hereafter entered into, shall be deemed cumulative
to and not in derogation or substitution of any of the terms, covenants,
conditions, or agreements of Borrower and Guarantors herein contained. The
failure or delay of Lender to exercise or enforce any rights, Liens, powers, or
remedies hereunder or under any of the aforesaid agreements or other documents
or security or Collateral shall not operate as a waiver of such Liens, rights,
powers and remedies, but all such Liens, rights, powers, and remedies shall
continue in full force and effect until all Loans and all other Obligations
owing or to become owing from Borrower or Guarantors to Lender shall have been
fully satisfied, and all Liens, rights, powers, and remedies herein provided for
are cumulative and none are exclusive.
SECTION 10. MISCELLANEOUS
10.1. POWER OF ATTORNEY. Borrower and Guarantors hereby irrevocably
designate, make, constitute and appoint Lender (and all Persons designated by
Lender) as such Borrower's and Guarantors' true and lawful attorney (and agent-
in-fact) and Lender, or Lender's agent, may, without notice to Borrower or
Guarantors and in Borrower's, Guarantors' or Lender's name, but at the cost and
expense of Borrower or Guarantors:
(A) At such time or times hereafter as Lender or said agent may
determine, in its sole discretion, endorse either Borrower's or Guarantors'
names on any checks, notes, acceptances, drafts, money orders or any other
evidence of payment or proceeds of the Collateral which come into the possession
of Lender or under Lender's control; and
(B) At such time or times upon or after the occurrence of an
Event of Default as Lender or its agent in its sole discretion may determine:
(i) demand payment of the Accounts from the Account Debtors, enforce payment of
the Accounts by legal proceedings or otherwise, and generally exercise all of
Borrower's rights and remedies with respect to the collection of the Accounts;
(ii) settle, adjust, compromise, discharge or release any of the Accounts or
other Collateral or any legal proceedings brought to collect any of the Accounts
or other
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Collateral; (iii) sell or assign any of the Accounts and other Collateral
upon such terms, for such amounts and at such time or times as Lender deems
advisable; (iv) take control, in any manner, of any item of payment or
proceeds relating to any Collateral; (v) obtain information pertaining to any
portion of the Collateral from a format processing company; (vi) prepare,
file and sign Borrower's or Guarantors' name to a proof of claim in
bankruptcy or similar document against any Account Debtor or to any notice of
lien, assignment or satisfaction of lien or similar document in connection
with any of the Collateral; (vii) receive, open and dispose of all mail
addressed to Borrower or Guarantors and to notify postal authorities to
change the address for delivery thereof to such address as Lender may
designate; (viii) endorse the name of Borrower upon any of the items of
payment or proceeds relating to any Collateral and deposit the same to the
account of Lender on account of the Obligations; (ix) endorse the name of
Borrower or Guarantors upon any chattel paper, document, instrument, invoice,
freight bill, bill of lading or similar document or agreement relating to the
Accounts and any other Collateral; (x) use Borrower's or Guarantors'
stationery and sign the name of Borrower or Guarantors' to verifications of
the Accounts and notices thereof to Account Debtors; (xi) use the information
recorded on or contained in any data processing equipment and computer
hardware and software relating to the Accounts and any other Collateral and
to which Borrower or Guarantors have access; (xii) make and adjust claims
under policies of insurance; and (xiii) do all other acts and things
necessary, in Lender's reasonable determination, to fulfill Borrower's and
Guarantors' obligations under this Agreement.
10.2. INDEMNITY. Borrower and Guarantors hereby agree to indemnify
Lender and hold Lender harmless from and against any liability, loss, damage,
suit, action or proceeding ever suffered or incurred by Lender as the result of
Borrower's or Guarantors' failure to observe, perform or discharge Borrower's or
Guarantors' duties hereunder except to the extent such failure is the result of
Borrower or Guarantors following Lender's instructions or the result of Lender's
gross negligence or willful misconduct. Without limiting the generality of the
foregoing, this indemnity shall extend to any claims asserted against Lender by
any Person under any Environmental Laws or similar laws by reason of Borrower's
or Guarantors' failure to comply with laws applicable to solid or hazardous
waste materials or other toxic substances or the failure of the Property to be
in compliance therewith. The obligation of Borrower or Guarantors under this
Section 12.2 shall survive the payment in full of the Obligations and the
termination of this Agreement.
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10.3. MODIFICATION OF AGREEMENT; SALE OF INTEREST. This Agreement
may not be modified, altered or amended, except by an agreement in writing
signed by Borrower, Guarantors and Lender. Borrower and Guarantors may not sell,
assign or transfer any interest in this Agreement or any of the other Loan
Documents, or any portion thereof, including, without limitation, Borrower's or
Guarantors' rights, title, interests, remedies, powers, and duties hereunder or
thereunder; provided, however, that Borrower and Guarantors hereby consents to
Lender's participation, sale, assignment, transfer or other disposition, at any
time or times hereafter, of this Agreement and any of the other Loan Documents,
or of any portion hereof or thereof, including, without limitation, Lender's
rights, title, interests, remedies, powers, and duties hereunder or thereunder.
10.4. REIMBURSEMENT OF EXPENSES. If, at any time or times prior or
subsequent to the date hereof, Lender employs outside counsel for advice or
other representation, or incurs reasonable legal expenses or other costs or out-
of-pocket expenses in connection with: (A) the negotiation and preparation of
this Agreement or any of the other Loan Documents, any amendment of or
modification of this Agreement or any of the other Loan Documents; or (B) the
administration of this Agreement or any of the other Loan Documents and the
transactions contemplated hereby and thereby; (C) any litigation, contest,
dispute, suit, proceeding or action (whether instituted by Lender, Borrower,
Guarantors or any other Person) in any way relating to the Collateral, this
Agreement or any of the other Loan Documents or Borrower's or Guarantors'
affairs; (D) any attempt to enforce any rights of Lender against Borrower or
Guarantors or any other Person which may be obligated to Lender by virtue of
this Agreement or any of the other Loan Documents, including, without
limitation, the Account Debtors; or (E) any attempt to verify, protect,
preserve, restore, collect, sell, liquidate or otherwise dispose of or realize
upon the Collateral; then, in any such event, the reasonable attorneys' fees
arising from such services and all expenses, costs, charges and other fees of
such counsel, or of Lender or relating to any of the events or actions described
in this Section 10.4 shall be payable, on demand, by Borrower or Guarantors to
Lender and shall be additional Obligations here-under secured by the Collateral.
Without limiting the generality of the foregoing, such expenses, costs, charges
and fees referred to in this Section 10.4 may include court costs and expenses;
photocopying and duplicating expenses; court reporter fees, costs and expenses;
long distance telephone charges; air express charges; telegram charges;
secretarial overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such outside legal services.
Additionally, if any taxes (excluding taxes imposed upon or measured by the net
income of Lender) shall be payable on account
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of the execution or delivery of this Agreement, or the execution, delivery,
issuance or recording of any of the Loan Documents, or the creation of any of
the Obligations hereunder, by reason of any existing or hereafter enacted
federal or state statute, Borrower will pay all such taxes, including, but
not limited to, any interest and penalties thereon, and will indemnify and
hold Lender harmless from and against liability in connection therewith.
10.5. INDULGENCES NOT WAIVERS. Lender's failure, at any time or
times hereafter, to require strict performance by Borrower or Guarantors of any
provision of this Agreement shall not waive, affect or diminish any right of
Lender thereafter to demand strict compliance and performance therewith. Any
suspension or waiver by Lender of an Event of Default by Borrower or Guarantors
under this Agreement or any of the other Loan Documents shall not suspend, waive
or affect any other Event of Default by Borrower or Guarantors under this
Agreement or any of the other Loan Documents, whether the same is prior or
subsequent thereto and whether of the same or of a different type. None of the
undertakings, agreements, warranties, covenants and representations of Borrower
or Guarantors contained in this Agreement or any of the other Loan Documents and
no Event of Default by Borrower or Guarantors under this Agreement or any of the
other Loan Documents shall be deemed to have been suspended or waived by Lender,
unless such suspension or waiver is by an instrument in writing specifying such
suspension or waiver and is signed by a duly authorized representative of Lender
and directed to Borrower or Guarantors.
10.6. SEVERABILITY. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective only to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
10.7. SUCCESSORS AND ASSIGNS. This Agreement, the Other Agreements
and the Security Documents shall be binding upon and inure to the benefit of the
successors and assigns of Borrower and Lender. This provision, however, shall
not be deemed to modify Section 10.3 hereof.
10.8. CUMULATIVE EFFECT; CONFLICT OF TERMS. The provisions of the
Other Agreements and the Security Documents are hereby made cumulative with the
provisions of this Agreement. Except as otherwise provided in Section 3.4 of
this Agreement and except as otherwise provided in any of the other Loan
Documents by specific
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reference to the applicable provision of this Agreement, if any provision
contained in this Agreement is in direct conflict with, or inconsistent with,
any provision in any of the other Loan Documents, the provision contained in
this Agreement shall govern and control.
10.9. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which counterparts taken together shall constitute but
one and the same instrument.
10.10. NOTICES. Except as otherwise provided herein, all notices,
requests and demands to or upon a party hereto to be effective shall be in
writing (and, if sent by mail, shall be sent by certified or registered mail,
return receipt requested) or by telegraph, telex or telecopier and, unless
otherwise expressly provided herein, shall be deemed to have been validly
served, given or delivered when delivered against receipt or three (3) Business
Day after deposit in the mail, postage prepaid, or, in the case of telegraphic
notice, when delivered to the telegraph company, or, in the case of telex
notice, when sent, answerback received, or in the case of telecopied notice,
when sent addressed as follows:
(A) If to Lender:
Bell Atlantic Tricon Leasing Corporation
1060 First Avenue
King of Prussia, PA 19406
Attention: CYRUS J. KEEFER,
SENIOR VICE PRESIDENT
and
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Bell Atlantic TriCon Leasing Corporation
Asset Based Lending
Headway Complex
Prudential Building I, Suite 105
4500 North State Road 7
Fort Lauderdale, FL 33319
Attention: JEFFREY WEISS
With a copy to:
Bell Atlantic TriCon Leasing Corporation
95 N. Route 17 South
Paramus, NJ 07653
Attention: JOSEPH D'AMORE, ESQUIRE
and a copy to:
Blank, Rome, Comisky & McCauley
1200 Four Penn Center
Philadelphia, PA 19103
Attention: LAWRENCE F. FLICK, II, ESQUIRE
(B) If To Borrower or Guarantors:
Zero Plus Dialing Inc.
9311 San Pedro, Suite 300
San Antonio, TX 78216
Attention: Kelly Simmons, Vice President
and
U.S. Long Distance Corp.
9311 San Pedro, Suite 300 San Antonio, TX 78216
Attention: Mark D. Buckner, Vice President,
Finance
Audie Long, Esquire
or to such other address as each party may designate for itself by like notice
given in accordance with this Section 10.10; PROVIDED, HOWEVER, that any notice,
request or demand to or upon Lender pursuant to Sections 2.2 or 3.5 shall not be
effective until received by Lender.
10.11. LENDER'S CONSENT. Whenever Lender's consent is required to be
obtained under this Agreement, any of the Other Agreements or any of the
Security Documents as a condition to any
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action, inaction, condition or event, Lender shall not unreasonably withhold
such consent, provided that Lender shall be authorized to condition its
consent upon the giving of additional collateral security for the
Obligations, the payment of money or any other matter to the extent not
completely unreasonable.
10.12 REGULATED ACTIVITIES OF LENDER. All of Lender's activities in
connection with the Revolving Credit Facility and the Loan Documents executed in
connection therewith shall be undertaken in full compliance with the
Modification of Final Judgment in U.S. V. AT&T, ET AL, and in compliance with
all applicable state and federal regulations to which Lender is bound. Borrower
and Guarantors acknowledge that certain affiliates of Lender may from time to
time provide services in competition with those provided by Borrower or
Guarantors and that such affiliates may from time to time engage in business
practices which could have an adverse affect on Borrower or Guarantors and its
business operations.
10.13. TIME OF ESSENCE. Time is of the essence of this Agreement,
the Other Agreements and the Security Documents.
10.14. ENTIRE AGREEMENT. This Agreement and the other Loan
Documents, together with all other instruments, agreements and certificates
executed by the parties in connection therewith or with reference thereto,
embody the entire understanding and agreement between the parties hereto and
thereto with respect to the subject matter hereof and thereof and supersede all
prior agreements, understandings and inducements, whether express or implied,
oral or written.
10.15 CONSENT TO ADVERTISING AND PUBLICITY. Lender may issue and
disseminate to the public information describing the credit accommodations
entered into pursuant to this Loan and Security Agreement.
10.16. GOVERNING LAW; CONSENT TO FORUM. THIS AGREEMENT HAS BEEN
NEGOTIATED, EXECUTED AND DELIVERED AT AND SHALL BE DEEMED TO HAVE BEEN MADE IN
PHILADELPHIA, PENNSYLVANIA. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA; PROVIDED,
HOWEVER, THAT IF ANY OF THE COLLATERAL SHALL BE LOCATED IN ANY JURISDICTION
OTHER THAN PENNSYLVANIA, THE LAWS OF SUCH JURISDICTION SHALL GOVERN THE METHOD,
MANNER AND PROCEDURE FOR FORECLOSURE OF LENDER'S LIEN UPON SUCH COLLATERAL AND
THE ENFORCEMENT OF LENDER'S OTHER REMEDIES IN RESPECT OF SUCH COLLATERAL TO THE
EXTENT THAT THE LAWS OF SUCH JURISDICTION ARE DIFFERENT FROM OR INCONSISTENT
WITH THE LAWS OF PENNSYLVANIA. AS PART OF THE CONSIDERATION FOR NEW VALUE THIS
DAY RECEIVED, BORROWER AND GUARANTORS HEREBY CONSENT
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TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED WITHIN
PHILADELPHIA COUNTY OF THE COMMONWEALTH OF PENNSYLVANIA AND WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECTED TO BORROWER AT THE
ADDRESS STATED IN SECTION 12.10 HEREOF AND SERVICE SO MADE SHALL BE DEEMED TO BE
COMPLETED UPON ACTUAL RECEIPT THEREOF. EACH BORROWER JOINTLY AND SEVERALLY
WAIVES ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED AGAINST
IT AS PROVIDED HEREIN AND AGREES NOT TO ASSERT ANY DEFENSE BASED ON LACK OF
JURISDICTION OR VENUE.
10.17. WAIVERS BY BORROWER AND GUARANTORS. EXCEPT AS OTHERWISE
PROVIDED FOR IN THIS AGREEMENT, BORROWER AND GUARANTORS WAIVE (i) THE RIGHT TO
TRIAL BY JURY (WHICH LENDER HEREBY ALSO WAIVES) IN ANY ACTION, SUIT, PROCEEDING
OR COUNTERCLAIM OF ANY KIND ARISING OUT OF OR RELATED TO ANY OF THE LOAN
DOCUMENTS, THE OBLIGATIONS OR THE COLLATERAL: (ii) PRESENTMENT, DEMAND AND
PROTEST AND NOTICE OF PRESENTMENT, PROTEST, DEFAULT, NON PAYMENT, MATURITY,
AFTER THE OCCURRENCE OF AN EVENT OF DEFAULT RELEASE, COMPROMISE, SETTLEMENT,
EXTENSION OR RENEWAL OF ANY OR ALL COMMERCIAL PAPER, ACCOUNTS, CONTRACT RIGHTS,
DOCUMENTS, INSTRUMENTS, CHATTEL PAPER AND GUARANTIES AT ANY TIME HELD BY LENDER
ON WHICH BORROWER OR GUARANTORS MAY IN ANY WAY BE LIABLE AND HEREBY RATIFIES AND
CONFIRMS WHATEVER LENDER MAY DO IN THIS REGARD; (iii) NOTICE PRIOR TO TAKING
POSSESSION OR CONTROL OF THE COLLATERAL OR ANY BOND OR SECURITY WHICH MIGHT BE
REQUIRED BY ANY COURT PRIOR TO ALLOWING LENDER TO EXERCISE ANY OF LENDER'S
REMEDIES, INCLUDING THE ISSUANCE OF AN IMMEDIATE WRIT OF POSSESSION; (iv) THE
BENEFIT OF ALL VALUATION, APPRAISEMENT AND EXEMPTION LAWS; AND (v) ANY RIGHT
BORROWER OR GUARANTORS MAY HAVE UPON PAYMENT IN FULL OF THE OBLIGATIONS TO
REQUIRE LENDER TO TERMINATE ITS SECURITY INTEREST IN THE COLLATERAL OR IN ANY
OTHER PROPERTY OF BORROWER OR GUARANTORS UNTIL TERMINATION OF THIS AGREEMENT IN
ACCORDANCE WITH ITS TERMS AND THE EXECUTION BY BORROWER, AND BY ANY PERSON WHOSE
LOANS TO BORROWER IS USED IN WHOLE OR IN PART TO SATISFY THE OBLIGATIONS, OF AN
AGREEMENT INDEMNIFYING LENDER FROM ANY LOSS OR DAMAGE LENDER MAY INCUR AS THE
RESULT OF DISHONORED CHECKS OR OTHER ITEMS OF PAYMENT RECEIVED BY LENDER FROM
BORROWER OR ANY LEC AND APPLIED TO THE OBLIGATIONS.
10.18 SECTION TITLES. The section titles and Table of Contents
contained in this Agreement are and shall be without substantive meaning or
content of any kind whatsoever and are not a part of the agreement between the
parties hereto.
-58-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed in
Philadelphia, Pennsylvania, on the day and year specified at the beginning
hereof.
ZERO PLUS DIALING INC., a
Delaware corporation
("Borrower")
[CORPORATE SEAL]
Attest: MARK D. BUCKNER By: /s/ KELLY SIMMONS
--------------------- ----------------------------
Kelly Simmons
Vice President
U.S. LONG DISTANCE, INC.
Attest: By: /s/ MARK D. BUCKNER
--------------------- ----------------------------
Mark D. Buckner
Vice President, Finance
U.S. LONG DISTANCE CORP.
Attest: By: /s/ MARK D. BUCKNER
--------------------- ----------------------------
Mark D. Buckner
Vice President, Finance
BELL ATLANTIC TRICON
LEASING CORPORATION ("Lender")
-59-
<PAGE>
12. TERMINATION. This Agreement may be terminated only upon thirty (30) days
written notice by either ZPDI or the Carrier. Termination by Carrier does not
terminate the Carrier Contract. At ZPDI's discretion, its termination of this
Agreement may terminate the Carrier Contract.
IN WITNESS THEREOF, Carrier has executed this Addendum as the date and year
first above written.
ACKNOWLEDGED, ACCEPTED AND APPROVED:
CARRIER:
BY: DATE:
------------------------ -------------------------
------------------------ -------------------------
(Printed or Typed Name) TITLE
ACKNOWLEDGED, ACCEPTED AND APPROVED:
ZERO PLUS DIALING, INC.
BY: DATE:
------------------------ -------------------------
Alan W. Saltzman
Senior Vice President
<PAGE>
REVOLVING CREDIT NOTE
May __, 1991
FOR VALUE RECEIVED, the undersigned, ZERO PLUS DIALING, INC., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of BELL
ATLANTIC-TRICON LEASING CORPORATION, a Delaware corporation ("Lender"), the
principal sum of the Credit Line, as such amount is set forth in the
Agreement (as hereinafter defined) or such amount as shall equal the
aggregate unpaid principal amount thereunder, three (3) years from the date
hereof or, if applicable under the Agreement, on the expiration date of any
Renewal Term, in lawful money of the United States of America and in
immediately available funds, together with interest from the date hereof at a
rate per annum equal to one and one eighth percent (1 1/8%) above the Base
Rate (the "Contract Rate")
In no event shall the amount of interest paid or agreed to be paid to
Lender hereunder exceed the highest lawful rate permissible under any law
which a court of competent jurisdiction may deem applicable hereto. Interest
hereunder shall be calculated on a daily basis (computed on the actual number
of days elapsed over a year of 360 days). Interest may be charged to
Borrower's Loan Account as provided in the Agreement. If any installment of
interest is not paid in full on the due date thereof (whether by maturity or
acceleration), or any other Event of Default occurs under the Agreement,
then, apart from Lender's rights of acceleration or other rights set forth in
the Agreement, the outstanding principal balance of this Note shall bear
additional interest from the due date of such installment, or from and after
such Event of Default, at the rate of six percent (6%) per annum above the
Base Rate (the "Default Rate") until such late payment or Event of Default is
cured, if applicable.
To the extent permitted by applicable law, Borrower, for itself and its
legal representatives, successors and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of non-payment, notice of
maturity and notice of protest.
This Note is the Revolving Credit Note referred to in the Amended and
Restated Loan and Security Agreement dated as of the date hereof (the
"Agreement"), between Borrower and Lender, and evidences the Revolving Credit
Loans made by Lender under the Credit Line thereunder. All of the terms,
covenants and conditions of the Agreement, as such Agreement may from time to
time be amended (including all exhibits and schedules thereto) and all other
instruments evidencing and/or securing the indebtedness hereunder are hereby
made a part of this Note and are deemed incorporated herein in full. Any
capitalized terms
<PAGE>
not otherwise defined herein shall have the meaning as set forth in the
Agreement.
BORROWER, BEING FULLY AWARE OF THE RIGHT TO NOTICE AND A HEARING ON THE
QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST BORROWER
BY LENDER BEFORE JUDGMENT CAN BE ENTERED HEREBY WAIVES THESE RIGHTS AND
AGREES AND CONSENTS TO JUDGMENT BEING ENTERED BY CONFESSION UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT. LENDER MAY EMPLOY SELF HELP OR ANY LEGAL
OR EQUITABLE PROCESS PROVIDED BY LAW TO TAKE POSSESSION OF ANY OF THE
COLLATERAL GRANTED IN CONNECTION HEREWITH WITHOUT FIRST OBTAINING FINAL
JUDGMENT OR WITHOUT FIRST GIVING NOTICE AND THE OPPORTUNITY TO BE HEARD ON
THE VALIDITY OF THE CLAIM UPON WHICH SUCH TAKING IS MADE.
Borrower hereby authorizes irrevocably, the Prothonotary, Clerk of the
Court, or any Attorney of any Court of Record to appear for it in such court,
at any time after an Event of Default under the Agreement, and confess
judgment against Borrower, with or without declaration in favor of the holder
of the within Note, for all amounts as may be unpaid hereon, together with
interest, costs, and a reasonable attorneys' collection fee, and waives and
releases all errors and consents to immediate execution upon such judgment,
hereby ratifying and confirming all that said attorney may do by virtue
hereof. The authority herein granted to confess judgment shall not be
exhausted by one exercise thereof, but shall continue from time to time and
at all times until full payment of all liabilities hereunder.
Notwithstanding the acceleration of this Note or the entry of judgment
(whether by confession or otherwise), the liabilities of Borrower under this
Note shall bear interest at the Contract Rate, or if applicable, at the
Default Rate.
All terms as used herein, unless otherwise specifically defined herein,
shall have the meanings ascribed to them in the Agreement.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as
of the date first above written.
[CORPORATE SEAL] ZERO PLUS DIALING, INC., a
Delaware corporation
Attest:_______________________________ By:_______________________________
Title: Title:
-2-
<PAGE>
EXHIBIT 2.2(A)
[Form Disbursing Letter)
Pursuant to the Amended &nd restated Loan and Security Agreement between Zero
Plus Dialing, Inc. ("Borrower"), and Bell Atlantic Tricon Leasing Corporation
("Lender"), dated May __, 1991, Borrower hereby requests $_______________ for
the following Approved Carriers:
CLASS 3 APPROVED CARRIERS AMOUNT
APC American Public Communications $_____________
CTC Call Technology Corporation _____________
[OSP] (Class 3 Approved Carrier] _____________
[OSP) [Class 3 Approved Carrier] _____________
Total Class 3 $_____________
CLASS 2 APPROVED CARRIERS
COB Correctional Communications _____________
CPS CPS Operator Services _____________
FOA Fone America Inc. _____________
FOC Pone America Central _____________
IP International Pacific _____________
LDN Long Distance Network _____________
[OSP] [Class 2 Approved Carrier) _____________
[OSP] (Class 2 Approved Carrier) _____________
[OSP] [Class 2 Approved Carrier) _____________
Total Class 2 $_____________
CLASS 1 APPROVED CARRIERS
[OSP] (Class 1 Approved Carrier] $_____________
[OSP) [Class 1 Approved Carrier) _____________
[OSP] [Class 1 Approved Carrier) _____________
Total Class 1 $_____________
Total Request for Borrowing $_____________
_____________
________________________________
Title: [Chief Executive Officer/
Chief Financial Officer/
executive Vice President)
of the Borrower
<PAGE>
EXHIBIT 2.2(B)
[Form OSP Wire Confirmation Letter]
Reference is made to the Amended and Restated Loan and Security Agreement
dated as of May __, 1991 (as modified and supplemented and in effect from
time to time, the "Loan and Security Agreement") among Zero Plus Dialing Inc.
("Borrower"); U.S. Long Distance Corp. and U.S. Long Distance Inc.
(collectively referred to as "Guarantors") and Bell Atlantic-Tricon Leasing
Corporation ("Lender"). Terms defined in the Loan and Security Agreement are
used herein as defined therein.
Pursuant to Section 2.2(B) of the Loan and Security Agreement, the
undersigned, the [Chief Executive Officer/Chief Financial Officer/Executive
Vice President/or his designee], of the Borrower hereby certifies that
Borrower has caused the wire transfer of funds in the amounts listed below to
the Approved Carriers listed below, on the date of the receipt of funds by
Borrower pursuant to Borrower's Disbursing Letter of even date, as further
evidenced by [bank copy of debit advice, or other documentation as may be
acceptable to Lender] attached hereto.
1. [OSP] [APPROVED CARRIER] [AMOUNT]
2. [OSP] [APPROVED CARRIER] [AMOUNT]
3.
4.
________
TOTAL [AMOUNT]
________
________
Borrower acknowledges that wire transfers to Approved Carriers in the amount
of $_________, representing the difference between the Borrower's Disbursing
Letter dated ______[the date of the last advance to borrower] and the total
amount as stated herein, will be subject to a reserve by Lender.
IN WITNESS WHEREOF, the undersigned has caused this letter to be duly
executed as of the ____ day of __________, 199_.
________________________________
Title: [Chief Executive Officer/
Chief Financial Officer/
Executive Vice President]
of the Borrower
<PAGE>
EXHIBIT 2.3(A)
TERM NOTE
$__________ May __, 1991
FOR VALUE RECEIVED, the undersigned, ZERO PLUS DIALING, INC., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of BELL
ATLANTIC TRICON LEASING CORPORATION, a Delaware corporation ("Lender"), the
principal sum of ____________________ ($____________) in lawful money of the
United States of America and in immediately available funds, together with
interest from the date hereof at a rate per annum equal to one and three
quarters percent (1 3/4%) above the base rate for corporate loans at large
United States money center banks as quoted in the Wall Street Journal under
the caption "Prime Rate" in the section entitled "Money Rates" as such rate
may change from time to time (the "Contract Rate") payable in _______________
(__) consecutive monthly installments of principal in the amount of
____________ ($__________) plus interest, commencing ____________ __, 1991
and on the first day of each subsequent month. The remaining principal
balance and all accrued and unpaid interest due thereon shall be paid on
__________________.
In no event shall the amount of interest paid or agreed to be paid to
Lender hereunder exceed the highest lawful rate permissible under any law
which a court of competent jurisdiction may deem applicable hereto. Interest
hereunder shall be calculated on a daily basis (computed on the actual number
of days elapsed over a year of 360 days) and shall be payable in arrears for
the preceding one month period. If any installment of principal or interest
is not paid in full on the due date thereof (whether by maturity or
acceleration), or any other Event of Default occurs under the Agreement as
herein defined, then, apart from Lender's rights of acceleration or other
rights set forth in the Agreement, the outstanding principal balance of this
Term Note shall bear additional interest from the due date of such
installment, or from and after such Event of Default, at the rate of six
percent (6.00%) per annum above the Contract Rate (the "Default Rate") until
such late payment or Event of Default is cured, if applicable.
To the extent permitted by applicable law, Borrower, for itself and its
legal representatives, successors and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of non-payment, notice of
maturity, notice of protest, notice of acceleration, notice of interest to
accelerate and notice of presentment.
<PAGE>
This Term Note is the Term Note referred to in the Amended and Restated
Loan and Security Agreement dated as of May , 1991 (the "Agreement"),
between Borrower and Lender, and evidences a Term Loan made by Lender to
Borrower thereunder. All of the terms, covenants and conditions of the
Agreement, as such Agreement may from time to time be amended (including all
exhibits and schedules thereto) and all other instruments evidencing and/or
securing the indebtedness hereunder are hereby made a part of this Term Note
and are deemed incorporated herein in full.
BORROWER, BEING FULLY AWARE OF THE RIGHT TO NOTICE AND A HEARING ON THE
QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST BORROWER
BY LENDER BEFORE JUDGMENT CAN BE ENTERED HEREBY WAIVES THESE RIGHTS AND
AGREES AND CONSENTS TO JUDGMENT BEING ENTERED BY CONFESSION. UPON THE
OCCURRENCE OF AN EVENT OF DEFAULT, LENDER MAY EMPLOY SELF HELP OR ANY LEGAL
OR EQUITABLE PROCESS PROVIDED BY LAW TO TAKE POSSESSION OF ANY OF THE
COLLATERAL GRANTED IN CONNECTION HEREWITH WITHOUT FIRST OBTAINING FINAL
JUDGMENT OR WITHOUT FIRST GIVING NOTICE AND THE OPPORTUNITY TO BE HEARD ON
THE VALIDITY OF THE CLAIM UPON WHICH SUCH TAKING IS MADE.
Borrower hereby authorizes irrevocably, the Prothonotary, Clerk of the
Court, or any Attorney of any Court of Record to appear for it in such court,
at any time after an Event of Default under the Agreement, and confess
judgment against Borrower, with or without declaration in favor of the holder
of the within Term Note, for all amounts as may be unpaid hereon, together
with interest, costs, and a reasonable attorneys' collection fee, and waives
and releases all errors and consents to immediate execution upon such
judgment, hereby ratifying and confirming all that said attorney may do by
virtue hereof. The authority herein granted to confess judgment shall not be
exhausted by one exercise thereof, but shall continue from time to time and
at all times until full payment of all liabilities hereunder.
Notwithstanding the acceleration of this Term Note or the entry of
judgment (whether by confession or otherwise), the liabilities of Borrower
under this Term Note shall bear interest at the Contract Rate, or if
applicable, at the Default Rate.
All terms as used herein, unless otherwise specifically defined herein,
shall have the meanings ascribed to them in the Agreement.
This Term Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Pennsylvania.
-2-
<PAGE>
Borrower hereby consents to the jurisdiction of the state and federal courts
located in Philadelphia County of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as
of the date first above written.
ZERO PLUS DIALING, INC.
By:_____________________________
-3-
<PAGE>
EXHIBIT 2.3(B)
ACKNOWLEDGEMENT AND ACCEPTANCE CERTIFICATE
Bell Atlantic TriCon Leasing Corporation
1060 First Avenue, Suite 200
King of Prussia, PA 19406
The undersigned hereby certifies that we have, as of the date hereof,
received from Zero Plus Dialing, Inc. ("ZPDI") one Xeta XACT telephone call
accounting computer (the "Equipment") and have inspected the Equipment and
found the same to be in good operating condition and, by execution and
delivery of this Certificate, hereby unconditionally accept the Equipment as
installed.
In consideration of your providing financing to ZPDI for the Equipment,
and intending to be legally bound, we acknowledge your security interest in
the Equipment and acknowledge that we are holding such Equipment as your
bailee.
We acknowledge that the 0+ or 0- Services Agreement between us and ZPDI
is in full force and effect. We further agree to send you a copy of any
written notice to terminate such agreement which we send to ZPDI. If we
terminate the agreement either at the end of the first eighteen (18) month
period or after an event of default by ZPDI, which is not cured within the
ten (10) day grace period provided in the agreement, and elect to retain the
Equipment, we agree to assume ZPDI's obligation to make the monthly payments
to you. We acknowledge that the Equipment shall at all times remain the
property of ZPDI and that we shall have no interest in such property until
such time as ZPDI's obligations and liabilities to you have been paid in
full. In the event that ZPDI defaults on its agreement with you, we agree to
provide you with access to the Equipment upon reasonable notice.
___________________________
By:________________________
<PAGE>
EXHIBIT 4.5
BUSINESS/COLLATERAL LOCATIONS
(1) Borrower and Guarantors currently have the following business
locations, and no others:
9311 San Pedro, Suite 300
San Antonio, Texas 78216
(2) Borrower and Guarantors maintain its books and records relating to
LEC Receivables and General Intangibles at:
9311 San Pedro, Suite 300
San Antonio, Texas 78216
(3) During the preceding seven-year period, Borrower and Guarantors
have had no office, place of business or agent for process located in any
county other than as set forth above, except:
None.
<PAGE>
EXHIBIT 5.4(C)
(Form Payment Letter)
Date of Payment ____,19__
Prior Day Balance in Dominion Account # 99761-00 $_________
Plus Current Day transfer from Clearing Account $_________
Total Cash Balance $___________
Less: Unreconciled Receipts $(_________)
Less: Disputed Amounts $(_________)
Total Cash Available to Transfer $___________
Transfer to BATCL:
Revolving Loan Payments $__________
Interest $__________
Fees $__________
other $__________
Less: Uncleared Funds (l) $(_________)
Total to Bell Atlantic $___________
Transfer to:
MELLON BANK WEST
PITTSBURGH, PA.
ABA # 043000261
Bell Atlantic Financial Service
Ref: Tricon Distribution Sales Finance
Account # 198-1584
Transfer to Zero Plus Dialing, Inc.:
ZPDI Funds $__________
Plus: Prior Day Transfer to BATCL (1) $__________
Total to ZPDI $___________
NCNB TEXAS NATIONAL
SAN ANTONIO BANKING CENTER
ABA # 111000025
FCT ZPDI ACCoUNT # 7114645438
Total Transfers $___________
Cash Remaining in Dominion Account $___________
___________
APPROVED:
__________________________________ ___________________________________
Bell Atlantic Tricon Leasing Corp. Zero Plus Dialing, Inc.
(1) Funds to be transferred to BATCL from ZPDI Operating Account
<PAGE>
EXHIBIT 6.1(A)
JURISDICTIONS QUALIFIED
The following are states where Zero Plus Dialing, Inc. is duly qualified to
do business and is in good standing as a foreign corporation.
Alabama Missouri
Arizona Montana
Arkansas Nebraska
California Nevada
Canada New Hampshire
Alberta
Manitoba New Jersey
New Brunswick
Newfoundland New Mexico
Nova Scotia
Ontario New York
Saskatchewan
Prince Edward Island North Carolina
Yukon Territories
North Dakota
Colorado Ohio
Connecticut Oklahoma
Florida Oregon
Georgia Pennsylvania
Idaho Rhode Island
Illinois South Carolina
Indiana Tennessee
Iowa Texas
Kansas Utah
Kentucky Vermont
Louisiana Virginia
Maryland Washington
Massachusetts Washington, D.C.
Michigan West Virginia
Minnesota Wyoming
Mississippi
-57-
<PAGE>
EXHIBIT 6.1(B)
CORPORATE TRADE NAMES; MERGERS
(1) Borrower's correct corporate name, as registered with the
Secretary of State of the State of DELAWARE is:
Zero Plus Dialing, Inc.
(2) During the preceding seven-year period, Borrower has used the
following names:
Zero Plus Dialing, Inc.
<PAGE>
EXHIBIT 6.1(H)
GENERAL INTANGIBLES, PATENTS, TRADEMARKS
(1) Borrower and Guarantors have no patents [, except].
None.
(2) Borrower and Guarantors have no trademarks [, except].
ZPDI filed a trademark application with the U.S. Patent &
Trademark Office, (Serial No. 74/014331), on December 26, 1989
registering the "ZPDI" insignia
(3) Borrower and Guarantors have no copyrights [, except].
None.
(4) Borrower and Guarantors have no licenses, other than routine business
licenses, authorizing them to transact business in local jurisdictions
[and the following:].
None.
<PAGE>
EXHIBIT 6.1(I)
CORPORATE STRUCTURE; SUBSIDIARIES; SECURITIES
(1) The number of authorized shares of common stock of Borrower
and U.S. Long Distance, Inc. is 1,000. The number of issued shares of common
stock of Borrower and Guarantors is 1,000. Borrower has no treasury stock.
(2) All of the issued shares of Borrower and Guarantors are fully
paid and non-assessable and are owned by the following Persons:
Mega Plus Dialing, Inc.
a wholly owned subsidiary of
U.S. Long Distance Corp.
(3) Borrower and Guarantors have no Subsidiaries
[, except the following:]
None.
(4) The number of authorized shares of common stock of U.S. Long
Distance, Inc. is 50,000. The number of authorized shares of common stock
of U.S. Long Distance Corp. is 6,786,771 and has 95,000 treasury stock.
<PAGE>
EXHIBIT 6.1(J)
RESTRICTIVE AGREEMENTS
NONE
<PAGE>
EXHIBIT 6.1 (K)
LITIGATION
(1) There are no proceedings pending against Borrower or
Guarantors in any court, except as follows:
Zero Plus Dialing, Inc. is not a party to any suits, actions,
proceedings or investigations, pending or threatened other than
those regulatory matters arising in the ordinary course of
business.
(2) The only threatened litigation of which Borrower or Guarantors
are aware is as follows:
Zero Plus Dialing, Inc. is not a party to any suits, actions,
proceedings or investigations, pending or threatened other than
those regulatory matters arising in the ordinary course of
business.
<PAGE>
EXHIBIT 6.1(P)
TAXES
NOT APPLICABLE
<PAGE>
EXHIBIT 6.1(O)
LABOR CONTRACTS
Borrower and Guarantors have no agreements with any organization of
its employees [, except the following:]
NONE
<PAGE>
EXHIBIT 6.1(S)
SURETY OBLIGATIONS
NONE
<PAGE>
EXHIBIT 6.1(T)
NO DEFAULTS
<PAGE>
EXHIBIT 6.1(V)
BUSINESS LOCATIONS
NONE
<PAGE>
EXHIBIT 6.1(W)
TRADE RELATIONS
NONE
<PAGE>
EXHIBIT 6.1(X)
CAPITALIZED AND OPERATING LEASES
1. Borrower and Guarantors have the following capitalized leases:
2. Borrower and Guarantors have the following operating leases:
ATTACHED
<PAGE>
SUMMARY OF LEASES AS OF MAY 15, 1991
CAPITAL LEASE; TOTAL MONTHLY EXPIRATION
- - ------------- LEASE PAYMENT DATE
----- ------- ----------
Hewlett-Packard Company:
Equipment and software $347,358 11,619 2/92
Equipment 66,238 2,438 4/92
Computer upgrade 267,715 9,019 12/92
Equipment 58,455 1,955 7/92
Hardware 233,617 7,982 9/93
Hardware 71,558 2,393 12/93
OPERATING LEASES
- - -----------------
Aloha Leasing - Konica copier 332
Stearns County National - Konica copier 442
Lease America - Copier 216
Beckwith Electronics - Music system 75
Pitney Bowes - Postage scale 285
Pitney Bowes - Postage meter 146
TNL Financial - Toshiba copier 491
Contel Office Comm. - Telcom equipment 81
GMAC - Vehicle 822
Wilson Business Products - Furniture 2,156
Marshall Clegg - Furniture 595
Cort Furniture - Apartment Furniture 239
Cort Furniture - Office Furniture 2,984
Nowlin Building - Office lease 30,760
HBH Properties - Customer service office 4,352
Hewlett Packard Company - Hardware 626
-------
$79,848
-------
-------
<PAGE>
EXHIBIT 6.1(Y)
BILLING CONTRACTS
ATTACHED
<PAGE>
EXHIBIT "A"
BILLING TELEPHONE COMPANIES
( 1) Pacific Bell
( 2) Nevada Bell
( 3) Pacific Northwest Bell Co.
( 4) Mountain Bell Telephone & Telegraph
( 5) Northwestern Bell Telephone Co.
( 6) Illinois Bell Telephone Co.
( 7) Michigan Bell Telephone Co.
( 8) Ohio Bell Telephone
( 9) New York Telephone
(10) New Jersey Bell Telephone Co.
(11) Diamond State Telephone Co.
(12) Bell of Pennsylvania
(13) Chesapeake & Potomac Telephone Co. of Washington, D.C.
(14) Cincinnati Bell Telephone
(15) Southern New England Bell
(16) Chesapeake & Potomac Telephone Co. of Maryland
(17) Chesapeake & Potomac Telephone Co. of Virginia
(18) Chesapeake & Potomac Telephone Co. of West Virginia
(19) Malheur Home Telephone Co.
(20) New England Telephone
(21) Southwestern Bell
(22) South Central Bell
(23) Southern Bell
(24) Indiana Bell Telephone
(25) Wisconsin Bell
(26) GTE - Florida
(27) GTE - Northwest
(28) GTE - Southwest
(29) GTE - South
(30) GTE - North (Formally Midwest)
(31) GTE - California
(32) GTE - Hawaii
(33) Centel
(34) U.S. Intelco
(35) NECA Services
(36) Alltel
(37) United Companies
(38) Telecom Canada
(39) United Telephone System Company of Pennsylvania
(40) United Telephone System Company of New Jersey
(41) Contel West
(42) Contel Central
(43) Contel East
NOTE: NPA-NXX list of above BTC's will be furnished to Carrier. Format and
media, i.e., tape, paper or floppy, to be mutually agreed by both
parties.
<PAGE>
EXHIBIT 6.1(Z)
LIST OF CARRIERS AND CREDIT LIMITS
CLASS 3 APPROVED CARRIERS CREDIT LIMIT
American Public Communications $4,000,000.00
American Telecommunications 3,000,000.00
Conquest Operator Services 700,000.00
Call Technology Corporation 1,000,000.00
Operator Services West 800,000.00
CLASS 2 APPROVED CARRIERS
Advanced Communication Technology 400,000.00
Comtel Computer Corp. 750,000.00
Correctional Communications 50,000.00
CPS Operator Services 75,000.00
Equicom Communications 500,000.00
Eastern Telecom Company 400,000.00
Fone America Inc. / Fone America Central 2,500,000.00
Gateway Technologies 200,000.00
Hedges & Associates, Inc. 100,000.00
International Pacific 500,000.00
Long Distance Network 1,000,000.00
Long Distance Operators 75,000.00
L. D. Communications 300,000.00
Mid-Atlantic Telecom 500,000.00
National Technical Associates 1,800,000.00
National Tele-Sav Inc. 500,000.00
Operator Services Company 800,000.00
Phonetel Technologies 400,000.00
Telescan, Inc. 200,000.00
Quest Communications 700,000.00
Southnet Corporation 500,000.00
U.S. Long Distance Inc. 3,000,000.00
<PAGE>
EXHIBIT 8.1(I)
ESCROW AND DISBURSING AGREEMENT
This Agreement is made this the day of May, 1991 by and between Zero
Plus Dialing, Inc., a Delaware corporation ("ZPDI"), Bell Atlantic-Tricon
Leasing Corporation, a Delaware corporation ("BATCL") and Texas Commerce Bank
National Association's Custody Group ("Escrow Agent").
WHEREAS, ZPDI has entered into various Billing and Collection Agreements
with certain Billing Telephone Companies (the "BTCs"), as set forth on Exhibit A
attached hereto, whereby the BTCs provide interstate and intrastate billing and
collection services for ZPDI and its customers; and
WHEREAS, ZPDI has previously entered into Billing and Collection Services
Agreements with certain customers of ZPDI who provide telephone operator
services to various end-users (the "Carriers"), pursuant to which ZPDI has
agreed, among other things, to prepare and submit to the BTCs certain System
Billed Telephone Traffic which the BTCs have agreed to purchase (the "Accounts
Receivable"); and
WHEREAS, ZPDI and the Carriers have entered into a certain Addendum to the
Billing and Collection Services Agreement (as amended, (the "Carrier Contracts")
Exhibit B attached hereto, pursuant to which ZPDI will purchase the Accounts
Receivable from the Carriers on the terms and conditions set forth therein; and
<PAGE>
WHEREAS, BATCL is in the business of providing financing, including the
financing of accounts receivable; and
WHEREAS, ZPDI has requested BATCL to continue to finance its acquisition of
the Accounts Receivable pursuant to the terms of a certain Amended and Restated
Loan and Security Agreement dated the date hereof between ZPDI and BATCL (the
"Loan Agreement") Exhibit C attached hereto; and
WHEREAS, pursuant to the terms of the Loan Agreement, BATCL has required
that ZPDI establish a Dominion Account (as defined in the Loan Agreement) into
which all collections and proceeds of the sale of the Accounts Receivable to the
BTCs (the "ZPDI Accounts") shall be deposited; and
WHEREAS, ZPDI has an existing lock box with Escrow Agent, Account Number
200809, wherein the BTCs forwarded the Accounts Receivable made payable to ZPDI
c/o the Lock Box Account, which Accounts Receivable are subsequently deposited
to an account (the "Clearing Account"), Account Number 00101752013, where Escrow
Agent is the sole authorized signatory on such account which reads: Bell
Atlantic TriCon Leasing Corporation for the benefit of Zero Plus Dialing, Inc.,
Clearing Account, which account is located at Escrow Agent's branch office at
600 Travis Street in Houston, Texas; and
-2-
<PAGE>
WHEREAS, BATCL and ZPDI have agreed that all amounts in the Clearing
Account shall continue to be deposited, on a daily basis into the Dominion
Account.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and to induce BATCL to continue finance the ZPDI
Accounts and Escrow Agent to perform its functions hereunder, ZPDI, BATCL and
Escrow Agent, each intending to be legally bound, agree as follows:
1. The Escrow Agent shall continue to deposit proceeds from the Lock Box
Account directly into the Clearing Account.
2. Pursuant to the automatic standing transfer form already in affect,
the Cash Management Department of Escrow Agent shall continue to transfer the
collected balance in the Clearing Account, at the start of each Business Day, to
Escrow Agent's Custody Group ("EACG") for deposit directly into the Dominion
Account. The Cash Management Department of Escrow Agent will provide ZPDI with
deposit information through its TEXCOM system which will allow ZPDI to reconcile
the account daily. The charges for the services of the Escrow Agent are
detailed in Exhibit D attached hereto and will be paid by ZPDI.
-3-
<PAGE>
3. Upon receipt by EACG of a disbursement form, in the form of Exhibit E,
attached hereto (the "Disbursement Authorization") which Disbursement
Authorization is fully executed by an authorized representative of BATCL and
ZPDI, EACG agrees to immediately disburse the collected funds in the Dominion
Account, in accordance with the instructions therein. The Disbursement
Authorization(s) will be transmitted by telefax to EACG no later than 12:00 p.m.
on any business day, for wire transfer that same day.
4. Upon written notice from Lender to the EACG certifying that at least
five (5) days have passed since Lender has given Borrower notice that Lender
believes that a portion of the proceeds in the Dominion Account represent the
proceeds of Lender's Collateral in excess of that previously shown on any
Disbursement Authorization (the "Disputed Amount"), the EACG shall immediately
make disbursements from the Dominion Account to Lender, in the amount
represented by Lender to be the Disputed Amount, in accordance with a
Disbursement Authorization executed solely by Lender. In addition, upon written
notice from Lender to EACG that an Event of Default has occurred under the Loan
Agreement, the EACG shall make all disbursements from the Dominion Account in
accordance with a Disbursement Authorization executed solely by Lender, until
further notice by Lender that such default has been cured.
-4-
<PAGE>
5. A. ZPDI represents, warrants, covenants and agrees that:
(1) It is a corporation presently in good standing in the state
of Delaware and has proper authority to transact business and is registered as a
foreign corporation in the state of Texas;
(2) It has Billing and Collection Agreements with the BTCs
listed on Exhibit A, attached hereto and made a part hereof;
(3) ZPDI is the sole and absolute owner of each ZPDI Account,
subject only to BATCL's security interest therein;
(4) There is no defense, offset or counterclaim against any of
the Accounts Receivable or the ZPDI Accounts, and no agreement has been made
under which ZPDI or any Carrier may claim any deductions or discounts, except
for ZPDI's collection and service fees and charges pursuant to the terms of the
Carriers' Contracts, and the BTCs' charges.
(5) No BTC will dispute or refuse to pay more than ten percent
(10%) of the aggregate Accounts Receivable presented for collection.
-5-
<PAGE>
6. ZPDI hereby agrees to indemnify Escrow Agent for any losses that
Escrow Agent may suffer as a result of ZPDI's breach of any of its warranties or
covenants, representations or agreements hereunder.
7. AGENTS DUTIES
A. All parties understand and agree that Escrow Agent is not a
principal, participant, or beneficiary of the financing transaction underlying
this Agreement. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in acting or refraining from acting on any instrument believed by it
to be genuine and to have been signed or presented by the proper party or
parties, their officers, representatives or agents. The Escrow Agent shall not
be liable for any action taken or omitted by it in good faith and believed by it
to be authorized hereby, nor for action taken or omitted by it in accordance
with the advice of its counsel. Escrow Agent shall be responsible for holding
and disbursing the funds on deposit in the Dominion Account (the "Escrowed
Assets") pursuant to the Agreement. Escrow Agent has no knowledge of or
responsibility for the terms, obligations or provisions of any related
agreements hereto, nor the representations or warranties of the other parties
contained herein.
-6-
<PAGE>
B. Subject to the terms of paragraph four (4) above, should any
controversy arise between the undersigned with respect to this Escrow Agreement,
Escrow Agent shall have the right to consult and/or to institute a bill of
interpleader in any court of competent jurisdiction to determine the rights of
the parties. Should such actions be necessary, or should Escrow Agent become
involved in litigation in any manner whatsoever on account of or in connection
with this Escrow Agreement or the Escrowed Assets, the undersigned hereby bind
and obligate themselves, their legal representatives, successors and assigns to
pay Escrow Agent reasonable attorneys' fees incurred by Escrow Agent, and any
other disbursements, expenses, losses, costs and damages in connection with or
resulting from such actions.
C. The Escrow Agent shall have no liability under, or duty to
inquire beyond the terms and provisions of the Agreement, and it is agreed that
its duties are purely ministerial in nature, and that the Escrow Agent shall
incur no liability whatsoever so long as it has acted in good faith, except for
liability occasioned by Escrow Agent's willful misconduct or gross negligence.
The Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, recision or supercision of this Escrow Agreement, unless the same
shall be in writing and signed by all of the other parties hereto and, if its
-7-
<PAGE>
duties as Escrow Agent hereunder are affected thereby, unless it shall have
given its prior written consent thereto.
D. The Escrow Agent may at any time resign hereunder by giving
written notice of its resignation to the other parties hereto, at their
addresses set forth herein, at least thirty (30) days prior to the date
specified for such resignation to take effect. Upon the effective date of such
resignation, the Escrowed Assets hereunder shall be delivered to such person as
may be designated in writing by the appropriate parties executing this Escrow
Agreement, whereupon all the Escrow Agents' obligations hereunder shall cease
and terminate. The escrow Agents' sole responsibility until such termination
shall be to keep safely all Escrowed Assets and to deliver the same to a person
designated by appropriate parties executing this Escrow Agreement or in
accordance with the directions of a final order or judgment of a court of
competent jurisdiction.
E. The parties agrees to be severally liable only for their own acts
and not jointly liable, agree to indemnify, defend and hold Escrow Agent
harmless for the tax, liability and expenses that may be incurred by Escrow
Agent arising out of or in connection with its acceptance or appointment as
Escrow Agent hereunder, including the legal costs and expenses of defending
itself against any claim or liability in connection with its
-8-
<PAGE>
performance hereunder. This provision shall survive the term of the Agreement.
Notwithstanding the foregoing, the parties agree to be jointly and severally
liable with respect to any costs incurred by the Escrow Agent, which costs are
incurred in the ordinary course of the Escrow Agent's duties and not costs
arising from any claim or liability incurred by Escrow Agent.
F. ZPDI agrees to pay to the Escrow Agent its fees for the services
rendered pursuant to the provisions of this Escrow Agreement and will reimburse
the Escrow Agent for reasonable expenses, including reasonable attorneys's fees,
incurred in connection with the negotiations, drafting and performance of such
services. Except as otherwise noted, this fee covers set-up and termination
expenses, plus usual and customary related administrative services such as
safekeeping, investment and payment of funds specified herein or in the exhibits
attached. Activities requiring excessive administrator time or out-of-pocket
expenses such as optional substitution of collateral or securities shall be
deemed extraordinary expenses for which related costs, transaction charges, and
additional fees will be billed at Escrow Agent's standard charges for such
items.
G. ZPDI agrees to indemnify the Escrow Agent fully for any tax
liability, penalty or interest incurred by the Escrow Agent arising hereunder
and agrees to pay in full any such tax
-9-
<PAGE>
liability together with penalty and interest if any is ultimately assessed
against the Escrow Agent for any reason as a result of its action hereunder
(except for the Escrow Agent's individual income tax liability).
H. The Escrow Agent shall have no liability for loss arising from
any cause beyond its control, including, but not limited to, the following: a)
the act, failure or neglect of any agent or correspondent selected by the Escrow
Agent or the parties hereto; (b) any delay, error, omission or default connected
with the remittance of funds; c) any delay, error, omission or default of any
mail, telegraph, cable or wireless agency or operator; d) the acts of edicts of
any government or governmental agency or other group or entity exercising
governmental powers.
I. This Escrow Agreement shall be governed by and construed in
accordance with the laws of the state of Texas, except that the portions of the
Texas Trust Code Sec. 111.001, et seq. of the Property Code, V.A.T.S. concerning
fiduciary duties and liability of Trustees shall not apply to this Agreement.
The parties hereto expressly waive such duties and liabilities, it being their
intent to create solely an agency relationship and hold the Escrow Agent liable
only in the event of its gross
-10-
<PAGE>
negligence or willful misconduct in order to obtain the lower fee schedule rates
as specifically negotiated with the Escrow Agent.
J. It is understood by all parties to this agreement that Escrow
Agent will not have investment responsibilities for the funds in the Dominion
Account unless otherwise authorized in writing by BATCL or ZPDI, nor shall
Escrow Agent be responsible for the collection of funds or checks or other
deposits. Escrow Agent or its Commercial Department shall be reimbursed by
ZPDI, U.S. Long Distance and/or any of its subsidiaries for any item returned
and may deduct any overdraft amounts or charges or losses incurred thereby from
ZPDI's or U.S. Long Distance's demand deposit or trust accounts at Escrow
Agent's Houston or San Antonio branch offices.
K. Escrow Agent is hereby given a lien on all Escrowed Assets to be
distributed to ZPDI for all fees, expenses, taxes, indebtedness, and other
financial obligations that may become owing to Escrow Agent arising hereunder,
including any indemnities prescribed herein, which lien may be enforced by
Escrow Agent without notice or presentment by setoff or appropriate foreclosure
proceedings. In all cases, any unpaid fees may be deducted by Escrow Agent
without prior written notice before final disbursement of Escrowed Assets.
-11-
<PAGE>
8. This Agreement shall continue in force and effect until Escrow Agent
receives written notice of cancellation from BATCL. Upon receipt of written
notice, the Escrow Agent will perform the following:
A. Advise parties to this Agreement of receipt of cancellation
notice; and
B. Request of BATCL a statement of outstanding loans attributable to
any Carrier; and
C. Continue to perform Escrow Agent duties as outlined in Paragraph
6 above until such time as the obligations identified in Paragraph 8B above have
been satisfied or until Escrow Agent shall resign pursuant to the terms hereof.
9. The terms and conditions of this Agreement shall prevail if in
conflict with the terms and conditions of any other attached or related
agreement.
BELL ATLANTIC-TRICON LEASING
CORPORATION
BY:
---------------------------
- - ------------------------------
(Printed or Typed Name)
(Additional Signatures On
Next Page)
TITLE:
------------------------
-12-
<PAGE>
ZERO PLUS DIALING, INC.
9311 San Pedro, Suite 300
San Antonio, TX 78216
BY:
---------------------------
- - ------------------------------
(Printed or Typed Name)
TITLE:
------------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Attn: Rodney Crowl and Steve Scott
Custody Group
600 Travis Street, Suite 1150
Houston, TX 77002
BY:
---------------------------
- - ------------------------------
(Printed or Typed Name)
TITLE:
------------------------
U.S. Long Distance Corp. and U.S. Long Distance, Inc. hereby jointly and
severally unconditionally guarantee the prompt performance of any and all of
ZPDI's representations, warranties, covenants and agreements hereunder.
U.S. LONG DISTANCE CORP.
9311 San Pedro, Suite 300
San Antonio, TX 78216
BY:
---------------------------
- - ------------------------------
(Printed or Typed Name)
TITLE:
------------------------
U.S. LONG DISTANCE, INC.
9311 San Pedro, Suite 300
San Antonio, TX 78216
BY:
---------------------------
- - ------------------------------
(Printed or Typed Name)
TITLE:
------------------------
-13-
<PAGE>
EXHIBIT 8.1(K)
TELECOMMUNICATIONS RECEIVABLE FINANCING PROGRAM
BACKGROUND INFORMATION
OSP:
-------------------------
CORPORATE OVERVIEW:
1) CORPORATE STRUCTURE: C CORP SUB-S CORP PARTNERSHIP
----- ---- ----
2) OWNERSHIP: (DESCRIBE SHAREHOLDERS OR PARENT COMPANY)
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
3) ARE YOUR RECEIVABLES CURRENTLY PLEDGED TO ANYONE?
(IF YES, PLEASE GIVE ALL DETAILS)
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
MANAGEMENT:
CHAIRMAN OF THE BOARD: AGE:
----------------------------------------- ----
TENURE WITH COMPANY:
-----------------------------------------------------
PREVIOUS EMPLOYER:
------------------------------------------------------
POSITION & TENURE:
------------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT ACCOMPLISHMENTS:
--------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
- - ------------------------------------------------------------------------------
-2-
<PAGE>
TELECOMMUNICATIONS RECEIVABLE FINANCING PROGRAM
BACKGROUND INFORMATION
OSP
------------------------
PRESIDENT: AGE:
---------------------------------------------- -----
TENURE WITH COMPANY:
------------------------------------------------
PREVIOUS EMPLOYER:
--------------------------------------------------
POSITION & TENURE:
-------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT
ACCOMPLISHMENTS:
--------------------------------------------------
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
V.P MARKETING: AGE:
------------------------------------------- -----
TENURE WITH COMPANY:
------------------------------------------------
PREVIOUS EMPLOYER:
--------------------------------------------------
POSITION & TENURE:
--------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT ACCOMPLISHMENTS:
-----
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
V.P. OPERATIONS: AGE:
------------------------------------------ -----
TENURE WITH COMPANY:
------------------------------------------------
PREVIOUS EMPLOYER:
--------------------------------------------------
POSITION & TENURE:
--------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT ACCOMPLISHMENTS:
-----
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
-3-
<PAGE>
TELECOMMUNICATIONS RECEIVABLE FINANCING PROGRAM
BACKGROUND INFORMATION
OSP
------------------------
V.P. LEGAL/REGULATORY: AGE:
------------------------------------ -----
TENURE WITH COMPANY:
------------------------------------------------
PREVIOUS EMPLOYER:
--------------------------------------------------
POSITION & TENURE:
--------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT ACCOMPLISHMENTS:
-----
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
TREASURER: AGE:
------------------------------------------------ -----
TENURE WITH COMPANY:
------------------------------------------------
PREVIOUS EMPLOYER:
--------------------------------------------------
POSITION & TENURE:
--------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT ACCOMPLISHMENTS:
-----
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
CONTROLLER: AGE:
----------------------------------------------- -----
TENURE WITH COMPANY:
------------------------------------------------
PREVIOUS EMPLOYER:
--------------------------------------------------
POSITION & TENURE:
--------------------------------------------------
DESCRIPTION OF PREVIOUS EMPLOYER & SIGNIFICANT ACCOMPLISHMENTS:
-----
- - --------------------------------------------------------------------
- - --------------------------------------------------------------------
-4-
<PAGE>
TELECOMMUNICATIONS RECEIVABLE FINANCING PROGRAM
BACKGROUND INFORMATION
OSP: __________________________
RECEIVABLE ANALYSIS
LAST MONTHS PERCENT OF
BILLINGS ($) TOTAL LOCAL EXCHANGE CARRIERS
- - ------------ ---------- -----------------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ----------------
- - ---------------- ---------------- REMAINDER LESS THAN 1% EACH
- - ---------------- ----------------
$--------------- -----------------
-5-
<PAGE>
OSP:
-------------------------------------
<TABLE>
<CAPTION>
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
0+/-
CALL VOLUME ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
0+/-
CALL MINUTES ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
0+/-
REVENUES ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
ALL OTHER REVENUE ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
TOTAL REVENUE ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
0+/-CASH COLLECTIONS JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
- - --------------------
BILLINGS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
DILUTIONS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
REJECTS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
LEC ALLOWANCE ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
UNBILLABLES ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
AMOUNT REMITTED ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
% OF AMOUNT REMITTED
TO GROSS BILLINGS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
0+/0-RECEIVABLES AGINGS: (FROM DATE THE TAPE IS SENT FOR COLLECTION)
- - -----------------------------------------------------------------------------------------------------------------------
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
0-90 DAYS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
91-120 DAYS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
OVER 120 DAYS ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
TOTAL 0+/0
ACCTS REC ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
</TABLE>
6
<PAGE>
OSP:
-------------------------------------
OPERATIONS: FISCAL DATE ------------------------
<TABLE>
<CAPTION>
JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT NOV DEC
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
CASH EXPENSES ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
NON CASH
EXPENSES ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
PRE TAX
PROFIT ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
NET PROFIT ------ ------ ------- ------ ------ ------- ------ ------ ------ ------ ------- ------
</TABLE>
- - -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
BANK: ACCOUNT NO: ADDRESS:
------------------------- ------------------ --------------------------------------------
(IF MORE THAN ONE, FILL (STREET, CITY, STATE, ZIP)
OUT SEPARATE SHEET)
FED/ABA #: BANK OFFICER CONTACT: PHONE NO.
------------------- ------------------- -----------------------------------
CREDIT LINE AMOUNT: OUTSTANDING:
------------ ----------------------------
</TABLE>
- - -------------------------------------------------------------------------------
A T T A C H M E N T S:
- - ----------------------
2 YEARS FISCAL FINANCIAL STATEMENTS
CURRENT YEAR QUARTERLY STATEMENTS AND PRIOR YEAR'S COMPARABLE STATEMENTS
7
<PAGE>
EXHIBIT 8.1(N)
[Form Class 1 OSP Certification]
CLASS 1 APPROVED OSP CERTIFICATION FORM
Reference is made to the Amended and Restated Loan and Security Agreement
dated as of May ____, 1991 (as modified and supplemented and in effect from
time to time, the "Loan and Security Agreement") among Zero Plus Dialing Inc.
("Borrower"); U.S. Long Distance Corp. and U.S. Long Distance Inc.
(collectively referred to as "Guarantors") and Bell Atlantic-Tricon Leasing
Corporation ("Lender"). Terms defined in the Loan and Security Agreement are
used herein as defined therein.
Pursuant to Section 8.1(O) of the Loan and Security Agreement, the
undersigned, the [Chief Executive Officer/Chief Financial Officer/Executive
Vice President/or his designee] , of the Borrower hereby certifies that for
[Class 1 Approved Carrier]: (i) he has reviewed the UCC lien searches and
determined that within two (2) Business Days following the first purchase of
Accounts Receivable pursuant to Addendum A, he will cause BATCL will have a
first priority security interest in the assets of [Class 1 Approved Carrier]
more fully described in Section 6 of Addendum A; (ii) he has reviewed the
Dilution Factor and the advance requested by Borrower is within the parameters
of the Borrowing Base (iii) [Class 1 Approver Carrier] has not filed
for protection under the U.S. Bankruptcy Code, as amended; (iv) [Class 1
Approve Carrier] meets all the terms and conditions set forth in the Class 1
Collateral and Credit Criteria List; (v) he has reviewed and analyzed the OSP
Background Form prepared by [Class 1 Approved Carrier] and certifies that to
the best of his knowledge, the information provided therein is true and
accurate.
The undersigned, further warrants and represents that no default or event of
default exists as set forth in the Loan and Security Agreement and hereby
confirms that there have been no breaches to any of the representations,
warranties and covenants described therein which continue in full force and
effect.
IN WITNESS WHEREOF, the undersigned has caused this letter to be duly executed
as of the ____ day of ______________________, 199__.
------------------------------------
Title: [Chief Executive Officer/
Chief Financial Officer/
Executive Vice President]
of the Borrower
<PAGE>
EXHIBIT 8.1(O) (a)
CLASS 1 OSP COLLATERAL AND CREDIT CRITERIA
1. In business and operating as an OSP.
2. Borrower has provided to BATCCS, the following:
A.) Class 1 OSP Certification Form
B.) A current completed Application and Background Form, prepared by
Carrier.
C.) UCC, tax lien, and judgement searches together with copies of
recorded filings.
D.) Executed copy of form UCC 1 indicating BATCCS as Assignee of the
collateral pursuant to Addendum A.
E.) Fully executed copies of Billing and Collection Services
Agreement, and Addendum A.<PAGE>
<PAGE>
EXHIBIT 8.1(O) (b)
CLASS 2 OSP COLLATERAL AND CREDIT CRITERIA
1. In business and operating as an OSP for the previous one (1) year period.
2. Senior management has experience in the telecommunications industry and has
a record satisfactory to BATCCS.
3. Validation method, vendor, and the percentage of calls validated are
acceptable to BATCCS.
4. Dilution Factor for the prior three (3) months is acceptable to BATCCS. In
the absence of an analysis of the Dilution Factor, BATCCS may apply an
advance at BATCCS sole discretion.
5. Borrower has provided to BATCCS, the following:
A.) A current completed Application and Background Form, prepared by
Carrier.
B.) An analysis of call traffic by origination type, showing the
dollar amount and percent, for a recent month. In instances of
recent rapid growth trends, three (3) month to six (6) month
analysis may be required.
C.) Financial Statements for the two (2) prior fiscal year ends, or
since inception if less than two (2) years, prepared in
accordance with GAAP, prepared by, and opined, in a manner
acceptable to BATCCS.
D.) Current interim financial statements not greater than 90 days
old.
E.) UCC, tax lien, and judgement searches together with copies of
recorded filings.
F.) Executed copy of form UCC l indicating BATCCS as Assignee of the
collateral pursuant to Addendum A.
G.) Fully executed copies of Billing and Collection Services
Agreement, and Addendum A.
<PAGE>
EXHIBIT 8.1(O) (c)
CLASS 3 OSP COLLATERAL AND CREDIT CRITERIA
1. In business and operating as an OSP for the previous one (l) year including
six (6) months minimum satisfactory experience with BATCCS; or in business
and operating as an OSP for the previous two (2) years.
2. Senior management has broad experience and depth in the telecommunications
and has a record satisfactory to BATCCS.
3. Validation method, vendor, and the percentage of calls validated is
acceptable to BATCCS.
4. Dilution factor for the prior twelve (12) months is acceptable to BATCCS.
5. Borrower has provided to BATCCS, the following:
A.) A current completed Application and Background Form, prepared by
Carrier.
B.) An analysis of call traffic by origination type, showing the
dollar amount and percent, for a recent month. In instances of
recent rapid growth trends, three (3) months to six (6) months
may be required.
C.) Financial Statements for the two (2) prior fiscal year ends, or
since inception if less than two (2) years, prepared in
accordance with GAAP, prepared by, and opined, in a manner
acceptable to BATCCS.
D.) Current interim financial statements not greater than 90 days
old.
E.) UCC, tax lien, and judgement searches together with copies of
recorded filings.
F.) Executed copy of form UCC l indicating BATCCS as Assignee of the
collateral pursuant to Addendum A.
G.) Fully executed copies of Billing and Collection Services
Agreement, and Addendum A.
<PAGE>
REVOLVING CREDIT NOTE
May 24, 1991
FOR VALUE RECEIVED, the undersigned, ZERO PLUS DIALING, INC., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of BELL ATLANTIC-
TRICON LEASING CORPORATION, a Delaware corporation ("Lender"), the principal sum
of the Credit Line, as such amount is set forth in the Agreement (as hereinafter
defined) or such amount as shall equal the aggregate unpaid principal amount
thereunder, three (3) years from the date hereof or, if applicable under the
Agreement, on the expiration date of any Renewal Term, in lawful money of the
United States of America and in immediately available funds, together with
interest from the date hereof at a rate per annum equal to one and one eighth
percent (1 1/8%) above the Base Rate (the "Contract Rate").
In no event shall the amount of interest paid or agreed to be paid to
Lender hereunder exceed the highest lawful rate permissible under any law which
a court of competent jurisdiction may deem applicable hereto. Interest
hereunder shall be calculated on a daily basis (computed on the actual number of
days elapsed over a year of 360 days). Interest may be charged to Borrower's
Loan Account as provided in the Agreement. If any installment of interest is
not paid in full on the due date thereof (whether by maturity or acceleration),
or any other Event of Default occurs under the Agreement, then, apart from
Lender's rights of acceleration or other rights set forth in the Agreement, the
outstanding principal balance of this Note shall bear additional interest from
the due date of such installment, or from and after such Event of Default, at
the rate of six percent (6%) per annum above the Base Rate (the "Default Rate")
until such late payment or Event of Default is cured, if applicable.
To the extent permitted by applicable law, Borrower, for itself and its
legal representatives, successors and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of non-payment, notice of maturity
and notice of protest.
This Note is the Revolving Credit Note referred to in the Amended and
Restated Loan and Security Agreement dated as of the date hereof (the
"Agreement"), between Borrower and Lender, and evidences the Revolving Credit
Loans made by Lender under the Credit Line thereunder. All of the terms,
covenants and conditions of the Agreement, as such Agreement may from time to
time be amended (including all exhibits and schedules thereto) and all other
instruments evidencing and/or securing the indebtedness hereunder are hereby
made a part of this Note and are deemed incorporated herein in full. Any
capitalized terms
<PAGE>
not otherwise defined herein shall have the meaning as set forth in the
Agreement.
BORROWER, BEING FULLY AWARE OF THE RIGHT TO NOTICE AND A HEARING ON THE
QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST BORROWER BY
LENDER BEFORE JUDGMENT CAN BE ENTERED HEREBY WAIVES THESE RIGHTS AND AGREES AND
CONSENTS TO JUDGMENT BEING ENTERED BY CONFESSION UPON THE OCCURRENCE OF AN EVENT
OF DEFAULT. LENDER MAY EMPLOY SELF HELP OR ANY LEGAL OR EQUITABLE PROCESS
PROVIDED BY LAW TO TAKE POSSESSION OF ANY OF THE COLLATERAL GRANTED IN
CONNECTION HEREWITH WITHOUT FIRST OBTAINING FINAL JUDGMENT OR WITHOUT FIRST
GIVING NOTICE AND THE OPPORTUNITY TO BE HEARD ON THE VALIDITY OF THE CLAIM UPON
WHICH SUCH TAKING IS MADE.
Borrower hereby authorizes irrevocably, the Prothonotary, Clerk of the
Court, or any Attorney of any Court of Record to appear for it in such court, at
any time after an Event of Default under the Agreement, and confess judgment
against Borrower, with or without declaration in favor of the holder of the
within Note, for all amounts as may be unpaid hereon, together with interest,
costs, and a reasonable attorneys' collection fee, and waives and releases all
errors and consents to immediate execution upon such judgment, hereby ratifying
and confirming all that said attorney may do by virtue hereof. The authority
herein granted to confess judgment shall not be exhausted by one exercise
thereof, but shall continue from time to time and at all times until full
payment of all liabilities hereunder.
Notwithstanding the acceleration of this Note or the entry of judgment
(whether by confession or otherwise), the liabilities of Borrower under this
Note shall bear interest at the Contract Rate, or if applicable, at the Default
Rate.
All terms as used herein, unless otherwise specifically defined herein,
shall have the meanings ascribed to them in the Agreement.
This Note shall be governed by, and construed and enforced in accordance
with, the laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of
the date first above written.
[CORPORATE SEAL] ZERO PLUS DIALING, INC., a
Delaware corporation
Attest: /s/ Mark D. Buckner By: /s/ [Illegible sig]
------------------------------ ----------------------------
Title: Corporate Secretary Title: Vice President
-2-
<PAGE>
REPLACEMENT TERM NOTE
$200,162.31 May 24, 1991
FOR VALUE RECEIVED, the undersigned, U. S. LONG DISTANCE, INC., a Delaware
corporation ("Borrower"), hereby promises to pay to the order of BELL ATLANTIC
TRICON LEASING CORPORATION, a Delaware corporation ("Lender"), the principal sum
of Two Hundred Thousand One Hundred Sixty-two and 31/100 Dollars ($200,162.31)
in lawful money of the United States of America and in immediately available
funds, together with interest from the date hereof at a rate per annum equal to
one and three quarters percent (1-3/4%) above the base rate for corporate loans
at large United States money center banks as quoted in the Wall Street Journal
under the caption "Prime Rate" in the section entitled "Money Rates" as such
rate may change from time to time (the "Contract Rate") payable in Fifteen (15)
consecutive monthly installments of principal in the amount of Thirteen Thousand
Three Hundred Forty-four and 15/100 Dollars ($13,344.15) plus interest,
commencing June 1, 1991 and on the first day of each subsequent month. The
remaining principal balance and all accrued and unpaid interest due thereon
shall be paid an September 1, 1992.
This Note evidences the obligation of Borrower as successor to Hobic Plus,
Inc. due to Lender as assignee of Source, Inc. under and replaces that certain
Term Note between Hobic Plus, Inc. as maker and Source, Inc. as payee dated July
12, 1990, in the original principaL amount of $320,000.
In no event shall the amount of interest paid or agreed to be paid to
Lender hereunder exceed the highest lawful rate permissible under any law which
a court of competent jurisdiction may deem applicable hereto. Interest
hereunder shall be calculated on a daily basis (computed on the actual number of
days elapsed over a year of 360 days) and shall be payable in arrears for the
preceding one month period. If any installment of principal or interest is not
paid in full on the due date thereof (whether by maturity or acceleration), or
any other Event of Default occurs under the Agreement as herein defined, then,
apart from Lender's rights of acceleration or other rights set forth in the
Agreement, the outstanding principal balance of this Term Note shall bear
additional interest from the due date of such installment, or from and after
such Event of Default, at the rate of six percent (6.00%) per annum above the
contract Rate (the "Default Rate") until such late payment or Event of Default
is cured, if applicable.
<PAGE>
To the extent permitted by applicable law, Borrower, for itself and its
legal representatives, successors and assigns, expressly waives presentment,
demand, protest, notice of dishonor, notice of non-payment, notice of maturity,
notice of protest, notices of acceleration, notice of interest to accelerate and
notice of presentment.
This Term Note is the Term Note referred to in the Amended and Restated
Loan and Security Agreement dated as of May __, 1991 (the "Agreement"), between
Borrower and Lender, and evidences a Term Loan made by Lender to Borrower
thereunder. All of the terms, covenants and conditions of the Agreement, as
such Agreement may from time to time be amended (including all exhibits and
schedules thereto) and all other instruments evidencing and/or securing the
indebtedness hereunder are hereby made a part of this Term Note and are deemed
incorporated herein in full.
BORROWER, BEING FULLY AWARE OF THE RIGHT TO NOTICE AND A HEARING ON THE
QUESTION OF THE VALIDITY OF ANY CLAIMS THAT MAY BE ASSERTED AGAINST BORROWER BY
LENDER BEFORE JUDGMENT CAN BE ENTERED HEREBY WAIVES THESE RIGHTS AND AGREES AND
CONSENTS TO JUDGMENT BEING ENTERED BY CONFESSION. UPON THE OCCURRENCE OF AN
EVENT OF DEFAULT, LENDER MAY EMPLOY SELF HELP OR ANY LEGAL OR EQUITABLE PROCESS
PROVIDED BY LAW TO TAKE POSSESSION OF ANY OF THE COLLATERAL GRANTED IN
CONNECTION HEREWITH WITHOUT FIRST OBTAINING FINAL JUDGMENT OR WITHOUT FIRST
GIVING NOTICE AND THE OPPORTUNITY TO BE HEARD ON THE VALIDITY OF THE CLAIM UPON
WHICH SUCH TAKING IS MADE.
Borrower hereby authorizes irrevocably, the Prothonotary, Clerk of the
Court, or any Attorney of any Court of Record to appear for it in such court, at
any time after an Event of Default under the Agreement, and confess judgment
against Borrower, with or without declaration in favor of the holder of the
within term Note, for all amounts as may be unpaid hereon, together with
interest, costs, and a reasonable attorneys' collection fee, and waives and
releases all errors and consents to immediate execution upon such judgment,
hereby ratifying and confirming all that said attorney may do by virtue hereof.
The authority herein granted to confess judgment shall not be exhausted by one
exercise thereof, but shall continue from time to time and at all times until
full payment of all liabilities hereunder.
Notwithstanding the acceleration of this Term Note or the entry of judgment
(whether by confession or otherwise), the liabilities of Borrower under this
Term Note shall bear interest at the Contract Rate, or if applicable, at the
Default Rate.
<PAGE>
All terms as used herein, unless otherwise specifically defined herein,
shall have the meanings ascribed to them in the Agreement.
This Term Note shall be governed by, and construed and enforced in
accordance with, the laws of the State of Pennsylvania. Borrower hereby consents
to the jurisdiction of the state and federal courts located in Philadelphia
County of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, Borrower has caused this Note to be duly executed as of
the date first above written.
U. S. LONG DISTANCE, INC.
By: /s/ MARK D. BUCKNER
------------------------------
<PAGE>
FIRST AMENDMENT AND JOINDER TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This First Amendment to Amended and Restated Loan and Security Agreement
("First Amendment") is made this 26th day of December, 1992 among Zero Plus
Dialing, Inc. ("Borrower"), a Delaware corporation with its chief executive
office and principal place of business at 9311 San Pedro, Suite 300, San
Antonio, Texas 78216, U.S. Long Distance Corp. ("USLDC"), a Delaware corporation
with its chief executive office and principal place of business at 9311 San
Pedro, Suite 300, San Antonio, Texas 78216, U.S. Long Distance, Inc. ("USLDI"),
a Texas corporation with its chief executive office and principal place of
business at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S. Billing,
Inc. ("USBI"), a Texas corporation with its chief executive office and principal
place of business at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, and
Bell Atlantic Tricon Leasing corporation ("Lender").
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Loan and Security Agreement ("Loan Agreement") and
certain related agreements and instruments, to reflect certain loan arrangements
among the parties.
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
<PAGE>
C. The Loan Agreement, the related agreements and instruments executed in
connection therewith, and the Letter Agreement are hereinafter collectively
referred to as the "Existing Loan Documents."
D. USBI desires to become an additional party to the Existing Loan
Documents as amended hereby, and Borrower, USLDC, USLDI, and Lender desire to
amend certain terms and conditions of the Existing Loan Documents.
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof, the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
1. a. USBI hereby joins in, assumes, adopts and agrees to be subject to
the terms and conditions of the Existing Loan Documents, as amended hereby, and
the Obligations evidenced thereby. Without limiting the generality of the
foregoing, USBI shall be liable, as surety, for all Obligations now existing or
hereafter incurred, including without limitation the Revolving Credit Note and
the Term Notes, and USBI grants to Lender a continuing first lien on and
security interest in all of its assets of the type described as Collateral in
Section 4 of the Loan Agreement, including without limitation all now owned or
hereafter acquired Accounts, General Intangibles, and Equipment, and including
all proceeds of all of the foregoing.
-2-
<PAGE>
b. The Loan Agreement is hereby amended to provide that in each
instance where the term "Guarantors" or "Guarantor" appears, such term or terms
shall jointly and severally include a reference to USBI.
2. The definition of the term "Credit Line" in Section 1.1 of the Loan
Agreement is hereby deleted and replaced by the following new definition of
Credit Line:
CREDIT LINE - as at any date of determination thereof, the total
amount available to Borrower under the Revolving Credit Facility, which is
the sum of (A) Twenty Million ($20,000,000.00) Dollars, and (B) the
aggregate amount of the credit limit as requested by Borrower and approved
in writing by Lender for all Class 3 Approved Carriers. The credit limits
for each Class 3 Approved Carriers as of the date hereof are listed on
Exhibit 6.1(Z).
3. The term "Tangible Capital Funds" is added to Section 1.1 of the
Loan Agreement and is defined as follows:
TANGIBLE CAPITAL FUNDS - shall mean, as of any date of determination
thereof, the sum (without duplication) of the following: (i) Net Worth,
MINUS (ii) assets other than cash, trade receivables, and property, plant
and equipment (net of leasehold improvements), MINUS (iii) allowances, in
excess of those shown in financial statements, on Accounts as Lender may
reasonably determine in good faith, PLUS (iv) Indebtedness subordinated to
Lender evidenced by duly executed subordination agreement(s) in form and
substance acceptable to Lender.
4. Subsections (ii), (iii), and (v) of the definition of the term
"Borrowing Base" in Section 1.1 of the Loan Agreement are hereby deleted and
replaced by the following new subsections (ii), (iii), and (v):
-3-
<PAGE>
(ii) advances against Eligible Accounts for any Class 1 Approved
Carrier shall not exceed Two Hundred and Fifty Thousand ($250,000.00)
Dollars for each Class 1 Approved Carrier and the aggregate advances
for all Class 1 Approved Carriers shall not exceed the lesser of (a)
Eight Million ($8,000,000.00) Dollars and (b) fifty (50%) percent of
USLDC's Tangible Capital Funds (adjusted quarterly as set forth in
USLDC's 10Q and 10K reports);
(iii) advances against Eligible Accounts for all Class 1 and
Class 2 Approved Carriers shall not exceed at any one time in the
aggregate for all Class 1 and Class 2 Approved carriers (a) Twenty
Million ($20,000,000.00) Dollars on the date of the First Amendment
and at all times thereafter;
(v) advances against Eligible Accounts of U.S. Long Distance,
Inc. (which shall be treated as a Class 2 Approved Carrier) shall not
exceed Three Million ($3,000,000.00) Dollars at any time in the
aggregate; provided, however that U.S. Long Distance, Inc. shall be
reclassified as a Class 3 Approved Carrier and the sublimit shall be
increased to Five Million ($5,000,000.00) Dollars, at any time in the
aggregate, upon the earlier of (a) Borrower's request for such
reclassification and increase, and (b) May 1, 1993.
5. Borrower has informed Lender of its intention to hire a new credit
officer to perform due diligence for Class 1 OSP's and to prepare credit
packages and approvals for such Class 1 OSP's. In the event that Lender is
satisfied with the form and substance of the first three (3) of Borrower's Class
1 OSP credit packages submitted to Lender for review after the date hereof,
Lender will increase the amount of the Borrowing Base advances against Eligible
Accounts for Class 1 Approved Carriers from Two Hundred
-4-
<PAGE>
and Fifty Thousand ($250,000.00) Dollars to Five Hundred Thousand ($500,000.00)
Dollars for each Class 1 Approved Carrier.
6. Section 2.1(B) of the Loan Agreement is hereby deleted and replaced by
the following new Section 2.1(B):
2.1 (B) The Revolving Credit Loans shall be used by Borrower to
purchase certain End User Accounts of Approved Carriers to the extent not
inconsistent with the provisions of this Agreement. For approval requests
involving Carriers for credit up to Two Million ($2,000,000.00) Dollars,
and increases for Approved Carriers with credit limits up to Two Million
($2,000,000.00) Dollars, Lender shall have a maximum of twenty (20) days
from the point at which all relevant credit information is received in
order to consider requests and advise Borrower of its determination for
approval of a Carrier or an increase of credit for an Approved Carrier.
Lender shall use its best efforts to promptly inform Borrower of any
additional information it deems necessary to consider such a request. Upon
approval of a Carrier or an increase of credit for an Approved Carrier,
Lender shall provide Borrower with written notification thereof within five
(5) Business Days.
7. The following Section 2.6 is hereby added to the Loan Agreement:
2.6. INVESTMENT ACCOUNT - Lender shall establish an investment account
("Investment Account") on the books of Lender, in which Lender shall
record, in increments of no less than $250,000.00, funds received by Lender
from Borrower. That portion of the amounts received by Lender and recorded
in the Investment Account equal to the difference between (i) the
outstanding Revolving Credit Loans, and (ii) fifty percent (50%) of the
Credit Line, shall earn interest at an annual rate equal to the Base Rate,
in effect from time to time, which shall be calculated in a manner
consistent with that set forth in Section 3.1(A) hereof. For the purpose
of computing interest on amounts in the Investment Account, amounts shall
be deemed to have been transferred into the Investment Account on the first
Business Day after receipt by Lender of such amounts. Disbursements made in
connection with amounts in the Investment Account shall be made by Lender
in increments of $250,000.00 and shall be made in the manner as set forth
in Section 7.3(B) of the Loan Agreement. All disbursements
-5-
<PAGE>
from the Investment Account shall be subject to a wire transfer fee of
$20.00 per wire transfer.
8. Section 3.1(A) of the Loan Agreement is hereby amended such that
interest shall accrue on the principal amount of the Revolving Credit Loans
outstanding at the end of each day at a fluctuating rate per annum equal to one
and three eighths percent (1 3/8%) above the Base Rate in effect on such day.
All other provisions of Section 3.1(A) remain unchanged and in full force and
effect.
9. Section 3.2(e) of the Loan Agreement is hereby deleted upon the
condition that, on the date hereof, Borrower pays to Lender the unused facility
fee at the rate set forth and calculated in accordance with Section 3.2(e),
which fee shall cover the period through and including the date hereof.
10. Section 3.3 of the Loan Agreement is hereby deleted and replaced by
the following new Section 3.3:
3.3 TERM OF AGREEMENT. Subject to Lender's right to cease making
loans to Borrower at any time upon or after the occurrence of any Default
or Event of Default, and such Event of Default has not been cured within
the required time limits, if any, the provisions of this Agreement shall be
in effect through and including two (2) years from the date of the First
Amendment, (the "Original Term"), unless terminated as provided in Section
3.4 hereof, and may be extended by the written consent of Lender and
Borrower (the "Renewal Term").
11. Paragraph 3.4(A) of the Loan Agreement is hereby deleted and replaced
by the following new paragraph 3.4(A):
3.4(A) Borrower may at any time prior to the end of the Original Term
or any Renewal Term and on not less than ninety (90) days prior written
notice to Lender, terminate
-6-
<PAGE>
this Agreement; provided, however, that on the termination date Borrower
shall pay all the outstanding Obligations and Borrower shall deposit
such amount of cash collateral as Lender determines is necessary to
secure Lender from loss, cost, damage or expenses, including reasonable
attorney fees, in connection with any remittance items or other payments
provisionally credited towards the repayment of the Obligations and/or
to which Lender has not yet received final and indefeasible payment.
Borrower shall also pay to Lender on such termination date a prepayment
fee ("Prepayment Fee") equal to one percent (1%) of the Credit Line.
12. The following paragraph (u) is added to Section 7.2 of the Loan
Agreement:
(u) PURCHASE OF END USER ACCOUNTS FROM APPROVED CARRIERS. Purchase
End User Accounts from Approved Carriers other than with advances received
directly from Lender pursuant to the Revolving Credit Loans.
13. Exhibit 8.1(N)-Class 1 OSP Certification form is hereby deleted and
replaced by a new Exhibit 8.1(N)-Class 1 OSP Certification form attached to this
First Amendment.
14. Section 10.10 of the Loan Agreement is hereby amended such that
notices to Bell Atlantic TriCon Leasing Corporation in King of Prussia, PA
should be sent to the attention of Larry Jadlocki. All other notice provisions
of Section 10.10 remain unchanged and in full force and effect.
15. Borrower shall pay to Lender a loan origination fee equal to three
quarters of one percent (.75%) of the increase in the sublimit for advances
against Eligible Accounts for Class 1 and Class 2 Approved Carriers, which fee
is fully earned on the date hereof and shall be payable to Lender on the date of
such increases. Borrower shall also pay to Lender a loan origination
-7-
<PAGE>
fee in connection with the reclassification of U.S. Long Distance, Inc.,
equal to one half of one percent (.50%) per annum of $5,000,000.00, in
accordance with Section 3.2(c) of the Loan Agreement, which fee is fully
earned on the date hereof and shall be payable to Lender upon the earlier of
(i) Borrower's request for such reclassification and increase, and (ii) May
1, 1993.
16. Borrower shall deliver or cause Guarantors to deliver the following to
Lender prior to Closing (all documents to be in form and substance satisfactory
to Lender):
a. This fully executed First Amendment and any other documents
required by any provision hereof;
b. A Corporate Guaranty executed by USBI, guaranteeing, as surety,
all Obligations (as defined in the Loan Agreement);
a. UCC-1 financing statements covering the Collateral of USBI which
is pledged to Lender hereunder;
b. UCC, federal and state tax lien and judgment searches for USBI
indicating that upon filing of the UCC-1 financing statements described in (c)
above, Lender shall have first liens on the Collateral pledged by USBI to
Lender;
c. Certified copies of resolutions of Borrower's and Guarantors'
(including USBI) board of directors authorizing the execution of this First
Amendment, and all agreements and documents referred to herein; and
-8-
<PAGE>
d. Payment of the loan origination fee due on the date hereof
($37,500.00) in accordance with Section 3.2(a) of the Loan Agreement, based upon
the increase in the credit Line as of the date hereof.
17. Guarantors hereby accept and approve the terms and conditions of this
First Amendment and covenant and agree that all Obligations, as modified by this
First Amendment, are covered by the Corporate Guarantees, and such corporate
Guarantees remain in full force and effect.
18. The parties acknowledge and agree that this First Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect. To
the extent that any term or provision of this First Amendment is or may be
deemed expressly inconsistent with any term or provision in the Existing Loan
Documents, the terms and provisions hereof shall control.
19. a. All capitalized terms not otherwise defined herein shall have the
meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein shall
be binding or enforceable unless in writing and signed on behalf of the party
against who enforcement is sought;
-9-
<PAGE>
c. No rights are intended to be created hereunder for the benefit of
any third party donee, creditor, or incidental beneficiary.
ZERO PLUS DIALING, INC.
By: [Illegible sig]
---------------------------------
Attest: ??????
U.S. LONG DISTANCE, INC.
By: [Illegible sig]
---------------------------------
Attest: ??????
U.S. LONG DISTANCE CORP.
By: [Illegible sig]
---------------------------------
Attest: ??????
U.S. BILLING, INC
By: [Illegible sig]
---------------------------------
Attest: ??????
BELL ATLANTIC TRICON LEASING
CORPORATION
By: [Illegible sig]
---------------------------------
-10-
<PAGE>
SECOND AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This Second Amendment to Amended and Restated Loan and Security
Agreement ("Second Amendment") is made this 2nd day of April 1993 among Zero
Plus Dialing, Inc. ("Borrower"), a Delaware corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, U.S. Long Distance Corp. ("USLDC"), a Delaware
corporation with its chief executive office and principal place of business
at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S. Long Distance,
Inc. ("USLDI"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, U.S. Billing, Inc. ("USBI"), a Texas corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, and Bell Atlantic TriCon Leasing Corporation
("Lender").
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Loan and Security Agreement ("Loan Agreement") and
certain related agreements and instruments, to reflect certain loan arrangements
among the parties.
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
<PAGE>
C. On December 28, 1992, Borrower, USLDC, USLDI and USBI and Lender
executed a certain First Amendment and Joinder to Amended and Restated Loan and
Security Agreement ("First Amendment").
D. The Loan Agreement, the related agreements and instruments executed in
connection therewith, the Letter Agreement and the First Amendment are
hereinafter collectively referred to as the "Existing Loan Documents."
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof, the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
1. Paragraph 7.2(u) of the Loan Agreement is hereby deleted and replaced
with the following new Paragraph 7.2(u):
(u) PURCHASE OF END-USER ACCOUNTS FROM APPROVED CARRIERS. Purchase
End-User Accounts from Approved Carriers other than with advances
received directly from Lender pursuant to the Revolving Credit
Loans; provided, however, that at any time after Borrower has
requested that Lender increase the Credit Line for any Approved
Carrier, then while such request is pending and at any time total
advances to such Approved Carrier are equal to the Credit Line
and Borrowing Base for such Approved Carrier, then Borrower may
purchase End-User Accounts from such Approved Carrier with other
funds.
2. Guarantors hereby accept and approve the terms and conditions of
this Second Amendment and covenant and agree that all Obligations, as
modified by this Second Amendment, are
-2-
<PAGE>
covered by the Corporate Guarantees, and such Corporate Guarantees remain in
full force and effect.
3. The parties acknowledge and agree that this Second Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect. To
the extent that any term or provision of this Second Amendment is or may be
deemed expressly inconsistent with any term or provision in the Existing Loan
Documents, the terms and provisions hereof shall control.
4. a. All capitalized terms not otherwise defined herein shall have the
meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein shall
be binding or enforceable unless in writing and signed on behalf of the party
against who enforcement is sought;
c. No rights are intended to be created hereunder for the benefit of
any third party donee, creditor, or incidental beneficiary.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
ZERO PLUS DIALING, INC.
By: /s/ Mark D. Buckner
--------------------------------
Attest:
----------------------------
U.S. LONG DISTANCE, INC.
By: /s/ Mark D. Buckner
--------------------------------
Attest:
----------------------------
U.S. LONG DISTANCE CORP.
By: /s/ Mark D. Buckner
--------------------------------
Attest:
----------------------------
U.S. BILLING, INC.
By: /s/ Mark D. Buckner
--------------------------------
Attest:
----------------------------
BELL ATLANTIC TRICON LEASING
CORPORATION
By: [Illegible sig]
--------------------------------
-4-
<PAGE>
THIRD AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This Third Amendment to Amended and Restated Loan and Security Agreement
("Third Amendment") is made this 1st day of October, 1993 among Zero Plus
Dialing, Inc. ("Borrower"), a Delaware corporation with its chief executive
office and principal place of business at 9311 San Pedro, Suite 300, San
Antonio, Texas 78216, U.S. Long Distance Corp. ("USLDC"), a Delaware
corporation with its chief executive office and principal place of business
at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S. Long Distance,
Inc. ("USLDI"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, U.S. Billing, Inc. ("USBI"), a Texas corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, and Bell Atlantic Tricon Leasing corporation
("Lender").
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Loan and Security Agreement ("Loan Agreement")
and certain related agreements and instruments, to reflect certain loan
arrangements among the parties.
<PAGE>
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
C. On December 28, 1992, Borrower, USLDC, USLDI and USBI and Lender
executed a certain First Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("First Amendment").
D. On April 2, 1993, Borrower, USLDC, USLDI and USBI and Lender
executed a certain Second Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("Second Amendment").
E. The Loan Agreement, the related agreements and instruments executed
in connection therewith, the Letter Agreement, First Amendment and the Second
Amendment are hereinafter collectively referred to as the "Existing Loan
Documents."
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof, the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
1. The amount provided for in Subparagraph (A) of the definition of
Credit Line shall at all times from the date hereof through October 31, 1993
be increased from Twenty Million Dollars ($20,000,000) to Twenty-two Million
Dollars ($22,000,000) and on November 1, 1993 and at all times thereafter
shall be Twenty Million Dollars ($20,000,000). At no time shall the amount
of
-2-
<PAGE>
the Revolving Credit Loans exceed the amount of the Credit Line as amended
hereby.
2. Guarantors hereby accept and approve the terms and conditions of
this Third Amendment and covenant and agree that all Obligations, as modified
by this Third Amendment, are covered by the Corporate Guarantees, and such
Corporate Guarantees remain in full force and effect.
3. The parties acknowledge and agree that this Third Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect.
To the extent that any term or provision of this Third Amendment is or may be
deemed expressly inconsistent with any term or provision in the Existing Loan
Documents, the terms and provisions hereof shall control.
4. a. All capitalized terms not otherwise defined herein shall have
the meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed on behalf of the
party against who enforcement is sought;
c. No rights are intended to be created hereunder for the benefit
of any third party donee, creditor, or incidental beneficiary.
-3-
<PAGE>
IN WITNESS WHEREOF, the undersigned parties have executed this Agreement
the day and year first above written.
ZERO PLUS DIALING, INC.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
U.S. LONG DISTANCE, INC.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
U.S. LONG DISTANCE CORP.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
U.S. BILLING, INC.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
BELL ATLANTIC TRICON LEASING
CORPORATION
By: [ILLEGIBLE NAMES]
-------------------------------
-4-
<PAGE>
FOURTH AMENDMENT AND JOINDER TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This Fourth Amendment to Amended and Restated Loan and Security
Agreement ("Fourth Amendment") is made this 1ST day of October, 1993 among
Zero Plus Dialing, Inc. ("Borrower"), a Delaware corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, U.S. Long Distance Corp. ("USLDC"), a Delaware
corporation with its chief executive office and principal place of business
at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S. Long Distance,
Inc. ("USLDI"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, U.S Billing, Inc. ("USBI"), a Texas corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, and USLD Acquisition Corp. d/b/a Telecom West,
Inc., an Texas corporation with its chief executive office and principal
place of business at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, and
Bell Atlantic Tricon Leasing Corporation ("Lender").
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Loan and Security Agreement ("Loan Agreement")
and certain related agreements and instruments, to reflect certain loan
arrangements among the parties.
<PAGE>
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
C. On December 28, 1992, Borrower, USLDC, USLDI and USBI and Lender
executed a certain First Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("First Amendment").
D. On April 2, 1993, Borrower, USLDC, USLDI and USBI and Lender
executed a certain Second Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("Second Amendment").
E. On October 1, 1993, Borrower, USLDC, USLDI, USBI and Lender
executed a certain Third Amendment to Amended and Restated Loan and Security
Agreement ("Third Amendment").
F. USLDC's wholly owned subsidiary, USLD Acquisition Corp. ("USLDA"),
is merging with Telecom West, Inc. The name of the successor corporation to
this merger shall be USLD Acquisition Corp. d/b/a Telecom West, Inc.
("Telecom").
G. The Loan Agreement, the related agreements and instruments executed
in connection therewith, the Letter Agreement, the First Amendment, the
Second Amendment and the Third Amendment are hereinafter collectively
referred to as the "Existing Loan Documents."
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof, the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
2
<PAGE>
1. a. Telecom hereby joins in, assumes, adopts and agrees to be
subject to the terms and conditions of the Existing Loan Documents, as
amended hereby, and the Obligations evidenced thereby. Without limiting the
generality of the foregoing, Telecom shall be liable, as surety, for all
Obligations now existing or hereafter incurred, including without limitation
the Revolving Credit Note and the Term Notes, and Telecom grants to Lender a
continuing first lien on and security interest in all of its assets of the
type described as Collateral in Section 4 of the Loan Agreement, including
without limitation all now owned or hereafter acquired Accounts, General
Intangibles, and Equipment, and including all cash and non-cash proceeds of
all of the foregoing.
b. The Loan Agreement is hereby amended to provide that in each
instance where the term "Guarantors" or "Guarantor" appears, such term or
terms shall jointly and severally include a reference to Telecom.
2. Borrower shall deliver or cause Guarantors to deliver the following
to Lender prior to Closing (all documents to be in form and substance
satisfactory to Lender):
a. This fully executed Fourth Amendment and any other documents
required by any provision hereof;
b. A Corporate Guaranty executed by Telecom guaranteeing, as
surety, all Obligations (as defined in the Loan Agreement);
3
<PAGE>
c. UCC-1 financing statements covering the Collateral of Telecom
which is pledged to Lender hereunder;
d. UCC, federal and state tax lien and judgment searches for
Telecom indicating that upon filing of the UCC-l financing statements
described in (c) above, Lender shall have a first priority security interest
in the Collateral pledged by Telecom to Lender; and
e. Certified copies of resolutions of Borrower's and Guarantors'
(including Telecom) board of directors authorizing the execution of this
Fourth Amendment, and all agreements and documents referred to herein.
3. Guarantors hereby accept and approve the terms and conditions of
this Fourth Amendment and covenant and agree that all Obligations, as
modified by this Fourth Amendment, are covered by the Corporate Guarantees,
and such Corporate Guarantees remain in full force and effect.
4. The parties acknowledge and agree that this Fourth Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect.
To the extent that any term or provision of this Fourth Amendment is or may
be deemed expressly inconsistent with any term or provision of the Existing
Loan Documents, the terms and provisions hereof shall control.
4
<PAGE>
5. a. All capitalized terms not otherwise defined herein shall the
meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed on behalf of the
party against who enforcement is sought;
c. No rights are intended to be created hereunder for the benefit
of any third party donee, creditor, or incidental beneficiary.
6. REPRESENTATIONS AND WARRANTIES. Telecom represents and
5
<PAGE>
warrants that Telecom is qualified to do business in the State of Oregon.
INTENDING TO BE LEGALLY BOUND, the undersigned parties have executed
this Fourth Amendment and Joinder to the Amended and Restated Loan Agreement
the date and year first written above.
ZERO PLUS DIALING, INC.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
U.S. LONG DISTANCE, INC.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
U.S. LONG DISTANCE CORP.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
U.S. BILLING, INC.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
USLD ACQUISITION CORP.
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
BELL ATLANTIC TRICON LEASING
CORPORATION
By: [ILLEGIBLE NAMES]
-------------------------------
Attest: [ILLEGIBLE NAMES]
---------------------------
6
<PAGE>
FIFTH AMENDMENT AND JOINDER TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This Fifth Amendment to Amended and Restated Loan and Security Agreement
("Fifth Amendment") is made this 16th day of November, 1993 among Zero Plus
Dialing, Inc. ("Borrower"), a Delaware corporation with its chief executive
office and principal place of business at 9311 San Pedro, Suite 300, San
Antonio, Texas 78216, U.S. Long Distance Corp. ("USLDC"), a Delaware
corporation with its chief executive office and principal place of business
at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S. Long Distance,
Inc. ("USLDI"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, U.S. Billing, Inc. ("USBI"), a Texas corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, USLD Acquisition Corp. d/b/a Telecom West,
Inc. ("Telecom"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, STS Telecommunications, Inc. ("STS"), a Texas corporation with its
chief executive officer and principal place of business at 1049 North 3rd
Street, Abilene, Texas 79604 and Bell Atlantic Capital Corp. (formerly known
as Bell Atlantic Tricon Leasing Corporation) ("Lender").
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Loan and Security
<PAGE>
Agreement ("Loan Agreement") and certain related agreements and instruments,
to reflect certain loan arrangements among the parties.
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
C. On December 28, 1992, Borrower, USLDC, USLDI and USBI and Lender
executed a certain First Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("First Amendment").
D. On April 2, 1993, Borrower, USLDC, USLDI and USBI and Lender
executed a certain Second Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("Second Amendment").
E. On October 1, 1993, Borrower, USLDC, USLDI, USBI and Lender
executed a certain Third Amendment to Amended and Restated Loan and Security
Agreement ("Third Amendment").
F. On October 1, 1993, USLDC's wholly owned subsidiary, USLD
Acquisition Corp. ("USLDA"), merged with Telecom West, Inc. The name of the
successor corporation to this merger shall be USLD Acquisition Corp. d/b/a
Telecom West, Inc. ("Telecom").
G. On October 1, 1993, Borrower, USLDC, USLDI, USBI, USLDA, Telecom
and Lender executed a certain Fourth Amendment and Joinder to Amended and
Restated Loan and Security Agreement ("Fourth Amendment")
H. STS, J.T. Poorman, Lou Poorman, Brad Poorman, Tony Poorman (J.T.
Poorman, Lou Poorman, Brad Poorman and Tony Poorman
2
<PAGE>
are collectively referred to herein as the "Individual Owners") NTS
Communications, Inc. ("NTS") and USLDC entered into that certain Stock
Purchase Agreement dated as of November 2, 1993 (the "STS Stock Purchase
Agreement"). Pursuant to the STS Stock Purchase Agreement, USLDC agreed to
purchase all of the issued and outstanding shares of STS from the Individual
Owners and NTS, by no later than December 31, 1993.
I. The Loan Agreement, the related agreements and instruments executed
in connection therewith, the Letter Agreement, the First Amendment, the
Second Amendment, the Third Amendment and the Fourth Amendment are
hereinafter collectively referred to as the "Existing Loan Documents."
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof; the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
1. a. STS hereby joins in, assumes, adopts and agrees to be subject
to the terms and conditions of the Existing Loan Documents, as amended
hereby, and the Obligations evidenced thereby. Without limiting the
generality of the foregoing, STS shall be liable, as surety, for all
Obligations now existing or hereafter incurred, including without limitation
the Revolving Credit Note and the Term Notes, and STS grants to Lender a
continuing first lien on and security interest in all of its assets of the
type described as Collateral in Section 4 of the Loan Agreement, including
without limitation all now owned or
3
<PAGE>
hereafter acquired Accounts, General Intangibles, and Equipment, and
including all cash and non-cash proceeds of all of the foregoing.
b. The Loan Agreement is hereby amended to provide that in each
instance where the term "Guarantors" or "Guarantor" appears, such term or
terms shall jointly and severally include a reference to STS.
2. Borrower shall deliver or cause Guarantors to deliver the following
to Lender prior to Closing (all documents to be in form and substance
satisfactory to Lender):
a. This fully executed Fifth Amendment and any other documents
required by any provision hereof;
b. A Corporate Guaranty executed by STS guaranteeing, as surety,
all Obligations (as defined in the Loan Agreement);
c. UCC-1 financing statements covering the Collateral of STS
which is pledged to Lender hereunder;
d. UCC, federal and state tax lien and judgment searches for STS
indicating that upon filing of the UCC-1 financing statements described in
(c) above, Lender shall have a first priority security interest in the
Collateral pledged by STS to Lender; and
e. Certified copies of resolutions of Borrower's and Guarantors'
(including STS) board of directors authorizing the execution of this Fifth
Amendment, and all agreements and documents referred to herein.
4
<PAGE>
3. Guarantors hereby accept and approve the terms and conditions of
this Fifth Amendment and covenant and agree that all Obligations, as modified
by this Fifth Amendment, are covered by the Corporate Guarantees, and such
Corporate Guarantees remain in full force and effect.
4. The parties acknowledge and agree that this Fifth Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect.
To the extent that any term or provision of this Fifth Amendment is or may be
deemed expressly inconsistent with any term or provision of the Existing Loan
Documents, the terms and provisions hereof shall control.
5. a. All capitalized terms not otherwise defined herein shall the
meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed on behalf of the
party against who enforcement is sought;
c. No rights are intended to be created hereunder for the benefit
of any third party donee, creditor, or incidental beneficiary.
6. REPRESENTATIONS AND WARRANTIES. STS represents and warrants that
STS is qualified to do business in the State of Oregon.
5
<PAGE>
INTENDING TO BE LEGALLY BOUND, the undersigned parties have executed
this Fifth Amendment and Joinder to the Amended and Restated Loan Agreement
the date and year first written above.
ZERO PLUS DIALING INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: President
U.S. LONG DISTANCE, INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: President
U.S. LONG DISTANCE CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: President
U.S. BILLING, INC
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: President
USLD ACQUISITION CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: President
[SIGNATURES CONTINUED ON NEXT PAGE]
6
<PAGE>
STS TELECOMMUNICATIONS, INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: President
BELL ATLANTIC CAPITAL CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
----------------------------- ----------------------------
Title: Staff Vice President
7
<PAGE>
SIXTH AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This sixth Amendment to Amended and Restated Loan and Security Agreement
("Sixth Amendment") is made as of December 7, 1993 among Zero Plus Dialing,
Inc. ("Borrower"), a Delaware corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, U.S. Long Distance Corp. ("USLDC"), a Delaware corporation with its
chief executive office and principal place of business at 9311 Ban Pedro,
Suite 300, San Antonio, Texas, 78216, U.S. Long Distance, Inc. ("USLDI"), a
Texas corporation with its chief executive office and principal place of
business at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S.
Billing, Inc. ("USBI"), a Texas corporation with its chief executive office
and principal place of business at 9311 San Pedro, Suite 300, San Antonio,
Texas 78216, USLD Acquisition Corp. d/b/a Telecom West, Inc. ("Telecom"), a
Texas corporation with its chief executive office and principal place of
business at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, STS
Telecommunications, Inc. ("STS"), a Texas corporation with its chief
executive officer and principal place of business at 1049 North 3rd Street,
Abilene, Texas 79604 and Bell Atlantic Capital Corp. (formerly known as Bell
Atlantic TriCon Leasing corporation) ("Lender").
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Ban and Security Agreement ("Loan Agreement")
and certain related agreements and
<PAGE>
instruments, to reflect certain loan arrangements among the parties.
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
C. On December 28, 1992, Borrower, USLDC, USLDI and USBI and Lab
executed a certain First Amendment and Joinder to Amended and Related Loan
and Security Agreement ("First Amendment").
D. On April 2, 1993, Borrower, USLDC, USLDI and USBI and Lender
executed a certain Second Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("Second Amendment").
E. On October 1, 1993, Borrower, USLDC, USLDI, USBI and Lender
executed a certain Third Amendment to Amended and Restated Loan and Security
Agreement ("Third Amendment").
F. On October 1, 1993, USLDC's wholly owned subsidiary, USLD
Acquisition Corp. ("USLDA"), merged with Telecom West, Inc. The name of the
successor corporation to this merger is USLD Acquisition Corp. d/b/a Telecom
West, Inc. ("Telecom").
G. On October 1, 1993, Borrower, USLDC, USLDI, USBI, USLDA, Telecom
and Lender executed a certain Fourth Amendment and Joinder to Amended and
restated loan and Security Agreement ("Fourth Amendment").
H. On November 16, 1993, Borrower, USLDC, USLDI, USBI, Telecom, STS
and Lender executed a certain Fifth Amendment to
2
<PAGE>
Amended and restated Loan and Security Agreement ("Fifth Amendment').
I. The Loan Agreement, the related agreements and instruments executed
in connection therewith, the Later Agreement, the First Amendment, the Second
Amendment, the Third Amendment, the Fourth Amendment and the Fifth Amendment
are hereinafter collectively referred to as the "Existing Loan Documents."
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof, the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
1. The definition of Approved Carrier in the Loan Agreement shall be
deleted and replaced in its entirety to read as follows:
APPROVED CARRIER - any operator service provider or interexchange
carrier (collectively, an "OSP") which beets each of the following
requirements to Lender's satisfaction in the exercise of its sole discretion:
(i) such OSP shall have executed and delivered the Carrier Contract and the
Addendum thereto, and UCC-1 financing statements to perfect Borrower's
interests in the Accounts being purchased, which financing statements shall
also indicate that Lender is the assignee thereof; and (ii) Borrower shall
have received copies of a Uniform Commercial Code searches and judgment,
state and federal tax lien searches against such OSP where such OSP's
principal place of business is located, indicating that there are no liens
against any of the Accounts of Such OSP.
2. The definition of Borrowing Bale in the Loan Agreement shall be
deleted and replaced in its entirety to read as follows:
BORROWING BASE - as at any date of determination thereof, an amount
up to the lesser of (A) the Credit Line, or (B) eighty percent (80%) of the
gross amount of Eligible Account: outstanding at such date (the "Advance
Rate"), provided, however,
3
<PAGE>
that Lender may, in its sole discretion, adjust the Advance Rate as follows;
(i) if the Dilution Factor exceeds eight percent (8.0%), the Advance Rate may
be reduced by Lender to seventy-five percent (75.0%), (ii) if the Dilution Fact
or exceeds eleven percent (11.0%), the Advance Rate may be reduced by Lender to
seventy percent (70.0%), or (iii) it the Dilution Factor exceeds fifteen
percent (15.0%), the Advance rate may be reduced by Lender two (2) percentage
points for each one (1) percentage point increase in the Dilution Factor over
fifteen percent (15.0%) and if the Dilution Factor exceeds fifty percent
(50.0%), the Advance Rate may be reduced by Lender to zero percent (0.0%). All
changes to the Advance Rate may result from the review of the Dilution Factors
on a quarterly basis or whenever a field examination is performed.
For purposes hereof, the gross amount of Eligible Accounts at any
time shall be the face amount of such Eligible Accounts without deducting any
discounts, credits, unbillability or uncollectability, whether or not due to
fraud and allowances of any nature at any time, but not including any excise
taxes owing in connection with such Accounts.
3. The definition of Credit Line in the Loan Agreement shall be
deleted and replaced in its entirety to read as follows:
CREDIT LINE - as at any date of determination thereof, the total
amount available to Borrower under the Revolving Credit Facility shall be
Forty-Five Million Dollars ($45,000,000) during the original Term, unless,
Borrower, at its sole option as lang as no Event of Default exists or would
exist with the passage of time or notice or both, has notified wider in
writing ninety (90) days prior to the third year of the original Tea that
Borrower requests that the total amount to be available under the Revolving
Credit Facility be increased, in which case the total amount available to
Borrower under the Revolving Credit Facility shall be increased to sixty
Million Dollars ($60,000,000) during the third year of the Original Term and
during any Renewal Tar: thereafter.
4. The definition of Eligible Account in the Loan Agreement shall be
deleted and replaced in its entirety to read as follows:
ELIGIBLE ACCOUNT - A LEC Receivable or USLD Receivable arising in
the ordinary course of business which Lender, in its reasonable judgment,
deems to be an Eligible Account.
4
<PAGE>
No LEC Receivable shall be an Eligible LEC Receivable if: (i) such
Account arises out of a sale made by an Approved Carrier to a Subsidiary or
an Affiliate of such Approved Carrier or of Borrower (other than sales by
U.S. Long Distance, Inc.) or to a Person controlled by an Affiliate of such
Approved Carrier or of Borrower, or (ii) such Account is unpaid more than
ninety (90) days after the date of the applicable billing tape or
transmission date; or (iii) fifty percent (50%) or more of the LEC
Receivables from a LEC are not deemed Eligible Accounts hereunder; or (iv)
any covenant, representation or warranty contained in this Agreement with
respect to such Account has been breached; or (v) the LEC has disputed
liability with respect to a LEC Receivable, or has made any claim with
respect to any other LEC Receivable due from the LEC to Borrower, to the
extent of any dispute or claim; or (vi) the LEC has commenced a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter
amended, or made an assignment for the benefit of creditors, or a decree or
order for relief has been entered by a Court having jurisdiction over the LEC
in an involuntary case under the federal bankruptcy law, as now constituted
or hereafter amended, or any other petition or other application for relief
under the federal bankruptcy laws has been filed against the LEC, or if the
LEC has failed, suspended business, ceased to be Solvent, or consented to or
suffered a receiver, trustee, liquidator or custodian to be appointed for it
or for all or a significant portion of its assets or affairs; or (vii) Lender
believes, in its reasonable judgment, that collection of such LEC Receivable
is insecure or that payment thereof is doubtful or will be delayed by reason
of the LEC's financial condition; or (viii) the LEC Receivable is subject to
a Lien; or (ix) more than thirty-five percent (35%) of Borrower's total
Accounts consist of LEC Receivables from the LEC; or (x) the LEC Receivable
is evidenced by chattel paper or an instrument of any kind, or has been
reduced to judgment; or (xi) Borrower has made any agreement with a LEC for
any deduction therefrom, except for post-billing adjustments which are made
in the ordinary course of business and except as provided in the applicable
Billing Contract; or (xii) Borrower has made an agreement with the LEC to
extend the time of payment thereof, unless notwithstanding such agreement
payment is made within ninety (90) days of the billing tape date or
transmission date, or (xiii) such LEC Receivable does not arise from the
purchase by Borrower from the Approved Carrier originating the End User
Account which has been sold, assigned or transferred to a LEC to create such
LEC Receivable pursuant to the terms set forth in the Carrier Contract in the
form attached to the Loan Agreement as EXHIBIT 1.1; or (xiv) more than
twenty-five percent (25%) of Borrower's total accounts consist of or arise
from End User Accounts purchased from any single OSP; or (xv) call records
for such Account have not been subjected to validation acceptable to Lender
or have dilution rates which are unacceptable to Lender.
5
<PAGE>
No USLD Receivable shall be an Eligible USLD Receivable if: (i)
such Account arises out of a sale made by an Approved Carrier to a Subsidiary
or an Affiliate of such Approved Carrier or of Account Debtor or to a Person
controlled by an Affiliate of such Approved Carrier or of Account Debtor; or
(ii) such Account is unpaid more than ninety (90) day. after the date of the
applicable billing tape or transmission date; or (iii) fifty percent (50%) or
more of the USLD Receivables from an Account Debtor are not deemed Eligible
Accounts hereunder; or (iv) any covenant, representation or warranty
contained in this Agreement with respect to such Account has been breached;
or (v) the Account Debtor has disputed liability with respect to a USLD
Receivable, or has made any claim with respect to any other USLD Receivable
due from the Account Debtor to USLD, Inc., to the extent of any dispute or
claim; or (vi) the Account Debtor has commenced a voluntary case under the
federal bankruptcy laws, as now constituted or hereafter amended, or made an
assignment for the benefit of creditors, or a decree or order for relief has
been entered by a court having jurisdiction over the Account Debtor in an
involuntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other petition or other application for relief
under the federal bankruptcy laws has been filed against any Account Debtor,
or if the Account Debtor has failed, suspended business, ceased to be
Solvent, or consented to or suffered a receiver, trustee, liquidator or
custodian to be appointed for it or for all or a significant portion of its
assets or affairs; or (vii) Lender believes, in its reasonable judgment, that
collection of such USLD Receivable is insecure or that payment thereof is
doubtful or will be delayed by reason of the Account Debtor's financial
condition; or (viii) the USLD Receivable is subject to a Lien; or (ix) loft
than thirty-five percent (35%) of USLD, Inc.'s total Accounts consist of USLD
Receivables from a single Account Debtor; or (x) the USLD Receivable is
evidenced by chattel paper or an instrument of any kind, or has been reduced
to judgment; or (xi) USLD, Inc. has made any agreement with an Account Debtor
for any deduction therefrom, except for post-billing adjustments which are
made in the ordinary course of business and except as provided in the
applicable Billing Contract; or (xii) USLD, Inc. has made an agreement with
the Account Debtor to extend the time of payment thereof, unless
notwithstanding such agreement payment is made within ninety (90) days of the
billing tape date or transmission date.
Lender has financed, and may continue in the future to finance
Persons in the same or similar business as Borrower which loans are, and
shall be, secured by LEC Receivables of various Persons (the LEC Loan
Program"). Borrower acknowledges that Lender's LEC Loan Program (which shall
include Lender's loans under this Agreement to Borrower) limits Lender's
aggregate loans to all borrowers thereunder which are secured by LEC
Receivables as follows: (i) the aggregate Accounts due from any single Bell
6
<PAGE>
Operating Telephone Company (each, a "BOC") which secure loans under the LEC
Loan Program shall not exceed at any one time in the aggregate for all
Persons Twenty Five Million Dollars ($25,000,000.00), (ii) the aggregate
Accounts due from any single telephone company unit of GTE, United Telephone,
and Centel which secure loans under the LEC Loan Program shall not exceed at
any one time in the aggregate for all Persons Fifteen Million Dollars
($15,000,000.00), and (iii) the aggregate Accounts due from any other single
LEC which is not a BOC which secure loans under the LEC loan Program shall
not exceed such lesser ceilings as may be established by Lender from time to
time on a case by case basis. USLD, Inc. acknowledges that Lender may from
time to time in its sole discretion increase or decrease the above per BOC
and per LEC ceilings. Due to the above stated restrictions on the LEC Loan
Program, Lender may from time to time exclude certain Eligible Accounts from
the respective Borrowing Bases of borrowers under the LEC Loan Program exceed
the ceilings set forth above, as such ceilings may from time to time be
increased or decreased by Lender. Lender shall provide Borrower with prompt
notice of Lender's becoming aware that Lender has reached ninety percent
(90%) of its limit for a specific LEC.
5. The definition of USLD Receivable in the Loan Agreement shall be
deleted and replaced in its entirety to read as follows:
USLD RECEIVABLE - shall mean all accounts receivable of U.S. Long
Distance, Inc. arising out of 0+ or 1+ services provided by (7.5. Long
Distance, Inc. to an Account Debtor.
6. The following definitions in the Loan Agreement are hereby deleted:
(i) Class 1 OSP Certification; (ii) Collateral and Credit Criteria
List; and (iii) OSP Certification Form.
7. Section 2.1(B) of the Loan Bent shall be deleted and shall be
replaced in its entirety to read:
(B) The Revolving Credit Loans shall be used by Borrower for its
working capital needs, including without limitation, for the purchase of
certain End User Accounts from OSPs and for acquisitions permitted hereunder,
to the extent not otherwise inconsistent with the terms of this Agreement.
8. A new Section 2.1(C) shall be added to Loan Agreement and shall
read in its entirety as follows:
7
<PAGE>
(C) The outstanding balance under the Revolving Credit Facility may
fluctuate from time to time, to be reduced by repayments made by Borrower, to
be increased by future advances and extensions of credit which may be made by
Lender to or for the benefit of Borrower. For the purposes of this
Agreement, any determination as to whether there is availability within the
Borrowing Base for advances or extensions of credit shall be determined by
Lender, in its sole discretion, in accordance with the provisions this
Agreement and such determination shall be final and binding upon Borrower.
Subject to availability under the Borrowing Base, the fulfillment of any
other conditions to borrowing contained in this Agreement and the absence of
an Event of Default or any event which with the giving of notice or passage
of time or both would become an Event of Default, Borrower may borrow, repay
and reborrow under the Revolving Credit Facility from time to time during the
Original Term.
9. Section 2.6 of the Loan Agreement which was added in the First
Amendment and Joinder to Amended and Restated Loan and Security Agreement
dated December 26, 1992 shall be deleted in its entirety.
10. Section 3.1(A) of the Loan Agreement shall be deleted and replaced
in its entirety to read as follows:
(A) Interest shall accrue on the principal amount of the Revolving
Credit Loans outstanding at the end of each day at a fluctuating rate per
annum equal to one-half of one percent (0.5%) above the Base Rate in effect
on such day. Interest shall accrue on the principal amount of the Term Loans
outstanding at the end of each day at a fluctuating rate per annum equal to
one-half of one percent (0.5%) above the Base Rate in effect on such day.
After the date hereof, the foregoing rate of interest shall be increased or
decreased, as the case may be, by an amount equal to any increase or decrease
in the Base Rate, with such adjustments to be effective as of the opening of
business on the day that any such change in the Base Rate becomes effective.
The Base Rate in effect on the date hereof shall be the Base Rate effective
as of the opening of business on the date hereof, but if this Agreement is
executed on a day that is not a Business Day, the Base Rate in effect on the
date hereof shall be the Base Rate effective as of the opening of business on
the last Business Day immediately preceding the date hereof. Interest shall
be calculated on a daily basis (computed on the actual number of bays elapsed
over a year of 360 days), commencing on the date hereof, and shall be payable
monthly, in arrears, on the first Business Day of each month.
11. Section 2.2 or the Loan Agreement shall be deleted and shall be
replaced in its entirety to read:
8
<PAGE>
3.2 FEES.
(A) Borrower shall pay to Lender on the date of this Sixth
Amendment, a commitment fee equal to one-half of one percent (0.5%) of the
credit Line as of the date hereof which fee shall be deemed to have been
fully earned as of the date hereof and shall be paid as follows: $112,500 on
the date hereof, $56,250 on December 14, 1994 and $56,250 on December 14,
1995.
(B) Borrower shall pay to Lender a revolving loan facility
fee equal to one half of one percent (0.5%) of Fifteen Million Dollars
($15,000,000) if the Credit Line increases from Forty-Five Million Dollars
($45,000,000) to Sixty million Dollars ($60,000,000), payable on the date of
such increase.
(C) Borrower shall pay to lender monthly, in arrears, an
unused facility fee equal to one quarter of one percent (0.25%) per annum
multiplied by the difference between the average outstanding daily loan
balance of the Revolving Line of Credit and the Credit Line for the month,
which fee shall be payable on the first Business Day after the end of any
month.
12. Section 3.3 of the Wan Agreement shall be deleted and shall be
replaced in its entirety to read:
3.3 TERM OF AGREEMENT. Subject to Lender's right to cease
making Loans to Borrower at any time upon or after the occurrence of any
Default or Event of Default, the provisions of this Agreement shall be in
effect from the date hereof through December 21, 1996 (the "Original Term"),
unless terminated as provided in Section 3.4 hereof and may be extended by
the written consent of Lender and Borrower (the "Renewal Term").
13. Section 4.1(E) of the Loan Agreement shall be deleted and shall be
replaced in its entirety to read:
(E) Equipment (excluding, however, all Equipment hereafter
acquired by Borrower).
14. Section 7.1(I) of the Loan Agreement shall be deleted and shall be
replaced in its entirety to read:
(I) VISITS AND INSPECTIONS. Permit representatives of Lender, from
time to time as often as way be requested, to visit and inspect the
Properties of borrower or any Guarantor, to inspect and make extracts from
their books, records, and corporate minutes and to discuss with their
officers, their employees and their independent accountants, the business,
9
<PAGE>
assets, liabilities, financial condition, business prospects and results of
operations of Borrower or any Guarantor. Borrower shall pay all of Lender's
out-of-pocket expenses incurred under this section.
15. The following sections of the Loan Agreement shall be deleted: (i)
7.3(A); and (ii) 7.3(C). Section 7.3(B) is hereby renamed as Section 7.3(A).
16. In addition to the reporting requirements set forth in Section
7.1(J) of the Loan Agreement, Borrower shall cause to be prepared and
furnished to lender the following (all to be kept and prepared in accordance
with GAAP applied on a consistent basis unless Borrower's and/or Guarantor's
certified public accountants concur in any change therein and such change is
disclosed to Lender and is consistent with (i) as soon as possible, but not
later than forty (40) days after the close of each month, unaudited monthly
and year to date financial statements of Borrower and Guarantors, together with
consolidating financial information, and all supporting schedules, all
certified by the Vice President and Treasurer, chief financial officer or
President of Borrower and Guarantors; (ii) as soon as possible but not later
than fifteen (15) days after the close of each month, Borrower shall deliver
a list of all OSPs participating in Borrower's advance funding program; (iii)
as soon as possible but not later than fifteen (15) days after the close of
each month, a report in form and substance acceptable to Lender, which sets
forth the monthly dilution rates by OSP; and (iv) as soon as possible but not
later than thirty (30) days prior to the end of any fiscal year, Borrower and
10
<PAGE>
Guarantors shall deliver annual projections, on a month by month basis, for
the coming fiscal year.
17. Lender and Borrower agree that Lender shall service Borrower's
account from its King of Prussia, Pennsylvania office and Borrower agrees to
address all Notices required under Section 10.10 of the Loan Agreement to be
addressed as follows:
Bell Atlantic Capital Corp.
1060 First Avenue, Suite 100
King of Prussia,
PA 19406
Attention; Frank Monzo
with copies to:
Bell Atlantic Capital Corp.
95 N. Route 17 South
Paramus, NJ 07653
Attention: Fred Bauman, Esquire
Blank, Rome, Comisky & McCauley
1200 Four Penn Center Plaza
Philadelphia, PA 19103
Attention: Lawrence F. Flick, II, Esquire
18. Borrower shall cause to be delivered to Lender on the date hereof,
the favorable, written opinion of counsel to Borrower: and Guarantor:,
regarding Borrowers and Guarantors, the loan Agreement, the Sixth Amendment
and the transactions contemplated thereby, in form and substance acceptable
to Lender and its counsel.
19. Any Disbursing latter provided by Borrower to Lender under Section
2. 2 (A) of the Loan Agreement shall contain such reporting information and
borrowing base documentation as required by Lender in its sole discretion.
11
<PAGE>
20. The parties acknowledge and agree that this sixth Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect.
To the extent that any term or provision of this Sixth Amendment is or may be
deemed expressly inconsistent with any term or provision of the Existing Loan
Documents, the terms and provisions hereof shall control.
21. All capitalized terms not otherwise defined herein shall the
meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed on behalf of the
party against who enforcement is sought;
c. No rights are intended to be created hereunder for the benefit
of any third party donee, creditor, or incidental beneficiary.
INTENDING TO BE LEGALLY BOUND, the undersigned parties have executed
this Sixth Amendment to Amended and Restated Loan Agreement the date and year
first written above.
ZERO PLUS DIALING, INC.
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: Vice President and
Treasurer
----------------------------
[SIGNATURES CONTINUED ON NEXT PAGE]
12
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
U.S. LONG DISTANCE, INC.
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: President
----------------------------
U.S. LONG DISTANCE CORP.
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: President
----------------------------
U.S.BILLING, INC.
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: President
----------------------------
USLD ACQUISITION CORP.
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: President
----------------------------
STS TELECOMMUNICATIONS, INC.
Attest: [ILLEGIBLE] By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: President
----------------------------
BELL ATLANTIC CAPITAL CORP.
Attest: By: [ILLEGIBLE]
---------------------------- ----------------------------
Title: Vice President
----------------------------
13
<PAGE>
SEVENTH AMENDMENT TO AMENDED AND
RESTATED LOAN AND SECURITY AGREEMENT
This Seventh Amendment to Amended and Restated Loan and Security
Agreement ("Seventh Amendment") is made as of March 17, 1994 among Zero Plus
Dialing, Inc. ("Borrower"), a Delaware corporation with its chief executive
office and principal place of business at 9311 San Pedro, Suite 300, San
Antonio, Texas 78216, U.S. Long Distance Corp. ("USLDC"), a Delaware
corporation with its chief executive office and principal place of business
at 9311 San Pedro, Suite 300, San Antonio, Texas 78216, U.S Long Distance,
Inc. ("USLDI"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, U.S. Billing, Inc. ("USBI"), a Texas corporation with its chief
executive office and principal place of business at 9311 San Pedro, Suite
300, San Antonio, Texas 78216, USLD Acquisition Corp. d/b/a Telecom West,
Inc. ("Telecom"), a Texas corporation with its chief executive office and
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216, STS Telecommunications, Inc. ("STS"), a Texas corporation with its
chief executive officer and principal place of business at 1049 North 3rd
Street, Abilene, Texas 79604, Enhanced Services Billing, Inc., a Delaware
corporation and wholly owned subsidiary of USLDC with its chief executive
office and principal place of business at 9311 San Pedro, Suite 300, San
Antonio, Texas 78216 ("Enhanced"), California Acquisition Corp., a Texas
corporation and wholly owned subsidiary of USLDC with its chief executive
office and
<PAGE>
principal place of business at 9311 San Pedro, Suite 300, San Antonio, Texas
78216 ("CAC"), a Texas corporation and wholly owned subsidiary of USLDC with
its chief executive office and principal place of business at 9311 San Pedro,
Suite 300, San Antonio, Texas 78216 ("TAC"), and Bell Atlantic Capital Corp.
("Lender")
BACKGROUND
A. On May 24, 1991, Borrower, USLDC, USLDI, and Lender entered into a
certain Amended and Restated Loan and Security Agreement ("Loan Agreement")
and certain related agreements and instruments, to reflect certain loan
arrangements among the parties.
B. On or about May 24, 1991, Borrower and Lender executed a certain
letter agreement ("Letter Agreement") clarifying certain terms of the Loan
Agreement.
C. On December 28, 1992, Borrower, USLDC, USLDI and USBI and Lender
executed a certain First Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("First Amendment").
D. On April 2, 1993, Borrower, USLDC, USLDI and USBI and Lender
executed a certain Second Amendment and Joinder to Amended and Restated Loan
and Security Agreement ("Second Amendment").
E. On October 1, 1993, Borrower, USLDC, USLDI, USBI and Lender
executed a certain Third Amendment to Amended and Restated Loan and Security
Agreement ("Third Amendment").
2
<PAGE>
F. On October 1, 1993, USLDC's wholly owned subsidiary, USLD
Acquisition Corp. ("USLDA"), merged with Telecom West, Inc. The name of the
successor corporation to this merger is USLD Acquisition Corp. d/b/a Telecom
West, Inc. ("Telecom").
G. On October l, 1993, Borrower, USLDC, USLDI, USBI, USLDA, Telecom
and Lender executed a certain Fourth Amendment and Joinder to Amended and
Restated Loan and Security Agreement ("Fourth Amendment").
H. On November 16, 1993, Borrower, USLDC, USLDI, USBI, Telecom, STS
and Lender executed a certain Fifth Amendment to Amended and Restated Loan
and Security Agreement ("Fifth Amendment").
I. On December 7, 1993, Borrower, USLDC, USLDI, USBI, Telecom, STS and
Lender executed a certain Sixth Amendment to Amended and Restated Loan and
Security Agreement ("Sixth Amendment").
J. The Loan Agreement, the related agreements and instruments executed
in connection therewith, the Letter Agreement, the First Amendment, the
Second Amendment, the Third Amendment, the Fourth Amendment, the Fifth
Amendment, and the Sixth Amendment are hereinafter collectively referred to
as the "Existing Loan Documents."
K. On March 17, 1994, USLDC formed Enhanced as its wholly owned
subsidiary for the purposes of billing and collecting "900" calls.
3
<PAGE>
L. Pursuant to an Agreement and Plan of Merger dated as of March 1,
1994 by and among USLDC, TAC and Inland Call America, Inc. ("Inland") and the
sole individual shareholders of Inland, Inland was merged into TAC.
M. Pursuant to an Agreement and Plan of Merger dated as of March 14,
1994 and effective as of March 15, 1994, by and among USLDC, CAC and Donyda,
Inc. d/b/a Call America of Palm Desert and Call America of San Diego
("Donyda") and Donald C. Clem, Nancy C. Clem and David M. Clem (the sole
individual shareholders of Donyda), Donyda was merged into CAC.
NOW THEREFORE, with the foregoing Background hereinafter deemed
incorporated by reference herein and made a part hereof, the parties hereto,
intending to be legally bound, hereby promise and agree as follows:
1. a. Enhanced, TAC and CAC each hereby joins in, assumes, adopts
and agrees to be subject to the terms and conditions of the Existing Loan
Documents, as amended hereby, and the Obligations evidenced thereby. Without
limiting' the generality of the foregoing, Enhanced, TAC and CAC shall each
be liable, as surety, for all Obligations now existing or hereafter incurred,
including, without limitation, the Revolving Credit Note and the Term Notes,
and Enhanced, TAC and CAC each grants to Lender a continuing first lien on
and security interest in all of its assets of the type described as
Collateral in Section 4 of the Loan Agreement, including, without limitation,
all now owned or hereafter acquired Accounts, General Intangibles, and
4
<PAGE>
Equipment, and including all cash and non-cash proceeds of all of the
foregoing.
b. The Loan Agreement is hereby amended to provide that in each
instance where the term "Guarantors" or "Guarantor" appears, such term or
terms shall jointly and severally include a reference to Enhanced, TAC and
CAC.
2. Borrower shall deliver or cause Guarantors to deliver the following
to Lender prior to Closing (all documents to be in form and substance
satisfactory to Lender):
a. This fully executed Seventh Amendment and any other documents
required by any provision hereof;
b. A Corporate Guaranty executed by Enhanced, TAC and CAC each
guaranteeing, as suretys, all Obligations (as defined in the Loan Agreement);
c. UCC-1 financing statements covering the Collateral of
Enhanced, TAC and CAC which are pledged to Lender hereunder;
d. UCC, federal and state tax lien and judgment searches for
Enhanced, TAC and CAC indicating that upon filing of the UCC-1 financing
statements described in (c) above, Lender shall have a first priority security
interest in the Collateral pledged by Enhanced, TAC and CAC to Lender; and
e. Certified copies of resolutions of each of Enhanced, TAC and
CAC's board of directors authorizing the execution of this Seventh Amendment,
and all agreements and documents referred to herein.
5
<PAGE>
3. Guarantors hereby accept and approve the terms and conditions of
this Seventh Amendment and covenant and agree that all Obligations, as
modified by this Seventh Amendment, are covered by the Corporate Guarantees,
and such Corporate Guarantees remain in full force and effect.
4. The parties acknowledge and agree that this Seventh Amendment is
incorporated into and made part of the Existing Loan Documents, the terms and
provisions of which, unless expressly modified herein, or unless no longer
applicable by their terms, continue unchanged and in full force and effect.
To the extent that any term or provision of this Seventh Amendment is or may
be deemed expressly inconsistent with any term or provision of the Existing
Loan Documents, the terms and provisions hereof shall control.
5. a. All capitalized terms not otherwise defined herein shall the
meanings as set forth in the Existing Loan Documents;
b. No modification hereof or any agreement referred to herein
shall be binding or enforceable unless in writing and signed on behalf of the
party against who enforcement is sought;
c. No rights are intended to be created hereunder for the benefit
of any third party donee, creditor, or incidental beneficiary.
6. REPRESENTATIONS AND WARRANTIES. Enhanced, TAC and CAC each
represents and warrants that Enhanced, TAC and CAC are qualified to do
business in their respective states of incorporation and in any other state
or commonwealth where
6
<PAGE>
Enhanced, TAC and CAC conduct business unless not being qualified will not
affect their ability to conduct business in such state or commonwealth.
INTENDING TO BE LEGALLY BOUND, the undersigned parties have executed
this Seventh Amendment and Joinder to the Amended and Restated Loan Agreement
the date and year first written above.
ZERO PLUS DIALING INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
U.S. LONG DISTANCE, INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
U.S. LONG DISTANCE CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
U.S. BILLING, INC
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
7
<PAGE>
USLD ACQUISITION CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
CALIFORNIA ACQUISITION CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
TELECOM ACQUISITION CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
STS TELECOMMUNICATIONS, INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: President
ENHANCED BILLING SERVICES, INC.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: PRESIDENT
BELL ATLANTIC CAPITAL CORP.
Attest: [ILLEGIBLE NAME] By: [ILLEGIBLE NAME]
---------------------------- ----------------------------
Title: Staff Vice President
8
<PAGE>
CORPORATE GUARANTY
TO: Bell Atlantic-TriCon Leasing Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with U.S. LONG DISTANCE, INC. (herein, the
"Debtor"), or to otherwise extend or continue financial accommodations in
favor of the Debtor or to acquire obligations or indebtedness owing by the
Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this 24th day of May, 1991
U.S. LONG DISTANCE CORP.
--------------------------------------
(Corporate Name)
a Delaware Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
------------------------------
San Antonio, TX 78216
------------------------------
By: /s/ MARK D. BUCKNER
---------------------------------
Mark D. Buckner
Title: Vice President, Finance
-------------------------------
Attest: /s/ KELLY SIMMONS
------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: Bell Atlantic-TriCon Leasing Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with ZERO PLUS DIALING INC. (herein, the
"Debtor"), or to otherwise extend or continue financial accommodations in
favor of the Debtor or to acquire obligations or indebtedness owing by the
Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this 24th day of May, 1991
U.S. LONG DISTANCE INC.
--------------------------------------
(Corporate Name)
a Texas Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
-----------------------------
San Antonio, TX 78216
-----------------------------
By: /s/ MARK D. BUCKNER
---------------------------------
Title:
-------------------------------
Attest: /s/ KELLY SIMMONS
------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: Bell Atlantic-TriCon Leasing Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with ZERO PLUS DIALING INC. (herein, the
"Debtor"), or to otherwise extend or continue financial accommodations in
favor of the Debtor or to acquire obligations or indebtedness owing by the
Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this 24th day of May, 1991
U.S. LONG DISTANCE CORP.
--------------------------------------
(Corporate Name)
a Delaware Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
-----------------------------
San Antonio, TX 78216
-----------------------------
By: /s/ MARK D. BUCKNER
---------------------------------
Title:
-------------------------------
Attest: /s/ KELLY SIMMONS
------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: Bell Atlantic-TriCon Leasing Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with U.S. LONG DISTANCE, INC. (herein, the
"Debtor"), or to otherwise extend or continue financial accommodations in
favor of the Debtor or to acquire obligations or indebtedness owing by the
Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this 24th day of May, 1991
ZERO PLUS DIALING, INC.
--------------------------------------
(Corporate Name)
a Delaware Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
-----------------------------
San Antonio, TX 78216
-----------------------------
By: /s/ KELLY SIMMONS
---------------------------------
Kelly Simmons
Title: Vice President
-------------------------------
Attest: /s/ MARK D. BUCKNER
------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: Bell Atlantic-TriCon Leasing Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. Identification. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with U.S. LONG DISTANCE, INC. AND ZERO PLUS
DIALING, INC. (collectively herein, the "Debtor"), or to otherwise extend or
continue financial accommodations in favor of the Debtor or to acquire
obligations or indebtedness owing by the Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this ____ day of October, 1993.
USLD ACQUISITION CORP.
--------------------------------------
(Corporate Name)
a Texas Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
-----------------------------
San Antonio, TX 78216
-----------------------------
By: /s/ LARRY M. JAMES
--------------------------------------
Title: Larry M. James, President
--------------------------------------
Attest: /s/ KELLY E. SIMMONS
--------------------------------------
Kelly E. Simmons, Treasurer/Asst. Secy
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: Bell Atlantic-TriCon Leasing Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with ZERO PLUS DIALING, INC. & U.S. LONG
DISTANCE, INC. (collectively herein, the "Debtor"), or to otherwise extend or
continue financial accommodations in favor of the Debtor or to acquire
obligations or indebtedness owing by the Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this ____ day of NOVEMBER, 1993.
STS TELECOMMUNICATIONS, INC.
--------------------------------------
(Corporate Name)
a TEXAS Corporation
--------------------------------------
Address:
--------------------------------------
By: /s/ LARRY M. JAMES
--------------------------------------
Title: President
--------------------------------------
Attest: [ILLEGIBLE]
--------------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: TriCon Capital Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with U.S. LONG DISTANCE, INC. & ZERO PLUS
DIALING, INC. (collectively herein, the "Debtor"), or to otherwise extend or
continue financial accommodations in favor of the Debtor or to acquire
obligations or indebtedness owing by the Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this ____ day of ____________, ____.
TELECOM ACQUISITION CORP.
--------------------------------------
(Corporate Name)
a Texas Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
San Antonio, TX 78216
--------------------------------------
By: /s/ LARRY M. JAMES
--------------------------------------
Title: President
--------------------------------------
Attest: [ILLEGIBLE]
--------------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: TriCon Capital Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with U.S. LONG DISTANCE, INC. and ZERO PLUS
DIALING, INC. (collectively herein, the "Debtor"), or to otherwise extend or
continue financial accommodations in favor of the Debtor or to acquire
obligations or indebtedness owing by the Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this ____ day of ____________, ____.
ENHANCED SERVICES BILLING, INC.
--------------------------------------
(Corporate Name)
a Delaware Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
San Antonio, TX 78216
--------------------------------------
By: /s/ LARRY M. JAMES
--------------------------------------
Title: President
--------------------------------------
Attest: [ILLEGIBLE]
--------------------------------------
(Corporate Seal)
<PAGE>
CORPORATE GUARANTY
TO: TriCon Capital Corporation
1060 First Avenue
Suite 200
King of Prussia, PA 19406
1. IDENTIFICATION. This Guaranty is made by each of the undersigned,
jointly and severally if more than one, in your favor, in order to induce you
to enter into one or more notes, loan agreements and/or security agreements
(herein, the "Agreements"), with U.S. LONG DISTANCE, INC. & ZERO PLUS
DIALING, INC. (collectively herein, the "Debtor"), or to otherwise extend or
continue financial accommodations in favor of the Debtor or to acquire
obligations or indebtedness owing by the Debtor.
2. GUARANTY OBLIGATION.
(a) We unconditionally guarantee to you and undertake the obligations
of a surety with respect to the following described obligations and liabilities
of the Debtor (herein, the "Debtor's Liabilities"):
(i) the prompt payment in full of any and all now existing or
hereafter arising indebtedness or obligations of the Debtor to you of every kind
or nature, whether acquired by you by negotiation, assignment or otherwise, and
whether direct or indirect, absolute or contingent, matured or unmatured, or
otherwise, and including without limitation all advances and other loans now or
at any time hereafter made by you to the Debtor under or secured by the
Agreements, or otherwise. WITHOUT LIMITATION, THE FOREGOING GUARANTY SHALL
EXTEND TO ANY OBLIGATIONS WHICH THE DEBTOR MAY INCUR TO YOU UNDER ANY AGREEMENT
OR BY REASON OF ANY OTHER FINANCIAL ACCOMMODATION BETWEEN YOU AND THE DEBTOR
MADE AFTER THE DATE HEREOF WHETHER OR NOT PRESENTLY CONTEMPLATED. WE ACKNOWLEDGE
THAT IT IS OUR RESPONSIBILITY TO OBTAIN FROM TIME TO TIME DIRECTLY FROM THE
DEBTOR SUCH INFORMATION AS WE MAY REQUIRE CONCERNING THE OBLIGATIONS AND
INDEBTEDNESS GUARANTEED HEREBY, WHICH RESPONSIBILITY IS REASONABLE IN LIGHT OF
OUR RELATIONSHIP WITH THE DEBTOR; and
(ii) the prompt, full and faithful performance and discharge by the
Debtor of each and every term, condition, agreement, representation, warranty
and provision on the part of the Debtor contained in any of the Agreements or in
any modification, amendment or substitution thereof or in any other document or
instrument evidencing or securing any obligation or indebtedness of the Debtor
to you.
(b) We shall, on your demand, reimburse you for all expenses,
collection charges, court costs and attorneys' fees incurred by you in
endeavoring to collect Debtor's Liabilities, and to enforce, protect or defend
any of your rights and remedies against us and/or the Debtor or against any
other person or entity primarily or secondarily liable for the obligations and
indebtedness guaranteed hereby (herein, an "Obligor"), or against or with
respect to any property, real or personal, now or hereafter granted to or
obtained by you as security for Debtor's Liabilities or for our liabilities and
obligations to you hereunder or for those of any Obligor (herein, "Secured
Property"), together with interest thereon until reimbursed at a rate equal to
five (5) percent above the rate of interest payable on the Debtor's Liabilities
guaranteed hereby (or the highest rate permitted by law) of the amount due by us
to you.
3. LIABILITY ABSOLUTE; WAIVERS.
(a) We shall pay all of the foregoing amounts and perform all of the
foregoing terms, covenants and conditions notwithstanding that any part or all
of the Agreements or other documents or instruments evidencing the Debtor's
Liabilities, or any financial accommodation for or transaction with the Debtor,
shall be invalid, void, voidable or otherwise unenforceable, in whole or in
part, as against the Debtor, any property of the Debtor, or any of Debtor's
creditors, including a trustee in bankruptcy of Debtor or Debtor as a debtor-in-
possession, including without limitation by reason of any theory or provision of
law or equity, statutory or otherwise, relating to consideration, or the lack
thereof, or to any alleged fraudulent, preferential or other improper transfer
or conveyance, and including further, without limitation, by reason of failure
by any person, including yourself, to file any document or take any other action
to make any of your rights against the Debtor, any other Obligor or any
property, pursuant to the Agreements or otherwise, enforceable in accordance
with their respective terms.
(b) You shall have the right from time to time, and at any time,
without notice to or consent from us, and without affecting, impairing or
discharging, in whole or in part, our obligations to you hereunder, to enter
into agreements with the Debtor or any other Obligor to modify, change or
supplement, in any respect whatsoever, any evidence of indebtedness, or any
agreement or transaction between you and the Debtor or between you and any other
Obligor, or any portion or provision of any thereof; to grant extensions of time
and other indulgences of any kind to the Debtor or other Obligor; to compromise,
release, substitute, exercise, enforce, or fail or refuse to exercise or enforce
any claims, rights or remedies of any kind which you may have, at any time,
against the Debtor or any other Obligor, or any portion thereof, or with respect
to any Secured Property; and to release, substitute or surrender and to enforce,
collect or liquidate any security of any kind held by you at any time, and all
of the foregoing whether done negligently, willfully or otherwise.
(c) Our obligations to you shall not be affected, impaired or
discharged, in whole or in part, by reason of your failure to obtain, in the
first instance, rights against any person or entity, including without
limitation, the Debtor, or in or with respect to any property, or to protect,
perfect, continue or maintain any such rights.
(d) We waive notice of acceptance hereof and all notices and demands
of any kind to which we may otherwise be entitled including, without limitation,
all demands of payment and notice of nonpayment, protest and dishonor, to us or
to the Debtor, or to the makers or endorsers of any notes or other instruments
for which we are or may be liable hereunder, and further waive notice of any
adverse change in the Debtor's financial condition, the value of any Secured
Property, or any other fact which might materially increase our risk to you
hereunder.
<PAGE>
(e) We waive any right to require you to, prior to proceeding against
us hereunder: (i) proceed against Debtor and/or any other Obligor; (ii) proceed
against or exhaust any Secured Property; or (iii) pursue any other remedy which
you may have.
4. PRIMARY NATURE OF OBLIGATIONS; NO SET-OFF.
Our liability to you hereunder is primary, absolute, unconditional,
continuing, direct and independent of the obligations of the Debtor. Nothing
shall discharge or satisfy our liability hereunder except the full performance
and payment of all of the Debtor's Liabilities. In the event that all of
Debtor's Liabilities shall have at any time been paid and performed in full,
this Guaranty and our obligations hereunder shall nevertheless remain in full
force and effect and be operative with respect to Debtor's Liabilities incurred
or arising at any time or times thereafter. We shall have no right of
subrogation, reimbursement or indemnity whatsoever and no right of recourse to
or with respect to the Debtor and/or any property of the Debtor, unless and
untIl all of Debtor's Liabilities have been paid and performed in full. Our
liability to you hereunder shall not be subject to set-off, counterclaim,
crossclaim or defense arising out of or by virtue of any claim or right which we
may at any time have against the Debtor or other Obligor, or which we may at any
time have against you in connection with this or any other transaction with or
acquired by you.
5. CONTINUING NATURE OF GUARANTY.
Our obligations under this Guaranty shall be continuing. This
instrument shall continue in full force and effect until our obligations to you
are terminated by the actual receipt by you of written notice from us of such
termination. Such termination shall be applicable only to such of Debtor's
Liabilities as have their inception thereafter. Specifically, without
limitation, we shall, after and notwithstanding such termination, remain
obligated to you under the terms hereof for: (i) all of Debtor's Liabilities
incurred prior to your actual receipt of such notice of termination, including
interest or other finance charges at any time theretofore accrued or thereafter
accruing or payable thereon, (ii) all of your costs and expenses, including
attorney's fees, at any time incurred in connection with your enforcement and
collection of Debtor's Liabilities incurred prior to your actual receipt of such
notice of termination, (iii) Debtor's Liabilities incurred subsequent to your
actual receipt of such notice of termination pursuant to any perceived or actual
commitment made on your part prior to such notice of termination, arising out of
any course of dealing or other perceived or actual legal or other requirement
obligating or committing you to make advances, loans or other financial
accommodations giving rise to such Debtor's Liabilities, and (iv) advances at
any time made by you to protect your interests under or in connection with
Debtor's Liabilities incurred prior to your actual receipt of such notice of
termination. We acknowledge that, upon such termination, you will have
absolutely no further obligation to consider any further requests for loans or
other extensions of credit or financial accommodations for the Debtor.
6. SECURITY FOR GUARANTY.
All sums at any time to our credit and any of our present and future
property at any time in your possession shall be deemed held by you as security
for any and all of our obligations to you hereunder.
7. SUBORDINATION.
Any and all present and future indebtedness and obligations of the
Debtor to us are hereby agreed to be postponed in your favor. Upon written
notice given by you to us, which you may give at any time whether or not the
Debtor is in default to you, we will refrain from accepting any payments on
account of such indebtedness tendered by the Debtor or any other Obligor
thereon, or realized from any security therefor, and any amounts received by us
in violation of the foregoing shall be held by us upon an express trust for your
benefit and turned over to you upon demand. Until such notice, we will accept
only such payments which are in the nature of regularly scheduled payments made
pursuant to periodic reductions required by the terms of the documents
evidencing such indebtedness, and shall not accept any prepayment thereof,
whether on default, on demand under any demand instrument, or otherwise. We
represent to you that all such indebtedness owing to us is, and agree that it
shall remain, and any future indebtedness shall be unsecured
8. NO WAIVER.
No failure, omission or delay on your part in exercising any rights
hereunder or under the Agreements or with respect to Debtor's Liabilities,
either against the Debtor or any other Obligor, or any Secured Property, shall
operate as a waiver of any such rights or shall, in any manner, prejudice your
rights against us hereunder or otherwise.
9. CUMULATIVE REMEDIES.
All of your rights and remedies under the Agreements, this Guaranty
and under any other document or instrument evidencing or securing Debtor's
Liabilities are separate and cumulative and may be pursued separately,
successively or concurrently, are non-exclusive and the exercise of any one or
more of them shall in no way limit or prejudice any other legal or equitable
right, remedy or recourse to which you may be entitled. This Guaranty shall be
deemed to be in addition to, and not in lieu of, any prior suretyship or
guaranty delivered by us to you, and any suretyship or guaranty at any time
hereafter delivered by us to you shall be deemed to be in addition to, and not
in lieu of, this Guaranty.
10. APPLICATION OF FUNDS.
Any payment made by us hereunder, or by the Debtor or any other
Obligor, and any proceeds realized by you from any Secured Property, may be
applied by you to any of Debtor's Liabilities in any order which you may
determine, notwithstanding any designation by us, the Debtor or other Obligor to
the contrary. To the extent that the Debtor has at any time any liabilities or
obligations to you for which we are not obligated to you under the terms of this
Guaranty, any payments received by you from the Debtor or any other Obligor, or
proceeds realized by you from any security, and regardless of any designation by
any person or entity to the contrary, may be applied by you to such other
liabilities and obligations prior to your applying any amounts to Debtor's
Liabilities for which we are obligated to you hereunder.
11. MODIFICATIONS.
No provision hereof shall be modified or limited, except by a written
agreement expressly referring hereto and to the provision so modified or
limited, and signed by us and you.
<PAGE>
12. MERGER.
This writing is intended as a final, complete and exclusive expression
of our agreement with you relative to the subject matter hereof. No course of
prior dealing between you and us, no usage of the trade, and no parole or
extrinsic evidence of any nature, shall be used or be relevant to supplement or
explain or modify any term used in this Guaranty.
13. SEVERABILITY.
In case any one or more of the provisions contained in this Guaranty
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions hereof, and this Guaranty shall be construed as if such
invalid, illegal or unenforceable provision had never been contained herein.
14. NOTICES.
We agree that any notice or demand upon us shall be deemed to be
sufficiently given or served if it is in writing and is personally served, or in
lieu of personal service is mailed by first class certified mail, postage
prepaid, addressed to us at the address set forth below. Any notice or demand so
mailed shall be deemed received on the date of actual receipt or the first
business day following mailing, whichever first occurs.
15. JUDGMENT INTEREST.
Any judgment entered against us hereunder shall, to the extent
permitted by applicable law, bear interest at the highest rate applicable to the
Debtor's Liabilities guaranteed hereby.
16. GOVERNING LAW.
THIS INSTRUMENT SHALL FOR ALL PURPOSES BE GOVERNED BY AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE COMMONWEALTH OF PENNSYLVANIA. WE CONSENT TO
THE JURISDICTION OF THE FEDERAL DISTRICT COURT FOR THE EASTERN DISTRICT OF
PENNSYLVANIA OR ANY STATE COURT LOCATED IN PHILADELPHIA COUNTY, PENNSYLVANIA
WITH RESPECT TO ANY LEGAL ACTION COMMENCED HEREUNDER. NOTHING CONTAINED HEREIN
IS INTENDED TO PRECLUDE YOU FROM COMMENCING ANY ACTION HEREUNDER IN ANY COURT
HAVING JURISDICTION THEREOF.
17. WAIVER OF JURY TRIAL.
AS AN INDEPENDENT COVENANT, WE IRREVOCABLY WAIVE JURY TRIAL AND THE
RIGHT THERETO IN ANY AND ALL ACTIONS BETWEEN US, WHETHER UNDER THIS AGREEMENT OR
OTHERWISE.
18. SUCCESSORS AND ASSIGNS.
This Guaranty shall inure to the benefit of your successors and
assigns and shall be binding on our successors and assigns.
19. GENDER; JOINT AND SEVERAL LIABILITY.
If there be more than one person or entity signing this Guaranty, each
of us will be jointly and severally obligated to you hereunder, and the terms
"we", "us" or "our" as used herein shall refer to each of us jointly and
severally. If less than all persons or entities who were intended to sign this
Guaranty do so, the same shall nevertheless be binding upon those who do sign.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty
this ____ day of ____________, ____.
CALIFORNIA ACQUISITION CORP.
--------------------------------------
(Corporate Name)
a Texas Corporation
--------------------------------------
Address: 9311 San Pedro, Suite 300,
San Antonio, TX 78216
--------------------------------------
By: /s/ LARRY M. JAMES
--------------------------------------
Title: President
--------------------------------------
Attest: [ILLEGIBLE]
--------------------------------------
(Corporate Seal)
<PAGE>
ESCROW AND DISBURSING AGREEMENT
This Agreement is made this the 24th day of May, 1991 by and between Zero
Plus Dialing, Inc., a Delaware corporation ("ZPDI"), Bell Atlantic-Tricon
Leasing Corporation, a Delaware corporation ("BATCL") and Texas Commerce Bank
National Association's Custody Group ("Escrow Agent").
WHEREAS, ZPDI has entered into various Billing and Collection Agreements
with certain Billing Telephone Companies (the "BTCs"), as set forth on Exhibit A
attached hereto, whereby the BTCs provide interstate and intrastate billing and
collection services for ZPDI and its customers; and
WHEREAS, ZPDI has previously entered into Billing and Collection Services
Agreements with certain customers of ZPDI who provide telephone operator
services to various end-users (the "Carriers"), pursuant to which ZPDI has
agreed, among other things, to prepare and submit to the BTCs certain System
Billed Telephone Traffic which the BTCs have agreed to purchase (the "Accounts
Receivable"); and
WHEREAS, ZPDI and the Carriers have entered into a certain Addendum to the
Billing and Collection Services Agreement (as amended, (the "Carrier Contracts")
Exhibit B attached hereto, pursuant to which ZPDI will purchase the Accounts
Receivable from the Carriers on the terms and conditions set forth therein; and
<PAGE>
WHEREAS, BATCL is in the business of providing financing, including the
financing of accounts receivable; and
WHEREAS, ZPDI has requested BATCL to continue to finance its acquisition of
the Accounts Receivable pursuant to the terms of a certain Amended and Restated
Loan and Security Agreement dated the date hereof between ZPDI and BATCL (the
"Loan Agreement") Exhibit C attached hereto; and
WHEREAS, pursuant to the terms of the Loan Agreement, BATCL has required
that ZPDI establish a Dominion Account (as defined in the Loan Agreement) into
which all collections and proceeds of the sale of the Accounts Receivable to the
BTCs (the "ZPDI Accounts") shall be deposited; and
WHEREAS, ZPDI has an existing lock box with Escrow Agent, Account Number
200809, wherein the BTCs forwarded the Accounts Receivable made payable to ZPDI
c/o the Lock Box Account, which Accounts Receivable are subsequently deposited
to an account (the "Clearing Account"), Account Number 00101752013, where Escrow
Agent is the sole authorized signatory on such account which reads: Bell
Atlantic TriCon Leasing Corporation for the benefit of Zero Plus Dialing, Inc.,
Clearing Account, which account is located at Escrow Agent's branch office at
600 Travis Street in Houston, Texas; and
-2-
<PAGE>
WHEREAS, BATCL and ZPDI have agreed that all amounts in the Clearing
Account shall continue to be deposited, on a daily basis into the Dominion
Account.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, and to induce BATCL to continue finance the ZPDI
Accounts and Escrow Agent to perform its functions hereunder, ZPDI, BATCL and
Escrow Agent, each intending to be legally bound, agree as follows:
1. The Escrow Agent shall continue to deposit proceeds from the Lock Box
Account directly into the Clearing Account.
2. Pursuant to the automatic standing transfer form already in affect, the
Cash Management Department of Escrow Agent shall continue to transfer the
collected balance in the Clearing Account, at the start of each Business Day, to
Escrow Agent's Custody Group ("EACG") for deposit directly into the Dominion
Account. The Cash Management Department of Escrow Agent will provide ZPDI with
deposit information through its TEXCOM system which will allow ZPDI to reconcile
the account daily. The charges for the services of the Escrow Agent are
detailed in Exhibit D attached hereto and will be paid by ZPDI.
-3-
<PAGE>
3. Upon receipt by EACG of a disbursement form, in the form of Exhibit E,
attached hereto (the "Disbursement Authorization") which Disbursement
Authorization is fully executed by an authorized representative of BATCL and
ZPDI, EACG agrees to immediately disburse the collected funds in the Dominion
Account, in accordance with the instructions therein. The Disbursement
Authorization(s) will be transmitted by telefax to EACG no later than 12:00 p.m.
on any business day, for wire transfer that same day.
4. Upon written notice from Lender to the EACG certifying that at least
five (5) days have passed since Lender has given Borrower notice that Lender
believes that a portion of the proceeds in the Dominion Account represent the
proceeds of Lender's Collateral in excess of that previously shown on any
Disbursement Authorization (the "Disputed Amount"), the EACG shall immediately
make disbursements from the Dominion Account to Lender, in the amount
represented by Lender to be the Disputed Amount, in accordance with a
Disbursement Authorization executed solely by Lender. In addition, upon written
notice from Lender to EACG that an Event of Default has occurred under the Loan
Agreement, the EACG shall make all disbursements from the Dominion Account in
accordance with a Disbursement Authorization executed solely by Lender, until
further notice by Lender that such default has been cured.
-4-
<PAGE>
5. A. ZPDI represents, warrants, covenants and agrees that:
(1) It is a corporation presently in good standing in the state
of Delaware and has proper authority to transact business and is registered as a
foreign corporation in the state of Texas;
(2) It has Billing and Collection Agreements with the BTCs
listed on Exhibit A, attached hereto and made a part hereof;
(3) ZPDI is the sole and absolute owner of each ZPDI Account,
subject only to BATCL's security interest therein;
(4) There is no defense, offset or counterclaim against any of
the Accounts Receivable or the ZPDI Accounts, and no agreement has been made
under which ZPDI or any Carrier may claim any deductions or discounts, except
for ZPDI's collection and service fees and charges pursuant to the terms of the
Carriers' Contracts, and the BTCs' charges.
(5) No BTC will dispute or refuse to pay more than ten percent
(10%) of the aggregate Accounts Receivable presented for collection.
-5-
<PAGE>
6. ZPDI hereby agrees to indemnify Escrow Agent for any losses that
Escrow Agent may suffer as a result of ZPDI's breach of any of its warranties or
covenants, representations or agreements hereunder.
7. AGENTS DUTIES
A. All parties understand and agree that Escrow Agent is not a
principal, participant, or beneficiary of the financing transaction underlying
this Agreement. The Escrow Agent shall be obligated only for the performance of
such duties as are specifically set forth herein and may rely and shall be
protected in acting or refraining from acting on any instrument believed by it
to be genuine and to have been signed or presented by the proper party or
parties, their officers, representatives or agents. The Escrow Agent shall not
be liable for any action taken or omitted by it in good faith and believed by it
to be authorized hereby, nor for action taken or omitted by it in accordance
with the advice of its counsel. Escrow Agent shall be responsible for holding
and disbursing the funds on deposit in the Dominion Account (the "Escrowed
Assets") pursuant to the Agreement. Escrow Agent has no knowledge of or
responsibility for the terms, obligations or provisions of any related
agreements hereto, nor the representations or warranties of the other parties
contained herein.
-6-
<PAGE>
B. Subject to the terms of paragraph four (4) above, should any
controversy arise between the undersigned with respect to this Escrow Agreement,
Escrow Agent shall have the right to consult and/or to institute a bill of
interpleader in any court of competent jurisdiction to determine the rights of
the parties. Should such actions be necessary, or should Escrow Agent become
involved in litigation in any manner whatsoever on account of or in connection
with this Escrow Agreement or the Escrowed Assets, the undersigned hereby bind
and obligate themselves, their legal representatives, successors and assigns to
pay Escrow Agent reasonable attorneys' fees incurred by Escrow Agent, and any
other disbursements, expenses, losses, costs and damages in connection with or
resulting from such actions.
C. The Escrow Agent shall have no liability under, or duty to
inquire beyond the terms and provisions of the Agreement, and it is agreed that
its duties are purely ministerial in nature, and that the Escrow Agent shall
incur no liability whatsoever so long as it has acted in good faith, except for
liability occasioned by Escrow Agent's willful misconduct or gross negligence.
The Escrow Agent shall not be bound by any modification, amendment, termination,
cancellation, recision or supercision of this Escrow Agreement, unless the same
shall be in writing and signed by all of the other parties hereto and, if its
-7-
<PAGE>
duties as Escrow Agent hereunder are affected thereby, unless it shall have
given its prior written consent thereto.
D. The Escrow Agent may at any time resign hereunder by giving
written notice of its resignation to the other parties hereto, at their
addresses set forth herein, at least thirty (30) days prior to the date
specified for such resignation to take effect. Upon the effective date of such
resignation, the Escrowed Assets hereunder shall be delivered to-such person as
may be designated in writing by the appropriate parties executing this Escrow
Agreement, whereupon all the Escrow Agents' obligations hereunder shall cease
and terminate. The escrow Agents' sole responsibility until such termination
shall be to keep safely all Escrowed Assets and to deliver the same to a person
designated by appropriate parties executing this Escrow Agreement or in
accordance with the directions of a final order or judgment of a court of
competent jurisdiction.
E. The parties agrees to be severally liable only for their own acts
and not jointly liable, agree to indemnify, defend and hold Escrow Agent
harmless for the tax, liability and expenses that may be incurred by Escrow
Agent arising out of or in connection with its acceptance or appointment as
Escrow Agent hereunder, including the legal costs and expenses of defending
itself against any claim or liability in connection with its
-8-
<PAGE>
performance hereunder. This provision shall survive the term of the
Agreement. Notwithstanding the foregoing, the parties agree to be jointly and
severally liable with respect to any costs incurred by the Escrow Agent,
which costs are incurred in the ordinary course of the Escrow Agent's duties
and not costs arising from any claim or liability incurred by Escrow Agent.
F. ZPDI agrees to pay to the Escrow Agent its fees for the services
rendered pursuant to the provisions of this Escrow Agreement and will reimburse
the Escrow Agent for reasonable expenses, including reasonable attorneys's fees,
incurred in connection with the negotiations, drafting and performance of such
services. Except as otherwise noted, this fee covers set-up and termination
expenses, plus usual and customary related administrative services such as
safekeeping, investment and payment of funds specified herein or in the exhibits
attached. Activities requiring excessive administrator time or out-of-pocket
expenses such as optional substitution of collateral or securities shall be
deemed extraordinary expenses for which related costs, transaction charges, and
additional fees will be billed at Escrow Agent's standard charges for such
items.
G. ZPDI agrees to indemnify the Escrow Agent fully for any tax
liability, penalty or interest incurred by the Escrow Agent arising hereunder
and agrees to pay in full any such tax
-9-
<PAGE>
liability together with penalty and interest if any is ultimately assessed
against the Escrow Agent for any reason as a result of its action hereunder
(except for the Escrow Agent's individual income tax liability).
H. The Escrow Agent shall have no liability for loss arising from
any cause beyond its control, including, but not limited to, the following: a)
the act, failure or neglect of any agent or correspondent selected by the Escrow
Agent or the parties hereto; (b) any delay, error, omission or default connected
with the remittance of funds; c) any delay, error, omission or default of any
mail, telegraph, cable or wireless agency or operator; d) the acts of edicts of
any government or governmental agency or other group or entity exercising
governmental powers.
I. This Escrow Agreement shall be governed by and construed in
accordance with the laws of the state of Texas, except that the portions of the
Texas Trust Code Sec. 111.001, et seq. of the Property Code, V.A.T.S. concerning
fiduciary duties and liability of Trustees shall not apply to this Agreement.
The parties hereto expressly waive such duties and liabilities, it being their
intent to create solely an agency relationship and hold the Escrow Agent liable
only in the event of its gross
-10-
<PAGE>
negligence or willful misconduct in order to obtain the lower fee schedule
rates as specifically negotiated with the Escrow Agent.
J. It is understood by all parties to this agreement that Escrow
Agent will not have investment responsibilities for the funds in the Dominion
Account unless otherwise authorized in writing by BATCL or ZPDI, nor shall
Escrow Agent be responsible for the collection of funds or checks or other
deposits. Escrow Agent or its Commercial Department shall be reimbursed by
ZPDI, U.S. Long Distance and/or any of its subsidiaries for any item returned
and may deduct any overdraft amounts or charges or losses incurred thereby from
ZPDI's or U.S. Long Distance's demand deposit or trust accounts at Escrow
Agent's Houston or San Antonio branch offices.
K. Escrow Agent is hereby given a lien on all Escrowed Assets to be
distributed to ZPDI for all fees, expenses, taxes, indebtedness, and other
financial obligations that may become owing to Escrow Agent arising hereunder,
including any indemnities prescribed herein, which lien may be enforced by
Escrow Agent without notice or presentment by set-off or appropriate foreclosure
proceedings. In all cases, any unpaid fees may be deducted by Escrow Agent
without prior written notice before final disbursement of Escrowed Assets.
-11-
<PAGE>
8. This Agreement shall continue in force and effect until Escrow Agent
receives written notice of cancellation from BATCL. Upon receipt of written
notice, the Escrow Agent will perform the following:
A. Advise parties to this Agreement of receipt of cancellation
notice; and
B. Request of BATCL a statement of outstanding loans attributable to
any Carrier; and
C. Continue to perform Escrow Agent duties as outlined in Paragraph
6 above until such time as the obligations identified in Paragraph 8B above have
been satisfied or until Escrow Agent shall resign pursuant to the terms hereof.
9. The terms and conditions of this Agreement shall prevail if in
conflict with the terms and conditions of any other attached or related
agreement.
BELL ATLANTIC-TRICON LEASING
CORPORATION
BY: /s/ G. ALEXANDER COLE
------------------------------------
G. Alexander Cole
- - ---------------------------------------
(Printed or Typed Name)
(Additional Signatures On
Next Page)
TITLE: Vice President
---------------------------------
-12-
<PAGE>
ZERO PLUS DIALING, INC.
9311 San Pedro, Suite 300
San Antonio, TX 78216
BY: /s/ KELLY E. SIMMONS
-------------------------------
Kelly E. Simmons
- - ----------------------------------
(Printed or Typed Name)
TITLE: Vice President
----------------------------
TEXAS COMMERCE BANK NATIONAL ASSOCIATION
Attn: Rodney Crowl and Steve Scott
Custody Group
600 Travis Street, Suite 1150
Houston, TX 77002
BY:
-------------------------------
- - ----------------------------------
(Printed or Typed Name)
TITLE:
----------------------------
U.S. Long Distance Corp. and U.S. Long Distance, Inc. hereby jointly and
severally unconditionally guarantee the prompt performance of any and all of
ZPDI's representations, warranties, covenants and agreements hereunder.
U.S. LONG DISTANCE CORP.
9311 San Pedro, Suite 300
San Antonio, TX 78216
BY: /s/ Mark D. Buckner
-------------------------------
- - ----------------------------------
(Printed or Typed Name)
TITLE:
----------------------------
U.S. LONG DISTANCE, INC.
9311 San Pedro, Suite 300
San Antonio, TX 78216
BY: /s/ Mark D. Buckner
-------------------------------
- - ----------------------------------
(Printed or Typed Name)
TITLE:
----------------------------
-13-
<PAGE>
EXHIBIT 21.1
LIST OF SUBSIDIARIES
The following is a list of all subsidiaries of the Company, jurisdiction of
incorporation or organization and the percentage of shares owned, directly or
indirectly, by the Company assuming the consummation of the Preliminary
Transactions.
STATE OR OTHER
JURISDICTION OF PERCENTAGE OF
NAME INCORPORATION SHARES OWNED
---- -------------- ------------
Billing Information Concepts, Inc. Delaware 100%
Enhanced Billing Services, Inc. Texas 100%
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR BILLING INFORMATION CONCEPTS
CORP. AS OF AND FOR THE SIX-MONTH PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 32,582
<SECURITIES> 0
<RECEIVABLES> 20,368
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 116,062
<PP&E> 8,687
<DEPRECIATION> 3,239
<TOTAL-ASSETS> 122,295
<CURRENT-LIABILITIES> 85,978
<BONDS> 1,805
0
100
<COMMON> 1
<OTHER-SE> 34,355
<TOTAL-LIABILITY-AND-EQUITY> 122,295
<SALES> 0
<TOTAL-REVENUES> 50,301
<CGS> 0
<TOTAL-COSTS> 32,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 154<F1>
<INCOME-PRETAX> 14,466
<INCOME-TAX> 5,497
<INCOME-CONTINUING> 8,969
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,969
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>DOES NOT INCLUDE INTEREST EXPENSE OF $598 RELATED TO THE COMPANY'S ADVANCE
FUNDING PROGRAM
</FN>
</TABLE>
<PAGE>
ANNEX 1
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/ / Definitive Information Statement
U.S. LONG DISTANCE CORP.
- - --------------------------------------------------------------------------------
(Name of Registrant As Specified In Charter)
U.S. LONG DISTANCE CORP.*
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing the Information Statement)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14c-5(g).
/X/ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock
------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
14,839,486
------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11** Pro forma book value per share of
the Common Stock to be distributed was $2.32 as of March 31, 1996
------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$34,427,607
------------------------------------------------------------------------
5) Total fee paid:
$6,885.52
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
------------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
3) Filing Party:
------------------------------------------------------------------------
4) Date Filed:
------------------------------------------------------------------------
- - ------------------------
* On behalf of Billing Information Concepts Corp.
** Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
[LETTERHEAD OF U.S. LONG DISTANCE CORP.]
, 1996
To the Stockholders of U.S. Long Distance Corp.:
The Board of Directors of U.S. Long Distance Corp. ("USLD") has approved the
distribution of the outstanding shares of common stock of its wholly owned
subsidiary, Billing Information Concepts Corp. ("Billing"), to holders of USLD
Common Stock. Billing will operate the third party billing clearinghouse and
information management services business formerly operated by USLD through
certain of its subsidiaries and will be a major third-party billing
clearinghouse for records resulting from telephone calls and other transactions
carried by its customers. These customers consist primarily of direct dial long
distance telephone companies and operator services and information services
providers. The enclosed Information Statement contains information about the
distribution and related transactions and other important financial and other
information about Billing, its organization, business, management and other
matters.
If you are a holder of USLD Common Stock of record at the close of business
on , 1996, you will receive as a dividend one share of Billing
Common Stock for each share of USLD Common Stock you hold. No fractional shares
will be issued. We expect to mail the Billing Common Stock certificates on or
about , 1996.
The Board of Directors believes that the spinoff will enhance value to
USLD's stockholders. The spinoff will provide Billing with more efficient access
to capital markets to finance the anticipated growth of its business. The
spinoff will separate two distinct companies with different missions and
different financial, investment and operating characteristics so that each can
pursue business strategies and objectives appropriate to its specific business.
The direct dial long distance and operator services provided by USLD through its
telecommunications group and the third party billing clearinghouse and
information management services provided by Billing are operated by distinct
management teams, and separation of the businesses should result in greater
focus of the management teams on the core strengths that make each business
successful and allow for more effective incentives for key employees of each
group. In addition, the spinoff will eliminate the perceived concern of
Billing's customers and potential customers who compete with USLD's
telecommunications group that Billing's affiliation with USLD could compromise
customer proprietary information. Moreover, as a result of the spinoff, USLD
will be able to compete with customers of Billing for the provision of
telecommunications services without concern for the impact on Billing. The
separation will permit investors, customers, lenders and other constituencies to
evaluate the respective businesses of USLD and Billing.
USLD will continue its telecommunications services business, offering direct
dial long distance services primarily to small and medium sized commercial
customers and operator services for the hospitality and private pay telephone
industries.
The Information Statement is being sent to stockholders of record of USLD as
of the date hereof. Stockholders of record on the record date for the
Distribution automatically participate in the Distribution. We are not asking
you for a proxy, and stockholder approval of the Distribution is neither
required nor sought. Because USLD will continue as a separate entity, your share
certificate of USLD must be retained. You will receive new Billing share
certificates.
We are excited about this restructuring and the growth opportunities it will
create for each company and their respective stockholders.
Sincerely,
Parris H. Holmes, Jr.
CHAIRMAN
<PAGE>
[LETTERHEAD OF BILLING INFORMATION CONCEPTS CORP.]
, 1996
To the Stockholders of U.S. Long Distance Corp.:
The enclosed Information Statement contains important financial and other
information about Billing Information Concepts Corp. (the "Company"), the
corporation of which you will become a stockholder if you own shares of U.S.
Long Distance Corp. as of the record date for the distribution. We want to
welcome you as a stockholder and invite you to learn more about our company.
The Company believes it is the largest third-party billing clearinghouse and
information management services provider to the telecommunications industry.
Through our contractual billing arrangements with over 1,200 local telephone
companies, we process telephone call records and other transactions and collect
the related end-user charges from these local telephone companies on behalf of
our customers.
Our customers primarily consist of direct dial long distance telephone
companies, who use the Company as a billing clearinghouse for processing and
collecting call records generated by their end-users, and operator services
providers, who provide operator services largely to the hospitality, penal and
private and public pay telephone industries. In 1994, the Company began
providing enhanced billing services for processing transactions related to
providers of premium services or products that also can be billed through the
local telephone companies, such as charges for 900 access pay-per-call
transactions, cellular long distance services, paging services, voice mail
services, caller ID and other telecommunications equipment charges.
In addition to its billing clearinghouse services, the Company also offers
billing management services to customers who have their own arrangements with
the local telephone companies. These management services may include data
processing, accounting, end-user customer service, telecommunication tax
processing and reporting.
We at Billing are excited about the future of our Company and the impact our
services can have in the growing telecommunications industry and elsewhere.
Sincerely,
Alan W. Saltzman
PRESIDENT
<PAGE>
INFORMATION STATEMENT
BILLING INFORMATION CONCEPTS CORP.
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
This Information Statement is being furnished in connection with the
distribution (the "Distribution") by U.S. Long Distance Corp. ("USLD") to
holders of record of USLD common stock ("USLD Common Stock") as of the close of
business on , 1996 (the "Record Date"), of one share of common
stock, par value $.01 per share (together with the associated rights issued
pursuant to a stockholder rights plan, collectively the "Billing Common Stock"),
of Billing Information Concepts Corp. ("Billing" or the "Company"), for each
share of USLD Common Stock owned as of the close of business on the Record Date,
pursuant to the terms of a Distribution Agreement between Billing and USLD dated
, 1996.
Billing is a wholly owned subsidiary of USLD that will, upon the
effectiveness of the Distribution, own the business and assets of, and will be
responsible for the liabilities associated with, the third party billing
clearinghouse and information management services business currently owned by
USLD. See "Special Factors" and "Business." The Distribution will result in 100%
of the outstanding shares of Billing Common Stock being distributed to holders
of USLD Common Stock on a pro rata basis. No consideration will be paid by
USLD's stockholders for shares of Billing Common Stock. The Distribution is
scheduled to occur on , 1996 (the "Distribution Date"). See "The
Distribution."
There is no current public market for the Billing Common Stock, although it
is expected that a "when-issued" trading market will develop prior to the
Distribution Date. Billing Common Stock has made application to list and
believes that the Billing Common Stock will be approved for listing on the
Nasdaq National Market subject to official notice of issuance. See "The
Distribution -- Listing and Trading of the Billing Common Stock."
------------------------
NO VOTE OF STOCKHOLDERS IS REQUIRED IN CONNECTION WITH THIS DISTRIBUTION,
NO PROXIES ARE BEING SOLICITED, AND YOU ARE REQUESTED NOT TO
SEND US A PROXY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
INFORMATION STATEMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
------------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES.
------------------------
Stockholders of USLD with inquiries related to the Distribution should
contact Investor Relations, USLD, 9311 San Pedro, Suite 100, San Antonio, Texas
78216, Telephone: (210) 525-6228; or the Billing Common Stock Transfer Agent,
Montreal Trust Company of Canada, Montreal Trust Centre, 510 Burrard Street,
Vancouver, British Columbia V6C 3B9, Telephone: (604) 661-0275. Montreal Trust
is also acting as Distribution Agent for the Distribution.
------------------------
The date of this Information Statement is , 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
SUMMARY.................................................................................................... 4
SPECIAL FACTORS............................................................................................ 11
Lack of Operating History as a Separate Entity; Limited Relevance of Historical Financial Information.... 11
Absence of USLD Financial Support........................................................................ 11
Dependence upon Key Personnel; Management of Growth...................................................... 11
Dependence on Proprietary Technology..................................................................... 11
Absence of Trading Market for the Billing Common Stock................................................... 11
Changes in Trading Prices of USLD Common Stock........................................................... 12
Certain Anti-Takeover Features........................................................................... 12
Uncertainty of Tax Consequences.......................................................................... 12
Certain Consent Requirements............................................................................. 13
Dividend Policy.......................................................................................... 13
The Relationship Between USLD and Billing................................................................ 13
Fraudulent Transfer Considerations; Legal Dividend Requirements.......................................... 13
Dependence upon Contracts with Local Telephone Companies................................................. 14
Anticipated Billing System Expenditures.................................................................. 14
Competition.............................................................................................. 14
Forward-Looking Information May Prove Inaccurate......................................................... 15
THE DISTRIBUTION........................................................................................... 15
Reasons for the Distribution............................................................................. 15
Opinions of Financial Advisor............................................................................ 16
Distribution Agent....................................................................................... 18
Manner of Effecting the Distribution..................................................................... 18
Results of Distribution.................................................................................. 18
Listing and Trading of the Billing Common Stock.......................................................... 19
Certain Federal Income Tax Consequences of the Distribution.............................................. 20
Conditions; Termination.................................................................................. 22
Reasons for Furnishing the Information Statement......................................................... 23
RELATIONSHIP BETWEEN BILLING AND USLD AFTER THE DISTRIBUTION............................................... 23
Distribution Agreement................................................................................... 23
Benefit Plans and Employment Matters Allocation Agreement................................................ 24
Tax Sharing Agreement.................................................................................... 29
Transitional Services and Sublease Agreement............................................................. 30
Billing Agreement........................................................................................ 30
Telecommunications Agreement............................................................................. 30
Policies and Procedures for Addressing Conflicts......................................................... 30
PRELIMINARY TRANSACTIONS................................................................................... 31
ACCOUNTING TREATMENT....................................................................................... 31
DIVIDEND POLICY............................................................................................ 31
CAPITALIZATION............................................................................................. 32
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET............................................................. 33
SELECTED HISTORICAL FINANCIAL DATA......................................................................... 35
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 37
Results of Operations.................................................................................... 37
Liquidity and Capital Resources.......................................................................... 40
Advance Funding Program and Receivable Financing Facility................................................ 41
Seasonality.............................................................................................. 42
Effect of Inflation...................................................................................... 42
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
PAGE
-----
New Accounting Standards................................................................................. 42
<S> <C>
BUSINESS................................................................................................... 43
General.................................................................................................. 43
Industry Background...................................................................................... 43
Development of Business.................................................................................. 44
Billing Clearinghouse and Information Management Services................................................ 45
Billing Process.......................................................................................... 45
Operations............................................................................................... 46
Customers................................................................................................ 47
Competition.............................................................................................. 47
Business Strategy........................................................................................ 48
Employees................................................................................................ 49
Properties............................................................................................... 49
Litigation............................................................................................... 49
MANAGEMENT................................................................................................. 51
Board of Directors and Committees of the Board........................................................... 51
Compensation of Directors................................................................................ 51
Board of Directors and Executive Officers................................................................ 53
EXECUTIVE COMPENSATION..................................................................................... 54
Stock Option Grants in Fiscal 1995....................................................................... 55
Aggregated Option Exercises in Fiscal 1995 and Fiscal Year-End Option Values............................. 55
Employee Benefit Plans................................................................................... 56
Employment Agreements and Change-of-Control Arrangements................................................. 64
Compensation Committee Interlocks and Insider Participation.............................................. 66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 66
DESCRIPTION OF CAPITAL STOCK............................................................................... 67
General.................................................................................................. 67
Common Stock............................................................................................. 67
Billing Stockholder Rights Plan and Junior Preferred Stock............................................... 68
Preferred Stock.......................................................................................... 68
No Preemptive Rights..................................................................................... 68
Transfer Agent and Registrar............................................................................. 68
PURPOSES AND ANTI-TAKEOVER EFFECTS OF CERTAIN PROVISIONS OF BILLING'S CERTIFICATE AND BYLAWS AND DELAWARE
LAW....................................................................................................... 68
Billing's Certificate and Bylaws......................................................................... 68
Stockholder Rights Plan.................................................................................. 72
Business Combinations with Interested Stockholders....................................................... 74
LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS.................................................... 74
INDEPENDENT ACCOUNTANTS.................................................................................... 76
ADDITIONAL INFORMATION..................................................................................... 76
INDEX TO FINANCIAL STATEMENTS.............................................................................. F-1
Annex A - Opinion of The Chicago Corporation
Annex B - Opinion of Houlihan Lokey Howard & Zukin
Annex C - Amended and Restated Certificate of Incorporation of Billing Information Concepts Corp.
Annex D - Bylaws of Billing Information Concepts Corp.
Annex E - Billing Information Concepts Corp. 1996 Employee Comprehensive Stock Plan
Annex F - Billing Information Concepts Corp. 1996 Non-Employee Director Plan
Annex G - Billing Information Concepts Corp. 1996 Employee Stock Purchase Plan
</TABLE>
3
<PAGE>
SUMMARY
THE FOLLOWING IS A SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN
THIS INFORMATION STATEMENT. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED
BY, THE MORE DETAILED INFORMATION SET FORTH IN THIS INFORMATION STATEMENT AND
THE ANNEXES HERETO, WHICH SHOULD BE READ IN ITS ENTIRETY. CAPITALIZED TERMS USED
BUT NOT DEFINED IN THIS SUMMARY ARE DEFINED ELSEWHERE IN THIS INFORMATION
STATEMENT. UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS INFORMATION
STATEMENT TO BILLING PRIOR TO THE CONSUMMATION OF THE DISTRIBUTION INCLUDE
USLD'S BILLING CLEARINGHOUSE AND INFORMATION MANAGEMENT SERVICES BUSINESS
CONDUCTED THROUGH CERTAIN OF ITS SUBSIDIARIES, AND REFERENCES TO BILLING AFTER
CONSUMMATION OF THE DISTRIBUTION INCLUDE BILLING, ITS PREDECESSORS AND ITS
SUBSIDIARIES.
THE DISTRIBUTION
<TABLE>
<S> <C>
Distributing Company.............. U.S. Long Distance Corp., a Delaware corporation
("USLD"). References herein to USLD include its
consolidated subsidiaries except where the context
otherwise requires.
Distributed Company............... Billing Information Concepts Corp. ("Billing" or the
"Company"), a Delaware corporation that currently is a
wholly owned subsidiary of USLD, and that, as of the
Distribution Date, will own the third party billing
clearinghouse and information management services
business which is currently owned by USLD and conducted
through certain of its subsidiaries (the "Billing
Group").
Distribution Ratio................ Each USLD stockholder will receive one share of the
Billing Common Stock for each share of USLD Common Stock
held on the Record Date.
Shares to be Distributed.......... Approximately 14,839,486 million shares of Billing
Common Stock (based on 14,839,486 million shares of USLD
Common Stock outstanding on May 10, 1996). The shares to
be distributed will constitute all of the outstanding
shares of Billing Common Stock immediately after the
Distribution.
Record Date....................... Close of business on , 1996.
Distribution Date................. , 1996.
Mailing Date...................... Certificates representing the shares of Billing Common
Stock to be distributed pursuant to the Distribution
will be delivered to the Distribution Agent on the
Distribution Date. The Distribution Agent will mail
certificates representing the shares of Billing Common
Stock to holders of USLD Common Stock as soon as
practicable thereafter. Holders of USLD Common Stock
should not send stock certificates to USLD, Billing or
the Distribution Agent. See "The Distribution -- Manner
of Effecting the Distribution."
Distribution Agent and Transfer
Agent............................ Montreal Trust Company of Canada.
Conditions to the Distribution.... The Distribution is conditioned upon, among other
things, declaration of the special dividend by the Board
of Directors of USLD (the "USLD Board"). The USLD Board
has reserved the right to waive any conditions to the
Distribution or, even if all of the conditions to the
Distribution are satisfied, to
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
abandon, defer or modify the Distribution at any time
prior to the Distribution Date. See "The Distribution --
Conditions; Termination."
Principal Businesses to be
Retained by USLD................. USLD will retain the direct dial long distance
telecommunication services and operator services
businesses, including its internal billing functions
(the "Telecommunications Group").
Reasons for the Distribution...... The USLD Board believes that the spinoff will enhance
value to USLD's stockholders. The separation will
provide Billing with more efficient access to capital
markets to finance the anticipated growth of its
business. The spinoff also will eliminate the perceived
concern of those customers or potential customers of the
Billing Group who compete with the Telecommunications
Group that doing business with the Billing Group assists
a competitor and could compromise customer proprietary
information. In addition, the spinoff will permit the
Telecommunications Group to compete for the provision of
telecommunications services with customers of the
Billing Group without any concern as to affecting that
customer's relationship with Billing. The Distribution
is designed to separate two distinct companies with
different missions and different financial, investment
and operating characteristics so that each can pursue
business strategies and objectives appropriate to its
specific business. The Telecommunications Group and the
Billing Group are operated by separate management teams,
and separation of the businesses should result in
greater focus of the management teams on the core
strengths that make each business successful. Further,
separation of the two businesses will enable the
respective management teams of the Telecommunications
Group and the Billing Group to concentrate their
attention and financial resources on their own core
business without regard to the corporate objectives,
policies and capital requirements of the other and allow
for more effective incentives for key employees of each
group, including stock-based and other incentive
programs that will more directly reward employees of
each business based on the success of that business. The
separation will permit investors, customers, lenders and
other constituencies to evaluate the respective
businesses of USLD and Billing. See "The Distribution --
Reasons for the Distribution."
Certain Federal Tax Consequences.. As a condition to the Distribution, USLD will receive a
tax opinion from Arter & Hadden, special tax counsel, to
the effect, among other things, that receipt of shares
of Billing Common Stock will be tax free for federal
income tax purposes to the stockholders of USLD and that
USLD will not recognize income, gain or loss as a result
of the Distribution. The tax opinion will be based upon
certain representations made by USLD and Billing, the
accuracy of which are critical
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
to the Distribution qualifying as a tax-free
distribution. Further, the opinion of counsel is only
the best judgment of counsel and is not binding on the
Internal Revenue Service (the "Service"). No ruling will
be sought from the Service. See "The Distribution -
Certain Federal Income Tax Consequences of the
Distribution" and "Special Factors -- Uncertainty of Tax
Consequences."
Trading Market.................... There is currently no public market for Billing's Common
Stock. The Company has made application to list the
shares of Billing Common Stock on the Nasdaq National
Market subject to official notice of issuance. See "The
Distribution -- Listing and Trading of the Billing
Common Stock" and "Special Factors -- Absence of Trading
Market for the Billing Common Stock."
Ticker Symbol.....................
Dividends......................... The Company anticipates that it will retain any earnings
and will not pay dividends to its stockholders in the
foreseeable future. See "Dividend Policy."
Preliminary Transactions.......... Prior to the Distribution, USLD intends to transfer to
Billing the stock of certain subsidiaries conducting the
third party billing clearinghouse and information
management services business, as well as certain other
assets associated with this business. See "Preliminary
Transactions."
Anti-Takeover Provisions.......... The Delaware General Corporation Law and Billing's
Restated Certificate of Incorporation and Bylaws contain
provisions that may have the effect of discouraging
unsolicited takeover bids from third parties. Such
provisions could further have the effect of making it
more difficult for third parties to cause the
replacement of the current management of Billing with-
out the concurrence of Billing's Board of Directors
("Billing Board"). See "Purposes and Anti-Takeover
Effects of Certain Provisions of Billing's Certificate
and Bylaws and Delaware Law."
Relationship Between USLD and
Billing after the Distribution... USLD will have no stock ownership in the Company upon
consummation of the Distribution. For purposes of
governing certain ongoing relationships between the
Company and USLD after the Distribution and to provide
for an orderly transition, Billing and USLD have entered
into or will enter into certain agreements. Such
proposed agreements include: (i) the Distribution
Agreement, providing for, among other things, the
Distribution and the division between the Company and
USLD of certain assets and liabilities and material
indemnification provisions; (ii) the Benefit Plans and
Employment Matters Allocation Agreement, providing for
certain allocations of responsibilities with respect to
benefit plans, employee compensation, and labor and
employment matters; (iii) the Tax Sharing Agreement
pursuant to which the Company and USLD will agree to
allocate tax liabilities that relate to periods prior to
and after the Distribution Date;
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
(iv) the Transitional Services and Sublease Agreement
pursuant to which USLD will provide certain services on
a temporary basis and sublease certain office space to
the Company and Billing will provide certain services to
USLD on a temporary basis; (v) the Zero Plus -- Zero
Minus Billing and Information Management Services
Agreement pursuant to which the Company will provide
billing clearinghouse and information management
services to USLD for an initial period of three years;
(vi) the Telecommunications Agreement pursuant to which
USLD will provide long distance telecommunications
services to the Company for an initial period of three
years; and (vii) the Expense Sharing Agreement, whereby
USLD and Billing agree to pay certain usage charges and
share certain expenses relating to the operation of an
airplane. It is the intention of USLD and Billing that
the Transitional Services and Sublease Agreement, the
Zero Plus -- Zero Minus Billing and Information
Management Services Agreement, the Telecommunications
Agreement and the Expense Sharing Agreement reflect
terms and conditions similar to those that would have
been arrived at by independent parties bargaining at
arm's length. There can be no assurance that such
agreements have been or will be effected on terms at
least as favorable to USLD or Billing as could have been
obtained from unaffiliated third parties. See
"Relationship Between Billing and USLD After the
Distribution."
Policies and Procedures for Ad-
dressing Conflicts............... Billing and USLD will share one common director. (Parris
H. Holmes, Jr. will serve as Chairman of the Board of
Directors of USLD and Chairman of the Board of Directors
and Chief Executive Officer of Billing.) The Company and
USLD will adopt policies and procedures to be followed
by the Board of Directors of each company to limit the
involvement of Parris H. Holmes, Jr. in conflict
situations, including requiring him to abstain from
voting as a director of either Billing or USLD on
certain matters that present a conflict of interest
between the two companies and providing for the outside
directors of each company to control the decision making
process in certain situations. The Company and USLD
believe that such conflict situations will be minimal.
See "Relationship Between Billing and USLD After the
Distribution -- Policies and Procedures for Addressing
Conflicts."
Special Factors................... See "Special Factors" for a discussion of certain
factors that should be considered in connection with the
Billing Common Stock received in the Distribution.
</TABLE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table presents summary historical financial and other data and
summary pro forma financial data for the Company after giving effect to the
Distribution and related transactions. The financial data presented for the
fiscal years ended September 30, 1993, 1994 and 1995 should be read in
conjunction with the Consolidated Financial Statements, the notes thereto and
the other financial information included in this Information Statement. The
Statements of Income and Statements of
7
<PAGE>
Cash Flows for the years ended September 30, 1993, 1994 and 1995 and the Balance
Sheets at September 30, 1994 and 1995 have been audited by Arthur Andersen LLP,
the Company's independent public accountants. All historical financial data
shown below for these periods have been derived from the audited financial
statements. The Income Statement data for the six months ended March 31, 1996
and March 31, 1995 and for the fiscal years ended September 30, 1992 and 1991,
the balance sheet data at March 31, 1996, and all Operating Data are unaudited.
In the opinion of management of Billing, the information presented reflects all
adjustments considered necessary for a fair presentation of the results for such
periods. Summary historical per share amounts are not included as they may not
be indicative of future performance. The following data should be read in
conjunction with Billing's Consolidated Financial Statements and the notes
thereto, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and other financial information included elsewhere
herein.
SUMMARY HISTORICAL FINANCIAL INFORMATION
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ENDED SEPTEMBER 30, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Operating revenues............. $ 16,327 $ 33,162 $ 46,451 $ 57,746 $ 80,847 $ 34,942 $ 50,301
Income from operations......... * * 10,416 13,392 22,055 9,402 14,230
Net income..................... * * 6,441 8,565 14,118 6,013 8,969
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1994 1995
--------- ----------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital............................................................. $ 11,132 $ 17,300 $ 30,084
Total assets................................................................ 89,710 106,895 122,295
Long-term obligations, less current portion................................. 853 2,216 1,805
U.S. Long Distance Corp.'s investment in and advances to Billing............ 13,001 21,122 34,355
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT BILLING SERVICES CUSTOMERS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
EBITDA (1)....................... * * $ 11,293 $ 14,346 $ 23,271 $ 9,921 $ 15,170
Billing call records processed
per month (2)(3)................ 6,500 10,800 16,900 25,920 40,410 28,530 45,340
Billing services customers (4)... 71 115 143 168 272 * 305
</TABLE>
8
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, (5)
1996
-------------
<S> <C>
BALANCE SHEET DATA:
Working capital.................................................................................... $ 16,523
Total assets....................................................................................... 108,734
Long-term obligations, less current portion........................................................ 1,805
U.S. Long Distance Corp.'s investment in and advances to Billing................................... 0
Paid-in capital.................................................................................... 20,745
</TABLE>
- - ------------------------
* Information is not available.
(1) "EBITDA" represents earnings before interest, taxes, depreciation and
amortization. EBITDA is a commonly used profitability/cash flow measurement.
(2) Calculated based upon a monthly average over the fiscal quarter ended on the
date indicated.
(3) Does not include call records that the Company processed for billing
management customers.
(4) At end of the period.
(5) The pro forma financial data are derived from the unaudited financial
information and notes thereto included elsewhere in this Information
Statement. The pro forma financial data gives effect to the Distribution,
the Preliminary Transactions and certain other adjustments including a cash
transfer from Billing to USLD of $13,561,000 as if the Distribution,
Preliminary Transactions and adjustments were consummated on March 31, 1996.
The pro forma financial data does not include direct costs associated with
the Distribution estimated to range from approximately $8,500,000 to
approximately $10,500,000. See "Pro Forma Condensed Consolidated Balance
Sheet."
9
<PAGE>
THE COMPANY
The Company believes it is the largest third-party billing clearinghouse and
information management services provider to the telecommunications industry. The
Company maintains contractual billing arrangements with over 1,200 local
telephone companies which provide access lines to and collect for services from
end-users of telecommunication services. The Company processes telephone call
records and other transactions and collects the related end-user charges from
these local telephone companies on behalf of its customers. See "Business."
Billing's direct dial long distance customers, including local and regional
long distance carriers, use the Company as a billing clearinghouse for
processing and collecting call records generated by their end-users. Although
such carriers can bill end-users directly, Billing provides these carriers with
a very cost-effective means of billing and collecting residential and small
commercial accounts through the local telephone companies.
The Company processes telephone call records for customers providing
operator services largely to the hospitality, penal, and private and public pay
telephone industries. In addition, Billing processes records for telephone calls
that require operator assistance and/or alternative billing options such as
collect and person-to-person calls, third-party billing and calling card
billing. Because operator services providers have only the billing number and
not the name or address of the billed party, they must have access to the
services of the local telephone companies to collect their charges. The Company
provides this access to its customers through its contractual billing
arrangements with the local telephone companies that bill and collect on behalf
of these operator services providers.
Because Billing acts as an aggregator of telephone call records and other
transactions from various sources, it can negotiate discounted billing costs
with the local telephone companies due to its large volume and can pass on these
discounts to its customers. Additionally, Billing can provide its services to
those long distance carriers and operator services providers who would otherwise
not be able to make the investments in billing and collection agreements with
the local telephone companies, fees, systems, infrastructure and volume
commitments required to establish and maintain the necessary relationships with
the local telephone companies.
In 1994, Billing began providing enhanced billing services for processing
transactions related to providers of premium services or products that can be
billed through the local telephone companies, such as charges for 900 access
pay-per-call transactions, cellular long distance services, paging services,
voice mail services, caller ID and other telecommunications equipment charges.
In addition to its billing clearinghouse services, Billing also offers
billing management services to customers who have their own billing arrangements
with the local telephone companies. These management services may include data
processing, accounting, end-user customer service, telecommunication tax
processing and reporting.
Billing is a newly formed corporation which, upon completion of the
Distribution, will be an independent, publicly held company that will own and
operate substantially all of the assets of, and will assume substantially all of
the liabilities associated with, the third party billing clearinghouse and
information management services business now operated by USLD. This business is
currently conducted primarily through USLD's subsidiaries Zero Plus Dialing,
Inc. ("ZPDI") and Enhanced Services Billing, Inc. ("ESBI").
Prior to the Distribution, USLD will contribute the capital stock of U.S.
Billing Management Corp. ("USBMC") and U.S. Billing, Inc. ("USBI"), also wholly
owned subsidiaries of USLD, to Billing in exchange for the capital stock of
Billing. ZPDI and ESBI will then merge with USBMC and USBI, respectively. ZPDI
and ESBI will be the surviving corporation in the mergers and will become wholly
owned subsidiaries of Billing. ZPDI will also change its name to Billing
Information Concepts, Inc. ("BICI"). The description of Billing that follows
assumes completion of the Preliminary Transactions (as defined herein) and the
Distribution.
Billing is a Delaware corporation with its principal executive offices
located at 9311 San Pedro, Suite 400, San Antonio, Texas 78216.
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SPECIAL FACTORS
In addition to the other information contained in this Information
Statement, holders of Billing Common Stock should carefully consider the
following information.
LACK OF OPERATING HISTORY AS A SEPARATE ENTITY; LIMITED
RELEVANCE OF HISTORICAL FINANCIAL INFORMATION
The Company was organized in 1996 for the purpose of effecting the
Distribution. Billing does not have an operating history as an independent
public company, but will own and conduct the billing clearinghouse and
information management services business previously conducted by USLD.
Management of the Company has historically relied upon USLD for certain
administrative services such as personnel management and financial
administration. After the Distribution Date, Billing will be responsible for
maintaining its own administrative functions except for certain services to be
provided by USLD during a transitional period pursuant to certain agreements
between Billing and USLD. See "Relationship between Billing and USLD after the
Distribution."
The financial information included herein may not necessarily reflect the
results of operations, financial position and cash flows of the Company in the
future or what the results of operations, financial position and cash flows
would have been had the Company been a separate, stand-alone entity during the
periods presented. See "Pro Forma Condensed Consolidated Balance Sheet."
ABSENCE OF USLD FINANCIAL SUPPORT
USLD has no obligation or intent to support Billing financially after the
Distribution. Billing has a revolving line of credit with FINOVA Capital
Corporation, secured by its accounts receivable and other unencumbered assets,
in order to offer an advance funding program to its billing customers. The
Company believes that internally generated funds and this line of credit will
continue to be sufficient to meet its other cash needs for the immediate future.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Advance Funding Program and Receivable Financing Facility."
DEPENDENCE UPON KEY PERSONNEL; MANAGEMENT OF GROWTH
The Company's future success depends to a significant degree upon the
continued services of its President and Chief Operating Officer, Alan W.
Saltzman, and other key senior management personnel, none of whom is covered by
an insurance policy under which Billing is the beneficiary. The Company does,
however, have a two year employment agreement with Mr. Saltzman that contains
noncompete and confidentiality provisions. Billing's future success also depends
on its continuing ability to attract and retain highly qualified managerial
personnel. Competition for such personnel is intense, and there can be no
assurance that Billing will be able to retain its key managerial employees or
attract, assimilate or retain other highly qualified managerial personnel in the
future. The Company's ability to manage growth successfully will require that it
continue to improve its operational, management and financial systems and
controls. Failure to do so could have a material adverse effect upon the
Company's business and results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY
The Company's future success is heavily dependent upon its proprietary
software technology. Billing relies principally on trade secret and copyright
law and nondisclosure agreements and other contractual arrangements to protect
its software technology. Billing currently enters into confidentiality
agreements with its key employees. There can be no assurance that the steps
taken by the Company will be effective in preventing misappropriation of its
proprietary rights.
ABSENCE OF TRADING MARKET FOR THE BILLING COMMON STOCK
There is not currently a public market for the Billing Common Stock, and
there can be no assurance as to the prices at which trading in the Billing
Common Stock will occur after the Distribution. Until the Billing Common Stock
is fully distributed and an orderly market develops, the prices at which trading
in such stock occurs may fluctuate significantly. The trading price of the
Billing
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Common Stock will be influenced by a variety of factors, including the Company's
operating results, the depth and liquidity of the market for Billing Common
Stock, investor perception of Billing and the industry in which its business
operates and general and economic market conditions. The Company has made
application to list and anticipates that the Billing Common Stock will be
approved for listing on the Nasdaq National Market subject to official notice of
issuance. See "The Distribution -- Listing and Trading of the Billing Common
Stock."
CHANGES IN TRADING PRICES OF USLD COMMON STOCK
It is expected that USLD Common Stock will continue to be listed and traded
on the Nasdaq National Market after the Distribution. As a result of the
Distribution, the trading price range of USLD Common Stock is expected to be
lower than the trading price range of USLD Common Stock prior to the
Distribution. The combined trading prices of the Billing Common Stock and USLD
Common Stock held by stockholders after the Distribution may be less than, equal
to or greater than the trading prices of USLD Common Stock prior to the
Distribution. See "The Distribution -- Listing and Trading of the Billing Common
Stock."
CERTAIN ANTI-TAKEOVER FEATURES
Upon consummation of the Distribution, certain provisions of Billing's
Certificate of Incorporation and Bylaws, along with certain provisions of
Delaware statutory law and certain agreements between Billing and USLD, could
discourage potential acquisition proposals and could delay or prevent a change
in control of the Company. Such provisions could diminish the opportunities for
a stockholder to participate in tender offers, including tender offers at a
price above the then-current market value of Billing Common Stock. Such
provisions also may inhibit fluctuations in the market price of Billing Common
Stock that could result from takeover attempts. See "Purposes and Anti-Takeover
Effects of Certain Provisions of Billing's Certificate and Bylaws and Delaware
Law."
UNCERTAINTY OF TAX CONSEQUENCES
As a condition to the completion of the Distribution, USLD and Billing will
receive an opinion from special tax counsel, to the effect that the Distribution
will qualify as a tax-free spinoff under Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"). This tax opinion is delivered in reliance
on a number of representations made by USLD and Billing. Certain of these
representations are critical to the qualification of the Distribution as a
tax-free spinoff under Section 355 of the Code. If any of the representations
are breached, then the total foundation of the tax opinion would be flawed and
it may not be relied upon.
Among the principal representations made by USLD to special tax counsel,
USLD has represented that it has no current plan or intent, and is not currently
engaged in any discussions, to merge USLD or Billing with another company or
sell or otherwise dispose of all or a substantial portion of its business
operations or assets of USLD or Billing after the Distribution (a "Disposition")
other than (i) in the ordinary course of business or (ii) in a transaction that,
in the opinion of tax counsel, would not be inconsistent with the Distribution
qualifying as a tax-free spinoff. In general, if a Disposition occurred in which
gain or loss was recognized and such Disposition, based upon all the facts and
circumstances, was found to be related to the Distribution, the Service may
assert that the Distribution was used as a "device" to distribute the earnings
and profits of one or both of USLD and Billing, with the result that the
Distribution may not qualify as a tax-free spinoff under Section 355 of the
Code. Legislation recently has been introduced proposing changes in the nation's
tax laws, including a proposal to recognize gain in certain Section 355 spinoff
transactions. The probability of passage of such a proposal and its impact on
the Distribution are uncertain.
Further, as reflected in the tax opinion, the applicability of Section 355
to the Distribution is complex and may be subject to differing interpretations.
Accordingly, even if the representations are accurate, there can be no assurance
that the Service will not successfully challenge the applicability of Section
355 to the Distribution, or assert that the Distribution fails the requirements
of Section 355
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on the basis of facts either existing at the Distribution Date or which may
arise after the Distribution Date. No ruling will be sought from the Service,
and the opinion of special tax counsel is not binding on the Service. See "The
Distribution -- Certain Federal Income Tax Consequences of the Distribution."
CERTAIN CONSENT REQUIREMENTS
USLD and its subsidiaries have reviewed their existing debt agreements and
other contractual arrangements in connection with the Distribution. It is a
condition of the Distribution that any amendments, consents or waivers necessary
to effect the Distribution have been obtained, except for those the failure of
which to obtain would not have a material adverse effect on Billing or USLD. The
Company believes that there will be no individual consents, the failure of which
to obtain would have a material adverse effect on it, USLD or the Distribution.
However, certain of the waivers and/or consents are expected to require that
existing cross guarantees and pledges of assets remain in effect. See
"Relationship between Billing and USLD after the Distribution -- Distribution
Agreement."
DIVIDEND POLICY
The future payment of dividends by the Company will depend on decisions that
will be made by the Board of Directors of the Company from time to time based on
the results of operations and financial condition of Billing and such other
business considerations as the Board of Directors of Billing considers relevant.
The Company currently does not expect to pay dividends in the foreseeable
future. Additionally, the Company is a holding company whose only material
assets are the stock of its subsidiaries. As a result, the Company conducts no
business and will be dependent on distributions it receives from its
subsidiaries to pay dividends. There can be no assurance that any such
distributions will be adequate to pay any dividends. Moreover, the Company is
subject to certain restrictions on the payment of dividends pursuant to its
credit agreements. See "Dividend Policy."
THE RELATIONSHIP BETWEEN USLD AND BILLING
The Distribution Agreement also provides that by the Distribution Date
Billing's Certificate of Incorporation and Bylaws shall be in the form as
attached hereto as Annexes C and D, respectively, and that the Company and USLD
will take all actions that may be required to elect or otherwise appoint, as
directors of Billing, the persons indicated herein. See "Management,"
"Description of Capital Stock" and "Purposes and Anti-Takeover Effects of
Certain Provisions of Billing's Certificate and Bylaws and Delaware Law."
For purposes of governing certain of the ongoing relationships between USLD
and the Company after the Distribution and to provide for an orderly transfer on
the Distribution Date of certain of the billing clearinghouse and information
management services business to the Company and an orderly transition to the
status of two separate companies, USLD and the Company have entered or will
enter into various agreements. In addition, the Company and USLD will adopt
policies and procedures to be followed by the Board of Directors of each company
to limit the involvement of Parris H. Holmes, Jr. in conflict situations,
including requiring him to abstain from voting as a director of either Billing
or USLD on certain matters that present a conflict of interest between the two
companies. See "Relationship between Billing and USLD after the Distribution."
FRAUDULENT TRANSFER CONSIDERATIONS; LEGAL DIVIDEND REQUIREMENTS
It is a condition to the consummation of the Distribution that the USLD
Board shall have received a satisfactory opinion regarding the solvency of
Billing and USLD and that the USLD Board determine the permissibility of the
Distribution under Section 170 of the Delaware General Corporation Law ("DGCL").
See "The Distribution -- Opinions of Financial Advisors." There is no certainty,
however, that a court would find the solvency opinion rendered by Houlihan Lokey
Howard & Zukin to be binding on creditors of the Company and USLD or that a
court would reach the same conclusions set forth in such opinion in determining
whether the Company or USLD was insolvent at the time of, or after giving effect
to, the Distribution.
If a court in a lawsuit by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy, were to find that at the time USLD
effected the Distribution, Billing or USLD, as the case
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may be, (i) was insolvent; (ii) was rendered insolvent by reason of the
Distribution; (iii) was engaged in a business or transaction for which Billing's
or USLD's remaining assets, as the case may be, constituted unreasonably small
capital; or (iv) intended to incur, or believed it would incur, debts beyond its
ability to pay as such debts matured, such court may be asked to void the
Distribution (in whole or in part) as a fraudulent conveyance and require that
the stockholders return the special dividend (in whole or in part) to USLD, or
require Billing to fund certain liabilities for the benefit of creditors. The
measure of insolvency for purposes of the foregoing will vary depending upon the
jurisdiction whose law is being applied. Generally, however, Billing or USLD, as
the case may be, would be considered insolvent if the fair value of their
respective assets were less than the amount of their respective liabilities or
if they incurred debt beyond its ability to repay such debt as it matures. In
addition, under Section 170 of the DGCL (which is applicable to the
Distribution), a corporation may make distributions to its stockholders only out
of its surplus (net assets minus capital) and not out of capital.
USLD's Board and management believe that, in accordance with the solvency
opinion rendered in connection with the Distribution, (i) Billing and USLD each
will be solvent at the time of the Distribution (in accordance with the
foregoing definitions), will be able to repay its debts as they mature following
the Distribution and will have sufficient capital to carry on their respective
businesses, and (ii) the Distribution will be made entirely out of surplus, as
provided under Section 170 of the DGCL.
DEPENDENCE UPON CONTRACTS WITH LOCAL TELEPHONE COMPANIES
The Company's business is dependent upon its contractual relationships with
over 1,200 local telephone companies pursuant to which these local telephone
companies bill and collect from their customers on Billing's behalf. Most of the
billing and collection agreements cover a one to five year period and provide
for automatic renewals unless notice of termination is given. Certain of these
local telephone companies, whose billing services provide access to a vast
majority of the businesses and households in the United States, are legally
required to provide billing and collection services for Billing if they provide
such services for any other third party, such as Billing's competitors. Although
the Company has not experienced the termination of any contracts in the past,
there can be no assurance that these contracts will continue in effect on their
present terms, if at all. The termination of one or more of these contracts
would severely diminish the Company's capacity to provide billing services in
the geographic areas covered by the terminated contracts and could adversely
affect the Company's business.
ANTICIPATED BILLING SYSTEM EXPENDITURES
To facilitate and support the growth anticipated in its business, Billing
plans to make significant expenditures in its operations over the next one to
two years. Specifically, the Company currently intends to spend approximately
$18 million to license, develop and create information systems that will enable
it to offer "direct billing" and "invoice ready" services to its customers (see
"Business -- Business Strategy"). These expenditures are expected to be made in
the areas of software development, hardware, additional local telephone company
agreements and related staffing. The Company believes that it will be able to
fund these expenditures with internally generated funds and borrowings, but
there can be no assurance that such funds will be generated and/or spent in
these projects.
COMPETITION
The billing services industry is highly competitive and is based upon
pricing, customer service and value-added services. The Company competes
primarily with a unit of Electronic Data Systems, Inc., a subsidiary of General
Motors Corporation. This competitor and its parent company have greater name
recognition than the Company and have, or have access to, substantially greater
financial and personnel resources than those available to the Company. While
management believes that measured by revenues, Billing is currently the largest
third-party billing clearinghouse in the industry, its success is dependent upon
its continued ability to maintain high quality, market driven services at
competitive prices. Although the Company believes that it currently competes
favorably with respect
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to these factors, there can be no assurance that Billing will be able to compete
successfully with existing or future competitors or that the competitive
pressures faced by Billing will not have a material adverse effect on its
business, operating results or financial condition. See "Business --
Competition."
FORWARD-LOOKING INFORMATION MAY PROVE INACCURATE
This Information Statement contains certain forward-looking statements and
information relating to Billing that are based on the beliefs of USLD or Billing
management as well as assumptions made by and information currently available to
USLD or Billing management. When used in this document the words "anticipate,"
"believe," "estimate," "expect" and "intend" and similar expressions, as they
relate to USLD, Billing or USLD or Billing management, are intended to identify
forward-looking statements. Such statements reflect the current views of USLD or
Billing with respect to future events and are subject to certain risks,
uncertainties and assumptions, including the risk factors described in this
Information Statement. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may vary materially from those described herein as anticipated, believed,
estimated, expected or intended. Neither USLD nor Billing intends to update
these forward-looking statements.
THE DISTRIBUTION
REASONS FOR THE DISTRIBUTION
USLD, through its Telecommunications Group, provides direct dial long
distance and operator services and, through its Billing Group, provides billing
clearinghouse and information management services to direct dial long distance,
operator services and other telecommunications businesses. The USLD Board, after
careful study and analysis and consultation with financial and other advisors,
has determined that it is in the best interests of USLD and its stockholders,
for the reasons set forth below, to separate ownership of the Telecommunications
Group and the Billing Group. USLD will continue to conduct the
Telecommunications Group business, and Billing will conduct the Billing Group
business.
The USLD Board believes that the Distribution will enhance value to USLD's
stockholders. The spinoff will provide Billing with more efficient access to
capital markets to finance the anticipated growth of its business. In addition,
the Distribution will eliminate the perceived concern of Billing's customers and
potential customers who compete with the Telecommunications Group that the
Billing Group's affiliation with the Telecommunications Group could compromise
customer proprietary information. Regarding this reason, the Billing Group uses
"most favored nations" contracts (wherein all customers pay the same rates for
given volumes of records) for certain of its services in part to appease the
concerns of the Telecommunications Group's competitors that they are subsidizing
the Telecommunications Group's billing and collection expenses. Although the
Billing Group is widely believed to be the most cost efficient provider of
billing and information management services, the prospect of any special
arrangement between the Telecommunications Group and the Billing Group, and the
possibility that the Telecommunications Group could have access to certain
proprietary information of the Billing Group's customers, has led some potential
customers to express concerns over such matters and in some cases to use the
Billing Group's competitors.
The advent of the new telecommunications law has heightened the
telecommunications industry's awareness of such potential conflicts. Prior to
the enactment of the Telecommunications Act of 1996 (the "Telecommunications
Act"), the Regional Bell Operating Companies ("RBOCs") and the General Telephone
Operating Companies from whom Billing purchased certain billing and collection
services were generally prohibited from competing in the direct dial long
distance market, and direct dial long distance carriers such as USLD, to whom
Billing resold local telephone company billing and collection services, were
generally prohibited from competing with the local telephone companies for local
services. The Telecommunications Act now allows this competition, but requires
the structural
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separation between an RBOC local service provider and the RBOC's long distance
entity. This structural separation was deemed necessary to prevent the RBOC's
long distance entity from utilizing customer proprietary information obtained
through the RBOC's local telephone records or billing and collection data to
target their competitors' premium long distance customers for their own long
distance service. As a result of the Telecommunications Act, all of the local
telephone companies with whom the Billing Group has contracts are now potential
direct dial long distance billing customers, and all of the Billing Group's
existing direct dial long distance billing customers may now enter into the
local telephone market as Billing's vendors and customers aggressively vie for
each other's market share. As evidenced by Congress's mandate to separate the
local and long distance arms of the RBOCs, the concerns of direct dial long
distance businesses in these areas will take a forefront in the new
telecommunications marketplace. Although the Telecommunications Group and the
Billing Group have taken measures to ensure that no such proprietary information
could be shared in the past, it has become extremely important for the continued
growth of the Billing Group to eliminate these fears from its existing and
potential customer base.
Moreover, as a result of the Distribution, the Telecommunications Group will
be able to compete with customers of the Billing Group for the provision of
telecommunications services without any concern as to the impact on the Billing
Group. The Distribution will separate two distinct companies with different
missions and different financial, investment and operating characteristics so
that each can pursue business strategies and objectives appropriate to its
specific business. While the Telecommunications Group and the Billing Group are
currently operated by separate management teams, separation of the two
businesses will enable each management group to concentrate its attention and
financial resources on its own business without regard to the corporate
objectives, policies and capital requirements of the other and allow for more
effective incentives for key employees of each business, including stock-based
and other incentive programs that will more directly reward employees of each
business. The separation will permit investors, customers, lenders and other
constituencies to evaluate the respective businesses of USLD and Billing.
OPINIONS OF FINANCIAL ADVISORS
BEST INTERESTS OF STOCKHOLDERS. As a condition of the Distribution
Agreement to be entered into between USLD and Billing prior to the Distribution,
the USLD Board received a written opinion from The Chicago Corporation dated May
13, 1996, to the effect that, based upon the factors set forth in such opinion,
the Distribution is in the best interests of the stockholders of USLD from a
financial point of view after considering other alternatives that were available
regarding Billing. The full text of The Chicago Corporation's opinion is set
forth in Annex A, and this summary is qualified in its entirety by reference to
the text of such opinion. It is a condition to the consummation of the
Distribution that The Chicago Corporation deliver an updated opinion to the USLD
Board, to be dated the Distribution Date, in substantially the same form as the
opinion set forth in Annex A. See "The Distribution -- Conditions; Termination"
below.
In its opinion, The Chicago Corporation states that it has, among other
things, (i) reviewed the publicly available consolidated financial statements of
USLD for recent years and interim periods to date and certain other relevant
financial and operating data of USLD made available to it from published sources
and by officers of USLD; (ii) reviewed the financial statements of Billing
contained in the Information Statement; (iii) reviewed certain internal
financial and operating information, including certain projections, relating to
USLD and Billing prepared by the managements of USLD and Billing, respectively;
(iv) discussed the business, financial condition and prospects of USLD with
certain officers of USLD; (v) discussed the business, financial condition and
prospects of Billing with certain officers of USLD and Billing; (vi) reviewed
the financial terms of the Distribution; (vii) reviewed the financial terms, to
the extent publicly available, of certain transactions it deemed relevant;
(viii) reviewed certain publicly available information relating to certain
companies it deemed appropriate in analyzing USLD and Billing; (ix) reviewed the
trading history of USLD Common Stock; (x) reviewed the Information Statement
included in the Registration Statement on Form 10 for the Billing Common Stock
filed with the Securities and Exchange Commission on May 14, 1996;
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(xi) reviewed the tax opinion of Arter & Hadden, Special Tax Counsel, that,
among other things, the transaction will be tax-free to USLD and its
stockholders; (xii) reviewed the solvency and sufficient surplus opinions
provided by Houlihan, Lokey, Howard and Zukin; and (xiii) performed such other
analysis and examinations and considered such other information, financial
studies, analyses and investigations and financial, economic and market data as
it deemed relevant. In making its analysis, The Chicago Corporation considered
the financial aspects of other alternatives available to USLD, including selling
certain of USLD's subsidiaries to an unaffiliated purchaser, the potential sale
of all or a portion of Billing to the public through an initial public offering
and maintaining Billing as a USLD subsidiary. The opinion also states that The
Chicago Corporation has relied upon publicly available information and
information provided by USLD and Billing (including the information contained in
this Information Statement), has not independently verified the information
concerning USLD and Billing or other data considered in its review, and has
relied upon the accuracy and completeness of all such information. In connection
with its opinion provided to the USLD Board, The Chicago Corporation was not
asked to, and did not, provide any opinion as to the valuation, future
performance or long-term viability of Billing as an independent public company
following the Distribution. The Chicago Corporation's opinion does not opine or
give assurances of the price at which the shares of USLD Common Stock or Billing
Common Stock will trade after the Distribution.
In connection with the services performed and to be performed by The Chicago
Corporation regarding the Distribution, including the rendering of its written
opinion, USLD has paid The Chicago Corporation the sum of $200,000 and has
agreed to pay The Chicago Corporation a fee equal to .75% of the market value of
the Billing Common Stock distributed to USLD stockholders upon completion of the
Distribution, less the $200,000 fee previously paid. USLD also has agreed to
reimburse The Chicago Corporation for its reasonable expenses, and to indemnify
it against certain liabilities and expenses in connection with its services as
financial advisor. The Chicago Corporation has from time to time performed
various investment banking and financial advisory services for USLD.
The Chicago Corporation, as part of its investment banking services, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, corporate restructurings, strategic
alliances, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
SOLVENCY AND ADEQUATE SURPLUS. In reaching a decision to undertake the
Distribution, the USLD Board considered, among other things, the advice of one
its financial advisors, Houlihan Lokey Howard & Zukin ("Houlihan Lokey"). A
summary of the opinion rendered by Houlihan Lokey with respect to the
Distribution is set forth below. The opinion rendered by Houlihan Lokey assumes
that the Distribution is consummated substantially as described in this
Information Statement. The full text of Houlihan Lokey's opinion is set forth in
Annex B, and this summary is qualified in its entirety by reference to the text
of such opinion. It is a condition to the consummation of the Distribution that
Houlihan Lokey deliver an updated opinion to the USLD Board, to be dated the
Distribution Date in substantially the same form as the opinion set forth in
Annex B. See "The Distribution -- Conditions; Termination" below.
In a written opinion dated May 13, 1996, Houlihan Lokey stated that, based
upon the conditions set forth therein and other factors it deemed relevant, it
was of the opinion that, (i) with respect to USLD before the Distribution and
with respect to each of USLD and Billing, assuming the Distribution is
consummated as proposed, immediately after and giving effect to the Distribution
on a pro forma basis (a) the fair value of such company's aggregate assets would
exceed such company's total liabilities (including contingent liabilities); (b)
the present fair salable value for such company's aggregate assets would be
greater than such company's probable liabilities on its debts as such debts
become absolute and mature or due; (ii) with respect to each of USLD and
Billing, assuming the Distribution is consummated as proposed, immediately after
and giving effect to the Distribution (c) such company would be able to pay its
debts and other liabilities (including contingent liabilities) as they become
absolute and mature or due; and (d) the capital remaining in such company after
the
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Distribution would not be unreasonably small for the business in which such
company is engaged, as management has indicated it is now conducted and is
proposed to be conducted following consummation of the Distribution; and (iii)
the excess of the value of aggregate assets of USLD, before consummation of the
Distribution, over the total identified liabilities (including contingent
liabilities) of USLD would equal or exceed the value of the Distribution to USLD
stockholders plus the stated capital of USLD.
In preparing its opinion, Houlihan Lokey relied on the accuracy and
completeness of all information supplied or otherwise made available to it by
USLD and did not independently verify such information or undertake any physical
inspection or independent appraisal of the assets or liabilities of USLD or
Billing. Such opinion was based on business, economic, market and other
conditions existing on the date such opinion was rendered.
Houlihan Lokey's opinion is also based on, among other things, its review of
the agreements relating to the Distribution, historical and pro forma financial
information and certain business information relating to Billing and USLD,
including that contained in this Information Statement, as well as certain
financial forecasts and other data provided by USLD relating to the respective
businesses and prospects of Billing and USLD. Houlihan Lokey also conducted
discussions with USLD's management with respect to the business and prospects of
USLD and Billing and conducted such financial studies, analysis and
investigations as it deemed appropriate in rendering its opinion.
In connection with the Distribution, USLD has paid Houlihan Lokey a fee of
$65,000 and out-of-pocket expenses in connection with Houlihan Lokey's delivery
of the opinion.
DISTRIBUTION AGENT
The Distribution Agent ("Distribution Agent") is Montreal Trust Company of
Canada.
MANNER OF EFFECTING THE DISTRIBUTION
The general terms and conditions relating to the Distribution are set forth
in the Distribution Agreement, dated as of , 1996 (the
"Distribution Agreement"), between USLD and Billing.
USLD will effect the Distribution on the Distribution Date by delivering
shares of Billing Common Stock to the Distribution Agent, for distribution to
holders of record of USLD Common Stock as of the close of business on the Record
Date. The Distribution will be made on the basis of one share of Billing Common
Stock for each share of USLD Common Stock outstanding as of the close of
business on the Record Date. The actual total number of shares of Billing Common
Stock to be distributed will depend on the number of shares of USLD Common Stock
outstanding on the Record Date. The shares of Billing Common Stock will be fully
paid and nonassessable and the holders thereof will not be entitled to
preemptive rights. See "Description of Capital Stock." Certificates representing
shares of Billing Common Stock will be mailed to USLD stockholders by the
Distribution Agreement as soon as practicable after the Distribution Date.
HOLDERS OF USLD COMMON STOCK SHOULD NOT SEND CERTIFICATES TO BILLING, USLD
OR THE DISTRIBUTION AGENT. THE DISTRIBUTION AGENT WILL MAIL THE STOCK
CERTIFICATES REPRESENTING SHARES OF BILLING COMMON STOCK AS SOON AS PRACTICABLE
AFTER THE DISTRIBUTION DATE. USLD STOCK CERTIFICATES WILL CONTINUE TO REPRESENT
SHARES OF USLD COMMON STOCK AFTER THE DISTRIBUTION IN THE SAME AMOUNT SHOWN ON
THE CERTIFICATES.
No holder of USLD Common Stock will be required to pay any cash or other
consideration for the shares of Billing Common Stock received in the
Distribution or to surrender or exchange shares of USLD Common Stock in order to
receive shares of Billing Common Stock. Because of the one for one share
dividend, there will be no fractional shares issued in the Distribution.
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RESULTS OF DISTRIBUTION
After the Distribution, Billing will be a separate public company and will
own and operate the commercial billing clearinghouse and information management
services business formerly conducted by USLD's Billing Group. The number and
identity of the holders of Billing Common Stock immediately after the
Distribution will be substantially the same as the number and identity of USLD
Common Stock on the Record Date. Immediately after the Distribution, Billing
expects to have approximately 730 holders of record of Billing Common Stock and
approximately 14,839,486 shares of Billing Common Stock outstanding based on the
number of record stockholders and outstanding shares of USLD Common Stock as of
the close of business on May 10, 1996 and a Distribution ratio of one share of
Billing Common Stock for each share of USLD Common Stock. The actual number of
shares of Billing Common Stock to be distributed will be determined as of the
Record Date. The Distribution will not affect the number of outstanding shares
of USLD Common Stock or any rights of USLD stockholders. For certain information
regarding the options to purchase Billing Common Stock that will be outstanding
after the Distribution, see "Relationship Between Billing and USLD After the
Distribution -- Benefit Plans and Employment Matters Allocation Agreement."
LISTING AND TRADING OF THE BILLING COMMON STOCK
Billing has made application to the Nasdaq National Market for the listing
of the Billing Common Stock. It is presently anticipated that Billing Common
Stock will be approved for listing on the Nasdaq National Market prior to the
Distribution Date, and trading may commence on a "when-issued" basis prior to
the Distribution. It is also possible that USLD Common Stock would be traded on
a "when-distributed" basis prior to the Distribution. On the trading day
following the date that certificates for Billing Common Stock are mailed by the
Distribution Agent, "when-issued" or "when-distributed" trading, as applicable,
in respect of each of the Billing Common Stock and USLD Common Stock would end
and "regular-way" trading would begin. The Nasdaq National Market will not
approve any trading in respect of the Billing Common Stock until the Securities
and Exchange Commission (the "Commission") has declared effective the
Registration Statement of Billing on Form 10 in respect of the Billing Common
Stock (the "Registration Statement on Form 10"), which is expected to occur
prior to the Distribution Date.
There is not currently a public market for the Billing Common Stock. Prices
at which the Billing Common Stock may trade prior to the Distribution on a
"when-issued" basis or after the Distribution cannot be predicted. Until the
Billing Common Stock is fully distributed and an orderly market develops, the
prices at which trading in such stock occurs may fluctuate significantly. The
prices at which the Billing Common Stock trades will be determined by the
marketplace and may be influenced by many factors, including, among others, the
depth and liquidity of the market for the Billing Common Stock, investor
perception of Billing and the industries in which Billing participates,
Billing's dividend policy and general economic and market conditions. Such
prices also may be affected by certain provisions of Billing's Certificate of
Incorporation and Bylaws, each of which will be in effect following the
Distribution, which may have an anti-takeover effect. See "Special Factors --
Dividend Policy" and "Purposes and Anti-Takeover Effects of Certain Provisions
of the Billing's Certificate and Bylaws and Delaware Law."
USLD filed a request for a no action letter with the staff of the
Commission, setting forth, among other things, USLD's view that the Distribution
of Billing Common Stock does not require registration under the Securities Act
of 1933, as amended (the "Securities Act"). As of the date hereof, USLD has not
received a decision from the Commission Staff in response to such request.
Assuming receipt of a favorable decision from the Commission Staff, it is
Billing's belief that the shares of Billing Common Stock distributed to USLD
stockholders will be freely transferable, except for shares received by persons
who may be deemed to be "affiliates" of Billing under the Securities Act.
Persons who may be deemed to be affiliates of Billing after the Distribution
generally include individuals or entities that control, are controlled by, or
are under common control with, Billing, and may include the Directors and
principal executive officers of Billing as well as any principal stockholder of
Billing. Persons who are affiliates of Billing will be permitted to sell their
shares of Billing Common Stock only
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pursuant to an effective registration statement under the Securities Act or an
exemption from the registration requirements of the Securities Act, such as the
exemptions afforded by Section 4(1) of the Securities Act and Rule 144
thereunder.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The following discussion sets forth certain federal income tax
considerations under the Code, for holders of USLD Common Stock with respect to
the receipt of the Billing Common Stock pursuant to the Distribution. The
discussion is intended for general information only and may not address all
federal income tax consequences that may be relevant to particular USLD
stockholders, e.g., foreign persons, dealers in securities and persons who
received USLD Common Stock in compensatory transactions. In addition, the
discussion does not address any state, local or foreign tax considerations
relative to the Distribution. ACCORDINGLY, ALL STOCKHOLDERS ARE URGED TO CONSULT
THEIR OWN TAX ADVISORS.
USLD has not requested a ruling from the Service with respect to the federal
income tax consequences of the Distribution. However, it is a condition of
consummation of the Distribution that USLD and Billing receive an opinion of
Arter & Hadden ("Special Tax Counsel") to the effect that the Distribution will
qualify as a tax-free spinoff under Section 355 of the Code and in general that:
(1) No gain or loss will be recognized by USLD or Billing solely as a result
of the Distribution;
(2) No gain or loss will be recognized by or be includable in the income of
a holder of USLD Common Stock solely as a result of the receipt of Billing
Common Stock pursuant to the Distribution;
(3) The tax basis of USLD Common Stock held by a USLD stockholder
immediately before the Distribution will be allocated between such USLD Common
Stock and the Billing Common Stock received by such stockholder in the
Distribution (based upon the relative fair market value of such USLD Common
Stock and Billing Common Stock on the Distribution Date); and
(4) Assuming that USLD Common Stock is held as a capital asset by the holder
thereof, the holding period for the Billing Common Stock received in the
Distribution will include the period during which such USLD Common Stock was
held by the holder thereof.
The tax opinion does not bind the Service nor does it preclude the Service
from adopting a contrary position from that taken in the tax opinion. In
rendering the tax opinion, Special Tax Counsel will rely upon certain
representations made by USLD and Billing, certain of which are critical to the
qualification of the Distribution as a tax-free spinoff under Section 355 of the
Code. In the event the representations are not accurate, USLD and Billing will
be unable to rely on the tax opinion. The Company is not aware of any present
facts or circumstances that could make such assumptions, facts, representations
and advice unobtainable or untrue. However, certain future events not within the
control of USLD and Billing, including, for example, certain dispositions of
USLD Common Stock or Billing Common Stock after the Distribution, could cause
the Distribution not to qualify as tax-free.
Among the principal representations made by USLD to Special Tax Counsel,
USLD has represented that it has no current plan or intent to merge USLD or
Billing with another company or sell or otherwise dispose of all or a
substantial portion of its business operations or assets of USLD or Billing
after the Distribution (a "Disposition") other than (i) in the ordinary course
of business or (ii) in a transaction which, in the opinion of tax counsel, would
not be inconsistent with the Distribution qualifying as a tax-free spinoff. In
general, if a Disposition occurred in which gain or loss was recognized and such
Disposition, based upon all the facts and circumstances, was found to be related
to the Distribution, the Service may assert that the Distribution was used as a
"device" to distribute the earnings and profits of one or both of USLD and
Billing, with the result that the Distribution may not qualify as a tax-free
spinoff under Section 355 of the Code.
Other representations made by USLD to Special Tax Counsel, the accuracy of
which are critical to the conclusions set forth in the tax opinion, include
statements that (i) except for the provision by USLD to Billing of certain
administrative services and subleasing of office space for a short period of
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time following the Distribution, the provision by Billing of certain billing
services to USLD, the provision by USLD of certain telecommunications services
to Billing, after the Distribution the provision of certain guarantees by both
companies in consideration of a credit support fee, and an agreement by USLD and
Billing to pay certain usage charges and to share certain expenses relating to
the operation of an airplane, USLD and Billing will continue the conduct of
their active businesses independently of one another; (ii) any indebtedness
incurred after the Distribution between USLD and Billing will be entered into in
the ordinary course of business; (iii) to the best knowledge of the management
of USLD, there is no current plan or intent on the part of USLD stockholders to
dispose of their stock in USLD or Billing after the Distribution; (iv) there is
no current plan or intent on the part of Billing to dispose of any of its assets
other than in the ordinary course of business; and (v) all payments made in
connection with transactions between USLD and Billing after the Distribution
will be based upon terms and conditions arrived at by the parties bargaining at
arm's length.
To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides that,
until the second anniversary of the Distribution Date, Billing must obtain an
opinion of counsel reasonably satisfactory to USLD or a supplemental tax ruling
before Billing may make certain material dispositions of its assets, engage in
certain repurchases of Billing capital stock or cease the active conduct of its
business independently, with its own employees and without material changes.
Billing does not expect these limitations to inhibit significantly its
operations, growth opportunities or its ability to respond to unanticipated
developments. USLD also must obtain an opinion of counsel reasonably
satisfactory to Billing or a supplemental tax ruling before USLD may engage in
similar transactions during such period. See "Special Factors -- Uncertainty of
Tax Consequences." USLD does not expect these limitations to inhibit
significantly its operations, growth opportunities or its ability to respond to
unanticipated developments.
If USLD should determine to engage in a Disposition that required
stockholder approval, the possible effect of such Disposition on the tax
treatment of the Disposition would be considered and presented to the
stockholders in connection with obtaining their approval.
As reflected in the tax opinion, the applicability of Section 355 of the
Code to the Distribution is complex and may be subject to differing
interpretations. Accordingly, even if the representations made by USLD and
Billing are accurate, there can be no assurance that the Service could not
successfully challenge the applicability of Section 355 of the Code to the
Distribution or assert that the Distribution fails the requirements of Section
355 on the basis of facts either existing at the time of the Distribution or
which may arise thereafter.
If the Distribution does not satisfy the requirements to be treated as a
tax-free spinoff under Section 355 of the Code, then: (i) USLD would recognize
capital gain equal to the difference between the fair market value of the
Billing Common Stock on the Distribution Date and the tax basis of USLD therein;
(ii) each stockholder receiving shares of Billing Common Stock in the
Distribution would be treated as having received a dividend taxable to the
extent of USLD's current and accumulated earnings and profits; (iii) the holding
period for determining capital gain treatment of the Billing Common Stock
received in the Distribution would commence on the Distribution Date; and (iv)
each stockholder would have a tax basis in the shares of Billing Common Stock
received in the Distribution equal to the fair market value of such shares on
the Distribution Date. Further, corporate stockholders may be eligible for a
dividend-received deduction (subject to certain limitations) with respect to the
portion of the Distribution constituting a dividend, and may be subject to the
Code's extraordinary dividend provisions which, if applicable, would require a
reduction in such holder's tax basis to the extent of such deduction.
Whether or not the Distribution qualifies as a tax-free spinoff, the
Distribution will trigger the recognition of certain income or tax items to
USLD. In October 1991, ZPDI declared a stock dividend payable to Mega Plus
Dialing, Inc. ("MPDI") (ZPDI's parent company at that time) payable in non-
voting cumulative preferred shares of ZPDI with redemption/liquidation and fair
market values equal
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to the then fair market value of ZPDI of $4,000,000. Immediately thereafter,
USLD (parent company) converted its advances to ZPDI into voting common shares
of ZPDI resulting in USLD (parent company) owning over 99% of the common shares
of ZPDI.
Prior to the Distribution of Billing, MPDI will sell all of its preferred
and common share holdings in ZPDI to USLD (parent company). The sale of ZPDI
stock to USLD (parent company) will cause MPDI to recognize Canadian-taxable
gain equal to the excess of the sales proceeds of the ZPDI shares over their
cost. For U.S. tax purposes, the gain will be considered "sub-part F" income and
cause a deemed dividend to USLD (parent company) in the amount of the gain.
After the sale, MPDI will distribute its assets to its sole stockholder, USLD
(parent company), in liquidation. The liquidating distribution will be subject
to Canadian withholding tax to the extent it exceeds MPDI's "paid-up" capital.
As a result of the above transactions, MPDI will recognize gain and pay income
and withholding taxes to Revenue Canada of approximately $2.1 million and to the
provincial government of British Columbia of approximately $1.1 million. USLD
(parent company) will recognize "sub-part F" income, but will generate a U.S.
federal income tax benefit directly through foreign tax credits for the Canadian
taxes paid with respect to this income. Consequently, no U.S. income taxes will
be payable as a result of the above transactions.
Within a reasonable time following the Distribution Date, USLD will provide
appropriate information to USLD stockholders concerning the appropriate
allocation of tax basis between USLD Common Stock and Billing Common Stock as
well as other relevant tax information.
THE FOREGOING IS ONLY A SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
OF THE DISTRIBUTION UNDER CURRENT LAW AND IS INTENDED FOR GENERAL INFORMATION
ONLY. EACH STOCKHOLDER SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE
PARTICULAR CONSEQUENCES OF THE DISTRIBUTION TO SUCH STOCKHOLDER, IN LIGHT OF HIS
OR HER PERSONAL CIRCUMSTANCES, INCLUDING THE APPLICATION OF STATE, LOCAL AND
FOREIGN TAX LAWS AND POSSIBLE CHANGES IN TAX LAW THAT MAY AFFECT THE TAX
CONSEQUENCES DESCRIBED ABOVE.
CONDITIONS; TERMINATION
USLD Board has conditioned the Distribution upon, among other things, (i)
the transfers of assets and liabilities contemplated by the Distribution
Agreement to occur prior to the Distribution having been consummated in all
material respects; (ii) the Billing Board having been elected by USLD as sole
stockholder of Billing, and the Certificate of Incorporation and the Bylaws of
Billing, as each will be in effect after the Distribution, having been adopted
and being in effect; (iii) the Registration Statement on Form 10 having become
effective under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); (iv) The Chicago Corporation having delivered an updated opinion to the
USLD Board, dated as of the Distribution Date, in substantially the same form as
the opinion attached hereto as Annex A; (v) Houlihan Lokey having delivered an
updated opinion to the USLD Board, dated as of the Distribution Date, in
substantially the same form as the opinion attached hereto as Annex B; and (vi)
receipt of any necessary consents to the Distribution from third parties to
certain contracts, except for those the failure of which to obtain would not
have a material adverse effect on Billing or USLD. USLD believes that, there
will be no individual consents, the failure of which to obtain would have a
material adverse effect on Billing, USLD or the Distribution. Because the terms
of certain debt agreement waivers and consents are expected to require that,
after the Distribution, USLD or Billing each remain liable as a guarantor and
continue to pledge security with respect to certain indebtedness that cannot be
economically allocated to only USLD or only Billing prior to the Distribution
Date, each of USLD and Billing has agreed to pay each other a credit support fee
equal to 1% per annum of the average monthly balance of indebtedness guaranteed
by one on behalf of the other for as long as such guarantees continue.
Any of the above conditions may be waived in the discretion of USLD Board.
Even if all of the above conditions are satisfied, the USLD Board has reserved
the right to abandon, defer or modify aspects of the Distribution or the other
elements of the Distribution at any time prior to the Distribution Date;
however, the USLD Board will not waive any of the conditions to the Distribution
or make
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any changes in the terms of the Distribution unless the USLD Board determines
that such changes would not be materially adverse to the USLD stockholders. See
"Relationship Between Billing and USLD After the Distribution -- Distribution
Agreement."
REASONS FOR FURNISHING THE INFORMATION STATEMENT
This Information Statement is being furnished by USLD solely to provide
information to USLD stockholders who will receive the Billing Common Stock in
the Distribution. It is not, and is not to be construed as, an inducement or
encouragement to buy or sell any securities of USLD or Billing. The information
contained in this Information Statement is believed by USLD and Billing to be
accurate as of the date set forth on its cover. Changes may occur after that
date, and neither Billing nor USLD will update the information except in the
normal course of their respective public disclosure practices.
RELATIONSHIP BETWEEN BILLING AND
USLD AFTER THE DISTRIBUTION
For purposes of governing certain of the ongoing relationships between USLD
and Billing after the Distribution, and to provide for an orderly transfer on
the Distribution Date of certain of the billing clearinghouse and information
management services business to Billing and an orderly transition to the status
of two separate companies, USLD and Billing have entered or will enter into
various agreements, including those described in this section. The terms of
these agreements are subject to change prior to execution. The forms of
agreements summarized in this section are included as exhibits to the
Registration Statement on Form 10 of which this Information Statement forms a
part, and the following summaries are qualified in their entirety by reference
to the agreements as filed.
DISTRIBUTION AGREEMENT
Prior to the Distribution Date, Billing and USLD will enter into the
Distribution Agreement, which provides for, among other things, (i) certain of
the Preliminary Transactions (see "Preliminary Transactions"); (ii) the
Distribution; (iii) the division between Billing and USLD of certain assets and
liabilities with Billing retaining substantially all the commercial billing
clearinghouse and information management services business and USLD retaining
its direct billing function, pursuant to which USLD will continue to directly
bill its direct dial long distance charges; and (iv) certain other agreements
governing the relationship between Billing and USLD following the Distribution.
Subject to certain exceptions, the Distribution Agreement provides for,
among other things, assumptions of liabilities and cross-indemnities designed to
allocate, effective as of the Distribution Date, financial responsibility for
the liabilities arising out of or in connection with the business of the Billing
Group ("Billing Group Business") to Billing and its subsidiaries, and financial
responsibility for the liabilities arising out of or in connection with the
business of the Telecommunications Group ("Telecommunications Group Business")
to USLD and its retained subsidiaries. The agreements to be executed in
connection with the Distribution Agreement set forth certain specific
allocations of liabilities between Billing and USLD. See "Relationship Between
Billing and USLD after the Distribution -- Benefit Plans and Employment Matters
Allocation Agreement"; -- "Tax Sharing Agreement"; and -- "Transitional Services
and Sublease Agreement" below. Under the Distribution Agreement, Billing will
transfer to USLD on the Distribution Date cash in an amount necessary to cause
USLD's working capital to be approximately $21,500,000 after taking into account
direct costs of the Distribution estimated to range from approximately
$8,500,000 to approximately $10,500,000. The calculation of this cash amount
will be based upon current assets and current liabilities as reported on the
USLD balance sheet at the month-end date immediately preceding the Distribution
and is subject to change at any time prior to execution of the Distribution
Agreement in light of changes in the financial position and results of operation
of Billing and USLD. See "Pro Forma Condensed Consolidated Balance Sheet."
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To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides that,
until the second anniversary of the Distribution Date, Billing must obtain an
opinion of counsel reasonably satisfactory to USLD or a supplemental tax ruling
from the Service before Billing may make certain material dispositions of its
assets, engage in certain repurchases of Billing capital stock or cease the
active conduct of its business independently, with its own employees and without
material changes. Billing does not expect these limitations to inhibit
significantly its operations, growth opportunities or its ability to respond to
unanticipated developments. USLD must also obtain an opinion of counsel
reasonably satisfactory to Billing or a supplemental tax ruling from the Service
before USLD may engage in similar transactions during such period. See "Special
Factors -- Uncertainty of Tax Consequences." USLD does not expect these
limitations to inhibit significantly its operations, growth opportunities or its
ability to respond to unanticipated developments.
The Distribution Agreement also provides that by the Distribution Date,
Billing's Certificate of Incorporation and Bylaws shall be in the forms attached
hereto as Annex C and D, respectively, and that Billing and USLD will take all
actions which may be required to elect or otherwise appoint, as directors of
Billing, the persons indicated herein. See "Description of Capital Stock" and
"Purposes and Anti-Takeover Effects of Certain Provisions of Billing's
Certificate and Bylaws and Delaware Law."
The Distribution Agreement also provides that each of Billing and USLD will
be granted access to certain records and information in the possession of the
other generally consisting of pre-Distribution, nonproprietary, noncustomer,
noncompetitive related information, and requires the retention by each of
Billing and USLD for a period of ten years following the Distribution of all
such information in its possession, and thereafter requires that each party give
the other prior notice of its intention to dispose of such information. In
addition, the Distribution Agreement provides for the allocation of shared
privileges with respect to certain information and requires each of Billing and
USLD to obtain the consent of the other prior to waiving any shared privilege.
Because the terms of certain debt agreement waivers and consents are
expected to require that, after the Distribution, USLD or Billing each remain
liable as a guarantor and continue to pledge security with respect to certain
indebtedness that cannot be economically allocated to only USLD or only Billing
prior to the Distribution Date, each of USLD and Billing has agreed to pay
annually to each other a credit support fee equal to 1% per annum of the average
monthly balance of indebtedness guaranteed by one on behalf of the other for as
long as such guarantees continue after the Distribution Date.
The Distribution Agreement provides that, except as otherwise set forth
therein or in any related agreement, all costs and expenses in connection with
the Distribution will be charged to the party for whose benefit the expenses are
incurred.
BENEFIT PLANS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT
Prior to the Distribution Date, USLD and Billing will enter into a Benefit
Plans and Employment Matters Allocation Agreement (the "Benefit Plans and
Employment Matters Allocation Agreement") providing for the allocation of
certain responsibilities with respect to employee compensation, benefit and
labor matters. The allocation of responsibility and adjustments to be made
pursuant to the Benefit Plans and Employment Matters Allocation Agreement are
substantially consistent with the existing benefits provided to USLD employees
under USLD's various compensation plans. The Benefit Plans and Employment
Matters Allocation Agreement will provide that, effective as of the Distribution
Date, Billing will, or will cause one or more of its subsidiaries to, assume or
retain, as the case may be, all liabilities of USLD, to the extent unpaid as of
the Distribution Date, under employee benefit plans, policies, arrangements,
contracts and agreements, with respect to employees who, on or after the
Distribution Date, will be employees of Billing or its subsidiaries. The Benefit
Plans and Employment Matters Allocation Agreement will also provide that,
effective as of the Distribution Date, USLD will, or will cause one or more of
its subsidiaries to, assume or retain, as the case may be,
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all liabilities of USLD, to the extent unpaid as of the Distribution Date, under
employee benefit plans, policies, arrangements, contracts and agreements with
respect to employees who on or after the Distribution Date will be employees of
USLD or its subsidiaries.
USLD currently provides additional compensation to its employees (including
Billing employees) under one or more of the following employee benefit plans:
USLD 401(k) Retirement Plan (the "USLD Retirement Plan"), the USLD 1990 Employee
Stock Option Plan ("USLD Employee Stock Option Plan"), the 1993 Non-Employee
Director Plan of USLD (the "USLD Director Plan"), the USLD Executive
Compensation Deferral Plan (the "USLD Executive Deferral Plan"), the USLD
Director Compensation Deferral Plan ("USLD Director Deferral Plan"), the USLD
Employee Stock Purchase Plan ("USLD Stock Purchase Plan") and the USLD 1995
Employee Restricted Stock Plan ("USLD Restricted Stock Plan"). Pursuant to the
Benefit Plans and Employment Matters Allocation Agreement, subject to certain
conditions set forth in the Benefit Plans and Employment Matters Allocation
Agreement in connection with the Distribution, USLD will adjust each existing
USLD employee benefit plan and award outstanding thereunder in the following
manner:
U.S. LONG DISTANCE CORP. 401(K) RETIREMENT PLAN
Under the USLD Retirement Plan, participants generally may make voluntary
salary deferred contributions, on a pre-tax basis of between 1% and 15% of their
base compensation in the form of voluntary payroll deductions up to a maximum
amount as indexed for cost of living adjustments. USLD has agreed to make
matching contributions equal to 50% of the first 3% of a participant's
compensation contributed as salary deferral. USLD also may from time to time
make additional discretionary contributions at the sole discretion of the Board
of Directors of USLD. USLD will make matching contributions under the USLD
Retirement Plan prior to the Distribution Date. As of the Distribution Date, the
plan administrator of the USLD Retirement Plan shall adjust the account balance
of all participants entitled under such plan to reflect such contributions and
any forfeitures under the plan. As soon as is practicable after the Distribution
Date, USLD shall cause the trustee of the USLD Retirement Plan to transfer to
the trustee or other funding agent of the Billing Information Concepts Corp.
401(k) Retirement Plan the amounts (in cash, securities, other property or a
combination thereof) acceptable to the Billing administrator or trustee
representing the account balances of all employees who, on or after the
Distribution Date, will be employees of Billing or its subsidiaries and certain
former employees of Billing or any Billing Group Business, and Billing shall
credit the accounts of such individuals under the Billing Information Concepts
Corp. 401(k) Retirement Plan with these amounts.
U.S. LONG DISTANCE CORP. DIRECTOR COMPENSATION DEFERRAL
PLAN AND EXECUTIVE COMPENSATION DEFERRAL PLAN
Under the USLD Director Deferral Plan and the USLD Executive Deferral Plan,
respectively, as of April 30, 1996, three outside directors and 26 executives
and other employees, defer current compensation for retirement or other
purposes. In connection with the Distribution, Billing will adopt the Billing
Information Concepts Corp. Director Compensation Deferral Plan and the Billing
Information Concepts Corp. Executive Compensation Deferral Plan and will assume
all liabilities and obligations of USLD relating to outside directors of Billing
and all employees who, on or after the Distribution Date, will be directors or
employees of Billing or its subsidiaries and certain former employees of Billing
or any Billing Group Business, accrued through the day immediately preceding the
Distribution Date with respect to the USLD Director Deferral Plan and USLD
Executive Deferral Plan, respectively, along with the earnings required to be
credited to account balances included in such plans. USLD will retain such
obligations with respect to all directors or employees who, on or after the
Distribution Date, will be directors or employees of USLD or its subsidiaries
and certain former employees of USLD or any Telecommunications Group Business
and directors of USLD. All service with USLD will be credited under the Billing
Information Concepts Corp. Director Compensation Deferral Plan and Billing
Information Concepts Corp. Executive Compensation Deferral Plan, as applicable,
for purposes of vesting thereunder.
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U.S. LONG DISTANCE CORP. 1995 EMPLOYEE RESTRICTED STOCK PLAN
As of April 30, 1996, there were outstanding 115,000 shares of USLD Common
Stock awarded under the USLD Restricted Stock Plan. Immediately prior to the
Distribution, the vesting of all of these shares will be accelerated and all
restrictions on these shares shall lapse. As a result, the holders of these
shares will participate in the Distribution as any other USLD stockholder and no
adjustments will be required.
U.S. LONG DISTANCE CORP. 1990 EMPLOYEE STOCK OPTION
PLAN AND 1993 NON-EMPLOYEE DIRECTOR PLAN
As of April 30, 1996, there were outstanding options to purchase (i)
1,702,386 shares of USLD Common Stock under the USLD Employee Stock Option Plan,
and (ii) 70,000 shares of USLD Common Stock under the USLD Director Plan. Of
these outstanding stock options ("USLD Options"), options to purchase 603,986
shares are held by individuals who will continue as directors, officers or
employees of Billing after the Distribution.
Prior to the Distribution, Billing also will adopt the 1996 Employee
Comprehensive Stock Plan (the "Billing Employee Stock Plan") and 1996
Non-Employee Director Plan (the "Billing Director Plan") under which officers
and employees, and non-employee directors, respectively, of Billing and its
affiliates are eligible to receive stock option grants. See "Executive
Compensation -- Employee Benefit Plans -- Stock Option and Grant Plans."
Immediately prior to the Distribution, Billing intends to grant, under the
Billing Employee Stock Plan and Billing Director Plan, respectively, options to
purchase Billing Common Stock ("Billing Options") to each holder of an
outstanding option to purchase shares of USLD Common Stock under the USLD
Employee Stock Option Plan and USLD Director Plan, respectively. The Billing
Options will be exercisable for Billing Common Stock on the basis of one share
of Billing Common Stock for every one share of USLD Common Stock subject to the
outstanding USLD Options. Based on the number of USLD Options outstanding on
April 30, 1996, it is anticipated that Billing Options to purchase a total of
1,772,386 shares of Billing Common Stock will be granted in connection with the
grant to USLD Option holders.
In connection with the grant of the Billing Options, the exercise price of
the USLD Options will be adjusted (the "Formula Adjustment"). The Formula
Adjustment and the grant of the Billing Options are designed to preserve the
economic value of the USLD Options existing immediately prior to the
Distribution (collectively, the "USLD Adjusted Options"). The Billing Options
shall have vesting schedules mirroring the vesting schedules of the related USLD
Options. As a result of the Formula Adjustment, and subject to the vesting
provisions of the Billing Options, the holders of the USLD Adjusted Options will
have the opportunity to acquire the same number of shares of Billing Common
Stock as they would have received had they exercised their USLD Options in full
prior to the Distribution.
Except for the Formula Adjustment, the terms of each USLD Adjusted Option
will be substantially the same as those in effect under the related USLD Options
prior to the Distribution.
FORMULA ADJUSTMENT. The per share exercise price of the USLD Options will
be adjusted by allocating it among each of the USLD Adjusted Options on the
basis of the relative fair market values of the underlying common stock of each
of the two companies after the Distribution. For purposes of such allocation,
the fair market value per share of common stock of each company will be the
average of the last sales price per share of that common stock on the Nasdaq
National Market for each of the ten (10) consecutive trading days beginning with
and including the Distribution Date. The USLD Adjusted Options will remain
exercisable for the same number of shares of USLD Common Stock as before the
Distribution.
26
<PAGE>
The Formula Adjustment will be based on the following formulas:
<TABLE>
<S> <C> <C>
X
THE EXERCISE PRICES FOR USLD ADJUSTED OPTIONS WILL EQUAL: A X Z
Y
THE EXERCISE PRICE FOR BILLING OPTIONS WILL EQUAL: A X Z
</TABLE>
<TABLE>
<S> <C> <C> <C>
Where A = The original exercise price of the USLD Options.
x = The fair market value per share of USLD Common Stock based on the average
of the last sales price per share for each of the 10 consecutive trading
days beginning on the Distribution Date.
y = The fair market value per share of Billing Common Stock based on the
average of the last sales price per share for each of the 10 consecutive
trading days beginning on the Distribution Date.
z = The sum of x + y.
</TABLE>
The Formula Adjustment will assure that each holder of an outstanding USLD
Option prior to the Distribution will have the opportunity after the
Distribution to obtain Billing Common Stock and the same number of shares of
USLD Common Stock at the same aggregate exercise price as if such individual had
exercised the USLD Option in full (as if such options were fully vested) prior
to the Distribution Date.
POST-DISTRIBUTION EXERCISABILITY. It is anticipated that immediately after
the Distribution each option holder who is an employee of USLD or Billing prior
to the consummation of the Distribution will continue in employment with the
same company employing that individual as prior to the Distribution. Therefore,
after the Distribution Date, such USLD Option holders will not only have the
right to purchase shares of USLD Common Stock, but will also possess separately
exercisable Billing Options. For each such USLD Option holder who continues to
be employed with either USLD or Billing after the Distribution Date, the
post-Distribution exercisability of his or her Billing Options and USLD Adjusted
Options will be as follows:
(a) Each USLD Adjusted Option held by a USLD employee after the
Distribution Date will terminate in accordance with the USLD Employee Stock
Option Plan upon the earliest to occur of (i) the specified expiration date
of the original USLD Option, (ii) the expiration of the three-month period
following the retirement (with the written consent of USLD) or other
termination of employment with USLD other than a termination that is either
(y) for cause or (z) voluntary on the part of the employee and without the
written consent of USLD (except that in the event that employment terminates
due to disability, the three month period shall be a one year period), or
(iii) the expiration of the 12 month period following the date of the option
holder's death, if such individual dies while in the service of USLD or
within three months after the termination of employment with USLD. In the
event of termination that is either for cause or voluntary on the part of
the employee and without the written consent of USLD, each USLD Adjusted
Option will terminate immediately on the date of termination of employment
with USLD.
(b) Each Billing Option granted in connection with the Distribution and
held by a USLD employee after the Distribution Date will terminate in
accordance with the Billing Employee Stock Plan upon the earliest to occur
of (i) the specified expiration date of the original USLD Option, (ii) the
expiration of the three month period following the retirement (with the
written consent of USLD) or other termination of employment with USLD other
than a termination that is (y) for cause or (z) voluntary on the part of the
employee and without the written consent of USLD (except that in the event
that employment terminates due to disability, the three month period shall
be a one year period), or (iii) the expiration of the 12 month period
following the date of the option holder's death, if such individual dies
while in the service of USLD or within three
27
<PAGE>
months after the termination of employment with USLD. In the event of
termination that is either for cause or voluntary on the part of the
employee and without the written consent of USLD, each Billing Option will
terminate immediately on the date of termination of employment with USLD.
(c) Each USLD Adjusted Option held by a Billing employee after the
Distribution Date will terminate in accordance with the USLD Employee Stock
Option Plan upon the earliest to occur of (i) the specified expiration date
of the original USLD Option, (ii) the expiration of the three month period
following the retirement (with the written consent of Billing) or other
termination of employment with Billing other than a termination that is (y)
for cause or (z) voluntary on the part of the employee and without the
written consent of Billing (except that in the event that employment
terminates due to disability, the three month period shall be a one year
period), or (iii) the expiration of the 12 month period following the date
of the option holder's death, if such individual dies while in the service
of Billing or within three months after the termination of employment with
Billing. In the event of termination that is either for cause or voluntary
on the part of the employee and without the written consent of Billing, each
USLD Adjusted Option will terminate immediately on the date of termination
of employment with Billing.
(d) Each Billing Option granted in connection with the Distribution and
held by a Billing employee after the Distribution Date will terminate in
accordance with the Billing Employee Stock Plan upon the earliest to occur
of (i) the specified expiration date of the original USLD Option, (ii) the
expiration of the three month period following the retirement (with the
written consent of Billing) or other termination of employment with Billing
other than a termination that is either (y) for cause or (z) voluntary on
the part of the employee and without the written consent of Billing (except
that in the event that employment terminates due to disability, the three
month period shall be a one year period), or (iii) the expiration of the 12
month period following the date of the option holder's death, if such
individual dies while in the service of Billing or within three months after
the termination of employment with Billing. In the event of termination that
is either for cause or voluntary on the part of the employee and without the
written consent of Billing, each Billing Option will terminate immediately
on the date of termination of employment with Billing.
Each USLD Adjusted Option agreement provides, and each Billing Option
agreement will provide, that upon a change of control (as defined in the
applicable stock option agreement) of either USLD or Billing, all nonvested USLD
Adjusted Options and all nonvested Billing Options shall immediately vest,
whether held by a USLD employee or a Billing employee. USLD and Billing have
also agreed to give effect in its corrresponding stock option agreement to any
amendments that the other may make to any USLD Adjusted Option agreement or any
Billing Option agreement, as the case may be, subsequent to the Distribution
Date.
The USLD Adjusted Options will be administered under the USLD Employee Stock
Option Plan and USLD Director Plan, as applicable. The Billing Options will be
granted and administered under the Billing Employee Stock Plan and Billing
Director Plan, as applicable, adopted by Billing prior to the Distribution.
TAX EFFECT OF OPTION ADJUSTMENT. Neither the grant of the Billing Options
nor the Formula Adjustment to the USLD Options should result in the recognition
of taxable income by USLD or Billing or their respective option holders.
U.S. LONG DISTANCE CORP. EMPLOYEE STOCK PURCHASE PLAN
The USLD Stock Purchase Plan provides the ability for USLD employees to
purchase, on the last day of each participation period (each offering period
commences at the beginning of USLD's regular payroll period that falls closest
to February 1 and August 1 of each year, and lasts approximately six months, or
such other period as the committee administering the USLD Stock Purchase Plan
prescribes), USLD Common Stock at the lesser of (i) 85% of the fair market value
on the first day of
28
<PAGE>
the applicable participation period or (ii) 85% of the fair market value on the
last day of such participation period. The purchase price is collected by means
of employee salary and wage deferrals. The USLD Stock Purchase Plan provides
that the right to participate terminates immediately upon the date the
participant ceases employment with USLD. Any contributions collected prior to
the date of termination are paid to the participant in cash. The committee
administering the USLD Stock Purchase Plan will adjust the length of the current
participation period to end prior to the Record Date and shares of USLD Common
Stock shall be purchased for all eligible participants so as to allow
participants to participate in the Distribution of Billing Common Stock. After
the Distribution, employees of Billing will be eligible to enroll in the Billing
Stock Purchase Plan. New offering periods under the USLD Stock Purchase Plan and
the Billing Stock Purchase Plan will begin on August 1, 1996, or on such other
date that the administrators under the respective plans determine.
ADDITIONAL ACTIONS
Prior to the Distribution, USLD, as sole stockholder of Billing, will
approve the adoption by Billing of the Billing Comprehensive Stock Plan, the
Billing Stock Purchase Plan and the Billing Director Plan. USLD will also
approve the reservation by Billing of 3,500,000, 1,000,000, and 400,000 shares
of Billing Common Stock under the Billing Comprehensive Stock Plan, the Billing
Stock Purchase Plan and the Billing Director Plan, respectively. For a
discussion of the principal terms and conditions of each of these stock plans,
see "Executive Compensation -- Employee Benefit Plans -- Stock Option and Grant
Plans."
Billing will assume, with respect to employees who, on or after the
Distribution Date, will be employees of Billing or any of its subsidiaries, all
responsibility for liabilities and obligations as of the Distribution Date for
medical and dental plan coverage and for vacation and welfare plans. USLD will
assume, with respect to employees who, on or after the Distribution Date, will
be employees of USLD or any of its subsidiaries, all responsibility for
liabilities and obligations as of the Distribution Date for medical and dental
plan coverage and for vacation and welfare plans.
The Benefit Plans and Employment Matters Allocation Agreement will provide
that the Distribution does not constitute a termination of employment for
employees who, on or after the Distribution Date, will be employees of Billing
or any of its subsidiaries or employees who, on or after the Distribution Date,
will be employees of USLD or any of its subsidiaries, and those employees who,
on or after the Distribution Date, will be employees of Billing or any of its
subsidiaries who are employed immediately prior to the Distribution Date will
not be deemed severed from employment from USLD or any of its subsidiaries for
purposes of any policy, plan, program or agreement that provides for the payment
of severance, salary, continuation or similar benefits based on periods of past
service.
TAX SHARING AGREEMENT
Billing and USLD will enter into a Tax Sharing Agreement (the "Tax Sharing
Agreement") that defines the parties' rights and obligations with respect to
deficiencies and refunds of federal, state and other income or franchise taxes
relating to Billing's business for tax years prior to the Distribution and with
respect to certain tax attributes of Billing after the Distribution. In general,
with respect to periods ending on or before September 30, 1996, the fiscal year
end for USLD, USLD is responsible for (i) filing both consolidated federal tax
returns for the USLD affiliated group and combined or consolidated state tax
returns for any group that includes a member of the USLD affiliated group,
including in each case Billing and its subsidiaries for the relevant periods of
time that such companies were members of the applicable group and (ii) paying
the taxes related to such returns (including any subsequent adjustments
resulting from the redetermination of such tax liabilities by the applicable
taxing authorities). Billing will reimburse to USLD the taxes attributed to any
Billing Group member and the cost of preparation of the associated tax returns
related to the Billing Group. Billing is responsible for filing returns and
paying taxes related to the Billing Group for periods commencing on and after
October 1, 1996. Billing and USLD have agreed to cooperate with each other and
to share information in preparing such tax returns and in dealing with other tax
matters.
29
<PAGE>
TRANSITIONAL SERVICES AND SUBLEASE AGREEMENT
USLD and Billing will enter into the Transitional Services and Sublease
Agreement pursuant to which (i) USLD will provide to Billing for six months
after the Distribution Date certain services necessary for the conduct of its
business, (ii) USLD will sublease to Billing certain office space utilized by
Billing until January 1998 with a one year renewal option and certain other
office space on a month-to-month basis, and (iii) Billing will provide to USLD
for six months after the Distribution Date certain services necessary for the
conduct of its business. The fee for USLD's services will be based on a
cost-plus basis or other negotiated arm's length basis. The sublease will be on
the same terms and conditions as the terms and conditions of the lease agreement
pursuant to which USLD leases such space from its landlord. The fee for
Billing's services will be based on a cost-plus basis or other negotiated arm's
length basis. Subject to termination provisions of the agreement, Billing and
USLD will be free to procure such services from outside vendors or may develop
an in-house capability in order to provide such services internally and Billing
may lease office space from outside landlords. The transitional services to be
provided to Billing pursuant to such agreement will include corporate secretary
services, accounting services, legal services, tax planning and administration,
information services, and may include any other similar services that Billing
may require. The transitional services to be provided to USLD pursuant to such
agreement will include management information systems and software consulting
with respect to the direct billing function to be retained by USLD.
BILLING AGREEMENT
USLD and Billing will enter into a Zero Plus - Zero Minus Billing and
Information Management Services Agreement (the "Zero Plus -- Zero Minus Billing
Agreement"). Under the Zero Plus -- Zero Minus Billing Agreement, Billing will
provide to USLD billing through local telephone companies for certain qualifying
"zero plus" and "zero minus" direct dialed or operator assisted station to
station or person to person calls. USLD is charged for the local telephone
company's applicable fees, charges, chargebacks, credits and adjustments as
prescribed in the agreement between Billing and the local telephone company, as
well as billing service fees, charges, chargebacks, credits and assessments of
Billing. These charges are deducted from the amounts payable to USLD for
qualifying calls. The Zero Plus -- Zero Minus Billing Agreement will have an
initial term of three (3) years.
TELECOMMUNICATIONS AGREEMENT
USLD and Billing will enter into a Telecommunications Agreement (the
"Telecommunications Agreement") whereby USLD will provide to Billing certain
direct dial long distance and 800 services. The Telecommunications Agreement has
a three-year term and renews for an additional one year unless either party
notifies the other not less than 60 days prior to the termination date. In
addition, Billing has the right to terminate services under the
Telecommunications Agreement by providing written notice within 30 days of
Billing's intent to cancel services 60 days from notice.
POLICIES AND PROCEDURES FOR ADDRESSING CONFLICTS
The ongoing relationship between USLD and Billing will present certain
conflict situations for Parris H. Holmes, Jr., who serves as Chairman of the
Board of USLD and Billing and Chief Executive Officer of Billing. Parris H.
Holmes, Jr., as well as other officers and directors of USLD and Billing, also
own (or have options or other rights to acquire) a significant number of shares
of USLD Common Stock and, as a result of the Distribution, will own (or have
options or other rights to acquire) a significant number of shares of Billing
Common Stock. Billing and USLD have adopted appropriate policies and procedures
to be followed by the board of directors of each company to limit the
involvement of Parris H. Holmes, Jr. (or such executive officers and other
directors having a significant ownership interest in the companies) in conflict
situations, including matters relating to contractual relations or litigation
between USLD and Billing. Such procedures include requiring Mr. Holmes (or such
executive officers or other directors having a significant ownership interest in
the companies) to abstain from voting as directors of each company with respect
to matters that place a significant conflict of interest between the companies.
Whether or not a significant conflict of interest situation exists will be
determined on a case by case basis depending on such factors as the dollar value
of the matter, the degree of personal interest of Mr. Holmes (or such executive
officers and other directors having a significant ownership
30
<PAGE>
interest in the companies) in the matter and a likelihood that resolution of the
matter has significant strategic, operational or financial implications for the
business of Billing. It is the principal responsibility of the general counsel
of each of Billing and USLD to monitor this issue in consultation with USLD's or
Billing's (as applicable) board of directors. In the event that the Board of
either company is unable to reach a decision on a particular matter because of a
split in the Board, the vote of its outside directors will control. Billing and
USLD believe such conflicts will be minimal.
PRELIMINARY TRANSACTIONS
The following transactions will be consummated prior to the Distribution:
(a) USLD will organize Billing as a wholly owned subsidiary; (b) USLD will
contribute or cause certain of its Telecommunications Group Subsidiaries to
contribute certain Billing Group related assets to Zero Plus Dialing, Inc., a
99%-owned subsidiary of USLD ("ZPDI"), and ZPDI will make a transfer of cash to
USLD in an amount necessary to cause USLD's working capital to be approximately
$21,500,000 after taking into account the direct costs of the Distribution
estimated to range from approximately $8,500,000 to approximately $10,500,000;
(c) USLD's net intercompany payable to Billing ($14,500,000 at March 31, 1996)
will be cancelled; (d) USLD will contribute the stock of U.S. Billing Management
Corp. ("USBMC") and U.S. Billing, Inc. ("USBI"), also wholly owned subsidiaries
of USLD, to Billing in exchange for shares of Billing Common Stock; (e) MPDI, a
wholly owned subsidiary of USLD, and holder of all the preferred stock and 1% of
the common stock of ZPDI ("MPDI/ZPDI Holdings") will sell such MPDI/ZPDI
Holdings to USLD for $8,185,000 in cash; (f) ZPDI will redeem from USLD all of
its shares of preferred stock and common stock previously held by MPDI, and (g)
ZPDI and one other wholly owned subsidiary of USLD engaged in the billing
business, Enhanced Services Billing, Inc. ("ESBI"), will adopt plans of merger
with USBMC and USBI, whereby (i) ZPDI and ESBI will be merged with USBMC and
USBI, respectively, with ZPDI and ESBI continuing as the surviving corporations
with ZPDI changing its name to Billing Information Concepts, Inc., ("BICI") and
(ii) the stock of USBMC and USBI will be converted into shares of Billing Common
Stock. As a result of the foregoing transactions, BICI and ESBI will be wholly
owned operating subsidiaries of Billing. See "Pro Forma Condensed Consolidated
Balance Sheet."
The calculation of the cash amount to be transferred by Billing to USLD will
be based on current assets and current liabilities as reported on the USLD
balance sheet on the month-end date immediately preceding the Distribution and
is subject to change at any time prior to execution of the Distribution
Agreement in light of changes in the financial position and results of operation
of Billing and USLD. Had the Distribution occurred on March 31, 1996,
approximately $13,561,000 of cash would have been required to be transferred by
Billing to USLD, not including any transfers of cash for payment of direct costs
of the Distribution. Had the Distribution occurred on March 31, 1996, the total
transfers from Billing to USLD under the cash transfer in (b) above and the
cancellation of the net intercompany payable in (c) above would have been
$28,061,000.
ACCOUNTING TREATMENT
The historical financial statements of Billing present its financial
position, results of operations and cash flows as if it were a separate entity
for all periods presented. USLD's historical basis in the assets and liabilities
of Billing has been carried over.
Upon approval of the Distribution, USLD will present the Billing Group
business as a discontinued operation to the extent financial information for
periods prior to the Distribution is required to be included in USLD's
historical financial statements. After the Distribution, the Billing Group
business will be reflected in Billing's own separate consolidated financial
statements.
DIVIDEND POLICY
Billing presently intends to retain earnings for use in its business and
does not anticipate paying cash dividends in the foreseeable future.
31
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of Billing as of March 31,
1996, and pro forma capitalization as of March 31, 1996, after giving effect to
the transactions described under the caption "Pro Forma Condensed Consolidated
Balance Sheet." The capitalization of Billing should be read in conjunction with
Billing's Consolidated Financial Statements and the notes thereto, the "Pro
Forma Condensed Consolidated Balance Sheet" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations," each contained
elsewhere herein.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1996
------------------------
ACTUAL PRO FORMA (1)
--------- -------------
(IN THOUSANDS)
<S> <C> <C>
Revolving credit receivable financing facility............................... $ 23,686 $ 23,686
Debt, including current portion.............................................. 2,524 2,524
Stockholders' equity......................................................... 34,456 20,895
--------- -------------
Total Capitalization......................................................... $ 60,666 $ 47,105
--------- -------------
--------- -------------
</TABLE>
- - ------------------------
(1) Pro forma for the consummation of the Distribution including the cash
transfer by Billing to USLD in the amount of $13,561,000, assuming the
Distribution was consummated as of March 31, 1996. The pro forma excludes
direct costs associated with the Distribution, estimated to range from
approximately $8,500,000 to approximately $10,500,000. See "Pro Forma
Condensed Consolidated Balance Sheet."
32
<PAGE>
PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
The unaudited Pro Forma Condensed Consolidated Balance Sheet of Billing
gives effect to the Distribution, the Preliminary Transactions and certain
adjustments including a cash transfer from Billing to USLD of $13,561,000 as of
March 31, 1996 as if such transactions occurred as of such date. The Pro Forma
Condensed Consolidated Balance Sheet of Billing does not include adjustments for
direct costs incurred in connection with the Distribution that are estimated to
range from approximately $8,500,000 to approximately $10,500,000.
The Pro Forma Condensed Consolidated Balance Sheet of Billing is unaudited
and presented for informational purposes only and may not reflect Billing's
future results of operations and financial position or what the results of
operations and financial position of Billing would have been had such
transactions occurred as of the dates indicated. Billing's Pro Forma Condensed
Consolidated Balance Sheet and notes thereto should be read in conjunction with
Billing's Consolidated Financial Statements and notes thereto and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained elsewhere herein.
33
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
MARCH 31, 1996
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
----------- --------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents............................................ $ 32,582 $ (13,561)(A) $ 19,021
Accounts receivable.................................................. 20,368 20,368
Purchased receivables................................................ 62,381 62,381
Prepaids and other................................................... 731 731
----------- --------------- -----------
Total current assets............................................... 116,062 (13,561) 102,501
Property and equipment............................................... 6,826 6,826
Less accumulated depreciation and amortization....................... (2,747) (2,747)
----------- --------------- -----------
Net property and equipment......................................... 4,079 4,079
Equipment held under capital leases.................................. 1,369 1,369
Other assets, net.................................................... 785 785
----------- --------------- -----------
Total assets....................................................... $ 122,295 $ (13,561) $ 108,734
----------- --------------- -----------
----------- --------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts Payable:
Trade.............................................................. $ 10,922 $ $ 10,922
Billing customers.................................................. 32,730 32,730
Accrued liabilities.................................................. 17,921 17,921
Revolving line of credit for purchased receivables................... 23,686 23,686
Current portion of long-term debt.................................... 298 298
Current portion of obligations under capital leases.................. 421 421
----------- --------------- -----------
Total current liabilities.......................................... 85,978 85,978
Long-term debt, less current portion................................... 880 880
Obligations under capital leases, less current portion................. 925 925
Other liabilities...................................................... 56 56
----------- --------------- -----------
Total liabilities.................................................. 87,839 87,839
STOCKHOLDERS' EQUITY:
Preferred shares, $10.00 par value, 10,000 shares authorized, 10,000
shares issued and oustanding........................................ 100 (100)(B) 0
Common shares, no par value, 102,000 shares authorized, 102,000
shares issued and outstanding....................................... 1 149(C) 150
U.S. Long Distance Corp.'s investment in and advances to Billing....... 34,355 (34,355)(D) 0
Paid-in capital........................................................ 0 20,745 20,745
----------- --------------- -----------
Total stockholders' equity......................................... 34,456 (13,561) 20,895
----------- --------------- -----------
Total liabilities and stockholders' equity......................... $ 122,295 $ (13,561) $ 108,734
----------- --------------- -----------
----------- --------------- -----------
</TABLE>
Notes to unaudited pro forma condensed consolidated balance sheet:
(A) Cash transfer made to USLD
(B) Redemption of preferred stock
(C) Issuance of Billing Common Stock
(D) Reclassified to paid-in capital
34
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
The following table presents selected historical financial and other data
and selected pro forma financial data for the Company after giving effect to the
Distribution and related transactions. The financial data presented for the
fiscal years ended September 30, 1993, 1994 and 1995 should be read in
conjunction with the Consolidated Financial Statements, the notes thereto and
the other financial information included in this Information Statement. The
Statements of Income and Statements of Cash Flows for the years ended September
30, 1993, 1994 and 1995 and the Balance Sheets at September 30, 1994 and 1995
have been audited by Arthur Andersen LLP, the Company's independent public
accountants. All historical financial data shown below for these periods have
been derived from the audited financial statements. The Income Statement data
for the six months ended March 31, 1996 and March 31, 1995 and for the fiscal
years ended September 30, 1992 and 1991, the balance sheet data at March 31,
1996, and all Operating Data are unaudited. In the opinion of management of
Billing, the data presented reflects all adjustments considered necessary for a
fair presentation of the results for such periods. Historical per share amounts
are not included as they may not be indicative of future performance. The
following data should be read in conjunction with Billing's Consolidated
Financial Statements and the notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
information included elsewhere herein.
<TABLE>
<CAPTION>
SIX MONTHS
FISCAL YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA:
Operating revenues............. $ 16,327 $ 33,162 $ 46,451 $ 57,746 $ 80,847 $ 34,942 $ 50,301
Gross profit................... * * 16,458 20,158 29,510 12,966 18,156
Advance funding program
income........................ 1,896 2,435 3,299 3,467 4,384 1,898 2,968
Advance funding program
expense....................... (1,552) (1,794) (2,581) (1,858) (1,351) (624) (598)
Income from operations......... * * 10,416 13,392 22,055 9,402 14,230
Net income..................... * * 6,441 8,565 14,118 6,013 8,969
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, PRO FORMA (1)
----------------------------------------------------- MARCH 31, MARCH 31,
1991 1992 1993 1994 1995 1996 1996
--------- --------- --------- --------- --------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Working capital................ * * * $ 11,132 $ 17,300 $ 30,084 $ 16,523
Total assets................... * * * 89,710 106,895 122,295 108,734
Long-term obligations, less
current portion............... * * * 853 2,216 1,805 1,805
U.S. Long Distance Corp.'s
investment in and advances to
Billing (2)................... * * * 13,001 21,122 34,355 0
Paid-in capital................ 0 0 0 0 0 0 20,745
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT BILLING SERVICES CUSTOMERS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
EBITDA(3)........................... * * $ 11,293 $ 14,346 $ 23,271 $ 9,921 $ 15,170
Billing call records processed per
month (4)(5)....................... 6,500 10,800 16,900 25,920 40,410 28,530 45,340
Billing services customers (6)...... 71 115 143 168 272 * 305
</TABLE>
- - ------------------------
* Information is not available.
(1) The pro forma financial data are derived from the unaudited financial
information and notes thereto included elsewhere in this Information
Statement. The pro forma financial data includes an adjustment for a cash
transfer from Billing to USLD of $13,561,000, assuming the Distribution was
consummated as of March 31, 1996, but does not include direct costs
associated with the Distribution estimated to range from approximately
$8,500,000 to approximately $10,500,000. See "Pro Forma Condensed
Consolidated Balance Sheet."
(2) The Company has never declared cash dividends on its Common Stock, nor does
it anticipate doing so in the foreseeable future.
(3) Earnings before interest, taxes, depreciation and amortization ("EBITDA") is
a commonly used profitability/cash flow measurement.
(4) Calculated based upon a monthly average over the fiscal quarter ended on the
date indicated.
(5) Does not include call records that the Company processed for billing
management customers.
(6) At end of the period.
36
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Financial
Statements of the Company, the Notes thereto and the other financial information
included elsewhere in this Information Statement. For purposes of the following
discussion, references to year periods refer to the Company's fiscal year ended
September 30 and references to quarterly periods refer to the Company's fiscal
quarters ended December 31, March 31, June 30 and September 30.
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
SEPTEMBER 30, MARCH 31,
---------------------------------- ----------------------
AS A PERCENTAGE OF REVENUES 1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of services............................... 64.6 65.1 63.5 62.9 63.9
----- ----- ----- ----- -----
Gross profit................................... 35.4 34.9 36.5 37.1 36.1
Selling, general and administrative............ 12.7 12.9 11.5 12.4 10.6
Advance funding program income................. (7.1) (6.0) (5.4) (5.4) (5.9)
Advance funding program expense................ 5.6 3.2 1.7 1.8 1.2
Depreciation and amortization.................. 1.9 1.7 1.5 1.5 1.9
----- ----- ----- ----- -----
Operating income............................... 22.4 23.2 27.3 26.9 28.3
Other income (expense), net.................... (.5) .4 .9 .9 .5
----- ----- ----- ----- -----
Income before taxes............................ 21.9 23.6 28.2 27.8 28.8
Income tax..................................... 8.1 8.7 10.7 10.6 10.9
----- ----- ----- ----- -----
Net income..................................... 13.9 14.8 17.5 17.2 17.8
</TABLE>
OPERATING REVENUES
The Company's revenues are derived from the provision of billing
clearinghouse and information management services to direct dial long distance
carriers and operator services providers. Beginning in 1995, revenues also have
been derived from enhanced services billing provided to companies that offer 900
services, as well as the billing for non-regulated telecommunications equipment
and services. Fees charged by the Company include processing and customer
service inquiry fees. Processing fees are assessed to customers either as a fee
charged for each telephone call record or other transaction processed or as a
percentage of the customer's revenue that is submitted by the Company to local
telephone companies for billing and collection. Customer service inquiry fees
are assessed to customers either as a fee charged for each record processed by
the Company or as a fee charged for each billing inquiry made by end-users.
Revenues include processing and customer service fees, as well as any charges
assessed to the Company by local telephone companies for billing and collection
services which are passed through to the customer.
Billing services revenues during the first six months of 1996 increased 44%
to $50.3 million from $34.9 million during the comparable period of 1995.
Billing services revenues in 1995 totaled $80.8 million compared to $57.7
million for 1994 and $46.5 million for 1993 representing increases of 40% and
24%, respectively. During the five-year period ended September 30, 1995, the
Company's revenues grew at a compounded annual rate of approximately 61%.
The revenue increases are primarily attributable to an increase in the
number of telephone call records processed and billed. Call record volume
increases in all periods were primarily the result of new business from new
direct dial long distance carriers, as well as expanded business from existing
direct dial long distance customers. The revenue increase in the first six
months of 1996 from the comparable prior year period is also due to the growth
of enhanced billing services revenues. Revenues derived from operator services
customers in both 1994 and 1995 were virtually the same as 1993. This lack of
operator services revenues growth is attributable to several factors, including
an increasing number of regulatory agencies that impose guidelines or rules on
operator services providers, such as
37
<PAGE>
the imposition of rate ceilings, which limit or impair the growth of the
operator services industry. Additionally, there has been an increased awareness
on the part of the consumer of the ability of the telephone user to select a
carrier of choice by dialing access codes of carriers other than the carrier
contracted by the telephone owner, resulting in a lower number of billable
telephone calls generated by the Company's customers (800 dial-around).
Telephone call record volumes were as follows:
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED SEPTEMBER 30, ENDED MARCH 31,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Direct dial long distance services....................... 30.9 103.3 252.0 99.4 191.0
Operator services........................................ 133.7 142.9 138.0 67.2 63.9
Enhanced billing services................................ 0.0 0.0 4.4 1.1 5.1
</TABLE>
COST OF SERVICES
Cost of services includes billing and collection fees charged to the Company
by local telephone companies and related transmission costs, as well as all
costs associated with the customer service organization, including staffing
expenses and costs associated with 800 services. Billing and collection fees
charged by the local telephone companies include fees that are assessed for each
record submitted and for each bill rendered to its end-user customers. The
Company achieves discounted billing costs due to its aggregated volumes and can
pass these discounted costs on to its customers.
Gross profit margin of 36.1% reported for the first six months of 1996
compares to 37.1% achieved in the comparable prior year period. This decrease
was primarily attributable to higher customer service costs which were partially
offset by lower billing and collection fees. The higher customer service costs
were due to increased 800 services usage and staffing expenses incurred by the
Company in order to support the rapid growth in the volume of customer inquiries
resulting from the significant growth in the number of records processed.
Gross profit margin of 36.5% reported for 1995 compares to 34.9% achieved in
1994 and 35.4% achieved in 1993. The improvement from 1994 to 1995 is due
primarily to the significant growth of the Company's higher gross margin
business from direct dial long distance and enhanced services billing customers.
The decrease in gross profit margin from 1993 to 1994 is attributable to higher
customer service costs that were partially offset by lower billing and
collection fees. The lower billing and collection fees as a percentage of
revenues were the result of growth of the Company's higher gross margin
business.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative ("SG&A") expenses are comprised of all
selling, marketing and administrative costs incurred in direct support of the
business operations of the Company. Additionally, the expense of certain USLD
corporate functions, such as treasury, financial reporting, investor relations,
legal, payroll and management information systems has been allocated to the
Company and is reflected in its historical financial results. SG&A expenses as a
percentage of revenues may be higher or lower in the future as actual costs
incurred differ from costs historically allocated to the Company.
SG&A expenses for the first six months of 1996 were $5.4 million,
representing 10.6% of revenues, compared to $4.3 million in the first six months
of 1995, or 12.4% of revenues. SG&A expenses for 1995 were $9.3 million,
representing 11.5% of revenues, compared to $7.4 million in 1994, or 12.9% of
revenues, and $5.9 million in 1993, or 12.7% of revenues.
SG&A expenses as a percentage of revenues for 1995 and the first six months
of 1996 decreased from the comparable prior year periods primarily as a result
of efficiencies associated with significant revenue growth, as certain SG&A
expenses, such as office administration and accounting, do not change
proportionately with revenue. The increase in SG&A expenses as a percentage of
revenues from 1993 to 1994 was primarily attributable to higher legal and
accounting costs allocated to the
38
<PAGE>
Company in connection with USLD's Securities and Exchange Commission
investigations and subse-
quent stockholder litigation. Based upon its review of facts and circumstances,
management expects that these costs will be nonrecurring.
ADVANCE FUNDING PROGRAM INCOME AND EXPENSE
Advance funding program income increased from $1.9 million in the first six
months of 1995 to $3.0 million in the first six months of 1996. Advance funding
program income was $4.4 million in 1995 compared with $3.5 million in 1994 and
$3.3 million in 1993. The year-to-year increases were primarily the result of
financing a higher level of customer receivables under the Company's advance
funding program (see "Advance Funding Program and Receivable Financing Facility"
below). The quarterly average balance of purchased receivables was $51.1
million, $44.1 million and $42.2 million in 1995, 1994 and 1993, respectively.
Advance funding program expense during the first six months of 1996 of
$598,000 compares to $624,000 during the comparable prior year period. Advance
funding program expense was $1.4 million in 1995 compared with $1.9 million in
1994 and $2.6 million in 1993. In addition to declining from year to year,
advance funding program expense in 1994 and 1995 declined relative to advance
funding program income reported in the respective years. The decreases in these
year-to-year periods were primarily attributable to the Company financing a
higher level of customer receivables with internally generated funds and lower
interest rates on borrowed funds as a result of renegotiating the Company's
revolving credit facility in December 1993. During the periods when this Company
operated as a subsidiary within the USLD consolidated group, the cash management
function was centralized and utilized all the available cash among the
consolidated entities to pay down the revolving credit facility to reduce the
expense of this facility as much as possible. Subsequent to the Distribution,
the Company will no longer have access to USLD's funds. In addition, the Company
anticipates making certain capital expenditures over the next two years (see
"Liquidity and Capital Resources"). Consequently, Advance Funding Program
expense initially will increase as a result of lower cash balances.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses are incurred with respect to certain
assets including computer hardware and software, office equipment, furniture,
leasehold improvements, and costs incurred in securing contracts with local
telephone companies and agreements with financing institutions. Asset lives
generally range between three and seven years.
Depreciation and amortization expense was $940,000 during the first six
months of 1996 compared with $519,000 in the first six months of 1995.
Depreciation and amortization expense as a percentage of revenues increased to
1.9% in the first six months of 1996 from 1.5% over the corresponding prior year
period. The increase in the percentage of revenues is primarily attributable to
the purchase of computer equipment and software and office furniture and
equipment to support the growth of the Company.
Depreciation and amortization expense was $1.2 million in 1995 compared with
$954,000 in 1994 and $877,000 in 1993. Depreciation and amortization expense as
a percentage of revenues was 1.5%, 1.7% and 1.9% in 1995, 1994, and 1993,
respectively. These year-to-year decreases in depreciation and amortization
expense as a percentage of revenues are primarily attributable to efficiencies
associated with the Company's revenue growth.
INCOME FROM OPERATIONS
Income from operations during the first six months of 1996 increased to
$14.2 million from $9.4 million during the comparable period of 1995. Income
from operations as a percent of revenues increased to 28.3% during the first six
months of 1996 from 26.9% during the comparable prior year period. This
improvement was the result of lower SG&A expenses as a percentage of revenues
and higher net advance funding program income, which were partially offset by a
lower gross profit margin and higher depreciation expenses in the first six
months of 1996.
Income from operations was $22.1 million, $13.4 million and $10.4 million in
1995, 1994 and 1993, respectively. As a percentage of revenues, income from
operations represented 27.3%, 23.2% and 22.4% in 1995, 1994, and 1993,
respectively. The increase in income from operations as a percentage of
39
<PAGE>
revenues from 1994 to 1995 is primarily attributable to an improved gross profit
margin, lower SG&A expenses as a percentage of revenues and higher net advance
funding income. The increase in the percentage of revenues from 1993 to 1994 is
primarily attributable to higher net advance funding income.
OTHER INCOME (EXPENSE)
Net other income decreased to $236,000 in the first six months of 1996 from
$301,000 in the first six months of 1995.
Net other income of $724,000 in 1995 compares to net other income of
$211,000 in 1994 and net other expense of $228,000 in 1993. The year-to-year
improvements were primarily attributable to increased interest income from
short-term investments. During the periods when the Company operated as a
subsidiary within the USLD consolidated group, the cash management function was
centralized and all excess cash of the consolidated group was used to pay down
the revolving credit facility or invested in short-term investments. Subsequent
to the Distribution, the Company will no longer have access to USLD's funds. In
addition, the Company anticipates making certain capital expenditures over the
next two years (see "Liquidity and Capital Resources"). Consequently, investment
income is expected to decrease initially as a result of lower cash balances.
INCOME TAXES
The Company's effective tax rate was 38.0% in the first six months of 1996
and 1995. The effective tax rate was 38.0%, 37.0% and 36.8% in 1995, 1994 and
1993, respectively. The Company's effective tax rate is higher than the federal
statutory rate due to the addition of state income taxes and certain deductions
taken for financial reporting purposes that are not deductible for federal
income tax purposes. The increase in the effective tax rate from 1994 to 1995 is
due to an increase in the federal statutory tax rate.
NET INCOME
The Company reported net income of $9.0 million during the first six months
of 1996 compared to net income of $6.0 million during the comparable period of
1995, representing an increase of 49%.
The Company reported net income of $14.1 million in 1995 compared to net
income of $8.6 million in 1994 and $6.4 million in 1993. The net income in 1995
and 1994 represented increases of 65% and 33% over 1994 and 1993, respectively.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating cash requirements consist principally of working
capital requirements, requirements under its advance funding program, scheduled
payments of principal on its outstanding indebtedness and capital expenditures.
The Company believes that cash flow from operating activities and periodic
borrowings under its receivable financing facility will be adequate to meet the
Company's operating cash requirements in the future.
Net cash provided by operating activities was $21.1 million, $9.6 million
and $9.0 million in 1995, 1994 and 1993, respectively, and reflected the
increases in net income from 1993 to 1995.
To facilitate and support the growth anticipated in its business, the
Company plans to spend approximately $18 million, over the next one to two
years, to develop and create information systems that will enable it to offer
"direct billing" and "invoice ready" services to its customers. These
expenditures, if made, will be focused in the areas of software development,
computer hardware, additional local telephone company agreements and related
staffing. The Company believes that it will be able to fund these expenditures
with internally generated funds and borrowings, but there can be no assurance
that such funds will be available and/or invested in these projects. See
"Special Factors -- Anticipated Billing System Expenditures."
Statements regarding anticipated billing system expenditures are
forward-looking statements which by their nature are subject to numerous
uncertainties that could cause actual results to vary.
40
<PAGE>
Historically, the Company has obtained financing for capital expenditures
through term debt agreements and capital lease agreements that were guaranteed
and cross-collateralized by USLD and other members of the Telecommunications
Group. These debt agreements were negotiated based on the strength of the
consolidated financial statements, earnings and cash flow of the USLD
consolidated group. Most of these debt agreements were secured by the assets of
all the subsidiaries within the consolidated group. The Company expects to
receive from certain lenders loan agreement amendments or separate loan
agreements whereby the subject indebtedness will be secured by only the
Company's or USLD's assets. In other cases, the Company expects to obtain
waivers from its lenders, provided that the cross guarantees and existing
security arrangements remain in place for the duration of the facility. In other
cases, Billing and USLD intend to pay off existing indebtedness releasing
applicable guarantees and security arrangements. The Company believes that it
has the ability to continue to secure long-term equipment financing and that
this ability, combined with cash flows generated from operations, will be
sufficient to fund capital expenditures, working capital needs and debt
repayment requirements for the foreseeable future. Additionally, management
believes that it has the ability to raise funds in the private and public equity
markets.
The Company's credit facilities and equipment loans contain various
restrictions. Under the most restrictive terms of its credit facilities, the
Company is prohibited from paying dividends on its common stock. The Company may
also be subject to certain limitations on its annual capital expenditures and on
the issuance of additional secured debt. Cross default provisions of the
Company's most significant credit facilities may place the Company in default of
such facilities should it fail to satisfy provisions of certain other loan
agreements. Under the Company's most significant credit facilities, the Company
has guaranteed the obligations of its subsidiaries. The Company was in
compliance with all required covenants at March 31, 1996, September 30, 1995 and
1994.
ADVANCE FUNDING PROGRAM AND RECEIVABLE FINANCING FACILITY
The Company has a $45 million revolving line of credit facility with FINOVA
to draw upon to advance funds to its billing customers prior to collection of
the funds from the local telephone companies (see Note 4 to the Consolidated
Financial Statements). This credit facility terminates on December 31, 1996.
Management believes that the capacity under this revolving credit facility is
sufficient to fund advances to its billing customers for the foreseeable future.
Because it generally takes 40 to 90 days to collect receivables from the
local telephone companies, customers can significantly accelerate cash receipts
by utilizing the Company's advance funding program. The Company offers
participation in this program to qualifying customers through its Advanced
Payment Agreement. Under the terms of this agreement, the Company purchases the
customer's accounts receivable for an amount equal to the face amount of the
billing records submitted to the local telephone companies by the Company for
billing and collection, less certain deductions. The purchase price is remitted
by the Company to its customers in two payments.
Within five days from receiving a customer's records, an initial payment is
made to the customer based on a percentage of the value of the customer's call
records submitted to the local telephone companies. This percentage is
established by the Advanced Payment Agreement and generally ranges between 50%
and 80%, but typically averages approximately 70%. The Company pays the
remaining balance of the purchase price upon collection of funds from the local
telephone companies. The funds used to make the initial payments generally are
borrowed under the Company's revolving line of credit facility with FINOVA.
Since the facility was amended in December 1993, the Company has from time to
time paid down a portion of the line with excess funds prior to collection of
the related receivables from the local telephone companies. The Company had paid
down $18.8 million of the credit facility at September 30, 1995, and
consequently, the outstanding balance of the line of credit represented
approximately 42% of purchased receivables at September 30, 1995. The amount
borrowed by the Company under this credit facility to finance the advance
funding program was $23.0 million and $25.2 million at September 30, 1995 and
1994, respectively.
Service fees charged to customers by the Company are recorded as advance
funding program income and are computed at a rate above the prime rate on the
amount of advances (initial payments)
41
<PAGE>
outstanding to a customer during the period commencing from the date the initial
payment is made until the Company recoups the full amount of the initial payment
from local telephone companies. The rate charged to the customer by the Company
is higher than the interest rate charged to the Company by FINOVA, in part to
cover the administrative expenses incurred in providing this service. Borrowing
costs are computed at a rate above the prime interest rate and are based on the
amount of borrowings outstanding during the period commencing from the date the
funds are borrowed until the loan is repaid by the Company. Borrowing costs are
recorded as advance funding program expense. The result of these financing
activities is the generation of a net amount of advance funding program income
that contributes to the net income of the Company.
As part of the Advanced Payment Agreement, the Company contractually
purchases the customer accounts upon which funds are advanced. Further, the
customer may grant a first lien security interest in other customer accounts and
assets and will take other action as may be required to perfect the Company's
first lien security interest in such assets. Under the terms of the agreement
with FINOVA, the Company is obligated to repay amounts borrowed from FINOVA and
advanced to its billing customers whether or not the purchased accounts
receivable are actually collected.
SEASONALITY
To some extent, the revenues and telephone call record volumes of most
customers of the Company are affected by seasonality. For example, the Company's
operator services customers typically experience decreases in operator services
revenues and telephone call record volumes in the fall and winter months as pay
telephone usage declines due to cold and inclement weather in many parts of the
United States. As a result of this seasonal variation, operator services
telephone call record volumes processed by the Company during the Company's
first fiscal quarter ending December 31 (which includes the Thanksgiving,
Christmas and New Year's Eve holidays), historically have been the lowest level
of any quarter of the year. Consequently, revenues reported by the Company that
are derived from operator services telephone call records are similarly
affected. Conversely, due to increased traffic from pay telephones during the
spring and summer months and a lower concentration of national holidays, the
Company has historically processed its highest volumes of operator services
telephone call records and reported its highest operator services-related
revenues in the third and fourth quarters of the fiscal year. The seasonal
effects caused by the Company's operator services customers has been lessened,
however, as a result of the growth in the Company's business from direct dial
long distance carriers. The Company's direct dial long distance customers use
the Company's services primarily to bill residential accounts, which typically
generate a higher traffic volume around holidays, particularly Thanksgiving,
Christmas and New Year's Day. The growth in billing revenues derived from direct
dial long distance carrier customers as a percentage of total revenues has
mitigated the seasonal effects of the revenues derived from the Company's
operator services customers.
EFFECT OF INFLATION
Inflation is not a material factor affecting the Company's business. Prices
charged to the Company by local telephone companies and third-party vendors for
billing, collection and transmission services have not increased significantly
during the past year. General operating expenses such as salaries, employee
benefits and occupancy costs are, however, subject to normal inflationary
pressures.
NEW ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123 ("SFAS No. 123"), "Accounting for
Stock-Based Compensation," which provides for a fair-value-based method of
accounting for stock-based compensation plans with employees and others. The
Company will not adopt the recognition and measurement provisions of SFAS No.
123, but will continue to account for stock-based compensation plans in
accordance with APB Opinion 25. However, the Company will be required to comply
with the disclosure requirements of SFAS No. 123 beginning in fiscal 1997.
42
<PAGE>
BUSINESS
GENERAL
The Company believes it is the largest third-party billing clearinghouse and
information management services provider to the telecommunications industry.
Billing's customers include direct dial long distance telephone companies,
operator services providers, information providers, telecommunications equipment
suppliers and other telecommunication services providers. The Company maintains
contractual billing arrangements with over 1,200 local telephone companies which
provide access lines to and collect for services from end-users of
telecommunication services. The Company processes telephone call records and
other transactions and collects the related end-user charges from these local
telephone companies on behalf of its customers.
Billing's direct dial long distance customers, including local and regional
long distance carriers, use the Company as a billing clearinghouse for
processing and collecting call records generated by their end-users. Although
such carriers can bill end-users directly, Billing provides these carriers with
a very cost-effective means of billing and collecting residential and small
commercial accounts through the local telephone companies.
The Company processes telephone call records for customers providing
operator services largely to the hospitality, penal, and private and public pay
telephone industries. In addition, Billing processes records for telephone calls
that require operator assistance and/or alternative billing options such as
collect and person-to-person calls, third-party billing and calling card
billing. Because operator services providers have only the billing number and
not the name or address of the billed party, they must have access to the
services of the local telephone companies to collect their charges. The Company
provides this access to its customers through its contractual billing
arrangements with the local telephone companies that bill and collect on behalf
of these operator services providers.
Because Billing acts as an aggregator of telephone call records and other
transactions from various sources, it can negotiate discounted billing costs
with the local telephone companies due to its large volume and can pass on these
discounts to its customers. Additionally, Billing can provide its services to
those long distance carriers and operator services providers who would otherwise
not be able to make the investments in billing and collection agreements with
the local telephone companies, fees, systems, infrastructure and volume
commitments required to establish and maintain the necessary relationships with
the local telephone companies.
In 1994, Billing began providing enhanced billing services for processing
transactions related to providers of premium services or products that can be
billed through the local telephone companies, such as charges for 900 access
pay-per-call transactions, cellular long distance services, paging services,
voice mail services, caller ID and other telecommunications equipment charges.
In addition to its billing clearinghouse services, Billing also offers
billing management services to customers who have their own billing arrangements
with the local telephone companies. These management services may include data
processing, accounting, end-user customer service, telecommunication tax
processing and reporting.
INDUSTRY BACKGROUND
Billing clearinghouse and information management services in the
telecommunications industry developed out of the 1984 breakup of American
Telephone & Telegraph ("AT&T") and the Bell System. In connection with the
breakup, the local telephone companies that make up the Regional Bell Operating
Companies, Southern New England Telephone, Cincinnati Bell and the General
Telephone Operating Companies ("GTE") were required to provide billing and
collections on a nondiscriminatory basis to all carriers that provided
telecommunication services to their end-user customers. Because of both the cost
of acquiring and the minimum charges associated with many of the local telephone
company billing and collection agreements, only the largest long distance
carriers, including AT&T, MCI Telecommunications Corporation ("MCI") and Sprint
Incorporated ("Sprint"), could afford the option of billing directly through the
local telephone companies. Several companies, including Billing, entered into
these billing and collection agreements and became aggregators of
43
<PAGE>
telephone call records for operator services providers and second and third tier
long distance carriers, thereby becoming "third-party clearinghouses." Today,
management believes that Billing is the largest third-party clearinghouse in the
telecommunications industry, providing billing and information services to
approximately 300 customers as of the date hereof.
The operator services industry began to develop in 1986 with the advent of
technology that allowed a zero-plus call (automated calling card call) or
zero-minus call (collect, third-party billing, operator assisted calling card or
person-to-person call) to be routed away from AT&T to a competitive long
distance services provider. Because a zero-plus or zero-minus call is placed by
an end-user whose billing information is unrelated to the telephone being used
to place the call, a long distance carrier would typically not have adequate
information to produce a bill. This information typically resides with the
billed party's local telephone company. In order to bill its telephone call
records, a long distance services provider carrying zero-plus and zero-minus
telephone calls must either obtain billing and collection agreements with the
local telephone companies or utilize the services of a third-party clearinghouse
that has the billing and collection agreements required.
Third-party clearinghouses such as Billing process these telephone call
records and other transactions and submit them to the local telephone companies
for inclusion in their monthly bills to end-users. As the local telephone
companies collect payments from end-users, they remit them to the third-party
clearinghouses who, in turn, remit payments to their carrier customers.
DEVELOPMENT OF BUSINESS
Billing is a newly formed corporation that, upon the completion of the
Distribution, will be an independent, publicly held company. Billing will
comprise the existing billing clearinghouse and information management services
business currently operated by USLD through its Billing Group subsidiaries.
In 1988, USLD acquired ZPDI and its billing and collection agreements with
several local telephone companies. USLD used these billing and collection
agreements to bill and collect through the local telephone companies for its own
operator services call record transactions. As USLD's operator services business
expanded, ZPDI entered into additional billing and collection agreements with
other local telephone companies, including the Regional Bell Operating
Companies, GTE and other independent local telephone companies. The Company
recognized the expense and time related to obtaining and administering these
billing and collection agreements and began offering its services as a
third-party clearinghouse to other operator services businesses who did not have
any proprietary agreements with the local telephone companies. In 1992, Billing
entered into a new set of billing and collection agreements with the local
telephone companies and began offering billing clearinghouse and information
management services as a third-party clearinghouse to direct dial long distance
services providers. The Company has billing and collection agreements covering
over 1,200 local telephone companies with access lines into approximately 95% of
the United States, Canada and Puerto Rico.
A key factor in the evolution of the Company's business has been the ongoing
development of its information management systems. In 1990, the Company
developed a comprehensive information system capable of processing, tracing and
accounting for telephone call record transactions (see "Business --
Operations"). Management believes that this proprietary system provides the
Company's customers with more detailed information and yields a better
collection rate than its competitors. Also in 1990, the Company became the first
third-party billing clearinghouse to finance its customers' accounts receivable.
Today, this activity is accomplished through a revolving receivable financing
facility with FINOVA Capital Corporation (see "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Advance Funding
Program and Receivable Funding Facility"). In 1991, USLD separated the
day-to-day management and operations of the Company from its long distance and
operator services businesses. The purpose of this separation was to satisfy some
of the Company's customers who were also competitors of USLD's long distance and
operator services businesses. These customers had two main concerns: (i) that
USLD's long distance and operator services businesses could gain knowledge of
its competitors through call records processed by Billing
44
<PAGE>
and (ii) that Billing was somehow subsidizing USLD's long distance and operator
services businesses with which these customers compete. Since the separation,
the Billing Group and the Telecommunications Group have operated independently,
except for certain corporate activities conducted by USLD's corporate staff.
In 1993, the Company began to offer billing management services to direct
dial long distance carriers and information services providers who have their
own billing and collection agreements with the local telephone companies. These
customers collect charges directly from the local telephone companies and, for
marketing purposes, may desire to place their own logo, name and customer
service number on the long distance bill page. Billing management services
provided by the Company to such customers may include contract management,
transaction processing, information management and reporting, tax compliance and
customer service.
In 1994, the Company began offering enhanced billing clearinghouse and
information management services to other businesses within the
telecommunications industry. These businesses include telecommunications
equipment providers, information providers and other communication services
providers of nonregulated services and products such as 900 access pay-per-call
transactions, cellular long distance services, paging services, voice mail
services, caller ID and other telecommunications equipment. The Company entered
into additional billing and collection agreements with the local telephone
companies to process these types of transactions. Management believes that
billing for such nonregulated products and services represents a significant
expansion opportunity for the Company.
BILLING CLEARINGHOUSE AND INFORMATION MANAGEMENT SERVICES
In general, the Company performs four types of billing clearinghouse and
information management services under different billing and collection
agreements with the local telephone companies. First, the Company offers Zero
Plus -- Zero Minus billing and information management services to operator
services providers. This service is the original form of local telephone company
billing provided by the Company and has driven the development of the systems
and infrastructure utilized by all of the Company's billing clearinghouse and
information management services. Second, the Company performs direct dial long
distance billing, which is the billing of "1+" long distance telephone calls to
individual residential customers and small commercial accounts. Third, the
Company performs enhanced billing clearinghouse and information management
services whereby it bills a wide array of charges that can be applied to a local
telephone company telephone bill, including charges for 900 pay-per-call
transactions, cellular services, paging services, voice mail services, caller ID
and other telecommunications equipment. Finally, under its billing management
function, the Company provides any of the three services discussed above
utilizing the customer's own billing and collection agreements.
BILLING PROCESS
Local telephone company billing relates to billing for transactions that are
included in the monthly local telephone bill of the end-user as opposed to a
direct bill that the end-user would receive directly from the telecommunications
or other services provider. The Company's customers submit telephone call record
data in batches, typically in weekly intervals; however, the frequency can range
from daily to monthly. The data is submitted either electronically or via
magnetic tape. Billing, through its proprietary software, sets-up an account
receivable for each batch of call records that it processes and processes the
telephone call record data to determine the validity of each record and to
include for each record certain telecommunication taxes and applicable customer
identification information. The Company then submits, through a third-party
vendor, the relevant billable telephone call records and other transactions to
the appropriate local telephone company for billing and collection. Billing
monitors and tracks each account receivable by customer and by batch throughout
the billing and collection process. The local telephone companies then include
these telephone call records and other transactions in their monthly local
telephone bills and remit the collected funds to the Company for payment to its
customers. The complete cycle can take up to 18 months from the time the records
are submitted for billing until all bad debt reserves are "trued up" with actual
bad debt experience. However, the billing and collection agreements provide for
the local telephone companies to purchase
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<PAGE>
the accounts receivable, with recourse, within a 40 to 90 day period. The
payment cycle from the time call records are transmitted to the local telephone
companies to the initial receipt of funds by the Company is, on average,
approximately 55 days. Typically, 90% of the value of the call records is
received in the initial payments by the local telephone companies.
The Company processes the tax records associated with each customer's
submitted telephone call records and other transactions and files certain
federal excise and state and local telecommunications-related tax returns
covering such records and transactions on behalf of many of its customers. The
Company submits more than 1,000 tax returns on behalf of its customers each
month.
Billing provides end-user inquiry and investigation (customer service) for
billed telephone call records. This service allows end-users to inquire
regarding calls for which they were billed. The Company's customer service
telephone number is included in the local telephone company bill to the
end-user, and the Company's customer service representatives are authorized to
resolve end-user disputes regarding such calls.
Billing earns its revenues based on (i) a processing fee that is assessed to
customers either as a fee charged for each telephone call record or other
transaction processed or as percentage of the customer's revenue that is
submitted by the Company to the local telephone companies for billing and
collection and (ii) a customer service inquiry fee that is assessed to customers
either as a fee charged for each record processed by the Company or as a fee
charged for each billing inquiry made by end-users. Any charges assessed to the
Company by local telephone companies for billing and collection services also
are included in revenues and are passed through to the customer.
Through its accounts receivable financing program, Billing offers its
customers the option to receive, within five days of the customer's submission
of records to Billing, a significant portion of the revenue associated with such
records. The customer pays interest for the period of time between the purchase
of records by the Company and the time the local telephone company submits
payment to Billing for the subject records.
OPERATIONS
The Company's billing clearinghouse and information management services are
highly automated through the Company's proprietary computer software and
state-of-the-art data transmission protocols. Except for the end-user inquiry
and investigation service (Customer Service), the staff required to provide the
Company's billing clearinghouse and information management services is largely
administrative and the number of employees is not directly volume sensitive.
Most of the services offered by Billing are automated and electronic by nature
and require a minimal amount of human intervention. Many of Billing's customers
submit their records to the Company using electronic transmission protocols
directly into the Company's electronic bulletin board. These records are
automatically accessed by Billing's proprietary software, processed, and then
submitted to the local telephone companies electronically. Upon completion of
the billing process, the Company provides reports relating to billable records
and returns any unbillable records to its customers electronically through the
bulletin board.
The Company operates two independent computer systems to ensure a continual,
uninterrupted processing of billing and information management services. One
system is dedicated to daily processing activities and the other serves as both
a back-up to the primary system and for storage of up to 12 months of billing
detail. This detail is immediately accessible to Billing's customer service
representatives who handle billing inquiries. Because timely submission of call
records to the local telephone companies is critical to prompt collections and
high collection rates, Billing has made a significant investment in computer
systems so that its customers' call records are processed and submitted to the
local telephone companies in a timely manner, generally within 24 hours of
receipt by Billing.
The Company's contracts with its customers provide for the billing and
information management services required by the customer specifying, among other
things, the services to be provided and the cost and term of the services. Once
the customer executes an agreement, Billing updates tables within
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each of the local telephone companys' billing systems to control the type of
records processed, the products or services allowed by the local telephone
companies, and the printing of the customer's name on the end-user's monthly
bill. While these local telephone company tables are being updated, the
Company's technical support staff tests the customer's records through its
proprietary software to ensure that the records can be transmitted to the local
telephone companies.
Billing maintains a relatively small direct sales force of less than ten
people and accomplishes most of its marketing efforts through active
participation in telecommunications industry trade shows, educational seminars
and workshops. The Company advertises to a limited extent in trade journals and
other industry publications.
CUSTOMERS
The Company provides billing and information management services to the
following categories of telecommunications services providers:
- Interexchange Carriers or Long Distance Companies: Facilities based
carriers that possess their own telecommunications switching equipment and
networks and that provide traditional direct dial telecommunications
services. Certain long distance companies provide operator assisted
services as well as direct dial services. These calls are billed to the
end-user by the local telephone company in the case of residential and
small commercial accounts.
- Switchless Resellers: Marketing organizations, affinity groups, or even
aggregator operations that buy direct dial long distance services in
volume at wholesale rates from a facilities based long distance company
and sell it back to individual customers at market rates. These calls are
billed to the end-user by the local telephone company in the case of
residential and small commercial accounts.
- Operator Services Providers: Carriers who handle "live" operator assisted
or "automated" operator assisted calls from remote locations using a
centralized telecommunications switching device. These calls are billed to
local telephone company calling cards, collect, third-party numbers or
person-to-person.
- Customer Owned Coin Operated Telephone Providers: Privately owned,
intelligent pay telephones that handle "automated" operator assisted calls
that are billed to a local telephone company calling card, collect or to a
third-party number.
- Customer Premise Equipment Providers: Carriers who install equipment at
aggregator locations, such as hotels, university dormitories, penal
institutions, etc., which handle calls originated from that location
device. These calls are subsequently billed to local telephone company
calling cards, collect, third-party numbers or person-to-person.
- Information Providers: Companies that provide various forms of
information, entertainment or voice mail services to subscribers. These
services are typically billed to the end-user by the local telephone
company based on a 900 pay-per-call or a monthly recurring service fee.
Other billing customers include suppliers of various forms of
telecommunications equipment, pager and cellular telephone companies.
COMPETITION
The Company operates in a highly competitive segment of the
telecommunications industry. All the third-party clearinghouses are either
privately held or, like Billing, are part of a larger parent company. Management
believes that Billing is the largest participant in the third-party
clearinghouse industry in the United States followed by OAN Services, Inc., a
subsidiary of Electronic Data Systems, Inc., itself a subsidiary of General
Motors Corporation. Consequently, availability of information on the industry is
scarce and it is difficult to accurately assess. However, management believes
that approximately 110 million transactions are processed each month by
third-party clearinghouses. The
47
<PAGE>
Company estimates that it processes approximately 60% of these transactions.
Competition among the clearinghouses is based on the quality of information
reporting, collection history, the speed of collections and the price of
services.
The Company believes that there are several significant challenges that face
potential new entrants in the local telephone company billing and information
management services industry. The cost to acquire the necessary billing and
collection agreements is significant as is the cost to develop and implement the
required systems for processing telephone call records and other transactions.
Additionally, most of the billing and collection agreements require a user to
make substantial monthly or annual volume commitments. Given these factors, the
average cost of billing and collecting a record could be expensive until a new
entrant could generate sufficient traffic to compete effectively on price. The
price charged by most local telephone companies for billing and collection
services is based on volume commitments and actual volumes being processed. As a
major third-party clearinghouse, Billing enjoys some of the most favorable rates
available in the industry and passes the benefits of its buying power on to its
customers.
Because most customers in the billing clearinghouse industry are under
contract with Billing or one of its competitors, management believes that the
existing market is already committed for up to three years. In addition, a new
entrant must be financially sound and have system integrity because funds
collected by the local telephone companies flow through the third-party
clearinghouse, which then distributes the cash to the customer whose traffic is
being billed. Management believes that the Company enjoys a reputation within
the industry for the timeliness and accuracy of its collections and
disbursements to customers.
BUSINESS STRATEGY
As the markets for the Company's services continue to develop and its target
market continues to demand increasingly sophisticated billing clearinghouse and
information management services, the Company believes there exist significant
opportunities to continue the expansion of its business base as new and existing
customers seek to outsource these services to the Company. The Company's
business strategy contains the following key elements:
MAINTAIN LEADERSHIP POSITION. Billing has developed a leadership position
in providing billing clearinghouse and information management services to its
customers. These services include managing relations with the local telephone
companies, developing automated reporting and cash management tools, providing
cost efficient customer service operations and offering cash flow alternatives
in the form of its advanced payment program. While each of these functions was
developed separately over time, the combination of these service offerings has
positioned the Company as a total solution for the management of a customer's
billing and information management function. Billing's services are currently
utilized by approximately 300 customers, and management believes that Billing
will maintain and expand its leadership position.
EXPAND CUSTOMER BASE. Management believes that the Company's reputation for
high quality services will make it an important resource for providers of
services and products, such as, 900 pay-per-call transactions, cellular
services, paging services, voice mail services, Internet services, personal
communication services ("PCS"), caller ID and other telecommunications
equipment. Like its existing customers, these services providers are likely
candidates not only for the core services of billing clearinghouse and
information management, but also for the full package of services that includes
customer service and advanced payment for receivables. Management believes that
the high growth potential of these services providers may present significant
potential opportunities for the Company.
NEW AND ENHANCED SERVICES. The Company believes that certain new or
enhanced services it currently contemplates developing and offering to the
marketplace present significant opportunities. These include the following:
ENHANCE SYSTEM TO INCLUDE INVOICE READY PLATFORM. The Company plans to
enhance its systems and billing and collection agreements with the local
telephone companies to include an "invoice ready" billing option for its
customers. An invoice ready billing platform will enable the Company to offer a
48
<PAGE>
customized bill page for inclusion in the local telephone company bill. The
Company will be able to put each customer's logo, end-user customer service
number, and a brief marketing message on this bill page. Currently, companies
such as AT&T, MCI and Sprint bill in this manner through the local telephone
companies. Because of the substantial cost associated with the implementation of
an invoice ready platform, it is not economical for many of the Company's
customers to develop this capability in-house. Therefore, the Company intends to
invest in system enhancements and new billing and collection agreements that
will allow it to offer invoice ready billing to its customers.
EXPAND DIRECT BILLING CAPABILITY. Management believes that there is
substantial demand by its customers and potential customers for a direct billing
product that would allow them to bill end-users directly for the services they
provide. Because these customers typically do not have or desire to maintain the
operational infrastructure or the billing platform necessary to produce bills
and send them directly to end-users, these customers typically outsource this
activity to third-party clearinghouses. The Company has targeted as likely
candidates for such a direct billing product the following types of customers:
long distance providers serving commercial accounts, cellular services
providers, PCS providers, competitive local access providers, cable television
companies and utilities. Additionally the Company is investigating the concept
of a "Universal Bill" whereby multiple services and products can be billed
directly to the end-user under one, unified billing statement. The Company is
currently expanding its direct billing capability and plans to begin marketing
the expanded service in 1997.
PURSUE NEW TELECOMMUNICATIONS ACT OPPORTUNITIES. Management believes that
the recently enacted Telecommunications Act will create new opportunities for
third-party clearinghouses. The Telecommunications Act requires that the
Regional Bell Operating Companies use separate subsidiaries to provide services
not related to their existing regulated local services. The Company is presently
negotiating with several Regional Bell Operating Companies to provide both
in-territory and out-of-territory billing for their long distance services.
While certain telephone call records are currently being billed by local
telephone companies for each other, the competition among the local telephone
companies created by the Telecommunications Act may encourage these companies to
use a third-party clearinghouse such as the Company. The Telecommunications Act
may provide an opportunity for the Company to compete for certain telephone call
records originated on pay telephones owned by the local telephone companies that
terminate out of their territories. Management believes the Company is the most
efficient processor of these types of telephone call records and can succeed in
penetrating this potential market as it develops.
EMPLOYEES
At April 30, 1996, Billing had 215 full-time employees, including five
executive officers, five sales and marketing personnel, 34 technical and
operations personnel, 71 accounting, administrative and support personnel, and
100 customer service representatives and related support personnel. At April 30,
1996, Billing also employed 181 part-time customer service representatives and
support personnel. None of Billing's employees is represented by a union.
Billing believes that its employee relations are good.
PROPERTIES
At April 30, 1996, Billing occupied approximately 16,000 square feet of
space for its corporate offices at 9311 San Pedro, Suite 400, San Antonio,
Texas, substantially all of which will be leased pursuant to a sublease
agreement with USLD that expires in January 1998 with an option for a one year
renewal. In addition, Billing will also sublease certain space from USLD on a
month to month basis. See "Relationship Between Billing and USLD After The
Distribution -- Transitional Services and Sublease Agreement." At such date,
Billing also occupied an additional 50,000 square feet located at 10500 Highway
281, also in San Antonio, Texas. Billing believes that its facilities are
adequate to meet its current needs.
LITIGATION
In December 1993, the Securities and Exchange Commission (the "Commission"),
Division of Enforcement, instituted an informal inquiry relating to certain of
USLD's accounting practices,
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<PAGE>
including revenue recognition and accounting related to accounts receivable,
purchased receivables and other assets, and related disclosures. When the USLD
Board learned of the Commission's informal inquiry, Arthur Andersen LLP, USLD's
independent public accountants, was engaged to conduct a special review of
USLD's accounting policies and procedures. This review was managed by a senior
partner of Arthur Andersen LLP who was not then involved in the annual audit
process. This special review provided strong additional assurance that the
financial statements of USLD were fairly stated and in conformity with generally
accepted accounting principles. Representatives of USLD and Arthur Andersen LLP
have met with the Enforcement Division of the Commission to discuss the issues
raised by the inquiry. On May 5, 1994, USLD was informed that the Commission had
instituted a formal order of private investigation pursuant to Section 21(a) of
the Securities Exchange Act of 1934, as amended (IN THE MATTER OF U.S. LONG
DISTANCE (HO-2852)), relating to, among other things, USLD's financial
condition, results of operations, assets and liabilities, revenues and revenue
recognition and agreements and transactions. Prior to August 1994, the
Commission issued subpoenas requesting documentation in a number of areas from
USLD, from Arthur Andersen LLP, USLD's independent auditors, and from certain
third parties, including former employees of USLD. USLD has and will continue to
cooperate fully with the Commission. Although USLD and Billing cannot predict
when the Commission's private investigation will be concluded, based upon their
review of facts and circumstances, neither of USLD's nor Billing's management
believes that the Commission's review of this matter will result in any
adjustment of USLD's or Billing's financial statements.
Billing is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. Billing believes it is
unlikely that the final outcome of any of the claims or proceedings to which
Billing is a party would have a material adverse effect on Billing's financial
position or results of operations; however, due to the inherent uncertainty of
litigation, there can be no assurance that the resolution of any particular
claim or proceeding would not have a material adverse effect on Billing's
results of operations for the fiscal period in which such resolution occurred.
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MANAGEMENT
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
Upon consummation of the Distribution, Billing's Board of Directors will
comprise five directors, Parris H. Holmes, Jr. (Chairman), Alan W. Saltzman, Lee
Cooke, and two directors to be named prior to the Distribution.
In connection with the Distribution, the Billing Board will be divided into
three classes. Directors for each class will stand for re-election at the annual
meeting of stockholders held in the year in which the term for such class
expires and, if elected, will serve thereafter for three years. The expiration
of the initial term of Billing's directors as of the Distribution Date will be
as follows:
<TABLE>
<CAPTION>
INITIAL TERM
DIRECTOR EXPIRES
- - ----------------------------------------------------------------------------------- -------------------
<S> <C>
Parris H. Holmes, Jr...............................................................
Alan W. Saltzman...................................................................
Lee Cooke..........................................................................
...........................................................
...........................................................
</TABLE>
The business of Billing will be managed under the direction of its Board of
Directors. The Billing Board will have three standing committees: (i) Audit,
(ii) Compensation and (iii) Nominating and Corporate Governance ("Nominating").
The Audit Committee will comprise certain directors who are not employees of
Billing or any of its subsidiaries. The Audit Committee will meet with the
independent auditors, management representatives and internal auditors;
recommend to the Billing Board appointment of independent auditors; approve the
scope of audits and other services to be performed by the independent and
internal auditors; consider whether the performance of any professional service
by the auditors other than services provided in connection with the audit
function could impair the independence of the outside auditors; and review the
results of internal and external audits and the accounting principles applied in
financial reporting and financial and operational controls. The independent
auditors and internal auditors will have unrestricted access to the Audit
Committee and vice versa.
The Compensation Committee will comprise certain directors who are not
employees of Billing or any of its subsidiaries. The Compensation Committee's
functions will include recommendations on policies and procedures relating to
senior officers' compensation and various employee stock and other benefit plans
and approval of individual salary adjustments and stock awards in those areas.
The Nominating Committee will comprise certain directors who are not
employees of Billing or any of its subsidiaries. The Nominating Committee will
consider candidates for election as directors and will be responsible for
keeping abreast of and making recommendations with regard to corporate
governance in general. In addition, the Committee will fulfill an advisory
function with respect to a range of matters affecting the Billing Board and its
Committees, including the making of recommendations with respect to
qualifications of director candidates, compensation of directors, the selection
of committee chairmen, committee assignments and related matters affecting the
functioning of the Billing Board. The Committee will consider nominees to the
Billing Board recommended by stockholders of Billing where such recommendations
are made pursuant to the procedures which are described in Billing's Certificate
of Incorporation and Bylaws. The form of Billing's Bylaws is attached hereto as
Annex D.
COMPENSATION OF DIRECTORS
MEETING AND ANNUAL RETAINER FEES. Each outside member of the Board of
Directors will receive a meeting fee of $2,000 for each meeting of the Board
attended. Additionally, each member of the Compensation Committee, Audit
Committee or Nominating Committee will receive $500 for each committee meeting
attended during the year except that the Chairperson of each such committee will
receive $1,000 for attendance. In each case, the members of the Board will be
reimbursed for their
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travel expenses to and from the meetings. The Board members will not receive a
fee for telephonic meetings. In addition, Billing will pay an Annual Director
Fee, currently $15,000 per year, to each outside director of Billing. See
"Executive Compensation -- Employee Benefit Plans -- Stock Option and Grant
Plans."
STOCK OPTIONS. Pursuant to Billing's Director Plan, each outside director
automatically will be granted a stock option to purchase certain shares of
Billing Common Stock. See "Executive Compensation -- Employee Benefit Plans --
Stock Option and Grant Plans." Options automatically received under the Billing
Director Plan are in addition to any stock option elected to be received in
payment of the Annual Director Fee.
The following table sets forth certain information regarding options granted
during the period October 1, 1994 through September 30, 1995 to outside
directors of USLD, who will be outside directors of Billing. For information
concerning the treatment of USLD options held by Billing directors after the
Distribution, see "Relationship Between Billing and USLD after the Distribution
- - -- Benefit Plans and Employment Matters Allocation Agreement."
<TABLE>
<CAPTION>
UNREALIZED
SECURITIES VALUE OF
UNDERLYING EXERCISE OPTIONS AT
PRESENTLY PRICE SEPTEMBER 30,
DIRECTOR EXERCISABLE OPTIONS PER SHARE 1995 ($)(1)
- - ------------------------------------------------- ------------------- ------------- ---------------
<S> <C> <C> <C>
Lee Cooke........................................ 15,000 $ 11.125 $ 59,063
10,000 $ 12.00 $ 30,625
</TABLE>
- - ------------------------
(1) Reflects the aggregate market value of the underlying securities as
determined by reference to the closing price of USLD Common Stock on the
Nasdaq National Market on September 29, 1995 ($15.0625 per share) minus the
aggregate exercise price for each option.
DIRECTOR COMPENSATION DEFERRAL PLAN. Billing has adopted, to be effective
upon the Distribution, the Billing Information Concepts Corp. Director
Compensation Deferral Plan (the "Billing Director Deferral Plan"). Participation
in the Billing Director Deferral Plan will be offered to outside directors of
Billing who elect to participate as provided in the plan ("Billing Director
Deferral Participants"). The Billing Director Deferral Plan is a deferred
compensation plan that generally allows Billing Director Deferral Participants
to make voluntary deferral contributions ("Voluntary Director Contribution"), on
a pre-tax basis, in increments of 1%, of up to 100% of the fees paid by Billing
for services rendered as a director. In addition, Billing intends to contribute
each plan year, on behalf of each Billing Director Deferral Participant, an
amount equal to 33% of that director's Voluntary Director Contribution (the
"Billing Director Contribution"); provided, however, that Billing reserves the
right to eliminate the Billing Director Contribution at any time or provide a
Billing Director Contribution of a different amount. From time to time Billing
shall credit each Billing Director Deferral Participant's participating plan
with interest at the rate declared by Billing in accordance with the Billing
Director Deferral Plan.
Billing Director Deferral Participants will be annually vested in 33% of any
Billing Director Contribution beginning with the Billing Director Deferral
Participant's first anniversary of service and becoming 100% vested after the
third anniversary of service or upon a change in control of Billing. Benefits
are generally payable to a Billing Director Deferral Participant (or his
beneficiary) upon retirement, disability, termination of service or death, in
each case as provided in the Billing Director Deferral Plan. In fiscal 1995, Lee
Cooke elected to make voluntary deferral contributions of $14,500, and USLD made
a contribution of $4,785 on Mr. Cooke's behalf.
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BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
Set forth below is information with respect to each individual who will
serve as a director or executive officer of Billing as of the Distribution Date.
<TABLE>
<CAPTION>
NAME AGE POSITION
- - ------------------------- --- --------------------------------------------------------------------
<S> <C> <C>
Parris H. Holmes, Jr..... 52 Chairman of the Board and Chief Executive Officer
Alan W. Saltzman......... 49 President and Chief Operating Officer
Kelly E. Simmons......... 41 Senior Vice President and Chief Financial Officer
Paul L. Gehri............ 42 Vice President of Sales of BICI and ESBI
Michael R. Long.......... 51 Vice President of Information Technology of BICI and ESBI
Lee Cooke................ 49 Director
</TABLE>
- - ------------------------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.
(3) Member of the Nominating Committee.
The following is a description of the biographies of Billing's executive
officers and directors for the past five years.
PARRIS H. HOLMES, JR. has served as Chairman of the Board and Chief
Executive Officer of USLD since September 8, 1986. Prior to March 1993, Mr.
Holmes also served as President of USLD. Mr. Holmes is also a member of the
Board of Directors of Tanisys Technology, Inc., a developer and marketer of
computer peripheral equipment.
ALAN W. SALTZMAN has been Executive Vice President -- Operations, Billing
and Information Management of the USLD since May 1993. Mr. Saltzman has been
Chief Operating Officer of ZPDI since February 1991. In August 1994, Mr.
Saltzman was elected President of ZPDI. Mr. Saltzman has been an adviser to the
Board of Directors of USLD since February 1994. Mr. Saltzman joined Billing in
1989 as Vice President -- Information Management Systems. Mr. Saltzman is a
director of Tanisys Technology, Inc.
KELLY E. SIMMONS joined USLD in November 1988 as Corporate Controller.
During 1990, Mr. Simmons was promoted to the position of Vice President of
Accounting and Corporate Treasurer. In July 1992, separate departments for the
accounting and treasury functions were created, at which time Mr. Simmons
retained responsibility for the treasury function and was named Vice-President
- - -- Finance and Corporate Treasurer. In September 1994, Mr. Simmons also became
Vice President -- Administration. In October 1995, Mr. Simmons also became
Senior Vice President of Business Development and Corporate Treasurer.
PAUL L. GEHRI has served as Vice President of Sales for ZPDI since May 1992.
Mr. Gehri was Vice President of Sales of U.S. Long Distance, Inc. from July 1991
to May 1992 and was Director of Sales and a principal of National Telephone
Exchange, Inc., a company acquired by USLD, from 1988 to July 1991.
MICHAEL R. LONG has served as Vice President -- Management Information
Systems of U.S. Long Distance, Inc. since December 1993. Prior to that time,
from 1989 to 1993, Mr. Long served in various capacities at United Services
Automobile Association, first as Director -- Life Systems Strategic Development
(1989-1991), then as Executive Director -- Life Systems Strategic Development
(1991-1993) and most recently as Assistant Vice President -- Life, Health and
Annuity Systems (1993).
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LEE COOKE has served as a director of USLD since 1991. Since May 1992, he
has been Chairman of the Board and Chief Executive Officer of Medical Polymers
Technologies, Inc. From 1988 through 1991, Mr. Cooke served in the elected
position of Mayor of Austin, Texas.
EXECUTIVE COMPENSATION
The following Summary Compensation Table sets forth certain information
regarding compensation paid by USLD to the individuals serving as Billing's
Chief Executive Officer and the four other most highly compensated executive
officers for the three fiscal years ended September 30, 1995, 1994 and 1993.
During the periods presented, the individuals were compensated in accordance
with USLD's plan and policies. All references in the tables to stock and stock
options relate to awards of stock and stock options of USLD.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
AWARDS
--------------------------
ANNUAL COMPENSATION RESTRICTED SECURITIES
NAME AND ------------------------- OTHER ANNUAL STOCK UNDERLYING
PRINCIPAL POSITION FISCAL YEAR SALARY ($) BONUS ($)(1) COMPENSATION ($) AWARDS ($)(3) OPTIONS (#)
- - ------------------------------ ----------- ------------ ----------- ----------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr.......... 1995 $ 276,000 $ 750,000 $ 22,421(2) $ 0 100,000
Chairman of the Board 1994 271,113 0 0 159,375(4) 90,000
and Chief Executive Officer 1993 223,254 175,000 0 0 50,000
Alan W. Saltzman.............. 1995 147,308 100,000 0 0 25,000
President and 1994 136,790 10,000 0 31,875(6) 58,000
Chief Operating Officer 1993 118,269 45,000 0 0 28,000
Kelly E. Simmons.............. 1995 96,000 33,000 0 0 0
Senior Vice President 1994 95,479 5,000 0 12,250(8) 19,000
and Chief Financial Officer 1993 86,385 10,000 0 0 10,000
Paul L. Gehri................. 1995 83,654 10,000 0 0 0
Vice President of Sales 1994 80,462 10,000 0 0 16,500
of BICI and ESBI 1993 74,923 16,000 0 0 6,500
Michael R. Long............... 1995 84,900 15,500 0 0 0
Vice President of 1994 63,750(11) 0 0 0 19,500
Information Technology of 1993 0 0 0 0 0
BICI and ESBI
<CAPTION>
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)
- - ------------------------------ --------------
<S> <C>
Parris H. Holmes, Jr.......... $ 38,964(5)
Chairman of the Board 24,637
and Chief Executive Officer 3,125
Alan W. Saltzman.............. 8,792(7)
President and 6,614
Chief Operating Officer 2,212
Kelly E. Simmons.............. 2,863(9)
Senior Vice President 0
and Chief Financial Officer 0
Paul L. Gehri................. 3,333(10)
Vice President of Sales 3,033
of BICI and ESBI 1,390
Michael R. Long............... 0
Vice President of 0
Information Technology of 0
BICI and ESBI
</TABLE>
- - ------------------------------
(1) In 1994 and 1993, represents bonuses earned in the applicable fiscal year,
but paid 50% in January and 50% in April of the following fiscal year.
Payment of such bonuses was conditioned upon USLD recognizing a profit in
its first and second fiscal quarters respectively. These conditions,
however, were waived by USLD for those bonuses earned for fiscal 1993 and
1994.
(2) Represents amounts reimbursed during fiscal 1995 for the payment of taxes.
(3) At September 30, 1995, the number and value of aggregate restricted stock
award holdings were as follows: Mr. Holmes, 15,000 shares ($225,938) and
Mr. Saltzman, 3,000 shares ($45,188). The value of the restricted stock
awards was determined by multiplying the market value of the USLD's Common
Stock on September 29, 1995 as determined by reference to the closing price
of the Common Stock on the Nasdaq National Market ($15.0625 per share) by
the number of shares of restricted stock held. If any dividends are paid
with respect to USLD's Common Stock, such dividends will be paid on the
restricted stock.
(4) Mr. Holmes was granted 15,000 shares of restricted stock on March 1, 1994,
which vested 50% on February 1, 1995 and 50% on February 1, 1996.
(5) Represents $1,871 in USLD 401(k) Retirement Plan contributions, $15,686 in
USLD deferred compensation contributions and $21,407 in life insurance
premiums made or paid on behalf of Mr. Holmes during fiscal 1995.
(6) Mr. Saltzman was granted 3,000 shares on March 1, 1994, which vest 50% on
February 1, 1995 and 50% on February 1, 1996.
(7) Represents $2,391 in USLD 401(k) Retirement Plan contributions and $6,401
in USLD deferred compensation contributions made on behalf of Mr. Saltzman
during fiscal 1995.
(8) Mr. Simmons was granted 1,000 shares on March 24, 1994, which vested 50% on
February 1, 1995 and 50% on February 1, 1996.
(9) Represents $1,303 in USLD 401(k) Retirement Plan contributions and $1,560 in
USLD deferred compensation contributions made on behalf of Mr. Simmons
during fiscal 1995.
(10) Represents $1,538 in USLD 401(k) Retirement Plan contributions and $1,795
in USLD deferred compensation contributions made on behalf of Mr. Gehri.
54
<PAGE>
(11) Amount shown reflects Mr. Long's salary from December 27, 1993, the
beginning date of his employment with U.S. Long Distance, Inc., through the
end of fiscal 1994.
STOCK OPTION GRANTS IN FISCAL 1995
The following table provides certain information related to options granted
to the named executive officers of Billing during the period October 1, 1994
through September 30, 1995 pursuant to USLD stock plans. For information
concerning the treatment of USLD options held by Billing officers after the
Distribution, see "Relationship Between Billing and USLD after the Distribution
- - -- Benefit Plans and Employment Matters Allocation Agreement."
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
------------------------------ ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (4)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL 1995 ($/SH) (2) DATE 5% ($) 10% ($)
- - ------------------------------------------ --------------- ------------- -------------- ------------ --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr...................... 100,000 44.4 $ 14.875(3) 4/12/00(3) $ 410,969 $ 908,134
(310,817) (686,824)
Alan W. Saltzman.......................... 25,000 11.1 14.875(3) 4/12/00(3) 102,742 227,033
(77,704) (171,706)
Kelly E. Simmons.......................... 0 0 N/A N/A N/A N/A
Paul L. Gehri............................. 0 0 N/A N/A N/A N/A
Michael R. Long........................... 0 0 N/A N/A N/A N/A
</TABLE>
- - ------------------------------
(1) For each named executive officer, the option listed represents a grant
under USLD's Employee Option Plan. Of the options granted in 1995,
one-third were immediately vested and, under the terms of the Employee
Option Plan, were exercisable six months from the date of grant and
one-third each are exercisable on the two anniversaries following the date
of grant.
(2) The exercise price may be paid by delivery of already owned shares of Common
Stock or by offset of the underlying shares of USLD Common Stock, subject to
certain conditions.
(3) In November 1995, each of these options was voluntarily surrendered in
consideration of an option grant for the same number of shares at an option
exercise price of $11.25 per share, and the option expiration dates were
extended to November 27, 2000.
(4) Calculation based on stock option exercise price over period of option
assuming annual compounding. The columns present estimates of potential
values based on certain mathematical assumptions. The actual value, if any,
that an executive officer may realize is dependent upon the market price on
the date of option exercise. Amounts in parentheses indicate potential
realizable value after giving effect to repricing described in footnote 3.
AGGREGATED OPTION EXERCISES IN FISCAL 1995 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to options exercised by the
named executive officers of Billing during the period October 1, 1994 through
September 30, 1995 and the number and value of USLD options held at fiscal year
end.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE(3) OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES ACQUIRED OPTIONS AT FY-END (#)(2) OPTIONS AT FY-END ($)(3)
UPON OPTION VALUE -------------------------- ----------------------------
NAME EXERCISE (#) REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - -------------------------------- ----------------- -------------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Parris H. Holmes, Jr............ 18,000 $ 138,250 105,501 100,499 $ 396,304 $ 200,571
(517,140)(4) (442,235)(4)
Alan W. Saltzman................ 15,000 129,375 64,334 38,666 315,313 125,000
(345,562)(4) (185,414)(4)
Kelly E. Simmons................ 7,333 88,913 24,000 11,000 177,000 60,813
Paul L. Gehri................... 7,000 78,785 24,709 10,041 184,620 20,118
Michael R. Long................. 6,501 35,370 0 12,999 0 111,222
</TABLE>
- - ------------------------------
(1) Market value of the underlying securities at exercise date, minus the
exercise price.
(2) Does not give effect to the repricing and regrant of options in fiscal
1996, which, among other things, lengthened the period of time in which
certain options become exercisable.
(3) Market value of the underlying securities at September 29, 1995 ($15.0625
per share), minus the exercise price.
55
<PAGE>
(4) Amount in parentheses reflects value after repricing of options occurring
in fiscal 1996. See "Stock Option Grants in Fiscal 1995" above.
EMPLOYEE BENEFIT PLANS
BILLING INFORMATION CONCEPTS CORP. 401(K) RETIREMENT PLAN
Prior to the Distribution, Billing will adopt the Billing Information
Concepts Corp. 401(k) Retirement Plan (the "Billing Retirement Plan") which will
be effective upon the effective date of the Registration Statement on Form 10.
Participation in the Billing Retirement Plan will be offered to eligible
employees of Billing or its subsidiaries (collectively, the "Participants").
Generally, all employees of Billing or its subsidiaries who are 21 years of age
and who have completed one year of service during which they worked at least
1,000 hours will be eligible for participation in the Billing Retirement Plan.
The Billing Retirement Plan will be a 401(k) plan, a form of defined
contribution plan which provides that Participants generally may make voluntary
salary deferral contributions, on a pre-tax basis, of between 1% and 15% of
their base compensation in the form of voluntary payroll deductions up to a
maximum amount as indexed for cost-of-living adjustments ("Voluntary
Contributions"). Billing will make matching contributions equal to 50% of the
first 3% of a Participant's compensation contributed as salary deferral. Billing
may from time to time make additional discretionary contributions at the sole
discretion of the Billing Board. The discretionary contributions, if any, are
allocated to Participants' accounts based on a discretionary percentage of the
Participants' respective salary deferrals.
Participants will be gradually vested in all contributions made by Billing
over a period of five years of credited service, vesting 25% a year for each
full year of service beginning with the Participant's second anniversary, and
becoming 100% vested after five years of service or upon death, total and
permanent disability, retirement under the Billing Retirement Plan or Billing
Retirement Plan termination. Participants will be always 100% vested in their
Voluntary Contributions. Service with USLD prior to the Distribution Date will
be credited under the Billing Retirement Plan for purposes of vesting as well as
eligibility to participate.
STOCK OPTION AND GRANT PLANS.
BILLING INFORMATION CONCEPTS CORP. 1996 EMPLOYEE COMPREHENSIVE STOCK PLAN
GENERAL. Prior to the Distribution, Billing will adopt, and USLD as the
sole stockholder of Billing will approve, the Billing Information Concepts, Inc.
1996 Employee Comprehensive Stock Plan (the "Billing Employee Stock Plan"),
which will become effective upon the effective date of the Registration
Statement on Form 10. The purpose of the Billing Employee Stock Plan is to
further the success of Billing and its affiliates by making the Billing Common
Stock available for purchase by all officers and employees upon the exercise of
options and by awarding restricted shares of Billing Common Stock to its
officers and employees and thus providing incentive to such individuals to
continue in the service of Billing and its affiliates and giving such
individuals a greater interest in Billing as stockholders. The Billing Employee
Stock Plan provides for (i) the grant of incentive stock options ("ISOs"), under
Section 422 of the Internal Revenue Code, (ii) the grant of nonqualified stock
options that do not qualify under Section 422 of the Code ("NQSOs") and (iii)
the award of shares of restricted stock of Billing. Under the terms of the
Billing Employee Stock Plan, 3,500,000 shares of Billing Common Stock have been
reserved for the granting of options and awards of restricted stock. If any
option or award granted under the Billing Employee Stock Plan terminates,
expires or is surrendered as to any shares, new options or awards may thereafter
be made covering such shares.
Based upon the number of USLD stock options outstanding on May 10, 1996, it
is anticipated that NQSOs to purchase a total of 1,685,475 shares of Billing
Common Stock will be granted in connection with the distribution to USLD option
holders prior to the Distribution. See "Relationship Between Billing and USLD
after the Distribution -- Benefit Plans and Employment Matters Allocation
Agreement."
56
<PAGE>
ADMINISTRATION. The Billing Employee Stock Plan will be administered by the
Compensation Committee of two "disinterested persons" appointed by the Board.
The Billing Employee Stock Plan grants broad authority to the Compensation
Committee to grant options or award restricted shares to full-time employees and
officers of Billing and its subsidiaries (estimated to total 600 eligible
individuals at the Distribution Date) selected by the Compensation Committee, to
determine the number of shares subject to options or awards and to provide for
the appropriate periods and methods of exercise and requirements regarding the
vesting of options and awards of restricted shares.
TERMS OF OPTIONS. The Billing Employee Stock Plan will limit the discretion
allowed to the Compensation Committee in granting options. The option price per
share with respect to each option shall be determined by the Compensation
Committee, but shall in no instance be less than the par value of the shares
subject to the option. In addition, the option price for ISOs may not be less
than 100% of the fair market value of the Billing Common Stock on the date of
grant. An ISO may be granted to a participant only if such participant, at the
time the option is granted, does not own stock possessing more than 10% of the
total combined voting power of all classes of Common Stock of Billing or of its
parent or subsidiary. The preceding restriction shall not apply if at the time
the option is granted the option price is at least 110% of the fair market value
of the Billing Common Stock subject to the option and such option by its terms
is not exercisable after the expiration of five years from the date of grant.
The aggregate fair market value (determined as of the time the option is
granted) of the stock with respect to which ISOs are exercisable for the first
time by a participant in any calendar year (under all plans of Billing and of
any parent or subsidiary) shall not exceed $100,000. There is no price
requirement for NQSOs, other than that the option price must exceed the par
value of the Billing Common Stock. The Compensation Committee may permit the
option purchase price to be payable by transfer to Billing of Billing Common
Stock owned by the option holder with a fair market value at the time of
exercise equal to the option purchase price. The expiration date of each option
shall be fixed by the Compensation Committee, but notwithstanding any provision
of the Billing Employee Stock Plan to the contrary, such expiration shall not be
more than ten years from the date of grant. No participant shall receive any
grant of options, whether ISOs or NQSOs, for more than an aggregate of 150,000
shares of Billing Common Stock during any one fiscal year of Billing.
Options to acquire Billing Common Stock granted to USLD optionees under the
Billing Employee Stock Plan prior to the Distribution shall have vesting and
other material provisions similar to those of the related USLD options. See
"Relationship Between Billing and USLD after the Distribution -- Benefit Plans
and Employment Matters Allocation Agreement."
TERMS OF RESTRICTED STOCK AWARDS. The Billing Employee Stock Plan permits
the Compensation Committee to make awards of shares of Billing Common Stock that
are subject to a designated period during which such shares of Billing Common
Stock may not be sold, assigned, transferred, pledged, or otherwise encumbered,
which period shall not be less than one (1) year nor more than two (2) years
from the date of grant. As a condition to any award, the Compensation Committee
may require an employee to pay to Billing the amount (such as the par value of
such shares) required to be received by Billing in order to assure compliance
with applicable state law. Any award for which such requirement is established
shall automatically expire if not purchased in accordance with the Compensation
Committee's requirements within 60 days after the date of grant. The
Compensation Committee may, at any time, reduce the restricted period with
respect to any outstanding shares of restricted stock and any retained
distributions with respect thereto awarded under the Billing Employee Stock
Plan. Shares of restricted stock awarded under the Billing Employee Stock Plan
shall constitute issued and outstanding shares of Billing Common Stock for all
corporate purposes.
Each employee shall have the right to vote the restricted stock held by such
employee, to receive and retain all cash dividends and distributions thereon and
exercise all other rights, powers and privileges of a holder of Billing Common
Stock with respect to such restricted stock, with the exception that (i) the
employee will not be entitled to delivery of the stock certificate or
certificates representing such restricted stock until the restricted period
applicable to such shares or a portion thereof shall have expired and unless all
other vesting requirements with respect thereto shall have been fulfilled;
57
<PAGE>
(ii) other than cash dividends and distributions and rights to purchase stock
that might be distributed to stockholders of Billing, Billing will retain
custody of all retained distributions (any securities or other property other
than cash dividends distributed by Billing or otherwise received by the holder
in respect of restricted stock during any restricted period) made or declared or
otherwise received by the holder thereof with respect to restricted stock (and
such retained distributions will be subject to the same restrictions, terms and
conditions as are applicable to the restricted stock with respect to which they
made, paid or declared) until such time, if ever, as the restricted period
applicable to the shares with respect to which such retained distribution shall
have been made, paid or declared or received shall have expired, and such
retained distribution shall not bear interest or be segregated in separate
accounts; (iii) an employee may not sell, assign, transfer, pledge, exchange,
encumber or dispose of any restricted stock or any retained distributions during
the applicable restricted period; and (iv) upon the breach of any restrictions,
terms or conditions provided in the Billing Employee Stock Plan or the
respective agreement or otherwise established by the Compensation Committee with
respect to any restricted stock or retained distributions, such restricted stock
and any related retained distributions shall thereupon be automatically
forfeited. Unless otherwise provided in the agreement relating to award, upon
the occurrence of a change of control, as defined in the Billing Employee Stock
Plan, all restrictions imposed on the employee's restricted stock and any
retained distributions shall automatically terminate and lapse and the
restricted period shall terminate; provided, however, that if the change in
control occurs within six months of the date of grant the restrictions and the
restricted period shall terminate on the sixth anniversary of the date of grant.
ADJUSTMENTS. The Compensation Committee, in its discretion, may make such
adjustments in the option price, the number of shares and other appropriate
provisions covered by outstanding options and the number or kind of shares
covered by outstanding awards of restricted stock that are required to prevent
any dilution or enlargement of the rights of the holders of such options and
awards that would otherwise result from any reorganization, recapitalization,
stock split, stock dividend, combination of shares, merger, consolidation,
issuance of rights or any other change in the capital structure of Billing. The
Compensation Committee, in its discretion, may also make such adjustments in the
aggregate number of shares subject to options and the number or class of shares
subject to restricted stock awards which are appropriate to reflect any
transaction or event described in the preceding sentence.
AMENDMENT AND TERMINATION. The Board of Directors may at any time suspend
or terminate the Billing Employee Stock Plan or may amend it from time to time
in such respects as the Board of Directors may deem advisable in order that
options and awards of restricted stock granted thereunder may conform to any
changes in the law or in any other respect that the Board of Directors may deem
to be in the best interests of Billing; PROVIDED, HOWEVER, that without approval
by the stockholders of Billing voting the proper percentage of its voting power,
no such amendment shall make any change in the Billing Employee Stock Plan for
which stockholder approval is required of Billing in order to comply with (i)
Rule 16b-3, as amended, promulgated under the Exchange Act, (ii) the Code or
regulatory provisions dealing with ISOs, (iii) any rules for listed companies
promulgated by any national stock exchange on which Billing stock is traded, or
(iv) any other applicable rule or law. Unless sooner terminated, the Billing
Employee Stock Plan shall terminate ten years after the date it becomes
effective. Except in connection with satisfaction of withholding requirements of
any federal, state or local withholding tax, no amendment, suspension or
termination of the Billing Employee Stock Plan shall, or consent impair or
negate any of the rights or obligations under any option or award of restricted
stock theretofore granted under the Billing Employee Stock Plan without the
consent of the participant granted such option or awarded such shares of
restricted stock.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is intended only as
a general guide as to certain federal income tax consequences under current law
for participation in the Billing Employee Stock Plan and does not attempt to
describe all potential tax consequences. Furthermore, tax consequences are
subject to change and a taxpayer's particular situation may be such that some
variation of the described rules is applicable.
58
<PAGE>
Options. No tax obligation will arise for the optionee or Billing upon the
granting of either ISOs or NQSOs under the Billing Employee Stock Plan. Upon
exercise of a NQSO, an optionee will recognize ordinary income in an amount
equal to the excess, if any, of the fair market value on the date of exercise of
the stock acquired over the exercise price of the option. Billing will be
entitled to a tax deduction in an amount equal to the ordinary income recognized
by the optionee. Any additional gain or loss realized by an optionee on
disposition of the shares generally will be capital gain or loss to the optionee
and will not result in any additional tax deduction to Billing. Because a NQSO
cannot be exercised prior to six months from the date of grant, the taxable
event arising from exercise of NQSOs by officers of Billing subject to Section
16(b) of the Exchange Act occurs on the date the option is exercised. The income
recognized at the end of any deferral period will include any appreciation in
the value of the stock during that period, and the capital gain holding period
of the stock for purposes of obtaining long-term capital gain treatment will not
begin until the completion of such period.
Upon the exercise of an ISO, an optionee recognizes no immediate taxable
income. The tax cost is deferred until the optionee ultimately sells the shares
of stock. If the optionee does not dispose of the option shares within two years
from the date the option was granted and within one year after the exercise of
the option ("holding periods"), and the ISO is exercised no later than three
months after the termination of the optionee's employment, the gain on the sale
will be treated as long-term capital gain. Subject to the limitations in the
Billing Employee Stock Plan, certain of these holding periods and employment
requirements are liberalized in the event of the optionee's death or disability
while employed by Billing. Billing is not entitled to any tax deduction, except
that if the stock is disposed of prior to satisfying the holding periods
described above, the gain on the sale of such stock equal to the lesser of (i)
the fair market value of the stock on the date of exercise minus the option
price or (ii) the amount realized on disposition minus the option price will be
taxed to the optionee as ordinary income and Billing will be entitled to a
deduction in the same amount. Any additional gain or loss recognized by an
optionee upon disposition of shares prior to the expiration of the holding
periods outlined above generally will be capital gain or loss to the optionee
and will not result in any additional tax deduction to Billing. The "spread"
between the fair market value of the option stock and the option price upon
exercise of an ISO is an item of adjustment used in the computation of the
"alternative minimum tax" of the optionee under the Code. The tax benefits which
might otherwise accrue to an optionee may be affected by the imposition of such
tax if applicable in the optionee's individual circumstances.
Restricted Stock. Awards of restricted stock will not result in taxable
income to the employee or a tax deduction to Billing for Federal income tax
purposes at the time of grant. A recipient of restricted stock generally will be
subject to tax at ordinary income rates on the fair market value of the Billing
Common Stock at the time the shares of restricted stock are no longer subject to
forfeiture. However, a recipient who so elects under Section 83(b) of the Code
within 30 days of the date of the grant will have ordinary taxable income on the
date of the grant equal to the fair market value of the restricted stock as if
such shares of stock were unrestricted and could be sold immediately. If the
shares of restricted stock subject to such election are forfeited, the recipient
will not be entitled to any deduction, refund or loss for tax purposes with
respect to the forfeited shares. Upon sale of the restricted stock after the
forfeiture period has expired, the holding period to determine whether the
recipient has long-term or short-term capital gain or loss begins when the
restriction period expires. However, if the recipient timely elects to be taxed
as of the date of the grant, the holding period commences on the date of the
grant and the tax basis will be equal to the fair market value of the shares of
restricted stock on the date of the grant as if such shares were then
unrestricted and could be sold immediately.
Billing is entitled to a deduction (subject to the provisions of Section
162(m) of the Code) for compensation paid to a participant at the same time and
in the same amount as the participant is considered to have realized as
compensation by reason of the lapse of restrictions on an award of restricted
stock or by reason of the election under Code Section 83(b) to recognize
ordinary income at the time of the grant.
59
<PAGE>
BILLING INFORMATION CONCEPTS CORP. 1996 NON-EMPLOYEE DIRECTOR PLAN
GENERAL. Prior to the Distribution, Billing will adopt, and USLD as the
sole stockholder of Billing will approve, the 1996 Non-Employee Director Plan of
Billing Information Concepts Corp. (the "Billing Director Plan"), which will
become effective on the effective date of the Registration Statement on Form 10.
The Billing Director Plan authorizes the granting of nonincentive options
("Billing Director Options") to purchase Billing Common Stock to non-employee
directors (estimated to total three eligible individuals at the Distribution
Date). A total of 400,000 shares of Billing Common Stock (subject to certain
adjustments) have been reserved for issuance upon exercise of Billing Director
Options and upon the exercise of Billing Director Fee Options (described below)
granted to non-employee directors who elect to receive their Annual Director Fee
(described below) wholly or partly in a Billing Director Fee Option. If any
Billing Director Option or Billing Director Fee Option terminates, expires or is
cancelled or surrendered as to any shares, new Billing Director Options and/or
Billing Director Fee Options may be granted covering such shares.
ADMINISTRATION. The Billing Director Plan will be administered by a stock
option committee consisting of not fewer than three (3) members of the Board of
Directors. Until this committee is appointed by the Board of Directors, the
Board of Directors will administer the Billing Director Plan.
TERMS OF OPTIONS. The Billing Director Plan provides that any future
non-employee director of Billing (who was not previously a director of Billing)
who is elected to the Board of Directors will be granted a Billing Director
Option exercisable for 15,000 shares of Billing Common Stock on the date such
non-employee director is so elected as a director, whether at the annual meeting
of stockholders or otherwise, at an exercise price equal to the fair market
value of the Billing Common Stock on the date such non-employee director is
elected. In addition, each non-employee director will receive, on the first
business day after the date of each annual meeting of stockholders of Billing,
commencing with the annual meeting of stockholders immediately following the
full vesting of any previously granted Billing Director Option, a new Billing
Director Option to purchase an additional 15,000 shares of Billing Common Stock
at an exercise price per share equal to the fair market value of Billing Common
Stock on the date of grant. In each case, such Billing Director Option will vest
as to 5,000 shares of Billing Common Stock on each of the first three
anniversaries of the date of grant.
Each outside Billing Director will receive an annual retainer fee (the
"Annual Director Fee") on the business day on or immediately after December 15
of each year in either cash or, in lieu thereof, at the election of each outside
director, a stock option ("Billing Director Fee Option") to purchase certain
shares of Billing Common Stock. Each outside director may also receive the
Annual Director Fee partly in cash and partly in a Billing Director Fee Option.
The Billing Director Plan provides that no later than December 31 of each year,
each non-employee director of Billing must elect to receive his or her Billing
Annual Director Fee for the following year in cash ($15,000) or in whole or in
part through the grant of a Billing Director Fee Option exercisable for up to
7,500 shares of Billing Common Stock at an exercise price per share equal to the
fair market value of the Billing Common Stock on the date of grant (I.E., the
business day on or immediately after December 15). A non-employee director must
still be a director of Billing on December 15 to be eligible to receive a
Billing Annual Director Fee. The Billing Director Fee Option will vest
immediately, but will not be exercisable for six months and will expire five
years from the date of grant.
A Billing Director Option is not exercisable for six months commencing with
the date of grant and terminates on the earlier to occur of (i) 30 days after
the date that the optionee ceases to be a Director, except that if the optionee
dies while a director, the Billing Director Option expires one year therefrom or
six months therefrom if the optionee dies during the 30-day period referenced
above, or (ii) five years from the date of grant of the Billing Director Option.
A Billing Director Fee Option will terminate five years from the date of grant.
LIMITS ON GRANTS. Billing Director Options and Billing Director Fee Options
may not be granted at an exercise price per share that is less than the fair
market value of the Billing Common Stock at the date of grant. The exercise
price of a Billing Director Option and a Billing Director Fee Option may be
60
<PAGE>
paid in cash, certified or cashier's check, money order, or by delivery of
already owned shares of Billing Common Stock having a fair market value equal to
the exercise price, or by delivery of a combination of the above. One purpose
for permitting delivery of Billing Common Stock in full or partial payment of
the exercise price is to make it possible for the optionee to exercise his
Billing Director Options or Billing Director Fee Option, without the need to
sell Billing Common Stock already owned, which sale would result in the optionee
incurring capital gain (or loss) for federal income tax purposes and/or
potential Section 16(b) liability.
ADJUSTMENTS. To prevent dilution of the rights of a holder of a Billing
Director Option and a Billing Director Fee Option, the Billing Director Plan
provides for the adjustment of (i) the number of shares upon which Billing
Director Options and Billing Director Fee Options may be granted, (ii) the
number of shares subject to outstanding Billing Director Options and Billing
Director Fee Options and (iii) the exercise price of a Billing Director Option
and a Billing Director Fee Option, in the event of any subdivision or
consolidation of shares of Billing Common Stock, any stock dividend,
recapitalization or other capital adjustment.
ASSIGNABILITY. The Billing Director Options and Billing Director Fee
Options are not assignable or transferable other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order.
During the lifetime of an optionee, a Billing Director Option or Billing
Director Fee Option is exercisable only by the optionee, the optionee's guardian
or legal representative. Billing has registered the shares of Billing Common
Stock issuable pursuant to the exercise of Billing Director Options and Billing
Director Fee Options with the Commission.
TERMINATION. The Billing Director Plan terminates on , 2006 and
any Billing Director Option or any Billing Director Fee Option outstanding on
such date will remain outstanding until it has either expired or been exercised.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The federal income tax rules
summarized below are based upon current tax laws and thus are subject to change.
Moreover, this summary of the tax consequences is not intended to be a complete
description of all federal, state and local tax consequences of the Billing
Director Plan.
The amount of the Annual Director Fee received in cash will be taxable upon
receipt. The grant of a Billing Director Option or Billing Director Fee Option
will not be taxable to an optionee. Generally, upon the exercise of a Billing
Director Option or Billing Director Fee Option that has been held by the
optionee for at least six months, an optionee who is subject to Section 16(b) of
the Exchange Act will recognize ordinary income at the time of exercise in an
amount equal to the excess of the then fair market value of the shares of
Billing Common Stock purchased over the exercise price. Optionees who are not
subject to Section 16(b) will generally recognize income at the time of exercise
of a Billing Director Option or Billing Director Fee Option determined in the
same manner as optionees subject to Section 16(b). Because participants in the
Billing Director Plan will not be employees of Billing, there will be no
withholding with respect to the recognized ordinary income resulting from the
exercise of Billing Director Options or Billing Director Fee Options or with
respect to receipt of the Annual Director Fee in cash (although the
self-employment tax on self-employed persons generally will apply thereto). When
shares of Billing Common Stock received upon the exercise of a Billing Director
Option or Billing Director Fee Option subsequently are disposed of in a taxable
transaction, the optionee generally will recognize capital gain (or loss) in the
amount by which the amount realized exceeds (or is less than) the fair market
value of the Billing Common Stock on the date the Billing Director Option or
Billing Director Fee Option was exercised. Such capital gain (or loss) will be
long- or short-term depending upon the optionee's holding period for the Billing
Common Stock acquired upon exercise of the Billing Director Option or Billing
Director Fee Option.
BILLING INFORMATION CONCEPTS CORP. 1996 EMPLOYEE STOCK PURCHASE PLAN
GENERAL. Prior to the Distribution, Billing will adopt, and USLD as the
sole stockholder of Billing will approve, the Billing Information Concepts Corp.
1996 Employee Stock Purchase Plan (the
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"Billing Purchase Plan"), which will become effective upon the effective date of
the Registration Statement on Form 10. The Billing Purchase Plan is intended to
allow employees of Billing and its subsidiaries to purchase Billing Common Stock
at regular intervals by means of wage and salary deferrals on a tax-favored
basis. A total of 1,000,000 shares of Billing Common Stock has been reserved for
issuance under the Billing Purchase Plan.
ADMINISTRATION. The Billing Purchase Plan, which is intended to qualify
under Section 423 of the Code, will be administered by the Employee Stock
Purchase Plan Committee, which will be appointed by the Board of Directors. The
Committee will consist of at least three persons who need not be members of the
Board of Directors. The Committee will supervise the administration and
enforcement of the Billing Purchase Plan, and all questions of interpretation or
application of the Billing Purchase Plan will be determined in the sole
discretion of the Committee. All decisions made by the Committee will be final,
conclusive and binding on all of the participants of the Billing Purchase Plan
and Billing.
ELIGIBILITY AND PARTICIPATION. Every employee of Billing and its
subsidiaries will be eligible to participate in the Billing Purchase Plan on a
voluntary basis with the exception of (i) employees who have not completed at
least six months of continuous service with Billing as of the applicable
enrollment date and (ii) employees who would, immediately upon enrollment, own
directly or indirectly, or hold purchase rights, options or rights to acquire,
an aggregate of 5% or more of the total combined voting power or value of all
outstanding shares of all classes of Billing or any subsidiary. To participate
in the Billing Purchase Plan, eligible employees must enroll in the Billing
Purchase Plan and authorize payroll deductions pursuant to the Billing Purchase
Plan. These payroll deductions may not exceed $10,625 in any six-month
participation period. A participant will be automatically re-enrolled in the
Billing Purchase Plan, under the same terms, on the next offering period unless
the participant notifies Billing of his or her election not to re-enroll or
desire to change his or her contribution amount. A participant has the right to
suspend payroll deductions at any time, including during an offering period. Any
participant who suspends participation in the Billing Purchase Plan must re-
enroll during any subsequent enrollment period in order to participate in any
future offering periods. Once a participant withdraws from an offering, that
participant may not participate in the same offering. Billing anticipates that
approximately 600 employees will be eligible to participate in the first
offering period under the Billing Purchase Plan.
OFFERING PERIODS. The initial offering period will begin on August 1, 1996
and will end on January 31, 1997. After the initial offering period, each
offering of Billing Common Stock under the Billing Purchase Plan will be for a
period of approximately six months. The commencement of each offering will start
at the beginning of Billing's regular payroll period that falls closest to
February 1 and August 1 of each year.
PURCHASE PRICE. Enrollment in the Billing Purchase Plan constitutes a grant
by Billing to the participant of the right to purchase shares of Billing's
Common Stock. The aggregate number of shares that may be issued under the
Billing Purchase Plan may not exceed 1,000,000 shares of Billing Common Stock,
subject to adjustment as provided in the Billing Purchase Plan. The purchase
price per share is the lesser of (i) 85% of the fair market value of the Billing
Common Stock on the first day of the applicable participation period or (ii) 85%
of the fair market value of the Billing Common Stock on the last day of such
participation period. The number of shares purchased is determined by dividing
the total amount of payroll deductions withheld from a participant's paychecks
during a participation period by the purchase price. The aggregate of monthly
payroll deductions cannot exceed $10,625 in any six-month participation period.
At the end of each offering period, the applicable number of shares of Billing
Common Stock is automatically purchased for the participant.
ADJUSTMENTS ON CHANGES IN CAPITALIZATION. In the event of any
reorganization, recapitalization, stock split, reverse stock split, stock
dividend, combination of shares, merger, consolidation, offering of rights or
other similar change in the capital structure of Billing, the Employee Stock
Purchase Plan Committee may make such adjustment, if any, as it deems
appropriate in the number, kind and
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<PAGE>
purchase price of the shares available for purchase under the Billing Purchase
Plan and in the maximum number of shares that may be issued under the Billing
Purchase Plan, subject to the approval of the Board of Directors.
ASSIGNMENT. The rights of a participant under the Billing Purchase Plan are
not assignable or otherwise transferrable by the participant except by will or
the laws of descent and distribution.
TERMINATION. The right of an employee to participate in the Billing
Purchase Plan terminates immediately when a participant ceases to be employed by
Billing or any subsidiary. Any contributions collected for the offering then in
effect prior to the date of termination will be paid to the employee in cash.
AMENDMENT AND TERMINATION OF THE PLAN. The Board of Directors may amend or
terminate the Billing Purchase Plan at any time as permitted by law, with the
exception that the provisions of the Billing Purchase Plan that constitute a
formula award for purposes of Rule 16b-3 and may not be amended more than once
every six months, other than to comply with changes in the Code, or the rules
thereunder. No amendment shall be effective unless within one year after the
change is adopted by the Board of Directors it is approved by the holders of a
majority of the voting power of Billing's outstanding shares (i) if and to the
extent such amendment is required to be approved by stockholders to continue the
exemption provided for in Rule 16b-3 (or any successor provision); or (ii) if
such amendment would cause the rights granted under the Billing Purchase Plan to
purchase shares of Billing Common Stock to fail to meet the requirements of
Section 423 of the Internal Revenue Code (or any successor provision).
CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The Billing Purchase Plan is
intended to be an "Employee Stock Purchase Plan" within the meaning of Section
423 of the Code. Under a plan that so qualifies, no taxable income is reportable
by a participant, and no deductions are allowable to Billing, by reason of the
grant of the purchase right at the beginning of an offering or the purchase of
shares at the end of an offering. A participant will, however, recognize taxable
income in the year in which the shares purchased under the Billing Purchase Plan
are sold or otherwise made the subject of a taxable disposition.
A sale or other disposition of the purchased shares will be a disqualifying
disposition if it is made either within two years after the date the purchase
right is granted (I.E., the commencement date of the offering to which the
purchase right pertains) or within one year from the date of transfer of the
stock received pursuant to such offering for the particular shares involved in
the disposition. If the participant makes a disqualifying disposition of the
purchased shares, then Billing will be entitled to an income tax deduction for
the taxable year of Billing in which such disposition occurs, equal to the
amount by which the fair market value of such shares on the date of purchase
exceeds the purchase price. In no other instance will Billing be allowed a
deduction with respect to the participant's disposition of the purchased shares.
If the shares are disposed of in a disqualifying disposition, then the
excess of the fair market value of the shares on the date of purchase over the
purchase price will be treated as ordinary income to the participant at the time
of such disposition. This amount is subject to tax even if the participant does
not realize any gain on the disposition. In addition, the participant could also
recognize a capital loss if the fair market value of the shares on the date of
purchase exceeds the amount realized on the sale, or a capital gain if the
amount realized on the sale exceeds the fair market value of the shares on the
date of purchase.
If the participant disposes of the shares in a taxable disposition after
satisfying the two-year and one-year holding periods outlined above (a
qualifying disposition), then the participant will realize ordinary income in
the year of disposition equal to the lesser of (i) the amount by which the fair
market value of the shares on the date of disposition exceeds the purchase price
or (ii) 15% of the fair market value of the shares on the day the purchase right
relating to the disposed shares was first granted. Similar rules result in the
recognition of income by an individual who owns stock acquired
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under the Billing Purchase Plan at his or her death. Except for shares held by
an estate, this amount of ordinary income will be added to the participant's
basis in the shares, and any gain (or loss) recognized upon the disposition will
be a long-term capital gain (or loss).
BILLING INFORMATION CONCEPTS CORP. EXECUTIVE COMPENSATION DEFERRAL PLAN
Prior to the Distribution, Billing will adopt the Billing Information
Concepts Corp. Executive Compensation Deferral Plan (the "Billing Executive
Deferral Plan"), which will become effective on the effective date of the
Registration Statement on Form 10. Participation in the Billing Executive
Deferral Plan is offered to certain key employees occupying management positions
and/or certain other highly compensated employees of Billing who are determined
by the Board, from time to time, to be eligible to participate in the Billing
Executive Deferral Plan ("Billing Executive Deferral Participants"). At the
Distribution Date, it is estimated that 8 individuals will be eligible to
participate in the Billing Executive Deferral Plan.
The Billing Executive Deferral Plan is a deferred compensation plan that
provides that Billing Executive Deferral Participants generally may make
voluntary salary deferral contributions, on a pre-tax basis, in equal monthly
amounts of up to 100% of his or her base compensation ("Voluntary Deferral
Contribution"). In addition, Billing intends to make certain matching
contributions with respect to each Voluntary Deferral Contribution (the
"Deferral Contribution") equal to the lesser of (i) the Voluntary Deferral
Contribution or (ii) that amount together with the Voluntary Deferral
Contribution which actuarially determined would yield a 10-year annuity equal to
50% of the Billing Executive Deferral Participant's compensation payable at age
65, with a minimum contribution of $3,000. However, Billing reserves the right,
at any time, to decrease the Billing Deferral Contribution or provide no Billing
Deferral Contribution whatsoever for any plan year. From time to time Billing
shall credit each Billing Executive Deferral Participant's plan account with
interest at the rate declared by Billing in accordance with the Billing
Executive Deferral Plan.
Unless terminated for cause, Billing Executive Deferral Participants will be
annually vested in 33% of any Billing Deferral Contribution beginning with the
Billing Executive Deferral Participant's first anniversary of service and
becoming 100% vested after the third anniversary of service or upon a change in
control of Billing. Service with USLD is considered service for this purpose.
Benefits will be generally payable to a Billing Executive Deferral Participant
(or his or her beneficiaries) upon retirement, disability, termination of
employment (other than for cause) or death, in each case as provided in the
Billing Executive Deferral Plan.
BILLING INFORMATION CONCEPTS CORP. EXECUTIVE QUALIFIED DISABILITY PLAN
Prior to the Distribution, Billing will adopt the Billing Information
Concepts Corp. Executive Qualified Disability Plan (the "Disability Plan") to be
effective on the effective date of the Registration Statement on Form 10. The
Disability Plan provides long-term disability benefits for certain employees
occupying management positions with Billing or its subsidiaries. Benefits under
the Disability Plan are provided directly by Billing based on definitions, terms
and conditions contained in the Disability Plan documents. Benefits under the
Disability Plan supplement benefits provided under Billing's insured long-term
disability plan. At the Distribution Date, there are expected to be
approximately 8 participants in the Disability Plan.
EMPLOYMENT AGREEMENTS AND CHANGE-OF-CONTROL ARRANGEMENTS
Prior to the Distribution Date, the Company will enter into an employment
agreement with Mr. Parris H. Holmes, Jr. which will be effective as of the
consummation of the Distribution. The agreement provides for a four-year term,
subject to automatic extension for an additional one year on each one-year
anniversary of the agreement unless terminated early as provided therein,
including termination by the Company for "cause" (as defined in the employment
agreement) or termination by Mr. Holmes for "good reason" (as defined in the
employment agreement). This employment agreement provides for an annual,
calendar year base salary of $300,000 and an incentive bonus at the discretion
of the Compensation Committee of the Board.
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Prior to the Distribution Date, the Company will enter into an employment
agreement with Mr. Saltzman which will be effective as of the consummation of
the Distribution. This agreement expires on , , subject to
extension for successive two-year terms unless the Company elects not to extend
the agreement. The employment agreement is subject to early termination as
provided therein, including termination by the Company for "cause" (as defined
in the employment agreement) or termination by Mr. Saltzman for "good reason"
(as defined in the employment agreement). The employment agreement provides for
an annual, calendar year base salary of $180,000. The employment agreement also
provides for incentive bonuses at the discretion of the Compensation Committee
of the Board.
Prior to the Distribution Date, the Company will enter into an employment
agreement with Mr. Simmons which will be effective as of the consummation of the
Distribution. This agreement provides for a one-year term, subject to automatic
extension unless and until terminated by either the Company or Mr. Simmons upon
not less than 120 days' prior written notice. The employment agreement is
subject to early termination as provided therein, including if Mr. Simmons fails
to perform his duties thereunder or to comply with any of the provisions thereof
or commits any act of misconduct, malfeasance, gross negligence or disloyalty,
upon written notice from the Company. The employment agreement provides for an
annual, calendar year base salary of $ . The employment agreement also
provides for an incentive bonus at the discretion of the Compensation Committee
of the Board.
The employment agreements with Messrs. Holmes, Saltzman and Simmons provide
that if the Company terminates their employment without cause (including the
Company's election to not extend the employment agreement at any renewal date)
or if they resign their employment for "good reason" (as "good reason" is
defined in the employment agreement), they will be entitled to the following
severance: Mr. Holmes -- at his election, either a lump-sum payment in the
amount equal to his base salary for the unexpired portion of the four-year term
of his agreement then in effect and without giving effect to any further
extension (a maximum of approximately $1,200,000) or continuation of his base
salary and benefits through the unexpired term of his agreement; Mr. Saltzman --
a lump-sum payment in the amount equal to two times his then effective annual
base salary ($360,000 ); Mr. Simmons -- a lump-sum payment in the amount equal
to one times his then effective annual base salary ($ ).
A change of control is deemed to have occurred if (i) more than 30% of the
combined voting power of the Company's then outstanding securities is acquired,
directly or indirectly, or (ii) at any time during the 24-month period after a
tender offer, merger, consolidation, sale of assets or contested election, or
any combination of such transactions, at least a majority of the Company's Board
of Directors shall cease to consist of "continuing directors" (meaning directors
of the Company who either were directors prior to such transaction or who
subsequently became directors and whose election, or nomination for election by
the Company's stockholders, was approved by a vote of at least two thirds of the
directors then still in office who were directors prior to such transaction), or
(iii) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation, other than a merger or consolidation that
would result in the voting securities of the Company outstanding immediately
prior thereto continuing to represent (either by remaining outstanding or by
being converted into voting securities of the surviving entity) at least 60% of
the total voting power represented by the voting securities of the Company or
such surviving entity outstanding immediately after such merger or
consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement of sale or disposition by
the Company of all or substantially all of the Company's assets.
The employment agreements with Messrs. Holmes, Saltzman and Simmons provide
that if, at any time within twelve months of a change of control, they cease to
be an employee of the Company by reason of (i) termination by the Company (or
its successor) without "cause" (as defined in the employment agreement) or (ii)
voluntary termination by the employee for "good reason upon change of control"
(as defined in the employment agreement), they will be entitled to the following
benefits in
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addition to the severance stated above: Mr. Holmes, Mr. Saltzman and Mr. Simmons
- - -- all outstanding stock options held by each shall become fully vested and
exercisable and such individuals shall receive an additional payment that, when
added to all other payments received in connection with a change of control,
will result in the maximum amount allowed to be paid to an employee without
triggering an excess parachute payment (as defined by the Internal Revenue
Code); Mr. Holmes -- all benefits (as defined by his employment agreement) shall
continue throughout the remainder of its term.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Directors Cooke and one outside director to be named will comprise the
Compensation Committee of the Board of Directors of the Company.
Mr. Saltzman, the Company's President and Chief Operating Officer, and Mr.
Holmes serve on the Board of Directors of Tanisys Technology, Inc., a developer
and marketer of computer peripheral equipment. Mr. Holmes also serves on the
Compensation Committee of Tanisys Technology, Inc. Mr. Holmes is Chairman of the
Board of Directors of the Company.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
USLD knows of no person or entity that as of April 30, 1996 had beneficial
ownership of five percent (5%) or more of the outstanding USLD Common Stock.
Accordingly, Billing knows of no person or entity that will beneficially own
five percent (5%) or more of the outstanding Billing Common Stock after
completion of the Distribution based upon application of the Distribution Ratio
to each stockholder's USLD holdings.
The following table sets forth information with respect to the shares of
Billing Common Stock which are anticipated to be beneficially owned by each
director of Billing and by all directors and executive officers of Billing as a
group after completion of the Distribution based upon application of the
Distribution Ratio to the respective holdings of USLD Common Stock as of April
30, 1996, according to the data furnished by the person named.
<TABLE>
<CAPTION>
COMMON STOCK
-----------------------------------------------
AMOUNT AND NATURE OF PERCENT OF CLASS
NAME AND BENEFICIAL OWNER BENEFICIAL OWNERSHIP BENEFICIALLY OWNED (1)
- - --------------------------------------------------------- -------------------- -------------------------
<S> <C> <C>
Parris H. Holmes, Jr..................................... 262,420(2) 1.7%
Alan W. Saltzman......................................... 139,411(3) *
Kelly E. Simmons......................................... 36,000(4) *
Paul L. Gehri............................................ 19,170(5) *
Michael R. Long.......................................... 6,500(6) *
Lee Cooke................................................ 5,000(7) *
All executive officers and directors as a group (six
persons, including the executive officers and directors
listed above)........................................... 468,501 3.1
</TABLE>
- - ------------------------
* Represents less than 1% of the issued and outstanding shares of Billing
Common Stock.
(1) The percentages of Common Stock indicated are based on 14,822,575 shares of
Common Stock issued and outstanding on April 30, 1996.
(2) Includes 151,667 shares that Mr. Holmes has the right to acquire upon the
exercise of stock options, exercisable within 60 days, and 753 shares
purchased under the USLD Stock Purchase Plan.
(3) Includes 94,667 shares that Mr. Saltzman has the right to acquire upon
exercise of stock options, exercisable within 60 days, an aggregate of 700
shares held in individual retirement accounts for
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Mr. Saltzman and his wife, and 3,293 shares that Mr. Saltzman holds in his
Billing 401(k) Retirement Plan account at March 31, 1996 and 753 shares
purchased under the USLD Stock Purchase Plan.
(4) Includes 32,000 shares that Mr. Simmons has the right to acquire upon
exercise of stock options, exercisable within 60 days.
(5) Includes 18,417 shares that Mr. Gehri has the right to acquire upon exercise
of stock options, exercisable within 60 days, and 753 shares purchased under
the USLD Stock Purchase Plan.
(6) Includes 6,500 shares that Mr. Long has the right to acquire upon exercise
of stock options, exercisable within 60 days.
(7) Represents 5,000 shares that Mr. Cooke has the right to acquire upon the
exercise of stock options, exercisable within 60 days.
(8) Includes 308,251 shares that six directors and executive officers have the
right to acquire upon exercise of stock options, exercisable within 60 days,
700 shares held in individual retirement accounts and 3,293 shares that such
executive officers held in their Billing 401(k) Retirement Plan accounts at
March 31, 1996.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Billing's authorized capital stock consists of 70,000,000 shares of Billing
Common Stock, of which shares are issued and outstanding and owned by
USLD. Prior to the Distribution Date, Billing's Certificate of Incorporation
will be amended by the Billing Board and by USLD, as sole stockholder of
Billing. Under such Certificate of Billing, which will be substantially in the
form set for in Annex C to this Information Statement, the total number of
shares of all classes of stock of which Billing will have authority to issue
will be 70,000,000, of which 10,000,000 will be shares of preferred stock, par
value $.01 per share ("Billing Preferred Stock"), and 60,000,000 will be shares
of common stock, par value $.01 per share ("Billing Common Stock"). Based on the
number of shares of USLD Common Stock outstanding at May 10, 1996, approximately
14,839,486 shares of Billing Common Stock, constituting 24.7% of the authorized
Billing Common Stock, will be issued to USLD and distributed to stockholders of
USLD in the Distribution. All of the shares of Billing Common Stock issued in
the Distribution will be validly issued, fully paid and nonassessable.
COMMON STOCK
VOTING RIGHTS. The holders of Billing Common Stock will be entitled to one
vote for each share on all matters voted on by stockholders, and the holders of
such shares will possess all voting power, except as otherwise required by law
or provided in any resolution adopted by the Board of Directors of Billing with
respect to any series of Preferred Stock of Billing. The shares of Billing
Common Stock will not have cumulative voting rights. As a result, subject to the
voting rights, if any, of the holders of any shares of Billing's Preferred Stock
that may be at any time outstanding, the holders of Billing Common Stock
entitled to exercise more than 50% of the voting rights in an election of
directors will be able to elect 100% of the directors to be elected if they
choose to do so. In such event, the holders of the remaining shares of Billing
Common Stock voting for the election of directors will not be able to elect any
person to Billing's Board. The Billing Certificate will provide that Billing's
Board shall be classified into three classes, each serving a three year term,
with one class to be elected in each of three consecutive years. The Billing
Certificate and Bylaws contain certain other provisions that could have an
anti-takeover effect. See "Purpose and Anti-Takeover Effects of Certain
Provisions of Billing's Certificate and Bylaws and Delaware Law."
DIVIDEND RIGHTS. Subject to any preferential or other rights of any
outstanding series of Preferred Stock of Billing that may be designated from
time to time by the Board of Directors of Billing, and subject to certain
contractual restrictions on the payment of dividends contained in Billing's debt
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agreements, the holders of Billing Common Stock will be entitled to such
dividends as may be declared from time to time by the Board of Directors of
Billing from funds legally available therefor. Because virtually all of the
operations of Billing will be conducted through wholly owned subsidiaries,
Billing's cash flow and consequent ability to pay dividends on the Billing
Common Stock are dependent to a substantial degree upon the earnings of such
subsidiaries and on dividends and other payments therefrom. See "Special Factors
- - -- Dividend Policy."
LIQUIDATION RIGHTS AND OTHER PROVISIONS. Subject to the prior rights of
creditors and the holders of any Billing preferred stock that may be outstanding
from time to time, the holders of Billing Common Stock are entitled in the event
of liquidation, dissolution or winding up to share pro rata in the distribution
of all remaining assets.
Billing Common Stock is not liable for any calls or assessments and is not
convertible into any other securities. Billing's Certificate will provide that
the private property of the stockholders shall not be subject to the payment of
corporate debts. There are no redemption or sinking fund provisions applicable
to Billing Common Stock.
BILLING STOCKHOLDER RIGHTS PLAN AND JUNIOR PREFERRED STOCK
Billing's Board will adopt a stockholder rights plan that is substantially
similar to the USLD stockholder rights plan, and cause to be issued, with each
share of Billing Common Stock issued to USLD's stockholders in the Distribution,
one Billing Right. The Billing Rights will be governed by a rights agreement to
be entered into between Billing and U.S. Trust Company of Texas, N.A., acting as
rights agent. See "Purposes and Anti-Takeover Effects of Certain Provisions of
Billing's Certificate and Bylaws and Delaware Law -- Stockholder Rights Plan."
PREFERRED STOCK
The Board of Directors of Billing will be authorized to provide for the
issuance of shares of Preferred Stock, in one or more series, and to fix for
each such series such voting powers, designations, preferences and relative,
participating, optional and other special rights, and such qualifications,
limitations or restrictions, as are stated in the resolution adopted by the
Board of Directors of Billing providing for the issuance of such series and as
are permitted by the Delaware General Corporation Law. No shares of Billing
Preferred Stock will be issued in connection with the Distribution, although it
is anticipated that approximately 6,000 shares of Billing Series A Junior
Participating Preferred Stock will be reserved for issuance in connection with
the Billing stockholder rights plan described in "Description of Capital Stock
- - -- Billing Stockholder Rights Plan and Junior Preferred Stock." See "Purposes
and Anti-Takeover Effects of Certain Provisions of Billing's Certificate and
Bylaws and Delaware Law -- Stockholder Rights Plan."
NO PREEMPTIVE RIGHTS
No holder of any stock of Billing of any class authorized at the
Distribution Date will then have any preemptive right to subscribe to any
securities of Billing of any kind or class.
TRANSFER AGENT AND REGISTRAR
The registrar and transfer agent of the Common Stock will be Montreal Trust
Company of Canada.
PURPOSES AND ANTI-TAKEOVER EFFECTS
OF CERTAIN PROVISIONS OF BILLING'S
CERTIFICATE AND BYLAWS AND DELAWARE LAW
BILLING'S CERTIFICATE AND BYLAWS
Billing's Certificate contains several provisions that will make difficult
an acquisition of control of Billing by means of a tender offer, open market
purchase, proxy fight or otherwise, that is not approved by Billing's Board.
Billing's Bylaws also contain provisions that could have an anti-takeover
effect.
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The purpose of the relevant provisions of Billing's Certificate and Bylaws
are to discourage certain types of transactions, described below, which may
involve an actual or threatened change of control of Billing and to encourage
persons seeking to acquire control of Billing to consult first with the Board of
Directors to negotiate the terms of any proposed business combination or offer.
The provisions are designed to reduce the vulnerability of Billing to an
unsolicited proposal for a takeover that does not contemplate the acquisition of
all outstanding shares or is otherwise unfair to stockholders of Billing or an
unsolicited proposal for the restructuring or sale of all or part of Billing.
USLD and Billing believe that, as a general rule, such proposals would not be in
the best interests of Billing and its stockholders.
Certain provisions of Billing's Certificate and Bylaws, in the view of USLD
and Billing, will help ensure that Billing's Board, if confronted by a surprise
proposal from a third party that has acquired a block of stock, will have
sufficient time to review the proposal and appropriate alternatives to the
proposal and to act in what it believes to be the best interests of the
stockholders.
These provisions, individually and collectively, will make difficult and may
discourage a merger, tender offer or proxy fight, even if such transaction or
occurrence may be favorable to the interests of the stockholders, and may delay
or frustrate the assumption of control by a holder of a large block of Billing's
Common Stock and the removal of incumbent management, even if such removal might
be beneficial to the stockholders. Furthermore, these provisions may deter or
could be utilized to frustrate a future takeover attempt that is not approved by
the incumbent Billing Board, but which the holders of a majority of the shares
may deem to be in their best interests or in which stockholders may receive a
substantial premium for their stock over the then prevailing market prices of
such stock. By discouraging takeover attempts, these provisions might have the
incidental effect of inhibiting certain changes in management (some or all of
the members of which might be replaced in the course of a change of control) and
also the temporary fluctuations in the market price of the stock which often
result from actual or rumored takeover attempts.
Set forth below is a description of such provisions in Billing's Certificate
and Bylaws. Such description is intended as a summary only and is qualified in
its entirety by reference to Billing's Certificate and Bylaws, the forms of
which are attached to this Information Statement as Annexes C and D,
respectively.
CLASSIFIED BOARD OF DIRECTORS. Billing's Certificate and Bylaws provide
that, subject to any rights of holders of preferred stock, the number of
directors shall be fixed by the Board but shall not be less than three.
Billing's Certificate provides for its Board to be divided into three classes
serving staggered terms so that directors' initial terms will expire either at
the 1997, 1998 or 1999 annual meeting of stockholders. Starting with the 1997
annual meeting of Billing's stockholders, one class of directors will be elected
each year for three-year terms. See "Management -- Board of Directors and
Committees of the Board."
The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of Billing's Board in a
relatively short period of time. At least two annual meetings of stockholders,
instead of one, generally will be required to effect a change in a majority of
Billing's Board. Such a delay may help ensure that its Board, if confronted by a
holder attempting to force a stock repurchase at a premium above market prices,
a proxy contest or an extraordinary corporate transaction, will have sufficient
time to review the proposal and appropriate alternatives to the proposal and to
act in what it believes are the best interests of the stockholders.
The classified board provision could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
Billing, even though such an attempt might be beneficial to Billing and its
stockholders. The classified board provision thus could increase the likelihood
that incumbent directors will retain their positions. In addition, because the
classified board provision is designed to discourage accumulations of large
blocks of Billing's stock by purchasers whose objective is to have such stock
repurchased by Billing at a premium or intend to use such block to initiate a
proxy contest, the classified board provision could tend to reduce the temporary
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fluctuations in the market price of Billing's stock that could be caused by
accumulations of large blocks of such stock. Accordingly, stockholders could be
deprived of certain opportunities to sell their stock at a temporarily higher
market price.
Billing believes that a classified board of directors will help to assure
the continuity and stability of Billing's Board and Billing's business
strategies and policies as determined by the Billing Board, because generally a
majority of the directors at any given time will have had prior experience as
directors of Billing. The classified board provision also will help assure that
the Billing Board, if confronted with an unsolicited proposal from a third party
that has acquired a block of the voting stock of Billing, will have sufficient
time to review the proposal and appropriate alternatives and to seek the best
available result for all stockholders.
REMOVAL; FILLING VACANCIES. Billing's Certificate provides that, subject to
any rights of the holders of preferred stock, only a majority of the Board then
in office shall have the authority to fill any vacancies of the Billing Board,
including vacancies created by an increase in the number of directors. In
addition, Billing's Certificate provides that a new director elected to fill a
vacancy on the Billing Board will serve for the remainder of the full term of
his or her class and that no decrease in the number of directors shall shorten
the term of an incumbent. Moreover, Billing's Certificate provides that
directors may be removed with or without cause only by the affirmative vote of
holders of at least 66 2/3% of the voting power of the shares entitled to vote
at the election of directors, voting together as a single class. These
provisions relating to removal and filling of vacancies on the Billing Board
will preclude stockholders from enlarging the Billing Board or removing
incumbent directors and filling the vacancies with their own nominees.
LIMITATIONS ON STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL
MEETINGS. Billing's Certificate and Bylaws provide that stockholder action can
be taken only at an annual or special meeting of stockholders and prohibit
stockholder action by written consent in lieu of a meeting (except that
Billing's name may be changed by written consent of the stockholders in lieu of
a meeting). Billing's Certificate and Bylaws provide that, subject to the rights
of holders of any series of preferred stock, special meetings of stockholders
can be called only by a majority of the entire Billing Board. Stockholders are
not permitted to call a special meeting or to require that Billing's Board call
a special meeting of stockholders. Moreover, the business permitted to be
conducted at any special meeting of stockholders is limited to the business
brought before the meeting by or at the direction of the Billing Board.
The provisions of Billing's Certificate and Bylaws restricting stockholder
action by written consent may have the effect of delaying consideration of a
stockholder proposal until the next annual meeting unless a special meeting is
called by a majority of the entire Billing Board. These provisions also would
prevent the holders of a majority of the voting power of the voting stock from
using the written consent procedure to take stockholder action and from taking
action by consent without giving all the stockholders of Billing entitled to
vote on a proposed action the opportunity to participate in determining such
proposed action. Moreover, a stockholder could not force stockholder
consideration of a proposal over the opposition of the Billing Board by calling
a special meeting of stockholders prior to the time the Billing Board believed
such consideration to be appropriate.
USLD and Billing believe that such limitations on stockholder action will
help to assure the continuity and stability of the Billing Board and Billing's
business strategies and policies as determined by the Billing Board, to the
benefit of all of Billing's stockholders. These provisions increase the
likelihood that the Billing Board, if confronted with an unsolicited proposal
from stockholders, will have sufficient time to review such proposal and to seek
the best available result for all stockholders, before such proposal is approved
by such stockholders by written consent in lieu of a meeting or through a
special meeting of stockholders.
NOMINATION OF DIRECTORS AND STOCKHOLDER PROPOSALS. Billing's Bylaws
establish an advance notice procedure with regard to the nomination other than
by or at the direction of the Billing Board
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of candidates for election as directors (the "Nomination Procedure") and with
regard to stockholder proposals to be brought before an annual or special
meeting of stockholders (the "Business Procedure").
The Nomination Procedure provides that only persons who are nominated by or
at the direction of the Billing Board, or by a stockholder who has given timely
prior written notice to the Secretary of Billing prior to the meeting at which
directors are to be elected, will be eligible for election as directors. The
Business Procedure provides that stockholder proposals must be submitted in
writing in a timely manner in order to be considered at any annual or special
meeting. To be timely, notice must be received by Billing (i) in the case of an
annual meeting, not less than 90 days prior to the annual meeting for a director
nomination, and not less than 120 days prior to the date established for release
by Billing of proxy materials for the previous year's annual meeting whichever
is earlier for a stockholder proposal or (ii) in the case of a special meeting
not later than the seventh day following the day on which notice of such meeting
is first given to stockholders for both a director nomination and a stockholder
proposal.
Under the Nomination Procedure, notice to Billing from a stockholder who
proposes to nominate a person at a meeting for election as a director must
contain certain information about that person, including business and residence
addresses, a representation that the stockholder is a holder of record of stock
of Billing entitled to vote at such meeting and intends to appear in person or
by proxy to nominate the person, a description of all arrangements or
understandings between the stockholder and each nominee and any other person
pursuant to which the nomination is to be made, such other information regarding
each nominee as would be required pursuant to the proxy rules of the Securities
and Exchange Commission had the nominee been nominated by the Billing Board, the
consent of such nominee to be nominated and such other information as would be
required to be included in a proxy statement soliciting proxies for the election
of the proposed nominee, and certain information about the stockholder proposing
to nominate that person. Under the Business Procedures, notice relating to a
stockholder proposal must contain certain information about such proposal and
about the stockholder who proposes to bring the proposal before the meeting,
including the class and number of shares of Billing Common Stock beneficially
owned by such stockholder. If the Chairman or other officer presiding at a
meeting determines that a person was not nominated in accordance with the
Nomination Procedure, such person will not be eligible for election as a
director, or if he determines that the stockholder proposal was not properly
brought before such meeting, such proposal will not be introduced at such
meeting. Nothing in the Nomination Procedure or the Business Procedure will
preclude discussion by any stockholder of any nomination or proposal properly
made or brought before an annual or special meeting in accordance with the
above-mentioned procedures.
The purpose of the Nomination Procedure is, by requiring advance notice of
nomination by stockholders, to afford the Billing Board a meaningful opportunity
to consider the qualifications of the proposed nominees and, to the extent
deemed necessary and desirable by the Board, to inform stockholders about such
qualifications. The purpose of the Business Procedure is, by requiring advance
notice of stockholder proposals, to provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the Billing Board, to provide the Billing Board with a
meaningful opportunity to inform stockholders, prior to such meetings, of any
proposal to be introduced at such meetings, together with any recommendation as
to the Board's position or belief as to action to be taken with respect to such
proposal, so as to enable stockholders better to determine whether they desire
to attend such meeting or grant a proxy to Billing's Board as to the disposition
of any such proposal. Although Billing's Bylaws do not give the Board any power
to approve or disapprove stockholder nominations for the election of directors
or of any other proposal submitted by stockholders, Billing's Bylaws may have
the effect of precluding a nomination for the election of directors or
precluding the conducting of business at a particular stockholder meeting if the
proper procedures are not followed, and may discourage or deter a third
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party from conducting a solicitation of proxies to elect its own slate of
directors or otherwise attempting to obtain control of Billing, even if the
conduct of such solicitation or such attempt might be beneficial to Billing and
its stockholders.
The provisions of the Nomination Procedure and the Business Procedure will
be subject to rules of the Commission with respect to stockholder proposals so
long as the Billing Common Stock remains quoted on the Nasdaq National Market or
is listed on a national securities exchange or is otherwise required to be
registered under the Exchange Act. Any stockholder proposal that is submitted in
compliance with such rules and is required by such rules to be set forth in the
proxy statement of the Company will be so set forth despite the requirements of
the Bylaws of the Company with respect to the timing and form of notice for such
proposals.
AMENDMENT OF BILLING'S CERTIFICATE AND BYLAWS. Billing's Certificate
contains provisions requiring the affirmative vote of the holders of at least
66-2/3% of the voting power of the stock entitled to vote generally in the
election of directors to amend certain provisions of Billing's Certificate and
Bylaws (including the provisions discussed above). These provisions will make it
more difficult for stockholders to make changes in Billing's Certificate or
Bylaws, including changes designed to facilitate the exercise of control of
Billing. In addition, the requirement for approval by at least a 66 2/3%
stockholder vote will enable the holders of a minority of Billing's capital
stock to prevent holders of less than 66 2/3% majority from amending such
provisions of Billing's Certificate or Bylaws.
STOCKHOLDER RIGHTS PLAN
The Billing Board will adopt a stockholder rights plan and cause to be
issued, with each share of Billing Common Stock issued to Billing's stockholders
in the Distribution, one Right. The Rights will be governed by a rights
agreement (the "Rights Agreement") to be entered into between Billing and U.S.
Trust Company of Texas, N.A., as rights agent. The following is a summary of the
anticipated terms of the Rights Agreement.
Each Right entitles the registered holder thereof to purchase from Billing
one ten-thousandth of a share of Series A Junior Participating Preferred Stock,
par value $.01 per share (the "Series A Preferred Stock"), at a price (the
"Purchase Price") of $ . As discussed below, initially the Rights will not
be exercisable, certificates for the Rights will not be issued and the Rights
will automatically trade with the Billing Common Stock.
The Billing Common Stock will contain a legend incorporating the Rights
Agreement by reference. The Rights Agreement provides that, until the Occurrence
Date as defined below (or the earlier redemption or expiration of the Rights),
the Rights will be represented by and transferred with, and only with, the
Billing Common Stock. Until the Occurrence Date (or the earlier redemption or
expiration of the Rights), the surrender for transfer of any of Billing's Common
Stock certificates, with or without such legend, also will constitute the
surrender for transfer of the Rights associated with the Billing Common Stock
evidenced by such certificates. The Occurrence Date will be the earlier of (i)
the tenth day following the public announcement that a person or group of
affiliated or associated persons ("Acquiring Person") other than Billing, any
subsidiary of Billing or any employee benefit plan or employee stock plan of
Billing or of any subsidiary of Billing ("Exempt Person") has acquired, or
obtained the right to acquire, beneficial ownership of 15% or more of the
outstanding Billing Common Stock (the "Stock Acquisition Date") or (ii) the
tenth business day following the commencement by any person (other than an
Exempt Person) of, or the announcement of the intention to commence, a tender or
exchange offer that would result in the ownership of 15% or more of the
outstanding Billing Common Stock. As soon as practicable following the
Occurrence Date, separate right Certificates will be mailed to holders of record
of Billing Common Stock at the close of business on the Occurrence Date, and
thereafter the Right Certificates alone will evidence the Rights and the Rights
will be transferable separate and apart from the Billing Common Stock.
The Rights are not exercisable until the Occurrence Date. The Rights will
expire at the close of business on , 2006, unless redeemed or
exchanged earlier as described below.
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The Series A Preferred Stock will not be redeemable and, unless otherwise
provided in connection with the creation of a subsequent series of preferred
stock, will be subordinate to all other series of Billing's preferred stock.
Each share of Series A Preferred Stock will represent the right to receive,
when, as and if declared, a quarterly dividend at an annual rate equal to the
greater of $1.00 per share or 10,000 times the quarterly per share cash
dividends declared on Billing's Common Stock during the immediately preceding
fiscal year. In addition, each share of Series A Preferred Stock will represent
the right to receive 10,000 times any noncash dividends (other than dividends
payable in Billing Common Stock) declared on the Billing Common Stock, in like
kind. In the event of the liquidation, dissolution or winding up of Billing,
each share of Series A Preferred Stock will represent the right to receive a
liquidation payment in an amount equal to the greater of $1.00 per share or
10,000 times the liquidation payment made per share of Billing Common Stock.
Each share of Series A Preferred Stock will have 10,000 votes, voting together
with the Billing Common Stock. In the event of any merger, consolidation or
other transaction in which common shares are exchanged, each share of Series A
Preferred Stock will be entitled to receive 10,000 times the amount received per
share of Billing Common Stock. The rights of the Series A Preferred Stock as to
dividends, liquidation, voting rights and merger participation are protected by
anti-dilution provisions.
The Purchase Price payable and the number of shares of Series A Preferred
Stock or other securities or property issuable upon exercise of the Rights are
subject to adjustment from time to time to prevent dilution (i) in the event of
a stock dividend on, or a subdivision, combination or reclassification of, the
Series A Preferred Stock, (ii) upon the grant to holders of the Series A
Preferred Stock of certain rights or warrants to subscribe for Series A
Preferred Stock or convertible securities at less than the current market price
of the Series A Preferred Stock or (iii) upon the distribution to holders of the
Series A Preferred Stock of evidences of indebtedness or assets (excluding
regular cash dividends and dividends payable in Series A Preferred Stock) or of
subscription rights or warrants.
If any Person (other than an Exempt Person) becomes the beneficial owner of
15% or more of the then outstanding shares of Billing Common Stock, each holder
of a Right, other than the Acquiring Person, will have the right to receive,
upon payment of the Purchase Price, in lieu of Series A Preferred Stock, a
number of shares of Billing Common Stock having a market value equal to twice
the Purchase Price. In the event that insufficient shares of Billing Common
Stock are available for the exercise in full of the Rights, Billing shall, in
lieu of issuing shares of Billing Common Stock upon exercise of Rights, to the
extent permitted by applicable law and any material agreements then in effect to
which Billing is a party, issue shares of Series A Preferred Stock, cash,
property or other securities of Billing (which may be accompanied by a reduction
in the Purchase Price), in proportions determined by Billing, so that the
aggregate value of such cash, property or other securities received is equal to
twice the Purchase Price. After the acquisition of shares of Billing Common
Stock by an Acquiring Person as described in this paragraph, Rights that are
(or, under certain circumstances, Rights that were) beneficially owned by an
Acquiring Person will be void.
The Board of Directors may, at its option, at any time after a person
becomes an Acquiring Person, authorize Billing to exchange all or part of the
then outstanding and exercisable Rights for shares of Billing Common Stock or
Series A Preferred Stock at an exchange ratio of one share of Billing Common
Stock for one ten-thousandth of a share of Series A Preferred Stock per Right,
provided that the Board of Directors may not effect such exchange after the time
that any Person (other than an Exempt Person) becomes the beneficial owner of
50% or more of the Billing Common Stock then outstanding. In the event that
insufficient shares of Billing Common Stock are available for such exchange, the
Board of Directors may substitute, in lieu thereof, shares of Series A Preferred
Stock or equivalent preferred stock of equal value.
Unless the Rights are earlier redeemed, if, after the Stock Acquisition
Date, Billing is acquired in a merger or other business combination (in which
any shares of the Billing Common Stock are changed into or exchanged for other
securities or assets) or more than 50% of the assets or earning power of Billing
and its subsidiaries (taken as a whole) is sold or transferred in one or more
transactions, other than a transfer to a lender (or an assignee of a lender) of
Billing pursuant to material
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agreements then in effect to which Billing is a party, the Rights Agreement
provides that proper provision shall be made so that each holder of record of a
Right will from and after that time have the right to receive, upon payment of
the Purchase Price, that number of shares of common stock of the acquiring
company which has a current market price at the time of such transaction equal
to twice the Purchase Price.
Interests in fractions of shares of Series A Preferred Stock may, at the
election of Billing, be evidenced by depository receipts. Billing also may issue
cash in lieu of fractional shares of Series A Preferred Stock that are not
integral multiples of one ten-thousandth of a share.
At any time until a person becomes an Acquiring Person, the Board of
Directors may cause Billing to redeem the Rights in whole, but not in part, at a
price of $.001 per Right, subject to adjustment. Immediately upon the effective
time of the redemption authorized by the Board of Directors, the right to
exercise the Rights will terminate, and the holders of the Rights will be
entitled to receive only the redemption price without any interest thereon.
As long as the Rights are redeemable, Billing may, except with respect to
the redemption price or the number of shares of Series A Preferred Stock for
which a Right is exercisable, amend the Rights in any manner. At any time when
the Rights are not redeemable, Billing may amend the Rights in any manner that
does not adversely affect the interests of holders of the Rights as such.
Until a Right is exercised, the holder, as such, will have no rights as a
stockholder of Billing, including without limitation the right to vote or to
receive dividends.
BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS
Section 203 of the DGCL prohibits transactions between a Delaware
corporation and an "interested stockholder," which is defined therein as a
person who, together with any affiliates and/or associates of such person,
beneficially owns, directly or directly, 15% or more of the outstanding voting
stock of a Delaware corporation. This provision prohibits certain business
combinations (defined broadly to include mergers, consolidations, sales or other
dispositions of assets having an aggregate value in excess of 10% of the
consolidated assets of the corporation, and certain transactions that would
increase the interested stockholder's proportionate stock ownership in the
corporation) between an interested stockholder and a corporation for a period of
three years after the date the interested stockholder acquired its stock unless
(i) the business combination is approved by the corporation's board of directors
prior to the date the interested stockholder acquired stock, (ii) the interested
stockholder acquired at least 85% of the voting stock of the corporation in the
transaction in which it becomes an interested stockholder, or (iii) the business
combination is approved by a majority of the board of directors and by the
affirmative vote of 66 2/3% of the votes entitled to be cast by disinterested
stockholders at an annual or special meeting.
Billing has not opted out of being governed by the above described
provisions of Delaware law. Consequently, business combinations between Billing
and an interested stockholder would be subject to its provisions.
LIABILITY AND INDEMNIFICATION
OF OFFICERS AND DIRECTORS
Articles XI and XV of the Billing Certificate and Article VIII of the
Billing Bylaws (the "Director Liability and Indemnification Provisions") limit
the personal liability of Billing's directors to Billing or its stockholders for
monetary damages for breach of fiduciary duty.
The Director Liability and Indemnification Provisions define and clarify the
rights of certain individuals, including Billing's directors and officers, to
indemnification by Billing in the event of personal liability or expenses
incurred by them as a result of certain litigation against them. Such provisions
are consistent with Section 102(b)(7) of the DGCL, which is designed, among
other things, to encourage qualified individuals to serve as directors of
Delaware corporations by permitting
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Delaware corporations to include in their certificates of incorporation a
provision limiting or eliminating directors' liability for monetary damages and
with other existing DGCL provisions permitting indemnification of certain
individuals, including directors and officers. The limitations of liability in
the Directors Liability and Indemnification Provisions may not affect claims
arising under the federal securities laws.
In performing their duties, directors of a Delaware corporation are
obligated as fiduciaries to exercise their business judgment and act in what
they reasonably determine in good faith, after appropriate consideration, to be
the best interests of the corporation and its stockholders. Decisions made on
that basis are protected by the "business judgment rule." The business judgment
rule is designed to protect directors from personal liability to the corporation
or its stockholders when business decisions are subsequently challenged.
However, the expense of defending lawsuits, the frequency with which unwarranted
litigation is brought against directors and the inevitable uncertainties with
respect to the outcome of applying the business judgment rule to particular
facts and circumstances mean that, as a practical matter, directors and officers
of a corporation rely on indemnity from, and insurance procured by, the
corporation they serve as a financial backstop in the event of such expenses or
unforeseen liability. The Delaware legislature has recognized that adequate
insurance and indemnity provisions are often a condition of an individual's
willingness to serve as director of a Delaware corporation. The DGCL has for
some time specifically permitted corporations to provide indemnity and procure
insurance for its directors and officers.
The Director Liability and Indemnification Provisions will be approved,
along with the rest of the Billing Certificate and the Billing Bylaws, by USLD,
as sole stockholder of Billing prior to the Distribution Date.
Set forth below is a description of the Director Liability and
Indemnification Provisions. Such description is intended as a summary only and
is qualified in its entirety by reference to the Billing Certificate and the
Billing Bylaws.
ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES. Article XV of the
Billing Certificate of Incorporation ("Article XV") eliminates the personal
liability of Billing's directors to Billing or its stockholders for monetary
damages for breach of fiduciary duty. Directors remain liable for (i) any breach
of the duty of loyalty to Billing or its stockholders, (ii) any act or omission
not in good faith or which involves intentional misconduct or a knowing
violation of law, (iii) any violation of Section 174 of the DGCL, which
proscribes the payment of dividends and stock purchases or redemptions under
certain circumstances, and (iv) any transaction from which a director is derived
an improper personal benefit.
Article XV further provides that future repeal or amendment of its terms
will not adversely affect any rights of directors existing thereunder with
respect to acts or omissions occurring prior to such repeal or amendment.
Article XV also incorporates any future amendments to Delaware law which further
eliminate or limit the liability of directors.
INDEMNIFICATION AND INSURANCE. Under Section 145 of the DGCL, directors and
officers as well as other employees and individuals may be indemnified against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement in connection with specified actions, suits or proceedings, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation -- a "derivative action"), if they acted in good
faith and in a manner they reasonably believed to be in or not opposed to the
best interests of Billing, and with respect to any criminal action or
proceeding, had no reasonable cause to believe their conduct was unlawful. A
similar standard of care is applicable in the case of derivative actions, except
that indemnification extends only to expenses (including attorneys' fees)
incurred in connection with defense or settlement of such an action and the DGCL
requires court approval before there can be any indemnification where the person
making indemnification has been found liable to Billing.
Article VIII of the Billing Bylaws provides that Billing shall indemnify any
person to whom, and to the extent, indemnification may be granted pursuant to
Section 145 of the DGCL.
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Article XI of the Billing Certificate provides that each person who was or
is made a party to, or is involved in any action, suit or proceeding by reason
of the fact that he is or was a director, officer or employee of Billing will be
indemnified by Billing against all expenses and liabilities, including
attorneys' fees, reasonably incurred by or imposed upon him, except in such case
where the director, officer or employee is adjudged guilty of willful
misfeasance or malfeasance in the performance of his duties. Article XI also
provides that the right of indemnification shall be in addition to and not
exclusive of all other rights, to which such director, officer or employee may
be entitled.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers and controlling persons pursuant to
the foregoing provisions, Billing has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
INDEPENDENT ACCOUNTANTS
The Board of Directors of Billing will select before the end of fiscal 1996
an independent accounting firm to audit Billing's financial statements for the
year ending September 30, 1996. Arthur Andersen LLP has served as independent
accountants of USLD through the periods covered by the financial statements
included in this Information Statement.
ADDITIONAL INFORMATION
Billing has filed with the Commission a Registration Statement on Form 10
under the Exchange Act with respect to the Billing Common Stock being received
by USLD stockholders in the Distribution. This Information Statement does not
contain all of the information set forth in the Registration Statement and the
exhibits and schedules thereto, to which reference is hereby made. Statements
made in this Information Statement as to the contents of any contract, agreement
or other document referred to herein are not necessarily complete. With respect
to each contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to such exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. The Registration Statement and the
exhibits thereto filed by Billing with the Commission may be inspected at the
public reference facilities of the Commission listed below.
USLD is and Billing will be subject to the reporting requirements of the
Exchange Act, and in accordance therewith, USLD files and Billing will file
periodic reports, proxy statements and other information relating to its
business, financial and other matters. Such reports, proxy statements and other
information filed by Billing can be inspected and copied at the public reference
facilities maintained by the Commission at Room 1024, 450 Fifth Avenue, N.W.,
Washington, D.C. 20549, and at the following regional offices of the Commission:
New York Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048, and Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials can be
obtained from the Public Reference Section of the Commission, Washington, D.C.
20549, at prescribed rates.
------------------------
Billing intends to furnish holders of Billing Common Stock with annual
reports containing consolidated financial statements audited by an independent
public accounting firm and quarterly reports for the first three quarters of
each fiscal year containing unaudited financial statements.
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BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Report of Independent Public Accountants................................................................... F-2
Consolidated Balance Sheets at September 30, 1994 and September 30, 1995................................... F-3
Consolidated Statements of Income for the Years Ended September 30, 1993, September 30, 1994 and September
30, 1995.................................................................................................. F-4
Consolidated Statements of Stockholders' Equity for the Years Ended September 30, 1993, September 30, 1994
and September 30, 1995.................................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended September 30, 1993, September 30, 1994 and
September 30, 1995........................................................................................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
Condensed Consolidated Balance Sheet at September 30, 1995 and March 31, 1996 (unaudited).................. F-17
Condensed Consolidated Statements of Income for the Six Months Ended March 31, 1995 and March 31, 1996
(unaudited)............................................................................................... F-18
Condensed Consolidated Statements of Cash Flows for the Six Months Ended March 31, 1995 and March 31, 1996
(unaudited)............................................................................................... F-19
Notes to Interim Condensed Consolidated Financial Statements (unaudited)................................... F-20
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholder of
Billing Information Concepts Corp.:
We have audited the accompanying consolidated balance sheets of Billing
Information Concepts Corp. (a Delaware corporation) and subsidiaries as of
September 30, 1994 and 1995, and the related consolidated statements of income,
stockholders' equity and cash flows for each of the three years in the period
ended September 30, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Billing Information Concepts
Corp. and subsidiaries as of September 30, 1994 and 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1995, in conformity with generally accepted accounting
principles.
As explained in Note 2 to the Consolidated Financial Statements, effective
October 1, 1993, the Company changed its method of accounting for income taxes.
ARTHUR ANDERSEN LLP
San Antonio, Texas
May 13, 1996
F-2
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------------
1994 1995
--------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................................. $ 20,742 $ 26,770
Accounts receivable.................................................................... 12,668 18,113
Purchased receivables.................................................................. 53,347 55,228
Prepaids and other..................................................................... 74 624
--------- -----------
Total current assets............................................................... 86,831 100,735
Property and equipment................................................................... 3,281 5,563
Less accumulated depreciation and amortization......................................... (1,788) (2,334)
--------- -----------
Net property and equipment......................................................... 1,493 3,229
Equipment held under capital leases, net of accumulated amortization of $108 (1994) and
$305 (1995)............................................................................. 504 1,556
Other assets, net of accumulated amortization of $1,806 (1994) and $2,105 (1995)......... 882 1,375
--------- -----------
Total assets....................................................................... $ 89,710 $ 106,895
--------- -----------
--------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade................................................................................ $ 7,748 $ 12,604
Billing customers.................................................................... 36,995 34,756
Accrued liabilities.................................................................... 5,463 12,362
Revolving line of credit for purchased receivables..................................... 25,235 23,030
Current portion of long-term debt...................................................... 124 285
Current portion of obligations under capital leases.................................... 134 398
--------- -----------
Total current liabilities.......................................................... 75,699 83,435
Long-term debt, less current portion..................................................... 440 1,048
Obligations under capital leases, less current portion................................... 413 1,168
Other liabilities........................................................................ 56 21
--------- -----------
Total liabilities.................................................................. 76,608 85,672
Commitments and contingencies (See Note 8)
Stockholders' equity:
Preferred shares, $10.00 par value, 10,000 shares authorized, 10,000 shares issued and
outstanding........................................................................... 100 100
Common shares, no par value, 102,000 shares authorized, 102,000 shares issued and
outstanding........................................................................... 1 1
U.S. Long Distance Corp.'s investment in and advances to Billing......................... 13,001 21,122
--------- -----------
Total stockholders' equity......................................................... 13,102 21,223
--------- -----------
Total liabilities and stockholders' equity......................................... $ 89,710 $ 106,895
--------- -----------
--------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
<S> <C> <C> <C>
Operating revenues............................................................. $ 46,451 $ 57,746 $ 80,847
Cost of services............................................................... 29,993 37,588 51,337
--------- --------- ---------
Gross profit................................................................... 16,458 20,158 29,510
Selling, general and administrative expenses................................... 5,883 7,421 9,272
Advance funding program income................................................. (3,299) (3,467) (4,384)
Advance funding program expense................................................ 2,581 1,858 1,351
Depreciation and amortization expense.......................................... 877 954 1,216
--------- --------- ---------
Income from operations......................................................... 10,416 13,392 22,055
Other income (expense):
Interest income.............................................................. 179 346 1,081
Interest expense............................................................. (466) (103) (188)
Other, net................................................................... 59 (32) (169)
--------- --------- ---------
Total other income (expense)............................................... (228) 211 724
--------- --------- ---------
Income before provision for income taxes....................................... 10,188 13,603 22,779
Provision for income taxes..................................................... (3,747) (5,038) (8,661)
--------- --------- ---------
Net income..................................................................... $ 6,441 $ 8,565 $ 14,118
--------- --------- ---------
--------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1993, 1994 AND 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
U.S. LONG
DISTANCE
CORP.'S
COMMON STOCK PREFERRED STOCK INVESTMENT IN
------------------------ ------------------------ AND ADVANCES TO
SHARES AMOUNT SHARES AMOUNT BILLING
----------- ----------- ----------- ----------- ---------------
<S> <C> <C> <C> <C> <C>
Balances at September 30, 1992............................. 102 $ 1 10 $ 100 $ 4,480
Transfers to affiliates.................................. 0 0 0 0 (5,990)
Net income............................................... 0 0 0 0 6,441
--- ----- --- ----- ---------------
Balances at September 30, 1993............................. 102 1 10 100 4,931
Transfers to affiliates.................................. 0 0 0 0 (495)
Net income............................................... 0 0 0 0 8,565
--- ----- --- ----- ---------------
Balances at September 30, 1994............................. 102 1 10 100 13,001
Transfers to affiliates.................................. 0 0 0 0 (5,997)
Net income............................................... 0 0 0 0 14,118
--- ----- --- ----- ---------------
Balances at September 30, 1995............................. 102 $ 1 10 $ 100 $ 21,122
--- ----- --- ----- ---------------
--- ----- --- ----- ---------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
--------------------------------
1993 1994 1995
--------- ---------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................................. $ 6,441 $ 8,565 $ 14,118
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................. 877 954 1,216
Deferred compensation..................................................... 33 24 18
Changes in current assets and liabilities:
Increase in accounts receivable......................................... (1,857) (4,437) (5,445)
(Increase) decrease in prepaids and other............................... (203) 129 (550)
Increase in trade accounts payable...................................... 2,580 2,321 4,856
Increase in accrued liabilities......................................... 1,101 1,963 6,899
Increase (decrease) in other liabilities................................ 0 56 (35)
--------- ---------- ---------
Net cash provided by operating activities..................................... 8,972 9,575 21,077
Cash flows from investing activities:
Purchases of property and equipment......................................... (557) (684) (1,922)
Payments for purchased receivables, net..................................... (6,384) (6,078) (1,881)
Collections of proceeds due (payments made) to customers, net............... 2,203 13,046 (2,239)
Other investing activities.................................................. (37) (573) (792)
--------- ---------- ---------
Net cash provided by (used in) investing activities........................... (4,775) 5,711 (6,834)
Cash flows from financing activities:
Draws (payments) on revolving line of credit for purchased receivables,
net........................................................................ 4,637 (10,826) (2,205)
Proceeds from issuance of debt.............................................. 197 365 917
Payments on debt............................................................ (13) (44) (148)
Payments on capital leases.................................................. (329) (227) (230)
Transfers to affiliates..................................................... (5,894) (1,007) (6,549)
--------- ---------- ---------
Net cash used in financing activities......................................... (1,402) (11,739) (8,215)
--------- ---------- ---------
Net increase in cash and cash equivalents..................................... 2,795 3,547 6,028
Cash and cash equivalents, beginning of year.................................. 14,400 17,195 20,742
--------- ---------- ---------
Cash and cash equivalents, end of year........................................ $ 17,195 $ 20,742 $ 26,770
--------- ---------- ---------
--------- ---------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1993, 1994 AND 1995
NOTE 1. BUSINESS ACTIVITY
Billing Information Concepts Corp., a Delaware corporation, is a wholly
owned subsidiary of U.S. Long Distance Corp. ("USLD") that will, upon the
effectiveness of the Distribution, be an independent, publicly held company that
will own and operate all of the assets of, and will be responsible for all of
the liabilities associated with, the commercial billing clearinghouse and
information management services business currently owned by USLD. This business
is currently conducted primarily through USLD's subsidiaries Zero Plus Dialing,
Inc. ("ZPDI") and Enhanced Services Billing, Inc. ("ESBI"). Prior to the
Distribution, these subsidiaries will be merged with U.S. Billing Management
Corp. ("USBMC") and U.S. Billing, Inc. ("USBI"), which will become wholly owned
subsidiaries of Billing (collectively referred to as "Billing" or the
"Company").
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Billing and USLD's subsidiaries ZPDI, USBI, ESBI and Mega-Plus Dialing, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
BASIS OF PRESENTATION
On May 13, 1996, the Board of Directors of USLD approved a plan to
distribute all of the Common Stock of Billing, pro rata to the stockholders of
USLD (the "Distribution") with the result being that Billing would be an
independent, publicly held company that would own and operate all of the assets
of, and will be responsible for all of the liabilities associated with, the
billing clearinghouse and information management services business currently
owned by USLD. The accompanying financial statements include the operations of
Billing which, until the date of Distribution, will be combined with and
reported as part of the consolidated financial statements of USLD. The assets
and liabilities of Billing are reflected at the historical book values included
in the USLD consolidated financial statements. Immediately prior to the
Distribution, Billing will cancel all of USLD's intercompany debt owed to
Billing. In recognition of this, the balance of the intercompany receivable from
USLD has been combined with and included in the balance sheet caption entitled
"U.S. Long Distance Corp.'s investment in and advances to Billing." All
stockholder equity account balances, except for the par value of Billing common
stock, have also been reported as "U.S. Long Distance Corp.'s investment in and
advances to Billing."
Certain assets and liabilities and selling, general and administrative
expenses of USLD were historically accounted for on a consolidated basis with no
allocation to individual subsidiaries. The historical statements of Billing have
been adjusted to include all of the assets, liabilities and expenses that
appropriately and fairly could have been allocated to Billing except for the
following items:
(a) Cash -- Cash has historically been managed by a centralized cash
management department in Billing. Consequently, cash was not allocated among
USLD's subsidiaries and was recorded on the balance sheet of Billing. There
is no reasonable means by which to allocate cash to the historical financial
statements of USLD's subsidiaries.
(b) Income taxes -- USLD's federal income taxes have historically been
determined on a consolidated basis. For purposes of preparing the Billing
historical consolidated financial statements, income taxes have been
determined on a separate company basis. Deferred taxes have been recorded on
Billing's consolidated financial statements, as appropriate. Accrued income
taxes payable are reflected in the balance sheet caption "U.S. Long Distance
Corp.'s investment
F-7
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
in and advances to Billing" as such amounts payable would have been payable
to USLD. Tax liabilities are reflected in a manner consistent with the Tax
Sharing Agreement between USLD and Billing.
For purposes of preparing Billing's consolidated financial statements,
certain amounts that have previously been classified as revenue, costs of
service, selling, general and administrative expenses, and other income
(expense) have been reclassified. Certain intercompany transactions that had
been eliminated in consolidation are properly reflected in the historical
consolidated financial statements of Billing at amounts that are believed by
management to reflect an arm's length relationship.
REVENUE RECOGNITION POLICIES
The Company recognizes revenue from its billing services upon transmission
of billable records to the local telephone companies, which records are to be
billed and collected by the Company.
BILLING SERVICES
The Company provides billing services to operator services providers and
direct dial long distance companies through billing agreements with the local
telephone companies, which maintain the critical database of end-user names and
addresses of the billed parties. Bills are generated by the local telephone
companies and the collected funds are remitted to the Company, which in turn
remits these funds, net of fees, to its billing customers. The Company records a
trade accounts receivable and revenue for fees charged for its billing services.
When the customer's receivables are collected by the Company from the local
telephone companies, the Company's trade receivables are reduced by the amount
corresponding to the Company's processing fees and the remaining funds are
recorded as an accounts payable to billing customers.
The Company offers participation in an advance funding program to qualifying
customers through its Advance Payment Agreement. Under the terms of this
agreement, the Company purchases the customer's accounts receivable for an
amount equal to the face amount of the billing records submitted to the local
telephone companies by the Company for billing and collection less:
- all local telephone company charges, rejects, unbillables and bad debt
deductions;
- all credits and adjustments granted to end-users;
- all of the Company's processing fees and sales taxes, if appropriate;
- all financing service charges assessed by the Company; and
- any and all losses, costs or expenses incurred by the Company in
processing or collecting the customer accounts from all previously billed
records.
The purchase price is remitted by the Company to its customers in two
payments. Within five days from receiving a customer's records, an initial
payment is made to the customer based on a percentage of the face amount of the
customer's call records submitted by the Company to the local telephone
companies. The Company pays the remaining balance of the purchase price to the
customer upon collection of funds from the local telephone companies. The
purchase date is the date the initial payment is made. In connection with its
purchase of billing records, the Company, generally, draws down on its revolving
credit facility for purchased receivables.
Any accounts receivable purchased by the Company are recorded as purchased
receivables from billing customers in an amount equal to the face amount of the
billing records submitted to the local telephone companies by the Company for
billing and collection. Concurrently, an equal amount is recorded as accounts
payable to billing customers. The amount of the initial payment made to the
F-8
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
customer reduces accounts payable to billing customers. The balance, reported as
accounts payable to billing customers ($36,995,000 and $34,756,000 at September
30, 1994 and 1995, respectively), consists of:
- an amount equal to the face value of all purchased receivables, reduced
for any amounts paid as initial payments under Advanced Payment
Agreements, and
- an amount equal to collections from local telephone companies that have
not yet been remitted to customers.
The purchased receivables balance is relieved at the time the customer
receivables are collected from the local telephone companies. Any differences
between the amount initially recorded as a purchased receivable and the amount
ultimately collected from the local telephone companies, resulting from the fees
and deductions detailed above, are recorded as a reduction of both the purchased
receivable and accounts payable to billing customers in an equal amount. The
funds are remitted to the customer after the Company deducts finance service
charges earned under the Advance Payment Agreement.
Finance service charges are assessed to customers and are computed at a rate
above the prime interest rate based on the amounts funded to customers. Finance
service charges are recorded as advance funding program income during the period
from the date of initial payment until the Company recoups the full amount of
the initial payment from receipts from local telephone companies. No other
revenues or income are recorded in connection with the Advance Payment
Agreement.
The following receivables purchased and financed by the Company were
outstanding at:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Purchased receivables from billing customers................................... $ 53,347 $ 55,228
Purchase money borrowings under revolving credit facility for purchased
receivables................................................................... 25,235 23,030
</TABLE>
The Company has virtually no collection risk related to its purchased
accounts receivable and thus does not record an allowance for doubtful accounts
related to such receivables. While the Company does not have the legal right of
recourse against its billing customers with respect to purchased receivables,
the Company does have the right of offset against all funds held for the account
of such customers and may hold a first lien security interest in such billing
customers' accounts, generally including those not acquired by the Company. The
Company does, however, have some risk with regard to adjustments charged to it
by the local telephone companies related to customers who are no longer serviced
by the Company to the extent that these adjustments exceed funds withheld from
such customers. Therefore, the Company has recorded an accrual for the estimated
liability associated with such charges.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation and amortization are
computed on a straight-line basis over the estimated useful lives of the related
assets, which range from three to seven years. Upon disposition, the cost and
related accumulated depreciation and amortization are removed from the accounts
and the resulting gain or loss is reflected in other income (expense) for that
period. Expenditures for maintenance and repairs are charged to expense as
incurred and major improvements are capitalized.
F-9
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
OTHER ASSETS
Other assets include costs incurred to acquire billing agreements with local
telephone companies for billing and collection services and other agreements.
These costs are being amortized over five to seven-year periods. Other assets
also include financing costs related to the issuance of debt, which have been
deferred and are amortized over the life of each respective financing agreement.
In addition, a certificate of deposit held as security for an equipment
financing facility and long-term deposits have been included in other assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS
Cash and cash equivalents are valued at their carrying amounts, which are
reasonable estimates of fair value. The fair value of all other financial
instruments approximates cost as stated.
INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income
Taxes," which the Company adopted effective October 1, 1993. Under SFAS No. 109,
deferred tax liabilities and assets are recorded based on enacted income tax
rates that are expected to be in effect in the period in which the deferred tax
liability or asset is expected to be settled or realized. A change in the tax
laws or rates results in adjustments to the deferred tax liabilities or assets.
The effects of such adjustments are required to be included in income in the
period in which the tax laws or rates are changed. The adoption of SFAS No. 109
did not have a material impact on the Company's financial position or results of
operations. Prior to October 1, 1993, the Company accounted for income taxes in
accordance with the provisions of Accounting Principles Board Opinion No. 11,
"Accounting for Income Taxes."
Billing and USLD will enter into a Tax Sharing Agreement that defines the
parties' respective rights and obligations with respect to deficiencies and
refunds of federal, state and other income or franchise taxes relating to
Billing's business for tax years prior to the Distribution and with respect to
certain tax attributes of Billing after the Distribution. In general, with
respect to periods ending on or before the last day of the year in which the
Distribution occurs, USLD is responsible for (i) filing both consolidated
federal tax returns for the USLD affiliated group and combined or consolidated
state tax returns for any group that includes a member of the USLD affiliated
group, including in each case Billing and its subsidiaries for the relevant
periods of time that such companies were members of the applicable group and
(ii) paying the taxes related to such returns (including any subsequent
adjustments resulting from the redetermination of such tax liabilities by the
applicable taxing authorities). Billing will reimburse USLD for a portion of
such taxes and the cost of preparation of the associated tax returns related to
the Billing affiliated group. Billing is responsible for filing returns and
paying taxes related to the Billing affiliated group for subsequent periods.
Billing and USLD have agreed to cooperate with each other and to share
information in preparing such tax returns and in dealing with other tax matters.
NEW ACCOUNTING STANDARD
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which provides for a fair-value-based method of accounting for
stock-based compensation plans with employees and others. The Company will not
adopt the recognition and measurement provisions of SFAS No. 123, but will
continue to account for stock-based compensation plans in accordance with APB
Opinion 25. However, the Company will be required to comply with the disclosure
requirements of SFAS No. 123 beginning in fiscal 1997.
F-10
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Cash payments and non-cash activities during the periods indicated were as
follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash payments for interest............................................... $ 2,789 $ 1,847 $ 1,564
Cash payments for income taxes........................................... 3,677 4,954 8,859
Non-cash investing and financing activities:
Capital lease obligations incurred..................................... 229 327 1,249
Tax benefit recognized in connection with stock option exercises....... 99 93 94
</TABLE>
For purposes of determining cash flows, the Company considers all temporary
cash investments purchased with an original maturity of three months or less to
be cash equivalents.
NOTE 3. DEBT
Long-term debt is comprised of the following:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit for purchased receivables, with a company, 9.25% at
September 30, 1995 (prime rate (8.75%) plus .5%), due in varying amounts through
December 1996................................................................... $ 25,235 $ 23,030
Fixed interest rate term notes................................................... 564 1,333
--------- ---------
Total debt....................................................................... 25,799 24,363
Less -- Current portion.......................................................... 25,359 23,315
--------- ---------
$ 440 $ 1,048
--------- ---------
--------- ---------
</TABLE>
The Company has a $45 million revolving line of credit with a company to
finance the purchase of certain eligible accounts receivable. This line of
credit matures December 31, 1996. Any amounts borrowed to purchase receivables
under this revolving credit facility are due upon the Company's collection of
the related receivables. At September 30, 1995, the Company had approximately
$22.0 million available for borrowing under this facility. Any borrowings under
this facility bear interest at the prime rate plus .5%. This facility is
collateralized by the related accounts receivable and by virtually all of the
assets of the Company not otherwise pledged as security under other debt
agreements. Performance under the revolving credit facility has been guaranteed
by the Company.
The Company has various fixed rate notes with rates ranging from 6.75% to
11%, due in varying amounts through October 2000. The proceeds from the issuance
of these notes were used to acquire certain computer equipment and office
furniture. The loans are guaranteed by the Company and are secured by the assets
acquired with the proceeds of such notes.
The credit facilities discussed above contain various restrictions and
financial ratio maintenance requirements. Under the most restrictive terms of
its credit facilities, the Company is required to maintain a quarterly ratio of
consolidated operating income, as defined in the agreements, to consolidated
fixed charges of at least 1.5 to 1.0 and is prohibited from paying dividends on
its common stock. The Company also may be subject to certain limitations on its
annual capital expenditures and on the issuance of additional secured debt, but
can issue subordinated unsecured debt provided the ratio of total consolidated
debt to total capitalization does not exceed 85%. Further, the Company is
required
F-11
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3. DEBT (CONTINUED)
to maintain a ratio of funded debt, as defined in the applicable loan agreement,
to total capitalization not greater than 60%. Cross-default provisions of the
Company's most significant credit facilities may place the Company in default of
such facilities should it fail to satisfy provisions of certain other loan
agreements. Under the Company's most significant credit facilities, the Company
has guaranteed the obligations of its subsidiaries. The Company was in
compliance with all required covenants at September 30, 1994 and 1995.
Historically, the Company has obtained financing for capital expenditures
through term debt agreements that were guaranteed and cross-collateralized by
USLD. These debt agreements were negotiated based on the strength of the
consolidated financial statements, earnings and cash flow of the USLD
consolidated group. Most of these debt agreements were secured by the assets of
all the subsidiaries within the consolidated group. The Company expects to
receive from certain lenders loan agreement amendments or separate loan
agreements whereby the indebtedness will be secured by only the Company's or
USLD's assets. In other cases, the Company expects to obtain waivers from its
lenders, provided that the cross guarantees and existing security arrangements
remain in place for the duration of the facility. In other cases, Billing and
USLD intend to payoff existing indebtedness releasing applicable guarantees and
security arrangements.
Scheduled maturities for the years ending September 30, 1996 through 2000
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Year Ending September 30,
1996.................................................................................. $ 23,315
1997.................................................................................. 307
1998.................................................................................. 296
1999.................................................................................. 258
2000.................................................................................. 184
Thereafter............................................................................ 3
--------------
$ 24,363
--------------
--------------
</TABLE>
NOTE 4. LEASES
The Company leases equipment and office space under operating leases. Rental
expense for fiscal 1993, 1994 and 1995 was $284,000, $304,000, and $555,000,
respectively. Future minimum lease payments under non-cancelable leases at
September 30, 1995 are shown below. These amounts do not include any future
payments relating to office space for the Company's administrative support
functions as the Company currently has not executed any agreements to lease such
space.
<TABLE>
<CAPTION>
(IN THOUSANDS)
---------------
<S> <C>
Year Ending September 30,
1996.................................................................................. $ 367
1997.................................................................................. 388
1998.................................................................................. 169
-----
Total minimum lease payments........................................................ $ 924
-----
-----
</TABLE>
F-12
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. LEASES (CONTINUED)
The Company also leases various computer equipment under capital lease
arrangements. Future minimum lease payments under these capital leases, together
with the present value of the net minimum lease payments at September 30, 1995,
are as follows:
<TABLE>
<CAPTION>
(IN THOUSANDS)
--------------
<S> <C>
Year Ending September 30,
1996.................................................................................. $ 524
1997.................................................................................. 533
1998.................................................................................. 498
1999.................................................................................. 308
-------
Total minimum lease payments.......................................................... 1,863
Less: Amount representing interest.................................................... (297)
-------
Present value of net minimum lease payments........................................... $ 1,566
-------
-------
</TABLE>
NOTE 5. SHARE CAPITAL
Billing has, historically, operated as a wholly-owned subsidiary of USLD
and, consequently, had no publicly owned common shares.
NOTE 6. INCOME TAXES
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current.................................................................. $ 3,777 $ 5,034 $ 8,927
Deferred................................................................. (30) 4 (266)
--------- --------- ---------
$ 3,747 $ 5,038 $ 8,661
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes for fiscal 1993, 1994 and 1995 differs from
the amount computed by applying the statutory federal income tax rate of 34% for
fiscal 1993 and 1994, and 35% for fiscal 1995 to income before taxes. The
reasons for these differences were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Computed income tax provision at statutory rate.......................... $ 3,464 $ 4,625 $ 7,973
Increases (reductions) in taxes resulting from:
State income taxes..................................................... 370 558 970
Amortization of asset valuations in excess of tax...................... 77 51 (97)
Other, net............................................................. (164) (196) (185)
--------- --------- ---------
Provision for income taxes............................................... $ 3,747 $ 5,038 $ 8,661
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-13
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6. INCOME TAXES (CONTINUED)
The tax effect of significant temporary differences, which comprise the
deferred tax assets and liabilities, are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Expense provisions.................................................................. $ 118 $ 530
Deferred tax liabilities:
Tax depreciation and amortization in excess of book................................. (61) (325)
Prepaid expenses.................................................................... (86) (21)
Other............................................................................... (3) 0
--------- ---------
Total gross deferred tax liabilities.................................................. (150) (346)
--------- ---------
Net deferred tax asset (liability).................................................... $ (32) $ 184
--------- ---------
--------- ---------
</TABLE>
The Company has been notified by the Internal Revenue Service ("IRS") that a
fiscal 1992 transaction between a wholly owned foreign subsidiary of USLD (Mega
Plus Dialing, Inc.) and the Company is proposed to be treated differently by the
IRS than originally characterized by the Company. The Company understands that
the IRS will issue a report that will propose an assessment of income tax and
related excise taxes, interest and penalties. The Company and its tax counsel
disagree with the IRS's position, and, therefore, no accrual for this potential
liability or any associated taxes, interest or penalties has been made.
NOTE 7. BENEFIT PLANS
Employees and directors of the Company are eligible to participate in
certain compensation and benefit plans provided by USLD.
Participation in the U.S. Long Distance Corp. 401(k) Retirement Plan
("Retirement Plan") is offered to eligible employees of the Company. Generally,
all employees of the Company who are 21 years of age or older and who have
completed one year of service during which they worked at least 1,000 hours were
eligible for participation in the Retirement Plan. The Retirement Plan is a
defined contribution plan which provides that participants generally may make
voluntary salary deferral contributions, on a pretax basis, of between 2% and
15% of their compensation in the form of voluntary payroll deductions up to a
maximum amount as indexed for cost-of-living adjustments. The Company makes
matching contributions as a percentage determined annually of the first 6% of a
participant's compensation contributed as salary deferral. The Company may make
additional discretionary contributions. During fiscal 1994, a discretionary
contribution in the amount of $8,000 was made. No discretionary contributions
were made in fiscal 1993 or 1995. During fiscal 1993, 1994 and 1995, the
Company's contributions totaled approximately $14,000, $31,000 and $27,000,
respectively.
Participation in the U.S. Long Distance Corp. Executive Compensation
Deferral Plan ("Executive Plan") is offered to selected employees occupying
management positions who are determined by USLD's board of directors from time
to time to be eligible to participate in the Executive Plan. Participation in
the U.S. Long Distance Corp. Director Compensation Deferral Plan ("Director
Plan") is offered to individuals occupying a position as an outside director.
The Executive and Director Plans are defined contribution plans which provide
that participants could make voluntary salary deferral contributions, on a
pretax basis, of between 1% and 100% of their eligible compensation. Under the
Executive Plan, the Company made matching contributions equal to the lesser of
100% of a participant's contributions or an amount determined based on a formula
established by the plan. Matching contributions under the Director Plan were 33%
of the participant's contributions. The Company has
F-14
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. BENEFIT PLANS (CONTINUED)
the right to make matching contributions of a different amount or no
contributions under both plans. During fiscal 1994 and 1995, the Company
contributed $7,000 and $12,000 to the Executive Plan, respectively.
Additionally, the U.S. Long Distance Corp. Executive Qualified Disability
Plan ("Disability Plan") is provided to certain employees occupying management
positions. The Disability Plan provides long-term disability benefits through
disability insurance coverage purchased by the Company and through Company
funded payments. Benefits under the Disability Plan are provided directly by the
Company based on definitions contained in the applicable insurance policies.
The U.S. Long Distance Corp. Employee Stock Purchase Plan (the "ESPP"),
which was established under the requirements of Section 423 of the Internal
Revenue Code of 1986, as amended, is offered to eligible employees of the
Company. The ESPP enables employees who have completed at least six months of
continuous service with the Company to purchase shares of USLD's common stock at
a 15% discount through voluntary payroll deductions.
NOTE 8. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party will have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
The Company is obligated to pay certain local telephone companies a total of
approximately $4,355,000 during fiscal 1996 for minimum usage charges under
billing and collection agreements. The Company anticipates exceeding the minimum
usage volumes with these vendors.
The Distribution plan provides the Company will only assume liabilities and
obligations for claims and litigation that arose from the ordinary course of the
Company's business. The Company will not assume any liabilities arising prior to
the date of Distribution that relate to the direct dial long distance and
operator service businesses of USLD.
NOTE 9. RELATED PARTIES
The Company provides billing and information management services for USLD
and purchases long distance and 800 services from USLD. Transactions under the
agreements for these services have been reflected in the accompanying
consolidated financial statements at market prices. Transactions between the
Company and USLD are summarized as follows:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Sales to USLD............................................................ $ 4,485 $ 5,308 $ 5,322
Purchases from USLD...................................................... 610 916 1,729
</TABLE>
In addition, the Company's accounts receivable balance at September 30, 1994
and 1995 includes $1,053,000 and $1,127,000, respectively, related to billing
services performed for USLD.
F-15
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1994 1995 1995 1995
------------ ----------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.......................................... $ 17,010 $ 17,932 $ 21,367 $ 24,538
Income from operations............................ 4,529 4,873 6,109 6,544
Net income........................................ 2,911 3,102 3,921 4,184
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
---------------------------------------------------
DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1993 1994 1994 1994
------------ ----------- --------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Revenues.......................................... $ 11,842 $ 13,342 $ 15,622 $ 16,940
Income from operations............................ 1,537 2,983 3,990 4,882
Net income........................................ 1,022 1,846 2,547 3,150
</TABLE>
F-16
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
1995
------------- MARCH 31,
1996
-----------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents........................................................... $ 26,770 $ 32,582
Accounts receivable................................................................. 18,113 20,368
Purchased receivables............................................................... 55,228 62,381
Prepaids and other.................................................................. 624 731
------------- -----------
Total current assets............................................................ 100,735 116,062
Property and equipment................................................................ 5,563 6,826
Less accumulated depreciation and amortization...................................... (2,334) (2,747)
------------- -----------
Net property and equipment...................................................... 3,229 4,079
Equipment held under capital leases, net of accumulated amortization of $305 (1995)
and $492 (1996)...................................................................... 1,556 1,369
Other Assets:
Other assets, net of accumulated amortization of $2,105 (1995) and $2,272 (1996).... 1,375 785
------------- -----------
Total assets.................................................................... $ 106,895 $ 122,295
------------- -----------
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable:
Trade............................................................................. $ 12,604 $ 10,922
Billing customers................................................................. 34,756 32,730
Accrued liabilities................................................................. 12,362 17,921
Revolving line of credit for purchased receivables.................................. 23,030 23,686
Current portion of long-term debt................................................... 285 298
Current portion of obligations under capital leases................................. 398 421
------------- -----------
Total current liabilities....................................................... 83,435 85,978
Long-term debt, less current portion.................................................. 1,048 880
Obligations under capital leases, less current portion................................ 1,168 925
Other liabilities..................................................................... 21 56
------------- -----------
Total liabilities............................................................... 85,672 87,839
Commitments and contingencies (See Note 3)
Stockholders' equity:
Preferred shares, $10.00 par value, 10,000 shares authorized, 10,000 shares issued
and outstanding.................................................................... 100 100
Common shares, no par value, 102,000 shares authorized, 102,000 shares issued and
outstanding........................................................................ 1 1
U.S. Long Distance Corp.'s investment in and advances to Billing...................... 21,122 34,355
------------- -----------
Total stockholders' equity...................................................... 21,223 34,456
------------- -----------
Total liabilities and stockholders' equity...................................... $ 106,895 $ 122,295
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-17
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Operating revenues......................................................................... $ 34,942 $ 50,301
Cost of services........................................................................... 21,976 32,145
--------- ---------
Gross profit............................................................................... 12,966 18,156
Selling, general and administrative expenses............................................... 4,319 5,356
Advance funding program income............................................................. (1,898) (2,968)
Advance funding program expense............................................................ 624 598
Depreciation and amortization expense...................................................... 519 940
--------- ---------
Income from operations..................................................................... 9,402 14,230
Other income (expense):
Interest income.......................................................................... 441 486
Interest expense......................................................................... (72) (154)
Other, net............................................................................... (68) (96)
--------- ---------
Total other income (expense)........................................................... 301 236
--------- ---------
Income before provision for income taxes................................................... 9,703 14,466
Provision for income taxes................................................................. (3,690) (5,497)
--------- ---------
Net income................................................................................. $ 6,013 $ 8,969
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-18
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED MARCH 31,
--------------------
1995 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................................. $ 6,013 $ 8,969
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization........................................................ 519 940
Deferred compensation................................................................ 9 7
Changes in current assets and liabilities:
Decrease (increase) in accounts receivable......................................... 5,478 (2,255)
Increase in prepaids and other..................................................... (135) (107)
Decrease in trade accounts payable................................................. (163) (1,682)
Increase (decrease) in accrued liabilities......................................... (632) 5,559
Increase (decrease) in other liabilities........................................... (26) 35
--------- ---------
Net cash provided by operating activities................................................ 11,063 11,466
Cash flows from investing activities:
Purchase of property and equipment..................................................... (398) (1,196)
Payments for purchased receivables, net................................................ (1,118) (7,153)
Payments made to customers, net........................................................ (6,949) (2,026)
Other investing activities............................................................. (588) 424
--------- ---------
Net cash used in investing activities.................................................... (9,053) (9,951)
Cash flows from financing activities:
Draws on revolving line of credit for purchased receivables, net....................... 1,083 656
Proceeds from issuance of debt......................................................... 182 0
Payments on long-term debt............................................................. (59) (155)
Payments on capital leases............................................................. (78) (220)
Transfers from (to) affiliates......................................................... (1,802) 4,016
--------- ---------
Net cash provided by (used in) financing activities...................................... (674) 4,297
--------- ---------
Net increase in cash and cash equivalents................................................ 1,336 5,812
Cash and cash equivalents, beginning of period........................................... 20,742 26,770
--------- ---------
Cash and cash equivalents, end of period................................................. $ 22,078 $ 32,582
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-19
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The interim condensed consolidated financial statements included herein have
been prepared by Billing and subsidiaries (collectively referred to as the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission ("SEC"). All adjustments have been made to
the accompanying interim condensed consolidated financial statements which are,
in the opinion of the Company's management, necessary for a fair presentation of
the Company's operating results. All adjustments are of a normal recurring
nature. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is recommended that these interim condensed consolidated
financial statements be read in conjunction with the consolidated financial
statements and the notes thereto included in this Information Statement for the
year ended September 30, 1995. Certain prior period amounts have been
reclassified for comparative purposes.
NOTE 2. STATEMENT OF CASH FLOWS
Cash payments and non-cash activities during the periods indicated were as
follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Cash payments for income taxes............................................... $ 2,887 $ 4,999
Cash payments for interest................................................... 697 775
</TABLE>
NOTE 3. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes it
is unlikely that the final outcome of any of the claims or proceedings to which
the Company is a party would have a material adverse effect on the Company's
financial position or results of operations; however, due to the inherent
uncertainty of litigation, there can be no assurance that the resolution of any
particular claim or proceeding would not have a material adverse effect on the
Company's results of operations for the fiscal period in which such resolution
occurred.
NOTE 4. RELATED PARTY TRANSACTIONS
The Company provides billing and information management services for USLD
and purchases long distance and 800 services from USLD. Transactions under the
agreements for these services have been reflected in the accompanying financial
statements at market prices. Transactions between the Company and USLD are
summarized as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
--------------------
1995 1996
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Sales to USLD............................................................ $ 2,476 $ 2,594
Purchases from USLD...................................................... 662 1,544
</TABLE>
In addition, the Company's accounts receivable balance at September 30, 1995 and
March 31, 1996 includes $1,127,000 and $885,000, respectively, related to
billing services performed for USLD.
NOTE 5. SUBSEQUENT EVENTS
In connection with a plan of Distribution adopted by USLD's Board of
Directors on May 13, 1996, USLD intends to distribute shares of the Company's
common stock to the existing stockholders of USLD. At the Distribution Date,
USLD stockholders on the record date for the Distribution will
F-20
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. SUBSEQUENT EVENTS (CONTINUED)
receive one share of the Company's common stock for each share of USLD common
stock held. If the Distribution had taken place on March 31, 1996, approximately
15.0 million shares of the Company's stock would have been issued to USLD
stockholders.
For purposes of governing certain ongoing relationships between the Company
and USLD after the Distribution and to provide for an orderly transition,
Billing and USLD will enter into certain agreements. Such proposed agreements
include: (i) the Distribution Agreement, providing for, among other things, the
Distribution and the division between the Company and USLD of certain assets and
liabilities and material indemnification provisions; (ii) the Benefit Plans and
Employment Matters Allocation Agreement, providing for certain allocations of
responsibilities with respect to benefit plans, employee compensation, and labor
and employment matters; (iii) the Tax Sharing Agreement pursuant to which the
Company and USLD will agree to allocate tax liabilities that relate to periods
prior to and after the Distribution Date; (iv) the Transitional Services and
Sublease Agreement pursuant to which USLD will provide certain services on a
temporary basis and sublease certain office space to the Company and Billing
will provide certain services to USLD on a temporary basis; (v) the Zero Plus --
Zero Minus Billing and Information Management Services Agreement pursuant to
which the Company will provide billing clearinghouse and information management
services to USLD for an initial period of three years; (vi) the
Telecommunications Agreement pursuant to which USLD will provide long distance
telecommunications services to the Company for an initial period of three years;
and (vii) the Expense Sharing Agreement, whereby USLD and Billing agree to pay
certain usage charges and share certain expenses relating to the operation of an
airplane. It is the intention of USLD and Billing that the Transitional Services
and Sublease Agreement, the Zero Plus -- Zero Minus Billing and Information
Management Services Agreement, the Telecommunications Agreement and the Expense
Sharing Agreement reflect terms and conditions similar to those that would have
been arrived at by independent parties bargaining at arm's length.
The Benefit Plans and Employment Matters Allocation Agreement ("Benefits
Agreement") provides for the allocation of certain responsibilities with respect
to employee compensation benefit and labor matters. The allocation of
responsibility and adjustments to be made pursuant to the Benefits Agreement
will be substantially consistent with the existing benefits provided to USLD
employees under USLD's various compensation plans. Among other things, the
Benefits Agreement will provide that, effective as of the Distribution Date,
Billing will or will cause one or more of its subsidiaries to, assume or retain,
as the case may be, all liabilities of USLD, to the extent unpaid as of the
Distribution Date, under employee benefit plans, policies, arrangements,
contracts and agreements, with respect to employees who, on or after the
Distribution Date, will be employees of Billing or its subsidiaries. The
Benefits Agreement will also provide that, effective as of the Distribution
Date, USLD will, or will cause one or more of its subsidiaries to assume or
retain, as the case may be, all liabilities of USLD, to the extent unpaid as of
the Distribution Date, under employee benefit plans, policies, arrangements,
contracts and agreements, with respect to employees who on or after the
Distribution Date will be employees of USLD or its subsidiaries.
In addition, Billing will assume, with respect to employees who, on or after
the Distribution Date, will be employees of Billing or any of its subsidiaries,
all responsibility for liabilities and obligations as of the Distribution Date
for medical and dental plan coverage and for vacation and welfare plans. USLD
will assume, with respect to the employees who, on or after the Distribution
Date, will be employees of USLD or any of its subsidiaries, all responsibilities
for all liabilities and obligations as of the Distribution Date for medical and
dental plan coverage and for vacation and welfare plans.
USLD currently provides additional compensation to its employees (including
Billing employees) under one or more of the following employee benefit plans:
USLD 401(k) Retirement Plan, the USLD
F-21
<PAGE>
BILLING INFORMATION CONCEPTS CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. SUBSEQUENT EVENTS (CONTINUED)
1990 Employee Stock Option Plan, the 1993 Non-Employee Director Plan of USLD,
the USLD Executive Compensation Deferral Plan, the USLD Director Compensation
Deferral Plan, the USLD Executive Qualified Disability Plan, the USLD Employee
Stock Option Purchase Plan and the USLD 1995 Employee Restricted Stock Plan.
Pursuant to the Benefits Agreement, subject to certain conditions set forth in
the Benefits Agreement in connection with the Distribution, USLD will adjust
each existing USLD employee benefit plan and award outstanding thereunder in the
manner described in "Benefit Plans and Employment Matters Allocation Agreement"
in this Information Statement.
Billing will adopt the 1996 Comprehensive Stock Plan and 1996 Non-Employee
Director Plan under which officers and employees, and non-employee directors,
respectively, of Billing and its affiliates will be eligible to receive stock
option grants. Immediately prior to the Distribution, Billing intends to grant,
under the Billing Comprehensive Stock Plan and Billing Director Plan,
respectively, options to purchase Billing Common Stock to each holder of an
outstanding option to purchase shares of USLD common stock under the USLD
Employee Stock Option Plan and USLD Non-Employee Director Plan, respectively.
The Billing options will be exercisable for Billing common stock on the basis of
one share of Billing common stock for every one share of USLD common stock
subject to the outstanding USLD options. Based on the number of USLD options
outstanding on March 31, 1996, it is anticipated that Billing options to
purchase a total of 1,686,000 shares of Billing common stock will be granted in
connection with the grant to USLD option holders. In connection with the grant
of the Billing options, the exercise price of the USLD options will be adjusted
to preserve the economic value of the USLD options existing immediately prior to
the Distribution after giving effect to the grant of the Billing options (see
"Benefits Plans and Employment Matters Allocation Agreement" included elsewhere
in this Information Statement). The Billing options will have vesting schedules
mirroring the vesting schedules of the related USLD options. Each Billing option
granted in connection with the Distribution and held by a USLD employee after
the Distribution Date will terminate in accordance with the original USLD option
grant. Each Billing option granted in connection with the Distribution and held
by a Billing employee will terminate in accordance with the original USLD option
grant.
USLD, as sole stockholder of Billing, is expected to approve the adoption of
the Billing 1996 Employee Comprehensive Stock Plan, the Billing 1996 Employee
Stock Purchase Plan and the Billing 1996 Non-Employee Director Plan.
F-22
<PAGE>
ANNEX A
The Board of Directors
U.S. Long Distance Corp.
9311 San Pedro Avenue
Suite 100
San Antonio, TX 78216
Gentlemen:
We have acted as financial advisor to U.S. Long Distance Corp., a Delaware
corporation ("USLD"), in connection with the proposed distribution (the
"Distribution") to the holders of USLD common stock, par value $.01 per share
(the "USLD Common Stock"), of 100% of the common stock, par value $.01 per share
(the "Billing Common Stock") of Billing Information Concepts Corp., a Delaware
corporation ("Billing"). Billing is a wholly owned subsidiary of USLD which,
upon completion of the "Preliminary Transactions", as defined in the Information
Statement, will own the billing clearinghouse and information management
services businesses currently owned by USLD. We have been advised that the
purposes of the Distribution are as set forth in the Information Statement
proposed to be sent to stockholders of USLD, a copy of which has been furnished
to us. The Distribution is described more fully in such Information Statement.
You have requested our opinion as to whether the Distribution is in the best
interests of the holders of USLD Common Stock from a financial point of view in
comparison to other alternatives that would be available to USLD regarding
Billing. We have assumed that the Distribution will not be a taxable transaction
to USLD or to stockholders of USLD. We have not been asked to, and do not,
express any opinion as to the valuation, future performance or long-term
viability of Billing or USLD as an independent public company following the
Distribution. This opinion does not opine on or give assurance of the prices at
which the shares of USLD Common Stock or Billing Common Stock will actually
trade after the Distribution.
In connection with our review of the Distribution, and in arriving at our
opinion, we have, among other things:
(i) reviewed the publicly available consolidated financial statements of
USLD for recent years and interim periods to date and certain other
relevant financial and operating data of USLD made available to us from
published sources and by officers of USLD;
(ii) reviewed the financial statements of Billing contained in the
Information Statement;
(iii) reviewed certain internal financial and operating information,
including certain projections, relating to USLD and Billing prepared by
the managements of USLD and Billing, respectively;
(iv) discussed the business, financial condition and prospects of USLD with
certain officers of USLD;
(v) discussed the business, financial condition and prospects of Billing
with certain officers of USLD and Billing;
(vi) reviewed the financial terms of the Distribution;
(vii) reviewed the financial terms, to the extent publicly available, of
certain transactions we deemed relevant;
(viii) reviewed certain publicly available information relating to certain
companies we deemed appropriate in analyzing USLD and Billing;
(ix) reviewed the trading history of USLD Common Stock;
A-1
<PAGE>
(x) reviewed the Information Statement included in the Registration
Statement on Form 10 for the Billing Common Stock filed with the
Securities and Exchange Commission on May 14, 1996;
(xi) reviewed the tax opinion of Arter & Hadden, Special Tax Counsel, that,
among other things, the transaction will be tax-free to USLD and its
stockholders;
(xii) reviewed the solvency and sufficient surplus opinions provided by
Houlihan, Lokey, Howard & Zukin; and
(xiii) performed such other analyses and examinations and considered such
other information, financial studies, analyses and investigations and
financial, economic and market data as we deemed relevant.
We have not independently verified any of the information concerning USLD or
Billing considered in connection with our review of the Distribution and, for
purposes of the opinion set forth herein, we have assumed and relied upon the
accuracy and completeness of all such information. With respect to the financial
forecasts and projections made available to us and used in our analysis, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of USLD and
Billing as to the expected future financial performance of their respective
companies. In our analysis we considered the financial aspects of certain
alternatives available to USLD, including selling certain of USLD's subsidiaries
to an unaffiliated purchaser, selling all or a portion of Billing to the public
through an initial public offering, and maintaining Billing as a USLD
subsidiary. Our opinion is necessarily based upon market, economic, financial
and other conditions as they exist and can be evaluated as of the date of this
letter. Any change in such conditions would require a reevaluation of this
opinion.
The Chicago Corporation, as part of its investment banking services, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, corporate restructurings, strategic
alliances, negotiated underwritings, secondary distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes. We have acted as financial advisor to the Board of Directors of USLD
in connection with the Distribution and will receive a fee for our services,
part of which is contingent upon the consummation of the Distribution. In the
past, we have provided investment banking and other financial advisory services
to USLD and have received fees for rendering these services. In the ordinary
course of business, The Chicago Corporation acts as a market maker and broker in
the USLD Common Stock and receives customary compensation in connection
therewith. The Chicago Corporation expects to act as a market maker and broker
in the Billing Common Stock following the Distribution.
This letter and the opinion stated herein are solely for the use of USLD's
Board of Directors and may not be reproduced, summarized, excerpted from or
otherwise publicly referred to in any manner without our prior written consent.
Based upon and subject to the foregoing and after considering such other
matters as we deem relevant, we are of the opinion that as of the date hereof,
in comparison to other alternatives that would be available to USLD regarding
Billing, the Distribution is in the best interests of the holders of USLD Common
Stock from a financial point of view.
We hereby consent to the inclusion of the full extent of our opinion and a
summary thereof in the Registration Statement on Form 10 for Billing and the
Schedule 14C of USLD and to references to our name therein.
Sincerely,
THE CHICAGO CORPORATION
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ANNEX B
May 13, 1996
To The Board of Directors
U.S. Long Distance Corp.
9311 San Pedro, Suite 300
San Antonio, TX 78216
Dear Directors:
We understand that U.S. Long Distance Corp. ("USLD") is considering a
restructuring, including the distribution, on a tax-free basis, of the issued
and outstanding shares of a to-be-formed wholly-owned subsidiary, Billing
Information Concepts Corp. ("Billing") to holders of USLD's common stock (the
"Distribution"). Billing will be a newly formed corporation which, upon
completion of the Distribution, will be an independent, publicly held company
that will own and operate substantially all of the assets of, and will assume
substantially all of the liabilities associated with, USLD's billing
clearinghouse and information management services business. This business is
currently conducted through USLD's subsidiaries, Zero Plus Dialing, Inc.,
Enhanced Services Billing, Inc. and U.S. Billing, Inc. Prior to the
Distribution, USLD will contribute the capital stock of U.S. Billing, Inc. and
U.S. Billing Management Corp., another subsidiary of USLD, to Billing in
exchange for the capital stock of Billing. Enhanced Services Billing, Inc. and
Zero Plus Dialing, Inc. will be merged with U.S. Billing, Inc. and U.S. Billing
Management Corp., respectively. Enhanced Services Billing, Inc. and Zero Plus
Dialing, Inc. will be the surviving corporations in the mergers and will become
wholly-owned subsidiaries of Billing. The Distribution and other related
transactions disclosed to Houlihan Lokey are referred to collectively herein as
the "Transaction."
You have requested our written opinion (the "Opinion") as to the matters set
forth below. This Opinion values each of USLD and Billing (each sometimes
referred to hereinafter singularly as a "Company") as a going concern (including
goodwill), on a pro forma basis, immediately after and giving effect to the
Distribution. Nothing has come to our attention during the course of our
investigation which would lead us to believe that each of USLD and Billing,
after giving effect to the Distribution, is not a going concern. For purposes of
this Opinion, "fair value" shall be defined as the amount at which the Company
would change hands between a willing buyer and a willing seller, each having
reasonable knowledge of the relevant facts, neither being under any compulsion
to act, with equity to both; and "present fair saleable value" shall be defined
as the amount that may be realized if the Company's aggregate assets (including
goodwill) are sold as an entirety with reasonable promptness in an arm's length
transaction under present conditions for the sale of comparable business
enterprises, as such conditions can be reasonably evaluated by Houlihan Lokey.
We have used the same valuation methodologies in determining fair value and
present fair saleable value for purposes of rendering this Opinion. The term
"identified contingent liabilities" shall mean the stated amount of contingent
liabilities identified to us and valued by responsible officers of the Company,
upon whom we have relied upon without independent verification; no other
contingent liabilities will be considered. During the course of our
investigation, nothing has come to our attention which would cause us to believe
our reliance on such identified amounts and the value thereof to be unreasonable
or that use of only such amounts was unreasonable. Being "able to pay its debts
as they become absolute and mature or due" shall mean that, assuming the
Transaction has been consummated as proposed, the Company's financial forecast
for the period September 30, 1996 to 2000 indicate positive cash flow for such
period. It is Houlihan Lokey's understanding, upon which it is relying, that
USLD's Board of Directors and any other recipient of the Opinion will consult
with and rely solely upon their own legal counsel with respect to said
definitions. No representation is made herein, or directly or indirectly by the
Opinion, as to any legal matter or as to the sufficiency of said definitions for
any purpose other then setting forth the scope of Houlihan Lokey's Opinion
hereunder.
Notwithstanding the use of the defined terms "fair value" and "present fair
saleable value," we have not been engaged to identify prospective purchasers or
to ascertain the actual prices at which and terms on which either Company can
currently be sold, and we know of no such efforts by others. Because the sale of
any business enterprise involves numerous assumptions and uncertainties, not all
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of which can be quantified or ascertained prior to engaging in an actual selling
effort, we express no opinion as to whether either Company would actually be
sold for the amount we believe to be its respective fair value and present fair
saleable value.
In connection with this Opinion, we have made such reviews, analyses and
inquiries as we have deemed necessary and appropriate under the circumstances.
Among other things, we have:
1. reviewed USLD's annual reports to shareholders and on Form 10-K for the
five fiscal years ended September 30, 1995 and quarterly report on Form
10-Q for the quarter ended December 31, 1995, which USLD's management has
identified as the most current information available;
2. reviewed Billing's proforma historical income statements for the three
years ended September 30, 1995 and for the six months ended March 31,
1995 and March 31, 1996 and balance sheets as of December 31, 1995 and
March 31, 1996;
3. reviewed USLD's proforma historical income statements for the three
years ended September 30, 1995, and for the six months ended March 31,
1995 and March 31, 1996 and balance sheets as of December 31, 1995 and
March 31, 1996;
4. review copies of the following agreements:
a. Distribution Agreement and exhibits;
b. Tax Sharing Agreement
c. Transitional Services and Sublease Agreement;
d. Zero Plus-Zero Minus Billing and Information Management Service
Agreement; and
e. Telecommunications Agreement.
5. reviewed drafts of USLD's Schedule 14C and Form 10 filings with the U.S.
Securities and Exchange Commission, dated May 7, 1996;
6. met with certain members of the senior management of each Company to
discuss the operations, financial condition, future prospects and
projected operations and performance of the respective Company and to
discuss certain other matters;
7. visited certain facilities and business offices of USLD;
8. reviewed forecasts and projections prepared by each Company's management
with respect to the respective Company for the years ended September 30,
1996 through 2000;
9. reviewed the historical market prices and trading volume for USLD's
publicly traded securities;
10. reviewed other publicly available financial data for each Company and
certain companies that we deem comparable to each Company;
11. reviewed drafts of certain documents to be delivered at the closing of
the Transaction, including, but not limited to, the reports of each
Company's chief financial officer and of the respective Company's
independent public accountants; and
12. conducted such other studies, analyses and investigations as we have
deemed appropriate.
We have relied upon and assumed, without independent verification, that the
financial forecasts and projections provided to us have been reasonably prepared
and reflect the best currently available estimates of the future financial
results and condition of each Company, and that there has been no material
adverse change in the assets, financial condition, business or prospects of
either Company since the date of the most recent financial statements made
available to us. Nothing has come to our attention during the course of our
investigation which would lead us to believe that our acceptance and reliance
upon such financial forecasts and projections was unreasonable.
We have not independently verified the accuracy and completeness of the
information supplied to us with respect to each Company and do not assume any
responsibility with respect to it. Nothing has
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come to our attention during the course of our investigation which would lead us
to believe that any information, when taken as a whole, reviewed by us or
presented to us in connection with our rendering of the Opinion was unreasonable
in any material respect or that is was unreasonable for us to utilize and rely
upon the financial projections or forecasts, financial statements, assumptions,
estimates, and judgments or statements, as the case may be, of the management of
USLD and Billing and their outside counsel, accountants and financial advisors.
We have not made any physical inspection or independent appraisal of any of the
properties or assets of either Company. Our opinion is necessarily based on
business, economic, market and other conditions as they exist and can be
evaluated by us at the date of this letter.
Based upon the foregoing, and in reliance thereon, it is our opinion as of
the date of this letter that:
(i) with respect to USLD before the Distribution and with respect to each of
USLD and Billing, assuming the Transaction had been consummated as
proposed, immediately after and giving effect to the Distribution on a
pro forma basis;
(a) the fair value of the Company's aggregate assets would exceed the
Company's total liabilities (including contingent liabilities);
(b) the present fair saleable value for the Company's aggregate assets
would be greater than the Company's probable liabilities on its debts
(including contingent liabilities) as such debts become absolute and
mature or due;
(ii) with respect to each of USLD and Billing, assuming the Transaction had
been consummated as proposed, immediately after and giving effect to the
Distribution:
(c) the Company would be able to pay its debts and other liabilities
(including contingent liabilities) as they become absolute and mature
or due; and
(d) the capital remaining in the Company after the Distribution would
not be unreasonably small for the business in which such company is
engaged, as management has indicated it has now conducted and is
proposed to be conducted following consummation of the Distribution,
and
(iii) the excess of the value of aggregate assets of USLD, before
consummation of the Distribution, over the total identified liabilities
(including contingent liabilities) of USLD would equal or exceed the
value of the Distribution to USLD stockholders plus the stated capital of
USLD.
This Opinion is furnished solely for your benefit and may not be relied upon
by any other person without our express, prior written consent. This Opinion is
delivered to each recipient subject to the conditions, scope of engagement,
limitations and understandings set forth in this Opinion and our engagement
letter dated April 19, 1996, and subject to the understanding that the
obligations of Houlihan Lokey in the Transaction are solely corporate
obligations, and no officer, director, employee, agent, shareholder or
controlling person of Houlihan Lokey shall be subjected to any personal
liability whatsoever to any person, nor will any such claim be asserted by or on
behalf of you or your affiliates.
We hereby ratify and confirm our consent to the inclusion of the full extent
of our opinion and a summary thereof in the Registration Statement on Form 10
for Billing and the Schedule 14C of USLD and to references to our name therein
which was given in our engagement letter dated April 19, 1996.
HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.
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ANNEX C
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BILLING INFORMATION CONCEPTS CORP.
This document constitutes an amendment and restatement of the original
Certificate of Incorporation of BILLING INFORMATION CONCEPTS CORP. which was
filed with the Secretary of State of Delaware on April 26, 1996. This Amended
and Restated Certificate of Incorporation was duly adopted in accordance with
the provisions of Section 245(c) of the Delaware General Corporation Law and
shall become effective at midnight on , 1996.
ARTICLE I.
NAME
The name of the corporation (the "corporation") is BILLING INFORMATION
CONCEPTS CORP.
ARTICLE II.
ADDRESS OF REGISTERED OFFICE, NAME OF REGISTERED AGENT
The address, including street, number, city and county, of the registered
office of the corporation in the State of Delaware is One Rodney Square, 10th
Floor, Tenth and King Streets, in the City of Wilmington, County of New Castle
19801; and the name of the registered agent of the corporation in the State of
Delaware at such address is RL&F Service Corp.
ARTICLE III.
PURPOSE AND POWERS
The purpose of the corporation is to engage in any lawful act or activity
for which a corporation may now or hereafter be organized under the Delaware
General Corporation Law. It shall have all powers that may now or hereafter be
lawful for a corporation to exercise under the Delaware General Corporation Law.
ARTICLE IV.
CAPITAL STOCK
4.1 TOTAL NUMBER OF SHARES OF STOCK. The total number of shares of all
classes of stock which the corporation shall have authority to issue is seventy
million (70,000,000). Of such shares, (i) sixty million (60,000,000) shall be
common stock, par value $0.01 per share ("Common Stock"), and (ii) ten million
(10,000,000) shall be preferred stock, par value $0.01 per share ("Preferred
Stock").
4.2 PREFERRED STOCK. Preferred Stock may be issued in one or more series.
To the fullest extent permitted by law, the board of directors shall have the
authority, by resolution, to create and issue such series of Preferred Stock and
to fix with respect to any such series the number of shares of Preferred Stock
comprising such series and the powers, designations, preferences and rights (and
the qualifications, limitations and restrictions thereof) of the shares, of such
series including, without limitation, the following:
(a) the number of shares constituting that series and the distinctive
designation of that series;
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(b) the dividend rate of the shares of that series, whether dividends
shall be cumulative, and, if so, from which date or dates, and the relative
rights of priority, if any, of payment of dividends on shares of that
series;
(c) whether that series shall have voting rights, in addition to the
voting rights provided by law, and, if so, the terms of such voting rights;
(d) whether that series shall have conversion privileges, and, if so,
the terms and conditions of such conversion, including provision for
adjustment of the conversion rate in such events as the board of directors
shall determine;
(e) whether or not the shares of such series shall be redeemable, and,
if so, the terms and conditions of such redemptions, including the date or
dates upon or after which they shall be redeemable, and the amount per share
payable in case of redemption, which amount may vary under different
conditions and at different redemption dates;
(f) whether that series shall have a sinking fund for the redemption or
purchase of shares of that series, and, if so, the terms and amount of such
sinking fund;
(g) the rights of the shares of that series in the event of voluntary
liquidation, dissolution or winding up of the corporation, and relative
rights of priority, if any, of payments of such shares of that series; and
(h) any other relative rights, preferences and limitations of that
series.
4.3 DESIGNATION OF SERIES A JUNIOR PARTICIPATING PREFERRED STOCK. There is
hereby established from among the Preferred Stock authorized above Series A
Junior Participating Preferred Stock ("Series A Preferred Stock"). The
designation and number of shares, and the relative rights, preferences and
limitations of the Series A Preferred Stock is as follows:
(a) DESIGNATION AND AMOUNT.
The shares of such series shall be designated as "Series A Junior
Participating Preferred Stock" (the "Series A Preferred Stock") and the number
of shares constituting the Series A Preferred Stock shall be 5,000. Such number
of shares may be increased or decreased by resolution of the Board of Directors;
provided that no decrease shall reduce the number of shares of Series A
Preferred Stock to a number less than the number of shares then outstanding plus
the number of shares reserved for issuance upon the exercise of outstanding
options, rights or warrants or upon the conversion of any outstanding securities
issued by the corporation convertible into Series A Preferred Stock.
(b) DIVIDENDS AND DISTRIBUTIONS.
(i) Subject to the rights of the holders of any shares of any other
series of Preferred Stock (or any similar stock) of the corporation, the
holders of shares of Series A Preferred Stock, in preference to the holders
of Common Stock of the corporation, and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of Directors out
of funds legally available for the purpose, cumulative preferential
dividends, payable in cash on the first day of January, April, July and
October in each year (each such date, a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Preferred Stock, at a
rate per annum (rounded to the nearest cent) equal to the greater of (a)
$1.00 per share, or (b) subject to the provision for adjustment hereinafter
set forth, 10,000 times the aggregate per share amount of all cash
dividends, and 10,000 times the aggregate per share amount (payable in kind)
of all noncash dividends or other distributions (other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding shares
of Common Stock (by reclassification or otherwise)), declared on the Common
Stock during the immediately preceding fiscal year. In the event the
corporation shall at any time after , 1996 declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) or combination or consolidation of the
outstanding shares of Common Stock into a greater or lesser number of shares
of
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Common Stock, then in each such case the amount to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying
such amount by a fraction, the numerator of which is the number of shares of
Common Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
(ii) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series A Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issuance of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly Dividend
Payment Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid
dividends shall not bear interest. Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of holders of
shares of Series A Preferred Stock entitled to receive payment of a dividend
or distribution declared thereon, which record date shall be not more than
60 days prior to the date fixed for the payment thereof.
(c) VOTING RIGHTS.
The holders of shares of Series A Preferred Stock shall have the following
voting rights:
(i) Each share of Series A Preferred Stock shall entitle the holder
thereof to 10,000 votes on all matters submitted to a vote of the
stockholders of the corporation. In the event the corporation shall at any
time after , 1996 declare or pay any dividend on the Common
Stock payable in shares of Common Stock, or effect a subdivision (by
reclassification or otherwise than by payment of a dividend in shares of
Common Stock) or combination or consolidation of the outstanding shares of
Common Stock into a greater or lesser number of shares of Common Stock, then
in each such case the number of votes to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the numerator of which is
the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.
(ii) Except as otherwise provided herein, in any other Certificate of
Designation, Preferences and Rights in respect of a series of preferred
stock (or any similar stock) of the corporation, in the Amended and Restated
Certificate of Incorporation of the corporation, or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
and any other capital stock of the corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
stockholders of the corporation.
(iii) Except as set forth herein, in the Amended and Restated
Certificate of Incorporation of the corporation or as otherwise provided by
law, holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the extent they are
entitled to vote with holders of Common Stock as set forth herein) for
taking any corporate action.
(d) CERTAIN RESTRICTIONS.
(i) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 4.3(b) are in
arrears, thereafter and until all accrued and unpaid dividends and
distributions, whether or not declared, on shares of Series A Preferred
Stock outstanding shall have been paid in full, the corporation shall not:
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(1) declare or pay dividends, or make any other distributions, on any
shares of stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
(2) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A Preferred
Stock, except dividends paid ratably on the Series A Preferred Stock and
all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares
are then entitled;
(3) redeem or purchase or otherwise acquire for consideration shares
of any stock ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) to the Series A Preferred Stock, provided that
the corporation may at any time redeem, purchase or otherwise acquire
shares of any such junior stock in exchange for shares of any stock of
the corporation ranking junior (both as to dividends and upon
liquidation, dissolution or winding up) to the Series A Preferred Stock;
or
(4) purchase or otherwise acquire for consideration any shares of
Series A Preferred Stock, or any shares of stock ranking on a parity with
the Series A Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board of
Directors) to all holders of such shares upon such terms as the Board of
Directors, after consideration of the respective annual dividend rates
and other relative rights and preferences of the respective series and
classes, shall determine in good faith will result in fair and equitable
treatment among the respective series or classes.
(ii) The corporation shall not permit any subsidiary of the corporation
to purchase or otherwise acquire for consideration any shares of stock of
the corporation unless the corporation could, under paragraph (e) of this
Section 4.3, purchase or otherwise acquire such shares at such time and in
such manner.
(e) REACQUIRED SHARES.
Any shares of Series A Preferred Stock redeemed, purchased or otherwise
acquired by the corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock
without designation as to series and may be reissued as part of a new series of
Preferred Stock subject to the conditions and restrictions on issuance set forth
herein, in the Amended and Restated Certificate of Incorporation, or in any
other Certificate of Designation, Preferences and Rights in respect of a series
of preferred stock (or any similar stock) of the corporation, or as otherwise
required by law.
(f) LIQUIDATION, DISSOLUTION OR WINDING UP.
Upon any liquidation, dissolution or winding up of the corporation, no
distribution shall be made to (1) the holders of shares of Common Stock or any
other stock ranking junior to the Series A Preferred Stock upon liquidation,
distribution or winding up, unless, prior thereto, the holders of shares of
Series A Preferred Stock shall have received $1.00 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment; provided that the holders of shares of
Series A Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
10,000 times the aggregate amount to be distributed per share to holders of
shares of Common Stock, or (2) to the holders of shares of stock ranking on a
parity with the Series A Preferred Stock upon liquidation, dissolution or
winding up, except distributions made ratably on the Series A Preferred Stock
and all such parity stock in proportion to the total amounts to which the
holders of all such shares are entitled upon such liquidation, dissolution or
winding up. In the event the corporation shall at any time after ,
1996 declare or pay any dividend on the Common Stock payable in shares of Common
Stock, or effect a subdivision (by reclassification or otherwise than by payment
of a dividend in shares of Common Stock) or combination or consolidation of the
outstanding shares of
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Common Stock into a greater or lesser number of shares of Common Stock, then in
each such case the aggregate amount to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event under the proviso
in clause (1) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.
(g) CONSOLIDATION, MERGER, ETC.
In the event the corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or converted or changed into other stock or securities, cash
and/or any other property, then in any such event proper provision shall be made
so that each share of Series A Preferred Stock shall at the same time be
similarly exchanged for or converted or changed into an amount per share,
subject to the provision for adjustment hereinafter set forth, equal to 10,000
times the aggregate amount of stock, securities, cash and/or any other property
(payable in kind), as the case may be, for which or into which each share of
Common Stock is exchanged for or converted or changed. In the event the
corporation shall at any time after , 1996 declare or pay any
dividend on the Common Stock payable in shares of Common Stock, or effect a
subdivision (by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) or combination or consolidation of the outstanding
shares of Common Stock into a greater or lesser number of shares of Common
Stock, then in each such event the amount set forth in the preceding sentence
with respect to the exchange or conversion or change of shares of Series A
Preferred Stock shall be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.
(h) NO REDEMPTION.
Shares of the Series A Preferred Stock shall not be redeemable.
(i) AMENDMENT.
This Section 4.3 shall not be amended in any manner that would materially
alter or change the powers, preferences or special rights of the Series A
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of at least two-thirds of the outstanding shares of Series A
Preferred Stock, voting together as a single class.
4.4 COMMON STOCK. The shares of Common Stock of the corporation shall be
identical in all respects and shall have equal rights and privileges. The
holders of Common Stock shall have one vote per share of Common Stock on all
matters on which holders of Common Stock are entitled to vote.
4.5 NO PREEMPTIVE RIGHTS. No holder of stock of any class of the
corporation, whether now or hereafter authorized or issued, shall be entitled as
such, as a matter of right, to subscribe for or purchase any part of any new or
additional issue of stock of any class whatsoever, or of any securities
convertible into stock of any class, or any character or to which are attached
or with which are issued warrants or rights to purchase any such stock, whether
now or hereafter authorized, issued or sold, or whether issued for money,
property or services, or by way of dividend or otherwise, or any right or
subscription to any thereof, other than such, if any, as the board of directors
in its direction may from time to time fix, pursuant to authority hereby
conferred upon it; and any shares of stock or convertible obligations with
warrants or rights to purchase any such stock, which the board of directors may
determine to offer for subscription, may be sold without being first offered to
any of the holders of the stock of the corporation of any class or classes or
may, as such board of directors shall determine, be offered to holders of any
class or classes of stock exclusively or to the holders of all classes of stock,
and if offered to more than one class of stock, in such proportions as between
such classes of stock as the board of directors, in its discretion, may
determine.
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ARTICLE V.
PLACE OF BOOKS AND RECORDS;
STOCKHOLDER INSPECTION RIGHTS
5.1 PLACE OF BOOKS AND RECORDS. The stockholders and directors shall have
power to hold their meetings and keep the books, documents and papers of the
corporation outside the State of Delaware, at such places as may be from time to
time designated by the Bylaws or by resolution of the stockholders or directors.
5.2 STOCKHOLDER INSPECTION RIGHTS. The Bylaws shall determine whether and
to what extent the accounts and books of this corporation, or any of them, shall
be open to the inspection of the stockholders; and no stockholder shall have any
right of inspecting any account, book, or document of this corporation, except
as conferred by law or the Bylaws, or by resolution of the stockholders or
directors.
ARTICLE VI.
EXISTENCE
The corporation is to have perpetual existence.
ARTICLE VII.
LIMITED LIABILITY OF SHAREHOLDERS
The private property of the stockholders shall not be subject to the payment
of the corporate debts to any extent whatsoever.
ARTICLE VIII.
BOARD OF DIRECTORS
8.1 NUMBER OF DIRECTORS. Except as otherwise fixed by or pursuant to the
provisions of Article IV hereof relating to the rights of the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect additional directors under specified
circumstances, the number of the directors of the corporation shall be fixed
from time to time by or pursuant to the Bylaws of the corporation.
8.2 CLASSIFIED BOARD OF DIRECTORS. The directors, other than those who may
be elected by the holders of any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation, shall be classified,
with respect to the time for which they severally hold office, into three
classes, as nearly equal in number as possible, as shall be provided in the
manner specified in the Bylaws of the corporation, one class to be originally
elected for a term expiring at the annual meeting of stockholders to be held in
1997, another class to be originally elected for a term expiring at the annual
meeting of stockholders to be held in 1998, and another class to be originally
elected for a term expiring at the annual meeting of stockholders in 1999, with
each class to hold office until its successor is elected and qualified. At each
annual meeting of the stockholders of the corporation, the successors of the
class of directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stockholders held in the
third year following the year of their election.
8.3 ADVANCE NOTICE OF STOCKHOLDER NOMINATIONS. Advance notice of
stockholder nominations for the election of directors shall be given in the
manner provided in the Bylaws of the corporation.
8.4 INCREASE IN NUMBER OF DIRECTORS; VACANCIES. Except as otherwise
provided for or fixed by or pursuant to the provisions of Article IV hereof
relating to the rights of the holders of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, newly created directorships resulting
from any increase in
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the number of directors and any vacancies on the board of directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the board of directors. Any directors
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been elected and qualified. No decrease in the number of
directors constituting the board of directors shall shorten the term of any
incumbent director.
8.5 REMOVAL OF DIRECTORS. Subject to the rights of any class or series of
stock having a preference over the Common Stock as to dividends or upon
liquidation to elect directors under specified circumstances, any director may
be removed from office, with or without cause and only by the affirmative vote
of the holders of at least sixty-six and two-thirds percent (66 2/3%) of the
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class.
8.6 AMENDMENT OF ARTICLE VIII. Notwithstanding anything contained in this
Amended and Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
voting (66 2/3%) of the voting power of all the shares of the corporation
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or adopt any provisions inconsistent with or repeal
this Article VIII.
8.7 WRITTEN BALLOTS. Election of directors need not be by written ballot
unless the Bylaws of the corporation shall so provide.
ARTICLE IX.
COMPROMISE
Whenever a compromise or arrangement is proposed between this corporation or
its creditors or any class of them and/or between this corporation and its
stockholders or any class of them, any court of equitable jurisdiction within
the State of Delaware may, on the application in a summary way of this
corporation or of any creditor or stockholder thereof or on the application of
any receiver or receivers appointed for this corporation under the provisions of
Section 291 of the Delaware General Corporation Law or on the application of
trustees in dissolution or of any receiver or receivers appointed for this
corporation under the provisions of Section 279 of the Delaware General
Corporation Law, order a meeting of the creditors or class of creditors, and/or
the stockholders or class of stockholders of this corporation, as the case may
be, to be summoned in such manner as the said court directs. If a majority in
number representing seventy five percent (75%) in value of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case may be, agrees to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
ARTICLE X.
TRANSACTIONS WITH OFFICERS AND DIRECTORS
The corporation may enter into contracts or transact business with one or
more of its officers or directors, or with any firms of which one or more of its
directors is a member, or may invest its funds in the securities of and may
enter into contracts, or transact business with any corporation or association
in which any one or more of its officers or directors is a stockholder, officer
or director, and in the absence of bad faith, or unfair dealing, such contract
or transaction or investment shall not be invalidated or to any extent affected
by the fact that any such officer or officers or any such director or directors
has or may have interests that are or might be adverse to the interests of the
corporation, provided that the remaining directors are sufficient in number to
ratify and approve the transaction.
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ARTICLE XI.
INDEMNIFICATION
Every director, officer or employee of the corporation shall be indemnified
by the corporation against all expenses and liabilities, including counsel fees,
reasonably incurred by or imposed upon him in connection with any proceeding to
which he may be made a party, or in which he may become involved, by reason of
his being or having been a director, officer or employee of the corporation, or
any settlement thereof, whether or not he is a director, officer or employee at
the time such expenses are incurred or liability incurred, except in such cases
where the director, officer or employee is adjudged guilty of willful
misfeasance or malfeasance in the performance of his duties; provided that in
the event of a settlement the indemnification herein shall apply only when the
board of directors approves such settlement and reimbursement as being for the
best interests of the corporation. The foregoing right of indemnification shall
be in addition to and not exclusive of all other rights to which such director,
officer or employee may be entitled.
ARTICLE XII.
REQUIRED VOTE FOR CERTAIN TRANSACTIONS
The affirmative vote of the holders of shares representing not less than
sixty-six and two-thirds percent (66 2/3%) of the voting power of the
corporation shall be required for the approval of any proposal for the
corporation to reorganize, merge, or consolidate with any other corporation, or
sell, lease, or exchange substantially all of its assets or business. The
amendment, alteration or repeal of this Article XII, or any portion hereof,
shall require the approval of the holders of shares representing at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of the
corporation.
ARTICLE XIII.
LIMITATION ON STOCKHOLDER ACTION BY WRITTEN CONSENT
Notwithstanding the provisions of Article XII, any action required or
permitted to be taken by the stockholders of the corporation must be effected at
a duly called annual or special meeting of such holders and may not be effected
by any consent in writing by such holders, except that an amendment to this
Certificate of Incorporation in order to change the name of the corporation may
be approved without a meeting, by consent in writing of the holders of the
outstanding stock of the corporation having not less than the minimum number of
votes that would be necessary to approve such amendment at a meeting at which
all shares entitled to vote thereon were present and voted pursuant to the
provisions of Section 228 of the Delaware General Corporation Law. Except as
otherwise required by law and subject to the rights of the holders of any class
or series of stock having a preference over the Common Stock as to dividends or
upon liquidation, special meetings of stockholders of the corporation may be
called only by the board of directors pursuant to a resolution approved by a
majority of the entire board of directors. Notwithstanding anything contained in
this Amended and Restated Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
entitled to vote (66 2/3%) of the voting power of all the shares of the
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or adopt any provision inconsistent with or repeal
this Article XIII.
ARTICLE XIV.
AMENDMENTS
14.1 CERTIFICATE OF INCORPORATION. This corporation reserves the right to
amend, alter, change or repeal any provision contained in this Amended and
Restated Certificate of Incorporation, in the manner now or hereafter set forth
herein or, in the absence of specific provision herein, in the manner prescribed
in the statutes of the State of Delaware, and all rights conferred on officers,
directors and stockholders herein are granted subject to this reservation.
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14.2 AMENDMENT OF BYLAWS. The board of directors shall have power to make,
alter, amend and repeal the Bylaws of the corporation (except insofar as the
Bylaws of the corporation adopted by the stockholders shall otherwise provide).
Any Bylaws made by the directors under the powers conferred hereby may be
altered, amended or repealed by the directors or by the stockholders.
Notwithstanding the foregoing and anything contained in this Amended and
Restated Certificate of Incorporation to the contrary, the affirmative vote of
the holders of at least sixty-six and two-thirds percent (66 2/3%) of the voting
power of all the shares of the corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
alter, amend or adopt any provision inconsistent with or repeal this Article
XIV.
ARTICLE XV.
LIMITATION ON LIABILITY OF DIRECTORS
No person shall be personally liable to the corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director; provided,
however, that the foregoing shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the corporation
or its stockholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit. If the Delaware
General Corporation Law is amended hereafter to authorize corporate action
further eliminating or limiting the personal liability of directors, then the
liability of a director of the corporation shall be eliminated or limited to the
fullest extent permitted by the Delaware General Corporation Law, as so amended.
Any amendment, repeal or modification of this Article XV shall not adversely
affect any right or protection of a director of the corporation existing
hereunder with respect to any act or omission occurring prior to such amendment,
repeal or modification.
ARTICLE XVI.
SEVERABILITY
In the event that any of the provisions of this Amended and Restated
Certificate of Incorporation (including any provision within a single section,
paragraph or sentence) is held by a court of competent jurisdiction to be
invalid, void or otherwise unenforceable, the remaining provisions are severable
and shall remain enforceable to the full extent permitted by law.
THE UNDERSIGNED, being the Chairman of the Board of Directors of the
corporation, for the purpose of amending and restating the Certificate of
Incorporation of the corporation pursuant to the Delaware General Corporation
Law, does make this Certificate, hereby declaring and certifying that this is
the act and deed of the corporation and that the facts herein stated are true,
and accordingly have hereunto set my hand as of this day of , 1996.
--------------------------------------
Parris H. Holmes, Jr., Chairman
ATTEST:
--------------------------------------
, Secretary
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ANNEX D
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BYLAWS
OF
BILLING INFORMATION CONCEPTS CORP.
(A DELAWARE CORPORATION)
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<PAGE>
BYLAWS
OF
BILLING INFORMATION CONCEPTS CORP.
(A DELAWARE CORPORATION)
------------------------
ARTICLE I.
OFFICES
1.1 The registered office shall be in the City of Wilmington, County of New
Castle, State of Delaware.
1.2 The Corporation may also have offices at such other places both within
and without the State of Delaware as the board of directors may from time to
time determine or the business of the Corporation may require.
ARTICLE II.
STOCKHOLDER MEETINGS
2.1 The annual meeting shall be held on the date and at the time fixed, from
time to time, by the directors, provided, that the first annual meeting shall be
held on a date within thirteen months after the organization of the Corporation,
and each successive annual meeting shall be held on a date within thirteen
months after the date of the preceding annual meeting. A special meeting shall
be held on the date and at the time fixed by the directors.
2.2 All meetings of the stockholders for the election of directors shall be
held at such place either within or without the State of Delaware as shall be
designated from time to time by the board of directors and stated in the notice
of the meeting. Meetings of stockholders for any other purpose may be held at
such time and place, within or without the State of Delaware, as shall be stated
in the notice of the meetings or in a duly executed waiver of notice thereof.
2.3 Annual meetings may be called by the directors or by any officer
instructed by the directors to call the meeting. Special meetings may be called
only as provided by Section 10.1 of Article X of these Bylaws.
2.4 Written notice of all meetings shall be given, stating the place, date
and hour of the meeting and stating the place within the city or other
municipality or community at which the list of stockholders of the Corporation
may be examined. The notice of an annual meeting shall state that the meeting is
called for the election of directors and for the transaction of other business
that may properly come before the meeting, and shall (if any other action which
could be taken at a special meeting is to be taken at such annual meeting) state
the purpose or purposes. The notice of a special meeting shall in all instances
state the purpose or purposes for which the meeting is called. The notice of any
meeting shall also include, or be accompanied by, any additional statements,
information, or documents prescribed by the Delaware General Corporation Law.
Except as otherwise provided by the Delaware General Corporation Law, a copy of
the notice of any meeting shall be given, personally or by mail, not less than
ten days nor more than sixty days before the date of the meeting, unless the
lapse of the prescribed period of time shall have been waived, and directed to
each stockholder at his record address or at such other address that he may have
furnished by request in writing to the Secretary of the Corporation. Notice by
mail shall be deemed to be given when deposited, with postage thereon prepaid,
in the United States mail. If a meeting is adjourned to another time, not more
than thirty days hence, and/or to another place, and if an announcement of the
adjourned time and/or place is made at the meeting, it shall not be necessary to
give notice of the adjourned meeting unless the directors, after adjournment,
fix a new record date for the adjourned meeting. Notice need not be
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given to any stockholder who submits a written waiver signed by him or her
before or after the time stated therein. Attendance of a stockholder at a
meeting of stockholders shall constitute a waiver of notice of such meeting,
except when the stockholder attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened. Neither the business to
be transacted at, nor the purpose of, any regular or special meeting of the
stockholders need be specified in any written waiver of notice.
2.5 Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
2.6 The officer who has charge of the stock ledger of the Corporation shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders, arranged in alphabetical order, and showing
the address of each stockholder and the number of shares registered in the name
of each stockholder. Such list shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a place
within the city or other municipality or community where the meeting is to be
held, which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present. The stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list required by this section or the books of the
Corporation, or to vote at any meeting of stockholders.
2.7 Meetings of the stockholders shall be presided over by one of the
following officers in the order of seniority and if present and acting - the
Chairperson of the Board, if any, the Vice-Chairperson of the Board, if any, the
Chief Executive Officer, the President, a Vice-President, or, if none of the
foregoing is in office and present and acting, by a chairperson to be chosen by
the stockholders. The Secretary of the Corporation, or in his absence, an
Assistant Secretary, shall act as secretary of every meeting, but if neither the
Secretary nor an Assistant Secretary is present, the chairperson of the meeting
shall appoint a secretary of the meeting.
2.8 Every stockholder may authorize another person or persons to act for him
by proxy in all matters in which a stockholder is entitled to participate,
whether by waiving notice of any meeting, voting or participating at a meeting,
or expressing consent or dissent without a meeting. Every proxy must be signed
by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted
upon after three years from its date unless such proxy provides for a longer
period. A duly executed proxy shall be irrevocable if it means that it is
irrevocable and, if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the Corporation generally.
2.9 The directors, in advance of any meeting, may, but need not, appoint one
or more inspectors of election to act at the meeting or any adjournment thereof.
If an inspector or inspectors are not appointed, the person presiding at the
meeting may, but need not, appoint one or more inspectors. In case any person
who may be appointed as an inspector fails to appear or act, the vacancy may be
filled by appointment made by the directors in advance of the meeting or at the
meeting by the person presiding thereat. Each inspector, if any, before entering
upon the discharge of his duties, shall take and sign an oath faithfully to
execute the duties of inspectors at such meeting with strict impartiality and
according to the best of his ability. The inspectors, if any, shall determine
the number of shares of stock outstanding and the voting power of each, the
shares of stock represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
result, and do such acts as are proper to
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conduct the election or vote with fairness to all stockholders. On request of
the person presiding at the meeting, the inspector or inspectors, if any, shall
make a report in writing of any challenge, question or matter determined by him,
her or them and execute a certificate of any fact so found.
2.10 The holders of a majority of the outstanding shares of stock entitled
to vote at the meeting, present in person or represented by proxy, shall
constitute a quorum at a meeting of stockholders for the transaction of any
business. The stockholders present may adjourn the meeting despite the absence
of a quorum.
2.11 When a quorum is present at any meeting, the vote of the holders of a
majority of the stock having voting power present in person or represented by
proxy shall decide any question brought before such meeting, unless the question
is one upon which, by express provision of the statutes or of the Certificate of
Incorporation, a different vote is required in which case such express provision
shall govern and control the decision of such question.
ARTICLE III.
DIRECTORS
3.1 The business of the Corporation shall be managed by its board of
directors, which may exercise all such powers of the Corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these Bylaws directed or required to be exercised or done by
the stockholders. The use of the phrase "whole board of directors" herein refers
to the total number of directors that the Corporation would have if there were
no vacancies.
3.2 A director need not be stockholder, a citizen of the United States, or a
resident of the State of Delaware. Except as otherwise fixed by or pursuant to
the provisions of Article IV of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to elect additional
directors under specified circumstances, the number of the directors of the
Corporation shall be fixed from time to time by the board of directors, but
shall not be less than three.
The directors, other than those who may be elected by the holders of any
class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation, shall be classified, with respect to the time for
which they severally hold office, into three classes, as nearly equal in number
as possible, as determined by the board of directors of the Corporation, one
class to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1997, another class to be originally elected for a
term expiring at the annual meeting of stockholders to be held in 1998, and
another class to be originally elected for a term expiring at the annual meeting
of stockholders to be held in 1999, with each class to hold office until its
successors is elected and qualified. At each annual meeting of the stockholders
of the Corporation, the successors of the class of directors whose term expires
at that meeting shall be elected to hold office for a term expiring at the
annual meeting of stockholders held in the third year following the year of
their election. Advance notice of stockholder nominations for the election of
directors shall be given in the manner provided in Section 3.13 of this Article
III of these Bylaws.
3.3 Except as otherwise provided for or fixed by or pursuant to the
provisions of Article IV of the Certificate of Incorporation relating to the
rights of the holders of any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation to elect directors under
specified circumstances, newly created directorships resulting from any increase
in the number of directors and any vacancies on the board of directors resulting
from death, resignation, disqualification, removal or other cause shall be
filled by the affirmative vote of a majority of the remaining directors then in
office, even though less than a quorum of the board of directors. Any directors
elected in accordance with the preceding sentence shall hold office for the
remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until such director's
successor shall have been duly elected and qualified. No decrease in the number
of directors
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constituting the board of directors shall shorten the term of any incumbent
director. Subject to the rights of any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from
office, with or without cause, only by the affirmative vote of the holders of at
least sixty-six and two-thirds percent (66 2/3%) of the voting power of all the
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class.
3.4 The board of directors shall choose from among the directors a
Chairperson of the Board and a Vice-Chairperson of the Board. Unless otherwise
provided in the resolution choosing him or her, the Chairperson of the Board and
the Vice-Chairperson of the Board shall be chosen for a term that shall continue
until the meeting of the board of directors following the next annual meeting of
stockholders and until his or her successor shall have been chosen and
qualified.
THE CHAIRPERSON OF THE BOARD
3.5 The Chairperson of the Board shall preside at all meetings of
stockholders and directors.
THE VICE-CHAIRPERSON OF THE BOARD
3.6 The Vice-Chairperson of the Board shall preside at meetings of
stockholders and directors if the Chairperson of the Board is absent or unable
to serve as chairperson at any such meeting.
MEETINGS OF DIRECTORS
3.7 Meetings shall be held at such time as the board of directors shall fix,
except that the first meeting of a newly elected board of directors shall be
held as soon after its election as the directors may conveniently assemble.
3.8 Meetings shall be held at such place within or without the State of
Delaware as shall be fixed by the board of directors.
3.9 No call shall be required for regular meetings for which the time and
place have been fixed. Special meetings may be called by or at the direction of
the Chairperson of the Board, if any, the Vice-Chairman of the Board, if any, of
the President, or of the Secretary on the written request of any two directors.
Notice thereof stating the place, date and hour of the meeting shall be given to
each director either by mail not less than forty-eight (48) hours before the
date of the meeting, by telephone or telegraph not less than twenty-four (24)
hours notice before the date of the meeting, or on such shorter notice as the
person or persons calling such meeting may deem necessary or appropriate in the
circumstances.
3.10 No notice shall be required for regular meetings for which the time
and place have been fixed. Notice need not be given to any director or to any
member of a committee of directors who submits a written waiver of notice signed
by him before or after the time stated therein. Attendance of any such person at
a meeting shall constitute a waiver of notice of such meeting, except when he
attends a meeting for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened. Neither the business to be transacted at, nor the purpose
of, any regular or special meeting of the directors need be specified in any
notice or written waiver of notice.
3.11 A majority of the whole board of directors shall constitute a quorum
except when a vacancy or vacancies prevents such majority, whereupon a majority
of the directors in office shall constitute a quorum, provided, that such
majority shall constitute at least one third of the whole board of directors. A
majority of the directors present, whether or not a quorum is present, may
adjourn a meeting to another time and place. Except as otherwise specifically
provided herein or in the Certificate of Incorporation, and except as otherwise
provided by the Delaware General Corporation Law, the vote of the majority of
the directors present at a meeting at which a quorum is present shall be the act
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of the board of directors. The quorum and voting provisions herein stated shall
not be construed as conflicting with any provisions of the Delaware General
Corporation Law or these Bylaws which govern a meeting of directors held to fill
vacancies and newly created directorships in the board of directors or action of
disinterested directors.
Any member or members of the board of directors, or of any committee
designated by the board of directors, may participate in a meeting of the board
of directors, or any such committee, as the case may be, by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other.
3.12 The Chairperson of the Board, if any and if present and acting, shall
preside at all meetings. Otherwise, the Vice-Chairperson of the Board, if any
and if present and acting, or the President, if present and acting, or any other
director chosen by the board of directors, shall preside.
COMMITTEES
3.13 Any action required or permitted to be taken at any meeting of the
board of directors or any committee thereof may be taken without a meeting if
all members of the board or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the board or committee.
3.14 The board of directors may, by resolution passed by a majority of the
whole board of directors, designate one or more committees, each committee to
consist of one or more of the directors of the Corporation. The board of
directors may designate one or more directors as alternate members of any
committee, who may replace any absent or disqualified member at any meeting of
the committee. In the absence or disqualification of any member of any such
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he, she or they constitute a
quorum, may unanimously appoint another member of the board of directors to act
at the meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of directors,
shall have and may exercise the powers and authority of the board of directors
in the management of the business and affairs of the Corporation with the
exception of any authority the delegation of which is prohibited by Section 141
of the Delaware General Corporation Law, and may authorize the seal of the
Corporation to be affixed to all papers that may require it.
COMPENSATION
3.15 The directors may be paid their expenses, if any, of attendance at
each meeting of the board of directors and may be paid a fixed sum for
attendance at each meeting of the board of directors and/ or a stated salary or
other compensation as director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor. Members of special or standing committees may be allowed like
compensation for attending committee meetings.
NOMINATION
3.16 Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of directors may be made by the board of directors
or a proxy committee appointed by the board of directors or by any stockholder
entitled to vote in the election of directors. However, any stockholder entitled
to vote in the election of directors at a meeting may nominate a director only
if written notice of such stockholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United States
mail, postage prepaid, to the Secretary of the Corporation not later than (i)
with respect to an election to be held at an annual meeting of stockholders,
ninety days in advance of the date established by the Bylaws for the holding of
such meeting, and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, the close of business on
the
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seventh day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth (a) the name and address of the
stockholder who intends to make the nomination and of the person or persons to
be nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at each meeting and intends to appear
in person or by proxy at the meeting to nominate the person or persons specified
in the notice; (c) a description of all arrangements or understandings between
the stockholder and each nominee and any other person or person (naming such
person or persons) pursuant to which the nomination or nominations are to be
made by the stockholder; (d) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities and Exchange
Commission, had the nominee been nominated or intended to be nominated, by the
board of directors; and (e) the consent of each nominee to serve as a director
of the Corporation if so elected. The chairperson of the meeting may refuse to
acknowledge the nomination of any person not made in compliance with the
foregoing procedure.
STOCKHOLDER PROPOSAL
3.17 Any stockholder entitled to vote in the election of directors and
who/which meets the requirements of the proxy rules under the Securities
Exchange Act of 1934, as amended, may submit to the directors proposals to be
considered for submission to the stockholders of the Corporation for their vote.
The introduction of any stockholder proposal that the directors decide should be
voted on by the stockholders of the Corporation shall be made by notice in
writing delivered or mailed by first-class United States mail, postage prepaid,
to the Secretary of the Corporation, and received by the Secretary not less than
(i) with respect to any proposal to be introduced at an annual meeting of
stockholders, one hundred and twenty days in advance of the date of the
Corporation's proxy statement released to stockholders in connection with the
previous year's annual meeting, and (ii) with respect to any proposal to be
introduced at a special meeting of stockholders, the close of business on the
seventh day following the date on which notice of such meeting is first given to
stockholders. Each such notice shall set forth: (a) the name and address of the
stockholder who intends to make the proposal and the text of the proposal to be
introduced; (b) the class and number of shares of stock held of record, owned
beneficially and represented by proxy by such stockholder as of the record date
for the meeting (if such date shall then have been made publicly available) and
as of the date of such notice; and (c) a representation that the stockholder
intends to appear in person or by proxy at the meeting to introduce the proposal
or proposals, specified in the notice. The Chairperson of the meeting may refuse
to acknowledge the introduction of any stockholder proposal not made in
compliance with the foregoing procedure.
ARTICLE IV.
NOTICES
4.1 Whenever, under the provisions of the statutes or of the Certificate of
Incorporation or of these Bylaws, notice is required to be given to any director
or stockholder, it shall not be construed to mean personal notice, but such
notice may be given in writing, by mail, addressed to such director or
stockholder, at his address as it appears on the records of the Corporation,
with postage thereon prepaid, and such notice shall be deemed to be given at the
time when the same shall be deposited in the United States mail. Notice to
directors may also be given by telegram.
4.2 Whenever any notice is required to be given under the provisions of the
statutes or of the Certificate of Incorporation or of these Bylaws, a waiver
thereof in writing, signed by the person or persons entitled to said notice,
whether before or after the time stated therein, shall be deemed equivalent
thereto.
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ARTICLE V.
OFFICERS
5.1 The officers of the Corporation shall consist of a Chief Executive
Officer, a President, a Secretary, a Treasurer, and, if deemed necessary,
expedient, or desirable by the board of directors, an Executive Vice-President,
one or more other Vice-Presidents, one or more Assistant Secretaries, one or
more Assistant Treasurers, and such other officers with such titles as the
resolution of the board of directors choosing them shall designate. Any number
of offices may be held by the same person, as the directors may determine.
5.2 Unless otherwise provided in the resolution choosing him or her, each
officer shall be chosen for a term that shall continue until the meeting of the
board of directors following the next annual meeting of stockholders and until
his or her successor shall have been chosen and qualified.
5.3 All officers of the Corporation shall have such authority and perform
such duties in the management and operation of the Corporation as shall be
prescribed in the resolutions of the board of directors designating and choosing
such officers and prescribing their authority and duties, and shall have such
additional authority and duties as are incident to their office except to the
extent that such resolutions may be inconsistent therewith. The Secretary or an
Assistant Secretary of the Corporation shall record all of the proceedings of
all meetings and actions in writing of stockholders, directors and committees of
directors, and shall exercise such additional authority and perform such
additional duties as the board of directors shall assign to him or her. Any
officer may be removed, with or without cause, by the board of directors. Any
vacancy in any office may be filled by the board of directors.
CHIEF EXECUTIVE OFFICER
5.4 The Chief Executive Officer shall be the head of the Corporation and
shall have general and active supervision of the business of the Corporation and
shall see that all orders and resolutions of the board of directors are carried
into effect and shall be responsible to the board of directors for the execution
of such duties and powers. The Chief Executive Officer shall, in the absence or
inability to act of the Chairperson of the Board and Vice-Chairperson of the
Board, assume and carry out all responsibilities set forth with respect to such
Chairperson of the Board and Vice-Chairperson of the Board.
THE PRESIDENT
5.5 The President shall be the chief operating officer of the Corporation.
The President shall, in the absence or inability to act of the Chief Executive
Officer, assume and carry out all responsibilities set forth with respect to
such Chief Executive Officer.
5.6 The Chief Executive Officer or the President shall execute bonds,
mortgages, and other contracts requiring a seal, under the seal of the
Corporation, except where required or permitted by law to be otherwise signed
and executed and except where the signing and execution thereof shall be
expressly delegated by the board of directors to some other officer or agent of
the Corporation.
THE VICE PRESIDENTS
5.7 Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, and
Assistant Vice Presidents shall have duties and powers as the board of directors
may designate.
THE SECRETARY AND ASSISTANT SECRETARIES
5.8 The Secretary shall attend all meetings of the board of directors and
all meetings of the stockholders and record all the proceedings of the meetings
of the Corporation and of the board of directors in a book to be kept for that
purpose and shall perform like duties for the standing
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committees when required. The Secretary shall give, or cause to be given, notice
of all meetings of the stockholders and special meetings of the board of
directors, and shall perform such other duties as may be prescribed by the board
of directors or President, under whose supervision the Secretary shall be. The
Secretary shall have custody of the corporate seal of the Corporation and the
Secretary, or an Assistant Secretary, shall have authority to affix the same to
any instrument requiring it and when so affixed, it may be attested by his or
her signature or by the signature of such assistant. The board of directors may
give general authority to any other officer to affix the seal of the Corporation
and to attest the affixing by his or her signature.
5.9 The Assistant Secretary, or if there be more than one, the Assistant
Secretaries in the order determined by the board of directors, shall, in the
absence or disability of the Secretary, perform the duties and exercise the
powers of the Secretary and shall perform such other duties and have such other
person as the board of directors may from time to time prescribe.
THE TREASURER AND ASSISTANT TREASURER
5.10 The Treasurer shall have the custody of the corporate funds and
securities and shall deposit all monies and other valuable effects in the name
and to the credit of the Corporation in such depositories as may be designated
by the board of directors.
5.11 The Treasurer shall have the authority to invest the normal funds of
the Corporation in the purchase and acquisition and to sell and otherwise
dispose of these investments upon such terms as the Treasurer may deem desirable
and advantageous, and shall, upon request, render to the President and the
directors an accounting of all such normal investment transactions.
5.12 The Treasurer shall disburse the funds of the Corporation as may be
ordered by the board of directors, taking proper vouchers for such
disbursements, and shall render to the President and the board of directors, at
its regular meetings, or when the board of directors so requires, an account of
all his transactions as Treasurer and of the financial condition of the
Corporation.
5.13 If required by the board of directors, the Treasurer shall give the
Corporation a bond (which shall be renewed every six years) in such sum and with
such surety or sureties as shall be satisfactory to the board of directors for
the faithful performance of the duties of his or her office and for the
restoration to the Corporation, in case of his death, resignation, retirement,
or removal from office, of all books, papers, vouchers, money, and other
property of whatever kind in his possession or under his control belonging to
the Corporation.
5.14 The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the board of directors, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties and have such
other powers as the board of directors may from time to time prescribe.
5.15 The controller shall keep the Corporation's accounting records and
shall prepare accounting reports of the operating results as required by the
board of directors and governmental authorities. The controller shall establish
systems of internal control and accounting procedures for the protection of the
Corporation's assets and funds.
ARTICLE VI.
CERTIFICATES OF STOCK
6.1 Every holder of stock in the Corporation shall be entitled to have a
certificate signed by, or in the name of the Corporation by, the Chief Executive
Officer, or the President or a Vice-President, and by the Secretary or an
Assistant Secretary, or by the Treasurer or an Assistant Treasurer of the
Corporation, certifying the number of shares owned by him in the Corporation.
All certificates shall also be signed by a transfer agent and by a registrar.
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6.2 All signatures that appear on the certificate may be facsimile
including, without limitation, signatures of officers of the Corporation or the
signatures of the stock transfer agent or registrar. In case any officer,
transfer agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate shall have ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if such person were such officer, transfer
agent or registrar at the date of issue.
6.3 If the Corporation shall be authorized to issue more than one class of
stock or more than one series of any class, the designations, preferences, and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized on the face
or back of the certificate which the Corporation shall issue to represent such
class or series of stock; provided, however, that except as otherwise provided
in Section 202 of the Delaware General Corporation Law, in lieu of the foregoing
requirements, there may be set forth on the face or back of the certificate
which the Corporation shall issue to represent such class or series of stock, a
statement that the Corporation will furnish without charge, to each stockholder
who so requests, the designations, preferences, and relative, participating,
optional or other special rights of each class of stock or series thereof and
the qualifications, limitations or restrictions of such preferences and/or
rights.
LOST CERTIFICATES
6.4 The board of directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost, stolen or destroyed, upon the making of
an affidavit of that fact by the person claiming the certificate of stock to be
lost, stolen or destroyed. When authorizing such issue of a new certificate or
certificates, the board of directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or his legal representative, to advertise
the same in such manner as it shall require and/or to give the Corporation a
bond in such sum as it may direct as indemnity against any claim that may be
made against the Corporation with respect to the certificate alleged to have
been lost, stolen or destroyed.
TRANSFERS OF STOCK
6.5 Transfers of stock shall be made on the books of the Corporation only by
direction of the person named in the certificate or such person's attorney,
lawfully constituted in writing, and only upon the surrender of the certificate
therefor and a written assignment of the shares evidenced thereby, which
certificate shall be cancelled before the new certificate is issued.
FIXING RECORD DATE
6.6 In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the board of directors may fix, in advance, a record date, which shall not be
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any adjournment
of the meeting; provided, however, that the board of directors may fix a new
record date for the adjourned meeting. In order that the Corporation may
determine the stockholders entitled to consent to corporate action in writing
without a meeting, the board of directors may fix a record date, which record
date shall not precede the date upon which the resolution fixing the record date
is adopted by the board of directors, and which date shall not be more than ten
days after the date upon which the resolution fixing the record date is adopted
by the board of directors. If no record date has been fixed by the board of
directors, the record
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date for determining the stockholders entitled to consent to corporate action in
writing without a meeting, when no prior action by the board of directors is
required by the Delaware General Corporation Law, shall be the first date on
which a signed written consent setting forth the action taken or proposed to be
taken is delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer or agent
of the Corporation having custody of the book in which proceedings of meetings
of stockholders are recorded. Delivery made to the corporation's registered
office shall be by hand or by certified or registered mail, return receipt
requested. If no record date has been fixed by the board of directors and prior
action by the board of directors is required by the Delaware General Corporation
Law, the record date for determining stockholders entitled to consent to
corporate action in writing without a meeting shall be at the close of business
on the day on which the board of directors adopts the resolution taking such
prior action. In order that the Corporation may determine the stockholders
entitled to receive payment of any dividend or other distribution or allotment
of any rights or the stockholders entitled to exercise any rights in respect of
any change, conversion or exchange of stock, or for the purpose of any other
lawful action, the board of directors may fix a record date, which record date
shall not precede the date upon which the resolution fixing the record date is
adopted, and which record date shall be not more than sixty days nor less than
ten days prior to such action. If no record date is fixed, the record date for
determining stockholders for any such purpose shall be at the close of business
on the day on which the board of directors adopts the resolution relating
thereto.
REGISTERED STOCKHOLDERS
6.7 The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and to hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of the State of
Delaware.
MEANING OF CERTAIN TERMS
6.8 As used herein in respect of the right to notice of a meeting of
stockholders or a waiver thereof or to participate or vote thereat or to consent
or dissent in writing in lieu of a meeting, as the case may be, the term "share"
or "shares" or "share of stock" or "shares of stock" or "stockholder" or
"stockholders" refers to an outstanding share or shares of stock and to a holder
or holders of record of outstanding shares of stock when the Corporation is
authorized to issue only one class of shares of stock, and said reference is
also intended to include any outstanding share or shares of stock and any holder
or holders of record of outstanding shares of stock of any class upon which or
upon whom the Certificate of Incorporation confers such rights where there are
two or more classes or series of shares of stock or upon which or upon whom the
Delaware General Corporation Law confers such rights notwithstanding that the
Certificate of Incorporation may provide for more than one class or series of
shares of stock, one or more of which are limited or denied such rights
thereunder; provided, however, that no such right shall vest in the event of an
increase or a decrease in the authorized number of shares of stock of any class
or series which is otherwise denied voting rights under the provisions of the
Certificate of Incorporation, except as any provision of law may otherwise
require.
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ARTICLE VII.
GENERAL PROVISIONS
DIVIDENDS
7.1 Dividends upon the capital stock of the Corporation, subject to the
provisions of the Certificate of Incorporation, if any, may be declared by the
board of directors at any regular or special meeting, pursuant to law. Dividends
may be paid in cash, in property or in shares of the capital stock, subject to
the provisions of the Certificate of Incorporation.
7.2 Before payment of any dividend, there may be set aside out of any funds
of the Corporation available for dividends such sum or sums as the directors
from time to time, in their absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation, or for such other purpose as the
directors shall think conducive to the interest of the Corporation, and the
directors may modify or abolish any such reserve in the manner in which it was
created.
ANNUAL STATEMENT
7.3 The board of directors shall present at each annual meeting and at any
special meeting of the stockholders when called for by vote of the stockholders
a full and clear statement of the business and condition of the Corporation.
CHECKS
7.4 All checks or demands for money and notes of the Corporation shall be
signed by such officer or officers or such other person or persons as the board
of directors may from time to time designate.
CORPORATE SEAL
7.5 The corporate seal shall be in such form as the board of directors shall
prescribe.
FISCAL YEAR
7.6 The fiscal year of the Corporation shall end on September 30.
ARTICLE VIII.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
8.1 The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that such person is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner that such person reasonably
believed to be in or not opposed to the best interests of the Corporation, and,
with respect to any criminal action or proceeding, had reasonable cause to
believe that such person's conduct was unlawful.
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8.2 The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that such person is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the Corporation unless and only to the extent that
the Court of Chancery of the State of Delaware or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.
8.3 To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 8.1 and 8.2 of this Article
VIII, or in defense of any claim, issue or matter therein, such person shall be
indemnified against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection therewith. For purposes of determining the
reasonableness of any such expenses, a certification to such effect by any
member of the Bar of the State of Delaware, which member of the Bar may have
acted as counsel to any such director, officer or employee, shall be binding
upon the Corporation unless the Corporation establishes that the certification
was made in bad faith.
8.4 Any indemnification under Sections 8.1 and 8.2 of this Article VIII
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because any such
person has met the applicable standard of conduct set forth in Sections 8.1 and
8.2 of this Article VIII. Such determination shall be made (1) by the board of
directors, by a majority vote of a quorum consisting of directors who were not
parties to such action, suit or proceeding, or (2) if such a quorum is not
obtainable, or even if obtainable, a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (3) by the
stockholders.
8.5 Expenses (including attorneys' fees) incurred by an officer, director,
employee or agent of the Corporation in defending any civil, criminal,
administrative or investigative action, suit or proceeding, shall be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that any such person is not entitled to be indemnified by the
Corporation as authorized by this Article VIII.
8.6 The indemnification and advancement of expenses provided by, or granted
pursuant to, the other sections of this Article VIII shall not be deemed
exclusive of any other rights to which any person seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in such
person's official capacity and as to action in another capacity while holding
such office.
8.7 The Corporation may but shall not be required to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against any liability asserted against
such person and incurred by such person in any capacity, or arising out of such
person's status as such, whether or not the Corporation would have the power to
indemnify such person against such liability under this Article VIII.
8.8 For purposes of this Article VIII, references to "the Corporation" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent)
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absorbed in a consolidation or merger which, if its separate existence had
continued, would have had power and authority to indemnify its directors,
officers, and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was serving
at the request of such constituent corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this Article VIII with
respect to the resulting or surviving corporation as such person would have with
respect to such constituent corporation if its separate existence had continued.
8.9 For purposes of this Article VIII, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee or
agent with respect to an employee benefit plan, its participants or
beneficiaries, and a person who acted in good faith and in a manner such person
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
VIII.
8.10 The indemnification and advancement of expenses provided by, or
granted pursuant to, this Article VIII shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
8.11 This Article VIII shall be interpreted and construed to accord, as a
matter of right, to any person who is or was a director, officer, employee or
agent of the Corporation or is or was serving at the request of the Corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, the full measure of indemnification
and advancement of expenses permitted by Section 145 of the Delaware General
Corporation Law.
8.12 Any person seeking indemnification or advancement of expenses by
virtue of such person being or having been a director, officer, employee or
agent of the Corporation may seek to enforce the provisions of this Article VIII
by an action in law or equity in any court of the United States or any state or
political subdivision thereof having jurisdiction of the parties. Without
limitation of the foregoing, it is specifically recognized that remedies
available at law may not be adequate if the effect thereof is to impose delay on
the immediate realization by any such person of the rights conferred by this
Article VIII. Any costs incurred by any person in enforcing the provisions of
this Article VIII shall be an indemnifiable expense in the same manner and to
the same extent as other indemnifiable expenses under this Article VIII.
8.13 No amendment, modification or repeal of this Article VIII shall have
the effect of or be construed to limit or adversely affect any claim to
indemnification or advancement of expenses made by any person who is or was a
director, officer, employee or agent of the Corporation with respect to any
statement of facts that existed prior to the date of such amendment,
modification or repeal. Accordingly, any amendment, modification or repeal of
this Article VIII shall be deemed to have prospective application only and shall
not be applied retroactively.
ARTICLE IX.
BYLAW AMENDMENTS
9.1 Subject to the provisions of the Certificate of Incorporation, these
Bylaws may be altered, amended or repealed at any regular meeting of the
stockholders (or at any special meeting thereof duly called for that purpose) by
a majority vote of the shares represented and entitled to vote at such meeting;
provided that in the notice of such special meeting notice of such purpose shall
be given. Subject to the laws of the State of Delaware, the Certificate of
Incorporation and these Bylaws, the board of directors may by majority vote of
those present at any meeting at which a quorum is present
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amend these Bylaws, or enact such other Bylaws as in their judgment may be
advisable for the regulation of the conduct of the affairs of the Corporation,
except that Sections 3.3 and 3.13 of Article III and Articles IX and X of the
Bylaws may be amended only by the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66 2/3%) of the voting power of all the shares
of the Corporation entitled to vote generally in the election of directors,
voting together as a single class.
ARTICLE X.
STOCKHOLDER ACTION
10.1 Any action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of such
holders and may not be effected by any consent in writing by such holders,
except that an amendment to the Certificate of Incorporation of the Corporation
in order to change the name of the Corporation may be approved without a
meeting, by consent in writing of the holders of the outstanding stock of the
Corporation having not less than the minimum number of votes that would be
necessary to approve such amendment at a meeting at which all shares entitled to
vote thereon were present and voted pursuant to the provisions of Section 228 of
the Delaware General Corporation Law. Except as otherwise required by law and
subject to the rights of the holders of any class or series of stock having a
preferences over the Common Stock as to dividends or upon liquidation, special
meetings of stockholders of the Corporation may be called only by the board of
directors pursuant to a resolution approved by a majority of the entire board of
directors.
I HEREBY CERTIFY that the foregoing is a full, true, and correct copy of the
Bylaws of BILLING INFORMATION CONCEPTS CORP., a Delaware corporation, as in
effect on the date hereof.
WITNESS my hand and seal of the Corporation.
Dated: , 1996
--------------------------------------
SECRETARY OF BILLING INFORMATION
CONCEPTS CORP.
(SEAL)
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ANNEX E
BILLING INFORMATION CONCEPTS CORP.
1996 EMPLOYEE COMPREHENSIVE STOCK PLAN
1. PURPOSE. The purpose of this 1996 Employee Comprehensive Stock Plan
(the "Plan") is to further the success of Billing Information Concepts Corp., a
Delaware corporation (the "Company"), and certain of its affiliates by making
available Common Stock of the Company to certain officers and employees of the
Company and its affiliates, and thus to provide an additional incentive to such
individuals to continue in the service of the Company or its affiliates and to
give them a greater interest as stockholders in the success of the Company.
Subject to compliance with the provisions of the Plan and the Code, Incentive
Stock Options as authorized by Section 422 of the Code and stock options which
do not qualify under Section 422 of the Code are authorized and may be granted
under the Plan. Further, the Company may grant Restricted Stock, as defined
below.
2. DEFINITIONS. As used in this Plan the following terms shall have the
meanings indicated as follows:
(a) "Award" means an award of stock options (including Incentive Stock
Options) or Restricted Stock, on a stand alone, combination or tandem basis,
as described in or granted under this Plan.
(b) "Award Agreement" means a written agreement setting forth the terms
of an Award, in the form prescribed by the Committee.
(c) "Board" means the Board of Directors of the Company.
(d) "Cause" shall mean, in the context of the termination of a
Participant, as determined by the Board, in the reasonable exercise of its
business judgment the occurrence of one of the following events: (i)
conviction of or a plea of NOLO CONTENDERE to a charge of a felony (which,
through lapse of time or otherwise, is not subject to appeal); (ii) willful
refusal without proper legal cause to perform, or gross negligence in
performing, Participant's duties and responsibilities; (iii) material breach
of fiduciary duty to the Company through the misappropriation of Company
funds or property or otherwise; or (iv) the unauthorized absence of
Participant from work (other than for sick leave or disability) for a period
of thirty working days or more during any period of forty-five working days;
provided, further, within one year following a Change of Control, "Cause"
shall be limited to the conviction of or a plea of NOLO CONTENDERE to the
charge of a felony (which, through lapse of time or otherwise, is not
subject to an appeal), or a material breach of fiduciary duty to the Company
through the misappropriation of Company funds or property or otherwise.
(e) "Change of Control" shall be deemed to have occurred if (i) any
"Person" (as such term is used in Sections 13(d) and 14(d) of the Exchange
Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company
representing more than 30% of the combined voting power of the Company's
then outstanding voting securities, or (ii) at any time during the 24-month
period after a tender offer, merger, consolidation, sale of assets or
contested election, or any combination of such transactions, at least a
majority of the Board shall cease to consist of "continuing directors"
(meaning directors of the Company who either were directors prior to such
transaction or who subsequently became directors and whose election, or
nomination for election by the Company's stockholders, was approved by a
vote of at least two thirds of the directors then still in office who were
directors prior to such transaction), or (iii) the stockholders of the
Company approve a merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 70% of
the total voting power represented by the voting securities of the
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Company or such surviving entity outstanding immediately after such merger
or consolidation, or (iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement of sale or disposition
by the Company of all or substantially all of the Company's assets.
(f) "Code" means the Internal Revenue Code of 1986, as amended.
(g) "Committee" means the Committee administering the Plan described in
Section 3 hereof.
(h) "Common Stock" means the Company's common stock, par value $.01 per
share.
(i) "Continuous Status as an Employee" means that the employment
relationship with any one or more of (i) the Company, (ii) any Parent, (iii)
any Subsidiary or (iv) USLD has not been terminated or interrupted.
(j) "Date of Grant" means the date on which an Award is granted under
an Award Agreement executed by the Company and a Participant pursuant to the
Plan.
(k) "Disinterested Person" means a "disinterested person" as such term
is defined in Rule 16b-3 promulgated under the Exchange Act or any successor
provision.
(l) "Effective Date" means the effective date of this Plan specified in
Section 14 hereof.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as it may
be amended from time to time.
(n) "Good Reason" shall mean the occurrence of any of the following
events: (a) removal from the principal office held by the Participant on the
date of the most recent Award, or a material reduction in the Participant's
authority or responsibility, including, without limitation, involuntary
removal from the Board, but not including termination of the Participant for
Cause; or (b) the Company otherwise commits a material breach of this Plan,
or the Participant's employment agreement, if applicable; provided, however,
that within one year following a Change of Control, "Good Reason" shall mean
(i) removal from the principal office held by the Participant on the date of
the most recent Award, (ii) a material reduction in the Participant's
authority or responsibility, including, without limitation, involuntary
removal from the Board, (iii) relocation of the Company's headquarters from
the San Antonio, Texas metropolitan area but not including termination of
the Participant for cause, (iv) a material reduction in the Participant's
compensation, or (v) the Company otherwise commits a material breach of this
Plan, or the Participant's employment agreement, if applicable.
(o) "Incentive Stock Option" means an option qualifying under Section
422 of the Code.
(p) "Parent" means a parent corporation of the Company as defined in
Section 424(e) of the Code.
(q) "Participants" means the employees and officers of the Company, its
Subsidiaries and its Parent (including those directors of the Company who
are also employees of the Company, its Parent or one or more of its
Subsidiaries). "Participants" includes the USLD Participants.
(r) "Restricted Period" shall mean the period designated by the
Committee during which Restricted Stock may not be sold, assigned,
transferred, pledged, or otherwise encumbered, which period shall not be
less than one year nor more than two years from the Date of Grant.
(s) "Restricted Stock" shall mean those shares of Common Stock issued
pursuant to an Award that remain subject to the Restricted Period.
(t) "Retained Distributions" shall mean any securities or other property
(other than cash dividends) distributed by the Company or otherwise received
by the holder in respect of Restricted Stock during any Restricted Period.
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(u) "Retirement" shall mean retirement of a Participant from the employ
of the Company, its Parent, its Subsidiaries or USLD, as the case may be, in
accordance with the then existing employment policies of any such employer.
(v) "Subsidiary" means a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.
(w) "USLD" means U.S. Long Distance Corp. and its Subsidiaries and any
Parent of USLD.
(x) "USLD Participants" means the employees and officers of USLD who are
or were employees and officers of USLD prior to and immediately following
the distribution of the Company Common Stock by USLD to the stockholders of
USLD.
3. ADMINISTRATION OF THE PLAN. The Board shall appoint a committee (the
"Committee") comprised of two or more directors to administer the Plan. Only
directors who are Disinterested Persons shall be eligible to serve as members of
the Committee. The Committee shall report all action taken by it to the Board,
which shall review and ratify or approve those actions that are by law required
to be so reviewed and ratified or approved by the Board. The Committee shall
have full and final authority in its discretion, subject to the provisions of
the Plan, to make determinations with respect to the participation of
Participants in this Plan, to prescribe the form of Award Agreements embodying
Awards made under the Plan, and, except as otherwise required by law or this
Plan, to set the size and terms of Awards (which need not be identical or
consistent with respect to each Participant) including vesting schedules, price,
whether stock options granted hereunder shall constitute an Incentive Stock
Option, restriction or option period, post-retirement and termination rights,
payment alternatives such as cash, stock or other means of payment consistent
with the purposes of this Plan, and such other terms and conditions as the
Committee deems appropriate. Except as otherwise required by this Plan, the
Committee shall have authority to interpret and construe the provisions of this
Plan and the Award Agreements, to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award Agreement in the manner
the Committee deems advisable for the administration of the Plan and make
determinations pursuant to any Plan provision or Award Agreement, which shall be
final and binding on all persons. The Committee may authorize any one or more of
their number or any officer of the Company to execute and deliver documents on
behalf of the Committee.
4. COMMON STOCK SUBJECT TO PROVISIONS OF THIS PLAN. The Common Stock
subject to the provisions of this Plan shall either be shares of authorized but
unissued Common Stock, shares of Common Stock held as treasury stock or
previously issued shares of Common Stock reacquired by the Company, including
shares purchased in the open market. Subject to adjustment in accordance with
the provisions of Section 11, the aggregate number of shares of Common Stock
available for grant of Awards (including, without limitation, Awards of
Restricted Stock) shall not exceed Three Millon Five Hundred Thousand
(3,500,000). If any part of an Award under this Plan shall be forfeited, the
shares of Common Stock subject to the forfeited portion of such Award shall
again be available for grant under the Plan.
5. ELIGIBILITY. Except as hereinafter provided, Awards may be granted to
any Participant as the Committee shall determine from time to time. In
determining the Participants to whom options shall be granted and the number of
shares to be covered by each such option, the Committee may take into account
the nature of the services rendered by the respective Participants, their
present and potential contributions to the Company's success and such other
factors as the Committee in its sole discretion shall deem relevant. A
Participant who has been granted an option under the Plan may be granted an
additional option or options under the Plan, in the Committee's sole discretion.
6. AWARDS UNDER THIS PLAN. The Committee, in its sole discretion, may make
Awards of stock options (including Incentive Stock Options and stock options
that do not qualify as Incentive Stock Options) as described in Sections 7 and 8
hereof, and of Restrictive Stock, as described in Section 10 hereof.
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7. OPTIONS AUTHORIZED. The options subject to Award under this Plan may be
Incentive Stock Options or stock options that do not qualify as Incentive Stock
Options (sometimes referred to herein as "nonqualified options" or "nonqualified
stock options"). The Committee shall have the full power and authority to (i)
determine which options shall be nonqualified stock options and which shall be
Incentive Stock Options, (ii) grant only Incentive Stock Options or,
alternatively, only nonqualified stock options, and (iii) in its sole
discretion, grant to the holder of an outstanding option, in exchange for the
surrender and cancellation of such option, a new option having a purchase price
lower than that provided in the option so surrendered and cancelled and/or
containing such other terms and conditions as the Committee may prescribe in
accordance with the provisions of the Plan. Under no circumstances may
nonqualified stock options be granted where the exercise of such nonqualified
stock options may affect the exercise of Incentive Stock Options granted
pursuant to the Plan. No options may be granted under the Plan prior to the
Effective Date. In addition to any other limitations set forth herein, (1) no
Participant shall receive any grant of options, whether Incentive Stock Options
or nonqualified stock options, exercisable for more than one hundred fifty
thousand (150,000) shares of Common Stock during any one fiscal year of the
Company and (2) the aggregate fair market value (determined in accordance with
Paragraph 8(a) of the Plan as of the time the option is granted) of the Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by a Participant in any calendar year (under all plans of the Company
and of any Parent or Subsidiary) shall not exceed $100,000.
8. TERMS AND CONDITIONS OF OPTIONS. The grant of an option under the Plan
shall be evidenced by an Award Agreement executed by the Company and the
applicable Participant and shall contain such terms and be in such form as the
Committee may from time to time approve, subject to the following limitations
and conditions:
(a) OPTION PRICE. The option exercise price per share with respect to
each option shall be determined by the Committee, but shall in no instance
be less than the par value of the shares subject to the option. In addition,
the option exercise price per share with respect to Incentive Stock Options
granted hereunder shall in no instance be less than the fair market value of
the shares subject to the option as determined by the Committee. For the
purposes of this Paragraph 8(a), fair market value shall be, where
applicable, the closing price of the Common Stock on the Date of Grant of
such option as reported on any national securities exchange on which the
Common Stock may be listed. If the Common Stock is not listed on a national
securities exchange but is publicly traded on the Nasdaq Stock Market's
National Market or on another automated quotation system, the fair market
value shall be the closing price of the Common Stock on the Date of Grant,
or if traded on the Nasdaq Small Cap or Nasdaq Over-The-Counter market, the
fair market value shall be the mean between the bid and ask prices on any
such system or market. If the Common Stock was not traded on the Date of
Grant of such option, the nearest preceding date on which there was a trade
shall be substituted. Notwithstanding the foregoing, however, fair market
value shall be determined consistent with Code Section 422(b)(4) or any
successor provisions. The Committee may permit the option exercise price to
be payable by transfer to the Company of Common Stock owned by the option
holder with a fair market value at the time of the exercise equal to the
option exercise price.
(b) PERIOD OF OPTION. The expiration date of each option shall be
fixed by the Committee, but notwithstanding any provision of the Plan to the
contrary, such expiration date shall not be more than ten (10) years from
the Date of Grant of the option.
(c) VESTING OF STOCKHOLDER RIGHTS. Neither the optionee nor his
successor in interest shall have any of the rights of a stockholder of the
Company until the shares relating to the option hereunder are issued by the
Company and are properly delivered to such optionee, or successor.
(d) EXERCISE OF OPTION. Each option shall be exercisable from time to
time (but not less than six (6) months after the Date of Grant) over such
period and upon such terms and conditions as the Committee shall determine,
but not at any time as to less than twenty-five (25) shares
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unless the remaining shares that have become so purchasable are less than
twenty-five (25) shares. After the death of the optionee, an option may be
exercised as provided in Section 9(c) hereof.
(e) DISQUALIFYING DISPOSITION. The Award Agreement evidencing any
Incentive Stock Options granted under this Plan shall provide that if the
optionee makes a disposition, within the meaning of Section 424(c) of the
Code and regulations promulgated thereunder, of any share or shares of
Common Stock issued to him or her pursuant to exercise of the option within
the two-year period commencing on the day after the Date of Grant of such
option or within the one-year period commencing on the day after the date of
issuance of the share or shares to him or her pursuant to the exercise of
such option, he or she shall, within ten (10) days of such disposition date,
notify the Company of the sales price or other value ascribed to or used to
measure the disposition of the share or shares thereof and immediately
deliver to the Company any amount of federal income tax withholding required
by law.
(f) LIMITATION ON GRANTS TO CERTAIN STOCKHOLDERS. An Incentive Stock
Option may be granted to a Participant only if such Participant, at the time
the option is granted, does not own, after application of the attribution
rules of Code Section 424, stock possessing more than ten percent (10%) of
the total combined voting power of all classes of Common Stock of the
Company or of its Parent or Subsidiary. The preceding restrictions shall not
apply if at the time the option is granted the option price is at least one
hundred ten percent (110%) of the fair market value (as defined in Section
8(a) above) of the Common Stock subject to the option and such option by its
terms is not exercisable after the expiration of five (5) years from the
Date of Grant.
(g) RESTRICTION ON ISSUING SHARES. The exercise of each option shall
be subject to the condition that if at any time the Company shall determine
in its discretion that the satisfaction of withholding tax or other
withholding liabilities, or that the listing, registration, or qualification
of any shares otherwise deliverable upon such exercise upon any securities
exchange or under any state or federal law, or that the consent or approval
of any regulatory body, is necessary or desirable as a condition of, or in
connection with, such exercise or the delivery or purchase of shares
pursuant thereto, then in any such event, such exercise shall not be
effective unless such withholding, listing, registration, qualification,
consent, or approval shall have been effected or obtained free of any
conditions not acceptable to the Company.
(h) CONSISTENCY WITH CODE. Notwithstanding any other provision in this
Plan to the contrary, the provisions of all Award Agreements relating to
Incentive Stock Options pursuant to the Plan shall not violate the
requirements of the Code applicable to the Incentive Stock Options
authorized hereunder.
9. EXERCISE OF OPTION.
(a) Any option granted hereunder shall be exercisable according to the terms
of the Plan and at such times and under such conditions as determined by the
Committee and set forth in the Award Agreement. An option shall be deemed
exercised when (i) the Company has received written notice of such exercise in
accordance with the terms of the Award Agreement, (ii) full payment of the
aggregate option exercise price of the shares as to which the option is
exercised has been made and (iii) arrangements that are satisfactory to the
Committee in its sole discretion have been made for the Participant's payment to
the Company of the amount, if any, that the Committee determines to be necessary
for the Company to withhold in accordance with applicable federal or state
income tax withholding requirements.
(b) Upon Retirement or other termination of the Participant's Continuous
Status as an Employee, other than (a) a termination that is either (i) for Cause
or (ii) voluntary on the part of a Participant and without the written consent
of the Company, a Parent, any Subsidiary or USLD or (b) a termination by reason
of death, the Participant may (unless otherwise provided in his Award Agreement)
exercise his option at any time within three (3) months after such termination
of the
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Participant's Continuous Status as an Employee (or within one (1) year after
termination of the Participant's Continuous Status as an Employee due to
permanent and total disability within the meaning of Code Section 22(e)(3)), or
within such other time as the Committee shall authorize, but in no event may the
Participant exercise his Option after ten (10) years from the Date of Grant
thereof (or such lesser period as may be specified in the Award Agreement), and
only to the extent of the number of shares for which his options were
exercisable by him at the date of the termination of the Participant's
Continuous Status as an Employee. In the event of the termination of the
Continuous Status as an Employee of a Participant to whom an option has been
granted under the Plan that is either (i) for Cause or (ii) voluntary on the
part of the Participant and without written consent, any option held by him
under the Plan, to the extent not previously exercised, shall forthwith
terminate on the date of such termination of the Participant's Continuous Status
as an Employee. Options granted under the Plan shall not be affected by any
change of employment so long as the holder continues to be an employee of the
Company, a Subsidiary or a Parent, or with respect to a USLD Participant, USLD.
The Award Agreement may contain such provisions as the Committee shall approve
with respect to the effect of approved leaves of absence.
(c) In the event a Participant to whom an option has been granted under the
Plan dies during, or within three (3) months after the Retirement or other
termination of, the Participant's Continuous Status as an Employee, such option
(unless it shall have been previously terminated pursuant to the provisions of
the Plan or unless otherwise provided in his Award Agreement) may be exercised
(to the extent of the entire number of shares covered by the option whether or
not purchasable by the Participant at the date of his death) by the executor or
administrator of the optionee's estate or by the person or persons to whom the
optionee shall have transferred such option by will or by the laws of descent
and distribution, at any time within a period of one (1) year after his death,
but not after the exercise termination date set forth in the relevant Award
Agreement.
(d) If as of the date of termination of the Participant's Continuous Status
as an Employee (other than as a result of the Participant's death) the
Participant is not entitled to exercise his or her entire options, the shares of
Common Stock covered by the unexercisable portion of the option shall revert to
the Plan. If the Participant (or his or her designee or estate as provided in
Section 9(c) above) does not exercise his or her options within the time
specified in the Plan and the Award Agreement, the unexercised options shall
terminate and the shares of Common Stock covered by such options shall revert to
the Plan.
10. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.
(a) GENERAL. The Committee, in its sole discretion, may make Awards of
Restricted Stock to selected Participants, which Awards shall be evidenced by an
Award Agreement that contains such terms and conditions, including vesting, as
the Committee may determine. As a condition to any Award of Restricted Stock
hereunder, the Committee may require a Participant to pay to the Company the
amount (such as the par value of such shares) required to be received by the
Company in order to assure compliance with applicable state law. Any Award of
Restricted Stock for which such requirement is established shall automatically
expire if not purchased in accordance with the Committee's requirements within
sixty (60) days after the Date of Grant.
Subject to the terms and conditions of the respective Award Agreement, the
Participant, as the owner of the Common Stock issued as Restricted Stock and any
Retained Distributions with respect thereto, shall have the rights of a
stockholder, including, but not limited to, voting rights as to such Common
Stock and the right to receive cash dividends or distributions thereon when, as
and if paid.
Within the limits set forth in the Plan, an Award of Restricted Stock may be
subject to such vesting requirements as may be fixed by the Committee. Vesting
may be accelerated by a Change of Control. Vesting may also be accelerated upon
death, permanent disability or Retirement.
Unless otherwise provided in the Award Agreement, in the event that an Award
of Restricted Stock is made to a Participant whose employment or service is
subsequently terminated by reason of
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death, permanent disability or Retirement or for such other reason as the
Committee may provide, such Participant (or his or her estate or beneficiary)
will be entitled to receive such additional portion of his or her Restricted
Stock and any Retained Distributions with respect thereto that the Participant
would have received had the Participant remained in the employment of the
Company, Parent, Subsidiary or USLD, as applicable, through the date on which
the next portion of the shares of unvested Restricted Stock subject to the Award
of Restricted Shares would have vested.
Unless otherwise provided in the Award Agreement, in the event an Award of
Restricted Shares is made to a Participant whose employment with the Company,
Parent, Subsidiary or USLD, as applicable, is subsequently terminated by the
Participant for Good Reason or by the Company, Parent, Subsidiary or USLD, as
applicable, other than for Cause, then in any such event, the Participant will
be entitled to receive such additional portion of his or her shares of
Restricted Stock and any Retained Distributions with respect thereto that the
Participant would have received had the Participant remained in the employment
of the Company, Parent, Subsidiary or USLD, as applicable, through the date on
which the next portion of the shares of unvested Restricted Stock subject to the
Award of Restricted Shares would have vested.
Unless otherwise provided in the Award Agreement, in the event that an Award
of Restricted Shares is made to a Participant who subsequently voluntarily
resigns or whose employment is terminated for Cause, then all such Restricted
Stock and any Retained Distributions with respect thereto as to which the
Restricted Period still applies shall be forfeited by such Participant and shall
again become available for grant under the Plan.
(b) TRANSFERABILITY. Restricted Stock and any Retained Distributions with
respect thereto may not be sold, assigned, transferred, pledged, or otherwise
encumbered during the Restricted Period, which shall be determined by the
Committee and shall not be less than one year nor more than two years from the
date such Restricted Stock was awarded. The Committee may, at any time, reduce
the Restricted Period with respect to any outstanding shares of Restricted Stock
and any Retained Distributions with respect thereto awarded under the Plan.
Shares of Restricted Stock, when issued, will be represented by a stock
certificate or certificates registered in the name of the Participant to whom
such Restricted Stock shall have been granted and shall bear a restrictive
legend to the effect that ownership of such Restricted Stock (and any related
Retained Distributions), and the enjoyment of all rights appurtenant thereto are
subject to the restrictions, terms, and conditions provided in the Plan and the
applicable Award Agreement. Each certificate shall be deposited by the
Participant with the Company, together with stock powers or other instruments of
assignment, each endorsed in blank, which will permit transfer to the Company of
all or any portion of the Restricted Stock and any securities constituting
Retained Distributions that shall be forfeited or that shall not become vested
in accordance with the respective Award Agreement. The certificate or
certificates issued for the Restricted Stock may bear such legend or legends as
the Committee may, from time to time, deem appropriate to reflect the
restrictions under the Plan for such Restricted Stock.
(c) STOCK CERTIFICATES; ADDITIONAL RESTRICTIONS. Shares of Restricted
Stock shall constitute issued and outstanding shares of Common Stock for all
corporate purposes. Each Participant will have the right to vote the Restricted
Stock held by such Participant, to receive and retain all cash dividends and
distributions thereon and exercise all other rights, powers and privileges of a
holder of Common Stock with respect to such Restricted Stock, with the exception
that:
(i) the Participant will not be entitled to delivery of the stock
certificate or certificates representing such Restricted Stock until the
Restricted Period applicable to such shares or portion thereof shall have
expired and unless all other vesting requirements with respect thereto shall
have been fulfilled;
(ii) other than cash dividends and distributions and rights to purchase
stock which might be distributed to stockholders of the Company, the Company
will retain custody of all Retained
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Distributions made, paid, declared or otherwise received by the holder
thereof with respect to Restricted Stock (and such Retained Distributions
will be subject to the same restrictions, terms and conditions as are
applicable to the Restricted Stock with respect to which they were made,
paid or declared) until such time, if ever, as the Restricted Period
applicable to the shares with respect to which such Retained Distributions
shall have been made, paid, declared or received shall have expired, and
such Retained Distributions shall not bear interest or be segregated in
separate accounts; and
(iii) upon the breach of any restrictions, terms or conditions provided
in the Plan or the respective Award Agreement or otherwise established by
the Committee with respect to any Restricted Stock or Retained
Distributions, such Restricted Stock and any related Retained Distributions
shall thereupon be automatically forfeited.
(d) MERGERS AND OTHER CORPORATE CHANGES. Unless otherwise provided in the
Award Agreement, upon the occurrence of a Change of Control, all restrictions
imposed on the Participant's Restricted Stock and any Retained Distributions
shall automatically terminate and lapse and the Restricted Period shall
automatically terminate; provided, however, that if the Change of Control occurs
within six months of the Date of Grant the restrictions and Restricted Period
shall terminate on the six month anniversary of the Date of Grant.
11. ADJUSTMENTS. The Committee, in its discretion, may make such
adjustments in the option price, the number or kind of shares and other
appropriate provisions covered by outstanding Awards that are required to
prevent any dilution or enlargement of the rights of the holders of such options
that would otherwise result from any reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, issuance of
rights or any other change in the capital structure of the Company. The
Committee, in its discretion, may also make such adjustments in the aggregate
number and class of shares that may be the subject of Awards which are
appropriate to reflect any transaction or event described in the preceding
sentence.
12. AMENDMENT, SUSPENSION AND TERMINATION OF THE PLAN. The Board may at
any time suspend or terminate the Plan or may amend it from time to time in such
respects as the Board may deem advisable in order that the Awards granted
thereunder may conform to any changes in the law or in any other respect that
the Board may deem to be in the best interests of the Company; provided,
however, that without approval by the stockholders of the Company voting the
proper percentage of its voting power, no such amendment shall make any change
in the Plan for which stockholder approval is required in order to comply with
(i) Rule 16b-3, as amended, promulgated under the Exchange Act, (ii) the Code or
regulatory provisions dealing with Incentive Stock Options, (iii) any rules for
listed companies promulgated by any national stock exchange on which the
Company's Common Stock is traded or (iv) any other applicable rule or law.
Unless sooner terminated hereunder, the Plan shall terminate ten (10) years
after the Effective Date. No amendment, suspension, or termination of the Plan
shall, without a Participant's consent, impair or negate any of the rights or
obligations under any Award theretofore granted to such Participant under the
Plan.
13. TAX WITHHOLDING. The Company shall have the right to withhold from any
payments made under this Plan, or to collect as a condition of payment, any
taxes required by law to be withheld. At any time when a Participant is required
to pay to the Company an amount required to be withheld under applicable income
tax laws in connection with a distribution of shares of Common Stock pursuant to
this Plan, the Participant may satisfy this obligation in whole or in part by
electing to have the Company withhold from such distribution shares of Common
Stock having a value equal to the amount required to be withheld. The value of
the shares of Common Stock to be withheld shall be based on the fair market
value, as determined pursuant to Section 8(a) hereof, of the Common Stock on the
date that the amount of tax to be withheld shall be determined (the "Tax Date").
Any such election is subject to the following restrictions: (i) the election
must be made on or prior to the Tax Date; (ii) the election must be irrevocable;
and (iii) the election must be subject to the disapproval of the Committee. To
the extent required to comply with rules promulgated under Section 16 of the
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Exchange Act, elections by Participants who are subject to Section 16 of the
Exchange Act are subject to the following additional restrictions: (i) no
election shall be effective for a Tax Date which occurs within six months of the
grant of the Award; and (ii) the election must be made either (a) six months or
more prior to the Tax Date or (b) during the period beginning on the third
business day following the date of release for publication for the Company's
quarterly or annual summary statements of sales and earnings and ending on the
twelfth business day following such date.
14. EFFECTIVE DATE OF THE PLAN. This Plan shall become effective on the
date (the "Effective Date") of the last to occur of (i) the adoption of the Plan
by the Board and (ii) the approval, within twelve (12) months of such adoption,
by a majority (or such other proportion as may be required by state law) of the
outstanding voting shares of the Company, voted either in person or by proxy, at
a duly held stockholders meeting or by written stockholder consent.
15. SPECIAL PROVISIONS REGARDING CHANGE OF CONTROL. The Board or the
Committee may, from time to time, make special provisions for one or more
Participants respecting a possible Change of Control of the Company, a
Subsidiary, Parent or USLD, and, to the extent that any such special provisions
made with the consent of the affected employee may have the effect of
accelerating vesting of stock options granted under the Plan or removal of
restrictions on Restricted Stock allotted under the Plan or the effect of
preventing a termination or dilution of benefits, such special provisions shall
be controlling over and shall be deemed to be an amendment of any inconsistent
terms of the applicable Award Agreement.
16. MISCELLANEOUS PROVISIONS.
(a) If approved by the Board, the Company or any Parent or Subsidiary may
lend money or guarantee loans by third parties to an individual to finance the
exercise of any option granted under the Plan to continue to hold Common Stock
thereby acquired. No such loans to finance the exercise of an Incentive Stock
Option shall have an interest rate or other terms that would cause any part of
the principal amount to be characterized as interest for purposes of the Code.
(b) This Plan is intended and has been drafted to comply in all respects
with Rule 16b-3, as amended, under the Exchange Act ("Rule 16b-3"). If any
provision of this Plan does not comply with Rule 16b-3, this Plan shall be
automatically amended to comply with Rule 16b-3.
(c) No person shall have any claim or right to be granted an Award, and the
grant of an Award shall not be construed as giving a Participant the right to be
retained in the employ of the Company, a Parent, a Subsidiary or USLD. Nothing
in this Plan shall interfere with or limit in any way the right of the Company,
a Parent, any Subsidiary or USLD to terminate any Participant's employment at
any time, nor confer upon any Participant any right to continue in the employ of
the Company, a Parent, any Subsidiary or USLD.
(d) To the extent that federal laws do not otherwise control, this Plan
shall be construed in accordance with and governed by the laws of the State of
Delaware or the property laws of any particular state.
(e) In case any one or more of the provisions of this Plan shall be held
invalid, illegal or unenforceable in any respect under applicable law and
regulation (including Rule 16b-3), the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby
and the invalid, illegal or unenforceable provisions shall be deemed null and
void; however, to the extent permissible by law, any provision which could be
deemed null and void shall first be construed, interpreted or revised
retroactively to permit this Plan to be construed in compliance with all
applicable laws (including Rule 16b-3) so as to foster the intent of this Plan.
Notwithstanding anything in this Plan to the contrary, the Committee, in its
sole and absolute discretion, may bifurcate this Plan so as to restrict, limit
or condition the use of any provision of this Plan to Participants who are
subject to Section 16 of the Exchange Act without so restricting, limiting or
conditioning this Plan with respect to other Participants.
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(f) None of a Participant's rights or interests under the Plan may be
assigned or transferred in whole or in part, either directly or by operation of
law or otherwise (except pursuant to a qualified domestic relations order or, in
the event of a Participant's death, by will or the laws of descent and
distribution), including, but not by way of limitation, execution, levy,
garnishment, attachment, pledge, bankruptcy or in any other manner, and no such
right or interest of any Participant in the Plan shall be subject to any
obligation or liability of such individual.
(g) No Restricted Stock or any Retained Distributions shall be issued
hereunder unless counsel for the Company shall be satisfied that such issuance
will be in compliance with applicable federal, state, or other securities laws.
(h) The expenses of the Plan shall be borne by the Company.
(i) By accepting any Award under the Plan, each Participant or beneficiary
claiming under or through him or her shall be conclusively deemed to have
indicated his or her acceptance and ratification of, and consent to, any action
taken under the Plan by the Company, the Committee or the Board.
(j) Awards granted under the Plan shall be binding upon the Company, its
successors and assigns.
(k) The appropriate officers of the Company shall cause to be filed any
reports, returns, or other information regarding Awards hereunder or any Common
Stock issued pursuant hereto as may be required by Section 13 or 15(d) of the
Exchange Act, or any other applicable statute, rule, or regulation.
(l) Nothing contained in this Plan shall prevent the Board of Directors from
adopting other or additional compensation arrangements, subject to stockholder
approval if such approval is required.
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ANNEX F
1996 NON-EMPLOYEE DIRECTOR PLAN OF
BILLING INFORMATION CONCEPTS CORP.
1. PURPOSE. The purpose of this Plan is to advance the interests of
Billing Information Concepts Corp., a Delaware corporation (the "Company"), by
providing an additional incentive to attract and retain qualified and competent
directors, upon whose efforts and judgment the success of the Company is largely
dependent, through the encouragement of stock ownership in the Company by such
persons.
2. DEFINITIONS. As used herein, the following terms shall have the meaning
indicated:
(a) "Annual Director Fee" shall mean a fee payable annually to each Eligible
Person on the business day on or immediately after December 15 of each year
("Payment Date"), at the election of the Eligible Person, in either cash of
$15,000 or an Option granted pursuant to Section 5 or partly in cash and partly
in an Option granted pursuant to Section 5.
(b) "Board" shall mean the Board of Directors of Billing Information
Concepts Corp.
(c) "Committee" shall mean the committee, if any, appointed by the Board
pursuant to Section 12 hereof.
(d) "Date of Grant" shall mean the date on which an Option is granted to
an Eligible Person pursuant to Section 4 or Section 5 hereof.
(e) "Director" shall mean a member of the Board or a member of the board
of directors of a Parent on the date of adoption of the Plan.
(f) "Eligible Person(s)" shall mean those persons who are Directors of
the Company or a Parent other than U.S. Long Distance Corp. and who are not
employees of the Company or a Subsidiary.
(g) "Fair Market Value" of a Share on any date of reference shall be the
closing price on the business day immediately preceding such date. For this
purpose, the closing price of the Shares on any business day shall be (i) if
the Shares are listed or admitted for trading on any United States national
securities exchange, the last reported sale price of Shares on such
exchange, as reported in any newspaper of general circulation, (ii) if
actual transactions in the Shares are included in the Nasdaq National Market
or are reported on a consolidated transaction reporting system, the closing
sales price of the Shares on such system, (iii) if Shares are otherwise
quoted on the Nasdaq system, or any similar system of automated
dissemination of quotations of securities prices in common use, the mean
between the closing high bid and low asked quotations for such day of Shares
on such system, (iv) if none of clause (i), (ii) or (iii) is applicable, the
mean between the high bid and low asked quotations for Shares as reported by
the National Daily Quotation Service if at least two securities dealers have
inserted both bid and asked quotations for Shares on at least five (5) of
the ten (10) preceding days.
(h) "Internal Revenue Code" or "Code" shall mean the Internal Revenue
Code of 1986, as it now exists or may be amended from time to time.
(i) "Nonqualified Stock Option" shall mean an option that is not an
incentive stock option as defined in Section 422 of the Internal Revenue
Code.
(j) "Option" shall mean any option granted under Section 4 or 5 of this
Plan.
(k) "Optionee" shall mean a person to whom an Option is granted under
this Plan or any successor to the rights of such person under this Plan by
reason of the death of such person.
(l) "Parent" shall mean a parent corporation of the Company as defined
in Section 424(e) of the Code and U.S. Long Distance Corp.
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(m) "Payment Date" shall have the meaning set forth in Section 2(a).
(n) "Plan" shall mean this 1996 Non-Employee Director Plan of Billing
Information Concepts Corp.
(o) "Prior Plan" shall mean the 1993 Non-Employee Director Plan of U.S.
Long Distance Corp.
(p) "Share(s)" shall mean a share or shares of the common stock, par
value one cent ($0.01) per share, of the Company.
(q) "Subsidiary" shall mean a subsidiary corporation of the Company as
defined in Section 424(f) of the Code.
3. SHARES AND OPTIONS. The maximum number of Shares to be issued pursuant
to Options under this Plan shall be FOUR HUNDRED THOUSAND (400,000) Shares.
Shares issued pursuant to Options granted under this Plan may be issued from
Shares held in the Company's treasury or from authorized and unissued Shares. If
any Option granted under this Plan shall terminate, expire, or be cancelled or
surrendered as to any Shares, new Options may thereafter be granted covering
such Shares. Any Option granted hereunder shall be a Nonqualified Stock Option.
4. AUTOMATIC GRANT OF OPTIONS. (a) Options shall automatically be granted
to Directors as provided in this Section 4. Each Option shall be evidenced by an
option agreement (an "Option Agreement") and shall contain such terms as are not
inconsistent with this Plan or any applicable law. Any person who files with the
Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.
(b) The Options automatically granted to Directors under this Plan shall be
in addition to regular director's fees and other benefits with respect to the
Director's position with the Company or its Subsidiaries. Neither the Plan nor
any Option granted under the Plan shall confer upon any person any right to
continue to serve as a Director.
(c) Options shall be automatically granted as follows:
(i) Each Director who holds one or more unexercised options under the
Prior Plan (an "Unexercised Option") will automatically receive an Option
for such number of Shares as is equal to the number of shares of U.S. Long
Distance Corp. common stock, $.01 per share, subject to his Unexercised
Options. Such Option will vest at the same time that his Unexercised Options
vest (assuming that his Unexercised Options remain outstanding and
exercisable);
(ii) Each Director who is an Eligible Person shall automatically receive
an Option for FIFTEEN THOUSAND (15,000) Shares on the date such Eligible
Person is initially appointed or elected a Director of the Company, and such
Option will vest as to FIVE THOUSAND (5,000) Shares on each of the first
three anniversaries of the Date of Grant; and
(iii) Each Director who is an Eligible Person will receive, on the first
business date after the date of each annual meeting of stockholders of the
Company, commencing with the annual meeting of stockholders immediately
following the full vesting of any Option previously granted under this
Section 4, an option to purchase FIFTEEN THOUSAND (15,000) Shares, and such
Option will vest as to FIVE THOUSAND (5,000) Shares on each of the first
three anniversaries of the Date of Grant.
For purposes of Section 4(c)(i), a Director's service with a Parent shall be
considered service with the Company.
(d) Any Option that may be granted pursuant to subparagraph (c) of this
Section 4 prior to the approval of this Plan by the stockholders of the Company
may be exercised on or after the Date of Grant subject to the approval of this
Plan by the stockholders of the Company within twelve (12)
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months after the effective date of this Plan. If any Optionee exercises an
Option prior to such stockholder approval, the Optionee must tender the exercise
price at the time of exercise and the Company shall hold the Shares to be issued
pursuant to such exercise until the stockholders approve this Plan. If this Plan
is approved by the stockholders, the Company shall issue and deliver the Shares
as to which the Option has been exercised. If this Plan is not approved by the
stockholders, the Company shall return the exercise price to the Optionee.
(e) Except for the automatic grants of Options under subparagraph (c) of
this Section 4 and grants of Options to Eligible Persons under Section 5 below,
no Options shall otherwise be granted hereunder, and neither the Board nor the
Committee, if any, shall have any discretion with respect to the grant of
Options within the meaning of Rule 16b-3 promulgated under the Securities
Exchange Act of 1934, as amended, or any successor rule.
5. ELECTION WITH RESPECT TO ANNUAL DIRECTOR FEE. Each Eligible Person may
elect to receive the Annual Director Fee in cash or in an Option, or partly in
cash and partly in an Option. Any election to receive an Option shall be in
writing and must be made not later than June 15, 1996, even if prior to the
effective date of the Plan, for Options to be granted for the Payment Date in
1996, and thereafter such election shall be made not later than December 31 of
each year with respect to the Annual Director Fee to be made on the Payment Date
in the subsequent year. The election may not be revoked or changed after it is
made. For purposes of this election and subject to Section 9, in lieu of receipt
of the Annual Director Fee in cash, as elected by the Eligible Person, each $2
of cash compensation shall be converted into an Option, granted as of the
Payment Date, to purchase one (1) share of Common Stock. If an Eligible Person
so elects to receive an Option, the Company shall promptly deliver to such
Eligible Person an Option Agreement. To be eligible to receive the Annual
Director Fee, for any year, the Eligible Person must be a Director on the
Payment Date for that Annual Director Fee. Any person who files with the
Committee, in a form satisfactory to the Committee, a written waiver of
eligibility to receive any Option under this Plan shall not be eligible to
receive any Option under this Plan for the duration of such waiver.
6. OPTION PRICE. The Option price per Share of any Option granted pursuant
to this Plan shall be one hundred percent (100%) of the Fair Market Value per
Share on the Date of Grant.
7. EXERCISE OF OPTIONS. Options may be exercised at any time after the
date on which the Options, or any portion thereof, are vested until the Option
expires pursuant to Section 8; provided, however, that no Option shall be
exercisable prior to six (6) months from the Date of Grant. An Option shall be
deemed exercised when (i) the Company has received written notice of such
exercise in accordance with the terms of the Option Agreement, (ii) full payment
of the aggregate Option price of the Shares as to which the Option is exercised
has been made and (iii) arrangements that are satisfactory to the Committee in
its sole discretion have been made for the Optionee's payment to the Company of
the amount, if any, that the Committee determines to be necessary for the
Company to withhold in accordance with applicable federal or state income tax
withholding requirements. Pursuant to procedures approved by the Committee, tax
withholding requirements, at the option of an Optionee, may be met by
withholding Shares otherwise deliverable to the Optionee upon the exercise of an
Option. Unless further limited by the Committee in any Option Agreement, the
Option price of any Shares purchased shall be paid solely in cash, by certified
or cashier's check, by money order, with Shares (but with Shares only if
permitted by the Option Agreement or otherwise permitted by the Committee in its
sole discretion at the time of exercise) or by a combination of the above;
provided, however, that the Committee in its sole discretion may accept a
personal check in full or partial payment of any Shares. If the exercise price
is paid in whole or in part with Shares, the value of the Shares surrendered
shall be their Fair Market Value on the date the Shares are received by the
Company.
8. TERMINATION OF OPTION PERIOD. The unexercised portion of an Option
shall automatically and without notice terminate and become null and void at the
time of the earliest to occur of the following:
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(a) with respect to Options granted automatically pursuant to Section
4(c), thirty (30) days after the date that an Optionee ceases to be a
Director (including for this purpose a Director of a Parent) regardless of
the reason therefor other than as a result of such termination by death of
the Optionee;
(b) with respect to Options granted automatically pursuant to Section
4(c), (y) one (1) year after the date that an Optionee ceases to be a
Director (including for this purpose a Director of a Parent) by reason of
death of the Optionee or (z) six (6) months after the Optionee shall die if
that shall occur during the thirty-day period described in Subsection 8(a);
or
(c) the fifth (5th) anniversary of the Date of Grant of the Option.
9. ADJUSTMENT OF SHARES. (a) If at any time while this Plan is in effect
or unexercised Options are outstanding, there shall be any increase or decrease
in the number of issued and outstanding Shares through the declaration of a
stock dividend or through any recapitalization resulting in a stock split-up,
combination or exchange of Shares, then and in such event:
(i) appropriate adjustment shall be made in the maximum number of Shares
then subject to being optioned under this Plan, so that the same proportion
of the Company's issued and outstanding Shares shall continue to be subject
to being so optioned; and
(ii) appropriate adjustment shall be made in the number of Shares and
the exercise price per Share thereof then subject to any outstanding Option,
so that the same proportion of the Company's issued and outstanding Shares
shall remain subject to purchase at the same aggregate exercise price.
In addition, the Committee shall make such adjustments in the Option price
and the number of shares covered by outstanding Options that are required to
prevent dilution or enlargement of the rights of the holders of such Options
that would otherwise result from any reorganization, recapitalization, stock
split, stock dividend, combination of shares, merger, consolidation, issuance of
rights, spin-off or any other change in capital structure of the Company.
(b) Except as otherwise expressly provided herein, the issuance by the
Company of shares of its capital stock of any class, or securities convertible
into shares of capital stock of any class, either in connection with a direct
sale or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or obligations of the Company convertible into such shares
or other securities, shall not affect, and no adjustment by reason thereof shall
be made with respect to, the number of or exercise price of Shares then subject
to outstanding Options granted under this Plan.
(c) Without limiting the generality of the foregoing, the existence of
outstanding Options granted under this Plan shall not affect in any manner the
right or power of the Company to make, authorize or consummate (i) any or all
adjustments, recapitalizations, reorganizations or other changes in the
Company's capital structure or its business; (ii) any merger or consolidation of
the Company; (iii) any issue by the Company of debt securities, or preferred or
preference stock that would rank above the Shares subject to outstanding
Options; (iv) the dissolution or liquidation of the Company; (v) any sale,
transfer or assignment of all or any part of the assets or business of the
Company; or (vi) any other corporate act or proceeding, whether of a similar
character or otherwise.
10. TRANSFERABILITY OF OPTIONS. Each Option Agreement shall provide that
such Option shall not be transferable by the Optionee otherwise than by will or
the laws of descent and distribution or pursuant to a qualified domestic
relations order and that, so long as an Optionee lives, only such Optionee or
his or her guardian or legal representative shall have the right to exercise the
related Option.
11. ISSUANCE OF SHARES. No person shall be, or have any of the rights or
privileges of, a stockholder of the Company with respect to any of the Shares
subject to an Option unless and until certificates representing such Shares
shall have been issued and delivered to such person. As a
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condition of any transfer of the certificate for Shares, the Committee may
obtain such agreements or undertakings, if any, as it may deem necessary or
advisable to assure compliance with any provision of this Plan, any Option
Agreement or any law or regulation, including, but not limited to, the
following:
(i) A representation, warranty or agreement by the Optionee to the
Company, at the time any Option is exercised, that he or she is acquiring
the Shares to be issued to him or her for investment and not with a view to,
or for sale in connection with, the distribution of any such Shares; and
(ii) A representation, warranty or agreement to be bound by any legends
that are, in the opinion of the Committee, necessary or appropriate to
comply with the provisions of any securities law deemed by the Committee to
be applicable to the issuance of the Shares and are endorsed upon the Share
certificates.
Share certificates issued to an Optionee who is a party to any stockholder
agreement or a similar agreement shall bear the legends contained in such
agreements.
12. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by a
stock option committee (the "Committee") consisting of not fewer than two (2)
members of the Board; provided, however, that if no Committee is appointed, the
Board shall administer this Plan and in such case all references to the
Committee shall be deemed to be references to the Board. The Committee shall
have all of the powers of the Board with respect to this Plan. Any member of the
Committee may be removed at any time, with or without cause, by resolution of
the Board, and any vacancy occurring in the membership of the Committee may be
filled by appointment by the Board.
(b) The Committee, from time to time, may adopt rules and regulations for
carrying out the purposes of this Plan. The determinations and the
interpretation and construction of any provision of this Plan by the Committee
shall be final and conclusive.
(c) Any and all decisions or determinations of the Committee shall be made
either (i) by a majority vote of the members of the Committee at a meeting or
(ii) without a meeting by the written approval of a majority of the members of
the Committee.
(d) This Plan is intended and has been drafted to comply with Rule 16b-3, as
amended, under the Securities Exchange Act of 1934, as amended. If any provision
of this Plan does not comply with Rule 16b-3, as amended, this Plan shall be
automatically amended to comply with Rule 16b-3, as amended.
(e) This Plan shall not be amended more than once every six (6) months,
other than to comport with applicable changes to the Internal Revenue Code, the
Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder.
13. INTERPRETATION. (a) If any provision of this Plan is held invalid for
any reason, such holding shall not affect the remaining provisions hereof, but
instead this Plan shall be construed and enforced as if such provision had never
been included in this Plan.
(b) THIS PLAN SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE EXCEPT
TO THE EXTENT SUPERSEDED BY THE LAWS OF THE UNITED STATES OR THE PROPERTY LAWS
OF ANY STATE.
(c) Headings contained in this Plan are for convenience only and shall in no
manner be construed as part of this Plan.
(d) Any reference to the masculine, feminine or neuter gender shall be a
reference to such other gender as is appropriate.
14. SECTION 83(B) ELECTION. If as a result of exercising an Option an
Optionee receives Shares that are subject to a "substantial risk of forfeiture"
and are not "transferable" as those terms are defined for purposes of Section
83(a) of the Code, then such Optionee may elect under Section 83(b) of
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the Code to include in his gross income, for his taxable year in which the
Shares are transferred to such Optionee, the excess of the Fair Market Value of
such Shares at the time of transfer (determined without regard to any
restriction other than one which by its terms will never lapse), over the amount
paid for the Shares. If the Optionee makes the Section 83(b) election described
above, the Optionee shall (i) make such election in a manner that is
satisfactory to the Committee, (ii) provide the Company with a copy of such
election, (iii) agree to promptly notify the Company if any Internal Revenue
Service or state tax agent, on audit or otherwise, questions the validity or
correctness of such election or of the amount of income reportable on account of
such election, and (iv) agree to such withholding as the Committee may
reasonably require in its sole and absolute discretion.
15. EFFECTIVE DATE AND TERMINATION DATE. This Plan is adopted as of June
, 1996, but shall only become effective on the Distribution Date as defined in
the Distribution Agreement between the Company and U.S. Long Distance Corp.
dated , 1996. The effective date of any amendment to the Plan is the
date on which the Board adopted such amendment; provided, however, if this Plan
is not approved by the stockholders of the Company within twelve (12) months
after the effective date, then, in such event, this Plan and all Options granted
pursuant to this Plan shall be null and void. This Plan shall terminate on
, 2001, and any Option outstanding on such date will remain outstanding
until it has either expired or has been exercised.
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ANNEX G
BILLING INFORMATION CONCEPTS CORP.
EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE
The Billing Information Concepts Corp. Employee Stock Purchase Plan (the
"Plan") is designed to encourage employees of Billing Information Concepts Corp.
("Billing") and its participating Subsidiaries (collectively, the "Company"),
where permitted by applicable laws and regulations, to acquire an equity
interest in Billing through the purchase of shares of the common stock, par
value $0.01 per share, of Billing ("Common Stock"). These purchases are intended
to establish a closer identification of employee, Company and stockholder
interests and to provide employees with a direct means of participating in the
Company's growth and earnings. It is anticipated that Plan participation will
motivate employees to remain in the employ of the Company and give greater
efforts on behalf of the Company. This Plan is intended to constitute an
"employee stock purchase plan" within the meaning of Section 423 of the Internal
Revenue Code of 1986, as amended (the "Code").
2. DEFINITIONS
The following words or terms, when used herein, shall have the following
respective meanings:
"Closing Market Price" refers to the reported closing sales price for shares
of the Common Stock as so reported in The Wall Street Journal for that day.
"Committee" shall refer to the committee appointed by the Billing Board of
Directors to administer this Plan.
"Designated Broker" refers to the securities brokerage company that will
assist Billing in administering the Plan and which may be designated from time
to time by the Committee. Initially the Designated Broker is Merrill Lynch & Co.
"Effective Date" means August 1, 1996, the first Enrollment Date under the
Plan.
"Employee" refers to all full-time and part-time employees, employed by
Billing or a Subsidiary on a continuous basis.
"Employee Contribution Amounts" refers to the amounts contributed by
employees via payroll deduction.
"Enrollment Date" refers to August 1, 1996, the first Enrollment Date under
the Plan, the first day of the initial six-month Participation Period ending
January 31, 1997, and after that latter date, refers to February 1 and August 1,
the first day of the succeeding six-month Participation Periods which continue
thereafter.
"Enrollment Period" refers to the designated period that precedes each
Enrollment Date during which employees eligible to participate are provided the
opportunity to enroll in the Plan. The Enrollment Period is approximately two
weeks in duration and, generally, will expire approximately 10 to 14 days prior
to the Enrollment Date. The exact dates for each Enrollment Period will be
communicated to all eligible employees prior to the Enrollment Period.
"Exercise Date" refers to the last stock trading day in a Participation
Period.
"Fair Market Value" refers to the Closing Market Price on either the first
or last stock trading day in the Participation Period as determined in
accordance with Section 9.
"Participant" refers to any employee meeting the eligibility requirements
specified in Section 5 who has enrolled in the Plan.
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"Participation Period" refers to the six-month period from the Effective
Date through January 31, 1997, and after that latter date refers to periods of
February 1 through July 31 and August 1 through January 31, during which periods
payroll deductions will be made to purchase stock under the Plan, or such other
period as the Committee may at any time prescribe.
"Plan" shall refer to this Billing Information Concepts Corp. Employee Stock
Purchase Plan.
"Prior Plan" refers to the U.S. Long Distance Corp. Stock Purchase Plan, the
stock purchase plan of Billing's former parent.
"Subsidiary" refers to any present or future corporation that is a
"subsidiary corporation" of the Company within the meaning of Section 424 of the
Code.
3. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Employee Stock Purchase Plan Committee
(the "Committee") appointed by the Board of Directors of Billing (the "Board"),
which Committee shall consist of at least three (3) persons, who need not be
members of the Board. The members of the Committee shall supervise the
administration and enforcement of the Plan according to its terms and provisions
and shall have all powers necessary to accomplish these purposes and discharge
its duties hereunder including, but not limited to, the power to interpret the
Plan, to make factual determinations and resolve issues of eligibility, stock
price determination, or any other issues arising under the Plan or as a result
of participation of Participants in the Plan.
The Committee may act by majority decision of its members at a regular or
special meeting of the Committee or by decision reduced to writing and signed by
all members of the Committee without holding a formal meeting. Vacancies in the
membership of the Committee arising from death, resignation or other inability
to serve shall be filled by appointment by the Board as soon as possible. All
decisions by the Committee shall be final and conclusive and binding upon all
Participants and the Company.
4. NATURE AND NUMBER OF SHARES
The Common Stock subject to issuance under the terms of the Plan shall be
shares of Billing's authorized but unissued shares. The aggregate number of
shares that may be issued under the Plan shall not exceed one million
(1,000,000) shares of Common Stock. If the total number of shares that Employees
elect to purchase under the Plan exceeds the shares available, the Committee
will allot shares among Employees.
In the event of any reorganization, recapitalization, stock split, reverse
stock split, stock dividend, spin-off, combination of shares, merger,
consolidation, offering of rights or other similar change in the capital
structure of Billing, the Committee may make such adjustment, if any, as it
deems appropriate in the number, kind and purchase price of the shares available
for purchase under the Plan, in the maximum number of shares that may be issued
under the Plan and in the Participation Periods, subject to the approval of the
Board and in accordance with Section 20 of the Plan.
If Billing is acquired in a transaction whereby it is not the surviving
entity or all or substantially all of Billing's assets are acquired, the
Committee shall determine a Plan termination date. This date shall precede the
expected effective date of such acquisition by not more than sixty (60) days.
Employee Contribution Amounts accumulated during the period between the most
recent Enrollment Date and Plan termination date shall be used to purchase
shares for Participants in the manner provided in Section 9 utilizing the Plan
termination date as the Exercise Date for determining the purchase price for
shares of Common Stock. In the event the Plan is terminated and the acquisition
transaction is not consummated, the Plan may be reactivated on a date determined
by the Committee.
5. ELIGIBILITY REQUIREMENTS
Each Employee, except as described in the next following paragraph, shall
become eligible to participate in the Plan in accordance with this Section 5 on
the first Enrollment Date following employment by the Company. Participation in
the Plan is voluntary.
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The following Employees are not eligible to Participate in the Plan:
i) Employees who have not completed at least six (6) months of
continuous service with the Company as of the Enrollment Date; and
ii) Employees who would, immediately upon enrollment in the Plan, own
directly or indirectly, or hold options or rights to acquire, an aggregate
of five percent (5%) or more of the total combined voting power or value of
all outstanding shares of all classes of Billing or any Subsidiary.
Employees of any corporation that may become a Subsidiary after the
Effective Date shall automatically be deemed to be eligible for participation
under this Plan effective as of the Enrollment Date following the date (1) the
corporation became a Subsidiary and (2) the Employees satisfied the continuous
service requirements described above.
All service with the former parent corporation of Billing or a subsidiary of
such former parent will be taken into account as continuous service for purposes
of this Section 5.
6. ENROLLMENT
Each eligible Employee of the Company as of the Effective Date will become
an eligible Employee in the Plan on the Effective Date if immediately prior to
the Effective Date he or she was eligible to participate in the Prior Plan. Each
other Employee of the Company who thereafter becomes eligible to participate may
enroll in the Plan on the February 1 and August 1 Enrollment Dates following the
date he or she first meets the eligibility requirements of Section 5 of the
Plan. Any eligible Employee not enrolling in the Plan when first eligible may
enroll in the Plan on the next succeeding February 1 or August 1 Enrollment
Date. In order to enroll, an eligible Employee must complete, sign and submit
the appropriate forms during the Enrollment Period to Billing's Human Resources
Department. Continued enrollment in subsequent periods shall be automatic and no
additional documentation is required, unless a Participant desires to revise the
Employee Contribution Amount for the subsequent Participation Period. Employee
Contribution Amounts shall remain constant if not changed at the Employee's
request during an Enrollment Period. In order to terminate Plan participation,
at any time, or change Employee Contribution Amounts during an Enrollment
Period, the participant must complete, sign and submit the appropriate forms to
Billing's Human Resources Department.
7. GRANT OF RIGHT TO PURCHASE SHARES ON ENROLLMENT
Enrollment in the Plan by an Employee on an Enrollment Date will constitute
the grant by Billing to the Participant of the right to purchase shares of
Common Stock under the Plan. Re-enrollment or continued enrollment by a
Participant in the Plan will constitute a grant, on the Enrollment Date on which
such re-enrollment or continued enrollment occurs, by Billing to the Participant
of a new right to purchase shares of Common Stock. A Participant who has not
terminated employment shall have shares of Common Stock automatically purchased
for him or her on the applicable Exercise Date. The participant shall
automatically be re-enrolled in the Plan for subsequent Participation Periods at
the same Employee Contribution Amount, unless the Participant notifies Billing's
Human Resources Department on the appropriate forms that he or she elects not to
re-enroll or desires to change his or her Employee Contribution Amount. A
Participant who has suspended payroll deductions during any Participation Period
must re-enroll on the appropriate forms to participate in the Plan in any future
Participation Periods.
Each right to purchase shares of Common Stock under the Plan during any
participation Period shall have the following terms:
i) the right to purchase shares of Common Stock during any
Participation Period shall expire on the earlier of (a) the completion of
the purchase of shares on the Exercise Date or (b) the date on which the
Participant terminates employment;
ii) in no event shall the right to purchase shares of Common Stock
during any Participation Period extend beyond twenty-seven (27) months from
the Enrollment Date;
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iii) payment for shares purchased shall be made only with amounts
contributed through payroll deductions;
iv) purchase of shares shall be accomplished only in accordance with
Section 9;
v) the price per share shall be determined as provided in Section 9;
vi) the right to purchase shares of Common Stock (taken together with
all other such rights then outstanding under this Plan and under all other
similar stock purchase plans of Billing or any Subsidiary) will in no event
give the Participant the right to purchase a number of shares of Common
Stock during a Participation Period in excess of the number of shares of
Common Stock derived by dividing $12,500.00 by the Fair Market Value of the
Common Stock on the applicable Grant Date, as defined in Section 9,
determined in accordance with Section 9; and
vii) the right to purchase shares of Common Stock shall in all respects
be subject to the terms and conditions of the Plan, as interpreted by the
Committee from time to time.
8. METHOD OF PAYMENT
Payment of shares of Common Stock shall be made as of the applicable
Exercise Date with amounts contributed through payroll deductions collected over
the Plan's designated Participation Period, with the first such deduction
commencing with the payroll period ending after the Enrollment Date. Each
Participant will authorize such deductions from his or her pay for each month
during the Participation Period. No changes in monthly deduction amounts are
permitted subsequent to the Enrollment Period other than ceasing ongoing payroll
deductions for the remainder of the Participation Period. Payroll deductions
will be made in equal installments on each of the first two payrolls of each
month during the Participation Period. No lump sum or prepayments are permitted.
Employees may select any monthly Employee Contribution Amount as long as the
following requirements are met:
i) at least $10.00 is deducted each month;
ii) amount selected is a multiple of $5.00;
iii) total amount deducted does not exceed Employee's net pay of their
base salary; and
iv) the aggregate of monthly deduction amounts does not exceed
$10,625.00 in any Participation Period (under this Plan and under all other
similar stock purchase plans of Billing or any Subsidiary). If for any
reason a Participants's contributions to the Plan exceed $10,625.00 during
any Participation Period, such excess amounts shall be refunded to the
Participant as soon as practicable after such excess has been determined to
exist.
A Participant may suspend payroll deductions at any time during a
Participation Period by given written notice to Billing's Human Resources
Department on the appropriate forms, which will be processed effective for the
first payroll period that is administratively feasible. In such case, the
Participant's account balance shall still be used to purchase Common Stock at
the end of the Participation Period. Any Participant who suspends payroll
deductions during any Participation Period cannot resume payroll deductions
during such period and must re-enroll in the Plan during a subsequent Enrollment
Period in order to participate in any future Participation Periods.
Except in the case of termination of employment, the amount in a
Participant's account at the end of any Participation Period shall be applied to
the purchase of shares, as provided in Section 9.
9. PURCHASE OF SHARES
The right to purchase shares of Common Stock granted by the Company under
the Plan is for the term of a Participation Period. The price to be paid for the
Common Stock to be purchased at the expiration of such Participation Period
shall be determined as the lower of: (a) 85% of the Closing
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Market Price on the first trading day of the Participation Period (Grant Date)
or (b) 85% of the Closing Market Price on the last trading day in the
Participation Period (Exercise Date). These dates constitute the date of grant
and the date of exercise for valuation purposes under Section 423 of the Code.
The number of shares of Common Stock, including fractional shares, purchased
on behalf of a Participant shall be recorded in the Designated Broker stock
trading account established for each Participant as soon as administratively
feasible, but no later than five (5) business days following the last business
day of the preceding Participation Period. The number of shares purchased shall
be computed by dividing the aggregate Employee Contribution Amount by the price
for the Common Stock determined in the manner described in the preceding
paragraph. Participants shall be treated as the record owners of the shares,
with all rights of a stockholder, effective as of the date the shares are posted
to the Participant's stock trading account. Any fees associated with maintaining
these stock trading accounts shall be the obligation of the Company.
10. WITHDRAWAL OF SHARES
The record of shares of Common Stock purchased shall be maintained in an
individual stock trading account established at the Designated Broker on behalf
of the Participant until the shares are either withdrawn or sold. A Participant
may elect to withdraw all shares held in his or her account at any time (without
withdrawing from the Plan) by giving notice to the Designated Broker. Upon
receipt of such notice, the Designated Broker will arrange for either (a) the
issuance and delivery of all shares held in the Participant's account as soon as
administratively feasible or (b) the sale of the shares, as described by the
Participant.
Certificates shall be issued only in the following situations:
i) if the Participant requests a certificate; or
ii) if the Participant terminates employment with the Company and
requests a certificate.
In both of these cases, the Participant will be required to notify the
Designated Broker and pay an issuance fee. The share certificate will be issued
to the Participant as soon as administratively feasible after the receipt by the
Designated Broker of the required form and payment of the issuance fee.
Fractional shares shall be handled as follows: For share withdrawals, only
whole shares will be certified and issued to Participants. A payment will be
made to the Participant for any fractional shares owned by the Participant. This
payment shall be computed using the Closing Market Price of a share of Common
Stock on the date the withdrawal is processed by the Designated Broker. For
shares sold, Participants shall receive credit for all whole and fractional
shares at the actual price for which the shares were sold.
11. INCOME TAX OBLIGATIONS
Participants shall be responsible for all personal income tax obligations
associated with selling shares of Common Stock purchased through this Plan. The
Committee recommends that each Participant seek competent, professional tax
advice prior to enrolling in the Plan to ensure he or she fully understands the
tax consequences resulting from stock sales.
12. TERMINATION OF PARTICIPATION
The right to participate in the Plan terminates immediately when a
Participant ceases to be employed by Billing or any Subsidiary. Employee
Contribution Amounts collected prior to the date of termination of employment
shall be paid in cash. The cash shall be delivered to the Participant as soon as
administratively feasible following the end of the Participation Period in which
the Participant's employment terminates. Employee Contribution Amounts for
Participants who are on a Leave of Absence will be used to purchase Common Stock
at the conclusion of the Participation Period in accordance with Section 9.
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13. DEATH OF A PARTICIPANT
As soon as administratively feasible after receiving notification of the
death of a Participant, Employee Contribution Amounts collected prior to the
date of termination of employment shall be paid in cash to the Participant's
estate. No additional shares of Common Stock may be purchased on behalf of a
Participant after notification of death is received. All assets in a
Participant's stock trading account will remain in the Participant's account
until the person whom the Participant has elected a joint tenant, with or
without right of survivorship, or the representative of the Participant's estate
requests delivery thereof from the Designated Broker and submits such
documentation as the Designated Broker may require to show proof of entitlement
thereto.
14. ASSIGNMENT
The rights of a Participant under the Plan shall not be assignable or
otherwise transferable by the Participant except by will or the laws of descent
and distribution or pursuant to a qualified domestic relations order . No
purported assignment or transfer of any rights of a Participant under the Plan,
whether voluntary or involuntary, by operation of law or otherwise, shall vest
in the purported assignee or transferee any interest or right therein
whatsoever, but immediately upon such assignment or transfer, or any attempt to
make the same, such rights shall terminate and become of no further effect. If
the foregoing provisions of this Section 14 are violated, the Participant's
election to purchase Common Stock shall terminate and the only obligation of the
Company remaining under the Plan shall be to pay the person entitled thereto the
Employee Contribution Amount then credited to the Participant's account. No
Participant may create a lien on any funds, securities, rights or other property
held for the account of the Participant under the Plan, except to the extent
permitted by will or the laws of descent and distribution if beneficiaries have
not been designated. A Participant's right to purchase shares of Common Stock
under the Plan shall be exercisable only during the Participant's lifetime and
only by him or her.
15. COSTS
Billing will pay all expenses incident to establishing and administering the
Plan. Expenses to be incurred by Participants shall be limited to brokerage fees
relating to sales of stock from the Participant's account (as described herein),
issuance fees (as described in Section 10) and any personal income tax
obligations.
16. REPORTS
At least annually, the Company shall provide or cause to be provided to each
Participant a report of their Employee Contribution Amounts and the shares of
Common Stock purchased with such Employee Contribution Amounts by that
Participant on each Exercise Date.
17. EQUAL RIGHTS AND PRIVILEGES
All eligible Employees shall have equal rights and privileges with respect
to the Plan so that the Plan qualifies as an "employee stock purchase plan"
within the meaning of Section 423 or any successor provision of the Code and
related regulations. Any provision of the Plan that is inconsistent with Section
423 or any successor provision of the Code shall without further act or
amendment by the Company be reformed to comply with the requirements of Section
423. This Section 17 shall take precedence over all other provisions in the
Plan.
18. RIGHTS AS A STOCKHOLDER
A Participant shall have no rights as a stockholder under his or her rights
to purchase Common Stock until he or she becomes a stockholder as herein
provided. A Participant will become a stockholder with respect to shares for
which payment has been completed as provided in Section 9 effective as of the
date the shares are posted to the Participant's stock trading account.
19. MODIFICATION AND TERMINATION
The Board may amend or terminate the Plan at any time as permitted by law,
with the exception that the provisions of the Plan (including, without
limitation, the provisions of Sections 8 and 9) that
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constitute a formula award for purposes of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Securities Exchange Act of 1934, as
amended ("Rule 16b-3"), may not be amended more than once every six (6) months,
other than to comply with changes in the Code, or the rules thereunder. No
amendment shall be effective unless within one (1) year after the change is
adopted by the Board it is approved by the holders of a majority of the voting
power of Billing's outstanding shares:
i) if and to the extent such amendment is required to be approved by
stockholders to continue the exemption provided for in Rule 16b-3 (or any
successor provision); or
ii) if such amendment would cause the rights granted under the Plan to
purchase shares of Common Stock to fail to meet the requirements of Section
423 of the Code (or any successor provision).
20. BOARD AND STOCKHOLDER APPROVAL; EFFECTIVE DATE
The Plan was approved by the Board and by the sole stockholder of Billing on
, 1996. The Plan will become effective as of August 1, 1996.
21. GOVERNMENTAL APPROVALS OR CONSENTS
The Plan and any offering or sale made to Employees under the Plan are
subject to any governmental approvals or consents that may be or become
applicable in connection therewith. Subject to the provisions of Section 19, the
Board may make such changes in the Plan and include such terms in any offering
under the Plan as may be desirable to comply with the rules or regulations of
any governmental authority.
22. USE OF FUNDS
All Employee Contribution Amounts received or held by the Company under this
Plan may be used by the Company for any corporate purpose, and the Company shall
not be obligated to segregate such amounts.
23. NO ADDITIONAL PURCHASE RIGHTS OR EMPLOYMENT RIGHTS
Other than for rights to purchase Common Stock under the Plan, the Plan does
not, directly or indirectly, create any right for the benefit of any Employee or
class of Employee to purchase any shares under the Plan, or create in any
Employee or class of Employee any right with respect to continuance of
employment with the Company, and it shall not be deemed to interfere in any way
with the Company's right to terminate, or otherwise modify, any Employee's
employment at any time.
24. EFFECT OF PLAN
The provisions of the Plan shall, in accordance with its terms, be binding
upon, and inure to the benefit of, all successors of each Employee participating
in the Plan, including, without limitation, such Employee's estate and the
executors, administrators or trustees thereof, heirs and legatees, and any
receiver, trustee in bankruptcy or representative of creditors of such Employee.
25. GOVERNING LAW
The laws of the State of Delaware will govern all matters relating to the
Plan except to the extent superseded by the laws of the United States or the
property laws of any particular state.
26. NO PAYMENT OF INTEREST
No interest will be paid or allowed on any Employee Contribution Amounts or
amounts credited to the account of any Participant.
27. OTHER PROVISIONS
The agreement to purchase shares of Common Stock under the Plan shall
contain such other provisions as the Committee and the Board shall deem
advisable, provided that no such provision shall in any way conflict with the
terms of the Plan.
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