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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 8-K
CURRENT REPORT
Pursuant to Section 10 or 15(d) of the
Securities Exchange Act of 1934
JANUARY 1, 1996
Date of Report (date of earliest event reported)
NETWORK LONG DISTANCE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23172 72-1122018
(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
525 FLORIDA STREET
BATON ROUGE, LOUISIANA 70801
(Address of Principal Executive Offices
Including Zip Code)
(504) 343-3125
(Registrant's telephone number,
including area code)
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Item 1. CHANGES IN CONTROL OF REGISTRANT
N/A
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 1, 1996, the Registrant acquired the selected assets of
Quantum Communications, Inc., a California corporation ("Quantum").
These assets consist of approximately 40% of Quantum's long distance
customer accounts and accounts receivables; Quantum's rights under any
agreements, term contracts and letters of agency related to the
customer accounts; customer and other deposits held or made by the
Registrant related to the customer accounts and all dialers, T-1's and
other equipment currently used by or for the customer accounts.
The Registrant purchased the Quantum assets for approximately
51,526 shares of the Registrant's restricted Common Stock, $474,225
in cash, and $339,570 paid in the form of equally denominated
promissory notes payable at the per annum rate of eight percent
(8%) in sixty equal consecutive monthly installments, the first of
which shall be due on February 1, 1996. the purchase price was
valued at approximately $1,323,150. The purchase price was based
upon a multiple of Quantum's monthly revenue and accounts
receivable subject to future adjustments for variations in
Quantum's billings on or before February 28, 1996. Certain of the
Registrant's shares and cash issued to Quantum will be held in escrow
subject to future adjustments based on a customer evaluation to be
conducted by the parties on or before February 28, 1996.
The Registrant believes the acquisition of the Quantum assets to be
beneficial as it will allow for the consolidation and reduction in
overhead costs while increasing overall revenues from operations. The
Registrant also believes the acquisition will enhance its corporate
image in an area of the country in which it has had limited operations
and may provide additional acquisition opportunities.
There exists no material relationship between the Registrant, its
officers and directors and Quantum and its officers, directors or
affiliates. The restricted common stock used by the Registrant to
purchase the assets of Quantum were from the Registrant's authorized
but unissued common stock.
Item 3. BANKRUPTCY OR RECEIVERSHIP
N/A
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Item 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
N/A
Item 5. OTHER EVENTS
N/A
Item 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS
N/A
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) N/A
(b) PRO FORMA COMBINING BALANCE SHEET
The following unaudited Pro Forma Combining Balance Sheet as
of September 30, 1995, illustrates the effect of the
acquisition of a segment of the customer base of Quantum
Communications, Inc. (Quantum) as of January 1, 1996 (the
Acquisition) and the related receivables for cash of $474,225,
the issuance of 51,256 shares of restricted common stock, and
the issuance of a note payable of $339,570 to Quantum. Of the
consideration stated above, 21,500 shares of restricted common
stock and cash of $30,000 are to be held in escrow until a
specified period of time passes while retaining a certain
level of the customer base. The Pro Forma Combining Balance
Sheet assumes that the Acquisition occurred on the date the
balance sheet is presented.
The unaudited Pro Forma Combining Balance Sheet is presented
for comparative purposes only and is not intended to be
indicative of actual financial position had the transaction
occurred as of the date indicated above nor does it purport to
indicate the financial position which may be reached in the
future.
PRO FORMA COMBINING BALANCE SHEET
AS OF SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Network/Quantum
Network Pro Forma Pro Forma
Historical Adjustments Combined
---------- ----------- --------
<S> <C> <C> <C>
Current assets $ 5,932,724 $ 225,000 (1) $ 6,157,724
(444,225) (2) (444,225)
Property and equipment, net 2,368,806 2,368,806
Excess of cost over net
tangible assets acquired 2,662,523 854,495 (3) 3,517,018
Other assets 360,250 360,250
----------- --------- -----------
Total assets $11,324,303 $ 635,270 $11,959,573
----------- --------- -----------
----------- --------- -----------
Liabilities $ 4,084,758 $ 339,570 (2) $ 4,424,328
Stockholders' equity:
Series A preferred stock -- -- --
Common stock 300 3 (2) 303
Additional paid-in-capital 6,578,990 295,697 (2) 6,874,687
Retained earnings 660,255 -- 660,255
----------- --------- -----------
Total stockholders' equity 7,239,545 295,700 7,535,245
----------- --------- -----------
Total liabilities and
stockholders' equity $11,324,303 $ 635,270 $11,959,573
----------- --------- -----------
----------- --------- -----------
</TABLE>
NOTES TO PRO FORMA COMBINING BALANCE SHEET
1. Represents the historical carrying value of the assets
acquired by the Company.
2. Represents the payment of $474,225 in cash, issuance
of 51,256 shares of the Company's restricted common stock
valued at $509,355 and issuance of a note payable to
Quantum for $339,570. Of the consideration mentioned
above, 21,500 shares of the Company's restricted common
stock valued at $213,656 and cash of $30,000 are to be
held in escrow until a specified period of time passes
while retaining a certain level of the customer base.
The customer base is not guaranteed to remain at this
level until the end of the restricted period. As the
outcome of this contingency is not determinable beyond
reasonable doubt, the stock and cash have been excluded
from the purchase price. The stock and cash held in
escrow will be recorded as additional consideration upon
release of the restrictions surrounding the stock and
cash.
3. Represents the allocation of the purchase price to
customer acquisition costs. The acquisition agreement
calls for 21,500 shares of the Company's common stock
and $30,000 cash to be held in escrow for the sellers.
This stock has not been included in the purchase price.
See Note 2. In addition, refinement in the asset values
reflected in the pro forma financial data will occur upon
final determination of fair values in accordance with
generally accepted accounting principles. Management is
currently reviewing the asset acquired in order to
determine the allocation of the acquisition costs between
the customer base and other intangibles and to determine
the useful life for these intangibles.
(c) N/A
Exhibit No. Page Description
- ---------- ---- -----------
1 5 Asset Purchase Agreement between the Registrant
and Quantum Communications, Inc. dated January 1,
1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NETWORK LONG DISTANCE, INC.
Dated: January 10, 1996 By: /s/ Marc I. Becker
__________________________________
Marc I. Becker,
Executive Vice President
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ASSET
PURCHASE
TRANSACTION
BETWEEN
NETWORD LONG DISTANCE, INC.
AND
QUANTUM COMMUNICATIONS, INC.
DATED
JANUARY 1, 1996
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TABLE OF CONTENTS
1. Asset Purchase Agreement
2. Schedule 2.3(b)(i): Qualified Customer Accounts
3. Schedule 2.3(b)(v): Accounts Receivable
4. Schedule 2.4: Allocation of Purchase Price
5. Schedule 2.5: Obligations Assumed
6. Exhibit 2.5: Agent Contracts (in globo)
7. Schedule 3.4: Accounts Receivable (with agings)
8. Schedule 3.5: Claims and Encumbrances
9. Schedule 3.6: Contracts, Obligations and Commitments
10. Schedule 3.8(a): Actions, Suits, etc.
11. Schedule 3.8(c): Licenses, Permits, etc.
12. Exhibit 6.1: Service Agreement
13. Bill of Sale
14. Master Letter of Agency
15. Written Consent of Shareholders of Quantum
16. Minutes of Meeting of Board of Directors of Quantum
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (THE "AGREEMENT") is made and entered into as
of the 1st day of January, 1996 between Network Long Distance, Inc., a Delaware
corporation ("PURCHASER"), and Quantum Communications, Inc., a California
corporation ("SELLER").
WHEREAS, Seller and Purchaser have entered into that certain Asset Purchase
Agreement (the "APA") of even date; and
WHEREAS, Seller and Purchaser desire to amend the APA in accordance with
the terms and conditions set forth hereinbelow.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, representations and warranties herein contained, the parties hereby
agree to amend and replace the APA, in its entirety, as follows:
1. SALE AND TRANSFER OF ASSETS
1.1 ASSETS TO BE SOLD
Subject to the terms and conditions set forth in this Agreement,
Seller agrees to sell, convey, transfer, assign and deliver to Purchaser, and
Purchaser agrees to purchase from Seller, the following selected assets:
(a) All Qualified Customer Accounts (as such term is defined below),
including all customer lists, mailing lists, books, records, files, data,
letters of agency and similar items related to the Qualified Customer Accounts;
(b) All accounts receivable associated with and derived from the
Qualified Customer Accounts and other mutually agreed to accounts receivable;
(c) All of Seller's rights under any agreements, application forms,
term contracts, letters of agency and all other contractual instruments related
to the Qualified Customer Accounts (COLLECTIVELY, THE "CUSTOMER CONTRACTS"),
including but not limited to Seller's right to assert claims and take other
rightful actions in respect of breaches, defaults and other violations of such
Customer Contracts;
(d) All customer and other deposits held or made by Seller related to
the Qualified Customer Accounts; and
(e) All dialers, T-1's and other equipment currently used by or for
the customers relative to the Qualified Customer Accounts.
1.2 ASSETS RETAINED BY SELLER
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All assets of Seller not listed in Section 1.1 are being retained by
Seller.
2. THE CLOSING
2.1 PLACE AND DATE
The closing of the purchase and sale of the Assets (THE "CLOSING")
shall take place at the offices of Purchaser, 525 Florida Street, Baton Rouge,
Louisiana, 70801, at or before 10:00 a.m., local time, on or before JANUARY 1,
1995, provided that the conditions set forth in Section 7 hereof have been
satisfied. The date of the Closing is herein referred to as the "CLOSING DATE."
2.2 TRANSFER OF ASSETS
(a) At the Closing and subject to the terms and conditions of this
Agreement, Seller shall deliver to Purchaser the following, and simultaneously
with such delivery, Seller shall take such action as may be necessary or
reasonably requested by Purchaser to place Purchaser in possession and control
of the Assets:
(i) Such bills of sale, assignments, novation agreements, master
letters of agency or other instruments of transfer and assignment as shall be
necessary to vest in Purchaser title to the Assets sold and assigned under this
Agreement, free and clear of all liens, claims and encumbrances;
(ii) Copies of resolutions of the Board of Directors of Seller
authorizing the execution, delivery and performance of this Agreement by Seller
and a certificate of Seller's secretary, dated the Closing Date, that such
resolutions were duly adopted and are in full force and effect;
(iii) A current list of the Qualified Customer Accounts to be
transferred with an accounts receivable aging report for such Qualified Customer
Accounts;
(iv) Such other certificates or other documents or instruments as
the Purchaser or Purchaser's counsel may reasonably request.
(b) At the Closing, as a condition to Seller's obligations under this
Agreement, Purchaser shall deliver to Seller the following:
(i) All instruments as may be reasonably necessary by which
Purchaser assumes the obligations and liabilities to be assumed by it hereunder;
(ii) Copies of resolutions of the Board of Directors of Purchaser
authorizing the execution, delivery and performance of this Agreement by
Purchaser and a certificate of Purchaser's secretary, dated the Closing Date,
that such resolutions were duly adopted and are in full force and effect; and
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(iii) Such other certificates or other documents or
instruments as Seller or Seller's counsel may reasonably request.
2.3 PURCHASE PRICE; ADJUSTMENTS; PAYMENT OF THE PURCHASE PRICE
(a) In full consideration for the Assets to be transferred to
Purchaser, Purchaser shall pay to Seller a combination of consideration (THE
"PURCHASE PRICE") equal to the sum of the Customer Base Purchase Price plus the
Accounts Receivable Purchase Price (as such terms are defined below).
(b) DEFINITIONS:
(i) "QUALIFIED CUSTOMER ACCOUNT" shall mean any end user long
distance telecommunications customer account of Seller which is listed in
SCHEDULE 2.3(b)(i) hereto (which schedule shall be updated as of the Closing
Date). Unless mutually agreed to by the parties, a "Qualified Customer Account"
may not be affiliated with Seller in any way or comprised, in whole or in part,
of any outstanding balance(s) which is/are more than sixty (60) days past due as
of the Closing Date.
(ii) "NET TOLL USAGE" shall mean the average monthly gross
billings of the Qualified Customer Accounts of Seller for the months of
September, October and November of 1995 multiplied by a factor of ninety percent
(90%). (For purposes of the Closing, the parties shall stipulate that Net Toll
Usage equals $165,000).
(iii) "BAD DEBT FACTOR" shall mean two percent (2%)
multiplied by Net Toll Usage.
(iv) "CUSTOMER BASE PURCHASE PRICE" shall mean Net Toll Usage
less the Bad Debt Factor multiplied by seven (7.0). (EXAMPLE: If Net Toll Usage
equals $200,000 and the Bad Debt Factor equals $4,000, then the Customer Base
Purchase Price shall equal $1,372,000).
(v) "ACCOUNTS RECEIVABLE" shall mean the accounts receivable, as
of midnight on December 31, 1995, which are associated with and derived from all
Qualified Customer Accounts. Accounts Receivable shall be listed, in gross
numerical dollar amounts, in SCHEDULE 2.3(b)(v) hereto (which schedule shall be
updated as of the Closing Date). (For purposes of the Closing, the parties
shall stipulate that Accounts Receivable equals $225,000).
(vi) "ACCOUNTS RECEIVABLE PURCHASE PRICE" shall mean the
aggregate total of the Accounts Receivable multiplied by a factor of eighty-five
percent (85%).
(c) MANNER AND FORM OF PAYMENT: The Purchase Price shall consist of
cash, restricted shares of Purchaser's voting common stock and a promissory
note.
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(i) CUSTOMER BASE PURCHASE PRICE:
(1) CASH PORTION. Twenty-five percent (25%) of the
Customer Base Purchase Price shall be paid in cash, by wire transfer or in other
immediately available funds.
(2) STOCK PORTION. Forty-five percent (45%) of the
Customer Base Purchase Price shall be paid in shares of Purchaser's voting
common stock which are restricted from transfer under SEC Rule 144 (THE
"RESTRICTED STOCK"). The number of shares of Restricted Stock to be paid shall
be computed by dividing the Stock Portion by the lower of: (1) the average of
the prevailing bid and asked price per share as of the close of the market on
December 11, 1995; or (2) the average of the prevailing bid and asked price per
share as of the close of the market on December 29, 1995.
(3) NOTE PORTION. Thirty percent (30%) of the Customer
Base Purchase Price shall be paid in the form of four (4) equally denominated
promissory notes payable at the per annum rate of eight percent (8%) in sixty
(60) equal consecutive monthly installments, the first of which shall be due on
February 1, 1996.
(ii) ACCOUNTS RECEIVABLE PURCHASE PRICE. The Accounts Receivable
Purchase Price shall be paid in cash, by wire transfer or in other immediately
available funds.
(d) ESCROWED SHARES. At the Closing, eleven thousand five hundred
(11,500) shares of Restricted Stock shall be placed in an escrow account
("ESCROWED SHARES") as security for: (i) Seller's payment of any
reimbursement(s) necessitated by the Customer Evaluation (as such term is
defined below); (ii) Seller's performance under the terms of the Service
Agreement (as such term is defined below); and (iii) the Special Indemnification
in paragraph 11.13 below. Unless Seller has failed and/or refused to fully
perform its duties and obligations under the Service Agreement (as such term is
defined below), any Escrowed Shares relating to this paragraph which remain in
escrow after the Customer Evaluation shall be released by the escrow agent and
delivered to Seller.
(e) RECONCILIATION. On or before February 28, 1996, the parties
shall perform a reconciliation (THE "RECONCILIATION") of the actual dollar
amount of the Net Toll Usage and the actual dollar amount of the Accounts
Receivable.
(i) The Net Toll Usage to be used in conducting the Customer
Evaluation shall be the actual amount of Net Toll Usage determined through the
Reconciliation.
(ii) The Purchase Price shall be adjusted in accordance with the
results of the Reconciliation. $30,000 (THE "ESCROWED CASH") and 10,000 shares
of Restricted Stock (THE "RECONCILIATION SHARES") shall be placed in escrow at
the Closing as security for any reimbursement(s) due to Purchaser as a result of
the Reconciliation.
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Any reimbursement(s) due to Purchaser as a result of the Reconciliation shall
be paid first in the form of the Escrowed Cash and then in the form of the
Reconciliation Shares.
(f) CUSTOMER EVALUATION. Upon the expiration of one (1) year from
the Closing (THE "EVALUATION PERIOD"), the parties shall mutually evaluate
whether there has been an increase or decrease in the Net Toll Usage of the
Qualified Customer Accounts. Such evaluation shall be known as the "CUSTOMER
EVALUATION".
(i) If the Customer Evaluation reveals an increase in the Net
Toll Usage level of the Qualified Customer Accounts, as measured by comparing
the Net Toll Usage of the Qualified Customer Accounts to ninety percent (90%) of
the average monthly gross billings of the Qualified Customer Accounts for the
months of September, October and November of 1996, Purchaser shall pay Seller
the amount of the increase multiplied by seven (7.0).
(1) Any payment resulting from such increase shall be in
the form of voting shares of Purchaser's common stock which are restricted under
SEC Rule 144.
(2) The number of shares to be paid shall be calculated
using the average of the prevailing "bid" and "asked" price per share as of the
close of the stock market on the day before the date of the Customer Evaluation.
(ii) If the Customer Evaluation indicates a decrease in the Net
Toll Usage level of the Qualified Customer Accounts greater than eighteen
percent (18%) (THE "ALLOWABLE ATTRITION"), as measured by comparing the Net Toll
Usage of the Qualified Customer Accounts to ninety percent (90%) of the average
monthly gross billings of the Qualified Customer Accounts for the months of
September, October and November of 1996, the Purchase Price shall be reduced by
an amount equal to seven (7.0) times the excess of the decrease over the
Allowable Attrition.
(1) Any reimbursement due as a result of such reduction
shall be paid first from the Escrowed Shares. The number of Escrowed Shares to
be reimbursed shall be calculated using the average of the prevailing "bid" and
"asked" price per share as of the close of the stock market on the day before
the date of the Customer Evaluation.
(2) If the Escrowed Shares are insufficient to fully
reimburse Purchaser pursuant to this paragraph, Seller shall pay Purchaser a
sufficient number of shares out of the Restricted Stock it receives at the
Closing in order to complete the reimbursement.
(3) If the Restricted Stock is insufficient to fully
reimburse Purchaser pursuant to this paragraph, Seller shall pay Purchaser any
remaining unpaid reimbursements in cash.
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(iii) Seller may, at its option, transfer additional customer
accounts (THE "REPLACEMENT ACCOUNTS") to Purchaser to increase the Net Toll
Usage level of all accounts transferred to Purchaser to the level on which the
Purchase Price was originally based.
(1) No portion of any Replacement Accounts may be more than
sixty (60) days old.
(2) All Replacement Accounts must have utilized Seller's
long distance service for at least six (6) months prior to their transfer
Purchaser.
(3) Notwithstanding any other provision of this paragraph
(iii), Purchaser shall in no event be obligated to pay any additional
consideration to Seller of any kind or nature regarding such transfer of
additional accounts.
(4) No Replacement Accounts will be accepted by Purchaser
unless Seller utilizes Wiltel as the direct underlying carrier for said
Replacement Accounts. If Seller transfers any Replacement Accounts to
Purchaser, all accounts receivable associated with and derived from said
Replacement Accounts shall also be transferred to Purchaser. In no event shall
Purchaser be obligated to pay any consideration whatsoever for such Replacement
Accounts or the accounts receivable associated therewith.
2.4 ALLOCATION OF PAYMENT OF PURCHASE PRICE
The purchase price shall be allocated in accordance with SCHEDULE 2.4
hereto which shall be submitted by Purchaser at the Closing, and all tax returns
filed by the parties shall be consistent with such Schedule. Seller and
Purchaser shall each file all applicable IRS Forms, including but not limited to
Form 8594, in a consistent manner and in accordance with such allocation and
applicable law and regulations.
2.5 ASSUMPTION OF SPECIFIC LIABILITIES
At the Closing, the Purchaser shall assume and shall subsequently
honor and discharge, in accordance with the relevant governing agreements, only
the obligations of Seller as, and only to the extent, listed on SCHEDULE 2.5
hereto. Purchaser shall further assume and shall subsequently honor and
discharge those obligations or liabilities which arise out of the ownership, use
or operation of the Assets, the factual and causative basis of which said
obligations or liabilities occur after the Closing Date, including but not
limited to the actual amount of any and all applicable sales agent commissions
(THE "AGENT COMMISSIONS"), not to exceed fifteen and three-tenths percent
(15.3%) of Net Toll Usage (THE "ALLOWABLE COMMISSION PERCENTAGE"), for as long
as said Agent Commissions are due and payable under the terms of the relevant
governing agreements between Seller and its various sales agents (THE "AGENT
CONTRACTS"). Seller shall continue to honor and pay any and all Agent
Commissions which exceed the Allowable Commission Percentage for as long as
Agent Commissions are owed under the terms of the Agent Contracts. All Agent
Contracts are attached hereto and made a part hereof, in globo, as EXHIBIT 2.5.
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2.6 LIMITATION ON ASSUMPTION OF LIABILITIES
Purchaser shall not be liable for any of the obligations or
liabilities of Seller, of any kind or nature, other than those specifically
assumed by Purchaser hereunder. Seller shall pay, perform and discharge all of
its valid liabilities and obligations which are not so assumed by Purchaser and
shall specifically indemnify and hold harmless Purchaser from and against same.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Purchaser as follows:
3.1 ORGANIZATION AND AUTHORITY
Seller is a corporation duly organized, validly existing and in good
standing under the laws of the State of California and has all requisite power
and authority to own, operate and lease its properties and to carry on its
business as now being conducted.
3.2 AUTHORIZATION OF AGREEMENT
The Board of Directors of Seller, pursuant to the power and authority
legally vested in it, has duly authorized the execution, sealing and delivery of
this Agreement by Seller and the transactions hereby contemplated, and no
action, confirmation or ratification by the stockholders of Seller or by any
other person, entity or governmental authority is required in connection
therewith. Seller has the power and authority to execute, seal and deliver this
Agreement, to consummate the transactions hereby contemplated and to take all
other actions required to be taken by it pursuant to the provisions hereof.
Seller has taken all actions required by law, its Certificate of Incorporation,
its Bylaws or otherwise to authorize the execution, sealing and delivery of this
Agreement. This Agreement is valid and binding upon Seller in accordance with
its terms. Neither the execution, sealing and delivery of this Agreement nor
the consummation of said transactions will constitute any violation or breach of
the Certificate of Incorporation or the Bylaws of Seller, or any order, writ,
injunction, decree, law, rule or regulation applicable to Seller.
3.3 NO CONFLICTS
To the best of Seller's knowledge, the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated hereby: (i) do not and will not with or without the giving of
notice or passage of time or both, violate, conflict with or result in a breach
or termination of any provision of, or constitute a default under, or accelerate
or permit the acceleration of the performance required by the terms of, or
result in a creation of any mortgage, security interest, claim, lien, charge or
other encumbrance upon any of the Assets pursuant to, or otherwise give rise to
any liability or obligation under any agreement, mortgage, deed of trust,
license, permit or other agreement or instrument, or any order, judgment,
decree, statute, regulation or any other restriction of any kind or description
to which Seller is a party or by which Seller or the Assets may be bound; and
(ii) will not terminate or result in the termination of any such
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agreement or instrument, or in any way affect or violate the terms and
conditions of, or result in the cancellation, modification, revocation or
suspension of, any rights in or to the Assets.
3.4 ACCOUNTS RECEIVABLE
All Accounts Receivable of Seller are listed (with agings) in SCHEDULE
3.4.
3.5 TITLE TO PURCHASED ASSETS
Seller has, and on the Closing Date will have, good and marketable
title to all of the Assets free and clear of all claims and encumbrances, except
claims and encumbrances listed on SCHEDULE 3.5.
3.6 MATERIAL CONTRACTS
Except as disclosed in SCHEDULE 3.6 hereto, Seller is not a party to
or bound by any material written or oral contracts, obligations or commitments
related to the Qualified Customer Accounts or the Accounts Receivable, including
any written or oral commitments to pay commissions or other compensation
relative to the Qualified Customer Accounts or the Accounts Receivable. Seller
has delivered or made available to Purchaser correct and complete copies of all
of the contracts, agreements and other documents listed in Schedule 3.6 hereto
and all amendments thereto and waivers granted thereunder. The rights and
interest of Seller in all such contracts and agreements may be assigned to
Purchaser without the consent of any other person, except as otherwise disclosed
on Schedule 3.6, and at the Closing, Purchaser will acquire all such rights and
interest. There are no unresolved disputes pending or, to the best knowledge of
Seller, threatened under or in respect of any such contracts or agreements. All
such contracts and agreements are valid and effective in accordance with their
respective terms. It is further specifically agreed by the parties that, with
respect to the Agent Contracts, Purchaser is only assuming herein the obligation
to pay Agent Commissions with respect to the Qualified Customer Accounts and
Accounts Receivable; Purchaser is not assuming the Agent Contracts themselves.
3.7 CUSTOMER RELATIONSHIPS
Seller has no knowledge that any Qualified Customer Account has been
terminated or is expected to be terminated, in whole or in part; provided,
however, that this subsection shall not be construed as a representation,
warranty, or guarantee that any such customer will, after the Closing, maintain
its present business relationships with Purchaser. To the best of Seller's
knowledge, no director or officer of Seller has any direct or indirect interest
in any such Qualified Customer Accounts.
3.8 LITIGATION; COMPLIANCE
(a) To the best of Seller's knowledge, except as disclosed in
SCHEDULE 3.8(a) hereto, there are no actions, suits, proceedings or arbitrations
or governmental
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investigations pending or threatened against, by or affecting Seller (or to
the best of the knowledge of Seller, any basis therefor) in which,
individually or in the aggregate, an unfavorable determination could
materially and adversely affect any of the Assets or impede execution or
performance of this Agreement. Seller has not received any notice of any
violation of any applicable Federal, State, local or foreign law, rule,
regulation, ordinance, order or decree relating to the Assets, and Seller is
not aware of any threatened claim of such violation or any basis therefor.
(b) To the best of Seller's knowledge, Seller has complied and is in
compliance in all material respects with all laws, rules, regulations,
ordinances, orders, decrees, writs, injunctions, building codes, safety, fire
and health codes, or other governmental restrictions applicable to Seller, or
the Assets.
(c) To the best of Seller's knowledge, Seller has all governmental
licenses, permits, approvals or other authorizations presently required to
service the Qualified Customer Accounts, all of which are in full force and
effect and all of which are listed on SCHEDULE 3.8(C) hereto.
3.9 BROKERS, FINDERS, ETC.
Seller has employed no finder, broker, agent or other intermediary in
connection with the negotiation or consummation of this Agreement or any of the
transactions contemplated hereby.
3.10 DISCLOSURE
To the best of Seller's knowledge, no representation or warranty by
Seller and no statement or certificate furnished or to be furnished by or on
behalf of Seller to Purchaser pursuant to this Agreement or in connection with
the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein not misleading.
3.11 ACQUISITION OF SHARES
Seller represents and warrants to Purchaser that the shares of
Restricted Stock being acquired by Seller pursuant to this Agreement are being
acquired by Seller for investment for its own account and not with a view to, or
for the offer for sale or for the sale in connection with, any distribution
thereof. Seller covenants and agrees that Seller shall not sell, assign or
otherwise transfer the Shares other than in transactions which are not in
violation of the Securities Act of 1933 and applicable state securities laws.
Each stock certificate of Purchaser representing the Restricted Stock shall bear
the following legend, unless such legend may be removed in accordance with its
terms:
"The securities represented by this stock
certificate have not been registered under the
Securities Act of 1933 (the "Act") or applicable
9
<PAGE>
state securities laws (the "State Acts"), and
shall not be sold, pledged, hypothecated, donated,
or otherwise transferred (whether or not for
consideration) by the holder except upon the
issuance to Purchaser of a favorable opinion of
its counsel or submission to the Corporation of
such other evidence as may be satisfactory to
counsel for Purchaser to the effect that any such
transfer shall ot be in violation of the Act and
the State Acts."
3.12 DISCLAIMER OF FRAUDULENT INTENT.
Seller represents and warrants that the transactions described in this
Agreement have been undertaken in good faith, considering its obligations to any
person or entity to whom Seller owes a right to payment, whether or not the
right is reduced to judgment, liquidated, unliquidated, fixed, contingent,
matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured
(collectively such persons with such claims are called "CREDITORS" under this
paragraph), and has undertaken these transactions without any intent to hinder,
delay or defraud any such Creditors, and either has disclosed in the ordinary
course of business or will undertake to disclose to all such Creditors the
existence of this transaction, and has not and will not conceal this transaction
or the proceeds ot this transaction from any such Creditors. Seller further
represents and warrants that: (1) it will not retain possession or control of
any of the property transferred under this Agreement following the Closing,
except as expressly provided in this Agreement and then only for and on behalf
of the account of the Purchaser; (2) the Seller has not been sued or threatened
with suit by any Creditor prior to the execution of this Agreement; (3) the
Seller has not removed or concealed any assets from any Creditors; (4) the
Seller has not incurred any substantial debt that is significantly greater than
the normal and customary debts of the Seller in the ordinary course of business;
(5) the Seller at Closing believes in good faith that Seller will receive
consideration reasonably equivalent to the value of the Assets transferred under
this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to Seller as follows:
4.1 CORPORATE STATUS
Purchaser is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware with full corporate power
and authority to carry on its business as now conducted.
4.2 AUTHORITY FOR AGREEMENT
Purchaser has the power and authority to execute and deliver this
agreement and to carry out its obligations hereunder. The execution, delivery
and performance by the
10
<PAGE>
Purchaser of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly
executed by Purchaser and the transactions contemplated by it constitute the
legal, valid and binding obligation of Purchaser enforceable against Purchaser
in accordance with its terms. No consent, approval, or authorization of, or
declaration, filing, or registration with, any federal or state governmental or
regulatory authority is required to be made or obtained by Purchaser in
connection with the execution, delivery, and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement, except
approval of applicable public service commissions.
4.3 NO CONFLICTS
To the best of Purchaser's knowledge, the execution, delivery and
performance of this Agreement and the consummation of all of the transactions
contemplated hereby: (i) do not and will not with or without the giving of
notice or passage of time or both, violate, conflict with or result in a breach
or termination of any provision of, or constitute a default under, or accelerate
or permit the acceleration of the performance required by the terms of, or
result in a creation of any mortgage, security interest, claim, lien, charge or
other encumbrance upon any of the Assets pursuant to, or otherwise give rise to
any liability or obligation under any agreement, mortgage, deed of trust,
license, permit or other agreement or instrument, or any order, judgment,
decree, statute, regulation or any other restriction of any kind or description
to which Purchaser is a party or by which Purchaser or the Assets may be bound;
and (ii) will not terminate or result in the termination of any such agreement
or instrument, or in any way affect or violate the terms and conditions of, or
result in the cancellation, modification, revocation or suspension of, any
rights in or to the Assets.
4.4 CONTINUED COMPETITION
Purchaser hereby acknowledges that Seller is a competitor of Purchaser
in the long distance telecommunications industry. Subject to any and all
applicable noncompetition covenants, Purchaser hereby consents to the continued
competition by Seller and Seller's individual shareholders in the long distance
telecommunications industry.
5. SELLER'S OBLIGATIONS BEFORE CLOSING
Seller covenants that from the date of this Agreement and until the Closing
Date:
(a) Purchaser and its counsel, accountants and other representatives
shall have full access to all properties, books, accounts, records, contracts
and documents of or relating to the Assets, but Purchaser shall not have access
to any information not related to the Assets. Seller shall furnish or cause to
be furnished to Purchaser and its representatives all data and information
concerning the Assets that may be reasonably requested. Seller agrees that,
unless and until the Closing has been consummated, Seller and its officers,
directors and other representatives will hold in strict confidence, and will
11
<PAGE>
not use to the detriment of Purchaser, all data and information with respect
to Purchaser and Purchaser's business and operations obtained in connection
with this transaction or Agreement. If the transaction contemplated by this
Agreement are not consummated, Purchaser will return to Seller all data and
information that Seller may reasonably request including all documents
prepared or made available to Purchaser by Seller in connection with this
Agreement.
(b) Seller will, with respect to the Qualified Customer Accounts,
carry on its business and activities diligently and in substantially the same
manner as they previously have been carried out and shall not make or institute
any unusual or novel methods of management or operations to the detriment of
Purchaser that vary materially from those methods used by Seller as of the date
of this Agreement relating to the Qualified Customer Accounts, without the prior
written consent of Purchaser.
6. COVENANTS
6.1 TRANSITION SERVICES
Seller shall provide billing and customer base transition services for
the transferred customers at Purchaser's expense and in accordance with the
terms of a service agreement between the parties to be executed at the Closing
(THE "SERVICE AGREEMENT"). The Service Agreement shall provide, among other
things, that the fees and charges to be paid to Seller by Purchaser each month
(THE "MONTHLY SERVICE FEE") shall be equal to five percent (5%) of Net Toll
Usage and shall be paid on or before the fifteenth (15th) day of each month for
services rendered during the previous month. For purposes of calculating the
Monthly Service Fee, Net Toll Usage shall ninety percent (90%) of the average
gross monthly billings of the three (3) months immediately preceding the month
for which the Monthly Service Fee is being paid. The Service Agreement shall
further provide that Purchaser shall pay all applicable sales agent commissions
relative to the Qualified Customer Accounts and Accounts Receivable but in no
event shall said sales agent commissions exceed fifteen and three-tenths percent
(15.3%) of Net Toll Usage. A copy of the Service Agreement is attached hereto
and made a part hereof as EXHIBIT 6.1.
6.2 FURTHER ASSURANCES
At any time and from time to time after the Closing Date, each party
shall, without further consideration, execute and deliver to the other such
other instruments of transfer and assumption and shall take such other action as
the other may reasonably request to carry out the transfer of the Assets and the
assumption of the specific liabilities contemplated by this Agreement.
6.3 STANDSTILL; PUBLIC ANNOUNCEMENT
Prior to the Closing or termination of this Agreement, Seller agrees
not to directly or indirectly solicit, entertain or encourage offers or
negotiate with any other person or entity regarding the purchase or sale of the
Assets except with respect to the release of
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<PAGE>
the lien(s) and priority on the Assets currently existing in favor of Wiltel,
Frontier and Fox. Seller shall not make any public announcement with respect
to the subject matter of this Agreement. Purchaser intends to make an
announcement consistent with its public disclosure obligations.
7. CONDITIONS PRECEDENT
7.1 CONDITIONS TO OBLIGATIONS OF PURCHASER
The obligation of Purchaser to pay the Purchase Price to Seller and to
satisfy its other obligations hereunder shall be subject to fulfillment (or
waiver by Purchaser) at or prior to the Closing, of the following additional
conditions, which Seller agrees to use its best efforts to cause to be
fulfilled:
(a) REPRESENTATIONS, PERFORMANCE
The representations and warranties of Seller contained in Section
3 hereof shall be true in all material respects at and as of the Closing Date,
except as affected by the transactions contemplated hereby. Seller shall have
duly performed and complied with all agreements and conditions required by this
Agreement to be performed, or complied with, by it prior to or on the Closing
Date. There shall have been no material adverse change in the Qualified
Customer Accounts.
(b) CONSENTS
Any required material approvals, acceptances, and consents of or
to the transactions contemplated hereby, shall have been applied for, including
notice to applicable public service commission.
(c) CORPORATE PROCEEDINGS
All corporate and other proceedings of Seller in connection with
the transactions contemplated by this Agreement and all documents and
instruments incident to such corporate proceedings, shall be reasonably
satisfactory in substance and form to Purchaser, and Purchaser shall have
received all such documents and instruments, or copies thereof.
7.2 CONDITIONS TO OBLIGATIONS OF SELLER
The obligations of Seller to deliver the bill of sale, assignments,
endorsements and other instruments of transfer relating to the Assets and to
satisfy Seller's other obligations hereunder shall be subject to the
fulfillment, on or prior to the Closing Date (or waiver by Seller), of the
following conditions, which Purchaser agrees to use its best efforts to cause to
be fulfilled:
(a) REPRESENTATIONS, PERFORMANCE
13
<PAGE>
The representations and warranties of Purchaser contained in
Section 4 hereof shall be true at and as of the Closing Date. Purchaser shall
have duly performed and complied in all material respects with all agreements
and conditions required by this Agreement to be performed, or complied with, by
it prior to or on the Closing Date.
(b) CORPORATE PROCEEDINGS
All corporate and other proceedings in connection with the
transactions contemplated by this Agreement, and all documents and instruments
incident thereto, shall be satisfactory to Seller and Seller shall have received
all such documents and instruments, or copies thereof.
(c) NO MATERIAL CHANGES
No material changes in the financial position of Purchaser or
material changes in the information previously disclosed to Seller shall have
occurred.
14
<PAGE>
8. USE OF NAME
Purchaser and its affiliated entities shall have the right to use the names
"Quantum Communications, Inc.", "Quantum", "QCI" and all other names currently
being used by Seller in the conduct of its business with respect to the
Qualified Customer Accounts for the period referenced in the Service Agreement.
9. COVENANT NOT TO COMPETE
As a material inducement for Purchaser to enter into and close this
Agreement, Seller agrees that, for a period of five (5) years from the Closing
Date, neither Seller nor any of Seller's officers, directors, employees or
agents will directly or indirectly offer any long distance services to the
Qualified Customer Accounts. Further, Seller agrees that neither Seller nor
any of Seller's officers, directors, employees or agents will use or disclose
any information regarding the telecommunication services of the Qualified
Customer Accounts for a period of five (5) years following the Closing Date
without the prior written consent of Purchaser, which consent may be withheld in
the sole and absolute discretion of Purchaser. The covenants contained herein
shall apply even if the customer is not then using the services of Purchaser.
Seller acknowledges and agrees that the extent of damages to Purchaser in the
event of a breach of the covenants contained in this Section would be impossible
to ascertain and there is and will be available to Purchaser no adequate remedy
at law to compensate it in the event of such a breach. Consequently, Seller
agrees that, in the event Seller or any of Seller's officers, directors,
employees or agents breach any such covenants, Purchaser shall be entitled to
enforce any and all of the covenants by injunctive or other equitable relief
ordered by any court of competent jurisdiction.
10. INDEMNIFICATION MANNER OF CLAIMS
10.1 INDEMNIFICATION. From and after the Closing Date, Seller will
indemnify Purchaser against, and hold Purchaser harmless from, any and all
liability, damage, deficiency, loss, cost or expense (including reasonable
attorney's fees) that is based upon or that arises out of (i) any
misrepresentation or breach of any representation, warranty or agreement made by
Seller herein (ii) any obligation, debt or liability of Seller to the extent
that the same is not expressly assumed herein by Purchaser, or (iii) the use and
ownership of the Assets on or prior to the Closing Date (other than those
liabilities specifically assumed by Purchaser hereunder).
10.2 MANNER OF CLAIMS
Any notice of a claim by reason of any of the representations and
warranties contained in this Agreement shall state specifically the
representation or warranty with respect to which the claim is asserted, and the
amount of liability asserted against the other party by reason of the claim.
11. MISCELLANEOUS
15
<PAGE>
11.1 CONSENTS OF THIRD PARTIES
This Agreement shall not constitute an agreement to assign any
interest in any instrument, contract, lease, permit or other agreement or
arrangement of Seller, or any claim, right or benefit arising thereunder or
resulting therefrom, if any assignment without the consent of a third party
would constitute a breach or violation thereof or adversely affect the rights of
the Purchaser or Seller thereunder. If a consent of a third party which is
required in order to assign any instrument, contract, lease, permit or other
agreement or arrangement or any claim, right or benefit arising thereunder or
resulting therefrom, which consent Seller shall use its best efforts to obtain
prior to the Closing, is not obtained prior to the Closing, or if an attempted
assignment would be ineffective or would adversely affect the ability of Seller
to convey its interest to the Purchaser, Seller will cooperate with Purchaser in
any lawful and economically feasible arrangement to provide that Purchaser shall
receive Seller's interest in the benefits under any such instrument, contract,
lease, permit or other agreement or arrangement; and any transfer or assignment
to Purchaser by Seller of any interest under any such instrument, contract,
lease, permit or other agreement or arrangement that requires the consent of a
third party shall be made subject to such consent or approval being obtained.
11.2 EXPENSES
Subject to the terms of Section 10 hereof, each of the parties hereto
shall bear its own expenses, costs and fees (including attorney's fees) in
connection with the transactions contemplated hereby, including the preparation
and execution of this Agreement and compliance herewith, whether or not the
transactions contemplated hereby shall be consummated.
11.3 SEVERABILITY
If any term or provision of this Agreement shall be held or deemed to
be, or shall in fact be, inoperative or unenforceable as applied in any
particular case because it conflicts with any other provision or provisions
hereof or any constitution or statute or rule of public policy, or for any other
reason, such circumstances shall not have the effect of rendering the term or
provision in question inoperative or unenforceable in any other case or
circumstance, or of rendering any other provision or provisions herein contained
invalid, inoperative, or unenforceable to any extent whatever, but such term or
provision shall be deemed modified or deleted as or to the extent required by
applicable law. The invalidity of any one or more phrases, sentences, clauses,
sections, or subsections of this Agreement shall not affect the remaining
portions of this Agreement.
16
<PAGE>
11.4 NOTICES
All notices, consents, requests, instructions, approvals and other
communications provided for herein in regard hereto shall be validly given, made
or served, if in writing and delivered personally or sent by registered or
certified mail (return receipt requested), postage prepaid, (i) if to Purchaser
at 525 Florida Street, Baton Rouge, Louisiana, 70801, Attn: Mike Ross,
President; and (ii) if to Seller at 1110 West Kettleman Lane, Lodi, California,
95240, Attn: W.O. Yotty, in each case at such other address as may be specified
in writing to the other parties.
11.5 AMENDMENT
This Agreement may not be amended except by an instrument in writing,
duly executed and delivered on behalf of each of the parties hereto.
11.6 WAIVER
Any party may waive compliance by another with any of the provisions
of this Agreement. No waiver of any provisions shall be construed as a waiver
of any other provision. Any waiver must be in writing.
11.7 COUNTERPARTS
This Agreement may executed in multiple counterparts, each of which
shall be deemed an original agreement, and all of which taken together shall
constitute one agreement, notwithstanding that all of the parties are not
signatories to the original or the same counterpart.
11.8 ASSIGNMENT
Any assignment of this Agreement or the rights or obligations
hereunder by any party without the prior written consent of the nonassigning
parties shall be void. Notwithstanding the foregoing, either party may assign
all or any party of its rights and/or obligations to one or more affiliates,
subsidiaries, parent companies or shareholders of said party. No such
assignment shall relieve the assigning party of any of its obligations or duties
under this Agreement.
11.9 COSTS
In the event any action is instituted to enforce or interpret the
terms of this Agreement or arises out of this Agreement, the party prevailing in
such action shall be entitled to recover its reasonable attorney's fees and
costs as determined by the court.
17
<PAGE>
11.10 ENTIRE AGREEMENT; APPLICABLE LAW, ETC.
This Agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof. This Agreement shall be governed in
all respects, including validity, interpretation and effect, by the laws of the
State of Louisiana applicable to contracts made and to be performed in
Louisiana.
11.11 INDUSTRY TERMS AND PHRASES
All terms and phrases unique to the telecommunications industry and
used within this Agreement shall be defined in accordance with the everyday
meaning assigned to such terms and phrases within the industry.
11.12 UNDERLYING CARRIER APPROVAL. The transactions contemplated by this
Agreement shall be strictly contingent upon the consent and approval, in
writing, of all of Seller's underlying carriers.
11.13 SPECIAL INDEMNIFICATION.
(a) Seller shall specifically indemnify and hold harmless Purchaser
from and against liabilities resulting from any of the following: (1) Seller's
use of invalid letters of agency/authorization; and (2) unauthorized transacting
of business by Seller without all necessary state and federal authority and
permission (THE "SPECIAL INDEMNIFICATION"). The Special Indemnification shall
be due within ten (10) days of Seller's receipt of written notice from Purchaser
and shall be paid first in the form of the Escrowed Shares. The number of
Escrowed Shares to be reimbursed shall be calculated using the average of the
prevailing "bid" and "asked" price per share as of the close of the stock market
on the day before the date of the Special Indemnification. If the Escrowed
Shares are insufficient to fully pay the Special Indemnification, Seller shall
pay Purchaser a sufficient number of shares out of the Restricted Stock it
receives at the Closing in order to complete the Special Indemnification.
(b) Seller hereby agrees to defend, indemnify and hold Purchaser
harmless from and against any liabilities for which Purchaser pays, or is asked
to pay, by any and all of Seller's currently existing creditors and/or the
Internal Revenue Service. By his signature hereunder, Mr. W.D. Yotty hereby
agrees, personally and individually, to defend, indemnify and hold Purchaser
harmless from and against any liabilities for which Purchaser pays, or is asked
to pay, by any and all of Seller's currently existing creditors and/or the
Internal Revenue Service.
11.14 OTHER. On or before January 25, 1996, Seller shall deliver a
letter to all of Seller's sales agents and affinity customers notifying them
that their commission checks and reports will be delivered on a quarterly basis
from this point forward for the remaining life of the applicable governing
agreements. Purchaser shall have the sole and absolute
18
<PAGE>
discretion to accept or reject any requests by Seller, the sales agents
and/or the affinity customers to continue to pay the Agent Commissions on a
monthly basis.
12. TERMINATION.
12.1 MUTUAL CONSENT. This Agreement may be terminated at any time prior to
the Closing by mutual consent of Seller and Purchaser, expressed by action of
their respective Boards of Directors.
12.2 REMEDIES ON TERMINATION. In the event any party hereto, without the
right to do so under this Agreement, shall fail or refuse to consummate the
transactions contemplated by this Agreement, or if any default under, or breach
of, any representation, warranty, covenant or condition of this Agreement on the
part of any party shall have occurred that results in the failure to consummate
the transactions contemplated hereby, then, in addition to any other remedies
provided in this agreement or by applicable law, the nondefaulting party shall
be entitled to obtain from the defaulting party costs and expenses, including
reasonable attorney's fees, incurred by it in enforcing its rights hereunder,
including but not limited to the right to seek specific performance of this
Agreement.
19
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
NETWORK LONG DISTANCE, INC. QUANTUM COMMUNICATIONS, INC.:
BY: BY:
-------------------------- ---------------------------
NAME: MIKE ROSS NAME: W.O. YOTTY
TITLE: PRESIDENT TITLE: PRESIDENT
-------------------------------
W. D. YOTTY, PERSONALLY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Appearing herein through its President and majority shareholder, Quantum
Communications, Inc. hereby requests that Cash Portion of the Customer Base
Purchase Price and the Accounts Receivable Purchase Price be paid directly to
Wiltel and Frontier in accordance with the annexed letters and that any cash
remaining after said payments be paid to Quantum Communications, Inc.
QUANTUM COMMUNICATIONS, INC.:
BY:
----------------------------
NAME: W.O. YOTTY
TITLE: PRESIDENT
ACCEPTED AND AGREED:
NETWORK LONG DISTANCE, INC.
BY:
-------------------------
NAME: MIKE ROSS
TITLE: PRESIDENT
20
<PAGE>
(To be supplied post closing)
<PAGE>
SCHEDULE 2.3(b)(v): ACCOUNTS RECEIVABLE
Accounts Receivable are assumed to be $225,000 for
purposes of the Closing [SEE section 2.3(b)(v)
above].
<PAGE>
SCHEDULE 2.4: ALLOCATION OF PURCHASE PRICE
Intentionally left blank.
<PAGE>
SCHEDULE 2.5: OBLIGATIONS ASSUMED
Purchaser hereby assumes the actual amount of any and all
Agent Commissions, not to exceed the Allowable Commission
Percentage, for as long as said Agent Commissions are due
and payable under the terms of the Agent Contracts and only
to the extent any Agent Commissions are due and payable
regarding the Qualified Customer Accounts.
<PAGE>
EXHIBIT 2.5: AGENT CONTRACTS (IN GLOBO)
(To be supplied post closing)
<PAGE>
SCHEDULE 3.4: ACCOUNTS RECEIVABLE (WITH AGINGS)
Accounts Receivable are assumed to be $225,000 for
purposes of the Closing [SEE section 2.3(b)(v)
above].
<PAGE>
SCHEDULE 3.5: CLAIMS AND ENCUMBRANCES
(To be supplied post closing)
<PAGE>
SCHEDULE 3.6: CONTRACTS, OBLIGATIONS AND COMMITMENTS
[see Exhibit 2.5]
<PAGE>
SCHEDULE 3.8(a): ACTIONS, SUITS, ETC.
[none]
<PAGE>
SCHEDULE 3.8(c): LICENSES, PERMITS, ETC.
(To be supplied post closing)
<PAGE>
EXHIBIT 6.1: SERVICE AGREEMENT
<PAGE>
SERVICE AGREEMENT
THIS AGREEMENT (the "Agreement") is entered into as of this 1st day of
January, 1996, by and between Network Long Distance, Inc. ("Network"), a
Delaware corporation with its headquarters located at 525 Florida Street, Baton
Rouge, Louisiana 70801 and Quantum Communications, Inc. ("Quantum"), a
California corporation with its offices located at 1110 West Kettleman Lane,
Lodi, California, 95240.
WHEREAS, Network is a switch-based reseller of long distance
telecommunications services; and
WHEREAS, Quantum is a switchless reseller of long distance
telecommunications services; and
WHEREAS, Network has purchased, or will shortly be purchasing, among other
things, selected accounts and receivables of Quantum's end user customers (the
"Customer Accounts") currently serviced out of Quantum's Lodi, California office
(the "Acquisition"); and
WHEREAS, Quantum has the capability to provide Network with certain
administrative services, including billing, collection and customer service,
with respect to the Customer Accounts for an interim transition period following
the Acquisition; and
WHEREAS, Network desires to utilize said administrative services and pay
Quantum for same in accordance with the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual representations, covenants
and warranties expressed herein and the payments described below, the parties
hereby agree as follows:
ARTICLE I.
DEFINITIONS
A. VENDOR(S): Quantum's underlying carrier(s), local exchange carriers,
interexchange carriers and other service providers, including but not limited to
billing providers and enhanced services providers.
B. VENDOR COSTS: the costs charged by Vendors and incurred by Quantum in
the fulfillment of its obligation to provide the Services (as such term is
defined below), on Network's behalf, to the Customer Accounts pursuant to this
Agreement.
C. SERVICES: The administrative services provided by Quantum and further
enumerated in Article III below, including but not limited to billing,
collection, customer service and use of Quantum's various trade and marketing
names, products and service offerings.
1
<PAGE>
D. All other terms and phrases unique to the telecommunications industry
and used within this Agreement shall be defined in accordance with the everyday
meaning assigned to the terms within the industry.
E. All terms and phrases contained herein shall be construed in
accordance with the meanings accorded to said terms and phrases in the Asset
Purchase Agreement of even date.
ARTICLE II.
TERM AND TERMINATION
A. This Agreement shall be for the term of one (1) year from and after
the effective date of this Agreement (the "Initial Term").
B. If either party materially breaches its obligations under this
Agreement, the other party may terminate this Agreement upon ten (10) days prior
written notice. The breaching party shall have ten (10) days from receipt of
said written notice within which to cure said material breach. If the breach is
not cured within said ten (10) day period, the Agreement shall be terminated as
of the expiration of said period. In that event and if Quantum is the breaching
party:
1. all sums owed and all stock held in escrow pursuant to the Asset
Purchase Agreement shall be forfeited to Network as liquidated damages; or, in
the event no sums are owed and no stock remains in escrow,
2. Quantum shall owe Network the sum of $25,000 as liquidated
damages.
C. Upon termination or expiration of this Agreement, each party shall
immediately deliver to the other all Proprietary Information furnished to it,
including all copies thereof as provided for in this Agreement.
D. Network may, in its sole discretion, terminate this Agreement upon
thirty (30) days prior written notice.
2
<PAGE>
F. Upon expiration or termination of this Agreement, Quantum must
immediately turn over and deliver to Network any and all information and
documents related in any way to the servicing of the Customer Accounts, and any
other information and documents otherwise necessary for Network's full use,
operation and enjoyment of the Assets acquired pursuant to the Asset Purchase
Agreement of even date.
ARTICLE III.
THE SERVICES
Quantum shall provide the Services to Network in a professional and
diligent manner, including but not limited to billing, collection, customer
service and all of the following specific functions (or specific functions as
selected by Network):
A. Quantum shall cooperate fully with Network in immediately arranging
and coordinating a smooth and orderly transition and conversion, from Quantum to
Network, of the Customer Accounts being purchased as part of the Acquisition and
shall execute all documents and take all actions necessary to accomplish same.
B. At Network's request, Quantum shall, upon reasonable notice and as
available, provide Network with written, printed, electronic transfer, computer
disk or tape reports detailing all information related in any way to Quantum's
performance of the Services, including but not limited to ANI's, billings,
collections, bad debt, trouble tickets, call records, credit checks, accounts
receivable ledgers, supporting documentation with respect to Vendor Costs, CARE
reports detailing service cancellations and other LEC information, LOA's and
complete copies of customer files.
C. Quantum hereby agrees to allow Network, during the term of this
Agreement, to utilize, for all purposes related to the servicing of the
Customer Accounts, the names "Quantum Communications, Inc.", "Quantum", "QCI"
and all other names currently used by Quantum in the conduct of its business
(the "Quantum Names"). This covenant shall specifically include, without
limitation, the right of Network to instruct Quantum to "co-brand" all invoices
rendered to the Customer Accounts with any or all of the foregoing names and the
name "Network Long Distance". Design of such invoices must be approved in
writing by Network. Quantum further agrees to indemnify Network from and
against any claims of third parties which result from Quantum providing Network
with the use of the Quantum Names pursuant to this Paragraph III.C. The
foregoing indemnification provision shall not apply to claims resulting from
Network's own actions or omissions. The obligations contained in this Paragraph
C shall survive termination of this Agreement, including but not limited to
Network's right to use the Quantum Names for as long as is necessary to collect
accounts receivable which were generated using the Quantum Names but which are
not paid at the time this Agreement terminates.
3
<PAGE>
D. Quantum hereby agrees to allow Network to utilize, for all purposes
related to the servicing of the Customer Accounts, all products and service
offerings currently provided by Quantum to its customers.
E. Quantum shall, as soon as possible, change the information typically
contained on the invoices rendered to the Customer Accounts prior to the
Acquisition to any information reasonably requested by Network, including but
not limited to information regarding the address and/or lockbox location to
which payments should be directed and the 800 numbers to which billing, customer
service or other inquiries should be directed. Quantum shall make Network the
"RespOrg" on such 800 numbers.
F. Quantum shall provide customer service functions to the Customer
Accounts in a professional and diligent manner and shall use its best efforts to
maintain customer satisfaction. Quantum shall further notify Network
immediately of any complaints, oral or written, received from any of the
Customer Accounts and shall take all reasonable steps necessary to satisfy said
complaints.
G. Quantum shall provide credit risk analysis functions in accordance
with Network's standard credit policies and procedures.
H. Quantum shall allow Network to utilize Quantum's regulatory tariffs to
the extent such utilization is necessary for Quantum to lawfully perform the
Services pursuant to this Agreement.
I. Quantum shall have the obligation to advise Network of any dispute
between Quantum and any Vendor which affect, or has the potential to affect, the
Customer Accounts. In such event, Quantum agrees to provide Network with an
itemized invoice of the Vendor Costs owed to such Vendor and hereby grants
Network the right to pay such Vendor Costs directly to the Vendor.
J. Quantum shall, during business hours or other reasonable mutually
agreed to times, allow access to Network to all documents, computer printouts,
computer disks, databases, files, reports, tapes, and any other tangible items
related in any way to the Services provided by Quantum pursuant to this
Agreement and shall work in good faith with Network to construct and reconcile,
in detail, such items to the mutual satisfaction of the parties.
K. Quantum shall assist Network, in any manner reasonably required, to
immediately set up a new lockbox arrangement and location or change the
ownership of Quantum's current lockbox over to Network ("Network's Lockbox") for
purposes of receiving payments made on Customer Accounts, and Quantum shall
facilitate all actions necessary to provide accounts receivable processing
functions with respect to the Customer Accounts, including but not limited to
picking up tapes from Vendors, downloading data from said tapes and compiling
appropriate billing data for purposes of finalizing and mailing out bills.
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<PAGE>
L. Quantum shall, on a daily basis, provide Network with all data, if
available, on all payments on Customer Accounts received in Network's Lockbox,
payments to Vendors and other transactions which occurred the previous day,
including actual bank/lockbox daily transmittal records.
M. Quantum shall, on a daily basis, provide Network with all data on
payments on Customer Accounts received by Quantum in order to properly account
for payments on Customer Accounts which were sent directly to Quantum, rather
than to Network's Lockbox, including actual bank/lockbox daily transmittal
records.
N. Quantum shall cooperate with Network in facilitating an electronic
interface between Quantum and Network for the transfer of all information which
Quantum is obligated to provide pursuant to this Agreement.
O. Quantum shall, during business hours or other reasonable mutually
agreed to times, allow access to Network for purposes of cross connect testing,
need-to-service and facilitating all other service tests.
P. Quantum shall, in no event, when rendering invoices to customers with
respect to the Customer Accounts, change the return address on envelopes in
which invoices are sent, the "send to" address on enclosed remittance envelopes,
the "payment" address on the invoices, the address of "Network's Lockbox" or the
payee on the invoices unless requested by Network in writing. Any violation of
this paragraph shall automatically result in an immediate breach of this
Agreement, resulting in the same penalties set forth in paragraph II(C) above.
Q. Quantum assumes the obligation to provide Network with confirmation of
the amount of all Vendor Costs and Quantum's payment thereof. Upon Network's
request, Quantum shall immediately execute a letter authorizing Network to
contact a Vendor directly.
R. Quantum shall, at its cost, provide paper, envelopes, ink, postage and
all other items, tangible and intangible, necessary to facilitate the billing
and invoicing of the Customer Accounts.
S. Quantum shall fully document all customer service calls received by
Quantum during the course of fulfilling its obligation to provide same pursuant
to this Agreement, including the name of the customer, the time of day and the
date.
T. Quantum agrees to and acknowledges that Network owns the Customer
Accounts pursuant to the Asset Purchase Agreement, and accordingly, Network
shall have the primary right, at all times, to collect payments made in
connection with any invoices rendered by Quantum on behalf of Network pursuant
to this Agreement.
5
<PAGE>
U. Quantum hereby indemnifies and holds Network harmless from and against
any claims of third parties, including any Vendors and any customers whose
Customer Accounts are being transferred pursuant to the Asset Purchase
Agreement, which arise out of or relate to Quantum's performance of the Services
pursuant to this Agreement. The foregoing indemnification provision shall not
apply to claims resulting from Network's own actions or omissions.
V. Quantum shall cooperate fully with Network in providing use, shared
use, re-arrangement, move assignment, re-routing, authorization and rights to
PIC customers and facilitate access on Quantum's vendors' CIC's to Network and
to grant and facilitate all current or future underlying transport services
requested by Network at Network's expense with Network's authorization.
W. Quantum shall provide mutually agreeable space and access for systems
and Network on-site personnel, as requested by Network, to perform and assist in
the transition process. In addition, a mutually agreeable transition
coordinator shall be assigned by Quantum and Network to facilitate a smooth and
effective transition and ongoing relationship.
X. Quantum will provide monthly information that will allow Network to
report current revenues and expenses, aged accounts receivable, meet timely
reporting requirements set by governmental and regulatory authorities, and which
will allow Network to produce accurate traffic reports from call usage details.
ARTICLE IV.
PAYMENT TERMS
A. Network shall compensate Quantum for the Services in accordance with
the payment terms described below and the schedule of fees and charges attached
hereto and made a part hereof as ATTACHMENT A. Unless otherwise specified
herein, all Services shall be performed and provided by Quantum, and paid for by
Network, in accordance with ATTACHMENT A.
B. Quantum shall render invoices to Network for each monthly billing
period during the term of this Agreement which invoices shall include: (1) the
Vendor Costs incurred by Quantum on Network's behalf during that period; (2) the
fees charged by Quantum, in accordance with ATTACHMENT A, for the Services
provided by Quantum to the Customer Accounts on Network's behalf during that
period; (3) all applicable Federal, State and Local use, excise, sales or
privilege taxes, duties or similar fees incurred in connection with the
provision of the Services during that period.
C. Network shall pay Quantum for invoices rendered by Quantum within
thirty (30) days of receipt of same. However, if a Vendor whose Vendor Costs
appear on said invoice requires payment prior to the expiration of said thirty
(30) days, Network shall pay
6
<PAGE>
Quantum for said Vendor Costs in accordance with said Vendor's payment terms.
Upon mutual written agreement between Network and Quantum, Network may pay any
Vendor Cost directly to the appropriate Vendor.
ARTICLE V.
CONFIDENTIALITY
Each party agrees that all information furnished to it and identified by
the other party as being confidential or proprietary information or trade
secrets (collectively referred to as "Proprietary Information"), is, and shall
continuously remain, the sole and exclusive property of the party furnishing the
same (hereinafter referred to as the "Disclosing Party"). Each party shall
treat the Proprietary Information and the contents of this Agreement in a
confidential manner and, except to the extent necessary in connection with the
performance of its obligations under this Agreement, neither party shall
directly or indirectly disclose the same to any third party without the written
consent of the Disclosing Party, unless required by law to divulge such
information to regulatory authorities or unless required in connection with
enforcing the Receiving Party's rights hereunder. The obligations contained in
this Article V. shall survive termination of this Agreement.
ARTICLE VI.
GENERAL
A. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns.
B. Nothing contained within this Agreement shall be construed as creating
a joint venture or employment relationship between the parties hereto or their
employees.
C. Neither Network nor Quantum shall have the authority to bind the
other, by contract or otherwise, or make representations as to the policies and
procedures of the other, except as provided for herein.
ARTICLE VII.
WAIVER
No waiver by any party or any default by any other party in the performance
of any provision of this Agreement shall be deemed to be a waiver of, or in any
manner release of such party from, performance of any provision in the future;
nor shall any delay or omission of any party to exercise any right hereunder in
any manner impair the exercise of such right or like right accruing to it
hereafter.
ARTICLE VIII.
AUTHORITY TO ENTER INTO AGREEMENT
7
<PAGE>
Each party hereto warrants and represents that it has full legal and
regulatory authority to enter into this Agreement and to consummate the
transactions contemplated hereby and that this Agreement is not in conflict with
any other agreement, contract or tariff to which such party is a party or by
which it may be bound. Each party hereto further warrants and represents that
the individuals executing the Agreement have the full power and authority to
bind their respective entities to the terms hereof and have been authorized to
do so in accordance with such entities corporate or other organization.
ARTICLE IX.
ARBITRATION, CONSTRUCTION AND INTERPRETATION
A. This Agreement shall be interpreted, construed and enforced in
accordance with the laws of the State of Louisiana. Any claims arising out of
this Agreement or the performance hereof shall be decided by binding arbitration
under the auspices of, and in accordance with the rules of, the American
Arbitration Association. Any arbitration hearing held pursuant to the terms of
this Article IX shall be held in Baton Rouge and shall be presided over by a
panel of three (3) arbitrators.
B. If any term, covenant, or condition of this Agreement or the
application thereof to any person or circumstance shall to any extent be invalid
or unenforceable, the remainder of this Agreement, or the application of such
term covenant or condition to persons or circumstance other than those to which
it is held invalid or unenforceable shall not be affected thereby and each term,
covenant or condition of the Agreement shall be valid and be enforced to the
fullest extent permitted by law.
ARTICLE X.
NOTICES
Any written notice, demand or request, required or authorized by this
Agreement, shall be deemed properly given to or served on Network if mailed by
United States Mail, certified, return receipt requested to:
NETWORK LONG DISTANCE, INC.
525 Florida Street
Baton Rouge, Louisiana 70801
ATTN: Mike Ross, President
and shall be deemed properly given to or served on Quantum if mailed by United
States Mail, return receipt requested to:
Quantum Communications, Inc.
1110 West Kettleman Lane
Lodi, California 95240
Attn: W.O. Yotty, President
8
<PAGE>
ARTICLE XI.
ENTIRE AGREEMENT
This Agreement, together with its attachments and exhibits, constitutes the
entire Agreement with respect to use of the services between the parties hereto
and supersedes all prior agreements, proposals, negotiations, representations,
discussions, and correspondence, either written or oral, with respect to the
subject matter hereof. To the extent, however, that any provision, term, or
condition of this Agreement is in conflict with any of the attachments,
exhibits, or addendums hereto, said attachments, exhibits, or addendums shall be
deemed to supercede this Agreement. No amendments to the Agreement shall be
effective unless in writing and signed by both parties hereto.
IN WITNESS WHEREOF, the parties caused these presents to be executed,
acknowledged and delivered in a form and manner proper and sufficient at law,
all as of the day and year first above written.
NETWORK LONG DISTANCE, INC.
BY:
-----------------------------------
NAME: Mike Ross
TITLE: President
QUANTUM COMMUNICATIONS, INC.
BY:
-----------------------------------
NAME: W.O. YOTTY
TITLE: PRESIDENT
9
<PAGE>
ATTACHMENT A
SCHEDULE OF FEES AND CHARGES
The fees and charges to be paid to Quantum by Network (THE "MONTHLY SERVICE
FEE") shall be equal to five percent (5%) of Net Toll Usage (in accordance with
the terms of Section 6.1 of the Asset Purchase Agreement of even date). The
Monthly Service Fee shall be paid on or before the fifteenth (15th) day of each
month for services rendered during the previous month. Network shall pay all
applicable sales agent commissions relative to the Qualified Customer Accounts
(as such term is defined in the Asset Purchase Agreement) but in no event shall
said sales agent commissions exceed fifteen and three-tenths percent (15.3%) of
Net Toll Usage.
ACCEPTED AND AGREED:
NETWORK LONG DISTANCE, INC. QUANTUM COMMUNICATIONS, INC.:
BY: BY:
--------------------------- --------------------------------
NAME: MIKE ROSS NAME: W.O. YOTTY
TITLE: PRESIDENT TITLE: PRESIDENT
10
<PAGE>
BILL OF SALE
Quantum Communications, Inc., a California corporation ("Seller"),
through its authorized corporate representative, hereby sells and transfers
the following itemized property, items and/or assets to Network Long Distance,
Inc., a Delaware corporation ("Purchaser"), which, appearing herein through its
authorized corporate representative, hereby purchases and accepts delivery of
same. Seller and Purchaser hereby agree that this Bill of Sale may be executed
in counterparts which, when taken together, shall constitute an original.
PURCHASE PRICE DESCRIPTION
- -------------- ---------------------------------------------------
$1,323,150 The "Assets" (as such term is defined in that certain
Asset Purchase Agreement dated January 1, 1996).
- ----------------------------- Quantum Communications, Inc.
Witness
By:
------------------------------------
Name: W.O. Yotty, President
- -----------------------------
Witness
Sworn to and subscribed before
me this ____ day of ____________,
1995.
---------------------------------
Notary Public
- ----------------------------- Network Long Distance, Inc.
Witness
By:
-----------------------------------
Name: Mike Ross, President
- -----------------------------
Witness
Sworn to and subscribed before
me this 1st day of January,
1996.
---------------------------------
Notary Public
<PAGE>
MASTER LETTER OF AGENCY
Master Letter of Agency ("Master LOA") executed this ___ day of __________,
1995, by and on behalf of Quantum Communications, Inc., a _________
____ corporation ("Seller"), in favor of Network Long Distance, Inc., a Delaware
corporation ("Purchaser").
Seller hereby names, appoints and authorizes Purchaser to act as the
substitute agent in all matters related to providing long distance service for
the customers whose customer accounts (the "Customer Accounts") are being
transferred to Purchaser pursuant to that certain Asset Purchase Agreement of
even date (the "Asset Purchase Agreement").
Seller further hereby authorizes Purchaser to obtain all information
necessary to service the Customer Accounts, including but not limited to
information relating to any account from any telephone company or any credit
reporting service.
Seller further hereby names, appoints and authorizes Purchaser to act as
the "RespOrg" on all Customer Accounts.
Seller and Purchaser hereby agree that this Master LOA may be executed in
counterparts which, when taken together, shall constitute an original.
SELLER:
Quantum Communications, Inc.
By:
---------------------------------
W.O. Yotty, President
PURCHASER:
Network Long Distance, Inc.
By:
---------------------------------
Mike Ross, President
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF SHAREHOLDERS IN LIEU OF MEETING OF
QUANTUM COMMUNICATIONS, INC.
Pursuant to the corporation laws of the State of ___________________ , and
in lieu of a meeting of Shareholders for such purposes, the undersigned
Shareholders of Quantum Communications, Inc., a ____________________________
corporation, do hereby take and authorize by unanimous written consent each and
all of the following actions:
RESOLVED, that the Corporation be and is hereby authorized
to sell selected assets of the Corporation to Network Long
Distance, Inc. (the "Network Acquisition") in accordance
with the terms and conditions of that certain Asset Purchase
Agreement of even date (the "Asset Purchase Agreement");
FURTHER RESOLVED, that the Corporation and its officers and
directors be and are hereby authorized to execute all such
documents necessary to effect the Network Acquisition.
IN WITNESS WHEREOF, this Action by Unanimous Written Consent has been
signed by each of the undersigned shareholders of the Corporation on the date
indicated below, and this Action by Unanimous Written Consent shall be filed
with or otherwise entered on the minutes or other appropriate records of the
Corporation.
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
__________________________________ ___________________________________
<PAGE>
MINUTES OF
OF A SPECIAL MEETING OF THE BOARD OF DIRECTORS
OF
NETWORK LONG DISTANCE, INC.
A special meeting of the Board of Directors of Network Long Distance,
Inc. (the "Corporation") was held on _________________________, 1995 at Baton
Rouge, Louisiana.
Directors present: Marc I. Becker
J. M. Edelman, M.D.
Michael M. Ross
Leon L. Nowalsky
Russell J. Page
Timothy Sledz
The waiver of notice of this meeting was presented, read and signed by each
director in attendance and the same was ordered filed.
Whereupon a discussion commenced regarding the proposed acquisition by the
Corporation of selected assets of Quantum Communications, Inc. ("Quantum"), a
long distance telecommunications company based in Lodi, California (the
"Acquisition"). The President of the Corporation, Mr. Ross, discussed the
merits of the Acquisition as follows:
Mr. Ross explained the steps which had been taken by the Coporation's
officers and counsel to examine the Acquisition. Mr. Ross explained that
several weeks of due diligence had been conducted by the Corporation and its
financial and legal advisors and that a final draft of an Asset Purchase
Agreement (the "Agreement") had been drafted. Mr. Ross provided each Director a
copy of the Agreement and orally described the terms and conditions of the
Agreement.
Mr. Ross went on to explain the basic points of the Agreement as follows:
The deal contemplates Network's acquisition of selected
accounts of Quantum's retail end user customers (the
"Accounts") and related assets (collectively, the "Assets").
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Network will pay the sum of approximately $1,700,000 for the
Assets based on a multiple of 7.5 times Quantum's Net Toll
Usage (as such term is defined in the Agreement) for the
Measurement Period indicated in the Agreement and 80% of
Quantum's Accounts Receivable.
Payment of the foregoing amount shall be in the form of
cash, restricted stock and a promissory note.
Mr. Becker then proceeded to discuss the market considerations, risk
factors and financial projections associated with the Acquisition.
Mssrs. Ross and Becker explained that all steps necessary to provide the
Corporation with as much information about Quantum and the assets to be
purchased as possible had been taken. Mssrs. Ross and Becker expressed that, in
their opinion, based on the due diligence conducted, the Corporation should go
forward with the Acquisition.
A proper quorum being present, and upon motion duly made, seconded and
carried, it was:
RESOLVED, that the officers of the Corporation, namely Michael M. Ross
(President) and Marc I. Becker (Executive Vice President, Secretary and
Treasurer) have the power to take all action and sign all documents necessary to
complete the acquisition of the selected assets of Quantum as contemplated in
the Agreement.
There being no further business, the meeting was adjourned.
2
<PAGE>
CERTIFICATE
The undersigned secretary of the Corporation certifies that the above and
foregoing are the true and correct minutes of the meeting of the Board of
Directors held on the above stated date at which all directors present voted in
favor of the action taken therein.
------------------------------------
Marc I. Becker, Secretary
3
<PAGE>
WAIVER OF NOTICE OF
BOARD OF DIRECTORS' MEETING OF
NETWORK LONG DISTANCE, INC.
The undersigned directors do hereby waive all requirements as to notice
of the time, place and purpose of the meeting of the Board of Directors of
the Corporation held on _____________________, 1995 at Baton Rouge, Louisiana
and of any adjournment of the meeting.
- ----------------------------- -----------------------------
Marc I. Becker Michael M. Ross
- ----------------------------- -----------------------------
J. M. Edelman, M.D. Leon L. Nowalsky
- ----------------------------- -----------------------------
Russell J. Page Timothy Sledz
4
<PAGE>
MINUTES OF
OF A SPECIAL MEETING OF THE BOARD OF DIRECTORS
OF
QUANTUM COMMUNICATIONS, INC.
A special meeting of the Board of Directors of Quantum Communications,
Inc. (the "Corporation") was held on ___________________________, 1995 at
Lodi, California.
Directors present: W.O. Yotty
-----------------------------
-----------------------------
-----------------------------
The waiver of notice of this meeting was presented, read and signed by each
director in attendance and the same was ordered filed.
Whereupon a discussion commenced regarding the proposed sale of selected
assets of the Corporation to Network Long Distance, Inc., a long distance
telecommunications company based in Baton Rouge, Louisiana (the "Sale"). The
President of the Corporation, Mr. Yotty, discussed the merits of the Sale as
follows:
Mr. Yotty explained the steps which had been taken by the Coporation's
officers and counsel to examine the Sale. Mr. Yotty explained that several
weeks of due diligence had been conducted by the Corporation and its financial
and legal advisors and that a final draft of an Asset Purchase Agreement (the
"Agreement") had been drafted. Mr. Yotty provided each Director a copy of the
Agreement and orally described the terms and conditions of the Agreement.
Mr. Yotty went on to explain the basic points of the Agreement as follows:
The deal contemplates Quantum's Sale of selected accounts of
retail end user customers (the "Accounts") and related
assets (collectively, the "Assets") to Network.
1
<PAGE>
Network will pay the sum of approximately $1,700,000 for the
Assets based on a multiple of 7.5 times Quantum's Net Toll
Usage (as such term is defined in the Agreement) for the
Measurement Period indicated in the Agreement and 80% of
Quantum's Accounts Receivable.
Payment of the foregoing amount shall be in the form of a
combination of cash, restricted common stock and a
promissory note.
Mr. Yotty then proceeded to discuss the market considerations, risk factors
and financial projections associated with the Sale.
Mr. Yotty explained that all steps necessary to provide the Corporation
with as much information about Network and the assets to be purchased as
possible had been taken. Mr. Yoty expressed that, in his opinion, based on the
due diligence conducted, the Corporation should go forward with the Sale.
A proper quorum being present, and upon motion duly made, seconded and
carried, it was:
RESOLVED, that the chief executive officer of the Corporation, namely W.O.
Yotty (President) has the power to take all action and sign all documents
necessary to complete the Sale of the selected assets to Network as contemplated
in the Agreement.
There being no further business, the meeting was adjourned.
2
<PAGE>
CERTIFICATE
The undersigned secretary of the Corporation certifies that the above and
foregoing are the true and correct minutes of the meeting of the Board of
Directors held on the above stated date at which all directors present voted in
favor of the action taken therein.
-----------------------------------
, Secretary
-----------------
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<PAGE>
WAIVER OF NOTICE OF
BOARD OF DIRECTORS' MEETING OF
QUANTUM COMMUNICATIONS, INC.
The undersigned directors do hereby waive all requirements as to notice
of the time, place and purpose of the meeting of the Board of Directors of
the Corporation held on _____________________________, 1995 at Lodi,
California and of any adjournment of the meeting.
- ---------------------------- -----------------------------
W.O. Yotty
- ---------------------------- -----------------------------
4
