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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
MAY 31, 1996
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Date of Report (date of earliest event reported)
NETWORK LONG DISTANCE, INC.
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(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-23172 72-1122018
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(State or Other (Commission (IRS Employer Iden-
Jurisdiction of File Number) tification Number)
Incorporation)
525 FLORIDA STREET
BATON ROUGE, LOUISIANA 70801
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(Address of Principal Executive Offices
Including Zip Code)
(504) 343-3125
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(Registrant's telephone number,
including area code)
Page 1 of 5.
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Item 1. CHANGES IN CONTROL OF REGISTRANT
N/A
Item 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 8, 1996, the Registrant signed a definitive agreement to
acquire substantially all of the assets of Universal Network
Services, Inc., a Nevada corporation ("UNS"). The acquisition
was consummated on May 31, 1996 with the Registrant purchasing
certain of UNS's long distance customer accounts and the
associated accounts receivable for cash of approximately
$3,628,000 and 243,758 shares of the Registrant's restricted
common stock. The acquisition, valued at approximately $6,480,000,
will be accounted for using the purchase method of accounting.
The purchase price was based upon a multiple of UNS's monthly
revenue and the value of the accounts receivable will be subject
to future adjustments based on attrition and bad debts.
Approximately 48,752 shares of the restricted stock paid to UNS
will be held in escrow subject to these future adjustments.
The customer accounts which were purchased include retail customer
contracts, applications for service, applications for credit,
customer lists, databases, mailing lists and billing information.
In addition, UNS and its Chief Executive Officer executed five year
non-competition agreements with the Registrant.
Registrant believes the acquisition of the UNS assets to be beneficial
as it will allow for the consolidation and reduction in overhead costs
while increasing overall revenues from operations. 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 UNS and its officers, directors or
affiliates. The restricted common stock used by the Registrant to
purchase the assets of UNS 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) and (b) The pro forma financial information and audited
financial statements required by this Item will
be filed as an amendment to this Report no
later than sixty (60) days from the date of this
Report.
(c) Exhibits: Filed herewith pursuant to Reg. S-K Item 601
EXHIBIT NO. PAGE DESCRIPTION
1 5 Asset Purchase Agreement between the Registrant
and Universal Network Services, Inc., dated May 8,
1996, effective May 31, 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: May 31, 1996 By:
--------------------------------
Marc I. Becker,
Executive Vice President
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ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (THE "AGREEMENT") is made and entered into as
of the ___________ day of May, 1996 between Network Long Distance, Inc., a
Delaware corporation ("PURCHASER"), and Universal Network Services, Inc., a
Nevada corporation ("SELLER").
WHEREAS, Seller conducts business as a reseller of long distance
telecommunications services and has established retail end user customer bases
in various states in the United States; and
WHEREAS, Purchaser desires to purchase selected assets of Seller on the
terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, representations and warranties herein contained, it is hereby agreed
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 (THE
"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,
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defaults and other violations of such Customer Contracts; and
(d) All customer and other deposits held or made by Seller related to
the Qualified Customer Accounts.
1.2 ASSETS RETAINED BY SELLER
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 June 1,
1996, 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;
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(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
(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 as
described below.
(b) DEFINITIONS:
(i) "QUALIFIED CUSTOMER ACCOUNT" shall mean any end user long
distance telecommunications customer account of Seller which is mutually agreed
to by the parties and which shall be listed in SCHEDULE 2.3(B)(I) to be attached
hereto and made a part hereof at the Closing. Unless mutually agreed to by the
parties, a "Qualified Customer Account": (1) may not be affiliated with Seller
in any way; (2) may not be comprised, in whole or in part, of any outstanding
balance(s) which is/are more than sixty (60) days past due as of 5:00 p.m. on
May 22, 1996; (3) must utilize the Wiltel "Wilmax" platform for all 1+ and 800
services, be in the process of being transitioned to the Wiltel "Wilmax"
platform or there is a high probability of it being converted to the Wiltel
"Wilmax" platform (all of which must be approved by Purchaser, in its sole
discretion); (4) must utilize a travel card platform which is acceptable to
Purchaser in its discretion; and (5) must not have been placed on "credit hold"
or similar restriction by Wiltel or any other underlying provider.
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(ii) "MEASUREMENT PERIOD" shall mean the period commencing March
1, 1996 and ending April 30, 1996. Attached hereto and made a part hereof as
SCHEDULE 2.3(b)(ii) is a listing of all days included in the Measurement Period
and designated by: (1) date; (2) day of week; and (3) weekday versus wee
kend day.
(iii) "AVERAGE WEEKDAY NET REVENUE" shall mean the average
daily gross toll usage for each Qualified Customer Account for all weekdays
(except holidays) during the Measurement Period, net of any discounts and minus
all other appropriate deductions, including but not limited to monthly service
fees, taxes, pass-through charges to customers, credits and chargebacks.
(iv) "AVERAGE WEEKEND DAY NET REVENUE" shall mean the average
daily gross toll usage and pro rata monthly fees for each Qualified Customer
Account for all weekend days (except holidays) during the Measurement Period,
net of any discounts and minus all other appropriate deductions, including but
not limited to monthly service fees, taxes, pass-through charges to customers,
credits and chargebacks.
(v) "NET TOLL USAGE" shall mean Average Weekday Net Revenue
multiplied by twenty-one (21) plus Average Weekend Day Net Revenue multiplied by
nine (9).
(vi) "BAD DEBT FACTOR" shall mean two percent (2%) multiplied by
Net Toll Usage.
(vii) "CUSTOMER BASE PURCHASE PRICE" shall mean Net Toll
Usage less the Bad Debt Factor multiplied by seven and one-half (7.5).
(EXAMPLE: If Net Toll Usage equals $800,000 and the Bad Debt Factor equals
$16,000, then the Customer Base Purchase Price shall equal $5,880,000).
(viii) "ACCOUNTS RECEIVABLE" shall mean the accounts
receivable as of 11:59 p.m. CST on May 31, 1996 which are associated with and
derived from all Qualified Customer Accounts.
(1) Accounts Receivable shall be listed, including a
complete and up-to-date aging analysis for each Qualified Customer Account in
particular and for all Qualified Customer Accounts in the aggregate, in SCHEDULE
2.3(b)(viii) which shall be attached hereto and made a part hereof upon
completion of the Accounts Receivable
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Reconciliation (as such term is defined below).
(2) ACCOUNTS RECEIVABLE RECONCILIATION.
(a) Since the actual dollar amount of the Accounts
Receivable cannot be ascertained prior to the Closing, the parties hereby
stipulate, for purposes of determining the consideration to be transferred at
the Closing, that Accounts Receivable equals Net Toll Usage multiplied by a
factor of one and twenty-five one-hundredths (1.25).
(b) The parties shall perform a reconciliation (THE
"ACCOUNTS RECEIVABLE RECONCILIATION") of the actual dollar amount of the
Accounts Receivable as of 11:59 p.m. CST on May 31, 1996 within fourteen (14)
days of Purchaser's confirmation of its receipt of all information necessary to
perform said Accounts Receivable Reconciliation.
(c) The Accounts Receivable Purchase Price shall be
adjusted in accordance with the results of the Accounts Receivable
Reconciliation.
(d) Nothing contained in this Section 2.3(b)(viii)(2)
shall be construed to effect a change in the definition of Accounts Receivable
Purchase Price (as such term is defined below).
(ix) "ACCOUNTS RECEIVABLE PURCHASE PRICE" shall mean the
aggregate total of the Accounts Receivable as of the Closing Date multiplied by
a factor of eighty percent (80%).
(x) "AGENT NET TOLL USAGE" shall mean, strictly for purposes of
the Customer Evaluation (as such term is defined below), the Net Toll Usage of
accounts sold by Seller's agents subsequent to the Closing on behalf of
Purchaser pursuant to agreements independently negotiated between said agents
and Purchaser (HEREINAFTER, "NEW AGENT ACCOUNTS"). For purposes of this
paragraph, the Net Toll Usage of New Agent Accounts shall be calculated in
accordance with the methodology set forth in paragraphs 2.3(b)(ii), (iii), (iv)
and (v) above, except that the accounts to be calculated shall be the New Agent
Accounts and the measurement period to be used shall be the Evaluation
Measurement Period (as such term is defined below).
(xi) "PURCHASE PRICE" shall mean the sum of the Customer Base
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Purchase Price plus the Accounts Receivable Purchase Price.
(c) MANNER AND FORM OF PAYMENT: The Purchase Price shall be paid in
the form of cash and restricted shares of Purchaser's voting common stock (as
more fully described below).
(i) CUSTOMER BASE PURCHASE PRICE:
(1) CASH PORTION. Fifty percent (50%) of the Customer Base
Purchase Price shall be paid in cash, by wire transfer or other immediately
available funds.
(2) STOCK PORTION. Fifty percent (50%) 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 average closing share price for the five (5)
trading days prior to the Closing Date.
(ii) ACCOUNTS RECEIVABLE PURCHASE PRICE. The Accounts Receivable
Purchase Price shall be paid in cash, by wire transfer or in other immediately
available funds. The Accounts Receivable Purchase Price may be increased in
accordance with the sliding scale set forth in SCHEDULE 2.3(C)(II). Any such
increase shall be paid in cash, by wire transfer or in other immediately
available funds on or before September 15, 1996.
(d) ESCROWED SHARES. At the Closing, a sufficient number of shares
of Restricted Stock representing ten percent (10%) of the Purchase Price,
calculated using the average closing share price for the five (5) trading days
prior to the Closing Date, 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)
the Special Indemnification set forth in paragraph 10.13 below; and (iii) any
other obligation of Seller which arises hereunder, including but not limited to
any reimbursement which may become due as a result of the Accounts Receivable
Reconciliation. 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) CUSTOMER EVALUATION. Upon the expiration of one (1) year from
the
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Closing, 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) For purposes of the Customer Evaluation, the term
"EVALUATION MEASUREMENT PERIOD" shall mean the period commencing March 1, 1997
and ending April 30, 1997. Attached hereto and made a part hereof as SCHEDULE
2.3(E)(I) is a listing of all days included in the Evaluation Measurement Period
and designated by: (1) date; (2) day of week; and (3) weekday versus weekend
day.
(ii) For purposes of the Customer Evaluation, the term
"EVALUATION NET TOLL USAGE" shall be calculated utilizing the same methodology
set forth above for calculating Net Toll Usage except using the Evaluation
Measurement Period.
(iii) If the Customer Evaluation reveals an increase in the
Net Toll Usage level of the Qualified Customer Accounts, as measured by
comparing Net Toll Usage to Evaluation Net Toll Usage, Purchaser shall pay
Seller the amount of the increase multiplied by seven and one-half (7.5).
(1) Any payment resulting from such increase shall be in
the form of additional shares of Restricted Stock.
(2) The number of shares to be paid shall be calculated
using the average closing share price for the five (5) trading days prior to the
date of the Customer Evaluation.
(iv) 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 Net Toll
Usage to the sum of (1) Evaluation Net Toll Usage plus (2) Agent Net Toll Usage,
then the Purchase Price shall be reduced by an amount equal to seven and one-
half (7.5) 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 closing share price for the
five (5) trading days prior to the date of the Customer Evaluation.
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(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 reimbursement in cash.
(4) Seller may, in its discretion, utilize cash for all or
a portion of any reimbursement due as a result of the Customer Evaluation.
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
(a) GENERAL. At the Closing, 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, mentioned
herein or listed on SCHEDULE 2.5(A) hereto.
(b) AGENT CONTRACTS.
(i) Purchaser shall assume and shall subsequently honor and
discharge the actual amount of any and all applicable sales agent commissions
(THE "AGENT COMMISSIONS") in an amount not to exceed seven and one-half percent
(7.5%) 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").
(ii) Seller shall continue to honor and pay any and all Agent
Commissions which exceed the Allowable
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Commission Percentage for as long as Agent Commissions are owed under the terms
of the Agent Contracts.
(iii) 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.
(iv) All Agent Contracts are attached hereto and made a part
hereof, in globo, as EXHIBIT 2.5(B)(IV).
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, directly attributable to the Qualified
Customer Accounts in the ordinary course of business, 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 Nevada 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
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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 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 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 3.4. Seller further warrants and
represents that none of its subsidiary, parent or affiliated companies have any
right, title or interest in the Assets, and Seller is free to transfer the
Assets without approval or intervention of same.
3.5 MATERIAL CONTRACTS
Except as disclosed in SCHEDULE 3.5 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
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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 3.5 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 3.5, 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.
3.6 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.
3.7 LITIGATION; COMPLIANCE
(a) To the best of Seller's knowledge, except as disclosed in
SCHEDULE 3.7(a) hereto, there are no actions, suits, proceedings or arbitrations
or governmental 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
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Qualified Customer Accounts, all of which are in full force and effect and all
of which are listed on SCHEDULE 3.7(C) hereto.
3.8 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.
3.9 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.
As used in this Section 3.9, "transactions which are not in violation of the
Securities Act of 1933" do not include transactions which directly or indirectly
result in a subsequent disposition of the Restricted Stock pursuant to
Regulation S adopted under the Securities Act of 1933. 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
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 not be in violation of that certain
Asset Purchase Agreement dated May 8, 1996,
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the Act and the State Acts."
3.10 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 to 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; and (6) no applicable bulk sales law or similar statute exists
which would prevent the sale of the Assets to Purchaser or require approval by
any of Seller's creditors of the sale of the Assets to Purchaser.
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.
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<PAGE>
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 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.
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
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<PAGE>
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 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 transactions 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 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.
6.2 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 the lien(s) and priority on the
Assets currently existing in favor of Wiltel. 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.
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<PAGE>
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
Seller shall have provided full cooperation to Purchaser with
respect to Purchaser's responsibility to apply for any required material
approvals, acceptances and consents of or to the transactions contemplated
hereby, including notice to applicable public service commissions.
(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.
(d) NEW AGENT AGREEMENTS
All agreements with any of Seller's agents who Purchaser, in its
sole discretion, deems necessary to preserving the integrity of the Assets
purchased hereby
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<PAGE>
shall have been successfully negotiated and fully executed.
(e) FORFEITURE OF DIALERS/EQUIPMENT
All dialers and other customer equipment currently owned and used
by Seller to service the Qualified Customer Accounts shall have been forfeited
and/or donated by Seller to the customers utilizing said dialers and equipment.
(f) FINANCIAL STATEMENTS
Seller shall have provided Purchaser with all audited financial
statements and unaudited interim financial statements which are required by
Regulation S-X of the Securities Act of 1933, as amended.
(g) NO MATERIAL CHANGES
No material changes shall have occurred affecting: (1) the
financial position of Seller; (2) the information previously disclosed to
Purchaser; or (3) the Assets to be purchased hereunder, including but not
limited to encumbrance or impairment of the Assets in any manner whatsoever.
(h) MINIMUM NET TOLL USAGE
Net Toll Usage, to be calculated at 5:00 p.m. CST on May 22,
1996, shall be equal to or greater than $600,000.
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
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
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<PAGE>
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.
8. USE OF NAME
Purchaser and its affiliated entities shall have the right to use the names
"Universal Network Services, Inc.", "UNS", "Uni-Net" and all other names
currently being used by Seller in the conduct of its business with respect to
the Qualified Customer Accounts for a period of ninety (90) days following the
Closing Date.
9. INDEMNIFICATION MANNER OF CLAIMS
9.1 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).
9.2 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
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<PAGE>
party by reason of the claim.
10. MISCELLANEOUS
10.1 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.
10.2 EXPENSES
Subject to the terms of Section 9 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. Notwithstanding the
foregoing, Purchaser agrees to pay fifty percent (50%) of the actual fees
charged by Seller's audit firm as billed in connection with the audit of
Seller's books currently being conducted. In no event shall the audit fees paid
by Purchaser pursuant to this paragraph exceed $22,000, provided an additional
audit is not required.
10.3 SEVERABILITY
If any term or provision of this Agreement shall be held or deemed to
be, or
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<PAGE>
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.
10.4 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 Two Corporate Plaza, Suite 200, Newport
Beach, CA 92660, Attn: Dennis Houston, in each case at such other address as
may be specified in writing to the other parties.
10.5 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.
10.6 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.
10.7 COUNTERPARTS
This Agreement may be 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.
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<PAGE>
10.8 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.
10.9 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.
10.10 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.
10.11 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.
10.12 UNDERLYING CARRIER APPROVAL.
The transactions contemplated by this Agreement shall be strictly
contingent upon the consent and approval, in writing, of any of Seller's
underlying carriers who provide service in connection with the Qualified
Customer Accounts.
10.13 SPECIAL INDEMNIFICATION.
(a) Seller shall specifically indemnify and hold harmless Purchaser
(THE
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<PAGE>
"SPECIAL INDEMNIFICATION") from and against liabilities resulting from: (1)
Seller's use of invalid letters of agency/authorization as determined by any
local exchange carrier; (2) unauthorized transacting of business by Seller
without all necessary state and federal authority and permission; and/or (3)
Seller's failure to pay any and all amounts owed by Seller to Tax Resource
Group, the Internal Revenue Service and any state taxing authority.
(i) The Special Indemnification shall be due within fifteen (15)
days of Seller's receipt of written notice from Purchaser demanding same and
shall be paid first in the form of the Escrowed Shares.
(ii) The number of Escrowed Shares to be paid shall be
calculated using the average closing share price for the five (5) trading
days prior to the date of the Special Indemnification.
(iii) If the Escrowed Shares are insufficient to fully
indemnify Purchaser pursuant to this paragraph, Seller shall pay Purchaser a
sufficient number of shares of Restricted Stock to complete the Special
Indemnification.
(iv) Seller may, in its discretion, utilize cash for all or a
portion of any Special Indemnification due as a result of this paragraph.
(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.
11. TERMINATION.
11.1 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.
11.2 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,
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<PAGE>
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.
12. ADDITIONAL TERMS, COVENANTS, ETC.
12.1 REGISTRATION OF RESTRICTED STOCK.
(a) Purchaser hereby warrants that, after sixty (60) days from the
Closing and upon Seller's request, it will file a Form S-3 Registration
Statement with the Securities Exchange Commission to apply for registration of
the Restricted Stock issued hereby in order to allow Seller the ability to sell
or transfer its Restricted Stock. Any covenants of Purchaser contained in this
paragraph (a) shall be subject to and limited by the terms and conditions of the
Lock-Up Agreement referred to in paragraph (b) below.
(b) At the Closing, the parties shall enter into a mutually
acceptable lock-up agreement (THE "LOCK-UP AGREEMENT"), a copy of which is
attached hereto as EXHIBIT 12.1(B), containing certain restrictive covenants
regarding share ownership and transfer of shares.
12.2 TRI-PARTY AGREEMENT
All of Purchaser's obligations hereunder, including but not limited to
Purchaser's obligation to close the transactions contemplated hereby, shall be
strictly contingent upon the successful negotiation and execution, within ten
(10) days of the date of this Agreement, of a tri-party agreement ("TRI-PARTY
AGREEMENT") between Seller, Purchaser and Wiltel pursuant to which Wiltel: (1)
agrees to the release of its security interest covering the Assets; (2) consents
to the transactions contemplated herein; and (3) agrees to allow Purchaser to
immediately transition all Qualified Customer Accounts to Purchaser's own Wilmax
contract at no additional cost to Purchaser and with no interruption of service
to the customers whose accounts are so transitioned. In the event a Tri-Party
Agreement is not so executed within ten (10) days of the date of this Agreement,
then Purchaser may terminate this Agreement in full and with no penalty or
liability whatsoever.
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<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first written above.
NETWORK LONG DISTANCE, INC. UNIVERSAL NETWORK SERVICES, INC.:
BY: BY:
------------------------- -----------------------------
NAME: MIKE ROSS NAME: DENNIS HOUSTON
TITLE: PRESIDENT TITLE: PRESIDENT
ATTEST: ATTEST:
BY: BY:
-------------------------- ------------------------------
NAME: DAVID ROSENFELD NAME: JOHN H. BROWNELL
TITLE: ASSISTANT SECRETARY TITLE: SECRETARY
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<PAGE>
SCHEDULE 2.3(b)(i): QUALIFIED CUSTOMER ACCOUNTS
[TO BE ATTACHED AT THE CLOSING]
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<PAGE>
SCHEDULE 2.3(b)(ii)
DESIGNATION OF DAYS INCLUDED IN MEASUREMENT PERIOD
DATE DAY OF WEEK WEEKDAY OR WEEKEND DAY
- ---------------- -------------------- --------------------------
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<PAGE>
SCHEDULE 2.3(b)(viii): ACCOUNTS RECEIVABLE
[TO BE ATTACHED UPON COMPLETION OF
THE ACCOUNTS RECEIVABLE RECONCILIATION
WITH COMPLETE AGING ANALYSIS
FOR EACH QUALIFIED CUSTOMER ACCOUNT
AS OF 11:59 P.M. CST ON MAY 31, 1996]
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<PAGE>
SCHEDULE 2.3(C)(II): SLIDING SCALE
FOR ACCOUNTS RECEIVABLE PURCHASE PRICE
(1) (2) (2) (2) (2)
% of A/R
to be paid 80.0% 82.5% 85.0% 87.5% 90.0%
| | | | |
------------------------------------------------------------
| | | | |
Collection Rate 85% 90% 95% 100%
Timing At 90 days
Closing After
Closing
(1) Purchaser shall pay Seller 80% of the Accounts Receivable at Closing (to be
adjusted on or before July 15, 1996 in accordance with the Accounts
Receivable Reconciliation).
(2) Purchaser shall pay Seller additional amounts based on actual collections
of accounts receivable during the 90 day period following the Closing:
If collections during Then the percentage
the 90 day period of Accounts Receivable
fall in this range to be paid equals this amount
-------------------- -----------------------------
0 - 84.99% 80.0%
85 - 89.99% 82.5%
90 - 94.99% 85.0%
95 - 99.99% 87.5%
100.0% 90.0%
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<PAGE>
SCHEDULE 2.3(e)(i)
DESIGNATION OF DAYS INCLUDED IN EVALUATION MEASUREMENT PERIOD
DATE DAY OF WEEK WEEKDAY OR WEEKEND DAY
- --------------- ------------------- ---------------------------
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<PAGE>
SCHEDULE 2.4: ALLOCATION OF PURCHASE PRICE
[INTENTIONALLY LEFT BLANK.]
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<PAGE>
SCHEDULE 2.5(a): 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.
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<PAGE>
EXHIBIT 2.5(b)(iv): AGENT CONTRACTS (IN GLOBO)
[SEE ATTACHED]
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<PAGE>
SCHEDULE 3.4: CLAIMS AND ENCUMBRANCES
[SEE ATTACHED]
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<PAGE>
SCHEDULE 3.5: CONTRACTS, OBLIGATIONS AND COMMITMENTS
[SEE EXHIBIT 2.5(a) ]
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<PAGE>
SCHEDULE 3.7(a): ACTIONS, SUITS, ETC.
[NONE]
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<PAGE>
SCHEDULE 3.7(c): LICENSES, PERMITS, ETC.
[SEE ATTACHED]
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<PAGE>
EXHIBIT 12.1(b): LOCK-UP AGREEMENT
[SEE ATTACHED]
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<PAGE>
BILL OF SALE
Universal Network Services, Inc., a Nevada 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
- -------------- ------------------------------------------------
$______________________ The "Assets" (as such term is defined in that
certain Asset Purchase Agreement dated May 8,
1996).
- ----------------------- Universal Network Services, Inc.
Witness
By:
- ----------------------- ---------------------------------------------
Witness Name: Dennis Houston, President
Sworn to and subscribed before
me this 31st day of May, 1996.
----------------------------------------------
Notary Public
_______________________ Network Long Distance, Inc.
Witness
By:
- ---------------------- -------------------------------------------
Witness Name: Mike Ross, President
Sworn to and subscribed before
me this 31st day of May, 1996.
----------------------------------------------
Notary Public
<PAGE>
ACTION BY UNANIMOUS WRITTEN CONSENT
OF SHAREHOLDERS IN LIEU OF MEETING OF
UNIVERSAL NETWORK SERVICES, INC.
On this 31st day of May, 1996, pursuant to the corporation laws of the
State of Nevada, and in lieu of a meeting of Shareholders for such purposes, the
undersigned Shareholders of Universal Network Services, Inc., a Nevada
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 dated May 8, 1996 (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>
LIMITED DURATION MASTER LETTER OF AGENCY
Limited Duration Master Letter of Agency ("Limited Master LOA") executed
this 31st day of May, 1996, by and on behalf of Universal Network Services,
Inc., a Nevada corporation ("Seller"), in favor of Network Long Distance, Inc.,
a Delaware corporation ("Purchaser").
WHEREAS, Seller and Purchaser have entered into that certain Asset Purchase
Agreement dated May 8, 1996 (the "Asset Purchase Agreement");
WHEREAS, pursuant to the Asset Purchase Agreement, Seller and Purchaser
have agreed that Seller's agents may independently negotiate agreements with
Purchaser for the purpose of selling Purchaser's long distance service, and
further, that any sales made by said agents pursuant to those agreements may be
counted toward the Customer Evaluation (as such term is defined in the Asset
Purchase Agreement);
WHEREAS, Seller has explained to Purchaser that it would be logistically
unfeasible for Seller to solicit all of its sales agents for purposes of signing
agreements directly with Purchaser prior to the Closing (as such term is defined
in the Asset Purchase Agreement);
WHEREAS, in light of the logistical problem described above, Purchaser has
agreed to allow Seller, for a ninety (90) day period following the Closing, to
act as a master agent with respect to New Agent Accounts (as such term is
defined in the Asset Purchase Agreement).
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements of the parties herein contained, the parties hereby agree as follows:
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 "New Agent Accounts") are sold by
Seller's sales agents during the ninety (90) day period following the
Closing.
Seller further hereby authorizes Purchaser to obtain all information necessary
to service the New Agent 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 New Agent Accounts.
Seller understands and acknowledges that Purchaser is free to require that any
New Agent Accounts fulfill Purchaser's established criteria for acceptance
of customer accounts, including but not limited to credit and references.
This Limited Master LOA shall only be effective for the ninety (90) day period
immediately following the Closing.
<PAGE>
All terms and phrases contained herein shall be accorded the same definition and
meaning as set forth in the Asset Purchase Agreement.
Seller and Purchaser hereby agree that this Limited Master LOA may be executed
in counterparts which, when taken together, shall constitute an original.
SELLER:
Universal Network Services, Inc.
By: ______________________________
Dennis Houston, President
PURCHASER:
Network Long Distance, Inc.
By: ___________________________ __
Mike Ross, President
<PAGE>
LOCK-UP AGREEMENT
THIS LOCK-UP AGREEMENT (THE "AGREEMENT") is made and entered as of the 31st
day of May, 1996 by and among Network Long Distance, Inc. ("PURCHASER") and
Universal Network Services, Inc. ("SELLER").
WHEREAS, Seller and Purchaser have executed an Asset Purchase Agreement
dated May 8, 1996 (the "Asset Purchase Agreement") whereby Seller has agreed to
sell, and Purchaser has agreed to purchase, certain selected assets of Seller
(the "Assets"); and
WHEREAS, as a material condition to Purchaser's performance under the Asset
Purchase Agreement, Seller has agreed to restrict itself from selling stock
received from Purchaser pursuant to the Asset Purchase Agreement (the "Acquired
Shares"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
covenants, representations and warranties herein contained, it is agreed as
follows:
1. Seller hereby agrees not to sell, transfer or otherwise dispose of any
portion of the Acquired Shares constituting more than one percent (1%) of all
issued and outstanding shares of Purchaser's common stock every ninety (90)
days. The foregoing covenant shall apply regardless of whether the Acquired
Shares are registered pursuant to a Form S-3 filing, or any other registration
statement filing, with the Securities Exchange Commission.
2. The restrictions and covenants contained herein shall be enforceable
against Seller as well as any subsequent owners, transferees and beneficial
owners of the Acquired Shares.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
NETWORK LONG DISTANCE, INC. UNIVERSAL NETWORK SERVICES, INC.
BY: BY:
------------------------ -----------------------------
NAME: MIKE ROSS NAME: DENNIS HOUSTON
TITLE: PRESIDENT TITLE: PRESIDENT
<PAGE>
MASTER LETTER OF AGENCY
Master Letter of Agency ("Master LOA") executed this 31st day of May, 1996,
by and on behalf of Universal Network Services, Inc., a Nevada 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 "Qualified Customer Accounts") are
being transferred to Purchaser pursuant to that certain Asset Purchase Agreement
dated May 8, 1996 (the "Asset Purchase Agreement").
Seller further hereby authorizes Purchaser to obtain all information
necessary to service the Qualified 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 Qualified 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:
Universal Network Services, Inc.
By:
-------------------------------
Dennis Houston, President
PURCHASER:
Network Long Distance, Inc.
By:
-------------------------------
Mike Ross, President
<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 May 6, 1996 at Baton Rouge, Louisiana.
Directors present: Marc I. Becker
J. M. Edelman, M.D.
Michael M. Ross
Leon L. Nowalsky
Not present: Russell J. Page
Timothy Sledz
Also present: David Rosenfeld, Executive Vice President
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 Universal Network Services, Inc. ("UNS"), a
long distance telecommunications company based in Newport Beach, California (the
"Acquisition"). The Executive Vice-President of the Corporation, Mr. Rosenfeld,
discussed the merits of the Acquisition as follows:
Mr. Rosenfeld explained the steps which had been taken by the Coporation's
officers and counsel to examine the Acquisition. Mr. Rosenfeld 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. Rosenfeld provided each
Director a copy of the Agreement and orally described the terms and conditions
of the Agreement.
Mr. Rosenfeld went on to explain the basic points of the Agreement as
follows:
<PAGE>
The deal contemplates Network's acquisition of selected
accounts of UNS's retail end user customers (the "Accounts")
and related assets (collectively, the "Assets").
Network will pay the sum of approximately $7,000,000 for the
Assets based on a multiple of 7.5 times UNS's Net Toll Usage
(as such term is defined in the Agreement) for the
Measurement Period indicated in the Agreement and 80% of
UNS's Accounts Receivable with additional possible payments
up to 90% of UNS's Accounts Receivable based on collections.
Payment of the foregoing amount shall be in the form of cash
and restricted stock.
Mr. Becker then proceeded to discuss the market considerations, risk
factors and financial projections associated with the Acquisition.
Mssrs. Rosenfeld and Becker explained that all steps necessary to provide
the Corporation with as much information about UNS and the assets to be
purchased as possible had been taken. Mssrs. Rosenfeld 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 UNS as contemplated in the
Agreement.
FURTHER RESOLVED, that David Rosenfeld (Executive Vice President) be and is
hereby appointed, solely for purposes of completing the legal documentation
associated with the Acquisition, to the position of Assistant Secretary of the
Corporation with full power
<PAGE>
and authority to act in such capacity.
There being no further business, the meeting was adjourned.
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
<PAGE>
NONCOMPETITION AGREEMENT
AGREEMENT (the "Agreement") made this 31st day of May, 1996, between
Network Long Distance, Inc., a Delaware corporation ("Network"), and Universal
Network Services, Inc. ("Company").
RECITALS
WHEREAS, Network is a switch-based reseller of long distance
telecommunications services based in Baton Rouge, Louisiana; and
WHEREAS, Company is a principal of Universal Network Services, Inc.
("UNS"), a switchless reseller of long distance telecommunications services
based in Newport Beach, California; and
WHEREAS, Network has purchased, or will shortly be purchasing, among other
things, selected customer accounts ("Customer Accounts") and related assets
(collectively, the "Assets") of UNS's end user customers (the "Acquisition");
and
WHEREAS, Company has agreed, as a condition to the Acquisition, to execute
a noncompetition agreement restraining it from contacting, selling, marketing,
soliciting and diverting the Customer Accounts as to long distance
telecommunications products and services, except with respect to the following
telecommunications services and products currently available to the Customer
Accounts through Uni-Net, Inc.: (1) International Call Back; (2) Debit Cards;
(3) Personal Communications Cards (PCC); (4) International Dial Around; and (5)
Prepaid Cellular.
NOW, THEREFORE, in consideration of the premises and mutual covenants and
agreements of the parties herein contained, the parties hereby agree as follows:
1. TERM.
1.1 Network and Company hereby agree that the term of this Agreement shall
be for five (5) years from the date hereof and shall not be cancellable prior to
its expiration unless specifically agreed to in writing by both parties.
2. CONFIDENTIALITY.
2.1 Company acknowledges that in and as a result of the Acquisition, it
will be making use of, acquiring, and/or adding to confidential information of a
special and unique nature and value relating to Network's business, including
but not limited to, Network's trade secrets, systems, procedures, manuals,
confidential reports, computer print-outs, lists of customers, computer data
base information, as well as the nature and type of services and goods sold,
marketed and/or rendered by Network and the prices charged therefore, and the
equipment and methods preferred and used by Network and its customers
("Confidential Information").
2.2 As a material inducement to Network to enter into this Agreement and
to
<PAGE>
consummate the Acquisition, Company covenants and agrees that: (a) it shall not
at any time during or following the term of this Agreement, directly or
indirectly, divulge or disclose for any purpose whatsoever any Confidential
Information that has been obtained by, or disclosed to, him as a result of the
Acquisition; and (b) upon termination of this Agreement, it shall deliver
promptly to Network all price lists, commissions schedules, discount rates,
equipment, notes, books, correspondence, drawings, customer lists, computer
print-outs, computer discs or duplicates, hard copy of computer data worksheets,
and any other written and/or graphic records or materials of any kind relating
to Network's business which are in its possession or under its control.
2.3 Furthermore, Company acknowledges and agrees that:
(a) Company shall keep secret all Confidential Information and will
not make, use, sell, or reveal any of the same to any competitor or any other
person unless and until the same shall have become a matter of public knowledge
or until written permission shall have been given to him by Network to such
sale, transfer or other disclosure.
(b) At all times Company shall cooperate with Network or its designee
and their counsel in prosecuting or defending any litigation and/or
administrative proceedings which may arise in connection with Network's business
operations.
(c) No termination of this Agreement shall release Company from the
above obligations.
2.4 In the event of a breach or threatened breach of Company of any of the
provisions of this Section 2, Network, in addition to and not in limitation of
any other rights, remedies or damages available to it, shall be entitled to
preliminary and permanent injunctive relief in order to prevent or restrain such
breach or threatened breach of Company.
3. COVENANTS AGAINST COMPETITION.
3.1 As a material inducement to Network to consummate the Acquisition,
Company covenants and agrees as follows:
(a) During the term of this Agreement, Company shall not, directly or
indirectly, own an interest in, operate, join, control, participate in, or be
connected in any manner with any person, firm, corporation or other entity which
intentionally solicits orders for, sells, distributes, or otherwise markets long
distance telecommunications services to the Customer Accounts, specifically
excluding the following telecommunications services: (1) International Call
Back; (2) Debit Cards; (3) Personal Communications Cards (PCC); (4)
International Dial Around; and (5) Prepaid Cellular.
(b) During the term of this Agreement, Company shall not, directly or
indirectly, engage in any business activity that would require Company to
disclose, base judgment upon, or otherwise utilize, any Confidential Information
obtained by or
<PAGE>
disclosed to Company as a result of the Acquisition.
(c) During the course of this Agreement, Company shall not, directly
or indirectly, commit any act or undertake any activity that would tend to
interfere or dispute any existing relationship between Network and any of the
customers whose Customer Accounts were transferred to Network as part of the
Acquisition.
(d) During the term of this Agreement, Company shall not contact or
solicit any customers of Network whom it learned of as a result of the
Acquisition.
(e) During the term of this Agreement, Company shall not contact or
solicit any customers whose accounts and/or service contracts were transferred
to Network by UNS as part of the Acquisition.
3.2 Company covenants and agrees that if it violates any of the foregoing
covenants, Network shall be entitled to an accounting and repayment of all
profits, compensation, commissions, remuneration or other benefits that Company
directly or indirectly, has realized and/or may realize as a result of, or in
connection with the violation. The foregoing remedies shall be in addition to,
and not in limitation of, any injunctive relief or other rights or remedies to
which Network is or may be entitled at law, in equity, or under this Agreement.
3.3 Company has carefully read and considered the foregoing provisions of
this section, and having done so, agrees that the restrictions contained therein
are fair and reasonable and reasonably required for the protection of the
interest of Network. If, notwithstanding the foregoing, any of the provisions
contained in this section shall be held to be invalid or unenforceable, the
remaining provisions thereof nevertheless shall continue to be valid and
enforceable as though the invalid or unenforceable provisions had not been
included in this section. If any restriction contained in this section is
deemed by a court or other tribunal with jurisdiction to be unreasonable or
unenforceable, such restriction shall become and thereafter shall be the maximum
restriction permitted by law.
4. APPLICABLE LAW. This Agreement shall be construed according to and
governed by the laws of Louisiana.
5. ASSIGNMENT. Company may not assign any right or obligation under
this Agreement without the prior written consent of Network. Any attempted
assignment in violation of this section shall be ineffective, null and void.
6. SEVERABILITY. The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any one or more of the
provisions of this Agreement shall not affect the validity and enforceability of
the other provisions.
7. NOTICE. Any notice required under this Agreement shall be sufficient
and shall be deemed effective if it is in writing and delivered personally or
sent by certified or registered mail, return receipt requested, first-class
postage prepaid, to the
<PAGE>
addresses listed below.
8. ENTIRE AGREEMENT.
8.1 This Agreement, contains the entire agreement and understanding by and
between Company and Network with respect to the subject matter hereof, and no
representations, promises, agreement, or understandings of any nature written or
oral, not contained herein shall be of any force or effect.
8.2 No modification or amendment of this Agreement shall be valid or
binding unless it is in writing and signed by the parties hereto.
8.3 No waiver of any provisions of this Agreement shall be valid unless it
is in writing and signed by the parties hereto.
IN WITNESS WHEREOF, the parties have fully executed this Agreement in
duplicate originals before the undersigned competent witnesses.
WITNESSES: NETWORK LONG DISTANCE, INC.
525 Florida Street
Baton Rouge, LA 70801
By:
- ------------------------------ -----------------------------------------
Name: Mike Ross
Title: President
UNIVERSAL NETWORK SERVICES, INC.,
Two Corporate Plaza, Suite 200
Newport Beach, California 92660
By:
- ------------------------------ -----------------------------------------
Name: Dennis Houston
Title: President
