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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
JULY 25, 1996
Date of Report (Date of earliest event reported)
U.S. LONG DISTANCE CORP.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 0-18195 74-2522103
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification No.)
Incorporation)
9311 SAN PEDRO, SUITE 100
SAN ANTONIO, TEXAS 78216
(Address of Principal (Zip Code)
Executive Offices)
(210) 525-9009
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 5. OTHER EVENTS.
On July 25, 1996, the Board of Directors of U.S. Long Distance Corp., a
Delaware corporation (the "Company"), declared a pro rata dividend on the
outstanding common stock of the Company, $.01 per share ("Company Common
Stock"), of such number of shares of the common stock, par value $.01 per share
(the "Billing Common Stock"), of Billing Information Concepts Corp. ("Billing"),
as shall be necessary to distribute to stockholders of record of the Company on
the record date for the Distribution one share of Billing Common Stock for each
share of Company Common Stock outstanding on the record date (the
"Distribution"). The dividend is payable to holders of record of Company Common
Stock at the close of business on July 29, 1996. The Distribution shall be
effective at the commencement of business on August 2, 1996 (the "Distribution
Date").
Billing is a wholly-owned subsidiary of the Company that will, upon the
effectiveness of the Distribution, own the business and assets of, and will be
responsible for liabilities associated with, the third party billing
clearinghouse and information management services business currently owned by
the Company. The Distribution will result in 100% of the outstanding shares of
Billing Common Stock being distributed to holders of the Company Common Stock on
a pro rata basis.
The dividend has been declared pursuant to the terms of a Distribution
Agreement dated as of July 10, 1996 between the Company and Billing (the
"Distribution Agreement").The Distribution Agreement provides, among other
things, for (i) certain preliminary transactions; (ii) the Distribution;
(iii) the division between Billing and the Company of certain assets and
liabilities with Billing retaining substantially all of the commercial
billing clearinghouse and information management services business and the
Company retaining its direct billing function, pursuant to which the Company
will continue to directly bill its direct dial long distance charges; (iv)
the sharing of the obligations under certain warrants previously issued by
the Company; (v) the issuance by Billing of a stock option to a former
Company director who has agreed to join the Board of Directors of Billing in
consideration of his joining the Board of Directors of Billing and to replace
an expiring, unvested option to acquire shares of Common Stock; and (vi)
certain other agreements governing the relationship between Billing and the
Company following the Distribution. Subject to certain exceptions, the
Distribution Agreement also provides for assumptions of liabilities and cross
indemnities designed to allocate, effective as of the Distribution Date,
financial responsibility for the liabilities arising out of or in connection
with the third party billing clearinghouse and information management
services business to Billing and its subsidiaries, and financial
responsibility for the liabilities arising out of or in connection with the
direct dial long distance telecommunication services and operator services
businesses, including the Company's internal billing functions, to the
Company and its retained subsidiaries. Under the Distribution Agreement,
Billing will transfer to the Company on the Distribution Date cash in an
amount necessary to cause the Company's working capital to be approximately
$21,500,000 after taking into account payment by the Company of the direct
costs of the Distribution estimated to be approximately $10,000,000 and the
receipt by the Company of $8,785,000 in connection with the dissolution of
its subsidiary MegaPlus Dialing, Inc. The calculation of this cash amount
will be based upon current assets and current liabilities as reported on the
Company's balance sheet at June 30, 1996.
To avoid adversely affecting the intended tax consequences of the
Distribution and related transactions, the Distribution Agreement provides
that, until the second anniversary of the Distribution Date, the Company must
obtain an opinion of counsel reasonably satisfactory to Billing or a
supplemental tax ruling from the Internal Revenue Service before the Company
may make certain material dispositions of its assets, engage in certain
repurchases of the Company capital stock or cease the active conduct of its
business independently, with its own employees and without material changes.
Because the terms of certain waivers and consents under the Company's and/or
Billing's, or their respective subsidiaries', debt agreements require that,
after the Distribution, the Company or Billing, and/or their respective
subsidiaries, each remain liable as a guarantor and continue to pledge
security with respect to certain indebtedness that cannot be economically
separated under existing arrangements and allocated to only the Company or
only Billing prior to the Distribution Date, each of the Company and Billing
has agreed in the Distribution Agreement to pay annually to each other a
credit support fee equal to 1% per annum of the average monthly balance of
indebtedness guaranteed by one on behalf of the other for as long as such
guarantees continue after the Distribution Date.
The Company has also entered into certain other agreements with Billing in
connection with the Distribution Agreement that set forth certain specific
allocations of liabilities between Billing and the Company. These agreements
include the Benefit Plans and Employment Matters Allocation Agreement, the Tax
Sharing Agreement, the Transitional Services and Sublease Agreement, the Zero
Plus-Zero Minus Billing and Information Management Services Agreement, the One
Plus Billing and Information Management Services Agreement, the
Telecommunications Agreement and the Leasing Agreement, each dated as of July
10, 1996. The Benefit Plans and Employment Matters Allocation Agreement
provides that, effective as of the Distribution Date, Billing will, or cause one
or more of its subsidiaries to, assume or retain, as the case may be, all
liabilities of the Company, to the extent unpaid as of the Distribution Date,
under employee benefit plans, policies, arrangements, contracts and agreements,
with respect to employees who, on or after the Distribution Date will be
employees of Billing or its subsidiaries, and the Company will, or cause one or
more of its subsidiaries to, assume or retain, as the case may be, all
liabilities of the Company, to the extent unpaid as of the Distribution Date,
under employee benefit plans, policies, arrangements, contracts and agreements
with respect to employees who on or after the Distribution Date
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will be employees of the Company or its subsidiaries. The Benefit Plans and
Employment Matters Allocation Agreement also provides for the adjustment to
the exercise price of each outstanding option issued under the Company's 1990
Employee Stock Option Plan and 1993 Non-Employee Director Plan to allocate
the exercise price of each such option among such option and the option that
will be issued by Billing immediately prior to the Distribution under similar
plans adopted by Billing to such option holders for an equal number of shares
of Billing Common Stock on the basis of the relative fair market values of
the underlying common stock of each of the Company and Billing after the
Distribution. Further, all restrictions on the Company Common Stock awarded
under the Company's Restricted Stock Plan shall lapse immediately prior to
the Distribution and all such shares shall vest immediately prior to the
Distribution.
The Tax Sharing Agreement provides that with respect to periods ending on
or before September 1996, the fiscal year end for the Company, the Company is
responsible for (i) filing both consolidated federal tax returns for the
Company's affiliated group and combined or consolidated state tax returns for
any group that includes a member of the Company's affiliated group, including in
each case Billing and its subsidiaries for the relevant periods of time such
companies were members of the applicable group, and (ii) paying the taxes
related to such returns (including any subsequent adjustments resulting from the
redetermination of tax liabilities by the applicable taxing authorities).
Billing will reimburse the Company the taxes attributable to Billing or any of
its subsidiaries and the cost of preparation of the associated tax returns
related thereto.
Under the Transitional Services and Sublease Agreement (i) the Company will
provide to Billing for six months after the Distribution Date certain services
requested by Billing for the conduct of Billing's business; (ii) the Company
will sublease to Billing certain office space on a month to month basis and
certain other office space through March 31, 1997 with Billing to share equally
the Company's out of pocket costs on the space should the Company be unable to
sublease the space for the remainder of the term ending in January 1998; and
(iii) Billing will provide to USLD for six months after the Distribution Date
certain services requested by the Company for the conduct of the Company's
business. The fee for the Company's and Billing's services will be based on a
cost plus basis or other negotiated arms length basis. The subleases are on the
same terms and conditions as the terms and conditions of the lease agreements
pursuant to which the Company leases such space from its landlord. Subject to
the termination provisions of the agreement, the Company and Billing will be
free to procure such services from outside vendors or may develop an in-house
capability to provide such services and Billing may lease office space from
outside landlords.
Under the Zero Plus-Zero Minus Billing and Information Management Services
Agreement and the One Plus Billing and Information Management Services
Agreement, Billing will provide to the Company billing through local telephone
companies for certain qualifying zero plus, zero minus and one plus direct
dialed or operator assisted station to station or person to person calls. The
Company will be charged for the local telephone company's applicable fees,
charges, chargebacks, credits and adjustments as prescribed in the agreement
between Billing and the local telephone company as well as billing service fees,
charges, chargebacks, credits and assessments of Billing. Each agreement has an
initial term of three years. The Telecommunications Agreement provides that the
Company will provide to Billing certain direct dial long distance and 800
services for a three year term with additional one year automatic renewal
unless terminated as provided in the agreement. Finally, under the Leasing
Agreement the Company may elect to lease an airplane owned by Billing on an
hourly or volume usage basis.
The foregoing summaries of the Distribution Agreement, Benefit Plans and
Employment Matters Allocation Agreement, Tax Sharing Agreement, Transitional
Services and Sublease Agreement, Zero Plus-Zero Minus Billing and Information
Management Services Agreement and Telecommunications Agreement are qualified in
their entirety by reference to the respective agreements that are included as
Exhibits 10.1, 10.2, 10.3, 10.4, 10.5 and 10.6 to this Form 8-K.
On August 1, 1996, the Board of Directors of the Company received the
updated opinions, effective as of August 2, 1996, of (i) The Chicago
Corporation to the effect that, based upon the factors set forth in such
opinion, the Distribution is in the best interests of the stockholders of the
Company from a financial point of view after considering other alternatives
that were available regarding Billing; (ii) Houlihan Lokey Howard & Zukin,
Inc. to the effect that based upon the conditions set forth therein (a) with
respect to the Company before the Distribution and with respect to each of
the Company and Billing, assuming the Distribution is consummated as
proposed, immediately after and giving effect to the Distribution on a pro
forma basis (1) the fair value of such company's aggregate assets would
exceed such company's total liabilities (including contingent liabilities),
and (2) the present fair salable value for such company's aggregate assets
would be greater than such company's probable liabilities on its debts as
such debts become absolute and mature or due; (b) with respect to each of the
Company and Billing, assuming the Distribution is consummated as proposed,
immediately after the giving effect to the Distribution (1) such company
would be able to pay its debts and other liabilities (including contingent
liabilities) as they become absolute and mature or due, and (2) the capital
remaining in such company after the Distribution would not be unreasonably
small for the business in which such company is engaged, as management has
indicated it is now conducted and is proposed to be conducted following
consummation of the Distribution; and (c) the excess of the value of
aggregate assets of the Company, before consummation of the Distribution,
over the total identified liabilities (including contingent liabilities) of
the Company would equal or exceed the value of the Distribution to the
Company stockholders plus the stated capital of the Company; and (iii) Arter
& Hadden, based upon certain representations made by the Company and Billing,
to the effect, among other things, that receipt of shares of Billing
Common Stock will be tax free for federal income tax purposes to the
stockholders of the Company and that the Company will not recognize income,
gain or loss as a result of the Distribution. The Board of Directors,
following review and consideration of such opinions, accepted such opinions.
The Board of Directors determined that all conditions to the Distribution
have been satisfied. Accordingly, the Board of Directors determined that the
Distribution shall occur on August 2, 1996.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Pursuant to the instructions to Item 7 of Form 8-K, the following documents
are provided as Exhibits to this Form 8-K:
(a) EXHIBITS.
EXHIBIT NO. DOCUMENT DESCRIPTION
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10.1 Distribution Agreement dated as of July 10, 1996 between the
Company and Billing (filed herewith).
10.2 Benefit Plans and Employment Matters Allocation Agreement dated
as of July 10, 1996 between the Company (filed herewith).
10.3 Tax Sharing Agreement dated as of July 10, 1996 between the
Company and Billing (filed herewith).
10.4 Transitional Services and Sublease Agreement dated as of July 10,
1996 between the Company and Billing (filed herewith).
10.5 Zero Plus-Zero Minus Billing and Information Management Services
Agreement dated as of July 10, 1996 between the Company and
Billing (filed herewith).
10.6 Telecommunications Agreement dated as of July 10, 1996 between
the Company and Billing (filed herewith).
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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.
U.S. LONG DISTANCE CORP.
July 31, 1996
By: /s/ Larry M. James
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Larry M. James, President
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INDEX TO EXHIBITS
PAGE NO. IN
EXHIBIT NO. DOCUMENT DESCRIPTION EXHIBIT VOLUME
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10.1 Distribution Agreement dated as of July 10, 1996 between
the Company and Billing (filed herewith).
10.2 Benefit Plans and Employment Matters Allocation Agreement
dated as of July 10, 1996 between the Company and Billing
(filed herewith).
10.3 Tax Sharing Agreement dated as of July 10, 1996 between
the Company and Billing (filed herewith).
10.4 Transitional Services and Sublease Agreement dated as of
July 10, 1996 between the Company and Billing (filed herewith).
10.5 Zero Plus-Zero Minus Billing and Information Management
Services Agreement dated as of July 10, 1996 between the
Company and Billing (filed herewith).
10.6 Telecommunications Agreement dated as of July 10, 1996
between the Company and Billing (filed herewith).
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DISTRIBUTION AGREEMENT
between
U.S. LONG DISTANCE CORP.
and
BILLING INFORMATION CONCEPTS CORP.
dated as of
July 10, 1996
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TABLE OF CONTENTS
Page
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ARTICLE I. DEFINITIONS..................................................... 1
Section 1.01. General.............................................. 1
Section 1.02. Terms Defined Elsewhere in Agreement................. 8
ARTICLE II. PRELIMINARY TRANSFERS.......................................... 9
Section 2.01. Preliminary Transfers................................ 9
Section 2.02. Transfers of Assets from Billing Group Subsidiaries
to USLD or Telecommunications Group Subsidiaries... 10
Section 2.03. Transfers Not Effected Prior to the Distribution..... 10
Section 2.04. Cooperation Regarding Assets......................... 10
Section 2.05. No Representations or Warranties; Consents........... 11
Section 2.06. Preliminary Transfer................................. 11
Section 2.07. Cash Allocation; Cash Management..................... 12
ARTICLE III. ASSUMPTION AND SATISFACTION OF LIABILITIES.................... 13
Section 3.01. Assumption and Satisfaction of Liabilities........... 13
Section 3.02. USLD and Billing Guarantees.......................... 13
ARTICLE IV. OBLIGATIONS FOR USLD WARRANTS
Section 4.01. Sharing of Warrant Obligations....................... 13
Section 4.02. Issuance of Billing Common Stock Upon Exercise
of Warrants........................................ 14
Section 4.03. Allocation of Exercise Price......................... 14
Section 4.04. Amendment to Warrants................................ 14
ARTICLE V. OBLIGATIONS FOR NON-PLAN OPTIONS................................ 15
Section 5.01. Grant of Non-Plan Option............................. 15
ARTICLE VI. THE DISTRIBUTION............................................... 15
Section 6.01. Cooperation Prior to the Distribution................ 15
Section 6.02. USLD Board Action; Conditions Precedent to the
Distribution....................................... 16
Section 6.03. The Distribution..................................... 17
Section 6.04. Securities Filings................................... 17
ARTICLE VII. INDEMNIFICATION............................................... 17
Section 7.01. Indemnification by USLD.............................. 17
Section 7.02. Indemnification by Billing........................... 18
Section 7.03. Insurance Proceeds................................... 18
Section 7.04. Procedure for Indemnification........................ 18
Section 7.05. Remedies Cumulative.................................. 20
Section 7.06. Survival of Indemnities.............................. 20
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ARTICLE VIII. CERTAIN ADDITIONAL MATTERS................................... 20
Section 8.01. Billing Board........................................ 20
Section 8.02. Resignations; USLD Board............................. 21
Section 8.03. Certificate and Bylaws............................... 21
Section 8.04. Certain Post-Distribution Transactions............... 21
Section 8.05. Billing Rights Plan.................................. 22
Section 8.06. Use of the "USLD" Name and the USLD Logo............. 22
Section 8.07. Noncompetition Agreement............................. 22
ARTICLE IX. ACCESS TO INFORMATION AND SERVICES............................. 23
Section 9.01. Provision of Corporate Records....................... 23
Section 9.02. Access to Information................................ 24
Section 9.03. Production of Witnesses.............................. 24
Section 9.04. Reimbursement........................................ 24
Section 9.05. Retention of Records................................. 25
Section 9.06. Confidentiality...................................... 25
Section 9.07. Privileged Matters................................... 25
ARTICLE X. INSURANCE....................................................... 27
Section 10.01. Policies and Rights Included Within the Billing
Group Assets....................................... 27
Section 10.02. Post-Distribution Date Claims........................ 27
Section 10.03. Administration and Reserves.......................... 28
Section 10.04. Agreement for Waiver of Conflict and Shared Defense.. 28
ARTICLE XI. MISCELLANEOUS.................................................. 29
Section 11.01. Complete Agreement; Construction..................... 29
Section 11.02. Expenses............................................. 29
Section 11.03. Governing Law........................................ 29
Section 11.04. Notices.............................................. 29
Section 11.05. Amendments........................................... 30
Section 11.06. Successors and Assigns............................... 30
Section 11.07. Termination.......................................... 30
Section 11.08. Subsidiaries......................................... 30
Section 11.09. No Third-Party Beneficiaries......................... 30
Section 11.10. Titles and Headings.................................. 30
Section 11.11. Exhibits and Schedules............................... 30
Section 11.12. Legal Enforceability................................. 30
Section 11.13. Arbitration of Disputes.............................. 30
Section 11.14. Prompt Action........................................ 31
Section 11.15. Applicability to Related Agreements.................. 31
INDEX OF EXHIBITS AND SCHEDULES............................................ 33
(ii)
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DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT (this "Agreement") is made as of this 10th
day of July, 1996, between U.S. Long Distance Corp., a Delaware corporation
("USLD"), and Billing Information Concepts Corp., a Delaware corporation and
wholly-owned subsidiary of USLD ("Billing").
RECITALS
WHEREAS, USLD, through its subsidiaries, (i) provides direct dial long
distance services, primarily to commercial customers, and operator services for
the hospitality and private pay phone industries (the "Telecommunications
Group") and (ii) provides billing clearinghouse and information management
services for other direct dial long distance and operator services companies and
for information providers, equipment suppliers and other telecommunication
services providers (the "Billing Group").
WHEREAS, the Board of Directors of USLD has determined that it is in the
best interests of USLD and the stockholders of USLD to separate the
Telecommunications Group and the Billing Group, and, in order to effect such
separation, to cause certain USLD subsidiaries conducting the business of the
Billing Group to merge with and into two wholly owned subsidiaries of Billing
and for the Telecommunications Group to transfer to Billing certain assets
and liabilities relating principally to the Billing Group, for the Billing
Group to transfer to USLD and/or the Telecommunications Group certain assets
and liabilities not relating principally to the Billing Group and to engage
in certain other transactions (the "Preliminary Transfers"), and thereafter
to distribute all of the outstanding shares of common stock, par value $.01
per share, of Billing to the holders of USLD Common Stock (the
"Distribution");
WHEREAS, in connection with the Distribution, Billing and USLD have
determined that it is necessary and desirable to set forth the principal
transactions required to effect the Distribution, and to set forth the
agreements that will govern certain matters following the Distribution.
NOW, THEREFORE, in consideration of the mutual agreements, provisions and
covenants contained in this Agreement, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.01. GENERAL. As used in this Agreement, the following terms
shall have the following meanings.
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ACTION: Any action, claim, suit, arbitration, inquiry, proceeding
or investigation by or before any court, any government or other regulatory or
administrative agency or commission or any arbitration tribunal.
AFFILIATE: Means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by, or under direct or
indirect common control with, such specified Person. For purposes of this
definition, "control," when used with respect to any Person, means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" shall have meanings correlative to
the foregoing. Notwithstanding the foregoing, (i) the Affiliates of USLD shall
not include Billing, the Billing Group Subsidiaries or any other Person that
otherwise would be an Affiliate of USLD by reason of USLD's ownership of the
capital stock of Billing prior to the Distribution or the fact that any officer
or director of Billing or any of the Billing Group Subsidiaries shall also serve
as an officer or director of USLD or any of the Telecommunications Group
Subsidiaries, and (ii) the Affiliates of Billing shall not include USLD, the
Telecommunications Group Subsidiaries or any other Person that otherwise would
be an Affiliate of Billing by reason of USLD's ownership of the capital stock of
Billing prior to the Distribution or the fact that any officer or director of
Billing or any of the Billing Group Subsidiaries shall also serve as an officer
or director of USLD or any of the Telecommunications Group Subsidiaries.
AGENT: Montreal Trust Company of Canada, as distribution agent
appointed by USLD to distribute the Billing Common Stock pursuant to the
Distribution.
BENEFIT PLANS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT: The
Benefit Plans and Employment Matters Allocation Agreement between Billing and
USLD, which agreement shall be entered into on or prior to the Distribution Date
in substantially the form of EXHIBIT A attached hereto.
BILLING BOARD: The Board of Directors of Billing.
BILLING BOOKS AND RECORDS: The books and records (including
computerized records) of Billing and the Billing Group Subsidiaries and any
other books and records of USLD's Subsidiaries that relate principally to the
Billing Group, are necessary to conduct the Billing Group Business, or are
required by law to be retained by Billing or a Billing Group Subsidiary,
including, without limitation, all such books and records relating to Billing
Group Employees, all files relating to any Action being assumed by Billing as
part of the Billing Group Liabilities, original corporate minute books, stock
ledgers and certificates and corporate seals, and all licenses, leases,
agreements and filings, relating to Billing, the Billing Group Subsidiaries or
the Billing Group Business (but not including the USLD Books and Records,
provided that Billing shall have access to, and have the right to obtain
duplicate copies of, the USLD Books and Records that pertain to the Billing
Group Business in accordance with the provisions of this Agreement).
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BILLING BYLAWS: The Bylaws of Billing, substantially in the form
of EXHIBIT B, to be in effect at the Distribution Date.
BILLING CERTIFICATE: The Amended and Restated Certificate of
Incorporation of Billing, substantially in the form of EXHIBIT C, to be in
effect at the Distribution Date.
BILLING COMMON STOCK: The common stock, par value $.01 per
share, of Billing (together with any rights issued pursuant to the Billing
Rights Plan).
BILLING GROUP: Billing and the Billing Group Subsidiaries,
collectively.
BILLING GROUP AGREEMENTS: All agreements to which USLD or any of
the Telecommunications Group Subsidiaries is a party relating principally to the
Billing Group Business.
BILLING GROUP ASSETS: (i) The Billing Group Subsidiaries' Stock;
(ii) the Transferred Intellectual Property; (iii) the Billing Books and Records;
(iv) the Billing Group Agreements; (v) all other assets, absolute or contingent,
expressly to be assigned or allocated to Billing or the Billing Group
Subsidiaries under this Agreement or the Related Agreements; and (vi) any other
assets of USLD and its Subsidiaries used principally in the Billing Group
Business and not held by Billing or one of the Billing Group Subsidiaries, but
excluding any assets related to the USLD Group's direct billing function for the
billing of direct dial long distance charges.
BILLING GROUP BUSINESS: The business conducted by the Billing
Group, as referenced in the recitals to this Agreement.
BILLING GROUP EMPLOYEES: The meaning specified in the Benefit
Plans and Employment Matters Allocation Agreement.
BILLING GROUP LIABILITIES: (i) All of the Liabilities of the
Billing Group under, or to be retained or assumed by Billing or any of the
Billing Group Subsidiaries pursuant to, this Agreement or any of the Related
Agreements; (ii) all Liabilities for payment, after the Distribution Date, of
outstanding drafts of USLD and its Subsidiaries existing as of the Distribution
Date attributable to the conduct of the Billing Group Businesses by the Billing
Group; (iii) all Liabilities of the Billing Group Subsidiaries, other than
Liabilities transferred to USLD or to any Telecommunications Group Subsidiary as
part of the Preliminary Transfers; and (iv) all other Liabilities arising out
of, or in connection with, any of the Billing Group Assets or the Billing Group
Business, including common area maintenance or other adjustments under
applicable lease agreements, but excluding any liabilities related to the USLD
Group's direct billing function for the billing of direct dial long distance
charges; PROVIDED, HOWEVER, that the Billing Group Liabilities shall not
include any Financing Obligations of USLD or the Telecommunications Group
Subsidiaries, except to the extent otherwise set forth above or reflected in the
Billing Pro Forma Balance Sheet.
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BILLING GROUP POLICIES: All Policies, current or past, which are
owned or maintained by or on behalf of USLD or any of its Affiliates or
predecessors, which relate to the Billing Group Business and the
Telecommunications Group Business, and which Policies are to be assigned to the
Billing Group.
BILLING GROUP SUBSIDIARIES: The Subsidiaries identified on
SCHEDULE 1.01(a) and directly or indirectly controlled by Billing at the time
of the Distribution.
BILLING GROUP SUBSIDIARIES' STOCK: All of the issued and
outstanding capital stock of the Billing Group Subsidiaries.
BILLING GUARANTEE: (a) Any guarantee by Billing or any Billing
Group Subsidiary of the performance or obligation of USLD or any
Telecommunications Group Subsidiary under any agreement or obligation to which
USLD or any Telecommunications Group Subsidiary is a party and (b) any
continuing liability of Billing under any Billing Group Agreement transferred to
USLD or any Telecommunications Group Subsidiary pursuant to this Agreement or
retained by Billing and held by Billing in trust for USLD pursuant to Section
2.03 of this Agreement.
BILLING PRO FORMA BALANCE SHEET: The Pro Forma Consolidated
Balance Sheet of Billing as of June 30, 1996, attached hereto as EXHIBIT D.
CREDIT SUPPORT FEE: A fee equal to one percent (1%) per annum of
the monthly average guaranteed rental, performance and other obligations to
which the credit support applies.
CUT OFF DATE: The day preceding the Record Date.
DISTRIBUTION DATE: The date determined by the USLD Board as the
date on which Distribution shall be effected, which Distribution Date is
contemplated by the USLD Board to occur on or about August 2, 1996.
DISTRIBUTION RECORD DATE: The date established by the USLD
Board as the date for taking a record of the Holders of USLD Common Stock
entitled to participate in the Distribution, which Distribution Record
Date has been established as July 29, 1996, subject to the fulfillment on
or before August 2, 1996 of certain conditions to the Distribution as
provided in Section 6.02.
FINANCING OBLIGATIONS: All (i) indebtedness for borrowed money,
(ii) obligations evidenced by bonds, notes, debentures or similar instruments,
(iii) obligations under capitalized leases and deferred purchase arrangements,
(iv) reimbursement or other obligations relating to letters of credit or
similar arrangements, and (v) obligations to guarantee, directly or indirectly,
any of the foregoing types of obligations on behalf of others.
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HOLDERS: The holders of record of USLD Common Stock as of the
Distribution Record Date.
INFORMATION STATEMENT: The definitive Information Statement
provided to holders of USLD Common Stock in connection with the Distribution.
INSURANCE PROCEEDS: Those moneys (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively-rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.
INSURED CLAIMS: Those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the Policies,
whether or not subject to deductibles, co-insurance, uncollectibility or
retrospectively-rated premium adjustments, but only to the extent that such
Liabilities are within applicable Policy limits, including aggregates.
IRS: The Internal Revenue Service.
LEASING AGREEMENT: The Leasing Agreement between USLD and
Billing, pursuant to which USLD agrees to pay certain usage charges and
expenses relating to the leasing of an airplane owned by Billing, which
agreement shall be entered into on or prior to the Distribution Date in
substantially the form of EXHIBIT E attached hereto.
LIABILITIES: Any and all debts, liabilities and obligations,
absolute or contingent, matured or unmatured, liquidated or unliquidated,
accrued or unaccrued, known or unknown, whenever arising, including all costs
and expenses relating thereto, and including, without limitation, those debts,
liabilities and obligations arising under any law, rule, regulation, Action,
threatened Action, order or consent decree of any governmental entity or any
award of any arbitrator of any kind, and those arising under any contract,
commitment or undertaking.
PERSON: Any individual, corporation, partnership, association,
trust, estate or other entity or organization, including any governmental entity
or authority.
POLICIES: Insurance policies and insurance contracts of any kind
relating to the Billing Group Business or the Telecommunications Group Business
as conducted prior to the Distribution Date, including without limitation
primary and excess policies, comprehensive general liability policies,
automobile, aircraft and workers' compensation insurance policies, and
self-insurance arrangements, together with the rights and benefits thereunder.
POST DISTRIBUTION BILLING CLOSING STOCK PRICE: The per share price
equal to the average of the Billing Closing Stock Price for each of the ten
consecutive trading days beginning on and including the Distribution Date.
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POST DISTRIBUTION USLD CLOSING STOCK PRICE: The per share price
equal to the average of the USLD Closing Stock Price for each of the ten
consecutive trading days beginning on and including the Distribution Date.
PRELIMINARY TRANSFER INSTRUMENTS: Collectively, the various
agreements, instruments and other documents to be entered into to effect the
Preliminary Transfers and the assignment of assets and the assumption of
Liabilities contemplated by this Agreement and the Related Agreements in the
manner contemplated herein and therein.
PRIVILEGES: All privileges that may be asserted under applicable
law including, without limitation, privileges arising under or relating to the
attorney-client relationship (including but not limited to the attorney-client
and work product privileges), the accountant-client privilege, and privileges
relating to internal evaluative processes.
PRIVILEGED INFORMATION: All information to which USLD, Billing or
any of their respective Subsidiaries are entitled to assert the protection of a
Privilege.
RELATED AGREEMENTS: All of the agreements, instruments,
understandings, assignments or other arrangements set forth in writing, which
are entered into in connection with the transactions contemplated hereby,
including, without limitation, the Preliminary Transfer Agreements, the Benefit
Plans and Employment Matters Allocation Agreement, the Tax Sharing Agreement,
and the Transitional Services and Sublease Agreement and the Leasing Agreement.
SHARED POLICIES: All Policies, current or past, that are owned or
maintained by or on behalf of USLD or any of its Subsidiaries or their
respective predecessors, which relate to both the Telecommunications Group
Business and the Billing Group Business.
SUBSIDIARY: With respect to any Person, (a) any corporation of
which at least a majority in interest of the outstanding voting stock (having by
the terms thereof voting power under ordinary circumstances to elect a majority
of the directors of such corporation, irrespective of whether or not at the time
stock of any other class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time,
directly or indirectly, owned or controlled by such Person, by one or more
Subsidiaries of such Person, or by such Person and one or more of its
Subsidiaries, or (b) any corporate or non-corporate entity in which such Person
and/or one or more Subsidiaries of such Person, directly or indirectly, at the
date of determination thereof, has an ownership interest and which is included
in the consolidated financial reports of such Person consistent with generally
accepted accounting principles.
SUPPLEMENTAL WARRANT AGREEMENTS: The Amendments to the Warrant
Certificates executed by USLD and Billing reflecting the adjustments to the
Warrants necessary to implement the agreements set forth in Article IV.
TAX OPINION: The Tax Opinion given by Arter & Hadden in
connection with the Distribution.
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TAX SHARING AGREEMENT: The Tax Sharing Agreement between Billing
and USLD, which agreement shall be entered into on or prior to the Distribution
Date in substantially the form of EXHIBIT F attached hereto.
TELECOMMUNICATIONS GROUP AGREEMENTS: All agreements to which USLD
or any of the Telecommunications Group Subsidiaries is a party relating
principally to the Telecommunications Group Business.
TELECOMMUNICATIONS GROUP ASSETS: The assets of USLD and the
Telecommunications Group Subsidiaries including without limitation: (i) the
capital stock of the Telecommunications Group Subsidiaries; (ii) the USLD Books
and Records; (iii) all of the assets expressly to be retained by, or assigned or
allocated to, USLD or any of the Telecommunications Group Subsidiaries under
this Agreement or the Related Agreements, including assets relating to the USLD
Group's direct billing function for the billing of direct dial long distance
charges; and (iv) any other assets, absolute or contingent, of USLD and its
Subsidiaries not comprising Billing Group Assets.
TELECOMMUNICATIONS GROUP BUSINESS: The business conducted by the
Telecommunications Group, as referenced in the recitals to this Agreement.
TELECOMMUNICATIONS GROUP EMPLOYEES: The meaning specified in the
Benefit Plans and Employment Matters Allocation Agreement.
TELECOMMUNICATIONS GROUP LIABILITIES: (i) all of the Liabilities
of USLD under, or to be retained or assumed by USLD or any of the
Telecommunications Group Subsidiaries pursuant to, this Agreement or any of the
Related Agreements; (ii) any Financing Obligations of USLD and its Subsidiaries
not constituting Billing Group Liabilities; (iii) all Liabilities for payment of
outstanding drafts of USLD attributable to the conduct of the Telecommunications
Group or to the Billing Group (to the extent not considered a Billing Group
Liability) existing as of the Distribution Date; (iv) all Liabilities
transferred to USLD or the Telecommunications Group Subsidiaries in the
Preliminary Transfers; (v) all other Liabilities arising out of, or in
connection with, any of the Telecommunications Group Assets or the
Telecommunications Group Business, including liabilities relating to the USLD
Group's direct billing function for the billing of direct dial long distance
charges; and (vi) all other Liabilities of USLD and its Subsidiaries not
constituting Billing Group Liabilities, if any, as defined herein, whether past
or present.
TELECOMMUNICATIONS GROUP SUBSIDIARIES: All Subsidiaries of USLD,
except Billing and the Billing Group Subsidiaries.
TRANSFERRED INTELLECTUAL PROPERTY: The intangible properties and
rights listed on Schedule 1.01(b) hereto to be conveyed by USLD to Billing in
connection with the Distribution.
TRANSITIONAL SERVICES AND SUBLEASE AGREEMENT: The Transitional
Services and Sublease Agreement by and between USLD and Billing pursuant to
which (a) such parties will provide to the other certain transitional
services after consummation of the Distribution, (b)
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Billing will agree to sublease certain space from USLD on a month-to-month
basis and (c) Billing will assume all of the liabilities for certain other
space from USLD until March 31, 1997, substantially in the form attached hereto
as EXHIBIT G.
USLD BOARD: The Board of Directors of USLD as it is constituted
prior to the Distribution Date.
USLD BOOKS AND RECORDS: The books and records (including
computerized records) of USLD and the Telecommunications Group Subsidiaries and
any other books and records of USLD's Subsidiaries that relate principally to
the Telecommunications Group, are necessary to operate the Telecommunications
Group, or are required by law to be retained by USLD or a Telecommunications
Group Subsidiary, including, without limitation, all books and records relating
to Telecommunications Group Employees, all files relating to any Action
pertaining to the Telecommunications Group Liabilities, original corporate
minute books, stock ledgers and certificates and corporate seals, and all
licenses, leases, agreements and filings, relating to USLD, the
Telecommunications Group Subsidiaries or the Telecommunications Group Business
(but not including the Billing Books and Records, provided that USLD shall have
access to, and shall have the right to obtain duplicate copies of, the Billing
Books and Records in accordance with the provisions of this Agreement.)
USLD CLOSING STOCK PRICE: The Nasdaq Stock Market's National
Market closing price per share for USLD Common Stock on the applicable date,
trading regular way.
USLD COMMON STOCK: The common stock, par value $.01 per share, of
USLD.
USLD GROUP: USLD and the Telecommunications Group Subsidiaries,
collectively.
USLD GUARANTEE: (a) Any guarantee by USLD or any
Telecommunications Group Subsidiary of the performance or obligation of Billing
or any Billing Group Subsidiary under any agreement or obligation to which
Billing or any Billing Group Subsidiary is a party and (b) any continuing
liability of USLD under any Telecommunications Group Agreement transferred to
Billing or any Billing Group Subsidiary pursuant to this Agreement or retained
by USLD and held by USLD in trust for Billing pursuant to Section 2.03 of this
Agreement.
USLD PRO FORMA BALANCE SHEET: The Pro Forma Consolidated Balance
Sheet of USLD as of June 30, 1996, attached hereto as EXHIBIT H.
WARRANTS: The Warrants (i) dated February 22, 1996 by and
between USLD and Paytel Northwest, Inc. to purchase an aggregate of 100,000
shares of USLD Common Stock and (ii) dated February 23, 1996, by and between
USLD and Communications Central, Inc. to purchase an aggregate of 125,000
shares of USLD Common Stock.
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Section 1.02. TERMS DEFINED ELSEWHERE IN AGREEMENT. Each of the
following terms is defined in the Section set forth opposite such term:
TERM SECTION
Billing............................................... Recitals
Billing Applicable Percentage......................... 4.03
Billing Group......................................... Recitals
Billing Indemnifiable Loss............................ 7.01
Billing Indemnitees................................... 7.01
Billing Initial Trading Price......................... 4.03
Billing Non-Plan Option............................... 5.01
Billing Rights........................................ 8.05
Billing Rights Plan................................... 8.05
Billing Suspension Period............................. 4.05
Cash.................................................. 2.07
Consents.............................................. 6.01
Distribution.......................................... Recitals
Exchange Act ......................................... 6.02
Indemnifiable Loss.................................... 7.02
Indemnifying Party.................................... 7.03
Indemnitee............................................ 7.03
Information........................................... 9.02
Preliminary Transfers................................. Recitals
Sales Price........................................... 4.03
Telecommunications Group.............................. Recitals
Third-Party Claim..................................... 7.04
Trading Day........................................... 4.03
USLD.................................................. Recitals
USLD Indemnifiable Loss............................... 7.02
USLD Indemnitees...................................... 7.02
USLD Initial Cash Balance............................. 2.07
USLD Initial Trading Price............................ 4.03
ARTICLE II.
PRELIMINARY TRANSFERS
Section 2.01. PRELIMINARY TRANSFERS. Prior to the Distribution Date,
USLD shall take or cause to be taken all actions necessary (i) to contribute
two of its wholly owned subsidiaries (U.S. Billing Corp. and U.S.
Billing, Inc.) to Billing, (ii) to cause MegaPlus Dialing, Inc., its wholly
owned subsidiary to sell to USLD for $8,785,000 all of the preferred and
common shares of ZeroPlus Dialing, Inc. that it owns and then to dissolve,
(iii) to cause ZeroPlus Dialing, Inc. to redeem all the preferred and
repurchase all of the common shares previously sold by
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MegaPlus Dialing, Inc. to USLD for $8,785,000, (iv) cause its two
subsidiaries engaged in the Billing Group Business (Zero Plus Dialing, Inc.
and Enhanced Services Billing, Inc.) to be merged with U.S. Billing Corp. and
U.S. Billing, Inc., with Zero Plus Dialing, Inc. and Enhanced Services
Billing, Inc. surviving, and Zero Plus Dialing, Inc. changing its name to
Billing Information Concepts, Inc., (v) to cause the transfer, assignment,
delivery and conveyance to Billing or any Billing Group Subsidiary of all of
USLD's and its Subsidiaries' right, title and interest in the remaining
Billing Group Assets and (vi) to effect the cash allocation set forth in
Section 2.07 below.
Section 2.02. TRANSFERS OF ASSETS FROM BILLING GROUP SUBSIDIARIES TO
USLD OR TELECOMMUNICATIONS GROUP SUBSIDIARIES. Prior to the Distribution
Date, Billing shall take or cause to be taken all action necessary to cause the
transfer, assignment, delivery and conveyance to USLD or any Telecommunications
Group Subsidiary of all of Billing's and its Subsidiaries' right, title and
interest in the Telecommunications Group Assets, if any.
Section 2.03. TRANSFERS NOT EFFECTED PRIOR TO THE DISTRIBUTION. To
the extent that any transfers required and legally made by this Article II shall
not have been fully effected on the Distribution Date, the parties shall
cooperate to effect such transfers as promptly as shall be practicable following
the Distribution Date. Nothing herein shall be deemed to require the transfer
of any assets or the assumption of any Liabilities which by their terms or
operation of law cannot be transferred or assumed; PROVIDED, HOWEVER, that
USLD and Billing and their respective Subsidiaries and Affiliates shall
cooperate in seeking to obtain any necessary consents or approvals for the
transfer of all assets and Liabilities contemplated to be transferred pursuant
to this Article II. In the event that any such transfer of assets or
Liabilities has not been consummated effective as of the Distribution Date, the
party retaining such asset or Liability shall thereafter hold such asset in
trust for the use and benefit of the party entitled thereto (at the expense of
the party entitled thereto) and retain such Liability for the account of the
party by whom such Liability is to be assumed pursuant hereto, and take such
other actions as may be reasonably required in order to place the parties,
insofar as reasonably possible, in the same position as would have existed had
such asset been transferred or such Liability been assumed as contemplated
hereby. As and when any such asset or Liability becomes transferable, such
transfer and assumption shall be effected forthwith. The parties agree that,
except as set forth in this Section 2.03, as of the Distribution Date, each
party hereto shall be deemed to have acquired complete and sole beneficial
ownership over all of the assets, together with all rights, powers and
privileges incidental thereto, and shall be deemed to have assumed in accordance
with the terms of this Agreement all of the Liabilities, and all duties,
obligations and responsibilities incidental thereto, which such party is
entitled to acquire or required to assume pursuant to the terms of this
Agreement.
Section 2.04. COOPERATION REGARDING ASSETS. In the case that at any
time after the Distribution Date, Billing reasonably determines that any of the
Telecommunications Group Assets are essential for the conduct of the Billing
Group Business, or USLD reasonably determines that any of the Billing Group
Assets are essential for the conduct of the Telecommunications Group Business,
and the nature of such assets makes it impracticable for Billing or USLD, as the
case may be, to obtain substitute assets or to make alternative
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arrangements on commercially reasonable terms to conduct their respective
businesses, and reasonable provisions for the use thereof are not already
included in the Related Agreements, then Billing (with respect to the Billing
Group Assets) and USLD (with respect to the Telecommunications Group Assets)
shall cooperate to make such assets available to the other party on
commercially reasonable terms, as may be reasonably required for such party
to maintain normal business operations (provided that such assets shall be
required to be made available only until such time as the other party may
reasonably obtain substitute assets or make alternative arrangements on
commercially reasonable terms to permit it to maintain normal business
operations.)
Section 2.05. NO REPRESENTATIONS OR WARRANTIES; CONSENTS. Except as
specifically provided in this Agreement or in any Related Agreement, each of
the parties hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement, or otherwise, representing or warranting in
any way (i) as to the value or freedom from encumbrance of, or any other matter
concerning, any assets of such party, or (ii) as to the legal sufficiency to
convey title to any asset transferred pursuant to this Agreement or any Related
Agreement. It is also agreed and understood that there are no warranties,
express or implied, as to the merchantability or fitness of any of the assets
either transferred to or retained by the parties, as the case may be, and all
such assets shall be "as is, where is" and "with all faults"; provided, however,
that the absence of warranties shall have no effect upon the allocation of
Liabilities under this Agreement and provided further that Billing represents
and warrants that, prior to the Distribution Date, Billing and the Billing Group
have maintained their cash balances, accounts payable, accounts receivable and
borrowings under their line of credit with FINOVA Capital Corporation in a
manner consistent with the customary practices of the Billing Group Business.
Each party hereto understands and agrees that no party hereto is, in this
Agreement, in any Related Agreement or otherwise, representing or warranting in
any way that the obtaining of any consents or approvals, the execution and
delivery of any amendatory agreements and the making of any filings or
applications contemplated by this Agreement, any Related Agreement or otherwise
will satisfy the provisions of any or all applicable laws or judgments or other
instruments or agreements relating to such assets. Notwithstanding the
foregoing, the parties shall use their good faith efforts to obtain all consents
and approvals, to enter into all reasonable amendatory agreements and to make
all filings and applications that may be reasonably required for the
consummation of the transactions contemplated by this Agreement and the Related
Agreements, and shall take all such further reasonable actions as shall be
reasonably necessary to preserve for each of the Billing Group and the USLD
Group, to the greatest extent feasible, the economic and operational benefits of
the allocation of assets and Liabilities provided for in this Agreement. In
case at any time after the Distribution Date any further action is necessary or
desirable to carry out the purposes of this Agreement, proper officers and
directors of each party to this Agreement shall take all such necessary or
desirable action.
Section 2.06. PRELIMINARY TRANSFER INSTRUMENTS. In connection with
the Preliminary Transfers, the merger of USLD's subsidiaries engaged in the
Billing Group Business with wholly owned subsidiaries of Billing, the assignment
of assets and the assumption of Liabilities and other related transactions
contemplated by this Agreement and any Related Agreements, the parties shall
execute, or cause to be executed by the appropriate entities, the Preliminary
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Transfer Instruments in such forms as the parties shall reasonably agree. All
transactions involving capital stock shall be effected by means of delivery of
stock certificates and executed stock powers and notation on the stock record
books of the corporation or other legal entities and, to the extent required by
applicable law, by notation on public registries.
Section 2.07. CASH ALLOCATION; CASH MANAGEMENT.
(a) CASH ALLOCATION ON THE DISTRIBUTION DATE. As of the close of
business on the Distribution Date, Billing shall transfer to USLD out of the
cash bank balances and short-term investments ("Cash") that it and the
Billing Group Subsidiaries then hold Cash in an amount necessary for USLD's
working capital to be approximately $21,500,000 after taking into account the
payment by USLD of the direct costs of the Distribution and all Preliminary
Transfers ("USLD Initial Cash Balance"), and Billing shall retain all other
Cash. The calculation of the cash amount to be transferred will be based on
current assets and current liabilities as reported on the USLD balance sheet
at June 30, 1996. To the extent practicable, the parties shall use their
reasonable best efforts to take all necessary action to cause the Cash
balances of the USLD Group immediately prior to consummation of the
Distribution to equal the USLD Initial Cash Balance. In the event the actual
Cash balances of the USLD Group as of the Distribution are less than the USLD
Initial Cash Balance, the amount of the deficiency shall be recorded in the
accounts of USLD and Billing as of the Distribution Date as a payable from
Billing to USLD (which payable will be paid as promptly as practicable
following the Distribution); and in the event the actual Cash balances of the
USLD Group as of the Distribution Date exceeds the USLD Initial Cash Balance,
the amount of such excess shall be recorded in the accounts of USLD and
Billing as of the Distribution Date as a payable from USLD to Billing (which
payable will be paid as promptly as practicable following the Distribution).
(b) CASH MANAGEMENT AFTER THE DISTRIBUTION DATE. Billing shall
establish and maintain a separate cash management system and accounting records
with respect to the Billing Group effective as of 12:01 a.m. on the day
following the Distribution Date. Thereafter, (i) any payments by USLD or the
Telecommunications Group Subsidiaries on behalf of Billing or the Billing Group
Subsidiaries in connection with the Billing Group (including, without
limitation, any such payments in respect of Liabilities or other obligations of
Billing or the Billing Group Subsidiaries under this Agreement and the Related
Agreements) shall be recorded in the accounts of the Billing Group as a payable
from the Billing Group to the USLD Group; (ii) any payments by Billing or the
Billing Group Subsidiaries on behalf of USLD or the Telecommunications Group
Subsidiaries in connection with the Telecommunications Group Business
(including, without limitation, any such payments in respect of Liabilities or
other obligations of USLD or the Telecommunications Group Subsidiaries under
this Agreement and the Related Agreements) shall be recorded in the accounts of
the USLD Group as a payable from the USLD Group to the Billing Group; (iii) any
cash payments received by USLD and the Telecommunications Subsidiaries relating
to the Billing Group Business shall be recorded in the accounts of the USLD
Group as a payable from the USLD Group to the Billing Group; (iv) any cash
payments received by Billing or the Billing Group Subsidiaries relating to the
Telecommunications Group Business shall be recorded in the accounts of the
Billing Group as a payable from the Billing
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Group to the USLD Group; (v) Billing and USLD shall make adjustments for late
deposits, checks returned for not sufficient funds and other
post-Distribution Date transactions as shall be reasonable under the
circumstances consistent with the purpose and intent of this Agreement and
the Related Agreements; and (vi) the net balance due to the USLD Group or the
Billing Group, as the case may be, in respect of the aggregate amounts of
clauses (i), (ii), (iii), (iv) and (v) shall be paid by Billing or USLD, as
appropriate, as promptly as practicable. For purposes of this Section
2.07(b), the parties contemplate that the Telecommunications Group Business
and the Billing Group Business, including, but not limited to, the respective
parties' administration of accounts payable and accounts receivable, will be
conducted in the normal course.
ARTICLE III.
ASSUMPTION AND SATISFACTION OF LIABILITIES
Section 3.01. ASSUMPTION AND SATISFACTION OF LIABILITIES. Except as
set forth in the Benefit Plans and Employment Matters Allocation Agreement, the
Tax Sharing Agreement, the Transition Services and Sublease Agreement, the
Leasing Agreement or other Related Agreements, effective as of and after
the Distribution Date, (a) Billing shall, and/or shall cause the Billing Group
Subsidiaries to, assume, pay, perform and discharge in due course all of the
Billing Group Liabilities, and (b) USLD shall, and/or shall cause the
Telecommunications Group Subsidiaries, to assume, pay, perform and discharge in
due course all of the Telecommunications Group Liabilities.
Section 3.02. USLD AND BILLING GUARANTEES. (a) Billing shall use its
reasonable best efforts to obtain the release of any USLD Guarantee existing on
and after the Distribution Date. USLD shall use its best efforts to obtain the
release of any Billing Guarantee existing on and after the Distribution Date.
(b) Commencing on the first business day of calendar year 1997 after the
Distribution, and on the first business day of each calendar year thereafter,
Billing shall become obligated to pay to USLD, in cash, a Credit Support Fee in
respect of each USLD Guarantee that was outstanding at any date during the
immediately preceding calendar year and USLD shall become obligated to pay to
Billing, in cash, a Credit Support Fee in respect of each Billing Guarantee that
was outstanding at any date during the immediately preceding calendar year. The
Credit Support Fee payable with respect to any USLD Guarantee or Billing
Guarantee, as the case may be, shall be an amount equal to the Credit Support
Fee times the average outstanding monthly balance of the principal amount of
indebtedness for the applicable calendar year (and for calendar 1996 from the
Distribution Date through December 31, 1996), the payment of which
is guaranteed pursuant to the applicable USLD Guarantee or Billing Guarantee.
The aggregate amount of any such Credit Support Fee shall be paid by January 31,
of the applicable year.
ARTICLE IV.
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OBLIGATIONS FOR USLD WARRANTS
Section 4.01. SHARING OF WARRANT OBLIGATIONS. USLD has issued certain
Warrants, of which approximately 225,000 Warrants were outstanding and
unexercised as of the date of this Agreement. USLD and Billing have agreed
that, in connection with the Distribution, Billing will assume its
proportionate share of the obligations represented by the Warrants, as set
forth below in this Article IV.
Section 4.02. ISSUANCE OF BILLING COMMON STOCK UPON EXERCISE OF
WARRANTS. (a) Following the Distribution Record Date, upon exercise of a
Warrant to purchase a share of USLD Common Stock and payment of the exercise
price therefor, at USLD's option, the holder of the Warrant will be entitled
to receive, in addition to each share of USLD Common Stock issuable upon
exercise of the Warrant, one share of Billing Common Stock. Upon receipt of
a notice of exercise of Warrants, USLD, if it so elects, will
promptly provide notice thereof to Billing or a transfer agent designated by
Billing to receive such notice (which notice will contain the number of
shares of Billing Common Stock issuable by Billing in connection with such
exercise, the person in whose name such shares are to be issued and the
address for delivery of the share certificates issuable to such person); and
in such event Billing shall promptly thereafter (and in any event within five
Business Days after receipt of such notice) issue the shares of Billing
Common Stock as set forth in such notice. Billing and USLD will, and will
cause their respective transfer agents to, work together in good faith to
establish procedures to ensure that such notices are received by Billing, and
such shares are issued by Billing, as promptly as practicable.
(b) Notwithstanding the provisions of Section 4.02(a) above, Billing
shall not be required to issue any frational shares of Billing Common Stock
upon exercise of any Warrant. If any fraction of a share of Billing Common
Stock would, except for the provision of this Section 4.02(b), be issuable on
the exercise of any Warrants, Billing shall pay to the exercising Warrant
holder (in lieu of issuance of such fractional share) an amount in cash equal
to such fraction multiplied by the Billing Warrant Exercise Amount, where the
"Billing Warrant Exercise Amount" equals the Billing Applicable Percentage
(as defined below) multiplied by the exercise price paid by the Warrant
holder upon such exercise.
Section 4.03. ALLOCATION OF EXERCISE PRICE. In the event Billing is
required to issue shares of Billing Common Stock pursuant to Section 4.02
above, Billing shall be entitled to receive the Billing Applicable
Percentage (as defined below) of the exercise price paid upon the exercise of
any Warrants (which exercise price currently is $12.50 per share for the
Warrants held by Paytel Northwest, Inc. and $12.50 per share for the Warrants
held by Communications Central, Inc.). Such Billing Applicable Percentage
shall be paid over to Billing by USLD as promptly as practicable following
USLD's receipt of the exercise price for any Warrants. The term "Billing
Applicable Percentage" shall mean the result of the following calculation,
expressed as a percentage: (i) the Post Distribution Billing Closing Stock
Price, DIVIDED BY (ii) the sum of (x) the Post Distribution Billing Closing
Stock Price PLUS (y) the Post Distribution USLD Closing Stock Price.
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Section 4.04. AMENDMENT TO WARRANTS. At USLD's option and request,
Billing agrees to execute prior to the Supplemental Warrant Agreements
reflecting any changes necessary to implement the agreements set forth in this
Article IV.
ARTICLE V.
OBLIGATIONS FOR NON-PLAN OPTIONS
Section 5.01. GRANT OF NON-PLAN OPTION. (a) Billing agrees to grant
to a former USLD Director who has agreed to join the Board of Directors of
Billing, in consideration of his joining the Billing Board of Directors and
to replace an unvested option for 5,000 of USLD Common Stock, a non-qualified
stock option of Billing to purchase 5,000 shares of Billing Common Stock
("Billing "Non-Plan Option") at an exercise price that preserves the current
spread between the exercise price of the USLD unvested option and the price of
the USLD Common Stock as of the Cut Off Date.
(b) For purposes of determining the exercise price of the Billing
Non-Plan Option, the following formula shall be used to maintain the holder's
exercise price spread per share from the unvested USLD option to the Billing
Non-Plan Option. The exercise price spread per share shall be maintained by
setting the exercise price for the Billing Non-Plan Option so that the
differences between (a) the Post Distribution Billing Closing Stock Price and
(b) the adjusted price of the Billing Non-Plan Option shall be equal to the
difference between (y) the USLD Closing Price on the day prior to the Record
Date and (z) the exercise price of the former Director's USLD unvested option
on the day prior to the Record Date.
(c) The obligation of Billing to issue Billing Common Stock upon the
exercise of the Billing Non-Plan Option shall be adjusted in accordance with
paragraph 5.01(b). Except for that adjustment, the terms of the Billing
Non-Plan Option will be the same as those in effect for the USLD unvested
option prior to the Distribution.
(d) Billing agrees to execute and deliver to the Billing Non-Plan
Option holder following the Distribution the Billing Non-Plan Option
agreement.
ARTICLE VI.
THE DISTRIBUTION
Section 6.01. COOPERATION PRIOR TO THE DISTRIBUTION.
(a) Billing and USLD shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereof that are appropriate to reflect the establishment of, or
amendments to, any employee benefits plans and other plans contemplated by the
Benefit Plans and Employment Matters Allocation Agreement.
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(b) Billing and USLD shall take all such actions as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Related Agreements.
(c) Billing and USLD shall use all reasonable efforts to obtain any
third-party consents or approvals necessary or desirable in connection with the
transactions contemplated hereby ("Consents").
(d) Billing and USLD will use all reasonable efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary
or desirable under applicable law, to consummate the transactions contemplated
under this Agreement and the Related Agreements.
Section 6.02. USLD BOARD ACTION; CONDITIONS PRECEDENT TO THE
DISTRIBUTION. The USLD Board shall, in its discretion, establish any
appropriate procedures in connection with the Distribution. In no event shall
the Distribution occur unless the following conditions have been satisfied:
(i) the transactions contemplated by Section 2.01 shall have been
consummated in all material respects;
(ii) the Billing Board, comprised as contemplated by Section 8.01,
shall have been elected by USLD, as sole stockholder of Billing, and the Billing
Certificate and Billing Bylaws shall have been adopted and shall be in effect;
(iii) USLD shall have received the opinion of The Chicago
Corporation substantially in the Form of EXHIBIT I and such opinion shall not
have been withdrawn;
(iv) USLD shall have received the opinion of Houlihan, Lokey,
Howard & Zukin, Inc. substantially in the form of EXHIBIT J and such opinion
shall not have been withdrawn;
(v) USLD shall have received the Tax Opinion of Arter & Hadden
substantially in the form of EXHIBIT K and such opinion shall not have been
withdrawn;
(vi) the Registration Statement on Form 10 under the Securities
Exchange Act of 1934, as amended ("Exchange Act"), filed by Billing shall have
been declared effective by the Commission and not be subject to further
comment by the Staff of the Commission;
(vii) Billing and USLD shall have entered into the Related
Agreements;
(viii) Billing's application to effect the listing of the Billing
Common Stock on the Nasdaq National Market shall have become effective;
(ix) the transactions contemplated hereby shall be in compliance
with applicable federal and state securities laws and USLD shall have received a
satisfactory "no action letter"
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from the Commission with regard to exemptions from registration of the
Distribution and related matters;
(x) USLD shall have received such consents, and shall have
received executed copies of such agreements and amendments of agreements, as it
shall deem necessary in connection with the completion of the transactions
contemplated by this Agreement;
(xi) no legal proceedings affecting or otherwise arising out of
the transactions contemplated hereby or which could otherwise affect USLD or
Billing in a materially adverse manner shall have been commenced or
threatened against USLD, Billing or the directors or officers of either USLD
or Billing; and
(xii) no material adverse change shall have occurred with
respect to USLD or Billing, the securities markets or general economic or
financial conditions which shall, in the reasonable judgment of USLD and
Billing, make the transactions contemplated by this Agreement inadvisable.
PROVIDED, HOWEVER, that (x) any such condition may be waived by the USLD
Board in its sole discretion, and (y) the satisfaction of such conditions shall
not create any obligation on the part of USLD or any other party hereto to
effect the Distribution or in any way limit USLD's power of termination set
forth in Section 11.07 or alter the consequences of any such termination from
those specified in such Section.
Section 6.03. THE DISTRIBUTION. On the Distribution Date, subject to
the conditions and rights of termination set forth in this Agreement, USLD shall
deliver to the Agent a share certificate representing all of the then
outstanding shares of Billing Common Stock owned by USLD and shall instruct the
Agent to distribute, on or as soon as practicable following the Distribution
Date, such Billing Common Stock to the Holders. Billing agrees to provide all
share certificates that the Agent shall require in order to effect the
Distribution.
Section 6.04. SECURITIES FILINGS. For a period of five years after
the Distribution Date, each of USLD and Billing shall provide to the other,
promptly following such time at which such documents shall be filed with the
Commission, copies of all documents which shall be publicly filed with the
Commission pursuant to the periodic and interim reporting requirements of the
Exchange Act and the rules and regulations of the Commission promulgated
thereunder.
ARTICLE VII.
INDEMNIFICATION
Section 7.01. INDEMNIFICATION BY USLD. Except as otherwise expressly
set forth in a Related Agreement, USLD shall indemnify, defend and hold harmless
Billing and each of the Billing Group Subsidiaries, and each of their respective
directors, officers, employees, agents and Affiliates and each of the heirs,
executors, successors and assigns of any of the foregoing
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(the "Billing Indemnitees") from and against the Telecommunications Group
Liabilities and any and all losses, Liabilities, damages including without
limitation, the costs and expenses of any and all Actions, threatened
Actions, demands, assessments, judgments, settlements and compromises
relating thereto and attorneys' fees and any and all expenses whatsoever
reasonably incurred in investigating, preparing or defending against any such
Actions or threatened Actions (collectively, "Billing Indemnifiable Losses"
and, individually, a "Billing Indemnifiable Loss") of the Billing Indemnitees
arising out of or due to the failure or alleged failure of USLD, any
Telecommunications Group Subsidiary, or any of their respective Affiliates to
(i) pay, perform or otherwise discharge in due course any of the
Telecommunications Group Liabilities, or (ii) comply with the provisions of
Section 7.04. To the extent that counsel is provided to Billing under this
indemnification, such counsel shall be selected by USLD and such counsel may
include its in-house corporate counsel.
Section 7.02. INDEMNIFICATION BY BILLING. Except as otherwise
expressly set forth in a Related Agreement, Billing shall indemnify, defend and
hold harmless USLD and each of the Telecommunications Group Subsidiaries, and
each of their respective directors, officers, employees, agents and Affiliates
and each of the heirs, executors, successors and assigns of any of the foregoing
(the "USLD Indemnitees") from and against the Billing Group Liabilities and any
and all losses, Liabilities, damages, including, without limitation, the costs
and expenses of any and all Actions, threatened Actions, demands, assessments,
judgments, settlements and compromises relating thereto and attorneys' fees and
any and all expenses whatsoever reasonably incurred in investigating, preparing
or defending against any such Actions or threatened Actions (collectively, "USLD
Indemnifiable Losses" and, individually, a "USLD Indemnifiable Loss") of the
USLD Indemnitees arising out of or due to the failure or alleged failure of
Billing, any Billing Group Subsidiaries, or any of their respective Affiliates
to (i) pay, perform or otherwise discharge in due course any of the Billing
Group Liabilities or (ii) comply with the provisions of Section 7.04. The
"Billing Indemnifiable Losses" and the "USLD Indemnifiable Losses" are
collectively referred to as the "Indemnifiable Losses." To the extent that
counsel is provided to USLD under this Indemnification, such counsel shall be
selected by Billing and such counsel may include its in-house corporate counsel.
Section 7.03. INSURANCE PROCEEDS. The amount that any party (an
"Indemnifying Party") is or may be required to pay to any other Person (an
"Indemnitee") pursuant to Section 7.01 or Section 7.02 shall be reduced
(including, without limitation, retroactively) by any Insurance Proceeds or
other amounts actually recovered by or on behalf of such Indemnitee in reduction
of the related Indemnifiable Loss. If an Indemnitee shall have received the
payment required by this Agreement from an Indemnifying Party in respect of an
Indemnifiable Loss and shall subsequently actually receive Insurance Proceeds,
or other amounts in respect of such Indemnifiable Loss as specified above, then
such Indemnitee shall pay to such Indemnifying Party a sum equal to the amount
of such Insurance Proceeds or other amounts actually received.
Section 7.04. PROCEDURE FOR INDEMNIFICATION. (a) Except as may be
set forth in a Related Agreement, if an Indemnitee shall receive notice or
otherwise learn of the assertion by a Person (including, without limitation, any
governmental entity) who is not a party to this Agreement or to any of the
Related Agreements of any claim or of the commencement by any
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such Person of any Action with respect to which an Indemnifying Party may be
obligated to provide indemnification pursuant to this Agreement (a
"Third-Party Claim"), such Indemnitee shall give such Indemnifying Party
written notice thereof promptly after becoming aware of such Third-Party
Claim; PROVIDED, that the failure of any Indemnitee to give notice as
required by this Section 7.04 shall not relieve the Indemnifying Party of its
obligations under this Article VII, except to the extent that such
Indemnifying Party is prejudiced by such failure to give notice. Such notice
shall describe the Third-Party Claim in reasonable detail, and shall indicate
the amount (estimated if necessary) of the Indemnifiable Loss that has been
or may be sustained by such Indemnitee.
(b) An Indemnifying Party may elect to defend or to seek to settle or
compromise, at such Indemnifying Party's own expense and by such Indemnifying
Party's own counsel, any Third-Party Claim, provided that the Indemnifying Party
must confirm in writing that it agrees that the Indemnitee is entitled to
indemnification hereunder in respect of such Third-Party Claim. Within 20 days
of the receipt of notice from an Indemnitee in accordance with Section 7.04(a)
(or sooner, if the nature of such Third-Party Claim so requires), the
Indemnifying Party shall notify the Indemnitee of its election whether to assume
responsibility for such Third-Party Claim (provided that if the Indemnifying
Party does not so notify the Indemnitee of its election within 20 days after
receipt of such notice from the Indemnitee, the Indemnifying Party shall be
deemed to have elected not to assume responsibility for such Third-Party Claim),
and such Indemnitee shall cooperate in the defense or settlement or compromise
of such Third-Party Claim. After notice from an Indemnifying Party to an
Indemnitee of its election to assume responsibility for a Third-Party Claim,
such Indemnifying Party shall not be liable to such Indemnitee under this
Article VII for any legal or other expenses (except expenses approved in advance
by the Indemnifying Party) subsequently incurred by such Indemnitee in
connection with the defense thereof; PROVIDED, that if the defendants in any
such claim include both the Indemnifying Party and one or more Indemnitees and
in such Indemnitees' reasonable judgment a conflict of interest between such
Indemnitees and such Indemnifying Party exists in respect of such claim, such
Indemnitees shall have the right to employ separate counsel and in that event
the reasonable fees and expenses of such separate counsel (but not more than one
separate counsel reasonably satisfactory to the Indemnifying Party) shall be
paid by such Indemnifying Party. If an Indemnifying Party elects not to assume
responsibility for a Third-Party Claim (which election may be made only in the
event of a good faith dispute that a claim was inappropriately tendered under
Section 7.01 or 7.02, as the case may be) such Indemnitee may defend or (subject
to the following sentence) seek to compromise or settle such Third-Party Claim.
Notwithstanding the foregoing, an Indemnitee may not settle or compromise any
claim without prior written notice to the Indemnifying Party, which shall have
the option within 10 days following the receipt of such notice (i) to disapprove
the settlement and assume all past and future responsibility for the claim,
including reimbursing the Indemnitee for prior expenditures in connection with
the claim, or (ii) to disapprove the settlement and continue to refrain from
participation in the defense of the claim, in which event the Indemnifying Party
shall have no further right to contest the amount or reasonableness of the
settlement if the Indemnitee elects to proceeds therewith, or (iii) to approve
the amount of the settlement, reserving the Indemnifying Party's right to
contest the Indemnitee's right to indemnity, or (iv) to approve and agree to pay
the settlement. In the event
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the Indemnifying Party makes no response to such written notice from the
Indemnitee, the Indemnifying Party shall be deemed to have elected option
(ii).
(c) If an Indemnifying Party chooses to defend or to seek to compromise
any Third-Party Claim, the Indemnitee shall make available to such Indemnifying
Party any personnel and any books, records or other documents within its control
or which it otherwise has the ability to make available that are necessary or
appropriate for such defense.
(d) Any claim on account of an Indemnifiable Loss that does not result
from a Third-Party Claim shall be asserted by written notice given by the
Indemnitee to the applicable Indemnifying Party. Such Indemnifying Party shall
have a period of 15 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 15-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 15-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party under applicable law or under this Agreement.
(e) In addition to any adjustments required pursuant to Section 7.03, if
the amount of any Indemnifiable Loss shall, at any time subsequent to the
payment required by this Agreement, be reduced by recovery, settlement or
otherwise, the amount of such reduction, less any expenses incurred in
connection therewith, shall promptly be repaid by the Indemnitee to the
Indemnifying Party.
(f) In the event of payment by an Indemnifying Party to any Indemnitee
in connection with any Third-Party Claim, such Indemnifying Party shall be
subrogated to and shall stand in the place of such Indemnitee as to any events
or circumstances in respect of which such Indemnitee may have any right or claim
relating to such Third-Party Claim against any claimant or plaintiff asserting
such Third-Party Claim. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense of such Indemnifying
Party, in prosecuting any subrogated right or claim.
Section 7.05. REMEDIES CUMULATIVE. The remedies provided in this
Article VII shall be cumulative and shall not preclude assertion by any
Indemnitee of any other rights or the seeking of any and all other remedies
against any Indemnifying Party.
Section 7.06. SURVIVAL OF INDEMNITIES. The obligations of each of
Billing and USLD under this Article VII shall survive the sale or other transfer
by it of any assets or businesses or the assignment by it of any Liabilities,
with respect to any Indemnifiable Loss of the other related to such assets,
businesses or Liabilities.
ARTICLE VIII.
CERTAIN ADDITIONAL MATTERS
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Section 8.01. BILLING BOARD. Billing and USLD shall take all actions
which may be required to constitute, effective as of the Distribution Date, the
following persons as the directors of Billing: Parris H. Holmes, Jr., Alan W.
Saltzman, Lee Cooke and James E. Sowell.
Section 8.02. RESIGNATIONS; USLD BOARD. Billing shall cause all of
its directors and Billing Group Employees to resign, effective as of the
Distribution Date, from all boards of directors or similar governing bodies of
USLD or any of its Subsidiaries on which they serve, and from all positions as
officers or employees of USLD or any of its Subsidiaries in which they serve,
except that Parris H. Holmes, Jr. shall serve as a director of both Billing and
USLD and as Chairman of both the USLD Board and the Billing Board. USLD shall
cause all of its directors and the Telecommunications Group Employees to resign
from all boards of directors or similar governing bodies of Billing or any of
its Subsidiaries on which they serve, and from all positions as officers or
employees of Billing or any of its Subsidiaries in which they serve, except that
Parris H. Holmes, Jr. shall serve as a director of both Billing and USLD and as
Chairman of both the USLD Board and the Billing Board and as Chief Executive
Officer of Billing.
Section 8.03. CERTIFICATE AND BYLAWS. On or prior to the Distribution
Date, Billing shall adopt the Billing Certificate and the Billing Bylaws, and
shall file the Billing Certificate with the Secretary of State of the State of
Delaware. USLD shall provide all necessary stockholder approvals for the
Billing Certificate prior to the filing of the Billing Certificate with the
Secretary of State of the State of Delaware.
Section 8.04. CERTAIN POST-DISTRIBUTION TRANSACTIONS.
(a) BILLING. (i) Billing shall, and shall cause each of the Billing
Group Subsidiaries to, comply with each representation and statement made, or to
be made, to any Person in connection with the Tax Opinion with respect to any
transaction contemplated by this Agreement, and (ii) until the second
anniversary of the Distribution Date, neither Billing nor any of its
Subsidiaries shall (a) make a material disposition, by means of a sale or
exchange of assets or capital stock, a distribution to stockholders or
otherwise, of any substantial portion of its assets, (b) repurchase or issue any
Billing capital stock (other than stock issued pursuant to employee plans or
outstanding options or Warrants), or (c) in the case of Billing, cease the
active conduct of a material portion of its business independently, with its own
employees and without material change, unless, in each of cases (a), (b) and
(c), in the opinion of counsel to Billing, which opinion shall be reasonably
satisfactory to USLD, or pursuant to a favorable IRS letter ruling or tax
opinion reasonably satisfactory to USLD, such act or omission would not
adversely affect the tax consequences of the Distribution to USLD or the
stockholders of USLD, as set forth in any ruling issued by any taxing authority
or tax opinion; and Billing has no present intention to take any such actions.
(b) USLD. (i) USLD shall, and shall cause each of the
Telecommunications Group Subsidiaries to comply with each representation and
statement made, or to be made, to any Person in connection with the Tax Opinion
with respect to any transaction contemplated by this Agreement; and (ii) until
the second anniversary of the Distribution Date, neither USLD nor any
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of its Subsidiaries shall (a) make a material disposition, by means of a sale
or exchange of assets or capital stock, a distribution to stockholders or
otherwise, of any substantial portion of its assets (other than Billing Group
Assets in connection with the Distribution or transactions effected in
contemplation thereof), (b) repurchase or issue any capital stock of USLD
(other than stock issued pursuant to employee plans or outstanding options or
Warrants), or (c) in the case of USLD, cease the active conduct of a material
portion of its business independently, with its own employees and without
material change, unless, in each of cases (a), (b) and (c), in the opinion of
counsel to USLD, which opinion shall be reasonably satisfactory to Billing,
or pursuant to a favorable IRS letter ruling or tax opinion reasonably
satisfactory to Billing, such act or omission would not adversely affect the
tax consequences of the Distribution to Billing or the stockholders of
Billing, as set forth in any ruling issued by any taxing authority or tax
opinion; and USLD has no present intention to take any such actions.
Section 8.05. BILLING RIGHTS PLAN. Prior to the Distribution Date,
the Billing Board may elect, in its sole discretion, to recommend that Billing
adopt a stockholder rights plan (the "Billing Rights Plan"). The Billing Rights
Plan will be substantially similar to the USLD Rights Plan and will provide for
the distribution of preferred share purchase rights ("Billing Rights") with
respect to each share of Billing Common Stock. The Billing Rights will be
attached to the Billing Common Stock and will not be exercisable, or
transferrable apart from the Billing Common Stock, unless and until certain
events occur. If certain events occur relating to the acquisition by an
acquiring person of Billing Common Stock, or a merger or other combination of
Billing with an acquiring person, the Billing Rights will entitle holders (other
than the acquiring person) to purchase either Billing Common Stock or common
stock of the acquiring person at a discount. The specific terms of the Billing
Rights will be determined by the Board of Directors of Billing consistent with
the description thereof in the Information Statement.
Section 8.06. USE OF THE "USLD" NAME AND THE USLD LOGO.
Notwithstanding anything to the contrary in this Agreement (including the
conveyance to Billing of the Transferred Intellectual Property) or in any
Related Agreement, the parties hereto agree that USLD shall retain the exclusive
right to use the mark "USLD" without limitation or expiration and the right to
use the USLD Logo following the Distribution.
Section 8.07. NONCOMPETITION AGREEMENT; RESTRICTED TRANSACTIONS. (a)
Each USLD and Billing agrees that for a period of one (1) year after the
Distribution Date, whether a breach of this Agreement or any Related Agreement
is alleged or not, neither USLD nor Billing will, without the prior written
consent of the other, which consent may be withheld in the sole discretion of
each, engage, whether for compensation or not, as an owner, partner,
stockholder, investor or in any other capacity whatsoever in any activity or
endeavor that competes directly or indirectly with the business of the other as
engaged in, or proposed to be engaged in, as of the Distribution Date; provided,
however, that nothing contained herein shall prohibit either USLD or Billing
from engaging in a merger, consolidation or other business combination with
another person or entity with departments or divisions that competes with either
USLD or Billing, as the case may be. Such restriction applies worldwide.
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(b) Each USLD and Billing further agrees for a period of six (6)
months after the Distribution Date, notwithstanding any allegation of breach
of this Agreement or any Related Agreement, not, without the prior written
consent of the other, to solicit, influence or attempt to influence any
employee of the other to terminate his or her employment or other contractual
relationship with his or her respective employer for any reason including,
without limitation, working for such soliciting party. Either Billing or
USLD may elect to pay to the other fifty percent (50%) of the total previous
12 months salary and bonus of any employee of the other for the privilege of
soliciting the employment of such employee without the necessity of obtaining
the consent of the employing party.
(c) The covenants of USLD and Billing contained in Section 8.07 will be
construed as independent of any other provision in this Agreement; and the
existence of any claim or cause of action by USLD or Billing against the other
will not constitute a defense to the enforcement of said covenants. Each USLD
and Billing further agrees and acknowledges that this Section 8.07 (1) is
reasonable as to length of time, scope and geographic area for purposes of
protecting the commercial advantages enjoyed by each USLD and Billing, (2) does
not impose a greater restraint than is necessary to protect the goodwill or
business interests of each USLD and Billing and (3) is more than adequately paid
for in the consideration derived by each USLD and Billing under this Agreement.
Each of USLD and Billing also agree that the arbitrators (under Section 11.13)
have jurisdiction to modify any provisions of this Section 8.07 in accordance
with the court's or arbitrators' respective ruling as to reasonableness or scope
of application and that this Agreement shall remain enforceable as modified or
amended in the jurisdiction where this Agreement is so modified or amended.
ARTICLE IX.
ACCESS TO INFORMATION AND SERVICES
Section 9.01. PROVISION OF CORPORATE RECORDS.
(a) Except as may otherwise be provided in a Related Agreement, USLD
shall arrange as soon as practicable following the Distribution Date, to the
extent not previously delivered in connection with the transactions contemplated
in Article II, for the transportation (at Billing's cost) to Billing of the
Billing Books and Records in USLD's possession, except to the extent such items
are already in the possession of Billing or a Billing Subsidiary. The Billing
Books and Records shall be the property of Billing, but shall be available to
USLD for review and duplication until USLD shall notify Billing in writing that
such records are no longer of use to USLD.
(b) Except as otherwise provided in a Related Agreement, Billing shall
arrange as soon as practicable following the Distribution Date, to the extent
not previously delivered in connection with the transactions contemplated in
Article II, for the transportation (at USLD's cost) to USLD of the USLD Books
and Records in Billing's possession, except to the extent such items are already
in the possession of USLD. The USLD Books and Records shall be the property of
USLD, but the USLD Books and Records that reasonably relate to the Billing Group
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Business shall be available to Billing for review and duplication until Billing
shall notify USLD in writing that such records are no longer of use to Billing.
Section 9.02. ACCESS TO INFORMATION.
Except as otherwise provided in a Related Agreement, from and after the
Distribution Date, USLD shall afford to Billing and its authorized accountants,
counsel and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to all records, books,
contracts, instruments, computer data and other data and information relating to
pre-Distribution operations (collectively, "INFORMATION") within USLD's
possession insofar as such access is reasonably required by Billing for the
conduct of its business, subject to appropriate restrictions for classified or
Privileged Information. Similarly, except as otherwise provided in a Related
Agreement, Billing shall afford to USLD and its authorized accountants, counsel
and other designated representatives reasonable access (including using
reasonable efforts to give access to persons or firms possessing information)
and duplicating rights during normal business hours to Information within
Billing's possession, insofar as such access is reasonably required by USLD for
the conduct of its business, subject to appropriate restrictions for classified
or Privileged Information. Information may be requested under this Article IX
for the legitimate business purposes of either party, including without
limitation, audit, accounting, claims (including claims for indemnification
hereunder), litigation and tax purposes, as well as for purposes for fulfilling
disclosure and reporting obligations and for performing this Agreement and the
transactions contemplated hereby. The parties hereby agree that Billing shall
also grant to USLD reasonable access to data maintained by Billing after the
Distribution that contain data and other information reasonably related to the
Telecommunications Group Assets or the Telecommunications Group Business, for
purposes of review and retrieval of such data (including the generation of
reports containing such data). USLD agrees to reimburse Billing for the
reasonable costs of the use of such computer systems. The parties also agree
that USLD shall grant to Billing reasonable access to data maintained by USLD
after the Distribution that certain data and other information reasonably
related to the Billing Group Assets or the Billing Group Business, for purposes
of review and retrieval of such data (including the generation of reports
containing such data). Billing agrees to reimburse USLD for the reasonable
costs of the use of such computer systems.
Section 9.03. PRODUCTION OF WITNESSES. At all times from and after
the Distribution Date, each of Billing and USLD shall use reasonable efforts to
make available to the other, upon written request, its and its Subsidiaries'
officers, directors, employees and agents as witnesses to the extent that such
persons may reasonably be required in connection with any Action.
Section 9.04. REIMBURSEMENT. Except to the extent otherwise
contemplated in any Related Agreement, a party providing Information or witness
services to the other party under this Article IX shall be entitled to receive
from the recipient, upon the presentation of invoices therefor, payments of such
amounts, relating to supplies, disbursements and other out-of-pocket expenses
(at cost) and direct and indirect expenses of employees who are witnesses or
otherwise
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furnish assistance (at cost), as may be reasonably incurred in
providing such Information or witness services.
Section 9.05. RETENTION OF RECORDS. Except as otherwise required by
law or agreed to in a Related Agreement or otherwise in writing, each of Billing
and USLD may destroy or otherwise dispose of any of the Information, which is
material Information and is not contained in other Information retained by USLD
or Billing, as the case may be, at any time after the tenth anniversary of this
Agreement, provided that, prior to such destruction or disposal, (a) it shall
provide no less than 90 or more than 120 days prior written notice to the other,
specifying in reasonable detail the Information proposed to be destroyed or
disposed of and (b) if a recipient of such notice shall request in writing prior
to the scheduled date for such destruction or disposal that any of the
Information proposed to be destroyed or disposed of be delivered to such
requesting party, the party proposing the destruction or disposal shall promptly
arrange for the delivery of such of the Information as was requested at the
expense of the party requesting such Information.
Section 9.06. CONFIDENTIALITY. Each of USLD and its Subsidiaries on
the one hand, and Billing and its Subsidiaries on the other hand, shall hold,
and shall cause its consultants and advisors to hold, in strict confidence, all
Information concerning the other in its possession or furnished by the other or
the other's representatives pursuant to this Agreement or the Related Agreements
(except to the extent that such Information has been (i) in the public domain
through no fault of such party or (ii) later lawfully acquired from other
sources by such party), and each party shall not release or disclose such
Information to any other person, except its auditors, attorneys, financial
advisors, rating agencies, bankers or other consultants and advisors, unless
compelled to disclose by judicial or administrative process, or as reasonably
advised by its counsel or by other requirements of law, or unless such
Information is reasonably required to be disclosed in connection with (x) any
litigation with any third-parties or litigation between the USLD Group and the
Billing Group, (y) any contractual agreement to which the USLD Group or the
Billing Group are currently parties, or (z) in exercise of either party's rights
hereunder or under any Related Agreement.
Section 9.07. PRIVILEGED MATTERS. Billing and USLD recognize that
legal and other professional services that have been and will be provided prior
to the Distribution Date have been and will be rendered for the benefit of both
the USLD Group and the Billing Group and that both the USLD Group and the
Billing Group should be deemed to be the client for the purposes of asserting
all Privileges. To allocate the interests of each party in the Privileged
Information, the parties agree as follows:
(a) USLD shall be entitled, in perpetuity, to control the assertion or
waiver of all Privileges in connection with Privileged Information that relates
solely to the Telecommunications Group, whether or not Privileged Information is
in the possession of or under the control of USLD or Billing. USLD shall also
be entitled, in perpetuity, to control the assertion or waiver of all Privileges
in connection with Privileged Information that relates solely to the subject
matter of any claims constituting Telecommunications Group Liabilities, now
pending or which may be asserted in the future, in any lawsuits or other
proceedings initiated
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against or by USLD, whether or not the Privileged Information is in the
possession of or under the control of USLD or Billing.
(b) Billing shall be entitled, in perpetuity, to control the assertion
or waiver of all Privileges in connection with Privileged Information that
relates solely to the Billing Group, whether or not the Privileged Information
is in the possession of or under the control of USLD or Billing. Billing shall
also be entitled, in perpetuity, to control the assertion or waiver of all
Privileges in connection with Privileged Information that relates solely to the
subject matter of any claims constituting Billing Group Liabilities, now pending
or which may be asserted in the future, in any lawsuits or other proceedings
initiated against or by Billing, whether or not the Privileged Information is in
the possession of Billing or under the control of USLD or Billing.
(c) Billing and USLD agree that they shall have a shared Privilege, with
equal right to assert or waive, subject to the restrictions in this Section
9.07, with respect to all Privileges not allocated pursuant to the terms of
Sections 9.07(a) and (b). All Privileges relating to any claims, proceedings,
litigation, disputes, or other matters that involve both Billing and USLD in
respect of which Billing and USLD retain any responsibility or liability under
this Agreement or any Related Agreement, shall be subject to a shared Privilege.
(d) No party may waive any Privilege that could be asserted under any
applicable law, and in which the other party has a shared Privilege, without the
consent of the other party, except to the extent reasonably required in
connection with any litigation with third-parties or as provided in subsection
(e) below. Consent shall be in writing, or shall be deemed to be granted unless
written objection is made within 20 days after notice upon the other party
requesting such consent.
(e) In the event of any litigation or dispute between a member of the
USLD Group and a member of the Billing Group, either party may waive a Privilege
in which the other party has a shared Privilege, without obtaining the consent
of the other party, provided that such waiver of a shared Privilege shall be
effective only as to the use of Information with respect to the litigation or
dispute between the USLD Group and the Billing Group, and shall not operate as a
waiver of the shared Privilege with respect to third-parties.
(f) If a dispute arises between the parties regarding whether a
Privilege should be waived to protect or advance the interest of either party,
each party agrees that it shall negotiate in good faith, shall endeavor to
minimize any prejudice to the rights of the other party, and shall not
unreasonably withhold consent to any request for waiver by the other party.
Each party specifically agrees that it will not withhold consent to waiver for
any purpose except to protect its own legitimate interests.
(g) Upon receipt by any party of any subpoena, discovery or other
request that arguably calls for the production or disclosure of Information
subject to a shared Privilege or as to which the other party has the sole right
hereunder to assert a Privilege, or if any party obtains knowledge that any of
its current or former directors, officers, agents or employees have received any
subpoena, discovery or other requests that arguably calls for the production or
26
<PAGE>
disclosure of such Privileged Information, such party shall promptly notify
the other party of the existence of the request and shall provide the other
party a reasonable opportunity to review the Information and to assert any
rights it may have under this Section 9.07 or otherwise to prevent the
production or disclosure of such Privileged Information.
(h) The transfer of the Billing Books and Records and the USLD Books and
Records and other Information between USLD and its Subsidiaries and Billing and
its Subsidiaries, is made in reliance on the agreement of Billing and USLD, as
set forth in Sections 9.06 and 9.07, to maintain the confidentiality of
Privileged Information and to assert and maintain all applicable Privileges.
The access to information being granted pursuant to Sections 9.01 and 9.02
hereof, the agreement to provide witnesses and individuals pursuant to Section
9.03 hereof and the transfer of Privileged Information between USLD and its
Subsidiaries and Billing and its Subsidiaries pursuant to this Agreement shall
not be deemed a waiver of any Privilege that has been or may be asserted under
this Agreement or otherwise.
ARTICLE X.
INSURANCE
Section 10.01. POLICIES AND RIGHTS INCLUDED WITHIN THE BILLING GROUP
ASSETS. Without limiting the generality of the definition of the Billing Group
Assets set forth in Section 2.01 or the effect of Section 2.01, the Billing
Group Assets shall include (a) any and all rights of an insured party under each
of the Shared Policies, specifically including rights of indemnity and the right
to be defended by or at the expense of the insurer, with respect to all
injuries, losses, liabilities, damages and expenses incurred or claimed to have
been incurred on or prior to the Distribution Date by any party in or in
connection with the conduct of the Billing Group or, to the extent any claim is
made against Billing or any of its Subsidiaries, the Telecommunications Group,
and which injuries, losses, liabilities, damages and expenses may arise out of
insured or insurable occurrences or events under one or more of the Shared
Policies; PROVIDED, HOWEVER, that nothing in this clause shall be deemed
to constitute (or to reflect) the assignment of the Shared Policies, or any of
them, to Billing and (b) the Billing Group Policies.
Section 10.02. POST-DISTRIBUTION DATE CLAIMS. If, subsequent to the
Distribution Date, any person, corporation, firm or entity shall assert a claim
against Billing or any of its Subsidiaries with respect to any injury, loss,
liability, damage or expense incurred or claimed to have been incurred prior to
the Distribution Date in, or in connection with, the conduct of the Billing
Group Business or, to the extent any claim is made against Billing or any of its
Subsidiaries, the Telecommunications Group Business, and which injury, loss,
liability, damage or expense may arise out of insured or insurable occurrences
or events under one or more of the Shared Policies, USLD shall at the time such
claim is asserted be deemed to assign, without need of further documentation, to
Billing any and all rights of an insured party under the applicable Shared
Policy with respect to such asserted claim, specifically including rights of
indemnity and the right to be defended by or at the expense of the insurer;
PROVIDED, HOWEVER,
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<PAGE>
that nothing in this sentence shall be deemed to constitute (or to reflect)
the assignment of the Shared Policies, or any of them, to Billing.
Section 10.03. ADMINISTRATION AND RESERVES. (a) Notwithstanding the
provisions of Article III, but subject to any contrary provisions of any Related
Agreement, from and after the Distribution Date:
(i) Billing shall be entitled to any reserves established by USLD
or any of its Subsidiaries, or the benefit of reserves held by any
insurance carrier, with respect to the Billing Group Liabilities; and
(ii) USLD shall be entitled to any reserves established by USLD or
any of its Subsidiaries, or the benefit of reserves held by any insurance
carrier, with respect to the Telecommunications Group Liabilities.
(b) INSURANCE PREMIUMS. Billing shall have the right but not the
obligation to pay the premiums, to the extent that USLD does not pay premiums
with respect to Telecommunications Group Liabilities (retrospectively-rated or
otherwise), with respect to Shared Policies and the Billing Group Policies, as
required under the terms and conditions of the respective Policies, whereupon
USLD shall forthwith reimburse Billing for that portion of such premiums paid by
Billing as are attributable to the Telecommunications Group Liabilities. USLD
shall provide continued coverage under its director and officer liability
insurance policy for a period of not less than five years for acts that took
place or were alleged to have taken place prior to the Distribution Date
covering persons who were directors and officers of USLD prior to the
Distribution Date. Fifty percent of the additional premiums, if any, for such
coverage shall be reimbursed by Billing within 15 days of the Distribution Date.
Such coverage for director and officer liability insurance shall not be
discontinued by USLD without the consent of Billing, which consent shall not be
unreasonably withheld.
(c) ALLOCATION OF INSURANCE PROCEEDS. Insurance Proceeds received
with respect to claims, costs and expenses under the Policies shall be paid to
Billing with respect to the Billing Group Liabilities and to USLD with respect
to the Telecommunications Group Liabilities. Payment of the allocable portions
of indemnity costs of Insurance Proceeds resulting from the liability policies
will be made to the appropriate party upon receipt from the insurance carrier.
In the event that the aggregate limits on any Shared Policies are exceeded, the
parties agree to provide an equitable allocation of Insurance Proceeds received
after the Distribution Date based upon their respective bona fide claims. The
parties agree to use their best efforts to cooperate with respect to insurance
matters.
Section 10.04. AGREEMENT FOR WAIVER OF CONFLICT AND SHARED DEFENSE. In
the event that Insured Claims of both Billing and USLD exist relating to the
same occurrence, Billing and USLD agree to jointly defend and to waive any
conflict of interest necessary to the conduct of that joint defense. Nothing in
this paragraph shall be construed to limit or otherwise alter in any way the
indemnity obligations of the parties to this Agreement, including those created
by this Agreement, by operation of law or otherwise.
28
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ARTICLE XI.
MISCELLANEOUS
Section 11.01. COMPLETE AGREEMENT; CONSTRUCTION. This Agreement,
including the Schedules and Exhibits and the Related Agreements and other
agreements and documents referred to herein, shall constitute the entire
agreement between the parties with respect to the subject matter hereof and
thereof and shall supersede all previous negotiations, commitments and writings
with respect to such subject matter. Notwithstanding any other provisions in
this Agreement to the contrary, in the event and to the extent that there shall
be a conflict between the provisions of this Agreement and the provisions of the
Related Agreements, then the Related Agreements shall control.
Section 11.02. EXPENSES. Except as otherwise set forth in this
Agreement or any Related Agreement, all costs and expenses in connection with
the preparation, execution, delivery and implementation of this Agreement, the
Distribution and with the consummation of the transactions contemplated by this
Agreement shall be charged to the party for whose benefit the expenses are
incurred, with any expenses that cannot be allocated on such basis to be split
equally between the parties.
Section 11.03. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Texas, without regard to
the principles of conflicts of laws thereof.
Section 11.04. NOTICES. All notices and other communications hereunder
shall be in writing and shall be delivered by hand or mailed by registered or
certified mail (return receipt requested) to the parties at the following
addresses (or at such other addresses for a party as shall be specified by like
notice) and shall be deemed given on the date on which such notice is received:
To Billing:
Billing Information Concepts Corp.
9311 San Pedro, Suite 400
San Antonio, Texas 78216
Attention: President
To USLD:
U.S. Long Distance Corp.
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Attention: President
29
<PAGE>
Section 11.05. AMENDMENTS. This Agreement may not be modified or
amended except by an agreement in writing signed by the parties.
Section 11.06. SUCCESSORS AND ASSIGNS. This Agreement and all of the
provisions hereof shall be binding upon and inure to the benefit of the parties
and their respective successors and permitted assigns.
Section 11.07. TERMINATION. This Agreement may be terminated and the
Distribution abandoned at any time prior to the Distribution Date by and in the
sole discretion of the USLD Board without the approval of Billing or of USLD's
stockholders. In the event of such termination, no party shall have any
liability to any other party pursuant to this Agreement.
Section 11.08. SUBSIDIARIES. Each of the parties hereto shall cause to
be performed, and hereby guarantees the performance of, all actions, agreements
and obligations set forth herein to be performed by any Subsidiary of such party
which is contemplated to be a Subsidiary of such party on and after the
Distribution Date.
Section 11.09. NO THIRD-PARTY BENEFICIARIES. This Agreement is solely
for the benefit of the parties hereto and their respective Subsidiaries and
Affiliates and should not be deemed to confer upon third-parties any remedy,
claim, Liability, reimbursement, claim of action or other right in excess of
those existing without reference to this Agreement.
Section 11.10. TITLES AND HEADINGS. Titles and headings to sections
herein are inserted for the convenience of reference only and are not intended
to be a part of or to affect the meaning or interpretation of this Agreement.
Section 11.11. EXHIBITS AND SCHEDULES. The Exhibits and Schedules
shall be construed with and as an integral part of this Agreement to the same
extent as if the same had been set forth verbatim herein.
Section 11.12. LEGAL ENFORCEABILITY. Any provision of this Agreement
that is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof. Any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. Without
prejudice to any rights or remedies otherwise available to any party hereto,
each party hereto acknowledges that damages would be an inadequate remedy for
any breach of the provisions of this Agreement and agrees that the obligations
of the parties hereunder shall be specifically enforceable.
Section 11.13. ARBITRATION OF DISPUTES. (a) Any controversy or claim
arising out of this Agreement or any Related Agreement, or any breach of this
Agreement or any Related Agreement, including any controversy relating to a
determination of whether specific assets constitute Billing Group Assets or
Telecommunications Group Assets or whether specific Liabilities constitute
Billing Group Liabilities or Telecommunications Group Liabilities, but excluding
any controversy relating to the matters set forth in Section 2.06, shall be
settled by
30
<PAGE>
arbitration in accordance with the rules of the American Arbitration Association
then in effect, as modified by this Section 11.13 or by the further agreement of
the parties.
(b) Such arbitration shall be conducted in Bexar County, Texas.
(c) Any judgment upon the award rendered by the arbitrators may be
entered in any court having jurisdiction thereof. The arbitrators shall not,
under any circumstances, have any authority to award punitive, exemplary or
similar damages, and may not, in any event, make any ruling, finding or award
that does not conform to the terms and conditions of this Agreement or the
Related Agreements.
(d) Nothing contained in this Section 11.13 shall limit or restrict in
any way the right or power of a party at any time to seek injunctive relief in
any court and to litigate the issues relevant to such request for injunctive
relief before such court (i) to restrain the other party from breaching this
Agreement or (ii) for specific enforcement of this Section 11.13. The parties
agree that any legal remedy available to a party with respect to a breach of
this Section 11.13 will not be adequate and that, in addition to all other legal
remedies, each party is entitled to an order specifically enforcing this Section
11.13.
(e) The Parties hereby consent to the jurisdiction of the federal courts
located in the State of Texas for all purposes under this Agreement.
(f) Neither party nor the arbitrators may disclose the existence or
results of any arbitration under this Agreement or any Related Agreement or any
evidence presented during the course of the arbitration without the prior
written consent of both parties, except as required to fulfill applicable
disclosure and reporting obligations, or as otherwise required by law.
(g) Each party shall bear its own costs incurred in the arbitration. If
either party refuses to submit to arbitration any dispute required to be
submitted to arbitration pursuant to this Section 11.13, and instead commences
any other proceeding, including, without limitation, litigation, then the party
who seeks enforcement of the obligation to arbitrate shall be entitled to its
attorneys' fees and costs incurred in any such proceeding.
Section 11.14. PROMPT ACTION. Where the terms of this Agreement
require payment or action "as promptly as possible," "as soon as practicable,"
or "as soon as possible" such payment or action shall be made or taken, as the
case may be, within five (5) business days.
Section 11.15. APPLICABILITY TO RELATED AGREEMENTS. To the extent that
an issue or question arises under a Related Agreement and such issue or question
is not specifically addressed in the Related Agreement (i.e. indemnification;
access to information, confidentiality, etc.), such issue or question shall be
governed by the applicable provisions in this Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date and year first above written.
U.S. LONG DISTANCE CORP.
By: /s/ LARRY M. JAMES
--------------------------------
Title: President
-----------------------------
BILLING INFORMATION CONCEPTS CORP.
By: /s/ ALAN W. SALTZMAN
--------------------------------
Title: President
-----------------------------
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INDEX OF EXHIBITS AND SCHEDULES
REFERENCED
ON
EXHIBITS PAGE
- -------- ----------
Exhibit A
Benefit Plans and Employment Matters Allocation Agreement........ 2
Exhibit B
Billing Bylaws................................................... 3
Exhibit C
Amended and Restated Certificate of Incorporation of Billing..... 3
Exhibit D
Billing Pro Forma Consolidated Balance Sheet..................... 4
Exhibit E
Leasing Agreement................................................ 5
Exhibit F
Tax Sharing Agreement............................................ 6
Exhibit G
Transitional Services and Sublease Agreement..................... 7
Exhibit H
USLD Pro Forma Consolidated Balance Sheet........................ 8
Exhibit I
Opinion of The Chicago Corporation.............................. 16
Exhibit J
Opinion of Houlihan Lokey....................................... 16
33
<PAGE>
Exhibit K
Opinion of Arter & Hadden....................................... 16
SCHEDULES
1.01(a) Billing Group Subsidiaries.................................... 7
1.01(b) Transferred Intellectual Property ............................ 7
34
<PAGE>
SCHEDULE 1.01(a)
BILLING GROUP SUBSIDIARIES
Billing Information Concepts, Inc., a Delaware corporation (100%)
Enhanced Services Billing, Inc. a Delaware corporation (100%)
InterLata Aviation, Inc., a Texas corporation (100%)
35
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SCHEDULE 1.01(b)
TRANSFERRED INTELLECTUAL PROPERTY
NONE
36
<PAGE>
BENEFIT PLANS AND
EMPLOYMENT MATTERS ALLOCATION AGREEMENT
between
U.S. LONG DISTANCE CORP.
and
BILLING INFORMATION CONCEPTS CORP.
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 DEFINITIONS.............................................. 1
1.1 DEFINITIONS.................................................... 1
Billing Business............................................... 1
Billing Stock Option........................................... 1
Code........................................................... 1
Commission..................................................... 1
Common Stock................................................... 2
(i) BILLING COMMON STOCK............................... 2
(ii) EMPLOYER COMMON STOCK.............................. 2
(iii) USLD COMMON STOCK.................................. 2
Company Contribution........................................... 2
Current Plan Year.............................................. 2
Cutoff Date.................................................... 2
Deferred Compensation Plan..................................... 2
(i) USLD EXECUTIVE COMPENSATION DEFERRAL PLAN.......... 2
(ii) USLD DIRECTOR COMPENSATION DEFERRAL PLAN........... 2
(iii) BILLING EXECUTIVE COMPENSATION DEFERRAL PLAN....... 2
(iv) BILLING DIRECTOR COMPENSATION DEFERRAL PLAN........ 3
Distribution Agreement......................................... 3
Distribution Date.............................................. 3
Employee....................................................... 3
(i) USLD TERMINEE...................................... 3
(ii) RETAINED EMPLOYEE.................................. 3
(iii) RETAINED INDIVIDUAL................................ 3
(iv) BILLING TERMINEE................................... 3
(v) BILLING EMPLOYEE................................... 3
(vi) BILLING INDIVIDUAL................................. 3
ERISA.......................................................... 3
Existing USLD Stock Option..................................... 4
401(k) Retirement.............................................. 4
(i) USLD 401(k) RETIREMENT PLAN........................ 4
(ii) BILLING 401(k) RETIREMENT PLAN..................... 4
IRS............................................................ 4
Medical/Dental Plan............................................ 4
(i) USLD MEDICAL/DENTAL PLANS.......................... 4
(ii) BILLING MEDICAL/DENTAL PLANS....................... 4
Nonqualified Award............................................. 4
Plan........................................................... 4
Post-Conversion Stock Price.................................... 4
Qualified Beneficiary.......................................... 5
(i) USLD FUTURE QUALIFIED BENEFICIARY.................. 5
(ii) USLD CURRENT QUALIFIED BENEFICIARY................. 5
(iii) BILLING FUTURE QUALIFIED BENEFICIARY............... 5
Retained Business.............................................. 5
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Service Credit................................................. 5
Stock Plans.................................................... 5
(i) USLD 1990 EMPLOYEE STOCK OPTION PLAN............... 5
(ii) USLD 1993 NON-EMPLOYEE DIRECTOR PLAN............... 5
(iii) USLD 1995 EMPLOYEE RESTRICTED STOCK PLAN........... 5
(iv) BILLING 1996 EMPLOYEE COMPREHENSIVE STOCK PLAN..... 6
(v) BILLING NON-EMPLOYEE DIRECTOR PLAN................. 6
Stock Purchase Plan............................................ 6
Subsidiary..................................................... 6
(i) RETAINED SUBSIDIARY................................ 6
(ii) BILLING SUBSIDIARY................................. 6
USLD........................................................... 6
Welfare Plan................................................... 6
1.2 CERTAIN CONSTRUCTIONS.......................................... 6
1.3 SCHEDULES; SECTIONS............................................ 6
1.4 SURVIVAL....................................................... 6
ARTICLE 2 EMPLOYEE BENEFITS........................................ 7
2.1 EMPLOYMENT..................................................... 7
(a) ALLOCATION OF RESPONSIBILITIES ON DISTRIBUTION DATE...... 7
(b) SERVICE CREDITS.......................................... 7
(i) DISTRIBUTION DATE TRANSFERS........................ 7
(ii) POST-DISTRIBUTION DATE TERMINATIONS................ 7
2.2 401(k) RETIREMENT PLANS........................................ 7
(a) CONTINUATION OF USLD 401(k) RETIREMENT PLAN.............. 7
(b) ESTABLISHMENT OF THE BILLING 401(k) RETIREMENT PLAN...... 7
(c) OBLIGATION TO MAKE COMPANY CONTRIBUTION.................. 8
(d) ADJUSTMENT MADE TO ACCOUNT BALANCES...................... 8
(e) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES.............. 8
(f) USLD TO PROVIDE INFORMATION.............................. 8
(g) REGULATORY FILINGS....................................... 8
2.3 COMPENSATION DEFERRAL PLANS.................................... 9
(a) USLD COMPENSATION DEFERRAL PLANS......................... 9
(b) BILLING COMPENSATION DEFERRAL PLANS...................... 9
2.4 STOCK PLANS.................................................... 9
(a) USLD STOCK OPTION PLAN AND RESTRICTED STOCK PLAN......... 9
(b) BILLING COMPREHENSIVE STOCK PLAN AND NON-EMPLOYEE
DIRECTOR PLAN.......................................... 10
(c) EFFECT OF THE DISTRIBUTION ON GRANTS AND AWARDS MADE
PRIOR TO THE CUTOFF DATE................................ 10
(i) RESTRICTED STOCK................................... 10
(ii) GRANT OF STOCK OPTIONS............................. 10
(iii) ADJUSTMENT AND SETTING OF EXERCISE PRICES.......... 11
(d) COMMUNICATION REGARDING TERMINATION OF EMPLOYMENT,
VESTING AND LAPSE OF RESTRICTIONS...................... 11
2.5 STOCK PURCHASE PLAN............................................ 11
(a) USLD STOCK PURCHASE PLAN................................. 11
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(b) BILLING STOCK PURCHASE PLAN.............................. 11
2.6 MEDICAL/DENTAL PLAN LIABILITY AND COVERAGE..................... 12
(a) USLD..................................................... 12
(b) BILLING. ................................................ 12
(c) CONTINUATION COVERAGE ADMINISTRATION..................... 12
2.7 VACATION AND SICK PAY LIABILITIES.............................. 13
(a) DIVISION OF LIABILITIES.................................. 13
(b) FUNDED RESERVES.......................................... 13
2.8 PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS.............. 13
2.9 NOTICE......................................................... 13
2.10 PAYROLL REPORTING AND WITHHOLDING.............................. 14
(a) FORM W-2 REPORTING....................................... 14
(b) FORMS W-4 AND W-5........................................ 14
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, QUALIFIED
MEDICAL CHILD SUPPORT ORDERS AND WAGE ASSIGNMENTS........ 14
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS.................... 14
ARTICLE 3 LABOR AND EMPLOYMENT MATTERS............................. 15
3.1 SEPARATE EMPLOYERS............................................. 15
3.2 EMPLOYMENT POLICIES AND PRACTICES.............................. 15
3.3 CLAIMS......................................................... 15
(a) SCOPE.................................................... 15
(b) EMPLOYMENT-RELATED CLAIMS................................ 15
(c) OBLIGATION TO INDEMNIFY.................................. 15
(d) PRE-DISTRIBUTION CLAIMS.................................. 16
(e) DISTRIBUTION AND OTHER JOINT LIABILITY CLAIMS............ 16
(f) POST-DISTRIBUTION EMPLOYMENT-RELATED CLAIMS.............. 16
3.4 FUNDING OF PLANS............................................... 16
3.5 NOTICE OF CLAIMS............................................... 16
3.6 ASSUMPTION OF EMPLOYMENT TAX RATES............................. 16
3.7 INTERCOMPANY SERVICE CHARGE.................................... 17
3.8 WARN CLAIMS.................................................... 17
3.9 EMPLOYEES ON LEAVE OF ABSENCE.................................. 17
3.10 NO THIRD-PARTY BENEFICIARY RIGHTS.............................. 17
3.11 ATTORNEY-CLIENT PRIVILEGE...................................... 17
ARTICLE 4 DEFAULT.................................................. 17
4.1 DEFAULT........................................................ 17
4.2 FORCE MAJEURE.................................................. 17
ARTICLE 5 MISCELLANEOUS............................................ 18
5.1 RELATIONSHIP OF PARTIES........................................ 18
5.2 ACCESS TO INFORMATION; COOPERATION............................. 18
5.3 ASSIGNMENT..................................................... 18
5.4 HEADINGS....................................................... 18
5.5 SEVERABILITY OF PROVISIONS..................................... 18
5.6 PARTIES BOUND.................................................. 18
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5.7 NOTICES........................................................ 18
5.8 FURTHER ACTION................................................. 19
5.9 WAIVER......................................................... 19
5.10 GOVERNING LAW.................................................. 19
5.11 CONSENT TO JURISDICTION........................................ 19
5.12 ENTIRE AGREEMENT............................................... 19
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BENEFIT PLANS AND
EMPLOYMENT MATTERS ALLOCATION AGREEMENT
THIS BENEFIT PLANS AND EMPLOYMENT MATTERS ALLOCATION AGREEMENT
("Agreement") is made and entered into as of July 10, 1996, by and between
U.S. LONG DISTANCE CORP., a Delaware corporation ("USLD"), and BILLING
INFORMATION CONCEPTS CORP., a Delaware corporation ("Billing").
R E C I T A L S:
WHEREAS, subject to certain conditions, USLD intends to pay a special
dividend to the holders of USLD Common Stock on a one share-for-one share basis,
consisting of all outstanding shares of Billing Information Concepts Corp.
common stock (the "Distribution"); and
WHEREAS, in connection with this special dividend, USLD and Billing have
entered into a Distribution Agreement (the "Distribution Agreement") dated as of
July 10, 1996; and
WHEREAS, pursuant to the aforesaid Distribution Agreement, USLD and
Billing have agreed to enter into an agreement allocating responsibilities with
respect to employee compensation, benefit plans, labor and certain other
employment matters pursuant to the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other valuable consideration the receipt and sufficiency of which are hereby
acknowledged, USLD and Billing agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS. As used in this Agreement, the following terms shall
have the meanings indicated below:
BILLING BUSINESS. Any business or operation of USLD or its Subsidiaries
that is, pursuant to the Distribution Agreement, defined as the Billing Group
Business, or which is to be conducted, following the Distribution, by Billing or
any Billing Subsidiary.
BILLING STOCK OPTION. An option to acquire Billing Common Stock granted
under the Billing 1996 Employee Comprehensive Stock Plan or Billing Non-Employee
Director Plan.
CODE. The Internal Revenue Code of 1986, as amended, or any successor
legislation.
COMMISSION. The Securities and Exchange Commission.
<PAGE>
COMMON STOCK. The common stock of USLD or Billing, as more specifically
described below:
(i) BILLING COMMON STOCK. The common stock, par value $.01 per
share, of Billing;
(ii) EMPLOYER COMMON STOCK. USLD Common Stock in the case of
Retained Employees and USLD Terminees and Billing Common Stock in the case
of Billing Employees; or
(iii) USLD COMMON STOCK. The common stock, par value $.01 per
share, of USLD.
COMPANY CONTRIBUTION. The Company Contribution of USLD under the USLD
401(k) Retirement Plan (as provided in the USLD 401(k) Retirement Plan
document), as may be supplemented in the sole and absolute discretion of the
USLD Board of Directors.
CURRENT PLAN YEAR. The plan year or fiscal year, whichever is
applicable with respect to any Plan, during which the Distribution occurs.
CUTOFF DATE. The date immediately preceding the Distribution Date.
DEFERRED COMPENSATION PLAN. A plan of deferred compensation that is not
tax-qualified under Section 401(a) of the Code and that is maintained for
Employees of USLD or Billing and their beneficiaries, as described below:
(i) USLD EXECUTIVE COMPENSATION DEFERRAL PLAN. The current USLD
Executive Compensation Deferral Plan, restated as of December 12, 1995,
through which eligible executives of USLD may defer current compensation
for retirement or other purposes, and that serves as the means by which
amounts that would otherwise exceed certain limitations for contributions
to the tax-qualified USLD 401(k) Retirement Plan are credited and
automatically deferred;
(ii) USLD DIRECTOR COMPENSATION DEFERRAL PLAN. The current USLD
Director Compensation Deferral Plan, restated as of December 19, 1995,
through which members of USLD's Board of Directors may defer current
compensation for retirement or other purposes, and that serves as a means
by which amounts that would otherwise exceed certain limitations for
contributions to tax qualified retirement plans are credited and
automatically deferred;
(iii) BILLING EXECUTIVE COMPENSATION DEFERRAL PLAN. The Billing
Executive Compensation Deferral Plan, adopted as of July 10, 1996,
but effective as of the Distribution Date, through which eligible
executives of Billing may defer current compensation for retirement or
other purposes, and that serves as the means by which amounts that would
otherwise exceed certain limitations for contributions to the
tax-qualified Billing 401(k) Retirement Plan are credited and
automatically deferred; or
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(iv) BILLING DIRECTOR COMPENSATION DEFERRAL PLAN. The Billing
Director Compensation Deferral Plan, adopted as of July 10, 1996, but
effective as of the Distribution Date, through which members of Billing's
Board of Directors may defer current compensation for retirement or other
purposes, and that serves as a means by which amounts that would otherwise
exceed certain limitations for contributions to tax qualified retirement
plans are credited and automatically deferred.
DISTRIBUTION AGREEMENT. The agreement described in the second recital
of this Agreement.
DISTRIBUTION DATE. The date on which the Distribution occurs.
EMPLOYEE. An individual who, on the Distribution Date, is identified as
being in any of the following categories:
(USLD CATEGORIES OF EMPLOYEES)
(i) USLD TERMINEE. Any individual formerly employed in any
Retained Business of USLD or of any Subsidiary of USLD who terminated such
employment prior to the Distribution Date, including, but not limited to,
any USLD Employee who has retired from a Retained Business prior to the
Distribution Date;
(ii) RETAINED EMPLOYEE. Any individual who is an Employee of
USLD or any Retained Subsidiary on the Distribution Date; or
(iii) RETAINED INDIVIDUAL. Any individual who (i) is a Retained
Employee, or (ii) is, as of the Cutoff Date, a USLD Terminee whose last
employment with USLD or a Retained Subsidiary was with a Retained Business
or any Retained Subsidiary, or (iii) is a beneficiary of any individual
described in clause (i) or (ii).
(BILLING CATEGORIES OF EMPLOYEES)
(iv) BILLING TERMINEE. Any individual formerly employed by any
Billing Business or any Subsidiary of USLD who terminated such employment
prior to the Distribution Date, including, but not limited to, any Billing
Employee who has retired from a Billing Business prior to the Distribution
Date;
(v) BILLING EMPLOYEE. Any individual who is an Employee of
Billing or any Billing Subsidiary on the Distribution Date; or
(vi) BILLING INDIVIDUAL. Any individual who (i) is a Billing
Employee, or (ii) is, as of the Cutoff Date, a Billing Terminee whose last
employment with USLD or a Retained Subsidiary was with a Billing Business
or any Billing Subsidiary, or (iii) is a beneficiary of any individual
specified in clause (i) or (ii).
ERISA. The Employee Retirement Income Security Act of 1974, as amended,
or any successor legislation.
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EXISTING USLD STOCK OPTION. An unexercised option to purchase USLD
Common Stock held by a grantee on the Cutoff Date pursuant to the USLD 1990
Employee Stock Option Plan or USLD 1993 Non-Employee Director Plan.
401(k) RETIREMENT PLAN. A defined contribution plan maintained pursuant
to Section 401(k) or 401(a) of the Code for Employees and their beneficiaries,
as specifically identified using one of the categories described below:
(i) USLD 401(k) RETIREMENT PLAN. The USLD Employees' 401(k)
Retirement Plan and Trust, as in effect prior to the Distribution Date; or
(ii) BILLING 401(k) RETIREMENT PLAN. The Billing Employees'
401(k) Retirement Plan and Trust to be adopted by Billing and to become
effective on the Distribution Date.
IRS. The Internal Revenue Service.
MEDICAL/DENTAL PLAN. A Welfare Plan providing health benefits to
Employees of USLD and their dependents, or to Employees of Billing and their
dependents, as described below:
(i) USLD MEDICAL/DENTAL PLANS. The existing USLD Medical/Dental
Plans maintained prior to the Distribution primarily for the benefit of
Retained Employees and Billing Employees and continued by USLD after the
Distribution Date pursuant to Section 2.6; or
(ii) BILLING MEDICAL/DENTAL PLANS. The Medical/Dental Plans to
be established by Billing in accordance with Section 2.6.
NONQUALIFIED AWARD. An award under the USLD 1990 Employee Stock Option
Plan, the USLD Non-Employee Director Plan or the Billing 1996 Employee
Comprehensive Stock Plan of a stock option that is not qualified as an incentive
stock option under Code Section 422.
PLAN. Any plan, policy, arrangement, contract or agreement providing
compensation or benefits for any group of Employees or former employees or for
any individual Employee or former employee or the dependents or beneficiaries of
any such Employee or former employee, whether formal or informal or written or
unwritten, and including, without limitation, any means, whether or not legally
required, pursuant to which any benefit is provided by an employer to any
Employee or former employee or the beneficiaries of any such Employee or former
employee. The term "Plan" as used in this Agreement does not include any
contract, agreement or understanding entered into by USLD prior to the
Distribution or by USLD or Billing after the Distribution and relating to
settlement of actual or potential employee-related litigation claims.
POST-CONVERSION STOCK PRICE. The per share price of USLD Common Stock
or Billing Common Stock, as applicable, equal to the average of the closing
sales price per share of that Common Stock on the Nasdaq National Market for
each of ten consecutive trading days beginning with and including the
Distribution Date.
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QUALIFIED BENEFICIARY. An individual (or dependent thereof) who either
(1) experiences a "qualifying event" (as that term is defined in Code Section
4980B(f)(3) and ERISA 603) while a participant in any Medical/Dental Plan, or
(2) becomes a "qualified beneficiary" (as that term is defined in Code Section
4980B(g)(1) and ERISA 607(3)) under any Medical/Dental Plan, and who is included
in any one of the following categories:
(i) USLD FUTURE QUALIFIED BENEFICIARY. Any person who becomes a
Qualified Beneficiary on or after the Distribution Date under any USLD
Medical/Dental Plan;
(ii) USLD CURRENT QUALIFIED BENEFICIARY. Any USLD Terminee who
on or before the Cutoff Date, was a Qualified Beneficiary under any USLD
Medical/Dental Plan;
(iii) BILLING FUTURE QUALIFIED BENEFICIARY. Any person who
becomes a Qualified Beneficiary after the Cutoff Date under any Billing
Medical/Dental Plan; or
(iv) BILLING CURRENT QUALIFIED BENEFICIARY. Any Billing Terminee
who on or before the Cutoff Date was a Qualified Beneficiary under any
USLD Medical/Dental Plan.
RETAINED BUSINESS. Any business or operation of USLD or its
Subsidiaries that is, pursuant to the Distribution Agreement, defined as the
Telecommunications Group Business, or that is to be conducted, following the
Distribution, by USLD or any Retained Subsidiary.
SERVICE CREDIT. The period taken into account under any Plan for
purposes of determining length of service or plan participation to satisfy
eligibility, vesting, benefit accrual and similar requirements under such Plan.
STOCK PLANS. Stock based incentive Plans maintained for Employees and
Non-Employee Directors of USLD or Billing and their respective beneficiaries, as
described below:
(i) USLD 1990 EMPLOYEE STOCK OPTION PLAN. A stock-based
incentive compensation Plan providing for awards of stock options
maintained for employees of USLD and its subsidiaries, and their
beneficiaries, adopted in 1990 and continued by USLD pursuant to Section
2.4(a);
(ii) USLD 1993 NON-EMPLOYEE DIRECTOR PLAN. A stock-based
incentive compensation Plan providing for awards of stock options
maintained for non-employee directors of USLD and its subsidiaries, and
their beneficiaries, adopted in 1993 (which incorporated and expanded a
1991 non-employee director plan) and continued pursuant to Section 2.4(a);
(iii) USLD 1995 EMPLOYEE RESTRICTED STOCK PLAN. A stock-based
incentive compensation Plan providing for awards of restricted stock
maintained for employees of USLD and its subsidiaries, and their
beneficiaries, adopted in 1995 and continued by USLD pursuant to Section
2.4(a);
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(iv) BILLING 1996 EMPLOYEE COMPREHENSIVE STOCK PLAN. A
stock-based incentive compensation Plan providing for awards of stock
options and restricted stock maintained for employees of Billing, its
parent and subsidiaries, and their beneficiaries, adopted by USLD as sole
stockholder of Billing on July 10, 1996, but effective as of the
date of effectiveness of Billing's Registration Statement on Form 10
filed under the Securities Exchange Act of 1934, as amended, and continued
by Billing pursuant to Section 2.4(b); or
(v) BILLING NON-EMPLOYEE DIRECTOR PLAN. A stock-based incentive
compensation Plan providing for awards of stock options to non-employee
directors of Billing, its parent and subsidiaries, adopted by USLD as the
sole stockholder of Billing on July 10, 1996, but effective as of the
date of effectiveness of Billing's Registration Statement on Form 10
filed under the Securities Exchange Act of 1934, as amended, and continued
by Billing pursuant to Section 2.4(b).
STOCK PURCHASE PLAN. A stock-based Plan meeting the requirements of
Section 423 of the Code, maintained for Employees of USLD or Billing.
SUBSIDIARY. Any corporation, including each of the following
categories:
(i) RETAINED SUBSIDIARY. Any subsidiary of USLD except Billing
and the Billing Subsidiaries; or
(ii) BILLING SUBSIDIARY. Each of the Billing Group Subsidiaries
as defined in the Distribution Agreement and all other Subsidiaries of
Billing as defined in the Distribution Agreement at the time of the
Distribution.
USLD. U.S. Long Distance Corp., a Delaware corporation.
WELFARE PLAN. Any Plan that provides medical, health, disability,
accident, life insurance, death, dental or any other welfare benefit, including,
without limitation, any post-employment benefit.
1.2 CERTAIN CONSTRUCTIONS. References to the singular in this
Agreement shall refer to the plural and vice-versa and references to the
masculine shall refer to the feminine and vice-versa.
1.3 SCHEDULES; SECTIONS. References to a "Schedule" are, unless
otherwise specified, to one of the Schedules attached to this Agreement, and
references to a "Section" are, unless otherwise specified, to one of the
Sections of this Agreement.
1.4 SURVIVAL. Obligations described in this Agreement shall remain in
full force and effect and shall survive the Distribution Date.
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ARTICLE 2
EMPLOYEE BENEFITS
2.1 EMPLOYMENT.
(a) ALLOCATION OF RESPONSIBILITIES ON DISTRIBUTION DATE. On the
Distribution Date, except to the extent retained or assumed by USLD under this
Agreement or any other agreement related to the Distribution, Billing shall
retain or assume, as the case may be, responsibility as employer for the Billing
Employees. On the Distribution Date, except to the extent retained or assumed
by Billing under this Agreement or any other agreement relating to the
Distribution, USLD shall retain or assume, as the case may be, responsibility as
employer for the Retained Employees. The assumption or retention of
responsibility as employer by USLD or Billing described in this Section 2.1
shall not, of itself, constitute a severance or a termination of employment
under any plan of severance, of income or other Plan extension maintained by
USLD or Billing, and no such severance, separation or termination shall be
deemed to occur.
(b) SERVICE CREDITS.
(i) DISTRIBUTION DATE TRANSFERS. On the Distribution Date, for
purposes of determining Service Credits under any Plans, USLD shall credit
each Retained Employee and Billing shall credit each Billing Employee with
such Employee's Service Credits and original hire date as are reflected in
the USLD payroll system records. Such Service Credits and hire date shall
continue to be maintained as described herein for as long as the Employee
does not terminate employment.
(ii) POST-DISTRIBUTION DATE TERMINATIONS. Subject to the
provisions of ERISA, USLD may, in the case of Retained Employees, and
Billing may, in the case of Billing Employees, each in its sole
discretion, make such decisions as it deems appropriate with respect to
determining Service Credits for such Employees who terminate employment
from the other company after the Distribution Date.
2.2 401(k) RETIREMENT PLANS.
(a) CONTINUATION OF USLD 401(k) RETIREMENT PLAN. Effective as of the
Distribution Date, USLD shall continue sponsorship of the USLD 401(k) Retirement
Plan.
(b) ESTABLISHMENT OF THE BILLING 401(k) RETIREMENT PLAN. Effective as
of the Distribution Date, Billing shall take, or cause to be taken, all action
necessary and appropriate to establish and administer a new Plan named the
Billing 401(k) Retirement Plan and Trust in the form approved by the Billing
Board of Directors. Billing shall provide benefits under such Billing 401(k)
Retirement Plan after the Distribution Date for all Billing Employees who,
immediately prior to the Distribution Date, were participants in or otherwise
entitled to benefits under the USLD 401(k) Retirement Plan. The Billing 401(k)
Retirement Plan shall be intended to qualify for tax-favored treatment under
Section 401(a) and 401(k) of the Code and to be in compliance with the
requirements of ERISA. All Billing Employees who wish to participate in
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the Billing 401(k) Retirement Plan will be required to enroll in the Billing
401(k) Retirement Plan as provided by such Plan.
(c) OBLIGATION TO MAKE COMPANY CONTRIBUTION. USLD is responsible for
USLD's obligation to make payment of Company Contributions under the USLD 401(k)
Retirement Plan in accordance with the terms and conditions of the USLD 401(k)
Retirement Plan for the period up to and including the Cutoff Date. The Company
Contribution to the Billing 401(k) Retirement Plan for the remainder of the
Current Plan Year shall be paid by Billing in accordance with the provisions of
the Billing 401(k) Retirement Plan document and applicable law.
(d) ADJUSTMENT MADE TO ACCOUNT BALANCES. As of the Distribution Date,
the plan administrator of the USLD 401(k) Retirement Plan shall adjust the
account balances of all participants entitled under such Plan to Company
Contributions and forfeitures for the Current Plan Year to reflect such Company
Contributions and forfeitures.
(e) TRANSFER AND ACCEPTANCE OF ACCOUNT BALANCES. As soon as
practicable after the Distribution Date, USLD shall cause the trustees of the
USLD 401(k) Retirement Plan to transfer to the trustee or other funding agent of
the Billing 401(k) Retirement Plan the amounts (in cash, securities, other
property, plan loans, or a combination thereof) acceptable to the Billing
administrator or trustee of the Billing 401(k) Retirement Plan representing the
account balances of all Billing Individuals, and Billing shall credit the
accounts of such individuals under the Billing 401(k) Retirement Plan with said
amounts. Each such transfer shall comply with Section 414(l) of the Code and
the requirements of ERISA and the regulations promulgated thereunder. Billing
shall cause the trustees or other funding agent of the Plan to accept the
plan-to-plan transfer from the USLD 401(k) Retirement Plan trustees, and to
credit the accounts of such Billing Individuals under the Billing 401(k)
Retirement Plan with amounts transferred on their behalf.
(f) USLD TO PROVIDE INFORMATION. USLD shall provide Billing, as soon
as practicable after the Distribution Date (with the cooperation of Billing to
the extent that relevant information is in the possession of Billing or a
Billing Subsidiary, and in accordance with Section 5.2), with a list of Billing
Individuals who, to the best knowledge of USLD, were participants in or
otherwise entitled to benefits under the USLD 401(k) Retirement Plan on the
Cutoff Date, together with a listing of each participant's Service Credits under
the USLD 401(k) Retirement Plan and a listing of each such Billing Individual's
account balance thereunder. USLD shall, as soon as practicable after the
Distribution Date and in accordance with Section 5.2, provide Billing with such
additional information in the possession of USLD or a Retained Subsidiary (and
not already in the possession of Billing or a Billing Subsidiary) as may be
reasonably requested by Billing and necessary for Billing to administer
effectively the Billing 401(k) Retirement Plan.
(g) REGULATORY FILINGS. Billing and USLD shall, in connection with
the plan-to-plan transfer described in Section 2.2(e), cooperate in making any
and all appropriate filings required by the Commission or the IRS, or required
under the Code, ERISA, or any applicable securities laws and the regulations
thereunder, and take all such action as may be necessary and appropriate to
cause such plan-to-plan transfer to take place as soon as practicable after the
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Distribution Date or otherwise when required by law. Further, Billing shall
seek a favorable IRS determination letter to the effect that the Billing 401(k)
Retirement Plan, as organized, satisfies all qualification requirements under
Section 401(a) and 401(k) of the Code, and the transfers described in Section
2.2(e) shall take place as soon as practicable. Such transfers may take place
pending issuance of a favorable determination letter, upon receipt of an opinion
of counsel reasonably satisfactory to both USLD and Billing that the Billing
Plan so qualifies, or can be made to so qualify by retroactive amendment, and
that the transfer will not adversely affect the qualified status of either Plan
or decrease the accrued benefits of any participant.
2.3 COMPENSATION DEFERRAL PLANS.
(a) USLD COMPENSATION DEFERRAL PLANS. USLD shall continue sponsorship
of the USLD Executive Compensation Deferral Plan and USLD Director Compensation
Deferral Plan and to provide future deferred compensation benefits thereunder
accruing after the Cutoff Date for all Retained Employees and outside directors
of USLD, as the case may be, who are admitted to participation in such
respective Plans on or after the Distribution Date. USLD shall be responsible
for all liabilities and obligations of USLD relating to Retained Individuals and
such outside directors of USLD, as the case may be, accrued through the Cutoff
Date with respect to the USLD Executive Compensation Deferral Plan and USLD
Director Compensation Deferral Plans, respectively, along with earnings required
to be credited to account balances included therein.
(b) BILLING COMPENSATION DEFERRAL PLANS. Billing shall adopt new
plans named the Billing Executive Compensation Deferral Plan and Billing
Director Compensation Deferral Plan. Billing shall thereafter (1) provide
similar deferred compensation opportunities to Billing Individuals and outside
directors of Billing as shall have been provided to participants in the USLD
Executive Compensation Deferral Plan and USLD Director Compensation Deferral
Plan, respectively, prior to the Distribution Date; and (2) shall assume all
liabilities and obligations of USLD relating to Billing Individuals and outside
directors of Billing accrued through the Cutoff Date with respect to the USLD
Executive Compensation Deferral Plan and USLD Director Compensation Deferral
Plan, respectively, along with earnings required to be credited to account
balances included in such Plans. The foregoing shall be subject to the
requirements of ERISA and the Code. All Billing Employees who wish to
participate in the Billing Executive Compensation Deferral Plan or Director
Deferral Plan, as applicable, must so elect as provided by such Plan.
2.4 STOCK PLANS.
(a) USLD STOCK OPTION PLAN AND RESTRICTED STOCK PLAN. USLD shall
continue the USLD 1990 Employee Stock Option Plan, the USLD 1993 Non-Employee
Director Plan and the USLD 1995 Employee Restricted Stock Plan. All awards
under these Plans will continue to be denominated in USLD Common Stock. USLD
shall continue to reserve those shares already reserved under the USLD 1990
Employee Stock Option Plan, the USLD 1993 Non-Employee Director Plan and the
USLD 1995 Employee Restricted Stock Plan. Additionally, USLD, after the
Distribution, will cause to be reserved any additional shares identified for
reservation thereunder to the extent authorized by the stockholders.
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(b) BILLING COMPREHENSIVE STOCK PLAN AND NON-EMPLOYEE DIRECTOR PLAN.
Prior to the Distribution Date, Billing shall take, or cause to be
taken, all action necessary and appropriate (i) to ratify the adoption of the
Billing 1996 Employee Comprehensive Stock Plan and the Billing Non-Employee
Director Plan, and (ii) to present such Plans to USLD, as the sole stockholder
of Billing, for its approval of these Plans. All awards of options under the
Billing 1996 Employee Comprehensive Stock Plan and the Billing Non-Employee
Director Plan will be denominated in Billing Common Stock. To the extent
authorized by USLD, its sole stockholder, prior to the Distribution Date,
Billing will reserve as shares under the Billing 1996 Employee Comprehensive
Stock Plan and the Billing Non-Employee Director Plan 3,500,000 shares and
400,000 shares, respectively, of Billing Common Stock, identified for
reservation thereunder. Any such shares not used to grant Billing Stock Options
or restricted share awards pursuant to Section 2.4(c) will be available for
future awards to Billing Individuals. Billing shall administer all grants of
Billing Stock Options and awards of restricted shares of Billing Common Stock
under the Billing 1996 Employee Comprehensive Stock Plan and all grants of
Billing Stock Options under the Billing Non-Employee Director Plan under the
terms of such Plans governing such grants or awards.
(c) EFFECT OF THE DISTRIBUTION ON GRANTS AND AWARDS MADE PRIOR TO THE
CUTOFF DATE.
(i) RESTRICTED STOCK. On the Distribution Date, the grantee of
each restricted share of USLD Common Stock awarded under the USLD 1995 Employee
Restricted Stock Plan shall retain such share and shall receive as part of the
Distribution one restricted share of Billing Common Stock under the Billing 1996
Comprehensive Stock Plan for each restricted share of USLD Common Stock awarded
under the USLD 1995 Employee Restricted Stock Plan as of the record date for the
Distribution. For the Retained Employees and USLD Terminees, the restricted
shares of Billing Common Stock will be held by Billing and will be subject to
restrictions identical to those applicable to the underlying restricted shares
of USLD Common Stock, which are and will continue to be held by USLD. For
Billing Employees and Billing Terminees, their restricted shares of USLD Common
Stock will continue to be held by USLD under the 1995 Employee Restricted Stock
Plan, the Billing Common Stock will be subject to restrictions for the benefit
of Billing identical to the restrictions for the benefit of USLD that are
applicable to the underlying shares of USLD Common Stock and Billing will hold
the restricted shares of Billing Common Stock under the Billing 1996
Comprehensive Stock Plan. Restricted shares of Billing Common Stock awarded as
part of the Distribution shall be released by Billing from restrictions at the
same time and on the same schedule as the restricted shares of USLD Common Stock
retained, under the terms of the restrictions to which the grantee's award under
the USLD 1995 Employee Restricted Stock Plan were subject. The Distribution
shall not be deemed a termination of employment by any Retained Employee or
Billing Employee for purposes of the USLD 1995 Restricted Stock Plan.
(ii) GRANT OF STOCK OPTIONS. As soon as practicable after the
date hereof and prior to the Distribution Date, Billing shall grant to (1) each
Retained Employee or Billing Employee that is a grantee of a Nonqualified Award
of an Existing USLD Stock Option under the USLD 1990 Employee Stock Option Plan,
a Nonqualified Award of a Billing Stock Option to purchase a number of shares of
Billing Common Stock under the Billing 1996 Comprehensive Stock Plan equal to
the number of shares of USLD Common Stock purchasable under the Existing USLD
Stock Option and (2) each non-employee director of USLD that is a grantee of
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an Existing USLD Stock Option under the USLD 1993 Non-Employee Director Plan, a
Billing Stock Option to purchase a number of shares of Billing Common Stock
under the Billing 1996 Comprehensive Stock Plan equal to the number of shares of
USLD Common Stock purchasable under the Existing USLD Stock Option. The Billing
Stock Options will be subject to the same terms and conditions of the
corresponding Existing USLD Stock Options, except that the exercise price of the
Billing Stock Options shall be set as described in paragraph 2.4(c)(iii) and the
Distribution shall not be deemed a termination of employment of any Retained
Employee or Billing Employee for purposes of the USLD 1990 Employee Stock Option
Plan or the Billing 1996 Comprehensive Stock Plan. The Existing USLD Stock
Options shall remain in effect with the same terms and conditions, including
that the same number of shares of USLD Common Stock shall be purchasable upon
exercise thereof, except that the exercise price of the Existing USLD Stock
Options shall be adjusted pursuant to paragraph 2.4(c)(iii).
(iii) ADJUSTMENT AND SETTING OF EXERCISE PRICES. The adjusted exercise
price (the "Adjusted USLD Option Exercise Price") of each Existing USLD Stock
Option and the exercise price of the related Billing Stock Option shall be as
follows. The Adjusted USLD Option Exercise Price shall equal the product of (1)
the exercise price of the Existing USLD Stock Option multiplied by (2) the ratio
of (a) the Post Conversion Stock Price of USLD Common Stock to (b) the sum of
(x) the Post Conversion Stock Price of the USLD Common Stock plus (y) the Post
Conversion Stock Price of the Billing Common Stock. The exercise price of the
related Billing Stock Option shall equal the product of (1) the exercise price
of the related Existing USLD Stock Option multiplied by (2) the ratio of (a) the
Post Conversion Stock Price of Billing Common Stock to (b) the sum of (x) the
Post Conversion Stock Price of the Billing Common Stock plus (y) the Post
Conversion Stock Price of the USLD Common Stock.
(d) COMMUNICATION REGARDING TERMINATION OF EMPLOYMENT, VESTING AND
LAPSE OF RESTRICTIONS. USLD shall promptly notify Billing of the termination
of employment of any Retained Employee holding Billing Stock Options or
restricted shares of Billing Common Stock and of any amendment to an Existing
USLD Stock Option held by a Retained Employee holding a related Billing Stock
Option. Billing shall promptly notify USLD of the termination of employment
of any Billing Employee holding an Existing USLD Stock Option or restricted
shares of USLD Common Stock and of any amendment to a Billing Stock Option
held by a Billing Employee holding a related Existing USLD Stock Option.
Such notices with respect to termination shall specify the date of
termination, the reason for termination (e.g. for cause, without cause, upon
a change of control, etc.), whether the termination is with or without
written consent and that the impact that such termination has on any
outstanding grant or award of options on restricted shares. Such notices
with respect to amendments to an Existing USLD Stock Option or Billing Stock
Option shall specify the amendment, the name of the Retained Employee or
Billing Employee, as applicable, and such other information as the other
party shall reasonably require. USLD agrees that each Existing USLD Stock
Option held by a Billing Employee whose related Billing Stock Option is
amended following the Distribution Date shall be deemed amended and shall be
amended to the same extent as the related Billing Stock Option is amended
without further action. Billing agrees that each Billing Stock Option held by
a Retained Employee whose related Existing USLD Stock Option is amended
following the Distribution Date shall be deemed amended and shall be amended
to the same extent as the related Existing USLD Stock Option is amended
without further action.
(e) CHANGE IN CONTROL. Each Existing USLD Stock Option agreement
provides or will provide, and each relating Billing Stock Option agreement
will provide, that (a) upon a change of control (as defined in the
applicable stock option agreement) of USLD, all nonvested Existing USLD Stock
Options, whether held by a Retained Employee or a Billing Employee, and all
nonvested Billing Stock Options held by Retained Employees shall immediately
vest, and (b) upon a change of control (as defined in the applicable stock
option agreement) of Billing, all nonvested Billing Stock Options, whether
held by a Retained Employee or a Billing Employee, and all nonvested Existing
USLD Stock Options held by Billing Employees shall immediately vest.
(f) DETERMINATION OF CONSENT TO TERMINATION OF EMPLOYMENT OF BILLING
EMPLOYEES UNDER USLD EMPLOYEE STOCK PLAN. USLD agrees that with respect to
Billing Employees who hold USLD Stock Options under the USLD 1990 Employee
Stock Plan, for purposes of Section 14 of the USLD 1990 Employee Stock Plan,
the giving or withholding of consent to the termination of employment of a
Billing Employee shall be as determined by Billing and stated in the notice
of termination provided by Billing to USLD as required by Section 2.4(d)
above.
2.5 STOCK PURCHASE PLAN.
(a) USLD STOCK PURCHASE PLAN. The current six-month enrollment period
for the USLD Stock Purchase Plan shall close early on June 30, 1996, or such
other date preceding the Distribution Date as the Plan administrator shall
specify, and shares of USLD Common Stock shall be purchased for all eligible
Plan participants so as to allow Plan participants to participate in the
Distribution of the shares of Billing Common Stock. The next six-month
enrollment period for the USLD Stock Purchase Plan shall begin on August 1,
1996, or such other date as the Plan Administrator shall specify following the
Distribution Date.
(b) BILLING STOCK PURCHASE PLAN. The Billing Stock Purchase Plan,
approved by USLD in its role as sole stockholder of Billing on July 10, 1996,
but effective as of the date of effectiveness of Billing's Registration
Statement on Form 10 filed under the Securities Exchange Act of 1934, as
amended, shall begin its initial enrollment period on August 1, 1996, or
such other date
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as Plan administrator shall specify following the Distribution Date. All
Billing Employees who wish to participate in the Billing Stock Purchase Plan
must so elect as provided by such Plan.
2.6 MEDICAL/DENTAL PLAN LIABILITY AND COVERAGE.
(a) USLD. USLD shall sponsor and continue the existing USLD
Medical/Dental Plans and be responsible for providing medical/dental coverage,
including appropriate stop-loss insurance, and assuming responsibility for the
associated liabilities and accrued obligations of these plans relating to
Retained Employees and Retained Individuals. The medical/dental plans to be
sponsored and continued by USLD are listed on Schedule 2.6(a) attached to and
incorporated into this Agreement.
(b) BILLING. After the Distribution Date, Billing shall be
responsible for providing medical/dental coverage and assuming responsibility
for the associated liabilities and accrued obligations of and relating to all
Billing Employees and their eligible dependents who will be offered
participation in the Billing Medical/Dental Plan or plans on terms and
conditions deemed appropriate by Billing. Billing Employees shall have no
preexisting condition limitation imposed other than that which is or was imposed
under their existing plan or plans, and they will be credited with any expenses
incurred toward deductibles, out-of-pocket expenses, maximum benefit payments,
and any benefit usage toward plan limits that would have been applicable to the
plan in which they were enrolled prior to the Distribution. The medical/dental
plans to be sponsored and continued by Billing are listed on Schedule 2.6(b)
attached to and incorporated into this Agreement.
(c) CONTINUATION COVERAGE ADMINISTRATION. As of the Distribution
Date, USLD or a Retained Subsidiary shall assume or retain and shall be solely
responsible for, or cause its insurance carriers (including for this purpose
HMOs and PPOs providing coverage) to be responsible for, the administration of
the continuation coverage requirements imposed by Code Section 4980B and ERISA
Sections 601 through 608 as they relate to any USLD Current Qualified
Beneficiary or any USLD Future Qualified Beneficiary. As of the Distribution
Date, USLD or a Retained Subsidiary shall assume or retain and shall be
responsible for, or cause its insurance carriers (including for this purpose
HMOs and PPOs providing coverage) to be responsible for, all liabilities and
obligations in connection with coverage to be provided, claims incurred and
premiums owed on or after the Cutoff Date under any USLD Medical/Dental Plan in
respect of any USLD Current Qualified Beneficiary or any USLD Future Qualified
Beneficiary. As of the Distribution Date, Billing or a Billing Subsidiary shall
assume or retain and shall be solely responsible for, or cause it insurance
carriers (including for this purpose HMOs and PPOs providing coverage) to be
responsible for, the administration of the continuation coverage requirements
imposed by Code Section 4980B and ERISA Sections 601 through 608 as they relate
to any Billing Current Qualified Beneficiary or any Billing Future Qualified
Beneficiary. As of the Distribution Date, Billing or a Billing Subsidiary shall
assume or retain and shall be responsible for, or cause its insurance carriers
(including for this purpose HMOs and PPOs providing coverage) to be responsible
for, all liabilities and obligations in connection with coverage to be provided,
claims incurred and premiums owed on or after the Cutoff Date under any Billing
Medical/Dental Plan in respect of any Billing Current Qualified Beneficiary or
any Billing Future Qualified Beneficiary.
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(d) In the event that subsequent to the Distribution Date, refunds are
received from or additional premium adjustments become payable to carriers
providing health or medical insurance where such amounts are the result of
actual experience differing from that used to compute premiums for any periods
prior to the Distribution Date, such refunds or obligations will be shared
between USLD and Billing based on the following formula. Billings share will
equal the percentage represented by the average number of Billing employees
during the period to which the refund or obligation relates divided by the
average total of Billing and USLD employees during such period. USLD's share
will equal the percentage represented by the average number of USLD employees
during the period to which the refund or obligation relates divided by the
average total of Billing and USLD employees during such period.
2.7 VACATION AND SICK PAY LIABILITIES.
(a) DIVISION OF LIABILITIES. Effective on the Distribution Date, USLD
shall retain, as to the Retained Employees, and, Billing shall assume, as to the
Billing Employees, all accrued liabilities (whether vested or unvested, and
whether funded or unfunded) for vacation and sick leave in respect of such
employees as of the Cutoff Date. USLD shall be solely responsible for the
payment of such vacation or sick leave to Retained Employees after the Cutoff
Date and Billing shall be solely responsible for the payment of such vacation or
sick leave to Billing Employees after the Cutoff Date. Each party shall provide
to its own Employees on the Distribution Date the same vested and unvested
balances of vacation and sick leave as credited to such Employee on the USLD
payroll systems on the Cutoff Date. The preceding sentence shall not be
construed as in any way limiting the right of either USLD or Billing to change
its vacation or sick leave policies as it deems appropriate.
(b) FUNDED RESERVES. Assets attributable to funded reserves for the
vacation or sick leave liabilities being divided in accordance with Section
2.7(a) (whether held in a trust, a voluntary employees beneficiary association,
or any other funding vehicle) shall be allocated in an appropriate and equitable
manner between USLD and Billing.
2.8 PRESERVATION OF RIGHT TO AMEND OR TERMINATE PLANS. Except as
otherwise expressly provided in Article 2, no provisions of this Agreement,
including, without limitation, the agreement of USLD or Billing, or any Retained
Subsidiary or Billing Subsidiary, to make a contribution or payment to or under
any Plan herein referred to for any period, shall be construed as a limitation
on the right of USLD or Billing or any Retained Subsidiary or Billing Subsidiary
to amend such Plan or terminate its participation therein which USLD or Billing
or any Retained Subsidiary or Billing Subsidiary would otherwise have under the
terms of such Plan or otherwise. No provision of this Agreement shall be
construed to create a right in any employee or former employee, or dependent or
beneficiary of such employee or former employee, under a Plan which such person
would not otherwise have under the terms of the Plan itself.
2.9 NOTICE. USLD and Billing acknowledge that USLD and the Retained
Subsidiaries, on the one hand, and Billing and the Billing Subsidiaries, on the
other hand, may incur costs and expenses, including, but not limited to,
contributions to Plans and the payment of insurance premiums arising from or
related to any of the Plans that are, as set forth in this Agreement, the
responsibility of the other party hereto. Accordingly, USLD (and any Retained
Subsidiary
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responsible therefor) and Billing (and any Billing Subsidiary responsible
therefor) shall (i) give notice to the other party of the costs to be incurred
prior to payment and (ii) demand that the other party which has the obligation
to pay shall pay the cost and expense.
2.10 PAYROLL REPORTING AND WITHHOLDING.
(a) FORM W-2 REPORTING. Billing and USLD hereby adopt the
"alternative procedure" for preparing and filing IRS Forms W-2 (Wage and Tax
Statements), as described in Section 5 of Revenue Procedure 84-77, 1984-2 IRS
Cumulative Bulletin 753 ("Rev. Proc. 84-77"). Under this procedure Billing as
the successor employer shall provide all required Forms W-2 to all Billing
Individuals reflecting all wages paid and taxes withheld by both USLD as the
predecessor and Billing as the successor employer for the entire year during
which the Distribution takes place. USLD shall provide all required Forms W-2
to all Retained Individuals reflecting all wages and taxes paid and withheld by
USLD before, on and after the Distribution Date. In connection with the
aforesaid agreement under Rev. Proc. 84-77, each business unit or business
operation of USLD shall be assigned to either USLD or Billing, depending upon
whether it is a Retained Business or a Billing Business, and each Retained
Individual or Billing Individual associated with such business unit or business
operation shall be assigned for payroll reporting purposes to USLD or Billing,
as the case may be.
(b) FORMS W-4 AND W-5. Billing and USLD agree to adopt the
alternative procedure of Rev. Proc. 84-77 for purposes of filing IRS Forms W-4
(Employee's Withholding Allowance Certificate) and W-5 (Earned Income Credit
Advance Payment Certificate). Under this procedure USLD shall provide to
Billing as the successor employer all IRS Forms W-4 and W-5 on file with respect
to each Billing Individual, and Billing will honor these forms until such time,
if any, that such Billing Individual submits a revised form.
(c) GARNISHMENTS, TAX LEVIES, CHILD SUPPORT ORDERS, QUALIFIED MEDICAL
CHILD SUPPORT ORDERS AND WAGE ASSIGNMENTS. With respect to Employees with
garnishments, tax levies, child support orders, qualified medical child support
orders, and wage assignments in effect with USLD on the Cutoff Date, Billing
with respect to each Billing Individual shall honor such payroll deduction
authorizations or court or governmental orders applicable to Billing Plans, and
will continue to make payroll deductions and payments to any authorized payee,
as specified by the court or governmental order that was filed with USLD.
Likewise, USLD with respect to each Retained Individual shall honor such payroll
deduction authorization or court or governmental orders applicable to USLD Plans
and will continue to make payroll deductions and payments to any authorized
payee, as specified by the court or governmental order that was filed with USLD.
(d) AUTHORIZATIONS FOR PAYROLL DEDUCTIONS. Unless otherwise
prohibited or provided by this Agreement or another agreement entered into in
connection with the Distribution, or by a Plan document, with respect to
Employees with authorizations for payroll deductions in effect with USLD on the
Cutoff Date, Billing as the successor employer will honor such payroll deduction
authorizations relating to each Billing Individual, including, without
limitation, scheduled loan repayments to the 401(k) Retirement Plan and direct
deposit of payroll, bonus advances and types of authorized company receivables
usually collectible through payroll
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<PAGE>
deductions, and shall not require that such Billing Individual submit a new
authorization to the extent that the type of deduction by Billing does not
differ from that made by USLD.
ARTICLE 3
LABOR AND EMPLOYMENT MATTERS
Notwithstanding any other provision of this Agreement or any other
Agreement between USLD and Billing to the contrary, USLD and Billing understand
and agree that:
3.1 SEPARATE EMPLOYERS. After the Distribution Date and the
separation of Employees into their respective companies, USLD and Billing will
be separate and independent employers.
3.2 EMPLOYMENT POLICIES AND PRACTICES. USLD and Billing may adopt,
continue, modify or terminate such employment policies, compensation practices,
retirement plans, welfare benefit plans, and other employee benefit plans or
policies of any kind or description, as each may determine, in its sole
discretion, are necessary and appropriate.
3.3 CLAIMS.
(a) SCOPE. This section is intended to allocate all liabilities for
employment-related claims involving USLD or Billing including, but not limited
to, claims against either or both USLD and Billing and their respective
officers, directors, agents and employees, or against or by their respective
employee benefit plans and plan administrators and fiduciaries; provided,
however, that this section shall not apply to any indemnification between the
parties for matters and services contemplated in that certain Transitional
Services and Sublease Agreement between the parties dated July 10, 1996 and
effective as of the Distribution Date.
(b) EMPLOYMENT-RELATED CLAIMS. An employment-related claim shall
include any actual or threatened lawsuit, arbitration, ERISA claim, or federal,
state or local judicial or administrative proceeding of whatever kind involving
a demand by or on behalf of or relating to Retained Individuals or Billing
Individuals, or by or relating to any federal, state or local government agency
alleging liability against USLD or Billing, or against any employee health,
welfare, deferred compensation or other benefit plan and/or their respective
officers, directors, agents, employees, administrators, trustees and
fiduciaries.
(c) OBLIGATION TO INDEMNIFY. The duty of a party to indemnify, defend
and hold harmless the other party under this Section 3.3 shall include the
following obligations of the party having such duty: to provide a legal defense
and incur all attorneys' fees and litigation costs that may be associated with
such a defense; to pay all costs of settlement or judgment where the
indemnifying party has the full duty to do so or to pay the full percentage of
the party's share when the duty is only a percentage of the full settlement or
judgment; and to hold harmless from all claims and costs that may be asserted
with or arising from the duty of the indemnifying party to defend and indemnify.
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(d) PRE-DISTRIBUTION CLAIMS.
(i) USLD shall indemnify, defend and hold harmless Billing from
any employment-related claims of a Retained Individual arising from acts
occurring on or before the Cutoff Date.
(ii) Billing shall indemnify, defend and hold harmless USLD from
any employment-related claims of a Billing Individual arising from acts
occurring on or before the Cutoff Date.
(e) DISTRIBUTION AND OTHER JOINT LIABILITY CLAIMS. Where
employment-related claims alleging or involving joint and several liability
asserted against USLD and Billing are not separately traceable to liabilities
relating to Retained Individuals or Billing Individuals, any liability shall be
appointed between USLD and Billing in accordance with the percentage that each
party's Employees represents of the combined total number of Employees of both
parties, as described below. The percentage of the liability assumed by USLD
shall equal the ratio of (i) the total number of Retained Employees on the
Distribution Date to (ii) the combined total number of Retained Employees and
Billing Employees on such date. The percentage of the liability assumed by
Billing shall equal the ratio of (i) the total number of Billing Employees on
the Distribution Date, to (ii) the combined total number of Retained Employees
and Billing Employees on such date. Each party will indemnify, defend and hold
harmless the other to the extent of the indemnifying party's apportioned
percentage determined in accordance herewith.
(f) POST-DISTRIBUTION EMPLOYMENT-RELATED CLAIMS. Employment related
claims arising from acts occurring after the Distribution and division of the
Employees between the parties and not relating to, arising from, or in
connection with the Distribution will be the sole responsibility of USLD as to
Retained Individuals and of Billing as to Billing Individuals. Each Company
will indemnify, defend, and hold harmless the other from employment-related
claims of the other company.
3.4 FUNDING OF PLANS. Without limitation to the scope and application
of Section 3.3, any claims by or on behalf of Employees or any federal, state or
local government agency for alleged underfunding of, or failure to make payments
to, health and welfare funds based on acts or omissions occurring on or before
the Cutoff Date or arising from or in connection with the Distribution, will be
the sole responsibility of each party as to its own employees (i.e., USLD with
respect to Retained Individuals and Billing with respect to Billing
Individuals), and the responsible party will indemnify, defend, and hold
harmless the other from any such claims.
3.5 NOTICE OF CLAIMS. Without limitation to the scope and application
to each party in the performance of its duties under Section 3.3 and 3.4 herein,
each party will notify in writing and consult with the other party prior to
making any settlement of an employee claim, for the purpose of avoiding any
prejudice to such other party arising from the settlement.
3.6 ASSUMPTION OF EMPLOYMENT TAX RATES. Changes in state unemployment
tax experience as of the Cutoff Date shall be handled as follows: In the event
an option exists to allocate state unemployment tax experience of USLD, the USLD
experience shall be transferred to Billing if this results in the lowest
aggregate unemployment tax costs for both USLD and
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<PAGE>
Billing combined, and the USLD experience shall be retained by USLD if this
results in the lowest aggregate unemployment tax costs for USLD and Billing
combined.
3.7 INTERCOMPANY SERVICE CHARGE. Legal, professional, managerial,
administrative, clerical, consulting and support or production services provided
to one party by personnel of the other party, upon the request of the first
party or when such services are otherwise required by this Agreement between
Billing and USLD, shall be charged to the party receiving such services on
commercially reasonable terms to be negotiated (or in accordance with the
provisions of any applicable agreement between the parties).
3.8 WARN CLAIMS. Before and after the Distribution Date, each party
shall comply in all material respects with the Worker Adjustment and Retraining
Act ("WARN"). USLD shall be responsible for WARN claims relating to Retained
Individuals or to Employees who prior to the Distribution Date were employed in
a Retained Business. Billing shall be responsible for WARN Claims relating to
Billing Individuals or to Employees who prior to the Distribution Date were
employed in a Billing Business. Each party shall indemnify, defend and hold
harmless the other in connection with WARN Claims for which the indemnitor is
responsible and which are brought against the indemnitee.
3.9 EMPLOYEES ON LEAVE OF ABSENCE. After the Distribution Date, USLD
shall assume responsibility, if any, as employer for all Employees returning
from an approved leave of absence who prior to the Distribution Date were
employed in a Retained Business. After the Distribution Date, Billing shall
assume responsibility, if any, as employer for all Employees returning from an
approved leave of absence who prior to the Distribution Date were employed in a
Billing Business.
3.10 NO THIRD-PARTY BENEFICIARY RIGHTS. Neither this Agreement nor any
other intercompany agreement between Billing and USLD is intended to nor does it
create any third party contractual or other common law rights. No person shall
be deemed a third-party beneficiary of the agreement between Billing and USLD.
3.11 ATTORNEY-CLIENT PRIVILEGE. Consistent with the provisions of the
Distribution Agreement, the provisions herein requiring either party to this
Agreement to cooperate shall not be deemed to be a waiver of the attorney/client
privilege for either party or shall it require either party to waive its
attorney/client privilege.
ARTICLE 4
DEFAULT
4.1 DEFAULT. If either party materially defaults hereunder, the
nondefaulting party shall be entitled to all remedies provided in the
Distribution Agreement, including the arbitration of disputes set forth in
Section 11.13.
4.2 FORCE MAJEURE. Billing and USLD shall incur no liability to each
other due to a default under the terms and conditions of this Agreement
resulting from fire, flood, war, strike, lock-out, work stoppage or slow-down,
labor disturbances, power failure, major equipment
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breakdowns, construction delays, accident, riots, acts of God, acts of United
States' enemies, laws, orders or at the insistence or result of any governmental
authority or any other delay beyond each other's reasonable control.
ARTICLE 5
MISCELLANEOUS
5.1 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship set forth herein.
5.2 ACCESS TO INFORMATION; COOPERATION. USLD and Billing and their
authorized agents will be given reasonable access to and may take copies of all
information relating to the subjects of this Agreement (to the extent permitted
by federal and state confidentiality laws) in the custody of the other party,
including in the custody of any agent, contractor, subcontractor, agent or any
other person or entity under contract by such party. The parties will provide
one another with such information within the scope of this Agreement as is
reasonably necessary to administer each party's Plans and to otherwise carry out
the provisions of this Agreement. The parties will cooperate with each other to
minimize the disruption caused by and such access and providing of information.
5.3 ASSIGNMENT. Neither party shall, without the prior written
consent of the other, have the right to assign any rights or delegate any
obligations under this Agreement.
5.4 HEADINGS. The headings used in this Agreement are inserted only
for the purpose of convenience and reference, and in no way define or limit the
scope or intent of any provision or part hereof.
5.5 SEVERABILITY OF PROVISIONS. Neither USLD nor Billing intends to
violate statutory or common law or existing contractual obligations by executing
this Agreement. If any section, sentence, paragraph, clause or combination of
provisions in this Agreement is in violation of any law, such sections,
sentences, paragraphs, clauses or combinations shall be inoperative and the
remainder of this Agreement shall remain in full force and effect and shall be
binding upon the parties.
5.6 PARTIES BOUND. This Agreement shall inure to the benefit of and
be binding upon the parties hereto and their respective successors and permitted
assigns. Nothing herein, expressed or implied, shall be construed to give any
other person any legal or equitable rights hereunder.
5.7 NOTICES. All notices, consents, approvals and other
communications given or made pursuant hereto shall be in writing and shall be
deemed to have been duly given when delivered personally or by overnight courier
or three days after being mailed by registered or certified mail (postage
prepaid, return receipt requested) to the named representatives of the
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parties at the following addresses (or at such other address for a party as
shall be specified by like notice, except that notices of changes of address
shall be effective upon receipt):
(a) if to USLD:
U.S. Long Distance Corp.
9311 San Pedro, Suite 100
San Antonio, Texas 78216
Attention: W. Audie Long, General Counsel
(b) if to Billing:
Billing Information Concepts Corp.
9311 San Pedro, Suite 400
San Antonio, Texas 78216
Attention: Marshall N. Millard, Esq.
--------------------------
Billing agrees that, upon the request of USLD, Billing will give copies of
all of its notices, consents, approvals and other communications hereunder to
any lender to USLD or other person specified by USLD.
5.8 FURTHER ACTION. Billing and USLD each shall cooperate in good
faith and take such steps and execute such papers as may be reasonably requested
by the other party to implement the terms and provisions of this Agreement.
5.9 WAIVER. Billing and USLD each agree that the waiver of any
default under any term or condition of this Agreement shall not constitute a
waiver of any subsequent default or nullify the effectiveness of that term or
condition. All waivers must be in writing and must be signed by the party
against whom the waiver is sought to be enforced.
5.10 GOVERNING LAW. All controversies and disputes arising out of or
under this Agreement shall be determined pursuant to the laws of the State of
Texas regardless of the laws that might be applied under applicable principles
of conflicts of law.
5.11 CONSENT TO JURISDICTION. The parties irrevocably submit to the
exclusive jurisdiction of (a) the courts of the State of Texas in Bexar County,
or (b) any federal district court where there is federal jurisdiction for the
purpose of any suit, action or other court proceeding arising out of this
Agreement. The parties hereby irrevocably designate, appoint and empower the
President of USLD or Billing, as the case may be, as its true and lawful agent
and attorney-in-fact in its name, place and stead to receive on its behalf
service of process in any action, suit, or proceeding with respect to any
matters as to which it has submitted to jurisdiction as set forth in the
immediately preceding sentence.
5.12 ENTIRE AGREEMENT. This Agreement and the Distribution Agreement
constitute the entire understanding between the parties hereto, and supersede
all prior written or oral communications, relating to the subject matter covered
by said agreements. No amendment, modification, extension or failure to enforce
any condition of this Agreement by either party
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shall be deemed a waiver of any of its rights herein. This Agreement shall not
be amended except by a writing executed by the parties.
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IN WITNESS HEREOF, the parties have executed this Agreement as of the date
first above written.
U.S. LONG DISTANCE CORP.,
a Delaware corporation
By: /s/ Larry M. James
----------------------------
Larry M. James
President
BILLING INFORMATION
CONCEPTS CORP.,
a Delaware corporation
By: /s/ Alan W. Saltzman
----------------------------
Alan W. Saltzman
President
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SCHEDULE 2.6(a)
[Medical/Dental Plans to be Sponsored and Continued by USLD]
<PAGE>
SCHEDULE 2.6(b)
[Medical/Dental Plans to be Sponsored and Established by Billing]
<PAGE>
TAX SHARING AGREEMENT
by and among
U.S. LONG DISTANCE CORP.,
and
BILLING INFORMATION CONCEPTS CORP.
dated as of
July 10, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
Section 1. Definitions.................................................... 1
1.1 Affiliate...................................................... 1
1.2 Affiliated Group............................................... 1
1.3 Billing........................................................ 1
1.4 Billing Group.................................................. 2
1.5 Billing Member................................................. 2
1.6 Closing........................................................ 2
1.7 Closing Date................................................... 2
1.8 Code........................................................... 2
1.9 Combined Jurisdiction.......................................... 2
1.10 Distribution Agreement......................................... 2
1.11 Final Determination............................................ 2
1.12 Information Return(s).......................................... 2
1.13 IRS............................................................ 2
1.14 Net Tax(es).................................................... 2
1.15 Overdue Rate................................................... 2
1.16 Post-Closing Straddle Period................................... 2
1.17 Post-Closing Taxable Period.................................... 3
1.18 Pre-Closing Straddle Period.................................... 3
1.19 Pre-Closing Taxable Period..................................... 3
1.20 Pre-Spin-Off Affiliate......................................... 3
1.21 Pre-Spin-Off Group............................................. 3
1.22 Pre-Spin-Off Member............................................ 3
1.23 Representative................................................. 3
1.24 Separate Return Basis.......................................... 3
1.25 Spin-Off....................................................... 3
1.26 Straddle Period................................................ 3
1.27 Tax(es)........................................................ 3
1.28 Taxable Period................................................. 3
1.29 Taxable Year................................................... 4
1.30 Tax Benefit(s)................................................. 4
1.31 Taxing Authority............................................... 4
1.32 Tax Practices.................................................. 4
1.33 Tax Return(s).................................................. 4
1.34 USLD........................................................... 4
1.35 USLD Group..................................................... 4
1.36 USLD Member.................................................... 4
Section 2. Obligations, Responsibilities and Rights of USLD and Billing... 5
2.1 Preparation and Filing of Tax Returns.......................... 5
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2.2 Provision of Filing Information................................ 5
2.3 Taxable Year................................................... 5
2.4 Straddle Period Taxes.......................................... 6
2.5 Payment of Taxes............................................... 6
2.6 Amendments to Tax Returns...................................... 6
2.7 Refund of Taxes................................................ 6
2.8 Carrybacks..................................................... 7
Section 3. Indemnification................................................ 7
3.1 By USLD........................................................ 7
3.2 By Billing..................................................... 7
3.3 Certain Reimbursements......................................... 8
3.4 Other Indemnification.......................................... 8
Section 4. Method, Timing and Character of Payments Required by This
Agreement.................................................... 8
4.1 Payment in Immediately Available Funds; Interest............... 8
4.2 Characterization of Payments................................... 8
Section 5. Tax Returns; Cooperation; Document Retention; Confidentiality.. 8
5.1 Provision of Cooperation, Documents and Other Information...... 8
5.2 Retention of Books and Records................................. 9
5.3 Status and Other Information Regarding Audits and Litigation... 9
5.4 Confidentiality of Documents and Information................... 9
Section 6. Contests and Audits............................................ 10
6.1 Notification of Audits or Disputes............................. 10
6.2 Control and Settlement......................................... 10
6.3 Delivery of Powers of Attorney and Other Documents............. 10
Section 7. Miscellaneous.................................................. 10
7.1 Effectiveness.................................................. 10
7.2 Entire Agreement............................................... 10
7.3 Guarantees of Performance...................................... 10
7.4 Severability................................................... 11
7.5 Indulgences, etc............................................... 11
7.6 Governing Law.................................................. 11
7.7 Notices........................................................ 11
7.8 Modification or Amendment...................................... 11
7.9 Successors and Assigns......................................... 11
7.10 No Third-Party Beneficiaries................................... 11
7.11 Other.......................................................... 12
7.12 Predecessors and Successors.................................... 12
7.13 Tax Elections.................................................. 12
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7.14 Injunctions.................................................... 12
7.15 Further Assurances............................................. 12
7.16 Setoff......................................................... 12
7.17 Costs and Expenses............................................. 13
7.18 Rules of Construction.......................................... 13
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TAX SHARING AGREEMENT
This TAX SHARING AGREEMENT is entered into by and among U.S. Long Distance
Corp., a Delaware corporation ("USLD"), Billing Information Concepts Corp., a
Delaware corporation ("Billing"), and their respective direct and indirect
subsidiaries. References herein to a "party" (or "parties") to this Agreement,
shall refer to USLD, Billing, and where appropriate and the context so requires,
their respective subsidiaries.
RECITALS
A. USLD and its subsidiaries have joined in filing consolidated federal
Tax Returns and certain consolidated, combined or unitary state, local or
foreign Tax Returns.
B. USLD and Billing have entered into that certain Distribution
Agreement, dated as of the date hereof (the "Distribution Agreement"), pursuant
to which USLD will distribute all of the outstanding common stock in Billing to
USLD's stockholders in a transaction intended to qualify for tax-free treatment
under Code Section 355 (the "Spin-Off").
C. Pursuant to the Spin-Off, Billing and its subsidiaries will leave
the Pre-Spin-Off Group.
D. The parties hereto wish to provide for (i) allocations of, and
indemnifications against, certain liabilities for Taxes, (ii) the preparation
and filing of Tax Returns on a basis consistent with prior practice and the
payment of Taxes with respect thereto, and (iii) certain related matters.
NOW THEREFORE, in consideration of the foregoing and their mutual
promises, the parties hereby agree as follows:
SECTION 1. DEFINITIONS. When used herein the following terms shall
have the following meanings:
1.1 "AFFILIATE" - with respect to any corporation (the "given
corporation"), each person, corporation, partnership or other entity that
directly or indirectly, through one or more intermediaries, controls, is
controlled by, or is under common control with, the given corporation. For
purposes of this definition, "control" means the possession, directly or
indirectly, of 50% or more of the voting power or value of outstanding voting
interests.
1.2 "AFFILIATED GROUP" - an affiliated group of corporations within
the meaning of Code Section 1504(a) for the Taxable Period or, for purposes of
any state income tax matters, any consolidated, combined or unitary group of
corporations within the meaning of the corresponding provisions of tax law for
the state in question.
1.3 "BILLING" - as defined in the recitals to this Agreement.
<PAGE>
1.4 "BILLING GROUP" - Billing and each corporation that joins with
Billing in filing a consolidated federal income tax return for any Post-Closing
Taxable Period. For purposes of this Agreement, the Billing Group shall exist
from the beginning of the day immediately after the Closing Date.
1.5 "BILLING MEMBER" - a corporation that was a Pre-Spin-Off Member
and becomes a member of the Billing Group at the beginning of the day
immediately after the Closing Date.
1.6 "CLOSING" - the time at which the Spin-Off shall become effective
on the Closing Date.
1.7 "CLOSING DATE" - the date on which the Spin-Off is effected by
USLD.
1.8 "CODE" - the Internal Revenue Code of 1986, as amended, or any
successor thereto, as in effect for the Taxable Year in question.
1.9 "COMBINED JURISDICTION" - for any Taxable Period, any state, local
or foreign jurisdiction in which USLD or a USLD Affiliate is included in a
consolidated combined, unitary or similar return with Billing or any Billing
Affiliate for state, local or foreign Tax purposes.
1.10" DISTRIBUTION AGREEMENT" - as defined in the recitals to this
Agreement.
1.11 "FINAL DETERMINATION" - (i) a decision, judgment, decree, or other
order by a court of competent jurisdiction, which has become final and
unappealable; (ii) a closing agreement or accepted offer in compromise under
Code Sections 7121 or 7122, or comparable agreements or accepted offers under
the laws of other jurisdictions; (iii) any other final settlement with the IRS
or other Taxing Authority; or (iv) the expiration of an applicable statute of
limitations.
1.12 "INFORMATION RETURN(s)" - with respect to any corporation or
Affiliated Group, any and all reports, returns, declarations or other filings
(other than Tax Returns) required to be supplied to any Tax Authority.
1.13 "IRS" - the Internal Revenue Service.
1.14 "NET TAX(ES)" - Taxes (as defined herein) less any related
interest or penalty attributed to such Taxes.
1.15 "OVERDUE RATE" - a rate of interest per annum that equals ten
percent (10%).
1.16 "POST-CLOSING STRADDLE PERIOD" - with respect to any Straddle
Period, the period beginning on the day after the Closing Date and ending on the
last day of such Taxable Year.
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1.17 "POST-CLOSING TAXABLE PERIOD" - a Taxable Year that begins on or
after the day immediately after the Closing Date.
1.18 "PRE-CLOSING STRADDLE PERIOD" - with respect to any Straddle
Period, the period beginning on the first day of such Taxable Year and ending on
the close of business on the Closing Date.
1.19 "PRE-CLOSING TAXABLE PERIOD" - a Taxable Year that ends at or
before the close of business on the Closing Date.
1.20 "PRE-SPIN-OFF AFFILIATE" - any Affiliate of any Pre-Spin-Off
Member.
1.21 "PRE-SPIN-OFF GROUP" - USLD and each corporation that joined with
USLD in filing a consolidated federal income tax return for any Pre-Closing
Taxable Period. For purposes of this Agreement, the Pre-Spin-Off Group shall
terminate at the close of business on the Closing Date.
1.22 "PRE-SPIN-OFF MEMBER" - a corporation that was a member of the
Pre-Spin-Off Group immediately prior to the close of business on the Closing
Date.
1.23 "REPRESENTATIVE" - with respect to any person or entity, any of
such person's or entity's directors, officers, employees, agents, consultants,
accountants, attorneys and other advisors.
1.24 "SEPARATE RETURN BASIS" - the Tax liability for the Billing Group
(or any Billing Member) calculated with Billing as the common parent of the
Affiliated Group and without regard to any USLD Member.
1.25 "SPIN-OFF" - as defined in the Recitals to this Agreement.
1.26 "STRADDLE PERIOD" - any Taxable Year beginning before and ending
after the close of business on the Closing Date.
1.27 "TAX(ES)" - with respect to any corporation or group of
corporations, any and all U.S. and foreign taxes based or measured by net
income, gross income, gross receipts (when levied in lieu of an income tax)
alternative minimum taxable income, capital surplus, payroll or fixed assets
regardless of whether denominated as an "income tax," a "franchise tax"
sales/use tax, local utility tax, Public Utility Commission (PUC) regulatory
tax, property tax or otherwise, imposed by any Taxing Authority, whether any
such tax is imposed directly or through withholding, together with any interest
and any penalty, addition to tax resulting from a tax deficiency or additional
amount, and related attorney and accountant fees.
1.28 "TAXABLE PERIOD" - a Pre-Closing Taxable Period, a Post-Closing
Taxable Period or a Straddle Period.
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1.29 "TAXABLE YEAR" - a taxable year (which may be shorter than a full
calendar or fiscal year), year of assessment or similar period with respect to
which any Tax may be imposed.
1.30 "TAX BENEFIT(S)" - (i) in the case of a Tax for which a
consolidated federal, or a consolidated, combined or unitary state or other, Tax
Return is filed, the amount by which the Tax liability of the Affiliated Group
or other relevant group of corporations is actually reduced on a "with and
without" basis (by deduction, entitlement to refund, credit, offset or
otherwise, whether available in the current Taxable Year, as an adjustment to
taxable income in any other Taxable Year or as a carryforward or carryback, and
including the effect of such reduction on other Taxes), plus any interest
received with respect to any related Tax refund, and (ii) in the case of any
other Tax, the amount by which the Tax liability of a corporation is actually
reduced on a "with and without" basis (by deduction, entitlement to refund,
credit offset or otherwise, whether available in the current Taxable Year, as an
adjustment to taxable income in any other Taxable Year or as a carryforward or
carryback, and including the effect of such reduction on other Taxes), plus any
interest received with respect to any related Tax refund.
1.31 "TAXING AUTHORITY" - the IRS and any other domestic or foreign
governmental authority responsible for the administration of any Tax.
1.32 "TAX PRACTICES" - the most recently applied policies, procedures
and practices employed by the Pre-Spin-Off Group in the preparation and filing
of, and positions taken on, any Tax Returns of USLD or any Pre-Spin-Off Member
or Pre-Spin-Off Affiliate for any Pre-Closing Taxable Period.
1.33 "TAX RETURN(S)" - with respect to any corporation or Affiliated
Group, all returns, reports, estimates, information statements, including forms
necessary to be filed to withdraw a company's authorization to do business in
any state or locality, declarations and other filings relating to, or required
to be filed in connection with, the payments or refund of any Tax for any
Taxable Period.
1.34 "USLD" - as defined in the recitals to this Agreement.
1.35 "USLD GROUP" - USLD and each corporation that joins with USLD in
filing a consolidated federal income tax return for any Post-Closing Taxable
Period. For purposes of this Agreement, the USLD Group shall exist from the
beginning of the day immediately after the Closing Date.
1.36 "USLD MEMBER" - a corporation that was immediately before the
Spin-Off a Pre-Spin-Off Member and becomes a member of the USLD Group at the
beginning of the day immediately after the Closing Date.
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SECTION 2. OBLIGATIONS, RESPONSIBILITIES AND RIGHTS OF USLD AND BILLING.
2.1 PREPARATION AND FILING OF TAX RETURNS.
(a) BY USLD. USLD shall prepare and timely file (or cause to be
prepared and timely filed):
(1) all U.S. and foreign Tax and Information Returns of the
Pre-Spin-Off Group and any Pre-Spin-Off Member that are required to be filed for
periods ending on or before the Closing Date;
(2) all U.S. and foreign Tax and Information Returns of the
Pre-Spin-Off Group and any Pre-Spin-Off Member for all Pre-Closing Taxable
Periods that are not required to be filed for periods ending on or before the
Closing Date;
(3) all U.S. and foreign Tax and Information Returns of the
USLD Group and any USLD Member for all Straddle Periods and Post-Closing Taxable
Periods; and
(4) all U.S. and foreign Tax and Information Returns not
otherwise required to be filed by USLD or Billing pursuant to this Section
2.1(a) and Section 2.1(b).
(b) BY BILLING. Billing shall prepare and timely file (or cause
to be prepared and timely filed) all Tax and Information Returns of the Billing
Group and any Billing Member for all Straddle Periods and Post-Closing Taxable
Periods.
2.2 PROVISION OF FILING INFORMATION. Each party shall cooperate and
assist the other party in the preparation and filing of all Tax and Information
Returns subject to Section 2.1 and submit to the other party (i) all necessary
filing information in a manner consistent with past Tax Practices and (ii) all
other information reasonably requested by the other party in connection with the
preparation of such Tax and Information Returns promptly after such request.
2.3 TAXABLE YEAR. Billing and USLD agree that, for Tax purposes, (i)
for the period ending on the Closing Date, the Billing Member shall be included
in the consolidated federal Tax Return of the Pre-Spin-Off Group for the Taxable
Year that ends at the close of business on September 30, 1996 (and in all
corresponding consolidated, combined or unitary state or other Tax Returns of
the Pre-Spin-Off Group) and (ii) for the period beginning the day after the
Closing Date, the Billing Group and each Billing Member shall begin a new short
period Taxable Year for purposes of such federal and, to the extent permitted by
law, state Taxes on the day after the Closing Date. The parties further agree
that, to the extent permitted by applicable law, all federal, state or other Tax
Returns shall be filed consistently with this position.
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2.4 STRADDLE PERIOD TAXES.
(a) For purposes of this Agreement, Taxes shall be allocated
between the Pre- and Post-Closing Straddle Periods, in USLD's reasonable
judgment with the consent of the appropriate Billing personnel, which shall not
be unreasonably withheld, in the following manner: (A) to the extent not
impractical, Taxes shall be allocated on the basis of the actual taxable income
for each such period, determined by closing the books of the Pre-Spin-Off Group
at the close of business on the Closing Date; and (B) to the extent that such an
allocation based on a closing of the books is impractical, USLD shall be
authorized to allocate Taxes based on rounding to the next nearest accounting
period-end.
(b) USLD shall pay to Billing within fourteen (14) days after
receipt of an executed Straddle Period Tax Return prepared by Billing pursuant
to Section 2.1(b), the excess of any amount so allocated (based on the amount of
Tax shown on such Tax Return) to the Pre-Closing Straddle Period over the amount
of any estimated Taxes previously paid by any Pre-Spin-Off Member to the
relevant Taxing Authority prior to the Closing Date; or Billing shall pay to
USLD within fourteen (14) days after the filing of such Tax Return the excess of
the amount of any estimated Taxes previously paid by any Pre-Spin-Off Member to
the relevant Taxing Authority prior to the Closing Date over the amount so
allocated to such Period.
2.5 PAYMENT OF TAXES. USLD shall pay (i) all Taxes shown to be due
and payable on all Tax Returns filed by (A) USLD pursuant to Section 2.1(a)
hereof and (ii) subject to Section 3, all Taxes that shall thereafter become due
and payable with respect to all Tax Returns filed pursuant to Sections 2.1(a) as
a result of a Final Determination; PROVIDED, HOWEVER, that Billing shall
reimburse USLD within fourteen (14) days of receipt of notification from USLD
for the amount of Net Taxes that are attributable to any Billing Member on a
Separate Return Basis for all Pre-Closing Taxable Periods that shall thereafter
become due and payable as a result of a Final Determination. Billing shall pay
all Taxes attributable to all Tax Returns filed by Billing pursuant to Section
2.1(b) hereof.
2.6 AMENDMENTS TO TAX RETURNS. No Tax Returns for any Pre-Closing
Taxable Periods filed by USLD may be amended without USLD's and Billing's
consent, which shall not be unreasonably withheld.
2.7 REFUND OF TAXES.
(a) USLD shall be entitled to any refund of Taxes and any Tax
Benefits realized as a result of a Final Determination with respect to all Tax
Returns filed by USLD pursuant to Section 2.1(a); provided, however, that USLD
shall reimburse Billing for the amount of any Tax Benefit attributable to any
Billing Member for all Pre-Closing Taxable Periods which arises as a result of a
Final Determination. (Any refund resulting from the application of a net
operating loss carryback is deemed attributable to the corporation generating
such net operating loss.) Billing shall be entitled to any refund with respect
to all Tax Returns filed by Billing pursuant to Section 2.1(b). Any such
refunds attributable to a Straddle Period shall be allocated
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between the Pre-Closing Straddle Period and Post-Closing Straddle Period on a
basis consistent with the method used to allocated the Tax liability for such
Straddle Period. With respect to Straddle Period Tax Returns prepared by
Billing pursuant to Section 2.1(b), USLD shall be entitled to any refund
attributable to a Pre-Closing Straddle Period.
(b) If USLD or any USLD Member receives a Tax refund or Tax
Benefit to which Billing or any Billing Member is entitled pursuant to this
Agreement, USLD shall pay (in accordance with Section 4) the amount of such Tax
refund or Tax Benefit to Billing within fourteen (14) days of receipt thereof.
(c) Except as otherwise provided in this Agreement, if Billing or
any Billing Member receives a Tax refund or Tax Benefit to which USLD or any
USLD Member is entitled pursuant to this Agreement, Billing shall pay (in
accordance with Section 4) the amount of such Tax refund or Tax Benefit
(including any interest received thereon) to USLD within fourteen (14) days of
receipt thereof.
2.8 CARRYBACKS. Neither Billing nor USLD shall file any carryback
claim for federal Taxes or state, local or foreign Taxes in a Combined
Jurisdiction for the Billing Group or any Billing Member or the USLD Group or
any USLD Member into a Pre-Closing Taxable Period without the prior written
consent of USLD or Billing, as applicable, which shall not be unreasonably
withheld.
2.9 PENDING TAX AUDIT. Notwithstanding any provision to the contrary
in this Agreement, the taxes, refunds, penalties, interest and attorney and
accountant fees arising with respect to the currently pending Internal
Revenue Service aduit of USLD's taxable years ending September 30, 1992, 1993
and 1994 (the "Pending Audit") shall be governed by the provisions of this
Section 2.9.
(a) Any tax deficiency payable as a result of the Pending Audit
(whether by settlement with the Internal Revenue Service or by final
judgement in a litigation of the issues arising in such Pending Audit) plus
related penalties and interest shall be allocated to and paid by USLD and
Billing, respectively, in proportion to the respective market capitalization
of their issued and outstanding stock as of the Closing Date based on the per
share price of USLD common stock and Billing common stock, as applicable,
determined by using the average of the closing sales price per share of that
common stock on the NASDAQ National Market for each of ten consecutive
trading days beginning with the including the Closing Date.
(b) Any tax refund payable as a result of the Pending Audit
attributable to adjustments to depreciation deductions will be distributed to
USLD and Billing, respectively, depending on which company owns after the
Closing Date the assets with respect to which the depreciation deductions
were adjusted and in proportion to such respective adjustments.
(c) Any interest payable with respect to the refunds described
in (b) above will be payable first to USLD as reimbursement for amounts
previously paid or accrued for attorney and accountant fees with respect to
the Pending Audit and any remaining amounts shall be allocated between the
companies in the same proportion as the refund payments under (b) above.
(d) All attorney and accountant fees with respect to the
Pending Audit shall be paid or accrued by USLD.
SECTION 3. INDEMNIFICATION.
3.1 BY USLD.
(a) TAXES. Except as provided in Section 3.2, USLD shall
indemnify and hold Billing and Billing Members harmless against any and all (A)
Taxes attributable to all Tax Returns filed by USLD pursuant to Section 2.1(a),
(including specifically any Taxes arising from the liquidation of Mega
Plus Dialing, Inc.) and (B) with respect to Straddle Period Tax Returns prepared
by Billing pursuant to Section 2.1(b), Taxes attributable to Pre-Closing
Straddle Periods as shown on such Tax Returns.
(b) MEMBER LIABILITY. Except as provided in Sections 3.1(a) and
3.2, USLD shall indemnify and hold Billing and the Billing Members harmless
against each and every liability for Taxes of the Pre-Spin-Off Group under
Treasury Regulation Section 1.1502-6 or any similar law, rule or regulation
administered by any Taxing Authority.
3.2 BY BILLING. Billing shall indemnify and hold USLD and USLD
Members harmless against any and all (i) Taxes attributable to all Tax Returns
filed by Billing pursuant to Section 2.1(b) (but excluding Taxes attributable to
Pre-Closing Straddle Periods that are shown on any Straddle Period Tax Returns),
and (ii) all Net Taxes attributable to any Billing Member on a Separate Return
Basis for all Pre-Closing Taxable Periods that shall thereafter become due and
payable as a result of a Final Determination.
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3.3 CERTAIN REIMBURSEMENTS. Billing (or USLD, as the case may be)
shall notify USLD (or Billing) of any Taxes paid by the Billing Group or any
Billing Member (or the USLD Group or any USLD Member) which are subject to
indemnification under this Section 3. To the extent not otherwise provided in
this Section 3, any other notification contemplated by this Section 3.3 shall
include a detailed calculation (including, if applicable, separate allocations
of such Taxes between Pre- and Post-Closing Taxable Periods and Pre- and
Post-Closing Straddle Periods and supporting work papers) and a brief
explanation of the basis for indemnification hereunder. Whenever a notification
described in this Section 3.3 is given, the notified party shall pay the amount
requested in such party notice to the notifying party in accordance with Section
4, but only to the extent that the notified party agrees with such request. To
the extent the notified party disagrees with such request, it shall, within
fourteen (14) days, so notify the notifying party, whereupon the parties shall
use their best efforts to resolve any such disagreement. Any payment after such
fourteen (14)day period shall include interest at the Overdue Rate from the date
such payment would have been made under Section 4 based upon the original notice
given by the notifying party.
3.4 OTHER INDEMNIFICATION. Notwithstanding the foregoing, the
indemnification provisions in this Agreement shall not restrict the scope of any
other indemnification provisions between any USLD Member and any Billing Member
as set forth in any other intercompany agreements entered into in connection
with the Spin-Off.
SECTION 4. METHOD, TIMING AND CHARACTER OF PAYMENTS REQUIRED BY THIS
AGREEMENT.
4.1 PAYMENT IN IMMEDIATELY AVAILABLE FUNDS; INTEREST. All payments
made pursuant to this Agreement shall be made in immediately available funds.
Except as otherwise provided herein, any payment not made within fourteen (14)
days of when due shall thereafter bear interest at the Overdue Rate from the
date such payment was due.
4.2 CHARACTERIZATION OF PAYMENTS. Any payments including future
reimbursements related to refunds or deficiencies (other than interest thereon)
made hereunder by USLD to Billing or by Billing to USLD shall be treated by all
parties for Tax purposes to the extent permitted by law, and for accounting
purposes to the extent permitted by generally accepted accounting principles, as
non-taxable dividend distributions or capital contributions made prior to the
close of business on the Closing Date.
SECTION 5. TAX RETURNS; COOPERATION; DOCUMENT RETENTION; CONFIDENTIALITY.
5.1 PROVISION OF COOPERATION, DOCUMENTS AND OTHER INFORMATION. Upon
the reasonable request of any party to this Agreement, USLD and Billing shall
provide (and shall cause the members of their respective Affiliated Groups to
provide) the requesting party, promptly upon request, with such cooperation and
assistance, documents, and other information, without charge, as may reasonably
be requested by such party in connection with (i) the preparation and filing of
any original or amended Tax Return, (ii) the conduct of any audit or
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other examination or any judicial or administrative proceeding involving to any
extent Taxes or Tax Returns within the scope of this Agreement, or (iii) the
verification by a party of an amount payable hereunder to, or receivable
hereunder from, another party. Such cooperation and assistance shall include,
without limitation: (i) the provision on demand of books, records, Tax Returns,
documentation or other information relating to any relevant Tax Return; (ii) the
execution of any document that may be necessary or reasonably helpful in
connection with the filing of any Tax Return, or in connection with any audit,
proceeding, suit or action of the type generally referred to in the preceding
sentence, including, without limitation, the execution of powers of attorney and
extensions of applicable statutes of limitations, with respect to Tax Returns
which USLD may be obligated to file on behalf of Billing Members pursuant to
Section 2.1; (iii) the prompt and timely filing of appropriate claims for
refund; and (iv) the use of reasonable best efforts to obtain any documentation
from a governmental authority or a third party that may be necessary or helpful
in connection with the foregoing. Each party shall make its employees and
facilities available on a mutually convenient basis to facilitate such
cooperation.
5.2 RETENTION OF BOOKS AND RECORDS. USLD, each USLD Member, Billing
and each Billing Member shall retain or cause to be retained all Tax Returns,
and all books, records, schedules, workpapers, and other documents relating
thereto, until the expiration of the later of (i) all applicable statutes of
limitations (including any waivers or extensions thereof), and (ii) any
retention period required by law or pursuant to any record retention agreement.
The parties hereto shall notify each other in writing of any waivers, extensions
or expirations of applicable statutes of limitations. The parties shall provide
written notice of any intended destruction of the documents referred to in this
subsection. A party giving such a notification shall not dispose of any of the
foregoing materials without first offering to transfer possession thereof to all
notified parties.
5.3 STATUS AND OTHER INFORMATION REGARDING AUDITS AND LITIGATION. Each
party shall use reasonable best efforts to keep the other party advised, as
to the status of Tax audits and litigation involving any issue relating to
any Taxes, Tax Returns or Tax Benefits subject to indemnification under this
Agreement. To the extent relating to any such issue, each party shall
promptly furnish the other party copies of any inquiries or requests for
information from any Taxing Authority or any other administrative, judicial
or other governmental authority as well as copies of any revenue agent's
report or similar report, notice of proposed adjustment or notice of
deficiency.
5.4 CONFIDENTIALITY OF DOCUMENTS AND INFORMATION. Except as required
by law or with the prior written consent of the other party, all Tax Returns,
documents, schedules, work papers and similar items and all information
contained therein, which Tax Returns and other materials are within the scope of
this Agreement, shall be kept confidential by the parties hereto and their
Representatives, shall not be disclosed to any other person or entity and shall
be used only for the purposes provided herein.
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SECTION 6. CONTESTS AND AUDITS.
6.1 NOTIFICATION OF AUDITS OR DISPUTES. Upon the receipt by a party
of notice of any pending or threatened Tax audit or assessment which may affect
the liability for Taxes that are subject to indemnification hereunder, such
party shall promptly notify the other party in writing of the receipt of such
notice.
6.2 CONTROL AND SETTLEMENT. USLD shall have the right and obligation
to control, and to represent the interests of all affected taxpayers in, any Tax
audit or administrative, judicial or other proceeding relating, in whole or in
part, to any Pre-Closing Taxable Period or any other Taxable Period for which
USLD is responsible, in whole or in part, for Taxes under Sections 2.5 and 3,
and to employ counsel of its choice. However, that, with respect to such issues
that may exclusively impact Billing or any Billing Member for any such Taxable
Period, USLD shall have the right and obligation to assign responsibility to
Billing as to the handling and disposition of such issues. To the extent that
both Billing and USLD have joint liability with respect to tax deficiencies,
USLD shall in good faith consult with Billing as to the handling and disposition
of such issues and shall not enter into any settlement that impacts Billing or
any Billing Member without the written consent of Billing, which shall not be
unreasonably withheld; and provided, further, that Billing's Tax Director shall
hand deliver to USLD's Chief Financial Officer a written response to any
notification by USLD of a proposed settlement within ten (10) days of the
receipt of such notification. If Billing's Tax Director fails to so respond
within such ten day period, Billing shall be deemed to have consented to the
proposed settlement.
SECTION 7. MISCELLANEOUS.
7.1 EFFECTIVENESS. This Agreement shall be effective from and after
the Closing Date and shall survive until the expiration of any applicable
statute of limitations; provided, however, that this Agreement shall terminate
immediately upon a termination of the Distribution Agreement.
7.2 ENTIRE AGREEMENT. This Agreement contains the entire agreement
among the parties hereto with respect to the subject matter hereof. This
Agreement terminates and supersedes, on a prospective basis only, any and all
other sharing or allocation agreements with respect to Taxes in effect at the
time between the Pre-Spin-Off Group and the Billing Members, but shall not
affect any such agreement to the extent applicable only among USLD Members.
7.3 GUARANTEES OF PERFORMANCE. USLD and Billing hereby guarantee the
complete and prompt performance by the members of their respective Affiliated
Groups of all of their obligations and undertakings pursuant to this Agreement.
If, subsequent to the close of business on the Closing Date, either USLD or
Billing shall be acquired by another entity such that 50% or more of its common
stock is in common control, such acquirer shall, by making such acquisition,
simultaneously agree to jointly and severally guarantee the complete and prompt
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performance by the acquired corporation and any Affiliate of the acquired
corporation of all of their obligations and undertakings pursuant to this
Agreement.
7.4 SEVERABILITY. In case any one or more of the provisions contained
in this Agreement should be invalid, illegal or unenforceable, the
enforceability of the remaining provisions hereof shall not in any way be
affected or impaired thereby. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions hereof without including any of such
which may hereafter be declared invalid, void or unenforceable. In the event
that any such term, provision, covenant or restriction is hereafter held to be
invalid, void or unenforceable, the parties hereto agree to use their best
efforts to find and employ an alternate means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction.
7.5 INDULGENCES, ETC. Neither the failure nor any delay on the part
of any party hereto to exercise any right under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise of any right preclude
any other or further exercise of the same or any other right, nor shall any
waiver of any right with respect to any occurrence be construed as a waiver of
such right with respect to any other occurrence.
7.6 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Texas without regard to the
conflict of law principles thereof, except with respect to matters of law
concerning the internal corporate affairs of any corporate entity which is a
party to or subject of this Agreement, and as to those matters the law of the
jurisdiction under which the respective entity derives its powers shall govern.
7.7 NOTICES. All notices, requests, demands and other communications
required or permitted under this Agreement shall be made in writing and shall be
delivered by hand or mailed by registered or certified mail (return receipt
requested) to the designated representative of the tax department of each party
and confirmed by a copy thereof directed to the [General Counsel] by each party.
7.8 MODIFICATION OR AMENDMENT. This Agreement may be amended at any
time by written agreement executed and delivered by duly authorized officers of
Billing and USLD.
7.9 SUCCESSORS AND ASSIGNS. A party's rights and obligations under
this Agreement may not be assigned without the prior written consent of the
other party. All of the provisions of this Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and
permitted assigns, and shall survive any acquisition, disposition or other
corporate restructuring or transaction involving either party.
7.10 NO THIRD-PARTY BENEFICIARIES. This Agreement is solely for the
benefit of the parties to this Agreement and their respective Affiliates and
should not be deemed to confer upon
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third parties any remedy, claim, liability, reimbursement, claim of action or
other right in excess of those existing without this Agreement.
7.11 OTHER. This Agreement may be executed in any number of
counterparts, each such counterpart being deemed to be an original instrument,
and all of such counterparts shall together constitute one and the same
instrument. The section numbers and captions herein are for convenience of
reference only, do not constitute part of this Agreement and shall not be deemed
to limit or otherwise affect any of the provisions hereof.
7.12 PREDECESSORS AND SUCCESSORS. To the extent necessary to give
effect to the purposes of this Agreement, any reference to any corporation,
Affiliated Group or member of an Affiliated Group shall also include any
predecessors or successors thereto, by operation of law or otherwise.
7.13 TAX ELECTIONS. Nothing in this Agreement is intended to change or
otherwise affect any previous tax election made by or on behalf of the
Pre-Spin-Off Group. USLD, as common parent of the USLD Group, shall continue to
have discretion, reasonably exercised, to make any and all elections with
respect to all members of the Pre-Spin-Off Group for all Pre-Closing Taxable
Periods for which it is obligated to file Tax or Information Returns under
Section 2.1(a).
7.14 INJUNCTIONS. The parties acknowledge that irreparable damage
would incur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached. The
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches hereto and to enforce specifically the terms and provisions hereof in
any court having jurisdiction; such remedy shall be in addition to any other
remedy available at law or in equity.
7.15 FURTHER ASSURANCES. Subject to the provisions hereof, the parties
hereto shall make, execute, acknowledge and deliver such other instruments and
documents, and take all such other actions, as may be reasonably required in
order to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby. Subject to the provisions hereof, each party
shall, in connection with entering into this Agreement, performing its
obligations hereunder and taking any and all actions relating hereto, comply
with all applicable laws, regulations, orders and decrees, obtain all required
consents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other party with all such information as it
may reasonably request in order to be able to comply with the provisions of this
sentence.
7.16 SETOFF. All payments to be made by any party under this Agreement
shall be made without setoff, counterclaim or withholding, all of which are
expressly waived.
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7.17 COSTS AND EXPENSES. Unless otherwise specifically provided
herein, each party agrees to pay its own costs and expenses resulting from the
fulfillment of its respective obligations hereunder.
7.18 RULES OF CONSTRUCTION. Any ambiguities shall be resolved without
regard to which party drafted the Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on their respective behalf by this respective officers thereunto duly
authorized, as of the day and year above written.
U.S. LONG DISTANCE CORP. AND
SUBSIDIARIES
By: /s/ Larry M. James
--------------------------------
Name: Larry M. James
------------------------------
Title: President
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BILLING INFORMATION CONCEPTS CORP.
AND SUBSIDIARIES
By: /s/ Alan W. Saltzman
--------------------------------
Name: Alan W. Saltzman
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Title: President
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TRANSITIONAL SERVICES AND SUBLEASE AGREEMENT
This TRANSITIONAL SERVICES AND SUBLEASE AGREEMENT, is made as of
July 10, 1996 (the "Agreement"), by and between U. S. LONG DISTANCE
CORP., a Delaware corporation ("USLD"), and BILLING INFORMATION CONCEPTS
CORP., a Delaware corporation ("Billing").
WHEREAS, USLD has agreed to provide certain transitional services to and
sublease certain facilities to Billing in connection with the distribution of
all of the shares of common stock of Billing to the stockholders of USLD (the
"Distribution") upon the terms and conditions hereinafter set forth; and
WHEREAS, Billing has agreed to provide certain transitional services to
USLD in connection with the Distribution upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. USLD SERVICES.
(a) To the extent requested by Billing, USLD agrees to provide
to Billing those administrative, support and other services, with respect to
the billing clearinghouse and information management services business of
Billing and its subsidiaries, listed and described in EXHIBIT A hereto (the
"USLD Services"), at the rate or rates specified in EXHIBIT A hereto. The
USLD Services are based on USLD's and Billing's understanding of the
administrative, support and other services reasonably required by Billing and
its subsidiaries at the date of this Agreement.
(b) If, following the Distribution, Billing reasonably determines
that additional services, consistent with the recent historical practices of
USLD or the billing clearinghouse and information management services business
provided by Billing and its subsidiaries, should be provided, USLD and Billing
agree to negotiate in good faith to appropriately modify this Agreement with
respect to such additional services.
(c) Billing shall pay USLD, for the USLD Services, on a monthly
basis, the amount stated in EXHIBIT A hereto, or, in the case of additional
services agreed to pursuant to paragraph 1.(b), such fees as the parties shall
negotiate on an arms-length basis. Charges for the USLD Services shall be
invoiced on or about the 20th business day of the calendar month next following
the calendar month in which the USLD Services have been performed, and such
invoices shall be payable net thirty (30) days following receipt thereof.
(d) USLD shall use good faith and its reasonable best efforts to
provide the USLD Services in a timely and competent manner. All USLD Services
provided under this Agreement shall be provided in accordance with USLD's
standard policies, procedures and practices.
<PAGE>
(e) USLD shall provide USLD Services as an independent contractor,
and the employees or agents of USLD providing such USLD Services shall remain
employees or agents of USLD. USLD shall use its discretion in performing the
USLD Services, subject to the general discretion of Billing and subject to
compliance with applicable law. USLD shall determine its work location, hours
and rules. However, to the extent USLD or an employee or agent of USLD
supplying USLD Services shall be on the premises of Billing, it shall observe
the working hours and working rules of such premises. USLD agrees, upon
Billing's reasonable request, to replace any of its employees assigned to
perform or assist in the performance of the USLD Services.
(f) USLD shall provide USLD Services to Billing for the term
set forth in EXHIBIT A, unless sooner terminated as provided in Section 4.
2. BILLING SERVICES.
(a) To the extent requested by USLD, Billing agrees to provide
to USLD those administrative, support and other services, with respect to the
direct dial long distance telecommunications services and operator services
businesses of USLD and its subsidiaries, listed and described in EXHIBIT B
hereto (the "Billing Services"), at the rate or rates specified in EXHIBIT B
hereto. The Billing Services are based on Billing's and USLD's understanding
of the administrative, support and other services reasonably required by USLD
and its subsidiaries at the date of this Agreement.
(b) If, following the Distribution, USLD reasonably determines
that additional services, consistent with the recent historical practices of
Billing or the direct dial long distance telecommunications services and
operator services businesses provided by USLD and its subsidiaries, should be
provided, Billing and USLD agree to negotiate in good faith to appropriately
modify this Agreement with respect to such additional services.
(c) USLD shall pay Billing, for the Billing Services, on a monthly
basis, the amount stated in EXHIBIT B hereto, or, in the case of additional
services agreed to pursuant to paragraph 2.(b), such fees as the parties shall
negotiate on an arms-length basis. Charges for the Billing Services shall be
invoiced on or about the 20th business day of the calendar month next following
the calendar month in which the Billing Services have been performed, and such
invoices shall be payable net thirty (30) days following receipt thereof.
(d) Billing shall use good faith and its reasonable best efforts
to provide the Billing Services in a timely and competent manner. All Billing
Services provided under this Agreement shall be provided in accordance with
Billing's standard policies, procedures and practices.
(e) Billing shall provide Billing Services as an independent
contractor, and the employees or agents of Billing providing such Billing
Services shall remain employees or agents of Billing. Billing shall use its
discretion in performing the Billing Services, subject to the general
discretion of USLD and subject to compliance with applicable law. Billing
shall
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determine its work location, hours and rules. However, to the extent Billing
or an employee or agent of Billing supplying Billing Services shall be on the
premises of USLD it shall observe the working hours and working rules of such
premises. Billing agrees, upon USLD's reasonable request, to replace any of
its employees assigned to perform or assist in the performance of the Billing
Services.
(f) Billing shall provide Billing Services to USLD for the term
set forth in EXHIBIT B, unless sooner terminated as provided in Section 4.
3. SUBLEASE OF FACILITIES.
(a) USLD, in consideration of the covenants, conditions and
agreements and stipulations of Billing hereinafter expressed, hereby leases,
demises and rents to Billing (i) approximately 6,200 square feet of the space
occupied by USLD at Suite 800, 9311 San Pedro, San Antonio, Texas, together
with the right to use the hallways, restrooms and common areas of Suite 800
and the 8th floor (the "8th Floor Subleased Premises") more fully described
in EXHIBIT C attached hereto and made a part hereof for all purposes and (ii)
approximately 18,633 square feet of the space occupied by Billing at Suite
400, 9311 San Pedro, San Antonio, Texas, together with the right to use
hallways, restrooms and common areas of Suite 400 and the 4th floor (the "4th
Floor Subleased Premises") more fully described in EXHIBIT D attached hereto
and made a part hereof for all purposes (collectively, the 4th Floor
Subleased Premises and the 8th Floor Subleased Premises are referred to as
the "Subleased Premises"). The Subleased Premises are situated in the Nowlin
building (the "Building") located in the city of San Antonio in Bexar County,
Texas. The Building is located on a tract of land situated in said county,
which land is more fully described in EXHIBIT E attached hereto and made a
part hereof for all purposes.
(b) To have and to hold the Subleased Premises, together
with the appurtenances thereto, unto Billing beginning on the date of the
Distribution until terminated as provided in Section 4, to be used and
occupied by Billing for general office purposes.
(c) In consideration of this sublease, Billing shall pay to
USLD at the address stated herein the sum of (i) approximately $6,500 per
month for the 8th Floor Subleased Premises and (ii) approximately $19,600 per
month for the 4th Floor Subleased Premises in legal tender of the United
States of America, payable, without demand, in advance on or before the 1st
day of each calendar month during the full term hereof; provided, however,
that if the term of this sublease commences on a date other than the 1st day
of the calendar month, the first rental payment to be made on said
commencement date shall be the rental for one calendar month plus the
prorated rental remainder for the calendar month in which the subleased term
commences.
(d) Insofar as the provisions of that certain Office Lease
Agreement dated September 29, 1988 by and between Nowlin Building
Partnership, Ltd., as Landlord, and USLD, as Tenant, as amended (the "Main
Lease"), do not conflict with the specific provisions herein contained, they
and each of them are incorporated into this Agreement as fully as if
completely rewritten, and Billing agrees to be bound to USLD by all of the
terms of the Main Lease and to assume and perform all of the obligations and
responsibilities of USLD pursuant to the Main Lease and to indemnify and hold
harmless USLD from any claim or liability under the Main Lease except for the
payment of rental by USLD to the Landlord as provided in the Main Lease. The
relationship between Billing and USLD hereunder shall be the same as that
between USLD and the Landlord under the Main Lease.
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<PAGE>
4. TERMINATION.
(a) TERMINATION WITHOUT PRIOR NOTICE. USLD and Billing may
each immediately terminate this Agreement by written notice to the other (i) in
the event of the other's voluntary bankruptcy or insolvency, (ii) in the event
that the other shall make an assignment for the benefit of creditors, or (iii)
in the event that a petition shall have been filed against the other under any
bankruptcy law, corporate reorganization law or other law for relief of debtors
(or any other law similar in purpose or effect), which has caused the other to
have its business effectively discontinued in its then present form.
(b) TERMINATION WITH NOTICE. If either USLD or Billing (the
"Defaulting Party") shall fail adequately to perform in any material respect
any of its material obligations under Sections 1 or 2 or this Agreement,
whether voluntarily or involuntarily or as a result of any law or regulation
or otherwise, the other may terminate the services portion of this Agreement
upon ten (10) days' written notice to the Defaulting Party specifying the
respects in which the Defaulting Party has so failed to perform its
obligations under this Agreement, unless during such period the Defaulting
Party shall have remedied such failure. The sublease of the 8th Floor
Subleased Premises my be terminated by Billing only upon thirty (30) days
advance written notice and the sublease of the 4th Floor Subleased Premises
may be terminated by Billing only after March 31, 1997; provided, further,
that should Billing terminate the sublease on the 4th Floor Subleased
Premises at any time after March 31, 1997 and USLD is not able to sublease or
turn back to the landlord under the Main Lease the 4th Floor Subleased
Premises and cover all of its out of pocket costs in doing so, Billing shall
promptly pay, as invoiced by USLD monthly 50% of USLD's out of pocket costs
related to the 4th Floor Subleased Premises until the Main Lease expires in
January 1998.
5. LIMITATION OF LIABILITY. Neither USLD nor Billing shall be
liable for any indirect, special or consequential damages in connection with, or
arising out of, this Agreement or the USLD Services or Billing Services provided
under this Agreement.
6. DISCLAIMER OF WARRANTIES. Except as expressly set forth in this
Agreement or in any other agreement between the parties modifying or
supplementing this Agreement, neither USLD nor Billing makes any representation
or warranty whatsoever, express or implied, including, but not limited to, any
representation or warranty as to merchantability or fitness for a particular
purpose, arising out of this Agreement or the USLD Services or Billing Services
provided under this Agreement.
7. NOTICES. All notices and other communications hereunder shall be
in writing and shall be delivered by hand or mailed by registered or certified
mail (return receipt requested) to the parties at the following addresses (or at
such other addresses for a party as shall be specified by like notice) and shall
be deemed given on the date in which such notice is received:
To Billing: Billing Information Concepts Corp.
9311 San Pedro, Suite 400
San Antonio, TX 78216
Attention: President
To USLD: U.S. Long Distance Corp.
9311 San Pedro, Suite 100
San Antonio, TX 78216
Attention: President
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<PAGE>
8. INDEMNITY.
(a) Subject to the terms and conditions specified herein, USLD agrees to
defend, indemnify, and hold harmless Billing and its agents, employees,
directors, and stockholders from any claims or actions of whatever nature that
may arise in connection with USLD providing USLD Services under this Agreement
to Billing. USLD shall not become a fiduciary to Billing by virtue of providing
USLD Services under this Agreement.
(b) Subject to the terms and conditions specified herein, Billing agrees
to defend, indemnify, and hold harmless USLD and its agents, employees,
directors, and stockholders from any claims or actions of whatever nature that
may arise in connection with Billing providing Billing Services under this
Agreement to USLD. Billing shall not become a fiduciary to USLD by virtue of
providing Billing Services under this Agreement.
9. GENERAL.
(a) Except as otherwise provided in this Agreement, neither USLD
nor Billing shall assign this Agreement or any rights or obligations hereunder
without the prior written consent of the other and any such attempted assignment
without such prior written consent shall be void and have no force or effect.
This Agreement shall inure to the benefit of, and shall be binding upon, the
successors and permitted assigns of USLD and Billing.
(b) USLD agrees that it shall take appropriate action by
instruction of or agreement with its personnel to ensure that all personnel
performing USLD Services under this Agreement shall be bound by and comply with
all of the terms and conditions of this Agreement and the related Agreements
executed in connection with the Distribution. Billing agrees that it shall take
appropriate action by instruction of or agreement with its personnel to ensure
that all personnel performing Billing Services under this Agreement shall be
bound by and comply with all of the terms and conditions of this Agreement and
the related Agreements executed in connection with the Distribution.
(c) USLD shall be responsible for its actions in the performance
of the USLD Services and shall indemnify, hold harmless and defend (upon
request) Billing from and against all claims and losses of any type (including
reasonable attorneys' fees) in connection with, in whole or in part, any
negligent act or omission, any willful misconduct, or any failure to comply with
federal, state or local law, in the performance of the USLD Services. Billing
shall be responsible for its actions in the performance of the Billing Services
and shall indemnify, hold harmless and defend (upon request) USLD from and
against all claims and losses of any type (including reasonable attorneys' fees)
in connection with, in whole or in part, any negligent act or omission, any
willful misconduct, or any failure to comply with federal, state or local law,
in the performance of the Billing Services.
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(d) USLD shall not be liable for any failure of, or delay in the
performance of, USLD Services under this Agreement for the period that such
failure or delay is due to acts of God, public enemy, civil war, strikes or
labor disputes, or any other cause beyond its reasonable control. Billing shall
not be liable for any failure of, or delay in the performance of, Billing
Services under this Agreement for the period that such failure or delay is due
to acts of God, public enemy, civil war, strikes or labor disputes, or any other
cause beyond its reasonable control. Each party agrees to notify the other
party hereto promptly of the occurrence of any such cause and to carry out this
Agreement as promptly as practicable after such cause is terminated.
(e) This Agreement constitutes the entire agreement of USLD and
Billing with respect to the USLD Services, the sublease and the Billing
Services. This Agreement may be amended or modified, and any of the terms or
conditions hereof may be waived, only by a written instrument executed by USLD
and Billing, or in the case of a waiver, by the party waiving compliance. Any
waiver by either USLD or Billing of any condition, or of the breach of any
provision or term in any one or more instances, shall not be deemed to be nor
construed as a further or continuing waiver of any such condition, or of the
breach of any other provision or term of this Agreement.
(f) Nothing in this Agreement is intended to confer any rights or
remedies under or by reason of this Agreement on any persons other than USLD or
Billing and their respective successors and permitted assigns. Nothing in this
Agreement is intended to relieve or discharge the obligations or liability of
any third persons to USLD or Billing. No provision of this Agreement shall give
any third persons any right of subrogation or action over or against USLD or
Billing.
(g) This Agreement shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of Texas without
reference to principles of conflicts of law.
(h) The section headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
(i) This Agreement may be executed in counterparts, each of which
shall be deemed an original, but all of which shall constitute the same
instrument.
U.S. LONG DISTANCE CORP. BILLING INFORMATION
CONCEPTS CORP.
By: /s/ Larry M. James By: /s/ Kelly E. Simmons
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Title: President Title: Sr. VP & CFO
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EXHIBIT A
USLD SERVICES
DEPT. SERVICES DATE OF TERM COST EST.
Accounting Reporting/Financial Planning 12/31/96 1
Accounting Accounts Payable & Payroll 12/31/96 $1.30/payment
2
Tax Tax Returns, Planning 12/31/96 1
Finance Borrowing, Cash Mgmt, 12/31/96 1
Investor Relations
Legal Contracts, SEC Compliance, AS REQUESTED 1
Stock Transfer, Employee
Stock Options
Office Services Mail 12/31/96 $1,500 per
month plus
postage
Employee Benefits Recordkeeping, Tax AS REQUESTED 1
Filings, Workers
Compensation Claims,
Health & Dental Claims
Information Services LAN, E-Mail, PC Support, 12/31/96 1
Consulting
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1 General pricing rule is that time spent on services or projects will be
charged at 1.5 times the salary of the individuals providing the service
plus out-of-pocket expenses.
2 Assumes that Billing will pay staffing requirements separately.
<PAGE>
EXHIBIT B
BILLING SERVICES
DEPT. SERVICES DATE OF TERM COST EST.
Accounting Reporting/Financial Planning 12/31/96 1
Accounting Accounts Payable & Payroll 12/31/96 $1.30/payment
2
Tax Tax Returns, Planning 12/31/96 1
Finance Borrowing, Cash Mgmt, 12/31/96 1
Investor Relations
Legal Contracts, SEC Compliance, AS REQUESTED 1
Stock Transfer, Employee
Stock Options
Office Services Mail 12/31/96 $1,500 per
month plus
postage
Employee Benefits Recordkeeping, Tax AS REQUESTED 1
Filings, Workers
Compensation Claims,
Health & Dental Claims
Information Services LAN, E-Mail, PC Support, 12/31/96 1
Consulting
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1 General pricing rule is that time spent on services or projects will be
charged at 1.5 times the salary of the individuals providing the service
plus out-of-pocket expenses.
2 Assumes that USLD will pay staffing requirements separately.
<PAGE>
EXHIBIT C
SUBLEASED PREMISES
[Diagram of 8th Floor Subleased Premises]
<PAGE>
EXHIBIT D
[REAL ESTATE]
<PAGE>
EXHIBIT E
3.33 acres including all of the land known as Lot 57, Block 5, NCB 11715,
Nowlin Subdivision, City of San Antonio, Bexar County Texas, according to
Plat recorded in Volume 9515, Page 179
<PAGE>
ZERO PLUS - ZERO MINUS
BILLING AND INFORMATION MANAGEMENT
SERVICES AGREEMENT
This Zero Plus - Zero Minus Billing and Information Management Services
Agreement (the "Agreement") is entered into this 10th day of July 1996, by
and between BILLING INFORMATION CONCEPTS INC., a Delaware corporation
("BICI"), and U.S. LONG DISTANCE, INC., a Texas corporation ("Customer").
W I T N E S S E T H:
WHEREAS, Customer is engaged in the business of providing certain "zero plus" or
"zero minus" telecommunication services for which Customer desires to bill and
collect for these services through the local exchange companies (LECs); and
WHEREAS, BICI has entered into billing and collection agreements with certain
LECs which allow BICI to provide billing and information management services
for qualifying "zero plus" and "zero minus" Message Telephone Service ("MTS")
calls on behalf of BICI's customers; and
WHEREAS, BICI has the ability through its computer hardware, computer
software and accounting systems to provide billing and information management
services for qualifying MTS calls for Customer, and Customer desires to
obtain such billing and information management services from BICI on the
terms and conditions contained herein:
NOW, THEREFORE, the parties hereto, in consideration of the mutual covenants
and agreements contained herein and other good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, do hereby agree
as follows:
SECTION 1. DEFINITIONS.
As used in this Agreement, the following terms shall have the meanings set forth
below, unless the context otherwise requires:
BAD DEBT: See Uncollectible Amounts and Written-Off Accounts.
BILLING TELEPHONE COMPANY (BTC): See Local Exchange Carrier.
BOC: Bell Operating Company.
BUSINESS DAY: A day other than Saturday and Sunday on which
commercial banks are open in the State of Texas.
CLAIM: Claim, loss, liability, damage, cost, correction and expense,
and whether ordinary, special, consequential or otherwise.
CONFIDENTIAL INFORMATION: See Section 8.
<PAGE>
EMI BILLING RECORDS: Computer readable records containing the
billing data for Customer's qualifying MTS calls, in the Bellcore EMI
(electronic message interface) format, for which each LEC has the
capability of processing through its billing and collection systems.
END USER: A natural person, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture,
governmental agency or instrumentality, or other entity that subscribes to
or uses Customer's services.
FCC: The Federal Communications Commission.
FOREIGN INTRASTATE TAXES: Those applicable Taxes for MTS calls
originating and terminating in the same state but billed in another state
as described in Section 9 herein.
INDEPENDENT TELEPHONE COMPANIES: Those LECs that are not BOCs, which
presently include, subject to revision by BICI from time to time: General
Telephone Operating Companies (GTOCs), United Telecommunications Operating
Companies (United), Alltel, the alliance of Independent Telephone
Companies through Independent NECA Services, and U. S. Intelco.
INTEREXCHANGE CARRIER (IXC): Those telephone companies, other than
the LECs, that can provide intraLATA (where applicable), interLATA,
interstate and international telecommunications service.
LEC PROCESSING FEES: As described in paragraph 4.(c)(i) and 4.(f).
LOCAL EXCHANGE CARRIER (LEC): Any one of the local telephone
companies, as listed on Exhibit A hereto, providing intraLATA exchange
telephone services or issuing calling cards and with whom BICI has entered
into a billing and collection agreement.
MTS (MESSAGE TELEPHONE SERVICES): Direct dialed or operator assisted
station-to-station or person-to-person telephone calls billed: (i) to the
originating telephone number, (ii) collect to the terminating telephone
number, (iii) to a third telephone number other than the originating or
terminating telephone number, or (iv) to a LEC or IXC calling card.
"ENHANCED TELECOMMUNICATIONS SERVICES" OR "INFORMATION SERVICES" ARE NOT
CONSIDERED MTS CALLS HEREIN AND CANNOT BE BILLED UNDER THIS AGREEMENT.
POST-BILLING ADJUSTMENT OR CREDIT: Credits or rate adjustments
applied to an End User's account by the LEC or by BICI.
RBOCS: Regional Bell Operating Companies.
SUBMISSION DATE: As Described in paragraph 3.(a).
TARIFFS: The rates, terms and conditions for providing intraLATA,
interLATA (intrastate), interstate and international telecommunication
services as authorized and filed with the FCC, or with state or local
regulatory authorities.
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TAXES: The word "Taxes" shall mean all those taxes and tax-like
surcharges described in paragraph 9.(a) herein.
UNBILLABLE RECORDS: Those EMI Billing Records that pass BICI's edits
and screens and are submitted to the LECs for billing and collection but
subsequently fail the LEC's edits and screens and are not posted to an End
User's account by the LECs.
UNCOLLECTIBLE AMOUNTS: Those amounts that are billed to an End User's
account for Customer's Valid EMI Billing Records but are not collected due
to the End User receiving a Post-Billing Adjustment or Credit to its bill
or the End User failing to pay its bill to the LEC and the account
subsequently being written off as Bad Debt by the LEC.
VALID EMI BILLING RECORDS: As described in paragraph 3.(b).
WRITTEN-OFF ACCOUNTS: Those End Users' accounts that are not paid by
the End Users and are subsequently written off as Bad Debt by the LECs.
BICI REJECTED RECORDS: Those EMI Billing Records that fail BICI's edits
and screens and are returned to Customer and not submitted to the LECs for
billing and collection.
SECTION 2. SCOPE OF AGREEMENT.
Customer hereby agrees to purchase from BICI the services described in Section 3
herein, and BICI agrees to provide such services at the time and in the manner,
and subject to the terms and upon the conditions, set forth herein. Customer
agrees that BICI shall be the EXCLUSIVE source for LEC billing and information
management services in the United States and Canada for the billing telephone
companies listed in Exhibit A, attached hereto. However, nothing contained
herein shall be interpreted to prohibit Customer from contracting directly with
any LEC for its own direct LEC billing and collection agreement, provided that
Customer shall notify BICI of its intent at least sixty (60) days prior to
activation of such agreement. As BICI enters into billing and collection
arrangements with additional LECs, BICI will provide billing and information
management services to Customer for such LECs on the same terms and conditions
as contained herein.
SECTION 3. BILLING SERVICES.
(a) SUBMISSION OF EMI BILLING RECORDS. Customer shall submit to BICI
its EMI Billing Records for its qualifying MTS calls for BICI to submit to
each LEC under contract with BICI. Customer shall be responsible for
submitting to BICI EMI Billing Records that contain adequate information so
that BICI and the LECs can process such EMI Billing Records. Customer shall
submit these EMI Billing Records to BICI once per week, except when Customer
cannot satisfy BICI's minimum volume requirements as described in paragraph
7.(f), in which case Customer shall submit its EMI Billing Records at least
once per month. The cost of these submissions shall be borne by Customer.
The date BICI receives Customer's EMI Billing Records will be, for those
records, the "Submission Date."
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(b) BICI'S EDITS AND SCREENS. Upon receipt of Customer's EMI Billing
Records, BICI will promptly process Customer's EMI Billing Records through
BICI's computer edits and screens. Those EMI Billing Records that pass
BICI's edits and screens shall be "Valid EMI Billing Records." Those EMI
Billing Records that do NOT pass BICI's edits and screens shall be "BICI
Rejected Records," and shall be returned to Customer.
(c) SUBMISSION TO LECS. Promptly after receipt of Customer's EMI
Billing Records (within five (5) Business Days after such receipt for the
RBOCs and GTE, or within ten (10) Business Days after such receipt for
Independent Telephone Companies), BICI will submit Customer's Valid EMI
Billing Records to the appropriate LECs.
(d) PURCHASE BY LEC. Each LEC shall be responsible, to the extent
required by its agreement with BICI, to purchase Customer's Valid EMI Billing
Records.
(e) BILLING AND COLLECTION BY LEC. Each LEC shall be responsible, for
such Valid EMI Billing Records purchased by the LEC, for the billing and
collection of the revenue, for Customer's qualifying MTS calls, from End Users
residing within the applicable billing area of such LEC.
(f) PRINTING OF CUSTOMER'S NAME ON END USER'S LEC TELEPHONE BILL:
Wherever possible, BICI will use its best efforts to cause each Billing
Telephone Company to print Customer's name, along with the associated Valid
EMI Billing Records, on each End User's telephone bill. Customer
acknowledges that where the Billing Telephone Companies do not provide this
service, Customer's name shall not appear on the End User's telephone bill.
SECTION 4: LEC PAYMENTS, FEES AND CHARGES:
(a) PAYMENT BY LECS: Each LEC shall make payments to BICI for Valid
EMI Billing Records purchased from Customer in accordance with the LEC's
billing and collection agreement with BICI.
(b) AMOUNT PAID BY LECS: The LEC shall pay to BICI the gross amount
of Valid EMI Billing Records purchased by the LEC LESS the then-applicable
fees, charges, charge backs, credits and adjustments as prescribed in its
billing and collection agreement with BICI.
(c) LEC FEES, CHARGES, CHARGE BACKS, CREDITS AND ADJUSTMENTS:
Customer acknowledges and understands that BICI is and will be bound by the
terms of its billing and collection agreement with each LEC with respect to
each LEC's right to deduct or to reduce its collectible funds for: (i) the
amount charged by each LEC for processing, billing and collecting Customer's
Valid EMI Billing Records ("LEC Processing Fees"), (ii) any Unbillable
Records, (iii) any Post-Billing Adjustments or Credits provided to End Users,
(iv) any reserve for anticipated Uncollectible Amounts ("Bad Debt Holdback
Reserve"), and (v) any LEC Bad Debt "true-ups" (i.e. periodic true-ups
between the Bad Debt Holdback Reserve and the actual Uncollectible Amounts
realized by the LECs). In addition, Customer shall be responsible for any
data transmission and distribution fees for delivering or receiving
Customer's EMI Billing Records and for any other LEC charges specifically
related to billing and collecting Customer's EMI Billing Records. Customer
further agrees that payment of all amounts described in this paragraph 4.(c)
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<PAGE>
shall be its sole responsibility and that BICI may withhold such amounts from
payments to Customer. Should such amounts exceed the amounts due to
Customer, such amounts shall be due and payable by Customer to BICI within
ten (10) Business Days of notification by BICI of any amounts due. A
schedule setting forth BICI's contractual average LEC Processing Fees for
each LEC is attached hereto as Exhibit B hereto.
(d) BAD DEBT HOLDBACK RESERVE: BICI will holdback or cause the LECs
to holdback an amount estimated to be sufficient to set-off any Uncollectible
Amounts that may be determined after the date BICI makes its final payment to
Customer for Customer's Valid EMI Billing Records billed and collected by the
LEC. Any Bad Debt Holdback Reserve withheld by the LEC shall be passed
through to Customer on the same percentage or the same amount as BICI was
assessed by the individual LECs. However, once sufficient data becomes
available to BICI from the LECs to enable BICI to determine a specific Bad
Debt history attributable to Customer, the Bad Debt Holdback Reserve rate
shall be based on Customer's specific historical Uncollectible Amounts. A
schedule setting forth the past twelve months' average Bad Debt Holdback
Reserve withheld by each LEC is attached hereto, for your reference, as
Exhibit G.
(e) MONTHLY LEC BAD DEBT TRUE-UP. Between six and eighteen (6 - 18)
months after BICI submits Customer's EMI Billing Records to the LECs for
billing and collection, the LECs will determine the actual amounts collected
from the End Users and true-up the difference between this amount and the
face amount of Customer's Valid EMI Billing Records purchased by the LEC.
BICI will provide Customer monthly reports on Bad Debt true-ups for these
differences. If the amount of these true-ups is "in favor" (positive) of
Customer, BICI will remit such amount to Customer when BICI receives the
true-up amount from the LECs. If the amount of these true-ups is "not in
favor" (negative) of Customer, BICI will withhold such amounts from the next
scheduled payment due to Customer. If the amounts due to Customer are not
sufficient to satisfy such true-up amounts, such amounts shall be due and
payable by Customer to BICI within ten (10) Business Days of notification by
BICI of any amounts due.
(f) LEC PROCESSING FEE CALCULATION. Each calendar month BICI will
determine the number of End User bills (renderings) that were or will be
required to bill all of BICI's similarly situated customer's Valid EMI
Billing Records submitted to BICI during that month and the average number of
Valid EMI Billing Records contained on each End User's bill. BICI will then
multiply these quantities by its contractual LEC Processing Fee schedules for
each LEC to calculate the "Average LEC Processing Fees" for each LEC.
Exhibit B, attached hereto, contains the Average LEC Processing Fees for each
LEC for the date thereof. BICI will then multiply this Average LEC
Processing Fee for each LEC by the number of Customer's Valid EMI Billing
Records submitted to each LEC to calculate Customer's LEC Processing Fees.
These Average LEC Processing Fees will also include any data transmission
fees, distribution fees, programming fees and any other charges directly
associated with billing Customer's Valid EMI Billing Records.
(g) END USER INQUIRY AND REBATE. Primary End User inquiry,
investigation and rebate policies are set forth in Exhibit F attached hereto.
Customer shall be responsible for payment of all Post-Billing Adjustments and
Credits provided to End Users by either the LEC or BICI. Such amounts may be
deducted weekly from the amounts due to Customer. If the amount due to
Customer is not sufficient to satisfy these amounts, then Customer shall pay
BICI such amount
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as is required to satisfy these amounts within ten (10) Business Days of
notification by BICI of any amounts due.
(h) REJECTED RECORDS. Those EMI Billing Records that fail BICI's
edits and screens and not submitted to the LECs for billing and collection,
BICI Rejected Records, shall be returned to Customer at no charge.
Unbillable Records rejected by the LEC, through no fault of BICI, shall be
charged the same BICI Processing Fees as described in Exhibit C attached
hereto.
(i) RESUBMITTED EMI BILLING RECORDS: Unbillable Records which are
resubmitted to the LECs for billing and collection shall be charged the
standard BICI Processing Fees as described in Exhibit C attached hereto.
SECTION 5. BICI BILLING SERVICE FEES, CHARGES AND CHARGE BACKS.
In addition to the LEC Processing Fees, charges, charge backs, credits and
adjustments set forth in Section 4, Customer agrees to pay to BICI and BICI
may deduct from amounts collected by the LECs on behalf of Customer and paid
to BICI, the following BICI billing service fees, charges, charge backs,
credits and assessments:
(a) A billing and information management service fee, the BICI
Processing Fee, for each Valid EMI Billing Record submitted to the LECs for
billing and collection by BICI, as specified in Exhibit C attached hereto;
(b) An End User inquiry, investigation and rebate fee for each Valid
EMI Billing Record submitted to the LECs for billing and collection by BICI,
as specified in Exhibit C attached hereto;
(c) Any Post-Billing Adjustment or Credit amounts refunded to End
Users by BICI's customer service inquiry and investigation activities, along
with any LEC charges associated with making such refunds to End Users;
(d) A charge, as specified in Exhibit C attached hereto, for any
submission of EMI Billing Records that contains less than the minimum volume
requirements of BICI for each "library code";
(e) An additional End User inquiry, investigation and rebate fee, as
described in Exhibit C attached hereto, for each inquiry that exceeds one
percent (1%) of the number of Valid EMI Billing Records for each library code
processed by BICI on behalf of Customer each month; and
(f) ACCOUNTS RECEIVABLE RECONCILIATION SYSTEM - FASTRACK: Customer
shall pay to BICI an initial, one-time fee, as described in Exhibit C
attached hereto, for BICI's accounts receivable reconciliation system known
as FASTRACK.
As collateral for all obligations now existing or hereafter arising from
Customer to BICI, Customer hereby grants to BICI a security interest in all
the following property of Customer, whether now owned or hereafter acquired
or created, and all proceeds and products thereof:
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(a) All amounts paid, and all amounts owing, by each LEC to BICI on
accounts for Customer's EMI Billing Records;
(b) All accounts owing from an End User to Customer arising from
services which give rise to Customer's EMI Billing Records;
(c) All amounts deposited by Customer with BICI pursuant to paragraph
13.(b) hereof; and
(d) all amounts owing and all amounts to be owing from BICI to Customer.
SECTION 6. PAYMENTS TO CUSTOMER.
(a) DETERMINATION OF AMOUNT DUE TO CUSTOMER. BICI will determine the
amount collected by each LEC for Customer's Valid EMI Billing Records and deduct
the then-applicable fees, charges, charge backs, credits and adjustments of the
LECs and BICI. If the amount due to Customer is not sufficient to satisfy these
fees, charges, charge backs, credits and adjustments, then Customer shall pay
this difference to BICI within ten (10) Business Days of notification by BICI of
any amounts due.
(b) RESERVES AND TRUE-UPS FOR UNBILLABLE RECORDS: BICI will reserve an
amount, from one month to the next, that is equal to Customer's prior history
for Unbillable Records. BICI will recalculate Customer's historical experience
quarterly from its prior three months results. Until such history can be
determined for Customer, BICI will reserve two and one-half percent (2.5%) from
the amount due to Customer. BICI will true-up this reserve each month when the
information becomes available from the LECs. BICI will then return excess
amounts to Customer or withhold additional amounts as may be required to satisfy
these liabilities from the amounts due to Customer.
(c) PAYMENT SCHEDULES: BICI will advance to Customer the estimated
amount determined under paragraph 6.(a) above within seven (7) Business Days of
receipt by BICI of any funds from a LEC for Customer's EMI Billing Records;
PROVIDED, HOWEVER, that if Customer has ceased doing business for five (5)
Business Days, is the subject of a bankruptcy proceeding, or a receiver, trustee
or custodian is appointed over substantially all of Customer's assets, or if
Customer fails to make any deposit required under paragraph 13.(b), or if BICI
has reasonable grounds to believe that the fees, charges, charge backs, credits
and adjustments to Customer may exceed any amount owing or to become owing from
BICI to Customer, BICI may withhold payments to Customer until all such amounts
have been determined and deducted from the amount owing to Customer. If the
amount owing to Customer is determined not sufficient to satisfy these fees,
charges, charge backs, credits and adjustments, then Customer shall pay the
difference to BICI within ten (10) Business Days of notification by BICI of any
amount due.
(d) METHOD OF PAYMENT: BICI will make all advance payments and final
payments due to Customer, using ACH wire transfer, each Tuesday or the first
Business Day following Tuesday should Tuesday not fall on a Business Day based
on the schedule described in paragraph 6.(c) herein.
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(e) ACCOUNTING FOR FUNDS: Funds received from the LECs for Customer's
Valid EMI Billing Records, less applicable fees, charges, charge backs, credits
and adjustments, shall be deposited and held by BICI in a common account until
such time as the amount determined to be due Customer is paid to Customer. BICI
will maintain an accounting of the balance owing or to be owing by BICI to
Customer of such amounts deposited and held by BICI.
SECTION 7. CUSTOMER'S OBLIGATIONS.
The Customer agrees as follows:
(a) COOPERATION BY CUSTOMER. Customer agrees to cooperate with BICI to
the fullest extent possible and to the best of Customer's ability to facilitate
the provisioning of services described in Section 3 herein. Such cooperation
shall include, but not be limited to, the following:
(i) Supplying BICI with Customer's identification codes, any and
all certifications of regulatory authority necessary for Customer to offer
its services, and any other information and documents necessary or helpful
to BICI; and
(ii) Supplying BICI with all technical information and assistance
with testing that may be necessary or helpful to BICI in providing its
services herein.
(b) APPLICABLE APPROVALS AND COMPLIANCE WITH LAW. Customer shall
obtain and keep current all applicable federal, state and local licenses,
certifications and approvals and shall fully comply with all other applicable
federal, state and local regulations, laws, rules and Tariffs. Customer agrees
that BICI shall assume and will assume no responsibility for such compliance
whatsoever. Customer acknowledges and understands that certain LEC billing
systems contain edits and screens that "block" Customer's EMI Billing Records
from being billed to End Users until BICI can demonstrate to such LECs that
Customer has proper authority for providing its services to the End User.
Customer further acknowledges and understands that it may take as long as sixty
(60) days after notification to the LECs of such authority before the LECs will
begin billing Customer's EMI Billing Records. Therefore, BICI will not be
responsible for billing Customer's EMI Billing Records for services provided
prior to the LECs removing their regulatory edits and screens from their billing
systems.
(c) VALIDATION. Customer shall validate all collect, third party and
calling card billed MTS calls using the LECs' LIDBs (line information data
bases) or some other alternative validation method that is acceptable to the
LECs and to BICI.
(d) COMPLETED CALLS. Customer acknowledges and agrees that where
required, Customer shall be in compliance with the FCC's order to determine call
connection using hardware or software "answer detection." Customer further
agrees that it will submit to BICI only those EMI Billing Records for calls that
represent valid, completed calls as defined in Exhibit D attached hereto.
(e) AGED EMI BILLING RECORDS. Customer shall not submit EMI Billing
Records to BICI that are more than ninety (90) days old or that exceed the "age
of toll" acceptable by the LECs, whichever is less.
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(f) MINIMUM TRANSMISSION VOLUMES. Customer shall not submit to BICI
fewer than five thousand (5,000) EMI Billing Records per "library code" in any
transmission of its EMI Billing Records. The minimum BICI Processing Fee, as
set forth in Exhibit C attached hereto, shall apply if the minimum volume per
transmission is not met.
(g) OBJECTIONABLE CONTENT. Customer agrees, as a condition of BICI's
performance under this Agreement, that BICI will not provide billing and
information management services which BICI deems harmful, damaging or against
public policy, including, but not limited to:
(i) Services which explicitly or implicitly refer to sexual
conduct;
(ii) Services which contain indecent, obscene or profane language;
(iii) Services which allude to bigotry, racism, sexism or other
forms of discrimination;
(iv) Services which through advertising, content or delivery are
deceptive, or that may take unfair advantage of minors or the general
public;
(v) Services which are publicly accessible, multi-party
connections commonly known as "gab" or "chat" services;
(vi) Services which are prohibited by Federal, state, or local laws
or Tariffs; or
(vii) Services which individual LECs exclude from the "types" of
services or products for which their policies permit them to bill and
collect.
(h) NO OTHER BILLING ARRANGEMENT: Customer warrants that the EMI
Billing Records submitted and to be submitted by Customer to BICI pursuant to
this Agreement are NOT and will NOT be subject to any other valid or
existing billing and collection agreement, have NOT been billed previously and
will NOT be billed by another party following their submission by Customer to
BICI.
SECTION 8. PROTECTION OF CONFIDENTIAL INFORMATION.
As used herein, "Confidential Information" shall mean (a) proprietary
information, (b) information marked or designated as confidential, (c)
information otherwise disclosed in a manner consistent with its confidential
nature, (d) information of one party, whether or not in written form and whether
or not designated as confidential, that is known or should reasonably be known
by the other party as being treated as confidential, and (e) information
submitted by one party to the second party where the second party knows or
reasonably should know that the first party is obligated to keep the information
confidential. The parties hereto expressly recognize and acknowledge that, as
result of the provision of services pursuant to this Agreement, Confidential
Information which may be proprietary to each party must or may be disclosed to
the other. Each party hereby agrees that it will make no disclosure of
Confidential Information provided under this Agreement without the prior written
consent of the other party. Additionally, each party shall restrict disclosure
of said information to its own employees, agents or independent contractors to
whom disclosure is necessary and who have agreed to be bound by the obligations
of confidentiality hereunder. Such employees, agents or independent contractors
shall use reasonable care, but not less care than they use with respect to their
own information of like character, to prevent disclosure of any Confidential
Information. Nothing contained in this Agreement shall be considered as
granting or conferring rights by license or otherwise in any Confidential
Information disclosed.
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SECTION 9. TAXES.
(a) CALCULATION OF TELECOMMUNICATIONS TAXES: BICI will be responsible
for calculating or will use its best efforts to cause the LECs to calculate the
following taxes applicable to each MTS call and allow them to be passed through
to the End User, such taxes being referred to herein collectively as "Taxes":
Federal excise tax, any state and local sales taxes or tax-like charges, or any
Foreign Intrastate Taxes or foreign tax-like charges. Notwithstanding the
foregoing, Customer acknowledges and agrees it is responsible for compliance
with all taxing requirements; therefore, Customer shall promptly notify BICI of
any tax or tax-like surcharges and the associated rates that apply to Customer's
MTS calls in any specific jurisdiction.
(b) BILLING AND COLLECTION OF TAXES: BICI will, for the benefit of and
on behalf of Customer, use its best efforts to cause the LECs to bill End Users
for all Taxes. Customer acknowledges and agrees that BICI is acting merely as
Customer's agent with respect to arranging for the billing and collection of
Taxes, and in no event shall BICI be entitled to retain or receive from
Customer, or from any End User, any statutory fee or share of Taxes to which
the person collecting the same may be entitled under applicable law.
(c) TAX EXEMPT STATUS FOR END USERS: BICI will have the authority, on
behalf of Customer, to authorize the LECs to calculate Taxes in the same manner
as the LECs calculate Taxes for their End Users and to authorize the LECs to
establish the tax exempt status of End Users in the same manner as the LECs
establish such status for their End Users. If Customer's MTS calls are exempt
from federal, state and local Taxes or tax-like charges, Customer shall so
indicate on each EMI Billing Record submitted to BICI.
(d) FILING AND PAYMENT OF TAXES: Based upon the information
calculated by BICI and/or received from the LECs with respect to Taxes assessed,
billed and collected by the LECs, BICI will, on behalf of Customer, prepare and
file in a timely manner with the applicable taxing authorities all returns
covering Taxes, and will, on behalf of Customer, but only to the extent of
amounts otherwise owing from BICI to Customer, pay in full and promptly remit to
such taxing authorities all Taxes owed thereto. Upon written request, BICI will
provide to Customer copies of any and all tax returns and other applicable
information relating to the payment of Taxes by BICI within thirty (30) days
after being filed and paid by BICI.
(e) HOLD HARMLESS: Customer shall indemnify and hold BICI and its
employees, agents and representatives free and harmless from and against any
Claim (including, without limitation, reasonable attorneys' fees and court
costs) relating to or arising out of any Taxes, penalties, interest, additions
to tax, surcharge or other amounts to which BICI may be subject or incur,
relating to or arising out of (i) BICI's reliance upon any calculations,
determinations or other directives, or lack thereof, given by Customer to BICI
with respect to the calculation, assessment, billing and/or collection of any
Taxes contemplated by this Agreement; or (ii) a determination by the Internal
Revenue Service or any other taxing authority that any amount paid by BICI
pursuant to paragraph 9.(d) above with respect to Taxes was insufficient, except
in the event such insufficiency was the result of gross negligence on the part
of BICI; provided, however, that Customer shall not be required to indemnify
BICI or the employees, agents and
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representatives thereof for any loss, damage, Claim, cause of action or other
liability to the extent, but only to the extent, caused by the gross negligence
or willful misconduct of BICI.
(f) BILLED TAXES: Customer shall be responsible for the payment of
any additional Taxes or tax-like charges assessed against BICI based on the
revenues collected by BICI from Customer's Valid EMI Billing Records, "Billed
Taxes" under this Agreement, excluding Federal and state income Taxes.
SECTION 10. FORCE MAJEURE.
BICI shall not be held liable for any delay or failure in performance of any
part of this Agreement or Exhibits attached hereto from any cause beyond its
control and without its fault or negligence, such as acts of God, acts of
civil or military authority, government regulations, embargoes, epidemics,
war, terrorist acts, riots, insurrections, fires, explosions, earthquakes,
nuclear accidents, floods, strikes, power blackouts, volcanic action, other
major environmental disturbances, unusually severe weather conditions,
inability to secure products or services of other persons or transportation
facilities, or acts or omissions of transportation common carriers.
SECTION 11. LIMITATION OF LIABILITY.
(a) BICI will use its best efforts at all times to provide prompt and
efficient service; however, BICI makes no warranties or representations
regarding the services except as specifically stated in this paragraph 11.(a).
BICI will use due care in processing all work submitted to it by Customer and
agrees that it will, at its expense, correct any errors which are due solely
to malfunction of BICI's computers, operating systems or programs or errors
by BICI's employees or agents. Correction shall be limited to reprocessing
Customer's EMI Billing Records. BICI will not be responsible in any manner
for failures of, or errors in, proprietary systems and programs other than
those of BICI, nor shall BICI be liable for errors or failures of Customer's
software or operational systems. THIS WARRANTY IS EXCLUSIVE AND IS IN LIEU OF
ALL OTHER WARRANTIES, AND CUSTOMER HEREBY WAIVES ALL OTHER WARRANTIES,
EXPRESSED, IMPLIED, OR STATUTORY, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTY
OF MERCHANTABILITY OR FITNESS FOR USE FOR A PARTICULAR PURPOSE. Should there
be any failure in performance or errors or omissions by BICI with respect to
the information being processed and being submitted to the LECs for billing
and collection, BICI's liability shall be limited to using its best efforts
to correct such failure. In no event, except as specifically set forth herein,
shall BICI be liable to Customer or any third parties (including Customer's
customers) for any Claim even if BICI has been advised of the possibility of
such Claim.
(b) Due to the nature of the services being performed by BICI, Customer
agrees that in no event will BICI be liable for any Claim caused by BICI's
performance or failure to perform hereunder which is not reported by Customer in
writing to BICI within thirty (30) days of such performance or failure to
perform.
(c) Customer shall indemnify and save harmless BICI from and against any
Claim asserted against BICI by third parties and arising out of Customer's use
of the services provided
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under this Agreement, unless such Claim arises out of the willful misconduct or
gross negligence of BICI.
(d) Liability of BICI in any and all categories and for any and all
Claims arising out of this Agreement or out of any act or omission relating
thereto shall, in the aggregate, not exceed one (1) month's average of BICI's
Processing Fees to Customer over the twelve (12) months preceding such date in
which the damage or injury is alleged to have occurred, but if this Agreement
has not been in effect for twelve (12) months preceding such date, then over
such fewer number of preceding months that this Agreement has been in effect.
SECTION 12. TERM OF AGREEMENT.
The initial term of this Agreement shall begin on the date on page 1 of this
Agreement or the date Customer begins submitting its EMI Billing Records to
BICI, whichever is later, and continue in full force and effect for a minimum
period of one (1) year from such date unless terminated in accordance with
paragraph 14.(b)(i) and shall automatically renew for successive periods of one
(1) year unless terminated by written notice from either party at least sixty
(60) days prior to the scheduled expiration date.
Notwithstanding anything to the contrary contained herein, if Customer is
currently billing more than twenty-five thousand (25,000) EMI Billing Records
per month, Customer may elect an initial term for this Agreement of two (2) or
three (3) years. Should Customer elect to extend the initial term of this
Agreement, Customer shall pay BICI a minimum Processing Fee, as described in
Exhibit C attached hereto, each month for the entire term of this Agreement. In
consideration for such, BICI will charge Customer a reduced billing services fee
for the term selected which coincides with the BICI fee schedule as presented in
Exhibit C, attached hereto.
SECTION 13. EXPIRATION OR TERMINATION.
(a) PAYMENT UPON EXPIRATION OR TERMINATION: Upon the expiration or
termination of this Agreement for any reason, Customer agrees to satisfy, when
or before due, any and all of its obligations arising under this Agreement.
(b) DEPOSIT FOR CHARGES: In addition, Customer acknowledges and
understands that certain LEC charges for Uncollectible Amounts, Bad Debt
true-ups and Post-Billing Adjustments and Credits which are not determined by
the LECs or provided to BICI for a period of up to eighteen (18) months after
the final processing of Customer's EMI Billing Records by BICI on behalf of
Customer. Customer further acknowledges and agrees that payment of these
amounts shall be its sole responsibility. To ensure such payments, Customer
shall, at the expiration or termination of this Agreement for any reason,
deposit with BICI an amount equal to two and one-half percent (2.5%) of the
face amount of Customer's gross billings for the prior twelve (12) months, or
such other amount as is estimated by BICI, based on Customer's prior history,
necessary to satisfy such charges. Such deposited amount shall be used by
BICI to pay Uncollectible Amounts, Bad Debt true-ups, Post-Billing Adjustments
and Credits and other charges incurred on behalf of Customer for billing and
collecting Customer's EMI Billing Records submitted by Customer to BICI during
the term of this Agreement. Each quarter BICI will re-examine the amount of
funds deposited and make such adjustments as BICI estimates may
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be necessary to satisfy the aforementioned charges. BICI will provide Customer
with proper documentation to substantiate charges attributable to Customer on
the same and consistent method as BICI determines such charges for all of its
customers. At the end of eighteen (18) months from the expiration or
termination date, BICI will return all unused amounts to Customer.
(c) REMAINING LIABILITY: Notwithstanding the foregoing, the deposit
of such amounts does not relieve or waive Customer's responsibility and
obligation to pay its obligations to BICI including, without limitations, any
and all fees, charges, charge backs, credits and adjustments associated with
billing and collecting its EMI Billing Records. In the event such associated
fees, charges, charge backs, credits and adjustments exceed the amount of the
deposit described in paragraph 13.(b), Customer shall remit to BICI such
additional amounts as are required to satisfy Customer's obligations under
this Agreement to BICI within ten (10) Business Days of notification by BICI
of any such amounts due.
(d) SAVINGS CLAUSE: Except as otherwise provided herein, expiration
or termination of this Agreement under this Section 13 shall terminate all
further rights and obligations of the parties hereunder, provided that:
(i) Neither BICI nor Customer shall be relieved of its respective
obligations to pay any sums of money due or to become due or payable or
accrued under this Agreement;
(ii) If such expiration or termination is a result of a default
hereunder or a breach hereof by a party hereto, the other party shall be
entitled to pursue any and all rights and remedies it has to redress such
default or breach in law or equity, subject to Sections 11, 14 and 24
hereof; and
(iii) The provisions of Sections 8 and 9 hereof, except paragraph
9.(b), shall survive the expiration or termination of this Agreement.
(e) EARLY TERMINATION OF EXTENDED TERM AGREEMENT: If Customer elects
to extend the initial term of this Agreement and should Customer terminate or
breach this Agreement before the expiration of the full initial term elected by
Customer upon execution hereof, BICI will recalculate and Customer shall pay to
BICI a processing fee for all EMI Billing Records processed under this Agreement
based on the current processing fee schedule at the one (1) year rate, attached
hereto as Exhibit C, plus ten percent (10%) for each EMI Billing Record
processed under this Agreement, at Customer's monthly volume levels.
SECTION 14. DEFAULT AND REMEDIES.
(a) DEFAULT: Either Party shall be in default hereunder if it:
(i) Fails to make any payment specified hereunder when or before
due and such failure continues for five (5) Business Days after written
notice;
(ii) Breaches any other material covenant or undertaking contained
in this Agreement and fails to remedy such breach within thirty (30)
Business Days after written notice thereof from the non-defaulting party;
or
(iii) Files, or there is filed against it, any voluntary or
involuntary proceeding under the Bankruptcy Code, or makes an assignment
for the benefit of creditors, dissolves, ceases to conduct business for
three (3) Business Days, resorts to any insolvency law, declares that it
is unable to pay its debts as they mature or if a receiver, trustee or
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custodian is appointed over, or an execution, attachment, or levy is made
upon, all or any material part of the property of such party.
(b) REMEDIES: Time is of the essence of this Agreement. In the event
of any default hereunder, the non-defaulting party shall have the following
rights and remedies:
(i) To terminate or cancel this Agreement, subject to the
provisions of paragraph 13.(d), by giving written notice thereof to the
defaulting party;
(ii) To declare all amounts due under this Agreement from the
defaulting party to the non-defaulting party to be immediately due and
payable;
(iii) To withhold, setoff, and retain, until all obligations of
Customer to BICI have been satisfied in full, any and all amounts which
may otherwise be due and payable to Customer under this Agreement and
apply such amounts to any balance due or to become due from Customer
to BICI;
(iv) All rights and remedies allowed by the applicable Uniform
Commercial Code;
(v) All other rights and remedies allowed by this Agreement and
under applicable law; and
(vi) All rights and remedies shall be cumulative and can be
exercised separately or concurrently.
SECTION 15. AMENDMENTS; WAIVERS.
No modification, amendment or waiver of any provision of this Agreement, and no
consent to any default under this Agreement, shall be effective unless the same
shall be in writing and signed by or on behalf of the party against whom such
modification, amendment, waiver or consent is claimed. In addition, no course
of dealing or failure of any party to strictly enforce any term, right or
condition of this Agreement shall be construed as a waiver or such term, right
or condition.
SECTION 16. ASSIGNMENT.
(a) BY CUSTOMER OR BICI. Assignment by Customer or BICI of any right,
obligation or duty or of any other interest hereunder, in whole or in part,
shall require consent by both parties. Such consent shall not be unreasonably
withheld by either party.
(b) GENERALLY. All rights, obligations, duties and interests of any
party under this Agreement shall inure to the benefit of and be binding on all
successors in interest and assigns of such party and shall survive any
acquisition, merger, reorganization or other business combination to which it is
a party.
SECTION 17. NOTICES AND DEMANDS.
(a) HOW NOTICE GIVEN: Except as otherwise provided under this
Agreement, all notices, demands and requests which may be given by any party to
the other party shall be in writing and shall be: (i) delivered in person; (ii)
mailed, postage prepaid, registered or certified mail, return receipt requested;
(iii) placed in the hands of a national overnight delivery service
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or (iv) sent by facsimile transmission to the recipient's facsimile machine,
with an extra copy immediately following by first class mail; and addressed as
follows:
IF TO BICI, TO IT AT:
BILLING INFORMATION CONCEPTS INC.
ATTENTION: MARSHALL N. MILLARD
9311 SAN PEDRO, SUITE 400
SAN ANTONIO, TEXAS 78216
TELEPHONE: (210) 321-6900
FAX: (210) 525-6298
_________________________________________________________________
IF TO CUSTOMER, TO IT AT:
U.S. LONG DISTANCE, INC.
ATTENTION: MR. AUDIE LONG
9311 SAN PEDRO, SUITE 100
SAN ANTONIO, TEXAS 78216
TELEPHONE: (210) 525-9009
FAX: (210) 366-2437
If personal delivery is selected as the method of giving notice under this
Section, a receipt for such delivery shall be obtained. The address to which
such notices, demands, requests, elections or other communications may be given
by either party may be changed by written notice given by such party to the
other party pursuant to this Section 17.
(b) WHEN NOTICE EFFECTIVE: Except as otherwise expressly provided
herein, all such notices shall be effective upon receipt if delivered by hand,
facsimile, national overnight delivery service, certified or registered mail and
otherwise five (5) Business Days after placement in the U.S. mails.
SECTION 18. NO THIRD-PARTY BENEFICIARIES.
This Agreement shall not provide any person not a party to this Agreement with
any remedy, claim, liability, reimbursement, cause of action or other right in
excess of those existing without reference to this Agreement.
SECTION 19. GOVERNING LAW.
This Agreement shall be deemed to be a contract made under the laws of the State
of Texas, and the construction, interpretation and performance of this Agreement
and all transactions hereunder shall be governed by the domestic laws of such
State without regard to conflict of law principles.
SECTION 20. ENTIRE AGREEMENT.
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This Agreement constitutes the entire and exclusive Agreement between the
parties and supersedes all prior or contemporaneous agreements, and oral or
written representations, between them.
SECTION 21. EXECUTION IN COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one
and the same document.
SECTION 22. HEADINGS.
The headings in this Agreement are for convenience only and shall not be
construed to define or limit any of the terms herein or affect the meaning or
interpretation of this Agreement.
SECTION 23. MOST FAVORED CUSTOMER.
It is the intent of the parties hereto that Customer shall be considered by
BICI as one of its most favored customers under this Agreement. By virtue of
this consideration, Customer shall not pay a greater BICI Processing Fee per
call, or in the alternative, receive a lesser number of out-cleared messages
for the same or lesser BICI Processing Fee, than any other similarly situated
customer of BICI under this Agreement. BICI will promptly reduce Customer's
monthly BICI Processing Fee and minimum revenue guarantees if it should grant
a lower rate per call or provide a greater number of out-cleared messages for
the same or lesser BICI Processing Fee to any customer of BICI under this
Agreement, similarly situated to Customer. Regardless of the mechanics of
the aforementioned, it is the intent of this clause and the principle
hereunder that Customer be treated as well as or better than the most
favorably treated customer of BICI under this Agreement.
SECTION 24. ARBITRATION
Any controversy, dispute or Claim arising out of or in connection with this
Agreement, or the breach, termination or validity hereof, shall be settled by
final and binding arbitration to be conducted by an arbitration tribunal in
San Antonio, Texas, pursuant to the rules of the American Arbitration
Association. In the event of any procedural matter not covered by the
aforesaid rules, the procedural law of the State of Texas shall govern. The
arbitration tribunal shall consist of three arbitrators. The party
initiating arbitration shall nominate one arbitrator in the request for
arbitration and the other party shall nominate a second in the answer thereto
within 15 days of receipt of the request. The two arbitrators so named will
then jointly appoint the third arbitrator. If the answering party fails to
nominate its arbitrator within the fifteen day period, or if the arbitrators
named by the parties fail to agree on the third arbitrator within thirty
days, the Office of the American Arbitration Association in Dallas, Texas
shall make the necessary appointments of such arbitrator(s). The arbitrator
shall only have authority to award compensatory damages and shall not have
authority to award punitive damages, other non-compensatory damages or any
other form of relief: the parties hereby waive all rights to and claims for
relief other than compensatory damages. The decision or award of the
arbitration tribunal (by a majority determination, or if there is no
majority, then by the determination of the third arbitrator, if any) shall be
final, and judgment upon such decision or award may be entered in the courts
of the
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State of Texas or the United States of America for the Western District of the
State of Texas. By execution and delivery of this Agreement, each of the
parties hereto accepts for itself and in respect of its property, generally and
unconditionally , the jurisdiction of the aforesaid courts.
Term
The initial term of this Agreement shall be for a period of three years from
the date hereof.
IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first
set forth above.
BILLING INFORMATION CONCEPTS INC.:
By: /s/ Alan W. Saltzman
--------------------------------
Alan W. Saltzman
President and
Chief Operating Officer
Date: July 10, 1996
------------------------------
CUSTOMER:
U.S. LONG DISTANCE, INC.
By: /s/ Larry M. James
--------------------------------
Name: Larry M. James
------------------------------
(print)
Its: President
-------------------------------
Date: July 10, 1996
------------------------------
______________________________
Account Representative
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TELECOMMUNICATIONS AGREEMENT
This Agreement is entered into this 10th of July, 1996, by and between
U. S. LONG DISTANCE, INC., a Texas corporation with its principal office at 9311
San Pedro, Suite 100, San Antonio, Texas 78216 ("USLD"), and BILLING INFORMATION
CONCEPTS INC., a Delaware corporation with its principal office at 9311 San
Pedro, Suite 400, San Antonio, Texas 78216 ("Customer").
WITNESSETH:
WHEREAS, USLD is in the business of providing telecommunications services;
and
WHEREAS, Customer desires to purchase telecommunications services from
USLD:
NOW, THEREFORE, in consideration of the mutual promises and convenants
contained herein, and for other good and valuable consideration, the parties do
hereby contract and agree as follows:
1. USLD agrees to furnish to Customer, and Customer agrees to purchase
from USLD, the telecommunication services as set forth in EXHIBIT "A" attached
hereto and made a part of this Agreement as if set forth verbatim herein.
2. This Agreement shall commence on the date on which U.S. Long
Distance Corp. distributes the common stock, par value $.01 per share, of
Billing Information Concepts Corp. to the holders of U.S. Long Distance
Corp.'s common stock, par value $.01 per share (the "Commencement Date") and
continue for a period of three (3) years. This Agreement shall be extended,
on the same terms and conditions, for an additional period of one (1) year
unless either party notifies the other party in writing not less than sixty
(60) days prior to the termination date of its desire to terminate this
Agreement.
3. During the term of this Agreement, USLD shall charge for the
telecommunication services, and Customer shall pay for such telecommunication
services, that amount as determined by using the rates set out in EXHIBIT "A."
4. USLD shall give Customer at least forty-five (45) days' notification
in the event any service rate in EXHIBIT "A" is modified. Upon such
notification, Customer will have the right to terminate this Agreement without
penalty by providing USLD written notice within thirty (30) days of Customer's
intent to cancel service sixty (60) days from notice.
5. Customer hereby acknowledges that USLD's charges for the provision
of its telecommunication services will be billed on a monthly basis and that
payment for such services is due and payable fifteen (15) days from the invoice
date. Late payments will be assessed a late charge of 1.5% per month. Payments
not received within thirty (30) days of the invoice date will result in the
right of USLD to cancel and terminate the services provided herein, after
providing Customer with written notice, via facsimile, of such intent to
terminate service and allowing Customer ten (10) working days to cure the
deficiency.
6. Should Customer dispute any of the monthly charges on its monthly
invoice, it shall notify USLD of the disputed charges not later than ten (10)
days from the date of invoice. This notice shall set forth in writing all
details concerning the disputed charges. In the event of a dispute, Customer
shall pay the entire invoice in accordance with the payment terms set forth
therein. After resolution of the disputed portion of the invoice, the
adjustment, if any, shall be immediately credited to Customer's account.
7. Should Customer claim any exemption of any sales, use or other tax,
then Customer shall provide documentation regarding such exemption to USLD.
USLD will be allowed to maintain a copy of such
<PAGE>
documentation in its offices in San Antonio, Texas. It will be the
responsibility of Customer to make sure that its proof of exempt status remains
current.
8. No term or provision of this Agreement shall be deemed waived, and
no breach shall be deemed excused, unless such waiver or consent shall be in
writing and signed by the party claimed to have waived or consented. No consent
by any party to, or waiver of, a breach or default by the other, whether
expressed or implied, shall constitute a consent to, waiver of or excuse for any
different or subsequent breach or default.
9. Neither USLD nor Customer shall be liable to the other for any
consequential, indirect, special or incidental damages whatsoever, including,
without limitation, any loss of revenue, goodwill, or profits or claims by third
parties or otherwise in connection with or related to any of the services
provided pursuant to this Agreement.
10. USLD warrants that the equipment used in providing the services to
Customer pursuant to this Agreement is suitable for the uses intended, and
Customer warrants and represents that it is fully authorized to contract for the
services under this Agreement.
USLD MAKES NO OTHER WARRANTIES, EITHER EXPRESSED OR IMPLIED.
11. This Agreement authorizes USLD to start provisioning of
telecommunications services, as set forth herein, to Customer on the
Commencement Date. This Agreement also authorizes USLD to act as Customer's
agent in placing orders with other carriers in order to provide
telecommunications services, if requested.
12. If the performance of the respective obligations of USLD or Customer
shall be prevented or interfered with by reason of any fire, flood, epidemic,
earthquake or any other act of God, explosion, strike or other disputes, riot or
civil disturbance, war (whether declared or undeclared) or armed conflict, any
municipal ordinance or state or federal law, governmental order or regulation or
order of any court of competent jurisdiction, or other similar forces not within
the control of USLD nor Customer, as the case may be, then Customer and/or USLD,
as the case may be, shall not be liable to the other for its failure to perform
such obligations hereunder.
13. If any term or provision of this Agreement shall be found to be
illegal or unenforceable, then, notwithstanding such illegality or
unenforceability, this Agreement shall remain in full force and effect and such
term or provision shall be deemed to be deleted. In addition, this Agreement
shall be terminated upon the determination of a governmental entity having
jurisdiction over the services provided under this Agreement.
14. Except as otherwise provided herein, the remedies provided for in
this Agreement are in addition to any other remedies available at law or in
equity, by statute or otherwise.
15. Should it be necessary for either party to this Agreement to retain
the services of an attorney to enforce its rights under this Agreement, and
should any suit be necessary to enforce said rights, then the prevailing party
shall be entitled to receive reasonable attorney's fees from the other party.
16. This Agreement shall be governed by the substantive laws of the
State of Texas, without regard to conflict of law principles, with venue at San
Antonio, Texas.
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17. This Agreement shall be binding upon and inure to the benefit of
USLD and Customer and their respective successors and assigns. USLD retains the
right to assign all or part of this Agreement. This Agreement may not be
assigned by Customer without the prior written consent of USLD. USLD reserves
the right to obtain necessary credit information or require additional security
deposits from successors and assigns.
18. This Agreement, including the exhibits hereto and the documents and
instruments referred to therein, embodies the entire agreement and understanding
of the parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings, other than those expressly set forth or referred to herein. This
Agreement, and any documents and instruments contemplated hereby, supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
19. This Agreement may be amended, modified or supplemented only by an
instrument in writing executed by the party against which enforcement of the
amendment, modification or supplement is sought.
20. This Agreement may be executed in two (2) or more counterparts, each
of which shall be deemed an original. It shall not be necessary in making proof
of this Agreement to produce or account for more than one (1) of such
counterparts.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the day
and year first above written, and the individuals signing below warrant that
they have authority to sign for and on behalf of the respective parties.
U. S. LONG DISTANCE, INC. BILLING INFORMATION CONCEPTS INC.
By: /s/ LARRY M. JAMES By: /s/ ALAN W. SALTZMAN
---------------------------- -------------------------------
Name: Larry M. James Name: Alan W. Saltzman
---------------------------- -------------------------------
Title: President Title: President
---------------------------- -------------------------------
Date: July 10, 1996 Date: July 10, 1996
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