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EXHIBIT 2.4
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement"), is made this
5th day of June, 1998, by and between TELESERVICES ACQUISITION CORPORATION, a
Delaware corporation ("Buyer"), TELESERVICES HOLDINGS CORPORATION, a Delaware
corporation and holder of all the issued and outstanding capital stock of Buyer
("Parent"), U.S. TELEFACTORS CORPORATION, an Illinois corporation ("USTC"), and
▇▇▇▇▇▇ ▇. Knee and ▇▇▇▇ ▇. and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (the "Sellers", and each
individually, a "Seller").
W I T N E S S E T H :
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WHEREAS, USTC is principally engaged in the business of
supplying telemarketing services and is the end user and subscriber for certain
toll free telephone numbers listed on Schedule 2.1(q) hereto (the "Toll Free
Telephone Numbers");
WHEREAS, the Sellers are presently the owners of an aggregate
of 1,000 shares of common stock, no par value (the "USTC Common Stock"), of USTC
(collectively, the "USTC Stock") which represents all of the issued and
outstanding capital stock of USTC;
WHEREAS, the Sellers desire to sell their respective shares of
USTC Stock to Buyer and Buyer desires to purchase all of the USTC Stock from the
Sellers, all in the manner and subject to the terms and conditions hereinafter
set forth.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements herein contained, the
parties hereby agree as follows:
1. TERMS OF ACQUISITION
1.1 STOCK PURCHASE. On the terms and subject to the conditions
of this Agreement, on the Closing Date (as hereinafter defined), each Seller
shall sell, convey, transfer, assign and deliver to Buyer, and Buyer shall
purchase and acquire from each such Seller, all right, title and interest of
such Sellers, legal or equitable, in and to the number of shares of USTC Stock
set forth opposite such Seller's name on Schedule 1.1 hereto under the caption
"Number of Shares Owned." Each Seller resides at the address set forth therein.
The certificates evidencing the USTC Stock shall be delivered at the Closing (as
hereinafter defined) to Buyer, free and clear of all liens, claims, security
interests and encumbrances, accompanied by duly executed stock powers (endorsed
in blank, with signatures guaranteed) and any necessary stock transfer tax
stamps affixed thereto.
1.2 PURCHASE PRICE. (a) As the purchase price for all of the
USTC Stock (the "Purchase Price"), (i) Buyer shall pay to the Sellers an
aggregate sum, subject to adjustment as provided in Section 1.4 below [******]
in cash (the "Cash Purchase Price"), and (ii) Buyer shall cause Parent to issue
[******] shares of Common Stock of Parent (the "Parent Common Stock") which
shall not be less than [****] of the issued and outstanding shares of Common
Stock of Parent after completion of Phase I and Phase II Acquisitions, the
further transfer of which shall be restricted under the Securities Act of 1933,
as amended (the "Securities Act") and as provided under Section 2.2(e) hereof.
For purposes hereof, (i) "Phase I Acquisition" shall mean the acquisition by
Buyer of the businesses of Operators Standing By, Inc., Sweet, ▇▇▇▇▇▇ and ▇▇▇▇▇,
Inc. and Protocol Communications Services, Inc. and "Phase II Acquisitions"
shall mean the
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In this Exhibit, "[***]" represents material omitted from this Exhibit and filed
separately with the Securities and Exchange Commission and for which
Confidential Treatment has been requested.
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acquisition by Buyer or its Affiliates of businesses comparable in revenue and
earnings, in the aggregate, to the Phase I Acquisitions and which acquisitions
shall occur on or before March 31, 1999.
(b) The Cash Purchase Price shall be payable in cash
at Closing by wire transfer of immediately available funds as follows: (i)
[******] (less any amounts due pursuant to Section 3(a) hereof) to an account of
the Sellers designated in writing by Sellers' Rep and (ii) [******] to the
account of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq., as escrow agent ("Escrow Agent") designated
in the escrow agreement annexed hereto as Exhibit A (as the same may be amended
from time to time, the "Escrow Agreement"), to be held and disbursed by the
Escrow Agent pursuant to the terms thereof. The Cash Purchase Price shall be
allocated by the Sellers' Rep among the Sellers as provided on Schedule 1.2
hereto under the caption "Allocation of Cash Purchase Price."
(c) The shares of Parent Common Stock shall be
allocated among the Sellers as provided on Schedule 1.2 hereto under the caption
"Allocation of Parent Common Stock" and certificates representing such shares
shall be delivered to the appropriate Sellers at Closing.
1.3 CLOSING DATE. The closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of O'Melveny
and ▇▇▇▇▇▇, Buyer's Lender's counsel, in New York City, at 10:00 A.M., June 5,
1998, or at such other place and/or on such other date and time as shall be
agreed upon by Buyer and the Sellers (the "Closing Date").
1.4 PURCHASE PRICE ADJUSTMENT.
(a) Within one hundred twenty (120) days after
Closing, Buyer, at its expense, shall cause KPMG Peat Marwick LLP to deliver to
the Sellers an audited balance sheet and related statements of income, retained
earnings and cash flows for USTC's fiscal year ended December 31, 1997 (the
"1997 Financial Statements"), and for the portion of USTC's 1998 fiscal year
ending on the Closing Date (the "Closing Date Financial Statements"), all of
which financial statements shall be prepared in accordance with generally
accepted accounting principles and the rules and regulations of the Securities
Exchange Commission applicable to financial reporting of public companies
("GAAP").
(b) The Sellers shall have forty-five (45) days from
delivery of the 1997 Financial Statements and the Closing Date Financial
Statements (collectively, the "Financial Statements") to raise any objection
thereto by delivery of joint written notice to Buyer setting forth such
objections in reasonable detail. In the event that the Sellers shall fail to so
deliver such written objections with respect to any of the Financial Statements
within such 45-day period, then any such Financial Statements in respect of
which no such objection is so delivered shall be deemed final and binding on the
parties. In the event that any such objections are so delivered, Buyer and
Sellers' Rep shall attempt, in good faith, to resolve such objections and, if
unable to do so within fifteen (15) days of delivery of such objections, shall,
within five (5) business days thereafter designate a nationally recognized firm
of independent public accountants, mutually satisfactory to Buyer and Sellers'
Rep (the "Independent Accountants"). In the event that Buyer and Sellers' Rep
are unable to agree on the Independent Accountants within such 5-business day
period, the Independent Accountants shall be designated jointly by the
independent accountants of Buyer and USTC within three (3) business days
thereafter. The Independent Accountants shall resolve all remaining objections
to the Financial Statements made by the Sellers in accordance herewith within
forty-five (45) days from their date of designation. The determination of the
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Independent Accountants shall be final and binding on the parties. The fees and
expenses of the Independent Accountants shall be borne one-half by Sellers,
jointly and severally, and one-half by Buyer.
(c) The Cash Purchase Price shall be adjusted in each
of the following instances, based on the Financial Statements, as finally
determined in accordance herewith, by the amounts ("Adjustment Amounts")
determined as follows:
(i) in the event that on the Closing Date
USTC shall have outstanding Funded Debt (as defined below) in excess of
[******], the Cash Purchase Price shall be reduced by an amount equal to such
excess; and
(ii) in the event that the sum of [******]
shall exceed 1997 EBITDA (as defined below), the Cash Purchase Price shall be
reduced by an amount equal to [****] for each $1.00 of such excess (rounded down
to the nearest whole dollar).
Within thirty (30) business days of the final determinations of the applicable
Financial Statements (e.g., the Financial Statements from which each Adjustment
Amount is to be calculated), each Seller shall pay to Buyer his or her share of
each Adjustment Amount (based on the percentages for the allocation of the Cash
Purchase Price set forth on Schedule 1.2 hereto) by wire transfer of immediately
available funds to an account designated by Buyer in writing to the Sellers. In
no event will the aggregate Adjustment Amounts exceed the Cash Purchase Price,
or, with respect to such amounts due from ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇, the aggregate
Cash Purchase Price allocated to them pursuant to Schedule 1.2 hereto.
(d) For purposes hereof, (i) "Funded Debt" shall mean
all indebtedness of USTC for borrowed money outstanding on the Closing Date
(including, without limitation, capitalized lease obligations but specifically
excluding the lease obligations set forth in Schedule 1.4(d) hereto), exclusive
of indebtedness incurred under the revolving credit facility referred to in
Schedule 2.1(v) hereto and (ii) "1997 EBITDA" shall mean the earnings of USTC
for its fiscal year ended December 31, 1997, before deduction for interest,
taxes, depreciation and amortization, in each case determined in accordance with
GAAP and before deduction in respect of charges set forth in Schedule 1.4(d)
hereto ("Non-Recurring Charges") and as set forth on the 1997 Financial
Statements.
2. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF USTC AND THE SELLERS.
USTC and the Sellers hereby, jointly and severally, represent and warrant to
Buyer as follows:
(a) ORGANIZATION, GOOD STANDING AND POWER. USTC is a
corporation duly organized, validly existing and in good standing and authorized
to exercise its corporate powers, rights and privileges under the laws of the
State of Illinois with full corporate power and authority to own, lease and
operate its properties and to carry on its business as presently conducted by
it. Schedule 2.1(a) hereto sets forth all states and other jurisdictions in
which USTC is duly qualified and in good standing to do business as a foreign
corporation. There are no other states or jurisdictions in which the character
and location of the properties owned or leased by it, or the conduct of its
business makes such qualification necessary, except where failure to so qualify
would not have a material adverse effect on the condition (financial or
otherwise) of USTC. Copies of USTC's Articles of Incorporation and all
amendments thereto, and of USTC's
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By-Laws, as amended to date, are attached to Schedule 2.1(a) and are complete
and correct.
(b) CAPITALIZATION. The authorized capital stock of
USTC consists of 300,000 shares of Common Stock, no par value, of which 1,000
shares are issued and outstanding; 36,666 shares of Class A Preferred Stock, par
value $1.00 per share, of which no shares are issued and outstanding; 36,666
shares of Class B Preferred Stock, par value $1.00 per share, of which 24,444
shares are issued and outstanding; 40,000 shares of Class C Preferred Stock, par
value $1.00 per share, of which 30,000 shares are issued and outstanding; 73,334
shares of Class D Preferred Stock, par value $1.00 per share, of which 48,889
shares are issued and outstanding; 20,000 shares of Class E Preferred Stock, par
value $1.00 per share, of which 20,000 shares are issued and outstanding; and
75,000 shares of Class F Preferred Stock, par value $1.00 per share, of which no
shares are issued and outstanding. USTC has redeemed or has exercised its rights
to redeem all issued and outstanding shares of its preferred stock outstanding
as of December 31, 1997, and, upon payment to ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇ of the
aggregate redemption price of $123,333, USTC will have no further rights or
obligations with respect thereto. The number of shares of USTC Stock owned
beneficially or of record by each of the Sellers is set forth on Schedule 1.1
hereto. All issued shares of USTC Stock have been duly authorized and validly
issued and are fully paid and nonassessable. There are no outstanding
obligations, options, warrants, rights, calls, commitments, conversion rights,
plans or other agreements of any character to which USTC is a party or otherwise
bound which provide for the purchase or issuance by USTC of any authorized but
not outstanding, or authorized and outstanding shares of capital stock of USTC.
There is no personal liability attached to the USTC Stock. No person has any
preemptive or similar rights in respect of any securities of USTC.
(c) AUTHORITY. The execution and delivery by USTC and
the Sellers of this Agreement and all of the agreements, schedules, exhibits,
documents and instruments specifically provided for hereunder to be executed
and/or delivered by any or all of them (all of the foregoing, including this
Agreement, being hereinafter sometimes collectively referred to as the "Executed
Agreements"), the performance by USTC and any or all of the Sellers (to the
extent that they are parties thereto) of their respective obligations under the
Executed Agreements, and the consummation of the transactions contemplated by
the Executed Agreements, have been duly and validly authorized by all necessary
corporate action on the part of USTC and by the Sellers, and USTC has all
necessary corporate power with respect thereto. The Executed Agreements are, or
when executed and delivered by the delivering parties shall be, the valid and
binding obligations of the delivering parties, enforceable in accordance with
their respective terms, except to the extent that enforceability may be limited
by the operation of bankruptcy, insolvency or similar laws. Neither the
execution and delivery by USTC and any or all of the Sellers (to the extent that
they are parties thereto) of the Executed Agreements, nor the consummation of
the transactions contemplated thereby, nor the performance by USTC and any or
all of the Sellers (to the extent that they are parties thereto) of their
respective obligations under the Executed Agreements, shall (nor with the giving
of notice or the lapse of time or both would) (i) conflict with or result in a
breach of any provision of the Articles of Incorporation or By-Laws of USTC,
(ii) except as set forth on Schedule 2.1(c)(ii) hereto, give rise to a default,
or any right of termination, cancellation or acceleration, or otherwise result
in a loss of contractual benefits to USTC, under any of the terms, conditions or
provisions of any note, bond, mortgage or indenture or any license, agreement or
other instrument or obligation material to the business of USTC to which USTC or
any Seller is a party or by which it or any of its properties or assets may be
bound, (iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to USTC or any of the Sellers or any of their respective
properties or assets, (iv) result in the creation or imposition of any lien,
claim, restriction, charge or encumbrance upon any of the properties or assets
of USTC, or (v) interfere
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with or otherwise materially and adversely affect the ability of USTC to carry
on its business as now conducted.
(d) INTERESTS IN OTHER ENTITIES. Except as set forth
in Schedule 2.1(d) hereto, USTC does not (i) own, directly or indirectly, of
record or beneficially, any shares of voting stock or other equity securities of
any other corporation or entity, (ii) have any ownership interest, direct or
indirect, of record or beneficially, in any entity, or (iii) have any
obligation, direct or indirect, present or contingent, to purchase or subscribe
for any interest in, advance or loan monies to, or in any way make investments
in, any person or entity, or to share any profits or capital investments in
other persons or entities, or both.
(e) GOVERNMENTAL AUTHORIZATIONS; THIRD PARTY
CONSENTS. Except as set forth in Schedule 2.1(e) hereto, no approval, consent,
compliance, exemption, authorization or other action by, or notice to or filing
with, any governmental authority or any other entity, and no lapse of a waiting
period, is necessary or required to be obtained by USTC or any Seller in
connection with the execution, delivery or performance by any of them, of this
Agreement, any of the Executed Agreements or the transactions contemplated
hereby.
(f) [Intentionally omitted.]
(g) FINANCIAL STATEMENTS; MINIMUM CLOSING NET WORTH,
ETC.
(i) USTC has delivered to Buyer true and
complete copies of its unaudited balance sheets as of December 31, 1996, and
related statements of income, retained earnings and cash flows for the period
then ending (the "1996 Financial Statements"), true and complete copies of its
unaudited balance sheets as of December 31, 1997, and related statements of
income, retained earnings and cash flows for the period then ending (the "1997
Financial Statements") and true and complete copies of its unaudited balance
sheet as of March 31, 1998 (the "Interim Balance Sheet"), and related statements
of income, retained earnings and cash flows for the period then ending
(collectively, with the Interim Balance Sheet, the "Interim Financial
Statements"). All of such financial statements, including any notes thereto,
were prepared on a consistent basis throughout the periods involved and such
financial statements fairly present the financial position of USTC at the dates
thereof and the results of its operations for the periods as indicated. The
books and records of USTC are in all material respects complete and correct,
have been maintained in accordance with good business practices, and accurately
reflect the basis for the financial condition and results of operations of USTC
as set forth in the financial statements referred to herein.
(ii) As of December 31 1997, USTC had a Net
Worth equal to or greater than [*****]. For purposes hereof, "Net Worth" shall
mean the excess of (A) the total assets of USTC as of December 31, 1997 over (B)
the total liabilities of USTC as of December 31, 1997, in each instance,
determination in accordance with GAAP.
(iii) The Non-Recurring Charges represent
amounts actually paid by USTC.
(h) ABSENCE OF UNDISCLOSED LIABILITIES. Except as
disclosed in Schedule 2.1(h) hereto, USTC does not have any liabilities,
commitments or obligations, whether accrued, absolute, contingent or otherwise
which have not been (i) in the case of liabilities, commitments and obligations
of a type customarily reflected on the corporate balance sheet of
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USTC, reflected on the Interim Balance Sheet or incurred, consistent with past
practice, in the ordinary course of business since the date of the Interim
Balance Sheet and which are not material either individually or in the aggregate
or (ii) in the case of all other types of liabilities and obligations, described
in Schedule 2.1(h).
(i) ABSENCE OF CERTAIN CHANGES. Except as and to the
extent set forth in Schedule 2.1(i) hereto, since December 31, 1997, USTC has
not:
(i) suffered any material adverse change in
its working capital, condition (financial or otherwise), assets, liabilities,
business or operations;
(ii) incurred any material liabilities or
obligations except items incurred in the ordinary course of business and
consistent with past practice, which do not exceed, in the aggregate, $50,000
(counting obligations or liabilities arising from one transaction or a series of
similar transactions, and all periodic installments or payments under any lease
or other agreement providing for periodic installments or payments, as a single
obligation or liability), or experienced any increase in, or change in any
assumption underlying or methods of calculating, any bad debt, contingency or
other reserves;
(iii) paid, discharged or satisfied any
claim, liabilities or obligations (absolute, accrued, contingent or otherwise)
other than the payment, discharge or satisfaction in the ordinary course of
business and consistent with past practice of liabilities and obligations
reflected or reserved against in the 1997 Financial Statements, the Interim
Balance Sheet or incurred in the ordinary course of business and consistent with
past practice since the date of the Interim Balance Sheet;
(iv) permitted or allowed any of its
property or assets (real, personal or mixed, tangible or intangible) to be
subjected to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind;
(v) written off as uncollectible any notes
or accounts receivable, except for write-offs in the ordinary course of business
and consistent with past practice, none of which are material;
(vi) canceled any debts or waived any claims
or rights of substantial value, or sold, transferred, or otherwise disposed of
any of its properties or assets (real, personal or mixed, tangible or
intangible), except in the ordinary course of business and consistent with past
practice;
(vii) disposed of or permitted to lapse any
patent, trademark, trade name or copyright, or disposed of or disclosed (except
as necessary in the conduct of its business) to any person any trade secret,
formula, process or know-how, other than Buyer;
(viii) granted any general increase in the
compensation of officers or employees (including any such increase pursuant to
any bonus, pension, profit-sharing or other plan or commitment) or any increase
in the compensation payable or to become payable to any officer or employee,
and, unless otherwise set forth in Schedule 2.1(i), no such increase is
customary on a periodic basis or is required by agreement or understanding;
(ix) made any single capital expenditure or
commitment in
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excess of $10,000 for additions to property, plant, equipment or intangible
assets or made aggregate capital expenditures and commitments in excess of
$50,000 (on a consolidated basis) for additions to property, plant, equipment or
intangible assets;
(x) declared, paid or set aside for payment
any dividend or other distribution in respect of, or redeemed any shares of, its
capital stock;
(xi) made any change in any method of
accounting or accounting practice;
(xii) paid, loaned or advanced any amount
to, or sold, transferred or leased any properties or assets (real, personal or
mixed, tangible or intangible) to, or entered into any agreement or arrangement
with, any of its officers, directors, debtholders, the Sellers or employees or
any "affiliate" or "associate" of any of its officers, directors, noteholders,
the Sellers or employees (as such terms are defined in Rule 405 promulgated
under the Securities Act and as used herein "Associate" and "Affiliate"), except
for compensation to officers and employees at rates not materially exceeding the
rates of compensation paid during the year ended December 31, 1997; (xiii) paid
any amount in respect of indebtedness for borrowed money except for regularly
scheduled payments of principal and interest in accordance with the terms
thereof; or
(xiv) agreed, whether in writing or
otherwise, to take any action described in this Section unless such action is
specifically excepted from this Section or described in Schedule 2.1(i).
(j) TAX MATTERS. Except as set forth in Schedule
2.1(j) hereto, USTC has filed with the appropriate governmental agencies all
Federal, state, local or foreign tax returns and reports required to be filed by
it ("Returns"), has paid in full or made adequate provision for the payment of,
all taxes of every nature, including, but not limited to, income, sales,
franchise and withholding taxes ("Taxes"), together with interest, penalties,
assessments and deficiencies owed by it with respect to all periods covered by
such Returns, and all such Returns were correct and complete in all respects.
USTC is not currently the beneficiary of any extension of time within which to
file any Returns. The Sellers have previously provided Buyer with true and
complete copies of all such Returns filed within the past three (3) years. There
are no filed or other known tax liens upon any property or assets of USTC. USTC
has not waived any statute of limitations in respect of Taxes or executed or
filed with any governmental authority any agreement extending the period for the
assessment or collection of any Taxes, and it is not a party to any pending or,
to USTC's or any Seller's knowledge, threatened action or proceeding by any
governmental authority for the assessment or collection of Taxes. To the
knowledge of USTC and the Sellers, no issue has arisen in any examination of
USTC by any governmental authority that if raised with respect to any other
period not so examined would, if upheld, result in a material deficiency for any
other period not so examined. There is no unresolved written claim by a
governmental authority in any jurisdiction where USTC does not file Returns that
USTC is or may be subject to taxation by such jurisdiction. There has been no
examination or audit with respect to Taxes with respect to any year. USTC is not
required to make any adjustment pursuant to Section 481 of the Internal Revenue
Code of 1986, as amended (the "Code"), by reason of a change in accounting
method or otherwise and, to the knowledge of USTC and the Sellers, neither the
Internal Revenue Service nor any other governmental authority has proposed any
such adjustment or change in accounting method in respect of USTC, which
proposal is currently pending and USTC does not have an
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application pending with any governmental authority requesting permission for
any change in accounting method that relates to its business and/or operations.
USTC has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, Seller or other third party. USTC has never filed any consolidated,
combined or unitary Return for any period ending on or prior to the Closing
Date.
(k) LITIGATION. Except as set forth in Schedule
2.1(k) hereto, there are no suits or actions, or administrative, arbitration or
other proceedings or governmental investigations, pending, or to the knowledge
of USTC and the Sellers, threatened against or affecting, or which may affect,
USTC or any of its properties, assets or businesses or the transactions
contemplated hereby. To the best knowledge of USTC and the Sellers, there are no
outstanding judgments, orders, stipulations, injunctions, decrees or awards
against USTC which are not satisfied.
(l) COMPLIANCE WITH APPLICABLE LAW. Except for any
noncompliance which would not, individually or in the aggregate, result in a
material adverse effect on the condition (financial or otherwise) of the
business or operations of USTC. USTC is, and at all times since its formation
has been, in compliance with all Federal, state, local and foreign laws,
statutes, ordinances, regulations, and administrative rulings (collectively
"Laws"), promulgated by any governmental or regulatory authority applicable to
USTC or to the conduct of the business or operations of USTC or to the use of
its properties and assets, including, without limitation, all environmental
Laws. USTC has not received, and does not know of the issuance or threatened
issuance of, any notices of violation or alleged violation of any laws by USTC.
(m) PERMITS. A list of all permits, approvals,
licenses, certificates (other than USTC's certificate of incorporation),
franchises, authorizations, consents and orders ("Permits") necessary to the
operation of the business of USTC in the manner in which it is presently
conducted is set forth on Schedule 2.1(m) hereto. All such Permits are valid and
remain in full force and effect. USTC has not engaged in any activity which
would cause revocation or suspension of any such Permits and no action or
proceeding looking to or contemplating the revocation or suspension of any
thereof is pending or threatened. No additional Permits will be required to
permit USTC to continue its business in the State of Illinois substantially in
the manner it is presently conducted after the consummation of the transactions
contemplated hereby.
(n) TITLE TO PROPERTIES. USTC does not own any real
property. Except as set forth in Schedule 2.1(n) hereto, USTC has good title to
all of the properties and assets (personal and mixed, tangible and intangible)
reflected on the Interim Balance Sheet or thereafter acquired or which it
purports to own (except properties or assets sold or otherwise disposed of in
the ordinary course of business consistent with past practice subsequent to the
date of the Interim Balance Sheet which in the aggregate did not have a book
value in excess of $10,000), free and clear of all mortgages, liens, pledges,
charges or encumbrances of any nature whatsoever. Schedule 2.1(n) also contains
an accurate list setting forth all (i) real property leased (whether as lessor
or lessee) or subject to contract or commitment of purchase or sale or lease
(whether as lessor or lessee) by USTC and (ii) significant personal property
leased by or to USTC or subject to a title retention or conditional sales
agreement or other security device. All leases listed in Schedule 2.1(n) are
valid, binding and enforceable in accordance with their terms, and are in full
force and effect, except to the extent that enforceability may be limited by the
operation of bankruptcy, insolvency or similar laws; there are no existing
defaults by USTC thereunder; no event of default has occurred which (whether
with or without notice, lapse of time or both) would constitute a default by
USTC thereunder; and all lessors under such leases have consented (where
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such consent is necessary) to the consummation of the transactions contemplated
by this Agreement without requiring modification of the rights and obligations
of USTC under such leases. All USTC's property is located at USTC's facilities
at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇.
(o) ACCOUNTS RECEIVABLE; FIXED ASSETS.
(i) The accounts receivable reflected on the
Interim Balance Sheet are good and collectible in the ordinary course of
business at the aggregate recorded amounts thereof and are not subject to any
offsets. The accounts receivable of USTC which were thereafter added are good
and collectible in the ordinary course of business at the aggregate amounts
recorded on the books of account and are not subject to any offsets. Set forth
on Schedule 2.1(o)(i) hereto is a true and complete list of USTC's accounts
receivable as of June 1, 1998, and aging with respect thereto.
(ii) Schedule 2.1(o)(ii) hereto contains a
complete and accurate list of all machinery, equipment and other fixed assets of
USTC (the "Equipment") having a book value in excess of $1,000. Each such item
of Equipment is in good operating condition, normal wear and tear excepted, and
is fit for its intended use. USTC has purchased maintenance agreements with
respect to its UPS battery back-up and telephone switch systems from the
manufacturers thereof or other qualified maintenance provider.
(p) INTELLECTUAL PROPERTY. Schedule 2.1(p) hereto
lists all licenses, patents, copyrights, or trademarks owned or used by USTC in
the conduct of its business and all applications therefor (the "Intellectual
Property"). No officer or director, Seller or employee of USTC nor any of their
Affiliates or Associates has any ownership or other interest in any of the
Intellectual Property. To the knowledge of USTC and the Sellers, none of the
Intellectual Property is being infringed upon by, or infringes, any licenses,
patents, copyrights, trademarks or other intellectual property rights of any
other person or entity. Except as set forth in Schedule 2.1(p), the validity of
the Intellectual Property and the title thereto of USTC have not been questioned
in any litigation or governmental inquiry or proceeding to which USTC, is a
party, and, to the knowledge of USTC and the Sellers, no such litigation,
governmental inquiry or proceeding is threatened. The conduct of the business of
USTC as presently conducted does not conflict with valid licenses, trademarks,
trademark rights, trade names, trade name rights, service marks or patents of
others in any way likely to affect adversely, in any material respect, the
Intellectual Property.
(q) TOLL FREE TELEPHONE NUMBERS. Schedule 2.1(q)
hereto sets forth a complete list of all Toll Free Telephone Numbers owned or
used by USTC in the conduct of its business. No officer or director, Seller or
employee of USTC nor any of their Affiliates or Associates has any ownership or
other interest in the Toll Free Telephone Numbers.
(r) INSURANCE. Schedule 2.1(r) hereto contains a
complete and correct list and copies of all policies of insurance in which USTC
or its officers or directors (in such capacity) is an insured party, beneficiary
or loss payable payee. Such policies are in full force and effect.
(s) BANK ACCOUNTS AND POWERS OF ATTORNEY. Schedule
2.1(s) hereto contains a complete and correct list showing (i) the name of each
bank in which USTC has an account or safe deposit box and the names of all
persons authorized to draw thereon or have access
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thereto, and (ii) the names of all persons, if any, holding powers of attorney
from USTC.
(t) EMPLOYEE ARRANGEMENTS; ERISA. USTC has (i) no
union, collective bargaining, employment, management, severance or consulting
agreements to which USTC is a party or is otherwise bound, and (ii) no
compensation plans, bonus plans, deferred compensation agreements, pension and
retirement plans, profit-sharing plans, stock purchase and stock option plans.
Schedule 2.1(t) hereto contains a complete and correct list and copies of USTC's
hospitalization, insurance plans or arrangements providing for benefits for
employees of USTC. Such Schedule also lists the names and compensation of all
persons employed by USTC. USTC has no employee benefits plans established or
maintained by USTC which are qualified for Federal income tax exemption under
Sections 401 and 501 of the Code.
(u) CERTAIN BUSINESS MATTERS. Except as set forth in
Schedule 2.1(u) hereto (i) USTC is not a party to or bound by any
distributorship, dealership, sales agency, franchise or similar agreement which
relates to the sale, distribution or servicing of the Toll Free Telephone
Numbers or services related thereto, (ii) USTC does not have any sole-source
supplier of significant goods or services (other than utilities) with respect to
which practical alternative sources are not available on comparable terms and
conditions, (iii) there are not pending and, to USTC's and the Sellers'
knowledge there are not threatened, any labor negotiations involving or
affecting USTC and, to USTC's and the Sellers' knowledge, no organizing
activities involving union representation exist in respect of any of its
employees, (iv) USTC neither gives nor is bound by any express warranties
relating to its services and, to the knowledge of USTC and the Sellers, there
has been no assertion of any breach of warranties which could have a material
adverse effect on the business or condition (financial or otherwise) of USTC
and, to the knowledge of USTC and the Sellers, there are no problems or
potential problems with respect to any product sold or services provided by
USTC, (v) USTC is not a party to or bound by any written agreement which limits
its freedom to compete in any line of business or with any person or entity,
(vi) USTC is not a party to or bound by any agreement which based on current
economic circumstances will result in a loss when performed, and (vii) USTC is
not a party to or bound by any agreement or involved in any transaction in which
any officer, director, debtholder or Seller, or any Affiliate or Associate of
any such person has, or had when made, a direct or indirect material interest.
(v) CONTRACTS. Schedule 2.1(v) hereto contains a
complete and correct list of any and all contracts, commitments, obligations and
undertakings, written or oral, to which USTC is a party or otherwise bound which
are material to the operation and business of USTC. True and complete copies of
all written contracts, commitments, obligations and undertakings set forth in
Schedule 2.1(v) hereto have been furnished to Buyer, and except as expressly
stated in Schedule 2.1(v), each of them is in full force and effect, no person
or entity which is a party thereto or otherwise bound thereby is, to the
knowledge of USTC and the Sellers, in default thereunder, and no event,
occurrence, condition or act exists which, with the giving of notice or the
lapse of time or both, would give rise to a default or right of cancellation
thereunder, and USTC is not in default thereunder and no event, occurrence,
condition or act exists by or on behalf of USTC which, with the giving of notice
or the lapse of time or both would give rise to a default by USTC thereunder. To
USTC's and the Sellers' knowledge, there have been no threatened cancellations
thereof and there are no outstanding disputes thereunder. Neither USTC nor any
Seller has been advised that any of USTC's contractual partners (including,
without limitation, the State of Illinois, Department of Central Management)
will terminate its relationship with USTC as a result of the acquisition of USTC
by Buyer.
(w) BROKERS. No agent, broker, person or firm acting
on behalf of
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USTC or the Sellers or under the authority of any of the foregoing, is or shall
be entitled to a brokerage commission, finder's fee, or other like payment in
connection with any of the transactions contemplated hereby, from USTC or any of
the Sellers.
(x) DISCLOSURE. No representation or warranty made by
USTC or the Sellers herein or in any of the Executed Agreements contains any
untrue statement of a material fact or omits or will omit to state a material
fact necessary in order to make the statements therein not misleading.
(y) AFFILIATED TRANSACTIONS. Except as set forth in
Schedule 2.1(y) hereto, no Seller (i) is a party to any agreement, transaction
or arrangement (oral or written) with or involving USTC or any Associate or
Affiliate of USTC or any of the Sellers, or (ii) has any claim, monetary or
otherwise, of any sort against USTC.
2.2 REPRESENTATIONS AND WARRANTIES OF THE SELLERS. Each of the
Sellers severally represents and warrants to Buyer, with respect to such Seller,
as follows:
(a) CAPACITY; VALIDITY. Such Seller has the legal
capacity to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed by such Seller and constitutes a valid and binding obligation of such
Seller enforceable against him in accordance with its terms.
(b) TITLE TO SECURITIES. Such Seller holds of record
and owns beneficially (or will own beneficially on the Closing Date) the number
of shares of the USTC Stock set forth opposite his or her name on Schedule 1.1
hereto, free and clear of any restrictions on transfer (other than any
restrictions under the Securities Act and state securities laws), taxes, liens,
charges, claims, demands, security interests, options, warrants, purchase
rights, contracts, commitments or other encumbrances. Such Seller is not a party
to any option, warrant, purchase right or other agreement or understanding that
could require such Seller to sell, transfer or otherwise dispose of any shares
of the USTC Stock. Such Seller is not a party to any voting trust, proxy or
other agreement or understanding with respect to the voting of any shares of the
USTC Stock.
(c) RIGHTS TO TOLL FREE TELEPHONE NUMBERS. Such
Seller does not own or possess any rights in or to the Toll Free Telephone
Numbers listed on Schedule 2.1(q) hereto.
(d) INVESTMENT INTENT. Such Seller acknowledges that
none of the shares of Parent Common Stock are registered under the Securities
Act or any state securities laws. The shares of Parent Common Stock are being
acquired by such Seller for investment purposes only and not with a view to the
distribution or resale thereof. Such Seller has no present intention to sell or
otherwise dispose of the Parent Common Stock, except in compliance with the
provisions of the Securities Act.
2.3 REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer hereby
represents and warrants to the Sellers as follows:
(a) ORGANIZATION, STANDING AND POWER. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and authority to own, lease
and operate its properties and to carry on its business
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as presently conducted by it and is qualified in each other jurisdiction in
which qualification is required for it to own, lease and operate its properties
and carry on its business as presently conducted by it, except to the extent
that failure to so qualify would not have a material adverse effect on the
financial condition, business or operations of Buyer.
(b) [Intentionally omitted]
(c) AUTHORITY. The execution and delivery by Buyer of
this Agreement and of each of the other Executed Agreements to which it shall be
a party, the performance by Buyer of its obligations under this Agreement or
such Executed Agreements and the consummation of the transactions contemplated
hereby and thereby, have been duly and validly authorized by all necessary
corporate action on the part of Buyer, and Buyer has all necessary corporate
power with respect thereto. This Agreement and the Executed Agreements are, or
when executed and delivered by Buyer shall be, the valid and binding obligations
of Buyer, enforceable in accordance with their respective terms, except to the
extent that enforceability may be limited by the operation of bankruptcy,
insolvency or similar laws. Neither the execution and delivery by Buyer of the
Executed Agreements, nor the consummation of the transactions contemplated
thereby, nor the performance by Buyer of its obligations under the Executed
Agreements, shall (nor with the giving of notice or the lapse of time or both
would) (i) conflict with or result in a breach of any provision of the Articles
of Incorporation or By-Laws of Buyer, (ii) violate any order, writ, injunction,
decree, law, statute, rule or regulation or (iii) interfere with or otherwise
materially and adversely affect the ability of Buyer to carry on its business as
now conducted.
(d) INVESTMENT INTENT. The USTC Stock is being
acquired by Buyer for investment purposes only and not with a view to the
distribution or resale thereof. Buyer has no present intention to sell or
otherwise dispose of the USTC Stock, except in compliance with the provisions of
the Securities Act.
(e) BROKERS. No agent, broker, person or firm acting
on behalf of Buyer or under its authority is or shall be entitled to a brokerage
commission, finder's fee, or other like payment in connection with any of the
transactions contemplated hereby.
2.4 REPRESENTATIONS AND WARRANTIES OF PARENT. Parent hereby
represents and warrants to Sellers that the authorized capital stock of Parent
consists of (i) 15,000,000 shares of Common Stock, par value $.001 per share, of
which 100,000 shares are designated Class B Common Stock ("Class B Stock") and
(ii) 7,000,000 shares of Series A Preferred Stock, par value $.001 per share.
2,485,000 shares of Common Stock are issued and outstanding or are reserved for
issue against outstanding options and warrants, of which 90,500 shares are Class
B Stock and 6,520,000 shares are Series A Preferred Stock are issued and
outstanding. The shares of the Parent Common Stock being transferred to the
Seller in accordance herewith shall be duly and validly issued and fully paid
and non-assessable. The transfer of such shares of Parent Common Stock to the
Seller as provided herein shall vest the Seller with good and marketable title
to the Parent Common Stock, free and clear of all liens, charges, claims and
encumbrances.
3. PREFERRED STOCK; PARENT COMMON STOCK
(a) PREFERRED STOCK REDEMPTIONS. Sellers acknowledge
and agree that to the extent that USTC shall have paid any amounts, or
undertaken to pay any amounts, in
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respect of the redemption of shares of its preferred stock set forth on Schedule
2.1(i) hereto. Buyer shall be entitled to deduct from the portion of the Cash
Purchase Price payable pursuant to 2.1(b)(i) hereto the amount paid or
undertaken to be paid by USTC in respect thereof as set forth in such Schedule
and to utilize such portion thereof to reimburse USTC in respect of any such
amounts paid by USTC or to satisfy at Closing any such amounts undertaken by
USTC to be paid.
(b) RESTRICTIONS ON TRANSFER.
(i) Each Seller agrees that he will not
transfer or otherwise dispose of (each, a "Transfer") any of the shares of
Parent Common Stock (or any interest therein) except upon the terms and
conditions specified herein and such Seller will cause any subsequent holder of
such Seller's shares of Parent Common Stock to agree to take and hold the shares
of Parent Common Stock subject to the terms and conditions of this Agreement, if
such shares of Parent Common Stock are required to include a legend pursuant to
Section 3(b) hereof.
(ii) Each certificate representing the
shares of Parent Common Stock issued to the Sellers or to any subsequent
stockholder shall include a legend in the following form; PROVIDED, HOWEVER,
that such legend shall not be required (and shall be removed) if a Transfer is
being made in connection with a sale of shares of Parent Common Stock registered
under the Securities Act, or in connection with a sale in compliance with Rule
144 under the Securities Act, as such Rule may be amended from time to time
(each a "Public Sale"):
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAW, AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION THEREOF OR A VALID EXEMPTION
THEREFROM.
(iii) Notwithstanding anything to the
contrary in this Section 3(b), such Seller shall not Transfer any of the shares
of Parent Common Stock except to the extent permitted, and in accordance with,
the Stockholders Agreement referred to in Section 4.1(g) hereof.
4. CONDITIONS TO CLOSING
4.1 CONDITIONS OF BUYER'S OBLIGATION TO CLOSE. The obligation
of Buyer to close under this Agreement is subject to the satisfaction of
following conditions any of which may be waived by Buyer in writing at or prior
to Closing:
(a) DUE DILIGENCE. Buyer shall have completed, to its
satisfaction, its business, legal and accounting due diligence.
(b) AGREEMENTS AND CONDITIONS. On or before the
Closing Date, the Sellers and USTC shall have complied with and duly performed
all agreements and conditions on their part to be complied with and performed
pursuant to or in connection with this Agreement on or before the Closing Date.
(c) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of the Sellers and USTC contained in this
Agreement, or otherwise made in connection with the transactions contemplated
hereby, shall be true and correct in all material respects on and
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as of the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of the Closing Date.
(d) NO LEGAL PROCEEDINGS. No court or governmental
action or proceeding shall have been instituted or threatened to restrain or
prohibit the transactions contemplated hereby, and on the Closing Date there
will be no court or governmental actions or proceedings pending or threatened
against or affecting USTC which involve a demand for any judgment or liability,
whether or not covered by insurance, and which may result in any material
adverse change in the business, operations, properties or assets or in the
condition, financial or otherwise, of USTC.
(e) CONSENTS. Buyer shall have received all Consents
necessary to effectuate this Agreement and to consummate the transactions
contemplated hereby.
(f) EMPLOYMENT AGREEMENTS. Buyer shall have entered
into Employment Agreements with ▇▇▇▇▇▇ ▇. Knee and ▇▇▇▇▇▇ ▇▇▇▇, in form and
substance satisfactory to Buyer.
(g) STOCKHOLDERS AGREEMENT. The Sellers shall have
entered into a Stockholders Agreement, in form and substance satisfactory to
Parent.
(h) ESCROW AGREEMENT. The Sellers and the Escrow
Agent shall have entered into the Escrow Agreement.
(i) RESIGNATIONS OF OFFICERS AND DIRECTORS. Buyer
shall have received resignations effective as of the Closing
Date from all of the executive officers and each of the members of the board of
directors of USTC.
(j) CERTIFICATES OF STATUS. Buyer shall have received
certificates from the Secretary of State of Illinois and of each jurisdiction
set forth in Schedule 2.1(a) hereto, providing that USTC has filed its most
recent annual report, has not filed articles of dissolution and is in good
standing in each such jurisdiction.
(k) OPINION OF COUNSEL. The Sellers shall have
furnished Buyer with a favorable opinion of counsel(s) for USTC and the Sellers,
dated as of the Closing Date, and in form and substance satisfactory to Buyer.
(l) GENERAL RELEASE OF USTC BY THE SELLERS. The
Sellers shall have fully released and discharged USTC from any and all
obligations owing to them by USTC in form and substance satisfactory to Buyer
and its counsel.
4.2 CONDITIONS OF THE SELLERS' AND USTC'S OBLIGATIONS TO
CLOSE. The obligations of the Sellers and USTC to close under this Agreement are
subject to the following conditions any of which may be waived by USTC in
writing at or prior to Closing:
(a) AGREEMENTS AND CONDITIONS. On or before the
Closing Date, Buyer shall have complied with and duly performed all agreements
and conditions on its part to be complied with and performed pursuant to or in
connection with this Agreement on or before the Closing Date.
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(b) REPRESENTATIONS AND WARRANTIES. The
representations and warranties of Buyer contained in this Agreement, shall be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as though such representations and warranties had been
made on and as of the Closing Date.
(c) OPINION OF COUNSEL. Buyer shall have furnished
Sellers with a favorable opinion of counsel(s) for Buyer, dated as of the
Closing, and in form and substance satisfactory to Seller's Rep.
(d) ESCROW AGREEMENT. Buyer and the Escrow Agent
shall have entered into the Escrow Agreement.
5. TRANSFER TAXES. Notwithstanding anything to the contrary
contained herein, the Sellers, jointly and severally, shall assume and pay all
sales, use, privilege, transfer, stock transfer, real property transfer,
documentary, gains, stamp, duties, recording and similar Taxes and fees
(including any penalties, interest or additions) imposed upon any party hereto
incurred in connection with the purchase of USTC Stock (or the redemption of any
shares of USTC's preferred stock) as contemplated by this Agreement
(collectively, "Transfer Taxes") and shall, at their own expense, accurately
file all necessary Returns and other documentation with respect to any Transfer
Tax other than Returns which Buyer is responsible for filing under applicable
law. The Sellers agree to timely sign and deliver such certificates or forms as
may be necessary or appropriate to establish a lawful exemption from (or
otherwise lawfully reduce), or file Returns with respect to, such Transfer
Taxes.
6. INDEMNIFICATION
6.1 SURVIVAL OF REPRESENTATIONS. The representations and
warranties of the Sellers in this Agreement or in any document delivered
pursuant hereto shall survive the Closing Date for a period of one year and
shall then terminate; PROVIDED, HOWEVER, that (i) any such representation and
warranty shall survive the time it would otherwise terminate only with respect
to claims of which notice has been given as provided in this Agreement prior to
such termination and (ii) such time limitation shall not apply to the
representations and warranties set forth in Section 2.2(b) hereof, which shall
survive indefinitely, and Sections 2.1(j), 2.1(l) (with respect only to
environmental laws) and 2.1(n) hereof, which shall survive until the expiration
of the applicable statute of limitations.
6.2 INDEMNITORS; INDEMNIFIED PERSONS. For purposes of this
Section 6, each party which, pursuant to this Section 6, shall agree to
indemnify any other person or entity shall be referred to, as applicable, as the
"Indemnitor", and each such person and entity who is entitled to be indemnified
by any Indemnitor shall be referred to as the "Indemnified Person" with respect
to such Indemnitor.
6.3 INDEMNITY OF SELLERS. The Sellers and, with respect only
to claims made hereunder by Buyer prior to the Closing, USTC, hereby jointly and
severally agree to indemnify, hold harmless and reimburse Buyer and its
directors, officers, stockholders, agents and employees from and against any and
all claims, liabilities, losses, damages and expenses incurred by such
Indemnified Persons (including reasonable attorneys' fees and disbursements)
which shall be caused by or related to or shall arise out of any breach or, with
respect to third party claims, alleged breach of any representation, warranty,
covenant or agreement of USTC or Sellers contained in this Agreement and shall
reimburse such Indemnified Persons for all costs and expenses (including
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reasonable attorneys' fees and disbursements) as they shall be incurred, in
connection with paying, investigating, preparing for or defending any action,
claim, investigation, inquiry or other proceeding, whether or not in connection
with pending or threatened litigation, which shall be caused by or related to or
shall arise out of such breach or alleged breach, whether or not any such
Indemnified Person shall be named as a party thereto and whether or not any
liability shall result therefrom. The Sellers and USTC further agree that they
shall not, without the prior written consent of Buyer settle or compromise or
consent to the entry of any judgment in any pending or threatened claim, action,
suit or proceeding in respect of which indemnification may be sought hereunder
unless such settlement, compromise or consent shall include an unconditional
release of each Indemnified Person under this Section 6.3 from all liability
arising out of such claim, action, suit or proceeding.
6.4 INDEMNITY OF BUYER. Buyer hereby agrees to indemnify, hold
harmless and reimburse the Sellers and USTC and USTC's directors, officers,
agents and employees from and against any and all claims, liabilities, losses,
damages and expenses incurred by them (including reasonable attorneys' fees and
disbursements) which shall be caused by or related to or shall arise out of any
breach or, with respect to third party claims, alleged breach of any
representation, warranty, covenant or agreement of Buyer contained in this
Agreement and shall reimburse such Indemnified Persons for all costs and
expenses (including reasonable attorneys' fees and disbursements) as shall be
incurred, in connection with paying investigating, preparing for or defending
any action, claim, investigation, inquiry or other proceeding, whether or not in
connection with pending or threatened litigation, which shall be caused by or
related to or shall arise out of such breach or alleged breach, whether or not
such Indemnified Persons shall be named as a party thereto and whether or not
any liability shall result therefrom. Buyer further agrees that it shall not,
without the prior written consent of the Sellers' Rep and USTC, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action, suit or proceeding in respect of which indemnification may be
sought hereunder unless such settlement, compromise or consent shall include an
unconditional release of the Sellers and USTC under this Section 6.4 from all
liability arising out of such claim, action, suit or proceeding.
6.5 PROCEDURES FOR INDEMNIFICATION; DEFENSE. Promptly after
receipt by an Indemnified Person of notice of any third party claim with respect
to which indemnification may be sought hereunder, such Indemnified Person shall
notify the Indemnitor of such claim, but failure to so notify the Indemnitor
shall not relieve the Indemnitor from any liability which the Indemnitor may
have hereunder or otherwise, unless the Indemnitor shall be materially
prejudiced by such failure. If the Indemnitor shall so elect, the Indemnitor
shall assume the defense of such claim, including the employment of counsel
reasonably satisfactory to such Indemnified Person, and shall pay the fees and
disbursements of such counsel. In the event, however, that such Indemnified
Person shall reasonably determine in its judgment that having common counsel
would present such counsel with a conflict of interest or alternative defenses
shall be available to an Indemnified Person or if the Indemnitor shall fail to
assume the defense of the action or proceeding in a timely manner, then such
Indemnified Person may employ separate counsel to represent or defend it in any
such action or proceeding and the Indemnitor shall pay the reasonable fees and
disbursements of such counsel; PROVIDED, HOWEVER, that the Indemnitor shall not
be required to pay the fees and disbursements of more than one separate counsel
for all Indemnified Persons in any jurisdiction in any single action or
proceeding. In any action or proceeding the defense of which the Indemnitor
shall assume, the Indemnified Person shall have the right to participate in any
litigation and to retain its own counsel at such Indemnified Person's own
expense except as otherwise provided above in this Section 6.5, so long as such
participation does not interfere with the Indemnitor's control of such
litigation.
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6.6 GUARANTY INDEMNITY. Subject to Section 6.5 above, Buyer
shall indemnify and hold harmless and reimburse ▇▇▇▇▇▇ ▇. Knee and ▇▇▇▇ ▇.
▇▇▇▇▇▇ from and against any and all claims, liabilities, losses, damages and
expenses incurred by Mr. Knee or ▇▇. ▇▇▇▇▇▇ under any of the guaranties provided
by him and set forth on Schedule 6.6 hereto, provided that Buyer shall be
entitled to set off any claim it may have against Mr. Knee or ▇▇. ▇▇▇▇▇▇
pursuant to Section 6.3 hereof against any obligation it may have hereunder.
Buyer shall use its best efforts to cause all such guaranties to be terminated
as soon as practicable after Closing.
6.7 LIMITATION ON LIABILITY. No Indemnified Person shall be
entitled to assert any claim for indemnification arising out of a breach of
representation or warranty under Section 6.3 or 6.4 hereof until such time as
all such claims for indemnification shall exceed $50,000 in the aggregate, and
then only to the extent of such excess. Further, the dollar amount of the
indemnification obligations in respect of such claims for a breach of
representations or warranties under each of Section 6.3 and 6.4 may not exceed,
in the aggregate, the Cash Purchase Price and, with respect to ▇▇▇▇ ▇. and ▇▇▇▇▇
▇. ▇▇▇▇▇▇, may not exceed the portion of the aggregate Cash Purchase Price
allocated to them pursuant to Schedule 1.2 hereto.
7. NON-COMPETITION; CONFIDENTIALITY
7.1 NON-COMPETITION. Following the Closing Date and for a
period of five (5) years thereafter (the "Non-Competition Period"), ▇▇▇▇▇▇ ▇.
Knee shall not, directly or indirectly, (a) engage in any business or activity
that competes with the call center business anywhere in North America (the
"Business"); (b) enter the employ of any person or entity engaged in any
business or activity that competes with the Business or render any consulting or
other services to any person or entity for use in or with the effect of
competing with the Business; or (c) have an interest in any business or activity
that competes with the Business, in any capacity, including, without limitation,
as an investor, partner, stockholder, officer, director, principal, agent,
employee, or creditor; PROVIDED, HOWEVER, that nothing herein shall prevent the
purchase or ownership by any Seller of less than 3% of the outstanding equity
securities of any class of securities of a company registered under Section 12
of the Securities and Exchange Act of 1934, as amended.
7.2 NO COMPETING INTERESTS. Each Seller hereby represents and
warrants to Buyer that he has no ownership or other interest in any business or
activity that competes, directly or indirectly, with the Business.
7.3 NON-DISRUPTION. During the Non-Competition Period, no
Seller shall, directly or indirectly, interfere with, disrupt or attempt to
disrupt any present or prospective relationship, contractual or otherwise,
between USTC or any of its Affiliates, on the one hand, and any of its
customers, suppliers or employees, on the other hand.
7.4 CONFIDENTIALITY. No Seller shall use for his own behalf or
divulge to any other person or entity any confidential information or trade
secrets of or relating to Buyer in any manner whatsoever (except as authorized
and required in connection with the Seller's relationship with Buyer or any of
its Affiliates during the term of such relationship or except as may be required
under legal process by subpoena or other court order; PROVIDED, HOWEVER, that
the Seller shall give Buyer prompt prior written notice thereof in order to
contest such requirement or order). As used herein, confidential information
shall consist of all information, knowledge or data relating to Buyer or any of
its Affiliates (including, without limitation, all information relating to
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inventions, procedures and operations, processes and methods, financial
information, customer and prospective customer lists, prices and trade
practices) which is not in the public domain or otherwise published or publicly
available.
7.5 REMEDIES UPON BREACH. The Sellers acknowledge and agree
that (a) Buyer shall be irreparably injured in the event of a breach by a Seller
of any of his obligations under this Section 7; (b) monetary damages shall not
be an adequate remedy for such breach; (c) Buyer shall be entitled to injunctive
relief, in addition to any other remedy which it may have, in the event of any
such breach; and (d) the existence of any claims which a Seller may have against
Buyer, whether under this Agreement or otherwise, shall not be a defense to the
enforcement by Buyer of any of its rights under this Agreement.
8. MISCELLANEOUS PROVISIONS
(a) CONFIDENTIALITY. USTC, the Sellers and Buyer
agree not to, directly or indirectly, without the prior written consent of the
other, use or disclose to any person, firm or corporation, any of the terms of
this Agreement, except as may be required by the disclosure obligations of Buyer
under applicable securities laws or as may be required to be disclosed to the
attorneys and/or accountants of the parties hereto in connection with the
transactions contemplated hereby.
(b) PUBLIC ANNOUNCEMENTS. The Sellers and Buyer agree
that they will consult with each other before issuing any press releases or
otherwise making any public statements with respect to this Agreement or the
transactions contemplated hereby and any press release or any public statement
shall be subject to mutual agreement of the parties, except as may be required
by the disclosure obligations of Buyer under applicable securities laws.
(c) NOTIFICATION. Each party hereto shall give the
other party or parties hereto prompt written notice of (i) the existence of any
fact or the occurrence of any event which constitutes, or with the giving of
notice or the passage of time or both would constitute, a breach of any
representation or warranty of the party giving such notice made herein or
pursuant hereto and (ii) the taking of any action by the party giving such
notice that would breach or violate, or constitute a default under, any
agreement or covenant of such party made herein or pursuant hereto. The giving
of any such notice shall not affect, modify or limit in any way any
representation, warranty, agreement or covenant of the parties made herein or
pursuant hereto.
(d) EXECUTION IN COUNTERPARTS. This Agreement may be
executed in counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same document.
(e) NOTICES. All notices, requests, demands and other
communications which are required or may be given pursuant to the terms of this
Agreement shall be in writing and shall be deemed duly given when delivered by
hand, telecopied or posted in the United States mail by registered or certified
mail with postage pre-paid, return receipt requested, (i) if to Buyer, to
Teleservices Acquisition Corporation, c/▇ ▇▇▇▇▇▇▇, Calamari & ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., facsimile
number: (▇▇▇) ▇▇▇-▇▇▇▇; and (ii) if to the Sellers, to c/o U.S. Telefactors
Corporation, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇,
Attention: Mr. Andrew Knee, facsimile number: (▇▇▇) ▇▇▇-▇▇▇▇, or to such other
address(es) as shall be specified by like notice to the other parties.
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(f) AMENDMENTS. This Agreement may be amended or
modified at any time prior to the Closing Date, but only by a written instrument
executed by all of the parties hereto.
(g) ENTIRE AGREEMENT. This Agreement (together with
the other agreements, certificates, instruments and documents delivered pursuant
hereto) constitutes the entire agreement among the parties hereto with respect
to the subject matter hereof, and supersedes all prior agreements and
understandings, oral and written, among the parties hereto with respect to the
subject matter hereof.
(h) APPLICABLE LAW. This Agreement and the legal
relations among the parties hereto shall be governed by and construed in
accordance with the internal laws of the State of Illinois. The parties hereby
consent to the nonexclusive jurisdiction of Federal and New York State courts
located in the County of New York and of Federal and Illinois State courts
located in the County of ▇▇▇▇ and agree that service of process by certified
mail, return receipt requested, shall constitute personal service for all
purposes hereof.
(i) HEADINGS. The headings contained herein are for
the sole purpose of convenience of reference, and shall not in any way limit or
affect the meaning or interpretation of any of the terms or provisions of this
Agreement.
(j) FEES AND DISBURSEMENTS. Buyer shall pay its own
expenses, and the fees and disbursements of the counsel, accountants or auditors
retained by it in connection with the preparation, execution and delivery of
this Agreement and the fees and expenses and disbursements of the counsel to
USTC and the Sellers shall be paid by the Sellers, provided that USTC may pay up
to $20,000 of Seller's legal expenses prior to Closing.
(k) ASSIGNMENT. This Agreement may not be assigned by
USTC or any Seller without the prior written consent of Buyer. This Agreement
may not be assigned by Buyer, except for an assignment by Buyer to any
Affiliate, without the prior written consent of the Sellers' Rep.
(l) BINDING EFFECT; BENEFITS. This Agreement shall
inure to the benefit of, and be binding upon, the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
Nothing in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective heirs, legal
representatives, successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
(m) SEVERABILITY. Any provision of this Agreement
which 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, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
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IN WITNESS WHEREOF, the parties hereto have executed this
Stock Purchase Agreement the day and year first above written.
TELESERVICES ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: Chairman of the Board
TELESERVICES HOLDING CORPORATION
with respect only to Section 2.4 hereof
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------
Title: Chairman of the Board
U.S. TELEFACTORS CORPORATION
By: /s/ ▇▇▇▇▇▇ ▇. Knee
------------------------------------
Title: President
SELLERS:
/s/ ▇▇▇▇▇▇ ▇. Knee
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▇▇▇▇▇▇ ▇. Knee
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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