RECAPITALIZATION AND INVESTMENT AGREEMENT
By and Among
TELEPHONE ACCESS, INC.,
THE SHAREHOLDERS OF TELEPHONE ACCESS, INC.,
ABBINGDON VENTURE PARTNERS LIMITED PARTNERSHIP,
ABBINGDON VENTURE PARTNERS LIMITED PARTNERSHIP-II
and
ABBINGDON VENTURE PARTNERS LIMITED PARTNERSHIP-III
RECAPITALIZATION AND INVESTMENT AGREEMENT
THIS RECAPITALIZATION AND INVESTMENT AGREEMENT dated the 6th
day of December, 1996 by and among Telephone Access, Inc., a Delaware
corporation ("TELAC"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇"),
▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ("▇▇▇▇▇▇"), ▇▇▇▇▇▇ ▇▇▇▇ ("▇▇▇▇"), the
estate of ▇▇▇▇▇▇ ▇▇▇ (the "Dee Estate") and ▇▇▇▇▇▇ ▇▇▇▇ ("Ball"; each of Morrow,
Jordan, Ficker, Searle, ▇▇▇▇, the Dee Estate and Ball, a "Shareholder", and
collectively, the "Shareholders"), Abbingdon Venture Partners Limited
Partnership, a Connecticut limited partnership ("Abbingdon- I"), Abbingdon
Venture Partners Limited Partnership-II, a Delaware limited partnership
("Abbingdon-II"), and Abbingdon Venture Partners Limited Partnership-III, a
Delaware limited partnership ("Abbingdon -III"; each of Abbingdon-I,
Abbingdon-II and Abbingdon-III, a "▇▇▇▇▇▇ Partnership", and collectively, the
"▇▇▇▇▇▇ Partnerships").
W I T N E S S E T H:
WHEREAS, TELAC and Telac, Inc., a Delaware corporation
("Tel"), were engaged in, and TELAC, as successor by merger, is engaged in, the
business of providing multilingual inbound and outbound teleservices through two
hundred thirty-seven (237) workstations at two (2) telephone call centers
located in Arlington, Virginia and Dallas, Texas (such activities being
hereinafter referred to as the "Business");
WHEREAS, TELAC desires to issue and sell to each of the ▇▇▇▇▇▇
Partnerships, and each of the ▇▇▇▇▇▇ Partnerships desires to purchase from
TELAC, for the consideration hereinafter provided, an aggregate of (i) 3,000,000
shares (the "Common Shares") of common stock, $.01 par value, of TELAC (the
"TELAC Common Stock"), (ii) 500,000 shares (the "Non-Voting Common Shares") of
non-voting, convertible common stock, $.01 par value (the "Non-Voting Common
Stock"), of TELAC, and (iii) 18,000 shares (the "Preferred Shares" and together
with the Common Shares and the Non-Voting Shares, the "TELAC Shares") of 8%
cumulative redeemable preferred stock, $0.01 par value (the "TELAC Preferred
Stock"), of TELAC, in such numbers of shares of TELAC Common Stock, Non-Voting
Common Stock and TELAC Preferred Stock as are set forth opposite such ▇▇▇▇▇▇
Partnership's name in Schedule I hereto (the purchase of the
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TELAC Shares is hereinafter referred to as the "▇▇▇▇▇▇
Purchase");
WHEREAS, in connection with the sale of the TELAC Shares to
the ▇▇▇▇▇▇ Partnerships, the parties hereto desire to recapitalize TELAC by
virtue of extensions of credit to TELAC by the ▇▇▇▇▇▇ Partnerships in the form
of 8% subordinated promissory notes (the "▇▇▇▇▇▇ Notes") in the aggregate
principal amount of up to $13,300,000 and to effect certain related transactions
as more fully described herein;
WHEREAS, the Shareholders desire to sell to TELAC, and TELAC
desires to redeem from the Shareholders, an aggregate of 3,500,000 shares of
TELAC Common Stock as more fully described herein; and
WHEREAS, to induce the ▇▇▇▇▇▇ Partnerships to consummate the
transactions hereby and perform their obligations hereunder, each of the
Shareholders and TELAC have agreed to make certain representations, warranties,
covenants and agreements (including the indemnification and non-competition
agreements) set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual
covenants and agreements hereinafter set forth, and intending to be legally
bound, the parties hereto hereby agree as follows:
SECTION I
PURCHASE AND SALE; RECAPITALIZATION
A. Purchase and Sale of the Shares. Subject to the terms and
conditions of this Agreement and on the basis of the representations,
warranties, covenants and agreements of TELAC and the Shareholders herein
contained, TELAC agrees to sell, assign and convey to each of the ▇▇▇▇▇▇
Partnerships, and each of the ▇▇▇▇▇▇ Partnerships agrees to purchase, acquire
and accept from TELAC, the number of TELAC Shares set forth opposite such ▇▇▇▇▇▇
Partnership's name in Schedule I hereto. At the Closing, each of the ▇▇▇▇▇▇
Partnerships shall pay to TELAC the purchase price for the TELAC Shares to be
purchased by such ▇▇▇▇▇▇ Partnership hereunder set forth opposite such ▇▇▇▇▇▇
Partnership's name on Schedule II hereto, by direct wire transfer to a bank
account designated by TELAC.
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B. Recapitalization and Other Transactions.
(i) Subject to the terms and conditions set
forth in this Agreement, at the Closing, TELAC shall borrow from the ▇▇▇▇▇▇
Partnerships and the ▇▇▇▇▇▇ Partnerships shall lend to TELAC, the sum of
$13,300,000. At the Closing, TELAC shall consummate the borrowings from the
▇▇▇▇▇▇ Partnerships by executing and delivering to each of the ▇▇▇▇▇▇
Partnerships 8% subordinated notes in the aggregate principal amount of
$13,300,000, each in the form of Exhibit A-1 attached hereto.
(ii) Subject to the terms and conditions set
forth in this Agreement, at the Closing, TELAC shall redeem from the
Shareholders an aggregate of 3,500,000 shares (the "Redemption Shares") of TELAC
Common Stock. At the Closing, TELAC shall pay to the Shareholders the purchase
price for the Redemption Shares by delivery to the Shareholders of promissory
notes (each, a "Closing Note") of TELAC in the aggregate principal amount of
$15,000,000, each in the form of Exhibit A-3 attached hereto and 6% convertible
subordinated notes of TELAC in the aggregate principal amount of $3,000,000,
each in the form of Exhibit A-2 attached hereto (each, a "Purchase Note"). The
number of Redemption Shares to be sold by each of the Shareholders and the
purchase price therefor is set forth in Schedule III hereto.
SECTION II
REPRESENTATIONS, WARRANTIES, COVENANTS
AND AGREEMENTS OF TELAC AND THE SHAREHOLDERS
Each of TELAC and each of the Shareholders, severally and not
jointly, hereby represents and warrants to, and covenants and agrees with, the
▇▇▇▇▇▇ Partnerships, as of the date of the Closing, that (it being understood
and agreed that, except for the representations and warranties set forth in
Section II(E) below, references to TELAC herein refer to both TELAC and Tel for
periods prior to the merger of such corporations and references to the Business
refer to the Business activities of both TELAC and Tel for periods prior to such
merger):
A. Organization and Qualification; Merger. TELAC is duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to own its properties and to
conduct the businesses in which it is now engaged. TELAC is in good standing in
each other jurisdiction wherein the
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failure so to qualify would have a material adverse effect on the financial
condition, operations, assets and properties of the Business taken as a whole;
provided, however, that any matter that has or may have an industry-wide effect
or any general economic conditions shall not be considered in the determination
of whether such material adverse effect has occurred or would occur (a "Material
Adverse Effect"). Except as set forth in Exhibit B, TELAC does not own any
subsidiaries, nor does it own any capital stock or other proprietary interest,
directly or indirectly, in any other corporation, association, trust,
partnership, joint venture or other entity and has no agreement with any person,
firm or corporation to acquire any such capital stock or other proprietary
interest. Except as set forth in Exhibit B, TELAC has full corporate power,
authority and legal right, and all necessary approvals, permits, licenses and
authorizations, to own its properties and to conduct the Business conducted by
it and to enter into and consummate the transactions contemplated under this
Agreement, except for such approvals, permits, licenses and authorizations, the
absence of which would have a Material Adverse Effect. The copies of the
certificate of incorporation and by-laws of TELAC which have been delivered to
the ▇▇▇▇▇▇ Partnerships are complete and correct. The merger of Tel into TELAC
pursuant to the Plan of Merger and Certificate of Merger in the forms attached
hereto as Exhibit P-1 and P-2 attached hereto has been validly consummated in
accordance with the laws of the State of Delaware.
B. Authority. The execution and delivery of this Agreement by
TELAC, the performance by TELAC of its covenants and agreements hereunder and
the consummation by TELAC of the transactions contemplated hereby have been duly
authorized by all necessary corporate action. This Agreement constitutes a valid
and legally binding obligation of TELAC, enforceable against TELAC in accordance
with its terms, except as enforceability may be limited by applicable equitable
principles or by bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting the enforcement of creditors' rights
generally.
C. No Legal Bar; Conflicts. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the certificate of incorporation or by-laws of TELAC
or any statute, ordinance, regulation, order, judgment or decree of any court or
governmental agency or board, or conflicts with or will result in any breach of
any of the terms of or constitute a default under or result in the termination
of or the creation of any lien
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pursuant to the terms of any contract or agreement to which TELAC is a party or
by which TELAC or any of the assets of TELAC is bound, except where such
violation, conflict, breach, default, termination or lien creation would not
have a Material Adverse Effect. No consents, approvals or authorizations of, or
filings with, any governmental authority or any other person or entity are
required in connection with the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby, except for the consents
set forth in Exhibit B attached hereto and consents, approvals or authorizations
the failure of any of which to be obtained would not have a Material Adverse
Effect.
D. Capitalization. Immediately prior to the consummation of
the transactions contemplated hereby, the authorized common stock of TELAC
consists of 20,000,000 shares of TELAC Common Stock, of which 4,300,000 shares
are issued and outstanding. All of the issued and outstanding shares of TELAC
Common Stock have been duly and validly authorized and issued and are fully paid
and non-assessable. Except for this Agreement, there are no outstanding
subscriptions, warrants, options, calls, commitments or other rights or
agreements to which TELAC is bound relating to the issuance, sale or redemption
of shares of TELAC Common Stock. No shares of capital stock or other securities
of TELAC are reserved for any purpose.
E. Financial Statements; No Undisclosed Liabilities. TELAC and
the Shareholders have delivered to the ▇▇▇▇▇▇ Partnerships the internally
prepared balance sheets of each of Tel and TELAC as of September 30, 1996, the
internally prepared balance sheet of Tel as of December 31, 1995 and the audited
balance sheet of TELAC as of December 31, 1995, which was audited by Jump,
Green, ▇▇▇▇▇▇ and Company, TELAC's independent public accountants, together with
the related statement of operations and the notes to such audited balance sheet,
if any, for the periods then ended (hereinafter referred to as the "Financial
Statements"). The Financial Statements are true and correct in all material
respects and have been prepared in accordance with generally accepted accounting
principles applied consistently throughout the periods involved, except that the
September 30, 1996 balance sheet of Tel and TELAC and the December 31, 1995
balance sheet of Tel do not contain any notes thereto and are subject to normal
year-end audit adjustments. The Financial Statements fairly present in all
material respects the financial condition of TELAC and Tel and the Business as
at the dates thereof and the results of the operations of TELAC and Tel for the
periods indicated. Except to the extent set forth in or provided
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for included in the Financial Statements in the balance sheets of each of Tel
and TELAC as of September 30, 1996 (collectively, the "1996 Balance Sheets") or
as identified in Exhibit B, and except for current liabilities incurred in the
ordinary course of business consistent with past practices (and not materially
different in type or amount), TELAC has no material liabilities or obligations
of any nature, whether accrued, absolute, contingent or otherwise, whether due
or to become due, whether properly reflected under generally accepted accounting
principles as a liability or a charge or reserve against an asset or equity
account, and whether the amount thereof is readily ascertainable or not. A true
and correct copy of the Financial Statements is attached hereto as Exhibit C.
F. Absence of Certain Changes. Except as set forth in Exhibit
B, subsequent to December 31, 1995, there has not been any (i) change in the
financial condition, assets, liabilities, properties or operations of TELAC
which has or could reasonably be expected to result in a Material Adverse
Effect; (ii) damage or destruction (whether or not insured) affecting the
properties or business operations of TELAC which is in excess of $75,000 in the
aggregate; (iii) labor dispute or, to the Knowledge (as hereinafter defined) of
TELAC and each of the Shareholders, threatened labor dispute involving the
employees of TELAC; (iv) actual or, to the Knowledge of TELAC and each of the
Shareholders, threatened verbally or in writing by Sprint or in writing by
others, disputes with any major accounts of TELAC, or actual or threatened loss
of business from any of the major accounts of TELAC, except where such disputes
or losses would not have a Material Adverse Effect; or (v) changes in the
methods or procedures for billing or collection of customer accounts or
recording of customer accounts receivable or reserves for doubtful accounts with
respect to TELAC, except in each case in the ordinary course of business.
G. Dividends; Distributions; Liabilities Incurred. Except as
disclosed in Exhibit B, subsequent to December 31, 1995, TELAC has not (i)
declared or paid any dividend or made any other distribution in respect of the
capital stock of TELAC or, directly or indirectly purchased, redeemed, or
otherwise acquired or disposed of any shares of capital stock of TELAC, (ii)
except in the ordinary course of business, paid or discharged any outstanding
indebtedness, (iii) incurred any bank indebtedness, entered into any loan
agreements or, except in the ordinary course of business consistent with past
practices, leases, contracts, obligations or arrangements of any kind,
including, without limitation, for the payment of money or
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property to any person, or (iv) except in the ordinary course of business,
permitted any liens or encumbrances to attach to any assets of TELAC.
H. Real Property Owned or Leased. A list and description of
all real property owned by or leased to or by TELAC or in which TELAC has any
interest is set forth in Exhibit B. Except as set forth in Exhibit B, all such
leased real property is held subject to written leases or other agreements which
are enforceable in accordance with their respective terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally, and
there are no existing defaults or events of default, or events which with notice
or lapse of time or both would constitute defaults, thereunder on the part of
TELAC, except for defaults, if any, which would not have a Material Adverse
Effect. Neither TELAC nor any of the Shareholders has any Knowledge of any
material default or claimed or purported or alleged material default on the part
of any other party in the performance of any obligation to be performed or paid
by such other party under any lease referred to in Exhibit B. Neither TELAC nor
any of the Shareholders has received any written or oral notice to the effect
that any lease will not be renewed at the termination of the term thereof or
that any such lease will be renewed only at a substantially higher rent.
I. Title to Assets; Condition of Property. TELAC has good and
valid title to all its owned properties and assets, real, personal and mixed,
tangible and intangible used in the operations of the Business as currently
conducted, except where the failure to have good and valid title would not have
a Material Adverse Effect. Except as set forth in Exhibit B, TELAC leases or
owns all properties and assets used in the operations of the Business as
currently conducted. All such properties and assets are in good condition and
repair, consistent with their respective ages and subject to ordinary wear and
tear, and have been maintained and serviced in accordance with the normal
practices of TELAC and as necessary in the normal course of business. None of
the assets or properties of TELAC is subject to any material liens, charges,
encumbrances or security interests, except as set forth in Exhibit B. None of
the assets of TELAC (or uses to which they are put) fails to conform with any
applicable agreement, law, ordinance or regulation in a manner which could
reasonably be expected to have a Material Adverse Effect.
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J. Taxes. Each of Tel and TELAC has filed or caused to be
filed on a timely basis all federal, state, local, foreign and other tax
returns, reports and declarations (collectively, "Tax Returns") required to be
filed by it. All Tax Returns filed by or on behalf of each of Tel and TELAC are
true, complete and correct in all material respects. Each of Tel and TELAC has
paid all income, estimated, excise, franchise, gross receipts, capital stock,
profits, stamp, occupation, sales, use, transfer, value added, property (whether
real, personal or mixed), employment, unemployment, disability, withholding,
social security, workers' compensation and other taxes, and interest, penalties,
fines, costs and assessments (collectively, "Taxes"), due and payable with
respect to the periods covered by such Tax Returns (whether or not reflected
thereon). There are no Tax liens on any of the properties or assets, real,
personal or mixed, tangible or intangible, of either of Tel or TELAC. The
accrual for Taxes reflected in the Financial Statements accurately reflects the
total amount of all unpaid Taxes, whether or not disputed and whether or not
presently due and payable, of Tel and TELAC as of the close of the period
covered by the Financial Statements, and the amount of TELAC's unpaid Taxes does
not exceed the accrual for Taxes reflected in the Financial Statements for the
period ended December 31, 1995. Since December 31, 1995, neither Tel nor TELAC
has incurred any tax liability other than in the ordinary course of business. To
the knowledge of TELAC and each of the Shareholders, no Tax Return of either Tel
or TELAC has ever been audited. To the knowledge of TELAC and each of the
Shareholders, no deficiency in Taxes for any period has been asserted by any
taxing authority which remains unpaid at the date hereof (the results of any
settlement being set forth in Exhibit B), no written inquiries or notices have
been received by Tel or TELAC from any taxing authority with respect to possible
claims for Taxes, neither TELAC nor any of the Shareholders has any reason to
believe that such an inquiry or notice is pending or threatened, and there is no
basis for any additional claims or assessments for Taxes. Neither Tel nor TELAC
has agreed to the extension of the statute of limitations with respect to any
Tax Return or Tax period. TELAC has delivered to the ▇▇▇▇▇▇ Partnerships copies
of the federal and state income Tax Returns filed by each of Tel and TELAC for
the past three years.
The Shareholders at their own expense shall be responsible for
preparing and filing any and all federal, state, municipal and other Tax Returns
of Tel and TELAC required to be filed by Tel and TELAC in respect of any and all
periods up to and including the date of the Closing (including, without
limitation, Tel's and TELAC's federal
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and state income Tax Returns for the short taxable year ending with the date of
the Closing) to the extent not already filed, whether or not required to be
filed on or before the date of the Closing, and shall pay all Taxes (and
interest, penalties, fines or assessments thereon) due and payable by Tel and
TELAC for all periods up to and including the date of the Closing to the extent
not already paid (including, without limitation, the federal and state income
Taxes due and payable with respect to the short taxable year referenced in the
preceding sentence.) The Shareholders shall review all such Tax Returns with the
▇▇▇▇▇▇ Partnerships prior to filing and shall submit such proof of payment of
the Taxes due as the ▇▇▇▇▇▇ Partnerships shall reasonably request.
K. Permits; Compliance with Applicable Law.
(i) General. TELAC is not in default under
any, and has complied with all, statutes, including the Federal Telephone
Consumer Act of 1991 and the Federal Telemarketing and Consumer Fraud and Abuse
Prevention Act of 1994, ordinances, regulations, orders, judgments and decrees
of any court or governmental entity or agency, relating to TELAC and the
Business as to which a default or failure to comply might have a Material
Adverse Effect. Within the last two (2) years, neither TELAC nor any of the
Shareholders has received any written notification of any asserted present or
past failure to comply with any of the foregoing which has not been
satisfactorily responded to in the time period required thereunder.
(ii) Permits; Intellectual Property. Set
forth in Exhibit B is a complete and accurate list of all material permits,
licenses, approvals, franchises, notices and authorizations issued by
governmental entities or other regulatory authorities, federal, state or local
(collectively the "Permits"), held by TELAC. The Permits set forth in Exhibit B
are all the material Permits required for the conduct of the Business. To the
Knowledge of TELAC and each of the Shareholders, no action or proceeding looking
to or contemplating the revocation or suspension of any such Permit is pending
or threatened. There are no existing material defaults or events of default or
event or state of facts which with notice or lapse of time or both would
constitute a material default by TELAC under any such Permit. The consummation
of the transactions contemplated hereby will in no way affect the continuation,
validity or effectiveness of the Permits set forth in Exhibit B.
(iii) Environmental. (a) TELAC has duly
complied with, in all material respects, the provisions of
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all federal, state and local environmental, health and safety laws, codes and
ordinances and all rules and regulations promulgated thereunder except where the
failure to so comply would not have a Material Adverse Effect.
(b) Neither TELAC nor any of the
Shareholders has received any written notice of any violations of, any federal,
state or local environmental, health or safety laws, codes or ordinances, and
any rules or regulations promulgated thereunder, which relate to the use,
ownership or occupancy of any of the real property currently owned, leased or
occupied by TELAC (the "Premises"). To the Knowledge of TELAC and each of the
Shareholders, TELAC is not in violation of any rights-of-way or covenants or
restrictions affecting any of the Premises or any rights appurtenant thereto.
L. Accounts Receivable; Accounts Payable.
(i) The accounts receivable of TELAC are in their entirety
valid accounts receivable, arising in the ordinary course of business. As of the
Closing, TELAC shall have unrestricted cash and cash equivalents of at least
$750,000.
(ii) The accounts and notes payable and other accrued expenses
reflected in the Financial Statements, and the accounts and notes payable and
accrued expenses incurred by the Business subsequent to December 31, 1995, are
in all respects valid claims that arose in the ordinary course of business.
Since December 31, 1995, the accounts and notes payable and other accrued
expenses of the Business have been paid in a manner consistent with past
practice. As of the date of the Closing, TELAC shall have no long-term debt.
M. Contractual and Other Obligations. Set forth in
Exhibit B is a list of all (i) material contracts, agreements, licenses, leases,
arrangements (written or oral) and other documents to which TELAC is a party or
by which TELAC, the Business or any of the assets of TELAC is bound; and (ii)
obligations and liabilities of TELAC pursuant to uncompleted orders for the
purchase of materials, supplies, equipment and services for the requirements of
the Business with respect to which the remaining obligation of TELAC is in
excess of $75,000; all of the foregoing being hereinafter referred to as the
"Contracts". Neither TELAC nor, to the Knowledge of TELAC and each of the
Shareholders, any other party is in default in the performance of any covenant
or condition under any Contract and no claim of such a default has been made
and no event has occurred on behalf of TELAC or, to the Knowledge of TELAC and
each of the Shareholders, any other party, which with the giving of notice or
the
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lapse of time would constitute a default under any covenant or condition under
any Contract, except where such default would not have a Material Adverse
Effect. Except as otherwise disclosed in this Agreement, TELAC is not a party to
any Contract which would terminate or be materially adversely affected by
consummation of the transactions contemplated by this Agreement. Originals or
true, correct and complete copies of all written Contracts have been provided to
the ▇▇▇▇▇▇ Partnerships.
N. Compensation. Set forth in Exhibit D attached hereto is a
list of all material written or oral agreements between TELAC and each natural
person employed by or independently contracting with TELAC with regard to
compensation, whether individually or collectively, and set forth in Exhibit D
is a list of all employees or independent contractors of TELAC entitled to
receive annual compensation in excess of $40,000 and their respective positions
and salaries. Except as set forth in Exhibit B, the transactions contemplated by
this Agreement will not result in any liability for severance pay to any
employee or independent contractor of TELAC. Except as set forth in Exhibit D,
neither TELAC nor any of the Shareholders has informed any employee or
independent contractor providing services to TELAC that such person will receive
any increase in compensation or benefits (except for such increases that are in
the ordinary course of business) or any ownership interest in TELAC or the
Business.
O. Employee Benefit Plans. Except as set forth in Exhibit E
attached hereto, TELAC does not maintain or sponsor, nor does it contribute to,
any pension, profit-sharing, savings, bonus, incentive or deferred compensation,
severance pay, medical, life insurance, welfare or other employee benefit plan.
All pension, profit-sharing, savings, bonus, incentive or deferred compensation,
severance pay, medical, life insurance, welfare or other employee benefit plans
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended (hereinafter referred to as "ERISA"), in which the
employees participate (such plans and related trusts, insurance and annuity
contracts, funding media and related agreements and arrangements being
hereinafter referred to as the "Benefit Plans") comply in all material respects
with all requirements of the Department of Labor and the Internal Revenue
Service, and with all other applicable laws, and TELAC has not taken or failed
to take any action with respect to the Benefit Plans which might create any
liability for the violation of applicable law on the part of TELAC or the ▇▇▇▇▇▇
Partnerships. Each "fiduciary" (within the meaning of
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Section 3(21)(A) of ERISA) as to each Benefit Plan has complied in all material
respects with all requirements of ERISA and all other applicable laws in respect
of each such Benefit Plan. TELAC has furnished to the ▇▇▇▇▇▇ Partnerships copies
of all Benefit Plans and all financial statements, actuarial reports, if any,
and annual reports and returns filed with the Internal Revenue Service with
respect to such Benefit Plans for a period of three years prior to the date
hereof. Such financial statements and actuarial reports, if any, and annual
reports and returns are true and correct in all material respects, and none of
the actuarial assumptions underlying such documents have changed since the
respective dates thereof. In addition:
(i) Each Benefit Plan intended to qualify under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code")
has received a favorable determination letter from the Internal Revenue
Service as to its qualification;
(ii) TELAC does not maintain, sponsor or contribute to, and
has never maintained, sponsored or contributed to a "defined benefit
plan" (within the meaning of Section 3(35) of ERISA) or a Multiemployer
Plan (within the meaning of Section 3(37) of ERISA);
(iii) No "prohibited transaction" (within the meaning of
Section 406 of ERISA or Section 4975(c) of the Code), with respect to
which an exemption is not applicable, has occurred with respect to any
Benefit Plan;
(iv) No provision of any Benefit Plan or of any agreement,
and no act or omission of TELAC in any way limits, impairs, modifies or
otherwise affects the right of TELAC or the ▇▇▇▇▇▇ Partnerships
unilaterally to amend or terminate any Benefit Plan after the Closing,
subject to the requirements of applicable law;
(v) Except as set forth in Exhibit E, there are no
contributions which are or hereafter will be required to have been made
to trusts in connection with any Benefit Plan that would constitute a
"defined contribution plan" (within the meaning of Section 3(34) of
ERISA);
(vi) Other than claims in the ordinary course for benefits
with respect to the Benefit Plans, there are no actions, suits or
claims (including claims for income taxes, interest, penalties, fines
or excise taxes with respect thereto) pending with respect to any
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Benefit Plan, or any circumstances which might give rise to any such
action, suit or claim (including claims for income taxes, interest,
penalties, fines or excise taxes with respect thereto) which
circumstances would have a Material Adverse Effect;
(vii) With respect to any Benefit Plan (whether or not
terminated) maintained, sponsored or contributed to (or required to be
contributed to) by TELAC or by any entity under common control with
TELAC, as determined under Section 414(b), (c), (m) or (o) of the Code,
no event has occurred and no condition exists which could on or after
the Closing (except with respect to acts or omissions arising after the
Closing which materially contribute to such event or condition) subject
TELAC, directly or indirectly (through an indemnification agreement or
otherwise), to any material liability under Section 412, 4971 or 4980B
of the Code or Title IV of ERISA;
(viii) All reports, returns and similar documents with respect
to the Benefit Plans required to be filed with any governmental agency
have been so filed on or before their due date (including extensions);
and
(ix) TELAC does not have any obligation to provide health or
other welfare benefits to former, retired or terminated employees,
except as specifically required under Section 4980B of the Code or
Section 601 of ERISA. TELAC has substantially complied with the notice
and continuation requirements of Section 4980B of the Code or Section
601 of ERISA and the regulations thereunder.
As of the Closing Date, the Shareholders shall take any and
all steps necessary to fully vest all employees of TELAC in their account
balances under the ▇▇▇▇▇▇ & Company, Inc. Savings Investment Plan (the "401(k)
Plan"), except to the extent such vesting would violate any provision of
applicable tax law that would jeopardize the 401(k) Plan's compliance with or
qualification under Section 401(a) of the Code. As soon as practicable following
the Closing Date, the Shareholders shall cause the trustees of the 401(k) Plan
to distribute such employees' account balances in the 401(k) Plan in accordance
with and subject to the terms of the 401(k) Plan documents and any and all
applicable laws, rules and regulations.
P. Labor Relations. There have been no violations of
any federal, state or local statutes, laws, ordinances, rules, regulations,
orders or directives with
14
respect to the employment of individuals by, or the employment practices or work
conditions of TELAC, or the terms and conditions of employment, wages and hours,
which violations would have, either individually or in the aggregate, a Material
Adverse Effect. Except as set forth in Exhibit B, TELAC is not engaged in any
unfair labor practice or other unlawful employment practice and there are no
charges of unfair labor practices or other employee-related complaints pending
or, to the Knowledge of TELAC and each of the Shareholders, threatened in
writing against TELAC before the National Labor Relations Board, the Equal
Employment Opportunity Commission, the Occupational Safety and Health Review
Commission, the Department of Labor or any other federal, state, local or other
governmental authority. There is no strike, picketing, slowdown or work stoppage
or organizational attempt pending or, to the Knowledge of TELAC and each of the
Shareholders, threatened in writing against or involving TELAC or the Business.
No union or collective bargaining unit or other labor organization has been
certified or recognized within the past three years by TELAC as the
representative of any of the employees of TELAC or the Business.
Q. Increases in Compensation or Benefits. Except as set forth
in Exhibit D, subsequent to December 31, 1995, there have been no increases in
the compensation payable or to become payable to any of the employees of TELAC
and there have been no payments or provisions for any awards, bonuses, stock
options, loans, profit sharing, pension, retirement or welfare plans or similar
or other disbursements or arrangements for or on behalf of such employees (or
related parties thereof), in each case, other than pursuant to currently
existing plans or arrangements, if any, set forth in Exhibit E. Except as
otherwise disclosed in the Financial Statements, all commissions heretofore
earned and all bonuses heretofore granted to employees or independent
contractors of TELAC have been paid in full to such employees or independent
contractors. The vacation policy of TELAC is set forth in Exhibit E. Except as
set forth in Exhibit E, no employee of TELAC is entitled to vacation time in
excess of three weeks during the current calendar year and no employee of TELAC
has any accrued vacation or sick time with respect to any period prior to the
current calendar year.
R. Insurance. A list of the insurance policies maintained by
TELAC is set forth in Exhibit B. Such insurance policies are in full force and
effect and all premiums due thereon prior to or on the date of the Closing have
been paid. TELAC has complied in all material respects with the provisions of
such policies. Such insurance is of
15
comparable amounts and coverage as that which companies engaged in similar
businesses maintain in accordance with good business practices. TELAC has
insurance in such amounts and with such coverages as required by the Contracts.
There are no notices of any pending or threatened termination or premium
increases with respect to any such policies except where such terminations or
increases would not have a Material Adverse Effect. TELAC has not had any
casualty loss or occurrence which may give rise to any claim of any kind not
covered by insurance and neither TELAC nor either of the Shareholders is aware
of any occurrence which may give rise to any claim of any kind not covered by
insurance. Within the last two (2) years, no third party has filed any claim
against TELAC or the Business for personal injury or property damage of a kind
for which liability insurance is generally available which is not fully insured,
subject only to the standard deductible. Within the last two (2) years, all
claims against TELAC or the Business covered by insurance have been reported to
the insurance carrier on a timely basis. TELAC has adequate insurance and
reserves to cover any liability that may arise out of any claims, including but
not limited to workers compensation and health insurance claims, that may be
asserted against TELAC for occurrences prior to the date of the Closing.
S. Conduct of Business. TELAC is not restricted from
conducting the Business in any location by agreement or court decree.
T. Allowances. Except as disclosed in Exhibit B, TELAC has
no obligation to make allowances to any of its customers, except allowances
which are consistent with its past practices.
U. Patents, Trademarks, etc. Set forth in Exhibit F attached
hereto is a list and brief description of all of the material patents,
registered and common law trademarks, service marks, tradenames, copyrights,
licenses and other similar rights of TELAC and applications for each of the
foregoing. TELAC owns all right, title and interest in and to all such
proprietary rights. The proprietary rights listed are all such rights necessary
to the conduct of the Business as currently conducted by TELAC, and, within the
last two (2) years, no adverse claims have been made and no dispute has arisen
with respect to any of the said proprietary rights; and, to the Knowledge of
TELAC and each of the Shareholders, the operations of the Business and the use
by TELAC of such proprietary rights do not involve infringement or claimed
infringement of any patent,
16
trademark, service ▇▇▇▇, tradename, copyright, license or similar right.
V. Power of Attorney. Except as set forth in Exhibit B,
TELAC has not granted any power of attorney (revocable or irrevocable) to any
person, firm or corporation for any purpose whatsoever.
W. Use of Names. All names under which TELAC currently
conducts the Business are listed in Exhibit F attached hereto. To the Knowledge
of TELAC and each of the Shareholders, no other person or business has ever
attempted to restrain TELAC from using the names under which TELAC currently
conducts the Business.
X. No Foreign Person. None of the Shareholders is a foreign
person within the meaning of Section 1445(b)(2) of the Code.
Y. Books and Records. The books and records of TELAC are in
all material respects complete and correct with respect to the information
they contain.
Z. Litigation; Disputes. Except as set forth in Exhibit B,
there are no claims, disputes, actions, suits, investigations or proceedings
pending or, to the Knowledge of TELAC and each of the Shareholders, threatened
in writing against or affecting TELAC, except for disputes, claims, actions,
suits, investigations or proceedings that would not have a Material Adverse
Effect. To the Knowledge of TELAC and each of the Shareholders, there is no
basis for any such claim, dispute, action, suit, investigation or proceeding.
Neither TELAC nor any of the Shareholders has any Knowledge of any default under
any such action, suit or proceeding. TELAC is not in default in respect of any
judgment, order, writ, injunction or decree of any court or of any federal,
state, municipal or other government department, commission, bureau, agency or
instrumentality or any arbitrator.
AA. Location of Business and Assets. Set forth in Exhibit B
is each location (specifying state and city) where TELAC (i) has a place of
business, (ii) owns or leases real property and (iii) owns or leases any other
property, including inventory, equipment and furniture.
BB. Bank Accounts. Set forth in Exhibit G attached hereto
is a list of all bank accounts maintained in the name of TELAC or the Business,
and a brief description of the persons having power to sign with respect to
each such account.
17
SECTION III
REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS OF THE SHAREHOLDERS
Each of the Shareholders, severally and not jointly, hereby
represents and warrants to, and covenants and agrees with, the ▇▇▇▇▇▇
Partnerships, as of the date of the Closing, that:
A. Authority. Such Shareholder is fully able to execute and
deliver this Agreement and to perform his covenants and agreements hereunder,
and this Agreement constitutes a valid and legally binding obligation of such
Shareholder, enforceable against him or it in accordance with its terms, except
as enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally.
B. No Legal Bar; Conflicts. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
violates any statute, ordinance, regulation, order, judgment or decree of any
court or governmental agency, or conflicts with or will result in any breach of
any of the terms of or constitute a default under or result in the termination
of or the creation of any lien pursuant to the terms of any contract or
agreement to which such Shareholder is a party.
C. Capitalization. All of the issued and outstanding shares of
TELAC Common Stock owned beneficially and of record by such Shareholder,
including all the Redemption Shares listed in Schedule III hereto, are owned by
such Shareholder free and clear of any lien, encumbrance, charge, security
interest or claim whatsoever. Upon consummation of the redemption by TELAC of
the Redemption Shares, TELAC will acquire the Redemption Shares, free and clear
of any lien, encumbrance, charge, security interest or claim whatsoever. Except
for this Agreement, there are no outstanding subscriptions, warrants, options,
calls, commitments or other rights or agreements to which such Shareholder is
bound relating to the issuance, sale or redemption of shares of his or its
shares of TELAC Common Stock. No persons other than such Shareholder has any
interest in such Shareholder's TELAC Shares.
D. Other Interests. Except as set forth in Exhibit B, such
Shareholder has no ownership interests in any businesses other than TELAC, of
providing multilingual
18
inbound and outbound teleservices and such Shareholder does not perform any
employment, consulting or other services, paid or unpaid, for any businesses
providing multilingual inbound and outbound teleservices.
E. Representations by the Estate of ▇▇▇▇▇▇ ▇▇▇. The following
representations and warranties are made by the Estate of ▇▇▇▇▇▇ ▇▇▇ only:
The executor of the estate of ▇▇▇▇▇▇ ▇▇▇ (the "Estate") has
the power and authority to execute this Agreement on behalf of the Estate and
has full power and authority to transfer 87,500 shares (the "Estate Shares") of
TELAC Common Stock to TELAC in connection with the Redemption. The Estate Shares
have not been specifically bequeathed by testamentary instrument and there are
no estate tax liens against the Estate which would encumber or restrict the
transfer of the Shares.
SECTION IV
REPRESENTATIONS AND WARRANTIES OF THE ▇▇▇▇▇▇ PARTNERSHIPS
Each of the ▇▇▇▇▇▇ Partnerships hereby represents and warrants
to, and covenants and agrees with, TELAC and each of the Shareholders, severally
and not jointly, as of the date of the Closing, that:
A. Organization and Qualification. Each ▇▇▇▇▇▇ Partnership is
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has full power and authority to purchase
the TELAC Shares and consummate the other transactions contemplated by this
Agreement.
B. Authority. The execution and delivery of this Agreement by
such ▇▇▇▇▇▇ Partnership, the performance by such ▇▇▇▇▇▇ Partnership of its
covenants and agreements hereunder and the consummation by such ▇▇▇▇▇▇
Partnership of the transactions contemplated hereby have been duly authorized by
all necessary partnership action. This Agreement constitutes a valid and legally
binding obligation of such ▇▇▇▇▇▇ Partnership, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium or
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally.
19
C. No Legal Bar; Conflicts. Neither the execution and delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
violates any provision of the limited partnership agreements of such ▇▇▇▇▇▇
Partnership or any statute, ordinance, regulation, order, judgment or decree of
any court or governmental agency or board, or conflicts with or will result in
any breach of any of the terms of or constitute a default under or result in the
termination of or the creation of any lien pursuant to the terms of any contract
or agreement to which such ▇▇▇▇▇▇ Partnership is a party or by which such ▇▇▇▇▇▇
Partnership or any of its assets is bound.
D. Investment. (i) Each such ▇▇▇▇▇▇ Partnership understands
that by the terms of this Agreement it is purchasing the TELAC Shares issued and
delivered by TELAC without compliance with the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the securities laws
of any state, under and in reliance on exemptions from the registration
requirements of the Securities Act and such laws, and without the approval,
disapproval, or passing on the merits by any regulatory authority; that for
purposes of such exemptions, TELAC will rely upon the representations,
warranties and agreements of each such ▇▇▇▇▇▇ Partnership contained herein; and
that such non-compliance with registration requirements is not permissible
unless such representations and warranties are correct and such agreements
performed.
(ii) Each such ▇▇▇▇▇▇ Partnership understands
that TELAC is under no obligation to effect a registration under the Securities
Act of the TELAC Shares to be purchased by each such ▇▇▇▇▇▇ Partnership
hereunder. Each such ▇▇▇▇▇▇ Partnership understands that, under existing rules
of the Securities and Exchange Commission (the "Commission"), each such ▇▇▇▇▇▇
Partnership may be unable to sell its TELAC Shares, except to the extent that
the TELAC Shares may be sold (A) in a bona fide private placement to a purchaser
who shall be subject to the same restrictions on sale or (B) subject to the
restrictions contained in Rule 144 under the Securities Act.
(iii) Each such ▇▇▇▇▇▇ Partnership is fully
familiar with the business, properties and financial condition of TELAC, and
each acknowledges that it has been afforded access to such additional
information concerning TELAC as it considers necessary or appropriate to make an
informed investment decision. Each such ▇▇▇▇▇▇ Partnership is an "accredited
investor" as such term is defined in Rule 501 under the Securities Act.
20
(iv) Each such ▇▇▇▇▇▇ Partnership is a
sophisticated investor familiar with the type of risks inherent in the
acquisition of securities such as the TELAC Common Stock, and its financial
position is such that it can afford to retain the TELAC Shares for an indefinite
period of time without realizing any direct or indirect cash return on its
investment.
(v) Each such ▇▇▇▇▇▇ Partnership is acquiring
the TELAC Shares pursuant to this Agreement for its own account and not with a
view to or for sale in connection with the distribution thereof within the
meaning of the Securities Act. Each such ▇▇▇▇▇▇ Partnership shall not effect a
distribution of any TELAC Shares until either (A) it has received the opinion of
counsel for TELAC that registration under the Securities Act is not required or
(B) a registration statement under the Securities Act covering such TELAC Shares
and the disposition thereof has become effective under the Securities Act, and
each such ▇▇▇▇▇▇ Partnership agrees that the certificates evidencing the TELAC
Shares may bear a restrictive legend to the foregoing effect.
SECTION V
[Intentionally Omitted]
SECTION VI
ADDITIONAL COVENANTS OF TELAC,
THE SHAREHOLDERS AND THE ▇▇▇▇▇▇ PARTNERSHIPS
A. Books and Records. Each of the Shareholders covenants and
agrees, severally and not jointly, that each of them shall give the ▇▇▇▇▇▇
Partnerships reasonable access to the historical financial books and records of
TELAC in its or his possession, for a period of five years from the date of the
Closing. The Shareholders shall retain all such books and records in
substantially their condition at the time of the Closing. None of such books and
records shall be destroyed without the prior written approval of TELAC or
without first offering such books and records to TELAC.
B. Working Capital. On or before January 31, 1997, TELAC shall
pay from an account over which ▇▇▇▇▇▇ has signatory authority (the "▇▇▇▇▇▇
Account") Payables (as hereinafter defined) identified by TELAC which are
accepted by the Shareholders as Payables. In the event of any dispute among the
parties concerning Payables, the parties
21
agree to use their good faith efforts to resolve such dispute by January 31,
1997 or as promptly as practicable thereafter. All Receivables shall be paid
into the ▇▇▇▇▇▇ Account. For purposes of this Section, "Receivables" shall mean
all accounts receivables for work performed by TELAC through the date of the
Closing determined in accordance with generally accepted accounting principles.
For purposes of this Section, "Payables" shall mean all current liabilities of
TELAC as of the date of the Closing determined in accordance with generally
accepted accounting principles and shall include, but not be limited to, all
accrued sick time, accrued and used vacation (used between December 1, 1996 and
December 31, 1996) and accrued payroll of the Business, all non-transaction
related professional fees, all non-transaction related audit fees, any gross
receipts tax due in Virginia, one-half of the closing bonuses to be paid to the
Key Employees (as hereinafter defined) on or after the date of Closing, one-half
of the expenses incurred prior to the date of Closing in connection with TELAC's
buildout capital expenditures at its Arlington, Virginia location (approximately
$40,000), one-half of the amount owed for the recent purchase of the Rockwell
cabinet (approximately $91,500), and eleven-twelfths of the amount of year-end
bonuses to be paid to non-key employees (approximately $83,500), but shall not
include any purchase price paid by the ▇▇▇▇▇▇ Partnerships for the JCSI Purchase
(as hereinafter defined). Payables shall not include any amount in excess of
one-half of the amount owed for the recent purchase of the Rockwell cabinet and
any amount in excess of one-half of the buildout capital expenditures at its
Arlington, Virginia location. TELAC agrees to pay all payables and expenses in a
timely manner in accordance with any Contracts or other vendor credit
arrangements with TELAC.
C. Location of TELAC Subsequent to Closing. Each of the
parties understands and agrees that subsequent to the date of Closing, TELAC's
headquarters will be in King of Prussia, Pennsylvania while TELAC's direct
marketing division will be located in TELAC's existing offices in Arlington,
Virginia. Each of the ▇▇▇▇▇▇ Partnerships represents that it has no current
plans to move or otherwise close the Arlington, Virginia and Dallas, Texas
facilities of TELAC.
D. Tax Reporting. Each of the parties understands and
agrees that the merger between TELAC and Tel is intended to be treated as a
reorganization within Section
22
368 of the Code, and the parties hereby agree that they will not report the
transaction in a manner which is inconsistent with such treatment, including
(without limitation) in the tax returns of TELAC.
SECTION VII
CLOSING
A. Time and Place of Closing. The closing of the purchase and
sale of the TELAC Shares and the consummation of the other transactions
contemplated by this Agreement as set forth herein (the "Closing") shall be held
at the offices of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇ at 4:00 P.M. local time on December 6, 1996 or such other time as the
parties shall agree.
B. Delivery of the Shares. Delivery of the TELAC Shares shall
be made by TELAC to the ▇▇▇▇▇▇ Partnerships at the Closing by delivering one or
more certificates in negotiable form representing the TELAC Shares, each such
certificate to be accompanied by any requisite documentary or stock transfer
Taxes.
C. Tax Matters. All transfer, documentary, stamp,
registration, value added, sales, use and other such taxes and fees (including
any penalties and interest) incurred in connection with this Agreement shall be
borne and paid by the party on which such taxes or fees are imposed, when due,
and the Shareholders will, at its or his, as the case may be, own expense, file
all necessary tax returns and other documentation with respect to all such taxes
and fees.
SECTION VIII
CONDITIONS TO TELAC'S
OBLIGATION TO CLOSE
The obligations of TELAC to sell the TELAC Shares to the
▇▇▇▇▇▇ Partnerships and otherwise consummate the transactions contemplated by
this Agreement at the Closing are subject to the following conditions precedent,
any or all of which may be waived by TELAC in its sole discretion and if any
condition precedent is waived, none of the Shareholders shall be entitled to
seek indemnification against TELAC for the failure to fulfill such condition
precedent, and each of which the ▇▇▇▇▇▇ Partnerships hereby
23
agrees to use their best efforts to satisfy at or prior to the Closing:
A. Opinion of Counsel. The Shareholders shall have received an
opinion of ▇▇▇▇▇▇ & ▇▇▇▇▇▇, counsel for the ▇▇▇▇▇▇ Partnerships, delivered to
the Shareholders pursuant to the instructions of the ▇▇▇▇▇▇ Partnerships, dated
the date of the Closing, in form and substance satisfactory to the Shareholders
and their counsel, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough L.L.P., in the form of
Exhibit M attached hereto.
B. No Litigation. No action, suit or proceeding against TELAC,
any of the Shareholders or the ▇▇▇▇▇▇ Partnerships relating to the consummation
of any of the transactions contemplated by this Agreement or any governmental
action seeking to delay or enjoin any such transactions shall be pending or
threatened.
C. Representations and Warranties. The representations and
warranties made by the ▇▇▇▇▇▇ Partnerships herein shall be correct as of the
date of the Closing in all respects with the same force and effect as though
such representations and warranties had been made as of the date of the Closing.
All the terms, covenants and conditions of this Agreement to be complied with
and performed by the ▇▇▇▇▇▇ Partnerships on or before the date of the Closing
shall have been duly complied with and performed in all respects.
D. Other Certificates. TELAC shall have received such
additional certificates, instruments and other documents, in form and substance
satisfactory to them and their counsel, as it shall have reasonably requested in
connection with the transactions contemplated hereby.
▇. ▇▇▇▇▇▇ Employment Agreement; Capital Stock. TELAC and
Jordan shall have entered into an employment agreement in the form of Exhibit H
attached hereto (the "Jordan Employment Agreement"). TELAC and Jordan shall have
entered into a Stock Purchase Agreement in the form of Exhibit I attached
hereto, providing for the sale of 75,000 shares of TELAC Common Stock to Jordan.
F. Employment Agreements for Key Employees; Closing Bonuses;
Stock Purchase Agreements for Capital Stock. TELAC and each of ▇▇▇▇▇ ▇▇▇▇▇▇
("▇▇▇ ▇▇▇▇▇▇"), ▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("Bykofsky"), ▇▇▇▇▇▇▇ ▇▇▇▇▇
("Andre"), ▇▇▇▇▇ ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇ (collectively, the
"Key Employees") shall have entered into an employment agreement in the forms of
Exhibits J-1 through
24
J-7 attached hereto (the "Key Employee Agreements"). TELAC shall have (i) paid
to each of the Key Employees the cash bonuses provided for in the Key Employee
Agreement for such Key Employee and (ii) entered into stock purchase agreements
with the Key Employees in the form of Exhibit L attached hereto providing for
the sale of 55,000 shares of TELAC Common Stock to such Key Employees.
G. Stockholders Agreement. TELAC and the Shareholders shall
have entered into a stockholders agreement in the form of Exhibit K attached
hereto (the "Stockholders Agreement").
H. JCSI Purchase. Simultaneously with the Closing hereunder,
the ▇▇▇▇▇▇ Partnerships or their designee shall have acquired the JCSI business
owned by ▇▇▇▇▇ ▇▇▇▇▇▇ for $240,000 and otherwise on mutually agreeable terms
(the "JCSI Purchase").
SECTION IX
CONDITIONS TO THE ▇▇▇▇▇▇ PARTNERSHIPS' OBLIGATION TO CLOSE
The obligation of the ▇▇▇▇▇▇ Partnerships to purchase the
TELAC Shares and otherwise consummate the transactions contemplated by this
Agreement at the Closing is subject to the following conditions precedent, any
or all of which may be waived by the ▇▇▇▇▇▇ Partnerships in their sole
discretion and if any condition precedent is waived, none of the ▇▇▇▇▇▇
Partnerships or TELAC shall be entitled to seek indemnification against any
Shareholder for the failure to fulfill such condition precedent, and each of
which TELAC and each of the Shareholders hereby agrees to use its or his best
efforts to satisfy at or prior to the Closing:
A. Opinion of Counsel. The ▇▇▇▇▇▇ Partnerships shall have
received an opinion of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇ L.L.P., counsel for
TELAC and the Shareholders, delivered to the ▇▇▇▇▇▇ Partnerships pursuant to the
instructions of TELAC, dated the date of the Closing, in form and substance
satisfactory to the ▇▇▇▇▇▇ Partnerships and its counsel, Messrs. ▇▇▇▇▇▇ &
▇▇▇▇▇▇, in the form of Exhibit N attached hereto.
B. No Litigation. No action, suit or proceeding against
TELAC, any of the Shareholders or the ▇▇▇▇▇▇ Partnerships relating to the
consummation of any of the transactions contemplated by this Agreement nor any
25
governmental action seeking to delay or enjoin any such transactions shall be
pending or threatened.
C. Representations and Warranties. The representations and
warranties made by TELAC and each of the Shareholders herein shall be correct as
of the date of the Closing in all respects with the same force and effect as
though such representations and warranties had been made as of the date of the
Closing. All the terms, covenants and conditions of this Agreement to be
complied with and performed by TELAC and each of the Shareholders on or before
the date of the Closing shall have been duly complied with and performed in all
respects.
D. Other Certificates. The ▇▇▇▇▇▇ Partnerships shall have
received such other certificates, instruments and other documents, in form and
substance satisfactory to the ▇▇▇▇▇▇ Partnerships and counsel for the ▇▇▇▇▇▇
Partnerships, as it shall have reasonably requested in connection with the
transactions contemplated hereby.
E. Third Party Consents. The ▇▇▇▇▇▇ Partnerships shall have
received all necessary consents of third parties under the contracts,
agreements, leases, insurance policies and other instruments of the Business,
which consents shall not provide for the acceleration of any liabilities or any
other detriment to the ▇▇▇▇▇▇ Partnerships or the Business.
▇. ▇▇▇▇▇▇ Employment Agreement. TELAC and Jordan shall have
entered into the Jordan Employment Agreement.
G. Key Employee Agreements. TELAC and each of the Key
Employees shall have entered into the Key Employee Agreements.
H. Stockholders Agreement. TELAC and the Shareholders shall
have entered into the Stockholders Agreement.
I. Governmental Licenses and Permits. TELAC shall have
obtained all required authorizations, permits and licenses required for it to
operate the Business.
J. Sprint Agreement. TELAC shall, at the ▇▇▇▇▇▇ Partnerships'
discretion, have entered into new agreements with Sprint or shall have received
a consent to assignment from Sprint of the existing Sprint agreement, in either
case, which such new agreements or consent shall be in form and substance
satisfactory to the ▇▇▇▇▇▇ Partnerships.
26
K. Evidence of Amendment to Certificate of Incorporation.
TELAC shall have delivered to the ▇▇▇▇▇▇ Partnerships evidence of the filing of
an amendment to TELAC's Certificate of Incorporation (the "TELAC Certificate")
amending the TELAC Certificate to (i) increase the number of authorized shares
of TELAC Common Stock from 1,000 to 20,000,000 and (ii) reducing the par value
of the Telac Common Stock from $1.00 par value per share to $.01 par value per
share.
L. Evidence of Authorization of Redemption. TELAC shall have
delivered to the ▇▇▇▇▇▇ Partnerships evidence of the due authorization by TELAC
of the redemption of 3,500,000 shares of TELAC Common Stock from the
Shareholders.
M. Amendment of TELAC Certificate. Simultaneously with the
Closing, TELAC shall file with the Delaware Secretary of State, a new amendment,
in the form of Exhibit O attached hereto, to the TELAC Certificate amending the
TELAC Certificate (i) to provide for the authorization of the TELAC Preferred
Shares and (ii) to provide for the authorization of the Non-Voting Common Stock.
N. Equipment Leases; ▇▇▇▇ of Sale. TELAC and Triple J shall
have (i) entered into a renegotiated equipment lease (the "First Triple J
Lease") on the following terms and otherwise on terms mutually agreeable to
TELAC, the ▇▇▇▇▇▇ Partnerships and the other parties thereto providing for:
Eight (8) remaining payments of $26,793, plus applicable sales taxes with TELAC
becoming the owner of the equipment, free and clear of any lien, encumbrance or
security interest, at the end of the First Triple J Lease and (ii) entered into
a renegotiated equipment lease (the "Second Triple J Lease") providing for the
transfer to TELAC of the equipment covered by the Second Triple J Lease, without
payment of any additional consideration, on January 1, 1997 free and clear of
any lien, encumbrance or security interest or delivered of a ▇▇▇▇ of Sale for
the equipment covered by the Second Triple J Lease effective January 1, 1997.
O. Resignations. TELAC shall have received resignations dated
the date of the Closing from its officers and directors.
P. Stock Purchase Agreements. TELAC and each of the Key
Employees shall have entered into the Stock Purchase Agreements.
27
SECTION X
INDEMNIFICATION
A. Indemnification by the Shareholders. Each of the
Shareholders, severally and not jointly, shall indemnify and hold harmless
TELAC and the ▇▇▇▇▇▇ Partnerships from and against all losses, claims, taxes,
assessments, demands, damages, liabilities, obligations, costs and/or expenses
whatsoever (hereinafter referred to collectively as the "▇▇▇▇▇▇ Partnerships'
Damages"), including, without limitation, ▇▇▇▇▇▇ Partnerships' Counsel
Expenses (as hereinafter defined), sustained or incurred by TELAC or the
▇▇▇▇▇▇ Partnerships as a result of or arising from the breach of any of the
obligations, covenants or provisions of, or the inaccuracy of any of the
representations or warranties made by, TELAC or any of the Shareholders herein;
provided, however, with respect to a breach of any representations, warranties
or covenants contained in Section III, TELAC and the ▇▇▇▇▇▇ Partnerships shall
be indemnified pursuant to this Agreement solely by the Shareholder to which
such representations, warranties or covenants relate, and TELAC and the ▇▇▇▇▇▇
Partnerships shall not seek indemnification from the other Shareholders for
such breach. Subject to the limitations set forth herein, for purposes hereof,
"▇▇▇▇▇▇ Partnerships' Counsel Expenses" shall mean reasonable fees and
disbursements of counsel actually sustained or incurred by the ▇▇▇▇▇▇
Partnerships or TELAC, including, without limitation, in any action or
proceeding between the ▇▇▇▇▇▇ Partnerships or TELAC and any third party.
B. Indemnification by TELAC. TELAC shall indemnify and hold
harmless each of the Shareholders from and against any and all losses, claims,
assessments, demands, damages, liabilities, obligations, costs and/or expenses
whatsoever (hereinafter referred to collectively as the "Shareholders' Damages";
the Shareholders' Damages and the ▇▇▇▇▇▇ Partnerships' Damages are sometimes
referred to herein as "Damages"), including, without limitation, Shareholders'
Counsel Expenses (as hereinafter defined) sustained or incurred by the
Shareholders as a result of or arising out of the breach of any of the
obligations, covenants or provisions of, or the inaccuracy of any of the
representations or warranties made by, the ▇▇▇▇▇▇ Partnerships herein. For
purposes hereof, "Shareholders' Counsel Expenses" shall mean reasonable fees and
disbursements of counsel actually sustained or incurred by the Shareholders,
including, without limitation, in any action or proceeding between the
Shareholders and the ▇▇▇▇▇▇
28
Partnerships and/or TELAC or in any action or proceeding between the
Shareholders and a third party.
C. Procedure for Indemnification.
(i) Direct Claims. In the event that any party
hereto shall incur any Damages in respect of which indemnity may be sought by
such party pursuant to this Section X which do not involve a Third Party Claim
(as defined below), the parties from whom such indemnity may be sought (each, an
"Indemnifying Party") shall be given reasonably prompt written notice thereof by
the party seeking such indemnity (the "Indemnified Party"), which notice shall
specify the amount and nature of such Damages and include the request of the
Indemnified Party for indemnification of such amount. The Indemnifying Party
shall within thirty (30) days pay to the Indemnified Party the amount of the
Damages so specified unless the Indemnifying Party contests such claim.
(ii) Third Party Claims.
(a) Notification and Defense Rights. If any
Indemnified Party receives written notice of the assertion of any claim or of
the commencement of any action or proceeding by any entity which is not a party
to this Agreement (a "Third Party Claim") against or affecting such Indemnified
Party, and if such assertion is presumed to be true (regardless of the actual
outcome), such Indemnified Party shall give such Indemnifying Party reasonably
prompt written notice thereof, but in any event no later than twenty (20)
calendar days after receipt of such written notice of such Third Party Claim;
provided, however, that any delay or failure to notify any Indemnifying Party of
any claim shall not relieve it from any liability except to the extent that the
Indemnifying Party demonstrates that the defense of such action is materially
prejudiced by such delay or failure to notify. The Indemnifying Party shall have
the right to control the defense of any Third Party Claim by such Indemnifying
Party's own counsel. The Indemnified Party also will have the right to
participate in the defense of any Third Party Claim assisted by counsel of its
own choosing, but at the sole cost and expense of the Indemnified Party;
provided, however, that if an Indemnifying Party and an Indemnified Party shall
be included as defendants in any action and the Indemnified Party shall have
been reasonably advised by its counsel that there may be legal defenses
available to the Indemnified Party which are different from or in addition to
those available to the Indemnifying Party, the Indemnified Party shall have the
right to employ its own counsel in such action and in such event, the fees and
expenses of such
29
counsel shall be borne by the Indemnifying Party, but only to the extent such
fees and expenses relate to defenses not being asserted by the Indemnified
Party. The Indemnifying Party and the Indemnified Party will cooperate with each
other in good faith in such defense. Notwithstanding the foregoing, the
Shareholders may, at their option, pay to TELAC any amount remaining under the
Cap (as hereinafter defined) that has not been paid, and upon such payment, the
Shareholders shall be under no further obligation to defend or contest such
proceedings. For purposes of determining whether the Cap has been reached, the
Shareholders' Counsel Expenses incurred in such defense shall be included.
(b) Settlement. If the Indemnifying Party
has reached a good faith, bona fide settlement agreement or compromise which
provides for a general release of the Indemnified Party, and provides only for
payments to settle the claims and not for any other remedy and such payments do
not exceed the Cap, subject only to approval hereunder, with any claimant
regarding a matter which may be the subject of indemnification hereunder and
desires to settle on the basis of such agreement or compromise, the Indemnifying
Party shall notify the Indemnified Party in writing of its desire to settle
setting forth the terms of such settlement or compromise (the "Notice of
Settlement"). The Third Party Claim may be settled or compromised on such basis
unless within twenty (20) days of the receipt of the Notice of Settlement the
Indemnifying Party receives a notice from the Indemnified Party of its desire to
continue to contest the matter (the "Notice to Contest"), and, in such case the
Indemnified Party shall assume all responsibility for the defense of such claim.
If a matter is contested after a Notice to Contest is delivered and is later
adjudicated, settled, compromised or otherwise disposed of and such
adjudication, compromise, settlement or disposition results in a liability,
loss, damage or injury in excess of the amount for which the Indemnifying Party
desired previously to settle the matter, then the liability of the Indemnifying
Party shall be limited to such lesser proposed settlement amount and the
Indemnified Party shall be solely responsible for the amount in excess of such
lesser proposed settlement amount.
D. Agreements Concerning Indemnification. It is
specifically understood and agreed that:
(i) The Shareholders shall not be obligated to
indemnify TELAC and the ▇▇▇▇▇▇ Partnerships for the ▇▇▇▇▇▇ Partnerships' Damages
unless and until the aggregate amount of all claims for such ▇▇▇▇▇▇
Partnerships' Damages exceeds $500,000 (the "Basket") at which time claims may
be asserted
30
for the excess of such amount. The Basket shall not apply in the case of a
breach of the representation contained in the second sentence of Section
II.(L)(i) hereof.
(ii) The Shareholders shall not be obligated to
indemnify TELAC and the ▇▇▇▇▇▇ Partnerships for the ▇▇▇▇▇▇ Partnerships' Damages
in excess of an aggregate of $3,000,000 (the "Cap") and the obligations of the
Shareholders for indemnification hereunder shall terminate when the Cap has been
paid (except for any ▇▇▇▇▇▇ Partnerships' Damages arising from any breach of any
of the representations and warranties contained in Section II(J)); provided,
however, that any such ▇▇▇▇▇▇ Partnership's Damages arising from any breach of
any representations and warranties contained in Section II(J) shall not be
subject to the Cap.
(iii) The indemnification obligations of each of
the Shareholders shall be limited to his or its respective Pro-Rata Share (as
defined herein) for each indemnifiable event pursuant to this Agreement, up to
the Cap and subject to the Basket. For purposes of this Agreement a
Shareholder's "Pro-Rata Share" shall be the percentage set forth opposite such
Shareholder's name on Schedule IV hereto. The aggregate obligation of the
Shareholders for indemnification hereunder will not exceed the Cap and the
aggregate obligation of each Shareholder for indemnification hereunder will not
exceed such Shareholder's Pro-Rata Share of the Cap.
(iv) Damages payable to an Indemnified Party
shall be reduced by (i) any Tax Benefit (as hereinafter defined) actually
received by the Indemnified Party on account of such indemnification and (ii)
any insurance proceeds actually received by the Indemnified Party on account of
such indemnification at the time the indemnification payment occurs, it being
understood that in no event shall any indemnification payment be delayed in
anticipation of the receipt of any Tax Benefit or insurance proceeds. If the
Indemnified Party receives a Tax Benefit after an indemnification payment is
made, TELAC shall pay to the Indemnifying Party, the aggregate amount of such
Tax Benefit at such time or times as and to the extent that such Tax Benefit is
received. If, upon audit by the relevant tax authority, part or all of such Tax
Benefit shall be disallowed, the Indemnifying Party, upon written notice to that
effect from the Indemnified Party, shall promptly reimburse the Indemnified
Party for the full amount so disallowed up to the amount of the Tax Benefit
credited to the Indemnifying Party. For purposes hereof, "Tax Benefit" shall
mean any refund of tax or reduction in the amount of
31
taxes which would otherwise be payable. The parties hereto shall seek full
recovery under all insurance policies covering any indemnification payment in
the ordinary course of business to the same extent as they would if such claim
were not subject to an indemnification payment hereunder. In the event that an
insurance recovery is made by the Indemnified Party, with respect to any
indemnification payment for which an indemnification claim has been made, the
Indemnified Party shall pay to the Indemnifying Party the amount of the
insurance recovery, but not more than the amount of such indemnification
payment.
(v) Neither TELAC nor the ▇▇▇▇▇▇ Partnerships
shall have a claim against any Shareholder for indemnification pursuant to this
Agreement in respect of a misrepresentation or breach of any covenant or
warranty of the Shareholders contained in or made pursuant to this Agreement to
the extent and only in the amount that TELAC or the ▇▇▇▇▇▇ Partnerships have
received a credit with respect to the subject matter of any such breach or
misrepresentation reflected in the calculation of working capital described in
Section VI(C).
(vi) The sole remedy for any misrepresentation,
breach of warranty or failure to fulfill any agreement or covenant to be
performed prior to the Closing (it being understood and agreed that this
limitation shall not apply to covenants or agreements to be performed subsequent
to the Closing) hereunder on the part of any party shall be governed by and
limited to the provisions of this Section X.
SECTION XI
NON-COMPETITION AGREEMENT
Following the consummation of the transactions contemplated
hereby, and in consideration thereof, none of the Shareholders shall, subsequent
to the date of the Closing and, except as provided herein, until five (5) years
after the date of the Closing, directly or indirectly, (i) engage, whether as
principal, agent, investor (except as an owner of less than a 5% interest in a
publicly held Company), distributor, representative, stockholder, employee,
consultant, volunteer or otherwise, with or without pay, in any activity or
business venture anywhere in the United States which is competitive with the
Business or business of TELAC or any other member of the Company Group (as
hereinafter defined) of providing multilingual inbound and outbound
teleservices, except as specifically allowed as set forth hereinafter, and
related activities, (ii) solicit
32
or endeavor to solicit away from any member of the Company Group any person who
is or was during the six (6) months prior to solicitation, a director, officer,
employee, agent or consultant of such member of the Company Group, on any of the
Shareholder's own accounts or for any person, firm, corporation or other
organization, whether or not such person would commit any breach of such
person's contract of employment by reason of leaving the service of such member
of the Company Group, (iii) solicit or endeavor to solicit away any of the
clients or customers of any member of the Company Group, on any of the
Shareholder's own accounts or for any other person, firm, corporation or
organization, or (iv) employ any person who is or was during the six (6) months
prior to employment, a director, officer or employee of any member of the
Company Group. Because the remedy at law for any breach of the foregoing
provisions of this Section XI would be inadequate, each of the Shareholders
hereby consents, in case of any such breach, to the granting by any court of
competent jurisdiction of specific enforcement, including, but not limited to
pre-judgment injunctive relief, of such provisions, as provided for in Section
XIII(F) hereof.
The parties hereto agree that if, in any proceeding, the court
or other authority shall refuse to enforce the covenants herein set forth
because such covenants cover too extensive a geographic area or too long a
period of time, any such covenant shall be deemed appropriately amended and
modified in keeping with the intention of the parties to the maximum extent
permitted by law.
Notwithstanding the foregoing, Jordan shall not be deemed to
be in breach of the provisions of Section XI(i) above following termination of
Jordan's employment by TELAC and none of the other Shareholders shall be deemed
to be in breach of the provisions of Section XI(i) by reason of their employment
by or association with an entity, the business of which is shareholder
communications, proxy solicitation, political polling, surveying or English
language political advocacy communications or public opinion polling, surveying
or English language political advocacy communications.
Each of the parties hereto expressly acknowledges and agrees
that the covenants and agreements of each of the Shareholders set forth in this
Section XI are reasonable in all respects, and necessary in order to protect,
maintain and preserve the value and goodwill of TELAC and the Business, as well
as the proprietary and other legitimate business interests of the members of the
Company Group.
33
For purposes hereof, "Company Group" shall mean, collectively,
the TELAC and its subsidiaries, affiliates and parent entities operating from
time to time in the same lines of business.
SECTION XII
BROKERS AND FINDERS
A. The Shareholders' Obligations. TELAC and the ▇▇▇▇▇▇
Partnerships shall not have any obligation to pay any fee or other compensation
to any person, firm or corporation dealt with by any of the Shareholders in
connection with this Agreement and the transactions contemplated hereby and each
of the Shareholders, severally and not jointly, hereby agree to indemnify and
save TELAC and each of the ▇▇▇▇▇▇ Partnerships (or its designee) harmless from
any liability, damage, cost or expense arising from any claim for any such fee
or other compensation.
B. The ▇▇▇▇▇▇ Partnerships's Obligations. The
Shareholders shall have no obligation to pay any fee or other compensation to
any person, firm or corporation dealt with by the ▇▇▇▇▇▇ Partnerships in
connection with this Agreement and the transactions contemplated hereby and
the ▇▇▇▇▇▇ Partnerships agrees to indemnify and save each of the Shareholders
harmless from any liability, damage, cost or expense arising from any claim
for any such fee or other compensation.
SECTION XIII
MISCELLANEOUS
A. Notices. All notices, requests or
instructions hereunder shall be in writing and delivered
personally, sent by Federal Express or sent by registered or
certified mail, postage prepaid, as follows:
(1) If to TELAC (prior to the Closing):
c/o ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
34
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇▇
L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(2) If to the Shareholders:
c/o ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Scarborough
L.L.P.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
(3) If to TELAC (after the Closing) or
to the ▇▇▇▇▇▇ Partnerships:
c/▇ ▇▇▇▇▇▇ Management Company
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
35
Any of the above addresses may be changed at any time by notice given as
provided above; provided, however, that any such notice of change of address
shall be effective only upon receipt. All notices, requests or instructions
given in accordance herewith shall be deemed received on the date of delivery,
if hand delivered or sent by Federal Express, and five business days after the
date of mailing, if mailed.
B. Survival of Representations. Subject to the limitations
described in Section X, each representation, warranty, covenant and agreement of
the parties hereto herein contained shall survive the Closing, notwithstanding
any investigation at any time made by or on behalf of any party hereto, for a
period ending the earlier to occur of (i) fifteen (15) months after the last day
of the month on which the Closing occurs (the "Survival Period") or (ii) the
closing of an underwritten public offering of TELAC Common Stock; except (a) for
covenants and agreements to be performed subsequent to the Closing and (b) that
nothing in the foregoing shall be deemed to diminish any Indemnifying Party's
indemnification obligations to an Indemnified Party respecting claims for
Damages properly made prior to the last day of the Survival Period of the date
of the Closing or the applicable statutes of limitations period for claims for
Damages based on any federal or state income tax obligations of TELAC for
periods prior to the Closing or common law fraud which shall survive for the
duration of the applicable statutes of limitations periods. No representation
made by the ▇▇▇▇▇▇ Partnerships in this Agreement shall be deemed to modify or
waive any rights of the TELAC or the ▇▇▇▇▇▇ Partnerships under Section X hereof.
No representation made by the Shareholders or TELAC in this Agreement shall be
deemed to modify or waive any rights of the Shareholders under Section X hereof.
C. Entire Agreement. This Agreement and the documents referred
to herein contain the entire agreement among the parties hereto with respect to
the transactions contemplated hereby, and no modification hereof shall be
effective unless in writing and signed by the party against which it is sought
to be enforced.
D. Further Assurances. Each of the parties hereto shall use
such party's reasonable best efforts to take such actions as may be necessary or
reasonably requested by the other parties hereto to carry out and consummate the
transactions contemplated by this Agreement, including the execution and
delivery of any reasonable and customary management representation letter
requested by the ▇▇▇▇▇▇ Partnership's independent certified public accountants
in connection with any audit by such accountants of the
36
financial statements of the Business as required by Regulation S-X under the
Securities Act.
E. Expenses. Each of the parties hereto shall bear such
party's own expenses in connection with this Agreement and the transactions
contemplated hereby.
F. Injunctive Relief. Notwithstanding the provisions of
Section XIII(G) hereof, in the event of a breach or threatened breach by any of
the Shareholders of the provisions of Section XI of this Agreement, each of the
Shareholders hereby agrees that the ▇▇▇▇▇▇ Partnerships and TELAC may seek an
injunction or similar equitable relief restraining any of the Shareholders from
committing or continuing any such breach or threatened breach or granting
specific performance of any act required to be performed by each of the
Shareholders under any such provision, without the necessity of showing any
actual damage or that money damages would not afford an adequate remedy and
without the necessity of posting any bond or other security. The parties hereto
hereby consent to the jurisdiction of the federal courts for the Eastern
District of Virginia and the Virginia commonwealth courts located in such
district for any proceedings under this Section XIII(F). The parties hereto
agree that the availability of arbitration in Section XIII(G) hereof shall not
be used by any party as grounds for the dismissal of any injunctive actions
instituted by TELAC or the ▇▇▇▇▇▇ Partnerships pursuant to this Section XIII(F).
Nothing herein shall be construed as prohibiting the ▇▇▇▇▇▇ Partnerships and
TELAC from pursuing any other remedies at law or in equity which it may have.
G. Arbitration. Any controversy or claim arising out of or
relating to this Agreement, or any breach hereof, shall, except as provided in
Section XIII(F) hereof, be settled by arbitration in accordance with the rules
of the American Arbitration Association then in effect and judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitration shall be held in the Washington, D.C.
metropolitan area.
H. Invalidity. Should any provision of this Agreement be held
by a court or arbitration panel of competent jurisdiction to be enforceable only
if modified, such holding shall not affect the validity of the remainder of this
Agreement, the balance of which shall continue to be binding upon the parties
hereto with any such modification to become a part hereof and treated as though
originally set forth in this Agreement. The parties further agree that any such
court or arbitration panel is expressly authorized to
37
modify any such unenforceable provision of this Agreement in lieu of severing
such unenforceable provision from this Agreement in its entirety, whether by
rewriting the offending provision, deleting any or all of the offending
provision, adding additional language to this Agreement, or by making such other
modifications as it deems warranted to carry out the intent and agreement of the
parties as embodied herein to the maximum extent permitted by law. The parties
expressly agree that this Agreement as modified by such court or arbitration
panel shall be binding upon and enforceable against each of them. In any event,
should one or more of the provisions of this Agreement be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions hereof, and if such
provision or provisions are not modified as provided above, this Agreement shall
be construed as if such invalid, illegal or unenforceable provisions had never
been set forth herein.
I. Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the successors and assigns of each of TELAC and
the ▇▇▇▇▇▇ Partnerships, respectively, and the legal representatives and heirs
of each of the Shareholders.
J. Governing Law. The validity of this Agreement and of any of
its terms or provisions, as well as the rights and duties of the parties under
this Agreement, shall be construed pursuant to and in accordance with the laws
of the Commonwealth of Pennsylvania.
K. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
L. Knowledge. Whenever the term "Knowledge" is used in this
Agreement, such term shall, with respect to TELAC, mean the actual knowledge or
awareness of Jordan, Morrow, ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇ ("Bazuro"), and shall with
respect to each Shareholder or officer named above, mean the actual knowledge or
awareness of such Shareholder or named officer without the duty to conduct any
investigation or inquiry.
M. Agency. Each of the Shareholders hereby authorizes TELAC to
deliver funds in the amount of $15,000,000 to ▇▇▇▇▇▇ Guaranty Trust Company of
New York as a deposit for a letter of credit which secures and would entirely
satisfy the obligations of TELAC under the Closing
Notes payable to the Shareholders.
38
Each of the Shareholders agrees that upon delivery of such
funds to ▇▇▇▇▇▇ Guaranty Trust Company of New York 2512091-3, such Shareholder
shall seek payment of the Closing Note of such Shareholder only by drawing
against such letter of credit for satisfaction of TELAC's obligations under such
Closing Note. None of the Shareholders shall seek any recourse from or make any
claim against TELAC or any other person with respect to such funds or the
payment of the Closing Notes.
N. Texas Lease. If necessary, ▇▇▇▇▇▇ on behalf of ▇▇▇▇▇▇ &
Company agrees to retain the law firm of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇, Dallas, Texas, or
another law firm agreeable to both parties, in order to defend ▇▇▇▇▇▇ & Company
and/or TELAC against an action to evict either ▇▇▇▇▇▇ & Company or TELAC from
their Dallas premises. ▇▇▇▇▇▇ agrees, on behalf of ▇▇▇▇▇▇ & Company, to pay the
reasonable attorneys' fees and costs of ▇▇▇▇▇▇▇▇ & Knight or another law firm
agreeable to both parties in connection with the representation described above.
▇▇▇▇▇▇ agrees that ▇▇▇▇▇▇ & Company will not agree to settle any eviction
proceeding if such settlement would result in a dispossession of TELAC from the
current Dallas, Texas premises without the consent of TELAC; provided, however,
that ▇▇▇▇▇▇ & Company will not be required to continue to defend any eviction
proceeding after fifteen (15) months from the date hereof.
* * *
39
IN WITNESS WHEREOF, this Agreement has been duly executed by
the parties hereto as of the date first above written.
TELEPHONE ACCESS, INC.
By /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
____________________________
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------
▇▇▇▇ ▇. ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇
------------------------------
▇▇▇▇▇▇ ▇▇▇▇
ESTATE OF ▇▇▇▇▇▇ ▇▇▇
By /s/ ▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇.
____________________________
Name: ▇▇▇▇▇▇ ▇. ▇▇▇, ▇▇.
Title: Executor
40
ABBINGDON VENTURE PARTNERS
LIMITED PARTNERSHIP
By: BDC-III Partners,
general partner
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
______________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
ABBINGDON VENTURE PARTNERS
LIMITED PARTNERSHIP-II
By: Abbingdon-II Partners,
general partner
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
______________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
ABBINGDON VENTURE PARTNERS
LIMITED PARTNERSHIP-III
By: Abbingdon-II Partners,
general partner
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
______________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇