<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
October 29, 1996
TELESPECTRUM WORLDWIDE INC.
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(Exact name of Registrant as specified in charter)
Delaware 0-21107 23-2845501
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(State of (Commission (IRS Employer
Incorporation) File Number) Identification Number)
443 South Gulph Road, King of Prussia, PA 19406
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(Address of principal executive offices)
(610) 878-7460
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(Registrant's telephone number)
<PAGE>
Item 2. Acquisition or Disposition of Assets
On October 29, 1996, TeleSpectrum Worldwide Inc. (the "Company")
purchased the assets of Technical Assistance Research Programs, Inc. and TARP
Information Systems, Inc. (collectively, "TARP") pursuant to an Asset Purchase
Agreement dated as of October 1, 1996 by and among the Company, TARP, John
Goodman and Mark Grainer. The purchase price was $15,000,000 paid in cash,
subject to adjustment based on a closing date balance sheet to be prepared after
closing. The assets sold included primarily cash, accounts and notes receivable,
and all other tangible and intangible personal property, including inventory,
furniture, fixtures, supplies, vehicles, computer hardware and software,
permits, trade names, goodwill and prepaid expenses.
On October 29, 1996, the Company also purchased all of the issued and
outstanding stock of Tarp (Europe) Limited ("Tarp Europe") pursuant to an
Exchange Agreement dated as of October 1, 1996 by and among the Company, John
Goodman, and Marc Grainer. The purchase price was $5,000,000 paid in shares of
Company common stock having an aggregate trading value equal to $5,000,000 and
an agreed upon fair market value of $3,250,000.
The combined consideration paid in connection with the above
transactions approximated the book value of the assets plus an additional amount
of $16,250,000.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of TARP and Tarp Europe.
To be filed on Form 8-K/A as soon as practicable, but not later than 60
days after this Form 8-K is filed.
(b) Pro Forma Financial Information (Unaudited).
To be filed on Form 8-K/A as soon as practicable, but not later than 60
days after this Form 8-K is filed.
(c) Exhibits
2.1 Asset Purchase Agreement dated as of October 1, 1996 by and
among TeleSpectrum Worldwide Inc.,Technical Assistance
Research Programs, Inc., TARP Information Systems, Inc., John
Goodman and Mark Grainer. (Schedules and similar attachments
referred to in the Asset Purchase Agreement are omitted but
will be furnished supplementally to the Securities and
Exchange Commission upon request.)
2
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2.2 Exchange Agreement dated as of October 1, 1996 by and among
TeleSpectrum Worldwide Inc., John Goodman, and Marc Grainer
3
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SIGNATURE
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TELESPECTRUM WORLWIDE INC.
BY: /s/ Richard C. Schwenk, Jr.
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Richard C. Schwenk, Jr.
Senior Vice President and
Chief Financial Officer
November 13, 1996
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EXHIBIT INDEX
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2.1 Asset Purchase Agreement dated as of October 1, 1996 by and among
TeleSpectrum Worldwide Inc.,Technical Assistance Research Programs, Inc.,
TARP Information Systems, Inc., John Goodman and Mark Grainer.
2.2 Exchange Agreement dated as of October 1, 1996 by and among TeleSpectrum
Worldwide Inc., John Goodman, and Marc Grainer
5
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EXHIBIT 2.1
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ASSET PURCHASE AGREEMENT
by and among
TELESPECTRUM WORLDWIDE INC.
(a Delaware corporation),
TECHNICAL ASSISTANCE RESEARCH PROGRAMS, INC.
(a District of Columbia corporation),
TARP INFORMATION SYSTEMS, INC.
(a Maryland corporation),
JOHN GOODMAN,
and
MARC GRAINER
Dated as of October 1, 1996
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<TABLE>
<CAPTION>
Section Page
<S> <C>
1. Reference to Definitions.............................................. -1-
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2. Purchase and Sale of the Business and Assets.......................... -1-
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3. Closing............................................................... -7-
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4. Conditions to Buyer's Obligations..................................... -8-
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5. Conditions to each Company's and each Shareholder's Obligations....... -8-
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6. Representations and Warranties of the Companies and the Shareholders.. -9-
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7. Representations and Warranties of the Buyer........................... -21-
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8. Certain Agreements.................................................... -22-
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9. Conduct of the Business Prior to the Closing.......................... -25-
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10. Survival of Representations; Indemnification.......................... -26-
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11. Termination........................................................... -29-
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12. Payment of Expenses................................................... -30-
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13. Contents of Agreement................................................. -30-
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14. Amendment, Parties in Interest, Assignment, Etc....................... -30-
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15. Interpretation........................................................ -30-
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16. Remedies.............................................................. -30-
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17. Notices............................................................... -31-
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18. Governing Law......................................................... -32-
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19. Consent to Jurisdiction; Service of Process, etc...................... -32-
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20. Counterparts.......................................................... -32-
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21. Definitions........................................................... -32-
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</TABLE>
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Exhibits
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A Form of Employment Agreement (Goodman)
B Form of Employment Agreement (Grainer)
C Form of Pledge Agreement
2.2 Excluded Assets
2.4 Excluded Liabilities
2.7 Allocation of Purchase Price
3.2(b)(i) Wire Instructions
3.2(b)(ii) Form of Bill of Sale and Assumption Agreement
4.2 Closing Certificate
4.3 Legal Opinion of Hurwitz & Abramson
5.3 Legal Opinion of Morgan, Lewis & Bockius
6 Disclosure Letter
<PAGE>
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT is made as of October 1, 1996, by and among
TeleSpectrum Worldwide Inc., a Delaware corporation ("Buyer"), Technical
Assistance Research Programs, Inc. (formerly known as TARP, Inc.), a District of
Columbia corporation ("Research"), Tarp Information Systems, Inc., a Maryland
corporation ("Systems" and together with Research, the "Companies"), John
Goodman and Marc Grainer. Messrs. Goodman and Grainer are sometimes referred to
together as the "Shareholders."
Background
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The Companies are engaged in the business of providing customer service,
customer service training, management research and consulting. The Companies
offer a wide range of services to help business maximize customer satisfaction.
These services include but are not limited to the assessments of customer
service performance; satisfaction measurement, baseline measurement;
satisfaction tracking and economic modeling; 800 number related assistance;
customer/inquiry handling for retail outlets; preventative analysis assistance;
casetracking software ("CRIS Software"); benchmarking studies, customer service
training and general consultative assistance in the area of customer driven
quality. The Shareholders own all of the issued and outstanding capital stock of
each Company. The Buyer desires to purchase the Purchased Assets (as defined
herein), the Companies desire the Purchased Assets to be sold, and the
Shareholders desire to cause the Companies to sell the Purchased Assets, all on
the terms and subject to the conditions of this Agreement.
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Reference to Definitions. For convenience, certain terms used in this
-------------------------
Agreement are listed in alphabetical order and defined or referred to in Section
21 (such terms as well as any other terms defined elsewhere in this Agreement
shall be equally applicable to both the singular and plural forms of the terms
defined).
2. Purchase and Sale of the Business and Assets.
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2.1. The Purchased Assets. Each Company, subject to the terms and
conditions of this Agreement, shall sell, transfer, convey and deliver to the
Buyer all of such Company's right, title and interest in all of its respective
Assets (collectively, the "Purchased Assets") which are not Excluded Assets. The
Purchased Assets include, without limitation, all of the following assets:
(a) the Business of each Company;
(b) the names Technical Assistance Research Programs, TARP, and
Tarp Information Systems; (c) the cash and cash equivalents of
each Company, wherever located;
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(c) the cash and cash equivalents of each Company, wherever
located;
(d) each Company's accounts and notes receivable and rights to
payment from any party for products sold and/or services delivered prior to the
Closing;
(e) the tangible and intangible personal property of each Company,
however owned, leased, or held, including, without limitation, machinery,
equipment, furniture, fixtures, supplies, vehicles, inventory, supplies and
computer hardware and software;
(f) the interests of each Company under all Contracts related to
the Business;
(g) the Permits of each Company;
(h) the goodwill, going concern value, past and present customer
and supplier lists and Intellectual Property (including the goodwill associated
therewith) of each Company;
(i) the prepaid expenses of each Company; and
(j) the books and records of each Company.
2.2. Excluded Assets. Notwithstanding anything to the contrary in
---------------
Section 2.1, the corporate seal, Charter Documents, bylaws, minute books and
other corporate records of each Company and any other assets listed on Exhibit
2.2 (the "Excluded Assets") shall not be included in the Purchased Assets:
2.3. Assumed Liabilities. At the Closing, the Buyer shall assume and
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thereafter in due course timely pay and fully satisfy all obligations (the
"Assumed Liabilities"):
(a) incurred after the Closing under all Contracts and Permits
which are conveyed to Buyer as Purchased Assets pursuant to the terms and
conditions hereof;
(b) any and all Liabilities relating exclusively to the Businesses
that are reflected on the Closing Balance Sheets and incurred after the date of
the Closing Balance Sheets in the ordinary course of business.
2.4. Excluded Liabilities. Except as expressly set forth in Section 2.3,
--------------------
the Buyer shall not, by virtue of its purchase of the Purchased Assets or
otherwise in connection with the Transactions, assume or become responsible for
any Liabilities (the "Excluded Liabilities") of the Company; including, without
limitation, (a) Liabilities for any taxes, other than for federal and state
income taxes owed by the Companies for periods prior to the Closing Date, (b)
Liabilities relating to any claims for health care or other welfare benefits,
(c) Liabilities relating to the violation of any Regulation, (d) tort
Liabilities, (e) Liabilities from claims arising under any Contract or Permit
not assumed by the Buyer hereunder and as described on Exhibit 2.4 hereto as
such Exhibit may be amended at or prior
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to the Closing; and (f) Liabilities for claims arising under any Contract or
Permit to the extent such claim is based on acts or omissions of any person
which occurred prior to the Closing.
2.5. Consent of Third Parties. Nothing in this Agreement shall be
------------------------
construed as an attempt by the Company to assign to the Buyer pursuant to this
Agreement any Contract or Permit included in the Purchased Assets which is by
its terms or by Regulation nonassignable without the consent of any other party
or parties, unless such consent or approval shall have been given, or as to
which all the remedies for the enforcement thereof available to the Company
would not by Regulation pass to the Buyer as an incident of the assignments
provided for by this Agreement (a "Non-Assignable Contract"). To the extent that
any such consent or approval in respect of, or a novation of, a Non-Assignable
Contract shall not have been obtained on or before the Closing Date, the
Companies and the Shareholders shall continue to use commercially reasonable
efforts to obtain any such consent, approval or novation after the Closing Date
until such time as it shall have been obtained, and the Companies shall
cooperate with the Buyer in any economically feasible arrangement to provide
that the Buyer shall receive the applicable Company's benefits under such
Non-Assignable Contract, provided that Buyer shall undertake to pay or satisfy
the corresponding Liabilities under the terms of such Non-Assignable Contract to
the extent that the Buyer would have been responsible therefor if such consent,
approval or novation had been obtained.
2.6. Post-Closing Adjustment to Purchase Price. As soon as practicable,
-----------------------------------------
but in any event within 30 days after the Closing, the Buyer shall engage Arthur
Andersen LLP to prepare, in accordance with GAAP (applied in a manner consistent
with the Audited Financial Statements), a balance sheet of each Company (the
"Closing Date Balance Sheets") as of the end of the business on September 30,
1996. If the aggregate shareholders' equity as shown on the Closing Date Balance
Sheets is less than $1,350,000 (such amount is referred to as the "Net Worth
Deficiency"), within ten business days after delivery of the Post-Closing
Balance Sheets to the Companies, the Companies shall pay the Buyer by wire
transfer of immediately available funds an amount equal to the Net Worth
Deficiency. If the aggregate shareholders' equity as shown on the Closing Date
Balance Sheets is greater than $1,350,000 (such amount is referred to as the
"Net Worth Excess"), within ten business days after delivery of the Post-Closing
Balance Sheets to the Companies, the Buyer shall pay to the Companies by wire
transfer of immediately available funds an amount equal to the Net Worth Excess.
Notwithstanding anything in this Section 2.6 to the contrary, if there is any
Net Worth Deficiency or Net Worth Excess and the parties hereto dispute any item
contained on the Closing Date Balance Sheets, the party disputing such item
shall notify the other party in writing of each disputed item, and specify the
amount thereof in dispute within thirty business days after the delivery of the
Closing Balance Sheets. If the Buyer and the Companies cannot resolve any such
dispute which would eliminate or reduce the amount of the Net Worth Deficiency
or Net Worth Excess, as applicable, then the amount to which there is no dispute
promptly shall be paid and the amount in dispute shall be resolved by an
independent nationally recognized accounting firm which is reasonably acceptable
to the Buyer and the Companies (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
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allocated between the Buyer and the Companies so that the Companies share of
such costs shall be in the same proportion that the aggregate amount of the
disputed amounts submitted to the Independent Accounting Firm that are
unsuccessfully disputed by the Companies (as finally determined by the
Independent Accounting Firm) bears to the total amount of such disputed amounts
so submitted to the Independent Account Firm. All distributions made by the
Companies prior to the Closing Date shall be deemed to have been made on or
before September 30, 1996 for purposes of this calculation regardless of when
declared or made.
The parties acknowledge that all profits and losses of the Companies
realized after the close of business on September 30, 1996 will accrue to the
benefit or detriment of the Buyer, as applicable. In this regard, for tax
purposes, the Companies shall operate the Businesses as agents for the Buyer and
the Buyer, as principal, shall recognize all such income, profit, losses and
expenses.
2.7. Purchase Price.
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(a) In addition to assuming the Assumed Liabilities, the aggregate
price to be paid by the Buyer to the Companies (the "Purchase Price") for the
purchase of the Purchased Assets shall be the sum of (i) $15,000,000 (the
"Closing Payment") and (ii) the Contingent Payments. The Buyer shall pay the
Closing Payment by wire transfer of immediately available funds pursuant to
written instructions provided by the Companies to the Buyer. The Closing Payment
shall be allocated among the Companies as set forth on Exhibit 2.7 hereto as
such Exhibit is amended on prior to the Closing.
(b) As additional consideration for the sale of the goodwill of the
Companies accompanying the Purchased Assets, the Companies shall have the
opportunity to receive up to an additional $1,666,667 on account of the
operating performance of the TARP Division in each of the 1997, 1998 and 1999
Periods. The Contingent Payment, if any, in each of the 1997, 1998 and 1999
Periods shall be equal to $1,666,667 provided the EBITDA of the TARP Division in
any such year exceeds $4,000,000. If the EBITDA of the TARP Division in any of
the 1997, 1998 or 1999 Periods is less than or equal to $3,500,000 then the
Companies shall not receive any Contingent Payment with respect to such
Period(s). If the EBITDA of the TARP Division in any of the 1997, 1998 or 1999
Periods is greater than $3,500,000 and less than $4,000,000, then the Companies
shall be entitled receive a Contingent Payment with respect to any such
Period(s) equal to (x) the difference between the EBITDA for such period minus
$3,500,000, divided by (y) $500,000, and multiplied by (z) $1,666,667. Subject
to Section 10.4(c), each Contingent Payment, if any, shall be payable on the
later of the 45th day after the end of the Buyer's fiscal quarter in which the
end of the applicable 1997, 1998 or 1999 Period ends or the date the EBITDA
Statement becomes final pursuant to Section 2.7(c). Notwithstanding anything to
the contrary in this Section 2.7(b), if EBITDA in 1998 or 1999 exceeds
$4,000,000, then the amount of the excess ("Excess EBITDA") shall be carried
back to the 1997 or 1998 periods and treated as earned EBITDA in such other
periods for purposes of calculating the amount of the Contingent Payments
payable in such other periods. In no event shall any Excess EBITDA be carried
forward to future periods in the calculation of any Contingent Payment. If the
carry back of any Excess EBITDA results in an increase in the amount of any
Contingent Payment payable with respect to a prior period, such portion of the
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Contingent Payment shall be due and payable at the same time as the Contingent
Payment is due with respect to the current period. The right to receive a
Contingent Payment shall be assignable to the Shareholders upon liquidation of
the Companies (and further assignable by the Shareholders but only to trusts for
the benefit of their respective families); provided, however, that the
obligations of the Shareholders to reimburse the Company under this Section 2.7
shall not be assignable. Since the value of the Contingent Payments, if any, is
highly speculative, the parties hereto acknowledge that they have not assigned
any value to the Contingent Payment.
For purposes hereof:
"EBITDA" shall mean the income from operations before income taxes,
depreciation and amortization of the TARP Division during the twelve
month period ending on September 30 in each of 1997, 1998 and 1999 (as
applicable), as calculated in accordance with GAAP. For purposes of
this calculation, EBITDA for the 1997, 1998 and 1999 Periods will be
adjusted for any of the following items:
(1) any expenses, charges and write-downs or any losses resulting
from the sale, conversion or other disposition of capital
assets, other than in the ordinary course of business, or
inconsistent with the past practice;
(2) any excess depreciation from assets as a result of the
write-up of any such asset's basis;
(3) any amortization of goodwill or other intangibles from the
write-up of such items;
(4) any management fees or allocations of overhead costs
attributable to the Buyer except for such fees or allocations
attributable to those administrative or other functions
previously performed by the TARP Division to the extent that
such fees or allocations do not exceed the cost which the TARP
Division would incur in performing such services;
(5) expenses incurred in the development of CRIS Software
(currently estimated to consist of approximately $400,000 of
outside vendor costs, plus related hardware and software costs
and employee costs) from a DOS-environment to a Windows-based
environment, but only to the extent the incursion of such
related hardware and software costs and employee costs are
pre-approved in writing by each of Buyer and each Shareholder;
and;
(6) any foreign currency gains or losses.
The Companies and the Shareholders acknowledge that as part of each
Shareholder's obligations under his respective Employment Agreement, he will be
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required to work with certain members of Buyer's management in connection with
the integration of the operations of the TARP Division with those of the Buyer.
In addition, the Shareholders further acknowledge that the Buyer is engaged in
the business of operating call centers and that he will periodically be
assisting the Buyer in the sale of its call center services, as well as advising
the Buyer from time to time regarding the performance of its call centers.
Accordingly, the Companies and each Shareholder further acknowledge that such
activities may adversely or positively affect the amount of the Contingent
Payments. The Buyer, however, shall not cause a diversion of a material portion
of the TARP Division's historical revenues from the TARP Division without first
obtaining the Shareholders prior written consent, such consent shall not
unreasonably be withheld. In the event of any such diversion of revenues, the
Shareholders and the Buyer shall amend this Section 2.7 to appropriately reflect
the financial impact of such diversion on the opportunity to earn the Contingent
Payments, so that the Shareholders shall be credited with the loss in EBITDA
when calculating the Contingent payments.
(c) Buyer shall engage Arthur Andersen LLP to calculate the EBITDA of
TARP Division as soon as reasonably practical after each of the 1997, 1998 and
1999 Periods and deliver to the Companies and the Buyer a statement (each an
"EBITDA Statement"), as soon as reasonably practical after each such Period, but
in no case more than 30 days thereafter, indicating its calculation of EBITDA
for the applicable Period. If the Companies or the Buyer disputes any item
contained on an EBITDA Statement, such person shall notify the other in writing
of each disputed item (collectively, the "Disputed Amounts") and specify the
amount thereof in dispute within twenty business days after the delivery of the
applicable EBITDA Statement. If the Companies and the Buyer cannot resolve any
such dispute within ten days thereafter, then the amount on which the parties
are in agreement promptly shall be paid and the amount in dispute shall be
resolved by an Independent Accounting Firm. The determination of the Independent
Accounting Firm shall be made as promptly as practical and shall be final and
binding on the parties, absent manifest error which error may only be corrected
by such Independent Accounting Firm. Any expenses relating to the engagement of
the Independent Accounting Firm shall be allocated between the Companies and the
Buyer so that the Companies' share of such costs shall bear the same proportion
to the total costs as the total of Disputed Amounts unsuccessfully contested by
the Companies (as finally determined by the Independent Accounting Firm) bears
to the total of the Disputed Amounts so submitted to the Independent Accounting
Firm.
2.8. Allocation of the Purchase Price. The Purchase Price shall be
---------------------------------
allocated among the Purchased Assets as set forth on Exhibit 2.7 hereto. The
Companies and the Buyer shall prepare their respective Federal, state and local
tax returns (and any applicable statements required by Section 1060 of the Code)
employing the allocation set forth on Exhibit 2.7 and shall not take a position
in any tax proceeding or otherwise that is inconsistent with such allocation.
The Companies and the Buyer shall give prompt notice to each other of the
commencement of any tax audit or the assertion of any proposed deficiency or
adjustment by any taxing authority or agency which challenges such allocation.
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3. Closing.
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3.1. Location, Date. The closing of the Transactions (the "Closing") shall
---------------
take place at the offices of the Morgan, Lewis & Bockius LLP, 2000 One Logan
Square, Philadelphia, PA 19103 on or before October 28, 1996 (the "Termination
Date") or such earlier date upon the satisfaction of (or waiver by the party
entitled to the benefit of) the conditions set forth in Sections 5 and 6, or at
such other place, date and time as the parties may agree in writing.
3.2. Closing Deliveries. In connection with the completion of the
-------------------
Transactions contemplated in Section 3, at the Closing,
(a) the Buyer shall deliver or cause to be delivered:
(i) the cash portion of the Purchase Price which is required
to be delivered to the Companies at the Closing;
(ii) executed copies of the Employment Agreements and the
Pledge Agreement; and
(iii) such other agreements, documents and instruments
contemplated by this Agreement and such other items as may be
reasonably requested; and
(b) the Companies shall deliver or cause to be delivered:
(i) payment instructions regarding the cash portion of the
Purchase Price as set forth on Exhibit 3.2(b)(i), which may be
amended by the Companies at the Closing;
(ii) bills of sale and assignment and assumption agreements
transferring all of the Companies right, title and interest in and to
the Purchased Assets in form and substance satisfactory to the Buyer
and substantially in the form of Exhibit 3.2(b)(ii) hereof); and
(iii) such other agreements, documents and instruments
contemplated by this Agreement and such other items as may be
reasonably requested.
(c) each Shareholder shall deliver his respective executed
counterparts of his Employment Agreement and the Pledge Agreement.
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4. Conditions to Buyer's Obligations.
----------------------------------
The obligations of Buyer to effect the Closing shall be subject to
the satisfaction at or prior to the Closing of the following conditions, any one
or more of which may be waived by Buyer:
4.1. No Court Order or Litigation. No Court Order or Litigation shall be
-----------------------------
pending or threatened that prevents or that seeks to restrain the consummation,
or challenges the validity or legality, of Transactions or that would limit or
affect adversely Buyer's acquisition of the Purchased Assets.
4.2. Representations, Warranties and Agreements. (a) The representations
-------------------------------------------
and warranties of the Companies and the Shareholders set forth in this Agreement
shall be true and correct in all material respects as of the Closing Date as
though made at such time and (b) the Companies and the Shareholders shall have
each performed or tendered performance in all material respects of all covenants
and agreements contained in this Agreement required to be performed and complied
with by them at or prior to the Closing. The Companies and the Shareholders
shall have delivered to the Buyer a certificate signed by the President of each
Company and each Shareholder, in form and substance reasonably satisfactory to
counsel to the Buyer, substantially in the form set forth in Exhibit 4.2 that
the Companies and the Shareholders have performed all covenants and agreements
to be performed by them under this Agreement and as regarding the accuracy of
its representations and warranties contained herein as of the Closing Date.
4.3. Legal Opinion. The Companies and the Shareholders shall have
--------------
tendered a legal opinion of Hurwitz & Abramson, counsel to the Companies and the
Shareholders, that is reasonably acceptable to counsel to the Buyer and
substantially in the form of Exhibit 4.3.
4.4. Regulatory Approvals. All Permits, if any, necessary for the
---------------------
consummation of Buyer's acquisition of the Purchased Assets shall have been
obtained and shall be in full force and effect.
4.5. Required Tender. The Shareholders and the Companies shall have
----------------
tendered or caused the tender of the items set forth in Section 3.2 (b).
5. Conditions to each Company's and each Shareholder's Obligations.
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The obligations of the Companies and the Shareholders to effect the Closing
shall be subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by such parties:
5.1. No Injunction. No Court Order or Litigation shall be pending or
--------------
threatened that prevents or that seeks to restrain the consummation, or
challenges the validity or legality, of Transactions.
5.2. Representations, Warranties and Agreements. The representations and
-------------------------------------------
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warranties of the Buyer set forth in this Agreement shall be true and complete
in all material respects as of the Closing Date as though made at such time and
the Buyer shall have performed or tendered performance in all material respects
of all covenants and agreements contained in this Agreement required to be
performed and complied with by it at or prior to the Closing. The Buyer shall
have delivered a certificate signed by the President of the Buyer, in form and
substance reasonably satisfactory to counsel to the Companies, that the Buyer
has performed all covenants and agreements to be performed by it under this
Agreement and as regarding the accuracy of its representations and warranties
contained herein as of the Closing Date.
5.3. Legal Opinion. The Buyer shall have tendered a legal opinion of
--------------
Morgan, Lewis & Bockius LLP, counsel to the Buyer, that is reasonably acceptable
to counsel to the Companies and substantially in the form of Exhibit 5.3.
5.4. Regulatory Approvals. All Permits, if any, necessary for the
---------------------
consummation of Buyer's acquisition of the Purchased Assets shall have been
obtained and shall be in full force and effect.
5.5. Required Tender. The Buyer shall have tendered or caused the tender
----------------
of the items set forth in Section 3.2(a).
6. Representations and Warranties of the Companies and the Shareholders. Each
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Company and each Shareholder hereby jointly and severally represents and
warrants to the Buyer that, except as set forth in a letter dated as of the date
of this Agreement, executed by each Company and each Shareholder, addressed and
delivered to Buyer by each Company and each Shareholder on or prior to the
Closing Date and containing information required by this Agreement and
exceptions to the representations and warranties of the Companies and the
Shareholders under this Agreement (the "Disclosure Letter"):
6.1. Corporate Status. Research is a corporation duly organized, validly
-----------------
existing and in good standing under the laws of the District of Columbia and is
qualified to do business as a foreign corporation under the laws of the
Commonwealth of Virginia and is in good standing in each jurisdiction where it
is required to be so qualified, except where the failure to so qualify would not
have a material adverse effect. The Charter Documents and bylaws of Research
that have been delivered to the Buyer are effective under applicable Regulations
and are current, correct and complete. Systems is a corporation duly organized,
validly existing and in good standing under the laws of the State of Maryland
and is qualified to do business as a foreign corporation and is in good standing
in each jurisdiction where it is required to be so qualified, except where the
failure to so qualify would not have a material adverse effect. The Charter
Documents and bylaws of Systems that have been delivered to the Buyer are
effective under applicable Regulations and are current, correct and complete.
6.2. Authorization. Each Company has the requisite power and authority to
--------------
own its property and carry on its Business as currently conducted, and to
execute and deliver the Transaction Documents to which it is a party and to
perform the Transactions to be performed by it. Such execution, delivery and
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<PAGE>
performance by each Company have been duly authorized by all necessary corporate
action. Each Shareholder has the requisite power, capacity, legal right and
authority to execute and deliver the Transaction Documents to which he is a
party and to perform the Transactions to be performed by him thereunder. Each
Transaction Document executed and delivered by each Company has been duly
executed and delivered by such Company and constitutes a valid and binding
obligation of such Company, enforceable against it in accordance with its terms.
Each Transaction Document to be executed and delivered by each Shareholder will
be duly executed and delivered by him and will constitute a valid and binding
obligation of him, enforceable against him in accordance with its terms.
6.3. Consents and Approvals. Except for the consents specified in the
-----------------------
Disclosure Letter (the "Required Consents"), neither the execution or delivery
by either Company or either Shareholder of the Transaction Documents to which it
or he is a party, nor the performance of the Transactions to be performed by it
or her thereunder, will require any filing, consent or approval, constitute a
Default or cause any payment obligation to arise under (a) any Regulation or
Court Order to which such Company or Shareholder is subject, (b) the Charter
Documents or bylaws of either Company or (c) any Contract, Government Permit or
other document to which either Company is a party or by which its Business or
Assets may be subject.
6.4. Stock Ownership. The Shareholders own all of the issued and
----------------
outstanding capital stock of each Company.
6.5. Financial Statements. The Disclosure Letter includes correct and
---------------------
complete copies of each Company's audited financial statements consisting of a
balance sheet of each Company as of December 31, 1993, 1994 and 1995 and the
related statements of income, retained earnings and cash flows for the years
then ended (collectively, the "Audited Financial Statements"), each of which
were audited by the firm of Halt, Jackson & Thrasher. The Disclosure Letter also
includes correct and complete copies of each Company's unaudited financial
statements consisting of a balance sheet of each Company as of the period ended
August 31, 1996 and the related statements of income and cash flow for the
period then ended (the "Unaudited Financial Statements," and together with the
Audited Financial Statements, the "Financial Statements"). The Financial
Statements of each Company are consistent with the books and records of such
Company, and there are no material transactions required by GAAP to be recorded
in accounting records that have not been recorded in the accounting records
underlying such Financial Statements. The Financial Statements have been
prepared in accordance with GAAP consistently applied and present fairly the
financial position and assets and liabilities of each Company as of the dates
thereof and its cash flows and the results of its operations for the years and
periods then ended, subject to normal recurring year-end adjustments and the
absence of notes in the case of the Unaudited Financial Statements. The balance
sheets of the Companies as of December 31, 1995 that are included in the
Financial Statements are referred to herein as the "Company Balance Sheets" and
the dates thereof is referred to as the "Balance Sheet Date." The balance sheets
of the Companies as of August 31, 1996 that are included in the Financial
Statements are referred to herein as the "Interim Company Balance Sheets" and
the dates thereof is referred to as the "Interim Balance Sheet Date."
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<PAGE>
6.6. Title to Assets and Related Matters. Each Company has good and
------------------------------------
marketable title to, valid leasehold interests in or valid licenses to use, all
of its respective Purchased Assets, free from any Encumbrances except those
specified on the Disclosure Letter. The use of the Purchased Assets is not
subject to any Encumbrances (other than those specified in the preceding
sentence), and such use does not materially encroach on the property or rights
of anyone else. All Purchased Assets are in the possession or under the control
of the Companies and consist of all of the Assets necessary to operate the
Businesses as now being operated. Except as set forth on the Disclosure Letter,
all of the tangible personal property included in the Assets (a) is in good
working condition and reasonable repair, subject to normal wear and tear, (b) is
usable in the ordinary course of business and (c) conforms in all material
respects with all applicable Regulations relating to its construction, use and
operation. Except for those items subject to the Personal Property Leases, no
Person other than the Companies own any vehicles, equipment or other tangible
assets located on the Real Property that are used by the Companies in the
Businesses (other than immaterial items of personal property owned by the
employees of the Companies) or that are necessary for the operation of the
Businesses.
6.7. Real Property. The Disclosure Letter describes all real estate
--------------
(including, without limitation, a description of how such real estate is zoned)
used in the operation of the Businesses as well as any other real estate that is
in the possession of or leased by the Companies and the improvements (including
buildings and other structures) located on such real estate (collectively, the
"Real Property"), identifies which Real Property is owned and which is leased,
and lists any leases under which any such Real Property is possessed by the
Companies or leased by the Companies to others (the "Real Estate Leases"). The
Disclosure Letter also describes any other real estate previously owned, leased
or otherwise operated by the Companies and the time periods of any such
ownership, lease or operation. All of the buildings and structures included in
the Real Property are structurally sound, and all of the heating, ventilating,
air conditioning, plumbing, sprinkler, electrical and drainage systems,
elevators and roofs, and all other fixtures, equipment and systems at or serving
such Real Property are generally in good condition, repair and working order and
are generally adequate for the present use of the Real Property by the Companies
in conducting their respective Businesses, and there is no condition which will
result in the termination of the present access from the Real Property to such
utility services and other facilities. The Companies have received no notices,
oral or written, and have no reason to believe, that any governmental body
having jurisdiction over any Real Property intends to exercise the power of
eminent domain or a similar power with respect to all or any part of the Real
Property. Neither Company has received any notices, oral or written, from any
governmental body, and has any reason to believe, that any of the Real Property
or any improvements erected or situate thereon, or the uses conducted thereon or
therein, violate any Regulations of any governmental body having jurisdiction
over such Real Property. The Companies have not received any notice from the
holder of any mortgage, from any insurance company which has issued a policy
with respect to any of the Real Property or from any board of fire underwriters
(or other body exercising similar functions) claiming any defects or
deficiencies in any of the Real Property or suggesting or requesting the
performance of any repairs, alterations or other work to any of the Real
Property.
6.8. Certain Personal Property. The Companies have delivered to the Buyer
--------------------------
a complete
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<PAGE>
fixed asset schedule, describing and specifying the location of all items of
tangible personal property that are included in the Company Balance Sheets.
Except as listed on the Disclosure Letter, since the Balance Sheet Date, the
Companies have not (i) acquired any items of tangible personal property that
has, in any case, a carrying value in excess of $25,000, or an aggregate
carrying value in excess of $50,000 or (ii) disposed of any items of tangible
personal property (other than inventory) that have, in any case, an initial
carrying value in excess of $25,000, or an initial aggregate carrying value in
excess of $50,000.
6.9. Personal Property Leases. The Disclosure Letter lists all assets
-------------------------
and property (other than Real Property) that have been used in the operation of
the Businesses and that are possessed by the Companies under an existing lease,
including all trucks, automobiles, forklifts, machinery, equipment, furniture
and computers, except for any lease under which the aggregate annual payments
are less than $12,000 (each, an "Immaterial Lease"). The Disclosure Letter also
lists the leases under which such assets and property listed on the Disclosure
Letter are possessed. All of such leases (excluding "Immaterial Leases") are
referred to herein as the "Personal Property Leases."
6.10. Accounts Receivable. The accounts receivable of each Company are
--------------------
bona fide accounts receivable created in the ordinary course of business and are
not subject to defenses, set-offs or counterclaims and are good and collectible
at the aggregate recorded amounts thereof (in each case, net of the reserves for
such items included in the Interim Company Balance Sheets). The Disclosure
Letter includes a correct and complete accounts and notes receivable aging of
the Companies as of the Interim Balance Sheet Date reflecting the aggregate
dollar amount of all accounts and notes receivable due the Companies which have
been outstanding for: 30 days or less; more than 30 but less than 61 days; more
than 60 but less than 91 days; and more than 90 days.
6.11. Inventory. All inventory of each Company consists of items
----------
useable or saleable in the ordinary course and is valued on each Company's books
and records at the lower of cost or fair market value. The inventory records for
each Company that have been delivered to the Buyer or made available for
inspection by the Buyer are accurate with respect to the data contained therein.
6.12. Accounts Payable. All accounts payable as set forth on the
------------------
Interim Company Balance Sheets or arising since the date thereof have been
incurred in the ordinary course of business.
6.13. Product Warranties and Price Guarantees. The Disclosure Letter
-----------------------------------------
sets forth all express product warranties and price guarantees made by the
Companies.
6.14. Liabilities. Except as specified on the Disclosure Letter, the
------------
Companies do not have any Liabilities, and none of the Purchased Assets are
subject to any Liabilities, except (a) as specifically disclosed on the Interim
Company Balance Sheets, (b) Liabilities incurred in the ordinary course since
the Interim Balance Sheet Date, and (c) Liabilities under any Contracts
specifically disclosed on the Disclosure Letter (or not required to be disclosed
because of the term or amount
-12-
<PAGE>
involved) that were not required under GAAP to
have been specifically disclosed or reserved for on the Interim Company Balance
Sheets.
6.15. Taxes. The Companies have duly filed all Federal, state, local,
------
foreign and other tax returns that are required to be filed and that were due
prior to the Closing Date, and have paid all taxes and assessments shown as
being due pursuant to such returns or pursuant to any assessment received. All
taxes and other assessments and levies that the Companies have been required by
law to withhold or to collect have been duly withheld and collected and have
been paid over to the proper governmental authorities or are properly held by
the Companies for such payment. There are no proceedings or other actions, nor
is there any basis for any proceedings or other actions, for the assessment or
collection of additional taxes of any kind for any period for which returns have
or should have been filed.
6.16. Subsidiaries. No Company owns, directly or indirectly, any
-------------
interest or investment (whether equity or debt) in any corporation, partnership,
business, trust, joint venture or other legal entity.
6.17. Legal Proceedings and Compliance with Law.
------------------------------------------
(a) Except as disclosed on the Disclosure Letter, there is no
Litigation that is pending or, to knowledge of either Company or either
Shareholder, threatened against or related to either Company. There has been no
Default under any Regulation applicable to either Company, the Assets or the
Businesses, including any Regulation relating to pollution or protection of the
environment, except for any Defaults that have been cured without material cost,
and no Company has received any notices from any governmental entity regarding
any alleged Default under any Regulation except those that have been cured
without material cost. There has been no Default with respect to any Court Order
applicable to either Company..
(b) Without limiting the generality of Section 6.17(a), except
as described on Disclosure Letter, there has not been any Environmental
Condition (i) at any premises at which the Businesses of the Companies (or any
predecessor of either Company) is currently conducted, (ii) at any property
owned, leased or operated at any time by either Company (or any predecessor of
either Company) or any Person controlled by any Affiliate of either Company, or
(iii) at any property at which wastes have been deposited or disposed by or at
the behest or direction of either Company (or any predecessor of either Company)
or any Person controlled by any Affiliate of either Company, nor has either
Company received written notice of any such Environmental Condition.
"Environmental Condition" means any condition or circumstance, including the
presence of Hazardous Substances, whether created by either Company (or any
predecessor of either Company) or any third party, at or relating to any such
property or premises that would (i) require abatement or correction under an
Environmental Law, (ii) give rise to any civil or criminal liability under an
Environmental Law, or (iii) create a public or private nuisance. "Environmental
Law" means all Regulations and Court Orders relating to pollution or protection
of the environment as well as any principles of common law under which a Person
may be held liable for the release or discharge of any materials into the
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<PAGE>
environment.
(c) The Companies have delivered to the Buyer correct and
complete copies of any written reports, studies or assessments in the possession
or control of either Company or any Shareholder that relate to any Environmental
Condition. Neither Company or any Shareholder knows of any other written
reports, studies or assessments, whether or not in the possession or control of
either Company or either Shareholder, that relate to any Environmental
Condition.
(d) Except in those cases where the failure would not have a
Material Adverse Effect, (i) each Company has obtained and is in full compliance
with all Permits, all of which are listed on the Disclosure Letter along with
their respective expiration dates, that are required for the ownership of the
Assets or operation of the Business and Assets as currently operated by such
Company, (ii) all of the Permits are currently valid and in full force and (iii)
each Company has filed such timely and complete renewal applications as may be
required with respect to its Permits. To the knowledge of each Company and each
Shareholder, no revocation, cancellation or withdrawal of a Permit has been
threatened.
6.18. Contracts.
----------
(a) The Disclosure Letter lists each Contract of the following
types to which either Company is a party or by which it is bound:
(i) Contracts with any present or former
stockholder, director, officer, employee, partner or consultant
or with any Affiliate of either Shareholder;
(ii) Contracts for the purchase of, or payment for,
supplies or products, or for the performance of services, from
or by a third party, in excess of $25,000 with respect to any
one supplier or other party;
(iii) Contracts to sell or supply products, inventory
or other property to, or to perform services for, a third
party, that involve an amount in excess of $25,000 with respect
to any one customer or other party;
(iv) Contracts to sell any product or provide any
service to a governmental or regulatory body;
(v) Contracts limiting or restraining it from
engaging or competing in any lines or business with any Person;
(vi) Contracts with any customer providing for
a volume refund, retrospective price adjustment or price
guarantee;
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<PAGE>
(vii) Contracts to lease to or to operate for
any other party any asset that involve an amount in excess of
$25,000 in any individual case (other than Real Estate Leases
and Personal Property Leases identified on the Disclosure
Letter);
(viii) Any notes, debenture, bonds, conditional sale
agreements, equipment trust agreements, letter of credit
agreements, reimbursement agreements, loan agreements or other
Contracts for the borrowing or lending of money (including
loans to or from officers, directors, partners or stockholders
or with Affiliates of either Shareholder or any members of his
immediate families), or agreements or arrangements for a line
of credit or for a guarantee of, or other undertaking in
connection with, the indebtedness of any other Person;
(ix) Contracts creating or recognizing any
Encumbrances with respect to any Assets;
(x) Contracts with distributors, manufacturers
sales representatives or other sales agents;
(xi) Contracts which relate in whole or in
part to any software, technical assistance or other know-how or
other Intellectual Property right;
(xii) Contracts for any capital expenditure or
leasehold improvement in excess of $25,000; and
(xiii) Any other Contracts (other than those that may
be terminated on not more than 30 days' notice without
Liability and those described in any of (i) through (xii)
above) not made in the ordinary course of business or which are
material to the Business or the assets.
(b) No Company is in Default under any Contract. To the
knowledge of each Company and each Shareholder, no Company has received any
communication from, or given any communication to, any other party indicating
that such Company or such other party, as the case may be, is in Default under
any Contract. To the knowledge of each Company and each Shareholder, none of the
other parties to any such Contract to which a Company is a party is in Default
thereunder.
6.19. Insurance. The Disclosure Letter lists all policies or binders of
---------
insurance held by or on behalf of the Companies or relating to the Business or
any of the Assets, specifying with respect to each policy the insurer, the type
of insurance, the amount of the coverage, insured, the expiration date, the
policy number and any pending claims thereunder. There is no Default with
respect to any such policy or binder, nor has there been any failure to give any
notice or present any claim under any such policy or binder in a timely fashion
or in the manner or detail required by the policy or binder, except for any of
the foregoing that would not, individually or in the aggregate, have a Material
Adverse Effect. There is no notice of nonrenewal or cancellation with respect
to, or disallowance
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<PAGE>
of any claim under, any such policy or binder that has been received by either
Company, except for any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect.
6.20. Intellectual Property and Software Products.
-------------------------------------------
(a) Neither Company neither currently uses nor has it previously
used in the development, production or marketing of its products and services
any Copyrights, Patents or Trademarks except for those listed on Disclosure
Letter. Each Company owns or has the lawful right to use all material
Intellectual Property that is used in the operation of its business in the
ordinary course or otherwise. All of the Intellectual Property listed on
Disclosure Letter is owned by such Company free and clear of any Encumbrances,
or used pursuant to an agreement that is described on Disclosure Letter. Except
in such cases that would not have a Material Adverse Effect, individually or in
the aggregate, neither Company infringes upon nor unlawfully or wrongfully uses
any Intellectual Property rights owned or claimed by another Person, and neither
Company is in Default, nor has received any notice of any claim of infringement
or any other claim or proceeding, with respect to any such Intellectual
Property. Except for any rights under written licenses or other written
Contracts, no current or former employee of the Company and no other Person owns
or has any proprietary, financial or other interest, direct or indirect, in
whole or in part, and including any right to royalties or other compensation, in
any of the Intellectual Property, or in any application therefor.
(b) Disclosure Letter contains a complete list of all of the
computer software products sold, licensed, distributed, marketed, used or under
development by the Companies (the "Software Products"). Each of the Software
Products performs substantially in accordance with the specifications,
documentation and other written material used in connection with the sale,
license, distribution, marketing or use thereof and is free of defects in
programming and operation except such defects as would not materially and
adversely affect the use of the respective Software Products for their intended
purposes.
(c) Except as specified on Disclosure Letter, all right, title and
interest in and to the Software Products are owned by the Companies, free and
clear of all Encumbrances. No government funding was utilized in the development
of any of the Software Products. Except for such violations that would not have
a Material Adverse Effect, individually or in the aggregate, the sale, license,
distribution, marketing or use of the Software Products by the Companies
violates any rights of any other Person, and the Companies have not received any
communication alleging such a violation. Except as specified on Disclosure
Letter, the Companies have no obligation to compensate any Person for the sale,
license, distribution, marketing or use of the Software Products. Other than as
set forth on Disclosure Letter, the Companies have not granted to any other
Person any license, option or other right in or to any of the Software Products,
except for non-exclusive, royalty-bearing, end-user licenses granted pursuant to
license agreements, substantially in the forms attached as part of Disclosure
Letter (the "End-User Licenses").
(d) The Companies have no obligation to any Person to maintain,
modify, improve or upgrade any of the Software Products, except for any such
obligation set forth in an End-User
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<PAGE>
License or under a customer-specific services agreement and such other
obligations as would not have a Material Adverse Effect.
(e) The Companies have kept secret and has not disclosed the source
codes for the Software Products to any Person other than to those Persons
identified on Disclosure Letter and to certain employees of the Companies.
6.21. Employee Relations.
------------------
(a) Except as described in the Disclosure Letter, no Company is
(a) a party to or otherwise bound by any collective bargaining or other type of
union agreement, (b) a party to, involved in or, to the knowledge of either
Company or either Shareholder, threatened by, any labor dispute or unfair labor
practice charge, or (c) currently negotiating any collective bargaining
agreement, and no Company has experienced any work stoppage during the last
three years. The Disclosure Letter sets forth the names and current annual
salary rates or current hourly wages of all present employees of each Company.
(b) Each Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice.
There are no outstanding claims against either Company (whether under
Regulation, Contract, policy, or otherwise) asserted by or on behalf of any
present or former employee or job applicant of such Company on account of or for
(i) overtime pay, other than overtime pay for work done in the current payroll
period, (ii) wages or salary for any period other than the current payroll
period, (iii) any amount of vacation pay or pay in lieu of vacation time off,
other than vacation time off or pay in lieu thereof earned in or in respect of
the current fiscal year, (iv) any amount of severance pay or similar benefits,
(v) unemployment insurance benefits, (vi) workers' compensation or disability
benefits, (vii) any violation of any statute, ordinance, order, rule or
regulation relating to plant closings, employment terminations or layoffs,
including but not limited to The Workers Adjustment and Retraining Act, (viii)
any violation of any statute, ordinance, order, rule or regulations relating to
employee "whistle blower" or "right-to-know" rights and protection, (ix) any
violation of any statute, ordinance, order, rule or regulations relating to the
employment obligations of federal contractors or subcontractors or (x) any
violation of any Regulation relating to minimum wages or maximum hours of work,
and neither Company nor either the Shareholder is aware of any such claims which
have not been asserted. No Person (including any governmental body) has asserted
or threatened any claims against either Company under or arising out of any
Regulation relating to discrimination or occupational safety in employment or
employment practices.
6.22. ERISA.
-----
(a) The Disclosure Letter contains a complete list of all
Benefit Plans sponsored or maintained by each Company or under which such
Company may be obligated. The Companies have delivered to the Buyer (i) accurate
and complete copies of all Benefit Plan documents and all other material
documents relating thereto, including all summary plan descriptions, summary
annual reports
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<PAGE>
and insurance contracts, (ii) accurate and complete detailed summaries of all
unwritten Benefit Plans, (iii) accurate and complete copies of the most recent
financial statements and actuarial reports with respect to all Benefit Plans for
which financial statements or actuarial reports are required or have been
prepared, and (iv) accurate and complete copies of all annual reports for all
Benefit Plans (for which annual reports are required) prepared within the last
three years. Each Benefit Plan providing benefits that are funded through a
policy of insurance is indicated by the word "insured" placed by the listing of
the Benefit Plan in the Disclosure Letter.
(b) All Benefit Plans conform (and at all times have conformed)
to, and are being administered and operated (and at all times have been
administered and operated) in material compliance with, the requirements of
ERISA, the Code and all other applicable Regulations. All returns, reports and
disclosure statements required to be made under ERISA and the Code with respect
to all Benefit Plans have been timely filed or delivered. There have not been
any "prohibited transactions," as such term is defined in Section 4975 of the
Code or Section 406 of ERISA involving any of the Benefit Plans, that could
subject either Company to any penalty or tax imposed under the Code or ERISA.
(c) Except as set forth in the Disclosure Letter, any Benefit
Plan that is intended to be qualified under Section 401(a) of the Code and
exempt from tax under Section 501(a) of the Code has been determined by the
Internal Revenue Service to be so qualified, and such determination remains in
effect and has not been revoked. To the knowledge of either Company or either
Shareholder, nothing has occurred since the date of any such determination that
would affect adversely such qualification or exemption, or result in the
imposition of excise taxes or income taxes on unrelated business income under
the Code or ERISA with respect to any Benefit Plan.
(d) No Company has a defined benefit plan subject to Title IV
of ERISA, nor does it have a current or contingent obligation to contribute to
any multiemployer plan (as defined in Section 3(37) of ERISA). No Company has
any liability with respect to any employee benefit plan (as defined in Section
3(3) of ERISA) other than with respect to the Benefit Plans. For purposes of
this Section 7.22(d), the term "Company" shall include any corporation that is a
member of any controlled group of corporations (as defined in Section 414(b) of
the Code) that includes each Company, any trade or business (whether or not
incorporated) that is under common control (as defined in Section 414(c) of the
Code) with either Company, any organization (whether or not incorporated) that
is a member of an affiliated service group (as defined in Section 414(m) of the
Code) that includes either Company and any other entity required to be
aggregated with such Company pursuant to the regulations issued under Section
414(o) of the Code.
(e) There are no pending or, to the knowledge of either Company
or either Shareholder, threatened claims by or on behalf of any Benefit Plans,
or by or on behalf of any individual participants or beneficiaries of any
Benefit Plans, alleging any breach of fiduciary duty on the part of either
Company or any of its officers, directors or employees under ERISA or any other
applicable Regulation, or claiming benefit payments other than those made in the
ordinary operation of such plans, nor is there, to the knowledge of either
Company or either Shareholder, any basis for
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<PAGE>
any such claim. To the knowledge of either Company or either Shareholder, the
Benefit Plans are not the subject of any investigation, audit or action by the
Internal Revenue Service, the Department of Labor or the Pension Benefit
Guaranty Corporation ("PBGC").
(f) Each Company has made all required contributions under its
Benefit Plans, including the payment of any premiums payable to the PBGC and
other insurance premiums on a timely basis, or such contributions are properly
accrued on such Company's Financial Statements.
(g) With respect to any Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(1) of ERISA) (a "Welfare
Plan"), (i) each Welfare Plan for which contributions are claimed as deductions
under any provision of the Code is in material compliance with all applicable
requirements pertaining to such deduction, (ii) with respect to any welfare
benefit fund (within the meaning of Section 419 of the Code) related to a
Welfare Plan, there is no disqualified benefit (within the meaning of Section
4976(b) of the Code) that would result in the imposition of a tax under Section
4976(a) of the Code, (iii) any Benefit Plan that is a group health plan (within
the meaning of Section 4980B(g)(2) of the Code) complies, and in each and every
case has complied, with all of the material requirements of Section 4980B of the
Code, ERISA, Title XXII of the Public Health Service Act and the applicable
provisions of the Social Security Act, and (iv) all Welfare Plans may be amended
or terminated by the Companies at any time on or after the Closing Date.
6.23. Corporate Records. The minute books of each Company contain
-----------------
complete and correct copies of its Charter Documents and bylaws and of all
minutes of meetings, resolutions and other proceedings of its Board of Directors
and stockholders. The stock record book of each Company is complete and correct.
6.24. Absence of Certain Changes. Except as contemplated by this
--------------------------
Agreement, since the Balance Sheet Date, except as mutually agreed, each Company
has conducted its Business in the ordinary course and there has not been with
respect to such Company:
(a) any material adverse change in its Business, Assets or
Liabilities;
(b) any change or amendment in its Charter Documents;
(c) any distribution or payment declared or made in respect of
its capital stock by way of dividend, purchase or redemption of shares or
otherwise;
(d) any increase in the compensation payable or to become
payable to any director, officer, employee or agent, except for increases for
non-officer employees made in the ordinary course of business, nor any other
change in any employment or consulting arrangement;
(e) any sale, assignment or transfer of any material Assets, or
any additions to or transactions involving any material Assets, other than those
made in the ordinary course of business;
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<PAGE>
(f) other than in the ordinary course of business, any waiver
or release of any claim or right or cancellation of any debt held;
(g) any payment to any Affiliate of such Company, except as
specified in the Disclosure Letter;
(h) any change in the accounting policies followed by such
Company or the method of applying such principles; or
(i) any capital expenditure commitment involving in any
individual case, or series of related cases, more than (i) $25,000 or (ii) an
amount that would cause the sum of all such capital expenditure commitments to
exceed $50,000.
6.25. Customers. Each Company has used its reasonable business
---------
efforts to maintain and currently maintains, good working relationships with all
of its customers. The Disclosure Letter contains a list of the names of each of
the five customers that, for the year ended December 31, 1995, were the largest
dollar volume customers of products and services sold and provided by each
Company. Except as specified on the Disclosure Letter, none of such customers
has given either Company notice terminating, canceling or threatening to
terminate or cancel any Contract or relationship with such Company.
6.26. Finder's Fees. Except for Hamilton Capital Partners, Inc.,
-------------
whose fee will be paid at the Closing by the Company, no Person retained by
either Company or either Shareholder is or will be entitled to any commission or
finder's or similar fee in connection with the Transactions.
6.27. [Intentionally Left Blank]
------------------------
6.28. Additional Information. The Disclosure Letter accurately lists
----------------------
the following:
(a) the names of all officers and directors of each Company;
(b) the names and addresses of every bank or other financial
institution in which each Company maintains an account (whether checking, saving
or otherwise), lock box or safe deposit box, and the account numbers and names
of the Persons having signing authority or other access thereto;
(c) the names of all Persons authorized to borrow money or
incur or guarantee indebtedness on behalf of each Company;
(d) the names of all Persons holding powers of attorney from
each Company and a summary statement of the terms thereof; and
(e) all names under which each Company has conducted any
Business or which it has
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otherwise used at any time during the past five years.
6.29. Transactions with Affiliates. Except as set forth on the
----------------------------
Disclosure Letter, no affiliate of any Shareholder or any member of his
immediate family, owns or has a controlling ownership interest in any
corporation or other entity (other than TARP Europe Ltd.) that is a party to any
Contract with respect to the Assets or Business.
6.30. Full Disclosure. There are and will be no materially misleading
---------------
misstatements in any of the representations and warranties made by either
Company or either Shareholder in this Agreement, the Disclosure Letter, the
Exhibits to this Agreement, any other Transaction Document or in any of the
documents, certificates and instruments delivered or to be delivered by either
Company or either Shareholder pursuant to this Agreement and each Company and
each Shareholder has not omitted to state any fact necessary to make statements
made herein or therein not materially misleading.
6.31. Full Disclosure. The representations and warranties of the
---------------
Companies and the Shareholders contained in this Agreement, disregarding all
qualifications and exceptions herein relating to materiality or Material Adverse
Effect, are true and correct with only such exceptions as would not in the
aggregate have a Material Adverse Effect.
7. Representations and Warranties of the Buyer. The Buyer hereby repre-
-------------------------------------------
sents and warrants to each Company and each Shareholder as follows:
7.1. Corporate. The Buyer is a corporation duly organized, validly
---------
existing and in good standing under the laws of the State of Delaware. The Buyer
has the requisite power and authority to execute and deliver the Transaction
Documents to which it is a party and to perform the Transactions to be performed
by it thereunder, and such execution, delivery and performance by it have been
duly authorized by all necessary corporate action.
7.2. Enforceability. The Transaction Documents to which the Buyer
--------------
is a party constitute valid and binding obligations of the Buyer, enforceable
against it in accordance with their terms.
7.3. Consents and Approvals. Neither the execution and delivery by
----------------------
the Buyer of the Transaction Documents to which it is a party, nor the
performance of the Transactions to be performed by it thereunder, will require
any filing, consent or approval or constitute a Default under (a) any Regulation
or Court Order to which it is subject, (b) its Charter Documents or bylaws or
(c) any Contract, Permit or other document to which it is a party or by which
its properties or other assets may be subject.
7.4. Finder's Fees. No Person retained by the Buyer is or will be
-------------
entitled to any commission or finder's or similar fee in connection with the
Transactions.
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7.5. Full Disclosure. There are and will be no materially misleading
---------------
misstatements in any of the representations and warranties made by the Buyer in
this Agreement, the Disclosure Letter, the Exhibits to this Agreement or in any
of the documents, certificates and instruments delivered or to be delivered by
the Buyer pursuant to this Agreement and the Buyer has not omitted to state any
fact necessary to make statements made herein or therein not materially
misleading.
8. Certain Agreements.
------------------
8.1. Access. Between the date of this Agreement and the Closing
------
Date, the Companies shall (a) give Buyer and its authorized representatives and
legal counsel reasonable access to all properties, books, Contracts, Assets and
records of the Companies, (b) permit Buyer to make inspections thereof, and (c)
cause its officers and its advisors to furnish the Buyer with such financial and
operating data and other information with respect to the Business of the
Companies and to discuss with the Buyer and its authorized representatives and
legal counsel the affairs of the Companies, all as Buyer may from time to time
reasonably request.
8.2. Regulatory Matters. The Companies and the Buyer shall (a) file
------------------
with applicable regulatory authorities any applications and related documents
required to be filed by them in order to consummate the transactions and (b)
cooperate with each other as they may reasonably request in connection with the
foregoing.
8.3. Exclusivity. From the date hereof until the earlier of the
-----------
Closing or the termination of this Agreement, no Company nor either Shareholder
or any of their respective agents shall, directly or indirectly, solicit or
negotiate or enter into any agreement with any other Person, or provide any
nonpublic information to any other Person, with respect to or in furtherance of
any proposal for a merger or business combination involving, or acquisition of
any interest in, or (except in the ordinary course of business) sale of assets
by, the Companies, except for the acquisition of the Purchased Assets by Buyer.
8.4. Update Disclosure Letter. Between the date hereof and the
------------------------
Closing Date, the Companies and the Shareholders shall promptly disclose to
Buyer in writing any information set forth in the Disclosure Letter which is no
longer applicable and any information of the nature of that set forth in the
Disclosure Letter which arises after the date hereof and which would have been
required to be included in the Disclosure Letter if such information had been
obtained on the date of delivery thereof.
8.5. Best Efforts. Each party shall use their best efforts to cause
------------
all conditions to the performance of the parties hereto that are within its
control to be satisfied and the Transactions consummated by the Termination
Date.
8.6. Financial Information. Until the Closing, each Company shall
---------------------
provide the Buyer, within 15 days after the end of each month, with an unaudited
consolidated balance sheet and income statement of such Company as of and for
the month then ended, prepared on the same basis as the
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interim financial statements referred to in Section 6.5, and certified as such
by the chief financial officer of such Company.
8.7. Restrictive Covenants.
---------------------
(a) Each Shareholder covenants that for the period ending four
years after the Closing Date, he will not, directly or indirectly, own, manage,
operate, join, control, finance or participate in the ownership, management,
operation, control or financing of, or be connected as a partner, principal,
agent, representative, consultant or otherwise with or use or permit his name to
be used in connection with, any business or enterprise engaged directly or
indirectly in competition with the business conducted by the Buyer at any time
during such period within any portion of the United States or Western Europe in
the direct marketing business which includes inbound and outbound telemarketing,
fulfillment, direct mail and customer retention (the "Restricted Business"). It
is recognized by the Buyer and each Shareholder that the Restricted Business is
and is expected to continue to be conducted throughout the United States and
Western Europe and that more narrow geographical limitations of any nature on
this non-competition covenant (and the non-solicitation covenant set forth in
Section 8.7(b)) are therefore not appropriate. The foregoing restriction shall
not be construed to prohibit (i) the ownership by a Shareholder as a passive
investment of not more than five percent (5%) of any class of securities of any
corporation which is engaged in any of the foregoing businesses having a class
of securities registered pursuant to Section 12 of the Securities Exchange Act
of 1934, as amended, or (ii) teaching, the authorship of articles or other
scholarly works or the delivery of speeches by either Shareholder.
(b) Each Shareholder further covenants that for the period
ending four years after the Closing Date, he will not, either directly or
indirectly, (i) call on or solicit any Person who or which within the past two
years has been a customer with respect to the Restricted Business with respect
to the activities prohibited by Section 8.7(a) or (ii) solicit the employment of
any person who is employed by the Buyer during such period on a full or
part-time basis.
(c) Each Shareholder recognizes and acknowledges that by reason
of his ownership of and employment by the Companies she has had access to
Confidential Information relating to the Restricted Business. Each Shareholder
acknowledges that such Confidential Information is a valuable and unique asset
and covenants that he will not disclose any such Confidential Information after
the Closing Date to any person for any reason whatsoever, unless such
information (a) is in the public domain through no wrongful act of such
Shareholder, (b) has been rightfully received from a third party without
restriction and without breach of this Agreement or (c) except as may be
required by law.
(d) Each Shareholder acknowledges that the restrictions
contained in this Section 8.7 are reasonable and necessary to protect the
legitimate interests of the Buyer, and that any violation will result in
irreparable injury to the Buyer.
(e) Each Shareholder agrees that the Buyer shall be entitled to
preliminary and
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permanent injunctive relief, without the necessity of proving actual damages, as
well as an equitable accounting of all earnings, profits and other benefits
arising from any violation of this Section 8.7, which rights shall be cumulative
and in addition to any other rights or remedies to which the Buyer may be
entitled. In the event that any of the provisions of this Section 8.7 should
ever be adjudicated to exceed the time, geographic, product or service, or other
limitations permitted by applicable law in any jurisdiction, then such
provisions shall be deemed reformed in such jurisdiction to the maximum time,
geographic, product or service, or other limitations permitted by applicable
law.
(f) The covenants set forth in this Section 8 shall be in
addition to and not in limitation of any similar covenants set forth in any
employment agreement between the Buyer or any of its Affiliates and either
Shareholder.
8.8. Required Consents. Each Company and each Shareholder shall use
-----------------
their best efforts to take, or cause to be taken, such action to execute and
deliver, or cause to be executed and delivered, such additional documents and
instruments and to do, or cause to be done, all things necessary, proper or
advisable to obtain the Required Consents.
8.9. Release of Personal Guarantees. The Buyer shall cause all
------------------------------
obligations of the Company which have been guaranteed by any Shareholder to
either be retired or use its best efforts to arrange to have such guarantees
released; provided, however, to the extent that the Company and the Buyer are
unable to effectuate any such release, Buyer shall indemnify and holds harmless
each Shareholder from and against any liabilities, claims, demands, judgments,
losses, costs, damages or expenses whatsoever (including reasonable attorneys'
fees and disbursements incurred by them in connection therewith) that he may
sustain, suffer or incur and that result from, arise out of or relate to such
guarantees.
8.10. Satisfaction of Liabilities. Each Company shall at the Closing,
---------------------------
fully satisfy or cause to have been satisfied all material third party
Liabilities and obligations of such Company which are not also Assumed
Liabilities.
8.11. Termination of the 401(k) Plan. The Companies shall terminate
------------------------------
the Technical Assistance Research Programs, Inc. 401(k)/Profit Sharing Plan as
or before the Closing Date, and shall take all actions necessary to enable the
participants to receive a distribution of their account balances on account of
the termination of the plan and roll over their distributed benefits to a 401(k)
plan maintained by Buyer if such Buyer's plan so permits.
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<PAGE>
9. Conduct of the Business Prior to the Closing.
--------------------------------------------
9.1. Operation in Ordinary Course. Between the date of this
----------------------------
Agreement and the Closing Date, each Company shall conduct its Business in all
material respects in the ordinary course and to use commercially reasonable
efforts to maintain all current business relationships.
9.2. Business Organization. Between the date of this Agreement and
---------------------
the Closing Date, each Company shall use commercially reasonable efforts, to
preserve substantially intact its business organization and keep available the
services of the present officers and employees of such Company.
9.3. Corporate Organization. Between the date of this Agreement and
----------------------
the Closing Date, no Company shall amend its Charter Document or bylaws and
shall not:
(a) issue, sell or otherwise dispose of any of its capital
stock, or create, sell or otherwise dispose of any options, rights, conversion
rights or other agreements or commitments of any kind relating to the issuance,
sale or disposition of any of its capital stock;
(b) reclassify, split up or otherwise change its capital stock;
(c) be party to any merger, consolidation or other business
combination;
(d) sell, lease, license or otherwise dispose of any of its
Assets (including, but not limited to rights with respect to its Intellectual
Property), except in the ordinary course of business; or
(e) organize any subsidiary or acquire any equity securities of
any Person or any equity or ownership interest in any business.
9.4. Business Restrictions. Between the date of this Agreement (the
---------------------
Balance Sheet Date with respect to Section 9.4(a)) and the Closing Date, except
as mutually agreed, no Company shall:
(a) borrow any funds or otherwise become subject to, whether
directly or by way of guarantee or otherwise, any indebtedness for borrowed
money;
(b) create any material Encumbrance on any of its material
Assets;
(c) except in the ordinary course of business, increase in any
manner the compensation of any director or officer or increase in any manner the
compensation of any class of employees;
(d) create or materially modify any bonus, deferred
compensation, pension, profit sharing, retirement, insurance, stock purchase,
stock option, or other fringe benefit plan, arrangement or practice or any other
employee benefit plan (as defined in section 3(3) of ERISA);
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<PAGE>
(e) make any capital expenditure or acquire any property or
assets (other than raw materials and supplies) for a cost in excess of $50,000
in any one case or $100,000 in the aggregate;
(f) enter into any agreement that materially restricts either
Company from carrying on the Business;
(g) cancel any material debts of others or waive any material
claims or rights; or
(h) act or omit from taking any action which would cause any of
the representations and warranties in Section 7 to be inaccurate.
9.5. Duty of Shareholders. The Shareholders shall cause each
--------------------
Company to take or refrain from taking such actions set forth elsewhere in this
Section 9.
10. Survival of Representations; Indemnification.
--------------------------------------------
10.1. Survival of Representations, Etc. The representations and
--------------------------------
warranties given by each Company, each Shareholder and the Buyer under this
Agreement shall survive the Closing for a period of two years after the Closing
Date, except that all representations and warranties contained in Sections 6.4,
6.15, 6.17 and 6.22 shall survive the Closing for the period of the applicable
statute of limitations plus any extensions or waivers thereof.
10.2. Indemnification by the Shareholders and the Companies. The
-----------------------------------------------------
Shareholders and the Companies, jointly and severally, hereby agree to indemnify
and hold harmless the Buyer, and its successors and assigns, (each, an
"Indemnified Buyer Party") from and against any and all Liabilities, claims,
demands, judgments, settlement payments, losses, costs, damages and expenses
whatsoever (including reasonable attorneys', consultants' and other professional
fees and disbursements of every kind, nature and description incurred by such
Indemnified Buyer Party in connection therewith) (collectively, "Damages") that
such Indemnified Buyer Party may sustain, suffer or incur that result from,
arise out of or relate to (a) any Excluded Liability, (b) any breach of or any
inaccuracy in any representation, warranty, covenant or agreement of either
Company or either Shareholder contained in this Agreement, including any breach
of the obligation to indemnify hereunder, (c) any Liability or obligation of
either Company involving an Environmental Condition or which otherwise relates
to, or involves a claim, Liability or obligation which arises out of or is based
upon, any Environmental Law, to the extent that such Liability or obligation
relates to or arises out of, in whole or in part, any activity occurring,
condition existing, omission to act or other matter existing prior to the
Closing Date, (d) any Liability or obligation of any Company or any shareholder
involving taxes due and payable by, or imposed with respect to either Company or
either Shareholder for any all taxable periods ending on or prior to the Closing
Date (whether or not such taxes have been due and payable) or (e) other
specified indemnities based upon due diligence investigation.
10.3. Indemnification by the Buyer. The Buyer hereby agrees to
----------------------------
indemnify and hold harmless each Company (each, an "Indemnified Seller Party")
from and against any Damages that any
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<PAGE>
Indemnified Seller Party may sustain, suffer or incur that result from, arise
out of or relate to any breach of or inaccuracy in any representation, warranty,
covenant or agreement of the Buyer contained in this Agreement, including any
breach of the obligation to indemnify hereunder.
10.4. Limitation on Liabilities.
-------------------------
(a) Notwithstanding anything in this Agreement to the contrary,
an indemnifying party shall not have any liability to an indemnified party in
respect of any claim for indemnification for the breach of any representation or
warranty contained herein (i) unless a claim with respect thereto is delivered
to the indemnifying party specifying the factual basis of the claim in
reasonable detail to the extent then known by the indemnifying party prior to
the termination of the survival period for such representation and warranty set
forth in Section 10.1 hereof and (ii) until the damages to the indemnified
party, after taking into account Section 10.4(a) hereof, exceed a cumulative
aggregate total of $175,000, but then to the full extent of such Damages.
(b) In addition, the indemnification liability of the Companies
and the Shareholders under Section 10.2 of this Agreement shall be limited to an
aggregate of $6,250,000 in the case of any claim or claims for breaches of
representations and warranties of either Company or either Shareholder made
herein or in any other Transaction Document.
(c) In pursuing the indemnification liability of the Companies
and the Shareholders under Section 10.2 of this Agreement, the Company shall
first resort to the Pledged Shares, valued as set forth in the Pledge Agreement.
In addition, the Buyer shall have an offset right against Contingent Payments
otherwise payable pursuant to Section 2.7 of this Agreement.
10.5. Procedure for Claims.
--------------------
(a) An Indemnified Buyer Party or an Indemnified Seller Party
that desires to seek indemnification under any part of this Section 10 (each, an
"Indemnified Party") shall give notice (a "Claim Notice") to each party
responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor"). Such notice shall briefly explain the nature of the claim and the
parties known to be involved, and shall specify the amount thereof. If the
matter to which a claim relates shall not have been resolved as of the date of
the Claim Notice, the Indemnified Party shall estimate the amount of the claim
in the Claim Notice, but also specify therein that the claim has not yet been
liquidated (an "Unliquidated Claim"). If an Indemnified Party gives a Claim
Notice for an Unliquidated Claim, the Indemnified Party shall also give a second
Claim Notice (the "Liquidated Claim Notice") within 60 days after the matter
giving rise to the claim becomes finally resolved, and the Liquidated Claim
Notice shall specify the amount of the claim. Each Indemnitor to which or whom a
Claim Notice is given shall respond to any Indemnified Party that has given a
Claim Notice (a "Claim Response") within 30 days (the "Response Period") after
the later of (i) the date that the Claim Notice is given or (ii) if a Claim
Notice is first given with respect to an Unliquidated Claim, the date on which
the Liquidated Claim Notice is given. Any Claim Notice or Claim Response shall
be given in accordance with the notice requirements hereunder, and any Claim
Response shall specify whether or not the
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Indemnitor giving the Claim Response disputes the claim described in the Claim
Notice. If any Indemnitor fails to give a Claim Response within the Response
Period, such Indemnitor shall be deemed not to dispute the claim described in
the related Claim Notice. If any Indemnitor elects not to dispute a claim
described in a Claim Notice, whether by failing to give a timely Claim Response
or otherwise, then the amount of such claim shall be conclusively deemed to be
an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an
Indemnified Party hereunder, such Indemnitor shall pay to such Indemnified Party
within 30 days after the last day of the applicable Response Period the amount
to which such Indemnified Party shall be entitled. If there shall be a dispute
as to the amount or manner of indemnification under this Section 10, the
Indemnitor and the Indemnified Party shall seek to resolve such dispute through
negotiations and, if such dispute is not resolved within twenty days, the
Indemnified Party may pursue whatever legal remedies may be available for
recovery of the Damages claimed from any Indemnitor. If any Indemnitor fails to
pay all or part of any indemnification obligation when due, then such Indemnitor
shall also be obligated to pay to the applicable Indemnified Party interest on
the unpaid amount for each day during which the obligation remains unpaid at an
annual rate equal to 10%.
10.6. Third Party Claims. An Indemnified Party that desires to seek
------------------
indemnification under any part of this Section 10 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor may,
or if so requested by such Indemnified Party, any Indemnitor shall, participate
in such Action or assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnitor shall not consent to the
entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party (which consent shall not be unreasonably
withheld), that (a) fails to include as an unconditional term thereof the giving
by the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect of any such Action or (b) grants the claimant or plaintiff
any injunctive relief against the Indemnified Party. Any failure to give prompt
notice under this Section 10.6 shall not bar an Indemnified Party's right to
claim indemnification under this Section 10, except to the extent that an
Indemnitor shall have been harmed by such failure.
10.7. Exceptions to Limitations. Nothing herein shall be deemed to
-------------------------
limit or restrict in any manner any rights or remedies which the Buyer has, or
might have, at law, in equity or otherwise, against either Company or either
Shareholder based on intentional fraud by either Company or either Shareholder
hereunder.
10.8. Effect of Investigation. Any claim for indemnification shall
-----------------------
not be invalid as a result of any investigation by or opportunity to investigate
afforded to Buyer unless the Buyer has actual conscious awareness of the claim
prior to the Closing.
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<PAGE>
10.9. Contingent Claims. Nothing herein shall be deemed to prevent an
-----------------
Indemnified Party from making a claim hereunder for potential or contingent
claims or demands provided the Claim Notice sets forth the specific basis for
any such potential or contingent claim to the extent then feasible and the
Indemnified Party has reasonable grounds to believe that such a claim or demand
may be made; provided, however, that any such potential or contingent claim or
demand must mature into an actual claim or demand not later than three years
after the Closing Date.
10.10 Security for Indemnification. As security for their
----------------------------
indemnification obligations, under this Section 10, the Shareholders shall
pledge certain of shares of the Common Stock, par value $.01 per share, of Buyer
pursuant to the Pledge Agreement attached hereto as Exhibit C.
11. Termination.
-----------
11.1 Grounds for Termination. This Agreement may be terminated at
-----------------------
any time prior to the Closing Date:
(a) by mutual written consent of the Buyer and the Companies;
(b) by Buyer prior to the Closing Date if its due diligence
investigation and review of the Businesses, the Purchased Assets and the
prospects and obligations of each Company shall not have been completed to its
sole satisfaction;
(c) by either Company or by Buyer, if the Closing has not
occurred by the Termination Date; provided, however, that the right to terminate
this Agreement under this paragraph (b) of Section 11.1 shall not be available
to any party that has breached any of its covenants, representations or
warranties in this Agreement in any material respect (which breach has not been
cured);
(d) by either Company or the Buyer, if there shall be any
Regulation that makes consummation of the Transactions illegal or otherwise
prohibited or if any Court Order enjoining such Company or the Buyer from
consummating the Transactions is entered and such Court Order shall become final
and nonappealable;
(e) by the Buyer, if either Company shall have breached any of
its covenants hereunder or if the representations and warranties of such Company
contained in this Agreement or in any certificate or other writing delivered by
such Company pursuant hereto shall not be true and correct, except for such
changes as are contemplated by this Agreement, and, in either event, if such
breach is subject to cure, such Company has not cured such breach within 10
business days of the Buyer's notice of an intent to terminate;
(f) by either Company, if the Buyer shall have breached any of
its covenants hereunder or if the representations and warranties of the Buyer
contained in this Agreement or in any certificate or other writing delivered by
the Buyer pursuant hereto shall not be true and correct, except for such
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<PAGE>
changes as are contemplated by this Agreement, and, in either event, if such
breach is subject to cure, the Buyer has not cured such breach within 10
business days of a Company's notice of an intent to terminate.
11.2. Effect of Termination. If this Agreement is terminated pursuant
---------------------
to Section 11.1, any party may pursue any legal or equitable remedies that may
be available if such termination is based on a breach of another party.
12. Payment of Expenses. Each party hereto shall pay their own expenses for
-------------------
lawyers, accountants, consultants, investment bankers, brokers, finders and
other advisors with respect to the Transactions.
13. Contents of Agreement. This Agreement, together with the other
---------------------
Transaction Documents, sets forth the entire understanding of the parties hereto
with respect to the Transactions and supersedes all prior agreements or
understandings among the parties regarding those matters.
14. Amendment, Parties in Interest, Assignment, Etc. This Agreement may be
-----------------------------------------------
amended, modified or supplemented only by a written instrument duly executed by
each of the parties hereto. If any provision of this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument duly executed by
such party. The parties hereto shall execute and deliver any and all documents
and take any and all other actions that may be deemed reasonably necessary by
their respective counsel to complete the Transactions.
15. Interpretation. Unless the context of this Agreement clearly requires
--------------
otherwise, (a) references to the plural include the singular, the singular the
plural, and the part the whole, (b) "or" has the inclusive meaning frequently
identified with the phrase "and/or" and (c) "including" has the inclusive
meaning frequently identified with the phrase "but not limited to." The section
and other headings contained in this Agreement are for reference purposes only
and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified. Each accounting
term used herein that is not specifically defined herein shall have the meaning
given to it under GAAP.
16. Remedies. The remedies provided by Section 10 shall constitute the
-------
exclusive remedies for the matters covered thereby. With respect to any matters
not covered by such Section, any party shall be entitled to such rights and
remedies as such party may have at law or in equity or otherwise for any breach
of this Agreement, including the right to seek specific performance, rescission
or restitution, none of which rights or remedies shall be affected or diminished
by the remedies provided hereunder.
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<PAGE>
17. Notices. All notices that are required or permitted hereunder shall be
-------
in writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto given in accordance with the foregoing notice procedures:
If to the Buyer:
TeleSpectrum Worldwide Inc.
443 S. Gulph Road
King of Prussia, PA 19406
FAX: 610-962-5109
Attention: Richard C. Schwenk, Jr., Senior Vice
President and Chief Financial Officer
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
FAX: 215-963-5299
Attention: Stephen M. Goodman, Esquire
If to Goodman:
John A. Goodman
5024 Balton Road
Bethesda, MD 20816
If to Grainer:
Marc A. Grainer
6406 Recreation Lane
Falls Church, VA 22041
In each case, with a required copy to:
Hurwitz & Abramson
1735 20th Street, N.W.
Washington, DC 20009
FAX: 202-462-0379
Attention: Ronald E. Abramson, Esq.
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<PAGE>
18. Governing Law. This Agreement shall be construed and interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its provisions concerning conflict of laws.
19. Consent to Jurisdiction; Service of Process, etc.
-------------------------------------------------
(a) Each party hereto irrevocably and unconditionally (i)
agrees that any suit, action or other legal proceeding (collectively, "Suit")
arising out of this Agreement may be brought and adjudicated in the United
States District Court for the Eastern District of Pennsylvania or, if such court
does not have jurisdiction or will not accept jurisdiction, in any court of
competent civil jurisdiction in Chester County, Pennsylvania, (ii) consents and
submits to the non-exclusive jurisdiction of any such court for the purposes of
any such Suit and (iii) waives and agrees not to assert by way of motion, as a
defense or otherwise in any such Suit, any claim that it or he is not subject to
the jurisdiction of the above courts, that such Suit is brought in an
inconvenient forum or that the venue of such Suit is improper.
(b) Each party hereto also irrevocably consents to the service
of any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 17 or by any other method provided or permitted
under applicable law. Each party hereto agrees that final judgment in any Suit
(with all right of appeal having either expired or been waived or exhausted)
shall be conclusive and that the Buyer shall be entitled to enforce such
judgment in any other jurisdiction of the world by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of indebtedness arising from such judgment.
20. Counterparts. This Agreement may be executed in two or more counter-
-------------
parts, each of which shall be binding as of the date first written above, and
all of which shall constitute one and the same instrument. Each such copy shall
be deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
21. Definitions.
------------
"Affiliates" means, with respect to a particular party, persons or
entities controlling, controlled by or under common control with that party, as
well as the officers, directors and majority-owned entities of that party and of
its other Affiliates.
"Agreement" means this Agreement and the exhibits hereto.
"Assets" means all of the assets, properties, goodwill and rights of
every kind and description, real and personal, tangible and intangible
(including goodwill), wherever situated and whether or not reflected in the most
recent Financial Statements, that are owned or possessed by the Companies.
"Assumed Liabilities" is defined in Section 2.3.
-32-
<PAGE>
"Balance Sheet Date" is defined in Section 6.5.
"Benefit Plans" means all employee benefit plans of each Company within
the meaning of Section 3(3) of ERISA and any related or separate Contracts,
plans, trusts, programs, policies, arrangements, practices, customs and
understandings, in each case whether formal or informal, that provide benefits
of economic value to any present or former employee of the Company, or present
or former beneficiary, dependent or assignee of any such employee or former
employee, including, without limitation, all incentive, bonus, deferred
compensation, vacation, holiday, medical, disability, share purchase or other
similar plans, policies, programs, practices or arrangements.
"Business" means the entire existing business and the operations,
facilities and other Assets of the Companies.
"Buyer" is defined above in the preamble.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 3.1.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Companies" is defined the preamble.
"Company Balance Sheets" is defined in Section 6.5.
"Confidential Information" means any confidential information or trade
secrets of the Business, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, know-how and other
technical information, advertising, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships with
dealers, distributors, wholesalers, customers, clients, suppliers and others who
have business dealings with the Business.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document or commitment, arrangement, undertaking, practice
or authorization that is or may be binding on any Person or its property under
applicable law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
-33-
<PAGE>
"Court Order" means any judgment, decree, injunction, order or ruling
of any Federal, state, local or foreign court or governmental or regulatory body
or arbitrator or authority that is binding on any Person or its property under
applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration.
"Disclosure Letter" is defined in Section 6.
"Employment Agreement" means the Employment Agreement between the Buyer
and each Shareholder entered into as of the Closing Date, in substantially the
forms attached as Exhibits A and B.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability or voting, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property interest.
"End-User Licenses" is defined in Section 6.20(c).
"Environmental Condition" is defined in Section 6.17(b).
"Environmental Law" is defined in Section 6.17(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Excluded Assets" is defined in Section 2.2.
"Excluded Liabilities" is defined in Section 2.4.
"Financial Statements" is defined in Section 6.5.
"GAAP" means United States generally accepted accounting principles.
"Hazardous Substances" means (i) any gasoline, fuel oil or any other
petroleum products, explosives, alcohols or chemical solvents or polychlorinated
biphenyls, (ii) any substance, waste, material or product defined as hazardous,
radioactive, extremely hazardous or toxic under any Environmental Law, and
(iii) asbestos, asbestos-containing substances or urea formaldehyde insulation.
"Indemnified Buyer Party" is defined in Section 10.2.
-34-
<PAGE>
"Indemnified Seller Party" is defined in Section 10.4.
"Interim Balance Sheet" is defined in Section 6.5.
"Interim Balance Sheet Date" is defined in Section 6.5.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
know-how, trade secrets (including, without limitation, all results of research
and development), product formulae, franchises, inventions, rights-to-use and
other industrial and intellectual property rights.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the
Business, Assets, financial condition, results of operations, liquidity,
products, competitive position, customers or customer relations of either
Company.
"Non-Assignable Contracts" is defined in Section 2.5.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent in nature and, where relevant, amount with
past practices.
"Patents" means all patents and patent applications.
"Permit" means any governmental permit, license, registration,
certificate of occupancy, approval and other authorization.
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Personal Property Leases" is defined in Section 6.9.
"Pledge Agreement" means the Pledge Agreement between the Buyer and
each Shareholder entered into as of the Closing Date, in substantially the form
attached as Exhibit C.
"Purchase Price" is defined in Section 2.7.
"Purchased Assets" is defined in Section 2.1.
-35-
<PAGE>
"Real Estate Leases" is defined in Section 6.7.
"Real Property" is defined in Section 6.7.
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any Federal, state, local, foreign or other governmental agency or body
or of any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, record keeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Shareholders" is defined in the preamble.
"TARP Division" shall collectively mean the subsidiary or other
distinct operating unit of Buyer that operates the Businesses and the Purchased
Assets following the Closing and TARP (Europe) Limited, a Company registered in
England and Wales.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Transaction Documents" means this Agreement and the Employment
Agreements.
"Transactions" means the purchase and sale of the Purchased Assets and
the consummation of the other transactions contemplated by the Transaction
Documents.
-36-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first written above.
TELESPECTRUM WORLDWIDE INC.
By:
------------------------------------------
TECHNICAL ASSISTANCE RESEARCH
PROGRAMS, INC.
By:
------------------------------------------
Name:
Title:
TARP INFORMATION SYSTEMS, INC.
By:
------------------------------------------
Name:
Title:
SHAREHOLDERS
---------------------------------------------
John Goodman
---------------------------------------------
Marc Grainer
<PAGE>
EXHIBIT A
EMPLOYMENT AGREEMENT -- GRAINER
<PAGE>
EXHIBIT B
EMPLOYMENT AGREEMENT -- GOODMAN
<PAGE>
EXHIBIT C
PLEDGE AGREEMENT
<PAGE>
Exhibit 2.2: EXCLUDED ASSETS
<PAGE>
Exhibit 2.4: EXCLUDED LIABILITIES
<PAGE>
EXHIBIT 2.8-- Allocation of Purchase Price
<TABLE>
<CAPTION>
FMV Amt. Allocated
<S> <C> <C>
Technical Assistance Research Programs, Inc.
Class I Cash & Cash Equivalents
Class II CDS & Marketable Securities
Class III Class III Assets
A/R
FFE
Prepared Items
Non Compete (Part of 10,000 10,000
Employment Agt.)
Class IV Goodwill and Going Concern ______ ______
Other Contingent Payment for
Excess goodwill 0 0
TARP Information Systems, Inc.
Class I Cash & Cash Equivalents
Class II CDS & Marketable Securities
Class III Class III Assets
A/R
FFE
Prepared Items
Non Compete (Part of 10,000 10,000
Employment Agt.)
Class IV Goodwill and Going Concern ______ ______
</TABLE>
<PAGE>
EXHIBIT 3.2(b)(i) -- WIRE INSTRUCTIONS
1. Account of Technical Assistance Research Programs, Inc.
Account #
2. Account of TWP Information Systems, Inc.
Account #
3. Account of Hamilton Capital Partners
Account #
4. Account of Hurwitz & Abramson
Account #
5. Account of Lane Powell Sears Lubersky
Account #
<PAGE>
EXHIBIT 3.2(b)(ii) -- FORM OF BILL OF SALE
AND ASSUMPTION AGREEMENTS
<PAGE>
EXHIBIT 4.2 -- CLOSING CERTIFICATE
<PAGE>
EXHIBIT 4.3 -- LEGAL OPINION OF HURWITZ & ABRAMSON
<PAGE>
EXHIBIT 5.3
LEGAL OPINION OF MORGAN, LEWIS & BOCKIUS LLP
<PAGE>
EXHIBIT 6 -- DISCLOSURE LETTER
<PAGE>
Exhibit 2.2
- --------------------------------------------------------------------------------
EXCHANGE AGREEMENT
by and among
TELESPECTRUM WORLDWIDE INC.
(a Delaware corporation),
JOHN GOODMAN,
and
MARC GRAINER
Dated as of October 1, 1996
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
Section Page
- ------- ----
<S> <C> <C>
1. Reference to Definitions ........................................ -1-
------------------------
2. Exchange. ....................................................... -1-
---------
3. Closing ......................................................... -2-
-------
4. Conditions to TeleSpectrum's Obligations. ....................... -2-
-----------------------------------------
5. Conditions to each Shareholder's Obligations. ................... -3-
---------------------------------------------
6. Representations and Warranties of the Shareholders .............. -4-
--------------------------------------------------
7. Representations and Warranties of TeleSpectrum. ................ -17-
-----------------------------------------------
8. Certain Agreements. ............................................ -18-
-------------------
9. Conduct of the Business Prior to the Closing ................... -19-
--------------------------------------------
10. Survival of Representations; Indemnification. .................. -21-
---------------------------------------------
11. Termination .................................................... -24-
-----------
12. Payment of Expenses ............................................ -25-
-------------------
13. Contents of Agreement. ......................................... -25-
----------------------
14. Amendment, Parties in Interest, Assignment, Etc. ............... -25-
------------------------------------------------
15. Interpretation. ................................................ -25-
---------------
16. Remedies. ...................................................... -25-
---------
17. Notices. ....................................................... -26-
--------
18. Governing Law .................................................. -27-
-------------
19. Consent to Jurisdiction; Service of Process, etc. .............. -27-
-------------------------------------------------
20. Legend; Registration Rights .................................... -27-
---------------------------
21. Counterparts. .................................................. -30-
-------------
22. Definitions .................................................... -30-
-----------
</TABLE>
<PAGE>
EXCHANGE AGREEMENT
THIS EXCHANGE AGREEMENT is made as of October 1, 1996, by and among
TeleSpectrum Worldwide Inc., a Delaware corporation ("TeleSpectrum"), John
Goodman and Marc Grainer. Messrs. Goodman and Grainer are sometimes referred to
together as the "Shareholders."
Background
----------
Tarp (Europe) Limited, a company registered in England and Wales (the
"Company"), is engaged in the business of providing customer service, management
research and consulting. The Shareholders own all of the issued and outstanding
capital stock of the Company which consists solely of voting stock, TeleSpectrum
desires to acquire all of such capital stock in exchange for the Shares (as
defined herein) and the Shareholders desire to acquire the Shares in exchange
for such capital stock, all on the terms and subject to the conditions of this
Agreement. The parties intend that, upon completion of the Exchange (defined
below), (a) the Company will be a wholly-owned subsidiary of TeleSpectrum,
(b) for federal income tax purposes, the Exchange shall constitute a tax-free
reorganization under ss. 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended (the "Code"). The parties also intend the Exchange to involve the
exchange of (x) such number of shares of TeleSpectrum Common Stock (as defined
below) having an aggregate Trading Value (defined below) equal to $5,000,000 and
an agreed upon fair market value (as defined in Section 22) of $3,250,000 for
(y) all of the issued and outstanding capital stock of the Company (having an
aggregate fair market value of $3,250,000).
NOW, THEREFORE, in consideration of and reliance on the respective
representations, warranties and covenants contained herein and intending to be
legally bound hereby, the parties hereto agree as follows:
1. Reference to Definitions. For convenience, certain terms used in this
-------------------------
Agreement are listed in alphabetical order and defined or referred to in Section
22 (such terms as well as any other terms defined elsewhere in this Agreement
shall be equally applicable to both the singular and plural forms of the terms
defined).
2. Exchange.
---------
2.1. Exchange. At the Closing, subject to the terms and conditions of
---------
this Agreement, (i) each Shareholder shall transfer, convey and deliver to
TeleSpectrum all of his right, title and interest in all of his TARP Shares and
(ii) the Company shall transfer and deliver certificates representing 50% of the
Shares to each Shareholder. Such transfers are collectively referred to as the
"Exchange."
2.2. Consent of Third Parties. Nothing in this Agreement shall be
-------------------------
construed as an attempt by the Company to assign pursuant to this Agreement any
Contract or Permit which is by its terms or by Regulation nonassignable without
the consent of any other party or parties, unless such consent or approval shall
have been given, (a "Non-Assignable Contract"). To the extent that any such
consent
<PAGE>
or approval in respect of, or a novation of, a Non-Assignable Contract
shall not have been obtained on or before the Closing Date, the Shareholders
shall continue to use commercially reasonable efforts to obtain any such
consent, approval or novation after the Closing Date until such time as it shall
have been obtained.
2.3. Post-Closing Adjustment to Equity. Immediately prior to the
----------------------------------
Closing, the Shareholders shall cause the Company to enter into an Agreement
with the Shareholders containing the substantive provisions set forth on Exhibit
2.3 hereto.
3. Closing.
--------
3.1. Location, Date. The closing of the Exchange (the "Closing") shall
---------------
take place at the offices of the Morgan, Lewis & Bockius LLP, 2000 One Logan
Square, Philadelphia, PA 19103 on or before October 28, 1996 (the "Termination
Date") or such earlier date upon the satisfaction of (or waiver by the party
entitled to the benefit of) the conditions set forth in Sections 4 and 5, or at
such other place within the United States, date and time as the parties may
agree in writing.
3.2. Closing Deliveries. In connection with the completion of the
-------------------
Exchange contemplated in Section 2, at the Closing,
(a) TeleSpectrum shall deliver or cause to be delivered certificates
representing the Shares, registered in the name of the Shareholders and such
other agreements, documents and instruments contemplated by this Agreement and
such other items as may be reasonably requested; and
(b) each Shareholder shall deliver his certificates representing the
TARP Shares duly endorsed for transfer and such other agreements, documents and
instruments contemplated by this Agreement and such other items as may be
reasonably requested.
4. Conditions to TeleSpectrum's Obligations.
-----------------------------------------
The obligations of TeleSpectrum to effect the Closing shall be
subject to the satisfaction at or prior to the Closing of the following
conditions, any one or more of which may be waived by TeleSpectrum:
4.1. No Court Order or Litigation. No Court Order or Litigation shall
-----------------------------
be pending or threatened that prevents or that seeks to restrain the
consummation, or challenges the validity or legality, of the Exchange or that
would limit or affect adversely TeleSpectrum's acquisition of the TARP Shares.
4.2. Representations, Warranties and Agreements. (a) The
-------------------------------------------
representations and warranties of the Shareholders set forth in this Agreement
shall be true and correct in all material respects as
-2-
<PAGE>
of the Closing Date as though made at such time and (b) the Shareholders shall
have each performed or tendered performance in all material respects of all
covenants and agreements contained in this Agreement required to be performed
and complied with by them at or prior to the Closing. The Shareholders shall
have delivered to TeleSpectrum a certificate signed by the President of the
Company and each Shareholder, in form and substance reasonably satisfactory to
counsel to TeleSpectrum and substantially in the form attached hereto as Exhibit
4.2, that the Company and the Shareholders have performed all covenants and
agreements to be performed by them under this Agreement and as regarding the
accuracy of its representations and warranties contained herein as of the
Closing Date.
4.3. Regulatory Approvals. All Permits, if any, necessary for the
---------------------
consummation of TeleSpectrum's acquisition of the Purchased Assets shall have
been obtained and shall be in full force and effect.
4.4. Legal Opinions. The Shareholders shall have tendered a legal
---------------
opinion of Lewis Silkin, special counsel to the Shareholders, that is reasonably
acceptable to counsel to TeleSpectrum and substantially in the form attached
hereto as Exhibit 4.4.
4.5. Required Tender. The Shareholders shall have tendered or caused
----------------
the tender of the items set forth in Section 3.2 (b).
5. Conditions to each Shareholder's Obligations.
---------------------------------------------
The obligations of the Shareholders to effect the Closing shall be subject
to the satisfaction at or prior to the Closing of the following conditions, any
one or more of which may be waived by such parties:
5.1. No Injunction. No Court Order or Litigation shall be pending or
--------------
threatened that prevents or that seeks to restrain the consummation, or
challenges the validity or legality, of the Exchange.
5.2. Representations, Warranties and Agreements. The representations
-------------------------------------------
and warranties of TeleSpectrum set forth in this Agreement shall be true and
complete in all material respects as of the Closing Date as though made at such
time and TeleSpectrum shall have performed or tendered performance in all
material respects of all covenants and agreements contained in this Agreement
required to be performed and complied with by it at or prior to the Closing.
TeleSpectrum shall have delivered a certificate signed by the President of
TeleSpectrum, in form and substance reasonably satisfactory to counsel to the
Company and substantially in the form attached hereto as Exhibit 5.2,
-3-
<PAGE>
that TeleSpectrum has performed all covenants and agreements to be performed by
it under this Agreement and as regarding the accuracy of its representations and
warranties contained herein as of the Closing Date.
5.3 Legal Opinion. TeleSpectrum shall have tendered a legal opinion of
--------------
Morgan, Lewis & Bockius LLP, counsel to TeleSpectrum, that is reasonably
acceptable to counsel to the Company and substantially in the form attached
hereto as Exhibit 5.3.
5.4 Regulatory Approvals. All Permits, if any, necessary for the
---------------------
consummation of TeleSpectrum's acquisition of the Purchased Assets shall have
been obtained and shall be in full force and effect.
5.5 Required Tender. TeleSpectrum shall have tendered or caused the
----------------
tender of the Shares as set forth in Section 3.2(a).
5.6 General Release. As of the Closing Date, the Shareholders and the
----------------
Company shall execute a mutual release of all claims in the form attached hereto
as Exhibit 5.6, as such form may be prepared on or prior to the Closing.
6. Representations and Warranties of the Shareholders. Each Shareholder hereby
---------------------------------------------------
jointly and severally represents and warrants to TeleSpectrum that, except as
set forth in a letter dated as of the date of this Agreement, executed by each
Shareholder, addressed and delivered to TeleSpectrum by each Shareholder at or
prior to the Closing and containing information required by this Agreement and
exceptions to the representations and warranties of the Shareholders under this
Agreement (the "Disclosure Letter"):
6.1 Corporate Status. The Company is a company duly organized, validly
-----------------
existing and in good standing under the laws of the United Kingdom. The Charter
Documents and bylaws of the Company that have been delivered to TeleSpectrum are
effective under applicable Regulations and are current, correct and complete.
6.2 Authorization. The Company has the requisite power and authority
--------------
to own its property and carry on its Business as currently conducted. Each
Shareholder has the requisite power, capacity, legal right and authority to
execute and deliver the Exchange Agreement and to perform the transactions to be
performed by him thereunder. The Exchange Agreement will be duly executed and
delivered by each Shareholder and will constitute a valid and binding obligation
of him, enforceable against him in accordance with its terms.
6.3 Consents and Approvals. Except for the consents specified in the
-----------------------
Disclosure Letter (the "Required Consents"), neither the execution nor delivery
by either Shareholder of this Agreement, nor the performance of the Exchange to
be performed by him thereunder, will require any filing, consent or approval,
constitute a Default or cause any payment obligation to arise under (a) any
Regulation or Court Order to which either the Company or Shareholder is subject,
(b) the
-4-
<PAGE>
Charter Documents or bylaws of the Company or (c) any Contract, Government
Permit or other document to which the Company is a party or by which its
business or assets may be subject.
6.4 Stock Ownership. The Shareholders own all of the TARP Shares, free
----------------
and clear or any Encumbrances, which represent all of the issued and outstanding
capital stock of the Company. There are no issued existing options, warrants,
calls, commitments or other rights of any character (including conversion or
preemptive rights) relating to the acquisition of any issued or unissued capital
stock or other securities of the Company. All of the TARP Shares are duly and
validly authorized and issued, fully paid and non-assessable. Upon completion of
the Exchange, TeleSpectrum will have received valid title to all of the TARP
Shares free and clear of any Encumbrances.
6.5 Financial Statements. The Disclosure Letter includes correct and
---------------------
complete copies of the Company's financial statements consisting of a balance
sheet of the Company as of March 31, 1994, 1995 and 1996 and the related
statements of income and retained earnings for the years then ended
(collectively, the "Financial Statements"), each of which were audited by the
firm of F.W. Stephens & Co. with respect to 1994 and 1995 and by Frank Hirth &
Co. with respect to 1996. The Disclosure Letter also includes correct and
complete copies of the Company's unaudited financial statements consisting of a
balance sheet of The Company as of the period ended August 31, 1996 and the
related statements of income for the period then ended (the "Unaudited Financial
Statements," and together with the Audited Financial Statements, the "Financial
Statements"). The Financial Statements of the Company are consistent with the
books and records of the Company, and there are no material changes required by
GAAP to be recorded in accounting records that have not been recorded in the
accounting records underlying such Financial Statements. The Financial
Statements have been prepared in accordance with GAAP consistently applied and
present fairly the financial position and assets and liabilities of the Company
as of the dates thereof and the results of its operations for the years and
periods then ended, subject to normal recurring year-end adjustments and the
absence of notes in the case of the Unaudited Financial Statements. The balance
sheets of the Company as of March 31, 1996 that are included in the Financial
Statements are referred to herein as the "Company Balance Sheets" and the dates
thereof is referred to as the "Balance Sheet Date." The balance sheets of the
Company as of August 31, 1996 that are included in the Financial Statements are
referred to herein as the "Interim Company Balance Sheets" and the dates thereof
is referred to as the "Interim Balance Sheet Date."
6.6 Title to Assets and Related Matters. The Company has good and
------------------------------------
marketable title to, valid leasehold interests in or valid licenses to use, all
of its assets, free from any Encumbrances except those specified on the
Disclosure Letter. The use of the Company's assets is not subject to any
Encumbrances (other than those specified in the preceding sentence), and such
use does not materially encroach on the property or rights of anyone else. All
of the Company's assets are in the possession or under the control of the
Company and consist of all of the assets necessary to operate the businesses of
the Company as now being operated. Except as set forth on the Disclosure Letter,
all of the tangible personal property included in the assets (a) is in good
working condition and reasonable repair, subject to normal wear and tear, (b) is
usable in the ordinary course of business and
-5-
<PAGE>
(c) conforms in all material respects with all applicable Regulations relating
to its construction, use and operation. Except for those items subject to the
Personal Property Leases, no Person other than the Company own any vehicles,
equipment or other tangible assets located on the Real Property that are used by
the Company in its business (other than immaterial items of personal property
owned by the employees of the Company) or that are necessary for the operation
of its business.
6.7 Real Property. The Disclosure Letter describes all real estate
--------------
(including, without limitation, a description of how such real estate is zoned)
used in the Company's operations as well as any other real estate that is in the
possession of or leased by the Company and the improvements (including buildings
and other structures) located on such real estate (collectively, the "Real
Property"), identifies which Real Property is owned and which is leased, and
lists any leases under which any such Real Property is possessed by the Company
or leased by the Company to others (the "Real Estate Leases"). The Disclosure
Letter also describes any other real estate previously owned, leased or
otherwise operated by the Company and the time periods of any such ownership,
lease or operation. All of the buildings and structures included in the Real
Property are structurally sound, and all of the heating, ventilating, air
conditioning, plumbing, sprinkler, electrical and drainage systems, elevators
and roofs, and all other fixtures, equipment and systems at or serving such Real
Property are generally in good condition, repair and working order and are
generally adequate for the present use of the Real Property by the Company in
conducting its business, and there is no condition which will result in the
termination of the present access from the Real Property to such utility
services and other facilities. The Company has not received any notices, oral or
written, and have no reason to believe, that any governmental body having
jurisdiction over any Real Property intends to exercise the power of eminent
domain or a similar power with respect to all or any part of the Real Property.
The Company has not received any notices, oral or written, from any governmental
body, and has any reason to believe, that any of the Real Property or any
improvements erected or situate thereon, or the uses conducted thereon or
therein, violate any Regulations of any governmental body having jurisdiction
over such Real Property. The Company has not received any notice from the holder
of any mortgage, from any insurance company which has issued a policy with
respect to any of the Real Property or from any board of fire underwriters (or
other body exercising similar functions) claiming any defects or deficiencies in
any of the Real Property or suggesting or requesting the performance of any
repairs, alterations or other work to any of the Real Property.
6.8 Certain Personal Property. The Company has delivered to
--------------------------
TeleSpectrum a complete fixed asset schedule, describing and specifying the
location of all items of tangible personal property that are included in the
Company Balance Sheet. Except as listed on the Disclosure Letter, since the
Balance Sheet Date, the Company has not (i) acquired any items of tangible
personal property that has, in any case, a carrying value in excess of $25,000,
or an aggregate carrying value in excess of $50,000 or (ii) disposed of any
items of tangible personal property (other than inventory) that have, in any
case, an initial carrying value in excess of $25,000, or an initial aggregate
carrying value in excess of $50,000.
6.9 Personal Property Leases. The Disclosure Letter lists all assets
-------------------------
and property (other than Real Property) that have been used in the operation of
the Company's business and that are
-6-
<PAGE>
possessed by the Company under an existing lease, including all trucks,
automobiles, forklifts, machinery, equipment, furniture and computers, except
for any lease under which the aggregate annual payments are less than $12,000
(each, an "Immaterial Lease"). The Disclosure Letter also lists the leases under
which such assets and property listed on the Disclosure Letter are possessed.
All of such leases (excluding "Immaterial Leases") are referred to herein as the
"Personal Property Leases."
6.10 Accounts Receivable. The accounts receivable of the Company are
--------------------
bona fide accounts receivable created in the ordinary course of business and are
not subject to defenses, set-offs or counterclaims and are good and collectible
at the aggregate recorded amounts thereof (in each case, net of the reserves for
such items included in the Interim Company Balance Sheets). The Disclosure
Letter includes a correct and complete accounts and notes receivable aging of
the Company as of the Interim Balance Sheet Date reflecting the aggregate dollar
amount of all accounts and notes receivable due the Company which have been
outstanding for: 30 days or less; more than 30 but less than 61 days; more than
60 but less than 91 days; and more than 90 days.
6.11 Inventory. All inventory of the Company consists of items useable
----------
or saleable in the ordinary course and is valued on the Company's books and
records at the lower of cost or fair market value. The inventory records for the
Company that have been delivered to TeleSpectrum or made available for
inspection by TeleSpectrum are accurate with respect to the data contained
therein.
6.12 Accounts Payable. All accounts payable as set forth on the
-----------------
Interim Company Balance Sheet or arising since the date thereof have been
incurred in the ordinary course of business.
6.13 Product Warranties and Price Guarantees. The Disclosure Letter
----------------------------------------
sets forth all express product warranties and price guarantees made by the
Company.
6.14 Liabilities. Except as specified on the Disclosure Letter, the
------------
Company does not have any Liabilities, and none of its assets are subject to any
Liabilities, except (a) as specifically disclosed on the Interim Company Balance
Sheet, (b) Liabilities incurred in the ordinary course since the Interim Balance
Sheet Date, and (c) Liabilities under any Contracts specifically disclosed on
the Disclosure Letter (or not required to be disclosed because of the term or
amount involved) that were not required under GAAP to have been specifically
disclosed or reserved for on the Interim Company Balance Sheet.
6.15 Taxes. The Company has duly filed all Federal, state, local,
------
foreign and other tax returns that are required to be filed and that were due
prior to the Closing Date, and have paid all taxes and assessments shown as
being due pursuant to such returns or pursuant to any assessment received. All
taxes and other assessments and levies that the Company have been required by
law to withhold or to collect have been duly withheld and collected and have
been paid over to the proper governmental authorities or are properly held by
the Company for such payment. There are no proceedings or other actions, nor is
there any basis for any proceedings or other actions, for the assessment or
collection of additional taxes of any kind for any period for which returns have
or
-7-
<PAGE>
should have been filed.
6.16 Subsidiaries. The Company does not own, directly or indirectly,
-------------
any interest or investment (whether equity or debt) in any corporation,
partnership, business, trust, joint venture or other legal entity.
6.17 Legal Proceedings and Compliance with Law.
------------------------------------------
(a) Except as disclosed on the Disclosure Letter, there is no
Litigation that is pending or, to knowledge of either Shareholder, threatened
against or related to the Company. There has been no Default under any
Regulation applicable to the Company, its assets or its business, including any
Regulation relating to pollution or protection of the environment, except for
any Defaults that have been cured without material cost, and the Company has not
received any notices from any governmental entity regarding any alleged Default
under any Regulation except those that have been cured without material cost.
There has been no Default with respect to any Court Order applicable to the
Company.
(b) Without limiting the generality of Section 6.17(a), except as
described on Disclosure Letter, there has not been any Environmental Condition
(i) at any premises at which the business of the Company (or any predecessor of
the Company) is currently conducted, (ii) at any property owned, leased or
operated at any time by the Company (or any predecessor of either Company) or
any Person controlled by any Affiliate of the Company, or (iii) at any property
at which wastes have been deposited or disposed by or at the behest or direction
of the Company (or any predecessor of the Company) or any Person controlled by
any Affiliate of the Company, nor has the Company received written notice of any
such Environmental Condition. "Environmental Condition" means any condition or
circumstance, including the presence of Hazardous Substances, whether created by
the Company (or any predecessor of the Company) or any third party, at or
relating to any such property or premises that would (i) require abatement or
correction under an Environmental Law, (ii) give rise to any civil or criminal
liability under an Environmental Law, or (iii) create a public or private
nuisance. "Environmental Law" means all Regulations and Court Orders relating to
pollution or protection of the environment as well as any principles of common
law under which a Person may be held liable for the release or discharge of any
materials into the environment.
(c) The Company has delivered to TeleSpectrum correct and
complete copies of any written reports, studies or assessments in the possession
or control of the Company or any Shareholder that relate to any Environmental
Condition. Neither Shareholder knows of any other written reports, studies or
assessments, whether or not in the possession or control of the Company or
either Shareholder, that relate to any Environmental Condition.
(d) Except in those cases where the failure would not have a
Material Adverse Effect, (i) the Company has obtained and is in full compliance
with all Permits, all of which are listed on the Disclosure Letter along with
their respective expiration dates, that are required for the ownership of its
assets or operation of its business as currently operated by the Company,
(ii) all of the Permits are
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<PAGE>
currently valid and in full force and (iii) the Company has filed such timely
and complete renewal applications as may be required with respect to its
Permits. To the knowledge of each Shareholder, no revocation, cancellation or
withdrawal of a Permit has been threatened.
6.18 Contracts.
----------
(a) The Disclosure Letter lists each Contract of the following
types to which the Company is a party or by which it is bound:
(i) Contracts with any present or former stockholder,
director, officer, employee, partner or consultant or with any
Affiliate of either Shareholder;
(ii) Contracts for the purchase of, or payment for,
supplies or products, or for the performance of services, from
or by a third party, in excess of $25,000 with respect to any
one supplier or other party;
(iii) Contracts to sell or supply products, inventory
or other property to, or to perform services for, a third
party, that involve an amount in excess of $25,000 with
respect to any one customer or other party;
(iv) Contracts to sell any product or provide any
service to a governmental or regulatory body;
(v) Contracts limiting or restraining it from
engaging or competing in any lines or business with any
Person;
(vi) Contracts with any customer providing for a
volume refund, retrospective price adjustment or price
guarantee;
(vii) Contracts to lease to or to operate for any
other party any asset that involve an amount in excess of
$25,000 in any individual case (other than Real Estate Leases
and Personal Property Leases identified on the Disclosure
Letter);
(viii) Any notes, debenture, bonds, conditional sale
agreements, equipment trust agreements, letter of credit
agreements, reimbursement agreements, loan agreements or other
Contracts for the borrowing or lending of money (including
loans to or from officers, directors, partners or stockholders
or with Affiliates of either Shareholder or any members of his
immediate families), or agreements or arrangements for a line
of credit or for a guarantee of, or other undertaking in
connection with, the indebtedness of any other Person;
(ix) Contracts creating or recognizing any
Encumbrances with respect to any assets;
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<PAGE>
(x) Contracts with distributors, manufacturers sales
representatives or other sales agents;
(xi) Contracts which relate in whole or in part to
any software, technical assistance or other know-how or other
Intellectual Property right;
(xii) Contracts for any capital expenditure or
leasehold improvement in excess of $25,000; and
(xiii) Any other Contracts (other than those that may
be terminated on not more than 30 days' notice without
Liability and those described in any of (i) through (xii)
above) not made in the ordinary course of business or which
are material to the Company's business or assets.
(b) The Company is not in Default under any Contract. To the
knowledge of each Shareholder, the Company has not received any communication
from, or given any communication to, any other party indicating that the Company
or such other party, as the case may be, is in Default under any Contract. To
the knowledge of each Shareholder, none of the other parties to any such
Contract to which the Company is a party is in Default thereunder.
6.19 Insurance. The Disclosure Letter lists all policies or binders of
----------
insurance held by or on behalf of the Company or relating to its business or any
of it assets, specifying with respect to each policy the insurer, the type of
insurance, the amount of the coverage, insured, the expiration date, the policy
number and any pending claims thereunder. There is no Default with respect to
any such policy or binder, nor has there been any failure to give any notice or
present any claim under any such policy or binder in a timely fashion or in the
manner or detail required by the policy or binder, except for any of the
foregoing that would not, individually or in the aggregate, have a Material
Adverse Effect. There is no notice of nonrenewal or cancellation with respect
to, or disallowance of any claim under, any such policy or binder that has been
received by the Company, except for any of the foregoing that would not,
individually or in the aggregate, have a Material Adverse Effect.
6.20 Intellectual Property and Software Products.
--------------------------------------------
(a) The Company neither currently uses nor has it previously used in
the development, production or marketing of its products and services any
Copyrights, Patents or Trademarks except for those listed on the Disclosure
Letter. The Company owns or has the lawful right to use all material
Intellectual Property that is used in the operation of its business in the
ordinary course or otherwise. All of the Intellectual Property listed on the
Disclosure Letter is owned by the Company free and clear of any Encumbrances, or
used pursuant to an agreement that is described on the Disclosure Letter. Except
in such cases that would not have a Material Adverse Effect, individually or in
the aggregate, the Company neither infringes upon nor unlawfully or wrongfully
uses any Intellectual Property rights owned or claimed by another Person, and
the Company is not in Default, nor has received any notice of any claim of
infringement or any other claim or proceeding, with
-10-
<PAGE>
respect to any such Intellectual Property. Except for any rights under written
licenses or other written Contracts, no current or former employee of the
Company and no other Person owns or has any proprietary, financial or other
interest, direct or indirect, in whole or in part, and including any right to
royalties or other compensation, in any of the Intellectual Property, or in any
application therefor.
(b) The Disclosure Letter contains a complete list of all of the
computer software products sold, licensed, distributed, marketed, used or under
development by the Company (the "Software Products"). Each of the Software
Products performs substantially in accordance with the specifications,
documentation and other written material used in connection with the sale,
license, distribution, marketing or use thereof and is free of defects in
programming and operation except such defects as would not materially and
adversely affect the use of the respective Software Products for their intended
purposes.
(c) Except as specified on the Disclosure Letter, all right, title and
interest in and to the Software Products is owned by the Company, free and clear
of all Encumbrances. No government funding was utilized in the development of
any of the Software Products. Except for such violations that would not have a
Material Adverse Effect, individually or in the aggregate, the sale, license,
distribution, marketing or use of the Software Products by the Company violates
any rights of any other Person, and the Company has not received any
communication alleging such a violation. Except as specified on Disclosure
Letter, the Company has no obligation to compensate any Person for the sale,
license, distribution, marketing or use of the Software Products. Other than as
set forth on Disclosure Letter, the Company has not granted to any other Person
any license, option or other right in or to any of the Software Products, except
for non-exclusive, royalty-bearing, end-user licenses granted pursuant to
license agreements, substantially in the forms attached as part of the
Disclosure Letter (the "End-User Licenses").
(d) The Company has no obligation to any Person to maintain, modify,
improve or upgrade any of the Software Products, except for any such obligation
set forth in an End-User License or under a customer-specific services agreement
and such other obligations as would not have a Material Adverse Effect.
(e) The Company has kept secret and has not disclosed the source codes
for the Software Products to any Person other than to those Persons identified
on the Disclosure Letter and to certain employees of the Company.
6.21 Employee Relations.
-------------------
(a) Except as described in the Disclosure Letter, the Company is
not (a) a party to or otherwise bound by any collective bargaining or other type
of union agreement, (b) a party to, involved in or, to the knowledge of the
Company or either Shareholder, threatened by, any labor dispute or unfair labor
practice charge, or (c) currently negotiating any collective bargaining
agreement, and the Company has not experienced any work stoppage during the last
three years. The
-11-
<PAGE>
Disclosure Letter sets forth the names and current annual salary rates or
current hourly wages of all present employees of the Company.
(b) The Company is in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment and wages and hours, and is not engaged in any unfair labor practice.
There are no outstanding claims against the Company (whether under Regulation,
Contract, policy, or otherwise) asserted by or on behalf of any present or
former employee or job applicant of the Company on account of or for
(i) overtime pay, other than overtime pay for work done in the current payroll
period, (ii) wages or salary for any period other than the current payroll
period, (iii) any amount of vacation pay or pay in lieu of vacation time off,
other than vacation time off or pay in lieu thereof earned in or in respect of
the current fiscal year, (iv) any amount of severance pay or similar benefits,
(v) unemployment insurance benefits, (vi) workers' compensation or disability
benefits, (vii) any violation of any statute, ordinance, order, rule or
regulation relating to plant closings, employment terminations or layoffs,
including but not limited to The Workers Adjustment and Retraining Act,
(viii) any violation of any statute, ordinance, order, rule or regulations
relating to employee "whistleblower" or "right-to-know" rights and protection,
(ix) any violation of any statute, ordinance, order, rule or regulations
relating to the employment obligations of federal contractors or subcontractors
or (x) any violation of any Regulation relating to minimum wages or maximum
hours of work, and neither Shareholder is aware of any such claims which have
not been asserted. No Person (including any governmental body) has asserted or
threatened any claims against either Company under or arising out of any
Regulation relating to discrimination or occupational safety in employment or
employment practices.
6.22 Benefit Plans.
--------------
(a) The Disclosure Letter contains a complete list of all
Benefit Plans sponsored or maintained by the Company or under which the Company
may be obligated. The Company has delivered to TeleSpectrum (i) accurate and
complete copies of all Benefit Plan documents and all other material documents
relating thereto, including all summary plan descriptions, summary annual
reports and insurance contracts, (ii) accurate and complete detailed summaries
of all unwritten Benefit Plans, (iii) accurate and complete copies of the most
recent financial statements and actuarial reports with respect to all Benefit
Plans for which financial statements or actuarial reports are required or have
been prepared, and (iv) accurate and complete copies of all annual reports for
all Benefit Plans (for which annual reports are required) prepared within the
last three years. Each Benefit Plan providing benefits that are funded through a
policy of insurance is indicated by the word "insured" placed by the listing of
the Benefit Plan in the Disclosure Letter.
(b) All Benefit Plans conform (and at all times have
conformed) to, and are being administered and operated (and at all times have
been administered and operated) in material compliance with all applicable
Regulations.
(c) There are no pending or, to the knowledge of either
Shareholder, threatened claims by or on behalf of any Benefit Plans, or by or on
behalf of any individual participants or
-12-
<PAGE>
beneficiaries of any Benefit Plans, alleging any breach of fiduciary duty on the
part of the Company or any of its officers, directors or employees under any
applicable Regulation, or claiming benefit payments other than those made in the
ordinary operation of such plans, nor is there, to the knowledge of either
Shareholder, any basis for any such claim.
(d) The Company has made all required contributions under its
Benefit Plans or such contributions are properly accrued on the Company's
Financial Statements.
6.23 Corporate Records. The minute books of the Company contain
------------------
complete and correct copies of its Charter Documents and bylaws. The stock
record book of the Company is complete and correct.
6.24 Absence of Certain Changes. Except as contemplated by this
---------------------------
Agreement, since the Balance Sheet Date, except as mutually agreed, the Company
has conducted its Business in the ordinary course and there has not been with
respect to the Company:
(a) any material adverse change in its Business, Assets or
Liabilities;
(b) any change or amendment in its Charter Documents;
(c) any distribution or payment declared or made in respect of
its capital stock by way of dividend, purchase or redemption of shares or
otherwise;
(d) except as contemplated by Section 2.3 hereof, any increase
in the compensation payable or to become payable to any director, officer,
employee or agent, except for increases for non-officer employees made in the
ordinary course of business, nor any other change in any employment or
consulting arrangement;
(e) any sale, assignment or transfer of any material assets,
or any additions to or Exchange involving any material assets, other than those
made in the ordinary course of business;
(f) other than in the ordinary course of business, any waiver
or release of any claim or right or cancellation of any debt held;
(g) any payment to any Affiliate of the Company, except as
specified in the Disclosure Letter;
(h) any change in the accounting policies followed by the
Company or the method of applying such principles; or
(i) any capital expenditure commitment involving in any
individual case, or series of related cases, more than (i) $25,000 or (ii) an
amount that would cause the sum of all such capital expenditure commitments to
exceed $50,000.
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<PAGE>
6.25 Customers. The Company has used its reasonable business efforts
---------
to maintain and currently maintains, good working relationships with all of its
customers. The Disclosure Letter contains a list of the names of each of the
five customers that, for the year ended March 31, 1996, were the largest dollar
volume customers of products and services sold and provided by The Company.
Except as specified on the Disclosure Letter, none of such customers has given
the Company notice terminating, canceling or threatening to terminate or cancel
any Contract or relationship with the Company.
6.26 Finder's Fees. Except for Hamilton Capital Partners, Inc., whose
-------------
fee will be paid at the Closing by the Company, no Person retained by either
Shareholder is or will be entitled to any commission or finder's or similar fee
in connection with the Transactions.
6.27 Investment Representatives.
---------------------------
(a) Each Shareholder represents and warrants that he has not
relied on any purchaser representative, or on TeleSpectrum or any other
shareholder of TeleSpectrum, in connection with the acquisition of shares of
Shares. Each Shareholder (i) has such knowledge, sophistication and experience
in business and financial matters that it or he is capable of evaluating the
merits and risks of an investment in the Shares (ii) fully understands the
nature, scope and duration of the limitations on transfer contained in this
Agreement and (iii) can bear the economic risk of an investment in the Shares
and can afford a complete loss of such investment. Each Shareholder has had an
adequate opportunity to ask questions and receive answers from the officers of
TeleSpectrum concerning any and all matters relating to the Exchange described
herein including without limitation the background and experience of the
officers and directors of TeleSpectrum, the plans for the operations of the
business of TeleSpectrum, the business, operations and financial condition of
TeleSpectrum, and any plans for additional acquisitions and the like. The
Shareholders have asked any and all questions in the nature described in the
preceding sentence and all questions have been answered to their satisfaction.
(b) Each Shareholder further represents, warrants,
acknowledges and agrees that it or he (i) is acquiring the Shares under this
Agreement for its or her own account, as principal and not on behalf of other
persons, and for investment and not with a view to the resale or distribution of
all or any part of such shares and (ii) will not sell or otherwise transfer such
shares unless, in the opinion of counsel who is satisfactory to TeleSpectrum,
the transfer can be made without violating the registration provisions of the
Securities Act of 1933 Act, as amended (the "1933 Act") and the rules and
regulations promulgated thereunder.
6.28 Additional Information. The Disclosure Letter accurately lists
-----------------------
the following:
(a) the names of all officers and directors of the Company;
(b) the names and addresses of every bank or other financial
institution in which The Company maintains an account (whether checking, saving
or otherwise), lock box or safe deposit
-14-
<PAGE>
box, and the account numbers and names of the Persons having signing authority
or other access thereto;
(c) the names of all Persons authorized to borrow money or incur
or guarantee indebtedness on behalf of the Company;
(d) the names of all Persons holding powers of attorney from the
Company and a summary statement of the terms thereof; and
(e) all names under which the Company has conducted any business
or which it has otherwise used at any time during the past five years.
6.29 Exchange with Affiliates. Except as set forth on the Disclosure
-------------------------
Letter, no affiliate of either Shareholder or any member of his immediate family
(other than TARP Information Services, Inc. and Technical Assistance Research,
Inc.), owns or has a controlling ownership interest in any corporation or other
entity that is a party to any Contract with respect to the Company's assets or
business.
6.30 Full Disclosure. There are and will be no materially misleading
----------------
misstatements in any of the representations and warranties made by either
Shareholder in this Agreement, the Disclosure Letter, the Exhibits to this
Agreement, or in any of the documents, certificates and instruments delivered or
to be delivered by either Shareholder pursuant to this Agreement and neither
Shareholder has omitted to state any fact necessary to make statements made
herein or therein not materially misleading.
6.31 Materiality. The representations and warranties of the
------------
Shareholders contained in this Agreement, disregarding all qualifications and
exceptions herein relating to materiality or Material Adverse Effect, are true
and correct with only such exceptions as would not in the aggregate have a
Material Adverse Effect.
6.32 Other. There is no plan or intention by either Shareholder to
-----
sell, exchange, or otherwise dispose of a number of the Shares that would reduce
the Shareholder's ownership of the Shares to a value, as of the date of Closing,
of less than 50% of the value of his TARP Shares transferred to TeleSpectrum at
the Closing. As of the Closing Date, the fair market value of the Company's
assets shall exceed the sum of its liabilities plus the liabilities, if any, to
which such assets are subject.
7. Representations and Warranties of TeleSpectrum. TeleSpectrum
----------------------------------------------
hereby represents and warrants to each Shareholder as follows:
7.1 Corporate. TeleSpectrum is a corporation duly organized, validly
----------
existing and in good standing under the laws of the State of Delaware.
TeleSpectrum has the requisite power and authority to execute and deliver this
Agreement and to perform the Exchange to be performed by it
-15-
<PAGE>
thereunder, and such execution, delivery and performance by it have been duly
authorized by all necessary corporate action.
7.2 Enforceability. This Agreement constitutes valid and binding
---------------
obligations of TeleSpectrum, enforceable against it in accordance with its
terms.
7.3 Consents and Approvals. Neither the execution and delivery by
-----------------------
TeleSpectrum of this Agreement, nor the performance of the Exchange to be
performed by it thereunder, will require any filing, consent or approval or
constitute a Default under (a) any Regulation or Court Order to which it is
subject, (b) its Charter Documents or bylaws or (c) any Contract, Permit or
other document to which it is a party or by which its properties or other assets
may be subject.
7.4 Stock Ownership; Valuation. The total authorized capital stock of
---------------------------
TeleSpectrum consists of 200,000,000 shares of TeleSpectrum Common Stock (of
which approximately 24,793,000 shares are issued and outstanding) and 5,000,000
shares of preferred stock, par value $.01 per share (of which no shares are
outstanding). All of the shares are duly and validly authorized and issued,
fully paid and non-assessable. Upon completion of the Exchange at the Closing,
the Company shall receive valid title to all of the Shares, free and clear of
all Encumbrances (other than restrictions imposed generally by applicable
securities laws).
7.5 Retention of Ownership.. TeleSpectrum is acquiring the TARP Shares
-----------------------
under this Agreement for investment and not with a view to the sale or
distribution thereof. After the Closing, TeleSpectrum has no plan or intention
to (i) cause the Company to issue additional shares of its capital stock such
that TeleSpectrum would no longer control the Company within the meaning of
Section 368(c)(1) of the Code or (ii) liquidate the Company, merge the Company
into another corporation, cause the Company to sell or otherwise dispose of any
of its assets, except for dispositions made in the ordinary course of business,
or to sell or otherwise dispose of any of the TARP Shares except for transfers
described in Section 368(a)(2)(C) of the Code.
7.6 Finder's Fees. Except as may be agreed to (in its sole discretion)
--------------
and payable by TeleSpectrum, no Person retained by TeleSpectrum is or will be
entitled to any commission or finder's or similar fee in connection with the
Transactions.
7.7 Full Disclosure. There are and will be no materially misleading
----------------
misstatements in any of the representations and warranties made by TeleSpectrum
in this Agreement, the Disclosure Letter, the Exhibits to this Agreement or in
any of the documents, certificates and instruments delivered or to be delivered
by TeleSpectrum pursuant to this Agreement and TeleSpectrum has not omitted to
state any fact necessary to make statements made herein or therein not
materially misleading.
7.8 Other. TeleSpectrum has no plan or intention to reacquire any of
------
the Shares. TeleSpectrum shall acquire the TARP Shares solely in exchange for
the Shares. For purposes of this representation, TARP Shares redeemed for cash
or other property furnished by TeleSpectrum will be considered as acquired by
TeleSpectrum. No liabilities of the Company or the Shareholders will be assumed
by TeleSpectrum, nor will any of the TARP Shares be subject to any liabilities.
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<PAGE>
TeleSpectrum does not own, directly or indirectly, nor has it owned during the
past five years, directly or indirectly, any of the capital stock of the
Company. Following the consummation of the Exchange, TeleSpectrum shall cause
the Company to continue its historic business or use a significant portion of
its historical business assets in its business. TeleSpectrum is not an
investment company as defined in Sections 368(a)(2)(F)(iii) and (iv) of the
Code.
8. Certain Agreements.
-------------------
8.1 Access. Between the date of this Agreement and the Closing Date,
-------
the Shareholders shall cause the Company to (a) give TeleSpectrum and its
authorized representatives and legal counsel reasonable access to all
properties, books, contracts, assets and records of the Company, (b) permit
TeleSpectrum to make inspections thereof, and (c) cause its officers and its
advisors to furnish TeleSpectrum with such financial and operating data and
other information with respect to the business of the Company and to discuss
with TeleSpectrum and its authorized representatives and legal counsel the
affairs of the Company, all as TeleSpectrum may from time to time reasonably
request.
8.2 Regulatory Matters. The Shareholders shall cause the Company to,
-------------------
and TeleSpectrum shall, (a) file with applicable regulatory authorities any
applications and related documents required to be filed by them in order to
consummate the Exchange and (b) cooperate with each other as they may reasonably
request in connection with the foregoing.
8.3 Exclusivity. From the date hereof until the earlier of the Closing
------------
or the termination of this Agreement, neither Shareholder or any of their
respective agents shall, directly or indirectly, solicit or negotiate or enter
into any agreement with any other Person, or provide any nonpublic information
to any other Person, with respect to or in furtherance of any proposal for a
merger or business combination involving, or acquisition of any interest in, or
(except in the ordinary course of business) sale of assets by, the Company,
except for the acquisition of the Shares by TeleSpectrum. The Shareholders shall
cause the Company to comply with the covenants contained in this Section 8.3.
8.4 Update Disclosure Letter. Between the date hereof and the Closing
-------------------------
Date, the Shareholders shall promptly disclose to TeleSpectrum in writing any
information set forth in the Disclosure Letter which is no longer applicable and
any information of the nature of that set forth in the Disclosure Letter which
arises after the date hereof and which would have been required to be included
in the Disclosure Letter if such information had been obtained on the date of
delivery thereof.
8.5 Best Efforts. Each party shall use their best efforts to cause all
-------------
conditions to the performance of the parties hereto that are within its control
to be satisfied and the Exchange consummated on or prior to the Termination
Date.
8.6 Tax Cooperation. Since the Company may constitute a Passive
----------------
Foreign Investment
-17-
<PAGE>
Company (PFIC), as defined in Section 1296 of the Code, beginning in its taxable
year ending March 31, 1996, the Shareholders shall make a (protective) QEF
election under Section 1293 of the Code for their taxable years ending December
31, 1996. TeleSpectrum shall provide Shareholders with the information necessary
to complete the PFIC Annual Information return for the periods ending March 31,
1996 and/or March 31, 1997 substantially in the form attached hereto as Exhibit
8.7 or in such other form as the Internal Revenue Service may require to
effectuate the intent of the QEF election for TARP's first taxable year as a
PFIC.
8.7 Required Consents. Each Shareholder shall use his best efforts to
------------------
take, or cause to be taken, such action to execute and deliver, or cause to be
executed and delivered, such additional documents and instruments and to do, or
cause to be done, all things necessary, proper or advisable to obtain the
Required Consents.
9. Conduct of the Business Prior to the Closing.
---------------------------------------------
9.1 Operation in Ordinary Course. Between the date of this Agreement
-----------------------------
and the Closing Date, the Shareholders shall cause the Company to conduct its
business in all material respects in the ordinary course and to use commercially
reasonable efforts to maintain all current business relationships.
9.2 Business Organization. Between the date of this Agreement and the
----------------------
Closing Date, the Shareholders shall cause the Company to use commercially
reasonable efforts, to preserve substantially intact its business organization
and keep available the services of the present officers and employees of such
Company.
9.3 Corporate Organization. Between the date of this Agreement and the
-----------------------
Closing Date, the Shareholders shall cause the Company to refrain from amending
its Charter Document or bylaws and shall not:
(a) issue, sell or otherwise dispose of any of its capital
stock, or create, sell or otherwise dispose of any options, rights, conversion
rights or other agreements or commitments of any kind relating to the issuance,
sale or disposition of any of its capital stock;
(b) reclassify, split up or otherwise change its capital
stock;
(c) be party to any merger, consolidation or other business
combination;
(d) sell, lease, license or otherwise dispose of any of its
Assets (including, but not limited to rights with respect to its Intellectual
Property), except in the ordinary course of business; or
(e) organize any subsidiary or acquire any equity securities
of any Person or any equity or ownership interest in any business.
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9.4 Business Restrictions. Between the date of this Agreement (the
----------------------
Balance Sheet Date with respect to Section 9.4(a)) and the Closing Date, except
as mutually agreed, the Shareholders shall cause the Company to refrain from:
(a) borrowing any funds or otherwise become subject to, whether
directly or by way of guaranteeing or otherwise, any indebtedness for borrowed
money;
(b) creating any material Encumbrance on any of its material
Assets;
(c) except in the ordinary course of business, increasing in any
manner the compensation of any director or officer or increase in any manner the
compensation of any class of employees;
(d) creating or materially modifying any bonus, deferred
compensation, pension, profit sharing, retirement, insurance, stock purchase,
stock option, or other fringe benefit plan, arrangement or practice or any other
employee benefit plan (as defined in section 3(3) of ERISA);
(e) making any capital expenditure or acquire any property or
assets (other than raw materials and supplies) for a cost in excess of $50,000
in any one case or $100,000 in the aggregate;
(f) entering into any agreement that materially restricts either
Company from carrying on the Business;
(g) canceling any material debts of others or waive any material
claims or rights; or
(h) acting or omitting from taking any action which would cause
any of the representations and warranties in Section 7 to be inaccurate.
10. Survival of Representations; Indemnification.
--------------------------------------------
10.1 Survival of Representations, Etc. The representations and
---------------------------------
warranties given by each Shareholder and TeleSpectrum under this Agreement shall
survive the Closing for a period of two years after the Closing Date, except
that all representations and warranties contained in Sections 6.4, 6.15, 6.17
and 6.22 shall survive the Closing for the period of the applicable statute of
limitations plus any extensions or waivers thereof.
10.2 Indemnification by the Shareholders. The Shareholders, jointly
------------------------------------
and severally, hereby agree to indemnify and hold harmless TeleSpectrum, and its
successors and assigns, (each, an "Indemnified TeleSpectrum Party") from and
against any and all Liabilities, claims, demands, judgments, settlement
payments, losses, costs, damages and expenses whatsoever (including reasonable
attorneys', consultants' and other professional fees and disbursements of every
kind, nature and description incurred by such Indemnified TeleSpectrum Party in
connection therewith) (collectively, "Damages") that such Indemnified
TeleSpectrum Party may sustain, suffer or incur that
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result from, arise out of or relate to (a) any breach of or any inaccuracy in
any representation, warranty, covenant or agreement of either Shareholder
contained in this Agreement, including any breach of the obligation to indemnify
hereunder, (b) any Liability or obligation involving an Environmental Condition
or which otherwise relates to, or involves a claim, Liability or obligation
which arises out of or is based upon, any Environmental Law, to the extent that
such Liability or obligation relates to or arises out of, in whole or in part,
any activity occurring, condition existing, omission to act or other matter
existing prior to the Closing Date, or (c) any Liability or obligation of either
Shareholder involving taxes due and payable by, or imposed with respect to the
either Company or either Shareholder for any all taxable periods ending on or
prior to the Closing Date (whether or not such taxes have been due and payable).
10.3 Indemnification by TeleSpectrum. TeleSpectrum hereby agrees to
-------------------------------
indemnify and hold harmless each Shareholder (each, an "Indemnified Seller
Party") from and against any Damages that any Indemnified Seller Party may
sustain, suffer or incur that result from, arise out of or relate to any breach
of or inaccuracy in any representation, warranty, covenant or agreement of
TeleSpectrum contained in this Agreement, including any breach of the obligation
to indemnify hereunder.
10.4 Limitation on Liabilities.
--------------------------
(a) Notwithstanding anything in this Agreement to the
contrary, an indemnifying party shall not have any liability to an indemnified
party in respect of any claim for indemnification for the breach of any
representation or warranty contained herein (i) unless a claim with respect
thereto is delivered to the indemnifying party specifying the factual basis of
the claim in reasonable detail to the extent then known by the indemnifying
party prior to the termination of the survival period for such representation
and warranty set forth in Section 10.1 hereof and (ii) until the damages to the
indemnified party, after taking into account Section 10.4(a) hereof, exceed a
cumulative aggregate total of $50,000, but then to the full extent of such
Damages.
(b) In addition, the indemnification liability of the
Shareholders under Section 10.2 of this Agreement shall be limited to an
aggregate of $1,600,000 in the case of any claim or claims for breaches of
representations and warranties of either Shareholder made herein or in any other
Transaction Document.
(c) In pursuing the indemnification liability of the
Shareholders under Section 10.2 of this Agreement, the Company shall first
resort to the Pledged Shares, valued as set forth in the Pledge Agreement. In
addition, TeleSpectrum shall have an offset right against certain contingent
payments otherwise payable to Technical Assistance Research Programs, Inc. and
Tarp Information Systems, Inc. (collectively, the Companies) pursuant to the
Asset Purchase Agreement dated as of October 1, 1996 by and among TeleSpectrum,
the Companies and the Shareholders.
10.5 Procedure for Claims.
---------------------
(a) An Indemnified TeleSpectrum Party or an Indemnified Seller
Party that desires
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to seek indemnification under any part of this Section 10 (each, an "Indemnified
Party") shall give notice (a "Claim Notice") to each party responsible or
alleged to be responsible for indemnification hereunder (an "Indemnitor"). Such
notice shall briefly explain the nature of the claim and the parties known to be
involved, and shall specify the amount thereof. If the matter to which a claim
relates shall not have been resolved as of the date of the Claim Notice, the
Indemnified Party shall estimate the amount of the claim in the Claim Notice,
but also specify therein that the claim has not yet been liquidated (an
"Unliquidated Claim"). If an Indemnified Party gives a Claim Notice for an
Unliquidated Claim, the Indemnified Party shall also give a second Claim Notice
(the "Liquidated Claim Notice") within 60 days after the matter giving rise to
the claim becomes finally resolved, and the Liquidated Claim Notice shall
specify the amount of the claim. Each Indemnitor to which or whom a Claim Notice
is given shall respond to any Indemnified Party that has given a Claim Notice (a
"Claim Response") within 30 days (the "Response Period") after the later of
(i) the date that the Claim Notice is given or (ii) if a Claim Notice is first
given with respect to an Unliquidated Claim, the date on which the Liquidated
Claim Notice is given. Any Claim Notice or Claim Response shall be given in
accordance with the notice requirements hereunder, and any Claim Response shall
specify whether or not the Indemnitor giving the Claim Response disputes the
claim described in the Claim Notice. If any Indemnitor fails to give a Claim
Response within the Response Period, such Indemnitor shall be deemed not to
dispute the claim described in the related Claim Notice. If any Indemnitor
elects not to dispute a claim described in a Claim Notice, whether by failing to
give a timely Claim Response or otherwise, then the amount of such claim shall
be conclusively deemed to be an obligation of such Indemnitor.
(b) If any Indemnitor shall be obligated to indemnify an
Indemnified Party hereunder, such Indemnitor shall pay to such Indemnified Party
within 30 days after the last day of the applicable Response Period the amount
to which such Indemnified Party shall be entitled. If there shall be a dispute
as to the amount or manner of indemnification under this Section 10, the
Indemnitor and the Indemnified Party shall seek to resolve such dispute through
negotiations and, if such dispute is not resolved within twenty days, the
Indemnified Party may pursue whatever legal remedies may be available for
recovery of the Damages claimed from any Indemnitor. If any Indemnitor fails to
pay all or part of any indemnification obligation when due, then such Indemnitor
shall also be obligated to pay to the applicable Indemnified Party interest on
the unpaid amount for each day during which the obligation remains unpaid at an
annual rate equal to 10%.
10.6. Third Party Claims. An Indemnified Party that desires to seek
-------------------
indemnification under any part of this Section 10 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor may,
or if so requested by such Indemnified Party, any Indemnitor shall, participate
in such Action or assume the defense thereof, with counsel reasonably
satisfactory to such Indemnified Party; provided, however, that such Indemnified
Party shall have the right to participate at its own expense in the defense of
such Action; and provided, further, that the Indemnitor shall not consent to the
entry of any judgment or enter into any settlement, except with the written
consent of such Indemnified Party (which consent shall not be unreasonably
withheld), that (a) fails to include as an unconditional term
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<PAGE>
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect of any such Action or (b) grants the
claimant or plaintiff any injunctive relief against the Indemnified Party. Any
failure to give prompt notice under this Section 10.6 shall not bar an
Indemnified Party's right to claim indemnification under this Section 10, except
to the extent that an Indemnitor shall have been harmed by such failure.
10.7. Exceptions to Limitations. Nothing herein shall be deemed to
--------------------------
limit or restrict in any manner any rights or remedies which TeleSpectrum has,
or might have, at law, in equity or otherwise, against either Shareholder based
on intentional fraud by either Shareholder hereunder.
10.8. Effect of Investigation. Any claim for indemnification shall not
------------------------
be invalid as a result of any investigation by or opportunity to investigate
afforded to TeleSpectrum unless TeleSpectrum had actual conscious awareness
of the claim prior to the Closing.
10.9. Contingent Claims. Nothing herein shall be deemed to prevent an
------------------
Indemnified Party from making a claim hereunder for potential or contingent
claims or demands provided the Claim Notice sets forth the specific basis for
any such potential or contingent claim to the extent then feasible and the
Indemnified Party has reasonable grounds to believe that such a claim or demand
may be made; provided, however, that any such potential or contingent claim or
demand must mature into an actual claim or demand not later than three years
after the Closing Date.
10.10 Security for Indemnification. As security for their
-----------------------------
indemnification obligations, under this Section 10, the Shareholders agree to
pledge certain of the Shares issuable hereunder pursuant to the Pledge Agreement
attached hereto as Exhibit A.
11. Termination.
------------
11.1 Grounds for Termination. This Agreement may be terminated at any
------------------------
time prior to the Closing Date:
(a) by mutual written consent of TeleSpectrum and the Shareholders,
(b) by TeleSpectrum prior to the Closing Date if its due diligence
investigation and review of the Company's business and assets and the
prospects and obligations of the Company shall not have been completed to its
sole satisfaction;
(c) by either Shareholder or by TeleSpectrum, if the Closing has
not occurred by the Termination Date; provided, however, that the right to
terminate this Agreement under this paragraph (b) of Section 11.1 shall not be
available to any party that has breached any of its covenants, representations
or warranties in this Agreement in any material respect (which breach has not
been cured);
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<PAGE>
(d) by either Shareholder or TeleSpectrum, if there shall be any
Regulation that makes consummation of the Exchange illegal or otherwise
prohibited or if any Court Order enjoining such Shareholder or TeleSpectrum
from consummating the Exchange is entered and such Court Order shall become
final and nonappealable;
(e) by TeleSpectrum, if either Shareholder shall have breached any
of its covenants hereunder or if the representations and warranties of such
Shareholder contained in this Agreement or in any certificate or other writing
delivered by such Shareholder pursuant hereto shall not be true and correct,
except for such changes as are contemplated by this Agreement, and, in either
event, if such breach is subject to cure, such Shareholder has not cured such
breach within 10 business days of TeleSpectrum's notice of an intent to
terminate;
(f) by either Shareholder, if TeleSpectrum shall have breached
any of its covenants hereunder or if the representations and warranties of
TeleSpectrum contained in this Agreement or in any certificate or other writing
delivered by TeleSpectrum pursuant hereto shall not be true and correct,
except for such changes as are contemplated by this Agreement, and, in either
event, if such breach is subject to cure, TeleSpectrum has not cured such
breach within 10 business days of a Shareholder's notice of an intent to
terminate.
11.2. Effect of Termination. If this Agreement is terminated pursuant
----------------------
to Section 11.1, any party may pursue any legal or equitable remedies that may
be available if such termination is based on a breach of another party.
12. Payment of Expenses. Each party hereto shall pay their own expenses for
--------------------
lawyers, accountants, consultants, investment bankers, brokers, finders and
other advisors with respect to the Transactions. Each party acknowledges that
the sole consideration used in the Exchange is voting Shares and voting TARP
Shares.
13. Contents of Agreement. This Agreement sets forth the entire understanding
----------------------
of the parties hereto with respect to the Exchange and supersedes all prior
agreements or understandings among the parties regarding those matters.
14. Amendment, Parties in Interest, Assignment, Etc. This Agreement may be
------------------------------------------------
amended, modified or supplemented only by a written instrument duly executed by
each of the parties hereto. If any provision of this Agreement shall for any
reason be held to be invalid, illegal, or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provision
hereof, and this Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the parties
hereto. Any term or provision of this Agreement may be waived at any time by the
party entitled to the benefit thereof by a written instrument duly executed by
such party. The parties hereto shall execute and deliver any and all documents
and take any and all other actions that may be deemed reasonably necessary by
their respective counsel to complete the Transactions.
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<PAGE>
15. Interpretation. Unless the context of this Agreement clearly requires
---------------
otherwise, (a) references to the plural include the singular, the singular the
plural, and the part the whole, (b) "or" has the inclusive meaning frequently
identified with the phrase "and/or" and (c) "including" has the inclusive
meaning frequently identified with the phrase "but not limited to." The section
and other headings contained in this Agreement are for reference purposes only
and shall not control or affect the construction of this Agreement or the
interpretation thereof in any respect. Section, subsection, schedule and exhibit
references are to this Agreement unless otherwise specified. Each accounting
term used herein that is not specifically defined herein shall have the meaning
given to it under GAAP.
16. Remedies. The remedies provided by Section 10 shall constitute the
--------
exclusive remedies for the matters covered thereby. With respect to any matters
not covered by such Section, any party shall be entitled to such rights and
remedies as such party may have at law or in equity or otherwise for any breach
of this Agreement, including the right to seek specific performance, rescission
or restitution, none of which rights or remedies shall be affected or diminished
by the remedies provided hereunder.
17. Notices. All notices that are required or permitted hereunder shall be
--------
in writing and shall be sufficient if personally delivered or sent by mail,
facsimile message or Federal Express or other delivery service. Any notices
shall be deemed given upon the earlier of the date when received at, or the
third day after the date when sent by registered or certified mail or the day
after the date when sent by Federal Express to, the address or fax number set
forth below, unless such address or fax number is changed by notice to the other
party hereto given in accordance with the foregoing notice procedures:
If to TeleSpectrum:
TeleSpectrum Worldwide Inc.
443 S. Gulph Road
King of Prussia, PA 19406
FAX: 610-962-5109
Attention: Richard C. Schwenk, Jr., Senior Vice
President and Chief Financial Officer
with a required copy to:
Morgan, Lewis & Bockius LLP
2000 One Logan Square
Philadelphia, PA 19103
FAX: 215-963-5299
Attention: Stephen M. Goodman, Esquire
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<PAGE>
If to Goodman:
John A. Goodman
5024 Balton Road
Bethesda, MD 20816
If to Grainer:
Marc A. Grainer
6406 Recreation Lane
Falls Church, VA 22041
In each case, with a required copy to:
Hurwitz & Abramson
1735 20th Street, N.W.
Washington, DC 20009
FAX: 202-462-0379
Attention: Ronald E. Abramson, Esq.
18. Governing Law. This Agreement shall be construed and interpreted in
--------------
accordance with the laws of the Commonwealth of Pennsylvania, without regard to
its provisions concerning conflict of laws.
19. Consent to Jurisdiction; Service of Process, etc.
-------------------------------------------------
(a) Each party hereto irrevocably and unconditionally (i) agrees
that any suit, action or other legal proceeding (collectively, "Suit") arising
out of this Agreement may be brought and adjudicated in the United States
District Court for the Eastern District of Pennsylvania or, if such court does
not have jurisdiction or will not accept jurisdiction, in any court of competent
civil jurisdiction in Chester County, Pennsylvania, (ii) consents and submits to
the non-exclusive jurisdiction of any such court for the purposes of any such
Suit and (iii) waives and agrees not to assert by way of motion, as a defense or
otherwise in any such Suit, any claim that it or he is not subject to the
jurisdiction of the above courts, that such Suit is brought in an inconvenient
forum or that the venue of such Suit is improper.
(b) Each party hereto also irrevocably consents to the service
of any process, pleadings, notices or other papers in a manner permitted by the
notice provisions of Section 17 or by any other method provided or permitted
under applicable law. Each party hereto agrees that final judgment in any Suit
(with all right of appeal having either expired or been waived or exhausted)
shall be conclusive and that the Buyer shall be entitled to enforce such
judgment in any other jurisdiction of the world by suit on the judgment, a
certified or exemplified copy of which shall be conclusive evidence of the fact
and amount of indebtedness arising from such judgment.
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<PAGE>
20. Legend; Registration Rights.
---------------------------
(a) Registration on Resale. The certificates evidencing Shares to be
----------------------
received by the Shareholders hereunder will bear a legend substantially in the
form set forth below and containing such other information as TeleSpectrum may
deem appropriate.
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT") OR
ANY STATE SECURITIES OR BLUE SKY LAWS. SUCH SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR SUCH SHARES UNDER THE 1933 ACT AND ANY STATE
SECURITIES OR BLUE SKY LAWS, UNLESS, IN THE OPINION (WHICH SHALL BE
IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION) OF COUNSEL
SATISFACTORY TO THE CORPORATION, SUCH REGISTRATION IS NOT REQUIRED.
In addition, such certificates shall also bear such other legends as counsel for
TeleSpectrum reasonably determines are required under the applicable laws of any
state.
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<PAGE>
(b) Piggyback Registration.
----------------------
(i) Right to Piggyback. At any time whenever TeleSpectrum proposes
------------------
to register any Common Stock under the Securities Act of 1933 and the registra-
tion form to be used may be used for the registration Securities (a "Piggyback
Registration"), TeleSpectrum will give prompt written notice to all holders of
Registrable Securities and will include in such Piggyback Registration, subject
to the allocation provisions below, all Registrable Securities with respect to
which TeleSpectrum has received written request for inclusion within 20 days
after TeleSpectrum's mailing of such notice.
(ii) Piggyback Expenses. In all Piggyback Registrations, Tele-
------------------
Spectrum will pay the Registration Expenses related to the Registrable
Securities of the Selling Stockholders, but the Selling Stockholders will pay
the Underwriting Commissions related to their Registrable Securities.
(iii) Priority on Primary Registrations. If a Piggyback
---------------------------------
Registration is an underwritten primary registration on behalf of TeleSpectrum,
and the managing underwriters advise TeleSpectrum in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in such offering, at a price reasonably
related to fair value, TeleSpectrum will allocate the securities to be included
as follows: first, the securities TeleSpectrum proposes to sell on its own
behalf, and second, Registrable Securities requested to be included in such
registration by the Selling Stockholders, pro rata on the basis of the
respective Registrable Securities owned among the Selling Stockholders.
(iv) Priority on Secondary Registrations. If a Piggyback
-----------------------------------
Registration is initiated as an underwritten secondary registration on behalf of
holders of TeleSpectrum's securities and the managing underwriters advise
Tele-Spectrum in writing that in their opinion the number of securities
requested to be included in such registration exceeds the number that can be
sold in such offering, at a price reasonably related to fair value, TeleSpectrum
will allocate the securities to be included on a pro rata basis, based on the
number of Registrable Securities owned among the Selling Stockholders.
(v) Selection of Underwriters. The selection of investment
-------------------------
banker(s) and manager(s) and other decisions regarding the underwriting
arrangements for the offering will be made by TeleSpectrum.
(vi) Indemnification. TeleSpectrum shall indemnify, to the extent
---------------
permitted by law, each Selling Stockholder against all losses, claims, damages,
liabilities and expenses arising our of or resulting from any untrue or alleged
untrue statement of material fact contained in any registration statement,
prospectus or preliminary prospectus or associated term sheet or any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading except insofar as the
same are caused by or contained in any information furnished in writing to
TeleSpectrum by such Selling Stockholder expressly for use therein or by such
Stockholder's failure to deliver a copy of the registration statement or
prospectus or any amendments
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<PAGE>
or supplements thereto after TeleSpectrum has furnished such Selling Stockholder
with a sufficient number of copies of the same.
(vii) Information. In connection with any registration statement in
-----------
which a Selling Stockholder is participating, each such holder will furnish to
TeleSpectrum in writing such information as is reasonably requested by
TeleSpectrum for use in any such registration statement or prospectus and will
indemnify, to the extent permitted by law, TeleSpectrum, its directors and
officers and each person who controls TeleSpectrum (within the meaning of the
1933 Act) against any losses, claims, damages, liabilities and expenses
resulting from any untrue or alleged untrue statement of material fact or any
omission or alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement or omission is contained in information so
furnished in writing by such holder specifically for use in preparing the
registration statement.
21. Counterparts. This Agreement may be executed in two or more counter-
-------------
parts, each of which shall be binding as of the date first written above, and
all of which shall constitute one and the same instrument. Each such copy shall
be deemed an original, and it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart.
22. Definitions.
------------
"Affiliates" means, with respect to a particular party, persons or
entities controlling, controlled by or under common control with that party, as
well as the officers, directors and majority-owned entities of that party and of
its other Affiliates.
"Agreement" means this Agreement and the exhibits hereto.
"Balance Sheet Date" is defined in Section 6.5.
"Benefit Plan" means all employee benefit, health, welfare, supplemental
unemployment benefit, bonus, pension, profit sharing, deferred compensation,
stock compensation, stock purchase, retirement, hospitalization insurance,
medical, dental, legal, disability and similar plans or arrangements or
practices.
"Charter Documents" means an entity's certificate or articles of
incorporation, certificate defining the rights and preferences of securities,
articles of organization, general or limited partnership agreement, certificate
of limited partnership, joint venture agreement or similar document governing
the entity.
"Closing" is defined in Section 3.1.
"Closing Date" means the date of the Closing.
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"Code" means the Internal Revenue Code of 1986, as amended.
"Company" is defined in the background section.
"Company Balance Sheets" is defined in Section 6.5.
"Confidential Information" means any confidential information or trade
secrets of the Business, including, without limitation, information and
knowledge pertaining to products and services offered, innovations, designs,
ideas, plans, trade secrets, proprietary information, know-how and other
technical information, advertising, distribution and sales methods and systems,
sales and profit figures, customer and client lists, and relationships with
dealers, distributors, wholesalers, customers, clients, suppliers and others who
have business dealings with the Business.
"Contract" means any written or oral contract, agreement, lease, plan,
instrument or other document or commitment, arrangement, undertaking, practice
or authorization that is or may be binding on any Person or its property under
applicable law.
"Copyrights" means registered copyrights, copyright applications and
unregistered copyrights.
"Court Order" means any judgment, decree, injunction, order or ruling
of any Federal, state, local or foreign court or governmental or regulatory body
or arbitrator or authority that is binding on any Person or its property under
applicable law.
"Default" means (a) a breach, default or violation, (b) the occurrence
of an event that with or without the passage of time or the giving of notice, or
both, would constitute a breach, default or violation or (c) with respect to any
Contract, the occurrence of an event that with or without the passage of time or
the giving of notice, or both, would give rise to a right of termination,
renegotiation or acceleration.
"Disclosure Letter" is defined in Section 6.
"Encumbrances" means any lien, mortgage, security interest, pledge,
restriction on transferability or voting, defect of title or other claim, charge
or encumbrance of any nature whatsoever on any property or property interest.
"End-User Licenses" is defined in Section 6.20(c).
"Environmental Condition" is defined in Section 6.17(b).
"Environmental Law" is defined in Section 6.17(b).
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
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"Financial Statements" is defined in Section 6.5.
"GAAP" means United States generally accepted accounting principles.
"Hazardous Substances" means (i) any gasoline, fuel oil or any other
petroleum products, explosives, alcohols or chemical solvents or polychlorinated
biphenyls, (ii) any substance, waste, material or product defined as hazardous,
radioactive, extremely hazardous or toxic under any Environmental Law, and (iii)
asbestos, asbestos-containing substances or urea formaldehyde insulation.
"Indemnified Seller Party" is defined in Section 10.4.
"Indemnified TeleSpectrum Party" is defined in Section 10.2.
"Interim Balance Sheet" is defined in Section 6.5.
"Interim Balance Sheet Date" is defined in Section 6.5.
"Intellectual Property" means any Copyrights, Patents, Trademarks,
know-how, trade secrets (including, without limitation, all results of research
and development), product formulae, franchises, inventions, rights-to-use and
other industrial and intellectual property rights.
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, guaranty or endorsement of
or by any Person, absolute or contingent, accrued or unaccrued, due or to become
due, liquidated or unliquidated.
"Litigation" means any lawsuit, action, arbitration, administrative or
other proceeding, criminal prosecution or governmental investigation or inquiry.
"Material Adverse Effect" means a material adverse effect on the
Business, Assets, financial condition, results of operations, liquidity,
products, competitive position, customers or customer relations of either
Company.
"Non-Assignable Contracts" is defined in Section 2.5.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent in nature and, where relevant, amount with
past practices.
"Patents" means all patents and patent applications.
"Permit" means any governmental permit, license, registration,
certificate of occupancy, approval and other authorization.
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<PAGE>
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Personal Property Leases" is defined in Section 6.9.
"Pledge Agreement" means the Pledge Agreement between the Buyer and
each Shareholder entered into as of the Closing Date, in substantially the form
attached as Exhibit C.
"Real Estate Leases" is defined in Section 6.7.
"Real Property" is defined in Section 6.7.
"Registrable Securities" means the Shares and any securities issued or to
be issued with respect to the Shares by way of a stock dividend or stock split
or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization. As to any particular Registrable
Securities, such securities will cease to be Registrable Securities when they
have been (A) effectively registered under the 1933 Act and disposed of in
accordance with the registration statement covering them, or (B) transferred
pursuant to Rule 144 promulgated under such Act (or any similar provision then
in force).
"Registration Expenses" means all expenses incident to TeleSpectrum's
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or blue sky laws, printing expenses, messenger and delivery expenses,
expenses and fees for listing the securities to be registered on exchange or
electronic quotation systems on which similar securities issued by TeleSpectrum
are then listed, and fees and disbursements of counsel for TeleSpectrum and of
all independent certified public accountants, underwriters (other than
Underwriting Commissions) and other persons retained by TeleSpectrum.
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any Federal, state, local, foreign or other governmental agency or body
or of any other type of regulatory body, including those covering environmental,
energy, safety, health, transportation, bribery, record keeping, zoning,
antidiscrimination, antitrust, wage and hour, and price and wage control
matters.
"Selling Stockholders" means registered holders of Registrable Securities
who request inclusion of all or a portion of their shares of Registrable
Securities in a Piggyback Registration pursuant to Section 20, provided,
however, for purposes of Sections 20(b)(iii) and (iv) only, such term shall also
include those Persons who were granted registration rights by TeleSpectrum with
respect to shares of TeleSpectrum Common Stock or Warrants to purchase shares of
TeleSpectrum Common Stock which were issued on or prior to August 13, 1996 and
those Persons who the Company may in the future deem Selling Stockholders.
"Shares" means such number of voting shares of TeleSpectrum Common Stock,
par value $.01 per share, with an aggregate Trading Value of $5,000,000 and an
agreed fair market value of
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<PAGE>
#3,250,000 after taking into account various restrictions, including the lack of
marketability of the Shares.
"Shareholders" is defined in the preamble.
"TARP Shares" means all of the issued and outstanding equity of the
Company, which consists of the following two classes of voting equity with
identical rights: (i) registered shares (par value 50 pence each) and
(ii) Bearer Share Warrants which are immediately convertible, without any
consideration, into actual bearer stock certificates. Each Bearer Share Warrant
has the same voting, participation and liquidation rights as 5,000 registered
bearer shares. The only difference between the registered shares and the Bearer
Share Warrants being: (i) that the Bearer Share Warrants must be deposited with
the registered office of the Company prior to voting in order to demonstrate
ownership and (ii) the Bearer Share Warrants can be delivered to TeleSpectrum
free of UK Stamp Duty or UK capital gains tax.
"TeleSpectrum Common Stock" means the common stock, par value $.01 per
share, of TeleSpectrum.
"Trademarks" means registered trademarks, registered service marks,
trademark and service mark applications and unregistered trademarks and service
marks.
"Trading Value" means average closing price of the Common Stock for the 30
days prior to the Closing Date as reported in The Wall Street Journal.
-----------------------
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<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto on the day and year first written above.
TELESPECTRUM WORLDWIDE INC.
By:
_________________________________________
J. Brian O'Neill
Chairman
SHAREHOLDERS
---------------------------------------------
John Goodman
---------------------------------------------
Marc Grainer
<PAGE>
EXHIBIT 2.3
As of September 30, 1996, Shareholders will cause the Company to declare a
dividend in an amount equal to the amount by which the Shareholders' net equity
exceeds US $650,000, such amount to be determined in concert with the following
principles. As soon as practicable, but in any event within 30 days after the
Closing, TeleSpectrum shall engage Arthur Andersen LLP to prepare, in accordance
with GAAP (applied in a manner consistent with the Audited Financial
Statements), a balance sheet of the Company (the "Closing Date Balance Sheet")
as of the end of the business on the day prior to the Closing Date. If the
aggregate shareholders' equity as shown on the Closing Date Balance Sheets is
less than $650,000 (such amount is referred to as the "Net Worth Deficiency"),
within ten business days after delivery of the Post-Closing Balance Sheets to
the Company the Shareholders shall contribute as of September 30, 1996 to the
Company by wire transfer of immediately available funds an amount equal to the
Net Worth Deficiency as an additional contribution to capital. If the aggregate
shareholders' equity as shown on the Closing Date Balance Sheet is greater than
$650,000 (such amount is referred to as the "Net Worth Excess"), within ten
business days after delivery of the Post-Closing Balance Sheets to the Company,
the Company shall distribute the dividend declared above by wire transfer of
immediately available funds in an amount equal to the Net Worth Excess.
Notwithstanding anything in this Section 2.3 to the contrary, if there is any
Net Worth Deficiency or Net Worth Excess and the parties hereto dispute any item
contained on the Closing Date Balance Sheet, the party disputing such item shall
notify the other party in writing of each disputed item, and specify the amount
thereof in dispute within thirty business days after the delivery of the Closing
Balance Sheets. If the Shareholders and the Company cannot resolve any such
dispute which would eliminate or reduce the amount of the Net Worth Deficiency
or Net Worth Excess, as applicable, then they shall pay the amount to which
there is no dispute and the amount in dispute shall be resolved by an
independent nationally recognized accounting firm which is reasonably acceptable
to the Shareholders and TeleSpectrum (the "Independent Accounting Firm"). The
determination of the Independent Accounting Firm shall be made as promptly as
practical and shall be final and binding on the parties, absent manifest error
which error may only be corrected by such Independent Accounting Firm. Any
expenses relating to the engagement of the Independent Accounting Firm shall be
allocated between the Shareholders and the Company so that the Company share of
such costs shall be in the same proportion that the aggregate amount of the
disputed amounts submitted to the Independent Accounting Firm that are
unsuccessfully disputed (as finally determined by the Independent Accounting
Firm) bears to the total amount of such disputed amounts so submitted to the
Independent Account Firm. For purposes of all currency exchange rate
calculations which are necessary to give effect to this Agreement, the
Independent Accounting Firm shall use the average bid/asked exchange rates for
the five business days immediately preceding the Closing Date as reported by The
---
Wall Street Journal.
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<PAGE>
EXHIBIT 4.2 -- SHAREHOLDERS' TAKEDOWN CERTIFICATE
<PAGE>
EXHIBIT 5.2 -- TELESPECTRUM'S TAKEDOWN CERTIFICATE
<PAGE>
EXHIBIT 4.4 -- OPINION OF LEWIS SILKEN
<PAGE>
EXHIBIT 5.3 -- MORGAN, LEWIS & BOCKIUS LLP OPINION
<PAGE>
EXHIBIT 5.6 -- MUTUAL RELEASE
<PAGE>
EXHIBIT 6 -- DISCLOSURE LETTER
<PAGE>
EXHIBIT 8.7 -- PFIC ANNUAL INFORMATION STATEMENT
