SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) December 13, 1996
Tel-Save Holdings, Inc.
(Exact Name of Registrant as Specified in Charter)
Delaware 0-26728 23-2827736
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(State or Other Jurisdiction (Commission File Number) (IRS Employer
of Incorporation) Identification No.)
6805 Route 202, New Hope, PA 18938
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code 215-862-1500
(Former Name or Former Address, if Changed Since Last Report)
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ITEM 7. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
If applicable, financial statements for the business
acquisition described in Item 2 will be filed in an amendment
to this Form 8-K as soon as practicable, but not later than 60
days after the date hereof.
(b) Pro forma financial information.
If applicable, Pro forma financial information for the
transaction described in Item 2 will be filed in an amendment
to this Form 8-K as soon as practicable, but not later than 60
days after the date hereof.
(c) Exhibits
2.1 Restructuring Agreement dated as of December 13, 1996 by
and between Tel-Save Holdings, Inc. and Tel-Save, Inc. and
American Business Alliance, Inc., Sam Means, Scott Arch,
Ellen Arch, the Voting Trust U/A dated September 1, 1993
under which Ralph Arch is the Trustee, and Ralph Arch.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Tel-Save Holdings, Inc.
(Registrant)
Date: February 3, 1997 By:/s/ Joseph Schenk
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Chief Financial Officer and
Treasurer
RESTRUCTURING AGREEMENT
RESTRUCTURING AGREEMENT, dated December 13, 1996, by and among Tel-Save
Holdings, Inc., a Delaware corporation ("Holdings"), Tel-Save, Inc., a
Pennsylvania corporation and wholly owned subsidiary of Holdings ("TS"),
American Business Alliance, Inc., a Pennsylvania corporation ("ABA"), Mr. Sam
Means, Mr. Scot Arch and Ms. Ellen Arch and the Voting Trust U/A dated September
1, 1993 (the "Voting Trust"), under which Mr. Ralph Arch is the Trustee
(collectively, the "Shareholders"), and Mr. Ralph Arch.
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Reorganization, dated as
of July 23, 1996 (as amended to the date hereof and including the ABA Disclosure
Memorandum dated August 27, 1996 attached hereto as Appendix A (the "ABA
Disclosure Memorandum ") and the Exhibits thereto, but without giving effect to
the provisions hereof, the "Original Agreement"), among Holdings, ABA and the
Shareholders, the parties thereto had agreed, among other things and subject to
the terms and conditions thereof, including that Holdings had the unilateral
right to terminate the Original Agreement in its sole discretion, to a
transaction whereby ABA would, through a statutory merger, become a subsidiary
of Holdings and TS would make advances of up to $12.2 million to ABA pending the
consummation of such merger;
WHEREAS, since the signing of the Original Agreement, TS has advanced
in excess of $12.2 million to ABA under the Original Agreement, for which ABA is
indebted to TS and which exceeds the maximum amount that TS was to advance under
the Original Agreement, and TS is not prepared to continue to advance further
funds to ABA;
WHEREAS, there have been a number of disagreements between and among
the parties to the Original Agreement in respect of the transactions proposed
therein, including allegations of bad faith and attempted interference with the
benefit of the proposed transactions, ABA and the Shareholders are in default in
certain of their obligations under the Original Agreement and Holdings is not
now prepared to proceed with the transactions as provided therein and is not
obliged, by the terms of the Original Agreement, to do so; and
WHEREAS, the parties to the Original Agreement wish to provide for the
settlement of their differences and out-
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standing obligations and have agreed to do so on the terms and conditions
hereof;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
A. Definitions Except as otherwise herein defined, capitalized terms
used herein shall be defined as in the Original Agreement.
ARTICLE II
SETTLEMENT TRANSACTIONS
A. Asset Purchase
1. On the terms and conditions hereof and on the date hereof,
ABA shall sell, assign, convey and transfer to TS all of ABA's right, title and
interest in, to and under the Transferred Assets (as hereinafter defined), in
consideration of TS' payments and assumptions as provided in Section II.A.2
hereof.
2. In consideration of ABA's sale, assignment and transfer as
provided in Section II.A.1 hereof and the grant of the option in Section II.E.
hereof, on the terms and conditions hereof and on the date hereof, TS shall pay
to ABA the amount of $9,450,000 (the "Purchase Amount") by delivery to ABA of
two TS checks, each in the amount of $4,725,000, shall assume the Assumed
Liabilities (as hereinafter defined) (it being expressly understood and agreed
that TS shall not assume, or be deemed to have assumed, any other liability,
including, without limitation, any Excluded Liability) and, to the extent
provided herein, shall release ABA from its outstanding obligations (as
described in the Statement of Account, dated October 31, 1996 attached hereto as
Appendix B) to make payments to TS for services or advances under the Restated
Partition Agreement. The Purchase Amount shall be allocated to the Transferred
Assets as provided in Schedule 1 hereto.
3. For purposes of this Agreement:
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(a) "Transferred Assets" shall mean and include, collectively, all of
ABA's right, title and interest in, to and under the following, whether or not
any of such assets has any value for accounting purposes, as the same shall
exist on the date hereof:
(i) all end-users and customers (collectively, the "Customers") at any
time provisioned (or to be provisioned) by TS, or using services or billing,
under the Restated Partition Agreement, or with respect to which ABA has
submitted a telephone line to TS in respect of an advance under the Partition
Agreement, or with respect to which ABA has submitted an ANI to TS in respect of
provisioning under the Partition Agreement, including, without limitation, the
following:
(1) all contracts or other agreements entered into between
ABA and the Customers (now existing or hereafter created), together
with all letters of agency relative thereto (as amended or modified,
collectively, the "Customer Agreements");
(2) all rights of ABA to receive moneys due and to become due
under or pursuant to the Customer Agree- ments;
(3) all rights of ABA to receive proceeds of any insurance,
indemnity, warranty, guaranty or security deposit with respect to the
Customer Agreements;
(4) all claims of ABA for damages arising out of or for
breach of or default under the Customer Agree- ments;
(5) all rights of ABA to terminate the Customer Agreements,
to perform thereunder and to compel performance and otherwise exercise
all remedies thereunder;
(6) all rights to use the ABA lists of Customers, their
telephone lines and any ANIs thereof, including, without limitation,
the rights to contact and market to Customers;
(7) all data, records and other information with respect to
any of the Customers or any transactions therewith, whether in written,
electronic or other form;
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(8) all accounts receivable arising in connection with the
Customer Agreements or otherwise from any Customer;
(9) all customer identification codes (CIC codes) used or
held by ABA in connection with the Customers or the provision of
services thereto;
(10) all rights to use the American Business Al- liance, Inc.
name and logo and variations thereof in the provision of services to
the Customers and in other communications with the Customers; and
(11) to the extent not included in the foregoing, all
proceeds of any and all of the foregoing;
(ii) all cash and cash equivalents assets of ABA, including, without
limitation, any cash or other assets held in any lock box established pursuant
to the Lock Box Agreement as provided in the Restated Partition Agreement, and
any notes or accounts receivable of ABA;
(iii) all computers and computer hardware and software used or held for
use in connection with the Customers, including any licenses with respect
thereto;
(iv) the ABA lease ("Lease"), as in effect on the date hereof and as to
be amended with respect to the building located in Kingston, Pennsylvania, which
Lease, as amended, is described in Schedule 2, and all furniture, furnishings
and fixtures located therein or thereon, a summary of the terms of which Lease
is included in Schedule 2 hereto;
(v) such other of ABA's right, title and interest in, to and under all
of the properties, assets and business of ABA (including, without limitation,
the name "American Business Alliance, Inc." and variations and abbreviations
thereof and all rights to use same throughout the world, all goodwill, customer
lists, intellectual property and other rights required for or incident to the
conduct of the business of ABA and all books and records relating thereto, but
not including the Excluded Assets) as TS shall have designated in writing to ABA
on or before the date sixty (60) days after the date hereof.
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(b) "Excluded Assets" shall mean and include the following:
(i) any state or federal license, permit or authorization to
conduct business;
(ii) any agreements between ABA and any employee of ABA
providing for the employment of such employee by ABA;
(iii) the corporate minute books and stock records of ABA;
(iv) the Haverford lease;
(v) any of the assets referred to in clause (v) of Section
II.A.3(a) hereof that are not designated as Transferred Assets pursuant
to the terms of such clause;
(vi) any insurance policy.
(c) "Assumed Liabilities" shall mean and include, collectively, the
following (as they exist on the date hereof, but in each case excluding the
Excluded Liabilities):
(i) all liabilities and obligations of ABA to provide
services or to pay credits for wrong numbers to the Customers under the
Customer Agreements; and
(ii) the Existing Residual Obligations disclosed in the
Original Agreement and listed as "Existing Residual Obligations" on
Schedule 2 hereto, but only to the extent they relate to the Customers;
(iii) if the ABA contract with Frontier is a Transferred
Asset, the Existing Residual Obligations disclosed in the Original
Agreement and listed as "Existing Residual Obligations" on Schedule 2
hereto, to the extent they relate to traffic under such Frontier
Agreement;
(iv) the liabilities and obligations of ABA under the Lease,
but not in excess of an aggregate of $75,000;
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(v) the liabilities and obligations of ABA in respect of the
liabilities indicated as being an "Assumed Liability" on Schedule 3
hereto; provided that the aggregate amount of such liabilities and
obligations hereby described and included shall not exceed the sum of
$515,218 plus the amount of cash included as a Transferred Asset and
transferred as of the date hereof to TS; and
(vi) all operating expenses incurred by ABA in the ordinary
course since December 5, 1996 (other than legal fees incurred in
connection with this Agreement, the Original Agreement and the Basic
Agreements and the transactions contemplated hereby and thereby);
provided that the aggregate amount of such liabilities and obligations
hereby described and included shall not exceed the sum of $515,218 plus
the amount of cash included as a Transferred Asset and transferred as
of the date hereof to TS.
(d) "Excluded Liabilities" shall mean and include any and all liability
and obligation, whether now existing or hereafter arising, arising from or under
or by reason of any of the following:
(i) the liabilities and obligations of ABA hereunder or
under any of the other Basic Agreements;
(ii) any liability or obligation related to or arising under
or by reason of any Excluded Asset subject to Article II.E;
(iii) any liability based upon or arising out of a violation
by ABA of any law, rule, regulation or judicial or administrative order
or ruling, including, without limitation, any such by reason of ABA's
marketing to, solicitation of or servicing of, any customer or end-user
under the Restated Partition Agreement for any actions taken prior to
date;
(iv) any liability based upon or arising out of any pending
action, suit or proceeding to which ABA is a party, including, without
limitation, any thereof under any of the Customer Agreements;
(v) any liability of ABA, fixed or contingent, asserted or
unasserted, known or unknown, foreseen or unforeseen, arising out of or
based upon incidents oc-
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curring on or before the date hereof, including any claim by any
customer or end-user of ABA, including, without limitation, any thereof
under any of the Customer Agreements, or by any state or federal
governmental, regulatory or administrative authority;
(vi) any liability for any state, federal or local franchise,
income or accumulated earnings taxes, other than taxes collected,
withheld or escrowed by TS in accordance with the provisions of the
Restated Partition Agreement;
(vii) any liability of ABA to any Shareholder or controlling
person of ABA, including, without limitation, any indebtedness of ABA
to either Means or Arch;
(viii) any documentary stamps, conveyance taxes or other
similar charges incurred by ABA on the transfer of the Transferred
Assets to TS; and
(ix) any other fees, charges, expense, taxes or liabilities
incurred by ABA or any Shareholder in connection with the transactions
contemplated by this Agreement, except the costs and expenses, if any
(the "Regulatory Costs"), of filing with state and federal governmental
and regulatory authorities with authority over the provision of
telecommunications services with respect to the transfers of the
Customers as herein provided.
4. The sale, conveyance, transfer, assignment and delivery of
the Transferred Assets shall be effected by delivery as of the date hereof by
ABA to TS of such deeds, transfers in registrable form, bills of sale in
registrable form, endorsements, assurances, conveyances, releases, discharges,
assignments, letters of agency, licenses (including, without limitation, the
non-exclusive (subject only to the right granted to The Furst Group to use the
name in connection with certain traffic transferred by ABA to The Furst Group)
right to use ABA's name or variations thereof in connection with the Customers
and the provisioning thereof), authorizations, certificates, drafts, checks or
other instruments of transfer and conveyance, duly executed by ABA, as TS shall,
from time to time, reasonably deem necessary to vest in TS good and marketable
title to such Transferred Assets free and clear of all claims, charges, liens
and encumbrances, and such other documents as TS may reasonably request to
demonstrate satisfaction of the
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conditions of and compliance with this Agreement by ABA, including, without
limitation, the Bill of Sale and Assumption in substantially the form of Exhibit
A attached hereto. The assumption by TS of the Assumed Liabilities shall be
effected by delivery on the date hereof by TS to ABA of the Bill of Sale and
Assumption in substantially the form of Exhibit A attached hereto (the
"Assumption Agreement", and together with such other documents as Holdings or TS
may reasonably request to demonstrate satisfaction of the conditions of and
compliance with this Agreement by TS and ABA, collectively, the "Other Transfer
Documents").
5. Nothing in this Agreement or in the Other Transfer
Documents shall be construed as an attempt or an agreement to assign or cause
the assignment or transfer of any Transferred Asset, including, without
limitation, any contract, agreement or license, which is in law nonassign- able
or nontransferable without the consent of the other party or parties thereto or
the issuer thereof or any other governmental or regulatory third party, unless
such consent shall have been given. Each of ABA and TS shall use its
commercially reasonable best efforts to obtain all necessary consents of such
other parties to the assignment of any such Transferred Assets.
6. If the consent of any third party to the assignment of any
Transferred Asset cannot be obtained, or if any attempted assignment of any
thereof would be ineffective or would adversely affect ABA's rights thereunder
so that TS would not in fact receive all such rights, ABA shall cooperate in any
arrangement TS may reasonably request to provide for TS the benefit under any
such Transferred Asset, including enforcement for the benefit of TS of any and
all of ABA's rights against any other party thereto arising out of the breach or
cancellation thereof by such party or otherwise.
7. ABA shall promptly and in good faith forward to TS, in the
manner directed by TS, any payment of monies to which TS is entitled hereunder,
but which is received by ABA rather than TS, and, until such amount is so paid
over, it shall be held in trust by ABA for the benefit of TS.
8. TS is hereby appointed the attorney-in-fact of ABA for the
purpose of effecting and perfecting its interests in the Transferred Assets and
carrying out the purposes of this Section, which appointment is irrevocable
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and coupled with an interest. Without limiting the generality of the foregoing,
TS shall have the right and power to receive, endorse and collect all checks
made payable to the order of ABA representing any payment that is a Transferred
Asset or any part thereof and to give full discharge for the same.
B. Termination and Release.
Each of TS and Holdings, jointly and severally, on the one
hand, and the Company, the Shareholders and Arch, jointly and severally, on the
other hand, on behalf of itself and its successors, assigns and affiliates,
hereby agrees for the benefit of each of the parties on the other hand (and
their respective directors, officers, share-holders, employees and affiliates
and the respective suc-cessors, assigns and affiliates thereof) that this
Agreement is being entered into in complete settlement of, and in full
satisfaction of, any and all obligations, liabilities, claims, demands, actions,
suits or causes of action as may exist or arise under or by reason of or in
respect of or as a consequence of the Original Agreement, the transactions
contemplated thereby, the prior business or financial relationships, contractual
or otherwise, that may have existed between or among any of the parties hereto
or any actions taken or not taken by any party prior to the date hereof with
respect to the transactions contemplated by the Original Agreement or the
Restated Partition Agreement or with respect to any of the transactions
contemplated hereby, and that, except as the terms and provisions thereof may be
incorporated by reference herein or otherwise expressly continued by the terms
of this Agreement, each of the Original Agreement and the Restated Partition
Agreement hereby shall be, and hereby is, terminated, without any further
liability or obligation thereunder on the part of any party thereto (or any of
their respective directors, officers, shareholders, employees and affiliates or
any of the respective successors, assigns and affiliates of any thereof), except
that the provisions of Section 7.7 of the Original Agreement shall survive such
termination; and each of TS and Holdings, jointly and severally, on the one
hand, and the Company, the Shareholders and Arch, jointly and severally, on the
other hand, on behalf of itself and its successors, assigns and affiliates,
hereby now and forever releases each of the parties on the other hand (and their
respective directors, officers, shareholders, employees and affiliates and the
respective successors, assigns and
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affiliates thereof) from any and all Claims and Damages as may exist or,
directly or indirectly, arise under or by reason of or in respect of or as a
consequence of (i) such termination, (ii) the Original Agreement or any of the
other "Basic Agreements" (as defined in the Original Agreement), (iii) the
transactions thereby or hereby contemplated or (iv) the actions or inactions of
any person in respect of the consummation or nonconsummation of the transactions
contemplated by the Original Agreement or the establishment of the terms hereof,
except, in each case, as otherwise expressly provided in this Agreement and the
other Basic Agreements. For purposes of this Agreement, "Basic Agreements" shall
mean, collectively, this Agreement, the Non-Compete Agreement (as hereinafter
defined), the Means Employment Agreement (as hereinafter defined) and the Other
Transfer Documents. Without limitation of the generality of the foregoing, TS
hereby releases ABA from any obligation or liability for the payment of the
outstanding amounts payable under the Restated Partition Agreement for services
provided thereunder or advances made thereunder or interest or other like
charges thereon and thereunder.
C. Certain Employment Arrangements
1. ABA and Means shall terminate the Means Employment
Agreement dated as of July 23, 1996 and each of ABA and Mr. Means ("Means")
shall be relieved of any obligation thereunder. TS and Means shall execute and
deliver the Employment Agreement, dated the date hereof (the "Means Employment
Agreement"), between TS and Means, in the form of Exhibit B attached hereto and
Holdings shall grant to Means the options referred to therein.
2. TS shall employ each of Gary Jester and Robert Means as
employees-at-will and Holdings shall grant to each of them an option to purchase
50,000 shares of Holdings Common Stock, which option will be substantially in
the form of the option forming a part of Exhibit B attached hereto to be
delivered to Means, including the provision for the vesting of rights thereunder
in three equal installments.
3. TS shall offer employment to the employees of ABA listed on
Schedule 2 hereto and will employ such of such employees, as employees-at-will,
as shall accept such offer, and ABA shall release such employees as are so
employed by TS as employees of ABA.
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D. Non-Compete Agreement
Holdings and ABA shall execute and deliver the Non-Compete
Agreement, dated the date hereof (the "ABA Non-Compete Agreement"), between
Holdings and ABA, in the form of Exhibit C attached hereto.
E. Option
ABA hereby grants to TS an option and right, exercisable on or
before the first anniversary of the date hereof, to acquire from ABA, upon
payment of $1 in cash and receipt of all necessary approvals, such of ABA's
state or federal licenses, permits or authorizations to conduct business
(collectively, the "Licenses") as TS may elect and ABA shall maintain such
Licenses in full force and effect if and to the extent that TS so requests and
provides ABA with the necessary funds to pay costs incurred after the date
hereof required so to maintain such Licenses.
ARTICLE III
CERTAIN COVENANTS
A. Further Assurances.
Subject to the conditions herein provided, each of the parties
hereto agrees to use all reasonable efforts to take, or cause to be taken, all
action and to do, or cause to be done, all things necessary, proper or advisable
to consummate and make effective as promptly as practicable the transactions
contemplated by the Basic Agreements, including, without limitation, cooperating
with Holdings and TS, using reasonable efforts to obtain all necessary waivers,
consents and approvals and effecting all necessary registrations and filings,
including, without limitation, submissions of information requested by
governmental authorities.
B. Confidentiality.
1. At all times after the date hereof, each of ABA and the
Shareholders shall treat as Holdings' and TS' confidential property and not use
or disclose to others, without the prior written consent of TS, any non-publicly
available information or data with respect to any of the Transferred Assets
(including, but not limited to, any technical information or data provided by
ABA or the
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Shareholders in respect of the Transferred Assets) that may have heretofore or
hereafter been provided or disclosed by ABA or the Shareholders in respect of
the Transferred Assets, in connection with the Original Agreement or the Basic
Agreements, any negotiations pertaining thereto or any of the transactions
contemplated hereby or thereby. At all times after the date of this Agreement,
each of the Shareholders and ABA shall treat, and ABA shall cause its directors,
officers, employees, agents, representatives and consultants to treat, as
Holdings' and TS' confidential property and not use or disclose to others or
permit ABA's directors, officers, employees, agents, representatives and
consultants to use or disclose to others, without the prior written consent of
TS, any non-publicly available information or data of Holdings or TS (including,
but not limited to, any technical information or data provided by or on behalf
of Holdings or TS) that may have heretofore or hereafter been provided or
disclosed by or on behalf of Holdings or TS in connection with the Basic
Agreements or the Original Agreement, any negotiations pertaining thereto or any
of the transactions contemplated hereby or thereby.
2. The foregoing clause 1. shall not prevent any party hereto
from using or disclosing to others information: (i) which such party can show
has become part of the public domain other than by acts or omissions of such
party, its directors, officers, employees, agents, representatives and
consultants; (ii) which has been furnished to such party by third parties as a
matter of right, without restriction on disclosure or use known to such party;
(iii) that such party is required to disclose by applicable law or regulation,
in which case the party so required to disclose shall give the other party
prompt notice of such requirement in all cases with sufficient time for such
other party to seek a protective order or other limit on disclosure (unless the
party subject to the disclosure requirement would suffer penalties or sanctions
for failure to immediately disclose such information); or (iv) as necessary for
the enforcement of this Agreement or any of the Basic Agreements. If any party
becomes aware of any motion or other regulatory or court proceeding that might
require it to disclose any of the terms of this settlement, that party will give
immediate written notice of such motion or proceeding to the other and both
parties shall act cooperatively to retain the confidentiality of the terms
hereof. For purposes of this paragraph, "third party" does not include a person
(other than a direct competitor of Holdings or its affiliates) retained by any
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party to provide advice, consultation, analysis, legal counsel or any other
services in connection with this Agreement, if such person agrees to be bound by
the confidentiality obligations of this Agreement.
C. Public Announcement.
No press release, public announcement, confirmation or other
information regarding this Agreement or the other Basic Agreements or the
contents hereof or thereof shall be made by any party without the prior written
approval of the other parties, except as may be necessary to meet the
requirements or regulations of any applicable law, governmental unit or agency
or NASDAQ.
D. Financial Information.
As soon as practicable after the date hereof, ABA shall
deliver to Holdings unaudited balance sheets of ABA as at the end of the nine
month period ended September 30, 1996 and as at the end of the comparative nine
month period of the preceding year, together with unaudited summaries of
earnings of ABA for such period and the comparative calendar period of the
preceding year. Such financial statements (i) shall present fairly, in all
material respects, the financial position, results of operations and cash flows
of ABA as at or for the period indicated and shall be prepared in accordance
with generally accepted accounting principles (other than to omit footnotes that
might be required thereby, and subject to normal year-end adjustments) and on a
basis consistent with the practices applied in the preparation of the December
31, 1995 Holdings financial statements, (ii) shall be certified, on behalf of
ABA, by the President and the Chief Financial Officer of ABA, and (iii) shall be
presented in accordance with the requirements of Reg. S-X. ABA shall direct
Fishbein & Co. to consent to the use of the 1995 Financial Statements by
Holdings and the filing of such 1995 Financial Statements by Holdings with the
SEC.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
A. ABA and Shareholders Representations and Warran- ties. Each of ABA
and the Shareholders hereby represents and warrants as of the date hereof as
follows:
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1. Each of the representations and warranties set forth in Section 4.1
of the Original Agreement (including the ABA Disclosure Memorandum dated
December 12, 1996 attached hereto as Appendix C, in the form delivered to, and
accepted by Holdings, but not including the last sentence of clause (i) of
Section 4.1(e) and Section 4.1(x) thereof) and in clauses (v) and (viii) of
Section 2.7(b) of the Restated Partition Agreement is incorporated herein in its
entirety by this reference, together with the definitions of the capitalized
terms herein (except that references therein to "this Agreement" and to the
"Basic Agreements" shall, for all purposes of this Section, be references to
this Restructuring Agreement and to the Basic Agreements as herein defined), and
each of such representations and warranties is complete and correct as of the
date hereof as fully as if made as of the date hereof and included in its
entirety herein.
2. The unaudited balance sheets of ABA as at the end of the nine month
period ended September 30, 1996 and as at the end of the comparative nine month
period of the preceding year, together with unaudited summaries of earnings of
ABA for such nine month period and the comparative calendar nine month period of
the preceding year to be delivered to Holdings within two weeks of the date
hereof shall present fairly, in all material respects, the financial position,
results of operations and cash flows of ABA as at or for the period indicated
and shall be prepared in accordance with generally accepted accounting
principles. Except to the extent reflected or reserved against in the September
30, 1996 balance sheet or incurred in the ordinary course of business since such
date and described in the ABA Disclosure Memorandum dated December 12, 1996
attached hereto as Appendix C or in a writing delivered to Holdings specifically
referencing this Section, ABA does not have any material liabilities or
obligations of any nature, whether accrued, absolute, contingent or otherwise,
including, without limitation, liabilities for taxes or relating to
environmental protection matters or occupational health or safety.
3. The consideration received by ABA for the Transferred Assets
represents reasonably equivalent value therefor and was negotiated by ABA, the
Shareholders, Holdings and TS in good faith and ABA will not, by reason of the
consummation of the transactions contemplated hereby, be rendered insolvent.
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4. ABA has good and marketable title to each of the Transferred Assets,
free and clear of any lien, charge or encumbrance except, in each case, as
indicated in the ABA Disclosure Memorandum.
5. Schedule 2 hereto contains a complete and correct summary of the
terms of the Lease.
6. Schedule 3 attached hereto includes a complete and correct list of
all of ABA's assets and liabilities as of the date hereof, whether tangible or
intangible.
B. Holdings and TS Representations and Warranties. Each of Holdings and
TS hereby represents and warrants as of the date hereof that it has the
corporate power and authority to execute and deliver the Basic Agreements to
which it is a party, to perform its obligations thereunder and to consummate the
transactions contemplated thereby, such execution, delivery, performance and
consummation have been duly authorized by all necessary corporate action on its
part and each of the Basic Agreements to which it is a party has been duly
executed and delivered by it and constitutes its valid and legally binding
obligation, enforceable in accordance with its terms.
ARTICLE V
INDEMNIFICATION
A. Holdings Indemnity.
Subject to the provisions hereof, Holdings shall indemnify ABA and the
Shareholders and ABA's directors, officers, employees, agents, shareholders and
affiliates (collectively, the "ABA Indemnified Parties") from, and hold each of
such ABA Indemnified Parties harmless from, any and all Damages incurred or
suffered by any of the ABA Indemnified Parties arising out of or by reason of or
based upon or as a consequence of:
1. any breach of any representation or warranty of Holdings or
its Subsidiaries contained in this Agreement or any other Basic Agreement;
2. the Regulatory Costs;
3. any fines, claims or other charges paid by ABA to any
governmental or other regulatory authority by
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reason of the transfer of the Transferred Assets to TS as contemplated by this
Agreement ("Regulatory Charges");
4. any liability of ABA arising after the date hereof to any
governmental or regulatory authority arising from any action by TS after the
date hereof in respect of the Transferred Assets or from any use by TS of the
ABA name;
5. any costs or expenses, incurred after the date hereof, for
obtaining any regulatory permits or licenses in connection with ownership or use
by TS of the Transferred Assets;
6. any breach of any of Holdings's covenants contained herein;
7. the Assumed Liabilities.
B. Notice Regarding Indemnities; Limitation of Indemnity.
1. If any legal proceeding shall be instituted, or any Claim or demand
shall be made against an indemnified party in respect of which an indemnifying
party may be liable hereunder, the indemnified party shall give prompt written
notice thereof to the indemnifying party. The indemnifying party, at its option
and expense, may participate in and assume the control of the defense of any
such legal proceeding and the negotiation and settlement of any such Claim or
demand, and the indemnifying party shall have the absolute right, in its sole
discretion and without the consent of the indemnified party, to settle any such
legal proceeding, Claim or demand; provided, however, that the indemnifying
party may not, in defense of any such proceeding, Claim or demand, except with
the written consent of the indemnified party (not to be unreasonably withheld or
delayed), consent to the entry of any judgment or enter into any settlement that
does not include, as an unconditional term thereof, the giving by the claimant
or plaintiff to the indemnified party of a release from all liability in respect
thereof. After notice to the indemnified party of the indemnifying party's
election to assume the control of the defense of any such proceeding or the
negotiation and settlement of any such Claim or demand, the indemnifying party
shall be liable to the indemnified party in respect of reasonable legal or other
expenses subsequently incurred by the indemnified party in
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connection with any such defense or negotiation or settlement only to the extent
incurred at the request of the indemnifying party. As to those actions, Claims
or demands with respect to which the indemnifying party does not elect to assume
the control of the defense or the negotiation and settlement, the indemnified
party will afford the indemnifying party an adequate opportunity to participate
in such defense or negotiation and settlement, at the indemnifying party's
expense, and will not consent to the entry of any judgment or enter into any
settlement of the same without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
2. If the amount of Damages paid, at any time subsequent to such
payment, shall be reduced by any recovery, settlement or otherwise, the amount
of such reduction, less any expense incurred by the party receiving such
recovery in connection therewith, promptly shall be repaid to the indemnifying
party.
3. No Claim with respect to Damages described in Section V.A hereof
shall be valid unless asserted in writing prior to the expiration of the
applicable period, if any, covered by such indemnity described in Section VI.L.
hereof, specifying in reasonable detail the representation or warranty that
allegedly has been breached and furnishing the basis for such allegation.
ARTICLE VI
MISCELLANEOUS
A. Brokers
ABA represents and warrants that no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission, or to the reimbursement of any of its expenses, in connection with
the transactions contemplated hereby.
B. Expenses
All costs and expenses incurred in connection with the Basic
Agreements and the transactions contemplated hereby or thereby shall be paid by
the party incurring such expenses.
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C. Notices
All notices and other communications hereunder shall be given
by telephone and immediately confirmed in writing and shall be deemed given if
delivered personally or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
(a) if to Holdings or TS, to it at:
Tel-Save Holdings, Inc.
Law Department
6805 Route 202
New Hope, Pennsylvania 18938
Attention: General Counsel
Telephone Number: (215) 862-1500
Facsimile Number: (215) 862-1085
With copies to:
Arnold & Porter
399 Park Avenue
New York, New York 10022
Attention: Jonathan C. Stapleton, Esq.
Telephone Number: (212) 715-1000
Facsimile Number: (212) 715-1399
(b) if to ABA:
220 Division Street
Kingston, Pennsylvania 18704
Attention: Mr. Sam Means
Telephone Number: (717) 283-9247
Facsimile Number: (717) 283-5331
and to:
86 West Eagle Road
Havertown, Pennsylvania 19083
Attention: Mr. Ralph Arch
Telephone Number: (610) 789-4888
Facsimile Number: (610) 789-8822
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with copies to:
Swidler & Berlin
3000 K Street, N.W.
Suite 300
Washington, DC 20007-5116
Attention: Andrew M. Ray, Esq.
Telephone Number: (202) 424-7500
Facsimile Number: (202) 424-7643
D. Interpretation
The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. References to Sections, Articles and Exhibits refer to sections,
articles and exhibits of this Agreement unless otherwise stated.
E. Severability
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants, and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify the Agreement to preserve, to the extent legally
permitted, each party's anticipated benefits and obligations under this
Agreement.
F. Entire Agreement
This Agreement and the Basic Agreements constitute the entire
agreement, and supersede all other prior agreements and undertakings, both
written and oral, among the parties with respect to the subject matter hereof.
G. Assignments
This Agreement (i) is not intended to confer upon any other
person any rights or remedies hereunder, except as provided in Article V hereof
with respect to the ABA Indemnified Parties and in Section II.B. hereof in
respect of those persons referenced therein other than the parties hereto; and
(ii) shall not be assigned by operation of law
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or otherwise, except that Holdings or TS may assign all or any portion of its
rights under this Agreement to any of its Affiliates (provided, however, that in
the event of any such assignment, Holdings or TS, as the case may be, shall
cause such assignee to execute and become a party to the Basic Agreements and
such assignee shall be vested with all the rights and obligations assigned to it
by the assignor as if it were named in this Agreement and the Basic Agreements),
but no such assignment shall relieve Holdings or TS, as applicable, of its
obligations hereunder.
H. Governing Law
This Agreement shall be governed in all respects, including
validity, interpretation and effect, by the internal laws of the Commonwealth of
Pennsylvania, without giving effect to the principles of conflict of laws
thereof.
I. Consent to Jurisdiction
The parties hereto expressly consent to the personal
jurisdiction of the courts of the United States of America and of the courts of
the Commonwealth of Pennsylva- nia, in each case sitting in the Commonwealth of
Pennsylva- nia.
J. Amendments
No provision of this Agreement may be amended, modified or
waived except by written agreement duly executed by each of the parties.
K. Third Party Beneficiaries
This Agreement and the other Basic Agreements are intended for
the benefit of the parties hereto and thereto, as the case may be, and their
respective successors and permitted assigns, and are not for the benefit of nor
may any provision hereof be enforced by, any other Person, including, without
limitation, any customer or End User of ABA (such customers and End Users having
no rights whatsoever herein or therein), except as provided in Article V hereof
with respect to the ABA Indemnified Parties and in Section II.B. hereof in
respect of those persons referenced therein other than the parties hereto.
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<PAGE>
L. Survival of Representations and Warranties and Related
Indemnification.
The representations and warranties of ABA and the Shareholders
shall terminate as of, and not survive, the closing on the date hereof. The
representations and warranties of TS and Holdings set forth herein and the
indemnifications set forth in Article V. hereof based thereon shall survive for
a period of nine (9) months after the closing on the date hereof.
M. Counterparts
This Agreement may be executed in any number of counterparts,
each of which shall constitute an original, but together shall be construed as
one document.
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IN WITNESS WHEREOF, each of the parties hereto have caused
this Agreement to be executed on the date first written above by their
respective officers thereunder duly authorized.
TEL-SAVE HOLDINGS, INC.
- ---------------------- By: __________________________________
Name: ____________________________
Title: ___________________________
By: __________________________________
Name: ____________________________
Title:____________________________
TEL-SAVE, INC.
- ---------------------
By: __________________________________
Name: ____________________________
Title:____________________________
By: _________________________________
Name:____________________________
Title:___________________________
AMERICAN BUSINESS ALLIANCE, INC.
By: _________________________________
- --------------------- Name: ___________________________
Title:___________________________
- --------------------- ____________________________________
MR. SAM MEANS
- --------------------- ____________________________________
MR. SCOT ARCH
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- --------------------- ___________________________________
MS. ELLEN ARCH
Voting Trust U/A dtd
September 1, 1993
- ---------------------
By: ______________________________
Ralph Arch, Voting Trustee
- --------------------- __________________________________
MR. RALPH ARCH
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