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EXHIBIT 2
RECAPITALIZATION AGREEMENT
BY AND AMONG
XXXXXX EQUITY INVESTORS, III, L.P.
AND CERTAIN OTHER INVESTORS
TO BE LISTED ON THE INVESTOR SCHEDULE
(THE "INVESTORS")
ALLIED BUS CORP.
(THE "COMPANY")
ALLIED TOURS HOLDING CORP.
("ALLIED PARENT")
AND
THE SHAREHOLDERS OF THE COMPANY
(THE "SHAREHOLDERS")
DATED MARCH 18, 1998
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS................................................................. 2
1.1 Definitions.................................................................... 2
ARTICLE II RECAPITALIZATION............................................................ 7
2.1 Stock Purchase................................................................. 7
2.2 Payment of Purchase Price...................................................... 8
2.3 The Financing.................................................................. 8
2.4 Redemption..................................................................... 8
2.5 Recapitalization............................................................... 8
2.6 Closing........................................................................ 8
2.7 Escrow Arrangements............................................................ 9
2.8 Intentionally Left Blank....................................................... 9
2.9 Closing Audit.................................................................. 9
2.10 Post-Closing Net Worth Adjustment............................................. 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY,
ALLIED PARENT AND SHAREHOLDERS..................................................... 10
3.1 Capitalization................................................................. 10
3.2 No Liens on Shares............................................................. 11
3.3 Subsidiaries................................................................... 11
3.4 Other Rights to Acquire Capital Stock.......................................... 11
3.5 Due Organization............................................................... 11
3.6 Due Authorization.............................................................. 11
3.7 Financial Statements........................................................... 12
3.8 Certain Actions................................................................ 13
3.9 Properties..................................................................... 14
3.10 Licenses and Permits.......................................................... 14
3.11 Intellectual Property......................................................... 15
3.12 Compliance with Laws.......................................................... 15
3.13 Insurance..................................................................... 15
3.14 Employee Benefit Plans........................................................ 16
(a) Employee Welfare Benefit Plans.......................................... 16
(b) Employee Pension Benefit Plans.......................................... 16
(c) Employment and Non-Tax Qualified Deferred Compensation
Arrangements......................................................... 16
3.15 Contracts and Agreements...................................................... 16
3.16 Claims and Proceedings........................................................ 17
3.17 Taxes......................................................................... 17
3.18 Personnel..................................................................... 18
3.19 Business Relations............................................................ 19
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3.20 Accounts Receivable; Accounts Payables; Customer Deposits and Bookings........ 19
(a) Accounts Receivable..................................................... 19
(b) Accounts Payable........................................................ 20
(c) Customer Deposits; Bookings............................................. 20
3.21 Bank Accounts; Investments.................................................... 20
3.22 Customer Claims............................................................... 20
3.23 Brokers....................................................................... 20
3.24 Affiliated Transactions....................................................... 21
3.25 Funded Indebtedness; Letters of Credit; Undisclosed Liabilities............... 21
(a) Funded Indebtedness..................................................... 21
(b) Letters of Credit....................................................... 21
(c) Undisclosed Liabilities................................................. 21
3.26 Year 2000..................................................................... 21
3.27 Information Furnished......................................................... 22
ARTICLE IV THE INVESTORS' REPRESENTATIONS AND WARRANTIES.............................. 22
4.1 Due Organization of Xxxxxx III................................................. 22
4.2 Due Authorization.............................................................. 22
4.3 No Brokers..................................................................... 22
4.4 Investment..................................................................... 23
ARTICLE V PRE-CLOSING COVENANTS OF THE COMPANY, ALLIED PARENT,
XXXXXX III AND SHAREHOLDERS........................................................ 23
5.1 Consents of Others............................................................. 23
5.2 Shareholders' Efforts.......................................................... 23
5.3 Powers of Attorney............................................................. 23
5.4 Conduct of Business Pending Closing............................................ 23
5.5 Access Before Closing.......................................................... 24
5.6 Investor Confidentiality....................................................... 24
ARTICLE VI POST-CLOSING COVENANTS...................................................... 24
6.1 General........................................................................ 24
6.2 Transition..................................................................... 25
6.3 Confidentiality................................................................ 25
6.4 Covenant Not to Compete........................................................ 25
6.5 Additional Matters............................................................. 26
6.6 Litigation Support............................................................. 28
6.7 Audits......................................................................... 28
6.8 Registration Rights............................................................ 28
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING................ 29
7.1 Conditions to the Investors' Obligations....................................... 29
(a) Covenants, Representations and Warranties............................... 29
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(b) Consents................................................................ 29
(c) Leases.................................................................. 29
(d) Discharge of Indebtedness and Lien; Shareholder Loans................... 29
(e) Fee..................................................................... 30
(f) Transfer Taxes.......................................................... 30
(g) Financial Condition..................................................... 30
(h) Documents to be Delivered by Shareholders; Allied Parent and the
Company.............................................................. 30
(i) Opinion of Shareholder's Counsel................................. 30
(ii) Certificates.................................................... 30
(iii) Release........................................................ 30
(iv) Escrow Agreement................................................ 30
(v) Employment Agreements............................................ 31
(vi) Delivery of Purchased Shares.................................... 31
(vii) Redemption of Existing Common Stock............................ 31
(viii) Resignation of Directors...................................... 31
(ix) Termination of Shareholder Agreements........................... 31
(x) Consulting Agreement............................................. 31
(i) Company Equity Arrangements............................................. 31
(j) Restated Certificate of Incorporation................................... 31
(k) Liquidation of Sister Business.......................................... 32
7.2 Conditions to Shareholders', Allied Parent's and the Company's Obligations..... 32
(a) Covenants, Representations and Warranties............................... 32
(b) Consents................................................................ 32
(c) Documents to be Delivered by Investors.................................. 32
(ii) Escrow Agreement................................................ 32
(iii) Employment Agreements.......................................... 32
(iv) Consulting Agreement............................................ 33
(d) Company Equity Arrangements............................................. 33
(e) Payments to Allied Parent............................................... 33
ARTICLE VIII INDEMNIFICATION.......................................................... 33
8.1 Indemnification by Allied Parent and Shareholders.............................. 33
8.2 Defense of Claims.............................................................. 34
8.3 Escrow Claim................................................................... 34
8.4 Tax Audits, Etc. .............................................................. 35
8.5 Indemnification of Shareholders, Allied Parent and the Company................. 35
8.6 Limits on Indemnification...................................................... 35
ARTICLE IX TERMINATION................................................................ 36
9.1 Termination.................................................................... 36
9.2 Effect of Termination.......................................................... 37
ARTICLE X MISCELLANEOUS............................................................... 37
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10.1 Modifications................................................................. 37
10.2 Notices....................................................................... 37
10.3 Counterparts; Facsimile Transmission.......................................... 38
10.4 Expenses...................................................................... 38
10.5 Binding Effect; Assignment.................................................... 39
10.6 Entire and Sole Agreement..................................................... 39
10.7 Governing Law................................................................. 39
10.8 Survival of Representations, Warranties and Covenants......................... 39
10.9 Invalid Provisions............................................................ 40
10.10 Public Announcements......................................................... 40
10.11 Remedies Cumulative.......................................................... 40
10.12 Third Parties................................................................ 40
10.13 No Strict Construction....................................................... 40
10.14 Joinder by Additional Investors.............................................. 40
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LIST OF EXHIBITS
Exhibit A Form of Restated Certificate of Incorporation
Exhibit B Form of Escrow Agreement
Exhibit C Opinion of the Company's and Shareholders' Counsel
Exhibit D [Intentionally Left Blank]
Exhibit E Form of Release
Exhibit F Form of Xxxxxxx Xxxxxx Employment Agreement
Exhibit F-1 Form of Xxxxxxx Xxxxxx Employment
Exhibit F-2 Form of Xxxxxxx Xxxxxxx Employment
Exhibit G Shareholders Accounts and Wire Transfer Instructions (Section 2.4)
Exhibit H Ownership of Shares (Section 3.1)
Exhibit I-1 Articles (Section 3.5)
Exhibit I-2 Bylaws (Section 3.5)
Exhibit I-3 Qualified Jurisdictions (Section 3.6)
Exhibit J List of Properties (Section 3.9)
Exhibit K List of Licenses and Permits (Section 3.10)
Exhibit L List of Intellectual Property (Section 3.11)
Exhibit m List of Insurance (Section 3.13)
Exhibit N List of Contracts (Section 3.15)
Exhibit O List of Personnel (Section 3.18)
Exhibit P List of Bookings (Section 3.20)
Exhibit Q [Intentionally Left Blank]
Exhibit R List of Bank Accounts and Investments (Section 3.21)
Exhibit S List of Letters of Credit (Section 3.25(b))
Exhibit T List of Indebtedness (Section 7.1(d))
Exhibit U Xxxx Xxxxxx Consulting Agreement
LIST OF SCHEDULES
INVESTOR SCHEDULE
ESCROW SCHEDULE
DISCLOSURE SCHEDULE
RECAPITALIZATION SCHEDULE
TAX PAYMENTS SCHEDULE
FINANCIAL STATEMENTS
GAAP EXCEPTIONS MEMO
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT (this "AGREEMENT") is entered into as of
March 18, 1998, by and among XXXXXX EQUITY INVESTORS III, L.P., a Delaware
limited partnership ("XXXXXX III"), on behalf of itself and certain other
investors who may execute a joinder hereto and shall be listed on the Investor
Schedule to this Agreement (Xxxxxx III and the other signatory investors shall
be referred to herein individually as an "INVESTOR" and collectively as the
"INVESTORS"), ALLIED BUS CORP., a New York corporation (the "COMPANY") and
ALLIED TOURS HOLDING CORP., a New York corporation ("ALLIED PARENT"), and
Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx, and Xxxxxxxx Xxxxxxx
(collectively, the "SHAREHOLDERS").
RECITALS
Pursuant to this Agreement, the Company, which is engaged in the
wholesale travel sales business in the United States (the "BUSINESS"), will be
recapitalized in a series of transactions (the "TRANSACTIONS"). The Transactions
will occur in the following steps:
A. THE CURRENT CAPITALIZATION OF THE COMPANY
On the date of this Agreement, the Company's capitalization consists of
200 shares of common stock, no par value per share (the "CAPITAL STOCK"). Allied
Parent is the owner of 100 shares of Capital Stock, which stock represents all
of the issued and outstanding stock of the Company (the "EXISTING SHARES"). The
Shareholders own 100 shares of the capital stock of Allied Parent, which stock
represents all of the issued and outstanding shares of capital stock of Allied
Parent.
B. THE STOCK PURCHASE
The Investors desire to purchase from Allied Parent and Allied Parent
desires to sell to the Investors an aggregate of 57 shares of Capital Stock (the
"STOCK PURCHASE") for a purchase price of $433,710 per share (an aggregate
purchase price of $24,721,470), subject to adjustment as provided herein.
C. THE FINANCING
It is anticipated that the Company will enter into a credit agreement or
agreements with a financial institution or institutions (the "FINANCING") to be
arranged by Xxxxxx III, which Financing shall provide for a loan or loans to the
Company on commercially reasonable terms in connection with the Transactions in
the principal amount of up to approximately $15,000,000 (the "LOAN PROCEEDS").
The closing of the Financing is not a condition precedent to the closing of the
Transactions, and if for any reason the Financing is not fully consummated, such
that some or all of the Loan Proceeds are not received by the Company, but all
of the remaining closing conditions to this Agreement are satisfied, then Xxxxxx
III will be responsible for funding on commercially
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reasonable terms the sums necessary to consummate the Transactions (any such
other funds, together with any Loan Proceeds as necessary to consummate the
Transactions, shall be referred to herein as the "FINANCING PROCEEDS").
D. THE REDEMPTION
At Closing, 34 shares (the "REDEMPTION SHARES") of the Existing Shares
held by Allied Parent will be redeemed by the Company for a purchase price of
$433,710 per share (an aggregate redemption price of $14,746,140), subject to
adjustment and escrow holdbacks as provided herein (the "REDEMPTION").
E. THE RECAPITALIZATION
Following the Redemption, the Company will recapitalize itself (the
"RECAPITALIZATION") by amending and restating its Certificate of Incorporation
to authorize two classes of capital stock, (i) the Common Stock, $.01 par value
(the "COMMON STOCK") and (ii) the Preferred Stock, par value $1,000 per share
(the "PREFERRED STOCK"). Pursuant to the Recapitalization, each issued and
outstanding share of Capital Stock will be exchanged for (i) 4,337.1 shares of
Common Stock and (ii) 390.339 shares of Preferred Stock. A chart showing the
details of the Recapitalization is attached as the Recapitalization Schedule
hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and agree
as follows:
ARTICLE I
DEFINITIONS
A. DEFINITIONS. In this Agreement, the following terms have the meanings
specified or referred to in this Section 1.1 and shall be equally applicable to
both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.
"AA" has the meaning set forth in Section 2.9 below.
"ACCOUNTS RECEIVABLE ADJUSTMENT" has the meaning set forth in Section
8.1 below.
"AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"ADJUSTED CLOSING FINANCIAL STATEMENTS" has the meaning specified in
Section 2.9.
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"BUSINESS" has the meaning specified in the first recital of the
Agreement.
"CAPITAL STOCK" has the meaning specified in Recital A of the Agreement.
"CLOSING" means the closing of the Stock Purchase followed by the
Redemption and subsequently the Recapitalization.
"CLOSING DATE" has the meaning specified in Section 2.6.
"CLOSING REDEMPTION PRICE" shall have the meaning assigned to such term
in Section 2.4(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning specified in Recital E of this Agreement.
"COMPANY" has the meaning specified in the first paragraph of this
Agreement.
"CONFIDENTIAL INFORMATION" means (i) the terms and provisions of this
Agreement and the Transactions and (ii) all confidential information and trade
secrets of the Company or its Affiliates including, without limitation, any of
the same comprising the identity, lists or descriptions of any customers,
referral sources or organizations; financial statements, cost reports or other
financial information; contract proposals, or bidding information; business
plans and training and operations methods and manuals; personnel records; fee
structure; and management systems, policies or procedures, including related
forms and manuals. Confidential Information shall not include any information
(a) which is disclosed pursuant to subpoena or other legal process, (b) which
has been publicly disclosed, or (c) which is subsequently disclosed to any third
party not in breach of a confidentiality agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
"COURT ORDER" means any judgment, order, award or decree of any foreign,
federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached to this
Agreement pursuant to which exceptions to Allied Parent's, the Shareholders' and
the Company's specific representations and warranties set forth in Article III
(and listed on a Section-by-Section basis) are disclosed to Investors pursuant
to said Article III.
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL AND OSHA OBLIGATIONS" has the meaning specified in
Section 3.12.
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"EQUITABLE EXCEPTIONS" shall have the meaning specified in Section 3.6.
"EQUITY AGREEMENTS" means those certain equity agreements between
Investors, the Company, Allied Parent, the Shareholders and certain executives
to be entered into as of the Closing Date, including without limitation, the
Shareholders Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ESCROW AGENT" means The Bank of New York.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and
among the Company, Allied Parent, the Shareholders, Xxxxxx III and the Escrow
Agent in the form of Exhibit B.
"ESCROW NOTE" has the meaning specified in Section 2.4.
"ESCROW PERIOD" has the meaning specified in Section 2.7.
"ESCROW SUM" has the meaning specified in Section 2.7.
"EXISTING SHARES" has the meaning specified in Recital A of the
Agreement.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
"FINANCING" has the meaning specified in Recital C of the Agreement.
"FINANCING PROCEEDS" has the meaning specified in Recital C of the
Agreement.
"FORCE MAJEURE" shall mean any failure or delay caused by acts of god,
flood, fire, war or terrorism or any failure or delay caused by a governmental
blockage of all currency transactions between a foreign Governmental Body and
the United States of America.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company for
borrowed money or other interest-bearing indebtedness; (ii) capital lease
obligations of the Company; (iii) obligations of the Company to pay the deferred
purchase or acquisition price for goods or services, other than trade accounts
payable in the ordinary course of business; (iv) indebtedness of others
guaranteed by the Company or secured by an Encumbrance on the Company's
property; and (v) indebtedness of the Company under extended credit terms of
more than 30 days from vendors provided to the Company.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
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"GAAP EXCEPTIONS MEMO" shall have the meaning specified in Section 3.7.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or other
governmental authority or regulatory body having jurisdiction over the Company,
Allied Parent and/or the Shareholders.
"GOVERNMENTAL PERMITS" has the meaning specified in Section 3.10.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section 2.9.
"INTELLECTUAL PROPERTY" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"INVESTORS" has the meaning specified in the first paragraph of this
Agreement.
"KNOWLEDGE OF THE COMPANY" (whether or not capitalized) shall mean
actual knowledge, after reasonable inquiry, of the Shareholders and the
employees of the Company with responsibility for the applicable subject matter.
"KNOWLEDGE OF THE SHAREHOLDERS" (whether or not capitalized) shall mean actual
knowledge of the Shareholders after reasonable inquiry
"LEASES" shall mean the leases for the Company's offices located at (i)
000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000; (ii) Suite Nos. 710
and 714 in 0000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx, Xxxxxxxxxx 00000; (iii) 000
Xxxxxxx Xxxx, Xxxxx XX.X.X., Xxxxx Xxxxx, Xxxxxxx 00000; and (iv) 0000 Xxxxxxxx
Xxxxxx, Part of 0xx Xxxxx, Xxxxxxxx, Xxxxxx.
"LOAN PROCEEDS" has the meaning specified in Recital C of the Agreement.
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"MATERIAL" (whether or not capitalized) shall, where appropriate in
context of its use in making the representations and warranties set forth in
Article III, be deemed to mean an amount of money greater than $100,000.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a material
adverse change or effect on the assets, properties, Business, operations,
liabilities, financial condition or prospects of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred in the context of the use of
such terms in the Company's, Allied Parent's and Shareholders' representations
and warranties set forth in Article III, such terms shall refer to the
occurrence of any single event, or any series of related events, or set of
related circumstances, which results or may result in a loss to the Company, in
excess of $100,000 per occurrence or $250,000 in the aggregate.
"NET WORTH" shall equal the Company's total assets minus its total
liabilities.
"NET WORTH ADJUSTMENT" has the meaning specified in Section 2.10.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. Sections
651 et seq., any amendment thereto, and any regulations promulgated thereunder.
"PERMITTED DISTRIBUTIONS" has the meaning specified in Section 3.8.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other governmental
charges and assessments which are not yet due and payable, (b) liens of
landlords and liens of carriers, warehousemen, mechanics and materialmen and
other like liens arising in the ordinary course of business for sums not yet due
and payable, or (c) other liens or imperfections on property which are not
material in amount or do not materially detract from the value or the existing
use of the property affected by such lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PREFERRED STOCK" has the meaning specified in Recital E of the
Agreement.
"PROJECTED NET WORTH" means a minus ($400,000).
"PURCHASE PRICE" has the meaning specified in Section 2.1.
"PURCHASED SHARES" has the meaning specified in Section 2.1.
"RECAPITALIZATION" has the meaning specified in Recital E of the
Agreement.
"REDEMPTION" has the meaning specified in Recital D of the Agreement.
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"REDEMPTION PRICE" has the meaning specified in Section 2.4.
"REDEMPTION SHARES" has the meaning specified in Recital D of the
Agreement.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements).
"SHAREHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"STOCK PURCHASE" has the meaning specified in Recital B of the
Agreement.
"TAX" or "TAXES" means any federal, state, local or foreign income,
alternative or add-on minimum, gross income, gross receipts, windfall profits,
severance, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amounts imposed thereon by any Governmental Body.
"TAX RETURN" means any return, report or similar statement required to
be filed with respect to any Taxes (including any attached schedules),
including, without limitation, any information return, claim for refund, amended
return and declaration of estimated Tax.
"XXXXXX III" has the meaning specified in the first paragraph of this
Agreement.
"TRANSACTIONS" has the meaning specified in the beginning of the
recitals of this Agreement.
ARTICLE II
RECAPITALIZATION
A. STOCK PURCHASE. On the Closing Date and subject to the terms and
conditions set forth in this Agreement, Allied Parent shall sell and deliver to
the Investors an aggregate of 57 shares of the Capital Stock (the "PURCHASED
SHARES"), free and clear of all Encumbrances, other than the restrictions
imposed by federal and state securities laws. The total purchase price for the
Purchased Shares (the "PURCHASE PRICE") shall be equal to $24,721,470, subject
to any adjustment required to be made pursuant to Section 2.10 below.
B. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable by the
Investors or Xxxxxx III as follows: (a) $21,350,470 of the Purchase Price will
be payable at the
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Closing (as defined in Section 2.6) in cash by wire transfer of funds to Allied
Parent's account as specified in Exhibit G attached hereto and (b) the balance
of the Purchase Price ($3,371,000) will be paid in accordance with the Tax
Payments Schedule attached hereto by wire transfer of funds to Allied Parent's
or the Shareholders' accounts as specified in Exhibit G attached hereto as
updated from time to time following the Closing Date.
C. THE FINANCING. On the Closing Date, the Company shall consummate the
Financing and shall borrow an amount equal to the Financing Proceeds in order to
consummate the Redemption.
D. REDEMPTION. On the Closing Date and subject to the terms and
conditions set forth in this Agreement, the Company shall redeem the Redemption
Shares from Allied Parent. Subject to the terms of Section 2.7, which provision
requires certain holdbacks prior to the distribution of such price to Allied
Parent, the Redemption Shares shall be redeemed at a price of $433,710 per
share, for an aggregate gross redemption price of $14,746,140 (the "REDEMPTION
PRICE"). The Redemption Price shall be payable as follows:
1. an aggregate of $10,746,140 shall be paid at Closing by wire
transfer of funds to Allied Parent's account as specified in Exhibit G hereto
(the "CLOSING REDEMPTION PRICE"); and
2. $4,000,000 shall be paid to the Escrow Agent at Closing
pursuant to Section 2.7 below to serve as the Escrow Sum (as defined below) in
the form of a 120 day promissory note which bears interest at the rate of 8%
per annum in a form mutually agreed upon by Xxxxxx III and Allied Parent (the
"ESCROW NOTE").
E. RECAPITALIZATION. Following the Stock Purchase and the Redemption and
on the Closing Date, the Company shall amend and restate its Certificate of
Incorporation to authorize the issuance of the two classes of the capital stock
(the Common Stock and the Preferred Stock) each having the rights and
preferences set forth in the Company's Restated Certificate of Incorporation in
substantially the form of Exhibit A attached hereto and as necessary to effect
the Transactions. Pursuant to such amendment, each share of Capital Stock issued
and outstanding after the Stock Purchase and the Redemption shall be exchanged
for (i) 4,337.1 shares of Common Stock and (ii) 390.34 shares of Preferred
Stock.
F. CLOSING. The Closing of the Transactions shall take place at 10:00
a.m., Eastern Time, at the offices of Xxxxx & Xxxxxxx L.L.P., 000 00xx Xxxxxx,
X.X. in Washington, D.C. on March 25, 1998, or on the date selected by Xxxxxx
III (which date shall be as soon as practicable following the date on which all
of the conditions to Closing set forth in Sections 7.1 and 7.2 have been
satisfied) (the "CLOSING DATE").
G. ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be entered
into among Shareholders, Allied Parent, the Company, Xxxxxx III and the Escrow
Agent, $4,000,000 of the Redemption Price shall be delivered to the Escrow Agent
at Closing pursuant to the Escrow Note. Upon payment of the Escrow Note by the
Company in immediately available funds on or prior to 120 days after the Closing
Date, such monies paid (which, together
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with all interest accrued thereon, is hereinafter referred to as the "ESCROW
SUM") shall be held pursuant to the terms of the Escrow Agreement for payment
from such Escrow Sum of the amounts, if any, owing by Allied Parent to the
Investors or the Company pursuant to the provisions of the Net Worth Adjustment
or the Escrow Schedule attached hereto and the indemnification provisions of
Article VIII below. At the conclusion of the period ending ten days after
completion of the final Adjusted Closing Financial Statements and the resolution
of any disputes therein pursuant to Section 2.9 below, the Escrow Sum shall be
reduced to an amount equal to the sum of $2,000,000 in cash, plus the amount, if
any, reserved, but not then paid or resolved, pursuant to claims made against
the Escrow Sum by the Investors or the Company pursuant to the provisions of the
Net Worth Adjustment and the Escrow Schedule (such amount of reduction in the
Escrow Sum being referred to as the "ESCROW SUM REDUCTION") and (ii) on the
first anniversary of the Closing Date (such one-year period being referred to
herein as the "ESCROW PERIOD"), such remaining portion of the Escrow Sum not
theretofore claimed by or paid to the Investors or the Company in accordance
with the terms of the Escrow Agreement, the Escrow Schedule and this Agreement
(together with any interest on such remaining portion of the Escrow Sum) shall
be disbursed to Allied Parent. All disbursements pursuant to the Escrow Sum
Reduction or at the expiration of the Escrow Period shall be paid in cash to
Allied Parent at its account set forth in Exhibit G as updated from time to
time. Shareholders, Allied Parent, the Company and Xxxxxx III agree that each
will execute and deliver such reasonable instruments and documents as are
furnished by any other party to enable such furnishing party to receive those
portions of the Escrow Sum to which the furnishing party is entitled under the
provisions of the Escrow Agreement and this Agreement.
H. [INTENTIONALLY LEFT BLANK].
I. CLOSING AUDIT. Within 120 days following the Closing Date, there
shall be delivered to Investors and to Shareholders an audit of the Company's
balance sheet and statements of income and cash flows as of and for the two
months ended February 28, 1998 (the "ADJUSTED CLOSING FINANCIAL STATEMENTS").
The Adjusted Closing Financial Statements shall be audited by Xxxxxx Xxxxxxxx,
LLP ("AA") in accordance with GAAP and then adjusted to be in accordance with
the Company's prior accounting practices. The cost of preparing the Adjusted
Closing Financial Statements shall be paid by the Company. In the event that
Allied Parent disputes any items or assumptions or methodologies regarding the
Adjusted Closing Financial Statements within thirty (30) days after Allied
Parent's receipt thereof, Allied Parent and Xxxxxx III shall jointly select and
retain an independent "Big Six" accounting firm (the "INDEPENDENT ACCOUNTANTS")
to review the disputed matter(s) on the Adjusted Closing Financial Statements.
In conducting such review, the Company and AA shall provide the Independent
Accountants and, during the thirty (30) day period, Allied Parent, with
customary access to the work papers of AA utilized in preparing the Adjusted
Closing Financial Statements. The final determination of such disputed matter(s)
by the Independent Accountants shall be utilized to determine all adjustments
described in Section 2.10 below and shall be final and binding on the parties
for such purposes. The cost of retaining the Independent Accountants shall be
borne by Shareholders, except that the Company shall reimburse Shareholders for
one-half the cost of the Independent Accountants in the event that such review
results in at least a
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$150,000 increase in the Company's Net Worth as reflected on the Adjusted
Closing Financial Statements prepared by AA.
J. POST-CLOSING NET WORTH ADJUSTMENT. The Redemption Price will be
adjusted upward or downward, on a dollar-for-dollar basis, to reflect the
increase or decrease, as the case may be, in Net Worth as reflected on the
Adjusted Closing Financial Statements from the Projected Net Worth (the "NET
WORTH ADJUSTMENT"). The Net Worth Adjustment shall be determined by AA. In the
event that the Net Worth Adjustment results in a decrease in the Redemption
Price, then the Escrow Agent or Allied Parent and the Shareholders shall pay
such amount to the Company in immediately available funds within ten (10)
business days of delivery of the Adjusted Closing Financial Statements as
finally determined in accordance with Section 2.9 above. Conversely, in the
event that the Net Worth Adjustment results in an increase in the Redemption
Price, then the Company shall pay such amount to Allied Parent to the account
set forth in Exhibit G hereto in immediately available funds within ten (10)
business days of delivery of the Adjusted Closing Financial Statements as
finally determined in accordance with Section 2.9 above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, ALLIED PARENT AND SHAREHOLDERS
Except as set forth on the Disclosure Schedule attached hereto (which
Disclosure Schedule contains a reasonably detailed description of each such
exception and references the applicable representation so qualified), the
Company, Allied Parent and Shareholders jointly and severally represent and
warrant to the Investors that:
A. CAPITALIZATION. The authorized capital stock of the Company
immediately prior to Closing consists of 200 shares of Capital Stock, 100 of
which being the Existing Shares are issued and outstanding. All of the Existing
Shares are duly authorized, validly issued, fully paid, and nonassessable. All
of the Existing Shares are owned of record and beneficially by Allied Parent.
All of the outstanding shares of Allied Parent are owned of record and
beneficially by the Shareholders in the amounts set forth on Exhibit H hereto.
None of the Existing Shares was issued or will be redeemed under this Agreement
in violation of any preemptive or preferential rights of any Person.
B. NO LIENS ON SHARES. Allied Parent owns the Existing Shares and
Shareholders own all of the Allied Parent shares, free and clear of any
Encumbrances other than the rights and obligations arising under this Agreement,
and none of the Existing Shares or the Allied Parent shares is subject to any
outstanding option, warrant, call, or similar right of any other Person to
acquire the same, and none of the Existing Shares or the Allied Parent shares is
subject to any restriction on transfer thereof except for restrictions imposed
by applicable federal and state securities laws. At Closing pursuant to the
Redemption and the Stock Purchase, Allied Parent will have full corporate power
and authority to convey good and marketable title to the
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Redemption Shares and the Purchased Shares, free and clear of any Encumbrances
other than the restrictions imposed by federal and state securities laws.
C. SUBSIDIARIES. The Company does not own, directly or indirectly, any
capital stock or ownership interests in any Person. The Shareholders do not own
any capital stock or ownership interests in any other Person engaged in the
Business other than Allied Parent. Allied Parent does not own any capital stock
or ownership interests in any other Person other than the Company.
D. OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in this
Agreement in respect of Investors' rights to acquire the Purchased Shares, there
are no authorized or outstanding warrants, options, or rights of any kind to
acquire from the Company any equity or debt securities of the Company, or
securities convertible into or exchangeable for equity or debt securities of the
Company, and there are no shares of capital stock of the Company reserved for
issuance for any purpose nor any contracts, commitments, understandings or
arrangements which require the Company to issue, sell or deliver any additional
shares of its capital stock.
E. DUE ORGANIZATION. The Company is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York
and has full corporate power and authority to own and lease its properties and
assets and to carry on the Business as now conducted and as proposed to be
conducted through Closing. Allied Parent is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York
and has full corporate power and authority to own and lease its properties and
assets and to carry on the Business as now conducted and as proposed to be
conducted through Closing. Complete and correct copies of the Certificate of
Incorporation and Bylaws of the Company and Allied Parent, and all amendments
thereto, have been delivered to Investors and are attached hereto as Exhibits
I-1 and I-2. The Company is qualified to do business in the State of New York
and in each jurisdiction in which the nature of the Business or the ownership of
its properties requires such qualification except where the failure to be so
qualified does not and could not reasonably be expected to have a Material
Adverse Effect. The jurisdictions in which the Company is so qualified are
listed on Exhibit I-3 attached hereto.
F. DUE AUTHORIZATION. The Company, Allied Parent and the Shareholders
each have full power and authority to execute, deliver and perform this
Agreement and to carry out the Transactions. The execution, delivery, and
performance of this Agreement and the Transactions have been duly and validly
authorized by all necessary corporate action of the Company and Allied Parent.
This Agreement has been duly and validly executed and delivered by the Company,
Allied Parent and Shareholders and constitutes the valid and binding obligations
of the Company, Allied Parent and Shareholders, enforceable in accordance with
its terms, except to the extent that enforceability may be limited by laws
affecting creditors' rights and debtors' obligations generally, and legal
limitations relating to remedies of specific performance and injunctive and
other forms of equitable relief (the "EQUITABLE EXCEPTIONS"). The execution,
delivery, and performance of this Agreement and the Transactions (as well as all
other instruments, agreements, certificates, or other documents contemplated
hereby) by the Company, Allied Parent and Shareholders, do not (a) violate any
Requirements of Laws or any
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Court Order of any Governmental Body applicable to the Company, Allied Parent or
Shareholders, or their respective property, (b) violate or conflict with, or
permit the cancellation of, or constitute a default under, any material
agreement to which the Company, Allied Parent or Shareholders are a party, or by
which any of them or any of their respective property is bound, (c) permit the
acceleration of the maturity of any material indebtedness of, or indebtedness
secured by the property of, the Company, Allied Parent or Shareholders, (d)
violate or conflict with any provision of the charter or bylaws of the Company
or Allied Parent, or (e) except for filings or approvals under the HSR Act and
such consents, approvals, or registrations as may be required under applicable
state securities laws, require any consent, approval or authorization of, or
notice to, or declaration, filing or registration with, any Governmental Body or
other third party.
G. FINANCIAL STATEMENTS. The following financial statements of the
Company have been delivered to Investors by the Company: reviewed balance sheets
of the Company as of December 31, 1995, December 31, 1996 and unaudited balance
sheet as of December 31, 1997, and reviewed statements of income and cash flows
of the Company for the fiscal years ended December 31, 1995 and December 31,
1996 and unaudited statements of income and cash flow for the year ending
December 31, 1997 (collectively, the "FINANCIAL STATEMENTS"). Copies of the
Financial Statements are included in the Disclosure Schedule hereto. The
Financial Statements, including the Financial Statements as of and for the year
ending December 31, 1997 (the "MOST RECENT FINANCIAL STATEMENTS"), have been
prepared in accordance with GAAP, except as specifically set forth in the Xxxxx
Xxxxxxx Xxxxxx Xxxxxx & Company LLP memorandum included in the Disclosure
Schedule hereto (the "GAAP EXCEPTIONS MEMO"). The Financial Statements
(including the notes thereto) have been prepared on a consistent basis
throughout the periods indicated and fairly present the financial position,
results of operations and changes in financial position of the Company as of the
indicated dates and for the indicated periods and are consistent with the books
and records of the Company (which books and records are correct and complete).
Since the date of the last of such Financial Statements, the Company has no
Material liabilities required by GAAP to be reflected on the Company's balance
sheet or notes thereto that are not so reflected in the Financial Statements
except as set forth in the GAAP Exceptions Memo, nor any other obligations
(whether absolute, contingent, or otherwise) which are (individually or in the
aggregate) Material (in amount or to the conduct of the Business); and neither
the Company nor Shareholders have Knowledge of any basis for the assertion of
any such Material liability or obligation. Since December 31, 1997, the Company
has not experienced any Material Adverse Change.
H. CERTAIN ACTIONS. Since December 31, 1997, the Company has not, except
as disclosed on any of the Financial Statements or notes thereto: (a) paid or
declared any dividends or distributions, or purchased, redeemed, acquired, or
retired any stock or indebtedness from Allied Parent or any Shareholder (other
than distributions to pay estimated income taxes of the Shareholders associated
with the income of the Company distributions of the Company's net income for the
fiscal year ended December 31, 1997; up to $900,000 of retained, pre-S
corporation earnings, less the aggregate amount of all debt owed by the
Shareholders to the Company; and additional distributions by the Company, all of
which shall be deemed to be made on or prior to February 28, 1998 (collectively
the "PERMITTED DISTRIBUTIONS"); provided that in
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the event that payment of any portion of the Permitted Distributions would
result in any violation of the condition to the Closing contained in Section
7.1(g) hereof, then the Company shall pay such Permitted Distributions at
Closing in an amount not to exceed $2,000,000 out of the Financing Proceeds);
(b) made or agreed to make any loans or advances or guaranteed or agreed to
guarantee any loans or advances to any party whatsoever; (c) suffered or
permitted any Encumbrance to arise or be granted or created against or upon any
of its assets, real or personal, tangible or intangible; (d) canceled, waived,
or released or agreed to cancel, waive, or release any of its debts, rights, or
claims against third parties in excess of $25,000 individually or $50,000 in the
aggregate; (e) sold, assigned, pledged, mortgaged, or otherwise transferred, or
suffered any material damage, destruction, or loss (whether or not covered by
insurance) to, any assets (except in the ordinary course of the Business); (f)
amended its charter or bylaws; (g) paid or made a commitment to pay any
severance or termination payment to any employee or consultant; (h) made any
material change in its method of management operation, accounting or reporting
of income or deductions for tax purposes or any change outside the ordinary
course of the Business in the Company's working capital other than Permitted
Distributions; (i) made any material acquisitions, made any capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $100,000; (j) made any investment or commitment therefor in any Person;
(k) made any payment or contracted for the payment of any bonus or other
compensation or personal expenses, other than (A) wages and salaries and
business expenses paid in the ordinary course of the Business, and (B) wage and
salary adjustments made in the ordinary course of the Business for employees who
are not officers, directors, or shareholders of the Company; (l) made, amended,
or entered into any written employment contract or created or made any material
change in any bonus, stock option, pension, retirement, profit sharing or other
employee benefit plan or arrangement; (m) made or entered into any vendor,
supply, sales, distribution, franchise, consortia or travel agency agreement
which involves annual consideration (or commissions) in excess of $100,000; (n)
made or entered into any agreement granting any Person any registration or offer
rights in respect of the Company's capital stock; (o) entered into any
non-competition agreement; (p) made or entered into any agreement or other
arrangement with any officer, director, shareholder, employee or Affiliate of
the Company or any of the foregoing Persons; (q) materially amended, experienced
a termination or received notice of actual or threatened termination or
non-renewal of any material contract, agreement, lease, franchise or license to
which the Company is a party that would or could reasonably be expected to have
a Material Adverse Effect; or (r) entered into any other material transactions
that would or could reasonably be expected to have a Material Adverse Effect.
I. PROPERTIES. Attached hereto as Exhibit J is a list containing a
description of each interest in real property (including, without limitation,
leasehold interests) and each item of personal property utilized by the Company
in the conduct of the Business having a book or fair market value in excess of
$20,000 as of the date hereof. Except for Permitted Exceptions, such real and
personal properties are free and clear of Encumbrances. Shareholders and the
Company have delivered to Investors copies of all real property leases and a
lien search obtained from the counties where the Company conducts business and
the New York Secretary of State office of all UCC liens of record against the
Company's personal property in the State of New
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York. All of the properties and assets necessary for continued operation of the
Business as currently conducted (including, without limitation, all books,
records, computers and computer software and data processing systems) are owned,
leased or licensed by the Company and are suitable for the purposes for which
they are currently being used. With the exception of used equipment and
inventory valued at no more than $20,000 in the aggregate on the Company's
Financial Statements, the physical properties of the Company, including the real
properties leased by the Company, are in operating condition and repair, normal
wear and tear excepted, and are free from any defects of a material nature.
Except for Permitted Exceptions, the Company has full and unrestricted legal and
equitable title to all such properties and assets. The operation of the
properties and Business of the Company in the manner in which they are now and
have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations which
would not, individually or in the aggregate, have a Material Adverse Effect. To
the Knowledge of the Shareholders, except for Permitted Exceptions, no
restrictive covenants, easements, rights-of-way, or regulations of record impair
the uses of the properties of the Company for the purposes for which they are
now operated. All leases of real or personal property by the Company are legal,
valid, binding, enforceable and in full force and effect and will remain legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately following the Closing, except for the Equitable Exceptions. All
facilities leased by the Company have received all approvals of any Governmental
Body (including Governmental Permits) required to be obtained by the Company in
connection with the operation of the Business and have been operated and
maintained in accordance with all Requirements of Laws applicable to the Company
as a lessee thereof. The Company owns no real property.
J. LICENSES AND PERMITS. Attached hereto as Exhibit K is a list of all
licenses, certificates, privileges, immunities, approvals, franchises,
authorizations and permits held or applied for by the Company from any
Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could, individually or in the aggregate, have a Material
Adverse Effect. The Company has complied in all material respects with the terms
and conditions of all such Governmental Permits, and the Company has not
received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof. All of such Governmental Permits are valid and in
full force and effect. No additional Governmental Permit is required from any
Governmental Body thereof in connection with the conduct of the Business which
Governmental Permit, if not obtained, would have a Material Adverse Effect.
K. INTELLECTUAL PROPERTY. Attached hereto as Exhibit L is a list and
brief description of all Intellectual Property owned or utilized by the Company.
The Company has furnished Investors with copies of all license agreements to
which the Company is a party, either as licensor or licensee, with respect to
any Intellectual Property. The Company has good title to or the right to use all
the Intellectual Property and all inventions, processes, designs, formulae,
trade secrets and know-how necessary for the conduct of the Business, in the
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any Intellectual Property right of
others, and neither the Company nor Shareholders are aware of any infringement
by others of any such rights owned by the Company.
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All licenses set forth on Exhibit L are valid and binding obligations of the
Company, and to the Knowledge of the Company the other parties thereto, and
enforceable against the Company, and to the Knowledge of the Company the other
parties thereto in accordance with their respective terms, except for the
Equitable Exceptions. The Company owns and possesses all right, title and
interest in and to, or has the right to use pursuant to a valid license, all
Intellectual Property necessary for the operation of the business of the Company
as presently conducted.
L. COMPLIANCE WITH LAWS. The Company has (i) complied in all material
respects with all Requirements of Laws, Governmental Permits and Court Orders
applicable to the Business and has filed with the proper Governmental Bodies all
statements and reports required by all Requirements of Laws, Governmental
Permits and Court Orders to which the Company or any of its employees (because
of their activities on behalf of the Company) are subject and (ii) to the
Knowledge of the Company, conducted the Business and is in compliance in all
material respects with all federal, state and local energy, public utility,
health, safety and environmental Requirements of Laws, Governmental Permits and
Court Orders including the Clean Air Act, the Clean Water Act, the Solid Waste
Act, the Comprehensive Environmental Response Compensation and Liability Act,
the Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA,
the Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "ENVIRONMENTAL AND OSHA OBLIGATIONS") and all other Governmental
Body requirements, except where any such failure to comply or file would not, in
the aggregate, have a Material Adverse Effect. No claim has been made by any
Governmental Body (and, to the Knowledge of the Company and Shareholders, no
such claim is anticipated) to the effect that the Business fails to comply, in
any respect, with any Requirements of Laws, Governmental Permit or Environmental
and OSHA Obligation or that a Governmental Permit or Court Order is necessary in
respect thereto.
M. INSURANCE. Attached hereto as Exhibit M is a list of all coverages
for fire, liability, or other forms of insurance and all fidelity bonds held by
or applicable to the Company. Copies of the binder for all such insurance
policies have been delivered to Investors. The insurance maintained by the
Company is adequate and customary for companies engaged in the Business. To the
best of the Company's and Shareholders' Knowledge, no event relating to the
Company has occurred which will result in (i) cancellation of any such insurance
coverages; (ii) a retroactive upward adjustment of premiums under any such
insurance coverages; or (iii) any prospective upward adjustment in such
premiums. All of such insurance coverages will remain in full force and effect
following the Closing. The Company is not in default under any such insurance
policies.
N. EMPLOYEE BENEFIT PLANS.
1. EMPLOYEE WELFARE BENEFIT PLANS. The Company does not maintain
or contribute to any "employee welfare benefit plan" as such term is defined in
Section 3(1) of ERISA. With respect to each such plan listed in the Disclosure
Schedule, (i) the plan is in material compliance with ERISA and all other
applicable Requirements of Laws; (ii) the plan has been administered in
accordance with its governing documents; (iii) neither the plan, nor any
fiduciary with respect to the plan, has engaged in any "prohibited transaction"
as defined in
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Section 406 of ERISA other than any transaction subject to a statutory or
administrative exemption; (iv) except for the processing of routine claims in
the ordinary course of administration, there is no material litigation,
arbitration or disputed claim outstanding; and (v) all premiums due on any
insurance contract through which the plan is funded have been paid.
2. EMPLOYEE PENSION BENEFIT PLANS. The Company does not maintain
or contribute to any arrangement that is or may be an "employee pension benefit
plan" relating to employees, as such term is defined in Section 3(2) of ERISA.
3. EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED COMPENSATION
ARRANGEMENTS. The Company does not maintain or contribute to any retirement or
deferred or incentive compensation or stock purchase, stock grant or stock
option arrangement entered into between the Company and any current or former
officer, consultant, director or employee of the Company that is not intended
to be a tax qualified arrangement under Section 401(a) of the Code.
O. CONTRACTS AND AGREEMENTS. Exhibit N hereto contains a list and brief
description of all written or oral contracts, commitments, leases (including
without limitation the Leases), and other agreements (including, without
limitation, promissory notes, loan agreements, and other evidences of
indebtedness, guarantees, hedging agreements, off-balance sheet financing
arrangements, indemnity agreements, vendor contracts with airlines and other
carriers, hotels and resorts, agreements with rental car companies, marketing
agreements, consortia agreements, travel agency agreements, interface or similar
agreements pertaining to various airline or other computer reservation systems)
to which the Company is a party or by which the Company or its properties are
bound pursuant to which the obligations thereunder of either party thereto are,
or are contemplated as being, for any one contract, $150,000 or greater or any
contract or agreement prohibiting it from freely engaging in any business or
competing anywhere in the world (collectively, the "CONTRACTS"). The Company is
not and, to the best knowledge of Shareholders and the Company, no other party
thereto is in default (and no event has occurred which, with the passage of time
or the giving of notice, or both, would constitute a default by the Company)
under any of the Contracts, and the Company has not waived any right under any
of the Contracts. All of the Contracts to which the Company is a party are
legal, valid, binding, enforceable and in full force and effect and will remain
legal, valid, binding, enforceable and in full force and effect on identical
terms immediately after the Closing, except for the Equitable Exceptions. The
Company has not guaranteed any obligations of any other Person. The Company has
no present expectation or intention of not fully performing all of its
obligations under any Contract, the Company has no Knowledge of any breach or
anticipated breach by the other parties to any Contract and the Company has not
received notice of actual or threatened termination or non renewal of any
Contract.
P. CLAIMS AND PROCEEDINGS. There are no claims, actions, suits,
proceedings, or investigations pending or, to the Knowledge of the Shareholders
or the Company, threatened against or affecting the Company or any of its
properties or assets, at law or in equity, before or by any court, municipality
or other Governmental Body. To the extent any are disclosed on the Disclosure
Schedule, none of such claims, actions, suits, proceedings, or investigations,
if adversely determined, will individually or in the aggregate result in any
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Material Adverse Effect to the Company. The Company has not been and the Company
is not now, subject to any Court Order, stipulation, or consent of or with any
court or Governmental Body. No inquiry, action or proceeding has been instituted
or, to the best knowledge and belief of the Shareholders or the Company,
threatened or asserted against the Shareholders, Allied Parent or the Company to
restrain or prohibit the carrying out of the Transactions or to challenge the
validity of the Transactions or any part thereof or seeking damages on account
thereof. To the Knowledge of the Company and Shareholders there is no basis for
any such valid claim or action.
Q. TAXES.
1. All Federal, foreign, state, county and local and other Taxes
due from the Company on or before the Closing have been paid and all Tax
Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by all
Requirements of Laws or extensions were timely filed, and all such Tax Returns
are true and correct and accurately reflect the Tax liabilities of the Company.
No Tax Returns of the Company, Allied Parent or any of the Shareholders are
presently subject to an extension of the time to file. All Taxes, assessments,
penalties, and interest of the Company which have become due pursuant to such
Tax Returns or any assessments received have been paid or adequately accrued on
the Company's Financial Statements. The provisions for Taxes reflected on the
balance sheets contained in the Financial Statements are adequate to cover all
of the Company's Tax liabilities for the respective periods then ended and all
prior periods. The Company has not executed any presently effective waiver or
extension of any statute of limitations against assessments and collection of
Taxes, and there are no pending or threatened claims, assessments, notices,
proposals to assess, deficiencies, or audits with respect to any such Taxes of
which any of the Shareholders or the Company are aware. For Governmental Bodies
with respect to which the Company does not file Tax Returns, no such
Governmental Body has given the Company written notification that the Company
is or may be subject to taxation by that Governmental Body. The Company has
withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, shareholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company.
2. Neither the Company nor any other corporation has filed an
election under Section 341(f) of the Code that is applicable to the Company or
any assets held by the Company. The Company has not made any payments, is not
obligated to make any payments, and is not a party to any agreement that under
certain circumstances could obligate it to make any payments that will not be
deductible under Code Sec. 280G. The Company has not been a United States real
property holding corporation within the meaning of Code Sec. 897(c)(2) during
the applicable period specified in Code Sec. 897(c)(1)(A)(ii). The Company is
not a party to any Tax allocation or sharing agreement. During the past seven
years, the Company has not and has never been (nor does the Company have any
liability for unpaid Taxes because it once was) a member of an affiliated group
during any part of which return year any corporation other than the Company
also was a member of the affiliated group.
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3. No transaction contemplated by this Agreement is subject to
withholding under Section 1445 of the Code and no stock transfer taxes, real
estate transfer taxes or similar taxes will be imposed upon the sale of the
Purchased Shares or the redemption of the Redemption Shares pursuant to this
Agreement.
4. The Company and Allied Parent have each made a valid election
under Section 1362 of the Code and any corresponding state or local provisions
to be an S corporation within the meaning of Section 1361 of the Code for all
taxable years (or portions thereof) beginning on or after December 31, 1982
with respect to the Company and since inception with respect to Allied Parent,
no such S election has been terminated (whether voluntarily, involuntarily or
inadvertently, including, without limitation, by taking any action defined in
Section 1362(d) of the Code) since such time. Allied Parent has made a valid
election for the Company to be qualified as a "Qualified Subchapter S
subsidiary" under Section 1361 of the Code and applicable state laws effective
as of the date that the Shareholders contributed the stock of the Company to
Allied Parent.
5. The Company will not be required to include any amount in
taxable income or exclude any item of deduction or loss from taxable income for
any taxable period (or portion thereof) ending after the Closing Date (i) as a
result of a change in method of accounting for a taxable period ending on or
prior to the Closing Date, (ii) as a result of any "closing agreement," as
described in Code Section 7121 (or any corresponding provision of state, local
or foreign income Tax law) entered into on or prior to the Closing Date, (iii)
as a result of any sale reported on the installment method where such sale
occurred on or prior to the Closing Date, and (iv) as a result of any prepaid
amount received on or prior to the Closing Date.
R. PERSONNEL. Attached hereto as Exhibit O is a list of the names and
annual rates of compensation of the directors and executive officers of the
Company, and of the employees of the Company whose annual rates of compensation
during the calendar year ended December 31, 1997 (including base salary, bonus
and incentive pay) exceed (or by December 31, 1998 are expected to exceed)
$60,000. Exhibit O also summarizes the bonus, profit sharing, percentage
compensation, company automobile, club membership, and other like benefits, if
any, paid or payable to such directors, officers, and employees during the
Company's calendar year ended December 31, 1997 and to the date hereof. Exhibit
O also contains a brief description of all material terms of employment
agreements to which the Company is a party and all severance benefits which any
director, officer or employee of the Company is or may be entitled to receive.
The employee relations of the Company are generally good and there is no pending
or, to the best knowledge of Shareholders or the Company, threatened labor
dispute or union organization campaign. None of the employees of the Company is
represented by any labor union or organization. The Company is in compliance in
all material respects with all Requirements of Laws respecting employment and
employment practices, terms and conditions of employment, and wages and hours,
and is not engaged in any unfair labor practices. Neither the Company or
Shareholders has been advised, or has good reason to believe, that any employee
will not agree to remain employed by the Company after the consummation of the
Transactions. There is no unfair labor practice claim against the Company before
the National Labor Relations Board, or
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any strike, dispute, slowdown, or stoppage pending or, to the Knowledge of the
Company and Shareholders, threatened against or involving the Company, and none
has previously occurred.
S. BUSINESS RELATIONS. Neither the Company nor Shareholders know or has
good reason to believe that any customer, supplier, travel agency, resort
operator or lodging or transportation company engaged in doing business with the
Company will cease to do business with the Company after the consummation of the
Transactions in the same manner and at the same levels as previously conducted
with the Company except for any reductions which do not result in a Material
Adverse Change. Neither Shareholders nor the Company has received any notice of
cancellation of any Material business arrangement between any Person and the
Company nor is the Company or Shareholders aware of any facts which could lead
them to believe that the Business will be subject to cancellation of any such
business arrangement.
T. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLES; CUSTOMER DEPOSITS AND
BOOKINGS.
1. ACCOUNTS RECEIVABLE. All of the accounts, notes, and loans
receivable that have been recorded on the books of the Company are bona fide
and represent amounts validly due for goods sold or services rendered and,
subject to a $660,000 write-off already reflected in the Most Recent Financial
Statements and the possibility of an occurrence of a Force Majeure event, all
such amounts will be collected in full prior to December 31, 1998. With respect
to such accounts, notes, and loans receivable: (i) all are free and clear of
any Encumbrances; (ii) no claims of offset have been asserted in writing
against any of such accounts, notes, or loans receivable; and (iii) none of the
obligors thereto has given written notice that it will or may refuse to pay the
full amount or any portion thereof. Lists of the Company's accounts receivable
(A) as of December 31, 1997 (including any reconciliation to the accounts
receivable entry on the balance sheet included in the Most Recent Financial
Statements), (B) as of February 28, 1998, and (C) as of the day prior to the
Closing (or as of the most recent date available), will all be delivered at the
Closing and added to the Disclosure Schedule.
2. ACCOUNTS PAYABLE. The aggregate amount of accounts payable
reflected on the Most Recent Financial Statements are true and correct in all
material respects in accordance with GAAP except as adjusted for in the Net
Worth Adjustment and, after giving effect to such adjustment, accurately
reflect the accounts payables of the Company as of December 31, 1997. Lists of
the Company's accounts payable (A) as of December 31, 1997 (including any
reconciliation to the accounts payable entry on the balance sheet included in
the Most Recent Financial Statements), (B) as of February 28, 1998, and (C) as
of the day prior to the Closing (or as of the most recent date available), will
all be delivered at the Closing and added to the Disclosure Schedule.
3. BOOKINGS. Exhibit P sets forth, as of the date specified
therein all customer bookings as of such date on an aggregate basis
("BOOKINGS"). For the period since December 31, 1997 through February 28, 1998,
to the Knowledge of the Company and the Shareholders, the Company's actual
Bookings are not less than the Company's Bookings for the period December 31,
1996 through February 28, 1997.
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U. BANK ACCOUNTS; INVESTMENTS. Attached hereto as Exhibit R is a list of
all banks or other financial institutions with which the Company has an account
or maintains a safe deposit box, showing the type and account number of each
such account and safe deposit box and the names of the persons authorized as
signatories thereon or to act or deal in connection therewith. Exhibit R also
contains a list of all material investments by the Company in any funds,
accounts, securities, certificates of deposit or instruments of any Person. All
of such investments are customary in form and amount for reasonably prudent
treasury investments of comparable businesses, none of which involve any type of
derivative, option, hedging or other speculative instrument.
V. CUSTOMER CLAIMS. No written or oral claim for breach of contract or
otherwise by any customer (a "CUSTOMER CLAIM") has been made against the Company
since January 1, 1998 which could, individually or in the aggregate, result in
any Material Adverse Effect. The level of Customer Claims for the period since
December 31, 1997 through the date hereof is consistent (plus or minus 5%) with
past practices of the Company for the comparable period in 1997. To the
Knowledge of Shareholders and the Company, no state of facts exists, and no
event has occurred, which could reasonably be expected to form the basis of any
present claim against the Company for liability to any third party in connection
with vacation packages sold or services rendered by the Company, other than
Customer Claims arising in the ordinary course of the Business.
W. BROKERS. Neither the Company, Allied Parent nor Shareholders have
engaged, or caused to be incurred any liability to any finder, broker, or sales
agent in connection with the origin, negotiation, execution, delivery, or
performance of this Agreement or the Transactions.
X. AFFILIATED TRANSACTIONS. No officer, director, shareholder (including
the Shareholders and Allied Parent) or Affiliate of the Company or any
individual related by blood or marriage to any such Person, or any entity in
which any such Person owns any beneficial interest, is a party to any agreement,
contract, arrangement or commitment with the Company or engaged in any
transaction with the Company or has any interest in any property used by the
Company. No officer, director, or shareholder of the Company, Allied Parent or
any Affiliate of any such officer, director, or shareholder, has any ownership
interest in any competitor, supplier, or customer of the Company (other than
ownership of securities of a publicly-held corporation of which such Person
owns, or has real or contingent rights to own, less than five percent of any
class of outstanding securities) or any property used in the operation of the
Business.
Y. FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED LIABILITIES.
1. FUNDED INDEBTEDNESS. Other than any Funded Indebtedness which
is to be repaid and discharged by Shareholders prior to Closing in accordance
with Section 7.1(d), the Company does not have any Funded Indebtedness.
2. LETTERS OF CREDIT. Other than those listed on Exhibit S, the
Company has no letters of credit, performance bonds or similar instruments
issued on or for its account for the benefit of any of its vendors or
otherwise.
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3. UNDISCLOSED LIABILITIES. The Company does not have any
liabilities in excess of $50,000 in the aggregate (whether absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected on a
corporate balance sheet or in the notes thereto, except as set forth in the
GAAP Exceptions Memo and except such liabilities which are accrued or reserved
against in the Financial Statements or disclosed in the notes thereto,
including without limitation any accounts payable or service liabilities of the
Company incurred prior to the Closing Date.
Z. YEAR 2000. To the Knowledge of the Company, all of the Material
computer software, computer firmware, computer hardware (whether general or
special purpose), and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by the Company in the
conduct of its business will not malfunction, will not cease to function, will
not generate incorrect data, and will not produce incorrect results when
processing, providing, and/or receiving (i) date-related data into and between
the twentieth and twenty-first centuries and (ii) date-related data in
connection with any valid date in the twentieth and twenty-first centuries,
except for any malfunctions or generations of incorrect data or results that
would not individually or in the aggregate have a Material Adverse Effect.
AA. INFORMATION FURNISHED. The Company and Shareholders have made
available to Investors true and correct copies of all material corporate records
of the Company and all material agreements, documents, and other items listed on
the Schedules to this Agreement or referred to in Article III of this Agreement,
and neither this Agreement, the Schedules hereto, nor any written information,
instrument, or document delivered to Investors pursuant to this Agreement
contains any untrue statement of a Material fact or omits any Material fact
necessary to make the statements herein or therein, as the case may be, not
misleading.
ARTICLE IV
THE INVESTORS' REPRESENTATIONS AND WARRANTIES
The Investors jointly and severally represent and warrant to
Shareholders, Allied Parent and the Company as follows:
A. DUE ORGANIZATION OF XXXXXX III. Xxxxxx III is a limited partnership
duly organized, validly existing, and in good standing under the laws of the
State of Delaware and has full partnership power and authority to execute,
deliver and perform this Agreement and to carry out the Transactions.
B. DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement has been duly authorized by all necessary individual, partnership or
corporate action on the part of each Person comprising the Investors, as
appropriate, and the Agreement has been duly and validly executed and delivered
by each of the Investors and constitutes the valid and binding obligation of
each of the Investors, enforceable in accordance with its terms, except for the
Equitable Exceptions. The execution, delivery, and performance of this Agreement
and the Escrow
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Agreement (as well as all other instruments, agreements, certificates or other
documents contemplated hereby) by the Investors shall not (a) violate any
Requirements of Laws or Court Order of any Governmental Body applicable to any
Investor or its or his respective property, (b) violate or conflict with, or
permit the cancellation of, or constitute a default under any agreement to which
any Investor is a party or by which any Investor or its or his respective
property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, any Investor,
(d) violate or conflict with any provision of the Certificate of Limited
Partnership of Xxxxxx III or the charter or bylaws of any other Investor which
is a corporation or a partnership (as applicable), or (e) except for filings or
approvals under the HSR Act and such consents, approvals, or registrations as
may be required under applicable state securities laws, require any consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any Governmental Body or other third party.
C. NO BROKERS. The Investors have not engaged, or caused to be incurred
any liability for which Shareholders or Allied Parent may be liable to any
finder, broker or sales agent in connection with the origin, negotiation,
execution, delivery, or performance of this Agreement or the Transactions.
D. INVESTMENT. The Investors will each acquire the Purchased Shares for
investment and for its own account and not with a view to the distribution
thereof.
ARTICLE V
PRE-CLOSING COVENANTS OF THE COMPANY, ALLIED PARENT, XXXXXX III
AND SHAREHOLDERS
A. CONSENTS OF OTHERS. Prior to the Closing, the Company, Allied Parent
and Shareholders shall use their best efforts to obtain and to cause the Company
to obtain all authorizations, consents and permits required of the Company,
Allied Parent and Shareholders to permit them to consummate the Transactions. To
the extent required to consummate the Transactions or to ensure that the
Contracts shall remain in full force and effect following the Closing,
Shareholders shall have obtained the written consent or waiver of any "change of
control" type termination rights of any third party to any Contract. As promptly
as practicable after the date hereof, Xxxxxx III, the Company and the
Shareholders shall make, or shall cause to be made, such filings as may be
required pursuant to the HSR Act with respect to the consummation of the
Transactions.
B. SHAREHOLDERS' EFFORTS. The Company and Shareholders shall use all
reasonable efforts to cause all conditions for the Closing to be met.
X. XXXXXX OF ATTORNEY. The Company and Shareholders shall cause the
Company to terminate at or prior to Closing all powers of attorney granted by
the Company, other than those relating to service of process, qualification or
pursuant to governmental regulatory or licensing agreements, or representation
before the IRS or other Governmental Bodies.
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D. CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement
to the Closing Date:
1. Except as otherwise contemplated by this Agreement, or as
Xxxxxx III may otherwise consent to in writing, the Company and Shareholders
shall conduct the Business only in the ordinary course and shall not engage in
any material activity or enter into any material transaction which would cause
a breach of the representations and warranties contained in Article III.
2. Shareholders and the Company shall use their best efforts to
cause the Business to preserve substantially intact its current business
organization and present relationships with its customers, vendors, suppliers
and employees and to maintain all of its insurance currently in effect.
3. Shareholders and the Company shall give prompt notice to
Investors of any notice of material default received by the Company or the
Business subsequent to the date of this Agreement under any Contract or any
Material Adverse Change occurring prior to the Closing Date in the operation of
the Company or the Business.
4. Neither the Company, Allied Parent nor the Shareholders, nor
any of their representatives, shall solicit, encourage or discuss any
Acquisition Proposal (as hereinafter defined) or supply any non-public
information concerning the Company or the Business or the Company's assets to
any party other than Investors or their representatives. As used herein,
"ACQUISITION PROPOSAL" means any proposal other than the Transactions, for (i)
any merger or other business combination involving the Company or the Business,
(ii) the acquisition of the Company or a material equity interest in the
Company or a material portion of its assets, or (iii) the dissolution or
liquidation of the Company.
E. ACCESS BEFORE CLOSING. Prior to the Closing Date, Shareholders and
the Company agree that it will give, or cause to be given, to the Investors and
their representatives, during normal business hours and at the Investors'
expense, full and unrestricted access to the Company's personnel, independent
accountants, customers, suppliers, officers, agents, employees, assets,
properties, titles, contracts, corporate minute and other books, records, files
and documents of the Company with respect to the Business (including financial,
tax basis, budget projections, accountants' work papers and other information as
Investors may request).
F. INVESTOR CONFIDENTIALITY. Until the Closing Date, Xxxxxx III agrees
to remain bound by the terms of the confidentiality provisions contained in the
December 8, 1997 letter of intent between Xxxxxx III and the Company.
ARTICLE VI
POST-CLOSING COVENANTS
A. GENERAL. In case at any time after the Closing any further action is
legally necessary or reasonably desirable (as determined by Xxxxxx III and
Shareholders) to carry out the
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purposes of this Agreement, each of the parties will take such further action
(including the execution and delivery of such further instruments and documents)
as any other party reasonably may request, all at the sole cost and expense of
the requesting party (unless the requesting party is entitled to indemnification
therefor under Article VIII below). The Shareholders acknowledge and agree that
from and after the Closing, the Company will be entitled to possession of all
documents, books, records, agreements, and financial data of any sort relating
to the Company, which shall be maintained at the chief executive office of the
Company; provided, however, that Shareholders shall be entitled to reasonable
access to and to make copies of such books and records at their sole cost and
expense and the Company will maintain all of the same for a period of at least
three (3) years after Closing. Thereafter, the Company will offer such
documentation to Shareholders before disposal thereof.
B. TRANSITION. For a period of four (4) years following Closing, the
Shareholders will not take any action (or cause any such action to be taken by
another Person) that primarily is designed or intended to have the effect of
discouraging any vendor (including without limitation any airline or other
carrier, hotel, resort or rental car company), lessor, licensor, customer,
travel agency, consortia member, supplier, or other business associate of the
Company from maintaining the same business relations with the Company after the
Closing as it maintained with the Company prior to the Closing. For a period of
four (4) years following Closing, the Shareholders will refer all customer
inquiries relating to the Business to the Company.
C. CONFIDENTIALITY. The Shareholders will treat and hold in confidence
and not disclose all Confidential Information and refrain from using any of the
Confidential Information except in connection with this Agreement or otherwise
for the benefit of the Company or Investors for a period of four (4) years from
the date of this Agreement, and deliver promptly to Investors or destroy, at the
written request and option of Xxxxxx III, all tangible embodiments (and all
copies) of the Confidential Information which are in their possession except as
otherwise permitted herein. In the event that any Shareholder is requested or
required (by oral question or written request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar legal proceeding) to disclose any Confidential Information, such
Shareholder will notify the Company and Xxxxxx III promptly of the request or
requirement.
D. COVENANT NOT TO COMPETE. For and in consideration of the allocation
of $50,000 of the Redemption Price paid to the Shareholders by the Company, each
Shareholder covenants and agrees, for a period of four (4) years from and after
the Closing Date, that he will not, directly or indirectly without the prior
written consent of the Company, for or on behalf of any entity:
1. become interested or engaged, directly or indirectly, as a
shareholder, bondholder, creditor, officer, director, partner, agent,
contractor with, employer or representative of, or in any manner associated
with, or give financial, technical or other assistance to, any Person, firm or
corporation for the purpose of engaging in the Business in competition with the
Company or any of its Affiliates, within the United States;
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2. enter into any agreement with, service, assist or solicit the
business of any customers of the Company or any of its Affiliates for the
purpose of providing wholesale travel services to such customers in competition
with the Company or any of its Affiliates in the United States or to cause them
to reduce or end their business with the Company or any of its Affiliates; or
3. hire, retain, or solicit the employment or services of
employees, consultants or representatives of the Company or any of its
Affiliates for the purpose of causing them to leave the employment of the
Company or any of its Affiliates;
provided, however, that no owner of less than five percent (5%) of the
outstanding stock of any publicly-traded corporation shall be deemed to be in a
violation of this Section 6.4 solely by reason thereof.
E. ADDITIONAL MATTERS.
1. The Shareholders shall cause the Company and Allied Parent to
file with the appropriate governmental authorities all Tax Returns required to
be filed by it for any taxable period ending prior to the Closing Date and the
Company and Allied Parent shall remit any Taxes (other than Taxes on income)
due in respect of such Tax Returns. In addition, Allied Parent and Shareholders
shall cause Rosen, Seymour, Xxxxxx, Xxxxxx & Co. to prepare a short period tax
return for the Company covering the period January 1, 1998 through the Closing
Date. The cost of preparation of such short period tax return shall be paid for
by Shareholders.
2. Investors and Shareholders recognize that each of them will
need access, from time to time, after the Closing Date, to certain accounting
and Tax records and information held by Investors and/or the Company to the
extent such records and information pertain to events occurring on or prior to
the Closing Date; therefore, Investors agree to cause the Company to (A) use
its best efforts to properly retain and maintain such records for a period of
six (6) years from the date the Tax Returns for the year in which the Closing
occurs are filed or until the expiration of the statute of limitations with
respect to such year, whichever is later, and (B) allow each Shareholder and
his agents and representatives at times and dates mutually acceptable to the
parties, to inspect, review and make copies of such records as such other party
may deem necessary or appropriate from time to time, such activities to be
conducted during normal business hours and at the other party's expense.
3. The Shareholders and Allied Parent shall be liable for, and
shall indemnify and hold Investors and the Company harmless against, any Taxes
or other costs attributable solely to (i) a failure on the part of any
Shareholder to take all actions required of him under Section 6.5(a); (ii) a
failure on the part of the Company or Allied Parent to qualify, at or prior to
the Closing, as an "S corporation" for federal and/or state income Tax
purposes; or (iii) a change in accounting method of the Company reasonably
required by applicable Tax law (as determined by the Company's independent
accountants) as a result of any action or omission taken by Shareholders,
Allied Parent or the Company on or prior to the Closing Date in the event of
any final determination by the IRS or any state or local Tax authority that the
parties' characterization that the transactions contemplated by this Agreement
would be treated as an
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"asset sale" for tax purposes is invalid. Payment for such indemnification
provided in the preceding sentence shall be due and payable within 30 days
after a final determination of such matter has been made; provided, however,
that payment for indemnification under clause (iii) of the preceding sentence
(other than interest and penalties of the Company which shall be immediately
due and payable upon incurrence thereof by the Company) shall not be due and
payable until 10 days after Allied Parent's and/or Shareholders' receipt of a
tax refund or tax credit resulting from such change in accounting method as
described in the last sentence of this Section 6.5(c). The Shareholders' and
Allied Parent's indemnification of the Company under clause (iii) above shall
be an amount equal to the sum of (A) Allied Parent's and the Shareholders'
actual federal, state and local income tax refunds and/or credits solely as a
result of the decreased income resulting from the change in accounting method
and (B) all interest and penalties due to such change in accounting method. In
the event of any required change in accounting method, Allied Parent and the
Shareholders shall use their best efforts to obtain all Tax refunds or credits
from the appropriate Tax authorities as a result of the change in accounting
method by filing their then current Tax Returns with a provision for a credit
against that current year's or other year's Taxes (if permitted by applicable
Tax law) or by filing amended Tax Returns within 30 days of Allied Parent's
receipt of written notice from the Company of such accounting method change.
Xxxxxx III shall have the right to review and approve any amended Tax Returns
or any provisions for credits against then current Taxes reflected on Tax
Returns made by the Shareholders or Allied Parent in connection therewith. In
the event any Tax authority disputes such refund or credit, Allied Parent shall
have the right to control (with the participation of Xxxxxx III and the
Company) all matters or proceedings relating to such dispute. Allied Parent and
Shareholders shall pay to the Investors all refunds or credits obtained by
Allied Parent or Shareholders within ten days after (A) their receipt of a tax
refund from the IRS or any state or local Tax authority (with respect to
refunds for amended Tax Returns) with respect to any decreased income as a
result of the accounting method change or (B) the filing of any Tax Return
claiming a credit or similar benefit against then current Taxes in any Tax
Return as a result of the accounting method change.
4. Subject to the limitations described below, the
Shareholders and Allied Parent shall be liable for and shall repay to the
Investors the aggregate amount of all payments made by the Investors to the
Shareholders pursuant to the Tax Payments Schedule (the "GROSS-UP TAXES") in
the event of any final determination by the IRS or any state or local Tax
authority that the parties' characterization that the transactions contemplated
by this Agreement would be treated as an "asset sale" for tax purposes is
invalid. In the event of such final determination, Allied Parent and the
Shareholders shall use their best efforts to either (i) obtain a refund from
the appropriate Tax authorities of all Gross-Up Taxes paid to any Tax authority
through an amended Tax Return (such refund to be filed for within 30 days of
Shareholders' receipt of written notice from the Company or Investors of a
final determination) or (ii) file its then current Tax Returns with a provision
for a credit against that current year's or other year's Taxes for the
overpayments for Gross-Up Taxes. Xxxxxx III shall have the right to review and
approve any amended Tax Returns or any provisions for credits against then
current Taxes reflected on Tax Returns made by the Shareholders or Allied
Parent in connection therewith. In the event any Tax authority disputes such
refund or credit, Allied Parent shall have the right to control (with the
participation of Xxxxxx III and the Company) all matters or proceedings
relating
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to such dispute. Allied Parent and Shareholders shall pay to the Investors all
refunds or credits obtained by Allied Parent or Shareholders within five (5)
business days after (A) their receipt of a tax refund from the IRS or any state
or local Tax authority (with respect to refunds for amended Tax Returns) with
respect to any Gross-Up Taxes or (B) the filing of any Tax Return claiming a
credit or similar benefit against then current Taxes in any Tax Return with
respect to the overpayments of Gross-Up Taxes. The aggregate liability of Allied
Parent and the Shareholders to the Investors for Gross-Up Taxes shall be limited
to the actual amount of all refunds and/or credits received by Allied Parent
and/or the Shareholders from Tax authorities. Notwithstanding the foregoing, in
the event that Allied Parent or the Shareholders determine that any of such
Gross-Up Taxes are not for any reason required to be made to any Tax authority
and the parties characterization of the transactions contemplated by this
Agreement as an "asset sale" for Tax purposes remains valid, then the
Shareholders shall promptly reimburse the Investors for ninety percent (90%) of
all of such Gross-Up Taxes not paid by the Shareholders. Any such reimbursement
required by the preceding sentence shall be refunded to the Shareholders in the
event that such Gross-Up Taxes are later determined to be required to be paid by
Shareholders. Allied Parent and the Shareholders shall cause Xxxxx Xxxxxxx
Xxxxxx Xxxxxx & Company LLP to certify to the Company the final amount of all
Gross-Up Taxes actually paid by the Shareholders.
5. The Shareholders shall maintain Allied Parent in existence
following the Closing Date for a period of at least four years; provided,
however, that at the Company's request, Allied Parent shall change its name so
that the words "Allied Tours" are removed therefrom.
F. LITIGATION SUPPORT. In the event and for so long as any party is
actively contesting or defending against any claim, suit, action or charge,
complaint, or demand in connection with (i) any transaction contemplated under
this Agreement or (ii) any fact, circumstance, status, condition, activity,
practice, occurrence, event, action, failure to act, or transaction on or prior
to the Closing Date involving the Company, each of the other parties will
cooperate and make available themselves or their personnel, as applicable, and
provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense.
G. AUDITS. Following the Closing, the Shareholders shall use their best
efforts to cause the Company, at the Company's expense, to deliver, or cause to
be delivered, to Investors an unqualified and unmodified audit report of Xxxxxx
Xxxxxxxx, LLP on the balance sheets of the Company as of December 31, 1995,
December 31, 1996, December 31, 1997 and the Closing Date, and audited
statements of operations and cash flows of the Company for the fiscal years then
ended and with respect to the period January 1, 1998 through the Closing Date,
which report shall be without limitation as to the scope of the audit.
Shareholders, in their capacities as officers and directors of the Company
during such periods, shall provide all management letters, reports or
representations reasonably requested by such auditors in connection with such
audits.
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H. REGISTRATION RIGHTS. Following the Closing, Xxxxxx III and the
Company anticipate that they may enter into a registration rights agreement with
respect to shares of the Company's Common Stock. Upon execution thereof, Xxxxxx
III and the Company each hereby agree to offer Allied Parent and the
Shareholders the right to become a party to such registration rights agreement,
in which event Allied Parent and the Shareholders shall receive customary
piggyback registration rights with respect to their shares of the Company's
Common Stock (including any shares of Common Stock issuable upon conversion of
the Preferred Stock). All customary registration expenses (other than
underwriting discounts and fees) in connection with any piggyback registration
will be at the Company's expense.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
A. CONDITIONS TO THE INVESTORS' OBLIGATIONS. The obligation of the
Investors under this Agreement to consummate the Closing is subject to the
conditions that:
1. COVENANTS, REPRESENTATIONS AND WARRANTIES. The Company,
Allied Parent and Shareholders shall have performed in all material respects
all obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by each
of them prior to or at the Closing Date. The representations and warranties of
the Company, Allied Parent and Shareholders set forth in this Agreement shall
be accurate in all material respects at and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date.
2. CONSENTS. All statutory requirements for the valid
consummation by the Company, Allied Parent and Shareholders of the Transactions
shall have been fulfilled and all authorizations, consents and approvals,
including expiration or early termination of all waiting periods under the HSR
Act and those of all federal, state, local and foreign governmental agencies
and regulatory authorities required to be obtained in order to permit the
consummation of the Transactions shall have been obtained in form and substance
reasonably satisfactory to Xxxxxx III unless such failure could not reasonably
be expected to have a Material Adverse Effect. All approvals of the Boards of
Directors and shareholders of the Company and Allied Parent necessary for the
consummation of this Agreement and the Transactions shall have been obtained.
3. LEASES. Each of the Leases shall provide that the Company is
the lessee and that such Lease survives the Closing for the term of such Lease,
and copies of such Leases (and any assignments pursuant to which any of such
Leases have been assigned to the Company prior to the Closing Date) shall have
been provided to the Investors.
4. DISCHARGE OF INDEBTEDNESS AND LIENS; SHAREHOLDER LOANS.
Shareholders and the Company shall have provided for the payment in full by the
Company of all Funded Indebtedness of the Company at the Closing. Such Funded
Indebtedness, if any, as of December 31, 1997, is listed on Exhibit T hereto.
Shareholders shall have also provided for the
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termination of all Encumbrances of record on the properties of the Company,
except for Permitted Exceptions. All liens or UCC filings against the Company
or Affiliates of the Company which are engaged in the Business, shall have been
terminated as of the Closing. All outstanding loans or other amounts owed by
any Shareholder or Allied Parent to the Company shall have been repaid in full
on or prior to the Closing.
5. FEE. In consideration of investment banking services provided
by Xxxxxx III's Affiliate, TC Management Partners LLC, in connection with the
Transactions, the Company shall pay to TC Management Partners LLC immediately
following the Closing a fee in the amount of $425,000.
6. TRANSFER TAXES. Shareholders shall be responsible for all
stock transfer or gains taxes imposed on Shareholders or Allied Parent incurred
in connection with this Agreement.
7. FINANCIAL CONDITION. The Company's Net Worth as projected at
the Closing shall be not less than ($400,000) and the Company shall continue to
have cash or cash equivalents on hand at the Closing in an amount not less than
$0.
8. DOCUMENTS TO BE DELIVERED BY SHAREHOLDERS, ALLIED PARENT AND
THE COMPANY. The following documents shall be delivered at the Closing by
Shareholders, Allied Parent and the Company:
(1) OPINION OF SHAREHOLDERS' COUNSEL. Investors shall
have received an opinion of counsel to the Company, Allied
Parent and Shareholders, dated the Closing Date, in
substantially the same form as the form of opinion that is
Exhibit C hereto.
(2) CERTIFICATES. Investors shall have received an
officer's certificate and a secretary's certificate of the
Company executed by officers of the Company, dated the Closing
Date, in a form mutually agreed upon by Xxxxxx III and Allied
Parent, which certificates shall include a certification as to
the aggregate amount of Permitted Distributions.
(3) RELEASE. Shareholders and Allied Parent shall have
furnished the Company with a general release of liabilities,
excluding compensation and employee benefits as well as
obligations pursuant to this Agreement, in the form attached as
Exhibit E hereto.
(4) ESCROW AGREEMENT. Shareholders, Allied Parent and
the Company shall have delivered to Investors at the Closing the
duly executed Escrow Agreement in substantially the form
attached hereto as Exhibit G.
(5) EMPLOYMENT AGREEMENTS. Xxxxxxx Xxxxxx, Xxxxxxx
Xxxxxx and Xxxxxxx Xxxxxxx shall each have duly executed and
delivered Employment Agreements in substantially the same form
attached as Exhibits F-1,
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F-2 and F-3 hereto, pursuant to which he will be employed by the
Company following the Closing, and the Company shall have
amended its incentive compensation arrangements with Xxxxxxx
Xxxx and Xxxx Xxxxxxxxx to a reasonably equivalent incentive
arrangement.
(6) DELIVERY OF PURCHASED SHARES. At the Closing, Allied
Parent shall deliver to Investors the Purchased Shares.
(7) REDEMPTION OF EXISTING COMMON STOCK. Allied Parent
shall have delivered the stock certificate(s) representing the
Redemption Shares duly endorsed for transfer to the Company and
free and clear of all encumbrances, other than the restrictions
imposed by federal and state securities laws.
(8) RESIGNATION OF DIRECTORS. The Company shall deliver
the written resignations of all directors of the Company
effective as of the Closing.
(9) TERMINATION OF SHAREHOLDER AGREEMENTS. The Company
shall have provided evidence satisfactory to Xxxxxx III of the
complete termination of all shareholder agreements among the
Shareholders, Allied Parent and/or the Company with respect to
the Company or the Existing Shares.
(10) CONSULTING AGREEMENT. Xxxxxxx Xxxxxx shall have
executed and delivered a Consulting Agreement with the Company
in substantially the form attached as Exhibit U hereto, pursuant
to which he will be engaged as a consultant to the Company
following the Closing.
9. COMPANY EQUITY ARRANGEMENTS. The Equity Agreements shall have
been executed and delivered by the respective parties thereto.
10. RESTATED CERTIFICATE OF INCORPORATION. At the Closing
immediately following the Stock Purchase and the Redemption, the Company's
Certificate of Incorporation shall have been duly amended and restated to
include substantially all of the provisions set forth in Exhibit A attached
hereto and shall not have been further amended or modified.
11. LIQUIDATION OF SISTER BUSINESSES. The Shareholders shall
have assigned and conveyed to the Company all of the assets of Allied Tours,
Inc. and Allied Tours International, Inc. (including all trademarks and
tradenames) and such corporations shall either have been dissolved or their
certificates of incorporation shall have been amended to remove "Allied" from
their corporate names.
B. CONDITIONS TO SHAREHOLDERS', ALLIED PARENT'S AND THE COMPANY'S
OBLIGATIONS. The obligation of Shareholders, Allied Parent and the Company under
this Agreement to consummate the Closing is subject to the conditions that:
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1. COVENANTS, REPRESENTATIONS AND WARRANTIES. Investors shall
have performed in all material respects all obligations and agreements and
complied in all material respects with all covenants contained in this
Agreement to be performed and complied with by Investors prior to or at the
Closing and the representations and warranties of Investors set forth in
Article IV hereof shall be accurate in all material respects, at and as of the
Closing Date, with the same force and effect as though made on and as of the
Closing Date.
2. CONSENTS. All statutory requirements for the valid
consummation by Investors of the Transactions shall have been fulfilled and all
authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act and those of all federal,
state, local and foreign governmental agencies and regulatory authorities
required to be obtained in order to permit the consummation by Investors of the
Transactions shall have been obtained unless such failure shall not have a
Material Adverse Effect on the Business.
3. DOCUMENTS TO BE DELIVERED BY INVESTORS. The following
documents shall be delivered at the Closing by Investors:
(1) ESCROW AGREEMENT. Investors shall have delivered to
Shareholders and Allied Parent at the Closing the duly executed
Escrow Agreement.
(2) EMPLOYMENT AGREEMENTS. Investors shall have caused
the Company to duly execute and deliver Employment Agreements
with each of Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx
in the same form attached as Exhibits F-1, F-2 and F-3 hereto,
pursuant to which such Persons will be employed by the Company
following the Closing. The Employment Agreements with each of
Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxx shall provide that each will
receive an option grant upon consummation of an initial public
offering of the Company (so long as he is employed by the
Company at such date) for the exercise of up to an aggregate of
$1,000,000 of the Company's Common Stock at an exercise price
per share equal to the initial public offering price.
(3) CONSULTING AGREEMENT. The Investors shall have
caused the Company to execute and deliver a Consulting Agreement
with Xxxxxxx Xxxxxx in substantially the form attached as
Exhibit U hereto, pursuant to which he will be engaged as a
consultant to the Company following the Closing.
4. COMPANY EQUITY ARRANGEMENTS. The Equity Agreements shall have
been executed and delivered by the respective parties thereto.
5. PAYMENTS TO ALLIED PARENT. Allied Parent shall have received
(i) the Closing Redemption Price for the Redemption Shares and (ii) the portion
of the Purchase Price payable to Allied Parent at Closing for the Purchased
Shares.
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ARTICLE VIII
INDEMNIFICATION
A. INDEMNIFICATION BY ALLIED PARENT AND SHAREHOLDERS. Except as provided
in Section 8.6, Shareholders and Allied Parent agree to jointly and severally
indemnify and hold harmless the Investors and the Company and each officer,
director, and Affiliate of the Investors and the Company, including without
limitation any successor of the Company (collectively, the "INDEMNIFIED
PARTIES") from and against any and all damages, losses, claims, liabilities,
demands, charges, suits, penalties, costs and expenses (including court costs
and reasonable attorneys' fees and expenses incurred in investigating and
preparing for any litigation or proceeding) (collectively, the "INDEMNIFIABLE
COSTS"), which any of the Indemnified Parties may sustain, or to which any of
the Indemnified Parties may be subjected, arising out of (A) any
misrepresentation, breach or default by Shareholders, Allied Parent or the
Company of or under any of the representations, covenants, agreements or other
provisions of this Agreement or any agreement or document executed in connection
herewith; (B) the Company's tortious acts or omissions to act prior to Closing
for which the Company did not carry liability insurance for themselves as the
insured party, whether or not such acts or omissions to act result in a breach
or violation of any representation or warranty; (C) any accounts receivable of
the Company in existence on the Closing Date (net of the $660,000 write-off for
bad debts already reflected in the Most Recent Financial Statements) which are
not collected prior to December 31, 1998 in accordance with the standards set
forth in the Escrow Schedule attached hereto (the "ACCOUNTS RECEIVABLE
ADJUSTMENT"); (D) any downward Net Worth Adjustment not paid to the Company
pursuant to a reduction of the Escrow Sum; and (E) any litigation matter
disclosed on Schedule 3.16 hereof. Determination of whether the Company, on the
one hand, or the Investors, on the other hand, is entitled to indemnification
hereunder shall be made by such parties in light of the economic impact or loss
caused by the matter which is the subject of the claim of indemnification. By
way of example, a claim of indemnification for breaches of the representation
made in Section 3.17 (Taxes) would impact the Company so that the Company would
be entitled to indemnification. A claim of indemnification based on a breach of
Section 3.1 (Capitalization) would affect the Investors' investment in the
Company directly (as opposed to derivatively), so that the Investors would be
entitled to indemnification.
B. DEFENSE OF CLAIMS. If any legal proceeding shall be instituted, or
any claim or demand made by a third Person, against any Indemnified Party in
respect of which Shareholders or Allied Parent may be liable hereunder, such
Indemnified Party shall give prompt written notice thereof to Shareholders and,
except as otherwise provided in Section 8.4 below, Shareholders shall have the
right to defend, or cause the Company or its successors to defend, any
litigation, action, suit, demand, or claim for which it may seek indemnification
unless, in the reasonable judgment of Xxxxxx III, such litigation, action, suit,
demand, or claim, or the resolution thereof, is seeking injunctive or other
equity relief or damages which would have a Material Adverse Effect on
Investors, the Company or its successors, and such Indemnified Party shall
extend reasonable cooperation in connection with such defense, which shall be at
Shareholders' expense. In the event Shareholders fail or refuse to defend the
same within a reasonable length of time, the Indemnified Parties shall be
entitled to assume the defense thereof, and Shareholders and Allied Parent shall
be jointly and severally liable to repay the Indemnified
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Parties for all expenses reasonably incurred in connection with said defense
(including reasonable attorneys' fees and settlement payments). If Shareholders
shall not have the right to assume the defense of any litigation, action, suit,
demand, or claim in accordance with either of the two preceding sentences, the
Indemnified Parties shall, at Shareholders' expense, have the absolute right to
control the defense of and to settle, in their sole discretion and without the
consent of Shareholders, such litigation, action, suit, demand, or claim, but
Shareholders shall be entitled, at their own expense, to participate in such
litigation, action, suit, demand, or claim. The party controlling any defense
pursuant to this Section 8.2 shall deliver, or cause to be delivered to the
other party, copies of all correspondence, pleadings, motions, briefs, appeals
or other written statements relating to or submitted in connection with the
defense of any such litigation, action, suit, demand or claim, and timely notice
of any hearing or other court proceeding relating to such litigation, action,
suit, demand or claim. Notwithstanding the forgoing, in no event will the
Shareholders or Allied Parent settle any litigation matter disclosed on Schedule
3.16 if such settlement results in any monetary liability to the Company without
the Company's express written consent.
C. ESCROW CLAIM. If any claim for indemnification is made by an
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party may first apply to the Escrow Agent
provided in Section 2.7 of this Agreement for reimbursement of such claim in
accordance with the provisions of the Escrow Agreement provided, however, the
Escrow Sum is not intended to be an exclusive remedy in the event Investors have
indemnification claims hereunder which exceed such amount.
D. TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
Company with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, the Shareholders and the Company
shall jointly control any and all such audits which may result in the assessment
of additional Taxes against the Company and any and all subsequent proceedings
in connection therewith, including appeals. Shareholders and Investors shall
cooperate fully in all matters relating to any such audit or other Tax
proceeding (including according access to all records pertaining thereto), and
will execute and file any and all consents, powers of attorney, and other
documents as shall be reasonably necessary in connection therewith. If
additional Taxes are payable by the Company as a result of any such audit or
other proceeding, Shareholders shall be responsible for and shall promptly pay
all Taxes, interest, and penalties for which any of the Indemnified Parties
shall be entitled to indemnification (subject to the limitations contained in
Section 6.5(c) in the event of any audit or proceeding relating to the
indemnification provided in Section 6.5(c)(iii) hereof).
E. INDEMNIFICATION OF SHAREHOLDERS, ALLIED PARENT AND THE COMPANY.
Investors agree to jointly and severally indemnify and hold harmless
Shareholders, Allied Parent and the Company and each officer, director,
Shareholder or Affiliate of the Company, from and against any Indemnifiable
Costs arising out of any material misrepresentation, breach or default by
Investors of or under any of the covenants, agreements or other provisions of
this Agreement or any agreement or document executed in connection herewith.
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F. LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by any
party hereunder shall be net of any insurance proceeds received by such Person
with respect to such claim (less the present value of any premium increases
occurring as a result of such claim). Except for any claims for breach of the
representations, warranties and covenants of Allied Parent and the Shareholders
under Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.17 or 6.5(c) hereof (the
indemnification for which shall expire on the expiration of the applicable
statute of limitations and if so made, such claims, and all Indemnifiable Costs
incurred thereafter, shall continue after such date until finally resolved), the
right to make claims for indemnification provided under this Article VIII shall
expire two (2) years following the Closing Date (except for any claims for
Indemnifiable Costs made prior to such date which claims shall continue after
such date until finally resolved). The Shareholders and Allied Parent shall not
be obligated to pay any amounts for indemnification under this Article VIII
until the aggregate indemnification obligation sought by Investors hereunder
exceeds $250,000, whereupon Shareholders and Allied Parent shall be liable for
all amounts in excess of $250,000 for which indemnification may be sought;
provided, however, that Shareholders and Allied Parent shall not be obligated to
pay any amounts for indemnification under Section 8.1(E) until the aggregate
indemnification obligation sought by Investors thereunder exceeds $100,000,
whereupon Shareholders and Allied Parent shall be liable for all amounts in
excess of $100,000 for which indemnification may be sought. For purposes of
making claims for indemnification under Section 8.1(A), any requirement in any
representation or warranty that an event or fact be Material or have a Material
Adverse Effect, as appropriate, in order for such event or fact to constitute a
misrepresentation or breach of such representation or warranty shall be ignored.
Notwithstanding the foregoing, in no event shall the aggregate liability of
Shareholders and Allied Parent to Investors for breach of representations and
warranties exceed the sum of $6,500,000; provided, however, that such $6,500,000
limitation shall not include and shall not limit any claims for (i) the Accounts
Receivable Adjustment and the Net Worth Adjustment and (ii) breach of the
representations and warranties of the Shareholders and Allied Parent under
Sections 3.1, 3.2, 3.3, 3.4, 3.6, and 3.17 hereof; provided, further, that in no
event shall the aggregate liability of Shareholders and Allied Parent to
Investors or the Company with respect to any claims described in clauses (i) and
(ii) above exceed the sum of the Purchase Price and the Redemption Price.
However nothing in this Article VIII shall limit Investors or Shareholders in
exercising or securing any remedies provided by applicable statutory or common
law with respect to the conduct of Shareholders, Allied Parent or Investors in
connection with this Agreement or in the amount of damages that it can recover
from the other in the event that Investors successfully prove intentional fraud
or intentional fraudulent conduct in connection with this Agreement. All
Indemnified Costs paid by Shareholders shall be deemed to be a reduction of the
Purchase Price paid to Allied Parent by Investors hereunder.
ARTICLE IX
TERMINATION
A. TERMINATION. This Agreement may be terminated at any time prior to
the Closing:
1. by the mutual written consent of all parties hereto;
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2. in writing by Xxxxxx III on behalf of all Investors, if the
Company, Allied Parent or any of the Shareholders has breached in any material
respect any representation, warranty or covenant contained in this Agreement,
and in each case such breach has not been remedied within ten (10) business
days after receipt of notice specifying such breach and demanding such breach
to be remedied; or
3. in writing by the Shareholders and the Company, if Investors
have breached in any material respect any representation, warranty or covenant
contained in this Agreement, and in each case such breach has not been remedied
within ten (10) business days after receipt of notice specifying such breach
and demanding such breach to be remedied; or
4. in writing by either the Company and the Shareholders, on the
one hand, or Xxxxxx III on behalf of all Investors, on the other hand, in the
event the Closing has not occurred on or before April 15, 1998, unless the
failure of such consummation or the failure to satisfy such condition, as
applicable, shall be due to a breach of any representation or warranty made by
the party or parties seeking to terminate this Agreement or the failure of such
party or parties to comply in all material respects with the agreements and
covenants contained herein to be performed by such party or parties.
B. EFFECT OF TERMINATION. If the Transactions are terminated pursuant to
Section 9.1 by notice in writing to the non-terminating party or parties, this
Agreement shall become void and of no further force and effect, except that (a)
such termination shall not relieve (i) any party from its covenants in respect
of confidentiality contained in Section 6.3 and (ii) any party then in breach of
any representation, warranty, covenant or agreement contained in this Agreement
from liability in respect of such breach and (b) Sections 10.4 and 10.7 shall
survive termination of this Agreement.
ARTICLE X
MISCELLANEOUS
A. MODIFICATIONS. Any amendment, change or modification of this
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or privilege
hereunder (and no course of dealing between or among any of the parties) shall
operate as a waiver of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of any subsequent or other
default. No single or partial exercise of any such right, power or privilege
shall preclude the further or full exercise thereof. Notwithstanding the
foregoing, Xxxxxx III shall have the right to act on behalf of all Investors on
any amendment, change or modification to this Agreement or any right, power or
privilege of Investors hereunder without the consent of such Investors unless
such action would materially adversely effect the obligations of such Investors
under this Agreement.
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B. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
or 48 hours after deposited in the United States mail, first-class, postage
prepaid, or by facsimile addressed to the respective parties hereto as follows:
Investors:
c/x Xxxxxx Equity Investors III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxxx L.L.P.
Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx or
Xxxxx Xxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
The Company, Allied Parent or Shareholders:
Allied Bus Corp.
000 X. 00xx Xxxxxx
10th Floor
New York, New York 10036
Attention: Xxxxxxx Xxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
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With a copy to:
Xxxxx & Xxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
C. COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement may be executed
in several counterparts, each of which shall be deemed an original but all of
which counterparts collectively shall constitute one instrument, and in making
proof of this Agreement, it shall never be necessary to produce or account for
more than one such counterpart. Signatures of a party to this Agreement or other
documents executed in connection herewith which are sent to the other parties by
facsimile transmission shall be binding as evidence of acceptance of the terms
hereof or thereof by such signatory party, with originals to be circulated to
the other parties in due course.
D. EXPENSES. Each of the parties hereto will bear all costs, charges and
expenses incurred by such party in connection with this Agreement and the
consummation of the Transactions, provided, however, that Shareholders shall
bear all costs and expenses of (i) any broker involved in this transaction on
behalf of Shareholders, Allied Parent or the Company and (ii) all legal and
other expenses of Shareholders, Allied Parent or the Company with respect to
this Agreement and the Transactions.
E. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Company, Allied Parent, Investors and Shareholders,
their heirs, representatives, successors, and permitted assigns, in accordance
with the terms hereof. This Agreement shall not be assignable by the Company,
Allied Parent or Shareholders without the prior written consent of Xxxxxx III on
behalf of all Investors. This Agreement shall be assignable by Xxxxxx III on
behalf of the Investors to either (a) any lender providing financing to
Investors or the Company (but only with respect to Investors' rights under
Article II and Article VIII hereof) or (b) any Affiliate of Xxxxxx III, provided
the Investors remain liable, in each case without the prior written consent of
Shareholders. In addition, following the Closing, Xxxxxx III may assign any or
all of its rights hereunder, without the consent of the Shareholders, in
connection with any sale of all or substantially all of the assets, capital
stock, partnership interests or business of the Company or Xxxxxx III (whether
effected by sale, exchange, merger, consolidation or other transaction) and
provided the acquiring party shall assume all of Xxxxxx III's obligations
hereunder.
F. ENTIRE AND SOLE AGREEMENT. This Agreement and the other schedules and
agreements referred to herein, constitute the entire agreement between the
parties hereto and supersede all prior agreements, representations, warranties,
statements, promises, information,
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arrangements and understandings, whether oral or written, express or implied,
with respect to the subject matter hereof.
G. GOVERNING LAW. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the substantive laws of the
State of New York, without giving effect to the principles of conflicts of laws
thereof.
H. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Regardless of
any investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties and the related indemnities made hereunder or
pursuant hereto or in connection with the Transactions shall survive the Closing
for a period of two (2) years, provided (a) the representations and warranties
contained in Section 3.17 of this Agreement, and the related indemnities, shall
survive the Closing until the expiration of the applicable statutes of
limitations for determining or contesting Tax liabilities including any
extension of such periods plus sixty (60) days, (b) the representations,
warranties and covenants contained in Sections 3.1, 3.2, 3.3, 3.4, 3.6 and
6.5(c) of this Agreement, and the related indemnities, shall survive the Closing
indefinitely and not expire, (c) all covenants in this Agreement which have an
expiration date contained therein shall expire as of such date and (d) all other
covenants in this Agreement which do not have an expiration date shall expire
upon the expiration of the applicable statutes of limitations.
I. INVALID PROVISIONS. If any provision of this Agreement is deemed or
held to be illegal, invalid or unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the extent it is deemed to be
illegal, invalid or unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any provision
of this Agreement is deemed or held to be illegal, invalid or unenforceable
there shall be added hereto automatically a provision as similar as possible to
such illegal, invalid or unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon all parties hereto.
J. PUBLIC ANNOUNCEMENTS. Neither Shareholders, Allied Parent nor the
Company (pre-Closing) shall make any public announcement of the Transactions
without the prior written consent of Xxxxxx III, which consent shall not be
unreasonably withheld. Shareholders shall have the right to approve any public
announcement of the Transactions by Xxxxxx III prior to the Closing Date.
K. REMEDIES CUMULATIVE. The remedies of the parties under this Agreement
are cumulative and shall not exclude any other remedies to which any party may
be lawfully entitled.
L. THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any Person, other than the parties hereto and their
permitted successors or assigns, any rights or remedies under or by reason of
this Agreement.
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M. NO STRICT CONSTRUCTION. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
N. JOINDER BY ADDITIONAL INVESTORS. During the term of this Agreement,
to the extent the Investor Schedule is updated to the effect that additional
Investors will join Xxxxxx III as Investors hereunder, Xxxxxx III shall cause
all such Persons to become parties hereto, without the consent of the Company,
Allied Parent or the Shareholders, by execution and delivery of a counterpart of
this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be duly executed as of the date and year first above written.
THE COMPANY:
ALLIED BUS CORP.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
President
ALLIED PARENT:
ALLIED TOURS HOLDING CORP.
By: /s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
President
SHAREHOLDERS:
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
--------------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxxx Xxxxxxx
--------------------------------------------
Xxxxxxxx Xxxxxxx
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INVESTORS:
XXXXXX EQUITY INVESTORS III, L.P.
By: TC Equity Partners, L.L.C.
Its: General Partner
By: /s/ Xxxxx Xxxxxx
-----------------------------
Name:
The Exhibits and Schedules to this Recapitalization Agreement are not included
with this Schedule 13D. Xxxxxx Equity Investors III, L.P. will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
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