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AGREEMENT AND PLAN OF ORGANIZATION
dated as of May 9, 1997
by and among
TRAVEL SERVICES INTERNATIONAL, INC.
AUTO-EUROPE, INC. (MAINE)
and
the STOCKHOLDERS named herein
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TABLE OF CONTENTS
Page
1. PURCHASE AND SALE................................................ 3
2. [INTENTIONALLY DELETED].......................................... 3
3. DELIVERY OF CONSIDERATION........................................ 3
4. CLOSING.......................................................... 4
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS..................................................... 6
5.1 Due Organization........................................ 7
5.2 Authorization........................................... 8
5.3 Capital Stock of the COMPANY............................ 8
5.4 Transactions in Capital Stock........................... 9
5.5 No Bonus Shares......................................... 9
5.6 Subsidiaries............................................ 10
5.7 Predecessor Status; etc................................. 10
5.8 Spin-off by the COMPANY................................. 11
5.9 Financial Statements.................................... 11
5.10 Liabilities and Obligations............................. 12
5.11 Accounts and Notes Receivable........................... 13
5.12 Permits and Intangibles................................. 14
5.13 Environmental Matters................................... 15
5.14 Personal Property....................................... 16
5.15 Significant Customers; Material Contracts and
Commitments............................................ 17
5.16 Real Property........................................... 18
5.17 Insurance............................................... 20
5.18 Compensation; Employment Agreements; Organized
Labor Matters.......................................... 20
5.19 Employee Plans.......................................... 21
5.20 Compliance with ERISA................................... 23
5.21 Conformity with Law; Litigation......................... 25
5.22 Taxes................................................... 26
5.23 No Violations........................................... 27
5.24 Government Contracts.................................... 28
5.25 Absence of Changes...................................... 28
5.26 Deposit Accounts; Powers of Attorney.................... 30
5.27 Validity of Obligations................................. 31
5.28 Relations with Governments.............................. 31
5.29 Disclosure.............................................. 31
5.30 Prohibited Activities................................... 33
5.31 Authority; Ownership.................................... 33
5.32 Preemptive Rights....................................... 34
6. REPRESENTATIONS OF TSII.......................................... 34
6.1 Due Organization........................................ 35
6.2 Authorization........................................... 35
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6.3 Capital Stock of the TSII................................ 35
6.4 Transactions in Capital Stock............................ 36
6.5 Subsidiaries............................................. 36
6.6 Financial Statements..................................... 37
6.7 Liabilities and Obligations.............................. 37
6.8 Conformity with Law; Litigation.......................... 38
6.9 No Violations............................................ 38
6.10 Validity of Obligations.................................. 39
6.11 TSII Stock............................................... 40
6.12 No Side Agreements....................................... 40
6.13 Business; Real Property; Material Agreements............. 40
6.14 Taxes.................................................... 41
6.15 No Intention to Dispose of LLC Interest.................. 42
7. COVENANTS PRIOR TO CLOSING........................................ 42
7.1 Access and Cooperation; Due Diligence.................... 42
7.2 Conduct of Business Pending Closing...................... 43
7.3 Prohibited Activities.................................... 45
7.4 No Shop.................................................. 47
7.5 Notice to Bargaining Agents.............................. 47
7.6 Agreements............................................... 47
7.7 Notification of Certain Matters.......................... 48
7.8 Amendment of Schedules................................... 49
7.9 Cooperation in Preparation of Registration
Statement............................................... 51
7.10 Final Financial Statements............................... 52
7.11 Further Assurances....................................... 53
7.12 Authorized Capital....................................... 53
7.13 Formation of LLC and Transfer of Assets.................. 54
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY........................................................... 55
8.1 Representations and Warranties........................... 55
8.2 Performance of Obligations............................... 55
8.3 No Litigation............................................ 56
8.4 Opinion of Counsel....................................... 56
8.5 Registration Statement................................... 56
8.6 Consents and Approvals................................... 56
8.7 Good Standing Certificates............................... 57
8.8 No Material Adverse Change............................... 57
8.9 Closing of IPO........................................... 57
8.10 Secretary's Certificate.................................. 57
8.11 Employment Agreements.................................... 58
8.12 Directors and Officers Insurance......................... 58
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF TSII....................... 58
9.1 Representations and Warranties........................... 59
9.2 Performance of Obligations............................... 59
9.3 No Litigation............................................ 59
9.4 Secretary's Certificate.................................. 60
9.5 No Material Adverse Effect............................... 60
9.6 STOCKHOLDERS' Release.................................... 60
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9.7 Termination of Related Party Agreements.................. 61
9.8 Opinion of Counsel....................................... 61
9.9 Consents and Approvals................................... 61
9.10 Good Standing Certificates............................... 61
9.11 Registration Statement................................... 61
9.12 Employment Agreements.................................... 62
9.13 Closing of IPO........................................... 62
9.14 FIRPTA Certificate....................................... 62
10. COVENANTS OF TSII AND THE STOCKHOLDERS AFTER CLOSING.............. 62
10.1 Release From Guarantees; Repayment of Certain
Obligations............................................. 62
10.2 Preservation of Tax and Accounting Treatment............. 63
10.3 Preparation and Filing of Tax Returns.................... 63
10.4 Directors and Officers................................... 65
10.5 Preservation of Employee Benefit Plans................... 65
10.6 Maintenance of Books..................................... 65
11. INDEMNIFICATION................................................... 66
11.1 General Indemnification by COMPANY and
STOCKHOLDERS............................................. 66
11.2 Indemnification by TSII.................................. 67
11.3 Third Person Claims...................................... 68
11.4 Exclusive Remedy......................................... 71
11.5 Limitations on Indemnification........................... 71
12. TERMINATION OF AGREEMENT.......................................... 73
12.1 Termination.............................................. 73
12.2 Liabilities in Event of Termination...................... 74
13. NONCOMPETITION.................................................... 75
13.1 Prohibited Activities.................................... 75
13.2 Damages.................................................. 77
13.3 Reasonable Restraint..................................... 77
13.4 Severability; Reformation................................ 77
13.5 Independent Covenant..................................... 78
13.6 Materiality.............................................. 78
13.7 Limitations.............................................. 78
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION......................... 79
14.1 STOCKHOLDERS............................................. 79
14.2 TSII..................................................... 80
14.3 Damages.................................................. 81
14.4 Survival................................................. 82
15. TRANSFER RESTRICTIONS............................................. 82
15.1 Transfer Restrictions.................................... 82
15.2 Certain Transfers........................................ 83
16. FEDERAL SECURITIES ACT REPRESENTATIONS............................ 83
16.1 Compliance with Law...................................... 84
16.2 Economic Risk; Sophistication............................ 84
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17. REGISTRATION RIGHTS............................................... 85
17.1 Piggyback Registration Rights............................ 85
17.2 Demand Registration Rights............................... 86
17.3 Registration Procedures.................................. 88
17.4 Underwriting Agreement................................... 88
17.5 Availability of Rule 144................................. 89
18. GENERAL........................................................... 89
18.1 Cooperation.............................................. 89
18.2 Successors and Assigns................................... 90
18.3 Entire Agreement......................................... 90
18.4 Counterparts............................................. 90
18.5 Brokers and Agents....................................... 90
18.6 Expenses................................................. 91
18.7 Notices.................................................. 92
18.8 Governing Law............................................ 93
18.9 Exercise of Rights and Remedies.......................... 93
18.10 Time....................................................... 94
18.11 Reformation and Severability............................... 94
18.12 Remedies Cumulative........................................ 94
18.13 Captions................................................... 94
18.14 Amendments and Waivers..................................... 94
18.16 Defined Terms.............................................. 95
ANNEX I
INTENTIONALLY DELETED..................................................... 101
ANNEX II
CERTIFICATE OF INCORPORATION AND BY-LAWS OF TSII.......................... 102
ANNEX III
CONSIDERATION TO BE PAID TO COMPANY....................................... 103
ANNEX IV
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY........................... 104
ANNEX V
STOCKHOLDERS AND STOCK OWNERSHIP OF TSII.................................. 105
ANNEX VI
FORM OF OPINION OF COUNSEL TO TSII........................................ 106
ANNEX VII
FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS.................... 110
ANNEX VIII
FORM OF EMPLOYMENT AGREEMENT.............................................. 114
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AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
May 9, 1997, by and among TRAVEL SERVICES INTERNATIONAL, INC., a Delaware
corporation ("TSII"), AUTO-EUROPE, INC. (MAINE), a Maine corporation (the
"COMPANY"), XXXX XXXXXXX, an individual residing in the City of Portland, Maine,
XXXX XXXXX, an individual residing in the City of Portland, Maine, XXXXXXX
XXXXXX, as Trustee for Xxxxxxxx Xxxxx, and XXXXXXX XXXXXX, as Trustee for Xxxx
Xxxxx. Xxxx Xxxxxxx, Xxxx Xxxxx and Xxxxxxx Xxxxxx are referred to collectively
herein as the "STOCKHOLDERS."
WHEREAS, the respective Boards of Directors of TSII and the
COMPANY deem it advisable and in the best interests of TSII and the
COMPANY and their respective stockholders that the COMPANY contribute
the ownership of substantially all of its assets to TSII, by
transferring such assets to the LLC and transferring the LLC interest
to TSII, in exchange for stock of TSII and cash pursuant to this
Agreement and in accordance with the applicable provisions of the laws
of the State of Delaware and the State in which the COMPANY is
incorporated;
WHEREAS, TSII is entering into an Agreement and Plan of
Organization (collectively, the "Other Agreements") with Cruises, Inc.,
a New York corporation, Cruises Only, Inc., a Florida corporation, D-FW
Tours, Inc., a Texas corporation, D- FW Travel Arrangements, Inc., a
Texas corporation, and 800- Ideas, Inc., a Nevada corporation, and
their respective
stockholders in order to acquire additional businesses (the COMPANY,
together with each of the entities with which TSII has entered into the
Other Agreements, are collectively referred to herein as the "Founding
Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of
TSII Stock constitute the "TSII Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of TSII and each of the Other Founding Companies that are
parties to the Other Agreements have approved and adopted the TSII Plan
of Organization as an integrated plan pursuant to which (1) the
COMPANY, Cruises Only, Inc. and 800-Ideas, Inc. will contribute the
ownership of substantially all of their respective assets to TSII, (2)
the stockholders of Cruises, Inc., D-FW Tours, Inc. and D-FW Travel
Arrangements will transfer the capital stock of such companies to TSII
and (3) the COMPANY, Cruises Only, Inc., 800-Ideas, Inc., the public,
and the STOCKHOLDERS of Cruises, Inc., D-FW Tours, Inc. and D-FW Travel
Arrangements, Inc. will acquire the stock of TSII as a tax-free
transfer of property under Section 351 of the Internal Revenue Code of
1986, as amended; and
WHEREAS, in consideration of the agreements of the Other
Founding Companies pursuant to the Other Agreements, the Board of
Directors of the COMPANY has approved this Agreement as part of the
TSII Plan of Organization in order to transfer the
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ownership of substantially all of the assets of the COMPANY to
TSII.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE
On the Funding and Consummation Date, (a) the COMPANY shall transfer,
convey, assign and deliver to TSII, and TSII shall acquire and accept from the
COMPANY, the LLC Interest, free and clear of all liens, security interests,
pledges, charges, voting trusts, restrictions, encumbrances and claims of every
kind.
2. [INTENTIONALLY DELETED]
3. DELIVERY OF CONSIDERATION
3.1 On the Funding and Consummation Date the COMPANY, which is on that
date the holder of all outstanding certificates representing limited liability
company interests of the LLC, shall, upon surrender of such certificates,
receive the number of shares of TSII Stock and the amount of cash set forth on
Annex III hereto, said cash to be payable by certified check or wire transfer.
3.2 The COMPANY shall deliver to TSII at the Closing the certificates
representing the LLC Interest, duly endorsed in blank by the COMPANY, or
accompanied by blank stock powers, and with all necessary transfer tax and other
revenue stamps, acquired at the
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COMPANY'S expense, affixed and cancelled. The COMPANY agrees promptly to cure
any deficiencies with respect to the endorsement of the interest certificates or
other documents of conveyance with respect to such LLC Interest or with respect
to the stock powers accompanying the LLC Interest.
3.3 All TSII Stock received by the COMPANY pursuant to this Agreement
shall, except for restrictions on resale or transfer described in Sections 15
and 16 hereof, have the same rights as all of the other shares of outstanding
TSII Stock by reason of the provisions of the Certificate of Incorporation of
TSII or as otherwise provided by the Delaware GCL. All voting rights of such
TSII Stock received by the COMPANY shall be fully exercisable by the COMPANY and
the COMPANY shall not be deprived nor restricted in exercising those rights. On
the Funding and Consummation Date, TSII shall have no class of capital stock
issued and outstanding other than the TSII Stock and the Restricted Common
Stock.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions
necessary to prepare to (i) effect the transfer and delivery of the LLC Interest
as contemplated by Section 1 hereof and (ii) effect the delivery of the
consideration referred to in Section 3 hereof; provided, however, that such
actions shall not include the actual completion of the transfer and delivery of
the LLC Interest or the delivery of the consideration by certified check(s) or
wire transfer(s) referred to in Section 3 hereof, each of which actions
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shall only be taken upon the Funding and Consummation Date as herein provided.
In the event that there is no Funding and Consummation Date and this Agreement
terminates, TSII hereby covenants and agrees to do all things required by
Delaware law and all things which counsel for the COMPANY advise TSII are
required by applicable laws of the State in which the COMPANY is incorporated in
order to rescind the effects, if any, of the transfer of the Assets to the LLC
as described Section 7.13 and to pay all related costs of the COMPANY directly
associated with such rescission. The taking of the actions described in clauses
(i) and (ii) above (the "Closing") shall take place on the closing date (the
"Closing Date") at the offices of Akin, Gump, Strauss, Xxxxx & Xxxx, L.L.P.,
0000 Xxx Xxxxxxxxx Xxxxxx, X.X., Xxxxxxxxxx, X.X. 00000. On the Funding and
Consummation Date (x) all transactions contemplated by this Agreement, including
the delivery of the LLC Interest and the delivery of shares and certified
check(s) or wire transfer(s) in an amount equal to the cash portion of the
consideration which the COMPANY shall be entitled to receive pursuant to Section
3 hereof shall occur and (y) the closing with respect to the IPO shall be
completed. The date on which the actions described in the preceding clauses (x)
and (y) occur shall be referred to as the "Funding and Consummation Date."
Except as provided in Sections 8 and 9 hereof with respect to actions to be
taken on the Funding and Consummation Date, during the period from the Closing
Date to the Funding and Consummation Date this Agreement may only be terminated
by a party if the underwriting
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agreement in respect of the IPO is terminated pursuant to the terms of such
agreement. This Agreement shall in any event terminate if the Funding and
Consummation Date has not occurred within 15 business days of the Closing Date.
Time is of the essence.
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of COMPANY and STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally
represents and warrants that all of the following representations and warranties
in this Section 5(A) are true at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of Closing and the Funding and
Consummation Date; provided, however, that representations and warranties
relating to the LLC shall be true only at the time of Closing and the Funding
and Consummation Date. Each of the COMPANY and the STOCKHOLDERS agrees that such
representations and warranties shall survive the Funding and Consummation Date
for a period of two years (the last day of such period being the "Expiration
Date"), except that (i) the warranties and representations set forth in Section
5.22 hereof shall survive until such time as the limitations period has run for
all Tax periods ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 5.22 and (ii) solely for
purposes of determining whether a claim for indemnification under Section
11.1(iii) hereof has been made on a timely basis, and solely to the extent that
in connection with
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the IPO, TSII actually incurs liability under the 1933 Act, the 1934 Act, or any
other federal or state securities laws as a result of a breach of a
representation or warranty by the COMPANY or a STOCKHOLDER, the representations
and warranties set forth herein shall survive until the expiration of any
applicable limitations period, which shall be deemed to be the Expiration Date
for such purposes. For purposes of this Section 5, the term "COMPANY" shall mean
and refer to the COMPANY and all of its Subsidiaries, including the LLC.
5.1 Due Organization. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and the COMPANY is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted, except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of the COMPANY taken as a whole (as used herein with
respect to the COMPANY, or with respect to any other person, a "Material Adverse
Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is
incorporated and contains a list of all such jurisdictions in which the COMPANY
is authorized or qualified to do business. True, complete and correct copies of
the Certificate of Incorporation and By-laws, each as amended, of the COMPANY
(the "Charter Documents")
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are all attached hereto as Schedule 5.1. The stock records of the COMPANY, as
heretofore made available to TSII, are correct and complete in all material
respects. There are no minutes in the possession of the COMPANY or the
STOCKHOLDERS which have not been made available to TSII, and all of such minutes
are correct and complete in all respects. Except as set forth on Schedule 5.1,
the most recent minutes of the COMPANY, which are dated no earlier than ten
business days prior to the date hereof, affirm and ratify all prior acts of the
COMPANY, and of its officers and directors on behalf of the COMPANY.
5.2 Authorization. (i) The representatives of the COMPANY executing
this Agreement have the authority to enter into and bind the COMPANY to the
terms of this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into and perform this Agreement, and all required approvals
of the shareholders and the Board of Directors of the COMPANY have been
obtained.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 5.3. All of the issued and outstanding
shares of the capital stock of the COMPANY are owned by the STOCKHOLDERS in the
amounts set forth in Annex IV and further, except as set forth on Schedule 5.3,
are owned free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind. All of the
issued and outstanding shares of the capital stock of the COMPANY have been duly
authorized and validly issued, are fully paid and nonassessable, are owned of
record and beneficially by the
8
STOCKHOLDERS and further, such shares were offered, issued, sold and delivered
by the COMPANY in compliance with all applicable state and federal laws
concerning the issuance of securities. Further, none of such shares were issued
in violation of the preemptive rights of any past or present stockholder.
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
the COMPANY has not acquired any COMPANY Stock since January l, 1994. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
authorized but unissued capital stock; (ii) the COMPANY has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure of
the COMPANY nor the relative ownership of shares among any of its respective
stockholders has been altered or changed in contemplation of the transactions
contemplated hereby and/or the TSII Plan of Organization. Schedule 5.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list of all outstanding options, warrants or other rights to
acquire shares of the COMPANY's stock and the material terms of such outstanding
options, warrants or other rights.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
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5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each
of the COMPANY's subsidiaries, including the LLC (each, a "Subsidiary"), and
sets forth the number and class of the authorized capital stock of each
Subsidiary and the number of shares or interests of each Subsidiary which are
issued and outstanding, all of which shares or interests (except as set forth on
Schedule 5.6) are owned by the COMPANY, free and clear of all liens, security
interests, pledges, voting trusts, equities, restrictions, encumbrances and
claims of every kind. Except as set forth on Schedule 5.6, the COMPANY does not
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock or any other equity
interest in any corporation, association or business entity nor is the COMPANY,
directly or indirectly, a participant in any joint venture, partnership or other
non-corporate entity. The COMPANY is the sole owner of all of the issued and
outstanding limited liability company interests of the LLC, free and clear of
all liens, security interests, pledges, voting trusts, equities, restrictions,
encumbrances and claims of every kind.
5.7 Predecessor Status; etc. Set forth on Schedule 5.7 is a listing of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary
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or division of another corporation or a part of an acquisition which was later
rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1994.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY Financial Statements") of the
COMPANY: the COMPANY's audited Consolidated Balance Sheets, if any, as of
December 31, 1996, 1995 and 1994 and Statements of Income, Cash Flows and
Retained Earnings, if any, for each of the years in the three-year period ended
December 31, 1996 (December 31, 1996 being hereinafter referred to as the
"Balance Sheet Date"). Except as set forth on Schedule 5.9, such Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated
(except as noted thereon or on Schedule 5.9). Except as set forth on Schedule
5.9, such Consolidated Balance Sheets as of December 31, 1996, 1995 and 1994
present fairly the financial position of the COMPANY as of the dates indicated
thereon, and such Consolidated Statements of Income, Cash Flows and Retained
Earnings present fairly the results of operations for the periods indicated
thereon.
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5.10 Liabilities and Obligations. The COMPANY has delivered to TSII an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected on the balance
sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of the COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements. Except as set forth on Schedule
5.10, since the Balance Sheet Date the COMPANY has not incurred any material
liabilities of any kind, character and description, whether accrued, absolute,
secured or unsecured, contingent or otherwise, other than liabilities incurred
in the ordinary course of business. The COMPANY has also delivered to TSII on
Schedule 5.10, in the case of those contingent liabilities related to pending or
threatened litigation, or other liabilities which are not fixed or are being
contested, the following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating
thereto;
(b) amounts claimed and any other action or relief
sought; and
(c) name of claimant and all other parties to the
claim, suit or proceeding;
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(ii) the name of each court or agency before which such
claim, suit or proceeding is pending; and
(iii) the date such claim, suit or proceeding was
instituted; and
(iv) a good faith and reasonable estimate of the maximum
amount, if any, which is likely to become payable with respect to
each such liability. If no estimate is provided, the estimate
shall for purposes of this Agreement be deemed to be zero.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to TSII
an accurate list (which is set forth on Schedule 5.11) of the accounts and notes
receivable of the COMPANY, as of the Balance Sheet Date, including any such
amounts which are not reflected in the balance sheet as of the Balance Sheet
Date, and including receivables from and advances to employees and the
STOCKHOLDERS. The COMPANY shall also provide to TSII (x) an accurate list of all
receivables obtained subsequent to the Balance Sheet Date up to the Closing Date
and (y) an aging of all accounts and notes receivable showing amounts due in 30
day aging categories (the "A/R Aging Reports"). Except to the extent reflected
on Schedule 5.11 or as disclosed by the COMPANY to TSII in a writing
accompanying the A/R Aging Reports, the accounts, notes and other receivables
shown on Schedule 5.11 and on the A/R Aging Reports are and shall be collectible
in the amounts shown, net of reserves reflected in the balance sheet as of the
Balance Sheet Date with respect to accounts receivable as of the Balance Sheet
Date, and net of reserves
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reflected in the books and records of the COMPANY (consistent with the methods
used for the balance sheet) with respect to accounts receivable of the COMPANY
after the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY holds all licenses,
franchises, permits and other governmental authorizations the absence of any of
which could have a Material Adverse Effect on its business, and the COMPANY has
delivered to TSII an accurate list and summary description (which is set forth
on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications and
copyrights owned or held by the COMPANY (including interests in software or
other technology systems, programs and intellectual property) (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 5.13). To the knowledge of the
COMPANY, the licenses, franchises, permits and other governmental authorizations
listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received
any notice that any governmental authority intends to cancel, terminate or not
renew any such license, franchise, permit or other governmental authorization.
The COMPANY has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 and is not in violation of any of the foregoing except where such
noncompliance or violation would not
14
have a Material Adverse Effect on the COMPANY. Except as specifically provided
on Schedule 5.12, the transactions contemplated by this Agreement will not
result in a default under or a breach or violation of, or adversely affect the
rights and benefits afforded to the COMPANY by, any such licenses, franchises,
permits or government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to it or any
of its properties, assets, operations and businesses relating to environmental
protection (collectively "Environmental Laws") including, without limitation,
Environmental Laws relating to air, water, land and the generation, storage,
use, handling, transportation, treatment or disposal of Hazardous Wastes and
Hazardous Substances including petroleum and petroleum products (as such terms
are defined in any applicable Environmental Law); (ii) the COMPANY has obtained
and adhered to all necessary permits and other approvals necessary to treat,
transport, store, dispose of and otherwise handle Hazardous Wastes and Hazardous
Substances, a list of all of which permits and approvals is set forth on
Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or
15
otherwise handled; (iii) there have been no releases or threats of releases (as
defined in Environmental Laws) at, from, in or on any property owned or operated
by the COMPANY except as permitted by Environmental Laws; (iv) the COMPANY knows
of no on-site or off-site location to which the COMPANY has transported or
disposed of Hazardous Wastes and Hazardous Substances or arranged for the
transportation of Hazardous Wastes and Hazardous Substances, which site is the
subject of any federal, state, local or foreign enforcement action or any other
investigation which could lead to any claim against the COMPANY or TSII for any
clean-up cost, remedial work, damage to natural resources, property damage or
personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; and (v) the COMPANY has no contingent liability in connection with any
release of any Hazardous Waste or Hazardous Substance into the environment.
5.14 Personal Property. The COMPANY has delivered to TSII an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
in "depreciable plant, property and equipment" on the balance sheet of the
COMPANY as of the Balance Sheet Date or that will be included on any balance
sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other
personal property owned by the COMPANY with a value in excess of $10,000 (i) as
of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z)
all leases and agreements in respect of personal property, including, true,
complete and correct copies
16
of all such leases and agreements. The COMPANY shall indicate on Schedule 5.14
those assets currently owned, or that were formerly owned, by STOCKHOLDERS,
relatives of STOCKHOLDERS, or Affiliates of the COMPANY. Except as set forth on
Schedule 5.14, (i) all personal property used by the COMPANY in its business is
either owned by the COMPANY or leased by the COMPANY pursuant to a lease
included on Schedule 5.14, (ii) all of the personal property listed on Schedule
5.14 is in good working order and condition, ordinary wear and tear excepted and
(iii) all leases and agreements included on Schedule 5.14 are in full force and
effect and constitute valid and binding agreements of the parties (and their
successors) thereto in accordance with their respective terms.
Except for the Excluded Assets listed on Schedule 7.13, the Assets
constitute all of the property and assets used in, and/or necessary to operate,
the business of the COMPANY as it is now being conducted and as contemplated to
be conducted by the LLC on and after the Funding and Consummation Date.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to TSII an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers (or persons or entities that are sources of
a significant number of
17
customers) have cancelled or substantially reduced or, to the knowledge of the
COMPANY, are currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than contracts, commitments and agreements otherwise listed on Schedules
5.10, 5.14 or 5.16, (a) in existence as of the Balance Sheet Date and (b)
entered into since the Balance Sheet Date, and in each case has delivered true,
complete and correct copies of such agreements to TSII. The COMPANY has complied
with all material commitments and obligations pertaining to it, and is not in
default under any contracts or agreements listed on Schedule 5.15 and no notice
of default under any such contract or agreement has been received. The COMPANY
has also indicated on Schedule 5.15 a summary description of all plans or
projects involving the opening of new operations, expansion of existing
operations, the acquisition of any personal property, business or assets
requiring, in any event, the payment of more than $25,000 by the COMPANY.
5.16 Real Property. Schedule 5.16 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet
18
Date and (ii) acquired since the Balance Sheet Date, and all other property, if
any, used by the COMPANY in the conduct of its business. The COMPANY has good
and insurable title to the real property owned by it, including those reflected
on Schedule 5.14, subject to no mortgage, pledge, lien, conditional sales
agreement, encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.16 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the Registry of Deeds for the County
in which the properties, assets and leasehold estates are located which do
not adversely affect the current use of the property.
Schedule 5.16 contains, without limitation, true, complete and correct copies of
all title reports and title insurance policies currently in possession of the
COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to TSII an accurate list of real
property leased by the COMPANY (which list is set forth on Schedule 5.16),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased
19
by the COMPANY (which copies are attached to Schedule 5.16), and an indication
as to which such properties, if any, are currently owned, or were formerly
owned, by STOCKHOLDERS or business or personal affiliates of the COMPANY or
STOCKHOLDERS. Except as set forth on Schedule 5.16, all of such leases included
on Schedule 5.16 are in full force and effect and constitute valid and binding
agreements of the parties (and their successors) thereto in accordance with
their respective terms.
5.17 Insurance. The COMPANY has delivered to TSII, as set forth on and
attached to Schedule 5.17, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all of the
insurance that the COMPANY is required to carry pursuant to all of its contracts
and other agreements and pursuant to all applicable laws. All of such insurance
policies are currently in full force and effect and shall remain in full force
and effect through the Funding and Consummation Date. No insurance carried by
the COMPANY has ever been cancelled by the insurer and the COMPANY has never
been unable to obtain insurance coverage for its assets and operations.
5.18 Compensation; Employment Agreements; Organized Labor Matters. The
COMPANY has delivered to TSII an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and
20
key employees of the COMPANY, listing all employment agreements with such
officers, directors and key employees and the rate of compensation (and the
portions thereof attributable to salary, bonus and other compensation,
respectively) of each of such persons (i) as of the Balance Sheet Date and (ii)
as of the date hereof. The COMPANY has provided to TSII true, complete and
correct copies of any employment agreements for persons listed on Schedule 5.18.
Since the Balance Sheet Date, there have been no increases in the compensation
payable or any special bonuses to any officer, director, key employee or other
employee, except ordinary salary increases implemented on a basis consistent
with past practices, except as set forth on Schedule 5.18.
Except as set forth on Schedule 5.18, (i) the COMPANY is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any arrangement with any labor union, (ii) no employees of the COMPANY are
represented by any labor union or covered by any collective bargaining
agreement, (iii) no campaign to establish such representation is in progress and
(iv) there is no pending or, to the best of the COMPANY's knowledge, threatened
labor dispute involving the COMPANY and any group of its employees nor has the
COMPANY experienced any labor interruptions over the past three years. The
COMPANY believes its relationship with employees to be good.
5.19 Employee Plans. The COMPANY has delivered to TSII an accurate
schedule (Schedule 5.19) showing all employee benefit plans currently sponsored
or maintained or contributed to by, or
21
which cover the current or former employees or directors of the COMPANY, all
employment agreements and other agreements or arrangements containing "golden
parachute" or other similar provisions, and all deferred compensation
agreements, together with true, complete and correct copies of such plans,
agreements and any trusts related thereto, and classifications of employees
covered thereby as of the Balance Sheet Date. Except for the employee benefit
plans, if any, described on Schedule 5.19, the COMPANY does not sponsor,
maintain or contribute to any plan program, fund or arrangement that constitutes
an "employee pension benefit plan," nor has the COMPANY any obligation to
contribute to or accrue or pay any benefits under any deferred compensation or
retirement funding arrangement on behalf of any employee or employees (such as,
for example, and without limitation, any individual retirement account or
annuity, any "excess benefit plan" (within the meaning of Section 3(36) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") or any
non-qualified deferred compensation arrangement). For the purposes of this
Agreement, the term "employee pension benefit plan" shall have the same meaning
as is given that term in Section 3(2) of ERISA. The COMPANY has not sponsored,
maintained or contributed to any employee pension benefit plan other than the
plans, agreements, arrangement and trusts set forth on Schedule 5.19, nor is the
COMPANY required to contribute to any retirement plan pursuant to the provisions
of any collective bargaining agreement establishing the terms and conditions or
employment of any of the COMPANY's employees.
22
The COMPANY is not now, and cannot as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation or to any
multiemployer employee pension benefit plan under the provisions of Title IV of
ERISA.
All employee benefit plans, agreements, arrangements and trusts listed
on Schedule 5.19 and the administration thereof are in substantial compliance
with their terms and all applicable provisions of ERISA and the regulations
issued thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.19 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
5.20 Compliance with ERISA. All such plans, agreements, arrangements
and trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.19 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.19 hereof. Except as
disclosed on Schedule 5.19, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports,
23
audit reports or Tax Returns) have been timely filed or distributed, and copies
thereof for the three most recent plan years are included as part of Schedule
5.19 hereof. Neither STOCKHOLDERS, any such plan listed on Schedule 5.19, nor
the COMPANY has engaged in any transaction prohibited under the provisions of
Section 4975 of the Code or Section 406 of ERISA. No such plan listed on
Schedule 5.19 has incurred an accumulated funding deficiency, as defined in
Section 412(a) of the Code and Section 302(1) of ERISA; and the COMPANY has not
incurred any liability for excise tax or penalty due to the Internal Revenue
Service nor any liability to the Pension Benefit Guaranty Corporation. The
STOCKHOLDERS further represent that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such Qualified Plan intended to
qualify under Section 401(a) of the Code without notice to and
approval by the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.19 subject to the
provisions of Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed
on Schedule 5.19;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA; and
(v) no circumstances exist pursuant to which the COMPANY could
have any direct or indirect liability whatsoever
24
(including, but not limited to, any liability to any multiemployer plan
or the Pension Benefit Guaranty Corporation under Title IV of ERISA or
to the Internal Revenue Service for any excise tax or penalty, or being
subject to any Statutory Lien to secure payment of any such liability)
with respect to any plan now or heretofore maintained or contributed to
by any entity other than the COMPANY that is, or at any time was, a
member of a "controlled group" (as defined in Section 412(n)(6)(B) of
the Code) that includes the COMPANY.
5.21 Conformity with Law; Litigation. Except to the extent set forth on
Schedules 5.21 or 5.13, the COMPANY is not in violation of any law or regulation
which would have a Material Adverse Effect, or of any order of any court or
federal, state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality having jurisdiction over the COMPANY; and
except to the extent set forth on Schedules 5.10 or 5.13, there are no claims,
actions, suits or proceedings, commenced or, to the knowledge of the COMPANY,
threatened, against or affecting the COMPANY, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over the COMPANY
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local
25
statutes, ordinances, permits, licenses, orders, approvals, variances, rules and
regulations, including all such permits, licenses, orders and other governmental
approvals set forth on Schedules 5.12 and 5.13, and is not in violation of any
of the foregoing.
5.22 Taxes. The COMPANY has timely filed all requisite federal, state
and other Tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22, there
are no examinations in progress or claims against the COMPANY for federal, state
and other Taxes (including penalties and interest) for any period or periods
prior to and including the Balance Sheet Date and no notice of any claim for
Taxes, whether pending or threatened, has been received. All Tax, including
interest and penalties (whether or not shown on any Tax Return) owed by the
COMPANY, any member of an affiliated or consolidated group which includes or
included the COMPANY, or with respect to any payment made or deemed made by the
COMPANY, required to be paid by the date hereof has been paid. The amounts shown
as accruals for Taxes on the COMPANY Financial Statements are sufficient for the
payment of all Taxes of the kinds indicated (including penalties and interest)
for all fiscal periods ended on or before that date. Copies of (i) the federal
and local income tax returns and franchise tax returns of the COMPANY for its
last three (3) fiscal years, or such shorter period of time as the COMPANY shall
have existed, (ii) any Tax examinations commenced or closed or outstanding
during their three (3) most recent fiscal
26
years, and (iii) currently outstanding extensions of statutory limitations, are
attached hereto as Schedule 5.22. The COMPANY has a taxable year ended on the
date set forth as such on Schedule 5.22. Except as disclosed on Schedule 5.22,
the COMPANY's methods of accounting have not changed in the past five years. The
COMPANY is not an investment company as defined in Section 351(e)(1) of the
Code.
5.23 No Violations. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15 or 5.16, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on Schedule 5.23, (a) the
rights and benefits of the COMPANY under the Material Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the Material Documents or the Charter Documents. Except as set
forth on Schedule 5.23, none of the Material Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect, and consummation of the
27
transactions contemplated hereby will not give rise to any right to termination,
cancellation or acceleration or loss of any right or benefit. Except as set
forth on Schedule 5.23, none of the Material Documents by its terms prohibits
the use or publication by the COMPANY or TSII of the name of any other party to
such Material Document, and none of the Material Documents prohibits or
restricts the COMPANY from freely providing services to any other customer or
potential customer of the COMPANY, TSII or any Other Founding Company.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or
28
indirect redemption, purchase or other acquisition of any of the capital
stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the COMPANY to any person,
including, without limitation, the STOCKHOLDERS and their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of any STOCKHOLDER or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the COMPANY or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or
29
assets outside of the ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
(xv) any other distribution of property or assets by the COMPANY.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
TSII an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.26 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or
30
special power of attorney from the COMPANY and a description of the terms of
such power.
5.27 Validity of Obligations. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
COMPANY and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the COMPANY,
enforceable against the Company in accordance with its terms except as limited
by bankruptcy, insolvency or other similar laws of general application relating
to or affecting the enforcement of creditors' rights generally, and the
individual(s) signing this Agreement on behalf of the Company have the legal
power, authority and capacity to bind the Company.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action which
would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. (a) This Agreement, including the schedules hereto,
together with the completed Directors and Officers Questionnaires and
Registration Statement Questionnaires attached hereto as Schedule 5.29 and all
other documents and information made available to TSII and its representatives
in writing pursuant hereto or thereto, present fairly the business and
operations of
31
the COMPANY for the time periods with respect to which such information was
requested. The COMPANY'S rights under the documents delivered pursuant hereto
would not be materially adversely affected by, and no statement made herein
would be rendered untrue in any material respect by, any other document to which
the COMPANY is a party, or to which its properties are subject, or by any other
fact or circumstance regarding the COMPANY (which fact or circumstance was, or
should reasonably, after due inquiry, have been known to the COMPANY) that is
not disclosed pursuant hereto or thereto.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i)
that there exists no firm commitment, binding agreement, or promise or other
assurance of any kind, whether express or implied, oral or written, that a
Registration Statement will become effective or that the IPO pursuant thereto
will occur at a particular price or within a particular range of prices or occur
at all; and (ii) that neither TSII or any of its officers, directors, agents or
representatives nor any Underwriter shall have any liability to the COMPANY, the
STOCKHOLDERS or any other person affiliated or associated with the COMPANY for
any failure of the Registration Statement to become effective, the IPO to occur
at a particular price or within a particular range of prices or to occur at all.
(c) The COMPANY does not have any present plan, intention,
commitment, binding agreement or arrangement to dispose of any shares of TSII
Stock received as described in Section 3.1,
32
provided that the COMPANY may distribute such shares of TSII Stock to the
STOCKHOLDERS if the STOCKHOLDERS represent and warrant to the COMPANY and TSII
that the STOCKHOLDERS do not have any present plan, intention, commitment,
binding agreement or arrangement to dispose of any such shares of TSII Stock.
5.30 Prohibited Activities. Except as set forth on Schedule 5.30 or as
contemplated by Section 7.13, the COMPANY has not, between the Balance Sheet
Date and the date hereof, taken any of the actions set forth in Section 7.3
(Prohibited Activities).
(B) Representations and Warranties of STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8 hereof, shall be true at the time of
Closing and on the Funding and Consummation Date, and that the representations
and warranties set forth in Sections 5.31 and 5.32 shall survive until the
second anniversary of the Funding and Consummation Date, which shall be the
Expiration Date for purposes of those Sections.
5.31 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement. Such STOCKHOLDER owns
beneficially and of record all of the shares of the COMPANY Stock identified on
Annex IV as being owned by such STOCKHOLDER, and, except as set forth on
Schedule 5.31, such COMPANY Stock is owned free and clear of all liens,
encumbrances and claims of every kind.
33
5.32 Preemptive Rights. Such STOCKHOLDER does not have, or hereby
waives, any preemptive or other right to acquire shares of COMPANY Stock that
such STOCKHOLDER has or may have had on the date hereof other than rights of any
STOCKHOLDER to acquire TSII Stock pursuant to any option granted by TSII.
6. REPRESENTATIONS OF TSII
TSII represents and warrants that all of the following representations
and warranties in this Section 6 are true at the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Closing and the
Funding and Consummation Date, and that such representations and warranties
shall survive the Funding and Consummation Date for a period of two years (the
last day of such period being the "Expiration Date"), except that (i) the
warranties and representations set forth in Section 6.14 hereof shall survive
until such time as the limitations period has run for all Tax periods ended on
or prior to the Funding and Consummation Date, which shall be deemed to be the
Expiration Date for Section 6.14 and (ii) solely for purposes of determining
whether a claim for indemnification under Section 11.2(iv) hereof has been made
on a timely basis, and solely to the extent that in connection with the IPO,
TSII actually incurs liability under the 1933 Act, the 1934 Act, or any other
federal or state securities laws, the representations and warranties set forth
herein shall survive until the expiration of any applicable limitations period,
which shall be deemed to be the Expiration Date for such purposes.
34
6.1 Due Organization. TSII is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect. True, complete and correct copies of the Certificate of Incorporation
and By-laws, each as amended, of TSII (the "TSII Charter Documents") are all
attached hereto as Annex II.
6.2 Authorization. (i) The representative of TSII executing this
Agreement has the authority to enter into and bind TSII to the terms of this
Agreement and (ii) TSII has the full legal right, power and authority to enter
into and perform this Agreement.
6.3 Capital Stock of the TSII. Immediately prior to the Funding and
Consummation Date, the authorized capital stock of TSII will consist of
50,000,000 shares of TSII Stock, of which the number of issued and outstanding
shares will be as set forth in the Registration Statement, and 1,000,000 shares
of preferred stock, $.01 par value, of which no shares will be issued and
outstanding. All of the issued and outstanding shares of the capital stock of
TSII are owned by the persons set forth on Annex V hereof, in each case, free
and clear of all liens, security interests, pledges, charges, voting trusts,
restrictions, encumbrances and claims of every kind. Upon consummation of the
IPO, the number of outstanding shares of TSII will be as set forth in the
Registration
35
Statement. All of the issued and outstanding shares of the capital stock of TSII
have been duly authorized and validly issued, are fully paid and nonassessable,
are owned of record and beneficially by the persons set forth on Annex V, and
further, such shares were offered, issued, sold and delivered by TSII in
compliance with all applicable state and federal laws concerning the issuance of
securities. Further, none of such shares was issued in violation of the
preemptive rights of any past or present stockholder of TSII.
6.4 Transactions in Capital Stock. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates TSII to issue any of its
authorized but unissued capital stock; and (ii) TSII has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of TSII.
6.5 Subsidiaries. TSII has no subsidiaries except for the companies to
become subsidiaries of TSII pursuant to this Agreement and each of the Other
Agreements as of the Funding and Consummation Date. Except as set forth in the
preceding sentence, TSII does not presently own, of record or beneficially, or
control, directly or
36
indirectly, any capital stock, securities convertible into capital stock or any
other equity interest in any corporation, association or business entity, and
TSII is not, directly or indirectly, a participant in any joint venture,
partnership or other non-corporate entity.
6.6 Financial Statements. Attached hereto as Schedule 6.6 are copies of
the following financial statements (the "TSII Financial Statements") of TSII,
which reflect the results of its operations from inception: TSII's audited
Balance Sheet as of December 31, 1996 and Statements of Income, Cash Flows and
Retained Earnings for the period from inception through December 31, 1996. Such
TSII Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted thereon or on Schedule 6.6). Except as set
forth on Schedule 6.6, such Balance Sheets as of December 31, 1996 present
fairly the financial position of TSII as of such date, and such statements of
Income, Cash Flows and Retained Earnings present fairly the results of
operations for the period indicated.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
TSII has no material liabilities, contingent or otherwise, except as set forth
in or contemplated by this Agreement and the Other Agreements and except for
fees and expenses incurred in connection with the transactions contemplated
hereby and thereby.
37
6.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 6.8, TSII is not in violation of any law or regulation which would have
a Material Adverse Effect, or of any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over TSII; and except to the extent set
forth on Schedule 6.8, there are no material claims, actions, suits or
proceedings, pending or, to the knowledge of TSII, threatened, against or
affecting TSII, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over TSII and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received.
TSII has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local statutes, ordinances, permits, licenses, orders,
approvals, variances, rules and regulations and is not in violation of any of
the foregoing. Assuming the representations and warranties of the COMPANY and
the STOCKHOLDERS contained herein are complete and correct in all respects, this
Agreement does not violate any federal or state securities laws, rules or
regulations.
6.9 No Violations. TSII is not violation of any TSII Charter Document.
Neither TSII or, to the knowledge of TSII, any other party thereto, is in
default under any lease, instrument, agreement, license or permit to which TSII
is a party, or by which
38
TSII or any of its properties are bound (collectively, the "TSII Documents");
and (a) the rights and benefits of TSII under the TSII Documents will not be
adversely affected by the transactions contemplated hereby and (b) the execution
of this Agreement and the performance of the obligations hereunder and the
consummation of the transactions contemplated hereby will not result in any
violation or breach or constitute a default under, any of the terms or
provisions of the TSII Documents or the TSII Charter Documents. Except as set
forth on Schedule 6.9, none of the TSII Documents requires notice to, or the
consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
6.10 Validity of Obligations. The execution and delivery of this
Agreement by TSII and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of TSII and this
Agreement has been duly and validly authorized by all necessary corporate action
and is a legal, valid and binding obligation of TSII, enforceable against TSII
in accordance with its terms except as limited by bankruptcy, insolvency or
other similar laws of general application relating to or affecting the
enforcement of creditors' rights generally, and the individual signing this
Agreement on behalf of TSII has the legal power, authority and capacity to bind
TSII.
39
6.11 TSII Stock. At the time of issuance thereof, the TSII Stock to be
delivered to the COMPANY pursuant to this Agreement will constitute valid and
legally issued shares of TSII, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the TSII Stock
issued and outstanding as of the date hereof and the TSII Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of TSII Stock to be issued to the COMPANY pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 No Side Agreements. TSII has not entered and will not enter into
any agreement with any of the Founding Companies or any of the stockholders of
the Founding Companies or TSII other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements referred to therein, and none of TSII, its equity owners
or its affiliates have received any cash compensation or payments in connection
with this transaction except for reimbursement of out-of-pocket expenses which
are necessary or appropriate to this transaction.
6.13 Business; Real Property; Material Agreements. TSII has not
conducted any operations or business since inception other than activities
related to the TSII Plan of Organization. TSII does not own and has not at any
time owned any real property or any material personal property and is not a
party to any other agreement, except as listed on Schedule 6.13 and except that
TSII is a party to the
40
Other Agreements and the agreements contemplated thereby and to such agreements
as will be filed as Exhibits to the Registration Statement.
6.14 Taxes. TSII has timely filed all requisite federal, state and
other Tax returns or extension requests for all fiscal periods ended on or
before the date hereof; and except as set forth on Schedule 6.14, there are no
examinations in progress or claims against TSII for federal, state and other
Taxes (including penalties and interest) for any period or periods prior to and
including the date hereof, and no notice of any claim for Taxes, whether pending
or threatened, has been received. All Tax, including interest and penalties
(whether or not shown on any Tax return) owed by TSII, any member of an
affiliated or consolidated group which includes or included TSII, or with
respect to any payment made or deemed made by TSII herein has been paid. The
amounts shown as accruals for Taxes on the TSII Financial Statements are
sufficient for the payment of all Taxes of the kinds indicated (including
penalties and interest) for all fiscal periods ended on or before that date.
Copies of (i) any Tax examinations, (ii) extensions of statutory limitations and
(iii) the federal and local income tax returns and franchise tax returns of TSII
for its last three (3) fiscal years, or such shorter period of time as TSII
shall have existed, are attached hereto as Schedule 5.22. TSII is not an
investment company as defined in Section 351(e)(1) of the Code.
41
6.15 No Intention to Dispose of LLC Interest. TSII is acquiring the LLC
Interest pursuant hereto for its own account for investment purposes and does
not have any present plan, intention, commitment, binding agreement, or
arrangement to dispose of the LLC Interest.
7. COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence. (a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of TSII and the Other Founding Companies
access to all of the COMPANY's sites, properties, books and records and will
furnish TSII with such additional financial and operating data and other
information as to the business and properties of the COMPANY as TSII or the
Other Founding Companies may from time to time reasonably request. The COMPANY
will cooperate with TSII and the Other Founding Companies and their respective
representatives, including TSII's auditors and counsel, in the preparation of
any documents or other material (including the Registration Statement) which may
be required in connection with any documents or materials required by this
Agreement. TSII, the STOCKHOLDERS and the COMPANY shall treat all information
obtained in connection with the negotiation and performance of this Agreement or
the due diligence investigations conducted with respect to the Other Founding
Companies as confidential in accordance with the provisions of Section 14
hereof. In addition, TSII will cause each of the Other
42
Founding Companies to enter into a provision similar to this Section 7.1
requiring each such Other Founding Company, its stockholders, directors,
officers, representatives, employees and agents to keep confidential any
information obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, TSII will afford to the officers and authorized representatives of the
COMPANY access to all of TSII's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of TSII
as the COMPANY may from time to time reasonably request. TSII will cooperate
with the COMPANY, its representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with any
documents or materials required by this Agreement. The COMPANY will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as confidential in accordance with the provisions of
Section 14 hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY shall, except (w)
as contemplated by Section 7.13, (x) as set forth on Schedule 7.2, (y) as
requested by TSII or (z) as consented to by TSII (which consent shall not be
unreasonably withheld):
43
(i) carry on its business in substantially the same manner as it has
heretofore and not introduce any new method of management, operation or
accounting;
(ii) maintain its properties and facilities, including those held
under leases, in as good working order and condition as at present,
ordinary wear and tear excepted;
(iii) perform in all material respects its obligations under
agreements relating to or affecting its assets, properties or rights;
(iv) keep in full force and effect present insurance policies or other
comparable insurance coverage;
(v) maintain and preserve its business organization intact, use its
best efforts to retain its present key employees and relationships with
suppliers, customers and others having business relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
(vii) maintain present debt and lease instruments and not enter into
new or amended debt or lease instruments, provided that debt and/or lease
instruments may be replaced if such replacement instruments are on terms at
least as favorable to the COMPANY as the instruments being replaced; and
(viii) maintain or reduce present salaries and commission levels for
all officers, directors, employees and agents
44
except for ordinary and customary bonus and salary increases for employees
in accordance with past practices.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3 or as
contemplated by Section 7.13, between the date hereof and the Funding and
Consummation Date, the COMPANY shall not, without prior written consent of TSII:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures, except if it is in the
normal course of business (consistent with past practice) or involves an
amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
45
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
being contested in good faith and by appropriate proceedings (and for which
contested Taxes adequate reserves have been established and are being
maintained) or (B) materialmen's, mechanics', workers', repairmen's,
employees' or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.16 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills or claims in the ordinary course
of business in a manner consistent with past practice, provided, further,
that such adjustments shall not be deemed to be included on Schedule 5.11
unless specifically listed thereon;
(x) commit a material breach or, except in the ordinary course of
business consistent with past practices, amend or
46
terminate any material agreement, permit, license or other right of the
COMPANY; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, the COMPANY, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than TSII
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
7.5 Notice to Bargaining Agents. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide TSII on Schedule 7.5 with proof that any required notice has been sent.
7.6 Agreements. The STOCKHOLDERS and the COMPANY shall terminate (i)
any stockholders agreements, voting agreements, voting trusts, options, warrants
and employment agreements between
47
the COMPANY and any employee listed on Schedule 8.11 hereto and (ii) any
existing agreement between the COMPANY and any STOCKHOLDER, on or prior to the
Funding and Consummation Date. Copies of such termination agreements are listed
on Schedule 7.6 and copies thereof are attached hereto.
7.7 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to TSII of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. TSII shall give prompt notice to the COMPANY of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty of TSII
contained herein to be untrue or inaccurate in any material respect at or prior
to the Closing and (ii) any material failure of TSII to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 7.7 that is not
accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify
48
the conditions set forth in Sections 8 and 9, or (iii) limit or otherwise affect
the remedies available hereunder to the party receiving such notice.
7.8 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the anticipated
effectiveness of the Registration Statement to supplement or amend promptly the
Schedules hereto with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules, provided, however, that
supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15 and 5.18 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the COMPANY that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless TSII and
a majority of the Founding Companies other than the COMPANY consent to such
amendment or supplement; and provided further, that no amendment or supplement
to a schedule prepared by TSII that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect may be made unless a
majority of the Founding Companies consent to such amendment or supplement. For
all purposes of this Agreement, including without limitation for purposes of
determining whether
49
the conditions set forth in Sections 8.1 and 9.1 have been fulfilled, the
Schedules hereto shall be deemed to be the schedules as amended or supplemented
pursuant to this Section 7.8. In the event that one of the Other Founding
Companies seeks to amend or supplement a schedule pursuant to Section 7.8 of one
of the Other Agreements, and such amendment or supplement constitutes or
reflects an event or occurrence that would have a Material Adverse Effect on
such Other Founding Company, TSII shall give the COMPANY notice promptly after
it has knowledge thereof. If TSII and a majority of the Founding Companies
consent to such amendment or supplement, which consent shall have been deemed
given by TSII or any Founding Company if no response is received within 24 hours
following receipt of notice of such amendment or supplement (or sooner if
required by the circumstances under which such consent is requested), but the
COMPANY does not give its consent, the COMPANY may terminate this Agreement
pursuant to Section 12.l(iv) hereof. In the event that the COMPANY seeks to
amend or supplement a Schedule pursuant to this Section 7.8, and TSII and a
majority of the Other Founding Companies do not consent to such amendment or
supplement, this Agreement shall be deemed terminated by mutual consent as set
forth in Section 12.1(i) hereof. In the event that TSII seeks to amend or
supplement a Schedule pursuant to this Section 7.8 and a majority of the
Founding Companies do not consent to such amendment or supplement, this
Agreement shall be deemed terminated by mutual consent as set forth in Section
12.1(i) hereof. No party to this Agreement shall be liable to any other
50
party if this Agreement shall be terminated pursuant to the provisions of this
Section 7.8.
7.9 Cooperation in Preparation of Registration Statement. The COMPANY
and STOCKHOLDERS shall furnish or cause to be furnished to TSII and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with TSII and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree
promptly to advise TSII if at any time during the period in which a prospectus
relating to the offering is required to be delivered under the 1933 Act, any
information contained in the prospectus concerning the COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. TSII will give the
COMPANY and the STOCKHOLDERS an opportunity to review and comment on the
Registration Statement and all amendments thereto prior to filing. Insofar as
the information relates solely to the COMPANY or the STOCKHOLDERS, the COMPANY
represents and warrants as to such information with respect to itself, and each
STOCKHOLDER represents and warrants, as to such information with respect to the
COMPANY and himself or herself, that the Registration Statement will not include
an untrue statement of a material fact or omit to state a material fact
51
required to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading and that each
STOCKHOLDER and the COMPANY has had the opportunity to review and approve such
information. If, prior to the 25th day after the date of the final prospectus of
TSII utilized in connection with the IPO, the COMPANY or the STOCKHOLDERS become
aware of any fact or circumstance which would change (or, if after the Funding
and Consummation Date, would have changed) a representation or warranty of the
COMPANY or the STOCKHOLDERS in this Agreement or would affect any document
delivered pursuant hereto in any material respect, the COMPANY and the
STOCKHOLDERS shall immediately give notice of such fact or circumstance to TSII.
However, subject to the provisions of Section 7.8, such notification shall not
relieve either the COMPANY or the STOCKHOLDERS of their respective obligations
under this Agreement, and, subject to the provisions of Section 7.8, at the sole
option of TSII, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the COMPANY and of STOCKHOLDERS
at the date of this Agreement and on the Closing Date and on the Funding and
Consummation Date, shall be a precondition to the consummation of this
transaction.
7.10 Final Financial Statements. The COMPANY shall provide prior to the
Funding and Consummation Date, and TSII shall have had sufficient time to
review, the unaudited consolidated balance sheets of the COMPANY as of the end
of all fiscal quarters following the Balance Sheet Date, and the unaudited
consolidated
52
statement of income, cash flows and retained earnings of the COMPANY for all
fiscal quarters ended after the Balance Sheet Date, disclosing no material
adverse change in the financial condition of the COMPANY or the results of its
operations from the financial statements as of the Balance Sheet Date. Except as
set forth on Schedule 7.10, such financial statements shall have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis throughout the periods indicated (except as noted therein).
Except as noted in such financial statements, all of such financial statements
will present fairly the results of operations of the COMPANY for the periods
indicated thereon and shall be for such dates and time periods as required by
Regulation S-X under the 1933 Act and the 1934 Act.
7.11 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
7.12 Authorized Capital. TSII shall maintain its authorized capital
stock as set forth in the Registration Statement filed with the SEC except for
such changes in authorized capital stock as are made to respond to comments made
by the SEC or requirements of any exchange or automated trading system for which
application is made to register the TSII Stock.
53
7.13 Formation of LLC and Transfer of Assets.
(i) Prior to the Closing Date, the COMPANY shall have caused
the due formation of a Delaware limited liability company that is a
wholly owned subsidiary of the COMPANY (the "LLC"), and the COMPANY
shall have delivered to TSII true and correct copies of all formation
and organization documents of the LLC.
(ii) Prior to the Closing Date, the COMPANY shall have
transferred, conveyed, assigned and delivered to the LLC, and the LLC
shall have acquired and accepted from the COMPANY: (a) all of the
assets held by the COMPANY and used by or useful to the COMPANY in
connection with the business of the COMPANY except for the Excluded
Assets, all of which assets are set forth on Schedule 7.13 under the
heading "Assets" (the "Assets"); and (b) all of the obligations of the
COMPANY in connection with the business of the COMPANY, all of which
obligations are set forth on Schedule 7.13 under the heading
"Obligations." All of the Excluded Assets are set forth on Schedule
7.13 under the heading "Excluded Assets."
(iii) Prior to the Closing Date, the COMPANY shall have
amended its legal name and fictitious names in all applicable
jurisdictions and shall have provided for the LLC to operate and
conduct business in such jurisdictions under the names currently used
in such jurisdictions by the COMPANY.
54
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions
to be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 8.2, 8.3, 8.8 and 8.9. From and after the Closing Date or, with respect
to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after
the Funding and Consummation Date, all conditions not satisfied shall be deemed
to have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of TSII contained in Section 6
hereof:
8.1 Representations and Warranties. All representations and warranties
of TSII contained in Section 6 shall be true and correct in all material
respects as of the Closing Date as though such representations and warranties
had been made as of that time; and a certificate to the foregoing effect dated
the Closing Date and signed by the President or any Vice President of TSII shall
have been delivered to the STOCKHOLDERS.
8.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by TSII on or
before the Closing Date and the Funding and Consummation Date shall have been
duly complied with and performed
55
in all material respects; and certificates to the foregoing effect dated the
Closing Date and the Funding and Consummation Date and signed by the President
or any Vice President of TSII shall have been delivered to the STOCKHOLDERS.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of the
COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.4 Opinion of Counsel. The COMPANY and the Underwriters shall have
received an opinion from counsel for TSII, dated the Closing Date, in the form
annexed hereto as Annex VI.
8.5 Registration Statement. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number of shares of TSII Stock to be received by the
STOCKHOLDERS is not less than the Minimum Value set forth on Annex III.
8.6 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
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8.7 Good Standing Certificates. TSII shall have delivered to the
COMPANY a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which TSII is authorized to do business, showing that TSII is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for TSII for all periods prior to the Closing have
been filed and paid.
8.8 No Material Adverse Change. No event or circumstance shall have
occurred with respect to TSII which would constitute a Material Adverse Effect,
and TSII shall not have suffered any material loss or damages to any of its
properties or assets, whether or not covered by insurance, which change, loss or
damage materially affects or impairs the ability of TSII to conduct its
business.
8.9 Closing of IPO. The closing of the sale of the TSII Stock to the
Underwriters in the IPO and the acquisitions of the Other Founding Companies
pursuant to the Other Agreements shall have occurred simultaneously with the
Funding and Consummation Date hereunder.
8.10 Secretary's Certificate. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of TSII, certifying the truth and correctness of attached copies of TSII's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the
57
stockholders of TSII approving TSII's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate or
certificates also shall be addressed to the Underwriters and copies thereof
shall be delivered to the Underwriters.
8.11 Employment Agreements. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 Directors and Officers Insurance. TSII shall have obtained
Directors and Officers Liability Insurance in amounts that are customary and
commercially reasonable.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF TSII
The obligations of TSII with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. The obligations of TSII with
respect to actions to be taken on the Funding and Consummation Date are subject
to the satisfaction or waiver on or prior to the Funding and Consummation Date
of the conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after
the Closing Date or, with respect to the conditions set forth in Sections 9.2,
9.3, 9.5 and 9.13, from and after the Funding and Consummation Date, all
conditions not satisfied shall be deemed to have been waived, except that no
such waiver shall be deemed to
58
affect the survival of the representations and warranties of the COMPANY
contained in Section 5 hereof.
9.1 Representations and Warranties. All representations and warranties
of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true
and correct in all material respects as of the Closing Date and the Funding and
Consummation Date with the same effect as though such representations and
warranties had been made on and as of such date; and the STOCKHOLDERS shall have
delivered to TSII certificates dated the Closing Date and signed by them to such
effect.
9.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
STOCKHOLDERS and the COMPANY on or before the Closing Date or the Funding and
Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS and the COMPANY
shall have delivered to TSII certificates dated the Closing Date and the Funding
and Consummation Date, respectively, and signed by them to such effect.
9.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of TSII as
a result of which the management of TSII deems it inadvisable to proceed with
the transactions hereunder.
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9.4 Secretary's Certificate. TSII shall have received a certificate,
dated the Closing Date and signed by the secretary of the COMPANY, certifying
the truth and correctness of attached copies of the COMPANY's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to
TSII an instrument dated the Closing Date releasing the LLC from (i) any and all
claims of the STOCKHOLDERS against the LLC and (ii) obligations of the LLC to
the STOCKHOLDERS, except for (x) items specifically identified on Schedules 5.10
and 5.16 as being claims of or obligations to the STOCKHOLDERS, (y) continuing
obligations to STOCKHOLDERS relating to their employment by the LLC and (z)
obligations arising under this Agreement or the transactions contemplated
hereby.
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9.7 Termination of Related Party Agreements. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
shall have been cancelled effective prior to or as of the Funding and
Consummation Date.
9.8 Opinion of Counsel. TSII shall have received an opinion from
Counsel to the COMPANY and the STOCKHOLDERS, dated the Closing Date,
substantially in the form annexed hereto as Annex VII, and the Underwriters
shall have received a copy of the same opinion addressed to the Underwriters.
9.9 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.23 shall have been
obtained.
9.10 Good Standing Certificates. The COMPANY shall have delivered to
TSII a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by TSII, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for the COMPANY for all periods prior to the
Closing have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
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9.12 Employment Agreements. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 Closing of IPO. The closing of the sale of the TSII Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to TSII
a certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. TSII shall have been named as an additional insured on
all insurance policies of the LLC and certificates of insurance to that effect
shall have been delivered to TSII.
9.16 Lockup Agreement. The COMPANY shall have signed an agreement with
the Underwriters, in form and substance identical to agreements signed by the
Founding Stockholders in connection with the Other Agreements, by which the
COMPANY covenants to hold all of the TSII Stock acquired hereunder for a period
of at least 180 days after the Funding and Consummation Date.
10. COVENANTS OF TSII AND THE STOCKHOLDERS AFTER CLOSING
10.1 Release From Guarantees; Repayment of Certain Obligations. TSII
shall, contemporaneously with the Funding and Consummation Date, use its best
efforts to have the STOCKHOLDERS released from any and all guarantees on any
indebtedness that they personally guaranteed and from any and all pledges of
assets that
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they pledged to secure such indebtedness for the benefit of the COMPANY, with
all such guarantees on indebtedness being assumed by TSII. In the event that
TSII cannot obtain such releases from the lenders of any such guaranteed
indebtedness on the Funding and Consummation Date, TSII shall pay off or
otherwise refinance or retire such indebtedness on the Funding and Consummation
Date. TSII shall indemnify and hold harmless STOCKHOLDERS from the payment of
any guaranties on any indebtedness or contractual obligations that STOCKHOLDERS
had incurred prior to the Closing Date provided that such indebtedness or
obligations are related to the business of the COMPANY as being conducted at the
Closing Date.
10.2 Preservation of Tax and Accounting Treatment. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, TSII shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the transaction, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the TSII Stock issued in connection with the transactions
contemplated hereby; or
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 Preparation and Filing of Tax Returns.
(i) The COMPANY shall, if possible, file or cause to be filed
all separate Returns of any Acquired Party for all taxable periods that
end on or before the Funding and Consummation Date. Each STOCKHOLDER
shall pay or cause to be
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paid all Tax liabilities (in excess of all amounts already paid with
respect thereto or properly accrued or reserved with respect thereto on
the COMPANY Financial Statements and books and records) shown by such
Returns to be due.
(ii) TSII shall file or cause to be filed all separate Returns
of, or that include, any Acquired Party for all taxable periods ending
after the Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its
subsidiaries and affiliates to, provide to each of the other parties
hereto such cooperation and information as any of them reasonably may
request in filing any Return, amended Return or claim for refund,
determining a liability for Taxes or a right to refund of Taxes or in
conducting any audit or other proceeding in respect of Taxes. Such
cooperation and information shall include providing copies of all
relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by taxing authorities and
relevant records concerning the ownership and Tax basis of property,
which such party may possess. Each party shall make its employees
reasonably available on a mutually convenient basis at its cost to
provide explanation of any documents or information so provided.
Subject to the preceding sentence, each party
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required to file Returns pursuant to this Agreement shall bear all
costs of filing such Returns.
(iv) Each of the COMPANY, TSII and each STOCKHOLDER shall
comply with the tax reporting requirements of Section 1.351-3 of the
Treasury Regulations promulgated under the Code, and treat the
transaction as a transfer to a controlled corporation under Section
351(a) of the Code.
10.4 Directors and Officers. The persons named in the Registration
Statement shall be appointed as directors and elected as officers of TSII, as
and to the extent set forth in the Registration Statement, promptly following
the Funding and Consummation Date. TSII shall make arrangements to compensate
each Director for attending meetings of the Board of Directors and to reimburse
them for related expenses.
10.5 Preservation of Employee Benefit Plans. Following the Funding and
Consummation Date, TSII shall not terminate any health insurance, life insurance
or 401(k) plan in effect at the COMPANY until such time as TSII is able to
replace such plan with a plan that is applicable to TSII and all of its then
existing subsidiaries. TSII shall have no obligation to provide replacement
plans that have the same terms and provisions as the existing plans; provided,
however, that any new health insurance plan shall provide for coverage for
preexisting conditions.
10.6 Maintenance of Books. TSII will cause the COMPANY (a) to maintain
the books and records of the COMPANY existing prior to the Closing Date for a
period of six years after the Closing Date and
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(b) to make such books and records available to the STOCKHOLDERS for any
reasonable purpose.
11. INDEMNIFICATION
The COMPANY, STOCKHOLDERS and TSII each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by COMPANY and STOCKHOLDERS. The COMPANY
and the STOCKHOLDERS covenant and agree that they, jointly and severally, will
indemnify, defend, protect and hold harmless TSII and the LLC at all times, from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by TSII or
the LLC as a result of or arising from (i) any breach of the representations and
warranties of the STOCKHOLDERS or the COMPANY set forth herein or on the
schedules or certificates delivered in connection herewith, (ii) any breach of
any agreement on the part of the STOCKHOLDERS or the COMPANY under this
Agreement, (iii) any liability under the 1933 Act, the 1934 Act or other federal
or state law or regulation, at common law or otherwise, arising out of or based
upon any untrue statement or alleged untrue statement of a material fact
relating to the COMPANY or the STOCKHOLDERS, and provided to TSII or its counsel
by the COMPANY or the STOCKHOLDERS contained in the Registration Statement or
any prospectus forming a part thereof, or
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any amendment thereof or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact relating to the
COMPANY or the STOCKHOLDERS required to be stated therein or necessary to make
the statements therein not misleading, or (iv) the matters described on Schedule
11.1(iv) (relating to specifically identified matters such as ongoing claims
and/or litigation), which schedule shall be prepared by TSII; provided, however,
(A) that in the case of any indemnity arising pursuant to clause (iii) such
indemnity shall not inure to the benefit of TSII or the LLC to the extent that
such untrue statement (or alleged untrue statement) was made in, or omission (or
alleged omission) occurred in, any preliminary prospectus and the STOCKHOLDERS
provided, in writing, corrected information to TSII counsel and to TSII for
inclusion in the final prospectus, and such information was not so included or
properly delivered, and (B) that no STOCKHOLDER shall be liable for any
indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
11.2 Indemnification by TSII. TSII covenants and agrees that it will
indemnify, defend, protect and hold harmless the COMPANY and the STOCKHOLDERS at
all times from and after the date of this Agreement until the Expiration Date,
from and against all claims, damages, actions, suits, proceedings, demands,
assessments, adjustments, costs and expenses (including specifically, but
without limitation, reasonable attorneys' fees and expenses of
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investigation) incurred by the COMPANY or the STOCKHOLDERS as a result of or
arising from (i) any breach by TSII of its representations and warranties set
forth herein or on the schedules or certificates attached hereto, (ii) any
nonfulfillment of any agreement on the part of TSII under this Agreement, (iii)
any liabilities which the COMPANY or the STOCKHOLDERS may incur due to TSII's
failure to be responsible for the liabilities and obligations of the LLC as
provided in Section 1 hereof; (iv) any liability under the 1933 Act, the 1934
Act or other federal or state law or regulation, at common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact relating to TSII or any of the Other Founding Companies
contained in any preliminary prospectus, the Registration Statement or any
prospectus forming a part thereof, or any amendment thereof or supplement
thereto, or arising out of or based upon any omission or alleged omission to
state therein a material fact relating to TSII or any of the Other Founding
Companies required to be stated therein or necessary to make the statements
therein not misleading, or (v) the matters described on Schedule 11.2(v)
(relating to specifically identified matters), which schedule shall be prepared
by the STOCKHOLDERS.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition
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precedent to a claim with respect thereto being made against any party obligated
to provide indemnification pursuant to Section 11.1 or 11.2 hereof (hereinafter
the "Indemnifying Party"), give the Indemnifying Party written notice of such
claim or the commencement of such action or proceeding. Such notice shall state
the nature and the basis of such claim and a reasonable estimate of the amount
thereof. The Indemnifying Party shall have the right to defend and settle (such
settlement to be subject to the consent of the Indemnified Party, as hereinafter
provided), at its own expense and by its own counsel, any such matter so long as
the Indemnifying Party pursues the same in good faith and diligently, provided
that the Indemnifying Party shall not settle any criminal proceeding without the
written consent of the Indemnified Party. If the Indemnifying Party undertakes
to defend or settle, it shall promptly notify the Indemnified Party of its
intention to do so, and the Indemnified Party shall cooperate with the
Indemnifying Party and its counsel in the defense thereof and in any settlement
thereof. Such cooperation shall include, but shall not be limited to, furnishing
the Indemnifying Party with any books, records or information reasonably
requested by the Indemnifying Party that are in the Indemnified Party's
possession or control. All Indemnified Parties shall use the same counsel, which
shall be the counsel selected by the Indemnifying Party, provided that if
counsel to the Indemnifying Party shall have a conflict of interest that
prevents counsel for the Indemnifying Party from representing the Indemnified
Party, the Indemnified Party shall have the right to
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participate in such matter through counsel of its own choosing and the
Indemnifying Party will reimburse the Indemnified Party for the reasonable
expenses of its counsel. Further, absent a conflict, the Indemnified Party may
select counsel and have such counsel participate in such matter at the sole cost
of the Indemnified Party. After the Indemnifying Party has notified the
Indemnified Party of its intention to undertake to defend or settle any such
asserted liability, and for so long as the Indemnifying Party diligently pursues
such defense, the Indemnifying Party shall not be liable for any additional
legal expenses incurred by the Indemnified Party in connection with any defense
or settlement of such asserted liability, except (i) as set forth in the
preceding sentence and (ii) to the extent such participation is requested by the
Indemnifying Party, in which event the Indemnified Party shall be reimbursed by
the Indemnifying Party for reasonable additional legal expenses and
out-of-pocket expenses. If the Indemnifying Party desires to accept a final and
complete settlement of any such Third Person claim and the Indemnified Party
refuses to consent to such settlement, then the Indemnifying Party's liability
under this Section with respect to such Third Person claim shall be limited to
the amount so offered in settlement by said Third Person. If the Indemnifying
Party does not undertake to defend such matter to which the Indemnified Party is
entitled to indemnification hereunder, or fails diligently to pursue such
defense, the Indemnified Party may undertake such defense through counsel of its
choice, at the cost and expense of the Indemnifying Party, and the
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Indemnifying Party shall reimburse the Indemnified Party for the amount paid in
such settlement and any other liabilities or expenses incurred by the
Indemnified Party in connection therewith, provided, however, that under no
circumstances shall the Indemnified Party settle any Third Person claim without
the written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. All settlements hereunder shall effect a
complete release of the Indemnified Party, unless the Indemnified Party
otherwise agrees in writing. The parties hereto will make appropriate
adjustments for insurance proceeds in determining the amount of any
indemnification obligation under this Section.
11.4 Exclusive Remedy. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided, however, that nothing herein
shall be construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
11.5 Limitations on Indemnification. TSII, the LLC and the other
persons or entities indemnified pursuant to Section 11.1 shall not assert any
claim for indemnification hereunder against the COMPANY or the STOCKHOLDERS
until such time as, and solely to the extent that, the aggregate of all claims
which such persons may have against the COMPANY and such STOCKHOLDERS shall
exceed 2.0% of the sum of (i) the cash paid to the COMPANY and (ii) the value of
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the TSII Stock delivered to the COMPANY (the "Indemnification Threshold"),
provided, however, that TSII, the LLC and the other persons or entities
indemnified pursuant to Section 11.1 may assert and shall be indemnified for any
claim under Section 11.l(iv) at any time, regardless of whether the aggregate of
all claims which such persons may have against the COMPANY or any STOCKHOLDER or
all STOCKHOLDERS exceeds the Indemnification Threshold, it being understood that
the amount of any such claim under Section 11.1(iv) shall not be counted towards
the Indemnification Threshold. The COMPANY and the STOCKHOLDERS shall not assert
any claim for indemnification hereunder against TSII until such time as, and
solely to the extent that, the aggregate of all claims which the COMPANY and the
STOCKHOLDERS may have against TSII or the LLC shall exceed $50,000, provided,
however, that the COMPANY and the STOCKHOLDERS and the other persons or entities
indemnified pursuant to Section 11.2 may assert and shall be indemnified for any
claim under Section 11.2(v) at any time, regardless of whether the aggregate of
all claims which such persons may have against TSII exceeds $50,000, it being
understood that the amount of any such claim under Section 11.2(v) shall not be
counted towards such $50,000 amount. No person shall be entitled to
indemnification under this Section 11 if and to the extent that: (a) such
person's claim for indemnification is directly or indirectly related to and
substantially the result of a breach by such person of any representation,
warranty, covenant or other agreement set forth in this Agreement; or (b) such
person receives a tax benefit equal to
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or in excess of the amount of such claim as a result of the claim or loss for
which indemnification is sought.
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), none of the COMPANY and the STOCKHOLDERS shall be liable under
this Section 11 for an amount which exceeds the amount of proceeds received by
the COMPANY in connection with the transactions contemplated hereby. Indemnity
obligations hereunder may be satisfied through the payment of cash or the
delivery of TSII Stock, or a combination thereof, at the COMPANY's or the
STOCKHOLDER's election. For purposes of calculating the value of the TSII Stock
received or delivered by the COMPANY or the STOCKHOLDERS (for purposes of
determining the Indemnification Threshold, the limitation on indemnity set forth
in the second preceding sentence and the amount of any indemnity paid), TSII
Stock shall be valued at its initial public offering price as set forth in the
Registration Statement. Any indemnification payment made by the COMPANY or the
STOCKHOLDERS pursuant to this Section 11 shall be deemed to be a reduction in
the consideration received by the COMPANY pursuant to Section 3.
12. TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated by written notice
from the party asserting termination to the other parties at any time prior to
the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of TSII and the
COMPANY;
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(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by TSII (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by September 30, 1997,
unless the failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by TSII, on
the other hand, if a material breach or default shall be made by the other party
in the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Funding and Consummation Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 Liabilities in Event of Termination. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no way limit any
obligation or liability of any party based on or arising from a breach or
default by such party with respect to any of its representations, warranties,
covenants or agreements contained in this Agreement including, but not limited
to, legal and audit costs and out of pocket expenses relating to the
transactions contemplated hereby. No party hereto shall be liable
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to any other party if the Agreement is terminated under Sections 12.1(i), (ii)
(except as set forth therein), (iv) or (v).
13. NONCOMPETITION
13.1 Prohibited Activities. Provided that TSII shall have complied with
and performed all of its obligations hereunder and that the COMPANY shall have
received payment in full of the consideration described in Section 3, the
STOCKHOLDERS and the COMPANY shall not, for a period of three (3) years
following the Funding and Consummation Date, for any reason whatsoever, directly
or indirectly, for themselves or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any travel services business in direct competition
with TSII or any of the subsidiaries thereof, within 100 miles of where
the COMPANY or any of its subsidiaries conducted business prior to the
effectiveness of the Funding and Consummation Date (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of TSII (including the subsidiaries thereof) in
a sales representative or managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
TSII (including the subsidiaries
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thereof), provided that each STOCKHOLDER shall be permitted to call
upon and hire any member of his or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (l) year prior to the Funding and
Consummation Date, a customer of TSII (including the subsidiaries
thereof), of the COMPANY or of any of the Other Founding Companies
within the Territory for the purpose of soliciting or selling products
or services in direct competition with TSII within the Territory;
(iv) call upon any prospective acquisition candidate, on the
COMPANY's or any STOCKHOLDER's own behalf or on behalf of any
competitor in the travel services business, which candidate, to the
actual knowledge of the COMPANY or such STOCKHOLDER after due inquiry,
was called upon by TSII (including the subsidiaries thereof) or for
which, to the actual knowledge of the COMPANY or such STOCKHOLDER after
due inquiry, TSII (or any subsidiary thereof) made an acquisition
analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed, of
the COMPANY or the LLC to any person, firm, partnership, corporation or
business for any reason or purpose whatsoever except to the extent that
the COMPANY has in the past disclosed such information to the types of
persons to whom disclosure is then presently contemplated for valid
business reasons.
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Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
TSII as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to TSII for which it would
have no other adequate remedy, the COMPANY and each STOCKHOLDER agrees that the
foregoing covenant may be enforced by TSII in the event of breach by the COMPANY
or such STOCKHOLDER, by injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
COMPANY and the STOCKHOLDERS in light of the activities and business of TSII
(including the subsidiaries thereof) on the date of the execution of this
Agreement and the current plans of TSII.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest
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extent which the court deems reasonable, and the Agreement shall thereby be
reformed.
13.5 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement. It is specifically agreed that the period of three (3) years stated
at the beginning of this Section 13, during which the agreements and covenants
of the COMPANY and each STOCKHOLDER made in this Section 13 shall be effective,
shall be computed by excluding from such computation any time during which the
COMPANY or such STOCKHOLDER is in violation of any provision of this Section 13.
The covenants contained in Section 13 shall have no effect if the transactions
contemplated by this Agreement are not consummated nor may such covenants be
enforced by any party to this Agreement that is in breach of its obligations
hereunder.
13.6 Materiality. The COMPANY and the STOCKHOLDERS hereby agree that
the covenants in this Section 13 are a material and substantial part of this
transaction.
13.7 Limitations. In the event that any STOCKHOLDER who is employed by
TSII or the LLC pursuant to an employment agreement is terminated without cause
(as defined in such employment agreement), the provisions of this Section 13
shall no longer be valid or enforceable by TSII. If such employment agreement
contains provisions relating to the same subject matter as this Section 13 that
are less restrictive than set forth in this Section 13, the provisions of such
employment agreement shall control.
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14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The COMPANY and the STOCKHOLDERS recognize and
acknowledge that they had in the past, currently have, and in the future may
possibly have, access to certain confidential information of the COMPANY, the
LLC, the Other Founding Companies, and/or TSII, such as operational policies,
and pricing and cost policies that are valuable, special and unique assets of
the COMPANY's, the LLC's, the Other Founding Companies' and/or TSII's respective
businesses. The COMPANY and the STOCKHOLDERS agree that they shall not disclose
such confidential information to any person, firm, corporation, association or
other entity for any purpose or reason whatsoever, except (a) to authorized
representatives of TSII, (b) following the Closing, such information may be
disclosed by the STOCKHOLDERS as is required in the course of performing their
duties for TSII or the LLC and (c) to counsel and other advisers, provided that
such advisers (other than counsel) agree to the confidentiality provisions of
this Section 14.1, unless (i) such information is or becomes known to the public
generally or to businesses operating in the travel industry through no fault of
the COMPANY and the STOCKHOLDERS, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, however, that
prior to disclosing any information pursuant to this clause (ii), the COMPANY
and the STOCKHOLDERS shall, if possible, give two days' prior written notice
thereof to TSII and provide TSII with the opportunity within such two-day period
to contest such disclosure,
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or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party. In the event of a breach or threatened breach by the COMPANY or any of
the STOCKHOLDERS of the provisions of this Section, TSII shall be entitled to an
injunction restraining the COMPANY and such STOCKHOLDERS from disclosing, in
whole or in part, such confidential information. Nothing herein shall be
construed as prohibiting TSII from pursuing any other available remedy for such
breach or threatened breach, including the recovery of damages. In the event the
transactions contemplated by this Agreement are not consummated, the COMPANY and
the STOCKHOLDERS shall have none of the above-mentioned restrictions on their
ability to disseminate confidential information with respect to the COMPANY.
14.2 TSII. TSII recognizes and acknowledges that TSII had in the past
and currently has access to certain confidential information of the COMPANY,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the COMPANY's business. TSII agrees that, prior to
the Closing, or if the transactions contemplated by this Agreement are not
consummated, it will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided, however, that such advisors (other than
counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to
the
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Other Founding Companies and their representatives pursuant to Section 7.1(a),
unless (i) such information becomes known to the public generally through no
fault of TSII, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, however, that prior to
disclosing any information pursuant to this clause (ii), TSII shall, unless
otherwise required by law or such order, give two days' prior written notice
thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the
STOCKHOLDERS with the opportunity within such two-day period to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by TSII of the
provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining TSII from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as
such breach or threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may
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be enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of three years from
(a) the Funding and Consummation Date if the transactions contemplated hereby
are consummated or (b) the date hereof if the transactions contemplated hereby
are not consummated.
15. TRANSFER RESTRICTIONS
15.1 Transfer Restrictions. Except for transfers to Affiliates of the
COMPANY who agree to be bound by the restrictions set forth in this Section
15.1, for a period of one year from the Funding and Consummation Date, except
pursuant to Section 17 hereof, the COMPANY shall not sell, assign, exchange,
transfer, distribute or otherwise dispose of any shares of TSII Stock received
by the COMPANY as described in Section 3.1. The certificates evidencing the TSII
Stock delivered to the COMPANY pursuant to Section 3 of this Agreement shall
bear a legend substantially in the form set forth below and containing such
other information as TSII may deem necessary or appropriate: THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED, EXCHANGED,
TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, APPOINTMENT
OR OTHER DISPOSITION PRIOR TO [first anniversary of Closing Date]. UPON THE
WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO REMOVE
THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER AGENT)
AFTER THE DATE SPECIFIED ABOVE (AS IT MAY BE REDUCED AS PROVIDED HEREIN).
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15.2 Certain Transfers. Except for transfers to Affiliates of the
COMPANY who agree to bound by the restrictions set forth in Section 15.1 and
except pursuant to Section 17 hereof, regardless of whether transfers of such
shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Funding and Consummation Date, the COMPANY
shall not sell, assign, exchange, transfer, distribute or otherwise dispose of,
in any transaction or series of transactions involving more than 5,000 shares (a
"Future Sale"), any shares of TSII Stock as described in Section 3.1 received by
the COMPANY in the transaction contemplated hereby except in accordance with
this Section 15.2. If the COMPANY desires to make a Future Sale, the COMPANY
shall first provide written notice thereof to TSII. As soon as practicable after
receipt of such notice by TSII, TSII shall designate in writing to the COMPANY
the names and other pertinent information of two investment banks or market
makers through whom the Future Sale may be made. The COMPANY may not make the
Future Sale except through one of the designated investment banks or market
makers for TSII Stock; provided, however, that the terms of such Future Sale
(including commissions) shall be at least as favorable to the COMPANY as the
COMPANY would have received in the absence of this Section 15.2.
16. FEDERAL SECURITIES ACT REPRESENTATIONS
The COMPANY acknowledges that the shares of TSII Stock to be delivered
to the COMPANY pursuant to this Agreement have not been
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and will not be registered under the 1933 Act and therefore may not be resold
without compliance with the 1933 Act. The TSII Stock to be acquired by the
COMPANY pursuant to this Agreement is being acquired solely for its own account,
for investment purposes only, and with no present intention of distributing,
selling or otherwise disposing of it in connection with a distribution.
16.1 Compliance with Law. Each of the COMPANY and the STOCKHOLDERS
covenants, warrants and represents that none of the shares of TSII Stock issued
to the COMPANY will be offered, sold, assigned, pledged, hypothecated,
transferred or otherwise disposed of except after full compliance with all of
the applicable provisions of the 1933 Act and the rules and regulations of the
SEC. All of the TSII Stock shall bear the following legend in addition to the
legend required under Section 15 of this Agreement: THE SHARES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
MAY ONLY BE SOLD OR OTHERWISE TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE
ACT AND APPLICABLE SECURITIES LAW.
16.2 Economic Risk; Sophistication. The COMPANY is able to bear the
economic risk of an investment in the TSII Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the proposed investment in the TSII Stock.
The COMPANY and the STOCKHOLDERS have had an adequate opportunity to ask
questions and receive answers from the officers of TSII
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concerning any and all matters relating to the transactions described herein
including, without limitation, the background and experience of the current and
proposed officers and directors of TSII, the plans for the operations of the
business of TSII, the business, operations and financial condition of the
Founding Companies other than the COMPANY, and any plans for additional
acquisitions and the like. The COMPANY and the STOCKHOLDERS have asked any and
all questions in the nature described in the preceding sentence and all
questions have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 Piggyback Registration Rights. At any time following the Funding
and Consummation Date, whenever TSII proposes to register any TSII Stock for its
own or others account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions of
additional businesses by TSII and (ii) registrations relating to employee
benefit plans, TSII shall give the COMPANY prompt written notice of its intent
to do so. Upon the written request of the COMPANY given within 30 days after
receipt of such notice, TSII shall cause to be included in such registration all
of the TSII Stock issued to the COMPANY pursuant to this Agreement which the
COMPANY requests, provided that TSII shall have the right to reduce the number
of shares included in such registration to the extent that inclusion of such
shares could, in the opinion of tax counsel to TSII or its
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independent auditors, jeopardize the status of the transactions contemplated
hereby and by the Registration Statement as a tax-free organization. In
addition, if TSII is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered pursuant
to any registration statement under this Section 17.1 that the number of shares
to be sold by persons other than TSII is greater than the number of such shares
which can be offered without adversely affecting the offering, TSII may reduce
pro rata the number of shares offered for the accounts of such persons (based
upon the number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, that, notwithstanding
Section 15.1 hereof, for each such offering made by TSII after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than TSII, the COMPANY and the Other Founding Companies or the
stockholders thereof who receive shares of TSII Stock pursuant to the Other
Agreements (collectively, the COMPANY and the Other Founding Companies or the
stockholders thereof who receive shares of TSII Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders.
17.2 Demand Registration Rights. At any time after the date two years
after the Closing, the holders of a majority of the shares of TSII Stock issued
to the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been
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previously registered or sold and which are not entitled to be sold under Rule
144(k) (or any similar or successor provision) promulgated under the 1933 Act
may request in writing that TSII file a registration statement under the 1933
Act covering the registration of the shares of TSII Stock issued to the COMPANY
pursuant to this Agreement and the Other Agreements then held by such Founding
Stockholders (a "Demand Registration"). Within ten (10) days of the receipt of
such request, TSII shall give written notice of such request to all other
Founding Stockholders and shall, as soon as practicable but in no event later
than 45 days after notice from the COMPANY, file and use its best efforts to
cause to become effective a registration statement covering all such shares.
TSII shall be obligated to effect only one Demand Registration for all Founding
Stockholders.
Notwithstanding the foregoing paragraph, following such a demand a
majority of TSII's disinterested directors (i.e., directors who have not
demanded or elected to sell shares in any such public offering) may defer the
filing of the registration statement for a 60 day period.
If at the time of any request by the Founding Stockholders for a Demand
Registration TSII has fixed plans to file within 60 days after such request a
registration statement covering the sale of any of its securities in a public
offering under the 1933 Act, no registration of the Founding Stockholders' TSII
Stock shall be initiated under this Section 17.2 until 90 days after the
effective date of such registration unless TSII is no longer proceeding
87
diligently to effect such registration; provided that TSII shall provide the
Founding Stockholders the right to participate in such public offering pursuant
to, and subject to, Section 17.1 hereof.
17.3 Registration Procedures. All expenses incurred in connection with
the registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by TSII. In connection with
registrations under Sections 17.1 and 17.2, TSII shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the TSII Stock and use its best efforts
to cause such registration to promptly become and remain effective for a period
of at least 45 days (or such shorter period during which the Founding
Stockholders shall have sold all TSII Stock which they requested to be
registered); (ii) use its best efforts to register and qualify the TSII Stock
covered by such registration statement under applicable state securities laws as
the holders shall reasonably request for the distribution for the TSII Stock;
and (iii) take such other actions as are reasonable and necessary to comply with
the requirements of the 1933 Act and the regulations thereunder to enable the
Founding Stockholders to sell their shares pursuant thereto.
17.4 Underwriting Agreement. In connection with each registration
pursuant to Sections 17.1 and 17.2 covering an underwritten registration public
offering, TSII and each
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participating holder agree to enter into a written agreement with the managing
underwriters in such form and containing such provisions (including
indemnification provisions) as are customary in the securities business for such
an arrangement between such managing underwriters and companies of TSII's size
and investment stature.
17.5 Availability of Rule 144. TSII shall not be obligated to register
shares of TSII Stock held by the COMPANY at any time when the resale provisions
of Rule 144(k) (or any similar or successor provision) promulgated under the
1933 Act are available to the COMPANY.
18. GENERAL
18.1 Cooperation. The COMPANY, STOCKHOLDERS and TSII shall each deliver
or cause to be delivered to the other on the Funding and Consummation Date, and
at such other times and places as shall be reasonably agreed to, such additional
instruments as the other may reasonably request for the purpose of carrying out
this Agreement. The COMPANY shall cooperate and use its reasonable efforts to
have the present officers, directors and the employees of the COMPANY cooperate
with TSII on and after the Funding and Consummation Date in furnishing
information, evidence, testimony and other assistance in connection with any tax
return filing obligations, actions, proceedings, arrangements or disputes of any
nature with respect to matters pertaining to all periods prior to the Funding
and Consummation Date.
89
18.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of TSII, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the STOCKHOLDERS,
the COMPANY and TSII and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY and TSII, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages
90
or expense arising out of claims for fees or commission of brokers employed or
alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated
shall be consummated, TSII will pay the fees, expenses and disbursements of TSII
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by TSII under this Agreement, including the fees and
expenses of Xxxxxx Xxxxxxxx, LLP, Xxxx, Gump, Strauss, Xxxxx & Xxxx, L.L.P., and
any other person or entity retained by TSII, and the costs of preparing the
Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and
disbursements of the STOCKHOLDERS, the COMPANY and their respective agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, TSII shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$25,000 plus such additional fees, expenses and disbursements as
91
are set forth on Schedule 18.6. In addition, each STOCKHOLDER shall pay all
sales, use, transfer, real property transfer, recording, gains, stock transfer
and other similar taxes and fees ("Transfer Taxes") imposed in connection with
the transactions contemplated hereby, other than Transfer Taxes, if any, imposed
by the State of Delaware. Each STOCKHOLDER shall file all necessary
documentation and Returns with respect to such Transfer Taxes. In addition, each
STOCKHOLDER acknowledges that he or she, and not the COMPANY or TSII, shall pay
all taxes due upon receipt of the consideration payable pursuant to Section 3
hereof, and shall assume all tax risks and liabilities of such STOCKHOLDER in
connection with the transactions contemplated hereby.
18.7 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
(a) If to TSII, addressed to it at:
Travel Services International, Inc.
c/o Alpine Consolidated, LLC
0000 Xxxxxxxxx Xxxx, XX 00
Xxxxxxxx, Xxxxxxxx 00000
Attention: Elan X. Xxxxxxxxx
with copies to:
Akin, Gump, Strauss, Xxxxx &
Xxxx, L.L.P.
0000 Xxx Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx X. Xxxxxxxxxx
92
(b) If to the STOCKHOLDERS, addressed to them at their addresses set
forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Auto Europe
00 Xxxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx 00000
Attention: Xxxx Xxxxxxx
and marked "Personal and Confidential"
with copy to:
Xxxx X. Xxxxxxxxx, Esq.
Bernstein, Shur, Xxxxxx & Xxxxxx
000 Xxxxxx Xxxxxx
Post Office Box 9729
Portland, Maine 04104-5029
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware.
18.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any right, power or remedy
accruing to any party as a result of any breach or default by any other party
under this Agreement shall impair any such right, power or remedy, nor shall it
be construed as a waiver of or acquiescence in any such breach or default, or of
any similar breach or default occurring later; nor shall any waiver of any
single breach or default be deemed a waiver of any other breach or default
occurring before or after that waiver.
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18.10 Time. Time is of the essence with respect to this Agreement.
18.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.12 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
18.14 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of TSII, the COMPANY and the STOCKHOLDERS. Any amendment or
waiver effected in accordance with this Section 18.14 shall be binding upon each
of the parties hereto, any other person receiving TSII Stock in connection with
the transactions contemplated hereby and each future holder of such TSII Stock.
94
18.15 Incorporation by Reference. To the extent that an item is
disclosed in a particular schedule or a subsection of a particular schedule and
such item is readily apparent on its face as being applicable to another
schedule or another subsection of the same schedule, such item shall be deemed
incorporated by reference in such schedule or such other subsection under the
same schedule.
18.16 Defined Terms. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Affiliates" has the meaning set forth in Section 5.8.
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Assets" has the meaning set forth in Section 7.13.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
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"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" means the capital stock of the COMPANY.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.19.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of
this Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Funding and Consummation Date" has the meaning set forth in Section 4.
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of TSII Stock pursuant to the
Registration Statement.
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"LLC" has the meaning set forth in Section 7.13.
"LLC Interest" means all of the limited liability company interests in
the LLC owned by the COMPANY.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Other Agreements" has the meaning set forth in the third recital of
this Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by TSII and the Underwriters
of the public offering price of the shares of TSII Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on
Form S-1 covering the shares of TSII Stock to be issued in the IPO.
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of TSII, par value
$0.01 per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set
97
forth in the Certificate of Incorporation, as amended, of TSII on the Funding
and Consummation Date.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Statutory Liens" has the meaning set forth in Section 7.3.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiary" has the meaning set forth in Section 5.6.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on minimum, environmental or other taxes,
assessments, duties, fees, levies or other governmental charges of any nature
whatever, whether disputed or not, together with any interest, penalties,
additions to tax or additional amounts with respect thereto.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.6.
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"TSII" has the meaning set forth in the first paragraph of this
Agreement.
"TSII Charter Documents" has the meaning set forth in Section 6.1.
"TSII Financial Statements" has the meaning set forth in Section 6.6.
"TSII Plan of Organization" has the meaning set forth in the fourth
recital of this Agreement.
"TSII Stock" means the common stock, par value $.01 per share, of TSII.
"Underwriters" means the prospective underwriters in the IPO, as
identified in the Registration Statement.
[The next page is the signature page]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/ Xxxxxxx Xxxxxx
---------------------------------
Name:
-----------------------------
Title:
----------------------------
AUTO-EUROPE, INC. (MAINE)
By:/s/ Xxxx Xxxxxxx
-------------------------------
Xxxx Xxxxxxx
President
STOCKHOLDERS:
/s/ Xxxx Xxxxxxx
----------------------------------
Xxxx Xxxxxxx, Individually
/s/ Xxxx Xxxxx
----------------------------------
Xxxx Xxxxx, Individually
/s/ Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx, as Trustee for
Xxxxxxxx Xxxxx
/s/ Xxxxxxx Xxxxxx
----------------------------------
Xxxxxxx Xxxxxx, as Trustee for
Xxxx Xxxxx
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