EXHIBIT 3
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PURCHASE AGREEMENT
BY AND AMONG
TRAVEL SERVICES INTERNATIONAL, INC.,
LEXINGTON SERVICES ASSOCIATES, LTD.,
LEXINGTON SERVICES CORPORATION,
1997-1 IRREVOCABLE TRUST,
X. X. XXXXXXX 1998 IRREVOCABLE TRUST
AND
SS-1998 IRREVOCABLE TRUST
DATED AS OF JUNE 1, 1998
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TABLE OF CONTENTS
PAGE NO.
ARTICLE I - PURCHASE OF PARTNERSHIP INTERESTS, PURCHASE PRICE...........................1
1.1 Purchase and Sale of Partnership Interests; Purchase Price.................1
1.2 TSI Stock..................................................................4
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND
THE COMPANY............................................................5
2.1 Organization, Qualification, etc...........................................5
2.2 Subsidiaries...............................................................6
2.3 Partnership Interests......................................................6
2.4 Partnership Record Books...................................................6
2.5 Title to Partnership Interests.............................................6
2.6 Options and Rights.........................................................6
2.7 Financial Condition at Closing.............................................7
2.8 Authorization, Etc.........................................................7
2.9 No Violation...............................................................7
2.10 Financial Statements......................................................8
2.11 Accounts Payable; Accounts Receivable; Customer Deposits..................8
2.12 Employees.................................................................8
2.13 Absence of Certain Changes................................................9
2.14 Contracts.................................................................9
2.15 Disclosure...............................................................12
2.16 Title and Related Matters................................................12
2.17 Litigation...............................................................12
2.18 Tax Matters..............................................................13
2.19 Compliance with Law and Applicable Government and other Regulations......14
2.20 ERISA and Related Matters................................................14
2.21 Intellectual Property....................................................16
2.22 Environmental Matters....................................................17
2.23 Dealings with Affiliates; Management Fees................................18
2.24 Banking Arrangements; Credit Facilities..................................18
2.25 Insurance................................................................18
2.26 Investment Representations...............................................19
2.27 Brokerage; Company Liability.............................................19
2.28 Improper and Other Payments..............................................19
2.29 Significant Suppliers and Customers; Material Plans and Commitments......19
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF THE PURCHASER..........................20
3.1 Corporate Organization, etc...............................................20
3.2 Authorization, Etc........................................................20
3.3 No Violation..............................................................20
3.4 Governmental Authorities..................................................21
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3.5 Issuance of TSI Stock.....................................................21
3.6 Shelf Registration Statement..............................................21
3.7 Commission Reports........................................................21
3.8 No Material Adverse Change................................................22
3.9 Securities Act............................................................22
3.10 No Brokers...............................................................22
ARTICLE IV - OTHER AGREEMENTS..........................................................22
4.1 Further Assurances........................................................22
4.2 Consent of Partners.......................................................23
4.3 Consents..................................................................23
4.4 No Termination of Sellers' Obligations by Subsequent Incapacity, Etc......23
4.5 Employment Agreements; Termination of Related Party Agreements............23
4.6 Public Announcements......................................................23
4.7 Non-Competition Covenant..................................................24
4.8 Non-disclosure; Confidentiality...........................................26
4.9 Stock Options.............................................................27
4.10 No Xxxx-Xxxxx-Xxxxxx Filing..............................................27
4.11 Settlement of Certain Obligations........................................28
4.12 Transferred Trademarks...................................................28
4.13 Use of Names.............................................................29
4.14 Consent of Ernst & Young.................................................29
4.15 Earn-Out Budget; Working Capital; Etc....................................29
4.16 Sales Under Securities Laws..............................................30
ARTICLE V - CLOSING....................................................................30
5.1 Closing...................................................................30
5.2 Closing Deliveries........................................................30
ARTICLE VI - SURVIVAL OF TERMS; INDEMNIFICATION........................................31
6.1 Survival..................................................................31
6.2 Indemnification by the Sellers............................................31
6.3 Indemnification by the Purchaser..........................................32
6.4 Third-Party Claims........................................................32
6.5 Limitation on Indemnification.............................................33
6.6 Business Records..........................................................35
ARTICLE VII - MISCELLANEOUS PROVISIONS.................................................35
7.1 Amendment and Modification................................................35
7.2 Entire Agreement..........................................................35
7.3 Certain Definitions.......................................................35
7.4 Exhibits and Schedules....................................................39
7.5 Waiver of Compliance; Consents............................................39
7.6 Assignment................................................................39
7.7 Governing Law.............................................................39
7.8 Consent to Jurisdiction; Service of Process...............................39
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7.9 Injunctive Relief.........................................................40
7.10 Headings.................................................................40
7.11 Pronouns and Plurals.....................................................40
7.12 Construction.............................................................40
7.13 Binding Effect...........................................................40
7.14 Delays or Omissions......................................................40
7.15 Severability.............................................................40
7.16 Expenses.................................................................40
7.17 Attorneys' Fees..........................................................41
7.18 Counterparts.............................................................41
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SCHEDULES
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1.1 Sellers; Partnership Interests; Proportionate Shares
1.1(b)(i) Payment of Cash at Closing
1.1(b)(ii) Stock Certificate Holders
2.1 Jurisdictions of Qualification
2.9 Violations; Third Party Consents
2.10(a) Additional Liabilities
2.10(b) Liabilities covered by Insurance
2.11(a) Accounts Payable
2.11(b) Accounts Receivable
2.11(c) Customer Deposits
2.12 Employee Matters
2.13 Certain Changes
2.14 Contracts
2.16 Liens; List of Property
2.17 Litigation
2.19(b) Permits and Licenses
2.20 ERISA, Benefit Plans and Other Matters
2.21 Intellectual Property
2.21(d) Software
2.22 Environmental Matters
2.23 Affiliated Transactions
2.24 Banking Arrangements
2.25 Insurance
2.27 Brokerage
2.29 Significant Suppliers and Customers; Material Plans and Commitments
4.5(a) Employment Agreements to be Terminated
4.5(b) Related Party Agreements to be Terminated
4.12 Transferred Trademarks
EXHIBITS
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2.1 Partnership Organizational Documents
2.10 Financial Statements
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PURCHASE AGREEMENT (the "AGREEMENT"), dated as of June 1, 1998 by and
among TRAVEL SERVICES INTERNATIONAL, INC., a Delaware corporation, or its
permitted assigns ("TSI" or the "PURCHASER"), LEXINGTON SERVICES ASSOCIATES,
LTD., a Texas limited partnership (the "COMPANY" or the "PARTNERSHIP"),
LEXINGTON SERVICES CORPORATION, a Texas corporation and the general partner of
the Company ("GP"), and 1997-1 IRREVOCABLE TRUST, X. X. XXXXXXX 1998 IRREVOCABLE
TRUST and SS-1998 IRREVOCABLE TRUST, each of which is a trust created under the
laws of Texas and a limited partner of the Company (each, an "LP", and together
with the GP, the "PARTNERS"). The Partners are also sometimes referred to herein
as the "SELLERS".
WHEREAS, the Sellers own all of the issued and outstanding partnership
interests in the Company;
WHEREAS, TSI desires to purchase and acquire from the Sellers, and the
Sellers desire to sell, transfer and deliver to TSI, all of the issued and
outstanding partnership interests in the Company, upon the terms and subject to
the conditions set forth herein (the "ACQUISITION"), which acquisition shall be
consummated by the assignment of such partnership interests by the Sellers to
two wholly-owned subsidiaries of Purchaser as provided in Section 1.1 below;
WHEREAS, upon the closing of the transactions contemplated by this
Agreement, the Company shall be and become a limited partnership whose interests
are owned only by subsidiaries of TSI, and the existence of the Company as a
Texas limited partnership shall continue thereafter until otherwise terminated;
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, TSI, the Sellers and the Company hereby agree,
intending to be legally bound, as follows:
ARTICLE I
PURCHASE OF PARTNERSHIP INTERESTS; PURCHASE PRICE
1.1 PURCHASE AND SALE OF PARTNERSHIP INTERESTS; PURCHASE PRICE.
(a) PURCHASE AND SALE OF PARTNERSHIP INTERESTS. Subject to the
terms and conditions of this Agreement, the Sellers agree to sell, transfer and
deliver to the Purchaser, and the Purchaser agrees to purchase, acquire and
accept delivery from the Sellers, all of the issued and outstanding partnership
interests in the Company, including all general and limited partnership
interests in the Company (collectively, the "COMPANY INTERESTS"), owned or held
by the Sellers, which Company Interests to be sold by each Seller and purchased
hereunder are set forth opposite each such Seller's name on SCHEDULE 1.1
attached hereto. Notwithstanding anything to the contrary in this Agreement, the
Acquisition shall be consummated by the transfer of the Company Interests as
follows: (i) all Company Interests constituting general partnership interests
shall be assigned by the Sellers at Closing to Lexington Services, Inc., a
Delaware corporation and wholly-owned subsidiary of Purchaser (the "NEW GP"),
and (ii) all Company Interests constituting limited partnership interests shall
be assigned by the Sellers at Closing to Lexington Services
Limited, Inc., a Delaware corporation and a wholly-owned subsidiary of Purchaser
(the "NEW LP") (the New GP and New LP are referred to herein as the "NEW
PARTNERS").
(b ) PURCHASE PRICE. Upon the sale, transfer and delivery to
the Purchaser by the Sellers of the Company Interests at the Closing (as such
term is defined in SECTION 5.1 hereof), and in consideration therefor, TSI shall
deliver to the Sellers the following consideration in the aggregate, to be
allocated among and delivered to each of the Sellers in the respective amounts
set forth on SCHEDULE 1.1 hereto (except that the consideration under paragraph
(iii) below shall be delivered if and when as provided therein);
(i ) TWENTY MILLION DOLLARS ($20,000,000) by wire
transfer of immediately available Funds, all of which funds
shall be delivered to the respective accounts and in the
respective amounts set forth on SCHEDULE 1.1(B)(I).
(ii) Certificates evidencing an aggregate of 283,990
shares of common stock, par value $.01 per share, of TSI (the
"TSI STOCK"), valued in the aggregate at $10,000,000 (based
upon a per share price of $35.2125, which is the average
closing price of TSI's common stock on the NASDAQ National
Market for the 20 trading days prior to and including the date
hereof), which stock certificates shall be issued and
registered in the names of the respective persons and in the
respective amounts listed in SCHEDULE 1.1(B)(II). The issuance
of TSI Stock shall be registered under the Securities Act of
1933, as amended (the "SECURITIES ACT") pursuant to the Shelf
Registration Statement (as defined in Section 2.26(a)).
(iii) Upon completion of the Company's income
statement and other financial statements (the "Contingent
Financials") for the twelve full calendar months following the
Closing (the "Accounting Period") in accordance with GAAP (as
defined in Section 7.3), and the determination of the amount
of the Company EBIT for the Accounting Period in accordance
with the procedures in paragraph (c) below; an amount (the
"CONTINGENT PAYMENT") equal to the excess, if any, of (1) the
product of 7.0 times the Company EBIT (as defined in Section
7.3) reflected in the Contingent Financials for the Accounting
Period, less (2) $30,000,000; provided, HOWEVER, that the
Contingent Payment is limited to a maximum of, and shall not
exceed, SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000). Two-thirds (2/3) of the Contingent Payment shall
be payable in immediately available funds, and one-third (1/3)
of the Contingent Payment shall be payable in registered
shares of TSI's common stock (the "ADDITIONAL TSI Shares")
subject to TSI's receipt of such agreements and
representations from the recipient's of such shares as the
Sellers have made in Section 2.26 of this Agreement regarding
the TSI Stock; PROVIDED, HOWEVER, that at TSI's option in its
sole discretion TSI may pay the entire Contingent Payment in
cash. Subject to the previous sentence, the issuance of the
Additional TSI Shares shall be registered under the Securities
Act pursuant to an applicable and appropriate registration
statement filed by TSI under the Securities Act and which is
effective at such time (the "Other Registration Statement").
The number of Additional TSI Shares will be determined based
upon the average closing price of
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TSI's common stock on the NASDAQ National Market, as published
in the Wall Street Journal for the twenty (20) trading days
following the end of the Accounting Period. During the
Accounting Period, TSI will maintain the separate existence of
the Company as a limited partnership owned by subsidiaries of
TSI (or cause the Company's business and assets to be held and
operated by a separate entity wholly-owned by TSI, in which
case TSI shall bear the cost of any such reorganization) and
allow the business of the Company to be managed by or under
the supervision of the Executives (as defined below in SECTION
4.5) in accordance with and subject to their respective
employment agreements, in a manner which is intended to
maximize the EBIT of the Company during such period, but also
in a reasonable and prudent manner in accordance with sound
business principles and TSI's operating policies (including
without limitation TSI's approval of expenditures and
contracts for technology and telecommunications as
contemplated by Section 4.15 hereof) and TSI's covenants under
its credit facilities, subject to the reasonable direction of
TSI's Board of Directors in good faith with due regard for the
intent of this paragraph.
(c) PROCEDURES; DISPUTES.
(1) Within 60 days after the end of the Accounting
Period, TSI shall furnish to the Sellers a statement (the "EARN-OUT
STATEMENT") setting forth the Company EBIT for such period, together
with a reasonably detailed calculation thereof and a copy of the
Contingent Financials. TSI shall permit the Executives to participate
in the preparation of the Earn-out Statement and shall consult with
them in calculating Company EBIT for the Accounting Period in
accordance with the terms of this Agreement, but the final contents of
the Earn-out Statement shall be determined by TSI.
(2) After delivery of the Earn-out Statement, TSI
shall afford to the Sellers and their authorized representatives
reasonable access to the relevant books and records of account of the
Company in order to permit them to determine whether the calculation of
Company EBIT for the Accounting Period is correct. If the Sellers
disagree with the determination of Company EBIT set forth in the
Earn-out Statement, the Sellers shall deliver a written notice (the
"DISPUTE NOTICE") to TSI within 30 days after the receipt of the
Earn-out Statement identifying each matter in dispute and a description
of the basis for the dispute.
(3) If the Sellers timely deliver a Dispute Notice to
TSI, TSI and the Sellers shall attempt in good faith to resolve such
dispute by agreement between the parties. If Purchaser and the Sellers
are unable to resolve any such dispute within 30 days after receipt by
TSI of the Dispute Notice, all items in dispute shall be submitted to
Xxxxxx Xxxxxxxx LLP (or, if such firm declines to act as Accounting
Arbiter (as defined below) pursuant to this paragraph (c), another
accounting firm of national standing and reputation jointly selected by
the parties), who shall act as an independent and impartial arbiter
(the "ACCOUNTING ARBITER") for purposes of resolving such dispute. The
determination of the Accounting Arbiter shall be limited to the matters
in dispute and shall be final, conclusive and binding on the parties.
The parties shall cooperate with each other and with the
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Accounting Arbiter and shall provide the Accounting Arbiter with such
information as it may reasonably require. The fees and expenses of the
Accounting Arbiter shall be borne equally by TSI and the Sellers.
1.2 TSI STOCK. The Purchaser shall issue the TSI Stock to the Sellers
subject to the conditions and restrictions set forth in this SECTION 1.2 (and
the Additional TSI Shares shall be subject to the same restrictions other than
paragraph (a)(1) below as if such shares were TSI Stock).
(a) RESTRICTIONS ON TRANSFER
(1) Except for transfers to immediate family members
of (i) the stockholders of the GP (who hold stock of the GP either
directly or through one or more corporations) or (ii) the trustees of
the LPs, who agree to be bound by the restrictions set forth in this
SECTION 1.2 (or trusts for the benefit of such family members, the
trustees of which so agree), during the one-year period (the
"RESTRICTION PERIOD") beginning on the Closing Date, the Sellers shall
not sell, assign, exchange, transfer, distribute or otherwise dispose
of (in each case, a "TRANSFER") any shares of TSI Stock received by the
Sellers hereunder. Following the Restriction Period, the Sellers may
transfer their shares of TSI Stock so long as such transfer is in
accordance with the Future Sale Procedures set forth in SECTION
1.2(A)(2) and other applicable provisions of this Section 1.2.
(2) The certificates evidencing the TSI Stock
delivered to the Sellers pursuant to this Agreement shall bear a legend
substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, DISTRIBUTED
OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE
REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE,
ASSIGNMENT, EXCHANGE, TRANSFER, DISTRIBUTION, OR
OTHER DISPOSITION, OTHER THAN IN ACCORDANCE WITH
SECTION 1.2 OF THAT CERTAIN PURCHASE AGREEMENT DATED
AS OF JUNE 1, 1998, BY AND AMONG ISSUER, LEXINGTON
SERVICES ASSOCIATES, LTD. AND THE SELLERS NAMED
THEREIN.
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED
PURSUANT TO A REGISTRATION STATEMENT COVERING THE
TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
At the request of any Seller, the foregoing legend
shall be removed from certificates for such Seller's TSI Stock by TSI
(or by any transfer agent appointed by TSI)
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at any time after the second anniversary of the Closing Date. In
addition, at the request of any Seller, the "Rule 145" legend will be
removed upon receipt by TSI of an opinion (reasonably acceptable to
TSI) of counsel (reasonably acceptable to TSI) that such legend may
appropriately be removed in the circumstances under applicable
securities laws, and the cost of one such opinion shall be paid by TSI
up to a maximum of $3,000.
(3) Except for transfers to family members of (i) the
stockholders of the GP (who hold stock of the GP either directly or
through one or more corporations) or (ii) the trustees of the LPs, who
agree to bound by the restrictions set forth in this SECTION 1.2 (or
trusts for the benefit of such family members, the trustees of which so
agree), during the one-year period following the Restriction Period, no
Seller shall transfer, in any transaction or series of transactions
occurring within any four-week period, more than 5,000 shares of TSI
Stock (in either case, a "FUTURE SALE"), unless the following
procedures (the "FUTURE SALE PROCEDURES") are complied with: (i) the
shares of TSI Stock are sold in private transactions not involving
sales on any securities exchange or NASDAQ market that are exempt from
the registration requirements of the Securities Act, and the purchasers
thereof agree to be bound by the restrictions in this Section 1.2 to
the same extent as the Seller and TSI is notified of such transaction;
or (ii) the Sellers notify TSI of a proposed Future Sale to be effected
in a public transaction in advance of the trade and the trade is
effected through one or more market makers who make a market in TSI's
stock.
(4) For purposes of this Agreement (and the
restrictions set forth in this SECTION 1.2), the term "TSI Stock" shall
mean and include (i) the shares of TSI Stock issued, granted, conveyed
and delivered to the Sellers pursuant to SECTION 1.1 hereof, and (ii)
any and all other or additional shares of capital stock of TSI issued
or delivered by TSI with respect to the shares of TSI Stock described
in clause (i) hereof, including without limitation any shares of
capital stock of TSI issued or delivered with respect to such shares as
a result of any stock split, stock dividend, stock distribution,
recapitalization or similar transaction.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANY
The Sellers and the Company, jointly and severally, make the following
representations and warranties to the Purchaser (but such representations and
warranties, to the extent they relate to actions on the part of the Company are
limited to actions taken prior to or on the Closing Date):
2.1 ORGANIZATION, QUALIFICATION, ETC.
(a) The Company is a limited partnership duly formed, validly
existing and in good standing under the laws of the State of Texas with the
partnership power and authority to
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carry on its business as it is now being conducted, and to own, operate and
lease its properties and assets.
(b) The Company is duly qualified or licensed to do business
in good standing in the jurisdictions set forth on SCHEDULE 2.1 attached hereto,
those being every jurisdiction in which the conduct of the Company's business,
the ownership or lease of its properties, or the transactions contemplated by
this Agreement, require it to be so qualified, registered or licensed, except
where the failure to be so qualified or in good standing would not have a
Material Adverse Effect.
(c) True, complete and correct copies of the Company's
certificate of limited partnership and partnership agreement (the "PARTNERSHIP
AGREEMENT"), as amended to date and as presently in effect, are attached hereto
as EXHIBIT 2.1. The Company has no other organizational documents.
2.2 SUBSIDIARIES. The Company has no Subsidiaries (as defined in
SECTION 12.3) nor any investment or other equity interest in any Person (as
defined in SECTION 7.3).
2.3 PARTNERSHIP INTERESTS. As of the date hereof, the Company Interests
constitute all of the authorized and outstanding partnership interests of the
Company; and all of the Company Interests are owned legally, beneficially and of
record only by the respective Sellers (or by their respective trustees or
beneficiaries, as applicable) as set forth on SCHEDULE 1.1 attached hereto,
which Schedule also indicates the nature of each Seller's Company Interest
(general or limited), all as indicated in SCHEDULE 1.1. The Company has no
partners (general, limited, or otherwise) other than the Sellers.
2.4 PARTNERSHIP RECORD BOOKS. The partnership record book of the
Company has been made available to the Purchaser, is complete and correct in all
material respects and contains all of the material proceedings of the partners
and the Company, and all requisite Federal and State documentary stamps, if any,
have been affixed thereon and canceled.
2.5 TITLE TO PARTNERSHIP INTERESTS. All of the issued and outstanding
partnership interests in the Company are owned only by the Sellers or by their
respective trustees or beneficiaries, as applicable, in the respective amounts
and as set forth on SCHEDULE 1.1 hereto, are duly authorized and validly issued,
and are free of all Liens (as defined in SECTION 7.3) other than restrictions on
transfer imposed under applicable securities law and restrictions arising under
the terms of the partnership agreement of the Company ("PERMITTED PARTNERSHIP
INTEREST RESTRICTIONS"). Upon delivery by the Sellers of the Company Interests
to the New Partners at the Closing against payment of the purchase price
thereof, the Sellers will convey, and the New Partners will receive, good and
valid title to all the Company Interests (including, without limitation, all
legal and beneficial title, rights and interests therein), free and clear of all
Liens or contractual restrictions or limitations whatsoever other than Permitted
Partnership Interest Restrictions and Liens arising from the contracts or
actions of TSI.
2.6 OPTIONS AND RIGHTS. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
other rights or arrangements under
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which the Company is bound or obligated to issue any additional partnership
interests. There are no agreements, arrangements or understandings between any
Sellers and/or the Company and any other Person (as defined in SECTION 7.3)
giving any Person any right or interest in any Company Interest. The Sellers do
not have, or hereby waive, any preemptive or other right to acquire partnership
interests of the Company that such Sellers have or may have had on the date
hereof.
2.7 FINANCIAL CONDITION AT CLOSING. At and as of Closing, (i) the
Company shall be current in all material respects on all bills and payables
according to standard trade terms, and will have paid all expenses in connection
with this transaction and (ii) the Company and Sellers shall have complied with
their respective obligations to be performed prior to or on the Closing Date
under Sections 4.11 and 2.23.
2.8 AUTHORIZATION, ETC. The Company has the full partnership power and
authority and each of the Sellers has all requisite corporate or trust power and
authority to enter into this Agreement and the agreements and documents
contemplated hereby to which they are or will become a party and perform their
respective obligations hereunder and thereunder. The execution, delivery and
performance of this Agreement and all other agreements and transactions
contemplated hereby to which the Company or any Seller is or will become a party
have been duly authorized by each of the Sellers and the Company (including, if
and to the extent required or necessary, with the approval of all trustees and
beneficiaries of the LPs and the Board of Directors and shareholders of the GP)
and no other corporate, partnership or trust proceedings or approvals on the
part of the Sellers and the Company are necessary to authorize this Agreement
and the transactions contemplated hereby. Upon execution and delivery of this
Agreement and all other agreements contemplated hereby by the parties hereto and
thereto, this Agreement and such other agreements shall constitute the legal,
valid and binding obligation of each of the Company and the Sellers party hereto
and thereto, enforceable against each such party in accordance with their
respective terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization and similar laws
which effect creditors' rights generally and by general equitable principles.
2.9 NO VIOLATION. The execution, delivery and performance by the
Company and the Sellers of this Agreement, and any and all other agreements
contemplated hereby, and the fulfillment of and compliance with the respective
terms hereof and thereof by the Company and the Sellers do not and will not,
except as set forth on SCHEDULE 2.9 attached hereto, (a) conflict with or result
in a breach of the terms, conditions or provisions of, (b) constitute a default
or event of default under (with due notice, lapse of time or both), (c) result
in the creation of any Lien upon the partnership interests or assets of the
Company pursuant to, (d) give any third party the right to accelerate any
obligation under, (e) result in a violation of, or (f) require any
authorization, consent, approval, exemption or other action by or notice to any
Authority (as defined in SECTION 7.3) or other Person pursuant to: the
partnership agreement and certificate of limited partnership of the Company, or
any Regulation (as defined in SECTION 7.3) to which the Company or the Sellers
are subject, Order (as defined in SECTION 7.3) or Contract (as defined in
SECTION 7.3) to which the Company or any Seller is subject, other than, in the
case of such Contracts, any such breaches or defaults that will not result in a
Material Adverse Effect. The Company and the Sellers will comply with all
applicable Regulations and Orders in connection
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with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
2.10 FINANCIAL STATEMENTS. Attached as EXHIBIT 2.10 hereto are the
following financial statements of the Company applied on a consistent basis: (i)
balance sheets for the fiscal years ended December 31, 1995, December 31, 1996
and Xxxxxxxx 00, 0000 (xxx "XXXXXXX XXXXXX"), (xx) statements of income,
partners' equity and cash flows for the fiscal years ended December 31, 1995,
December 31, 1996 and December 31, 1997 (the "STATEMENTS OF REVENUES AND
EXPENSES"), and (iii) balance sheet and statement of operations for the three
months ended March 31, 1998 (collectively, together with the Balance Sheets and
the Statements of Revenues and Expenses, the "FINANCIAL STATEMENTS"). The
Financial Statements at and for the years ended December 31, 1996 and 1997 were
audited by Ernst & Young LLP as indicated in such firm's audit reports included
in the Financial Statements. The balance sheets (and the notes thereto) included
in the Financial Statements fairly present in all material respects the
financial position of the Company at the respective dates thereof, and the
statements of income, partners' equity and cash flows included in the Financial
Statements fairly present the results of operations for the periods therein
referred to (except as stated therein or in the notes or schedules thereto)
applied in conformity with GAAP (subject, in the case of, statements referred to
in clause (iii) above, to the absence of footnotes and normal year-end
adjustments). Except as set forth on SCHEDULE 2.10(A) attached hereto, the
Company has no liability, whether accrued, absolute or contingent, of a type
required to be reflected on a balance sheet or described in the notes thereto in
accordance with GAAP, other than (i) liabilities which have been reflected or
reserved against in the Financial Statements, (ii) liabilities incurred in the
ordinary course of business since March 31, 1998, and (iii) liabilities covered
by insurance or reinsurance (a complete and detailed description of which
liabilities and insurance coverage is provided in SCHEDULE 2.10(B)).
2.11 ACCOUNTS PAYABLE; ACCOUNTS RECEIVABLE; CUSTOMER DEPOSITS. Schedule
2.11(a) sets forth a complete list of the Company's accounts payable and accrued
expenses as of March 31, 1998. Schedule 2.11(b) attached hereto sets forth a
true and complete list of the aged accounts receivable of the Company as of May
29, 1998, all of which arose out of bona fide sales and deliveries of goods,
performance of services or other business transactions (and also including all
loans or advances to officers, directors or Company Employees as of April 30,
1998). The allowances reflected in Schedule 2.11(b) as of April 30, 1998 were
determined in good faith and consistent with the Company's historical practices
and collection experience, and to the knowledge of Company and Sellers there is
no reason to change or adjust the methodology for determining such allowances.
The customer deposits of the Company, if any, are held as set forth on Schedule
2.11(c).
2.12 EMPLOYEES. An accurate list is set forth on SCHEDULE 2.12 showing
all employees of the Company or any of its Affiliates (including, but not
limited to, Lexington Management Corporation) who render services partially (20%
or more of work time) or exclusively in connection with business of the Company
as of May 15, 1998 (the "COMPANY EMPLOYEES") and indicating the Person that is
the employer of each Company Employee, and listing all employment agreements
with such employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons. The Company has provided or made available to TSI true, complete
and correct copies of any
8
employment agreements for persons listed on SCHEDULE 2.12. Since December 31,
1997, there have been no increases in the compensation payable or any special
bonuses to any Company Employee or consultant to the Company, except ordinary
salary and bonus increases implemented on a basis consistent with past
practices, except as set forth on SCHEDULE 2.12. Except as set forth on SCHEDULE
2.12, neither Seller is related by blood or marriage to, or otherwise affiliated
with, any person listed on SCHEDULE 2.12.
The Company has been for the past four years, and currently is, in
compliance in all material respects with all Federal, State and local
Regulations and Orders affecting employment and employment practices of the
Company (including those Regulations promulgated by the Equal Employment
Opportunity Commission), including terms and conditions of employment and wages
and hours. Except as set forth on SCHEDULE 2.12, (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 Company Employees are represented
by any labor union or covered by any collective bargaining agreement, (iii) to
the Company's and Sellers' knowledge, no campaign to establish such
representation is in progress and (iv) there is no pending or, to the Company's
and Sellers' knowledge, threatened labor dispute involving the Company and any
Company Employees nor has the Company experienced any labor interruptions over
the past three years. The Company believes its relationship with Company
Employees to be generally good.
2.13 ABSENCE OF CERTAIN CHANGES. Except as set forth on SCHEDULE 2.13,
since March 31, 1998, there has not been (a) any Material Adverse Change (as
defined in SECTION 7.3) to the Company; (b) any damage, destruction or loss,
whether covered by insurance or not, having a Material Adverse Effect on the
Company; (c) any declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect of the Company's
partnership interests, or any redemption or other acquisition of such
partnership interests by the Company (and no such item has occurred during the
period from December 31, 1997 through the date hereof); (d) any amendment,
modification or termination of any existing, or entering into any new, Contract
or plan relating to any salary, bonus, insurance, pension, health or other
employee welfare or benefit plan for or with any Company Employees or
consultants of the Company; (e) any entry into any material Contract not in the
ordinary course of business, including without limitation relating to any
borrowing or capital expenditure; (f) any disposition by the Company of any
material asset other than in the ordinary course of business and consistent with
prior practices; (g) any write-off, as uncorrectable, of any notes, trade
accounts or other receivables having an aggregate value in excess of $10,000;
(h) any change by the Company in accounting methods or principles; or (i) any
adverse changes to the terms of, or any termination of, any contracts of the
nature described in paragraphs (a)(xiv) and (a)(xv) of Section 2.14 below.
2.14 CONTRACTS.
(a) The Company has listed on SCHEDULE 2.14(A) all material
(as defined in the following sentence) written and oral 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 suppliers, customers, joint venture or partnership agreements,
contracts with any labor organizations and strategic alliances), in existence as
of the date hereof, and in each case has delivered or made available true,
complete and correct copies of such agreements to TSI.
9
The Company's written or oral material contracts, commitments and similar
agreements required to be listed in SCHEDULE 2.14(A) include (but are not
limited to) all of the material Contracts of the following types (if any) to
which the Company is a party (it being understood that a Contract shall be
deemed material for purposes of this Section 2.14 only if (i) in the case of
Contracts other than those described in the following clause (ii), the aggregate
liability of the Company thereunder, or the aggregate consideration payable by
or to the Company thereunder during the twelve-month period commencing on the
date hereof, exceed $25,000, or (ii) the Contract is for the Company's hotel
reservation services and pursuant to such contract the Company is expected to
receive five percent or more of its revenues during the 12 month period
commencing on the Closing Date, and further agreed that SCHEDULE 2.14(A) shall
nevertheless include a list of all of Company's customers with which the Company
currently has a Contract for hotel reservation services);
(i) pension, profit sharing, bonus, retirement, stock
option, stock purchase or other plan providing for deferred or
other compensation to employees or any other employee benefit
plan (other than as set forth in SCHEDULE 2.20 hereto), or any
Contract with any labor union;
(ii) employment, consultation or other compensation
Contracts to which any Company Employees are parties which are
not terminable on notice of 30 days' or less by the Company
without penalty or other financial obligation or which provide
for total salary, bonus and other compensation from the
Company of $35,000.00 or more per annum.
(iii) Contract containing covenants or agreements
limiting the freedom of the Company or any of its Company
Employees to compete in any line of business presently
conducted by the Company or to compete with any Person in any
such line of business in any area;
(iv) Contract with any Seller or with any affiliate
or relative of any Seller;
(v) Contract relating to or providing for loans to
Company Employees or Affiliates or any Sellers or employees,
officers or directors thereof;
(vi) Contract under which the Company has advanced or
loaned, or is obligated to advance or loan, funds to any
Person;
(vii) Contract relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability (in
respect of money or funds borrowed), including letters of
credit, or otherwise pledging, granting a security interest in
or placing a Lien on any asset of the Company;
(viii) guarantee or endorsement of any obligation;
(ix) Contract under which the Company is lessee or
licensee of or holds, uses or operates any property, real or
personal, intangible, intellectual (trademarks,
10
patents, copyrights, other Proprietary Rights, etc.) or
otherwise, owned by any other party;
(x) Contract pursuant to which the Company is lessor
of or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Company;
(xi) assignment, license, indemnification or Contract
with respect to any Proprietary Rights (as defined in SECTION
7.3 hereto));
(xii) warranty Contract with respect to its services
rendered (or to be rendered);
(xiii) Contract or lease for, or with, any telephone
switch, long distance or toll-free telephone providers;
(xiv) Contract with Global Distribution System
("GDS") or Central Reservation Systems ("CRS") (i.e., SABRE,
THISCO, GALILEO, AMADEUS, WORLDSPAN, etc.), or any Internet
service providers or Internet-based reservation systems;
(xv) Contracts for any telecommunications equipment
or services, and any computer-based information systems
(including hardware and software);
(xvi) Override agreements with travel agencies, other
customers or suppliers;
(xvii) Contract which prohibits, restricts or limits
in any way the payment of dividends or distributions by the
Company;
(xviii) Contract under which it has granted any
Person any registration rights (including piggyback rights)
with respect to any securities;
(xix) Contract for the purchase or acquisition of
property and assets;
(xx) Contracts with independent agents, brokers,
dealers or distributors;
(xxi) Sales, commissions, advertising or marketing
Contracts;
(xxii) Governmental Contracts subject to
redetermination or renegotiation; or
(xxiii) any other Contract which is material to the
Company's operations or business prospects, except those which
(x) were made in the ordinary course of business, and (y) are
terminable on 30 days' or less notice by the Company without
penalty or other financial obligation.
11
(b) The Company has performed in all material respects all
obligations required to be performed by it and is not in default or breach in
any material respect under any Contract listed on SCHEDULE 2.14(A); no event has
occurred which with the passage of time or the giving of notice or both would
result in a default, breach or event of non-compliance in any material respect
by the Company, or to the knowledge of the Company and Sellers, by any other
party under any Contract listed on SCHEDULE 2.14(A).
2.15 DISCLOSURE. Neither this Agreement nor any of the exhibits,
schedules, certificates or other documents delivered by Sellers or the Company
pursuant to this Agreement at Closing contains any untrue statement of a
material fact or omits a material fact necessary to make each statement
contained herein or therein in light of the circumstances under which it was
made not misleading (it being agreed that any item not disclosed on a Schedule
hereto because it is not required to be disclosed thereon by the express terms
of the applicable representation shall not constitute a violation of this
Section 2.15).
2.16 TITLE AND RELATED MATTERS.
(a) The Company has good and valid title to all of the
property and assets reflected in the balance sheets included in the Financial
Statements or acquired after the date thereof except for properties sold or
otherwise disposed of since the date thereof in the ordinary course of business,
free and clear of all Liens, except (i) tax and other statutory Liens not yet
delinquent, (ii) Liens of a Lessor under any lease disclosed in the Schedules to
this Agreement, (iii) such imperfections or irregularities of title, Liens,
easements, charges or encumbrances as do not detract from or interfere with the
present use of the properties or assets subject thereto or affected thereby,
otherwise impair present business operations at such properties; or do not
materially detract from the value of such properties and assets, taken as a
whole, (iv) as reflected in the balance sheets included in Financial Statements
or the notes thereto, or (v) as expressly disclosed on SCHEDULE 2.16 hereto
(collectively "Permitted Liens"). Except for normal breakdowns and servicing
requirements, all machinery and equipment regularly used by the Company in the
conduct of its business is in good operating condition and repair, ordinary wear
and tear excepted.
(b) The Company does not own any real Property. SCHEDULE 2.16
attached hereto sets forth a description of all real property leased and all
material personal property owned or leased by the Company.
2.17 LITIGATION. Except as set forth on SCHEDULE 2.17, there is no
Claim (as defined in SECTION 7.3) pending or, to the knowledge of the Sellers
and the Company, any material Claim threatened, against any of the Sellers or
the Company, nor is there any Order outstanding against any of the Sellers or
the Company; and the matters disclosed on Schedule 2.17, both individually and
in the aggregate, are reasonably expected to not have a Material Adverse Effect
on the Company.
12
2.18 TAX MATTERS.
(a) The Partnership has from the date of its formation
qualified as, and on the Closing date shall qualify as, a partnership for
federal and state income tax purposes in accordance with subchapter K of the
Internal Revenue Code of 1986 as amended (the "CODE") and corresponding state
statutes and any regulations and rules promulgated thereunder. The Company has
filed all federal, state, local and franchise tax reports and returns, and all
other material reports, returns and other documents (collectively, the "TAX
RETURNS") required to be filed with any federal, state, local or other taxing
authorities (each a "TAXING AUTHORITY", collectively, the "TAXING AUTHORITIES")
in respect of all relevant taxes, including without limitation income, premium,
gross receipts, net proceeds, alternative or add-on minimum, ad valorem, value
added, turnover, sales, use, property, personal property (tangible and
intangible), stamp, leasing, lease, user, excise, duty, franchise, transfer,
license, withholding, payroll, employment, fuel, excess profits, occupational
and interest equalization, windfall profits, severance, and other charges
(including interest and penalties) (collectively, the "TAXES") and in accordance
with all tax sharing agreements to which any Seller or the Company may be a
party. All Taxes required or anticipated to be paid by the Company for all
periods prior to and including March 31, 1998 have been paid or accrued or
otherwise provided for by the Company and all such Company Taxes for periods
prior to and including the Closing Date shall be paid or accrued or otherwise
provided for (to the extent required to be accrued or provided for in accordance
with the Company's prior practice and in the ordinary course of business) by the
Company prior to Closing, including any of the Company's Taxes that may be due
or claimed to be due as a result of the consummation of the transactions
contemplated by this Agreement. All Taxes which are required to be withheld or
collected by the Company have been duly withheld or collected and, to the extent
required, have been paid to the proper Taxing Authority or properly segregated
or deposited as required by applicable laws. There are no Liens for Taxes upon
any property or assets of the Company except for liens for Taxes not yet due and
payable.
(b) No audit of the Company or the Company's Tax Returns by
any Taxing Authority is currently pending or threatened, and no issues have been
raised by any Taxing Authority in connection with the examination of any Tax
Returns, and there are no unresolved issues or unpaid deficiencies relating to
any such examinations, if any. The items relating to the business, properties or
operations of the Company on the Tax Returns filed by or on behalf of the
Company for all taxable years (including the supporting schedules filed
therewith), state accurately in all material respects the information requested
with respect to the Company and such information was derived from the books and
records of the Company.
(c) The Sellers shall cause the Company to file all income Tax
Returns and reports with respect to income Taxes which are required to be filed
for Tax periods ending on or before the Closing Date and to file all other Tax
Returns and reports with respect to Taxes (other than income Tax Returns and
reports with respect to income Taxes) which are due on or before the Closing
Date (collectively, "PRE-CLOSING TAX RETURNS"). The Sellers shall pay all income
Taxes due in respect of such Pre-Closing Tax Returns to the appropriate Taxing
Authority, including any income Taxes of the Sellers, in their capacity as
partners of the Company, that may be due as a result of the consummation of the
transactions contemplated by this Agreement. The Sellers shall (i) cause the
Company to prepare a statement of election under Treasury Regulation
13
Section 1.754-1(b), (ii) submit a copy of such statement of election to TSI at
least thirty (30) days prior to the due date (determined with regard to any
applicable extensions; provided, however, that the foregoing election shall be
made on a timely basis so that it may be reflected in the tax returns of TSI) of
the Company's U.S. federal partnership return for the Company's tax year that
ends on the Closing Date, and (iii) timely file the final version of such
statement of election with such partnership return.
2.19 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT AND OTHER
REGULATIONS.
(a) The Company is presently complying in respect of its
operations, equipment, practices, real property, structures, and other property,
and all other aspects of its business and operations, with all applicable
Regulations and Orders, including all Regulations relating to the safe conduct
of business, environmental protection, quality and labeling, antitrust, Taxes,
consumer protection, equal opportunity, discrimination, health, sanitation,
fire, zoning, building and occupational safety except where such failure or
failures to comply therewith would not individually or in the aggregate have a
Material Adverse Effect. There are no Claims pending, nor to the knowledge of
the Company and the Sellers are there any material Claims threatened, nor has
the Company or any Seller received any written notice, regarding any violations
of any Regulations and Orders enforced by any Authority claiming jurisdiction
over the Company, including any requirement of OSHA or any pollution and
environmental control agency (including air and water).
(b) SCHEDULE 2.19(B) attached hereto sets forth all material
permits, licenses, provider numbers, orders, franchises, registrations and
approvals (collectively, "PERMITS") from all Authorities held by the Company.
The Permits listed on SCHEDULE 2.19(B) are the only Permits that are required
for the Company to conduct its business as presently conducted, except for those
the absence of which would not have a Material Adverse Effect on the Company.
Each such Permit is in full force and effect and, to the knowledge of the
Company and Sellers, no suspension or cancellation of any such Permit is
threatened and there is no basis for believing that such Permit will not be
renewable upon expiration.
(c) The Company is not subject to any Regulation, rule or
requirement of any industry groups with which it is a member or affiliated.
2.20 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Except as set
forth in SCHEDULE 2.20 hereto, the Company is neither a party to nor
participates in or has any liability or contingent liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multiemployer plan" (as those terms
are respectively defined in Sections 3(1), 3(2) and 3(37) of
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"));
14
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any employee,
director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not
constitute an "employee benefit plan" (as defined in Section
3(3) of ERISA); or
(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
Any plan, arrangement or agreement required to be listed on
SCHEDULE 2.20 is sometimes hereinafter referred to as a "BENEFIT PLAN".
(b) PLAN DOCUMENTS AND REPORTS. A true and correct copy of
each of the Benefit Plans required to be listed on SCHEDULE 2.20, and all
contracts relating thereto, or to the funding thereof, including, without
limitation, all trust agreements, insurance contracts, investment management
agreements, subscription and participation agreements and record keeping
agreements, each as in effect on the date hereof, has been supplied or made
available to the Purchaser. In the case of any Benefit Plan that is not in
written form, the Purchaser has been supplied with an accurate description of
such Benefit Plan as in effect on the date hereof. A true and correct copy of
the three most recent annual reports and accompanying schedules, the three most
recent actuarial reports, and the most recent summary plan description and
Internal Revenue Service determination letter with respect to each such Benefit
Plan, to the extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not readily
tradable) held with respect to any funded Benefit Plan has been supplied to or
made available the Purchaser by the Company, and there have been no material
changes in the financial condition in the respective Benefit Plans from that
stated in the annual reports and actuarial reports supplied.
(c) COMPLIANCE WITH LAWS; LIABILITIES. As to all Benefit
Plans, except as otherwise specified on SCHEDULE 2.20, the Company is in
compliance in all material respects with the terms of all Benefit Plans and
every Benefit Plan is in compliance in all material respects with all of the
requirements and provisions of ERISA and all other laws and regulations
applicable thereto, including without limitation the timely filing of all annual
reports or other filings required with respect to such Benefit Plans. None of
the assets of any Benefit Plan are invested in employer securities or employer
real property, as those terms are defined in Section 407(d) of ERISA. There have
been no "prohibited transactions" (as described in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Benefit Plan and the Company has
not otherwise engaged in any prohibited transaction.
(d) With respect to any Benefit Plan or any other employee
benefit plan (as defined in Section 3(3) of ERISA) subject to Title IV of ERISA
to which the Company or any ERISA Affiliate contributes or has contributed or is
or has been under an obligation to contribute in the last six years
(collectively, the "Plans"), there is no (i) liability to the Pension Benefit
Guaranty Corporation, other than for the payment of premiums, all of which have
been paid when
15
due; (ii) liability under sections 4062, 4063, 4064, or 4068 of ERISA; (iii)
withdrawal liability (including contingent withdrawal liability) within the
meaning of sections 4201, 4202, or 4204 of ERISA to any "multiemployer plan," as
such term is defined in section 4001 of ERISA; nor (iv) any "accumulated funding
deficiency" as such term is defined in section 302 of ERISA and section 412 of
the Code or any lien attributable thereto under section 412(f) and (m) of the
Code. There would not be any such liability if the Company, or any ERISA
Affiliate terminated or withdrew from any Plan on the Closing Date or were
deemed to terminate or withdraw from any such Plan in connection with the
transition of certain employees from Lexington Management Corporation
("Manager") to the Company pursuant to the Services Agreement dated as of the
Closing Date between Manager and the Company. No "reportable event" under
section 4043 of ERISA has occurred with respect to any Plan. For purposes of
this section, the term ERISA AFFILIATE shall mean any trade or business, whether
or not incorporated, that together with the Company would be deemed to be a
single employer within the meaning of section 4001(b)(1) of ERISA.
2.21 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.21 and SCHEDULE 2.21(D) sets forth a true and
correct list of all (i) registered Proprietary Rights owned by the Company, (ii)
applications for registrations of Proprietary Rights filed by the Company and
(iii) unregistered trademarks and service marks and certain other Proprietary
Rights owned or used by the Company which are material to the Company. SCHEDULE
2.21 also contains a complete and accurate list of all licenses (other than
software licenses with respect to software that is commercially available from
third parties) with respect to any material Proprietary Rights. The Company has
complied in all material respects with all federal and international trademark
laws and has made all necessary filings and has registered its material
Proprietary Rights in all jurisdictions necessary to protect each of its
Proprietary Rights set forth on SCHEDULE 2.21. The consummation of the Closing
will not impair in any material respect any Proprietary Rights of the Company.
(b) The Company has the right to use all of its Proprietary
Rights, including those listed in SCHEDULE 2.21 and SCHEDULE 2.21(D), without
infringing the rights of any third party, except where such infringement would
not have a Material Adverse Effect on the Company. Each of such Proprietary
Rights is free and clear of all royalty obligations and Liens other than
Permitted Liens. There are no Claims pending, or to the best knowledge of the
Company and the Sellers, any Claims threatened, against the Company or any
Seller that its use of any Proprietary Rights infringes the rights of any
Person. The Company and the Sellers have no knowledge of any third-party's
conflicting use of any of such Proprietary Rights that conflicts in any material
respect with the Company's Proprietary Rights, and any such conflicting uses
will not have a Material Adverse Effect.
(c) Except as set forth in SCHEDULE 2.21 or SCHEDULE 2.21(D),
the Company is not a party in any capacity to any franchise, license or royalty
agreement respecting any Proprietary Right and there is no conflict with the
rights of others in respect to any Proprietary Right now used in the conduct of
its business.
16
(d) SOFTWARE PROGRAMS
(i) DEFINITION. As used herein, the term "Software"
shall mean the proprietary hotel reservation software program
and data developed by the Company, and used by the Company in
the operation of its business, which Software includes the
"Proprietary Software" indicated on SCHEDULE 2.21(D) and a
product known as "LexLink." The Software does not include any
off-the-shelf software or operating system not developed by
the Company.
(ii) OWNERSHIP. The Company is the sole owner of the
Software. The Company has not sold, assigned, licensed,
distributed or in any other way disposed of or encumbered the
Software. The Company possesses or has access to the source
code for the Software for the purposes of recreating and
future maintenance and updates. The use by the Company of the
Software in the normal course of business (as conducted prior
to the date hereof) does not infringe any valid and subsisting
copyright, patent or trade secret owned by third persons
except for any infringement which would not have a Material
Adverse Effect.
(iii) SUFFICIENCY AND OPERATION. The Software is
sufficient for use by the Company in the normal course of its
business operations (as conducted prior to the date hereof for
the volume of hotel reservation information processed thereby)
as of the date hereof, without material defects or programming
or documentation errors. The Company warrants that the
Software will function without material defect in view of the
year 2000 problem.
(iv) LICENSED SOFTWARE. Any software used by the
Company which is licensed from third parties or off-the-shelf
is held and used by the Company legitimately. The material
licensed software used by the Company is set forth in SCHEDULE
2.21(D). The licensed software which performs general ledger
and related accounting functions can be modified (without
significant expense beyond the expenditures contemplated by
the 1998 Annual Budget) so as to operate without material
defect in light of the year 2000 problem.
2.22 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 2.22: (a)
neither the Company's business or assets nor the operation thereof violates in
any material respect any applicable Environmental Law (as defined in SECTION
7.3), and no condition, occurrence, accident, happening or event has occurred at
any time prior to the Closing Date, which has resulted or will result in a claim
against the Company or the Purchaser or has created or will create a liability
or loss for the Company or the Purchaser and which, with notice or the passage
of time or both, would constitute a violation in any material respect of any
Environmental Law; (b) the Company is in possession of all material
Environmental Permits (as defined in SECTION 7.3) required under any applicable
Environmental Law for the conduct or operation of the Company's business (or any
part thereof), and the Company is in compliance in all material respects with
all of the requirements and limitations included in such Environmental Permits;
(c) the Company has not stored or used any pollutants, contaminants or hazardous
or toxic wastes, substances or materials on or at any property or facility now
or previously owned, leased or operated by the Company in
17
violation in any material respect of any Environmental Law; (d) neither the
Company nor any Seller has received any notice from any Authority or any private
Person that the Company's business or the operation of any of its facilities is
in violation of any Environmental Law or any Environmental Permit or that it is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any property or facility now or previously owned, leased or operated by
the Company, or at, on or beneath any land adjacent thereto or in connection
with any waste or contamination site; (e) to the knowledge of the Company and
Sellers, the Company is not the subject of any Federal, state, local, or private
Claim involving a demand for damages or other potential liability with respect
to a violation of Environmental Laws or under any common law theories relating
to operations or the condition of any facilities or property (including
underlying groundwater) owned, leased, or operated by the Company; (f) no
property or facility now or previously owned, leased or operated by the Company,
is listed or proposed for listing on the National Priorities List pursuant to
CERCLA, on the CERCLIS or on any other federal or state list of sites requiring
investigation or clean-up; and (g) to the knowledge of the Company and Sellers,
there are no polychlorinated biphenyls, radioactive materials or friable
asbestos present at any property or facility now or previously owned or leased
by the Company. The Company has timely filed all reports required to be filed
with respect to all of its property and facilities and has generated and
maintained all required data, documentation and records under all applicable
Environmental Laws.
2.23 DEALINGS WITH AFFILIATES; MANAGEMENT FEES. Except as set forth on
SCHEDULE 2.23, as of the Closing the Company is not a party to any oral or
written agreement or arrangement with any one or more Affiliates of the Company
or any Seller, other than the agreements to be signed at Closing as expressly
contemplated by this Agreement, and all such affiliated agreements and
arrangements in effect during 1997 are reflected in the Company's audited
financial statements for such year included in the Financial Statements. Since
December 31, 1997, the Company has not paid any management fee or other fees or
compensation to any Affiliate of the Company other than (i) management fees paid
to Woodstone International, Inc., which fees did not exceed $1,350,000 for the
period from January 1, 1998 through May 31, 1998, (ii) compensation to Company
Employees, or (iii) other fees, if any, at levels not materially greater than
the fees reflected in the Company's audited Financial Statements for 1997.
2.24 BANKING ARRANGEMENTS; CREDIT FACILITIES. The Company has no bank
account(s), or safety deposit box. Except as set forth on SCHEDULE 2.24, the
Company has no liability or obligation relating to funds or money borrowed by or
loaned to the Company (whether under any credit facility, line of credit, loan,
indenture, advance, pledge or otherwise).
2.25 INSURANCE. The Company is insured under various insurance
coverages as indicated in the certificate(s) of insurance attached to SCHEDULE
2.25 attached hereto, and as of the Closing Date TSI's principal lender,
NationsBank, is named as a loss payee on such policies. The Company has no
unresolved claims filed with any insurance providers, and has no unfiled
insurance claims that the Company has determined to file, in the aggregate
amount of $10,000 or more. Such policies are valid, outstanding and enforceable
policies, as to which premiums have been paid currently. Neither the Company nor
any Seller has received any notice of the occurrence of (a) a material claim
against the Company not fully covered by insurance for liability on account of
any express or implied warranty or tortious omission or commission, or (b) a
18
material increase in aggregate insurance premiums of the Company (other than any
increase resulting from the establishment of separate insurance policies for the
Company as a result of the consummation of the transactions contemplated by this
Agreement).
2.26 INVESTMENT REPRESENTATIONS. In connection with this Agreement or
any agreement or transaction contemplated hereby, each Seller hereby represents
and warrants to TSI as follows:
(a) Each Seller acknowledges receipt of a copy of TSI's
Prospectus contained in TSI's shelf registration statement on Form S-1 (File No.
333-50533) dated May 4, 1998 (the "SHELF REGISTRATION Statement"), pursuant to
which TSI proposes to issue the TSI Stock to Sellers.
(b) Each Seller has been offered, the opportunity to ask
questions of, and receive answers from, TSI and its Subsidiaries, and the
Sellers have been given full and complete access to all available information
and data relating to the business and assets of TSI and its Subsidiaries, has
obtained to such Seller's satisfaction all such additional information about TSI
and its Subsidiaries which the Sellers have deemed necessary in order to
evaluate the opportunities, both financial and otherwise, with respect to TSI
and, except as set forth herein, has not relied on any representation, warranty
or other statement concerning the Purchaser and its Subsidiaries in such
Seller's evaluation of the decision to consummate the transactions contemplated
herein. On the basis of the foregoing, each Seller is familiar with the
operations, business plans and financial condition of TSI.
2.27 BROKERAGE; COMPANY LIABILITY. Except as set forth in SCHEDULE
2.27, neither the Company nor any Seller has employed any broker, finder,
advisor, consultant or other intermediary in connection with this Agreement or
the transactions contemplated by this Agreement who is or might be entitled to
any fee, commission or other compensation from the Company or any Seller, or
from the Purchaser or its Affiliates, upon or as a result of the execution of
this Agreement or the consummation of the transactions contemplated hereby; and
the Company does not and will not have any liability to any Person in respect of
any matter disclosed on Schedule 2.27.
2.28 IMPROPER AND OTHER PAYMENTS. (a) neither the Company, any
director, officer, thereof, nor, to the Company's or any Seller's knowledge, any
employee, agent or representative of the Company nor any Person acting on behalf
of any of them, has made, paid or received any unlawful bribes, kickbacks or
other similar payments to or from any Person or Authority, (b) no unlawful
contributions have been made, directly or indirectly, to a domestic or foreign
political party or candidate by or, to the knowledge of Sellers and the Company,
on behalf of, the Company, and (c) no improper foreign payment (as defined in
the Foreign Corrupt Practices Act) has been made by or, to the knowledge of
Sellers and the Company, on behalf of, the Company.
2.29 SIGNIFICANT SUPPLIERS AND CUSTOMERS; MATERIAL PLANS AND
COMMITMENTS. The Company has delivered to TSI an accurate list (which is set
forth on Schedule 2.29) of (i) all significant suppliers and customers of the
Company, it being understood and agreed that a "significant" supplier or
customer, for purposes of this Section 2.29, means a supplier or customer
representing 5% or more of the Company's annual revenues or expenses as of the
Balance Sheet
19
Date. Since December 31, 1997, except to the extent set forth on Schedule 2.29,
none of the Company's significant customers (or persons or entities that are
sources of a significant number of customers) have canceled a contract or
substantially reduced utilization of the services of the Company, and the
Company has not received any written notice that any significant customer is
currently attempting or threatening to cancel a contract or substantially reduce
utilization of the services provided by the Company. Schedule 2.29 sets forth
the Company's budgets for 1998 and its preliminary estimated budget for 1999 for
capital expenditures for 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, including without limitation any development
expenditures, purchases or leases of information systems, telecommunications
equipment, computer hardware and software, etc., which budgets also specify the
items recommended by the Company to be acquired during the Accounting Period.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
3.1 CORPORATE ORGANIZATION, ETC. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business in good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, or the transactions
contemplated by this Agreement, require it to be so qualified or licensed and
the failure to be so qualified or licensed would have a Material Adverse Effect.
3.2 AUTHORIZATION, ETC. The Purchaser has full corporate power and
authority to enter into this Agreement and the agreements or documents
contemplated hereby to which it is or will become a party and to carry out the
transactions contemplated hereby and thereby. The Board of Directors of the
Purchaser has duly authorized the execution, delivery and performance of this
Agreement and the other agreements and transactions contemplated hereby, and no
other corporate proceedings on its part are necessary to authorize this
Agreement and the transactions contemplated hereby. Upon execution and delivery
of this Agreement and the other agreements contemplated hereby to which the
Purchaser is party by the parties thereto, this Agreement and such other
agreements shall constitute the legal, valid and binding obligation of the
Purchaser, enforceable against the Purchaser in accordance with their respective
terms, except as the enforceability thereof may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization and similar laws which effect
creditors' rights generally and by general equitable principles.
3.3 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and will not (a) conflict with
20
or result in a material breach of the terms, conditions or provisions of, (b)
result in a violation of, or (c) require any authorization, consent, approval,
exemption or other action by or notice to any Authority pursuant to, the
certificate of incorporation or by-laws of the Purchaser, or any Regulation to
which the Purchaser is subject, or any material Contract or Order to which the
Purchaser or its properties are subject. The Purchaser will comply with all
applicable Regulations and Orders in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.4 GOVERNMENTAL AUTHORITIES. The Purchaser has complied in all
material respects with all applicable Regulations in connection with its
execution, delivery and performance of this Agreement and the agreements and
transactions contemplated hereby. The Purchaser is not required to submit any
notice, report, or other filing with any governmental authority in connection
with its execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby. No authorization, consent, approval, exemption
or notice is required to be obtained by the Purchaser in connection with the
execution, delivery, and performance of this Agreement and the agreements and
transactions contemplated hereby.
3.5 ISSUANCE OF TSI STOCK. The shares of TSI Stock and Additional TSI
Shares that are required to be issued by TSI to the Sellers pursuant to, in
accordance with the terms and subject to the conditions set forth in this
Agreement, shall, upon issuance and delivery, be duly authorized, validly
issued, fully paid and non-assessable.
3.6 SHELF REGISTRATION STATEMENT. Subject to Section 1.1 hereof, the
issuance of TSI Stock and Additional TSI Shares, when issued under this
Agreement, shall be registered pursuant to the Shelf Registration Statement (or,
the Other Registration Statement, in the case of the Additional TSI Shares). The
Shelf Registration Statement is effective as of the date hereof and, if
Additional TSI Shares are issued hereunder, the Other Registration Statement
will be effective as of the date upon which the Additional TSI Shares are issued
to the Sellers. Upon any such issuance of TSI Stock or Additional TSI Shares,
the Shelf Registration Statement (and the Other Registration Statement, as
applicable) will comply in all material respects with the applicable
requirements of the Securities Act. The Shelf Registration Statement did not and
will not (and the Other Registration Statement will not) (i) at the time such
registration statement became effective under the Securities Act, (ii) at the
time the prospectus contained in such registration statement was delivered to
the Sellers by TSI, (iii) on the Closing Date, in the case of the Shelf
Registration Statement or (iv) on the date upon which the Additional TSI Shares
are issued to the Sellers, contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
3.7 COMMISSION REPORTS. TSI has filed all reports, statements, forms
and other documents required to be filed with the Securities Exchange Commission
since July 22, 1997 (collectively, the "COMMISSION REPORTS"), all of which
complied as of the filing date (or, in the case of any Commission Report that
has been amended, as of the date of amendment) in all material respects with the
applicable requirements of the Securities Act or the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), as the case may be, and of all applicable
rules and regulations thereunder. None of the Commission Reports contained as of
the
21
filing date (or, in the case of any Commission Report that has been amended, as
of the date of amendment) any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the consolidated financial statements (including
the notes thereto) contained in the Commission Reports (collectively, the "TSI
FINANCIAL STATEMENTS"), was prepared in accordance with GAAP except as disclosed
otherwise therein (and, in the case of the financial statements for interim
periods, the absence of notes thereto and normal year-end adjustments) applied
on a consistent basis throughout the periods covered thereby (except as may be
indicated in any notes thereto) and the TSI Financial Statements fairly present
in all material respects in accordance with GAAP the consolidated financial
position of TSI and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations and changes in cash flows of
TSI and its consolidated subsidiaries for the periods indicated.
3.8 NO MATERIAL ADVERSE CHANGE. Since the date of the most recent
Commission Report, there has not been any Material Adverse Change or any event,
occurrence or development which could reasonably be expected to have a Material
Adverse Effect on TSI.
3.9 SECURITIES ACT. The Purchaser is acquiring the Company Interests
solely for the purpose of investment and not with a view to, or for sale in
connection with, any distribution thereof within the meaning of the Securities
Act. The Purchaser acknowledges that the Company Interests have not been
registered under the Securities Act or any applicable state securities law, and
that such partnership interests may not be transferred or sold except pursuant
to the registration provisions of such Securities Act or pursuant to an
applicable exemption therefrom and pursuant to applicable state securities laws
and regulation as applicable. The Purchaser is knowledgeable, sophisticated and
experienced in business and financial matters of the type contemplated by this
Agreement and is able to bear the economic risks associated with its investment
regarding the Company. The Purchaser has been afforded access to information
regarding the Company and its financial condition, operating results,
properties, liabilities, operations and management sufficient to enable it to
evaluate the risks and merits of its investment in the Company.
3.10 NO BROKERS. The Purchaser has not employed any broker, finder,
advisor, consultant or other intermediary in connection with this Agreement or
the transactions contemplated by this Agreement who is or might be entitled to
any fee, commission or other compensation from the Purchaser or from the Company
or the Seller, upon or as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE IV
OTHER AGREEMENTS
The parties hereto further agree as follows:
4.1 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its reasonable best efforts to
take, or cause to be taken, all action,
22
and to do, or cause to be done, all things necessary, proper or advisable under
applicable Regulations to consummate and make effective the transactions
contemplated by this Agreement. If at any time after the Closing Date the
Purchaser shall consider or be advised that any further assignments or
assurances in law or in any other things are necessary, desirable or proper to
vest, perfect or confirm, of record or otherwise, in the New Partners, the title
to the Company Interests acquired or to be acquired by reason of, or as a result
of, the Purchaser's acquisition of the Company Interests hereunder, the Sellers
agree that the Sellers shall execute and deliver all such proper assignments and
assurances reasonably requested by Purchaser and do all things necessary,
desirable or proper to vest, perfect or confirm title to the Company Interests
in the New Partners, and otherwise to carry out the purpose of this Agreement.
4.2 CONSENT OF PARTNERS. Notwithstanding anything to the contrary in
the Partnership Agreement, all of the Partners hereby agree and consent to the
sale and assignment of the Company Interests to the New Partners under this
Agreement, and to the New GP becoming the sole general partner and the New LP
becoming the sole limited partner of the Company. In addition, all of the
Partners hereby waive compliance with any provisions of the Partnership
Agreement or any other agreement to which they are parties which may restrict or
prohibit the consummation of the transactions contemplated hereby.
4.3 CONSENTS. Without limiting the generality of SECTION 4.1, each of
the parties hereto shall use their reasonable best efforts to obtain all
permits, authorizations, consents and approvals of all Persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
4.4 NO TERMINATION OF SELLERS' OBLIGATIONS BY SUBSEQUENT INCAPACITY,
ETC. To the fullest extent permitted by law, each Seller specifically agrees
that the obligations of such Seller hereunder, including, without limitation,
obligations pursuant to Article VI shall not be terminated by the death or
incapacity of any trustee, beneficiary, officer, shareholder, director or any
agent or representative of any Seller.
4.5 EMPLOYMENT AGREEMENTS; TERMINATION OF RELATED PARTY AGREEMENTS.
(a) NEW AND TERMINATED EMPLOYMENT AGREEMENTS. At or prior to
Closing, the Company and Sellers shall terminate or cause to be terminated any
existing employment or independent contractor agreements between the Company or
Affiliates of the Company and such persons listed on SCHEDULE 4.5(A) hereto; and
the Company and each of Xxxxx X. Xxxxxxx, Xx., Xxxxx Xxxxxxx, III, and Xxxxx
Xxxxxx (the "EXECUTIVES") shall enter into an employment agreement in the form
contained in EXHIBIT 4.5 attached hereto (the "EMPLOYMENT AGREEMENTS").
(b) TERMINATION OF CERTAIN RELATED PARTY AGREEMENTS. At or
prior to Closing, the Sellers and the Company shall terminate or cause to be
terminated the agreements listed on SCHEDULE 4.5(B) hereto.
4.6 PUBLIC ANNOUNCEMENTS. Neither any Seller nor the Company nor any
Affiliate, representative, employee or shareholder of either of such Persons,
shall disclose any of the terms of this Agreement to any third party (other than
the Purchaser's advisors and senior lending group
23
and the Sellers' advisors) without the Purchaser's prior written consent unless
required by any applicable law or to the extent previously publicly disclosed by
TSI. The form, content and timing of any and all press releases, public
announcements or publicity statements with respect to this Agreement or the
transactions contemplated hereby shall be subject to the prior approval of the
Purchaser and Sellers, which approval shall not be unreasonably withheld, but
subject to TSI's public disclosure obligations under applicable law and stock
exchange regulations. Notwithstanding the foregoing, and except for any
disclosures required under or pursuant to Federal or State securities laws in
connection with the registration of TSI's securities or otherwise required by
law or stock exchange regulations, the initial press release or other public
communication in connection with this transaction or any agreement pertaining
hereto will not be made without the mutual agreement of the Purchaser and
Sellers after prior review of such proposed release, which approval shall not be
unreasonably withheld.
4.7 NON-COMPETITION COVENANT.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, pay the purchase price for the Company Interests
hereunder and consummate the transactions provided for herein, during the
"RESTRICTED PERIOD" (as hereinafter defined), each of the Sellers and Xxxxx X.
Xxxxxxx, Xx. (collectively, the "RESTRICTED PARTIES") agrees, unless otherwise
permitted by TSI in writing, that such Restricted Party shall not (except as
expressly permitted in SECTION 4.7(B) below), directly or indirectly, for
himself 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 the business of
providing central reservation services to hotels and motels or
any other businesses to which the Company has provided such
services on or before the Closing Date (including, without
limitation, any such reservation services conducted through
telephone or other reservation centers, or through electronic
distribution channels of any nature such as GDS, CRS,
Switches, the Internet, etc.) (the "COVERED BUSINESS") in
direct competition with TSI or the Company or any subsidiary
or Affiliate of TSI (collectively with TSI, the "TSI ENTITIES"
and each (including TSI), a "TSI ENTITY"), within the United
States or within 100 miles of any other geographic area in
which any TSI Entity conducts business, including any
territory serviced by any TSI Entity (the "RESTRICTED
Territory");
(ii) solicit any person who is, at that time, or who
has been within one (1) year prior to that time, an employee
of any TSI Entity for the purpose or with the intent of
enticing such employee away from or out of the employ of any
TSI Entity; or
(iii) solicit any person or entity which is, at that
time, or which has been within one (1) year prior to that
time, a customer or supplier of any TSI Entity in connection
with the Covered Business for the purpose of soliciting or
selling
24
products or services related to the Covered Business in direct
competition with any TSI Entity within the Restricted
Territory.
(b) Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit (i) the Restricted Parties from acquiring in the
aggregate, 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, or (ii) any Restricted Party from providing hotel
reservation services to hotels in which the Restricted Party owns a controlling
interest, or to hotels franchised by the Restricted Party which conduct business
under names as to which the Restricted Party owns the trademark for use of such
name in such business and in which the Restricted Party is the hotel franchisor.
(c) As used in this Agreement, the term "RESTRICTED PERIOD"
shall mean a period of five (5) years, from the Closing to the fifth (5th)
anniversary of the Closing, except that with respect to Xxxxx X. Xxxxxxx, Xx.,
the Restricted Period shall mean the longer of (x) such five-year period, and
(y) during such time as he is employed by any TSI Entity and for a period of two
(2) years following the effective date of termination of such employment.
(d) In recognition of the substantial nature of such potential
damages and the difficulty of measuring economic losses to TSI as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to TSI for which it would have no other adequate
remedy, each Restricted Party agrees that in the event of breach by such
Restricted Party of the foregoing covenant, the Company and TSI shall be
entitled to specific performance of this provision and injunctive and other
equitable relief.
(e) It is agreed by the parties that the foregoing covenants
in this SECTION 4,7 impose a reasonable restraint on the Restricted Parties in
light of the activities and business of the Company and other TSI Entities on
the date of the execution of this Agreement and the current plans of the Company
and other TSI Entities; but it is also the intent of TSI and the Restricted
Parties that such covenants be construed and enforced with respect to Xxxxx X.
Xxxxxxx, Xx. in accordance with the changing activities, business and locations
of the TSI Entities, whether before or after the date of termination of his
employment or other relationship with the Company or other TSI Entity; provided,
that he is actively involved in the management, operation or development of the
changed activity, business or location. For example, if, during the Restricted
Period, the Company and other TSI Entity engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or its existing activities or business or
the locations currently established therefor and Xxxxx X. Xxxxxxx, Xx. is
involved in the management, development or operation of such new or different
activities or business, then Xxxxx X. Xxxxxxx, Xx. will be precluded from
soliciting the customers or employees of such new or different activities or
business or from such new location and from directly competing with such new or
different business within 100 miles of its then-established operating
location(s) through the Restricted Period.
(f) The covenants in this SECTION 4.7 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
25
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall be reformed in accordance
therewith.
(g) All of the covenants in this SECTION 4.7 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Restricted Party
against TSI, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by TSI of such covenants. Further, this
SECTION 4.7 shall survive the Closing and the termination of any Restricted
Party's employment with a TSI Entity. It is specifically agreed that the
Restricted Period, during which the agreements and covenants of any Restricted
Party made in this SECTION 4.7 shall be effective, shall be computed by
excluding from such computation any time during which such Restricted Party is
in violation of any provision of this SECTION 4.7.
4.8 NON-DISCLOSURE; CONFIDENTIALITY.
(a) CONFIDENTIAL INFORMATION. By virtue of any Restricted
Party's prior or future employment, association or involvement with the Company
or other TSI Entity, the Restricted Party may have obtained or may hereafter
obtain confidential or proprietary information developed, or to be developed, by
the Company or other TSI Entity. "Confidential Information" means all
proprietary or confidential business information, whether in oral, written,
graphic, machine-readable or tangible form, and whether or not registered, and
including all notes, plans, records, documents and other evidence thereof,
including but not limited to all: patents, patent applications, copyrights,
trademarks, trade names, service marks, service names, "know-how," customer
lists, details of client or consulting contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
procurement and sales activities, promotion and pricing techniques, credit and
financial data concerning customers, business acquisition plans or any portion
or phase of any scientific or technical information, discoveries, computer
software or programs used or developed in whole or in part by any TSI Entity
(including source or object codes), processes, procedures, formulas or
improvements of any TSI Entity; algorithms; computer processing systems and
techniques; price lists; customer lists; procedures; improvements, concepts and
ideas; business plans and proposals; technical plans and proposals; research and
development; budgets and projections; technical memoranda, research reports,
designs and specifications; new product and service developments; comparative
analyses of competitive products, services and operating procedures; and other
information, data and documents now existing or later acquired by an TSI Entity,
regardless of whether any of such information, data or documents qualify as a
"trade secret" under applicable Federal or State law. "Confidential Information"
shall not include any information which is in the public domain, provided such
information is not in the public domain as a consequence of disclosure by any
Restricted Party in violation of this Agreement.
(b) NON-DISCLOSURE. Each Restricted Party agrees that, except
as directed by such Restricted Party's TSI Entity employer, as required or
otherwise contemplated under this Agreement or such Restricted Party's
Employment Agreement or as otherwise required by law, he will not at any time
(including the term of such Restricted Party's employment, if any, by an TSI
Entity or at any time thereafter), except as may be expressly authorized by the
TSI Entity in
26
writing, disclose to any Person or use any Confidential Information whatsoever
for any purpose whatsoever, or permit any Person whatsoever to examine and/or
make copies of any reports or any documents or software (whether in written form
or stored on magnetic, optical or other mass storage media) prepared by him or
that come into his possession or under his control by reason of his employment
by an TSI Entity or by reason of any consulting or software development services
he has performed or may in the future perform for an TSI Entity which contain or
are derived from Confidential Information. Each Restricted Party further agrees
that while employed at an TSI Entity, no Confidential Information shall be
removed from the TSI Entity's business premises except as permitted by TSI
policies, without the prior written consent of such TSI Entity. In addition,
each of the Restricted Parties hereby acknowledges that he is aware of the
restrictions imposed by federal securities laws on persons possessing material
non-public information with respect to SEC reporting companies and agree that
such Restricted Party will not effect any transactions in the stock of TSI
without compliance with such laws.
(c) TSI GROUP PROPERTY. As used in this Agreement, the term
"TSI GROUP PROPERTY" means all documents, papers, computer printouts and disks,
records, customer or customer lists, files, manuals, supplies, computer hardware
and software, equipment, inventory and other materials that have been created,
used or obtained by any TSI Entity, or otherwise belonging to any TSI Entity, as
well as any other materials containing Confidential Information as defined
above. Each Restricted Party recognizes and agrees that:
(i) All the TSI Group Property shall be and remain
the property of the TSI Entity to which such belongs;
(ii) The Restricted Parties will preserve, use and
hold the TSI Group Property only for the benefit of TSI and
its Affiliates and to carry out the business of the TSI
Entity, TSI and its Affiliates; and
(iii) When any Restricted Party's employment is
terminated, such Restricted Party will immediately deliver and
surrender to the TSI Entity all the TSI Group Property,
including all copies, extracts or any other types of
reproductions, which such Restricted Party has in his
possession or control.
4.9 STOCK OPTIONS. TSI shall grant stock options for 5,000 shares of
TSI common stock as of the Closing Date to each of Xxxxx Xxxxxx and Xxxxx
Xxxxxxx, III, and options for 5,000 shares to Xxxxxx Xxxxxxx when he becomes an
employee of the Company or at such earlier time approved by TSI. The provisions
of the stock options will be consistent with (and the options will be granted
under) TSI's existing stock option plan (4-year vesting at 25% per year, 10-year
exercise term, etc.).
4.10 NO XXXX-XXXXX-XXXXXX FILING. The Sellers and the Company hereby
represent and warrant to Purchaser that the Company's "acquired person" for
purposes of the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended
(the "HSR ACT"), does not meet the $10 million "size of the parties" test under
the HSR Act because the Company's assets are under $10 million, the Company's
revenues are not counted for purposes of the test, and because the Company is
not "controlled" by any other entity as defined in the HSR Act. Accordingly, the
27
parties acknowledge and agree based on such representations (among other
things), that no filing is required to be made under the HSR Act regarding the
Acquisition contemplated hereby.
4.11 SETTLEMENT OF CERTAIN OBLIGATIONS.
(a) On the Closing Date, the Sellers shall pay or cause to be
paid to the Company $1,885,557.03 in cash (the "SELLER PAYMENT"), it being
understood that, upon receipt of the Seller Payment by the Company and subject
only to paragraph (d) below, the Intercompany Payable (as defined below) and
Intercompany Receivable (as defined below) shall be deemed to be fully
discharged, satisfied and paid and neither the Company nor any Affiliates of the
Sellers shall have any further rights, liabilities or obligations in respect
thereof (other than any rights provided for under the express terms of this
Section 4.11). The Sellers represent to TSI that they believe in good faith,
based on the information available to them on the Closing Date, that the amount
of the Seller Payment is greater than the Net Intercompany Receivable (as
defined below).
(b) Immediately upon receipt of the Seller Payment on the
Closing Date, the Company shall use such funds to repay in full all indebtedness
for borrowed money (including accrued and unpaid interest) owing by the Company
to NationsBank of Texas, N.A. as of the Closing Date (the "BANK DEBT") under its
existing bank credit facilities and any other obligations to such bank
(collectively, the "EXISTING BANK FACILITIES"), and the Sellers warrant that
upon the payment of such funds to such bank, the Existing Bank Facilities (and
all of the lenders security interests and collateral therefor) will thereupon be
terminated and cease to be of any further force or effect, and Sellers shall
cause lender to deliver to TSI deliver the lenders written confirmation thereof
to TSI and to file appropriate UCC-3 filings within a reasonable period
thereafter.
(c) Within 30 days after the Closing Date, TSI, the Company
and the Sellers shall jointly prepare a statement (the "SETTLEMENT STATEMENT")
setting forth (i) the aggregate amount of the indebtedness or other obligations
in respect of intercompany loans, advances and other obligations owing by the
Company to the Sellers or any Affiliates of the Sellers as of the Closing Date
(the "INTERCOMPANY PAYABLE") and (ii) the aggregate amount of any indebtedness
or other obligations in respect of intercompany loans, advances or any other
obligations owing by the Sellers or any Affiliates of the Sellers to the Company
as of the Closing Date (the "INTERCOMPANY RECEIVABLE"). If TSI, the Company and
the Sellers fail to agree upon the Settlement Statement within 30 days after the
Closing Date, any dispute among the parties relating to such statement shall be
resolved in accordance with procedures which approximate as nearly as possible
the procedures described in Section 1.1(c). As used herein, the term "NET
INTERCOMPANY RECEIVABLE" means the net amount, if any, by which the Intercompany
Receivable exceeds the Intercompany Payable.
(d) Within five days after the Settlement Statement has been
agreed upon by the parties, if the Net Intercompany Receivable calculated based
on such statement exceeds the Seller Payment, the Sellers shall pay or cause to
be paid to the Company an amount in cash equal to such excess.
4.12 TRANSFERRED TRADEMARKS. Prior to the date hereof, the Company
assigned to an Affiliate of the Sellers the trademarks and trademark
applications set forth in SCHEDULE 4.12 (the
28
"TRANSFERRED TRADEMARKS"). The Purchaser acknowledges that it is aware of the
assignment of the Transferred Trademarks, and the Purchaser and the Company
hereby waive any rights and claims of any kind that they may have therein or in
respect thereof, except as otherwise granted to the Company and TSI in the
trademark license agreement relating to the "Lexington" trademark delivered to
the Company at Closing (the "TRADEMARK LICENSE").
4.13 USE OF NAMES. From and after the date hereof, the Purchaser shall
not, and shall cause the company not to, use the name "Lexington" or any
derivatives thereof or any names deceptively similar thereto in any of its
present or future business operations or for any other purpose except for any
use permitted under the express terms of the Trademark License.
4.14 CONSENT OF ERNST & YOUNG. The Sellers shall use their best efforts
to cause the Company's prior auditors, Xxxxxx & Xxxxx, LLP (the "CPA"), at the
expense of TSI, to prepare and deliver to TSI upon reasonable request of TSI
from time to time, (i) the CPA's written consent, as required under SEC rules,
to the filing of the CPA's audit report relating to the Company in any of TSI's
SEC filings that require such audited financial statements, and (ii) a customary
accounting "comfort letter" in connection with securities offerings or other
transactions engaged in by TSI.
4.15 EARN-OUT BUDGET; WORKING CAPITAL; ETC. At all times during the
Accounting Period, TSI and its Affiliates shall comply with the following
provisions (in each case, unless otherwise agreed by the Sellers in writing):
(a) TSI may cause the Company to distribute cash to TSI and/or
the New Partners, but not to the extent that such reductions in the Company's
cash would impair the ability of the Company to have adequate sources of funds
to meet its working capital, operating and capital expenditure requirements
during the Accounting Period at substantially the levels contemplated by the
Company's budgets included in SCHEDULE 2.29 to the extent such budgets relate to
the Accounting Period (the "EARN-OUT BUDGET").
(b) Subject to TSI's debt covenants, during the Accounting
Period, TSI shall cause the Company to make, or TSI shall make on behalf of the
Company, capital expenditures substantially at the aggregate amount contemplated
by the Earn-Out Budget, but the decisions as to capital expenditures for
technology and telecommunications resources and equipment (including, without
limitation, hardware and software), and the particular products and services
purchased therewith, shall be made following consultation with and approval by
TSI's Chief Information Officer, but the decisions made by TSI's CIO shall not
materially impair the Company's ability to operate its business at volume levels
commensurate with the Company's operating budgets; and
(c) Neither TSI nor any of its Affiliates shall take any other
action with the intent and purpose to defer the recognition of any item of
income or gain or accelerate the recognition of any item of loss or expense so
as to reduce the amount of Company EBIT for the Accounting Period (other than
actions consistent with the Company's prior business practices).
29
4.16 SALES UNDER SECURITIES LAWS. No Seller shall transfer any shares
of the TSI Stock at any time if such transfer would constitute a violation of
any federal or state securities or "blue sky" laws, rules or regulations
(collectively, "SECURITIES LAWS")
ARTICLE V
CLOSING
5.1 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be effective as of 12:01 a.m. on June 1, 1998
(the "CLOSING DATE").
5.2 CLOSING DELIVERIES. At the Closing,
(a) the Sellers and the Company shall deliver or cause to be
delivered to the Purchaser:
(i) assignments of the Company Interests to the New
Partners;
(ii) copies of certain consents and approvals
required under the Company's Contracts;
(iii) the Opinions of counsel to Company and Sellers
requested by TSI;
(iv) the Services Agreement between Lexington
Management Corporation and the Company;
(v) the Employment Agreements, and terminations of
agreements, required by SECTION 4.5;
(vi) Landlord's consent to assignment of office lease
to the Company and sublease to Glade Properties, Inc.
(vii) assignment of trademarks referenced in Section
4.12, and the Trademark License;
(viii) a certificate, signed an officer of the GP of
the Company, as to the partnership agreement and other
organizational documents of the Company, the resolutions
adopted by the board of directors and shareholders of the GP,
and by all the Partners of the Company, in connection with
this Agreement, and the incumbency of certain officers of the
GP and the Partners of the Company;
(ix) certificates issued by the appropriate
governmental authorities evidencing the existence of the
Company and the existence and good standing of the GP; and
(x) such other documents and certificates as are
required to consummate the transactions contemplated by this
Agreement.
30
(b) The Purchaser shall deliver to the Sellers:
(i) immediately available funds in the amount of
$20,000,000, delivered as directed by Sellers under Section
1.1;
(ii) the TSI Stock to be issued and delivered in
accordance with SECTION 1.1;
(iii) an Officers' Certificate of TSI;
(iv) the Employment Agreements required by SECTION
4.5; and
(v) such other documents and certificates as are
required to consummate the transactions contemplated by this
Agreement.
ARTICLE VI
SURVIVAL OF TERMS; INDEMNIFICATION
6.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (b) all
representations and warranties of the Company and the Sellers (and all rights to
indemnification in respect thereof), shall expire on May 31, 1999 (the
"EXPIRATION DATE"), except that: (I) representations, warranties and indemnities
for which an indemnification claim shall be pending (and of which written notice
shall have been received by the Sellers) as of the Expiration Date shall survive
with respect to such claim until the final disposition thereof, and (II)
representations, warranties and indemnities under Section 2.18 (tax matters) and
2.20 (ERISA matters) shall survive until the expiration of the respective
statutes of limitations applicable to the matters addressed therein and until
the final disposition of any indemnification claim thereunder that is pending
(and of which written notice shall have been received by the Sellers) as of the
date of expiration of such applicable limitations period.
6.2 INDEMNIFICATION BY THE SELLERS. Subject to this ARTICLE VI, the
Purchaser and the New Partners and their respective officers, directors,
employees, shareholders, assigns, representatives and agents shall be
indemnified and held harmless by the Sellers at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, cost or expense (including the fees and
expenses of counsel) resulting from, or in respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of any Seller or the Company under
this Agreement, or contained in any schedule or exhibit to this Agreement or
from any misrepresentation in or omission from any certificate, schedule, other
agreement or instrument executed by any Seller or the Company and
31
delivered hereunder; provided, however, that to the extent that this paragraph
(a) relates to any breach or non-fulfillment of any covenant or agreement by the
Company, such breach or non-fulfillment occurred prior to or on the Closing Date
and not at any time thereafter.
(b) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any claim incident
to any of the foregoing.
All third-party claims shall be resolved in accordance with Section 6.4 as
applicable.
6.3 INDEMNIFICATION BY THE PURCHASER. Subject to this ARTICLE VI, the
Sellers and their officers, directors, employees, shareholders, trustees,
beneficiaries, heirs, assigns, representatives and agents shall be indemnified
and held harmless by the Purchaser, at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, demands, assessments, judgment, cost or
expense (including the fees and expenses of counsel) resulting from, or in
respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Purchaser under this
Agreement, or contained in any schedule or exhibit to this Agreement or from any
misrepresentation in or omission from any certificate, schedule, other agreement
or instrument executed by Purchaser and delivered hereunder;
(b) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any claim incident
to any of the foregoing.
All third-party claims shall be resolved in accordance with
Section 6.4 as applicable.
6.4 THIRD-PARTY CLAIMS. Except as otherwise provided in this Agreement,
the following procedures shall be applicable with respect to indemnification for
third-party claims. Promptly after receipt by the party seeking indemnification
hereunder (hereinafter referred to as the "INDEMNITEE") of notice of the
commencement of any (a) Tax audit or proceeding for the assessment of Tax by any
taxing authority or any other proceeding likely to result in the imposition of a
Tax liability or obligation or (b) any action or the assertion of any Claim,
liability or obligation by a third party (whether by legal process or
otherwise), against which assessment, imposition, Claim, liability or obligation
any other party to this Agreement (hereinafter the "INDEMNITOR") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to participate in the defense of such action with counsel
of reputable standing. The indemnitor shall have the right to assume and control
the defense of such action unless such action if adversely determined (i) may if
adversely determined result in injunctions or other equitable remedies in
respect of the indemnitee or its business; (ii) may if adversely determined
result in liabilities which, taken with other then existing claims under this
ARTICLE VI, would not be fully indemnified hereunder (as determined without
reference to the $300,000 "deductible" described below); or (iii) may have an
adverse impact on the business or financial condition of the indemnitee after
the Closing Date (including an effect on the Tax liabilities, earnings or
ongoing business relationships of the
32
indemnitee), other than as a result of the payment of money damages. The
indemnitor and the indemnitee shall cooperate in the defense of such Claims. In
the case that the indemnitor shall assume or participate in the defense of such
audit, assessment or other proceeding as provided herein, the indemnitee shall
make available to the indemnitor all relevant records and take such other action
and sign such documents as are necessary to defend such audit, assessment or
other proceeding in a timely manner. Subject to the immediately following
paragraph, if the indemnitee shall be required by judgment or a settlement
agreement to pay any amount in respect of any obligation or liability against
which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitor shall promptly reimburse the indemnitee in an amount
equal to the amount of such payment plus all reasonable expenses (including
legal fees and expenses, subject to the last paragraph of this Section 6.4)
incurred by such indemnitee in connection with such obligation or liability
subject to this ARTICLE VI.
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the indemnitee liable on such claim or, in the case
of a settlement, the indemnitee must first receive the written approval of the
terms and conditions of such settlement from the indemnitor. An indemnitor shall
have the right to settle any Claim for which it is or would be liable to the
indemnitee hereunder, but not until and subject to and in accordance with the
prior written approval of the indemnitee, which approval shall not be
unreasonably withheld.
An indemnitee shall have the right to employ its own counsel and
participate in any case, but the fees and expenses of such counsel shall be at
the expense of the indemnitee unless (a) the employment of such counsel shall
have been authorized in writing by the indemnitor in connection with the defense
of such action or Claim, (b) the indemnitor shall not have employed counsel in
the defense of, or the indemnitor does not have the right under this SECTION 6.4
to assume the defense of, such action or Claim, or (c) such indemnitee shall
have reasonably concluded that there may be defenses available to it which are
contrary to, or inconsistent with, those available to the indemnitor, in any of
which events such fees and expenses of not more than one additional counsel for
the indemnified parties shall be borne by the indemnitor.
6.5 LIMITATION ON INDEMNIFICATION. (a a) The Sellers shall be obligated
to indemnify as and to the extent set forth in this Article VI only if and to
the extent that the aggregate of all of the Sellers' aggregate liability under
such indemnity obligations exceeds $300,000, it being understood that said
$300,000 figure is to serve as a one time "deductible" (for example, if the
indemnity claims for which the Sellers would, but for the provisions of this
sentence, be liable aggregate $350,000, the Sellers would then be liable for
$50,000 and not $350,000). In addition, in no event shall the aggregate
indemnification liability of any Seller under this Article VI exceed the amount
resulting by multiplying such Seller's "PROPORTIONATE SHARE" as specified in
SCHEDULE 1.1 hereto) by $15,000,000 (i.e., $4,500,000 in the case of 1997-1
Irrevocable Trust; $4,500,000 in the case of X.X. Xxxxxxx 1998 Irrevocable
Trust; $4,500,000 in the case of SS-1998 Irrevocable Trust and $1,500,000 in the
case of Lexington Services Corporation); PROVIDED, HOWEVER, that such
$15,000,000 limitation on indemnification liability (and the $300,000
"deductible") shall not be applicable with respect to breaches of Sections 2.3
(partnership interests), 2.5 (title to interests) and 2.6 (options and rights);
and FURTHER PROVIDED that the parties
33
agree that indemnification as provided under this Article VI shall be the sole
and exclusive remedy for the matters indemnified against under Sections 6.2 and
6.3 above, except that notwithstanding such exclusive remedy, nothing herein
shall limit Purchaser's remedies for (x) actual fraud under applicable law or
(y) equitable remedies (other than the payment of money damages) under
applicable law (such as injunctive relief, specific performance, etc.) The
parties further agree that with respect to any indemnification claim for which
the Sellers are liable to Purchaser under the terms of this Article VI, no
Seller shall be obligated to pay more than such Seller's Proportionate Share of
such claim.
(b) The Purchaser shall be obligated to indemnify as and to
the extent set forth in this Article VI only if and to the extent that the
aggregate of all of the Purchaser's aggregate liability under such indemnity
obligations exceeds $300,000, it being understood that said $300,000 figure is
to serve as a one time "deductible" (for example, if the indemnity claims for
which the Purchaser would, but for the provisions of this sentence, be liable
aggregate $350,000, the Purchaser would then be liable for $50,000 and not
$350,000). In addition, in no event shall the aggregate indemnification
liability of Purchaser under this Article VI exceed $15,000,000.
(c) For purposes of this paragraph, "TSI Shares" means any TSI
Stock and Additional TSI Shares issued under this Agreement. Each Seller hereby
agrees that any claims for indemnification by Purchaser against the Sellers (or
any of them) hereunder may be satisfied, as provided below, by TSI canceling the
TSI Shares held by Sellers (it being agreed that each such TSI Share shall be
deemed to have a value equal to $35.2125 (the "SHARE VALUE") and that all
cancellations for indemnity claims made pursuant to this paragraph shall be made
with respect to each Seller's TSI Shares in accordance with such Seller's
Proportionate Share of the indemnification claim). Unless a Seller otherwise
elects to satisfy a greater portion (or all) of his or its indemnification
liability hereunder by paying cash to TSI, TSI must satisfy a Seller's
indemnification liability by canceling a Seller's TSI Shares having an aggregate
value (based on the Share Value) equal to 50% of the liability (or such lesser
portion of the liability to the extent of the value of the total number of TSI
Shares still held by such Seller, if the value is less than 50% of the
liability), and the Seller shall satisfy the remainder of his liability by cash
payment to TSI. Unless a Seller promptly delivers his certificates for
cancellation by TSI within 10 days of the date on which his indemnification
liability is determined under this Article VI, TSI may at its option elect to
require the Seller's entire liability to be satisfied in cash. Any Seller's
failure to so deliver his certificates shall not negate TSI's right to
nevertheless cancel the TSI Shares represented thereby. Notwithstanding the
foregoing, in the event of a "non-third-party" indemnification claim by
Purchaser to which Section 6.4 does not apply, TSI shall not cancel a Seller's
TSI Shares unless and until TSI obtains a final court judgment or decree holding
the Seller liable on such claim or, in the case of a settlement, TSI obtains the
written approval of such settlement from the Seller.
(d) No indemnitee that is entitled to receive an
indemnification payment from an indemnitor under this Article VI shall have any
right to setoff, under applicable law or otherwise, the amount due hereunder
against any payment obligation of the indemnitee to the indemnitor (including
any amount owing by the Purchaser pursuant to Section 1.1) unless and until (i)
the right of the indemnitee to such payment has been determined by a final court
judgment
34
or decree holding the indemnitor liable for such indemnification payment or (ii)
the indemnitor has agreed in writing that it is obligated to pay such amount.
6.6 BUSINESS RECORDS. Sellers hereby agree and warrant to Purchaser
that all files, records and documents constituting or relating to the assets,
liabilities and business of the Company are the property of the Company, and are
in the possession of the Company at its office facilities on the date hereof,
except for certain records held in offsite storage which Sellers shall cause to
be made available and delivered to the Company at Company's request hereafter.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by the Company, the Purchaser and the Sellers.
7.2 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
7.3 CERTAIN DEFINITIONS.
"AFFILIATE" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or controlling
such Person, (b) any Person, directly or indirectly, in which such Person holds,
of record or beneficially, ten percent or more of the equity or voting
securities, (c) any Person that holds, of record or beneficially, ten percent or
more of the equity or voting securities of such Person, (d) any Person that,
through Contract, relationship or otherwise, exerts a substantial influence on
the management of such Person's affairs, or (e) any director, officer, partner
or individual holding a similar position in respect of such Person.
"AUTHORITY" means any governmental, regulatory or
administrative body, agency, arbitrator or authority, any court or judicial
authority, or any regulatory agency or arbitrator authority, whether
international, national, federal, state or local.
"CLAIM" means any action, claim, obligation, liability,
expense, lawsuit, demand, suit, inquiry, hearing, or investigation that is
sought or commenced against a Person pursuant to any official proceeding or
process or forum of any Authority for the resolution of disputes or the
provision of remedies or the imposition of fines, penalties or other damages or
liabilities, including, without limitation, any court, tribunal, hearing,
litigation, proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise.
35
"CONTRACT" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether written or
oral.
"COMPANY EBIT" means for the Accounting Period, the sum of (i)
the consolidated net income of the Company, as determined in accordance with
GAAP applied on a basis consistent with the Financial Statements, (ii) plus
interest expense less interest income, to the extent taken into account in
computing consolidated net income, (iii) provision for income taxes, to the
extent taken into account in computing consolidated net income, (iv) any charges
related to the amortization of goodwill arising from the consummation of the
transactions contemplated by this Agreement, to the extent taken into account in
computing consolidated net income, and (v) plus extraordinary expenses less
extraordinary income not related to operations, to the extent taken into account
in computing consolidated net income. Company EBIT shall also be computed in
accordance with the following requirements:
(1) Company EBIT shall not include deductions or
expenses for any TSI intercompany charges (including, but not limited
to, any management fees, transaction fees or allocations of general and
administrative or other overhead expenses, technology fees, shared
services or license fees), and shall not include travel expenses for
travel by Company management required by TSI for (a) meetings outside
of the continental United States other than such travel in the ordinary
course of the Company's business or (b) other travel that is unusually
excessive and extraordinary in comparison to the nature and extent of
travel customarily made by managers of TSI's operating companies.
(2) If the Company is party to any transaction with
TSI or an Affiliate of TSI (including, but not limited to, any sale of
assets, investment, loan or provision of services) with the Company,
and if such transaction is not on an arms-length basis and on terms
which are as favorable as could reasonably be expected to be obtained
by the Company from an unaffiliated third party, then any expenses or
revenue of the Company from such transaction shall be appropriately
adjusted (up or down), to reflect in all material respects the expenses
or revenues that the Company would have incurred or realized if such
transaction were on an arms'-length basis and to reflect the terms that
could reasonably be expected to have been obtained from an unaffiliated
third party;
(3) If the Company makes any cash distributions or
advances to TSI and/or the New Partners during the Accounting Period,
Company EBIT shall be adjusted to reflect the net effects that would
result as if TSI had paid interest to the Company at the rate of 5% per
annum, on the average net daily outstanding balance of such
distributions during the Accounting Period.
(4) If the Company's capital expenditures during
the Accounting Period exceed the levels of capital expenditures
contemplated by the Earn-Out Budget (AND such increased levels of
expenditures were not approved by the Executives), then the amount of
charges for depreciation and amortization applied in computing Company
EBIT shall not exceed the amount of such charges that would otherwise
reasonably be expected to have been applied if such capital
expenditures were consistent with the maximum budgeted amounts for the
Accounting Period.
36
"ENVIRONMENTAL LAW" means any Regulation, Order, settlement
agreement or governmental requirement, which relates to or otherwise imposes
liability or standards of conduct concerning mining or reclamation of mined
land, discharges, emissions, releases or threatened releases of noises, odors or
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials, whether as matter or energy, into ambient air, water, or land, or
otherwise relating to the manufacture, processing, generation, distribution,
use, treatment, storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including (but not
limited to) the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, as
amended, the Resource Conservation and Recovery Act of 1976, as amended, the
Toxic Substances Control Act of 1976, as amended, the Federal Water Pollution
Control Act Amendments of 1972, the Clean Water Act of 1977, as amended, any
so-called "Superlien" law, and any other similar Federal, state or local
statutes.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Company's business.
"GAAP" means generally accepted accounting principles.
"LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, easement or restriction of another Person of any
kind or nature.
"MATERIAL ADVERSE CHANGE" means any development or change
which has, had or would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of
facts or matters which has, or would reasonably be expected to have, a material
adverse effect in respect of TSI's or the Company's (as the case may be)
business, operations, properties, assets, condition (financial or otherwise), or
results of operations.
"ORDER" means any decree, consent decree, judgment, award,
order, injunction, or ruling of or by an Authority.
"PERSON" means any corporation, partnership, joint venture,
company, syndicate, organization, association, trust, entity, Authority or
natural person.
"PROPRIETARY RIGHTS" means any patent, patent application,
copyright, trademark, trade name, service xxxx, service name, trade secret,
know-how, confidential information or other intellectual property or proprietary
rights.
"REGULATION" means any law, statute, rule, regulation,
ordinance, requirement or other binding action of or by an Authority.
"SUBSIDIARY" means, with respect to any Person (the "Parent"),
any Person as to which the Parent owns, directly or indirectly, 50% or more of
the outstanding stock or other equity interests.
37
(5) NOTICES. All notices, requests, demands and
other communications required or permitted hereunder shall be in
writing and shall be delivered by hand delivery, via facsimile or
overnight receipted courier service, and shall be deemed to have been
duly given when delivered by hand or mailed, first class certified mail
with postage paid or by overnight receipted courier service:
(a) If to the Sellers or the Company, to:
c/o Lexington Services Corporation
0000 Xxxxxx Xxxx Xxxx
Xxxxx 000
Xxxxxx, Xxxxx 00000
Attention: Xxxxx Xxxxxxx, Xx.
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Xxxxx, L.L.P.
0000 Xxxx Xxxxxx
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx
Facsimile: (000) 000-0000
or to such other person or address as the Sellers or the Company shall furnish
by notice to the Purchaser in writing.
(b) If to the Purchaser to:
Travel Services International, Inc.
000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
President and Chief Operating Officer
with a copy to:
Travel Services International, Inc.
000 Xxxxxxxx Xxxx Xxxxx
Xxxxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxx, Esq.
Senior Vice President and General Counsel
38
with a further copy to:
Xxxxxxxxx Traurig Xxxxxxx
Xxxxxx Xxxxx & Xxxxxxx, P.A.
000 X. Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx, Esq.
or to such other person or address as the Purchaser shall furnish by notice to
Sellers in writing. Notice shall be deemed to have been duly given when the
party being noticed has received delivery of the notice, except that notice
effected via facsimile shall be deemed given upon delivery of hard copy of the
facsimile by one of the other delivery methods specified above.
7.4 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to in
this Agreement are attached hereto and incorporated herein by this reference.
Disclosure of a specific item in any one Schedule shall be deemed restricted
only to the Section of this Agreement to which such disclosure relates, except
where such disclosure gives the party to whom such disclosure is made fair and
reasonable notice of the matter set forth in the disclosure, and to the extent
that, there is an explicit cross-reference in such Schedule to another Schedule.
7.5 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
7.6 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights (but not its obligations)
hereunder to any wholly-owned Subsidiary.
7.7 GOVERNING LAW. The Agreement shall be governed by the internal laws
of the State of Florida as to all matters, including but not limited to matters
of validity, construction, effect and performance.
7.8 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Company and each
of the Sellers and TSI hereby irrevocably submit to the jurisdiction of the
state or federal courts located in Broward County, Florida and in Dallas County,
Texas, in connection with any suit, action or other proceeding arising out of or
relating to this Agreement and the transactions contemplated hereby, and hereby
agree not to assert, by way of motion, as a defense, or otherwise in any such
suit, action or proceeding that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced by such
courts.
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7.9 INJUNCTIVE RELIEF. The parties hereto agree that in the event of a
breach of any provision of this Agreement, the aggrieved party or parties may be
without an adequate remedy at law. The parties therefore agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may elect to institute and prosecute proceedings in any court of competent
jurisdiction to enforce specific performance or to enjoin the continuing breach
of such provision, as well as to obtain damages for breach of this Agreement. By
seeking or obtaining any such relief, the aggrieved party shall not be precluded
from seeking or obtaining any other relief to which it may be entitled.
7.10 HEADINGS. The article, section and other headings contained in
this Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement (or any provision hereof).
7.11 PRONOUNS AND PLURALS. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular forms of nouns, pronouns, and verbs
include the plural and vice versa.
7.12 CONSTRUCTION. The parties acknowledge that each party has reviewed
and revised this Agreement and that the normal rule of construction to the
effect that any ambiguities are to be resolved against the drafting party shall
not be employed in the interpretation of this Agreement.
7.13 BINDING EFFECT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
7.14 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach or default under this Agreement, or
any waiver on the part of any party of any provisions or conditions of this
Agreement must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law or otherwise afforded to any party, shall be cumulative and
not alternative except as expressly provided herein.
7.15 SEVERABILITY. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
7.16 EXPENSES. Except as otherwise expressly provided in this
Agreement, all fees, costs and expenses (including, without limitation, legal,
auditing and accounting fees, costs and expenses) incurred in connection with
considering, pursuing, negotiating, documenting or
40
consummating this Agreement and the transactions contemplated hereby shall be
borne and paid solely by the party incurring such fees, costs and expenses.
7.17 ATTORNEYS' FEES. If any party to this Agreement seeks to enforce
the terms and provisions of this Agreement, then the prevailing party in such
action shall be entitled to recover all costs in connection with such action,
including without limitation reasonable attorneys' fees, expenses and costs
incurred in attempting to resolve the dispute and with respect to trials,
appeals and collection.
7.18 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, which may be delivered by facsimile, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
* * * *
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
PURCHASER:
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/ Xxxx X. Xxxxx
----------------------------------------
Name: Xxxx Xxxxx
Title: Senior Vice President and Chief
Financial Officer
COMPANY:
LEXINGTON SERVICES ASSOCIATES, LTD.
By: LEXINGTON SERVICES CORPORATION,
its general partner
By: /s/ Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
SELLERS:
LEXINGTON SERVICES CORPORATION
By: /s/ Xxxxx Xxxxxx
-----------------------------------------
Name: Xxxxx Xxxxxx
Title: Vice President
SIGNATURES CONTINUED NEXT PAGE
42
1997-1 IRREVOCABLE TRUST
By: /s/ Xxxxx X. Xxxxxxx, Xx.
------------------------------------------------
Name: Xxxxx X. Xxxxxxx, Xx.
As Trustee for the
1997-1 Irrevocable Trust
X.X. XXXXXXX 1998 IRREVOCABLE TRUST
By: /s/ Xxxxx X. Xxxxxxx
------------------------------------------------
Name: Xxxxx X. Xxxxxxx
As Trustee for the
X.X. Xxxxxxx 1998 Irrevocable Trust
SS-1998 IRREVOCABLE TRUST
By: /s/ Xxxxxxx X. Xxxxxxx
------------------------------------------------
Name: Xxxxxxx X. Xxxxxxx
As Trustee for the
SS-1998 Irrevocable Trust
RESTRICTED PARTY:
The undersigned Restricted Party
agrees to the provisions of
Sections 4.7 and 4.8 of this
Agreement applicable to such party
as provided therein
/s/ Xxxxx X. Xxxxxxx, Xx.
----------------------------------------------------
XXXXX X. XXXXXXX, XX.
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