FIRST AMENDMENT TO THE
STOCK PURCHASE AGREEMENT
THIS FIRST AMENDMENT to the Stock Purchase Agreement (the "Amendment")
is entered into as of November 19, 1997, by and among TRAVEL SERVICES
INTERNATIONAL, INC., a Delaware corporation, ("TSI" or the "Purchaser"),
CRUISEONE, INC., a Florida corporation (the "Company"), Xxxx Xxxxxxx and
Xxxxxxxxx Xxxx (collectively, the "Sellers" or individually, a "Seller")..
R E C I T A L S
A. The parties hereto entered into a Stock Purchase Agreement (the
"Agreement") dated as of October 28, 1997.
B. Section 12.1 of the Agreement provides that the Agreement may be
amended by a written instrument executed by each of the parties thereto.
C. The parties hereto desire to clarify the rights and obligations
of the parties under the Agreement and amend the terms of the Agreement in the
manner set forth in this Amendment.
A G R E E M E N T
In consideration of the foregoing premises and the mutual promises
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency of which is acknowledged hereby, the parties hereto, intending to be
bound legally, hereby agree as follows:
1. The recitals set forth above are true and correct in all
respects and are incorporated herein and made a part hereof.
2. All capitalized terms used in this Amendment without definition
shall have the meanings assigned thereto in the Agreement.
3. Section 1.2(a)(1) of the Agreement is hereby deleted in its
entirety and replaced with the following:
"(1) Except for transfers to immediate family members
who agree to be bound by the restrictions set forth in this
Section 1.2 (or trusts for the benefit of family members of the
Sellers, the trustees of which so agree), during the period (the
"Pooling Restriction Period") beginning on the date hereof and
ending on the earlier of (x) such time as financial statements
covering at least thirty (30) days of post-acquisition combined
operations of TSI and the Company have been published and (y)
the six month anniversary of the Closing Date, the Sellers shall
not sell, assign, exchange, transfer, distribute, pledge,
encumber or otherwise dispose of (in each case, a "transfer")
any shares of TSI Stock. Following the Pooling Restriction
Period, the Sellers shall be free from the restrictions of this
Section 1.2(a)(1) to transfer the shares of TSI Stock held by
Sellers, so long as such transfers are in accordance with the
Future Sale Procedures set forth in Section 1.2(a)(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, ENCUMBERED, PLEDGED,
DISTRIBUTED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT
BE REQUIRED TO GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT,
EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, OR OTHER
DISPOSITION, OTHER THAN IN ACCORDANCE WITH SECTIONS 1.2 OF THAT
CERTAIN STOCK PURCHASE AGREEMENT DATED AS OF OCTOBER 28, 1997,
BY AND AMONG ISSUER, CRUISEONE, INC. AND THE SELLERS NAMED
THEREIN (THE "PURCHASE AGREEMENT"). UPON THE WRITTEN REQUEST OF
THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES TO PROMPTLY
REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER PLACED WITH
THE TRANSFER AGENT) TO THE EXTENT THE RESTRICTIONS SET FORTH IN
SECTION 1.2 OF THE PURCHASE AGREEMENT NO LONGER APPLY."
4. Section 11.1 of the Agreement is hereby deleted in its entirety
and replaced with the following:
"11.1 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
shall survive and continue until the one year anniversary of the
Closing Date."
5. The phrase "324,022 shares of Common Stock" contained in the
last paragraph of Section 1.1 of the Agreement shall be replaced by "328,492
shares of Common Stock.". In addition, Schedule 1.1 of the Agreement shall be
replaced in its entirety by the Schedule 1.1 attached hereto.
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6. Section 4.1(c)(iii) shall be replaced in its entirety with the
following language:
"(iii) the marketing fees described on Schedule 2.16 hereto to
the extent that such fees are incurred in the ordinary course of
business."
7. This Amendment may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
In addition, Schedule 1.1 and Schedule 2.16 of the Agreement shall be
replaced in its entirety with Schedule 1.1 and Schedule 2.16, respectively,
attached hereto.
IN WITNESS WHEREOF, the undersigned have each executed this Amendment as
of the date first above-written.
PURCHASER:
TRAVEL SERVICES INTERNATIONAL, INC.:
By: /s/ Xxxxxxx X. Xxxxxxxx
---------------------------
Xxxxxxx X. Xxxxxxxx, President
and Chief Operating Officer
SELLERS:
/s/ Xxxx Xxxxxxx
------------------------
Xxxx Xxxxxxx
/s/ Xxxxxxxxx Xxxx
------------------------
Xxxxxxxxx Xxxx
THE COMPANY:
CRUISEONE, INC.
By: /s/ Xxxx Xxxxxxx
------------------------
Name: Xxxx Xxxxxxx
Title: President
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND AMONG
TRAVEL SERVICES INTERNATIONAL, INC.,
CRUISEONE, INC.
AND
THE SHAREHOLDERS SET FORTH ON SCHEDULE 1.1
DATED AS OF OCTOBER 28, 1997
TABLE OF CONTENTS
Page No.
ARTICLE I
1.1 Purchase and Sale of Capital Stock.................................1
1.2 TSI Stock..........................................................2
ARTICLE II
2.1 Organization, Qualification, etc...................................4
2.2 Subsidiaries.......................................................4
2.3 Capital Stock......................................................4
2.4 Corporate Record Books.............................................4
2.5 Title to Stock.....................................................4
2.6 Options and Rights.................................................5
2.7 No Bonus Shares....................................................5
2.8 Predecessor Status, etc............................................5
2.9 Spin-off by the Company............................................5
2.10 Financial Condition at Closing.....................................5
2.11 Certain Accounting Matters.........................................5
2.12 Authorization, Etc.................................................6
2.13 No Violation.......................................................6
2.14 Financial Statements...............................................6
2.15 Accounts Payable; Accounts Receivable; Customer Deposits...........7
2.16 Employees..........................................................7
2.17 Absence of Certain Changes.........................................8
2.18 Contracts..........................................................8
2.19 Disclosure........................................................10
2.20 Title and Related Matters.........................................11
2.21 Litigation........................................................11
2.22 Tax Matters.......................................................11
2.23 Compliance with Law and Applicable Government and other
Regulations...................................................12
2.24 ERISA and Related Matters.........................................13
2.25 Intellectual Property.............................................14
2.26 Environmental Matters.............................................15
2.27 Dealings with Affiliates..........................................17
2.28 Banking Arrangements..............................................17
2.29 Insurance.........................................................17
2.30 Investment Representations........................................17
2.31 Inventories.......................................................18
2.32 Brokerage.........................................................18
2.33 Improper and Other Payments.......................................19
2.34 Significant Suppliers; Material Plans and Commitments.............19
2.35 Franchising Matters...............................................19
ARTICLE III
3.1 Corporate Organization, etc.......................................20
3.2 Authorization, Etc................................................20
3.3 No Violation......................................................20
3.4 Governmental Authorities..........................................21
3.5 Issuance of TSI Stock.............................................21
3.6 Taxes.............................................................21
3.7 Capital Stock.....................................................22
3.8 Options and Rights................................................22
3.9 Litigation........................................................22
3.10 Compliance with Law and Applicable Government Regulations.........22
3.11 Material Adverse Change...........................................22
3.12 SEC Reports.......................................................22
ARTICLE IV
4.1 Regular Course of Business........................................23
4.2 Amendments........................................................24
4.3 Agreement to Retain Shares........................................24
4.5 Capital and Other Expenditures....................................24
4.6 Cash and Cash Equivalents.........................................24
4.7 Borrowing.........................................................24
4.8 Other Commitments.................................................24
4.9 Interim Financial Information.....................................24
4.10 Full Access and Disclosure........................................24
4.11 Confidentiality...................................................25
4.13 Fulfillment of Conditions Precedent...............................25
ARTICLE V.....................................................................25
5.1 Confidentiality...................................................25
5.2 Full Access and Disclosure........................................26
ARTICLE VI
6.1 Further Assurances................................................26
6.2 Pooling Accounting; Tax Matters...................................27
6.3 Agreement to Defend...............................................27
6.4 Consents..........................................................27
6.5 No Solicitation or Negotiation....................................27
6.6 No Termination of Sellers' Obligations by Subsequent
Incapacity, Etc...............................................27
6.7 Employment Agreements.............................................28
6.8 Public Announcements..............................................28
6.9 Non-Competition Covenant..........................................28
6.10 Non-disclosure; Confidentiality...................................30
6.11 Registration Rights...............................................31
6.12 Affiliates; Pooling Agreements....................................31
6.13 Advice of Changes.................................................32
ARTICLE VII
7.1 Representations and Warranties; Covenants and Agreements..........32
7.2 No Injunction.....................................................33
7.3 Third Party Consents..............................................33
7.4 Regulatory Approvals..............................................33
7.5 No Material Adverse Change........................................33
7.6 Accountants' Letters..............................................33
7.7 Opinion of Sellers' Counsel.......................................34
7.8 Employment Agreements.............................................34
7.9 Delivery of the Company Share Certificates........................34
7.10 Affiliate Agreements..............................................34
7.11 Simultaneous Closings.............................................34
ARTICLE VIII
8.1 Representations and Warranties; Performance.......................34
8.2 No Injunction.....................................................35
8.3 Purchase Consideration............................................35
8.4 Employment Agreements.............................................35
8.5 Registration Rights Agreement.....................................35
8.6 Regulatory Approvals..............................................35
8.7 No Material Adverse Change........................................35
8.8 Opinion of Purchasers' Counsel....................................35
8.9 Simultaneous Closing..............................................35
ARTICLE IX
9.1 Closing...........................................................35
9.2 Closing Deliveries................................................36
ARTICLE X
10.1 Methods of Termination............................................37
10.2 Procedure Upon Termination........................................37
ARTICLE XI
11.1 Survival..........................................................38
11.2 Indemnification by the Sellers....................................38
11.3 Indemnification by the Purchaser..................................39
11.4 Third-Party Claims................................................39
ARTICLE XII
12.1 Amendment and Modification........................................41
12.2 Entire Agreement..................................................41
12.3 Certain Definitions...............................................41
12.4 Notices...........................................................43
12.5 Exhibits and Schedules............................................44
12.6 Waiver of Compliance; Consents....................................44
12.7 Assignment........................................................44
12.8 Governing Law.....................................................44
12.9 Consent to Jurisdiction; Service of Process.......................44
12.10 Injunctive Relief.................................................44
12.11 Headings..........................................................45
12.12 Pronouns and Plurals..............................................45
12.13 Construction......................................................45
12.14 Binding Effect....................................................45
12.15 Delays or Omissions...............................................45
12.16 Severability......................................................45
12.17 Expenses..........................................................45
12.18 Attorneys' Fees...................................................46
12.19 Counterparts......................................................46
SCHEDULES
1.1 Sellers; Capitalization; Consideration
2.1 Jurisdictions of Qualification
2.2 Subsidiaries; Investments; Interests
2.7 Bonus Shares
2.8 Predecessor Status
2.13 Violations; Third Party Consents
2.14(a) Additional Liabilities
2.14(b) Liabilities covered by Insurance
2.15(a) Accounts Payable
2.15(b) Accounts Receivable
2.15(c) Customer Deposits
2.16 Employee Matters
2.18(a) Contracts
2.20 Real and Personal Property
2.21 Litigation
2.23(b) Permits and Licenses
2.23(c) Industry Affiliations and Memberships
2.24 ERISA, Benefit Plans and Other Matters
2.25 Intellectual Property
2.25(d) Software
2.26 Environmental Matters
2.27 Affiliated Transactions
2.28 Banking Arrangements
2.29 Insurance
2.30(c) Non-Accredited Investors
2.30(d) Non-Sophisticated Investors
2.33 Improper Payments
2.34 Significant Customers and Material Plans and Commitments
2.35(b) Franchising Breaches
2.35(c) Earnings Claims
2.35(d) Franchisees
6.12 Affiliates
EXHIBITS
2.1 The Company's Articles of Incorporation, as amended, and By-laws
2.14 Financial Statements
6.7 Form of Employment Agreement
6.11 Form of Registration Rights Agreement
6.12 Form of Affiliate Letter Agreement
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement"), dated as of October 28,
1997, by and among TRAVEL SERVICES INTERNATIONAL, INC., a Delaware corporation
("TSI" or the "Purchaser"), CRUISEONE, INC., a Florida corporation (the
"Company"), and the Persons set forth on Schedule 1.1 hereto, who constitute the
holders of all of the issued and outstanding shares of capital stock of the
Company (the "Sellers" or individually, a "Seller").
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock of 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 shares of capital stock of the Company, upon the terms and subject
to the conditions set forth herein;
WHEREAS, upon the closing of the transactions contemplated by this
Agreement, the Company shall be and become a wholly-owned subsidiary of TSI;
WHEREAS, for federal income tax purposes, it is intended that the
transaction will qualify as a reorganization under the provisions of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"); and
WHEREAS, for financial accounting purposes, it is intended that the
transaction will be accounted for as a pooling of interests transaction under
GAAP (as defined in Section 12.3);
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 CAPITAL STOCK
1.1 Purchase and Sale of Capital Stock .
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 shares of common stock, par
value $1.00 per share (the "Company Shares"), of the Company owned or
held by the Sellers, which number of Company Shares to be sold and
purchased hereunder is set forth opposite each such Seller's name on
Schedule 1.1 attached hereto.
Contemporaneously with the sale, transfer and delivery to the Purchaser
by the Sellers of the Company Shares at the Closing (as such term is defined in
Section 9.1 hereof), and in consideration therefor, TSI shall deliver to the
Sellers certificates evidencing, in the aggregate (to be distributed to the
Sellers as set forth on Schedule 1.1 attached hereto), 324,022 shares of Common
Stock, par value $.01 per share, of TSI.
1.2 TSI Stock. The Purchaser shall issue the TSI Stock (as defined
in Section 1.2) to the Sellers subject to the conditions and restrictions set
forth in this Section 1.2.
(a) Restrictions on Transfer
(1) Except for transfers to immediate family members who
agree to be bound by the restrictions set forth in this Section
1.2 (or trusts for the benefit of family members of the Sellers,
the trustees of which so agree), during the period (the "Pooling
Restriction Period") beginning on the date hereof and ending
such time as financial statements covering at least thirty (30)
days of post-acquisition combined operations of TSI and the
Company have been published, the Sellers shall not sell, assign,
exchange, transfer, distribute or otherwise dispose of (in each
case, a "transfer") any shares of TSI Stock. Following the
Pooling Restriction Period, the Sellers, in the aggregate and in
proportion to the number of such shares of TSI Stock held by
each such Seller, may transfer up to 15 percent of 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), provided,
however, that following the date which is six (6) months after
the end of the Closing Date, the Sellers shall be free from the
restrictions of this Section 1.2(a)(1) to transfer the remaining
shares of TSI Stock held by such Sellers, so long as such
transfers are in accordance with the Future Sale Procedures set
forth in Section 1.2(a)(2). The certificates evidencing the TSI
Stock shall bear a legend substantially in the form set forth
below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, OR OTHERWISE DISPOSED OF, AND THE
ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO ANY
ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER,
ENCUMBRANCE, PLEDGE, DISTRIBUTION, OR OTHER DISPOSITION,
OTHER THAN IN ACCORDANCE WITH SECTIONS 1.2 OF THAT
CERTAIN STOCK PURCHASE AGREEMENT DATED AS OF OCTOBER 28,
1997, BY AND AMONG ISSUER, CRUISEONE, INC. AND THE
SELLERS NAMED THEREIN (THE "PURCHASE AGREEMENT"). UPON
THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE,
THE ISSUER AGREES TO PROMPTLY REMOVE THIS RESTRICTIVE
LEGEND (AND ANY STOP ORDER PLACED WITH THE TRANSFER
AGENT) TO THE EXTENT THE RESTRICTIONS SET FORTH IN
SECTION 1.2 OF THE PURCHASE AGREEMENT NO LONGER APPLY.
(2) Except for transfers to family members who agree to
bound by the restrictions set forth in this Section 1.2 (or
trusts for the benefit of the Sellers or their family members,
the trustees of which so agree), regardless of whether or not
2
transfers of such shares are restricted pursuant to the terms of
subsection (1) above, during the two-year period commencing on
the Closing Date, none of the Sellers shall transfer, in any
transaction or series of related transactions, more than 5000
shares of TSI Stock (in either case, a "Future Sale"), except in
accordance with this Section 1.2(a)(2) (the "Future Sale
Procedures"). If any Seller desires to make a Future Sale, the
Seller shall first give written notice thereof to TSI. Within
two (2) business days after such notice is given to TSI, TSI
shall designate in writing to the Seller the names and other
pertinent information of at least two investment banks or market
makers who actively make a market of TSI's stock and through
whom the Future Sale may be made (subject to the volume
restrictions in (I) above).
(3) No Sellers 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"), or a breach of
the conditions to any exemption from registration of the TSI
Stock under any such Securities Laws, or a breach of any
undertaking or agreement of such Seller entered into with TSI
pursuant to such Securities Laws or in connection with obtaining
an exemption thereunder.
(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:
2.1 Organization, Qualification, etc.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida with the
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.
(b) The Company is duly qualified, registered or licensed to do
business in good standing in the jurisdictions set forth on Schedule 2.1
attached hereto, those being every
3
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 and the failure to be so
qualified, registered or licensed would have a Material Adverse Effect (as
defined in Section 12.3).
(c) True, complete and correct copies of the Company's articles
of incorporation and by-laws, as presently in effect, are attached hereto as
Exhibit 2.1.
2.2 Subsidiaries. Except as set forth on Schedule 2.2, the Company has
no Subsidiaries (as defined in Section 12.3) nor any investment or other equity
interest in, or any outstanding loan or advance to or from, any Person (as
defined in Section 12.3), including any officer, director, shareholder or
Affiliate (as defined in Section 12.3).
2.3 Capital Stock. As of the date hereof, the authorized capital stock
of the Company consists of five hundred (500) shares of common stock, par value
$1.00 per share. The stock record book of the Company has been made available to
the Purchaser for inspection prior to the date hereof and is complete and
correct, and all requisite Federal and State documentary stamps have been
affixed thereon and canceled. The Company Shares constitute all of the issued
and outstanding shares of capital stock of the Company; and all of the Company
Shares are owned beneficially and of record by the Sellers as set forth on
Schedule 1.1 attached hereto.
2.4 Corporate Record Books. The corporate minute books of the Company
have been made available to the Purchaser, are complete and correct in all
material respects and contain all of the material proceedings of the
shareholders and directors of the Company.
2.5 Title to Stock. All of the issued and outstanding shares of the
capital stock of the Company are and immediately prior to the transfer to
Purchaser at the Closing will be owned by the Sellers (in the amounts and as set
forth on Schedule 1.1 hereto), are duly authorized, validly issued, fully paid
and nonassessable, and are free of all Liens (as defined in Section 12.3). Upon
delivery of the TSI Stock to the Sellers at the Closing, the Sellers will
convey, and the Purchaser will own and hold, good and valid title to the Company
Shares immediately prior to the Closing owned by such Sellers, free and clear of
all Liens or contractual restrictions or limitations whatsoever other than
liens, restrictions or limitations 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
arrangements under which the Company is bound or obligated to issue any
additional shares of its capital stock or rights to purchase shares of its
capital stock, other than any preemptive rights that are waived below. There are
no agreements, arrangements or understandings between any Sellers and/or the
Company and any other Person (as defined in Section 12.3) regarding the Company
Shares (or the transfer, disposition, holding or voting thereof). The Sellers do
not have, or hereby waive, any preemptive or other right to acquire shares of
Company Stock such Sellers have or may have had on the date hereof.
4
2.7 No Bonus Shares. Except as set forth on Schedule 2.7, none of the
Company Shares were issued pursuant to awards, grants or bonuses.
2.8 Predecessor Status, etc.. Schedule 2.8 sets forth a listing of all
names of all predecessor companies of the Company. Except as set forth on
Schedule 2.8, the Company has not at any time been a subsidiary or division of
another corporation or a part of an acquisition which was later rescinded.
2.9 Spin-off by the Company. There has not been any sale or spin-off of
material assets of the Company, any subsidiary thereof or any person or entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with any Company within the preceding
two (2) years.
2.10 Financial Condition at Closing. At and as of Closing, the Company
shall (i) have cash on hand that is sufficient, after taking into consideration
(x) the payments to be made pursuant to Section 4.1 (c) hereof and (y) the
anticipated receipts and expenditures of the Company through December 31, 1997,
to fund the operation of the Company during the period commencing as of the
Closing Date and ending on January 1, 1998, (ii) have positive stockholders'
equity, (iii) be current in all material respects on all bills and payables
according to standard trade terms, (iv) have all client deposits for future
travel held by the applicable supplier or held by the Company in a segregated
cash or cash equivalent account (and such amount shall not be considered for
purposes of clause (i) of this Section 2.10), all calculated and fairly
presented in accordance with GAAP consistently applied.
2.11 Certain Accounting Matters. No Seller, the Company, nor any of
their affiliates, has taken or agreed to take any action that (without regard to
any action taken or agreed to be taken by TSI or any of its affiliates) would to
his or her knowledge prevent TSI from accounting for the transactions
contemplated hereby as pooling of interests business combinations in accordance
with GAAP and the criteria of Accounting Principles Board Opinion No. 16 and the
regulations of the SEC.
2.12 Authorization, Etc. The Company has the corporate power and
authority and each of the Sellers has the capacity 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 is or
will become a party have been duly authorized by the Board of Directors of the
Company 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 all other agreements contemplated
hereby by the parties hereto and thereto this Agreement and all other agreements
contemplated hereby 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.
2.13 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
5
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
2.13 attached hereto, (a) conflict with or result in a material 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 capital stock or assets of the Company pursuant to, (d) give
any third party the right to accelerate any obligation under, (e) result in a
material violation of, or (f) require any authorization, consent, approval,
exemption or other action by or notice to any Authority (as defined in Section
12.3) pursuant to, the articles of incorporation or by-laws of the Company or
any Regulation (as defined in Section 12.3) to which the Company or the Sellers
are subject, Order (as defined in Section 12.3) or material Contract (as defined
in Section 12.3) to which the Company or any Seller is subject. The Company and
the Sellers will comply with all applicable Regulations and Orders in connection
with the execution, delivery and performance of this Agreement and the
transactions contemplated hereby.
2.14 Financial Statements. Attached as Exhibit 2.14 hereto are the
following financial statements of the Company prepared in accordance with GAAP
applied on a consistent basis: (i) balance sheets for the fiscal years ended
December 31, 1994, December 31, 1995 and December 31, 1996 (the "Balance
Sheets"), (ii) statements of operations, stockholder's equity and cash flows for
the fiscal years ended December 31, 1994, December 31, 1995 and December 31,
1996 (the "Statements of Revenues and Expenses"), and (iii) the balance sheet,
statement of operations, stockholder's equity and cash flows for the eight
months ended August 31, 1997 (collectively, together with the Balance Sheets and
the Statements of Revenues and Expenses, 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 operations, stockholder's
equity and cash flows included in the Financial Statements fairly present in all
material respects 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. Except as set forth on Schedule 2.14(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 August 31, 1997, and (iii) liabilities covered
by insurance or reinsurance (a complete and detailed description of which is
provided in Schedule 2.14(b)).
2.15 Accounts Payable; Accounts Receivable; Customer Deposits. Schedule
2.15(a) sets forth a complete list of the Company's accounts payable and accrued
expense as of the date set forth thereon. The accounts receivable of the Company
reflected on Schedule 2.15(b) attached hereto on the date hereof have been
collected since the date of such report or are good and collectible except to
the extent reserved against in the Financial Statements (which reserves have
been determined in accordance with GAAP). All such accounts receivable (except
to the extent so reserved against) arise out of bona fide sales and deliveries
of goods, performance of services or other business transactions and are not
subject to defenses, set-offs or counterclaims. The customer deposits for future
travel are either (i) held by the Company in cash or cash
6
receivables or (ii) held by the cruise line providing such travel. The customer
deposits of the Company are held as set forth on Schedule 2.15(c).
2.16 Employees. The Company has delivered to TSI an accurate list (which
is set forth on Schedule 2.16) showing all officers, directors and key employees
of the Company, listing all employment agreements with such officers, directors
and key employees and the rate of compensation (and the portions thereof
attributable to salary, bonus and other compensation, respectively) of each of
such persons (i) as of the end of the Company's most recent fiscal year (the
"Balance Sheet Date") and (ii) for 1997 through September 30, 1997. The Company
has provided to TSI true, complete and correct copies of any employment
agreements for persons listed on Schedule 2.16. Since the Balance Sheet Date,
there have been no increases in the compensation payable or any special bonuses
to any officer, director, key employee or other employee, except ordinary salary
increases implemented on a basis consistent with past practices, except as set
forth on Schedule 2.16. Except as set forth on Schedule 2.16, no Seller is
related by blood or marriage to, or otherwise affiliated with, any person listed
on Schedule 2.16.
As of the date hereof, the Company has approximately 50 employees. The
Company 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 2.16, (i) the Company is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any arrangement with any labor union, (ii) no employees of the Company are
represented by any labor union or covered by any collective bargaining
agreement, (iii) to the knowledge of the Company, no campaign to establish such
representation is in progress and (iv) there is no pending or, to the best of
the Company's knowledge, threatened labor dispute involving the Company and any
group of its employees nor has the Company experienced any labor interruptions
over the past three years. The Company believes its relationship with employees
to be good.
2.17 Absence of Certain Changes. Since September 30, 1997, there has not
been (a) any Material Adverse Change (as defined in Section 12.3) 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 payment by the
Company to, or any notice to or acknowledgment by the Company of any material
amount due or owing to, the Company's self-insured carrier, if any, in
connection with any self-insured amounts or liabilities under health insurance
covering employees of the Company, in each case, in excess of a reserve therefor
on the balance sheet for the fiscal year ended December 31, 1996 included in the
Financial Statements; (d) any declaration, setting aside or payment of any
dividend or distribution (whether in cash, stock or property) in respect of the
Company's capital stock, or any redemption or other acquisition of such capital
stock by the Company; (e) any increase in the rate of compensation or in the
benefits payable or to become payable by the Company to its directors, officers,
employees or consultants other than in the ordinary course of business and
consistent with prior practices; (f) 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
7
plan for or with any directors, officers, employees or consultants of the
Company; (g) any entry into any material Contract not in the ordinary course of
business, including without limitation relating to any borrowing or capital
expenditure; (h) any disposition by the Company of any material asset other than
in the ordinary course of business and consistent with prior practices; (i) any
material adverse change in the sales patterns, pricing policies, accounts
receivable or accounts payable relating to the Company; (j) any write-down of
the value of any inventory having an aggregate value in excess of $5,000, or
write-off, as uncollectible, of any notes, trade accounts or other receivables
having an aggregate value in excess of $5,000; or (k) any change by the Company
in accounting methods or principles.
2.18 Contracts.
(a) The Company has listed on Schedule 2.18(a) all 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), (a) in existence as of the Balance Sheet Date and (b) entered into
since the Balance Sheet Date, and in each case has delivered true, complete and
correct copies of such agreements to TSI. The Company's written or oral
contracts, commitments and similar agreements include but are not limited to,
the following (if any):
(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 2.24 hereto), or any
Contract with any labor union;
(ii) employment, consultation or other compensation
Contract, which is not terminable on notice of 30 days' or less
by the Company without penalty or other financial obligation
(and, except as set forth on Schedule 2.18(a), no officer or
employee of the Company receives 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 employees to
compete in any line of business presently conducted by the
Company with any Person or to compete in any such line of
business in any area;
(iv) Contract with any Seller or with any affiliate or
relative of any Seller (except for any Contract disclosed in
Schedule 2.18(a)pursuant to clauses (ii) or (iii) of this
Section 2.18(a));
(v) Contract relating to or providing for loans to
officers, directors, employees or Affiliates;
(vi) Contract under which the Company has advanced or
loaned, or is obligated to advance or loan, funds to any Person;
8
(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 of or
holds or operates any property, real or personal, 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 intangible property (including, without
limitation, any Proprietary Rights (as defined in Section 12.3
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 central reservation systems ("CRS")
(i.e., SABRE, APOLLO, SYSTEM ONE, etc.);
(xv) override agreements with travel agencies, other
customers or suppliers;
(xvi) Contract which prohibits, restricts or limits in
any way the payment of dividends or distributions by the
Company;
(xvii) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xviii) Contract for the purchase, acquisition or supply
of inventory and other property and assets, whether for resale
or otherwise;
(xix) Contracts with independent agents, brokers,
dealers or distributors;
(xx) sales, commissions, advertising or marketing
Contracts;
(xxi) Contracts providing for "take or pay" or similar
unconditional purchase or payment obligations;
9
(xxii) Contracts with Persons with which, directly or
indirectly, any Seller also has a Contract;
(xxiii) Governmental Contracts subject to
redetermination or renegotiation; or
(xxiv) 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.
(b) The Company has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach of any material Contract listed on Schedule 2.18(a) nor in
receipt of any claim of default or breach under any Contract listed on Schedule
2.18(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 by
the Company, or to the knowledge of the Company, by any other party under any
material Contract to which the Company is subject (including without limitation
all performance bonds, warranty obligations or otherwise); the Company does not
have any present expectation or intention of not fully performing all such
obligations; the Company does not have any knowledge of any material breach or
anticipated breach by the other parties to any such Contract to which it is a
party.
2.19 Disclosure. Neither this Agreement nor any of the exhibits,
documents, certificates or other items delivered by Sellers or the Company
hereunder 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.
2.20 Title and Related Matters.
(a) Except as described on Schedule 2.20, 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 or assets sold or otherwise disposed of since the date
thereof in the ordinary course of business, free and clear of all Liens, except
(i) statutory Liens not yet delinquent, (ii) such imperfections or
irregularities of title, Liens, easements, charges or encumbrances as do not
materially 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, or (iii) as reflected in the
balance sheets included in Financial Statements or the notes thereto. Except for
normal breakdowns and servicing requirements, all machinery and equipment
regularly used by the Company in the conduct of its business is in reasonably
good operating condition and repair, ordinary wear and tear excepted.
(b) Schedule 2.20 attached hereto sets forth a description
of all real and personal property owned or leased by the Company.
10
2.21 Litigation. Except as set forth on Schedule 2.21, there is no
Claim (as defined in Section 12.3) pending or, to the best knowledge of the
Sellers and the Company, threatened against any of the Sellers or the Company
which, if adversely determined, would have a Material Adverse Effect on the
Company. Nor is there any Order outstanding against any of the Sellers or the
Company having, or which, insofar as can reasonably be foreseen, in the future
would have, a Material Adverse Effect on the Company.
2.22 Tax Matters.
(a) The Company has filed all federal, state, and local tax
reports, returns, information 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 material Taxes required to be paid by the Company with
respect to all periods prior to the Closing Date (including the period up to and
including the day immediately preceding the Closing Date) have either been paid
in full, or have been accrued on the Company's books and records in accordance
with GAAP consistently applied. All material 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. Neither any Seller nor the Company has executed a
waiver of the statute of limitations on the right of the Internal Revenue
Service or any other Taxing Authority to assess additional Taxes against the
Company or to contest the income or loss with respect to any Tax Return of the
Company.
(b) No audit of the Company or the Company's Tax Returns by
any Taxing Authority is currently pending or, to the knowledge of the Company,
threatened, and no issues have been raised by any Taxing Authority in connection
with any Tax Returns of the Company. No material issues have been raised in any
examination by any Taxing Authority with respect to the Company which reasonably
could be expected to result in a proposed deficiency for any other period not so
examined, and there are no unresolved issues or unpaid deficiencies relating to
such examinations. 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), available
copies of which have been supplied to the Purchaser, 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 Company has not made nor has become obligated to
make, nor will as a result of any event connected with the Closing become
obligated to make, any "excess
11
parachute payment" as defined in Section 280G of the Code (without regard to
subsection (b)(4) thereof).
(d) The Sellers shall cause the Company to file all Tax
Returns and reports with respect to Taxes which are required to be filed before
the Closing Date (a "Pre-Closing Tax Return"), and the Company shall pay all
Taxes due in respect of such Pre-Closing Tax Returns to the appropriate Taxing
Authority; and the Company shall pay all costs associated with the preparation
thereof.
2.23 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 failure or failures
to so comply would not individually or in the aggregate have a Material Adverse
Effect on the Company. There are no Claims pending, nor to the best knowledge of
the Company are there any Claims threatened, nor has any Seller received any
written notice regarding any material 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 2.23(b) attached hereto sets forth all material
permits, licenses, provider numbers, orders, franchises, registrations and
approvals (collectively, "Permits") from all Federal, state, local and foreign
governmental regulatory bodies held by the Company. The Permits listed on
Schedule 2.23(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 best of the knowledge of the Company, 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) Schedule 2.23(c) attached hereto sets forth all industry
affiliations and membership in industry groups (e.g., International Association
of Travel Agents ("IATA"), Airline Reporting Corporation ("ARC"), etc.) of the
Sellers and/or the Company. Neither the Company nor any of the Sellers are in
violation in any material respect of any Regulation, rule or requirement of such
affiliations or memberships. Except as set forth on Schedule 2.23(b), no consent
of any such industry group is required for the Company and the Sellers to
consummate the transactions contemplated by this Agreement.
12
2.24 ERISA and Related Matters.
(a) Benefit Plans; Obligations to Employees. Except as set
forth in Schedule 2.24 hereto, neither the Company, nor any ERISA Affiliate of
the Company, is a party to or 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"));
(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 2.24 for which any Seller or any ERISA Affiliate of any Seller may
have any material liability or contingent liability is sometimes hereinafter
referred to as a "Benefit 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 a "single employer" within the meaning
of Section 4001(b)(1) of ERISA.
(b) Plan Documents and Reports. A true and correct copy of
each of the Benefit Plans listed on Schedule 2.24, 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 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 2.24, the Company is in
compliance in all material respects
13
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 neither the Company nor any ERISA Affiliate of the Company
has otherwise engaged in any prohibited transaction. There has been no
"accumulated funding deficiency" as defined in Section 302 of ERISA, nor has any
reportable event as defined in Section 4043(b) of ERISA occurred with respect to
any Benefit Plan. Actuarially adequate accruals for all obligations or
contingent obligations under the Benefit Plans are reflected in the Company's
balance sheet for the fiscal year ended December 31, 1996 included in Financial
Statements provided to the Purchaser and such obligations include a pro rata
amount of the contributions which would otherwise have been made in accordance
with past practices for the plan years which include the closing date.
2.25 Intellectual Property.
(a) Except as set forth on Schedule 2.25, the Company has no
trade name, service xxxx, patent, copyright or trademark related to its
business. Except as set forth on Schedule 2.25, 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 2.25.
(b) The Company has the right to use each material
Proprietary Right listed in Schedule 2.25, and except as otherwise set forth
therein, each of such Proprietary Rights is, and will be on the Closing Date,
free and clear of all royalty obligations and Liens. There are no Claims
pending, or to the best knowledge of the Sellers, threatened, against any Seller
that its use of any of the Proprietary Rights listed on Schedule 2.25 infringes
the rights of any Person. The Sellers have no knowledge of any conflicting use
of any of such Proprietary Rights.
(c) The Company is not a party in any capacity to any
franchise, license or royalty agreement respecting any Proprietary Right and to
the knowledge of the Company and the Sellers there is no conflict with the
rights of others in respect to any Proprietary Right now used in the conduct of
its business.
(d) Internal Software Applications.
(i) Software Applications. The current software
applications used by the Company in the operation of its business are set forth
and described on Schedule 2.25(d) hereto (the "Software"). All of the Software
used by the Company is to the knowledge of the Company and the Sellers year 2000
compliant.
(ii) Owned Software. To the extent any of the Software
has been designed or developed by the Company's management information or
development staff or by consultants on the Company's behalf, such Software, is
to the knowledge of the Company and the
14
Sellers original and capable of copyright protection in the United States, and
the Company has complete rights to and ownership of such Software, including
possession of, or ready access to, the source code for such software in its most
recent version. No part of any such Software is to the knowledge of the Company
and the Sellers an imitation or copy of, or infringes upon, the software of any
other Person or violates or infringes upon any common law or statutory rights of
any other Person, including, without limitation, rights relating to defamation,
contractual rights, copyrights, trade secrets, and rights of privacy or
publicity. The Company has not sold, assigned, licensed, distributed or in any
other way disposed of or encumbered the Software.
(iii) Licensed Software. The Software, to the extent it
is licensed from any third party licensor or constitutes "off-the-shelf"
software, is held by the Company in compliance with applicable law and is fully
transferable to the Purchaser without any third party consent. All of the
Company's computer hardware has legitimately-licensed software installed
therein.
(iv) No Errors; Nonconformity. The Company warrants that
the Software is free from any significant software defect or programming or
documentation error, operates and runs in a reasonable and efficient business
manner, conforms to the specifications thereof, and, with respect to owned
Software, the applications can be recreated from their associated source codes.
2.26 Environmental Matters. Except as disclosed in Schedule 2.26: (a)
neither the Company's business nor the operation thereof violates in any
material respect any applicable Environmental Law (as defined in Section 12.3)
and no condition or occurrence (any accident, happening or event which occurs or
has occurred at any time prior to the Closing Date, which results in or could
result in a claim against the Company or the Purchaser or creates or could
create a liability or loss for the Company or the Purchaser) which, with notice
or the passage of time or both, would constitute a violation by the Company in
any material respect of any Environmental Law; (b) the Company is in
possession of all material Environmental Permits (as defined in Section 12.3)
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 except for inventories of chemicals which are used or to be used in
all material respects in the ordinary course of the Company's business (which
inventories have been sorted or used in accordance with all applicable
Environmental Permits and all Environmental Laws, including all so-called "Right
to Know" laws); (d) the Company has not 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) the Company is not the
subject of any Federal, state, local, or private Claim involving a demand for
15
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) the Company has not buried,
dumped, disposed, spilled or released any pollutants, contaminants or hazardous
or wastes, substances or materials on, beneath or adjacent to any property or
facility now or previously owned, leased or operated by the Company or any
property adjacent thereto; (g) no by-products of any manufacturing or mining
process employed in the operation of the Company's business which may constitute
pollutants, contaminants or hazardous or toxic wastes, substances or materials
under any Environmental Law are currently stored or otherwise located on any
property or facility now or previously owned, leased or operated by the Company
or any property adjacent thereto; (h) 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; (i) there
are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property or facility now or previously owned,
leased or operated by the Company; (j) the Company has not directly transported
or directly arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any federal or state list or which is
the subject of federal, state or local enforcement actions or other
investigations which may lead to material Claims against the Company for any
remedial work, damage to natural resources or personal injury, including Claims
under CERCLA; and (k) 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.
2.27 Dealings with Affiliates. Schedule 2.27 hereto sets forth a
complete list, including the parties, of all oral or written agreements and
arrangements to which the Company is, will be or has been a party, at any time
from January 1, 1995 to the Closing Date, and to which any one or more
Affiliates is also a party.
2.28 Banking Arrangements. Schedule 2.28 attached hereto sets forth the
name of each bank in or with which the Company has an account, credit line or
safety deposit box, and a brief description of each such account, credit line or
safety deposit box, including the names of all Persons currently authorized to
draw thereon or having access thereto. Except as set forth on Schedule 2.28, 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).
2.29 Insurance. Schedule 2.29 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
property, fire, liability, business interruption, workers' compensation and
other forms of insurance held by the Company as of the date hereof, as well as a
schedule of unresolved Claims filed with the Company's current insurance
carrier, including a history of such Claims and a description and estimated
dollar
16
amount of any unresolved Claims. Such policies are valid, outstanding and
enforceable policies, as to which premiums have been paid currently. Neither the
Company nor any Seller know of any state of facts, or of the occurrence of any
event which is reasonably likely to (a) form the basis for any claim against the
Company not fully covered by insurance for liability on account of any express
or implied warranty or tortuous omission or commission, or (b) result in
material increase in insurance premiums of the Company.
2.30 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 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, have
obtained 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,
have not relied on any representation, warranty or other statement concerning
the Purchaser and its Subsidiaries in their evaluation of the decision to
consummate the transactions contemplated herein.
(b) Each Seller understands that he or she must bear the
economic risk of the TSI Stock, if and when issued to such Seller, for an
indefinite period of time because, except as provided in this Agreement and the
Registration Rights Agreement, (i) Seller understands that TSI proposes to issue
and deliver the shares of TSI Stock issuable in accordance with this Agreement,
without compliance with the registration requirements of the Securities Act of
1933, as amended (the "Securities Act") or the securities law of the State of
Florida, New York or New Jersey; that for such purpose TSI will rely upon the
representations, warranties, covenants and agreements contained herein, as well
as any additional representations, warranties, covenants, agreements and
certifications reasonably requested by TSI to be delivered by the Seller at such
time(s) of issuance or reissuance of the TSI Stock; and that such noncompliance
with registration is not permissible unless such representations and warranties
are correct and such covenants and agreements are performed at and as of the
time of issuance; (ii) Seller understands that, under existing rules of the
Securities and Exchange Commission ("SEC"), there are restrictions in the
transferability of his shares of TSI Stock; his shares of TSI Stock may be
transferred only if registered under the Securities Act or if an exemption from
such registration is available; and (iii) TSI neither has an obligation to
register a sale of the TSI Stock held by any Seller nor has it agreed to do so
in the future, except as set forth in the Registration Rights Agreement.
(c) Except as set forth Schedule 2.30(c) each Seller is an
"accredited investor", as such term is defined in Rule 501 of Regulation D
promulgated under the Securities Act in that each Seller, as of the date of this
Agreement, either (a) (either individually or jointly with such Seller's spouse)
has a net worth in excess of $1,000,000; or (b) had an individual income in
excess of $200,000 in each of the two most recent years or joint income with
such Seller's spouse in excess of $300,000 in each of those years, and
reasonably expects reaching the same income level in the current year.
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(d) Except as set forth in Schedule 2.30(d) each Seller is a
sophisticated investor familiar with the type of risks inherent in the
acquisition of securities such as the shares of TSI Stock and such Seller's
financial position is such that such Seller can afford to retain his shares of
TSI Stock for an indefinite period of time without realizing any direct or
indirect cash return on such Seller's investment.
(e) Each Seller received this Agreement and first learned of
the transactions contemplated hereby in his or her state of residence and
executed or will execute all documents contemplated hereunder in such state.
(f) Sellers are acquiring their shares of TSI Stock for such
Seller's own account and not with a view to, or for sale in connection with, the
distribution thereof within the meaning of the Securities Act. No Seller has any
present plan, intention, commitment, binding agreement or arrangement to dispose
of any shares of TSI Stock except as set forth herein or in the Registration
Rights Agreement.
(g) Sellers understand that the certificates evidencing
their shares of TSI Stock, when and if issued, will bear the restrictive legends
set forth herein.
2.31 Inventories. The inventories (e.g. promotional items, gifts and
brochures) of the Company on the date hereof do not include any items which are
reflected on the balance sheets, included in the Financial Statements.
2.32 Brokerage. Except as set forth in the immediately following
sentence, 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.
Company has engaged and shall solely be responsible for the fee payable to
Spectrum Realty Corp.
2.33 Improper and Other Payments. Except as set forth on Schedule
2.33 hereto, (a) neither the Company, any director or officer, thereof, nor, to
the Company's knowledge, any employee (other than an officer or director), 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 contributions have been
made, directly or indirectly, to a domestic or foreign political party or
candidate by or on behalf of the Company, and (c) no improper foreign payment
(as defined in the Foreign Corrupt Practices Act) has been made by or on behalf
of the Company.
2.34 Significant Suppliers; Material Plans and Commitments. The
Company has delivered to TSI an accurate list (which is set forth on Schedule
2.34) of (i) all significant suppliers, it being understood and agreed that a
"significant supplier", for purposes of this Section 2.34, means a suppliers
representing 5% or more of the Company's annual revenues as of the Balance Sheet
Date and as of September 30, 1997. Except to the extent set forth on Schedule
18
2.34, none of the Company's significant customers (or persons or entities that
are sources of a significant number of customers) have canceled or substantially
reduced or, to the knowledge of the Company, are currently attempting or
threatening to cancel a contract or substantially reduce utilization of the
services provided by the Company. The Company has also indicated on Schedule
2.34 a summary description of all plans or projects involving the opening of new
operations, expansion of existing operations, the acquisition of any personal
property, business or assets requiring, in any event, the payments of more than
$25,000 by the Company.
2.35 Franchising Matters.
(a) The Company has complied in all material respects with
all applicable Federal and State Franchise Laws and Business Opportunity Laws.
There are no material lapsed filings and all material changes in the Company's
franchising filings, including the Company's Uniform Franchise Offering Circular
(the "UFOC"), have been filed with all the appropriate Authorities on a timely
basis. No administrative orders have been issued or, to the best of the
Company's knowledge, threatened by any Authority against the Company.
(b) Except as set forth on Schedule 2.35(b), there are no
material breaches of any franchising agreement by the Company, or to the
Company's knowledge by any material franchise. All of the Company's trade names,
service marks, copyrights, trademarks and other intangible assets have been
properly filed and registered with all the appropriate franchising Authorities.
The Company has no international franchisees, has not completed any
international franchising transactions and has not made any offers to any
prospective international franchisee.
(c) Except as set forth on Schedule 2.35(c), no earnings
claims have been made during the Company's sales and recruitment process and no
representations or warranties were made to any prospective franchisee by the
Company which are in conflict with the UFOC.
(d) The UFOC is true and correct in all material respects.
The Company has filed the UFOC with all necessary and appropriate Authorities
and has made all necessary updates thereto. Schedule 2.35(d) lists all the
franchisees of the Company, as well as the jurisdictions where the Company has
registered the UFOC and the status of such filings.
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
19
it to be so qualified or licensed and the failure to be so qualified or licensed
would have a Material Adverse Effect on the Purchaser.
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 by the parties
hereto and thereto this Agreement and the other agreements contemplated hereby
shall constitute the legal, valid and binding obligation of the Purchaser,
enforceable against the Purchaser in accordance with its terms.
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 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 any 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 that are required to
be issued by TSI to the Sellers pursuant to this Agreement, shall, upon issuance
and delivery and subject to the conditions set forth in this Agreement, be duly
authorized, validly issued, fully paid and non-assessable.
3.6 Taxes.
(a) The Purchaser has no present plan or intention for the
Company to issue additional shares of stock, that would result in Purchaser
losing control of the Company within the meaning of Section 368(c) of the Code.
20
(b) The Purchaser has no present plan or intention to
liquidate the Company, to merge the Company into another corporation, to cause
the Company to sell or otherwise dispose of any of its assets (except for
dispositions made in the ordinary course of business) or to sell or otherwise
dispose of any of the Company stock acquired in the transaction, except for
transfers described in Section 368(a)(2)(C) of the Code.
(c) The Purchaser has no present plan or intention to
reacquire any of its stock issued in the transaction.
(d) The Purchaser will acquire the Company stock solely in
exchange for Purchaser voting stock. Further, no liabilities of the Company or
the Sellers will be assumed by the Purchaser, nor will any of the Company stock
be subject to any liabilities.
(e) Following the transaction, the Company intends to
continue its historic business or use a significant portion of its historic
business assets in a business.
(f) The Purchaser is not an investment company as defined in
Section 368(a)(2)(F)(iii) and (iv) of the Code.
(g) The Purchaser shall report the transaction as a tax-free
reorganization under Section 368(a)(1)(B) of the Code. The Purchaser shall not
take any action that would adversely affect such treatment.
3.7 Capital Stock. As of the date hereof, the authorized capital stock
of the Purchaser consists of 51,000,000 shares of capital stock, consisting of
50,000,000 shares of common stock, par value $.01 per share and 1,000,000 shares
of preferred stock. As of August 28, 1997 (i) 8,781,726 shares of Purchaser's
common stock were issued and outstanding, all of which are validly issued, fully
paid and nonassessable and (ii) no shares of preferred stock are issued and
outstanding
3.8 Options and Rights. There are no outstanding subscriptions, options,
warrants, rights or securities, under which the Purchaser is bound or obligated
to issue any additional shares of its capital stock or rights to purchase shares
of its capital stock other than options granted under the Purchasers Stock
Option Plan.
3.9 Litigation. There is no Claim pending or to the best knowledge of
the Purchaser, threatened against the Purchaser which, if adversely determined,
would have a Material Adverse Effect on the Purchaser. Nor is there any Order
outstanding against the Purchaser having, or which, insofar as can reasonably be
foreseen, in the future will have a Material Adverse Effect on the Purchaser.
3.10 Compliance with Law and Applicable Government Regulations. The
Purchaser 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,
except where such failures or failures to so comply would not individually or in
the aggregate have a Material Adverse Effect. There are no Claims pending,
21
nor to the best knowledge of the Purchaser are there any Claims threatened, nor
has Purchaser received any written notice, regarding any material violations of
any Regulations and Orders enforced by any Authority claiming jurisdiction over
the Company, including any requirements of OSHA or any pollution and
environmental control agency (including air and water).
3.11 Material Adverse Change. Since June 30, 1997, there has not been a
Material Adverse Change to the Purchaser.
3.12 SEC Reports. Purchaser has timely filed all reports required to be
filed with the SEC pursuant to the Securities and Exchange Act of 1934
(collectively, the "SEC Reports"), and has previously made available to the
Sellers true and complete copies of all such SEC Reports. Such SEC Reports, as
of their respective dates, complied in all material respects with applicable
law, and none of such SEC Reports contained, as of their respective dates, any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statement therein, in light of the
circumstances under which they were made, not misleading. The financial
statements contained in the SEC Reports fairly present in all material respects,
the financial position of the Purchaser at and as of the applicable dates
thereof.
ARTICLE IV
COVENANTS OF THE SELLERS
From the date hereof until the Closing or the termination of this
Agreement, except as otherwise consented to or approved by the Purchaser in
writing, the Company covenants and agrees that it shall act, and the Sellers
shall cause the Company so to act or refrain from acting where required
hereinafter, to comply with the following:
4.1 Regular Course of Business.
(a) The Company shall operate its business diligently and in
good faith and in the ordinary and usual course, consistent with past management
practices; shall maintain all of its respective properties in good order and
condition, shall maintain (except for expiration due to lapse of time) all
leases and Contracts in effect without change except as expressly provided
herein or except as occurs in the ordinary course of business; shall comply in
all material respects with the provisions of all Regulations and Orders
applicable to the Company and the conduct of its business; shall not cancel,
release, waive or compromise any debt, Claim or right in its favor; shall not
alter the rate or basis of compensation of any of its officers, directors,
employees or consultants; shall maintain insurance and reinsurance coverage as
in effect on the date hereof up to the Closing Date; and shall preserve the
business of the Company intact, and use its reasonable best efforts to keep
available for the Company and the Purchaser the services of the officers and
employees of the Company, and to preserve the good will of clients, suppliers
and others having business relations with the Company.
(b) Without limiting the generality of the foregoing
paragraph, the Company shall not, from the date hereof until the Closing,
directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of TSI:
22
(i) issue, sell, pledge, dispose of, encumber, or
authorize the issuance, sale, pledge, disposition, grant or
encumbrance of any shares of its capital stock of any class, or
any options, warrants, convertible securities or other rights of
any kind to acquire any shares of such capital stock, or any
other ownership interest, of it;
(ii) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock, except for
distributions to shareholders, which (i) are consistent with
past practice, (ii) do not cause the Company to fail to meet the
financial conditions set forth in Section 2.10 and (iii) do not
violate pooling of interests restrictions; or
(iii) reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any of
its capital stock.
(c) Notwithstanding any other provision set forth in this
Section 4.1, Section 4.5 or Section 2.17, the Purchaser hereby acknowledges and
agrees that the Company shall pay: (i) the attorney's fees and other expenses
incurred in connection with the negotiation and consummation of the transactions
contemplated hereunder, (ii) the broker's fee described in Section 2.32 hereof,
(iii) the bonus payments and marketing fees described on Schedule 216 hereto to
the extent that such fees are incurred in the ordinary course of business.
4.2 Amendments. No change or amendment shall be made in the articles of
incorporation or by-laws of the Company. The Company shall not merge with or
into or consolidate with any other corporation or Person, acquire substantially
all of the assets of any Person or change the character of its business.
4.3 Agreement to Retain Shares Each Seller agrees not to transfer, sell
or otherwise dispose of or direct or cause the sale, transfer or other
disposition of, or reduce such Seller's risk relative to, any of the Company's
Shares (except for the conversion into TSI Stock in the transactions
contemplated hereby) or TSI Stock held by such Seller or on such Seller's
behalf, whether owned on the date hereof or after acquired, within the thirty
(30) days prior to the Closing Date.
4.4 Capital and Other Expenditures. The Company shall not make any
capital expenditures, or commitments with respect thereto in excess of $10,000.
4.5 Cash and Cash Equivalents. Cash and cash equivalents shall be
preserved, and expended, solely in the ordinary and usual course of business.
4.6 Borrowing. The Company shall not incur, assume or guarantee any
indebtedness for borrowed money, obligations or liabilities not reflected on the
Financial Statements (or the balance sheets included therein) except in the
ordinary course of business or for purposes of consummation of the transactions
contemplated by this Agreement and, in the case of borrowed money, only after
consultation with the Purchaser.
23
4.7 Other Commitments. Except as set forth in this Agreement or as
incurred or transacted in the ordinary course of business, or permitted in
writing by the Purchaser, the Company shall not enter into any material
transaction or make any material commitment or incur any material obligation
(including entering into any real property leases).
4.8 Interim Financial Information. To the extent prepared in the
ordinary course of business, the Company shall supply the Purchaser with
unaudited financial statements (including, without limitation, balance sheets
and statements of revenues and expenses) and information for each calendar
month, promptly after they become available.
4.9 Full Access and Disclosure.
(a) The Company shall afford to the Purchaser and its counsel,
accountants and other authorized representatives reasonable access during
business hours to the Company's facilities, properties, books and records in
order that the Purchaser may have full opportunity to make such reasonable
investigations as it shall desire to make of the affairs of the Company,
including financial audits; and the Sellers shall cause the Company's officers,
employees and auditors to furnish on a timely basis such additional financial
and operating data and other information as the Purchaser shall from time to
time reasonably request including, without limitation, any internal control
recommendations applicable to the Company made by the Company's independent
auditors in connection with any examination of the Company's Financial
Statements and books and records.
(b) In connection with any "due diligence" examination performed
by the Purchaser with respect to the business of the Company, the Sellers shall
fully cooperate and provide assistance reasonably requested by Purchaser.
4.10 Confidentiality. Each Seller and the Company shall, and shall
cause its principals, officers and other personnel and authorized
representatives to, hold in confidence, and not disclose to any other party
without the Purchaser's prior consent, all written and oral information
furnished or disclosed by or received from the Purchaser or its officers,
directors, employees, agents, counsel and auditors in connection with the
transactions contemplated hereby except as may be required by applicable law or
as otherwise contemplated herein.
4.11 Fulfillment of Conditions Precedent. The Company and the Sellers
shall use their reasonable best efforts to obtain at their expense, on or prior
to the Closing Date, all such waivers, Permits, consents, approvals or other
authorizations from third parties and Authorities, and to do all other things as
may be required, obtained or done by the Company or Sellers in connection with
the transactions contemplated by this Agreement in order to fully and
expeditiously consummate the transactions contemplated by this Agreement.
24
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Company and the
Sellers that prior to the Closing or the termination of this Agreement:
5.1 Confidentiality. The Purchaser shall, and shall cause its
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Sellers' prior
consent, all written or oral information furnished or disclosed by or received
from the Sellers, the Company or the Company's officers, directors, employees,
agents, counsel and auditors in connection with the transactions contemplated
hereby except as may be required by applicable law or as otherwise contemplated
herein.
5.2 Full Access and Disclosure.
(a) The Purchaser shall afford to the Company and the Sellers,
and their counsel, accountants and other authorized representatives an
opportunity to make such reasonable investigations as they shall desire to make
of the business of the Purchaser; and the Purchaser shall cause its officers,
employees and auditors to furnish such additional financial and operating data
and other information as the Sellers shall from time to time reasonably request.
(b) From time to time prior to the Closing Date, the Purchaser
shall promptly supplement or amend information previously delivered to the
Company and/or the Sellers with respect to any matter hereafter arising which,
if existing or occurring at the date of this Agreement, would have been required
to be set forth herein or disclosed.
5.3 Capital Structure. The Purchaser shall not reclassify, combine,
subdivide or split its common stock or a pay a stock dividend.
5.4 Merger. The Purchaser shall not merge with or consolidate into
any other corporation, other than a merger or consolidation pursuant to which
the Purchaser is the surviving entity.
5.5 Interim Financial Information; Periodic Reports. To the extent
prepared in the ordinary course of business, the Purchaser shall supply the
Company with its audited financial statements as they become available. The
Purchaser shall supply the Company with all reports filed under the Securities
and Exchange Act of 1934, promptly after such filing.
5.6 Fulfillment of Conditions Precedent. The Purchaser shall use its
reasonable best efforts to obtain, at its expense, on or prior to the Closing
Date, all waivers, Permits, consents, approvals or other authorizations from
third parties and Authorities, and to do all other things that are required to
be done or obtained by the Purchaser in connection with the transactions
contemplated in this Agreement or in order to fully and expeditiously consummate
the transactions contemplated by this Agreement.
25
ARTICLE VI
OTHER AGREEMENTS
The parties hereto further agree, on or before the Closing Date, as
follows:
6.1 Further Assurances. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, 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. In furtherance
and not in limitation of the preceding sentence, the parties hereto shall use
their best efforts to cause the Closing to take place on or before November 30,
1997. If at any time after the Closing Date the Purchaser shall consider or be
advised that any further deeds, 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 Purchaser (or the Company, as appropriate), the title to
any property or rights of the Sellers acquired or to be acquired by reason of,
or as a result of, the acquisition, the Sellers agree that the Sellers shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary, desirable or proper to vest, perfect or confirm title
to such property or rights in the Company and otherwise to carry out the purpose
of this Agreement.
6.2 Pooling Accounting; Tax Matters. Each of the parties hereto
shall use its reasonable efforts to cause the transactions contemplated hereby
to be accounted for as a pooling of interests and to qualify as a reorganization
under the provisions of Section 368(a)(1)(B) of the Code. Each of the parties
hereto shall not, and shall use its reasonable efforts to cause its affiliates
to not, knowingly take any action that would adversely affect the ability of TSI
to account for the transactions contemplated hereby as a pooling of interests or
to qualify as a reorganization under the provisions of Section 368 of the Code.
6.3 Agreement to Defend. In the event any action, suit, proceeding
or investigation of the nature specified in Sections 7.2 or 8.2 is commenced,
whether before or after the Closing Date, all the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto.
6.4 Consents. Without limiting the generality of Section 6.1, 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.
6.5 No Solicitation or Negotiation. Unless and until this Agreement
is terminated, neither the Sellers nor the Company through its directors,
officers, employees, representatives, agents, advisors, accountants and
attorneys shall initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to, or engage in
negotiations concerning, or provide any confidential information or data to any
Person with respect to, or have any discussions with any Persons relating to,
any acquisition, business combination or
26
purchase of all or any significant asset of, or any equity interest in, the
Company, or otherwise facilitate any effort or attempt to do or seek any of the
foregoing, and shall immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties conducted heretofore
with respect to any of the foregoing. Should the Company or any Seller be
contacted with respect to any offer, inquiry or proposal, the Company and the
Sellers shall immediately advise the Purchaser in writing of the name, address
and phone number of the contact and the nature of the inquiry.
6.6 No Termination of Sellers' Obligations by Subsequent Incapacity,
Etc. Each Seller specifically agrees that the obligations of such Seller
hereunder, including, without limitation, obligations pursuant to Article XI
shall not be terminated by the death or incapacity of any Seller.
6.7 Employment Agreements. The Company, the Sellers, Xxxx Xxxxxxx
and Xxxxxxxxx Xxxx shall, at or prior to the Closing, terminate any existing
employment agreements between the Company and such Persons, and Xxxx Xxxxxxx and
Xxxxxxxxx Xxxx shall each enter into an Employment Agreement with TSI (or, at
TSI's option if guaranteed by TSI, an affiliate or subsidiary of TSI) in the
form of Exhibit 6.7 attached hereto (the "Employment Agreements").
6.8 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 and the Sellers' advisors)
without the other party's prior written consent unless required by any
applicable law. The form, content and timing of any and all press releases,
public announcements or publicity statements (except for any disclosures
required by Federal or State securities laws in connection with the registration
of TSI's securities or otherwise) with respect to this Agreement or the
transactions contemplated hereby shall be subject to the prior approval of the
Purchaser. No press releases, public announcements or publicity statements shall
be released by either party without such prior mutual agreement.
6.9 Non-Competition Covenant.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, issue and deliver the shares of TSI Stock hereunder
and consummate the transactions provided for herein, during the "Restricted
Period" (as hereinafter defined), each Seller agrees, unless otherwise permitted
by TSI in writing, that he or she shall not, directly or indirectly, for himself
or herself or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as
an employee, independent contractor, consultant or advisor or as
a sales representative, in any travel service business in direct
competition with TSI 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
27
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;
(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 for the purpose of
soliciting or selling products or services in direct competition
with any TSI Entity within the Restricted Territory; or
(iv) solicit any prospective acquisition candidate, on
such Seller's own behalf or on behalf of any competitor or
potential competitor, which candidate was, to such Seller's
knowledge, either called upon by any TSI Entity or for which TSI
made an acquisition analysis, for the purpose of acquiring such
entity.
(b) Notwithstanding the above, the foregoing covenant shall not
be deemed to prohibit any Seller from acquiring as an investment not more than
two percent (2%) of the capital stock of a competing business, whose stock is
traded on a national securities exchange or over-the-counter.
(c) As used in this Agreement, the term "Restricted Period"
shall mean a period equal to five years.
(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, Seller agrees that in the event of breach by such Seller of the
foregoing covenant, TSI shall be entitled to specific performance of this
provision and co-injunctive and other equitable relief.
(e) It is agreed by the parties that the foregoing covenants in
this Section 6.9 impose a reasonable restraint on the Sellers in light of the
activities and business of the TSI Entities on the date of the execution of this
Agreement and the current plans of the TSI Entities; but it is also the intent
of TSI and the Sellers that such covenants be construed and enforced in
accordance with the changing activities, business and locations of the TSI
Entities, whether before or after the date of termination of the employment of
such Seller provided, that the applicable Seller participated in the development
of the changed activity, business or location. For example, if, during the
Restricted Period, a 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, then such Seller will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within 100
miles of its then-established operating location(s) through the Restricted
28
Period if the Seller was involved in the development of such new businesses,
locations or activities.
(f) The covenants in this Section 6.9 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall be reformed in accordance therewith.
(g) All of the covenants in this Section 6.9 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 Seller 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 6.9 shall survive
the Closing and the termination of such Seller's employment with a TSI Entity.
It is specifically agreed that the Restricted Period, during which the
agreements and covenants of the Seller made in this Section 6.9 shall be
effective, shall be computed by excluding from such computation any time during
which such Seller is in violation of any provision of this Section 6.9.
6.10 Non-disclosure; Confidentiality
(a) Confidential Information. By virtue of Seller's employment,
association or involvement with a TSI Entity, Seller may obtain confidential or
proprietary information developed, or to be developed, by an 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
(a) any information which is in the public domain during the period of service
by the Seller or becomes public thereafter, provided such information is not in
the public domain as a consequence of disclosure by the Sellers in violation
29
of this Agreement, and (b) any information not considered confidential
information by similar enterprises operating in the travel service industry or
otherwise in the ordinary course.
(b) Non-Disclosure. Each Seller agrees that, except as directed
by such Seller's TSI Entity employer, as required or otherwise contemplated
under this Agreement or such Seller's Employment Agreement or as otherwise
required by law, he or she will not at any time (during the term of such
Seller's employment by an TSI Entity or at any time thereafter), except as may
be expressly authorized by the TSI Entity in 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 or her
possession or under his control by reason of his or her employment by a TSI
Entity or by reason of any consulting or software development services he or she
has performed or may in the future perform for a TSI Entity which contain or are
derived from Confidential Information. Each Seller further agrees that while
employed at an TSI Entity, no Confidential Information shall be removed from the
TSI Entity's business premises, without the prior written consent of such TSI
Entity. In addition, each of the Sellers hereby acknowledges that he or she 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 he or she will 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 Seller 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) Sellers 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 Seller's employment is terminated, such
Seller 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 Seller has in his
possession or control.
6.11 Registration Rights. TSI and the Sellers shall enter into a
registration rights agreement (the "Registration Rights Agreement")
substantially in the form attached hereto as Exhibit 6.11.
6.12 Affiliates; Pooling Agreements. The Sellers represent and
warrant that attached as Schedule 6.12 is a list of all persons who could in
connection with the acquisition of the
30
Company by TSI be deemed to be "affiliates" of the Company for purposes of Rule
145 under the Securities Act ("Rule 145") or applicable "pooling" accounting
restrictions, and the Sellers shall promptly notify TSI of any change in such
list from time to time through the Closing Date. The Sellers shall (and shall
cause each person listed or required to be listed on Schedule 6.12 to) deliver
to TSI, at least 10 days prior to the Closing Date, a written "affiliates"
agreement, in the form of Exhibit 6.12 hereto, restricting the disposition by
such affiliate of the TSI Stock to be received by such person pursuant hereto or
in connection herewith, as contemplated by Rule 145 and as required to qualify
the acquisition for pooling of interest accounting treatment and tax-free
reorganization treatment under the Code. In furtherance thereof, the Sellers and
the Company covenant and agree to (i) cause their auditors to be reasonably
available and (ii) execute and delivery any certificates or documents or
instruments that the Purchaser's independent auditors reasonably deem necessary,
so that the Purchaser's independent auditors could review or confirm any
information necessary in order to satisfy itself that the transaction will
qualify for pooling of interest accounting treatment and tax-free reorganization
treatment under the Code.
6.13 Advice of Changes. The Sellers, the Company and the Purchaser
shall promptly advise the other party orally and in writing to the extent it has
knowledge of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it to
comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement and (iii) any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have a material adverse
effect on such party or on the truth of their respective representations and
warranties or the ability of the conditions set forth in Article VII or VIII to
be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement. Notwithstanding the foregoing, if such notification results from
or relates to an event occurring or condition or state of facts existing after
the date hereof, such notification shall cure for all purposes other than the
condition existing in Section 7.1 or Section 8.1, as the case may be, any breach
of representation or warranty that would exist in the absence of such
notification.
6.14 Personal Guarantee. Prior and subsequent to the Closing, the
Company shall use its best efforts to effect a release of Xxxxxxx Xxxxxxx'x
obligations under any agreement entered into by the Company and guaranteed by
Xxxxxxx X. Xxxxxxx (the "Xxxxxxx Agreement"). Further, notwithstanding the
indemnification provisions set forth in Article XI hereof, the Company, and
following the Closing Date, the Purchaser, shall indemnify Xxxxxxx X. Xxxxxxx
for any and all expenses, losses, claims, damages or liabilities incurred by
Xxxxxxx X. Xxxxxxx under any Xxxxxxx Agreement.
31
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Purchaser:
7.1 Representations and Warranties; Covenants and Agreements. The
representations and warranties of the Sellers contained in Article II and
elsewhere in this Agreement and all information contained in any exhibit,
certificate, schedule or attachment hereto or in any writing delivered by, or on
behalf of, the Sellers or the Company to the Purchaser, shall be true and
correct both when made and at and as of the Closing Date, as if made at and as
of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct (without giving effect to any
limitation as to "materiality", "material adverse effect" or "material adverse
change" set forth therein) does not have, and is not likely to have,
individually or in the aggregate, a Material Adverse Effect on the Sellers or
the Company. The Sellers and the Company shall have performed and complied with
all agreements, covenants and conditions and shall have made all deliveries
required by this Agreement to be performed, delivered and complied with by them
prior to the Closing Date. Each of the Sellers and the president of the Company
(on behalf of the Company) shall have executed and delivered to the Purchaser a
certificate, dated the Closing Date, certifying to the foregoing.
7.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 Third Party Consents. The Sellers and the Company shall have
obtained all consents, approvals, waivers or other authorizations with respect
to all of the Company's store front leases and any other Contract, under which
the payments are reasonably anticipated to equal or exceed $10,000 over the
following twelve months, such that such Contracts and leases shall remain in
effect (without default, acceleration, termination, assignment, right of
termination or assignment, payment, increase in rates or compensation payable,
penalty, interest or other adverse effect) from and after the Closing Date as
such contracts and leases operated and were in effect before the Closing Date.
7.4 Regulatory Approvals. [This Section intentionally left blank.]
7.5 No Material Adverse Change. There shall have been no Material
Adverse Change to the Company since the date of this Agreement. The Purchaser
shall have received a certificate (which shall be addressed to the Purchaser),
dated the Closing Date, of the president and chief financial officer of the
Company, certifying (on behalf of the Company) to the foregoing.
7.6 Accountants' Letters. TSI shall have received a letter from Xxxxxx
Xxxxxxxx LLP, in form and substance reasonably satisfactory to TSI, to the
effect that, as of the Closing Date,
32
accounting for the transaction as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations a "Pooling"
is appropriate if the transaction is closed and consummated as contemplated by
this Agreement. The Sellers and the Company shall have used their best efforts
to obtain the cooperation of the Company's accountant in order for the Purchaser
to establish that the Company and its operations are suitable for and are not
prohibited from qualifying for a Pooling.
7.7 Opinion of Sellers' Counsel. The Purchaser shall have received an
opinion of counsel to the Sellers and the Company (which will be addressed to
the Purchaser), dated the Closing Date, in the form of reasonably satisfactory
to Purchaser.
7.8 Employment Agreements. Xxxx Xxxxxxx and Xxxxxxxxx Xxxx shall have
terminated their existing employment agreements, if any, with the Company and
shall have executed and delivered to the Purchaser Employment Agreements with
TSI in the form of Exhibit 6.7 attached hereto.
7.9 Delivery of the Company Share Certificates. Each of the Sellers
shall have executed and delivered this Agreement, or a counterpart hereof, and
together shall have delivered at the Closing stock certificates representing all
of the Company Shares, duly endorsed for transfer to the Purchaser, together
with stock powers duly executed in blank.
7.10 Affiliate Agreements. The Purchaser shall have received executed
copies of all "affiliate" agreements required under Section 6.12 hereof, each of
which shall be substantially the form attached hereto as Exhibit 6.12.
7.11 Simultaneous Closings. The Purchaser shall have received executed
copies of all agreements, documents and other deliveries required to close, and
shall have closed (or will simultaneously close herewith) the acquisition of
CruiseWorld, Inc. by TSI.
7.12 Financial Statements. The Company shall deliver a balance sheet,
statement of operations, and statement of stockholder's equity and cash flows
for the Company covering the nine months ended September 30, 1997.
ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers under this Agreement shall be
subject to the satisfaction, on or before the Closing Date, of each of the
following conditions unless waived in writing by the Sellers:
8.1 Representations and Warranties; Performance. The representations and
warranties of the Purchaser contained in Article III and elsewhere in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto, the Purchaser, to the Sellers, shall be true and correct both when made
and at and as of the Closing Date, as if made at and as of such time (except to
the extent expressly made as of an earlier date, in which case as of such date),
33
except where the failure of such representations and warranties to be so true
and correct (without giving effect to any limitation as to "materiality",
"material adverse effect" or "material adverse change" set forth therein) does
not have, and is not likely to have, individually or in the aggregate, a
Material Adverse Effect on the Purchaser. The Purchaser shall have performed and
complied in all material respects with all agreements, covenants and conditions
required by this Agreement to be performed and complied with by them prior to
the Closing Date. An authorized officer of the Purchaser shall have delivered to
the Sellers a certificate, dated the Closing Date, certifying to the foregoing.
8.2 No Injunction. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 Purchase Consideration. The Sellers shall have received the
consideration (in the form of TSI Stock) required to be delivered at Closing and
to which each Seller is entitled pursuant to Section 1.1 hereof.
8.4 Employment Agreements. TSI shall have executed and delivered to
each of Xxxx Xxxxxxx and Xxxxxxxxx Xxxx an Employment Agreement between TSI and
such Person in the form of Exhibit 6.7 attached hereto.
8.5 Registration Rights Agreement. Purchaser shall have executed the
Registration Rights Agreement.
8.6 Regulatory Approvals. [This Section intentionally left blank.]
8.7 No Material Adverse Change. There shall have been no Material
Adverse Change in the Purchaser since the date of this Agreement. The Company
shall have received a certificate (addressed to the Company and the Sellers),
dated the Closing Date of an officer of the Purchaser, certifying the foregoing.
8.8 Opinion of Purchasers' Counsel. The Company shall have received
an opinion of counsel to the Purchaser (which will be addressed to the Sellers),
dated the Closing Date, in a form reasonably satisfactory to the Company.
8.9 Simultaneous Closing. The Company shall have received executed
copies of all agreements, documents and other deliveries required to close, and
shall have closed (or will simultaneously close herewith) the acquisition of
CruiseWorld, Inc. by TSI.
ARTICLE IX
CLOSING
9.1 Closing. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of Article X hereof, a closing of the
transactions contemplated by this Agreement (the "Closing") shall be held on or
before November 30, 1997, or on such other date
34
which is mutually agreed upon in writing following the satisfaction or waiver of
the conditions to closing set forth in Article VII and Article VIII hereof (the
"Closing Date").
9.2 Closing Deliveries. At the Closing,
(a) the Sellers and the Company shall deliver or cause to be
delivered to the Purchaser:
(i) a certificate or certificates evidencing all of the
Company Shares, duly endorsed for transfer with all necessary
transfer stamps affixed;
(ii) copies of all consents and approvals required by
Sections 7.3 and 7.4;
(iii) the Opinion of Counsel required by Section 7.7;
(iv) the Officers' Certificates required by Sections 7.1
and 7.5;
(v) the Employment Agreements required by Section 7.8;
(vi) the Affiliate Letters required by Section 7. 10;
(vii) a certificate, signed by the secretary of the
Company, as to the articles of incorporation and by-laws of the
Company, the resolutions adopted by the board of directors and
shareholders of the Company in connection with this Agreement,
the incumbency of certain officers of the Company and the
jurisdictions in which the Company is qualified to conduct
business, in form acceptable to the Purchaser;
(viii) certificates issued by the appropriate
governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all
franchise taxes, of the Company as of a date not more than 10
days prior to the Closing Date, as a corporation organized under
the laws of the State of Florida and as a foreign corporation
authorized to do business under the laws of the various
jurisdictions where it is so qualified.
(ix) such other certified resolutions, documents and
certificates as are required to be delivered at the Closing by
any Seller or the Company pursuant to the provisions of this
Agreement.
(b) The Purchaser shall deliver to the Sellers:
(i) the TSI Stock required to be issued and delivered to
each such Seller at Closing in accordance with Section 1.1
(ii) the Officers' Certificate required by Section 8.1;
and
35
(iii) the Employment Agreements required by Section 8.4;
(iv) such other certified resolutions, documents and
certificates as are required to be delivered at the Closing by
the Purchaser pursuant to the provisions of this Agreement.
(v) the Officer's Certificate required by Section 8.7;
(vi) the Registration Rights Agreement as required by
Section 8.5;
(vii) the Opinion of Counsel required to be delivered by
Section 8.8.
ARTICLE X
TERMINATION AND ABANDONMENT
10.1 Methods of Termination. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser, the Sellers and the
Company;
(b) by notice given by the Purchaser or each of the Sellers
and the Company if this Agreement is not consummated on or before December 31,
1997; provided, however, that if the failure to consummate the transaction as of
that date has resulted from the breach or default of any party with respect to
its respective obligations under this Agreement on or before such date, such
party may not terminate this Agreement pursuant to this Section 10.1(b), and
each other party to this Agreement shall at its option enforce its rights
against such breaching or defaulting party and seek any remedies against such
party, in either case as provided hereunder and by applicable law; or
(c) by notice given by the Purchaser or each of the Sellers
and the Company if as of the Closing Date (including any extensions) any of the
conditions specified in Article VII or Article VIII hereof, respectively, shall
not have been satisfied.
10.2 Procedure Upon Termination. In the event of termination and
abandonment pursuant to Section 10.1 hereof, and subject to the proviso
contained in Section 10.1(b), this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party furnishing
the same;
(b) all information received by any party hereto with
respect to the business of any other party or the Company (other than
information which is a matter of public knowledge or which has heretofore been
or is hereafter published in any publication for public distribution or filed as
public information with any governmental authority) shall not at any time be
used for the
36
advantage of, or disclosed to third parties by, such party to the detriment of
the party furnishing such information; and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this Agreement;
provided, however, the non-breaching or non-defaulting party shall not be
foreclosed from bringing a Claim or cause of action or otherwise recovering from
the breaching or defaulting party for such breach or default.
ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
11.1 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 shall survive and
continue until:
(1) with respect to the representations and warranties
in Sections 2.22 (tax matters) and 2.24 (ERISA matters) and 2.26
(environmental matters), until sixty (60) days following the
expiration of the applicable statute of limitations;
(2) with respect to the representations and warranties
in Sections 2.3 (capitalization), 2.5 (title to the Company
Shares) and 2.6 (options and rights on capital stock), these
representations shall survive and continue forever and without
limitation; and
(3) with respect to all other representations and
warranties, the date upon which TSI receives from its outside
auditors the audited financial statements for TSI's fiscal year
ending December 31, 1998 (the "1998 Audit Date"), except for
representations, warranties and indemnities for which an
indemnification Claim shall be pending as of the 1998 Audit
Date, in which event such indemnities shall survive with respect
to such Claim until the final disposition thereof.
11.2 Indemnification by the Sellers. Subject to this Article XI, the
Purchaser and its officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless by the Sellers, jointly and
severally, 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 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
37
agreement or instrument executed by any Seller or the Company and delivered
hereunder; provided, that Sellers shall not have any obligation under this
Section 11.2 to indemnify Purchaser until the aggregate combined total of all
losses, claims, expenses, liabilities or damages incurred by Purchaser exceeds
$125,000, whereupon Purchaser shall be entitled to indemnification hereunder for
the entire aggregate amount of all such losses in excess of $125,000, up to a
maximum indemnification payment equal to $7,250,000.
11.3 Indemnification by the Purchaser. Subject to this Article XI,
the Sellers and their 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 misrepresentation, breach of warranty, or non-fulfillment of any
obligation on the part of the Purchaser under this Agreement, any document
relating thereto 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 by the Purchaser hereunder provided, that Purchaser
shall not have any obligation under this Section 11.3 to indemnify Sellers until
the aggregate combined total of all losses, claims, expenses, liabilities or
damages incurred by Sellers exceeds $125,000 whereupon Sellers shall be entitled
to indemnification hereunder for the entire aggregate amount of all such losses
in excess of $125,000, up to a maximum indemnification payment of $7,250,000.
11.4 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 the 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 XI, would not be fully
indemnified hereunder; 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
indemnitee). 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
38
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner. 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) incurred by such indemnitee in connection with such
obligation or liability subject to this Article XI.
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 failing such
judgment or decree, and 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 against it, subject in the case of any settlement that
does not solely require the payment of money to 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 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, or is prohibited under this
Section 11.4 from employing, counsel in 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.
Notwithstanding anything contained in this Article XI, in the event that
Xxxxxx Xxxxxxxx, LLP determines that, as a result of the provisions contained in
this Article XI, it is unable to deliver the letter referred to in Section 7.6,
the parties hereto shall promptly amend this Article XI in whatever manner
necessary such that the provisions of this Article XI do not result in Xxxxxx
Xxxxxxxx, LLP's inability to deliver the letter referred to in Section 7.6.
The parties hereto acknowledge and agree that the remedies set forth in
this Article XI shall be the sole remedies available to such parties from any
claims arising hereunder.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 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.
12.2 Entire Agreement. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and
39
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.
12.3 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, five percent or more of the equity or voting
securities, (c) any Person that holds, of record or beneficially, five 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, (e) any Person that, through Contract,
relationship or otherwise, is influenced substantially in the management of
their affairs by such Person, or (f) 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, any
public, private or industry regulatory agency, arbitrator authority, whether
international, national, federal, state or local.
"Claim" means any action, claim, obligation, liability, expense,
lawsuit, demand, suit, inquiry, hearing, investigation, notice of a violation,
litigation, proceeding, arbitration, or other dispute, whether civil, criminal,
administrative or otherwise, whether pursuant to contractual obligations or
otherwise.
"Contract" means any agreement, contract, commitment, instrument
or other binding arrangement or understanding, whether written or oral.
"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.
40
"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, Claim, 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 ruling, consent 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 any Person which the Purchaser or the
Company, as the case may be, owns, directly or indirectly, 50% or more of the
outstanding stock or other equity interests.
12.4 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 to:
(a) If to the Sellers or the Company, to:
CruiseOne, Inc.
00 Xxxxxxx Xxxxx
Xxxxxxxxx Xxxxx, XX 00000
with a copy to:
Xxxxxx Xxxxxx Flattau & Klimpl, L.L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx Xxxx Xxxxxxxx, Esq.
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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
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 given when the party
being noticed has received delivery of the notice, except that notice effected
via facsimile shall be deemed given upon confirmation of the transmission of the
facsimile.
12.5 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.
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12.6 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.
12.7 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, interests and obligations
hereunder to any wholly-owned Subsidiary.
12.8 Governing Law. The Agreement shall be governed by the internal
laws of the State of Delaware as to all matters, including but not limited to
matters of validity, construction, effect and performance.
12.9 Consent to Jurisdiction; Service of Process. The Company and
each of the Sellers hereby irrevocably submit to the jurisdiction of the state
or federal courts located in Palm Beach County, Florida, 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.
12.10 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.
12.11 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).
12.12 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.
12.13 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
43
be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
12.14 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.
12.15 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.
12.16 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.
12.17 Expenses. 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 consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses.
12.18 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 from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred with respect to trials, appeals and
collection.
12.19 Counterparts. This Agreement may be executed in two or more
counterparts, 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:
Name:
Title:
SELLERS:
/s/ Xxxx Xxxxxxx
------------------------
Xxxx Xxxxxxx
/s/ Xxxxxxxxx Xxxx
------------------------
Xxxxxxxxx Xxxx
THE COMPANY:
CRUISEONE, INC.
By: /s/ Xxxx Xxxxxxx
------------------------
Name: Xxxx Xxxxxxx
Title: President
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