1
Exhibit 10.1
RECAPITALIZATION AGREEMENT
BY AND AMONG
XXXXXX EQUITY INVESTORS, III, L.P.
AND CERTAIN OTHER INVESTORS
TO BE LISTED ON THE INVESTOR SCHEDULE
(THE "INVESTORS")
ALLIED BUS CORP.
(THE "COMPANY")
ALLIED TOURS HOLDING CORP.
("ALLIED PARENT")
AND
THE SHAREHOLDERS OF THE COMPANY
(THE "SHAREHOLDERS")
DATED MARCH 18, 1998
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TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II RECAPITALIZATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 Stock Purchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.3 The Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.4 Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.5 Recapitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.7 Escrow Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.8 Intentionally Left Blank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.9 Closing Audit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Post-Closing Net Worth Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY, ALLIED PARENT AND SHAREHOLDERS . . . . . 10
3.1 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.2 No Liens on Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Other Rights to Acquire Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Due Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Due Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.8 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.9 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Licenses and Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.13 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Employee Welfare Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(b) Employee Pension Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(c) Employment and Non-Tax Qualified Deferred Compensation Arrangements . . . . . . . . 16
3.15 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.16 Claims and Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.17 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Personnel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.19 Business Relations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
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3.20 Accounts Receivable; Accounts Payables; Customer Deposits and Bookings . . . . . . . . . . 19
(a) Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(b) Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(c) Customer Deposits; Bookings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.21 Bank Accounts; Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.22 Customer Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.23 Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.24 Affiliated Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.25 Funded Indebtedness; Letters of Credit; Undisclosed Liabilities . . . . . . . . . . . . . 20
(a) Funded Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(b) Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
(c) Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.26 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.27 Information Furnished . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV THE INVESTORS' REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . 21
4.1 Due Organization of Xxxxxx III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Due Authorization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 No Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE V PRE-CLOSING COVENANTS OF THE COMPANY, ALLIED PARENT, XXXXXX III AND SHAREHOLDERS . . . . 22
5.1 Consents of Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.2 Shareholders' Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.3 Powers of Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4 Conduct of Business Pending Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.5 Access Before Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.6 Investor Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VI POST-CLOSING COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.2 Transition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Confidentiality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.4 Covenant Not to Compete . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
6.5 Additional Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.6 Litigation Support. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.7 Audits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.8 Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING . . . . . . . . . . . . . . 28
7.1 Conditions to the Investors' Obligations . . . . . . . . . . . . . . . . . . . . . . . . . 28
(a) Covenants, Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 28
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(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(c) Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
(d) Discharge of Indebtedness and Lien; Shareholder Loans . . . . . . . . . . . . . . . 29
(e) Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(f) Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(g) Financial Condition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(h) Documents to be Delivered by Shareholders; Allied Parent and the Company . . . . . 29
(i) Opinion of Shareholder's Counsel . . . . . . . . . . . . . . . . . . . . . 29
(ii) Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(iii) Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(iv) Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
(v) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(vi) Delivery of Purchased Shares . . . . . . . . . . . . . . . . . . . . . . 30
(vii) Redemption of Existing Common Stock . . . . . . . . . . . . . . . . . . 30
(viii) Resignation of Directors . . . . . . . . . . . . . . . . . . . . . . . 30
(ix) Termination of Shareholder Agreements . . . . . . . . . . . . . . . . . . 30
(x) Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(i) Company Equity Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(j) Restated Certificate of Incorporation . . . . . . . . . . . . . . . . . . . . . . . 30
(k) Liquidation of Sister Business . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.2 Conditions to Shareholders', Allied Parent's and the Company's Obligations . . . . . . . . 31
(a) Covenants, Representations and Warranties . . . . . . . . . . . . . . . . . . . . . 31
(b) Consents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(c) Documents to be Delivered by Investors . . . . . . . . . . . . . . . . . . . . . . 31
(ii) Escrow Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(iii) Employment Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 31
(iv) Consulting Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(d) Company Equity Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(e) Payments to Allied Parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
ARTICLE VIII INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.1 Indemnification by Allied Parent and Shareholders . . . . . . . . . . . . . . . . . . . . . 32
8.2 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
8.3 Escrow Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.4 Tax Audits, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
8.5 Indemnification of Shareholders, Allied Parent and the Company . . . . . . . . . . . . . . 33
8.6 Limits on Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE IX TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
9.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE X MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
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10.1 Modifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
10.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
10.3 Counterparts; Facsimile Transmission . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.4 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.5 Binding Effect; Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.6 Entire and Sole Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.8 Survival of Representations, Warranties and Covenants . . . . . . . . . . . . . . . . . . 38
10.9 Invalid Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.10 Public Announcements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.11 Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.12 Third Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
10.13 No Strict Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
10.14 Joinder by Additional Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
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LIST OF EXHIBITS
Exhibit A Form of Restated Certificate of Incorporation
Exhibit B Form of Escrow Agreement
Exhibit C Opinion of the Company's and Shareholders' Counsel
Exhibit D [Intentionally Left Blank]
Exhibit E Form of Release
Exhibit F Form of Xxxxxxx Xxxxxx Employment Agreement
Exhibit F-1 Form of Xxxxxxx Xxxxxx Employment
Exhibit F-2 Form of Xxxxxxx Xxxxxxx Employment
Exhibit G Shareholders Accounts and Wire Transfer Instructions(Section 2.4)
Exhibit H Ownership of Shares (Section 3.1)
Exhibit I-1 Articles (Section 3.5)
Exhibit I-2 Bylaws (Section 3.5)
Exhibit I-3 Qualified Jurisdictions (Section 3.6)
Exhibit J List of Properties (Section 3.9)
Exhibit K List of Licenses and Permits (Section 3.10)
Exhibit L List of Intellectual Property (Section 3.11)
Exhibit M List of Insurance (Section 3.13)
Exhibit N List of Contracts (Section 3.15)
Exhibit O List of Personnel (Section 3.18)
Exhibit P List of Bookings (Section 3.20)
Exhibit Q [Intentionally Left Blank]
Exhibit R List of Bank Accounts and Investments (Section 3.21)
Exhibit S List of Letters of Credit (Section 3.25(b))
Exhibit T List of Indebtedness (Section 7.1(d))
Exhibit U Xxxx Xxxxxx Consulting Agreement
LIST OF SCHEDULES
INVESTOR SCHEDULE
ESCROW SCHEDULE
DISCLOSURE SCHEDULE
RECAPITALIZATION SCHEDULE
TAX PAYMENTS SCHEDULE
FINANCIAL STATEMENTS
GAAP EXCEPTIONS MEMO
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RECAPITALIZATION AGREEMENT
THIS RECAPITALIZATION AGREEMENT (this "AGREEMENT") is entered
into as of March 18, 1998, by and among XXXXXX EQUITY INVESTORS III, L.P., a
Delaware limited partnership ("XXXXXX III"), on behalf of itself and certain
other investors who may execute a joinder hereto and shall be listed on the
Investor Schedule to this Agreement (Xxxxxx III and the other signatory
investors shall be referred to herein individually as an "INVESTOR" and
collectively as the "INVESTORS"), ALLIED BUS CORP., a New York corporation (the
"COMPANY") and ALLIED TOURS HOLDING CORP., a New York corporation ("ALLIED
PARENT"), and Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx Xxxxxx, and Xxxxxxxx
Xxxxxxx (collectively, the "SHAREHOLDERS").
RECITALS
Pursuant to this Agreement, the Company, which is engaged in
the wholesale travel sales business in the United States (the "BUSINESS"), will
be recapitalized in a series of transactions (the "TRANSACTIONS"). The
Transactions will occur in the following steps:
A. THE CURRENT CAPITALIZATION OF THE COMPANY
On the date of this Agreement, the Company's capitalization
consists of 200 shares of common stock, no par value per share (the "CAPITAL
STOCK"). Allied Parent is the owner of 100 shares of Capital Stock, which
stock represents all of the issued and outstanding stock of the Company (the
"EXISTING SHARES"). The Shareholders own 100 shares of the capital stock of
Allied Parent, which stock represents all of the issued and outstanding shares
of capital stock of Allied Parent.
B. THE STOCK PURCHASE
The Investors desire to purchase from Allied Parent and Allied
Parent desires to sell to the Investors an aggregate of 57 shares of Capital
Stock (the "STOCK PURCHASE") for a purchase price of $433,710 per share (an
aggregate purchase price of $24,721,470), subject to adjustment as provided
herein.
C. THE FINANCING
It is anticipated that the Company will enter into a credit
agreement or agreements with a financial institution or institutions (the
"FINANCING") to be arranged by Xxxxxx III, which Financing shall provide for a
loan or loans to the Company on commercially reasonable terms in connection
with the Transactions in the principal amount of up to approximately
$15,000,000 (the "LOAN PROCEEDS"). The closing of the Financing is not a
condition precedent to the closing of the Transactions, and if for any reason
the Financing is not fully consummated, such that some or all of the Loan
Proceeds are not received by the Company, but all of the remaining closing
conditions to this Agreement are satisfied, then Xxxxxx III will be responsible
for funding on commercially
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reasonable terms the sums necessary to consummate the Transactions (any such
other funds, together with any Loan Proceeds as necessary to consummate the
Transactions, shall be referred to herein as the "FINANCING PROCEEDS").
D. THE REDEMPTION
At Closing, 34 shares (the "REDEMPTION SHARES") of the
Existing Shares held by Allied Parent will be redeemed by the Company for a
purchase price of $433,710 per share (an aggregate redemption price of
$14,746,140), subject to adjustment and escrow holdbacks as provided herein
(the "REDEMPTION").
E. THE RECAPITALIZATION
Following the Redemption, the Company will recapitalize itself
(the "RECAPITALIZATION") by amending and restating its Certificate of
Incorporation to authorize two classes of capital stock, (i) the Common Stock,
$.01 par value (the "COMMON STOCK") and (ii) the Preferred Stock, par value
$1,000 per share (the "PREFERRED STOCK"). Pursuant to the Recapitalization,
each issued and outstanding share of Capital Stock will be exchanged for (i)
4,337.1 shares of Common Stock and (ii) 390.339 shares of Preferred Stock. A
chart showing the details of the Recapitalization is attached as the
Recapitalization Schedule hereto.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual premises and
covenants contained herein and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the parties hereto
covenant and agree as follows:
ARTICLE I
DEFINITIONS
1.1. DEFINITIONS. In this Agreement, the following terms
have the meanings specified or referred to in this Section 1.1 and shall be
equally applicable to both the singular and plural forms. Any agreement
referred to below shall mean such agreement as amended, supplemented and
modified from time to time to the extent permitted by the applicable provisions
thereof and by this Agreement.
"AA" has the meaning set forth in Section 2.9 below.
"ACCOUNTS RECEIVABLE ADJUSTMENT" has the meaning set forth in
Section 8.1 below.
"AFFILIATE" means, with respect to any Person, any other
Person which directly or indirectly controls, is controlled by or is under
common control with such Person.
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"ADJUSTED CLOSING FINANCIAL STATEMENTS" has the meaning
specified in Section 2.9.
"BUSINESS" has the meaning specified in the first recital of
the Agreement.
"CAPITAL STOCK" has the meaning specified in Recital A of the
Agreement.
"CLOSING" means the closing of the Stock Purchase followed by
the Redemption and subsequently the Recapitalization.
"CLOSING DATE" has the meaning specified in Section 2.6.
"CLOSING REDEMPTION PRICE" shall have the meaning assigned to
such term in Section 2.4(a).
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMON STOCK" has the meaning specified in Recital E of this
Agreement.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
"CONFIDENTIAL INFORMATION" means (i) the terms and provisions
of this Agreement and the Transactions and (ii) all confidential information
and trade secrets of the Company or its Affiliates including, without
limitation, any of the same comprising the identity, lists or descriptions of
any customers, referral sources or organizations; financial statements, cost
reports or other financial information; contract proposals, or bidding
information; business plans and training and operations methods and manuals;
personnel records; fee structure; and management systems, policies or
procedures, including related forms and manuals. Confidential Information
shall not include any information (a) which is disclosed pursuant to subpoena
or other legal process, (b) which has been publicly disclosed, or (c) which is
subsequently disclosed to any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
"COURT ORDER" means any judgment, order, award or decree of
any foreign, federal, state, local or other court or tribunal and any award in
any arbitration proceeding.
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached
to this Agreement pursuant to which exceptions to Allied Parent's, the
Shareholders' and the Company's specific representations and warranties set
forth in Article III (and listed on a Section-by-Section basis) are disclosed
to Investors pursuant to said Article III.
"ENCUMBRANCE" means any lien, claim, charge, security
interest, mortgage, pledge, easement, conditional sale or other title retention
agreement, defect in title, restrictive covenant or other restrictions of any
kind.
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"ENVIRONMENTAL AND OSHA OBLIGATIONS" has the meaning specified
in Section 3.12.
"EQUITABLE EXCEPTIONS" shall have the meaning specified in
Section 3.6.
"EQUITY AGREEMENTS" means those certain equity agreements
between Investors, the Company, Allied Parent, the Shareholders and certain
executives to be entered into as of the Closing Date, including without
limitation, the Shareholders Agreement.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means The Bank of New York.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed
by and among the Company, Allied Parent, the Shareholders, Xxxxxx III and the
Escrow Agent in the form of Exhibit B.
"ESCROW NOTE" has the meaning specified in Section 2.4.
"ESCROW PERIOD" has the meaning specified in Section 2.7.
"ESCROW SUM" has the meaning specified in Section 2.7.
"EXISTING SHARES" has the meaning specified in Recital A of
the Agreement.
"FINANCIAL STATEMENTS" has the meaning specified in Section
3.7.
"FINANCING" has the meaning specified in Recital C of the
Agreement.
"FINANCING PROCEEDS" has the meaning specified in Recital C of
the Agreement.
"FORCE MAJEURE" shall mean any failure or delay caused by acts
of god, flood, fire, war or terrorism or any failure or delay caused by a
governmental blockage of all currency transactions between a foreign
Governmental Body and the United States of America.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the
Company for borrowed money or other interest-bearing indebtedness; (ii) capital
lease obligations of the Company; (iii) obligations of the Company to pay the
deferred purchase or acquisition price for goods or services, other than trade
accounts payable in the ordinary course of business; (iv) indebtedness of
others guaranteed by the Company or secured by an Encumbrance on the Company's
property; and (v) indebtedness of the Company under extended credit terms of
more than 30 days from vendors provided to the Company.
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"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"GAAP EXCEPTIONS MEMO" shall have the meaning specified in
Section 3.7.
"GOVERNMENTAL BODY" means any foreign, federal, state, local
or other governmental authority or regulatory body having jurisdiction over the
Company, Allied Parent and/or the Shareholders.
"GOVERNMENTAL PERMITS" has the meaning specified in Section
3.10.
"HSR ACT" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section
8.1.
"INDEMNIFIED PARTIES" has the meaning specified in Section
8.1.
"INDEPENDENT ACCOUNTANTS" has the meaning specified in Section
2.9.
"INTELLECTUAL PROPERTY" shall mean all of the following: (i)
patents, patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"INVESTORS" has the meaning specified in the first paragraph
of this Agreement.
"KNOWLEDGE OF THE COMPANY" (whether or not capitalized) shall
mean actual knowledge, after reasonable inquiry, of the Shareholders and the
employees of the Company with responsibility for the applicable subject matter.
"KNOWLEDGE OF THE SHAREHOLDERS" (whether or not capitalized) shall mean actual
knowledge of the Shareholders after reasonable inquiry
"LEASES" shall mean the leases for the Company's offices
located at (i) 000 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000;
(ii) Suite Nos. 710 and 714 in 0000 Xxxx Xxxxxxx Xxxxxxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx 00000; (iii) 000 Xxxxxxx Xxxx, Xxxxx XX.X.X., Xxxxx Xxxxx, Xxxxxxx
00000; and (iv) 0000 Xxxxxxxx Xxxxxx, Part of 0xx Xxxxx, Xxxxxxxx, Xxxxxx.
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"LOAN PROCEEDS" has the meaning specified in Recital C of the
Agreement.
"MATERIAL" (whether or not capitalized) shall, where
appropriate in context of its use in making the representations and warranties
set forth in Article III, be deemed to mean an amount of money greater than
$100,000.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, financial condition or prospects of the Company and
its subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred in the context of the use of
such terms in the Company's, Allied Parent's and Shareholders' representations
and warranties set forth in Article III, such terms shall refer to the
occurrence of any single event, or any series of related events, or set of
related circumstances, which results or may result in a loss to the Company, in
excess of $100,000 per occurrence or $250,000 in the aggregate.
"NET WORTH" shall equal the Company's total assets minus its
total liabilities.
"NET WORTH ADJUSTMENT" has the meaning specified in Section
2.10.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
Sections 651 et seq., any amendment thereto, and any regulations promulgated
thereunder.
"PERMITTED DISTRIBUTIONS" has the meaning specified in Section
3.8.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, or (c) other liens or imperfections on property
which are not material in amount or do not materially detract from the value or
the existing use of the property affected by such lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PREFERRED STOCK" has the meaning specified in Recital E of
the Agreement.
"PROJECTED NET WORTH" means a minus ($400,000).
"PURCHASE PRICE" has the meaning specified in Section 2.1.
"PURCHASED SHARES" has the meaning specified in Section 2.1..
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"RECAPITALIZATION" has the meaning specified in Recital E of
the Agreement.
"REDEMPTION" has the meaning specified in Recital D of the
Agreement.
"REDEMPTION PRICE" has the meaning specified in Section 2.4.
"REDEMPTION SHARES" has the meaning specified in Recital D of
the Agreement.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and
occupational safety and health requirements).
"SHAREHOLDERS" has the meaning set forth in the first
paragraph of this Agreement.
"STOCK PURCHASE" has the meaning specified in Recital B of the
Agreement.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance, property, production, sales, use, transfer, gains, license,
excise, employment, payroll, withholding or minimum tax, transfer, goods and
services, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or any
penalty, addition to tax or additional amounts imposed thereon by any
Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
"XXXXXX III" has the meaning specified in the first paragraph
of this Agreement.
"TRANSACTIONS" has the meaning specified in the beginning of
the recitals of this Agreement.
ARTICLE II
RECAPITALIZATION
2.1. STOCK PURCHASE. On the Closing Date and subject to
the terms and conditions set forth in this Agreement, Allied Parent shall sell
and deliver to the Investors an aggregate of 57 shares of the Capital Stock
(the "PURCHASED SHARES"), free and clear of all Encumbrances, other than the
restrictions imposed by federal and state securities laws. The total
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purchase price for the Purchased Shares (the "PURCHASE PRICE") shall be equal
to $24,721,470, subject to any adjustment required to be made pursuant to
Section 2.10 below.
2.2. PAYMENT OF PURCHASE PRICE. The Purchase Price shall
be payable by the Investors or Xxxxxx III as follows: (a) $21,350,470 of the
Purchase Price will be payable at the Closing (as defined in Section 2.6) in
cash by wire transfer of funds to Allied Parent's account as specified in
Exhibit G attached hereto and (b) the balance of the Purchase Price
($3,371,000) will be paid in accordance with the Tax Payments Schedule attached
hereto by wire transfer of funds to Allied Parent's or the Shareholders'
accounts as specified in Exhibit G attached hereto as updated from time to time
following the Closing Date.
2.3. THE FINANCING. On the Closing Date, the Company
shall consummate the Financing and shall borrow an amount equal to the
Financing Proceeds in order to consummate the Redemption.
2.4. REDEMPTION. On the Closing Date and subject to the
terms and conditions set forth in this Agreement, the Company shall redeem the
Redemption Shares from Allied Parent. Subject to the terms of Section 2.7,
which provision requires certain holdbacks prior to the distribution of such
price to Allied Parent, the Redemption Shares shall be redeemed at a price of
$433,710 per share, for an aggregate gross redemption price of $14,746,140 (the
"REDEMPTION PRICE"). The Redemption Price shall be payable as follows:
(a) an aggregate of $10,746,140 shall be paid at
Closing by wire transfer of funds to Allied Parent's account as specified in
Exhibit G hereto (the "CLOSING REDEMPTION PRICE"); and
(b) $4,000,000 shall be paid to the Escrow Agent
at Closing pursuant to Section 2.7 below to serve as the Escrow Sum (as defined
below) in the form of a 120 day promissory note which bears interest at the
rate of 8% per annum in a form mutually agreed upon by Xxxxxx III and Allied
Parent (the "ESCROW NOTE").
2.5. RECAPITALIZATION. Following the Stock Purchase and
the Redemption and on the Closing Date, the Company shall amend and restate its
Certificate of Incorporation to authorize the issuance of the two classes of
the capital stock (the Common Stock and the Preferred Stock) each having the
rights and preferences set forth in the Company's Restated Certificate of
Incorporation in substantially the form of Exhibit A attached hereto and as
necessary to effect the Transactions. Pursuant to such amendment, each share
of Capital Stock issued and outstanding after the Stock Purchase and the
Redemption shall be exchanged for (i) 4,337.1 shares of Common Stock and (ii)
390.34 shares of Preferred Stock.
2.6. CLOSING. The Closing of the Transactions shall take
place at 10:00 a.m., Eastern Time, at the offices of Xxxxx & Xxxxxxx L.L.P.,
000 00xx Xxxxxx, X.X. in Washington, D.C. on March 25, 1998, or on the date
selected by Xxxxxx III (which date shall be as soon as practicable following
the date on which all of the conditions to Closing set forth in Sections 7.1
and 7.2 have been satisfied) (the "CLOSING DATE").
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2.7. ESCROW ARRANGEMENTS. Pursuant to the Escrow
Agreement to be entered into among Shareholders, Allied Parent, the Company,
Xxxxxx III and the Escrow Agent, $4,000,000 of the Redemption Price shall be
delivered to the Escrow Agent at Closing pursuant to the Escrow Note. Upon
payment of the Escrow Note by the Company in immediately available funds on or
prior to 120 days after the Closing Date, such monies paid (which, together
with all interest accrued thereon, is hereinafter referred to as the "ESCROW
SUM") shall be held pursuant to the terms of the Escrow Agreement for payment
from such Escrow Sum of the amounts, if any, owing by Allied Parent to the
Investors or the Company pursuant to the provisions of the Net Worth Adjustment
or the Escrow Schedule attached hereto and the indemnification provisions of
Article VIII below. At the conclusion of the period ending ten days after
completion of the final Adjusted Closing Financial Statements and the
resolution of any disputes therein pursuant to Section 2.9 below, the Escrow
Sum shall be reduced to an amount equal to the sum of $2,000,000 in cash, plus
the amount, if any, reserved, but not then paid or resolved, pursuant to claims
made against the Escrow Sum by the Investors or the Company pursuant to the
provisions of the Net Worth Adjustment and the Escrow Schedule (such amount of
reduction in the Escrow Sum being referred to as the "ESCROW SUM REDUCTION")
and (ii) on the first anniversary of the Closing Date (such one-year period
being referred to herein as the "ESCROW PERIOD"), such remaining portion of the
Escrow Sum not theretofore claimed by or paid to the Investors or the Company
in accordance with the terms of the Escrow Agreement, the Escrow Schedule and
this Agreement (together with any interest on such remaining portion of the
Escrow Sum) shall be disbursed to Allied Parent. All disbursements pursuant to
the Escrow Sum Reduction or at the expiration of the Escrow Period shall be
paid in cash to Allied Parent at its account set forth in Exhibit G as updated
from time to time. Shareholders, Allied Parent, the Company and Xxxxxx III
agree that each will execute and deliver such reasonable instruments and
documents as are furnished by any other party to enable such furnishing party
to receive those portions of the Escrow Sum to which the furnishing party is
entitled under the provisions of the Escrow Agreement and this Agreement.
2.8. [INTENTIONALLY LEFT BLANK].
2.9. CLOSING AUDIT. Within 120 days following the Closing
Date, there shall be delivered to Investors and to Shareholders an audit of the
Company's balance sheet and statements of income and cash flows as of and for
the two months ended February 28, 1998 (the "ADJUSTED CLOSING FINANCIAL
STATEMENTS"). The Adjusted Closing Financial Statements shall be audited by
Xxxxxx Xxxxxxxx, LLP ("AA") in accordance with GAAP and then adjusted to be in
accordance with the Company's prior accounting practices. The cost of
preparing the Adjusted Closing Financial Statements shall be paid by the
Company. In the event that Allied Parent disputes any items or assumptions or
methodologies regarding the Adjusted Closing Financial Statements within thirty
(30) days after Allied Parent's receipt thereof, Allied Parent and Xxxxxx III
shall jointly select and retain an independent "Big Six" accounting firm (the
"INDEPENDENT ACCOUNTANTS") to review the disputed matter(s) on the Adjusted
Closing Financial Statements. In conducting such review, the Company and AA
shall provide the Independent Accountants and, during the thirty (30) day
period, Allied Parent, with customary access to the work papers of AA utilized
in preparing the Adjusted Closing Financial Statements. The final
determination of such disputed matter(s) by the Independent Accountants shall
be
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utilized to determine all adjustments described in Section 2.10 below and shall
be final and binding on the parties for such purposes. The cost of retaining
the Independent Accountants shall be borne by Shareholders, except that the
Company shall reimburse Shareholders for one-half the cost of the Independent
Accountants in the event that such review results in at least a $150,000
increase in the Company's Net Worth as reflected on the Adjusted Closing
Financial Statements prepared by AA.
2.10. POST-CLOSING NET WORTH ADJUSTMENT. The Redemption
Price will be adjusted upward or downward, on a dollar-for-dollar basis, to
reflect the increase or decrease, as the case may be, in Net Worth as reflected
on the Adjusted Closing Financial Statements from the Projected Net Worth (the
"NET WORTH ADJUSTMENT"). The Net Worth Adjustment shall be determined by AA.
In the event that the Net Worth Adjustment results in a decrease in the
Redemption Price, then the Escrow Agent or Allied Parent and the Shareholders
shall pay such amount to the Company in immediately available funds within ten
(10) business days of delivery of the Adjusted Closing Financial Statements as
finally determined in accordance with Section 2.9 above. Conversely, in the
event that the Net Worth Adjustment results in an increase in the Redemption
Price, then the Company shall pay such amount to Allied Parent to the account
set forth in Exhibit G hereto in immediately available funds within ten (10)
business days of delivery of the Adjusted Closing Financial Statements as
finally determined in accordance with Section 2.9 above.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY, ALLIED PARENT AND SHAREHOLDERS
Except as set forth on the Disclosure Schedule attached hereto
(which Disclosure Schedule contains a reasonably detailed description of each
such exception and references the applicable representation so qualified), the
Company, Allied Parent and Shareholders jointly and severally represent and
warrant to the Investors that:
3.1. CAPITALIZATION. The authorized capital stock of the
Company immediately prior to Closing consists of 200 shares of Capital Stock,
100 of which being the Existing Shares are issued and outstanding. All of the
Existing Shares are duly authorized, validly issued, fully paid, and
nonassessable. All of the Existing Shares are owned of record and beneficially
by Allied Parent. All of the outstanding shares of Allied Parent are owned of
record and beneficially by the Shareholders in the amounts set forth on Exhibit
H hereto. None of the Existing Shares was issued or will be redeemed under
this Agreement in violation of any preemptive or preferential rights of any
Person.
3.2. NO LIENS ON SHARES. Allied Parent owns the Existing
Shares and Shareholders own all of the Allied Parent shares, free and clear of
any Encumbrances other than the rights and obligations arising under this
Agreement, and none of the Existing Shares or the Allied Parent shares is
subject to any outstanding option, warrant, call, or similar right of any other
Person to acquire the same, and none of the Existing Shares or the Allied
Parent shares is
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subject to any restriction on transfer thereof except for restrictions imposed
by applicable federal and state securities laws. At Closing pursuant to the
Redemption and the Stock Purchase, Allied Parent will have full corporate power
and authority to convey good and marketable title to the Redemption Shares and
the Purchased Shares, free and clear of any Encumbrances other than the
restrictions imposed by federal and state securities laws.
3.3. SUBSIDIARIES. The Company does not own, directly or
indirectly, any capital stock or ownership interests in any Person. The
Shareholders do not own any capital stock or ownership interests in any other
Person engaged in the Business other than Allied Parent. Allied Parent does
not own any capital stock or ownership interests in any other Person other than
the Company.
3.4. OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set
forth in this Agreement in respect of Investors' rights to acquire the
Purchased Shares, there are no authorized or outstanding warrants, options, or
rights of any kind to acquire from the Company any equity or debt securities of
the Company, or securities convertible into or exchangeable for equity or debt
securities of the Company, and there are no shares of capital stock of the
Company reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require the Company to issue, sell or
deliver any additional shares of its capital stock.
3.5. DUE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of New York and has full corporate power and authority to own and lease its
properties and assets and to carry on the Business as now conducted and as
proposed to be conducted through Closing. Allied Parent is a corporation duly
organized, validly existing, and in good standing under the laws of the State
of New York and has full corporate power and authority to own and lease its
properties and assets and to carry on the Business as now conducted and as
proposed to be conducted through Closing. Complete and correct copies of the
Certificate of Incorporation and Bylaws of the Company and Allied Parent, and
all amendments thereto, have been delivered to Investors and are attached
hereto as Exhibits I-1 and I-2. The Company is qualified to do business in the
State of New York and in each jurisdiction in which the nature of the Business
or the ownership of its properties requires such qualification except where the
failure to be so qualified does not and could not reasonably be expected to
have a Material Adverse Effect. The jurisdictions in which the Company is so
qualified are listed on Exhibit I-3 attached hereto.
3.6. DUE AUTHORIZATION. The Company, Allied Parent and
the Shareholders each have full power and authority to execute, deliver and
perform this Agreement and to carry out the Transactions. The execution,
delivery, and performance of this Agreement and the Transactions have been duly
and validly authorized by all necessary corporate action of the Company and
Allied Parent. This Agreement has been duly and validly executed and delivered
by the Company, Allied Parent and Shareholders and constitutes the valid and
binding obligations of the Company, Allied Parent and Shareholders, enforceable
in accordance with its terms, except to the extent that enforceability may be
limited by laws affecting creditors' rights and debtors' obligations generally,
and legal limitations relating to remedies of specific performance and
injunctive and other forms of equitable relief (the "EQUITABLE EXCEPTIONS").
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The execution, delivery, and performance of this Agreement and the Transactions
(as well as all other instruments, agreements, certificates, or other documents
contemplated hereby) by the Company, Allied Parent and Shareholders, do not (a)
violate any Requirements of Laws or any Court Order of any Governmental Body
applicable to the Company, Allied Parent or Shareholders, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any material agreement to which the Company, Allied
Parent or Shareholders are a party, or by which any of them or any of their
respective property is bound, (c) permit the acceleration of the maturity of
any material indebtedness of, or indebtedness secured by the property of, the
Company, Allied Parent or Shareholders, (d) violate or conflict with any
provision of the charter or bylaws of the Company or Allied Parent, or (e)
except for filings or approvals under the HSR Act and such consents, approvals,
or registrations as may be required under applicable state securities laws,
require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any Governmental Body or other third
party.
3.7. FINANCIAL STATEMENTS. The following financial
statements of the Company have been delivered to Investors by the Company:
reviewed balance sheets of the Company as of December 31, 1995, December 31,
1996 and unaudited balance sheet as of December 31, 1997, and reviewed
statements of income and cash flows of the Company for the fiscal years ended
December 31, 1995 and December 31, 1996 and unaudited statements of income and
cash flow for the year ending December 31, 1997 (collectively, the "FINANCIAL
STATEMENTS"). Copies of the Financial Statements are included in the
Disclosure Schedule hereto. The Financial Statements, including the Financial
Statements as of and for the year ending December 31, 1997 (the "MOST RECENT
FINANCIAL STATEMENTS"), have been prepared in accordance with GAAP, except as
specifically set forth in the Xxxxx Xxxxxxx Xxxxxx Xxxxxx & Company LLP
memorandum included in the Disclosure Schedule hereto (the "GAAP EXCEPTIONS
MEMO"). The Financial Statements (including the notes thereto) have been
prepared on a consistent basis throughout the periods indicated and fairly
present the financial position, results of operations and changes in financial
position of the Company as of the indicated dates and for the indicated periods
and are consistent with the books and records of the Company (which books and
records are correct and complete). Since the date of the last of such
Financial Statements, the Company has no Material liabilities required by GAAP
to be reflected on the Company's balance sheet or notes thereto that are not so
reflected in the Financial Statements except as set forth in the GAAP
Exceptions Memo, nor any other obligations (whether absolute, contingent, or
otherwise) which are (individually or in the aggregate) Material (in amount or
to the conduct of the Business); and neither the Company nor Shareholders have
Knowledge of any basis for the assertion of any such Material liability or
obligation. Since December 31, 1997, the Company has not experienced any
Material Adverse Change.
3.8. CERTAIN ACTIONS. Since December 31, 1997, the
Company has not, except as disclosed on any of the Financial Statements or
notes thereto: (a) paid or declared any dividends or distributions, or
purchased, redeemed, acquired, or retired any stock or indebtedness from Allied
Parent or any Shareholder (other than distributions to pay estimated income
taxes of the Shareholders associated with the income of the Company
distributions of the Company's net income for the fiscal year ended December
31, 1997; up to $900,000 of retained, pre-S
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corporation earnings, less the aggregate amount of all debt owed by the
Shareholders to the Company; and additional distributions by the Company, all
of which shall be deemed to be made on or prior to February 28, 1998
(collectively the "PERMITTED DISTRIBUTIONS"); provided that in the event that
payment of any portion of the Permitted Distributions would result in any
violation of the condition to the Closing contained in Section 7.1(g) hereof,
then the Company shall pay such Permitted Distributions at Closing in an amount
not to exceed $2,000,000 out of the Financing Proceeds); (b) made or agreed to
make any loans or advances or guaranteed or agreed to guarantee any loans or
advances to any party whatsoever; (c) suffered or permitted any Encumbrance to
arise or be granted or created against or upon any of its assets, real or
personal, tangible or intangible; (d) canceled, waived, or released or agreed
to cancel, waive, or release any of its debts, rights, or claims against third
parties in excess of $25,000 individually or $50,000 in the aggregate; (e)
sold, assigned, pledged, mortgaged, or otherwise transferred, or suffered any
material damage, destruction, or loss (whether or not covered by insurance) to,
any assets (except in the ordinary course of the Business); (f) amended its
charter or bylaws; (g) paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (h) made any material change
in its method of management operation, accounting or reporting of income or
deductions for tax purposes or any change outside the ordinary course of the
Business in the Company's working capital other than Permitted Distributions;
(i) made any material acquisitions, made any capital expenditures, including,
without limitation, replacements of equipment in the ordinary course of the
Business, or entered into commitments therefor, except for capital expenditures
or commitments therefor which do not, in the aggregate, exceed $100,000; (j)
made any investment or commitment therefor in any Person; (k) made any payment
or contracted for the payment of any bonus or other compensation or personal
expenses, other than (A) wages and salaries and business expenses paid in the
ordinary course of the Business, and (B) wage and salary adjustments made in
the ordinary course of the Business for employees who are not officers,
directors, or shareholders of the Company; (l) made, amended, or entered into
any written employment contract or created or made any material change in any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement; (m) made or entered into any vendor, supply,
sales, distribution, franchise, consortia or travel agency agreement which
involves annual consideration (or commissions) in excess of $100,000; (n) made
or entered into any agreement granting any Person any registration or offer
rights in respect of the Company's capital stock; (o) entered into any
non-competition agreement; (p) made or entered into any agreement or other
arrangement with any officer, director, shareholder, employee or Affiliate of
the Company or any of the foregoing Persons; (q) materially amended,
experienced a termination or received notice of actual or threatened
termination or non-renewal of any material contract, agreement, lease,
franchise or license to which the Company is a party that would or could
reasonably be expected to have a Material Adverse Effect; or (r) entered into
any other material transactions that would or could reasonably be expected to
have a Material Adverse Effect.
3.9. PROPERTIES. Attached hereto as Exhibit J is a list
containing a description of each interest in real property (including, without
limitation, leasehold interests) and each item of personal property utilized by
the Company in the conduct of the Business having a book or fair market value
in excess of $20,000 as of the date hereof. Except for Permitted Exceptions,
such real and personal properties are free and clear of Encumbrances.
Shareholders and the
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Company have delivered to Investors copies of all real property leases and a
lien search obtained from the counties where the Company conducts business and
the New York Secretary of State office of all UCC liens of record against the
Company's personal property in the State of New York. All of the properties
and assets necessary for continued operation of the Business as currently
conducted (including, without limitation, all books, records, computers and
computer software and data processing systems) are owned, leased or licensed by
the Company and are suitable for the purposes for which they are currently
being used. With the exception of used equipment and inventory valued at no
more than $20,000 in the aggregate on the Company's Financial Statements, the
physical properties of the Company, including the real properties leased by the
Company, are in operating condition and repair, normal wear and tear excepted,
and are free from any defects of a material nature. Except for Permitted
Exceptions, the Company has full and unrestricted legal and equitable title to
all such properties and assets. The operation of the properties and Business
of the Company in the manner in which they are now and have been operated does
not violate any zoning ordinances, municipal regulations, or other Requirements
of Laws, except for any such violations which would not, individually or in the
aggregate, have a Material Adverse Effect. To the Knowledge of the
Shareholders, except for Permitted Exceptions, no restrictive covenants,
easements, rights-of-way, or regulations of record impair the uses of the
properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms
immediately following the Closing, except for the Equitable Exceptions. All
facilities leased by the Company have received all approvals of any
Governmental Body (including Governmental Permits) required to be obtained by
the Company in connection with the operation of the Business and have been
operated and maintained in accordance with all Requirements of Laws applicable
to the Company as a lessee thereof. The Company owns no real property.
3.10. LICENSES AND PERMITS. Attached hereto as Exhibit K
is a list of all licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could, individually or in the aggregate, have a Material
Adverse Effect. The Company has complied in all material respects with the
terms and conditions of all such Governmental Permits, and the Company has not
received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof. All of such Governmental Permits are valid and in
full force and effect. No additional Governmental Permit is required from any
Governmental Body thereof in connection with the conduct of the Business which
Governmental Permit, if not obtained, would have a Material Adverse Effect.
3.11. INTELLECTUAL PROPERTY. Attached hereto as Exhibit L
is a list and brief description of all Intellectual Property owned or utilized
by the Company. The Company has furnished Investors with copies of all license
agreements to which the Company is a party, either as licensor or licensee,
with respect to any Intellectual Property. The Company has good title to or
the right to use all the Intellectual Property and all inventions, processes,
designs, formulae, trade secrets and know-how necessary for the conduct of the
Business, in the Business as
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presently conducted without the payment of any royalty or similar payment, and
the Company is not infringing on any Intellectual Property right of others, and
neither the Company nor Shareholders are aware of any infringement by others of
any such rights owned by the Company. All licenses set forth on Exhibit L are
valid and binding obligations of the Company, and to the Knowledge of the
Company the other parties thereto, and enforceable against the Company, and to
the Knowledge of the Company the other parties thereto in accordance with their
respective terms, except for the Equitable Exceptions. The Company owns and
possesses all right, title and interest in and to, or has the right to use
pursuant to a valid license, all Intellectual Property necessary for the
operation of the business of the Company as presently conducted.
3.12. COMPLIANCE WITH LAWS. The Company has (i) complied
in all material respects with all Requirements of Laws, Governmental Permits
and Court Orders applicable to the Business and has filed with the proper
Governmental Bodies all statements and reports required by all Requirements of
Laws, Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject
and (ii) to the Knowledge of the Company, conducted the Business and is in
compliance in all material respects with all federal, state and local energy,
public utility, health, safety and environmental Requirements of Laws,
Governmental Permits and Court Orders including the Clean Air Act, the Clean
Water Act, the Solid Waste Act, the Comprehensive Environmental Response
Compensation and Liability Act, the Resource Conservation and Recovery Act, the
Safe Drinking Water Act, OSHA, the Toxic Substances Control Act and any similar
state, local or foreign laws (collectively "ENVIRONMENTAL AND OSHA
OBLIGATIONS") and all other Governmental Body requirements, except where any
such failure to comply or file would not, in the aggregate, have a Material
Adverse Effect. No claim has been made by any Governmental Body (and, to the
Knowledge of the Company and Shareholders, no such claim is anticipated) to the
effect that the Business fails to comply, in any respect, with any Requirements
of Laws, Governmental Permit or Environmental and OSHA Obligation or that a
Governmental Permit or Court Order is necessary in respect thereto.
3.13. INSURANCE. Attached hereto as Exhibit M is a list of
all coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binder for all such
insurance policies have been delivered to Investors. The insurance maintained
by the Company is adequate and customary for companies engaged in the Business.
To the best of the Company's and Shareholders' Knowledge, no event relating to
the Company has occurred which will result in (i) cancellation of any such
insurance coverages; (ii) a retroactive upward adjustment of premiums under any
such insurance coverages; or (iii) any prospective upward adjustment in such
premiums. All of such insurance coverages will remain in full force and effect
following the Closing. The Company is not in default under any such insurance
policies.
3.14. EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE WELFARE BENEFIT PLANS. The Company
does not maintain or contribute to any "employee welfare benefit plan" as such
term is defined in Section 3(1) of ERISA. With respect to each such plan
listed in the Disclosure Schedule, (i) the plan is
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in material compliance with ERISA and all other applicable Requirements of
Laws; (ii) the plan has been administered in accordance with its governing
documents; (iii) neither the plan, nor any fiduciary with respect to the plan,
has engaged in any "prohibited transaction" as defined in Section 406 of ERISA
other than any transaction subject to a statutory or administrative exemption;
(iv) except for the processing of routine claims in the ordinary course of
administration, there is no material litigation, arbitration or disputed claim
outstanding; and (v) all premiums due on any insurance contract through which
the plan is funded have been paid.
(b) EMPLOYEE PENSION BENEFIT PLANS. The Company
does not maintain or contribute to any arrangement that is or may be an
"employee pension benefit plan" relating to employees, as such term is defined
in Section 3(2) of ERISA.
(c) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED
COMPENSATION ARRANGEMENTS. The Company does not maintain or contribute to any
retirement or deferred or incentive compensation or stock purchase, stock grant
or stock option arrangement entered into between the Company and any current or
former officer, consultant, director or employee of the Company that is not
intended to be a tax qualified arrangement under Section 401(a) of the Code.
3.15. CONTRACTS AND AGREEMENTS. Exhibit N hereto contains
a list and brief description of all written or oral contracts, commitments,
leases (including without limitation the Leases), and other agreements
(including, without limitation, promissory notes, loan agreements, and other
evidences of indebtedness, guarantees, hedging agreements, off-balance sheet
financing arrangements, indemnity agreements, vendor contracts with airlines
and other carriers, hotels and resorts, agreements with rental car companies,
marketing agreements, consortia agreements, travel agency agreements, interface
or similar agreements pertaining to various airline or other computer
reservation systems) to which the Company is a party or by which the Company or
its properties are bound pursuant to which the obligations thereunder of either
party thereto are, or are contemplated as being, for any one contract, $150,000
or greater or any contract or agreement prohibiting it from freely engaging in
any business or competing anywhere in the world (collectively, the
"CONTRACTS"). The Company is not and, to the best knowledge of Shareholders
and the Company, no other party thereto is in default (and no event has
occurred which, with the passage of time or the giving of notice, or both,
would constitute a default by the Company) under any of the Contracts, and the
Company has not waived any right under any of the Contracts. All of the
Contracts to which the Company is a party are legal, valid, binding,
enforceable and in full force and effect and will remain legal, valid, binding,
enforceable and in full force and effect on identical terms immediately after
the Closing, except for the Equitable Exceptions. The Company has not
guaranteed any obligations of any other Person. The Company has no present
expectation or intention of not fully performing all of its obligations under
any Contract, the Company has no Knowledge of any breach or anticipated breach
by the other parties to any Contract and the Company has not received notice of
actual or threatened termination or non renewal of any Contract.
3.16. CLAIMS AND PROCEEDINGS. There are no claims,
actions, suits, proceedings, or investigations pending or, to the Knowledge of
the Shareholders or the Company, threatened against or affecting the Company or
any of its properties or assets, at law
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or in equity, before or by any court, municipality or other Governmental Body.
To the extent any are disclosed on the Disclosure Schedule, none of such
claims, actions, suits, proceedings, or investigations, if adversely
determined, will individually or in the aggregate result in any Material
Adverse Effect to the Company. The Company has not been and the Company is not
now, subject to any Court Order, stipulation, or consent of or with any court
or Governmental Body. No inquiry, action or proceeding has been instituted or,
to the best knowledge and belief of the Shareholders or the Company, threatened
or asserted against the Shareholders, Allied Parent or the Company to restrain
or prohibit the carrying out of the Transactions or to challenge the validity
of the Transactions or any part thereof or seeking damages on account thereof.
To the Knowledge of the Company and Shareholders there is no basis for any such
valid claim or action.
3.17. TAXES.
(a) All Federal, foreign, state, county and local
and other Taxes due from the Company on or before the Closing have been paid
and all Tax Returns which are required to be filed by the Company on or before
the date hereof have been filed within the time and in the manner provided by
all Requirements of Laws or extensions were timely filed, and all such Tax
Returns are true and correct and accurately reflect the Tax liabilities of the
Company. No Tax Returns of the Company, Allied Parent or any of the
Shareholders are presently subject to an extension of the time to file. All
Taxes, assessments, penalties, and interest of the Company which have become
due pursuant to such Tax Returns or any assessments received have been paid or
adequately accrued on the Company's Financial Statements. The provisions for
Taxes reflected on the balance sheets contained in the Financial Statements are
adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which any of the Shareholders or the Company are
aware. For Governmental Bodies with respect to which the Company does not file
Tax Returns, no such Governmental Body has given the Company written
notification that the Company is or may be subject to taxation by that
Governmental Body. The Company has withheld and paid all Taxes required to
have been withheld and paid in connection with amounts paid or owing to any
employee, shareholder, creditor, independent contractor or other party. There
are no Tax liens on any of the property or assets of the Company.
(b) Neither the Company nor any other corporation
has filed an election under Section 341(f) of the Code that is applicable to
the Company or any assets held by the Company. The Company has not made any
payments, is not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Sec. 280G. The Company has not
been a United States real property holding corporation within the meaning of
Code Sec. 897(c)(2) during the applicable period specified in Code Sec.
897(c)(1)(A)(ii). The Company is not a party to any Tax allocation or sharing
agreement. During the past seven years, the Company has not and has never been
(nor does the Company have any liability for unpaid Taxes
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because it once was) a member of an affiliated group during any part of which
return year any corporation other than the Company also was a member of the
affiliated group.
(c) No transaction contemplated by this Agreement
is subject to withholding under Section 1445 of the Code and no stock transfer
taxes, real estate transfer taxes or similar taxes will be imposed upon the
sale of the Purchased Shares or the redemption of the Redemption Shares
pursuant to this Agreement.
(d) The Company and Allied Parent have each made
a valid election under Section 1362 of the Code and any corresponding state or
local provisions to be an S corporation within the meaning of Section 1361 of
the Code for all taxable years (or portions thereof) beginning on or after
December 31, 1982 with respect to the Company and since inception with respect
to Allied Parent, no such S election has been terminated (whether voluntarily,
involuntarily or inadvertently, including, without limitation, by taking any
action defined in Section 1362(d) of the Code) since such time. Allied Parent
has made a valid election for the Company to be qualified as a "Qualified
Subchapter S subsidiary" under Section 1361 of the Code and applicable state
laws effective as of the date that the Shareholders contributed the stock of
the Company to Allied Parent.
(e) The Company will not be required to include
any amount in taxable income or exclude any item of deduction or loss from
taxable income for any taxable period (or portion thereof) ending after the
Closing Date (i) as a result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date, (ii) as a result of any "closing
agreement," as described in Code Section 7121 (or any corresponding provision
of state, local or foreign income Tax law) entered into on or prior to the
Closing Date, (iii) as a result of any sale reported on the installment method
where such sale occurred on or prior to the Closing Date, and (iv) as a result
of any prepaid amount received on or prior to the Closing Date.
3.18. PERSONNEL. Attached hereto as Exhibit O is a list of
the names and annual rates of compensation of the directors and executive
officers of the Company, and of the employees of the Company whose annual rates
of compensation during the calendar year ended December 31, 1997 (including
base salary, bonus and incentive pay) exceed (or by December 31, 1998 are
expected to exceed) $60,000. Exhibit O also summarizes the bonus, profit
sharing, percentage compensation, company automobile, club membership, and
other like benefits, if any, paid or payable to such directors, officers, and
employees during the Company's calendar year ended December 31, 1997 and to the
date hereof. Exhibit O also contains a brief description of all material terms
of employment agreements to which the Company is a party and all severance
benefits which any director, officer or employee of the Company is or may be
entitled to receive. The employee relations of the Company are generally good
and there is no pending or, to the best knowledge of Shareholders or the
Company, threatened labor dispute or union organization campaign. None of the
employees of the Company is represented by any labor union or organization.
The Company is in compliance in all material respects with all Requirements of
Laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and is not engaged in any unfair labor
practices. Neither the Company or Shareholders has been advised, or has good
reason to believe, that any employee will not agree to
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remain employed by the Company after the consummation of the Transactions.
There is no unfair labor practice claim against the Company before the National
Labor Relations Board, or any strike, dispute, slowdown, or stoppage pending
or, to the Knowledge of the Company and Shareholders, threatened against or
involving the Company, and none has previously occurred.
3.19. BUSINESS RELATIONS. Neither the Company nor
Shareholders know or has good reason to believe that any customer, supplier,
travel agency, resort operator or lodging or transportation company engaged in
doing business with the Company will cease to do business with the Company
after the consummation of the Transactions in the same manner and at the same
levels as previously conducted with the Company except for any reductions which
do not result in a Material Adverse Change. Neither Shareholders nor the
Company has received any notice of cancellation of any Material business
arrangement between any Person and the Company nor is the Company or
Shareholders aware of any facts which could lead them to believe that the
Business will be subject to cancellation of any such business arrangement.
3.20. ACCOUNTS RECEIVABLE; ACCOUNTS PAYABLES; CUSTOMER
DEPOSITS AND BOOKINGS.
(a) ACCOUNTS RECEIVABLE. All of the accounts,
notes, and loans receivable that have been recorded on the books of the Company
are bona fide and represent amounts validly due for goods sold or services
rendered and, subject to a $660,000 write-off already reflected in the Most
Recent Financial Statements and the possibility of an occurrence of a Force
Majeure event, all such amounts will be collected in full prior to December 31,
1998. With respect to such accounts, notes, and loans receivable: (i) all are
free and clear of any Encumbrances; (ii) no claims of offset have been asserted
in writing against any of such accounts, notes, or loans receivable; and (iii)
none of the obligors thereto has given written notice that it will or may
refuse to pay the full amount or any portion thereof. Lists of the Company's
accounts receivable (A) as of December 31, 1997 (including any reconciliation
to the accounts receivable entry on the balance sheet included in the Most
Recent Financial Statements), (B) as of February 28, 1998, and (C) as of the
day prior to the Closing (or as of the most recent date available), will all be
delivered at the Closing and added to the Disclosure Schedule.
(b) ACCOUNTS PAYABLE. The aggregate amount of
accounts payable reflected on the Most Recent Financial Statements are true and
correct in all material respects in accordance with GAAP except as adjusted for
in the Net Worth Adjustment and, after giving effect to such adjustment,
accurately reflect the accounts payables of the Company as of December 31,
1997. Lists of the Company's accounts payable (A) as of December 31, 1997
(including any reconciliation to the accounts payable entry on the balance
sheet included in the Most Recent Financial Statements), (B) as of February 28,
1998, and (C) as of the day prior to the Closing (or as of the most recent date
available), will all be delivered at the Closing and added to the Disclosure
Schedule.
(c) BOOKINGS. Exhibit P sets forth, as of the
date specified therein all customer bookings as of such date on an aggregate
basis ("BOOKINGS"). For the period since December 31, 1997 through February
28, 1998, to the Knowledge of the Company and the
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Shareholders, the Company's actual Bookings are not less than the Company's
Bookings for the period December 31, 1996 through February 28, 1997.
3.21. BANK ACCOUNTS; INVESTMENTS. Attached hereto as
Exhibit R is a list of all banks or other financial institutions with which the
Company has an account or maintains a safe deposit box, showing the type and
account number of each such account and safe deposit box and the names of the
persons authorized as signatories thereon or to act or deal in connection
therewith. Exhibit R also contains a list of all material investments by the
Company in any funds, accounts, securities, certificates of deposit or
instruments of any Person. All of such investments are customary in form and
amount for reasonably prudent treasury investments of comparable businesses,
none of which involve any type of derivative, option, hedging or other
speculative instrument.
3.22. CUSTOMER CLAIMS. No written or oral claim for breach
of contract or otherwise by any customer (a "CUSTOMER CLAIM") has been made
against the Company since January 1, 1998 which could, individually or in the
aggregate, result in any Material Adverse Effect. The level of Customer Claims
for the period since December 31, 1997 through the date hereof is consistent
(plus or minus 5%) with past practices of the Company for the comparable period
in 1997. To the Knowledge of Shareholders and the Company, no state of facts
exists, and no event has occurred, which could reasonably be expected to form
the basis of any present claim against the Company for liability to any third
party in connection with vacation packages sold or services rendered by the
Company, other than Customer Claims arising in the ordinary course of the
Business.
3.23. BROKERS. Neither the Company, Allied Parent nor
Shareholders have engaged, or caused to be incurred any liability to any
finder, broker, or sales agent in connection with the origin, negotiation,
execution, delivery, or performance of this Agreement or the Transactions.
3.24. AFFILIATED TRANSACTIONS. No officer, director,
shareholder (including the Shareholders and Allied Parent) or Affiliate of the
Company or any individual related by blood or marriage to any such Person, or
any entity in which any such Person owns any beneficial interest, is a party to
any agreement, contract, arrangement or commitment with the Company or engaged
in any transaction with the Company or has any interest in any property used by
the Company. No officer, director, or shareholder of the Company, Allied
Parent or any Affiliate of any such officer, director, or shareholder, has any
ownership interest in any competitor, supplier, or customer of the Company
(other than ownership of securities of a publicly-held corporation of which
such Person owns, or has real or contingent rights to own, less than five
percent of any class of outstanding securities) or any property used in the
operation of the Business.
3.25. FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED
LIABILITIES.
(a) FUNDED INDEBTEDNESS. Other than any Funded
Indebtedness which is to be repaid and discharged by Shareholders prior to
Closing in accordance with Section 7.1(d), the Company does not have any Funded
Indebtedness.
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(b) LETTERS OF CREDIT. Other than those listed
on Exhibit S, the Company has no letters of credit, performance bonds or
similar instruments issued on or for its account for the benefit of any of its
vendors or otherwise.
(c) UNDISCLOSED LIABILITIES. The Company does
not have any liabilities in excess of $50,000 in the aggregate (whether
absolute, accrued, contingent or otherwise) of a nature required by GAAP to be
reflected on a corporate balance sheet or in the notes thereto, except as set
forth in the GAAP Exceptions Memo and except such liabilities which are accrued
or reserved against in the Financial Statements or disclosed in the notes
thereto, including without limitation any accounts payable or service
liabilities of the Company incurred prior to the Closing Date.
3.26. YEAR 2000. To the Knowledge of the Company, all of
the Material computer software, computer firmware, computer hardware (whether
general or special purpose), and other similar or related items of automated,
computerized, and/or software system(s) that are used or relied on by the
Company in the conduct of its business will not malfunction, will not cease to
function, will not generate incorrect data, and will not produce incorrect
results when processing, providing, and/or receiving (i) date-related data into
and between the twentieth and twenty-first centuries and (ii) date-related data
in connection with any valid date in the twentieth and twenty-first centuries,
except for any malfunctions or generations of incorrect data or results that
would not individually or in the aggregate have a Material Adverse Effect.
3.27. INFORMATION FURNISHED. The Company and Shareholders
have made available to Investors true and correct copies of all material
corporate records of the Company and all material agreements, documents, and
other items listed on the Schedules to this Agreement or referred to in Article
III of this Agreement, and neither this Agreement, the Schedules hereto, nor
any written information, instrument, or document delivered to Investors
pursuant to this Agreement contains any untrue statement of a Material fact or
omits any Material fact necessary to make the statements herein or therein, as
the case may be, not misleading.
ARTICLE IV
THE INVESTORS' REPRESENTATIONS AND WARRANTIES
The Investors jointly and severally represent and warrant to
Shareholders, Allied Parent and the Company as follows:
4.1. DUE ORGANIZATION OF XXXXXX III. Xxxxxx III is a
limited partnership duly organized, validly existing, and in good standing
under the laws of the State of Delaware and has full partnership power and
authority to execute, deliver and perform this Agreement and to carry out the
Transactions.
4.2. DUE AUTHORIZATION. The execution, delivery and
performance of this Agreement has been duly authorized by all necessary
individual, partnership or corporate action on the part of each Person
comprising the Investors, as appropriate, and the Agreement has been duly
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and validly executed and delivered by each of the Investors and constitutes the
valid and binding obligation of each of the Investors, enforceable in
accordance with its terms, except for the Equitable Exceptions. The execution,
delivery, and performance of this Agreement and the Escrow Agreement (as well
as all other instruments, agreements, certificates or other documents
contemplated hereby) by the Investors shall not (a) violate any Requirements of
Laws or Court Order of any Governmental Body applicable to any Investor or its
or his respective property, (b) violate or conflict with, or permit the
cancellation of, or constitute a default under any agreement to which any
Investor is a party or by which any Investor or its or his respective property
is bound, (c) permit the acceleration of the maturity of any indebtedness of,
or any indebtedness secured by the property of, any Investor, (d) violate or
conflict with any provision of the Certificate of Limited Partnership of Xxxxxx
III or the charter or bylaws of any other Investor which is a corporation or a
partnership (as applicable), or (e) except for filings or approvals under the
HSR Act and such consents, approvals, or registrations as may be required under
applicable state securities laws, require any consent, approval or
authorization of, or notice to, or declaration, filing or registration with,
any Governmental Body or other third party.
4.3. NO BROKERS. The Investors have not engaged, or
caused to be incurred any liability for which Shareholders or Allied Parent may
be liable to any finder, broker or sales agent in connection with the origin,
negotiation, execution, delivery, or performance of this Agreement or the
Transactions.
4.4. INVESTMENT. The Investors will each acquire the
Purchased Shares for investment and for its own account and not with a view to
the distribution thereof.
ARTICLE V
PRE-CLOSING COVENANTS OF THE COMPANY, ALLIED PARENT, XXXXXX III AND
SHAREHOLDERS
5.1. CONSENTS OF OTHERS. Prior to the Closing, the
Company, Allied Parent and Shareholders shall use their best efforts to obtain
and to cause the Company to obtain all authorizations, consents and permits
required of the Company, Allied Parent and Shareholders to permit them to
consummate the Transactions. To the extent required to consummate the
Transactions or to ensure that the Contracts shall remain in full force and
effect following the Closing, Shareholders shall have obtained the written
consent or waiver of any "change of control" type termination rights of any
third party to any Contract. As promptly as practicable after the date hereof,
Xxxxxx III, the Company and the Shareholders shall make, or shall cause to be
made, such filings as may be required pursuant to the HSR Act with respect to
the consummation of the Transactions.
5.2. SHAREHOLDERS' EFFORTS. The Company and Shareholders
shall use all reasonable efforts to cause all conditions for the Closing to be
met.
5.3. POWERS OF ATTORNEY. The Company and Shareholders
shall cause the Company to terminate at or prior to Closing all powers of
attorney granted by the Company,
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other than those relating to service of process, qualification or pursuant to
governmental regulatory or licensing agreements, or representation before the
IRS or other Governmental Bodies.
5.4. CONDUCT OF BUSINESS PENDING CLOSING. From the date
of this Agreement to the Closing Date:
(a) Except as otherwise contemplated by
this Agreement, or as Xxxxxx III may otherwise consent to in writing, the
Company and Shareholders shall conduct the Business only in the ordinary course
and shall not engage in any material activity or enter into any material
transaction which would cause a breach of the representations and warranties
contained in Article III.
(b) Shareholders and the Company shall
use their best efforts to cause the Business to preserve substantially intact
its current business organization and present relationships with its customers,
vendors, suppliers and employees and to maintain all of its insurance currently
in effect.
(c) Shareholders and the Company shall
give prompt notice to Investors of any notice of material default received by
the Company or the Business subsequent to the date of this Agreement under any
Contract or any Material Adverse Change occurring prior to the Closing Date in
the operation of the Company or the Business.
(d) Neither the Company, Allied Parent
nor the Shareholders, nor any of their representatives, shall solicit,
encourage or discuss any Acquisition Proposal (as hereinafter defined) or
supply any non-public information concerning the Company or the Business or the
Company's assets to any party other than Investors or their representatives.
As used herein, "ACQUISITION PROPOSAL" means any proposal other than the
Transactions, for (i) any merger or other business combination involving the
Company or the Business, (ii) the acquisition of the Company or a material
equity interest in the Company or a material portion of its assets, or (iii)
the dissolution or liquidation of the Company.
5.5. ACCESS BEFORE CLOSING. Prior to the Closing Date,
Shareholders and the Company agree that it will give, or cause to be given, to
the Investors and their representatives, during normal business hours and at
the Investors' expense, full and unrestricted access to the Company's
personnel, independent accountants, customers, suppliers, officers, agents,
employees, assets, properties, titles, contracts, corporate minute and other
books, records, files and documents of the Company with respect to the Business
(including financial, tax basis, budget projections, accountants' work papers
and other information as Investors may request).
5.6. INVESTOR CONFIDENTIALITY. Until the Closing Date,
Xxxxxx III agrees to remain bound by the terms of the confidentiality
provisions contained in the December 8, 1997 letter of intent between Xxxxxx
III and the Company.
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ARTICLE VI
POST-CLOSING COVENANTS
6.1. GENERAL. In case at any time after the Closing any
further action is legally necessary or reasonably desirable (as determined by
Xxxxxx III and Shareholders) to carry out the purposes of this Agreement, each
of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor
under Article VIII below). The Shareholders acknowledge and agree that from
and after the Closing, the Company will be entitled to possession of all
documents, books, records, agreements, and financial data of any sort relating
to the Company, which shall be maintained at the chief executive office of the
Company; provided, however, that Shareholders shall be entitled to reasonable
access to and to make copies of such books and records at their sole cost and
expense and the Company will maintain all of the same for a period of at least
three (3) years after Closing. Thereafter, the Company will offer such
documentation to Shareholders before disposal thereof.
6.2. TRANSITION. For a period of four (4) years following
Closing, the Shareholders will not take any action (or cause any such action to
be taken by another Person) that primarily is designed or intended to have the
effect of discouraging any vendor (including without limitation any airline or
other carrier, hotel, resort or rental car company), lessor, licensor,
customer, travel agency, consortia member, supplier, or other business
associate of the Company from maintaining the same business relations with the
Company after the Closing as it maintained with the Company prior to the
Closing. For a period of four (4) years following Closing, the Shareholders
will refer all customer inquiries relating to the Business to the Company.
6.3. CONFIDENTIALITY. The Shareholders will treat and
hold in confidence and not disclose all Confidential Information and refrain
from using any of the Confidential Information except in connection with this
Agreement or otherwise for the benefit of the Company or Investors for a period
of four (4) years from the date of this Agreement, and deliver promptly to
Investors or destroy, at the written request and option of Xxxxxx III, all
tangible embodiments (and all copies) of the Confidential Information which are
in their possession except as otherwise permitted herein. In the event that
any Shareholder is requested or required (by oral question or written request
for information or documents in any legal proceeding, interrogatory, subpoena,
civil investigative demand, or similar legal proceeding) to disclose any
Confidential Information, such Shareholder will notify the Company and Xxxxxx
III promptly of the request or requirement.
6.4. COVENANT NOT TO COMPETE. For and in consideration of
the allocation of $50,000 of the Redemption Price paid to the Shareholders by
the Company, each Shareholder covenants and agrees, for a period of four (4)
years from and after the Closing Date, that he will not, directly or indirectly
without the prior written consent of the Company, for or on behalf of any
entity:
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(a) become interested or engaged, directly or
indirectly, as a shareholder, bondholder, creditor, officer, director, partner,
agent, contractor with, employer or representative of, or in any manner
associated with, or give financial, technical or other assistance to, any
Person, firm or corporation for the purpose of engaging in the Business in
competition with the Company or any of its Affiliates, within the United
States;
(b) enter into any agreement with, service,
assist or solicit the business of any customers of the Company or any of its
Affiliates for the purpose of providing wholesale travel services to such
customers in competition with the Company or any of its Affiliates in the
United States or to cause them to reduce or end their business with the Company
or any of its Affiliates; or
(c) hire, retain, or solicit the employment or
services of employees, consultants or representatives of the Company or any of
its Affiliates for the purpose of causing them to leave the employment of the
Company or any of its Affiliates;
provided, however, that no owner of less than five percent (5%) of the
outstanding stock of any publicly-traded corporation shall be deemed to be in a
violation of this Section 6.4 solely by reason thereof.
6.5. ADDITIONAL MATTERS.
(a) The Shareholders shall cause the Company and
Allied Parent to file with the appropriate governmental authorities all Tax
Returns required to be filed by it for any taxable period ending prior to the
Closing Date and the Company and Allied Parent shall remit any Taxes (other
than Taxes on income) due in respect of such Tax Returns. In addition, Allied
Parent and Shareholders shall cause Rosen, Seymour, Xxxxxx, Xxxxxx & Co. to
prepare a short period tax return for the Company covering the period January
1, 1998 through the Closing Date. The cost of preparation of such short period
tax return shall be paid for by Shareholders.
(b) Investors and Shareholders recognize that
each of them will need access, from time to time, after the Closing Date, to
certain accounting and Tax records and information held by Investors and/or the
Company to the extent such records and information pertain to events occurring
on or prior to the Closing Date; therefore, Investors agree to cause the
Company to (A) use its best efforts to properly retain and maintain such
records for a period of six (6) years from the date the Tax Returns for the
year in which the Closing occurs are filed or until the expiration of the
statute of limitations with respect to such year, whichever is later, and (B)
allow each Shareholder and his agents and representatives at times and dates
mutually acceptable to the parties, to inspect, review and make copies of such
records as such other party may deem necessary or appropriate from time to
time, such activities to be conducted during normal business hours and at the
other party's expense.
(c) The Shareholders and Allied Parent shall be
liable for, and shall indemnify and hold Investors and the Company harmless
against, any Taxes or other costs attributable solely to (i) a failure on the
part of any Shareholder to take all actions required of him under Section
6.5(a); (ii) a failure on the part of the Company or Allied Parent to qualify,
at
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or prior to the Closing, as an "S corporation" for federal and/or state income
Tax purposes; or (iii) a change in accounting method of the Company reasonably
required by applicable Tax law (as determined by the Company's independent
accountants) as a result of any action or omission taken by Shareholders,
Allied Parent or the Company on or prior to the Closing Date in the event of
any final determination by the IRS or any state or local Tax authority that the
parties' characterization that the transactions contemplated by this Agreement
would be treated as an "asset sale" for tax purposes is invalid. Payment for
such indemnification provided in the preceding sentence shall be due and
payable within 30 days after a final determination of such matter has been
made; provided, however, that payment for indemnification under clause (iii) of
the preceding sentence (other than interest and penalties of the Company which
shall be immediately due and payable upon incurrence thereof by the Company)
shall not be due and payable until 10 days after Allied Parent's and/or
Shareholders' receipt of a tax refund or tax credit resulting from such change
in accounting method as described in the last sentence of this Section 6.5(c).
The Shareholders' and Allied Parent's indemnification of the Company under
clause (iii) above shall be an amount equal to the sum of (A) Allied Parent's
and the Shareholders' actual federal, state and local income tax refunds and/or
credits solely as a result of the decreased income resulting from the change in
accounting method and (B) all interest and penalties due to such change in
accounting method. In the event of any required change in accounting method,
Allied Parent and the Shareholders shall use their best efforts to obtain all
Tax refunds or credits from the appropriate Tax authorities as a result of the
change in accounting method by filing their then current Tax Returns with a
provision for a credit against that current year's or other year's Taxes (if
permitted by applicable Tax law) or by filing amended Tax Returns within 30
days of Allied Parent's receipt of written notice from the Company of such
accounting method change. Xxxxxx III shall have the right to review and approve
any amended Tax Returns or any provisions for credits against then current
Taxes reflected on Tax Returns made by the Shareholders or Allied Parent in
connection therewith. In the event any Tax authority disputes such refund or
credit, Allied Parent shall have the right to control (with the participation
of Xxxxxx III and the Company) all matters or proceedings relating to such
dispute. Allied Parent and Shareholders shall pay to the Investors all refunds
or credits obtained by Allied Parent or Shareholders within ten days after (A)
their receipt of a tax refund from the IRS or any state or local Tax authority
(with respect to refunds for amended Tax Returns) with respect to any decreased
income as a result of the accounting method change or (B) the filing of any Tax
Return claiming a credit or similar benefit against then current Taxes in any
Tax Return as a result of the accounting method change.
(d) Subject to the limitations described below,
the Shareholders and Allied Parent shall be liable for and shall repay to the
Investors the aggregate amount of all payments made by the Investors to the
Shareholders pursuant to the Tax Payments Schedule (the "GROSS-UP TAXES") in
the event of any final determination by the IRS or any state or local Tax
authority that the parties' characterization that the transactions contemplated
by this Agreement would be treated as an "asset sale" for tax purposes is
invalid. In the event of such final determination, Allied Parent and the
Shareholders shall use their best efforts to either (i) obtain a refund from
the appropriate Tax authorities of all Gross-Up Taxes paid to any Tax authority
through an amended Tax Return (such refund to be filed for within 30 days of
Shareholders' receipt of written notice from the Company or Investors of a
final determination) or (ii) file its
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then current Tax Returns with a provision for a credit against that current
year's or other year's Taxes for the overpayments for Gross-Up Taxes. Xxxxxx
III shall have the right to review and approve any amended Tax Returns or any
provisions for credits against then current Taxes reflected on Tax Returns made
by the Shareholders or Allied Parent in connection therewith. In the event any
Tax authority disputes such refund or credit, Allied Parent shall have the
right to control (with the participation of Xxxxxx III and the Company) all
matters or proceedings relating to such dispute. Allied Parent and
Shareholders shall pay to the Investors all refunds or credits obtained by
Allied Parent or Shareholders within five (5) business days after (A) their
receipt of a tax refund from the IRS or any state or local Tax authority (with
respect to refunds for amended Tax Returns) with respect to any Gross-Up Taxes
or (B) the filing of any Tax Return claiming a credit or similar benefit
against then current Taxes in any Tax Return with respect to the overpayments
of Gross-Up Taxes. The aggregate liability of Allied Parent and the
Shareholders to the Investors for Gross-Up Taxes shall be limited to the actual
amount of all refunds and/or credits received by Allied Parent and/or the
Shareholders from Tax authorities. Notwithstanding the foregoing, in the event
that Allied Parent or the Shareholders determine that any of such Gross-Up
Taxes are not for any reason required to be made to any Tax authority and the
parties characterization of the transactions contemplated by this Agreement as
an "asset sale" for Tax purposes remains valid, then the Shareholders shall
promptly reimburse the Investors for ninety percent (90%) of all of such
Gross-Up Taxes not paid by the Shareholders. Any such reimbursement required
by the preceding sentence shall be refunded to the Shareholders in the event
that such Gross-Up Taxes are later determined to be required to be paid by
Shareholders. Allied Parent and the Shareholders shall cause Xxxxx Xxxxxxx
Xxxxxx Xxxxxx & Company LLP to certify to the Company the final amount of all
Gross-Up Taxes actually paid by the Shareholders.
(e) The Shareholders shall maintain Allied Parent
in existence following the Closing Date for a period of at least four years;
provided, however, that at the Company's request, Allied Parent shall change
its name so that the words "Allied Tours" are removed therefrom.
6.6. LITIGATION SUPPORT. In the event and for so long as
any party is actively contesting or defending against any claim, suit, action
or charge, complaint, or demand in connection with (i) any transaction
contemplated under this Agreement or (ii) any fact, circumstance, status,
condition, activity, practice, occurrence, event, action, failure to act, or
transaction on or prior to the Closing Date involving the Company, each of the
other parties will cooperate and make available themselves or their personnel,
as applicable, and provide such testimony and access to their books and records
as shall be necessary in connection with the contest or defense.
6.7. AUDITS. Following the Closing, the Shareholders
shall use their best efforts to cause the Company, at the Company's expense, to
deliver, or cause to be delivered, to Investors an unqualified and unmodified
audit report of Xxxxxx Xxxxxxxx, LLP on the balance sheets of the Company as of
December 31, 1995, December 31, 1996, December 31, 1997 and the Closing Date,
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and audited statements of operations and cash flows of the Company for the
fiscal years then ended and with respect to the period January 1, 1998 through
the Closing Date, which report shall be without limitation as to the scope of
the audit. Shareholders, in their capacities as officers and directors of the
Company during such periods, shall provide all management letters, reports or
representations reasonably requested by such auditors in connection with such
audits.
6.8. REGISTRATION RIGHTS. Following the Closing, Xxxxxx
III and the Company anticipate that they may enter into a registration rights
agreement with respect to shares of the Company's Common Stock. Upon execution
thereof, Xxxxxx III and the Company each hereby agree to offer Allied Parent
and the Shareholders the right to become a party to such registration rights
agreement, in which event Allied Parent and the Shareholders shall receive
customary piggyback registration rights with respect to their shares of the
Company's Common Stock (including any shares of Common Stock issuable upon
conversion of the Preferred Stock). All customary registration expenses (other
than underwriting discounts and fees) in connection with any piggyback
registration will be at the Company's expense.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
7.1. CONDITIONS TO THE INVESTORS' OBLIGATIONS. The
obligation of the Investors under this Agreement to consummate the Closing is
subject to the conditions that:
(a) COVENANTS, REPRESENTATIONS AND WARRANTIES.
The Company, Allied Parent and Shareholders shall have performed in all
material respects all obligations and agreements and complied in all material
respects with all covenants contained in this Agreement to be performed and
complied with by each of them prior to or at the Closing Date. The
representations and warranties of the Company, Allied Parent and Shareholders
set forth in this Agreement shall be accurate in all material respects at and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
(b) CONSENTS. All statutory requirements for the
valid consummation by the Company, Allied Parent and Shareholders of the
Transactions shall have been fulfilled and all authorizations, consents and
approvals, including expiration or early termination of all waiting periods
under the HSR Act and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation of the Transactions shall have been obtained
in form and substance reasonably satisfactory to Xxxxxx III unless such failure
could not reasonably be expected to have a Material Adverse Effect. All
approvals of the Boards of Directors and shareholders of the Company and Allied
Parent necessary for the consummation of this Agreement and the Transactions
shall have been obtained.
(c) LEASES. Each of the Leases shall provide
that the Company is the lessee and that such Lease survives the Closing for the
term of such Lease, and copies of such Leases (and any assignments pursuant to
which any of such Leases have been assigned to the Company prior to the Closing
Date) shall have been provided to the Investors.
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(d) DISCHARGE OF INDEBTEDNESS AND LIENS;
SHAREHOLDER LOANS. Shareholders and the Company shall have provided for the
payment in full by the Company of all Funded Indebtedness of the Company at the
Closing. Such Funded Indebtedness, if any, as of December 31, 1997, is listed
on Exhibit T hereto. Shareholders shall have also provided for the termination
of all Encumbrances of record on the properties of the Company, except for
Permitted Exceptions. All liens or UCC filings against the Company or
Affiliates of the Company which are engaged in the Business, shall have been
terminated as of the Closing. All outstanding loans or other amounts owed by
any Shareholder or Allied Parent to the Company shall have been repaid in full
on or prior to the Closing.
(e) FEE. In consideration of investment banking
services provided by Xxxxxx III's Affiliate, TC Management Partners LLC, in
connection with the Transactions, the Company shall pay to TC Management
Partners LLC immediately following the Closing a fee in the amount of $425,000.
(f) TRANSFER TAXES. Shareholders shall be
responsible for all stock transfer or gains taxes imposed on Shareholders or
Allied Parent incurred in connection with this Agreement.
(g) FINANCIAL CONDITION. The Company's Net Worth
as projected at the Closing shall be not less than ($400,000) and the Company
shall continue to have cash or cash equivalents on hand at the Closing in an
amount not less than $0.
(h) DOCUMENTS TO BE DELIVERED BY SHAREHOLDERS,
ALLIED PARENT AND THE COMPANY. The following documents shall be delivered at
the Closing by Shareholders, Allied Parent and the Company:
(i) OPINION OF SHAREHOLDERS' COUNSEL.
Investors shall have received an opinion of counsel to the
Company, Allied Parent and Shareholders, dated the Closing
Date, in substantially the same form as the form of opinion
that is Exhibit C hereto.
(ii) CERTIFICATES. Investors shall have
received an officer's certificate and a secretary's
certificate of the Company executed by officers of the
Company, dated the Closing Date, in a form mutually agreed
upon by Xxxxxx III and Allied Parent, which certificates shall
include a certification as to the aggregate amount of
Permitted Distributions.
(iii) RELEASE. Shareholders and Allied
Parent shall have furnished the Company with a general release
of liabilities, excluding compensation and employee benefits
as well as obligations pursuant to this Agreement, in the form
attached as Exhibit E hereto.
(iv) ESCROW AGREEMENT. Shareholders,
Allied Parent and the Company shall have delivered to
Investors at the Closing the duly executed Escrow Agreement in
substantially the form attached hereto as Exhibit G.
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(v) EMPLOYMENT AGREEMENTS. Xxxxxxx
Xxxxxx, Xxxxxxx Xxxxxx and Xxxxxxx Xxxxxxx shall each have
duly executed and delivered Employment Agreements in
substantially the same form attached as Exhibits F-1, F-2 and
F-3 hereto, pursuant to which he will be employed by the
Company following the Closing, and the Company shall have
amended its incentive compensation arrangements with Xxxxxxx
Xxxx and Xxxx Xxxxxxxxx to a reasonably equivalent incentive
arrangement.
(vi) DELIVERY OF PURCHASED SHARES. At the
Closing, Allied Parent shall deliver to Investors the
Purchased Shares.
(vii) REDEMPTION OF EXISTING COMMON STOCK.
Allied Parent shall have delivered the stock certificate(s)
representing the Redemption Shares duly endorsed for transfer
to the Company and free and clear of all encumbrances, other
than the restrictions imposed by federal and state securities
laws.
(viii) RESIGNATION OF DIRECTORS. The
Company shall deliver the written resignations of all
directors of the Company effective as of the Closing.
(ix) TERMINATION OF SHAREHOLDER
AGREEMENTS. The Company shall have provided evidence
satisfactory to Xxxxxx III of the complete termination of all
shareholder agreements among the Shareholders, Allied Parent
and/or the Company with respect to the Company or the Existing
Shares.
(x) CONSULTING AGREEMENT. Xxxxxxx
Xxxxxx shall have executed and delivered a Consulting
Agreement with the Company in substantially the form attached
as Exhibit U hereto, pursuant to which he will be engaged as a
consultant to the Company following the Closing.
(i) COMPANY EQUITY ARRANGEMENTS. The Equity
Agreements shall have been executed and delivered by the
respective parties thereto.
(j) RESTATED CERTIFICATE OF INCORPORATION. At
the Closing immediately following the Stock Purchase and the Redemption, the
Company's Certificate of Incorporation shall have been duly amended and
restated to include substantially all of the provisions set forth in Exhibit A
attached hereto and shall not have been further amended or modified.
(k) LIQUIDATION OF SISTER BUSINESSES. The
Shareholders shall have assigned and conveyed to the Company all of the assets
of Allied Tours, Inc. and Allied Tours International, Inc. (including all
trademarks and tradenames) and such corporations shall either have been
dissolved or their certificates of incorporation shall have been amended to
remove "Allied" from their corporate names.
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7.2. CONDITIONS TO SHAREHOLDERS', ALLIED PARENT'S AND THE
COMPANY'S OBLIGATIONS. The obligation of Shareholders, Allied Parent and the
Company under this Agreement to consummate the Closing is subject to the
conditions that:
(a) COVENANTS, REPRESENTATIONS AND WARRANTIES.
Investors shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained
in this Agreement to be performed and complied with by Investors prior to or at
the Closing and the representations and warranties of Investors set forth in
Article IV hereof shall be accurate in all material respects, at and as of the
Closing Date, with the same force and effect as though made on and as of the
Closing Date.
(b) CONSENTS. All statutory requirements for the
valid consummation by Investors of the Transactions shall have been fulfilled
and all authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act and those of all federal,
state, local and foreign governmental agencies and regulatory authorities
required to be obtained in order to permit the consummation by Investors of the
Transactions shall have been obtained unless such failure shall not have a
Material Adverse Effect on the Business.
(c) DOCUMENTS TO BE DELIVERED BY INVESTORS. The
following documents shall be delivered at the Closing by Investors:
(i) ESCROW AGREEMENT. Investors shall
have delivered to Shareholders and Allied Parent at the
Closing the duly executed Escrow Agreement.
(ii) EMPLOYMENT AGREEMENTS. Investors
shall have caused the Company to duly execute and deliver
Employment Agreements with each of Xxxxxxx Xxxxxx, Xxxxxxx
Xxxxxx and Xxxxxxx Xxxxxxx in the same form attached as
Exhibits F-1, F-2 and F-3 hereto, pursuant to which such
Persons will be employed by the Company following the Closing.
The Employment Agreements with each of Xxxxxxx Xxxxxx and
Xxxxxxx Xxxxxx shall provide that each will receive an option
grant upon consummation of an initial public offering of the
Company (so long as he is employed by the Company at such
date) for the exercise of up to an aggregate of $1,000,000 of
the Company's Common Stock at an exercise price per share
equal to the initial public offering price.
(iii) CONSULTING AGREEMENT. The Investors
shall have caused the Company to execute and deliver a
Consulting Agreement with Xxxxxxx Xxxxxx in substantially the
form attached as Exhibit U hereto, pursuant to which he will
be engaged as a consultant to the Company following the
Closing.
(d) COMPANY EQUITY ARRANGEMENTS. The Equity
Agreements shall have been executed and delivered by the respective parties
thereto.
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(e) PAYMENTS TO ALLIED PARENT. Allied Parent
shall have received (i) the Closing Redemption Price for the Redemption Shares
and (ii) the portion of the Purchase Price payable to Allied Parent at Closing
for the Purchased Shares.
ARTICLE VIII
INDEMNIFICATION
8.1. INDEMNIFICATION BY ALLIED PARENT AND SHAREHOLDERS.
Except as provided in Section 8.6, Shareholders and Allied Parent agree to
jointly and severally indemnify and hold harmless the Investors and the Company
and each officer, director, and Affiliate of the Investors and the Company,
including without limitation any successor of the Company (collectively, the
"INDEMNIFIED PARTIES") from and against any and all damages, losses, claims,
liabilities, demands, charges, suits, penalties, costs and expenses (including
court costs and reasonable attorneys' fees and expenses incurred in
investigating and preparing for any litigation or proceeding) (collectively,
the "INDEMNIFIABLE COSTS"), which any of the Indemnified Parties may sustain,
or to which any of the Indemnified Parties may be subjected, arising out of (A)
any misrepresentation, breach or default by Shareholders, Allied Parent or the
Company of or under any of the representations, covenants, agreements or other
provisions of this Agreement or any agreement or document executed in
connection herewith; (B) the Company's tortious acts or omissions to act prior
to Closing for which the Company did not carry liability insurance for
themselves as the insured party, whether or not such acts or omissions to act
result in a breach or violation of any representation or warranty; (C) any
accounts receivable of the Company in existence on the Closing Date (net of the
$660,000 write-off for bad debts already reflected in the Most Recent Financial
Statements) which are not collected prior to December 31, 1998 in accordance
with the standards set forth in the Escrow Schedule attached hereto (the
"ACCOUNTS RECEIVABLE ADJUSTMENT"); (D) any downward Net Worth Adjustment not
paid to the Company pursuant to a reduction of the Escrow Sum; and (E) any
litigation matter disclosed on Schedule 3.16 hereof. Determination of whether
the Company, on the one hand, or the Investors, on the other hand, is entitled
to indemnification hereunder shall be made by such parties in light of the
economic impact or loss caused by the matter which is the subject of the claim
of indemnification. By way of example, a claim of indemnification for breaches
of the representation made in Section 3.17 (Taxes) would impact the Company so
that the Company would be entitled to indemnification. A claim of
indemnification based on a breach of Section 3.1 (Capitalization) would affect
the Investors' investment in the Company directly (as opposed to derivatively),
so that the Investors would be entitled to indemnification.
8.2. DEFENSE OF CLAIMS. If any legal proceeding shall be
instituted, or any claim or demand made by a third Person, against any
Indemnified Party in respect of which Shareholders or Allied Parent may be
liable hereunder, such Indemnified Party shall give prompt written notice
thereof to Shareholders and, except as otherwise provided in Section 8.4 below,
Shareholders shall have the right to defend, or cause the Company or its
successors to defend, any litigation, action, suit, demand, or claim for which
it may seek indemnification unless, in the reasonable judgment of Xxxxxx III,
such litigation, action, suit, demand, or claim, or the resolution thereof, is
seeking injunctive or other equity relief or damages which would have a
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Material Adverse Effect on Investors, the Company or its successors, and such
Indemnified Party shall extend reasonable cooperation in connection with such
defense, which shall be at Shareholders' expense. In the event Shareholders
fail or refuse to defend the same within a reasonable length of time, the
Indemnified Parties shall be entitled to assume the defense thereof, and
Shareholders and Allied Parent shall be jointly and severally liable to repay
the Indemnified Parties for all expenses reasonably incurred in connection with
said defense (including reasonable attorneys' fees and settlement payments).
If Shareholders shall not have the right to assume the defense of any
litigation, action, suit, demand, or claim in accordance with either of the two
preceding sentences, the Indemnified Parties shall, at Shareholders' expense,
have the absolute right to control the defense of and to settle, in their sole
discretion and without the consent of Shareholders, such litigation, action,
suit, demand, or claim, but Shareholders shall be entitled, at their own
expense, to participate in such litigation, action, suit, demand, or claim.
The party controlling any defense pursuant to this Section 8.2 shall deliver,
or cause to be delivered to the other party, copies of all correspondence,
pleadings, motions, briefs, appeals or other written statements relating to or
submitted in connection with the defense of any such litigation, action, suit,
demand or claim, and timely notice of any hearing or other court proceeding
relating to such litigation, action, suit, demand or claim. Notwithstanding
the forgoing, in no event will the Shareholders or Allied Parent settle any
litigation matter disclosed on Schedule 3.16 if such settlement results in any
monetary liability to the Company without the Company's express written
consent.
8.3. ESCROW CLAIM. If any claim for indemnification is
made by an Indemnified Party pursuant to this Article VIII prior to the
expiration of the Escrow Period, such Indemnified Party may first apply to the
Escrow Agent provided in Section 2.7 of this Agreement for reimbursement of
such claim in accordance with the provisions of the Escrow Agreement provided,
however, the Escrow Sum is not intended to be an exclusive remedy in the event
Investors have indemnification claims hereunder which exceed such amount.
8.4. TAX AUDITS, ETC. In the event of an audit of a Tax
Return of the Company with respect to which an Indemnified Party might be
entitled to indemnification pursuant to this Article VIII, the Shareholders and
the Company shall jointly control any and all such audits which may result in
the assessment of additional Taxes against the Company and any and all
subsequent proceedings in connection therewith, including appeals.
Shareholders and Investors shall cooperate fully in all matters relating to any
such audit or other Tax proceeding (including according access to all records
pertaining thereto), and will execute and file any and all consents, powers of
attorney, and other documents as shall be reasonably necessary in connection
therewith. If additional Taxes are payable by the Company as a result of any
such audit or other proceeding, Shareholders shall be responsible for and shall
promptly pay all Taxes, interest, and penalties for which any of the
Indemnified Parties shall be entitled to indemnification (subject to the
limitations contained in Section 6.5(c) in the event of any audit or proceeding
relating to the indemnification provided in Section 6.5(c)(iii) hereof).
8.5. INDEMNIFICATION OF SHAREHOLDERS, ALLIED PARENT AND
THE COMPANY. Investors agree to jointly and severally indemnify and hold
harmless Shareholders, Allied Parent and the Company and each officer,
director, Shareholder or Affiliate of the Company, from and
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against any Indemnifiable Costs arising out of any material misrepresentation,
breach or default by Investors of or under any of the covenants, agreements or
other provisions of this Agreement or any agreement or document executed in
connection herewith.
8.6. LIMITS ON INDEMNIFICATION. All Indemnifiable Costs
sought by any party hereunder shall be net of any insurance proceeds received
by such Person with respect to such claim (less the present value of any
premium increases occurring as a result of such claim). Except for any claims
for breach of the representations, warranties and covenants of Allied Parent
and the Shareholders under Sections 3.1, 3.2, 3.3, 3.4, 3.6, 3.17 or 6.5(c)
hereof (the indemnification for which shall expire on the expiration of the
applicable statute of limitations and if so made, such claims, and all
Indemnifiable Costs incurred thereafter, shall continue after such date until
finally resolved), the right to make claims for indemnification provided under
this Article VIII shall expire two (2) years following the Closing Date (except
for any claims for Indemnifiable Costs made prior to such date which claims
shall continue after such date until finally resolved). The Shareholders and
Allied Parent shall not be obligated to pay any amounts for indemnification
under this Article VIII until the aggregate indemnification obligation sought
by Investors hereunder exceeds $250,000, whereupon Shareholders and Allied
Parent shall be liable for all amounts in excess of $250,000 for which
indemnification may be sought; provided, however, that Shareholders and Allied
Parent shall not be obligated to pay any amounts for indemnification under
Section 8.1(E) until the aggregate indemnification obligation sought by
Investors thereunder exceeds $100,000, whereupon Shareholders and Allied Parent
shall be liable for all amounts in excess of $100,000 for which indemnification
may be sought. For purposes of making claims for indemnification under Section
8.1(A), any requirement in any representation or warranty that an event or fact
be Material or have a Material Adverse Effect, as appropriate, in order for
such event or fact to constitute a misrepresentation or breach of such
representation or warranty shall be ignored. Notwithstanding the foregoing, in
no event shall the aggregate liability of Shareholders and Allied Parent to
Investors for breach of representations and warranties exceed the sum of
$6,500,000; provided, however, that such $6,500,000 limitation shall not
include and shall not limit any claims for (i) the Accounts Receivable
Adjustment and the Net Worth Adjustment and (ii) breach of the representations
and warranties of the Shareholders and Allied Parent under Sections 3.1, 3.2,
3.3, 3.4, 3.6, and 3.17 hereof; provided, further, that in no event shall the
aggregate liability of Shareholders and Allied Parent to Investors or the
Company with respect to any claims described in clauses (i) and (ii) above
exceed the sum of the Purchase Price and the Redemption Price. However nothing
in this Article VIII shall limit Investors or Shareholders in exercising or
securing any remedies provided by applicable statutory or common law with
respect to the conduct of Shareholders, Allied Parent or Investors in
connection with this Agreement or in the amount of damages that it can recover
from the other in the event that Investors successfully prove intentional fraud
or intentional fraudulent conduct in connection with this Agreement. All
Indemnified Costs paid by Shareholders shall be deemed to be a reduction of the
Purchase Price paid to Allied Parent by Investors hereunder.
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ARTICLE IX
TERMINATION
9.1. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of all parties
hereto;
(b) in writing by Xxxxxx III on behalf of all
Investors, if the Company, Allied Parent or any of the Shareholders has
breached in any material respect any representation, warranty or covenant
contained in this Agreement, and in each case such breach has not been remedied
within ten (10) business days after receipt of notice specifying such breach
and demanding such breach to be remedied; or
(c) in writing by the Shareholders and the
Company, if Investors have breached in any material respect any representation,
warranty or covenant contained in this Agreement, and in each case such breach
has not been remedied within ten (10) business days after receipt of notice
specifying such breach and demanding such breach to be remedied; or
(d) in writing by either the Company and the
Shareholders, on the one hand, or Xxxxxx III on behalf of all Investors, on the
other hand, in the event the Closing has not occurred on or before April 15,
1998, unless the failure of such consummation or the failure to satisfy such
condition, as applicable, shall be due to a breach of any representation or
warranty made by the party or parties seeking to terminate this Agreement or
the failure of such party or parties to comply in all material respects with
the agreements and covenants contained herein to be performed by such party or
parties.
9.2. EFFECT OF TERMINATION. If the Transactions are
terminated pursuant to Section 9.1 by notice in writing to the non-terminating
party or parties, this Agreement shall become void and of no further force and
effect, except that (a) such termination shall not relieve (i) any party from
its covenants in respect of confidentiality contained in Section 6.3 and (ii)
any party then in breach of any representation, warranty, covenant or agreement
contained in this Agreement from liability in respect of such breach and (b)
Sections 10.4 and 10.7 shall survive termination of this Agreement.
ARTICLE X
MISCELLANEOUS
10.1. MODIFICATIONS. Any amendment, change or modification
of this Agreement shall be void unless in writing and signed by all parties
hereto. No failure or delay by any party hereto in exercising any right, power
or privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power or privilege
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shall preclude the further or full exercise thereof. Notwithstanding the
foregoing, Xxxxxx III shall have the right to act on behalf of all Investors on
any amendment, change or modification to this Agreement or any right, power or
privilege of Investors hereunder without the consent of such Investors unless
such action would materially adversely effect the obligations of such Investors
under this Agreement.
10.2. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
personally delivered, or 48 hours after deposited in the United States mail,
first-class, postage prepaid, or by facsimile addressed to the respective
parties hereto as follows:
Investors:
c/x Xxxxxx Equity Investors III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxx Xxxxxx
Xxxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
With a copy to:
Xxxxx & Xxxxxxx L.L.P.
Xxxxxxxx Xxxxxx
Xxxxxxxxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxxxxxx X. Xxxxx or
Xxxxx Xxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
The Company, Allied Parent or Shareholders:
Allied Bus Corp.
000 X. 00xx Xxxxxx
10th Floor
New York, New York 10036
Attention: Xxxxxxx Xxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
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With a copy to:
Xxxxx & Xxxxx, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxx X. Xxxxxxx
Fax No.: (000) 000-0000
Tel No.: (000) 000-0000
or to such other address as to any party hereto as such party shall designate
by like notice to the other parties hereto.
10.3. COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement
may be executed in several counterparts, each of which shall be deemed an
original but all of which counterparts collectively shall constitute one
instrument, and in making proof of this Agreement, it shall never be necessary
to produce or account for more than one such counterpart. Signatures of a
party to this Agreement or other documents executed in connection herewith
which are sent to the other parties by facsimile transmission shall be binding
as evidence of acceptance of the terms hereof or thereof by such signatory
party, with originals to be circulated to the other parties in due course.
10.4. EXPENSES. Each of the parties hereto will bear all
costs, charges and expenses incurred by such party in connection with this
Agreement and the consummation of the Transactions, provided, however, that
Shareholders shall bear all costs and expenses of (i) any broker involved in
this transaction on behalf of Shareholders, Allied Parent or the Company and
(ii) all legal and other expenses of Shareholders, Allied Parent or the Company
with respect to this Agreement and the Transactions.
10.5. BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Company, Allied Parent, Investors
and Shareholders, their heirs, representatives, successors, and permitted
assigns, in accordance with the terms hereof. This Agreement shall not be
assignable by the Company, Allied Parent or Shareholders without the prior
written consent of Xxxxxx III on behalf of all Investors. This Agreement shall
be assignable by Xxxxxx III on behalf of the Investors to either (a) any lender
providing financing to Investors or the Company (but only with respect to
Investors' rights under Article II and Article VIII hereof) or (b) any
Affiliate of Xxxxxx III, provided the Investors remain liable, in each case
without the prior written consent of Shareholders. In addition, following the
Closing, Xxxxxx III may assign any or all of its rights hereunder, without the
consent of the Shareholders, in connection with any sale of all or
substantially all of the assets, capital stock, partnership interests or
business of the Company or Xxxxxx III (whether effected by sale, exchange,
merger, consolidation or other transaction) and provided the acquiring party
shall assume all of Xxxxxx III's obligations hereunder.
10.6. ENTIRE AND SOLE AGREEMENT. This Agreement and the
other schedules and agreements referred to herein, constitute the entire
agreement between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information,
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arrangements and understandings, whether oral or written, express or implied,
with respect to the subject matter hereof.
10.7. GOVERNING LAW. This Agreement and its validity,
construction, enforcement, and interpretation shall be governed by the
substantive laws of the State of New York, without giving effect to the
principles of conflicts of laws thereof.
10.8. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. Regardless of any investigation at any time made by or on behalf of
any party hereto or of any information any party may have in respect thereof,
all covenants, agreements, representations, and warranties and the related
indemnities made hereunder or pursuant hereto or in connection with the
Transactions shall survive the Closing for a period of two (2) years, provided
(a) the representations and warranties contained in Section 3.17 of this
Agreement, and the related indemnities, shall survive the Closing until the
expiration of the applicable statutes of limitations for determining or
contesting Tax liabilities including any extension of such periods plus sixty
(60) days, (b) the representations, warranties and covenants contained in
Sections 3.1, 3.2, 3.3, 3.4, 3.6 and 6.5(c) of this Agreement, and the related
indemnities, shall survive the Closing indefinitely and not expire, (c) all
covenants in this Agreement which have an expiration date contained therein
shall expire as of such date and (d) all other covenants in this Agreement
which do not have an expiration date shall expire upon the expiration of the
applicable statutes of limitations.
10.9. INVALID PROVISIONS. If any provision of this
Agreement is deemed or held to be illegal, invalid or unenforceable, this
Agreement shall be considered divisible and inoperative as to such provision to
the extent it is deemed to be illegal, invalid or unenforceable, and in all
other respects this Agreement shall remain in full force and effect; provided,
however, that if any provision of this Agreement is deemed or held to be
illegal, invalid or unenforceable there shall be added hereto automatically a
provision as similar as possible to such illegal, invalid or unenforceable
provision and be legal, valid and enforceable. Further, should any provision
contained in this Agreement ever be reformed or rewritten by any judicial body
of competent jurisdiction, such provision as so reformed or rewritten shall be
binding upon all parties hereto.
10.10. PUBLIC ANNOUNCEMENTS. Neither Shareholders, Allied
Parent nor the Company (pre-Closing) shall make any public announcement of the
Transactions without the prior written consent of Xxxxxx III, which consent
shall not be unreasonably withheld. Shareholders shall have the right to
approve any public announcement of the Transactions by Xxxxxx III prior to the
Closing Date.
10.11. REMEDIES CUMULATIVE. The remedies of the parties
under this Agreement are cumulative and shall not exclude any other remedies to
which any party may be lawfully entitled.
10.12. THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or give to any Person, other than the parties hereto
and their permitted successors or assigns, any rights or remedies under or by
reason of this Agreement.
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10.13. NO STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of this Agreement. In the
event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the parties hereto, and
no presumption or burden of proof shall arise favoring or disfavoring any party
by virtue of the authorship of any of the provisions of this Agreement.
10.14. JOINDER BY ADDITIONAL INVESTORS. During the term of
this Agreement, to the extent the Investor Schedule is updated to the effect
that additional Investors will join Xxxxxx III as Investors hereunder, Xxxxxx
III shall cause all such Persons to become parties hereto, without the consent
of the Company, Allied Parent or the Shareholders, by execution and delivery of
a counterpart of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
THE COMPANY:
-----------
ALLIED BUS CORP.
By: /s/ Xxxxxxx Xxxxxx
----------------------------
Xxxxxxx Xxxxxx
President
ALLIED PARENT:
-------------
ALLIED TOURS HOLDING CORP.
By: /s/ Xxxxxxx Xxxxxx
----------------------------
Xxxxxxx Xxxxxx
President
SHAREHOLDERS:
------------
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxx Xxxxxx
------------------------------------
Xxxxxxx Xxxxxx
/s/ Xxxxxxxx Xxxxxxx
------------------------------------
Xxxxxxxx Xxxxxxx
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INVESTORS:
---------
XXXXXX EQUITY INVESTORS III, L.P.
By: TC Equity Partners, L.L.C.
Its: General Partner
By: /s/ Xxxxx Xxxxxx
-------------------
Name:
The Exhibits and Schedules to this Recapitalization Agreement are not included
with this Registration Statement on Form S-1. Global will provide these
exhibits and schedules upon the request of the Securities and Exchange
Commission.
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