UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) FEBRUARY 9, 1998
TRAVEL SERVICES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 0-29296 52-2030324
(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
220 CONGRESS PARK DRIVE, DELRAY BEACH, FLORIDA 33445
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 561-266-0860
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
GOLD COAST TRAVEL AGENCY CORPORATION, INC.
D/B/A GOLD COAST CRUISE CENTER
On February 9, 1998, Travel Services International, Inc. (the "Company")
completed the acquisition of all of the outstanding capital stock of Gold Coast
Travel Agency Corporation, Inc., a Florida corporation ("Gold Coast"), pursuant
to a Stock Purchase Agreement, effective February 1, 1998 (such acquisition
being referred to as the "Gold Coast Acquisition"). Gold Coast is a specialized
distributor of cruises, operating out of a central reservation center in Miami,
Florida. The Gold Coast Acquisition further expands the Company's existing
presence in the cruise reservations market, while adding additional marketing
opportunities via cable and satellite television commercials.
The aggregate consideration paid for the Gold Coast Acquisition was $10.5
million, consisting of 163,775 shares of common stock of the Company (valued at
approximately $3.75 million based on the average of the closing prices of the
Company's common stock for the ten trading days prior to the effective date of
the Stock Purchase Agreement), $6.25 million in cash and $500,000 in contingent
consideration (based upon performance for the 1998 fiscal year). The cash
portion of the consideration was funded with advances on the Company's revolving
credit facility with NationsBank, N.A. The amount of consideration was
determined based on arms-length negotiations. The selling stockholder of Gold
Coast was Rhea Sherota. The acquisition will be accounted for as a purchase.
Prior to the Gold Coast Acquisition, all of the capital stock of Gold Coast was
owned by Rhea Sherota who, following the acquisition, is the Chief Executive
Officer of Gold Coast. There are no other material relationships known to the
Company between the seller of the acquired company and the Company or its
affiliates, directors or officers, or associates of such directors or officers.
The assets of Gold Coast include supplier contracts, customer lists, accounts
receivable, personal property, cash and cash equivalents, toll-free telephone
numbers and certain intangibles. The Company expects to continue to utilize
these assets in a manner consistent with that of their historical usage.
The Company has agreed to register the shares issued in connection with the Gold
Coast Acquisition on a shelf registration statement to be filed within six
months so as to permit the sale or other disposition (subject to certain lock-up
agreements and restrictions) by the holder of such shares. The Company has
agreed to pay the expenses in connection with any such registration, other than
selling commissions.
The foregoing descriptions are qualified in all respects by reference to the
full text of the acquisition agreement which is included as an exhibit to this
report.
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ITEM 5. OTHER EVENTS.
DIPLOMAT TOURS, INC. AND INTERNATIONAL AIRLINE CONSOLIDATORS
On January 20, 1998, the Company completed the acquisition of substantially all
of the assets and assumption of substantially all of the liabilities of Diplomat
Tours, Inc., a California corporation, and International Airline Consolidators,
a sole proprietorship (collectively, "Diplomat"), pursuant to an Asset Purchase
Agreement dated as of October 28, 1997, among the Company, Diplomat and Darleen
Rippon, as sole stockholder (such acquisition being referred to as the "Diplomat
Acquisition"). Diplomat, located in Sacramento, California, is a specialized
distributor of international airline reservations. The Diplomat Acquisition
further expands the Company's existing presence in the international airline
reservations market.
The consideration paid for the Diplomat Acquisition was determined based on
arms-length negotiations and consisted of a combination of cash and shares of
common stock of the Company. The acquisition will be accounted for as a
purchase. The Company is not aware of any material relationship that existed
prior to the Diplomat Acquisition between the Company or its affiliates,
directors or officers, or associates of such directors or officers on the one
hand, and Diplomat and its shareholder on the other hand. Darleen Rippon will
continue as the Chief Executive Officer of Diplomat.
AUTONET INTERNATIONAL, INC.
On February 20, 1998, the Company completed the acquisition of all of the
outstanding capital stock of, and business assets relating to, AutoNet
International, Inc., a Delaware corporation ("AutoNet"), pursuant to a Purchase
Agreement dated February 20, 1998, among the Company, AutoNet, Canadian Travel
Advisors Limited and International Voyages Limited (such acquisition being
referred to as the "AutoNet Acquisition"). AutoNet is a specialized distributor
of auto rental reservations to travel agents and travelers.
The consideration paid for the AutoNet Acquisition was determined based on
arms-length negotiations and consisted solely of cash. The acquisition will be
accounted for as a purchase. The Company is not aware of any material
relationship that existed prior to the AutoNet Acquisition between the Company
or its affiliates, directors or officers, or associates of such directors or
officers on the one hand, and AutoNet and its shareholders on the other hand.
Ronald R. Denaro will continue to manage the business as President of AutoNet on
behalf of the Company.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
EXHIBITS
Stock Purchase Agreement, dated as of February 9, 1998, among Travel Services
International, Inc., Gold Coast Travel Agency Corporation, Inc., and Rhea
Sherota
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TRAVEL SERVICES INTERNATIONAL, INC.
(Registrant)
Date: February 24, 1998
/S/ JILL M. VALES
--------------------------------------------------
Jill M. Vales
Senior Vice President and Chief Financial Officer
(as both a duly authorized officer of the
registrant and the principal financial
officer or chief accounting officer of the
registrant)
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1 Stock Purchase Agreement, effective as of February 1, 1998, by and
among Travel Services International, Inc., Gold Coast Travel
Agency Corporation, Inc. and Rhea Sherota
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STOCK PURCHASE AGREEMENT
BY AND AMONG
TRAVEL SERVICES INTERNATIONAL, INC.,
GOLD COAST TRAVEL AGENCY CORPORATION, INC. D/B/A GOLD COAST
CRUISE CENTER
AND
RHEA SHEROTA
EFFECTIVE AS OF FEBRUARY 1, 1998
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TABLE OF CONTENTS
PAGE NO.
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ARTICLE I PURCHASE OF CAPITAL STOCK.......................................1
1.1 Purchase and Sale of Capital Stock..............................1
ARTICLE II PURCHASE PRICE..................................................2
2.1 Purchase Price..................................................2
2.2 TSI Stock.......................................................3
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SELLER....5
3.1 Organization, Qualification, etc................................5
3.2 Subsidiaries....................................................6
3.3 Capital Stock...................................................6
3.4 Corporate Record Books..........................................6
3.5 Title to Stock..................................................6
3.6 Options and Rights..............................................6
3.7 Authorization, Etc..............................................6
3.8 No Violation....................................................7
3.9 Certain Financial Information...................................7
3.10 Employees; Independent Contractors.............................8
3.11 Contracts.......................................................8
3.12 True and Complete Copies.......................................11
3.13 Title and Related Matters......................................11
3.14 Litigation.....................................................11
3.15 Tax Matters....................................................12
3.16 Compliance with Law and Applicable Government
and other Regulations........................................13
3.17 ERISA and Related Matters......................................13
3.18 Intellectual Property..........................................14
3.19 Environmental Matters..........................................15
3.20 Dealings with Affiliates.......................................16
3.21 Banking Arrangements...........................................16
3.22 Insurance......................................................16
3.23 Consents.......................................................17
3.24 Investment Representations.....................................17
3.25 Brokerage......................................................19
3.26 Improper and Other Payments....................................19
3.27 Disclosure.....................................................19
3.28 Significant Suppliers; Material Plans and Commitments..........19
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASER................20
4.1 Corporate Organization, etc....................................20
4.2 Authorization, Etc.............................................20
4.3 No Violation...................................................20
4.4 Governmental Authorities.......................................21
4.5 Issuance of TSI Stock..........................................21
4.6 Capitalization.................................................21
4.7 Financial Statements...........................................21
4.8 Disclosure.....................................................21
4.9 Litigation.....................................................21
4.10 No Brokers.....................................................21
ARTICLE V OTHER AGREEMENTS...............................................22
5.1 Further Assurances.............................................22
5.2 Agreement to Defend............................................22
5.3 Consents.......................................................22
5.4 Employment Agreements; Consulting Agreement....................22
5.5 Public Announcements...........................................23
5.6 Deliveries After Closing.......................................23
5.7 Non-Competition Covenant.......................................23
5.8 Rule 144 Best Efforts..........................................25
5.9 Registration Rights............................................25
5.10 Accounting Manager.............................................26
5.11 338(h)(10) Election............................................26
5.12 Access to Company Records......................................26
ARTICLE VI CLOSING........................................................27
6.1 Closing........................................................27
6.2 Closing Deliveries.............................................27
ARTICLE VII SURVIVAL OF TERMS; INDEMNIFICATION.............................28
7.1 Survival.......................................................28
7.2 Indemnification by the Seller..................................29
7.3 Indemnification by the Purchaser...............................30
7.4 Third-Party Claims.............................................30
7.5 Deductible.....................................................31
7.6 Maximum Liability..............................................31
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ARTICLE VIII MISCELLANEOUS PROVISIONS.......................................31
8.1 Amendment and Modification.....................................31
8.2 Entire Agreement...............................................32
8.3 Certain Definitions............................................32
8.4 Notices........................................................33
8.5 Exhibits and Schedules.........................................35
8.6 Waiver of Compliance; Consents.................................35
8.7 Assignment.....................................................35
8.8 Governing Law..................................................35
8.9 Consent to Jurisdiction; Service of Process....................35
8.10 Injunctive Relief..............................................36
8.11 Headings.......................................................36
8.12 Pronouns and Plurals...........................................36
8.13 Construction...................................................36
8.14 Dealings in Good Faith; Best Efforts...........................36
8.15 Binding Effect.................................................36
8.16 Delays or Omissions............................................36
8.17 Severability...................................................37
8.18 Expenses.......................................................37
8.19 Attorneys' Fees................................................37
8.20 Counterparts...................................................37
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SCHEDULES
3.1 Jurisdictions of Qualification
3.2 Subsidiaries; Investments; Interests
3.8 Violations; Third Party Consents
3.9(a) Reconciled Cash Balance
3.9(b) Trade Accounts Payable
3.9(c) Customer Deposits
3.9(d) Furniture, Fixtures and Equipment
3.9(e) Lease Liabilities
3.9(f) Cooperative Advertising Receivables
3.9(g) Other Receivables
3.9(h) Deposits
3.9(i) Prepaid Commissions
3.10 Employee Matters
3.11(a) Contracts
3.13(a) Exceptions to Title
3.13(b) Real and Personal Property
3.14 Litigation
3.16(a) Permits and Licenses
3.16(b) Industry Affiliations and Memberships
3.18 Intellectual Property
3.18(d) Software
3.19 Environmental Matters
3.20 Affiliated Transactions
3.21 Banking Arrangements
3.22 Insurance
3.23 Consents; Regulatory Approvals
3.26 Improper Payments
3.28 Significant Customers and Material Plans and Commitments
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EXHIBITS
2.1 Budget
3.1 The Company's Articles of Incorporation, as amended, and By-laws
5.4(a) Form of Employment Agreement - Seller
5.4(b) Form of Employment Agreement - Other parties
5.4(c) Form of Consulting Agreement
6.2 Opinion of Company's Counsel
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STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of February 9, 1998 and
effective as of 12:01 am on February 1, 1998 (the "Effective Time"), by and
among TRAVEL SERVICES INTERNATIONAL, INC., a Delaware corporation, or its
permitted assigns ("TSI" or the "PURCHASER"), GOLD COAST TRAVEL AGENCY
CORPORATION, INC. D/B/A GOLD COAST CRUISE CENTER, a Florida corporation (the
"COMPANY"), and RHEA SHEROTA (the "SELLER"), who is the sole holder of all of
the issued and outstanding shares of capital stock of the Company.
WHEREAS, the Company is engaged in the business of providing travel
services (the "Business").
WHEREAS, the Seller owns all of the issued and outstanding shares of
capital stock of the Company;
WHEREAS, TSI desires to purchase and acquire from the Seller, and the
Seller desires to sell, transfer and deliver to TSI, all of the issued and
outstanding shares of capital stock of the Company, upon the terms and subject
to the conditions set forth herein, including an election by the Company
pursuant to Section 338(h)(10) of the Internal Revenue Code of 1986, as amended
and the regulations thereunder (the "CODE");
WHEREAS, upon the closing of the transactions contemplated by this
Agreement, the Company shall be and become a wholly-owned subsidiary of TSI;
WHEREAS, although the parties hereto have agreed as to the minimum
value of the Company, they are not able to agree as to the total value of the
Company, and thus the parties hereto have agreed to certain additional
contingent purchase price consideration based upon the results of operations of
the Company as more fully set forth herein.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, TSI, the Company and the Seller hereby agree,
intending to be legally bound, as follows:
ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 PURCHASE AND SALE OF CAPITAL STOCK.
Subject to the terms and conditions of this Agreement, Seller
agrees to sell, transfer and deliver to the Purchaser, and the
Purchaser agrees to purchase, acquire and accept delivery from Seller,
all of the issued and outstanding shares of common stock, no par value
per share (the "COMPANY SHARES"), of the Company owned or held by
Seller.
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ARTICLE II
PURCHASE PRICE
2.1 PURCHASE PRICE. Upon the sale, transfer and delivery to the
Purchaser by the Seller of the Company Shares at the Closing (as such term is
defined in SECTION 6.1 hereof), and in consideration therefor, TSI shall deliver
to the Seller the following consideration in the aggregate:
(a) FIVE MILLION SEVEN HUNDRED FIFTY THOUSAND DOLLARS
($5,750,000.00) by cashier's check or by wire
transfer .
(b) Certificates evidencing 163,755 shares of Common
Stock, par value $.01 per share, of TSI (the "TSI
STOCK") valued, in the aggregate, at $3,750,000.00.
(c) At the Closing, Purchaser will deposit FIVE HUNDRED
THOUSAND DOLLARS ($500,000.00) in an interest-bearing
segregated account (the "Cash Reserve Account") at
NationsBank (or one of its Affiliates). The Cash
Reserve Account shall be specifically and solely for
use by the Company, if needed, during the one year
period following the Closing to fund any operating
cash needs of the Company to support the 1998 budget
of the Company attached hereto as EXHIBIT 2.1 (the
"Budget"); provided, however, that the Company shall
be permitted to fund (through loan or otherwise) up
to $50,000 solely for the purpose of obtaining
additional computer equipment, telephone equipment
and/or systems furniture for use by additional sales
agents of the Company, which expenditures are not
included in the Budget and shall not be funded
through the Cash Reserve Account. The President of
the Company shall be the only Company representative
authorized to request TSI to withdraw funds from the
Cash Reserve Account. A copy of each monthly bank
statement shall be furnished to Purchaser and to
Seller as such statements become available. In the
event that any amounts are remaining in the Cash
Reserve Account on the date which is one year after
the Closing, such amounts shall be distributed to
Seller as additional Purchase Price as soon as
practicable after such date and in no event later
than thirty (30) days after such date.
(d) In the event that the Business of the Company
(conducted in a manner reasonably consistent with the
Budget) generates pre-tax profits of at least
$1,500,000 for the year ending December 31, 1998,
calculated in accordance with GAAP (as defined in
SECTION 8.3) and TSI accounting policies (applied
consistently with other operating units of TSI that
are in the same line of business as the Company) and
determined by TSI's independent auditors in
connection with their audit of TSI for such period
(provided that for such purposes no allocation of
overhead costs from TSI
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or any other inter-company transactions or
allocations shall be considered and no amortization
of goodwill or other costs related to the
transactions contemplated by this Agreement shall be
considered when computing the pre-tax profits of the
Business), then TSI further agrees to pay the Seller,
as additional purchase price, FIVE HUNDRED THOUSAND
DOLLARS ($500,000.00), payable in immediately
available funds within thirty (30) days of TSI
publishing its audit results for the year ended
December 31, 1998.
In the event that at any time during which TSI may still have
an obligation to pay Seller any amounts due under SECTION 2.1 (C) or SECTION
2.1(D) (collectively, the "Contingent Payments"), any Person shall acquire the
Company, whether by means of a merger with or into the Company or by the
acquisition of all or substantially all of the stock or assets of the Company (a
"COMPANY DISPOSITION"), then, with respect to the Contingent Payments, as a
condition to consummation of the Company Disposition, the acquiring Person shall
be required to acknowledge TSI's on-going obligations under the Contingent
Payments (if TSI survives the Company Disposition as the parent of the Company
or its Business) or to assume the obligations under the Contingent Payments (if
TSI does not survive the Company Disposition as the parent of the Company or its
Business) and, in either case, separately track the results of operations of the
Company's Business to make possible the calculation of the Company's operating
results through and until one year after the Closing hereunder.
2.2 TSI STOCK. The Purchaser shall issue the TSI Stock to the Seller
subject to the conditions and restrictions set forth in this SECTION 2.2.
(a) RESTRICTIONS ON TRANSFER
(1) Except for transfers to immediate family members of the
Seller who agree to be bound by the restrictions set forth in this
SECTION 2.2 (or trusts for the benefit of family members of the Seller,
the trustees of which so agree), for a period of one year from the
Closing Date, the Seller shall not sell, assign, exchange, transfer,
distribute or otherwise dispose of any shares of TSI Stock received by
the Seller hereunder; provided that in the event that Purchaser
provides a general waiver of transfer restrictions to the former
shareholders of Purchaser's Founding Companies (as such term is defined
in Purchaser's Prospectus dated July 22, 1997 (the "Prospectus")), the
Seller shall also receive the same waiver. The certificates evidencing
the TSI Stock delivered to the Seller pursuant to this Agreement shall
bear a legend substantially in the form set forth below and containing
such other information as TSI may deem necessary or appropriate:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, APPOINTED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
EFFECT TO ANY ATTEMPTED SALE,
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ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR
TO [ONE YEAR FROM CLOSING]. UPON THE WRITTEN REQUEST
OF THE HOLDER OF THIS CERTIFICATE, THE ISSUER AGREES
TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP
ORDER PLACED WITH THE TRANSFER AGENT) AFTER THE DATE
SPECIFIED ABOVE."
(2) Except for transfers to family members who agree to
bound by the restrictions set forth in this SECTION 2.2 (or trusts for
the benefit of the Seller or her family members, the trustees of which
so agree), regardless of whether or not transfers of such shares are
restricted pursuant to the terms of subsection (1) above during the
two-year period commencing on the Closing Date, the Seller shall not
sell, assign, exchange, transfer, distribute or otherwise dispose of,
in any transaction or series of transactions, more than 5,000 shares of
TSI Stock (a "Future Sale"), except in accordance with this SECTION
2.2(A)(2). If the Seller desires to make a Future Sale, the Seller
shall first provide written notice thereof to TSI. Within three (3)
business days after receipt of such notice by TSI, TSI shall designate
in writing to the Seller the names and other pertinent information of
at least two investment banks or market makers who actively make a
market in TSI's stock and through whom the Future Sale may be made;
PROVIDED, HOWEVER, that the terms of such Future Sale (including
commissions) shall be competitive with what the Seller would receive in
the absence of this SECTION 2.2(A)(2) from a non-discount brokerage
firm.
(3) The Seller shall not transfer any shares of the TSI
Stock at any time that such transfer would constitute a violation of
any federal or state securities or "blue sky" laws, rules or
regulations (collectively, "SECURITIES LAWS"), or a breach of the
conditions to any exemption from registration of the TSI Stock under
any such Securities Laws, or a breach of any undertaking or agreement
of the Seller entered into with TSI pursuant to such Securities Laws or
in connection with obtaining an exemption thereunder, and TSI shall not
transfer upon its books any shares of TSI Stock unless prior thereto
TSI shall have received an opinion of counsel to the Seller, in form
and substance satisfactory to TSI, of counsel, reasonably satisfactory
to TSI, that such transfer is in compliance with this SECTION 2.2 and
the Securities Laws.
(4) For purposes of this Agreement (and the restrictions set
forth in this SECTION 2.2), the term "TSI Stock" shall mean and include
(i) the shares of TSI Stock issued, granted, conveyed and delivered to
the Seller pursuant to SECTION 2.1 hereof (the "PRIMARY SHARES"), and
(ii) any and all other or additional shares of capital stock of TSI
issued or delivered by TSI with respect to the shares of TSI Stock
described in clause (i) hereof, including without limitation any shares
of capital stock of TSI issued or delivered with respect to such shares
as a result of any stock split, stock dividend, stock distribution,
recapitalization or similar transaction (the "ADDITIONAL SHARES").
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(b) LEGEND REMOVAL. Purchaser agrees to cooperate with the
Seller in removing the restrictive legend from the certificates representing the
TSI Stock beginning two years from the date of the Closing.
(c) REPRESENTATIONS. The Seller understands that, in
connection with the issuance of the TSI Stock, TSI is relying upon the
representations and warranties being made by the Seller to TSI in SECTION 3.24
hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND THE SELLER
The Seller and the Company, jointly and severally, make the following
representations and warranties to the Purchaser, each of which shall be deemed
material (and the Purchaser, in executing, delivering and consummating this
Agreement, has relied and will rely upon the correctness and completeness of
each of such representations and warranties notwithstanding independent
investigation, if any; provided that, if TSI has actual knowledge of any false
statement contained in the following representations and warranties, TSI agrees
to inform Company of same):
3.1 ORGANIZATION, QUALIFICATION, ETC.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Florida with full
corporate power and authority to carry on its business as it is now being
conducted, and to own, operate and lease its properties and assets.
(b) The Company is duly qualified or licensed to do business
in good standing in the jurisdictions set forth on SCHEDULE 3.1 attached hereto,
those being every jurisdiction in which the conduct of the Company's business,
the ownership or lease of its properties, the proposed conduct of the Company's
business, the ownership or lease of its properties, or the transactions
contemplated by this Agreement, require it to be so qualified, registered or
licensed and the failure to be so qualified or licensed would have a Material
Adverse Effect (as defined in SECTION 8.3).
(c) True, complete and correct copies of the Company's
articles of incorporation and by-laws, as presently in effect, are attached
hereto as EXHIBIT 3.1.
3.2 SUBSIDIARIES. Except as set forth on SCHEDULE 3.2, the Company
has no Subsidiaries (as defined in SECTION 8.3) nor any investment or other
interest in, or any outstanding loan or advance to or from, any Person (as
defined in SECTION 8.3), including any officer, director, shareholder or
Affiliate (as defined in SECTION 8.3).
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3.3 CAPITAL STOCK. As of the date hereof, the authorized, issued and
outstanding capital stock of the Company consists of one hundred (100) shares of
common stock, no par value per share. The stock record book of the Company has
been delivered to the Purchaser for inspection prior to the date hereof and is
complete and correct, and all requisite Federal and State documentary stamps
have been affixed thereon and canceled. The Company Shares held by the Seller
constitute all of the issued and outstanding shares of capital stock of the
Company; and all of the Company's shares of capital stock are owned beneficially
and of record by the Seller.
3.4 CORPORATE RECORD BOOKS. The corporate minute books of the Company
have been made available to the Purchaser, are complete and correct and contain
all of the proceedings of the shareholders and directors of the Company.
3.5 TITLE TO STOCK. All of the issued and outstanding shares of the
capital stock of the Company are and immediately prior to the transfer to
Purchaser at the Closing will be owned by the Seller, are duly authorized,
validly issued and fully paid, nonassessable, and are free of all Liens (as
defined in SECTION 8.3). Upon delivery of the purchase price to the Seller at
the Closing, Seller will convey, and the Purchaser will own and hold, good and
marketable title to the Company Shares immediately prior to the Closing owned by
Seller, free and clear of all Liens or contractual restrictions or limitations
whatsoever.
3.6 OPTIONS AND RIGHTS. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements under which the Company is bound or obligated to issue any
additional shares of its capital stock or rights to purchase shares of its
capital stock. There are no agreements, arrangements or understandings between
the Seller and/or the Company and any other Person (as defined in SECTION 8.3)
regarding the shares of capital stock of the Company (or the transfer,
disposition, holding or voting thereof). The Seller does not have, or hereby
waives, any preemptive or other right to acquire shares of capital stock of the
Company that the Seller has or may have had on the date hereof.
3.7 AUTHORIZATION, ETC. The Company has full power and authority and
the Seller has full capacity to enter into this Agreement and the agreements and
documents contemplated hereby and perform its or her respective obligations
hereunder and thereunder. The execution, delivery and performance of this
Agreement and all other agreements and transactions contemplated hereby have
been duly authorized by the Board of Directors and shareholders of the Company
and no other corporate proceedings on its part are necessary to authorize this
Agreement and the transactions contemplated hereby. The Seller is entering into
this Agreement on the Seller's own volition, free from any undue influence or
coercion. Upon execution and delivery of this Agreement by the parties hereto
this Agreement and all other agreements contemplated hereby shall constitute the
legal, valid and binding obligation of each of the Company and the Seller,
enforceable against each such party in accordance with their respective terms.
3.8 NO VIOLATION. The execution and delivery by the Company and the
Seller of this Agreement, and any and all other agreements contemplated hereby,
and the fulfillment of and
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compliance with the respective terms hereof and thereof by the Company and the
Seller do not and will not, except as set forth on SCHEDULE 3.8 attached hereto,
(a) conflict with or result in a breach of the terms, conditions or provisions
of, (b) constitute a default or event of default under (with due notice, lapse
of time or both), (c) result in the creation of any Lien upon the capital stock
or assets of the Company pursuant to, (d) give any third party the right to
accelerate any obligation under, (e) result in a violation of, or (f) require
any authorization, consent, approval, exemption or other action by or notice to
any court or Authority (as defined in SECTION 8.3) pursuant to, the articles of
incorporation or by-laws of the Company or any Regulation (as defined in SECTION
8.3), Order (as defined in SECTION 8.3) or material Contract (as defined in
SECTION 8.3) to which the Company or the Seller is subject. The Company and the
Seller will comply with all applicable Regulations and Orders in connection with
the execution, delivery and performance of this Agreement and the transactions
contemplated hereby.
3.9 CERTAIN FINANCIAL INFORMATION.
(a) SCHEDULE 3.9(A) sets forth the Company's reconciled cash
balance as of January 31, 1998.
(b) SCHEDULE 3.9(B) set forth a true and correct list of all
of the Company's trade accounts payable as of January 31, 1998 (i.e., all
amounts due to vendors for invoices received prior to January 31, 1998 and a
good faith estimate of amounts due for goods and services received by the
Company prior to January 31, 1998 but not yet invoiced).
(c) SCHEDULE 3.9(C) sets forth a true and correct list of all
of the Company's customer deposits as of January 31, 1998 (i.e., amounts due to
cruise lines on fully paid bookings and customer deposits for bookings not fully
paid).
(d) SCHEDULE 3.9(D) sets forth a true and correct list of all
of the Company's furniture, fixtures and equipment and related accumulated
depreciation as of January 31, 1998.
(e) SCHEDULE 3.9(E) sets forth a true and correct list of all
of the Company's liabilities pursuant to capital leases and real estate leases
as of January 31, 1998.
(f) SCHEDULE 3.9(F) sets forth a true and correct list of all
of the Company's cooperative advertising receivables and amounts due from cruise
line suppliers for commissions due on credit card transactions as of January 31,
1998.
(g) SCHEDULE 3.9(G) sets forth a true and correct list of all
of the Company's overrides from cruise lines as of January 31, 1998.
(h) SCHEDULE 3.9(H) sets forth a true and correct list of all
of the Company's security and other deposits as of January 31, 1998.
(i) SCHEDULE 3.9(I) sets forth a true and correct computation
of all of the Company's prepaid commissions to reservation agents as of January
31, 1998.
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3.10 EMPLOYEES; INDEPENDENT CONTRACTORS. The Company has delivered
to TSI an accurate list (which is set forth on SCHEDULE 3.10) showing all
officers, directors and key employees of the Company, listing all employment
agreements with such officers, directors and key employees and the rate of
compensation (and the portions thereof attributable to salary, bonus and other
compensation, respectively) of each of such persons as of January 31, 1998. The
Company has provided to TSI true, complete and correct copies of any employment
agreements for persons listed on SCHEDULE 3.10. Except as set forth on SCHEDULE
3.10, the Seller is not related by blood or marriage to, or otherwise affiliated
with, any person listed on SCHEDULE 3.10. Set forth on SCHEDULE 3.10 is a list
of independent contractors who act as reservation agents for the Company.
As of the Effective Time, the Company has approximately 90 employees
and approximately 6 independent contractors. Except as set forth on SCHEDULE
3.10, the Company has been for the past four years, and currently is, in
compliance with all material Federal, State and local Regulations and Orders
affecting employment and employment practices of the Company (including those
Regulations promulgated by the Equal Employment Opportunity Commission),
including terms and conditions of employment and wages and hours. Except as set
forth on SCHEDULE 3.10, (i) the Company is not bound by or subject to (and none
of its assets or properties is bound by or subject to) any arrangement with any
labor union, (ii) no employees of the Company are represented by any labor union
or covered by any collective bargaining agreement, (iii) no campaign to
establish such representation is in progress and (iv) there is no pending or, to
the best of the Company's knowledge, threatened labor dispute involving the
Company and any group of its employees nor has the Company experienced any labor
interruptions over the past three years. The Company believes its relationship
with employees to be good.
3.11 CONTRACTS.
(a) The Company has listed on SCHEDULE 3.11(A) all written
or oral contracts, commitments and similar agreements over $5,000 to
which the Company is a party or by which it or any of its properties
are bound (including, but not limited to, contracts with significant
suppliers, customers, joint venture or partnership agreements,
contracts with any labor organizations and strategic alliances) in
existence as of January 31, 1998, and has delivered true, complete and
correct copies of such agreements to TSI. The Company's written or oral
contracts, commitments and similar agreements include, but are not
limited to, the following (if any):
(i) pension, profit sharing, bonus, retirement,
stock option, stock purchase or other plans providing for
deferred or other compensation to employees or any other
employee benefit plan (other than as set forth in SCHEDULE
3.17 hereto), or any Contract with any labor union;
(ii) employment, consultation or other
compensation Contracts, which is not terminable on notice of
30 days' or less by the Company without penalty or other
financial obligation (and, except as set forth on SCHEDULE
3.11(A), no officer
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or employee of the Company receives total salary, bonus and
other compensation from the Company of $35,000.00 or more per
annum).
(iii) Contracts containing covenants or agreements
limiting the freedom of the Company or any of its employees to
compete in any line of business presently conducted by the
Company with any Person or to compete in any such line of
business in any area;
(iv) Contracts with the Seller or with any affiliate
or relative of the Seller (except for any Contract disclosed
in SCHEDULE 3.11(A) pursuant to clauses (ii) or (iii) of this
SECTION 3.11(A));
(v) Contracts relating to or providing for loans to
officers, directors, employees or Affiliates;
(vi) Contracts under which the Company has advanced
or loaned, or is obligated to advance or loan, funds to any
Person;
(vii) Contracts relating to the incurrence,
assumption or guarantee of any indebtedness, obligation or
liability (in respect of money or funds borrowed), including
letters of credit, or otherwise pledging, granting a security
interest in or placing a Lien on any asset of the Company;
(viii) guarantees or endorsement of any obligation;
(ix) Contracts under which the Company is lessee of
or holds or operates any property, real or personal, owned by
any other party;
(x) Contracts pursuant to which the Company is lessor
of or permits any third party to hold or operate any property,
real or personal, owned or controlled by the Company;
(xi) assignments, licenses, indemnifications or
Contracts with respect to any intangible property (including,
without limitation, any Proprietary Rights (as defined in
SECTION 8.3 hereto));
(xii) warranty Contracts with respect to its services
rendered (or to be rendered);
(xiii) Contracts or lease for, or with, any telephone
switch, long distance or toll-free telephone providers;
(xiv) Contracts with central reservation systems
("CRS") (i.e., SABRE, APOLLO, SYSTEM ONE, etc.);
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(xv) override agreements with travel agencies, other
customers or suppliers;
(xvi) Contracts which prohibit, restrict or limit in
any way the payment of dividends or distributions by the
Company;
(xvii) Contracts under which it has granted any
Person any registration rights (including piggyback rights)
with respect to any securities;
(xviii) Contracts for the purchase, acquisition or
supply of inventory and other property and assets, whether for
resale or otherwise;
(xix) Contracts with independent agents, brokers,
dealers or distributors;
(xx) sales, commissions, advertising or marketing
Contracts;
(xxi) Contracts with Persons with which, directly or
indirectly, the Seller also has a Contract;
(xxii) Governmental Contracts subject to
redetermination or renegotiation; or
(xxiii) any other Contracts which are material to the
Company's operations or business prospects, except those which
(x) were made in the ordinary course of business, and (y) are
terminable on 30 days' or less notice by the Company without
penalty or other financial obligation.
(b) Except as set forth on SCHEDULE 3.8, no consent of any party to
any Contract is required in connection with the execution, delivery or
performance of this Agreement, or the consummation of the transactions
contemplated hereby.
(c) The Company has performed in all material respects all
obligations required to be performed by it and is not in default in any respect
under or in breach of nor in receipt of any claim of default or breach under any
Contract listed on SCHEDULE 3.11(A); no event has occurred which with the
passage of time or the giving of notice or both would result in a default,
breach or event of non-compliance under any material Contract to which the
Company is subject (including without limitation all performance bonds, warranty
obligations or otherwise); the Company does not have any present expectation or
intention of not fully performing all such obligations; the Company does not
have any knowledge of any breach or anticipated breach by the other parties to
any such Contract to which it is a party.
3.12 TRUE AND COMPLETE COPIES. Copies of all Contracts and documents
delivered and to be delivered hereunder by the Seller or the Company are and
will be true and complete copies of such agreements, contracts and documents.
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3.13 TITLE AND RELATED MATTERS.
(a) The Company has good and marketable title to all of its
properties and assets, free and clear of all Liens, except (i)
statutory Liens not yet delinquent, (ii) such imperfections or
irregularities of title, Liens, easements, charges or encumbrances as
do not detract from or interfere with the present use of the properties
or assets subject thereto or affected thereby, otherwise impair present
business operations at such properties; or do not detract from the
value of such properties and assets, taken as a whole, or (iii) Liens
on assets that are the subject of capital leases.
(b) Except as set forth on SCHEDULE 3.13(A), the Company owns
good and marketable title to all the personal property and assets,
tangible or intangible, used in its business except as to those assets
leased, all of which leases are in good standing and no party is in
default thereunder. Except as set forth on SCHEDULE 3.13(A), none of
the assets belonging to or held by the Company will be at the Effective
Time subject to any (i) Contracts of sale or lease, or (ii) Liens.
Except for normal breakdowns and servicing requirements, all machinery
and equipment regularly used by the Company in the conduct of its
business is in good operating condition and repair, ordinary wear and
tear excepted.
(c) There has not been since January 31, 1998 any sale, lease,
or any other disposition or distribution by the Company of any of its
assets or properties and any other assets now or hereafter owned by it,
except transactions in the ordinary and regular course of business or
as otherwise consented to by the Purchaser. After the Closing, the
Company, as a wholly-owned subsidiary of the Purchaser, will own, or
have the right to use, all properties and assets that are currently
used in connection with the business of the Company.
(d) SCHEDULE 3.13(B) attached hereto sets forth a description
of all real and personal property owned or leased by the Company.
3.14 LITIGATION. Except as set forth on SCHEDULE 3.14, there is no
Claim (as defined in SECTION 8.3) pending or, to the best knowledge of the
Seller and the Company, threatened against the Seller or the Company which, if
adversely determined, would have a Material Adverse Effect on the Company. Nor
is there any Order outstanding against the Seller or the Company having, or
which, insofar as can reasonably be foreseen, in the future may have, a Material
Adverse Effect on the Company.
3.15 TAX MATTERS.
(a) The Company has filed all federal, state, and local tax
reports, returns, information returns and other documents
(collectively, the "TAX RETURNS") required to be filed with any
federal, state, local or other taxing authorities (each a "TAXING
AUTHORITY", collectively, the "TAXING AUTHORITIES") in respect of all
relevant taxes, including without limitation income, premium, gross
receipts, net proceeds, alternative or add-on minimum,
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ad valorem, value added, turnover, sales, use, property, personal
property (tangible and intangible), stamp, leasing, lease, user,
excise, duty, franchise, transfer, license, withholding, payroll,
employment, fuel, excess profits, occupational and interest
equalization, windfall profits, severance, and other charges (including
interest and penalties) (collectively, the "TAXES") and in accordance
with all tax sharing agreements to which the Seller or the Company may
be a party. All Taxes required or anticipated to be paid for all
periods prior to and including the Closing Date have been or will be
paid, including any of the Company's Taxes that may be due or claimed
to be due as a result of the consummation of the transactions
contemplated by this Agreement. All Taxes which are required to be
withheld or collected by the Company have been duly withheld or
collected and, to the extent required, have been paid to the proper
Taxing Authority or properly segregated or deposited as required by
applicable laws. There are no Liens for Taxes upon any property or
assets of the Company except for liens for Taxes not yet due and
payable. Neither the Seller nor the Company has executed a waiver of
the statute of limitations on the right of the Internal Revenue Service
or any other Taxing Authority to assess additional Taxes or to contest
the income or loss with respect to any Tax Return. The basis of any
depreciable assets, and the methods used in determining allowable
depreciation (including cost recovery), is correct and in compliance
with the Code.
(b) No audit of the Company or the Company's Tax Returns by
any Taxing Authority is currently pending or threatened, and no issues
have been raised by any Taxing Authority in connection with any Tax
Returns. No material issues have been raised in any examination by any
Taxing Authority with respect to the Company which reasonably could be
expected to result in a proposed deficiency for any other period not so
examined, and there are no unresolved issues or unpaid deficiencies
relating to such examinations. The items relating to the business,
properties or operations of the Company on the Tax Returns filed by or
on behalf of the Company for all taxable years for which the Company
was in existence (including the supporting schedules filed therewith),
available copies of which have been supplied to the Purchaser, state
accurately the information requested with respect to the Company and
such information was derived from the books and records of the Company.
(c) The Seller shall cause the Company to file all Tax Returns
and reports with respect to Taxes which are required to be filed for
Tax periods ending on or before the Effective Time (a "PRE-CLOSING TAX
RETURN"), and the Seller shall pay all Taxes due in respect of such
Pre-Closing Tax Returns to the appropriate Taxing Authority; and the
Seller shall pay all costs associated with the preparation thereof.
(d) The Company has had in effect at all times since January
1, 1978 through the date hereof (and will have through the Effective
Time) a valid election to be taxed under Subchapter S of the Code.
3.16 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT AND OTHER
REGULATIONS. The Company is presently complying in respect of its operations,
equipment, practices, real property, plants, laboratories, structures, and other
property, and all other aspects of its business and
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operations, with all applicable Regulations and Orders, all Regulations relating
to the safe conduct of business, environmental protection, quality and labeling,
antitrust, Taxes, consumer protection, equal opportunity, discrimination,
health, sanitation, fire, zoning, building and occupational safety where such
failure or failures would individually or in the aggregate have a Material
Adverse Effect. There are no Claims pending, nor to the best knowledge of the
Company are there any Claims threatened, nor have the Seller received any
written notice, regarding any violations of any Regulations and Orders enforced
by any Authority claiming jurisdiction over the Company, including any
requirement of OSHA or any pollution and environmental control agency (including
air and water).
(a) SCHEDULE 3.16(A) attached hereto sets forth all permits,
licenses, provider numbers, orders, franchises, registrations and
approvals (collectively, "PERMITS") from all Federal, state, local and
foreign governmental regulatory bodies held by the Company. The Permits
listed on SCHEDULE 3.16(A) are the only Permits that are required for
the Company to conduct its business as presently conducted, except for
those the absence of which would not have any Material Adverse Effect
on the Company. Each such Permit is in full force and effect and, to
the best of the knowledge of the Company, no suspension or cancellation
of any such Permit is threatened and there is no basis for believing
that such Permit will not be renewable upon expiration.
(b) SCHEDULE 3.16(B) attached hereto sets forth all industry
affiliations and membership in industry groups (e.g., International
Airlines of Travel Agent Network ("IATAN"), Airline Reporting
Corporation ("ARC"), etc.) of the Seller and/or the Company. Neither
the Company nor the Seller are in violation of any Regulation, rule or
requirement of such affiliations or memberships. Except as set forth on
SCHEDULE 3.18(B), no consent of any such industry group is required for
the Company and the Seller to consummate the transactions contemplated
by this Agreement.
3.17 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Neither the
Company, nor any ERISA Affiliate of the Company, is a party to or
participates in or has any liability or contingent liability with
respect to:
(i) any "employee welfare benefit plan" or
"employee pension benefit plan" or "multi-employer plan" (as
those terms are respectively defined in Sections 3(1), 3(2)
and 3(37) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment
compensation plan, vacation pay, severance pay, bonus or
benefit arrangement, insurance or hospitalization program or
any other fringe benefit arrangements for any employee,
director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal
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understanding, which does not constitute an "employee benefit
plan" (as defined in Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on
30 days' or less written notice, without further liability.
3.18 INTELLECTUAL PROPERTY.
(a) Except as set forth on SCHEDULE 3.18, the Company has no
trade name, service mark, patent, copyright or trademark related to its
business.
(b) The Company has the right to use each Proprietary Right
listed in SCHEDULE 3.18, and except as otherwise set forth therein,
each of such Proprietary Rights is free and clear of all royalty
obligations and Liens. There are no Claims pending, or to the best
knowledge of the Seller, threatened, against the Company or the Seller
that the Company's use of any of the Proprietary Rights listed on
SCHEDULE 3.18 infringes the rights of any Person. The Seller has no
knowledge of any conflicting use of any of such Proprietary Rights.
(c) The Company is not a party in any capacity to any
franchise, license or royalty agreement respecting any Proprietary
Right and there is no conflict with the rights of others in respect to
any Proprietary Right now used in the conduct of its business.
(d) INTERNAL SOFTWARE APPLICATIONS.
(i) SOFTWARE APPLICATIONS. The current software
applications used by the Company in the operation of its
business are set forth and described on SCHEDULE 3.18(D)
hereto (the "SOFTWARE"). The Seller and the Company do not
have any knowledge that any of the Software used by the
Company is not year 2000 compliant.
(ii) OWNED SOFTWARE. To the extent any of the
Software has been designed or developed by the Company's
management information or development staff or by consultants
on the Company's behalf, to Seller's and the Company's
knowledge, such Software is original and capable of copyright
protection in the United States, and the Company has complete
rights to and ownership of such Software, including possession
of, or ready access to, the source code for such software in
its most recent version. To the Company's and the Seller's
knowledge, no part of any such Software is an imitation or
copy of, or infringes upon, the software of any other Person
or violates or infringes upon any common law or statutory
rights of any other Person, including, without limitation,
rights relating to defamation, contractual rights, copyrights,
trade secrets, and rights of privacy or publicity. The Company
has not sold, assigned, licensed, distributed or in any other
way disposed of or encumbered the Software.
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(iii) LICENSED SOFTWARE. The Software, to the extent
it is licensed from any third party licensor or constitutes
"off-the-shelf" software, is held by the Company legitimately
and is fully transferable to the Purchaser without any third
party consent. To the Seller's and the Company's knowledge,
all software used in the Company's business and installed on
the Company's computer hardware has been
legitimately-licensed.
(iv) NO ERRORS; NONCONFORMITY. The Software operates
and runs in a reasonable and efficient business manner and
conforms to the specifications thereof. To the Company's and
the Seller's knowledge, the Software is free from any
significant software defect or programming or documentation
error.
3.19 ENVIRONMENTAL MATTERS. Except as disclosed in SCHEDULE 3.19:(a)
neither the Company's business nor the operation thereof violates any applicable
Environmental Law (as defined in SECTION 8.3) and, to Company's and Seller's
knowledge, no condition or occurrence (any accident, happening or event which
occurs or has occurred at any time prior to the Closing Date, which results in
or could result in a claim against the Company or the Purchaser or creates or
could create a liability or loss for the Company or the Purchaser) which, with
notice or the passage of time or both, would constitute a violation of any
Environmental Law;(b) the Company is in possession of all Environmental Permits
(as defined in SECTION 8.3) required under any applicable Environmental Law for
the conduct or operation of the Company's business (or any part thereof), and
the Company is in full compliance with all of the requirements and limitations
included in such Environmental Permits;(c) the Company has not stored or used
any pollutants, contaminants or hazardous or toxic wastes, substances or
materials on or at any property or facility now or previously owned, leased or
operated by the Company except for inventories of chemicals which are used or to
be used in the ordinary course of the Company's business (which inventories have
been sorted or used in accordance with all applicable Environmental Permits and
all Environmental Laws, including all so-called "Right to Know" laws);(d) the
Company has not received any notice from any Authority or any private Person
that the Company's business or the operation of any of its facilities is in
violation of any Environmental Law or any Environmental Permit or that it is
responsible (or potentially responsible) for the cleanup of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on or
beneath any property or facility now or previously owned, leased or operated by
the Company, or at, on or beneath any land adjacent thereto or in connection
with any waste or contamination site;(e) the Company is not the subject of any
Federal, state, local, or private Claim involving a demand for damages or other
potential liability with respect to a violation of Environmental Laws or under
any common law theories relating to operations or the condition of any
facilities or property (including underlying groundwater) owned, leased, or
operated by the Company;(f) the Company has not buried, dumped, disposed,
spilled or released any pollutants, contaminants or hazardous wastes, substances
or materials on, beneath or adjacent to any property or facility now or
previously owned, leased or operated by the Company or any property adjacent
thereto;(g) no by-products of any manufacturing or mining process employed in
the operation of the Company's business which may constitute pollutants,
contaminants or hazardous or toxic wastes, substances or materials under any
Environmental Law are currently stored or otherwise located on any
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property or facility now or previously owned, leased or operated by the Company
or any property adjacent thereto; (h)no property or facility now or previously
owned, leased or operated by the Company, is listed or proposed for listing on
the National Priorities List pursuant to CERCLA, on the CERCLIS or on any other
federal or state list of sites requiring investigation or clean-up; (i)to
Company's and Seller's knowledge after inquiry with Company's current landlord,
there are no underground storage tanks, active or abandoned, including petroleum
storage tanks, on or under any property or facility now or previously owned,
leased or operated by the Company; (j)the Company has not directly transported
or directly arranged for the transportation of any Hazardous Material to any
location which is listed or proposed for listing on the National Priorities List
pursuant to CERCLA, on the CERCLIS or on any federal or state list or which is
the subject of federal, state or local enforcement actions or other
investigations which may lead to material Claims against the Company for any
remedial work, damage to natural resources or personal injury, including Claims
under CERCLA; and (k) to Company's and Seller's knowledge after inquiry with
Company's current landlord, there are no polychlorinated biphenyls, radioactive
materials or friable asbestos present at any property or facility now or
previously owned or leased by the Company. The Company has timely filed all
reports required to be filed with respect to all of its property and facilities
and has generated and maintained all required data, documentation and records
under all applicable Environmental Laws.
3.20 DEALINGS WITH AFFILIATES. Excluding loans between the Company
and the Seller, SCHEDULE 3.20 hereto sets forth a complete list, including the
parties, of all oral or written agreements and arrangements to which the Company
is, will be or has been a party, at any time from January 1, 1997 to the Closing
Date, and to which any one or more Affiliates is also a party, to the extent
that any such agreement or arrangement requires payments by any party in excess
of $25,000 in the aggregate.
3.21 BANKING ARRANGEMENTS. SCHEDULE 3.21 attached hereto sets forth
the name of each bank in or with which the Company has an account, credit line
or safety deposit box, and a brief description of each such account, credit line
or safety deposit box, including the names of all Persons currently authorized
to draw thereon or having access thereto. Except as set forth on SCHEDULE 3.21,
the Company has no liability or obligation relating to funds or money borrowed
by or loaned to the Company (whether under any credit facility, line of credit,
loan, indenture, advance, pledge or otherwise).
3.22 INSURANCE. SCHEDULE 3.22 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
property, fire, liability, business interruption, workers' compensation and
other forms of insurance held by the Company as of the date hereof, as well as a
schedule of Claims filed with the Company's current insurance carrier, including
a history of such Claims and a description and estimated dollar amount of any
unresolved Claims. Such policies are valid, outstanding and enforceable
policies, as to which premiums have been paid currently. Neither the Company nor
the Seller know of any state of facts, or of the occurrence of any event which
might reasonably (a) form the basis for any claim against the Company not fully
covered by insurance for liability on account of any express or implied warranty
or tortious omission or commission, or (b) result in material increase in
insurance premiums of the Company.
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3.23 CONSENTS. SCHEDULE 3.23 attached hereto, sets forth a complete
list of consents of governmental and other regulatory agencies or authorities,
foreign or domestic, required to be received by or on the part of the Company
and the Seller to enable the Company or the Seller to enter into and carry out
this Agreement in all material respects. All such requisite consents have been,
or prior to the Closing will have been, obtained.
3.24 INVESTMENT REPRESENTATIONS. In connection with this Agreement
or any agreement or transaction contemplated hereby, the Company and the Seller
hereby represent and warrant to TSI as follows:
(a) The Seller has been offered, and up to the Closing Date
and the time(s) of issuance of the TSI Stock shall be offered, the
opportunity to ask questions of, and receive answers from, TSI and its
Subsidiaries, and the Seller has been given full and complete access to
all available information and data relating to the business and assets
of TSI and its Subsidiaries which the Seller has deemed necessary in
order to evaluate the opportunities, both financial and otherwise, with
respect to TSI and, except as set forth herein, have not relied on any
representation, warranty or other statement concerning the Purchaser
and its Subsidiaries in their evaluation of the decision to consummate
the transactions contemplated herein.
(b) The Seller understands that she must bear the economic
risk of the TSI Stock for an indefinite period of time because, except
as provided in this Agreement:
(i) the Seller understands:
(a) that TSI proposes to issue and deliver
the shares of TSI Stock issuable in
accordance with this Agreement, without
compliance with the registration
requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT")
or the securities laws of the State of
Florida,
(b) that for such purpose TSI will rely
upon the representations, warranties,
covenants and agreements contained
herein, as well as any additional
representations, warranties, covenants,
agreements and certifications reasonably
requested by TSI to be delivered by the
Seller at such time(s) of issuance or
reissuance of the TSI Stock; and
(c) that such noncompliance with
registration is not permissible unless
such representations and warranties are
correct and such covenants and
agreements are performed at and as of
the time of issuance;
(ii) the Seller understands that:
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(a) under existing rules of the Securities
and Exchange Commission (the "SEC"),
there are substantial restrictions in
the transferability of the shares of TSI
Stock;
(b) the shares of TSI Stock may be
transferred only if registered under the
Securities Act or if an exemption from
such registration is available;
(c) Seller may not be able to satisfy the
requirements of Rule 144 promulgated by
the SEC under the Securities Act with
respect to the transfer of such shares;
(iii) the TSI Stock may NOT be sold, transferred,
pledged, or otherwise disposed of (absent a
registration statement covering such shares),
without an opinion of counsel for or satisfactory
to TSI that registration under the Securities Act
or any applicable state securities laws is not
required; and
(iv) TSI neither has an obligation to register a sale
of the TSI Stock held by Seller nor has it agreed
to do so in the future, except as set forth in
SECTION 5.9.
(c) The Seller is an "accredited investor", as such term is
defined in Rule 501 of Regulation D promulgated under the Securities
Act; the Seller, as of the date of this Agreement, either (a) (either
individually or jointly with the Seller's spouse) has a net worth in
excess of $1,000,000; or (b) had an individual income in excess of
$200,000 in each of the two most recent years or joint income with the
Seller's spouse in excess of $300,000 in each of those years, and
reasonably expects reaching the same income level in the current year.
(d) The Seller has relied upon advisors who are familiar
with the type of risks inherent in the acquisition of securities such
as the shares of TSI Stock and the Seller's financial position is such
that the Seller can afford to bear the risk of an investment in her
shares of TSI Stock.
(e) The Seller received this Agreement and first learned of
the transactions contemplated hereby in Florida. The Company and the
Seller executed and will execute all documents contemplated hereby in
Florida, and intends that the laws of Florida govern this transaction.
The Seller is a resident of Florida.
(f) The Seller is acquiring her shares of TSI Stock for her
own account and not with a view to, or for sale in connection with, the
distribution thereof within the meaning of the Securities Act. The
Seller has no present commitment, binding agreement or arrangement to
dispose of any shares of TSI Stock.
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(g) The Seller understands that the certificates evidencing
the shares of TSI Stock will bear appropriate restrictive legends.
3.25 BROKERAGE. Neither the Company nor the Seller has employed any
broker, finder, advisor, consultant or other intermediary in connection with
this Agreement or the transactions contemplated by this Agreement who is or
might be entitled to any fee, commission or other compensation from the Company
or the Seller, or from the Purchaser or its Affiliates, upon or as a result of
the execution of this Agreement or the consummation of the transactions
contemplated hereby.
3.26 IMPROPER AND OTHER PAYMENTS. Except as set forth on SCHEDULE
3.26 hereto, (a) neither the Company, any director, officer, employee thereof,
nor, to the Company's knowledge, any agent or representative of the Company nor
any Person acting on behalf of any of them, has made, paid or received any
unlawful bribes, kickbacks or other similar payments to or from any Person or
Authority, (b) no contributions have been made, directly or indirectly, to a
domestic or foreign political party or candidate, and (c) no improper foreign
payment (as defined in the Foreign Corrupt Practices Act) has been made.
3.27 DISCLOSURE. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Purchaser by or on behalf of the Seller or the Company
with respect to the transactions contemplated hereby contains any untrue
statement of a material fact or omits a material fact necessary to make each
statement contained herein or therein not misleading.
3.28 SIGNIFICANT SUPPLIERS; MATERIAL PLANS AND COMMITMENTS. The
Company has delivered to TSI an accurate list (which is set forth on SCHEDULE
3.28) of (i) all significant suppliers, it being understood and agreed that a
"significant supplier", for purposes of this SECTION 3.28, means a supplier
representing 5% or more of the Company's annual revenues as of the Balance Sheet
Date. Except to the extent set forth on SCHEDULE 3.28, none of the Company's
significant suppliers have canceled or substantially reduced or, to the
knowledge of the Company, are currently attempting or threatening to cancel a
contract or substantially reduce utilization of the services provided by the
Company. The Company has also indicated on SCHEDULE 3.28 a summary description
of all plans or projects involving the opening of new operations, expansion of
existing operations, the acquisition of any personal property, business or
assets requiring, in any event, the payments of more than $25,000 by the
Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Company and to the Seller
as follows:
4.1 CORPORATE ORGANIZATION, ETC. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own,
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operate and lease its properties and assets. The Purchaser is duly qualified or
licensed to do business in good standing in every jurisdiction in which the
conduct of its business, the ownership or lease of its properties, or the
transactions contemplated by this Agreement, require it to be so qualified or
licensed and the failure to be so qualified or licensed would have a Material
Adverse Effect on its business.
4.2 AUTHORIZATION, ETC. The Purchaser has full corporate power and
authority to enter into this Agreement and all other agreements contemplated
hereby to which Purchaser is a party, and to carry out the transactions
contemplated hereby and thereby. The Board of Directors of the Purchaser has
duly authorized the execution, delivery and performance of this Agreement and
the other agreements and transactions contemplated hereby, and no other
corporate proceedings on its part are necessary to authorize this Agreement and
the transactions contemplated hereby. Upon execution and delivery of this
Agreement by the parties hereto this Agreement shall constitute the legal, valid
and binding obligation of the Purchaser, enforceable against the Purchaser in
accordance with their respective terms.
4.3 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and will not (a) conflict with or result in a material
breach of the terms, conditions or provisions of, (b) result in a violation of,
or (c) require any authorization, consent, approval, exemption or other action
by or notice to any Authority pursuant to, the certificate of incorporation or
by-laws of the Purchaser, or any Regulation to which the Purchaser is subject,
or any material Contract (other than the Credit Agreement dated as of October
15, 1997 by and between TSI and NationsBank, which has been obtained) or Order
to which the Purchaser or its properties are subject. The Purchaser will comply
with all applicable Regulations and Orders in connection with its execution,
delivery and performance of this Agreement and the transactions contemplated
hereby.
4.4 GOVERNMENTAL AUTHORITIES. The Purchaser has complied in all
material respects with all applicable Regulations in connection with its
execution, delivery and performance of this Agreement and the agreements and
transactions contemplated hereby. The Purchaser is not required to submit any
notice, report, or other filing with any governmental authority in connection
with its execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby. No authorization, consent, approval, exemption
or notice is required to be obtained by the Purchaser in connection with the
execution, delivery, and performance of this Agreement and the agreements and
transactions contemplated hereby.
4.5 ISSUANCE OF TSI STOCK. The shares of TSI Stock that are required
to be issued by TSI to the Company, in accordance with the terms and subject to
the conditions set forth in this Agreement, shall, upon issuance and delivery,
be duly authorized, validly issued, fully paid and non-assessable.
4.6 CAPITALIZATION. As of January 31, 1998, the authorized capital
stock of the Purchaser consists of 50,000,000 shares of common stock, par value
$0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per
share, of which 10,188,237 shares of
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common stock are outstanding (on a fully diluted basis) and no shares of
preferred stock are outstanding.
4.7 FINANCIAL STATEMENTS. The financial statements dated as of
September 30, 1997 contained in Purchaser's Form 10-Q for the quarter ended
September 30, 1997 (the "10-Q") fairly presented, in accordance with GAAP, the
Purchaser's financial position and its results of operations as of and for the
nine month period ended September 30, 1997 and the Purchaser has not experienced
a Material Adverse Change since such date.
4.8 DISCLOSURE. Neither this Agreement nor any of the exhibits,
attachments, written statements, documents, certificates or other items prepared
for or supplied to the Company or the Seller by or on behalf of the Purchaser
with respect to the transactions contemplated hereby (including the 10-Q and the
Prospectus) contains any untrue statement of a material fact or omits a material
fact necessary to make each statement contained herein or therein not misleading
(as of the respective dates thereof, with respect to the 10-Q and the
Prospectus).
4.9 LITIGATION. There is no material litigation pending or, to
Purchaser's knowledge, threatened against the Purchaser as of the date hereof.
4.10 NO BROKERS. The Purchaser has not employed any broker, finder,
advisor, consultant or other intermediary in connection with this Agreement or
the transactions contemplated by this Agreement who is or might be entitled to
any fee, commission or other compensation from the Purchaser or from the Company
or the Seller, upon or as a result of the execution of this Agreement or the
consummation of the transactions contemplated hereby.
ARTICLE V
OTHER AGREEMENTS
The parties hereto further agree as follows:
5.1 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. If at any time
after the Closing Date the Purchaser shall consider or be advised that any
further deeds, assignments or assurances in law or in any other things are
necessary, desirable or proper to vest, perfect or confirm, of record or
otherwise, in the Purchaser (or the Company, as appropriate), the title to any
property or rights of Seller acquired or to be acquired by reason of, or as a
result of, the acquisition, the Seller agrees that the Seller shall execute and
deliver all such proper deeds, assignments and assurances in law and do all
things necessary, desirable or proper to vest, perfect or confirm title to such
property or rights in the Company and otherwise to carry out the purpose of this
Agreement.
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5.2 AGREEMENT TO DEFEND. In the event any action, suit, proceeding or
investigation is commenced, whether before or after the Closing Date, all the
parties hereto agree to cooperate and use their best efforts to defend against
and respond thereto.
5.3 Without limiting the generality of SECTION 5.1, each of the parties
hereto shall use their best efforts to obtain all permits, authorizations,
consents and approvals of all Persons and governmental authorities necessary,
proper or advisable in connection with the consummation of the transactions
contemplated by this Agreement. With respect to every material Contract of the
Company, even those Contracts for which a consent or approval is not required
under the terms of such Contract, upon the execution and delivery of this
Agreement, each party to each such Contract shall, after consultation with and
coordination by TSI, be advised of the transaction contemplated hereby.
5.4 EMPLOYMENT AGREEMENTS; CONSULTING AGREEMENT. The Company shall
terminate effective no later than the Effective Time, any existing employment
agreements between the Company and each of the Seller, Michael Sherota, Jeffrey
Sherota and Adolfo Sanmartino and each of such persons shall enter into an
Employment Agreement with TSI (or, at TSI's option, an affiliate or subsidiary
of TSI) in the form of EXHIBIT 5.4(A) attached hereto with respect to Seller and
in the form of EXHIBIT 5.4(B) attached hereto with respect to such other parties
(collectively, the "EMPLOYMENT AGREEMENTS"). The Company shall terminate
effective no later than the Effective Time any existing consulting agreement
between the Company and Walter Sherota and Walter Sherota shall enter into a
Consulting Agreement with TSI (or, at TSI's option, an affiliate or subsidiary
of TSI) in the form of EXHIBIT 5.4(C) attached hereto (the "CONSULTING
AGREEMENT").
5.5 PUBLIC ANNOUNCEMENTS. Neither the Seller nor the Company nor any
Affiliate, representative, employee or shareholder of either of such Persons,
shall disclose any of the terms of this Agreement to any third party (other than
the Purchaser's advisors and the Seller's advisors) without the other party's
prior written consent unless required by any applicable law. The form, content
and timing of any and all press releases, public announcements or publicity
statements (except for any disclosures under or pursuant to Federal or State
securities laws in connection with the registration of TSI's securities or
otherwise) with respect to this Agreement or the transactions contemplated
hereby shall be subject to the prior approval of the Purchaser. No press
releases, public announcements or publicity statements shall be released by
either party without such prior mutual agreement.
5.6 DELIVERIES AFTER CLOSING. From time to time after the Closing, at
the Purchaser's request and without expense to the Company and without further
consideration from the Purchaser or the Company, the Seller shall execute and
deliver such other instruments of conveyance and transfer and take such other
action as the Purchaser reasonably may require to convey, transfer to and vest
in the Purchaser, and to put the Purchaser in possession of, any rights or
property to be sold, conveyed, transferred or delivered hereunder.
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5.7 NON-COMPETITION COVENANT.
(a) As a material and valuable inducement for the Purchaser
to enter into this Agreement, pay and deliver the Purchase Price
consideration and consummate the transactions provided for herein,
during the "RESTRICTED PERIOD" (as hereinafter defined), the Seller
agrees, unless otherwise permitted by TSI in writing, that she shall
not, directly or indirectly, for herself or on behalf of or in
conjunction with any other person, persons, company, partnership,
corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder,
owner, partner, joint venturer or in a managerial capacity,
whether as an employee, independent contractor, consultant or
advisor or as a sales representative, in any travel service
business in direct competition with those aspects of the
business of TSI or any subsidiary or Affiliate of TSI
(collectively with TSI, the "TSI Entities" and each (including
TSI), a "TSI Entity"), with which Company or Seller has had
substantive involvement, within the United States or within
100 miles of any other geographic area in which any TSI Entity
conducts business, including any territory serviced by any TSI
Entity (the "RESTRICTED TERRITORY");
(ii) solicit any person who is, at that time, or
who has been within one (1) year prior to that time, an
employee of any TSI Entity for the purpose or with the intent
of enticing such employee away from or out of the employ of
any TSI Entity;
(iii) solicit any person or entity which is, at
that time, or which has been within one (1) year prior to that
time, a customer or supplier of any TSI Entity for the purpose
of soliciting or selling products or services in direct
competition with those aspects of the business of the Company
or TSI or any TSI Entity with which Company or Seller have had
substantive involvement, within the Restricted Territory; or
(iv) solicit any prospective acquisition
candidate, on the Company's or the Seller's own behalf or on
behalf of any competitor or potential competitor, which
candidate was, to the Company's or the Seller's knowledge,
either called upon by any TSI Entity or for which TSI made an
acquisition analysis, for the purpose of acquiring such
entity. Notwithstanding the above, the foregoing covenant
shall not be deemed to prohibit the Company or the Seller from
acquiring as an investment not more than two percent (2%) of
the capital stock of a competing business, whose stock is
traded on a national securities exchange or over-the-counter.
(b) As used in this Agreement, the term "RESTRICTED PERIOD"
shall mean and include the longer of (x) a period of five (5) years,
from the Closing to the fifth (5th) anniversary of the Closing, and (y)
during such time as the Seller is employed by any TSI Entity and for a
period of two (2) years following the effective date of any termination
of
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the Seller's employment with any such TSI Entity (regardless of the
cause, reason or justification of any such termination); provided,
however, in the event Seller's employment by any TSI Entity is
terminated without cause (as defined in the employment agreement with
Seller) or such TSI Entity materially breaches such employment
agreement, then the term "Restricted Period" shall mean and include a
period of two (2) years following the termination of such employment.
(c) In recognition of the substantial nature of such
potential damages and the difficulty of measuring economic losses to
TSI as a result of a breach of the foregoing covenants, and because of
the immediate and irreparable damage that could be caused to TSI for
which it would have no other adequate remedy, the Seller agrees that in
the event of breach by the Seller of the foregoing covenant, TSI shall
be entitled to specific performance of this provision and co-injunctive
and other equitable relief, and that the Seller will be responsible for
the payment of court costs and reasonable attorneys' fees incurred by
TSI in seeking enforcement of the covenants set forth in this SECTION
5.7.
(d) It is agreed by the parties that the foregoing covenants
in this SECTION 5.7 impose a reasonable restraint on the Seller in
light of the activities and business of the TSI Entities on the date of
the execution of this Agreement and the current plans of the TSI
Entities; but it is also the intent of TSI and the Seller that such
covenants be construed and enforced in accordance with the changing
activities, business and locations of the TSI Entities, whether before
or after the date of termination of the employment of the Seller. For
example, if, during the Restricted Period, a TSI Entity engages in new
and different travel service activities or establishes new locations
for its current activities or business in addition to or its existing
activities or business and Seller has substantive involvement with a
TSI Entity in providing such new travel services, then Seller will be
precluded from soliciting the customers or employees of such new
activities or business or from such new location and from directly
competing with such new travel service business within 100 miles of its
then-established operating location(s) through the Restricted Period.
(e) The covenants in this SECTION 5.7 are severable and
separate, and the unenforceability of any specific covenant shall not
affect the provisions of any other covenant. Moreover, in the event any
court of competent jurisdiction shall determine that the scope, time or
territorial restrictions set forth are unreasonable, then it is the
intention of the parties that such restrictions be enforced to the
fullest extent which the court deems reasonable, and the Agreement
shall be reformed in accordance therewith.
(f) All of the covenants in this SECTION 5.7 shall be
construed as an agreement independent of any other provision in this
Agreement, and the existence of any claim or cause of action of the
Seller against TSI, whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by TSI of such
covenants. Further, this SECTION 5.7 shall survive the Closing and the
termination of the Seller's employment with a TSI Entity. It is
specifically agreed that the Restricted Period, during which the
agreements and covenants of the Seller made in this SECTION 5.7 shall
be
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effective, shall be computed by excluding from such computation any
time during which the Seller is in violation of any provision of this
SECTION 5.7.
5.8 RULE 144 BEST EFFORTS. While TSI is a public company with its
securities registered under the Securities Act, and listed or quoted for trading
by a national securities exchange or inter-dealer quotation system, TSI will use
its best efforts to see that TSI is in compliance with the requirements of Rule
144 under the Securities Act applicable to the issuer of securities, so as to
facilitate non-registered sales of TSI Stock by the Company or the Seller
consistent with the requirements and limitations of Rule 144. Nothing in this
SECTION 5.8 shall be deemed as either (i) any representation or warranty that
TSI will remain a public company with securities registered under the Securities
Act, or (ii) any covenant or agreement by TSI to register, under federal or
state securities laws or otherwise, any TSI securities issued to, or held by,
the Company or the Seller..
5.9 REGISTRATION RIGHTS.
(a) TSI will utilize its reasonable best efforts to cause,
as soon as practicable after the Closing Date but no later than six
months after the Closing Date, a registration statement to be filed
under the Securities Act or an existing registration statement to be
amended for the purpose of registering the TSI Stock (the "Shelf
Registration Statement") for resale by the Seller. TSI will use its
reasonable best efforts to have the Shelf Registration Statement become
effective and remain effective for two (2) years (or, if a lesser time
period, until all of the TSI Stock has been sold by Seller) and cause
the TSI Stock to be registered for resale under the Securities Act and
registered, qualified or exempted under the state securities laws of
such jurisdictions as the Seller reasonably requests as soon as
reasonably practicable following the Closing Date, provided, however,
that TSI shall not be required to qualify to do business in any state
or to consent to be subject to general service of process in any state
where it is not otherwise required to be so qualified or subject.
Seller agrees to use her best efforts to assist TSI in obtaining
information regarding the Company or the Business required in order to
satisfy the requirements of the SEC with respect to the Shelf
Registration Statement. TSI will bear the costs relating to the Shelf
Registration Statement, other than selling commissions and expenses
that may be incurred by the Seller in connection with any sale of the
TSI Stock.
(b) The Seller agrees, if requested by TSI and an
underwriter of common stock (or other securities) of TSI not to sell or
otherwise transfer or dispose of any common stock (or other securities)
of TSI held by Seller during the 90 day period following any
registration statement filed by TSI (other than the Shelf Registration
Statement) under the Securities Act, provided that all executive
officers, directors and principal stockholders of TSI enter into
similar agreements. If required by the underwriters, the Seller shall
execute a separate agreement to the foregoing effect. TSI may impose
stop-transfer instructions with respect to the shares (or securities)
subject to the foregoing restriction until the end of such period.
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5.10 ACCOUNTING MANAGER. As soon as practicable, the Company shall
hire a full-time Accounting Manager to oversee financial reporting, cash flow
management and other financial management duties relating to the Company. TSI
shall have the right to interview and approve the individual hired as Accounting
Manager. The Accounting Manager will report to the President of the Company and
to the Chief Financial Officer of TSI (or her designee).
5.11 338(H)(10) ELECTION. The parties hereto agree that (i) the
acquisition of the Company Shares will be in accordance with Section 338 of the
Code, (ii) a Statement of Election (the "ELECTION") on Form 8023-A under Section
338(h)(10) of the Code shall be made and filed with the appropriate authority
and (iii) the Seller shall be solely responsible for paying any taxes which may
result from the Election and out of or as a consequence of the transactions
contemplated hereby. For purposes of allocation under Section 1060 of the Code
for purposes of the Election, valuations will be made in accordance with the
applicable provisions of the Code and Federal income tax regulations as
determined by Purchaser and its independent advisors, whose determinations shall
be binding on all parties. The Seller shall indemnify Purchaser (and its
Affiliates) and hold Purchaser (and its Affiliates) harmless from any loss,
charge or expense resulting from the Election and the payment of the taxes due
in connection therewith and herewith. Notwithstanding the foregoing, the
allocation under Section 1060 of the Code shall not materially differ from the
draft allocation delivered to the Seller on or prior to the Closing Date.
5.12 ACCESS TO COMPANY RECORDS. (a a) TSI, the Company and Seller shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to SECTION 3.15 and any
audit, litigation or other proceeding with respect to Taxes. Such cooperation
shall include the retention and (upon the other party's request) the provision
of records and information which are reasonably relevant to any such audit
litigation or other proceeding. TSI, the Company and Seller agree (a) to retain
all books and records with respect to tax matters pertinent to the Company
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitation (and, to the extent notified by TSI, the
Company or Seller, any extensions thereof) of the respective taxable periods,
and to abide by all record retention agreements entered into with any taxing
authority, and (b) to give the other party reasonable written notice prior to
transferring, destroying or discarding any such books and records and, if the
other party so requests, TSI, the Company or Seller, as the case may be, shall
allow the other party to take possession of such books and records or to make
copies thereof, as appropriate.
ARTICLE VI
CLOSING
6.1 CLOSING. A closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be held simultaneously with the execution of
this Agreement or on such other date which is mutually agreed upon in writing
(the "CLOSING DATE"). Regardless of the Closing
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Date, the parties hereto agree that the Closing of the transactions contemplated
by this Agreement shall be effective as of the Effective Time.
6.2 CLOSING DELIVERIES. At the Closing,
(a) the Seller and the Company shall deliver or cause to be
delivered to the Purchaser:
(i) a certificate or certificates evidencing all of
the Company Shares, duly endorsed for transfer with all
necessary transfer stamps affixed, and all minute books and
stock transfer records of the Company;
(ii) copies of all consents and approvals required
(including UCC termination statements, releases of mortgages
or other releases of Liens);
(iii) an Opinion of Company's Counsel substantially
in the form attached hereto as EXHIBIT 6.2;
(iv) the Employment Agreements and the Consulting
Agreement;
(v) a certificate, signed by the secretary of the
Company, as to the articles of incorporation and by-laws of
the Company, the resolutions adopted by the board of directors
and shareholders of the Company in connection with this
Agreement, the incumbency of certain officers of the Company
and the jurisdictions in which the Company is qualified to
conduct business, in form acceptable to the Purchaser;
(vi) certificates issued by the appropriate
governmental authorities evidencing the good standing of the
Company as of a date not more than 10 days prior to the
Closing Date, as a corporation organized under the laws of the
State of Florida and as a foreign corporation authorized to do
business under the laws of the various jurisdictions where it
is so qualified; and
(vii) such other certified resolutions, documents and
certificates as are required to be delivered by the Seller or
the Company pursuant to the provisions of this Agreement.
(b) The Purchaser shall deliver to the Seller:
(i) the consideration (in the form of cash and TSI
Stock) required to be paid or delivered to the Seller at
Closing in accordance with SECTION 2.1
(ii) the Employment Agreements and the Consulting
Agreement;
(iv) opinion of Purchaser's counsel in form
reasonably satisfactory to Company and Seller;
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(v) such other certified resolutions, documents and
certificates as are required to be delivered by the Purchaser
pursuant to the provisions of this Agreement; and
(v) proof of establishment of the Cash Reserve
Account.
ARTICLE VII
SURVIVAL OF TERMS; INDEMNIFICATION
7.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing;
provided, however, that (a) the agreements and covenants set forth in this
Agreement shall survive and continue until all obligations set forth therein
shall have been performed and satisfied; and (b) all representations and
warranties shall survive and continue until:
(1) with respect to the representations and
warranties in SECTIONS 3.15 (tax matters) and 3.17 (ERISA
matters) and 3.19 (environmental matters), until sixty (60)
days following the expiration of the applicable statute of
limitations;
(2) with respect to the representations and
warranties in SECTIONS 3.3 (capitalization), 3.5 (title to
stock), 3.6 (options and rights on capital stock) and 3.13
(title and related matters), these representations shall
survive and continue forever and without limitation; and
(3) with respect to all other representations and
warranties, the date which is eighteen (18) months after the
Closing Date, except for representations, warranties and
indemnities for which an indemnification Claim shall be
pending as of such date, in which event such indemnities shall
survive with respect to such Claim until the final disposition
thereof.
7.2 INDEMNIFICATION BY THE THE SELLER. Subject to the limitations of
this ARTICLE VII, the Purchaser and its officers, directors, employees,
shareholders, representatives and agents shall be indemnified and held harmless
by the Seller at all times after the date of this Agreement, against and in
respect of any and all damage, loss, deficiency, liability, obligation,
commitment, cost or expense (including the fees and expenses of counsel)
resulting from, or in respect of, any of the following:
(a) Any misrepresentation, omission of material fact, or
non-fulfillment of any warranty, covenant or obligation on the part of
the Seller or the Company under this Agreement, any document relating
thereto or contained in any schedule or exhibit to this Agreement;
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(b) Any and all liabilities of the Company of any nature
whether accrued, absolute, contingent or otherwise, and whether known
or unknown, existing at the Effective Time to the extent not adequately
disclosed in this Agreement or the schedules or exhibits thereto or not
adequately disclosed in writing to Purchaser prior to the Closing Date,
without limitation:
(i) All Tax liabilities of the Company, together
with any interest or penalties thereon or related thereto,
through the Effective Time and any Tax liability of the
Company arising in connection with the transactions
contemplated hereby. Any Taxes, penalties or interest
attributable to the operations of the Company payable as a
result of an audit of any tax return shall be deemed to have
accrued in the period to which such Taxes, penalties or
interest are attributable;
(ii) All environmental liabilities relating to any
of the Company's properties, including federal, state and
local environmental liability, together with any interest or
penalties thereon or related thereto, through the Effective
Time; and
(c) All demands, assessments, judgments, costs and
reasonable legal and other expenses arising from, or in connection with
any Claim incident to any of the foregoing.
(d) All other Claims of the Purchaser shall be resolved in
accordance with SECTION 7.4.
7.3 INDEMNIFICATION BY THE PURCHASER. Subject to the limitations of
this ARTICLE VII, the Seller and her heirs, assigns, representatives and agents
shall be indemnified and held harmless by the Purchaser, at all times after the
date of this Agreement, against and in respect of any and all damage, loss,
deficiency, liability, obligation, commitment, cost or expense (including the
fees and expenses of counsel) resulting from, or in respect of, any
misrepresentation, omission of material fact, or non-fulfillment of any
warranty, covenant or obligation on the part of the Purchaser under this
Agreement, any document relating thereto or contained in any schedule or exhibit
to this Agreement.
7.4 THIRD-PARTY CLAIMS. Except as otherwise provided in this
Agreement, the following procedures shall be applicable with respect to
indemnification for third-party Claims. Promptly after receipt by the party
seeking indemnification hereunder (hereinafter referred to as the "INDEMNITEE")
of notice of the commencement of any (a) Tax audit or proceeding for the
assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (b) any action or
the assertion of any Claim, liability or obligation by a third party (whether by
legal process or otherwise), against which Claim, liability or obligation the
other party to this Agreement (hereinafter the "INDEMNITOR") is, or may be,
required under this Agreement to indemnify such indemnitee, the indemnitee will,
if a Claim thereon is to be, or may be, made against the indemnitor, notify the
indemnitor in writing of the commencement or assertion thereof and give the
indemnitor a copy of such Claim, process and all legal pleadings. The indemnitor
shall have the right to participate in the defense of such
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action with counsel of reputable standing. The indemnitor shall have the right
to assume the defense of such action unless such action (i) may result in
injunctions or other equitable remedies in respect of the indemnitee or its
business; (ii) may result in liabilities which, taken with other then existing
Claims under this ARTICLE VII, would not be fully indemnified hereunder; or
(iii) may have a Material Adverse Effect on the indemnitee after the Closing
Date (including an effect on the Tax liabilities, earnings or ongoing business
relationships of the indemnitee). The indemnitor and the indemnitee shall
cooperate in the defense of such Claims. In the case that the indemnitor shall
assume or participate in the defense of such audit, assessment or other
proceeding as provided herein, the indemnitee shall make available to the
indemnitor all relevant records and take such other action and sign such
documents as are necessary to defend such audit, assessment or other proceeding
in a timely manner. If the indemnitee shall be required by judgment or a
settlement agreement to pay any amount in respect of any obligation or liability
against which the indemnitor has agreed to indemnify the indemnitee under this
Agreement, the indemnitor shall promptly reimburse the indemnitee in an amount
equal to the amount of such payment plus all reasonable expenses (including
legal fees and expenses) incurred by such indemnitee in connection with such
obligation or liability subject to this ARTICLE VII.
Prior to paying or settling any Claim against which an
indemnitor is, or may be, obligated under this Agreement to indemnify an
indemnitee, the indemnitee must first supply the indemnitor with a copy of a
final court judgment or decree holding the indemnitee liable on such claim or
failing such judgment or decree, and must first receive the written approval of
the terms and conditions of such settlement from the indemnitor. An indemnitor
shall have the right to settle any Claim against it, subject to the prior
written approval of the indemnitee, which approval shall not be unreasonably
withheld.
An indemnitee shall have the right to employ its own counsel
in any case, but the fees and expenses of such counsel shall be at the expense
of the indemnitee unless (a) the employment of such counsel shall have been
authorized in writing by the indemnitor in connection with the defense of such
action or Claim, (b) the indemnitor shall not have employed, or is prohibited
under this SECTION 7.4 from employing, counsel in the defense of such action or
Claim, or (c) such indemnitee shall have reasonably concluded that there may be
defenses available to it which are contrary to, or inconsistent with, those
available to the indemnitor, in any of which events such fees and expenses of
not more than one additional counsel for the indemnified parties shall be borne
by the indemnitor.
7.5 DEDUCTIBLE. Notwithstanding the foregoing provisions of this
ARTICLE VII, except for the next succeeding sentence of this SECTION 7.5, no
indemnification pursuant to this ARTICLE VII shall be required of any
indemnifying party hereunder unless and until, and only to the extent that, the
aggregate amount due the indemnified party for all Claims under this ARTICLE VII
shall exceed $100,000 (the "Deductible"). Notwithstanding the foregoing, no
Claim (regardless of amount) that arises out of a breach of any of the
representations or warranties contained in SECTIONS 3.3 (capital stock), 3.5
(title to stock), 3.6 (options and rights), 3.13 (title and related matters),
and 3.15 (tax matters), shall at any time be subject to the Deductible or be
counted in determining the Maximum Liability (as defined in SECTION 7.6).
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7.6 MAXIMUM LIABILITY. Notwithstanding the foregoing provisions of
this ARTICLE VII, except as provided in the last sentence of SECTION 7.5 above,
the maximum liability in connection with any and all Claims for indemnification
or breach or violation of representations or warranties under this Agreement or
otherwise with respect to this transaction shall be in the aggregate, with
respect to the Seller, the total purchase price received by Seller as set forth
in SECTION 2.1 hereof (including the Contingent Payments if they become payable
to Seller in the future); provided, however, that Purchaser agrees to first
offset the amount of any Claim due Purchaser hereunder against the Contingent
Payments (if they, in fact, become payable to Seller in the future) prior to
proceeding to collect the balance of the Claim directly from Seller. The
Purchaser's maximum liability shall be equal to the maximum liability of the
Seller on the date any Claim is made hereunder.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by the Company, the Purchaser and the Seller.
8.2 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
8.3 CERTAIN DEFINITIONS.
"AFFILIATE" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or
controlling such Person, (b) any Person, directly or indirectly, in
which such Person holds, of record or beneficially, five percent or
more of the equity or voting securities, (c) any Person that holds, of
record or beneficially, five percent or more of the equity or voting
securities of such Person, (d) any Person that, through Contract,
relationship or otherwise, exerts a substantial influence on the
management of such Person's affairs, (e) any Person that, through
Contract, relationship or otherwise, is influenced substantially in the
management of their affairs by such Person, or (f) any director,
officer, partner or individual holding a similar position in respect of
such Person.
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"AUTHORITY" means any governmental, regulatory or
administrative body, agency, arbitrator or authority, any court or
judicial authority, any public, private or industry regulatory agency,
arbitrator authority, whether international, national, federal, state
or local.
"CLAIM" means any action, claim, obligation, liability,
expense, lawsuit, demand, suit, inquiry, hearing, investigation, notice
of a violation, litigation, proceeding, arbitration, or other dispute,
whether civil, criminal, administrative or otherwise, whether pursuant
to contractual obligations or otherwise.
"CONTRACT" means any agreement, contract, commitment,
instrument or other binding arrangement or understanding, whether
written or oral.
"ENVIRONMENTAL LAW" means any Regulation, Order, settlement
agreement or governmental requirement, which relates to or otherwise
imposes liability or standards of conduct concerning mining or
reclamation of mined land, discharges, emissions, releases or
threatened releases of noises, odors or any pollutants, contaminants or
hazardous or toxic wastes, substances or materials, whether as matter
or energy, into ambient air, water, or land, or otherwise relating to
the manufacture, processing, generation, distribution, use, treatment,
storage, disposal, cleanup, transport or handling of pollutants,
contaminants, or hazardous wastes, substances or materials, including
(but not limited to) the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and
Recovery Act of 1976, as amended, the Toxic Substances Control Act of
1976, as amended, the Federal Water Pollution Control Act Amendments of
1972, the Clean Water Act of 1977, as amended, any so-called
"Superlien" law, and any other similar Federal, state or local
statutes.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Corporation's
business.
"GAAP" means generally accepted accounting principles, applied
on a consistent basis.
"LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement, restriction or interest of
another Person of any kind or nature.
"MATERIAL ADVERSE CHANGE" means any development or change
which has, had or would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of
facts or matters which has, or might reasonably be expected to have, a
material adverse effect in respect of TSI's or the Company's (as the
case may be) business, operations, properties, assets,
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condition (financial or otherwise), results, plans, strategies or
prospects, based on TSI or the Company (as the case may be) taken as a
whole.
"ORDER" means any decree, consent decree, judgment, award,
order, injunction, rule, consent of or by an Authority.
"PERSON" means any corporation, partnership, joint venture,
company, syndicate, organization, association, trust, entity, Authority
or natural person.
"PROPRIETARY RIGHTS" means any patent, patent application,
copyright, trademark, trade name, service mark, service name, trade
secret, know-how, confidential information or other intellectual
property or proprietary rights.
"REGULATION" means any law, statute, rule, regulation,
ordinance, requirement, announcement or other binding action of or by
an Authority.
"SUBSIDIARY" means any Person which the Purchaser or the
Company, as the case may be, owns, directly or indirectly, 50% or more
of the outstanding stock or other equity interests.
8.4 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, two business days after mailing first
class certified mail with postage paid, or by overnight receipted courier
service:
(a) If to the Seller or the Company, to:
Gold Coast Travel Agency Corporation, Inc.
d/b/a Gold Coast Cruise Center
19056 Northeast 29th Avenue
North Miami Beach, Florida 33180
Attention: Rhea Sherota
with a copy to:
Leonard H. Bloom, Esq.
Shapo, Freedman & Bloom, P.A.
200 S. Biscayne Boulevard
First Union Financial Center
Suite 4750
Miami, Florida 33131
or to such other person or address as the Seller or
the Company shall furnish by notice to the Purchaser in writing.
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(b) If to the Purchaser to:
Travel Services International, Inc.
220 Congress Park Drive
Delray Beach, Florida 33445
Attention: Michael J. Moriarty
President and Chief Operating Officer
with a copy to:
Travel Services International, Inc.
220 Congress Park Drive
Delray Beach, Florida 33445
Attention: Suzanne B. Bell, Esq.
Senior Vice President and General Counsel
with a further copy to:
Greenberg Traurig Hoffman
Lipoff Rosen & Quentel, P.A.
515 E. Las Olas Boulevard, Suite 1500
Fort Lauderdale, Florida 33301
Attn: Daniel H. Aronson, Esq.
or to such other person or address as the Purchaser shall
furnish by notice to the Seller in writing.
8.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to
in this Agreement are attached hereto and incorporated herein by this reference.
8.6 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any party
hereto to comply with any obligation, covenant, agreement or condition herein
may be waived in writing by the other parties hereto, but such waiver or failure
to insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
8.7 ASSIGNMENT. This Agreement and all of the provisions hereof
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any wholly-owned Subsidiary, and may grant Liens or security
interests in respect of its rights and interests hereunder, without the prior
approval of the Seller.
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8.8 GOVERNING LAW. The Agreement shall be governed by the internal
laws of the State of Florida as to all matters, including but not limited to
matters of validity, construction, effect and performance.
8.9 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Company and
the Seller hereby irrevocably submit to the jurisdiction of the state or federal
courts located in Broward County, Florida in connection with any suit, action or
other proceeding arising out of or relating to this Agreement and the
transactions contemplated hereby, and hereby agree not to assert, by way of
motion, as a defense, or otherwise in any such suit, action or proceeding that
the suit, action or proceeding is brought in an inconvenient forum, that the
venue of the suit, action or proceeding is improper or that this Agreement or
the subject matter hereof may not be enforced by such courts.
8.10 INJUNCTIVE RELIEF. The parties hereto agree that in the event
of a breach of any provision of this Agreement, the aggrieved party or parties
may be without an adequate remedy at law. The parties therefore agree that in
the event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
8.11 HEADINGS. The article, section and other headings contained in
this Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement (or any provision hereof).
8.12 PRONOUNS AND PLURALS. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular forms of nouns, pronouns, and verbs
include the plural and vice versa.
8.13 CONSTRUCTION. The parties acknowledge that each party has
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
8.14 DEALINGS IN GOOD FAITH; BEST EFFORTS. Each party hereto agrees
to act in good faith with respect to the other party in exercising its rights
and discharging its obligations under this Agreement. Each party further agrees
to use its best efforts to ensure that the purposes of this Agreement are
realized and to take all further steps as are reasonably necessary to implement
the provisions of this Agreement. Each party agrees to execute, deliver and file
any document or instrument necessary or advisable to realize the purposes of
this Agreement.
8.15 BINDING EFFECT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
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8.16 DELAYS OR OMISSIONS. No delay or omission to exercise any
right, power or remedy accruing to any party hereto, upon any breach or default
of any other party under this Agreement, shall impair any such right, power or
remedy of such party nor shall it be construed to be a waiver of any such breach
or default, or an acquiescence therein, or of or in any similar breach or
default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party hereto of any breach or default under this
Agreement, or any waiver on the part of any party of any provisions or
conditions of this Agreement must be made in writing and shall be effective only
to the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any party, shall be cumulative
and not alternative.
8.17 SEVERABILITY. Unless otherwise provided herein, if any
provision of this Agreement shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
8.18 EXPENSES. All fees, costs and expenses (including, without
limitation, legal, auditing and accounting fees, costs and expenses) incurred in
connection with considering, pursuing, negotiating, documenting or consummating
this Agreement and the transactions contemplated hereby shall be borne and paid
solely by the party incurring such fees, costs and expenses.
8.19 ATTORNEYS' FEES. If any party to this Agreement seeks to
enforce the terms and provisions of this Agreement, then the prevailing party in
such action shall be entitled to recover from the losing party all costs in
connection with such action, including without limitation reasonable attorneys'
fees, expenses and costs incurred with respect to trials, appeals and
collection.
8.20 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
* * * THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. * * *
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IN WITNESS WHEREOF, the parties hereto have made and entered into this
Agreement the date first hereinabove set forth.
PURCHASER:
TRAVEL SERVICES INTERNATIONAL, INC.
By: /S/ MICHAEL J. MORIARTY
------------------------------------------
Name: Michael J. Moriarty
Title: President and Chief Operating Officer
SELLER:
/S/ RHEA SHEROTA
----------------------------------------------
RHEA SHEROTA
COMPANY:
GOLD COAST TRAVEL AGENCY
CORPORATION, INC. D/B/A GOLD COAST
CRUISE CENTER
By: /S/ RHEA SHEROTA
------------------------------------------
Name: Rhea Sherota
Title: President
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