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 1, 1999
TRAVEL SERVICES INTERNATIONAL, INC.
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(Exact name of registrant as specified in its charter)
FLORIDA 0-29298 52-2030324
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(State or other juris- (Commission (IRS Employer
diction of incorporation) File Number) Identification No.)
220 CONGRESS PARK DRIVE, DELRAY BEACH, FLORIDA 33445
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(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.
AHI INTERNATIONAL CORPORATION
On February 1, 1999, Travel Services International, Inc. (the "Company")
completed the acquisition of all of the outstanding capital stock of AHI
International Corporation ("AHI"), an Illinois corporation, pursuant to a Stock
Purchase Agreement dated as of January 8, 1999 (such acquisition being referred
to as the "AHI Acquisition"). AHI develops, markets and sells packaged European
vacations to individuals that are members of over 200 university and college
alumni associations throughout North America, utilizing sophisticated direct
marketing techniques. AHI's tours typically combine air, hotel, and European
river cruises in packages ranging in length from 7 days to 15 days. AHI is also
a longstanding provider of alumni tour packages to college bowl games. The AHI
Acquisition represents the Company's first acquisition of a company specializing
in marketing of packaged vacations. In addition, the AHI acquisition adds an
additional marketing niche to the Company and further enhances the Company's
position as a leading specialized distributor of leisure travel services.
The consideration for the acquisition consisted of $24.0 million in cash and
145,400 shares of common stock of the Company. The $24.0 million in cash was
funded with advances on the Company's revolving credit facility with
NationsBank, N.A. The acquisition will be accounted for using the purchase
method of accounting.
Prior to the AHI Acquisition, all of the capital stock of AHI was owned by
Richard and Arlene Small. Following the AHI Acquisition, the Small family will
continue to manage the busniess of AHI as a wholly-owned subsidiary of the
Company. There are no other material relationships known to the Company between
the sellers of the acquired company or its affiliates, directors or officers, or
associates of such directors or officers.
The assets of AHI include cash and cash equivalents, supplier contracts,
customer lists, accounts receivable, personal property, and computer systems.
The acquired company expects to continue to utilize these assets in a manner
consistent with that of their historical usage.
The foregoing descriptions are qualified in all respects by reference to the
full text of the Stock Purchase Agreement and the Company's Press Release dated
January 11, 1999, each of which is included as an exhibit to this report.
ITEM 5. OTHER EVENTS.
LIFESTYLE VACATION INCENTIVES, INC. AND ALL SEASONS SMART TRAVELER, INC.
On February 1, 1999, the Company also completed the acquisition of all of the
outstanding capital stock of Lifestyle Vacation Incentives, Inc. and All Seasons
Smart Traveler, Inc. (collectively, "LVI"), an Florida corporation, pursuant to
a Merger Agreement dated as of January 30, 1999 (such acquisition being referred
to as the "LVI Acquisition"). LVI operates in the travel incentive and promotion
industry. Its proprietary travel programs provide structured discounts to
consumers for various forms of leisure travel. Clients, such as Samsonite, AT&T,
and General Motors utilize LVI's incentive travel programs to promote the sale
of goods, services, memberships, loans, credit cards, and dozens of other
applications. LVI also provides fulfillment for third-party travel clubs such as
the Samsonite Travel Club. In addition to marketing through businesses and other
organizations, LVI also markets cruises directly to consumers over the
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Internet through its Website, www.cruises.com.
The consideration for the acquisition consisted of $6.25 million in cash and
248,000 shares of common stock of the Company, plus contingent consideration
based on future earnings. The contingent consideration shall not exceed $3.0
million. The contingent consideration is payable in stock and cash. The cash
payment of $6.25 million was funded with the Company's operating capital. The
acquisition will be accounted for using the purchase method of accounting.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
It is impracticable at this time to provide the required financial
statements with respect to the acquisition described in Item 2 above. The
required financial statements will be filed as soon as practicable, but in
no event later than April 17, 1999 (60 days after this report on Form 8-K is
required to be filed).
(b) PRO FORMA FINANCIAL INFORMATION.
It is impracticable at this time to provide the required pro forma financial
information with respect to the acquisition described in Item 2 above. The
required pro forma financial information will be filed as soon as
practicable, but in no event later than April 17, 1999 (60 days after this
report on Form 8-K is required to be filed).
(c) EXHIBITS.
1 Purchase Agreement, dated as of January 8, 1999, among Travel Services
International, Inc., AHI International Corporation, Richard D. Small and
Arlene P. Small.
2 Press Release dated January 11, 1999
3 Press Release dated February 2, 1999
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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 16, 1998 /s/ JILL M. VALES
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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
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1 Purchase Agreement, dated as of January 8, 1999, among Travel
Services International, Inc., AHI International Corporation,
Richard D. Small and Arlene P. Small.
2 Press Release dated January 11, 1999
3 Press Release dated February 2, 1999
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EXHIBIT 1
STOCK PURCHASE AGREEMENT
BY AND AMONG
TRAVEL SERVICES INTERNATIONAL, INC.,
AHI INTERNATIONAL CORPORATION,
RICHARD D. SMALL,
AND
ARLENE P. SMALL
DATED AS OF JANUARY 8, 1999
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE NO.
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<S> <C>
ARTICLE I PURCHASE OF CAPITAL STOCK................................................1
1.1 Purchase and Sale of Capital Stock; Purchase Price.......................1
1.2 TSI Stock................................................................2
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE SELLERS AND THE COMPANY............4
2.1 Organization, Qualification, etc.........................................4
2.2 Subsidiaries.............................................................4
2.3 Capital Stock............................................................4
2.4 Corporate Record Books...................................................4
2.5 Title to Stock...........................................................5
2.6 Options and Rights.......................................................5
2.7 No Bonus Shares..........................................................5
2.8 Predecessor Status, etc..................................................5
2.9 Spin-off by the Company..................................................5
2.10 Financial Condition at Closing...........................................5
2.11 Authorization, Etc.......................................................5
2.12 No Violation.............................................................6
2.13 Financial Statements.....................................................6
2.14 Accounts Payable; Accounts Receivable; Customer Deposits.................7
2.15 Employees; Independent Contractors.......................................7
2.16 Absence of Certain Changes...............................................7
2.17 Contracts................................................................8
2.18 Disclosure..............................................................10
2.19 Title and Related Matters...............................................11
2.20 Litigation..............................................................11
2.21 Tax Matters.............................................................11
2.22 Compliance with Law and Applicable Government and other Regulations.....13
2.23 ERISA and Related Matters...............................................13
2.24 Intellectual Property...................................................15
2.25 Environmental Matters...................................................16
2.26 Dealings with Affiliates................................................17
2.27 Banking Arrangements....................................................18
2.28 Insurance...............................................................18
2.29 Investment Representations..............................................18
2.30 Inventories.............................................................19
2.31 Brokerage...............................................................19
2.32 Improper and Other Payments.............................................19
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2.33 Significant Suppliers and Customers; Material Plans and Commitments.....20
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.........................20
3.1 Corporate Organization, etc.............................................20
3.2 Authorization, Etc......................................................20
3.3 No Violation............................................................20
3.4 Governmental Authorities................................................21
3.5 Issuance of TSI Stock...................................................21
3.6 Shelf Registration Statement............................................21
3.7 Capitalization..........................................................21
3.8 Commission Reports......................................................21
3.9 No Material Adverse Change..............................................22
3.10 Litigation..............................................................22
3.11 Brokerage...............................................................22
ARTICLE IV COVENANTS OF THE SELLERS................................................22
4.1 Regular Course of Business..............................................23
4.2 Amendments..............................................................24
4.3 Agreement to Retain Shares..............................................24
4.4 Capital and Other Expenditures..........................................24
4.5 Cash and Cash Equivalents...............................................24
4.6 Borrowing...............................................................24
4.7 Other Commitments.......................................................24
4.8 Interim Financial Information...........................................24
4.9 Full Access and Disclosure..............................................24
4.10 Confidentiality.........................................................25
4.11 Fulfillment of Conditions Precedent.....................................25
4.12 Banking Arrangements....................................................25
4.13 Representation Letter...................................................25
4.14 Budgets.................................................................25
ARTICLE V COVENANTS OF THE PURCHASER..............................................26
5.1 Confidentiality.........................................................26
5.2 Full Access and Disclosure..............................................26
ARTICLE VI OTHER AGREEMENTS........................................................26
6.1 Further Assurances......................................................26
6.2 338(h)(10) Election and Other Tax Agreements............................27
6.3 Agreement to Defend.....................................................29
6.4 Consents................................................................29
6.5 No Solicitation or Negotiation..........................................29
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6.6 No Termination of Sellers' Obligations by Subsequent Incapacity, Etc....29
6.7 Employment Agreements; Termination of Certain Agreements................30
6.8 Public Announcements....................................................30
6.9 Deliveries After Closing................................................30
6.10 Non-Competition Covenant................................................30
6.11 Non-disclosure; Confidentiality.........................................32
6.13 Advise of Changes.......................................................34
6.14 Stock Options...........................................................34
ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER..........................35
7.1 Representations and Warranties; Covenants and Agreements................35
7.2 No Injunction...........................................................35
7.3 Third Party Consents....................................................35
7.4 Regulatory Approvals....................................................35
7.5 No Material Adverse Change..............................................36
7.6 Opinion of Sellers' and the Company's Counsel...........................36
7.7 Employment Agreements...................................................36
7.8 Delivery of the Company Share Certificates..............................36
7.9 Due Diligence; Board Approval...........................................36
7.10 Shelf Registration......................................................36
7.11 Credit Facility Approval................................................36
7.12 Hart-Scott-Rodino Act Filing and Waiting Period.........................36
7.13 Financial Statements and Tax Returns....................................37
7.14 Allocation Schedule.....................................................37
7.15 Other Documents.........................................................37
ARTICLE VIII CONDITIONS TO THE OBLIGATIONS OF THE SELLERS............................37
8.1 Representations and Warranties; Performance.............................37
8.2 No Injunction...........................................................37
8.3 Purchase Consideration..................................................37
8.4 Employment Agreements...................................................38
8.5 Hart-Scott-Rodino Act Filing and Waiting Period.........................38
8.6 Third Party Consents....................................................38
8.7 Opinion of Sellers' and the Company's Counsel...........................38
8.8 Shelf Registration......................................................38
8.9 Allocation Schedule.....................................................38
8.10 Other Documents.........................................................38
ARTICLE IX CLOSING.................................................................38
9.1 Closing.................................................................38
9.2 Closing Deliveries......................................................39
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ARTICLE X TERMINATION AND ABANDONMENT.............................................40
10.1 Methods of Termination..................................................40
10.2 Procedure Upon Termination..............................................41
ARTICLE XI SURVIVAL OF TERMS; INDEMNIFICATION......................................41
11.1 Survival................................................................41
11.2 Indemnification by the Sellers..........................................42
11.3 Indemnification by the Purchaser........................................42
11.4 Limitation on Indemnification...........................................43
11.4 Third-Party Claims......................................................43
ARTICLE XII MISCELLANEOUS PROVISIONS................................................44
12.1 Amendment and Modification..............................................44
12.2 Entire Agreement........................................................44
12.3 Certain Definitions.....................................................45
12.4 Notices.................................................................46
12.5 Exhibits and Schedules..................................................48
12.6 Waiver of Compliance; Consents..........................................48
12.7 Assignment..............................................................48
12.8 Governing Law...........................................................48
12.9 Consent to Jurisdiction; Service of Process.............................48
12.10 Injunctive Relief.......................................................48
12.11 Headings................................................................49
12.12 Pronouns and Plurals....................................................49
12.13 Construction............................................................49
12.14 Binding Effect..........................................................49
12.15 Delays or Omissions.....................................................49
12.16 Severability............................................................49
12.17 Expenses................................................................49
12.18 Attorneys' Fees.........................................................50
12.19 Counterparts............................................................50
</TABLE>
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SCHEDULES
1.1(a) Sellers; Capitalization
1.1(b) Consideration
2.1 Jurisdictions of Qualification
2.2 Subsidiaries; Investments; Interests
2.8 Predecessor Status
2.12 Violations; Third Party Consents
2.13(a) Additional Liabilities
2.13(b) Liabilities covered by Insurance
2.14(a) Accounts Payable
2.14(b) Accounts Receivable
2.14(c) Customer Deposits
2.15 Employees; Independent Contractors
2.17(a) Contracts
2.19 Real and Personal Property
2.20 Litigation
2.22(b) Permits and Licenses
2.22(c) Industry Affiliations and Memberships
2.23 ERISA, Benefit Plans and Other Matters
2.24 Intellectual Property
2.24(d) Software
2.25 Environmental Matters
2.26 Affiliated Transactions
2.27 Banking Arrangements
2.28 Insurance
2.30 Inventories
2.31 Brokerage
2.32 Improper and Other Payments
2.33 Significant Suppliers and Customers and Material Plans and Commitments
7.4 Regulatory Approvals
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EXHIBITS
2.1 The Company's Articles of Incorporation, as amended, and By-laws
2.13 Financial Statements
6.7 Form of Employment Agreement
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STOCK PURCHASE AGREEMENT (the "AGREEMENT"), dated as of January 8, 1998
by and among TRAVEL SERVICES INTERNATIONAL, INC., a Florida corporation, d/b/a
The Travel Company ("TSI" or the "PURCHASER"), AHI INTERNATIONAL CORPORATION, an
Illinois corporation, ("AHI" or the "COMPANY"), RICHARD D. SMALL, an Illinois
resident ("MR. SMALL") and ARLENE P. SMALL, an Illinois resident ("MS. SMALL"
and, together with Mr. Small, the "SELLERS").
WHEREAS, the Sellers own all of the issued and outstanding shares of
capital stock of the Company;
WHEREAS, TSI desires to purchase and acquire from the Sellers, and the
Sellers desire to sell, transfer and deliver to TSI, all of the issued and
outstanding shares of capital stock of the Company, upon the terms and subject
to the conditions set forth herein, 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"); and
WHEREAS, upon the closing of the transactions contemplated by this
Agreement, the Company shall be and becomes a wholly-owned subsidiary of TSI.
NOW, THEREFORE, for and in consideration of the mutual benefits to be
derived hereby and the premises, representations, warranties, covenants and
agreements herein contained, TSI, the Sellers and the Company hereby agree,
intending to be legally bound, as follows:
ARTICLE I
PURCHASE OF CAPITAL STOCK
1.1 PURCHASE AND SALE OF CAPITAL STOCK; PURCHASE PRICE.
(a) Subject to the terms and conditions of this Agreement, the
Sellers agree to sell, transfer and deliver to the Purchaser, and the
Purchaser agrees to purchase, acquire and accept delivery from the
Sellers, all of the issued and outstanding shares of common stock, no
par value, of AHI owned or held by the Sellers (the "COMPANY SHARES")
which number of Company Shares to be sold and purchased hereunder is
set forth opposite each such Seller's name on SCHEDULE 1.1(A) attached
hereto.
(b) Contemporaneously with the sale, transfer and delivery to
the Purchaser by the Sellers of the Company Shares at the Closing (as
such term is defined in SECTION 9.1 hereof), and in consideration
therefor, TSI shall deliver to the Sellers in the aggregate (i)
TWENTY-FOUR MILLION DOLLARS ($24,000,000.00) by wire transfer of
immediately available funds (the "CASH PORTION") and (ii) One Hundred
Forty Five Thousand Four Hundred (145,400) registered shares of common
stock, par value $0.01 per share, of TSI (the "TSI STOCK"), valued in
the aggregate at ONE MILLION SIX HUNDRED FOUR THOUSAND EIGHT HUNDRED
FIFTY SIX DOLLARS AND FIFTY ONE CENTS ($1,604,856.51), based upon the
average closing price of TSI's common stock as quoted on the Nasdaq
National Market, as published in the WALL STREET
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JOURNAL, for the ten (10) trading days commencing on October 5, 1998
and ending on October 16, 1998. The stock certificates for the TSI
Stock shall be issued and registered in the names of the respective
Sellers, and in the respective amounts listed in SCHEDULE 1.1(B). The
issuance of TSI Stock shall be registered under the Securities Act of
1933, as amended (the "SECURITIES ACT"), pursuant to the Shelf
Registration Statement (as defined in SECTION 2.29(a)).
1.2 TSI STOCK. The Purchaser shall issue the TSI Stock to the Sellers
subject to the conditions and restrictions set forth in this SECTION 1.2.
(a) Restrictions on Transfer
(1) Except for transfers to immediate family members
who agree to be bound by the restrictions set forth in this
SECTION 1.2 (or trusts for the benefit of family members of
the Sellers, the trustees of which so agree), during the
period (the "RESTRICTION PERIOD") beginning on the date of
Closing and ending on the one year anniversary of the Closing,
the Sellers shall not sell, assign, exchange, transfer,
distribute or otherwise dispose of (in each case, a
"TRANSFER") any shares of TSI Stock received by the Sellers
hereunder. Following the Restriction Period, the Sellers may
transfer their shares of TSI Stock so long as such transfer is
in accordance with the Future Sale Procedures set forth in
SECTION 1.2(a)(2). The certificates evidencing the TSI Stock
delivered to the Sellers pursuant to this Agreement shall bear
a legend substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE
SOLD, ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED,
PLEDGED, DISTRIBUTED, CHANGED OR OTHERWISE DISPOSED
OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE
EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE,
TRANSFER, ENCUMBRANCE, PLEDGE, DISTRIBUTION, OR OTHER
DISPOSITION, OTHER THAN IN ACCORDANCE WITH SECTIONS
1.2 OF THAT CERTAIN STOCK PURCHASE AGREEMENT DATED AS
OF JANUARY __, 1999, BY AND AMONG ISSUER, AHI
INTERNATIONAL CORPORATION, RICHARD SMALL AND ARLENE
SMALL.
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
APPLIES. THESE SHARES MAY ONLY BE TRANSFERRED
PURSUANT TO A REGISTRATION STATEMENT COVERING THE
TRANSFER OF SUCH SHARES OR A VALID EXEMPTION FROM
REGISTRATION.
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(2) Except for transfers to family members who agree
to be bound by the restrictions set forth in this SECTION 1.2
(or trusts for the benefit of the Sellers or their family
members, the trustees of which so agree), regardless of
whether or not transfers of such shares are restricted
pursuant to the terms of subsection (1) above, during the
two-year period commencing on the Closing Date, no Seller
shall transfer in any transaction or series of transactions
over a thirty-day period that, when taken together, will total
more than 5,000 shares of such Seller's TSI Stock (in either
case, a "FUTURE SALE"), except in accordance with this SECTION
1.2(a)(2) (the "FUTURE SALE PROCEDURES"). If any Seller
desires to make a Future Sale, the Seller shall first provide
written or verbal notice thereof to TSI's General Counsel.
Promptly, but in no event later than (5) 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 of TSI's stock and through whom the Future Sale may be
made (subject to the procedures set forth above); 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 1.2(a)(2) from a
non-discount brokerage firm.
(3) No Sellers shall transfer any shares of the TSI
Stock at any time if such transfer would constitute a
violation of any federal or state securities or "blue sky"
laws, rules or regulations (collectively, "SECURITIES LAWS"),
or a breach of the conditions to any exemption from
registration of the TSI Stock under any such Securities Laws,
or a breach of any undertaking or agreement of such Seller
entered into with TSI pursuant to such Securities Laws or in
connection with obtaining an exemption thereunder.
(4) For purposes of this Agreement (and the
restrictions set forth in this SECTION 1.2), the term "TSI
Stock" shall mean and include (i) the shares of TSI Stock
issued, granted, conveyed and delivered to the Sellers
pursuant to SECTION 1.1 hereof, and (ii) any and all other or
additional shares of capital stock of TSI issued or delivered
by TSI with respect to the shares of TSI Stock described in
clause (i) hereof, including without limitation any shares of
capital stock of TSI issued or delivered with respect to such
shares as a result of any stock split, stock dividend, stock
distribution, recapitalization or similar transaction.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF THE SELLERS AND THE COMPANY
The Sellers and the Company, jointly and severally, make the following
representations and warranties to the Purchaser:
2.1 ORGANIZATION, QUALIFICATION, ETC.
(a) The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Illinois with the
corporate power and authority to carry on its business as it is now being
conducted, and to own, operate and lease its properties and assets.
(b) The Company is duly qualified or licensed to do business
in good standing in the jurisdictions set forth on SCHEDULE 2.1 attached hereto,
those being every jurisdiction in which the conduct of the Company's business,
the ownership or lease of its properties, or the transactions contemplated by
this Agreement, require it to be so qualified, registered or licensed, except
where the failure to be so qualified, registered or licensed would not have a
Material Adverse Effect.
(c) True, complete and correct copies of the Company's
Articles of Incorporation and by-laws, as presently in effect, are attached
hereto as EXHIBIT 2.1.
2.2 SUBSIDIARIES. Except as set forth on SCHEDULE 2.2, the Company has
no Subsidiaries (as defined in SECTION 12.3) nor any investment or other equity
interest in, or any outstanding loan or advance to or from, any Person (as
defined in SECTION 12.3) in excess of $5,000 individually and $10,000 in the
aggregate, including any officer, director, shareholder or Affiliate (as defined
in SECTION 12.3).
2.3 CAPITAL STOCK. As of the date hereof, the authorized capital stock
of AHI consists of One Hundred Thousand (100,000) shares of common stock, no par
value, of which twenty thousand six hundred eighty two (20,682) shares are
issued and outstanding. The stock record book of the Company has been made
available to the Purchaser for inspection prior to the date hereof and is
complete and correct. The Company Shares constitute all of the issued and
outstanding shares of capital stock of the Company; and all of the Company
Shares are owned beneficially and of record by the Sellers as set forth on
SCHEDULE 1.1(a) attached hereto.
2.4 CORPORATE RECORD BOOKS. The corporate minute books of the Company
have been made available to the Purchaser, are complete and correct in all
material respects and contain all written minutes of the shareholders and
directors of the Company.
2.5 TITLE TO STOCK. All of the issued and outstanding shares of the
capital stock of the Company is, and immediately prior to the transfer to
Purchaser at the Closing will be, owned by the Sellers (in the amounts and as
set forth on SCHEDULE 1.1(a) hereto), are duly authorized,
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validly issued, fully paid and nonassessable, and are free of all Liens (as
defined in SECTION 12.3). Upon delivery of the TSI Stock to the Sellers at the
Closing, the Sellers will convey, and the Purchaser will own and hold, good and
valid title to the Company Shares immediately prior to the Closing owned by the
Sellers, free and clear of all Liens or contractual restrictions or limitations
whatsoever other than liens, restrictions or limitations arising from the
contracts or actions of TSI or under federal or state securities laws.
2.6 OPTIONS AND RIGHTS. There are no outstanding subscriptions,
options, warrants, rights, securities, contracts, commitments, understandings or
arrangements under which the Company is bound or obligated to issue any
additional shares of their capital stock or rights to purchase shares of their
capital stock. There are no agreements, arrangements or understandings between
the Sellers and/or the Company and any other Person (as defined in SECTION 12.3)
regarding the Company Shares (or the transfer, disposition, holding or voting
thereof). The Sellers do not have, or hereby waive, any preemptive or other
right to acquire shares of the Company Shares that such Sellers have or may have
had on the date hereof.
2.7 NO BONUS SHARES. None of the Company Shares were issued pursuant to
awards, grants or bonuses.
2.8 PREDECESSOR STATUS, ETC. SCHEDULE 2.8 sets forth a listing of all
names of all predecessor companies of the Company. The Company has not at any
time been a subsidiary or division of another corporation or a part of an
acquisition which was later rescinded.
2.9 SPIN-OFF BY THE COMPANY. There has not been any sale or spin-off of
material assets of the Company, any subsidiary thereof or any person or entity
that directly, or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with the Company within the preceding
two (2) years.
2.10 FINANCIAL CONDITION AT CLOSING. At and as of Closing, the Company
shall (i) have made cumulative distributions, commencing on September 30, 1998
and ending as of the Closing Date (including a $15,000 distribution to the
Sellers in October 1998), to the Sellers in an aggregate amount not to exceed
$2,500,000 (the "PRE-CLOSING DISTRIBUTION"), and (ii) be current in all material
respects on all bills, obligations and payables according to standard trade
terms.
2.11 AUTHORIZATION, ETC. The Company has the full corporate power and
authority and each of the Sellers has the capacity to enter into this Agreement
and the agreements and documents contemplated hereby to which they are or will
become a party and perform their respective obligations hereunder and
thereunder. The execution, delivery and performance of this Agreement and all
other agreements and transactions contemplated hereby to which the Company is or
will become a party have been duly authorized by the Board of Directors and
shareholders of the Company and no other corporate proceedings on its part are
necessary to authorize this Agreement and the transactions contemplated hereby.
Upon execution and delivery of this Agreement and all other agreements
contemplated thereby by the parties hereto and thereto shall constitute the
legal, valid and binding obligation of the Company and the Sellers party hereto
and thereto, enforceable against each such party in accordance with their
respective terms.
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2.12 NO VIOLATION. The execution, delivery and performance by the
Company and the Sellers of this Agreement, and any and all other agreements
contemplated hereby, and the fulfillment of and compliance with the respective
terms hereof and thereof by the Company and the Sellers do not and will not,
except as set forth on SCHEDULE 2.12 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
Authority (as defined in SECTION 12.3) pursuant to, the Articles of
incorporation or by-laws of the Company or any Regulation (as defined in SECTION
12.3) to which the Company or the Sellers are subject. The Company and the
Sellers will comply in all material respects with all applicable Regulations and
Orders in connection with the execution, delivery and performance of this
Agreement and the transactions contemplated hereby.
2.13 FINANCIAL STATEMENTS. Attached as EXHIBIT 2.13 hereto are the
following financial statements of the Company: (i) balance sheets for the fiscal
years ended October 31, 1996 and October 31, 1997 (prepared in accordance with
GAAP) and for the periods ended March 31, 1998, June 30, 1998, September 30,
1998, and October 31, 1998 (prepared on a consistent basis with the year end
financial statements) (collectively, the "BALANCE SHEETS"), and (ii) Income
Statement for the fiscal years ended October 31, 1996 and October 31, 1997 and
for the ten month period ended October 31, 1998 and the Statement of Cash Flow
and Stockholders' Equity for the fiscal years ended October 31, 1996 and October
31, 1997 (prepared on a consistent basis with the year end financial statements)
(collectively, the "STATEMENTS OF INCOME") (collectively, together with the
Balance Sheets and the Statements of Income, the "FINANCIAL STATEMENTS"). The
balance sheets (and the notes thereto) included in the Financial Statements
fairly present in all material respects the financial position of the Company at
the respective dates thereof, and the statements of operations, stockholder's
equity and cash flows included in the Financial Statements fairly present the
results of operations for the periods therein referred to (except as stated
therein or in the notes or schedules thereto) applied in conformity with GAAP.
Except as set forth on SCHEDULE 2.13(A) attached hereto, the Company has no
liability, whether accrued, absolute or contingent, of a type required to be
reflected on a balance sheet or described in the notes thereto in accordance
with GAAP, other than (i) liabilities which have been reflected or reserved
against in the Financial Statements, (ii) liabilities incurred in the ordinary
course of business since October 31, 1998, and (iii) liabilities covered by
insurance or reinsurance (a complete and detailed description of which is
provided in SCHEDULE 2.13(b)).
2.14 ACCOUNTS PAYABLE; ACCOUNTS RECEIVABLE; CUSTOMER DEPOSITS. SCHEDULE
2.14(a) sets forth a true and complete list of the Company's accounts payable
and accrued expenses as of October 31, 1998. The accounts receivable of the
Company reflected on SCHEDULE 2.14(b) attached hereto on the date hereof are
good and collectible except to the extent reserved against in the Financial
Statements (which reserves have been determined in accordance with GAAP). All
such accounts receivable arise out of bona fide sales and deliveries of goods,
performance of services or other business transactions and are not subject to
defenses, set-offs or counterclaims. The customer deposits of the Company are
held as set forth on SCHEDULE 2.14(c).
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2.15 EMPLOYEES; INDEPENDENT CONTRACTORS. The Company has delivered to
TSI an accurate list (which is set forth on SCHEDULE 2.15) showing all officers,
directors and key employees, independent contractors and consultants of the
Company, listing all employment agreements with such officers, directors and key
employees and the rate of compensation (and the portions thereof attributable to
salary, bonus and other compensation, respectively) of each of such persons (i)
as of October 31, 1998 (the "BALANCE SHEET DATE") and (ii) as of the date
hereof. The Company has made available to TSI true, complete and correct copies
of any employment agreements for persons listed on SCHEDULE 2.15. Since the
Balance Sheet Date, there have been no material individual increases in the
compensation payable or any special bonuses to any officer, director, key
employee or other employee, except ordinary salary and bonus increases
implemented on a basis consistent with past practices, except as set forth on
SCHEDULE 2.15. Except as set forth on SCHEDULE 2.15, neither Seller is related
by blood or marriage to, or otherwise affiliated with, any person listed on
SCHEDULE 2.15.
As of the date hereof, AHI has approximately 85 employees. The Company
has been for the past four (4) 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. As of the date hereof, (i) the Company is not
bound by or subject to (and none of its assets or properties is bound by or
subject to) any arrangement with any labor union, (ii) no employees of the
Company are represented by any labor union or covered by any collective
bargaining agreement, (iii) to the best of the Sellers knowledge 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 the Company's employees nor has the Company experienced
any labor interruptions over the past three (3) years. To the Sellers'
knowledge, the Company believes that its relationships with its employees to be
good.
2.16 ABSENCE OF CERTAIN CHANGES. Since October 31, 1998, there has not
been (a) any Material Adverse Change (as defined in SECTION 12.3) to the
Company; (b) any damage, destruction or loss, whether covered by insurance or
not, having a Material Adverse Effect, on the Company's properties and business;
(c) except, prior to the Closing, the Company may make the Pre-Closing
Distribution subject to the limitations set forth in SECTION 2.10, any
declaration, setting aside or payment of any dividend or distribution (whether
in cash, stock or property) in respect of the Company's capital stock, or any
redemption or other acquisition of such capital stock by the Company; (d) any
increase in the rate of compensation or in the benefits payable or to become
payable by the Company to its directors, officers, employees or consultants
other than in the ordinary course of business and consistent with prior
practices; (e) any entry into any material Contract not in the ordinary course
of business, including without limitation relating to any borrowing or capital
expenditure; (f) any disposition by the Company of any material asset other than
in the ordinary course of business and consistent with prior practices; (g) any
adverse change in the sales patterns, pricing policies, accounts receivable or
accounts payable relating to the Company; (h) any write-down of the value of any
inventory having an aggregate value in excess of $25,000, or write-off, as
uncollectible, of any notes, trade accounts or other receivables having an
aggregate value in excess of $25,000; or (i) any change by the Company in
accounting
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methods or principles. The Company is not self-insured or a self-insured
carrier, nor does the Company maintain self-insurance.
2.17 CONTRACTS.
(a) The Company has listed on SCHEDULE 2.17(a) all written and
oral "MATERIAL" (as defined below) contracts, commitments and similar agreements
to which the Company is a party or by which it or any of its properties are
bound (including, but not limited to, contracts with significant suppliers,
customers, joint venture or partnership agreements, contracts with any labor
organizations and strategic alliances), (a) in existence as of the Balance Sheet
Date and (b) entered into since the Balance Sheet Date, and in each case has
made available to TSI true, complete and correct copies of such agreements to
TSI. A contract, commitment or similar agreement shall be considered "MATERIAL"
(a) if it involves an amount equal to or greater than twenty five thousand
dollars ($25,000.00) (except for hotel supplier agreements for hotels with less
than 150 room nights committed for in 1999) or (b) it is an outside sales agent
contract. The Company's written or oral Material contracts, commitments and
similar agreements include but are not limited to, the following (if any):
(i) pension, profit sharing, bonus, retirement, stock
option, stock purchase or other plan providing for deferred or
other compensation to employees or any other employee benefit
plan (other than as set forth in SCHEDULE 2.23 hereto), or any
Contract with any labor union;
(ii) employment, consultation or other compensation
Contract, which is not terminable on notice of 30 days' or
less by the Company without penalty or other financial
obligation (and, except as set forth on SCHEDULE 2.17(a), no
officer or employee of the Company receives total salary,
bonus and other compensation from the Company of $25,000 or
more per annum).
(iii) Contract containing covenants or agreements
limiting the freedom of the Company or any of its employees to
compete in any line of business presently conducted by the
Company with any Person or to compete in any such line of
business in any area;
(iv) Contract with any Seller or with any affiliate
or relative of any Seller (except for any Contract disclosed
in SCHEDULE 2.17(a) pursuant to clauses (ii) or (iii) of this
SECTION 2.17(a));
(v) Contract relating to or providing for loans to
officers, directors, employees or Affiliates;
(vi) Contract under which the Company has advanced or
loaned, or is obligated to advance or loan, funds to any
Person;
(vii) Contract relating to the incurrence, assumption
or guarantee of any indebtedness, obligation or liability (in
respect of money or funds borrowed),
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including letters of credit, or otherwise pledging, granting a
security interest in or placing a Lien on any asset of the
Company;
(viii) guarantee or endorsement of any obligation;
(ix) Contract under which the Company is lessee of or
hold or operate any property, real or personal, owned by any
other party;
(x) Contract pursuant to which the Company is lessor
of or permit any third party to hold or operate any property,
real or personal, owned or controlled by the Company;
(xi) assignment, license, indemnification or Contract
with respect to any intangible property (including, without
limitation, any Proprietary Rights (as defined in SECTION 12.3
hereto));
(xii) warranty Contract with respect to its services
rendered (or to be rendered);
(xiii) Contract or lease for, or with, any telephone
switch, long distance or toll-free telephone providers;
(xiv) Contract with central reservation systems
("CRS") (i.e., SABRE, APOLLO, AMADEUS, etc.);
(xv) override agreements with travel agencies, other
customers or suppliers;
(xvi) Contract which prohibits, restricts or limits
in any way the payment of dividends or distributions by the
Company;
(xvii) Contract under which it has granted any Person
any registration rights (including piggyback rights) with
respect to any securities;
(xviii) Contract for the purchase, acquisition or
supply of inventory and other property and assets, whether for
resale or otherwise;
(xix) Contracts with independent agents, brokers,
dealers or distributors, or any other independent contractors;
(xx) sales, commissions, advertising or marketing
Contracts;
(xxi) Contracts providing for "take or pay" or
similar unconditional purchase or payment obligations;
(xxii) Contracts with Persons with which, directly or
indirectly, any Seller also has a Contract;
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(xxiii) Governmental Contracts subject to
redetermination or renegotiation;
(xxiv) any other Contract which is material to the
Company's operations or business prospects, except those which
(x) were made in the ordinary course of business, and (y) are
terminable on 30 days' or less notice by the Company without
penalty or other financial obligation;
(xxv) any Contract with travel providers, including,
but not limited to, airlines, hotels, riverboat cruises,
cruises, and ground transportation companies; or
(xxvi) any hedge, option, derivative or similar
agreements related to foreign currency, interest rate or
similar risks.
(b) The Company has performed in all material respects all
obligations required to be performed by it and is not in default in any
material respect under, or in material breach of, nor in receipt of any
claim of default or breach under, any Contract listed on SCHEDULE
2.17(a); no event has occurred which with the passage of time or the
giving of notice or both would result in a material default, breach or
event of non-compliance by the Company, or to the knowledge of the
Company, by any other party under any material Contract to which the
Company is subject (including without limitation all performance bonds,
warranty obligations or otherwise); the Company does not have any
present expectation or intention of not fully performing all such
obligations; the Company does not have any knowledge of any breach or
anticipated breach by the other parties to any such Contract to which
it is a party.
2.18 DISCLOSURE. Neither this Agreement nor any of the exhibits,
documents, certificates or other items delivered by Sellers 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 in light of the circumstances under which it was
made not misleading.
2.19 TITLE AND RELATED MATTERS.
(a) The Company has good and valid title to all of the
property and assets reflected in the balance sheets included in the Financial
Statements or acquired after the date thereof except for properties sold or
otherwise disposed of since the date thereof in the ordinary course of business,
free and clear of all Liens, except (i) 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) as reflected in the
balance sheets included in Financial Statements or the notes thereto. Except for
normal breakdowns and servicing requirements, all machinery and equipment
regularly used by the Company in the conduct of its business is in good
operating condition and repair, ordinary wear and tear excepted.
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(b) SCHEDULE 2.19 attached hereto sets forth a description of
all real and personal property owned or leased by the Company.
2.20 LITIGATION. Except as set forth on SCHEDULE 2.20, there is no
Claim (as defined in SECTION 12.3) pending or, to the best knowledge of the
Sellers and the Company, threatened against any of the Sellers or the Company
which, if adversely determined, would have a Material Adverse Effect on the
Company. Nor is there any Order outstanding against any of the Sellers or the
Company having, or which, insofar as can reasonably be foreseen, in the future
would have, a Material Adverse Effect on the Company.
2.21 TAX MATTERS.
(a) The Company has filed all federal, state, and local tax
reports, returns, information returns, documents and statements relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof (collectively, the "TAX RETURNS") required to be filed through the
Closing with any federal, state, local or other taxing authorities in the United
States or any other country (each a "TAXING AUTHORITY", collectively, the
"TAXING AUTHORITIES") in respect of all relevant taxes derived from the Company
and its operations, including without limitation income, premium, gross
receipts, net proceeds, alternative or add-on minimum, ad valorem, value added,
turnover, sales, use, property, personal property (tangible and intangible),
stamp, leasing, lease, user, excise, duty, franchise, transfer, license,
withholding, payroll, employment, fuel, excess profits, occupational and
interest equalization, windfall profits, severance, franchise, profits, social
security (or similar), other tax of any kind whatsoever or other charges
(including interest, penalty or addition thereto, whether disputed or not)
(collectively, the "TAXES") and in accordance with all tax sharing agreements,
if any, to which any 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 paid or will be paid by Sellers, including 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 any Seller nor the Company has executed a
waiver of the statute of limitations on the right of the Internal Revenue
Service or any other Taxing Authority to assess additional Taxes or to contest
the income or loss with respect to any Tax Return. To the Sellers' and the
Company's knowledge, 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, to Sellers' and the Company's
knowledge, 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
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examinations. No Seller or director or officer (or employee responsible for Tax
matters) of the Company expects any Taxing Authority to assess any additional
Taxes for any period for which Tax Returns have been filed. There is no
additional dispute or claim concerning any Tax liability of the Company either
(i) claimed or raised by any authority in writing, or (ii) as to which any of
the Sellers and the directors and officers (and employees responsible for tax
matters) of the Company has knowledge based upon personal contact with any agent
of such authority. 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 the
past seven (7) taxable years (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 Company has not made nor has become obligated to make,
nor will as a result of any event connected with the Closing become obligated to
make, any "excess parachute payment" as defined in Section 280g of the Code
(without regard to subsection (b)(4) thereof). In addition, the Company has
either not taken, or has disclosed on its federal income Tax Returns, all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code ss.6662.
(d) The Sellers 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 Closing Date (a "PRE-CLOSING TAX RETURN"), and
the Sellers shall pay all Taxes due in respect of such Pre-Closing Tax Returns
to the appropriate Taxing Authority; and the Sellers shall pay all costs
associated with the preparation thereof. The Sellers shall comply with all other
tax agreements specified in Section 6.2.
(e) AHI has had in effect at all times since 1984 through the
date hereof (and will have until the Closing Date) a valid election to be taxed
under Subchapter S of the Code.
2.22 COMPLIANCE WITH LAW AND APPLICABLE GOVERNMENT AND OTHER
REGULATIONS.
(a) The Company is presently complying in respect of its
operations, equipment, practices, real property (except environmental matters,
which shall be addressed under Section 2.25 herein), structures, and other
property, and all other aspects of its business and operations, with all
applicable Regulations and Orders, including all Regulations relating to the
safe conduct of business, aircraft chartering, 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
(and the Company and Sellers are not aware of any such failures to comply,
whether or not material). There are no Claims pending, nor to the best knowledge
of the Company and Sellers are there any Claims threatened, nor has the Company
nor any Seller received any written notice, regarding any violations of any
Regulations and Orders enforced by any Authority claiming jurisdiction over the
Company, including any requirement of OSHA.
(b) SCHEDULE 2.22(b) attached hereto sets forth all material
permits, licenses, provider numbers, orders, franchises, registrations and
approvals (collectively, "PERMITS") from
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all Federal, state, local and foreign governmental regulatory bodies held by the
Company. The Permits listed on SCHEDULE 2.22(b) are the only Permits that are
required for the Company to conduct its business as presently conducted, except
for those the absence of which would not have a Material Adverse Effect on the
Company. Each such Permit is in full force and effect and, to the best of the
knowledge of the Company and Sellers , no suspension or cancellation of any such
Permit is threatened and there is no basis for believing that such Permit will
not be renewable upon expiration.
(c) SCHEDULE 2.22(c) attached hereto sets forth all industry
affiliations and membership in industry groups (e.g., International Airlines
Travel Agent Network ("IATAN"), Airline Reporting Corporation ("ARC"), etc.) of
the Sellers and/or the Company. Neither the Company nor any of the Sellers are
in violation of any material Regulation, rule or requirement of such
affiliations or memberships. Except as set forth on SCHEDULE 2.22(c), no consent
of any such industry group is required for the Company and the Sellers to
consummate the transactions contemplated by this Agreement.
2.23 ERISA AND RELATED MATTERS.
(a) BENEFIT PLANS; OBLIGATIONS TO EMPLOYEES. Except as set
forth in SCHEDULE 2.23 hereto, neither the Company, nor any ERISA Affiliate of
the Company, is a party to or participates in or has any liability or contingent
liability with respect to:
(i) any "employee welfare benefit plan" or "employee
pension benefit plan" or "multiemployer plan" (as those terms are respectively
defined in Sections 3(1), 3(2) and 3(37) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"));
(ii) any retirement or deferred compensation plan,
incentive compensation plan, stock plan, unemployment compensation plan,
vacation pay, severance pay, bonus or benefit arrangement, insurance or
hospitalization program or any other fringe benefit arrangements for any
employee, director, consultant or agent, whether pursuant to contract,
arrangement, custom or informal understanding, which does not constitute an
"employee benefit plan" (as defined in Section 3(3) of ERISA); or
(iii) any employment agreement not terminable on 30
days' or less written notice, without further liability.
Any plan, arrangement or agreement required to be
listed on SCHEDULE 2.23 for which any Seller or any ERISA Affiliate of any
Seller may have any material liability or contingent liability is sometimes
hereinafter referred to as a "BENEFIT PLAN". For purposes of this Section, the
term "ERISA AFFILIATE" shall mean any trade or business, whether or not
incorporated, that together with the Company would be deemed a "SINGLE EMPLOYER"
within the meaning of Section 4001(b)(1) of ERISA.
(b) PLAN DOCUMENTS AND REPORTS. A true and correct copy of
each of the Benefit Plans listed on SCHEDULE 2.23, and all contracts relating
thereto, or to the funding thereof, including, without limitation, all trust
agreements, insurance contracts, investment management
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agreements, subscription and participation agreements and record keeping
agreements, each as in effect on the date hereof, has been supplied or made
available to the Purchaser. In the case of any Benefit Plan that is not in
written form, the Purchaser has been supplied with an accurate description of
such Benefit Plan as in effect on the date hereof. A true and correct copy of
the three most recent annual reports and accompanying schedules, the three most
recent actuarial reports, and the most recent summary plan description and
Internal Revenue Service determination letter with respect to each such Benefit
Plan, to the extent applicable, and a current schedule of assets (and the fair
market value thereof assuming liquidation of any asset which is not readily
tradable) held with respect to any funded Benefit Plan has been supplied to or
made available to the Purchaser by the Company, and there have been no material
changes in the financial condition in the respective Plans from that stated in
the annual reports and actuarial reports supplied.
(c) COMPLIANCE WITH LAWS; LIABILITIES. As to all Benefit
Plans, except as otherwise specified on SCHEDULE 2.23, the Company is in
compliance in all material respects with the terms of all Benefit plans and
every Benefit Plan is in compliance in all material respects with all of the
requirements and provisions of ERISA and all other laws and regulations
applicable thereto, including without limitation the timely filing of all annual
reports or other filings required with respect to such Benefit Plans. None of
the assets of any Benefit Plan are invested in employer securities or employer
real property, as those terms are defined in Section 407(d) of ERISA. There have
been no "prohibited transactions" (as described in Section 406 of ERISA or
Section 4975 of the Code) with respect to any Benefit Plan and neither the
Company nor any ERISA Affiliate of the Company have otherwise engaged in any
prohibited transaction. There has been no "accumulated funding deficiency" as
defined in Section 302 of ERISA, nor has any reportable event as defined in
Section 4043(b) of ERISA occurred with respect to any Benefit Plan. Actuarially
adequate accruals for all obligations or contingent obligations under the
Benefit Plans are reflected in the Company's balance sheet as of October 31,
1998 included in Financial Statements provided to the Purchaser. The Company is
not subject to and does not maintain or have in effect a multi-employer plan.
2.24 INTELLECTUAL PROPERTY.
(a) SCHEDULE 2.24 and SCHEDULE 2.24(d) set forth a true and
correct list of all (i) registered Proprietary Rights owned by the Company, (ii)
applications for registrations of Proprietary Rights filed by the Company and
(iii) trademarks, service marks, patents, trade names, copyrights, toll free
numbers, URL or Web site addresses, and any other Proprietary Rights owned or
used by the Company which are material to the Company. SCHEDULE 2.24 also
contains a complete and accurate list of all fictitious names ever registered,
or used in the last five (5) years, by the Company, including the jurisdictions
in which each name was registered, and the current status of each such
registration. The Company has complied in all material respects with all federal
and international trademark laws and has made all necessary filings and has
registered its trademarks listed as items 1 through 3 on Schedule 2.24 in all
jurisdictions necessary to protect each such Proprietary Rights. The
consummation of the Closing will not impair in any material respect any
Proprietary Rights of the Company.
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(b) The Company owns or has the right to use each material
Proprietary Right listed in SCHEDULE 2.24 (as noted in such schedule) and
SCHEDULE 2.24(d), without infringing the rights of any third-party, and an
affiliate or successor to the Company has the right to continue such use. Each
of such Proprietary Rights is, and will continue to be on the Closing Date, free
and clear of all royalty obligations and Liens other than Permitted Liens. There
are no Claims pending, or to the best knowledge of the Company and the Sellers
any Claims threatened, against any of the Company or any Seller that its use of
any Proprietary Rights infringes the rights of any Person. The Company and the
Sellers have no knowledge of any third-party's conflicting use of any of such
Proprietary Rights that conflicts with the Company's Proprietary Rights.
(c) Except as set forth in SCHEDULE 2.24 or SCHEDULE 2.24(d),
the Company is not a party in any capacity to any franchise, license or royalty
agreement respecting any Proprietary Right and, there is no conflict with the
rights of others in respect to any Proprietary Right now used in the conduct of
the Company's business.
(d) INTERNAL SOFTWARE APPLICATIONS.
(i) SOFTWARE APPLICATIONS. The current software
application used by the Company in the operation of its business are set forth
and described on SCHEDULE 2.24(d) hereto (the "SOFTWARE"). Except as disclosed
on SCHEDULE 2.24(D), all of the Software used by the Company is to the knowledge
of the Company and the Sellers Year 2000 compliant.
(ii) OWNED SOFTWARE. To the extent any of the
Software has been designed or developed by the Company's management information
or development staff or by consultants on the Company's behalf, such Software,
is to the knowledge of the Company and the Sellers original and capable of
copyright protection in the United States, and the Company has complete rights
to and ownership of such Software, including possession of, or ready access to,
the source code of such software in its most recent version. No part of any such
Software is to the knowledge of the Company and the Sellers an imitation or copy
of, or infringes upon, the software of any other Person or violates or infringes
upon any common law or statutory rights of any other Person, including, without
limitation, rights relating to defamation, contractual rights, copyrights, trade
secrets, and rights of privacy or publicity. The Company has not sold, assigned,
licensed, distributed or in any way disposed of or encumbered the Software.
(iii) LICENSED SOFTWARE. The Software, to the extent
it is licensed from any third party licensor or constitutes "off-the-shelf"
software, is held by the Company legitimately, in compliance with applicable law
and is fully transferable to the Purchaser without any third party consent. All
of the Company's computer hardware has legitimately-licensed software installed
therein.
(iv) NO ERRORS; NONCONFORMITY. The Company warrants
that the Software is free from any significant software defect or programming or
documentation error, the Software operates and runs in a reasonable and
efficient manner, conforms to the specifications thereof, and, with respect to
owned Software, the applications can be recreated from their associated source
codes.
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2.25 ENVIRONMENTAL MATTERS. Notwithstanding any other provisions herein
to the contrary, this Section 2.25 shall constitute the only, and the total,
representations and warranties of the Sellers and the Company relating to
Environmental Laws, Environmental Permits, and any matters, claims or
liabilities related thereto. Except as disclosed in SCHEDULE 2.25: (a) neither
the Company's business or assets nor the operation thereof violates in any
material respect any applicable Environmental Law (as defined in SECTION 12.3)
except where such violation would not have a Material Adverse Effect and no
condition or occurrence has taken place (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 in any
material respect of any Environmental Law, except where such violation would not
have a Material Adverse Effect; (b) the Company is in possession of all material
Environmental Permits (as defined in SECTION 12.3) required under any applicable
Environmental Law for the conduct or operation of the Company's business (or any
part thereof), and the Company is in compliance in all material respects with
all of the requirements and limitations included in such Environmental Permits,
except where the lack of an Environmental Permit or the non-compliance
thereunder would not have a Material Adverse Effect; (c) the Company has not
stored or used any pollutants, contaminants or hazardous or toxic wastes,
substances or materials on or at any property or facility now or previously
owned, leased or operated by the Company except for inventories of chemicals
which are used or to be used in all material respects in the ordinary course of
the Company's business (which inventories have been stored or used in accordance
with all applicable Environmental Permits and all Environmental Laws, including
all so-called "Right to Know" laws) except where such violation would not have a
Material Adverse Effect; (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 are in violation of any Environmental Law or any
Environmental Permit or that the Company 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
except where such violation or responsibility would not have a Material Adverse
Effect; (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 except where
such violation would not have a Material Adverse Effect; (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 in violation of Environmental Law except where
such violation would not have a Material Adverse Effect; (g) no by-products of
any manufacturing or mining process employed in the operation of the Company's
business which may constitute pollutants, contaminants or hazardous or toxic
wastes, substances or materials under any Environmental Law are currently stored
or otherwise located on any property or facility owned, leased or operated by
the Company or any property adjacent thereto and no such by-products were stored
or otherwise located on any property or facility
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previously owned, leased or operated by the Company or any property adjacent
thereto during such time when the Company owned, leased or operated such
property or facility; (h) no property or facility now or previously owned,
leased or operated by the Company, is to the knowledge of the Company and the
Sellers, 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 the knowledge of the Company and the
Sellers, there are no underground storage tanks, active or abandoned, including
petroleum storage tanks, on or under any property or facility owned, leased or
operated by the Company and, to the knowledge of the Company and the Sellers,
there were no such underground storage tanks on or under any property or
facility previously owned, leased or operated by the Company during such time
when the Company owned, leased or operated such property or facility; (j) the
Company has not directly transported or directly arranged for the transportation
of any Hazardous Material to any location which is listed or to the Sellers'
knowledge 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 in violation
of Environmental Law; and (k) there are no polychlorinated biphenyls,
radioactive materials or friable asbestos present at any property or facility
now owned or leased by the Company nor, to the knowledge of the Company and the
Sellers, at any property or facility previously owned or leased by the Company
during such time when the Company owned or leased such property or facility. The
Company has timely filed all reports required to be filed with respect to all of
its property and facilities and has generated and maintained all required data,
documentation and records under all applicable Environmental Laws.
2.26 DEALINGS WITH AFFILIATES. SCHEDULE 2.26 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, 1996 to the Closing Date, and to which any one or more
Affiliates is also a party.
2.27 BANKING ARRANGEMENTS. SCHEDULE 2.27 attached hereto sets forth the
name of each bank in or with which the Company has an account, credit line or
safety deposit box, and a brief description of each such account, credit line or
safety deposit box, including the names of all Persons currently authorized to
draw thereon or having access thereto. Except as set forth on SCHEDULE 2.27, the
Company has no liability or obligation relating to funds or money borrowed by or
loaned to the Company (whether under any credit facility, line of credit, loan,
indenture, advance, pledge or otherwise).
2.28 INSURANCE. SCHEDULE 2.28 attached hereto sets forth a list and
brief description, including dollar amounts of coverage, of all policies of
property, fire, liability, business interruption, workers' compensation and
other forms of insurance held by the Company as of the date hereof, as well as a
schedule of unresolved Claims filed with the Company's current insurance
carrier, including a history of such Claims and a description and estimated
dollar amount of any unresolved Claims. Such policies are valid, outstanding and
enforceable policies, as to which premiums have been paid currently. Neither the
Company nor any Seller know of
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any state of facts, or of the occurrence of any event which is reasonably likely
to (a) form the basis for any claim against the Company not fully covered by
insurance for liability on account of any express or implied warranty or
tortious omission or commission, or (b) result in material increase in insurance
premiums of the Company.
2.29 INVESTMENT REPRESENTATIONS. In connection with this Agreement or
any agreement or transaction contemplated hereby, each Seller hereby represents
and warrants to TSI as follows:
(a) Each Seller acknowledges receipt of a copy of TSI's Shelf
Registration Statement (the "SHELF REGISTRATION STATEMENT") on Form S-4 (File
No. 333-50533) as amended to date, as filed with the Securities and Exchange
Commission (the "SEC") on August 10, 1998, pursuant to which TSI proposes to
issue the TSI Stock to Sellers.
(b) Each Seller has been offered, the opportunity to ask
questions of, and receive answers from, TSI and its Subsidiaries, and the
Sellers have been given full and complete access to all available information
and data relating to the business and assets of TSI and its Subsidiaries, have
obtained such additional information about TSI and its Subsidiaries which the
Sellers have deemed necessary in order to evaluate the opportunities, both
financial and otherwise, with respect to TSI and, except as set forth herein and
in the Prospectus (included as part of the Company's Registration Statement on
Form S-1 (File No. 333-56567)), 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.
On the basis of the foregoing, each Seller is familiar with the operations,
business plans and financial condition of TSI.
(c) Each Seller is an "accredited investor", as such term is
defined in Rule 501 of Regulation D promulgated under the Securities Act in that
each Seller, as of the date of this Agreement, either (a) (either individually
or jointly with such Seller's spouse) has a net worth in excess of $1,000,000;
or (b) had an individual income in excess of $200,000 in each of the two most
recent years or joint income with such Seller's spouse in excess of $300,000 in
each of those years, and reasonably expects reaching the same income level in
the current year.
(d) Each Seller is a sophisticated investor familiar with the
type of risks inherent in the acquisition of securities such as the shares of
TSI Stock and such Seller's financial position is such that such Seller can
afford to retain his shares of TSI Stock for an indefinite period of time
without realizing any direct or indirect cash return on such Seller's
investment.
(e) Each Seller received this Agreement and first learned of
the transactions contemplated hereby in Illinois. Each Seller executed and will
execute all documents contemplated hereby in Illinois. Each Seller is a resident
of Illinois.
(f) Sellers are acquiring their shares of TSI Stock for such
Seller's own account and not with a view to, or for sale in connection with, the
distribution thereof within the meaning of the Securities Act. No Seller has any
present plan, intention, commitment, binding agreement or arrangement to dispose
of any shares of TSI Stock.
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(g) Sellers understand that the certificates evidencing their
shares of TSI Stock, when and if issued, will bear appropriate restrictive
legends.
2.30 INVENTORIES. The inventories (e.g. promotional items, gifts and
brochures) of the Company on the date hereof does not include any items which
are reflected on the balance sheets, included in the Financial Statements.
SCHEDULE 2.30 hereto sets forth a complete list and description of the Company's
inventories as of October 31, 1998.
2.31 BROKERAGE. Except as set forth in SCHEDULE 2.31 and except for the
Company's and Sellers' legal counsel, neither the Company nor any Seller has
employed any broker, finder, advisor, consultant or other intermediary (other
than Raymond James & Associates, as the Sellers' advisor, the fees and expenses
for which the Sellers are solely responsible) in connection with this Agreement
or the transactions contemplated by this Agreement who is or might be entitled
to any fee, commission or other compensation from the Company or any Seller, or
from the Purchaser or its Affiliates, upon or as a result of the execution of
this Agreement or the consummation of the transactions contemplated hereby.
2.32 IMPROPER AND OTHER PAYMENTS. Except as set forth on SCHEDULE 2.32
hereto, (a) neither the Company, any director, officer, thereof, nor, to the
Company's knowledge, any employee (other than an officer or director) agent or
representative of the Company nor any Person acting on behalf of any of them,
has made, paid or received any unlawful bribes, kickbacks or other similar
payments to or from any Person or Authority, (b) no contributions have been
made, directly or indirectly, to a domestic or foreign political party or
candidate by or on behalf of the Company, and (c) no improper foreign payment
(as defined in the Foreign Corrupt Practices Act) has been made by or on behalf
of the Company.
2.33 SIGNIFICANT SUPPLIERS AND CUSTOMERS; MATERIAL PLANS AND
COMMITMENTS. The Company has delivered to TSI an accurate list (which is set
forth on SCHEDULE 2.33) of all significant suppliers and customers of the
Company, it being understood and agreed that a "significant supplier" or
"significant customer", for purposes of this SECTION 2.33, means a supplier or
customer representing 5% or more of the Company's annual revenues or expenses
since December 31, 1997. Since December 31, 1997, except to the extent set forth
on SCHEDULE 2.33, none of the Company's significant customers (or persons or
entities that are sources of a significant number of customers) have canceled a
contract or substantially reduced utilization of the services of the Company,
and the Company has not received any written notice that any significant
customer is currently attempting or threatening to cancel a contract or
substantially reduce utilization of the services provided by the Company.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Sellers as follows:
3.1 CORPORATE ORGANIZATION, ETC. The Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation with full corporate power and authority to carry
on its business as it is now being conducted and to own, operate and lease its
properties and assets. The Purchaser is duly qualified or licensed to do
business in good standing in every jurisdiction in which the conduct of its
business, the ownership or lease of its properties, or the transactions
contemplated by this Agreement, require it to be so qualified or licensed except
where the failure to be so qualified or licensed would not have a Material
Adverse Effect.
3.2 AUTHORIZATION, ETC. The Purchaser has full corporate power and
authority to enter into this Agreement and the agreements or documents
contemplated hereby to which it is or will become a party and to carry out the
transactions contemplated hereby and thereby. The execution, delivery and
performance of this Agreement and all other agreements and transactions
contemplated hereby to which the Purchaser is or will become a party have been
duly authorized by the Board of Directors of the Purchaser and no other
corporate proceedings on its part are necessary to authorize this Agreement and
the transactions contemplated hereby. Upon execution and delivery of this
Agreement and all other agreements contemplated hereby to which the Purchaser is
or will become a party shall constitute the legal, valid and binding obligation
of Purchaser, enforceable against Purchaser in accordance with their respective
terms.
3.3 NO VIOLATION. The execution, delivery and performance by the
Purchaser of this Agreement, and all other agreements contemplated hereby, and
the fulfillment of and compliance with the respective terms hereof and thereof
by the Purchaser, do not and will not (a) conflict with or result in a material
breach of the terms, conditions or provisions of, (b) result in a violation of,
(c) require any authorization, consent, approval, exemption or other action by
or notice to any Authority pursuant to, (d) constitute a default or event of
default under (with due notice, lapse of time of both), (e) give any third party
the right to accelerate any obligation under, or (f) result in the creation of
any Lien upon the capital stock or assets of the Purchaser pursuant to, the
certificate of incorporation or by-laws of the Purchaser, or any Regulation to
which the Purchaser is subject, or any material Contract or Order to which the
Purchaser or its properties are subject. The Purchaser will comply with all
applicable Regulations and Orders in connection with its execution, delivery and
performance of this Agreement and the transactions contemplated hereby.
3.4 GOVERNMENTAL AUTHORITIES. The Purchaser has complied in all
material respects with all applicable Regulations in connection with its
execution, delivery and performance of this Agreement and the agreements and
transactions contemplated hereby. The Purchaser is not required to submit any
notice, report, or other filing with any governmental authority in connection
with its execution or delivery of this Agreement or the consummation of the
transactions contemplated hereby. No authorization, consent, approval, exemption
or notice is
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required to be obtained by the Purchaser in connection with the execution,
delivery, and performance of this Agreement and the agreements and transactions
contemplated hereby.
3.5 ISSUANCE OF TSI STOCK. The shares of TSI Stock that are required to
be issued by TSI to the Sellers at Closing pursuant to, in accordance with the
terms and subject to the conditions set forth in this Agreement, shall, upon
issuance and delivery, be duly authorized, validly issued, fully paid and
non-assessable and free and clear of all Liens, pledges and encumbrances, except
for the restrictions under this Agreement, Rule 145 of the Securities Act, and
the Securities Laws.
3.6 SHELF REGISTRATION STATEMENT The issuance of the shares of TSI
Stock, when issued under this Agreement, shall be (i) registered pursuant to the
Shelf Registration Statement, and (ii) listed on the Nasdaq National Market.
3.7 CAPITALIZATION. The authorized capital stock of TSI consists of
50,000,000 shares of TSI common stock, par value $0.01 per share (the "TSI
Common Stock") and 1,000,000 shares of preferred stock, $0.01 par value per
share (the "TSI Preferred Stock"). As of November 9, 1998, (i) 13,359,695 shares
of TSI Common Stock were issued and outstanding and (ii) no shares of TSI
Preferred Stock were issued and outstanding. All of the issued and outstanding
capital stock of TSI is duly authorized, validly issued, fully paid and
nonassessable and was issued in compliance with applicable state and federal
securities laws.
3.8 COMMISSION REPORTS. TSI has filed all reports, statements, forms
and other documents required to be filed with the SEC since July 22, 1997
(collectively, the "COMMISSION REPORTS"), all of which complied as of the filing
date (or, in the case of any Commission Report that has been amended, as of the
date of amendment) in all material respects with the applicable requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), as the case may be, and of all applicable rules and regulations
thereunder. None of the Commission Reports contained as of the filing date (or,
in the case of any Commission Report that has been amended, as of the date of
amendment) any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading. Each of the consolidated financial statements (including the
notes thereto) contained in the Commission Reports (collectively, the "TSI
FINANCIAL STATEMENTS"), was prepared in accordance with GAAP except as disclosed
otherwise therein (and, in the case of the financial statements for interim
periods, the absence of notes thereto and normal year-end adjustments) applied
on a consistent basis throughout the periods covered thereby (except as may be
indicated in any notes thereto) and the TSI Financial Statements fairly present
in all material respects in accordance with GAAP the consolidated financial
position of TSI and its consolidated subsidiaries as of the respective dates
thereof and the consolidated results of operations and changes in cash flows of
TSI and its consolidated subsidiaries for the periods indicated.
3.9 NO MATERIAL ADVERSE CHANGE. Since the date of the most recent
Commission Report, there has not been any Material Adverse Change or any event,
occurrence or development which could reasonably be expected to have a Material
Adverse Effect on TSI.
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3.10 LITIGATION. Except as disclosed in the Commission Reports, as of
the date hereof, there are no claims, suits, actions, investigations,
indictments or information, or administrative, arbitration or other proceedings
pending or, to the best of TSI's knowledge, threatened against TSI which, if
determined adversely to TSI, individually or in the aggregate, would have or
would reasonably be expected to have a Material Adverse Effect on TSI.
3.11 BROKERAGE. 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 Company or any Seller, upon
or as a result of the execution of this Agreement or the consummation of the
transactions contemplated hereby.
ARTICLE IV
COVENANTS OF THE SELLERS
From the date hereof until the Closing, except as otherwise consented
to or approved by the Purchaser in writing, the Company covenants and agrees
that it shall act, and the Sellers shall cause the Company so to act or refrain
from acting where required hereinafter, to comply with the following:
4.1 REGULAR COURSE OF BUSINESS.
(a) The Company shall operate its business diligently and in
good faith and in the ordinary and usual course, consistent with past management
practices; shall maintain all of its properties in good order and condition,
shall maintain (except for expiration due to lapse of time) all leases and
Contracts in effect without change except as expressly provided herein; shall
comply with the provisions of all material Regulations and Orders applicable to
the Company and the conduct of its business; shall not cancel, release, waive or
compromise any debt, Claim or right in its favor; shall not increase the rate or
basis of compensation of any of its officers, directors, employees or
consultants; shall maintain insurance and reinsurance coverage as in effect on
the date hereof up to the Closing Date; and shall preserve the business of the
Company intact, and use its reasonable best efforts to keep available for the
Company and the Purchaser the services of the officers and employees of the
Company, and to preserve the good will of clients, suppliers and others having
business relations with the Company.
(b) Without limiting the generality of the foregoing
paragraph, the Company shall not, from the date hereof until the Closing,
directly or indirectly, do or propose or agree to do any of the following
without the prior written consent of TSI:
(i) issue, sell, pledge, dispose of, encumber, or
authorize the issuance, sale, pledge, disposition, grant or
encumbrance of any shares of its capital stock of any class,
or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital
stock, or any other ownership interest, of it;
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(ii) declare, set aside, make or pay any dividend or
other distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock, except,
prior to the Closing, the Company may make the Pre-Closing
Distribution, subject to the limitations set forth in SECTION
2.10 ;
(iii) reclassify, combine, split, subdivide or
redeem, purchase or otherwise acquire, directly or indirectly,
any of its capital stock;
(iv) declare any increase in salary or bonus to any
employee, other than in the ordinary course of business;
(v) materially alter or change any existing material
contractual relationships;
(vi) purchase or commit to purchase capital assets in
excess of $25,000; or
(vii) incur additional indebtedness or contingent
liabilities in excess of $25,000.
4.2 AMENDMENTS. No change or amendment shall be made in the articles of
incorporation or by-laws of the Company. The Company shall not merge with or
into or consolidate with any other corporation or Person, acquire substantially
all of the assets of any Person or change the character of its business.
4.3 AGREEMENT TO RETAIN SHARES Each Seller agrees not to transfer, sell
or otherwise dispose of or direct or cause the sale, transfer or other
disposition of the Company's Shares (except for the conversion into TSI Stock in
the transactions contemplated hereby) or TSI Stock held by such Seller or on
such Seller's behalf, whether owned on the date hereof or after acquired, within
the thirty (30) days prior to the Closing Date.
4.4 CAPITAL AND OTHER EXPENDITURES. The Company shall not make any
capital expenditures, or commitments with respect thereto in excess of $25,000
each or $75,000 in the aggregate.
4.5 CASH AND CASH EQUIVALENTS. Cash and cash equivalents shall be
preserved, and expended, solely in the ordinary and usual course of business.
4.6 BORROWING. The Company shall not incur, assume or guarantee any
indebtedness for borrowed money, obligations or liabilities not reflected on the
Financial Statements (or the balance sheets included therein) except in the
ordinary course of business or for purposes of consummation of the transactions
contemplated by this Agreement and in any case only after consultation with the
Purchaser.
4.7 OTHER COMMITMENTS. Except as set forth in this Agreement, incurred
or transacted in the ordinary course of business, or permitted in writing by the
Purchaser, the Company shall
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not enter into any material transaction or make any material commitment or incur
any material obligation (including entering into any real property leases).
4.8 INTERIM FINANCIAL INFORMATION. To the extent prepared in the
ordinary course of business, the Company shall make available the Purchaser with
its unaudited financial statements (including, without limitation, balance
sheets and statements of revenues and expenses) and information for each
calendar month, promptly after they become available.
4.9 FULL ACCESS AND DISCLOSURE.
(a) The Company shall afford to the Purchaser and its
respective counsel, accountants and other authorized representatives reasonable
access during business hours to the Company's facilities, properties, books and
records in order that the Purchaser may have full opportunity to make such
reasonable investigations as it shall desire to make of the affairs of the
Company, including financial audits; and the Sellers shall cause the Company's
officers, employees and auditors to furnish on a timely basis such additional
financial and operating data and other information as the Purchaser shall from
time to time reasonably request including, without limitation, any internal
control recommendations applicable to the Company made by the Company's
independent auditors in connection with any examination of the Company's
Financial Statements and books and records.
(b) In connection with any "due diligence" examination
performed by the Purchaser with respect to the business of the Company, the
Sellers shall fully cooperate and provide assistance reasonably requested by
Purchaser.
4.10 CONFIDENTIALITY. Each Seller and the Company shall cause its
respective principals, officers and other personnel and authorized
representatives to, hold in confidence, and not disclose to any other party
without the Purchaser's prior consent, all written and oral information
furnished or disclosed by or received from the Purchaser or its officers,
directors, employees, agents, counsel and auditors in connection with the
transactions contemplated hereby except as may be required by applicable law or
as otherwise contemplated herein.
4.11 FULFILLMENT OF CONDITIONS PRECEDENT. The Company and the Sellers
shall use their reasonable best efforts to obtain at their expense, on or prior
to the Closing Date, all such waivers, Permits, consents, approvals or other
authorizations from third parties and Authorities (including any required
consents and approvals indicated in SCHEDULE 2.12) and to do all other things as
may be required, obtained or done by the Company or Sellers in connection with
the transactions contemplated by this Agreement in order to fully and
expeditiously consummate the transactions contemplated by this Agreement.
4.12 BANKING ARRANGEMENTS. The Sellers shall open such bank accounts
and establish banking relationships as directed by TSI and shall transfer all
the Company's funds to such accounts effective upon the Closing, as required to
be in compliance with Purchaser's credit facility from and after the Closing
Date.
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4.13 REPRESENTATION LETTER. The Sellers and the Company shall deliver
to TSI or its auditors prior to the Closing Date, a management representation
letter with respect to the Company's financial statements for the year ended
December 31, 1998, or such additional or other information, including, but not
limited to financial statements, auditor's reports and accountants consents,
that TSI may request from the Sellers and the Company in connection with any
filings TSI shall be required to make with the SEC pursuant to the transactions
contemplated by this Agreement.
4.14 BUDGETS. The Sellers shall deliver to TSI (i) the Company's
operating budget for 1999 (the "OPERATING Budget"), attached hereto as EXHIBIT
4.14, and (ii) prior to the Closing Date, the Company's capital expenditure
budget for 1999 (the "CAPITAL EXPENDITURE BUDGET", and together with the
Operating Budget, the "BUDGETS"). The capital expenditure budgets shall include
capital expenditure for all plans or projects involving the opening of new
operations, expansion of existing operations, the acquisition of any personal
property, business or assets requiring, and in any event, the payment of more
than $25,000 in the aggregate by the Company, including without limitation any
development expenditures, purchases or leases of information systems,
telecommunications equipment, computer hardware and software, etc. The Budgets
provided by the Sellers to TSI have been prepared on a consistent basis with the
Company's 1998 interim financial statements.
ARTICLE V
COVENANTS OF THE PURCHASER
The Purchaser hereby covenants and agrees with the Company and the
Sellers that prior to the Closing or the termination of this Agreement:
5.1 CONFIDENTIALITY. The Purchaser shall, and shall cause its
principals, officers and other personnel and authorized representatives to, hold
in confidence, and not disclose to any other party without the Sellers' prior
consent, all written or oral information furnished or disclosed by or received
from the Sellers, the Company or the Company's officers, directors, employees,
agents, counsel and auditors in connection with the transactions contemplated
hereby except as may be required by applicable law or as otherwise contemplated
herein.
5.2 FULL ACCESS AND DISCLOSURE.
(a) The Purchaser shall afford to the Company and the Sellers,
and each of their respective counsel, accountants and other authorized
representatives an opportunity to make such reasonable investigations as they
shall desire to make of the business of the Purchaser; and the Purchaser shall
cause its officers, employees and auditors to furnish such additional financial
and operating data and other information as the Sellers shall from time to time
reasonably request.
(b) From time to time prior to the Closing Date, the Purchaser
shall promptly supplement or amend information previously delivered to the
Company and/or the Sellers with
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respect to any matter hereafter arising which, if existing or occurring at the
date of this Agreement, would have been required to be set forth herein or
disclosed.
ARTICLE VI
OTHER AGREEMENTS
The parties hereto further agree, on or before the Closing Date, as
follows:
6.1 FURTHER ASSURANCES. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable under applicable Regulations to consummate and
make effective the transactions contemplated by this Agreement. In furtherance
and not in limitation of the preceding sentence, the parties hereto shall use
their best efforts to cause the Closing to take place on or before February 1,
1999 and be effective February 1, 1999. If at any time after the Closing Date
the Purchaser shall consider or be advised that any further deeds, assignments
or assurances in law or in any other things are necessary, desirable or proper
to vest, perfect or confirm, of record or otherwise, in the Purchaser (or the
Company, as appropriate), the title to any property or rights of the Sellers or
the Company acquired or to be acquired by reason of, or as a result of, the
acquisition of the Company Shares, the Sellers agree that the Sellers shall
execute and deliver all such proper deeds, assignments and assurances in law and
do all things necessary, desirable or proper to vest, perfect or confirm title
to such property or rights in the Company and otherwise to carry out the purpose
of this Agreement.
6.2 338(h)(10) ELECTION AND OTHER TAX AGREEMENTS.
(a) ss.338(h)(10) ELECTION. The Company and each of the
Sellers will join with the Purchaser in making an election under Code
ss.338(h)(10) of the Code (and any corresponding election under state, local,
and foreign tax law) with respect to the purchase and sale of the stock of the
Company hereunder (a "Section 338(h)(10) Election"). The Sellers will include
any income, gain, loss, deduction, or other tax item resulting from the
ss.338(h)(10) Election on their Tax Returns to the extent permitted and required
by applicable law. The Sellers shall also pay any Tax imposed on the Company or
its Subsidiaries (if any) attributable to the making of the ss.338(h)(10)
Election, including, but not limited to, (i) any Tax imposed under ss.1374, (ii)
any tax imposed under Reg. ss.1.338(h)(10)-1(e)(5), or (iii) any state, local or
foreign tax imposed on the Company's or its Subsidiaries' (if any), gain, and
the Sellers shall indemnify the Purchaser, the Company and its Subsidiaries
against any Adverse Consequences arising out of any failure to pay any such
Taxes.
(b) NO LIABILITY. The Company will not be liable for any Tax
under Code ss.1374 in connection with the deemed sale of the Company's assets
(including the assets of any qualified subchapter S subsidiaries) caused by the
ss.338(h)(10) election. Neither the Company nor any qualified subchapter S
subsidiary of the Company has, in the past 10 years, (i) acquired assets from
another corporation in a transaction in which the Company's tax basis for the
acquired assets was determined, in whole or in part, by reference to the tax
basis of the
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acquired assets (or any other property) in the hands of the transferor or (ii)
acquired the stock of any corporation which is a qualified sub S subsidiary.
(c) ALLOCATION OF PURCHASE PRICE. The Purchaser, the Company
and the Sellers agree that the Purchase Price and the liabilities of the Company
and its qualified subchapter S subsidiaries (plus other relevant items) will be
allocated to the assets of the Company for tax purposes (in a manner as
illustrated on the preliminary pro forma ALLOCATION SCHEDULE as of December 31,
1998 to be delivered pursuant to Section 7.14 on or prior to the Closing Date)
in a manner consistent with the fair market values as of the effective Closing
Date. The Purchaser, the Company, and the Sellers will file all Tax Returns
(including amended returns and claims for refund) and information reports in a
manner consistent with such allocation.
(d) S CORPORATION STATUS. The Company and the Sellers will not
revoke the Company's election to be taxed as an S corporation within the meaning
of ss.1361 and ss.1362. The Company and the Sellers will not take or allow any
action (other than the sale of Target's stock pursuant to the Agreement) that
would result in the termination of the Company's status as a validly electing S
corporation within the meaning of ss.1361 and ss.1362.
(e) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE. The
Sellers shall, at their own expense, prepare or cause to be prepared and filed
or cause to be filed all Tax Returns for the Company and its Subsidiaries for
all periods ending on or prior to the Closing Date which are filed after the
Closing Date. The Sellers shall permit the Purchaser to review and comment on
each such Tax Return described in the preceding sentence prior to filing and
shall make such revisions to such Tax Returns as are reasonably requested by the
Purchaser and which are reasonably acceptable to Sellers' and the Company's tax
preparers. To the extent permitted or required by applicable law, the Sellers
shall include any income, gain, loss, deduction or other tax items for such
periods on their Tax returns in a manner consistent with the Schedule K-1s
furnished by the Company to the Sellers for such periods.
(f) COOPERATION ON TAX MATTERS.
(i) The Purchaser, the Company and the Sellers shall
cooperate fully, as and to the extent reasonably requested by the other party,
in connection with the filing of Tax Returns pursuant to this Section 6.2 and
this Agreement 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 and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. The Company and the Sellers 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 limitations (and, to the extent notified by the
Purchaser or the Sellers, 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
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books and records and, if the other party so requests, the Company or the
Sellers, as the case may be, shall allow the other party to take possession of
such books and records.
(ii) The Purchaser and the Sellers further agree, upon
request, to use their best efforts to obtain any certificate or other document
from any governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(g) TAX SHARING AGREEMENTS. All tax sharing agreements or
similar agreements with respect to or involving the Company and any affiliates
shall be terminated as of the Closing Date and, after the Closing Date, the
Company and its affiliates shall not be bound thereby or have any liability
thereunder.
(h) CERTAIN TAXES. All transfer, documentary, sales, use,
stamp, registration and other such transfer taxes and fees (including any
penalties and interest) incurred in connection with the Agreement shall be paid
by the Sellers when due, and the Sellers will, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other transfer taxes and fees,
and, if required by applicable law, the Purchaser will, and will cause its
affiliates to, join in the execution of any such Tax Returns and other
documentation.
6.3 AGREEMENT TO DEFEND. In the event any action, suit, proceeding or
investigation of the nature specified in SECTIONS 7.2 or 8.2 is commenced,
whether before or after the Closing Date, all the parties hereto agree to
cooperate and use their best efforts to defend against and respond thereto.
6.4 CONSENTS. Without limiting the generality of SECTION 6.1, each of
the parties hereto shall use their reasonable best efforts to obtain all
permits, authorizations, consents and approvals of all Persons and governmental
authorities necessary, proper or advisable in connection with the consummation
of the transactions contemplated by this Agreement prior to the Closing Date.
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.
6.5 NO SOLICITATION OR NEGOTIATION. Unless and until this Agreement is
terminated as provided herein, neither the Sellers nor the Company through its
directors, officers, employees, representatives, agents, advisors, accountants
and attorneys shall initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to, or engage in
negotiations concerning, or provide any confidential information or data to any
Person with respect to, or have any discussions with any Persons relating to,
any acquisition, business combination or purchase of all or any significant
asset of, or any equity interest in, the Company, or otherwise facilitate any
effort or attempt to do or seek any of the foregoing, and shall immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Should the Company or any Seller be contacted with respect to any
such offer, inquiry or proposal, the Company and
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the Sellers shall immediately advise the Purchaser in writing of the name,
address and phone number of the contact and the nature of the inquiry.
6.6 NO TERMINATION OF SELLERS' OBLIGATIONS BY SUBSEQUENT INCAPACITY,
ETC. Each Seller specifically agrees that the obligations of such Seller
hereunder, including, without limitation, obligations pursuant to ARTICLE XI
shall not be terminated by the death or incapacity of any Seller.
6.7 EMPLOYMENT AGREEMENTS; TERMINATION OF CERTAIN AGREEMENTS. The
Company and the Sellers shall, at or prior to the Closing, terminate any
existing employment agreements or other agreements between the Company and such
Persons, and Sellers shall each enter into an Employment Agreement with the
Company (or, at TSI's option, an affiliate or subsidiary of TSI) substantially
in the form of EXHIBIT 6.7 attached hereto, including therein any changes or
modifications that are mutually agreed upon and satisfactory to such parties
(the "EMPLOYMENT AGREEMENTS").
6.8 PUBLIC ANNOUNCEMENTS. Neither any Seller nor the Company nor any
Affiliate, representative, employee or shareholder of either of such Persons,
shall disclose any of the terms of this Agreement to any third party (other than
the Purchaser's advisors and senior lending group and the Sellers' advisors)
without the other party's prior written consent unless required by any
applicable law. The form, content and timing of any and all press releases,
public announcements or publicity statements with respect to this Agreement or
the transactions contemplated hereby shall be subject to the prior approval of
the Purchaser. Notwithstanding the foregoing, and except for any disclosures
required under or pursuant to Federal or State securities laws in connection
with the registration of TSI's securities or the rules of The Nasdaq Stock
Market or otherwise required by law, the initial press release or other public
communication in connection with this transaction or any agreement pertaining
hereto will not be made without the mutual agreement of the parties hereto after
prior review of such proposed release.
6.9 DELIVERIES AFTER CLOSING. From time to time after the Closing, at
the Purchaser's request and without expense to the Sellers, the Sellers 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 the possession of, any
rights or property to be sold, conveyed, transferred or delivered hereunder.
6.10 NON-COMPETITION COVENANT.
(a) As a material and valuable inducement for the Purchaser to
enter into this Agreement, pay and issue the shares of TSI Stock hereunder and
consummate the transactions provided for herein, during the "RESTRICTED
PERIOD" (as hereinafter defined), each Seller agrees, unless otherwise
permitted by TSI in writing, that 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:
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(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 the Company, TSI or any
subsidiary or Affiliate of TSI (collectively with TSI, the
"TSI Entities" and each (including TSI), a "TSI ENTITY"), in
which the Employee has had Substantive Involvement, within the
United States or within one hundred (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 any TSI Entity, in which the Employee has had
Substantive Involvement, within the Restricted Territory; or
(iv) solicit any prospective acquisition candidate,
on such Seller's own behalf or on behalf of any competitor or
potential competitor, which candidate was, to such Seller's
knowledge, either called upon by any TSI Entity or for which
TSI made an acquisition analysis, for the purpose of acquiring
such entity.
(b) Notwithstanding the above, the foregoing covenant shall
not be deemed to prohibit any Seller from acquiring as an investment not more
than two percent (2%) of the capital stock of a competing business, whose stock
is traded on a national securities exchange or over-the-counter.
(c) As used in this Agreement, the term "RESTRICTED PERIOD"
shall mean and include with respect to each Seller, the longer of (x) a period
of five (5) years, from the Closing to the fifth (5th) anniversary of the
Closing or (y) with respect to each Seller employed by a TSI Entity following
the Closing, during such time as such Seller is employed by any TSI Entity and
for a period of two (2) years following the effective date of the termination of
such Seller's employment with any TSI Entity (regardless of the cause, reason or
justification of such termination.
(d) In recognition of the substantial nature of such potential
damages and the difficulty of measuring economic losses to TSI as a result of a
breach of the foregoing covenants, and because of the immediate and irreparable
damage that could be caused to TSI for which it would have no other adequate
remedy, each Seller agrees that in the event of breach by such Seller of the
foregoing covenant, TSI and the Company shall be entitled to specific
performance of this provision and co-injunctive and other equitable relief.
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(e) It is agreed by the parties that the foregoing covenants
in this SECTION 6.10 impose a reasonable restraint on the Sellers in light of
the activities and business of the Company and the TSI Entities on the date of
the execution of this Agreement and the current plans of the TSI Entities; but
it is also the intent of TSI and the Sellers that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the TSI Entities, whether before or after the date of termination of the
employment of such Seller provided, that the applicable Seller participated in
the development of the changed activity, business or location. For example, if,
during the Restricted Period, a TSI Entity engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or its existing activities or business or
the locations currently established therefor, then such Seller will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the Restricted
Period if the Seller was involved in the development of such new businesses,
locations or activities.
(f) The covenants in this SECTION 6.10 are severable and
separate, and the unenforceability of any specific covenant shall not affect the
provisions of any other covenant. Moreover, in the event any court of competent
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall be reformed in accordance therewith.
(g) All of the covenants in this SECTION 6.10 shall be
construed as an agreement independent of any other provision in this Agreement,
and the existence of any claim or cause of action of any Seller against TSI,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI of such covenants. Further, this SECTION 6.10
shall survive the Closing and the termination of such Seller's employment with a
TSI Entity. It is specifically agreed that the Restricted Period, during which
the agreements and covenants of the Seller made in this SECTION 6.10 shall be
effective, shall be computed by excluding from such computation any time during
which such Seller is in violation of any provision of this SECTION 6.10.
6.11 NON-DISCLOSURE; CONFIDENTIALITY.
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(a) CONFIDENTIAL INFORMATION. By virtue of the Sellers'
respective prior employment, association or involvement with the Company, such
Seller may have obtained confidential or proprietary information developed, or
to be developed, by the Company. "Confidential Information" means all
proprietary or confidential business information, whether in oral, written,
graphic, machine-readable or tangible form, and whether or not registered, and
including all notes, plans, records, documents and other evidence thereof,
including but not limited to all: patents, patent applications, copyrights,
trademarks, trade names, service marks, service names, "know-how," customer
lists, details of client or consulting contracts, pricing policies, operational
methods, marketing plans or strategies, product development techniques or plans,
procurement and sales activities, promotion and pricing techniques, credit and
financial data concerning customers, business acquisition plans or any portion
or phase of any scientific or technical information, discoveries, computer
software or programs used or developed in whole or in part by the Company
(including source or object codes), processes, procedures, formulas or
improvements of the Company; algorithms; computer processing systems and
techniques; price lists; customer lists; procedures; improvements, concepts and
ideas; business plans and proposals; technical plans and proposals; research and
development; budgets and projections; technical memoranda, research reports,
designs and specifications; new product and service developments; and
comparative analyses of competitive products, services and operating procedures.
"Confidential Information" shall not include (a) any information which is in the
public domain during the period of service by the Seller or becomes public
thereafter, provided such information is not in the public domain as a
consequence of disclosure by any Seller in violation of this Agreement, and (b)
any information not considered confidential information by similar enterprises
operating in the travel service industry or otherwise in the ordinary course.
(b) NON-DISCLOSURE. Each Seller agrees that, except as
directed by such Seller's TSI Entity employer (if any), as required or otherwise
contemplated under this Agreement or such Seller's Employment Agreement (if any)
or as otherwise required by law, he or she will not at any time (including
during the term of such Seller's employment by a TSI Entity (if any) or at any
time thereafter), except as may be expressly authorized by the TSI Entity in
writing, disclose to any Person or use any Confidential Information whatsoever
for any purpose whatsoever, or permit any Person whatsoever to examine and/or
make copies of any reports or any documents or software (whether in written form
or stored on magnetic, optical or other mass storage media) prepared by him or
her or that come into his or her possession or under his or her control by
reason of his or her employment by an TSI Entity or by reason of any consulting
or software development services he or she has performed or may in the future
perform for an TSI Entity which contain or are derived from Confidential
Information. In addition, each of the Sellers hereby acknowledges that she is
aware of the restrictions imposed by federal securities laws on persons
possessing material non-public information with respect to SEC reporting
companies and agree that neither Seller will effect any transactions in the
stock of TSI without compliance with such laws.
(c) TSI GROUP PROPERTY. As used in this Agreement, the term
"TSI GROUP PROPERTY" means all documents, papers, computer printouts and disks,
records, customer or customer lists, files, manuals, supplies, computer hardware
and software, equipment, inventory and other materials that have been created,
used or obtained by any TSI Entity, or otherwise
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belonging to any TSI Entity, as well as any other materials containing
Confidential Information as defined above. Each Seller recognizes and agrees
that:
(i) All the TSI Group Property shall be and remain
the property of the TSI Entity to which such belongs;
(ii) Sellers will preserve, use and hold the TSI
Group Property only for the benefit of TSI and its Affiliates
and to carry out the business of the TSI Entity, TSI and its
Affiliates; and
(iii) When any Seller's employment is terminated,
such Seller will immediately deliver and surrender to the TSI
Entity all the TSI Group Property, including all copies,
extracts or any other types of reproductions, which such
Seller has in his possession or control.
6.12 ADVISE OF CHANGES. The Sellers, the Company and the Purchaser
shall promptly advise the other parties orally and in writing to the extent it
has knowledge of (i) any representation or warranty made by it contained in this
Agreement that is qualified as to materiality becoming untrue or inaccurate in
any respect or any such representation or warranty that is not so qualified
becoming untrue or inaccurate in any material respect, (ii) the failure by it to
comply in any material respect with or satisfy in any material respect any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement and (iii) any change or event having, or which, insofar as can
reasonably be foreseen, could reasonably be expected to have a material adverse
effect on such party or on the truth of their respective representations and
warranties or the ability of the conditions set forth in ARTICLE VII or VIII to
be satisfied; provided, however, that no such notification shall affect the
representations, warranties, covenants or agreements of the parties (or remedies
with respect thereto) or the conditions to the obligations of the parties under
this Agreement. Notwithstanding the foregoing, if such notification results from
or relates to an event occurring or condition or state of facts existing after
the date hereof, such notification shall cure for all purposes other than the
condition existing in Section 7.1 or Section 8.1, as the case may be, any breach
of representation or warranty that would exist in the absence of such
notification.
6.13 STOCK OPTIONS.. TSI shall grant stock options for an aggregate of
20,000 shares of TSI common stock to the management and other employees of the
Company, excluding Richard Small, Arlene Small, Joseph Small, Brian Small and
Richard Small, Jr. The terms of such stock options will be consistent with the
provisions of TSI's 1997 Long-Term Incentive Plan (a copy of which has been
provided to each of the Sellers).
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASER
Each and every obligation of the Purchaser under this Agreement shall
be subject to the satisfaction, on or before the Closing Date, of each of the
following conditions, unless waived in writing by the Purchaser:
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7.1 REPRESENTATIONS AND WARRANTIES; COVENANTS AND AGREEMENTS. The
representations and warranties of the Sellers and the Company contained in
ARTICLE II and elsewhere in this Agreement and all information contained in any
exhibit, certificate, schedule or attachment hereto or in any writing delivered
by, or on behalf of, the Sellers or the Company to the Purchaser, shall be true
and correct both when made and at and as of the Closing Date, as if made at and
as of such time (except to the extent expressly made as of an earlier date, in
which case as of such date), except where the failure of such representations
and warranties to be so true and correct does not have, and is not likely to
have, individually or in the aggregate, a Material Adverse Effect on the
Sellers, the Company or the Purchaser. The Sellers and the Company shall have
performed and complied with all agreements, covenants and conditions and shall
have made all deliveries required by this Agreement to be performed, delivered
and complied with by them prior to the Closing Date. Each of the Sellers and the
president of the Company (on behalf of the Company) shall have executed and
delivered to the Purchaser a certificate, dated the Closing Date, certifying to
the foregoing.
7.2 NO INJUNCTION. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
7.3 THIRD PARTY CONSENTS. The Purchaser, the Sellers and the Company
shall have obtained all consents, approvals, waivers or other authorizations
with respect to the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, such that the
Contracts and leases listed in SCHEDULE 2.12 hereto shall remain in effect
(without default, acceleration, termination, assignment, right of termination or
assignment, payment, increase in rates or compensation payable, penalty,
interest or other adverse effect) from and after the Closing Date as such
contracts and leases operated and were in effect before the Closing Date.
7.4 REGULATORY APPROVALS. The Federal and State regulatory agencies or
authorities listed in SCHEDULE 7.4 hereto (if any) shall have approved the
applications listed in such Schedule with respect to the change of control
represented by the transactions contemplated by this Agreement, and such
approval shall not impose financial obligations on the Purchaser that are
objectionable to it.
7.5 NO MATERIAL ADVERSE CHANGE. There shall have been no Material
Adverse Change to the Company since the date of this Agreement. The Purchaser
shall have received a certificate (which shall be addressed to the Purchaser),
dated the Closing Date, of the president and chief financial officer of the
Company, certifying to the foregoing.
7.6 OPINION OF SELLERS' AND THE COMPANY'S COUNSEL. The Purchaser shall
have received an opinion of counsel to the Sellers and the Company (which will
be addressed to the Purchaser), dated the Closing Date.
7.7 EMPLOYMENT AGREEMENTS. Sellers and each of Joseph Small, Brian
Small, Richard Small, Jr. (collectively, the "CHILDREN") shall each have (i)
terminated their existing
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employment agreements with the Company, and (ii) executed and delivered to the
Purchaser Employment Agreements in the form of EXHIBIT 6.7 attached hereto.
7.8 DELIVERY OF THE COMPANY SHARE CERTIFICATES. Each of the Sellers
shall have executed and delivered this Agreement, or a counterpart hereof, and
together shall have delivered at the Closing to Purchaser stock certificates
representing all of the Company Shares, duly endorsed for transfer to the
Purchaser, together with stock powers duly executed in blank.
7.9 DUE DILIGENCE; BOARD APPROVAL. The Purchaser shall have completed,
to its satisfaction and in its sole discretion, its due diligence review of the
Company. The Board of Directors of the Purchaser shall have approved this
Agreement and the transactions and other agreements contemplated hereunder.
7.10 SHELF REGISTRATION. The availability of the Shelf Registration
Statement for registration of TSI's issuance of the TSI Stock pursuant to this
Agreement, in accordance with all requirements of the Securities Act.
7.11 CREDIT FACILITY APPROVAL. TSI shall have obtained (i) sufficient
funding for the payment to the Sellers of the Cash Portion of the Purchase Price
under its Credit Agreement, dated October 15, 1997, by and among TSI and
NationsBank, N.A. ("NationsBank"), and (ii) the required consent of NationsBank
thereunder in connection with the transactions contemplated herein.
7.12 HART-SCOTT-RODINO ACT FILING AND WAITING PERIOD. The Purchaser
shall have filed a Notification and Report Form in connection with the
transactions contemplated by this Agreement with the Federal Trade Commission
(the "FTC") pursuant to the Hart-Scott-Rodino Antitrust Improvement Act of 1976,
as amended (the "HSR ACT"), and any applicable waiting period under the HSR Act
has expired or been terminated.
7.13 FINANCIAL STATEMENTS AND TAX RETURNS. The Purchaser shall have (i)
received the Financial Statements, and (ii) received, no later than January 31,
1999, audited financial statements of the Company prepared by Arthur Andersen,
LLP for the twelve month period ending December 31, 1998.
7.14 ALLOCATION SCHEDULE. Pursuant to Section 6.2 hereof, a preliminary
pro forma Allocation Schedule as of December 31, 1998, as mutually agreed to by
each of the Purchaser and the Sellers, shall have been delivered to each of the
Purchaser and the Sellers on or prior to the Closing Date.
7.15 OTHER DOCUMENTS. The Sellers and the Company shall have delivered
such other documents and instruments required hereunder or reasonably requested
by Purchaser.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF THE SELLERS
Each and every obligation of the Sellers to consummate the Closing
under this Agreement shall be subject to the satisfaction, on or before the
Closing Date, of each of the following conditions unless waived in writing by
the Sellers:
8.1 REPRESENTATIONS AND WARRANTIES; PERFORMANCE. The representations
and warranties of the Purchaser contained in ARTICLE III and elsewhere in this
Agreement and all information contained in any exhibit, schedule or attachment
hereto or in any writing delivered by or on behalf of the Purchaser, shall be
true and correct both when made and at and as of the Closing Date, as if made at
and as of such time (except to the extent expressly made as of an earlier date,
in which case as of such date), except where the failure of such representations
and warranties to be so true and correct does not have, and is not likely to
have, individually or in the aggregate, a Material Adverse Effect on the
Purchaser. The Purchaser shall have performed and complied in all material
respects with all agreements, covenants and conditions required by this
Agreement to be performed and complied with by Purchaser prior to the Closing
Date. An authorized officer of the Purchaser shall have delivered to the Sellers
a certificate, dated the Closing Date, certifying to the foregoing.
8.2 NO INJUNCTION. No preliminary or permanent injunction or other
Order, decree or ruling issued by any Authority, or any Regulation promulgated
or enacted by any Authority shall be in effect, which would prevent the
consummation of the transactions contemplated hereby.
8.3 PURCHASE CONSIDERATION. The Sellers shall have received the
consideration required to be delivered at Closing and to which each Seller is
entitled pursuant to SECTION 1.1 hereof.
8.4 EMPLOYMENT AGREEMENTS. TSI or its affiliate shall have executed and
delivered to each of the Sellers and the Children an Employment Agreement
between TSI (or its affiliate) and such Person in the form of EXHIBIT 6.7
attached hereto.
8.5 HART-SCOTT-RODINO ACT FILING AND WAITING PERIOD. The Sellers shall
have filed a Notification and Report Form in connection with the transactions
contemplated by this Agreement with the FTC pursuant to the HSR Act, and any
applicable waiting period under the HSR Act has expired or been terminated.
8.6 THIRD PARTY CONSENTS. The Purchaser, the Sellers and the Company
shall have obtained all consents, approvals, waivers or other authorizations
with respect to the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby, such that the
Contracts and leases listed in SCHEDULE 2.12 hereto shall remain in effect
(without default, acceleration, termination, assignment, right of termination or
assignment, payment, increase in rates or compensation payable, penalty,
interest or other adverse effect) from and after the Closing Date as such
contracts and leases operated and were in effect before the Closing Date.
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8.7 OPINION OF PURCHASER'S COUNSEL. The Sellers and the Company shall
have received an opinion of counsel to the Purchaser (which will be addressed to
the Sellers and the Company), dated the Closing Date.
8.8 SHELF REGISTRATION. The availability of the Shelf Registration
Statement for registration of TSI's issuance of the TSI Stock pursuant to this
Agreement, in accordance with all requirements of the Securities Act.
8.9 ALLOCATION SCHEDULE. Pursuant to Section 6.2 hereof, a preliminary
pro forma Allocation Schedule as of December 31, 1998, as mutually agreed to by
each of the Purchaser and the Sellers, shall have been delivered to each of the
Purchaser and the Sellers on or prior to the Closing Date.
8.10 OTHER DOCUMENTS. The Purchaser shall have delivered such other
documents and instruments required hereunder or reasonably requested by Sellers
and the Company.
ARTICLE IX
CLOSING
9.1 CLOSING. Unless this Agreement shall have been terminated or
abandoned pursuant to the provisions of ARTICLE X hereof, a closing of the
transactions contemplated by this Agreement (the "CLOSING") shall be held on or
before February 1, 1999 and be effective February 1, 1999 or on such other date
which is mutually agreed upon in writing following the satisfaction or waiver of
the conditions to closing set forth in ARTICLE VII and ARTICLE VIII hereof (the
"CLOSING DATE").
9.2 CLOSING DELIVERIES. At the Closing,
(a) the Sellers and the Company shall deliver or cause to
be delivered to the Purchaser:
(i) a certificate or certificates evidencing all of
the Company Shares, duly endorsed for transfer with all
necessary transfer stamps affixed;
(ii) copies of all consents and approvals required by
SECTIONS 7.3, 7.4 and 7.11 (including UCC termination
statements, releases of mortgages or other releases of Liens);
(iii) the Opinion of Counsel required by SECTION 7.6;
(iv) the Officers' Certificates required by SECTIONS
7.1 and 7.5;
(v) the Employment Agreements and termination of
agreements required by SECTIONS 6.7 and 7.7;
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(vi) certificates, 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;
(vii) certificates issued by the appropriate
governmental authorities evidencing the good standing, with
respect to both the conduct of business and the payment of all
franchise taxes, of the Company as of a date not more than 10
days prior to the Closing Date, as a corporation organized
under the laws of the State of Illinois and as a foreign
corporation authorized to do business under the laws of the
various jurisdictions where it is so qualified;
(viii) such other certified resolutions, documents
and certificates as are required to be delivered by any Seller
or the Company pursuant to the provisions of this Agreement;
(ix) resignations of each officer and director of the
Company (including each Seller); and
(x) the stock records and minute books of the
Company.
(b) The Purchaser shall deliver to the Sellers:
(i) immediately available funds in the amount of
$24,000,000.00, delivered as directed by the Sellers under
Section 1.1
(ii) the TSI Stock required to be issued and
delivered to each such Seller at Closing in accordance with
SECTION 1.1(B)
(iii) the Officers' Certificate required by SECTION
8.1;
(iv) the Employment Agreements required by SECTION
8.4;
(v) Opinion of counsel required by SECTION 8.6;
(vi) certificates, signed by the Secretary of the
Purchaser, as to the Certificate of Incorporation and by-laws
of the Purchaser, the resolutions adopted by the Board of
Directors of the Purchaser in connection with this Agreement,
the incumbancy of certain officers of the Purchaser, in form
acceptable to the Purchaser; and
(vii) such other certified resolutions, documents and
certificates as are required to be delivered at the Closing by
the Purchaser pursuant to the provisions of this Agreement.
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ARTICLE X
TERMINATION AND ABANDONMENT
10.1 METHODS OF TERMINATION. This Agreement may be terminated and the
transactions herein contemplated may be abandoned at any time:
(a) by mutual consent of the Purchaser, the Sellers and the
Company;
(b) by the Purchaser or each of the Sellers and the Company
collectively, if this Agreement is not consummated on or before February 1,
1999; PROVIDED, HOWEVER, that if the failure to consummate the transaction as of
that date has resulted from the breach or default of any party with respect to
its respective obligations under this Agreement on or before such date, such
party may not terminate this Agreement pursuant to this SECTION 10.1(b), and
each other party to this Agreement shall at its option enforce its rights
against such breaching or defaulting party and seek any remedies against such
party, in either case as provided hereunder and by applicable law; or
(c) by notice given by the Purchaser or each of the Sellers
and the Company if as of the Closing Date (including any extensions) any of the
conditions specified in ARTICLE VII or ARTICLE VIII hereof, respectively, shall
not have been satisfied or if the Company or any of the Sellers or the
Purchaser, respectively, is otherwise in default under this Agreement.
10.2 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment pursuant to SECTION 10.1 hereof, and subject to the proviso
contained in SECTION 10.1(b), this Agreement shall terminate and shall be
abandoned, without further action by any of the parties hereto. If this
Agreement is terminated as provided herein:
(a) each party shall redeliver all documents and other
material of any other party relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party furnishing
the same;
(b) all information received by any party hereto with respect
to the business of any other party or the Company (other than information which
is a matter of public knowledge or which has heretofore been or is hereafter
published in any publication for public distribution or filed as public
information with any governmental authority) shall not at any time be used for
the advantage of, or disclosed to third parties by, such party to the detriment
of the party furnishing such information; and
(c) no party hereto shall have any further liability or
obligation to any other party under or in connection with this Agreement;
PROVIDED, HOWEVER, the non-breaching or non-defaulting party shall not be
foreclosed from bringing a Claim or cause of action or otherwise recovering from
the breaching or defaulting party for such breach or default.
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ARTICLE XI
SURVIVAL OF TERMS; INDEMNIFICATION
11.1 SURVIVAL. All of the terms and conditions of this Agreement,
together with the representations, warranties and covenants contained herein or
in any instrument or document delivered or to be delivered pursuant to this
Agreement, shall survive the execution of this Agreement and the Closing
notwithstanding any investigation heretofore or hereafter made by or on behalf
of any party hereto; provided, however, that (a) the agreements and covenants
set forth in this Agreement shall survive and continue until all obligations set
forth therein shall have been performed and satisfied; and (b) all
representations and warranties of the Company and the Sellers shall survive and
continue until:
(1) with respect to the representations and warranties in
SECTIONS 2.21 (tax matters) and 2.23 (ERISA matters) and 2.19
(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 2.3 (capitalization), 2.5 (title to stock), and 2.6 (options
and rights on capital stock), these representations shall survive and
continue forever and without limitation; and
(3) with respect to all other representations and warranties,
the date upon which TSI receives from its outside auditors the audited
financial statements for TSI's fiscal year ending December 31, 1999
(the "1999 AUDIT Date"), except for representations, warranties and
indemnities for which an indemnification Claim shall be pending as of
the 1999 Audit Date, in which event such indemnities shall survive with
respect to such Claim until the final disposition thereof.
11.2 INDEMNIFICATION BY THE SELLERS. Subject to this ARTICLE XI, the
Purchaser and its officers, directors, employees, shareholders, representatives
and agents shall be indemnified and held harmless by the Sellers, jointly and
severally, at all times after the date of this Agreement, against and in respect
of any and all damage, loss, deficiency, liability, obligation, commitment, cost
or expense (including the reasonable fees and expenses of counsel) resulting
from, or in respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of any Seller or the Company under
this Agreement, or contained in any schedule or exhibit to this Agreement or
from any misrepresentation in or omission from any certificate, schedule, other
agreement or instrument executed by any Seller or the Company and delivered
hereunder;
(b) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any Claim incident
to any of the foregoing; and
(c) Any Adverse Consequences the Purchaser may suffer
resulting from, arising out of, relating to, in the nature of, or caused by any
liability of the Company and any of
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its Subsidiaries (i) for any Taxes of the Company and its Subsidiaries with
respect to any tax year or portion thereof ending on or before the Closing Date
(or for any tax year beginning before and ending after the Closing Date to the
extent allocable to the portion of such period beginning before and ending on
the Closing Date), to the extent such Taxes are not reflected in the reserve for
Tax Liability shown on the face of the Balance Sheet, as such reserve is
adjusted for the passage of time through the Closing Date in accordance with the
past custom and practice of the Company and its Subsidiaries in filing their Tax
Returns, and (ii) for the unpaid Taxes of any Person (other than any of the
Company and its Subsidiaries) under Reg. ss.1.1502-6 (or any similar provision
of state, local or foreign laws), as a transferee or successor, by contract, or
otherwise. In addition, any and all damages, loss, deficiency, liability,
obligation, commitment, cost or expense (including the reasonable fees and
expenses of counsel) arising under this SECTION 11.2(c) (the "SECTION 11.2(c)
CLAIMS") shall not be subject to any of the Indemnification Limitations set
forth in SECTION 11.4.
11.3 INDEMNIFICATION BY THE PURCHASER. Subject to this ARTICLE XI, the
Sellers and their officers, directors, employees, shareholders, trustees,
beneficiaries, heirs, assigns, representatives and agents shall be indemnified
and held harmless by the Purchaser, at all times after the date of this
Agreement, against and in respect of any and all damage, loss, deficiency,
liability, obligation, commitment, demands, assessments, judgment, cost or
expense (including the fees and expenses of counsel) resulting from, or in
respect of, any of the following:
(a) Any misrepresentation, breach of warranty, or
non-fulfillment of any obligation on the part of the Purchaser under this
Agreement, or contained in any schedule or exhibit to this Agreement or from any
misrepresentation in or omission from any certificate, schedule, other agreement
or instrument executed by Purchaser and delivered hereunder;
(b) All demands, assessments, judgments, costs and reasonable
legal and other expenses arising from, or in connection with any claim incident
to any of the foregoing.
11.4 LIMITATION ON INDEMNIFICATION. Except for the Section 11.2(c)
Claims, the Sellers shall be obligated to indemnify as and to the extent set
forth in this ARTICLE XI only if and to the extent that the aggregate of all of
the Sellers' aggregate liability under such indemnity obligations exceeds
$255,000 (the "Sellers' Basket Amount"), it being understood that said Seller's
Basket Amount is to serve as a one time "deductible" so that the indemnity
obligation of the Sellers shall be for the amount in excess of the Seller's
Basket Amount (for example, if the indemnity claims for which the Sellers would
be liable are $300,000, the Sellers would then be liable for $45,000 and not
$300,000). In addition, except for the Section 11.2(c) Claims, in no event,
shall the aggregate indemnification liability of the Sellers under this ARTICLE
XI exceed $18,000,000 for all Claims arising prior to April 1, 2000; provided,
however, that with respect to all Claims arising after April 1, 2000, the
aggregate indemnification liability shall not exceed $5,000,000.
11.5 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
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assessment of Tax by any taxing authority or any other proceeding likely to
result in the imposition of a Tax liability or obligation or (b) any action or
the assertion of any Claim, liability or obligation by a third party (whether by
legal process or otherwise), against which assessment, imposition, Claim,
liability or obligation any other party to this Agreement (hereinafter the
"INDEMNITOR") is, or may be, required under this Agreement to indemnify such
indemnitee, the indemnitee will, if a Claim thereon is to be, or may be, made
against the indemnitor, notify the indemnitor in writing of the commencement or
assertion thereof and give the indemnitor a copy of such Claim, process and all
legal pleadings. The indemnitor shall have the right to participate in the
defense of such action with counsel of reputable standing. The indemnitor shall
have the right to assume and control the defense of such action unless such
action if adversely determined (i) may if adversely determined result in
injunctions or other equitable remedies in respect of the indemnitee or its
business; (ii) may if adversely determined result in liabilities which, taken
with other then existing Claims under this ARTICLE XI, would not be fully
indemnified hereunder; or (iii) may have an adverse impact on the business or
financial condition of the indemnitee after the Closing Date (including an
effect on the Tax liabilities, earnings or ongoing business relationships of the
indemnitee). The indemnitor and the indemnitee shall cooperate in the defense of
such Claims. In the case that the indemnitor shall assume or participate in the
defense of such audit, assessment or other proceeding as provided herein, the
indemnitee shall make available to the indemnitor all relevant records and take
such other action and sign such documents as are necessary to defend such audit,
assessment or other proceeding in a timely manner. If the indemnitee shall be
required by judgment or a settlement agreement to pay any amount in respect of
any obligation or liability against which the indemnitor has agreed to indemnify
the indemnitee under this Agreement, the indemnitor shall promptly reimburse the
indemnitee in an amount equal to the amount of such payment plus all reasonable
expenses (including legal fees and expenses) incurred by such indemnitee in
connection with such obligation or liability subject to this ARTICLE XI.
Prior to paying or settling any Claim against which an indemnitor is,
or may be, obligated under this Agreement to indemnify an indemnitee, the
indemnitee must first supply the indemnitor with a copy of a final court
judgment or decree holding the indemnitee liable on such claim, or failing such
judgment or decree and in the case of a settlement, the indemnitee must first
receive the written approval of the terms and conditions of such settlement from
the indemnitor, which approval shall not be unreasonably withheld. An indemnitor
shall have the right to settle any Claim for which it is or would be liable to
the indemnitee hereunder. The indemnitor shall have the right to settle any
Claim for which it is or would be liable to the indemnitee hereunder, without
the written approval of the indemnitee, unless such Claim involves injunctive
relief, equitable remedies or has some other type of business effect on the
indemnitee, in which case the indemnitor shall not concede, settle or compromise
any Claim without the consent of the indemnitee, which approval shall not be
unreasonably withheld.
An indemnitee shall have the right to employ its own counsel and
participate in any case, but the fees and expenses of such counsel shall be at
the expense of the indemnitee unless (a) the employment of such counsel shall
have been authorized in writing by the indemnitor in connection with the defense
of such action or Claim, (b) the indemnitor shall not have employed within a
reasonable time after such counsel should have been employed, or is prohibited
under
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this SECTION 11.5 from employing, counsel in the defense of such action or
Claim, or the indemnitor does not have the right under this SECTION 11.5 to
assume the defense of such matter or (c) such indemnitee shall have reasonably
concluded that there may be defenses available to it which conflict with, those
available to the indemnitor such that a joint defense is reasonably
impracticable, 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.
ARTICLE XII
MISCELLANEOUS PROVISIONS
12.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented only by a written agreement
signed by the Company, the Purchaser and the Sellers.
12.2 ENTIRE AGREEMENT. This Agreement, including the schedules and
exhibits hereto and the documents, annexes, attachments, certificates and
instruments referred to herein and therein, embodies the entire agreement and
understanding of the parties hereto in respect of the agreements and
transactions contemplated by this Agreement and supersedes all prior agreements,
representations, warranties, promises, covenants, arrangements, communications
and understandings, oral or written, express or implied, between the parties
with respect to such transactions. There are no agreements, representations,
warranties, promises, covenants, arrangements or understandings between the
parties with respect to such transactions, other than those expressly set forth
or referred to herein.
12.3 CERTAIN DEFINITIONS.
"AFFILIATE" means, with regard to any Person, (a) any Person,
directly or indirectly, controlled by, under common control of, or controlling
such Person, (b) any Person, directly or indirectly, in which such Person holds,
of record or beneficially, five percent or more of the equity or voting
securities, (c) any Person that holds, of record or beneficially, five percent
or more of the equity or voting securities of such Person, (d) any Person that,
through Contract, relationship or otherwise, exerts a substantial influence on
the management of such Person's affairs, (e) any Person that, through Contract,
relationship or otherwise, is influenced substantially in the management of
their affairs by such Person, or (f) any director, officer, partner or
individual holding a similar position in respect of such Person.
"ADVERSE CONSEQUENCES" means all actions, suits, proceedings,
hearings, investigations, charges, complaints, claims, demands, injunctions,
judgments, orders, decrees, rulings, damages, dues, penalties, fines, costs,
amounts paid in settlement, liabilities, obligations, Taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"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.
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"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 in effect as of the Closing, which relates
to or otherwise imposes liability or standards of conduct concerning mining or
reclamation of mined land, discharges, emissions, releases or threatened
releases of noises, odors or any pollutants, contaminants or hazardous or toxic
wastes, substances or materials, whether as matter or energy, into ambient air,
water, or land, or otherwise relating to the manufacture, processing,
generation, distribution, use, treatment, storage, disposal, cleanup, transport
or handling of pollutants, contaminants, or hazardous wastes, substances or
materials, including (but not limited to) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, as amended, the Resource Conservation and Recovery
Act of 1976, as amended, the Toxic Substances Control Act of 1976, as amended,
the Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, any so-called "Superlien" law, and any other similar
Federal, state or local statutes.
"ENVIRONMENTAL PERMIT" shall mean Permits, certificates,
approvals, licenses and other authorizations relating to or required by
Environmental Law and necessary or desirable for the Company's business.
"GAAP" means generally accepted accounting principles.
"LIEN" means any security interest, lien, mortgage, pledge,
hypothecation, encumbrance, Claim, easement or restriction of another Person of
any kind or nature.
"MATERIAL ADVERSE CHANGE" means any development or change
which has, had or would have a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" means any circumstances, state of
facts or matters which has, or would reasonably be expected to have, a material
adverse effect in respect of TSI's or the Company's (as the case may be)
businesses, operations, properties, assets, condition (financial or otherwise),
or results of operations.
"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.
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"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 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.
"SUBSTANTIVE INVOLVEMENT" means involvement with a TSI
Entity's non-public material and confidential business plan(s), strategies,
methodologies, processes, budgets, financial statements and/or financial
projections.
12.4 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be delivered by
hand delivery, via facsimile or overnight receipted courier service to: and
shall be deemed to have been duly given when delivered by hand or mailed, first
class certified mail with postage paid or by overnight receipted courier
service:
(a) If to the Sellers or the Company, to:
Mr. Richard D. Small
c/o AHI International Corporation
6400 Schafer Court
Rosemont, IL 60018
Fax No.: 847-318-5000
with a copy to:
Mr. Michael L. Igoe, Jr.
Vedder, Price, Kaufman & Kammholz
222 N. LaSalle Street
Chicago, Illinois 60601
Fax No.: 312-609-5005
or to such other person or address as the Sellers or the Company shall furnish
by notice to the Purchaser in writing.
(b) If to the Purchaser to:
Travel Services International, Inc.
220 Congress Park Drive
Delray Beach, Florida 33445
Attention: Jill M. Vales
Senior Vice President and
Chief Financial Officer
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Fax No.: (561) 266-0872
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
Fax No.: (561) 266-0872
with a further copy to:
Greenberg Traurig, P.A.
515 E. Las Olas Boulevard, Suite 1500
Fort Lauderdale, Florida 33301
Attn: Daniel H. Aronson, Esq.
Fax No.: (954) 765-1477
or to such other person or address as the Purchaser shall furnish by notice to
Sellers in writing or Sellers shall furnish by notice to Purchaser in writing.
Notice shall be deemed to have been duly given when the party being noticed has
received delivery of the notice, except that notice effected via facsimile shall
be deemed given upon confirmation of the transmission of the facsimile.
12.5 EXHIBITS AND SCHEDULES. The Exhibits and Schedules referred to in
this Agreement are attached hereto and incorporated herein by this reference.
Disclosure of a specific item in any one Schedule shall be deemed restricted
only to the Section of this Agreement to which such disclosure relates, except
where such disclosure gives the party to whom such disclosure is made fair and
reasonable notice of the matter set forth in the disclosure, and to the extent
that, there is an explicit cross-reference in such Schedule to another Schedule.
12.6 WAIVER OF COMPLIANCE; CONSENTS. Any failure of any party hereto to
comply with any obligation, covenant, agreement or condition herein may be
waived in writing by the other parties hereto, but such waiver or failure to
insist upon strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure. Whenever this Agreement requires or permits consent
by or on behalf of any party hereto, such consent shall be given in writing.
12.7 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto without the prior written consent of the other parties,
except that the Purchaser may assign its rights, interests and obligations
hereunder to any wholly-owned Subsidiary.
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12.8 GOVERNING LAW. The Agreement shall be governed by the internal
laws of the State of Illinois as to all matters, including but not limited to
matters of validity, construction, effect and performance.
12.9 CONSENT TO JURISDICTION; SERVICE OF PROCESS. The Company, each of
the Sellers, and the Purchaser hereby irrevocably submit to the jurisdiction of
the state or federal courts located in Cook County, Illinois in connection with
any suit, action or other proceeding arising out of or relating to this
Agreement and the transactions contemplated hereby, and hereby agree not to
assert, by way of motion, as a defense, or otherwise in any such suit, action or
proceeding that the suit, action or proceeding is brought in an inconvenient
forum, that the venue of the suit, action or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced by such courts.
12.10 INJUNCTIVE RELIEF. The parties hereto agree that in the event of
a breach of any provision of this Agreement, the aggrieved party or parties may
be without an adequate remedy at law. The parties therefore agree that in the
event of a breach of any provision of this Agreement, the aggrieved party or
parties may elect to institute and prosecute proceedings in any court of
competent jurisdiction to enforce specific performance or to enjoin the
continuing breach of such provision, as well as to obtain damages for breach of
this Agreement. By seeking or obtaining any such relief, the aggrieved party
shall not be precluded from seeking or obtaining any other relief to which it
may be entitled.
12.11 HEADINGS. The article, section and other headings contained in
this Agreement are for reference purposes only and do not affect in any way the
meaning or interpretation of this Agreement (or any provision hereof).
12.12 PRONOUNS AND PLURALS. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine, or neuter forms, and the singular forms of nouns, pronouns, and verbs
include the plural and vice versa.
12.13 CONSTRUCTION. The parties acknowledge that each party has
reviewed and revised this Agreement and that the normal rule of construction to
the effect that any ambiguities are to be resolved against the drafting party
shall not be employed in the interpretation of this Agreement.
12.14 BINDING EFFECT. This Agreement shall not be construed so as to
confer any right or benefit upon any Person other than the signatories to this
Agreement and each of their respective successors and permitted assigns.
12.15 DELAYS OR OMISSIONS. No delay or omission to exercise any right,
power or remedy accruing to any party hereto, upon any breach or default of any
other party under this Agreement, shall impair any such right, power or remedy
of such party nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach
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or default under this Agreement, or any waiver on the part of any party of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing. All
remedies, either under this Agreement or by law or otherwise afforded to any
party, shall be cumulative and not alternative except as expressly provided
herein.
12.16 SEVERABILITY. Unless otherwise provided herein, if any provision
of this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
12.17 EXPENSES. Except as otherwise expressly provided in this
Agreement, all fees, costs and expenses (including, without limitation, legal,
auditing and accounting fees, costs and expenses) incurred in connection with
considering, pursuing, negotiating, documenting or consummating this Agreement
and the transactions contemplated hereby shall be borne and paid solely by the
party incurring such fees, costs and expenses; provided, however, that in the
case of all of the Company's and Sellers' fees, costs and expenses incurred
hereunder, the Sellers shall be solely responsible.
12.18 ATTORNEYS' FEES. If any party to this Agreement seeks to enforce
the terms and provisions of this Agreement, then the prevailing party in such
action shall be entitled to recover all costs in connection with such action,
including without limitation reasonable attorneys' fees, expenses and costs
incurred in attempting to resolve the dispute and with respect to trials,
appeals and collection.
12.19 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, which may be delivered by facsimile, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
* * * *
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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.
D/B/A THE TRAVEL COMPANY
By: /s/ JILL M. VALES
-------------------------------
Name: Jill M. Vales
Title: Senior Vice President and Chief Financial
Officer
COMPANY:
AHI INTERNATIONAL CORPORATION
By: /s/ RICHARD D. SMALL
-------------------------------
Name: Richard D. Small
Title: President
SELLERS:
/s/ RICHARD D. SMALL
-----------------------------------
RICHARD D. SMALL
/s/ ARLENE P. SMALL
-----------------------------------
ARLENE P. SMALL
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EXHIBIT 2
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AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
- ------------------------------------------------ --------------------------------
JILL M. VALES SPENCER FRAZIER DOUG DELIETO CHRISTINAHOWARD
CHIEF FINANCIAL OFFICER CHIEF MARKETING OFFICER
(FINANCIAL INFO.) (TRAVEL MEDIA INFO.) (GENERAL INFO.) (ANALYST INFO.)
(561) 266-0860 (561) 266-6180 (212) 661-8030
</TABLE>
THE TRAVEL COMPANY TO ACQUIRE ALUMNI MARKETER
AND ENTER PACKAGED VACATION SEGMENT
Delray Beach, Fl, January 11,1999 -- Travel Services International, Inc., dba
The Travel Company (Nasdaq: TRVL), a leading specialized distributor of leisure
travel services, today announced that it has signed a definitive agreement to
acquire all of the outstanding capital stock of AHI INTERNATIONAL CORPORATION of
Rosemont, Illinois. The purchase price of $25.6 million will be paid in cash and
shares of common stock of the Company. The acquisition, which will be accounted
for under the purchase method of accounting, is expected to close within thirty
days subject to customary closing conditions and is expected to be accretive to
earnings in 1999.
Founded by Richard and Arlene Small in 1962 as Alumni Holidays, AHI develops,
markets and sells packaged European vacations to individuals that are members of
over 200 university and college alumni associations throughout North America,
utilizing sophisticated direct marketing techniques. AHI's tours typically
combine air, hotel, and European river cruises in packages ranging in length
from 7 days to 15 days. AHI is also a longstanding provider of alumni tour
packages to college bowl games such as the Rose Bowl. The Small family will
continue to manage the business of AHI as a wholly-owned subsidiary of The
Travel Company. Gross sales in 1998 were approximately $61 million.
Joseph Vittoria, Chairman and Chief Executive Officer of The Travel Company,
stated: "We are extremely pleased to add AHI to our portfolio of specialized
distributors of leisure travel. AHI is a well-established, well-managed,
profitable niche marketer with a demonstrated track record of internal growth.
They serve a very large, yet focused market - over 40 million alumni - with
excellent demographics and a high propensity for leisure travel. AHI also
possesses a great deal of expertise in direct marketing, mailing over 16 million
brochures annually, which should benefit our other direct-to-consumer business
units."
Mel Robinson, Vice President of Corporate Development, added: "After evaluating
dozens of acquisition candidates in this segment since our 1997 IPO, we feel
that AHI represents an excellent
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choice as our very first acquisition in the packaged vacation segment. Under the
capable leadership of two generations of the Small family, we expect AHI to
continue growing not only with its core packaged vacation products, but also
with new products and services that should further strengthen AHI's ties to
alumni associations and their members."
##################
STATEMENTS CONTAINED IN THIS PRESS RELEASE REGARDING FUTURE FINANCIAL AND
OPERATING PERFORMANCE AND RESULTS, SALES, REVENUE, MARKETING PLANS AND
INITIATIVES, ACQUISITIONS, OPERATIONAL INITIATIVES, TECHNOLOGY, THE ECONOMY AND
OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND ACTUAL
RESULTS COULD DIFFER SIGNIFICANTLY FROM ANY RESULTS ANTICIPATED IN ANY FORWARD
LOOKING STATEMENT. THE FORWARD LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS
AND UNCERTAINTIES TO THE COMPANY, INCLUDING BUT NOT LIMITED TO THE RISKS
ASSOCIATED WITH: SUCCESSFUL DEPLOYMENT AND INTEGRATION OF SYSTEMS, FACTORS
AFFECTING INTERNAL GROWTH AND MANAGEMENT OF GROWTH, THE COMPANY'S ACQUISITION
STRATEGY AND AVAILABILITY OF ADEQUATE FINANCING, THE COMPANY'S ABILITY TO
IMPLEMENT ITS STRATEGIC TECHNOLOGY, MARKETING AND OPERATIONAL INITIATIVES, THE
TRAVEL INDUSTRY, THE COST AND AVAILABILITY OF ADVERTISING, SEASONALITY,
QUARTERLY FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS, DEPENDENCE ON TECHNOLOGY
AND TRAVEL PROVIDERS, AND OTHER FACTORS, INCLUDING THOSE DISCUSSED IN THE
COMPANY'S FORM 10-K AND IN THE COMPANY'S PROSPECTUS DATED JULY 15, 1998
(INCLUDED IN A FORM S-1 REGISTRATION STATEMENT) ON FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION.
2
EXHIBIT 3
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AT THE COMPANY AT THE FINANCIAL RELATIONS BOARD
- ------------------------------------------------ --------------------------------
JILL M. VALES SPENCER FRAZIER DOUG DELIETO CHRISTINAHOWARD
CHIEF FINANCIAL OFFICER CHIEF MARKETING OFFICER
(FINANCIAL INFO.) (TRAVEL MEDIA INFO.) (GENERAL INFO.) (ANALYST INFO.)
(561) 266-0860 (212) 661-8030
</TABLE>
THE TRAVEL COMPANY ACQUIRES WWW.CRUISES.COM
AND INCENTIVE TRAVEL COMPANY
DELRAY BEACH, FL -- FEBRUARY 2, 1999 -- Travel Services International, Inc., dba
The Travel Company (Nasdaq: TRVL), a leading specialized distributor of leisure
travel services, today announced that it has completed the acquisition of all of
the outstanding capital stock of LIFESTYLE VACATION INCENTIVES, INC. ("LVI") and
All Seasons Smart Traveler, Inc., an affiliated company, of Delray Beach,
Florida. The aggregate purchase price of $15.5 million, including a contingent
payment based upon the 1999 earnings of the acquired companies, will be paid in
cash and shares of common stock of the Company. The acquisition will be
accounted for under the purchase method of accounting and is expected to be
accretive to earnings in 1999.
LVI was founded in 1989 and operates in the travel incentive and promotion
industry. Its proprietary travel programs provide structured discounts to
consumers for various forms of leisure travel, including airline tickets, cruise
vacations, rental cars, hotel rooms, and vacation packages. Hundreds of
businesses, universities and organizations are clients of LVI, including
Samsonite, AT&T, General Motors, Staples, First USA Bank and the University of
Florida. Clients utilize LVI's incentive travel programs to promote the sale of
goods, services, memberships, loans, credit cards, and dozens of other
applications. LVI's Website, WWW.LIFESTYLEVACATIONS.COM, describes a sampling of
some of these applications. LVI also provides fulfillment for third-party travel
clubs such as the Samsonite Travel Club. Gross sales in 1998 were approximately
$16 million.
In addition to marketing through businesses and other organizations, LVI also
markets cruises directly to consumers over the Internet through its Website,
WWW.CRUISES.COM. The site is very productive at generating cruise leads, despite
the fact that LVI has never advertised it externally. The marketing of cruises
to consumers over the Internet is a rapidly growing activity for The Travel
Company, which maintains several Websites including its flagship site,
WWW.TRAVELCO.COM.
Joseph Vittoria, Chairman and Chief Executive Officer of The Travel Company,
commented: "As we have stated before, the current acquisition strategy of The
Travel Company is to acquire businesses that operate within new or unique
distribution niches in the leisure travel industry, yet are complementary to our
existing business units. Lifestyle Vacation Incentives is an excellent
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example of this strategy: the company markets to consumers through the
promotional activities of businesses and organizations, which is a somewhat
different distribution niche for us. Many of LVI's products can also be
cross-marketed through our other business units, and LVI will also be able to
draw upon our technology and other resources to develop new programs for their
existing customers. LVI is also experienced in developing and operating consumer
travel clubs. In addition, their productive cruise Website, WWW.CRUISES.COM,
should further enhance our position as the largest cruise distributor in the
world."
The Travel Company is a leading specialized distributor of cruise vacations,
domestic and international airline tickets, and European auto rentals, and is a
leading provider of electronic hotel reservation services. The Company provides
travel agents and travelers a unique combination of specialized expertise, the
ability to compare options from multiple travel providers and competitive
prices.
##################
STATEMENTS CONTAINED IN THIS PRESS RELEASE REGARDING FUTURE FINANCIAL AND
OPERATING PERFORMANCE AND RESULTS, SALES, REVENUE, MARKETING PLANS AND
INITIATIVES, ACQUISITIONS, OPERATIONAL INITIATIVES, TECHNOLOGY, THE ECONOMY AND
OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS ARE FORWARD LOOKING STATEMENTS.
PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS, AND ACTUAL
RESULTS COULD DIFFER SIGNIFICANTLY FROM ANY RESULTS ANTICIPATED IN ANY FORWARD
LOOKING STATEMENT. THE FORWARD LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS
AND UNCERTAINTIES TO THE COMPANY, INCLUDING BUT NOT LIMITED TO THE RISKS
ASSOCIATED WITH: SUCCESSFUL DEPLOYMENT AND INTEGRATION OF SYSTEMS, FACTORS
AFFECTING INTERNAL GROWTH AND MANAGEMENT OF GROWTH, THE COMPANY'S ACQUISITION
STRATEGY AND AVAILABILITY OF ADEQUATE FINANCING, THE COMPANY'S ABILITY TO
IMPLEMENT ITS STRATEGIC TECHNOLOGY, MARKETING AND OPERATIONAL INITIATIVES, THE
TRAVEL INDUSTRY, THE COST AND AVAILABILITY OF ADVERTISING, SEASONALITY,
QUARTERLY FLUCTUATIONS AND GENERAL ECONOMIC CONDITIONS, DEPENDENCE ON TECHNOLOGY
AND TRAVEL PROVIDERS, AND OTHER FACTORS, INCLUDING THOSE DISCUSSED IN THE
COMPANY'S FORM 10-K AND IN THE COMPANY'S PROSPECTUS DATED JULY 15, 1998
(INCLUDED IN A FORM S-1 REGISTRATION STATEMENT) ON FILE WITH THE SECURITIES AND
EXCHANGE COMMISSION.
2
