<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the quarterly period ended August 31, 1998 or
---------------
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from __________ to
___________
COMMISSION FILE NUMBER 000-22551
CAREY INTERNATIONAL, INC.
-------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 52-1171965
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
4530 WISCONSIN AVENUE, NW, SUITE 500, WASHINGTON, DC 20016
----------------------------------------------------------
(Address of principal executive offices, including zip code)
(202) 895-1200
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
------ ------
There were 9,448,834 shares of the registrant's common stock, par value $.01
per share, outstanding at September 26, 1998.
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
INDEX
-----
PART I: FINANCIAL INFORMATION
Item 1: Financial Statements (unaudited)
Consolidated balance sheets as of November 30, 1997 and
August 31, 1998
Consolidated statements of operations for the three and nine
month periods ended August 31, 1997 and 1998
Consolidated statements of cash flows for the nine
month periods ended August 31, 1997 and 1998
Notes to consolidated financial statements
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II: OTHER INFORMATION
Item 2: Changes in Securities
Item 4: Submission of Matters to a Vote of Security Holders
Item 5: Other Information
Item 6: Exhibits and Reports on Form 8-K
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November 30, August 31,
1997 1998
------------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 5,333,402 $ 31,497,934
Accounts receivable, net 15,932,426 16,142,947
Notes receivable from contracts, current portion 670,266 913,651
Prepaid expenses and other current assets 1,435,176 1,709,604
------------- -------------
Total current assets 23,371,270 50,264,136
Fixed assets, net 9,278,319 9,095,343
Notes receivable from contracts, excluding current portion 8,164,337 9,349,879
Franchise rights, net 5,112,348 10,656,665
Trade name, trademark and contract rights, net 6,493,693 6,353,220
Goodwill and other intangible assets, net 30,991,450 35,001,603
Deferred tax assets 501,545 480,379
Deposits and other assets 1,481,252 1,465,049
------------- -------------
Total assets $85,394,214 $122,666,274
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of notes payable $ 996,575 $ 1,020,587
Current portion of capital leases 321,965 400,948
Accounts payable and accrued expenses 17,054,081 16,832,139
------------- -------------
Total current liabilities 18,372,621 18,253,674
Notes payable, excluding current portion 2,792,022 1,769,689
Capital leases, excluding current portion 1,339,666 830,393
Deferred rent and other long-term liabilities 1,193,577 264,974
Deferred revenue 13,396,104 14,623,264
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value; 20,000,000 authorized
shares, and 7,630,007 and 9,448,834 issued and
outstanding shares in 1997 and 1998, respectively 76,300 94,488
Additional paid-in capital 45,173,336 78,730,451
Retained earnings 3,050,588 8,099,341
------------- -------------
Total stockholders' equity 48,300,224 86,924,280
------------- -------------
Total liabilities and stockholders' equity $85,394,214 $122,666,274
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
1
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended August 31, Nine Months ended August 31,
------------------------------- -------------------------------
1997 1998 1997 1998
------------- ------------- ------------- -------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Revenue, net $22,932,463 $30,346,811 $57,217,364 $84,797,598
Cost of revenue 15,358,731 20,300,634 38,022,538 57,160,077
------------- ------------- ------------- --------------
Gross profit 7,573,732 10,046,177 19,194,826 27,637,521
Selling, general and administrative
expense 5,551,586 6,859,956 14,271,544 19,628,479
------------- ------------- ------------- -------------
Operating income 2,022,146 3,186,221 4,923,282 8,009,042
Other income (expense):
Interest expense (169,919) (84,502) (1,022,554) (328,257)
Interest income 111,142 452,356 170,397 631,358
Gain on sales of fixed assets 38,993 141,993 179,471 220,763
------------- ------------- ------------- -------------
Income before provision for income taxes 2,002,362 3,696,068 4,250,596 8,532,906
Provision for income taxes 822,640 1,509,684 1,696,876 3,541,156
------------- ------------- ------------- -------------
Net income $1,179,722 $2,186,384 $2,553,720 $4,991,750
============= ============= ============= =============
Net income per common share - basic $ 0.16 $ 0.23 $ 0.74 $ 0.60
============= ============= ============= =============
Net income per common share - diluted $ 0.15 $ 0.22 $ 0.50 $ 0.56
Weighted average common shares used in
computing net income per common share-
basic 7,470,332 9,373,230 3,465,667 8,362,096
============= ============= ============= =============
Weighted average common shares used in
computing net income per common share-
diluted 7,908,500 9,948,910 5,416,885 8,894,827
============= ============= ============= =============
Pro forma net income per common share-
basic $ 0.16 $ 0.49
============= =============
Pro forma net income per common share-
diluted $ 0.15 $ 0.50
============= =============
Pro forma weighted average common
shares used in computing net income per
common share - basic 7,525,986 5,184,840
============= =============
Pro forma weighted average common
shares used in computing net income per
common share - diluted 7,910,370 5,474,609
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
CAREY INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended August 31,
------------------------------
1997 1998
------------- -------------
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,553,720 $ 4,991,750
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization of fixed assets 1,444,831 1,875,082
Amortization of intangible assets 900,346 1,301,428
Gain on sales of fixed assets (179,471) (220,763)
Provision for deferred taxes (424,025) 21,166
Change in deferred revenue 860,543 1,227,160
Changes in operating assets and liabilities:
Accounts receivable 1,010,533 306,998
Notes receivable from contracts (1,170,305) (1,428,927)
Prepaid expenses, deposits and other assets (453,038) (275,321)
Accounts payable and accrued expenses (1,675,064) (1,665,273)
Deferred rent and other long-term liabilities (58,165) (1,028,603)
------------- -------------
Net cash provided by operating activities 2,809,905 5,104,697
------------- -------------
Cash flows from investing activities:
Proceeds from sales of fixed assets 1,291,286 1,334,816
Purchases of fixed assets (3,177,135) (2,375,917)
Acquisitions of chauffeured vehicle service companies (7,394,060) (5,151,646)
------------- -------------
Net cash used in investing activities (9,279,909) (6,192,747)
------------- -------------
Cash flows from financing activities:
Principal payments under capital lease obligations (185,574) (529,157)
Payments of notes payable (17,838,591) (2,299,768)
Proceeds from notes payable 450,000 -
Proceeds from issuance of common stock 30,897,290 30,081,507
Common stock dividends (101,857) -
Payments under Recapitalization Plan (4,015,952) -
------------- -------------
Net cash provided by financing activities 9,205,316 27,252,582
------------- -------------
Net increase in cash and cash equivalents 2,735,312 26,164,532
Cash and cash equivalents at beginning of period 2,867,711 5,333,402
------------- -------------
Cash and cash equivalents at end of period $ 5,603,023 $31,497,934
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BACKGROUND AND ORGANIZATION
General
Carey International, Inc. (the "Company") provides services through a
worldwide network of owned and operated companies, licensees and affiliates
serving 420 cities in 65 countries. In addition, the Company licenses the
"Carey" name, and provides central reservations, billing, and sales and
marketing services to its licensees. The Company's worldwide network includes
affiliates in locations in which the Company has neither owned and operated
locations nor licensees. The Company provides central reservations and billing
services to such affiliates.
Acquisitions
The Company makes strategic acquisitions of chauffeured vehicle service
businesses. The chauffeured vehicle service businesses that the Company seeks to
acquire may be in cities in which the Company has owned and operated service
providers, licensees operating under the Carey name and trademark, and
affiliates of the Company. In fiscal 1997 the Company acquired chauffeured
vehicle service companies in New York, Los Angeles and Indianapolis. In the
first nine months of 1998, the Companies acquired six chauffeured vehicle
service companies in Boston, Chicago, South Florida and London. (See Note 3)
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements and these notes do not
include all of the disclosures included in the Company's audited consolidated
financial statements for the years ended November 30, 1996 and 1997, and should
be read in conjunction with those financial statements. For further information,
such as the significant accounting policies followed by the Company, refer to
the notes to the Company's audited consolidated financial statements.
The consolidated financial statements included herein have not been audited.
However, in the opinion of management, the consolidated financial statements
reflect all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results for the periods reflected. The
results for these periods are not necessarily indicative of the results for the
full fiscal year.
4
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Pro forma net income per common share
Consistent with Staff Accounting Bulletin IB-2, the Company has recalculated
historical weighted average common shares outstanding and net income per common
share to give effect to a recapitalization effected by the Company during fiscal
1997. The recalculated pro forma net income per common share is determined by
(i) adjusting net income available to common shareholders to reflect the
elimination in interest expense, net of taxes, resulting from the conversion of
$4,867,546 of subordinated debt into Common Stock and (ii) increasing the
weighted average common shares outstanding by the number of common shares
resulting from the conversion of such debt, as well as the partial conversion of
the Series A Preferred Stock.
3. ACQUISITIONS
In the periods ended August 31, 1997 and 1998, the following acquisition
activity was recorded by the Company:
<TABLE>
<CAPTION>
Nine months ended August 31,
-----------------------------
1997 1998
------------- -------------
<S> <C> <C>
Fair value of net assets and liabilities acquired:
Receivables and other assets $ 159,575 $ 517,519
Notes receivable from contracts 6,647,766 -
Prepaid expenses and other current assets - 33,762
Fixed assets 1,498,444 948,400
Goodwill and other intangibles assets 21,046,816 4,888,895
Franchise rights - 5,772,562
Accounts payable and accrued expenses (4,353,898) (1,500,839)
Notes payable (8,524,850) (1,301,447)
Deferred rent and other long-term liabilities - (100,000)
Capital leases - (613,410)
Deferred revenue (6,679,793) -
------------- -------------
Fair value of assets and liabilities acquired 9,794,060 8,645,442
Issuance of stock (228,571 and 170,271 shares of
common stock, 1997 and 1998, respectively) 2,400,000 3,493,796
------------- -------------
Cash payments $ 7,394,060 $ 5,151,646
============= =============
</TABLE>
4. COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company is subject to various legal
actions which are not material to the financial condition, results of operations
or cash flows of the Company.
One of the corporations acquired by the Company has been examined by the
Internal Revenue
5
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
Service ("IRS") for periods prior to the acquisition date. The IRS has notified
the acquired corporation of challenges to its methods of accounting and the tax
treatment of certain items in those tax returns. The Company believes that any
assessments ultimately sustainable by the IRS in this matter would be offset by
net operating loss carry forwards (NOLs) of the acquired corporation and
indemnification payments under the acquisition agreements, and would not have a
material effect on the financial position, results of operations or cash flows
of the Company.
5. NET INCOME PER COMMON SHARE
In 1998, the Company adopted SFAS No. 128, Earnings Per Share. Basic net
income per common share has been computed by dividing net income by the
weighted-average number of common shares outstanding during the period. Diluted
net income per common share has been computed by dividing net income by the
weighted average number of common shares outstanding plus an assumed increase in
common shares outstanding for dilutive securities. Dilutive securities consist
of convertible securities which are dilutive, preferred stock, and options and
warrants to acquire Common Stock for a specified price and for which the
dilutive effect is measured using the treasury method. Net income per common
share amounts for all periods presented have been restated to conform to SFAS
No. 128.
Net income per common share, on a historical basis, is as follows:
6
<PAGE>
CAREY INTERNATIONAL, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS-(Continued)
<TABLE>
<CAPTION>
Three months ended Nine months ended
August 31, August 31,
------------------------ --------------------------
1997 1998 1997 1998
----------- ----------- ----------- -------------
<S> <C> <C> <C> <C>
Net income $1,179,722 $2,186,384 $2,553,720 $4,991,750
Effect of conversion of subordinated
debt - - 176,436 -
----------- ----------- ----------- -------------
Net income plus effect of conversion $1,179,722 $2,186,384 $2,730,156 $4,991,750
=========== =========== =========== =============
Weighted average common shares
outstanding - basic 7,470,332 9,373,230 3,465,667 8,362,096
Dilutive effect of:
Stock options 328,494 423,369 265,126 388,616
Warrants 77,665 152,311 69,302 144,115
Convertible preferred stock:
Series B preferred stock 14,430 - 445,738 -
Series F preferred stock 2,935 - 90,674 -
Series G preferred stock 14,644 - 452,370 -
Effect of conversion of subordinated
debt - - 627,578 -
----------- ----------- ----------- -------------
Weighted average common shares
outstanding - diluted 7,908,500 9,948,910 5,416,885 8,894,827
=========== =========== =========== =============
Net income per share - basic $ 0.16 $ 0.23 $0.74 $ 0.60
=========== =========== =========== =============
Net income per share - diluted $ 0.15 $ 0.22 $0.50 $ 0.56
=========== =========== =========== =============
</TABLE>
6. SUBSEQUENT EVENTS
The Company completed the acquisition of American Airport Limousine
Corporation ("American Limousine") in Chicago, Illinois on October 2, 1998.
American Limousine generated 1997 sales of approximately $20 million.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31,998 (the "1998 PERIOD") COMPARED TO THREE MONTHS
ENDED AUGUST 31, 1997 (the "1997 PERIOD")
Revenue, Net. Revenue, net increased $7.4 million or 32.3% from
$22.9 million in the 1997 Period to $30.3 million in the 1998 Period. Of the
increase, $3.9 million represented internal growth resulting from expanded use
of the Carey network, including an increase in business from corporate travel
customers and business travel arrangers. The remaining $3.5 million of the
increase was due to the revenues from seven acquisitions, which were not fully
included in the 1997 Period.
Cost of Revenue. Cost of revenue increased $4.9 million or 32.2% from
$15.4 million in the 1997 Period to $20.3 million in the 1998 Period. The
increase was primarily attributable to higher costs due to increased business
levels and to increased cost associated with businesses acquired by Carey
subsequent to the 1997 Period. Cost of revenue decreased as a percentage of
revenue, net from 67.0% in the 1997 Period to 66.9% in the 1998 Period.
Selling, General and Administrative Expense. Selling, general and
administrative expense increased $1.3 million or 23.6% from $5.6 million in the
1997 Period to $6.9 million in the 1998 Period. The increase largely was due to
the costs associated with higher business levels and costs of acquired
businesses including personnel costs, administrative expenses and marketing
expenses, and an increase in amortization of intangibles. Selling, general and
administrative expense decreased as a percentage of revenue, net from 24.2% in
the 1997 Period to 22.6% in the 1998 Period as a result of an increase in
revenue, net without a corresponding increase in administrative costs.
Interest Expense. Interest expense decreased approximately $85,000 or 50.3%
from approximately $170,000 in the 1997 Period to approximately $85,000 in the
1998 Period, primarily as a result of the use of proceeds from the Company's
sale of common stock to repay outstanding debt and the conversion of
subordinated and certain other debt.
Provision for Income Taxes. The provision for income taxes increased
approximately $687,000 from approximately $823,000 in the 1997 Period to
$1.5 million in the 1998 Period. The increase primarily was a result of the
increase in pre-tax income of the Company from $2.0 million in the 1997 Period
to $3.7 million in the 1998 Period.
Net Income. As a result of the foregoing, the Company's net income increased
$1.0 million or 85.3% from $1.2 million in the 1997 Period to $2.2 million in
the 1998 Period.
8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
NINE MONTHS ENDED AUGUST 31, 1998 (the "1998 NINE-MONTH PERIOD") COMPARED TO
NINE MONTHS ENDED AUGUST 31, 1997 (the "1997 NINE-MONTH PERIOD")
Revenue, Net. Revenue, net increased $27.6 million or 48.2% from $57.2
million in the 1997 Nine-Month Period to $84.8 million in the 1998 Nine-Month
Period. Of the increase, $10.2 million represented internal growth resulting
from expanded use of the Carey network, including an increase in business from
corporate travel customers and business travel arrangers. The remaining $17.4
million was due to revenues of six acquisitions, which were not fully included
in the 1997 Nine-Month Period.
Cost of Revenue. Cost of revenue increased $19.1 million or 50.3% from $38.0
million in the 1997 Nine-Month Period to $57.2 million in the 1998 Nine-Month
Period. The increase was primarily attributable to higher costs due to increased
business levels and to costs of revenue of the acquired businesses which were
not included in the 1997 Nine-Month Period. Cost of revenue increased as a
percentage of revenue, net from 66.5% in the 1997 Nine-Month Period to 67.4% in
the 1998 Nine-Month Period, primarily reflecting a greater reliance on
subcontractors or "farmouts," to service higher levels of business during peak
periods as well as increases in costs for businesses acquired during the 1998
Nine-Month that were not fully integrated into the Company's operations.
Nine Selling, General and Administrative Expense. Selling, general and
administrative expense increased $5.4 million or 37.5% from $14.3 million in the
1997 Nine-Month Period to $19.6 million in the 1998 Nine-Month Period. The
increase was largely due to the costs of additional personnel, increased
marketing expenses and increased administrative expense in support of higher
business levels. Selling, general and administrative expense decreased as a
percentage of revenue, net from 24.9% in the 1997 Nine-Month Period to 23.1% in
the 1998 Nine-Month Period as a result of an increase in revenue, net without a
corresponding increase in administrative costs.
Interest Expense. Interest expense decreased approximately $694,000 or 67.9%
from $1.0 million in the 1997 Nine-Month Period to approximately $328,000 in the
1998 Nine-Month Period. The decrease resulted from repayment of the principal
amounts of debt outstanding between the two periods and conversion of
subordinated and certain other debt to Common Stock coincident with the
Company's initial public offering (IPO).
Provision for Income Taxes. The provision for income taxes increased $1.8
million from approximately $1.7 million in the 1997 Nine-Month Period to $3.5
million in the 1998 Nine-Month Period. The increase primarily related to the
increase in pre-tax income of the Company from $4.3 million in the 1997 Nine-
Month Period to $8.5 million in the 1998 Nine-Month Period.
Net Income. As a result of the foregoing, the Company's net income increased
$2.4 million or 95.5% from $2.6 million in the 1997 Nine-Month Period to $5.0
million in the 1998 Nine-Month Period.
9
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS --(CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of funding have been cash flow from operations,
commercial bank credit facilities, notes issued by the Company to sellers of
acquired chauffeured vehicle service companies and, to a lesser extent, the sale
of vehicles obtained from acquired companies. In June 1997, the Company
completed the IPO from which it received net proceeds of $30.8 million and in
May 1998, the Company completed a follow-on offering from which it received net
proceeds of $29.8 million (the "follow-on offering").
The Company's principal uses of cash have been, and will continue to be, the
funding of acquisitions, repayment of debt, and investment in both Carey
International Reservations System (the CIRS) and the Company's automated
operation and information systems.
Net cash provided by operating activities was $2.8 million in the 1997 Nine-
Month Period, compared to net cash provided by operating activities of $5.1
million in the 1998 Nine-Month Period. As of August 31, 1998, the Company's
working capital and current ratio improved to approximately $32.0 million and
2.8, respectively, as a result of the net proceeds from the follow-on offering
and continued cash flow from operations.
Net cash used in investing activities was $9.3 million in the 1997 Nine-Month
Period compared to net cash used in investing activities of $6.2 million in the
1998 Nine-Month Period. Cash was used in the 1998 Nine-Month Period to acquire
operations in London, Boston, Chicago and South Florida. Cash was used in the
1997 Nine-Month Period to acquire an operation in New York. In both Nine-Month
Periods, funds used for acquisitions and capital expenditures were offset in
part by proceeds from the sale of fixed assets, primarily vehicles acquired in
connection with the purchase of chauffeured vehicle service companies.
Net cash provided by financing activities was $9.2 million in the 1997 Nine-
Month Period compared to cash provided by financing activities of $27.3 million
in the 1998 Nine-Month Period. In both Nine-Month Periods, cash was provided by
the proceeds from the sale of common stock in the IPO and the follow-on
offering, while cash was primarily used to retire debt and preferred stock.
The Company completed its acquisition of American Limousine in Chicago,
Illinois on October 2, 1998. Of the purchase price of $20 million, $19 million
is payable in November 1998 and the remainder is payable in January 1999.
On August 15, 1997, the Company entered into a senior credit facility with
three banks consisting of a secured revolving line of credit of $25.0 million
(the "Facility"). As of August 31, 1998, the Company had no amounts outstanding
under the Facility, as a result of the repayment of balances from the net
proceeds of the follow-on offering. The Facility, which may be used for
acquisitions and working capital, is collateralized by the assets of the Company
and its domestic subsidiaries and by a pledge of the stock of its international
subsidiary. The Facility also provides availability for the issuance of letters
of credit. Loans made under the revolving line of credit bear interest at the
Company's option at either the bank's prime lending rate or 2.0% above the LIBOR
rate. Commitment fees equal to 0.375% per annum are payable on the unused
portion of the revolving line of credit. On the second anniversary of the
Facility, outstanding balances under the Facility will convert to a five-year
term loan, which will bear interest either at a fixed rate (subject to
availability) or at a variable LIBOR or prime-based rate with adjustments
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS--(CONTINUED)
determined based on the Company's earnings. The terms of the Facility
(i) prohibit the payment of dividends by the Company, (ii) with certain
exceptions, prevent the Company from incurring or assuming other indebtedness
that is not subordinated to borrowings under the Facility and (iii) require the
Company to comply with certain financial covenants.
The Company is in the process of upgrading the CIRS and subsidiary reservation
systems as well as financial and certain other computer software and hardware
systems. The upgrades are expected to provide significant enhancements to the
Company's customer service and management information capabilities along with
increased opportunities for more efficient processing and distribution of
information. The Company's program of enhancements and upgrades overlaps with
its plans to address the Year 2000 Problem, as described in the following three
paragraphs, and replaces the need for on-going investments in its current
systems that would otherwise occur in the absence of the program for
enhancements and upgrades. The Company is currently committed to or anticipates
spending an aggregate of approximately $6 to $8 million over the next 12 to 18
months on designing, developing and deploying software and replacing or
upgrading computer-related hardware as part of its program of enhancements and
upgrades.
The Year 2000 Problem, which is common to most corporations, concerns the
inability of certain information systems, primarily computer software programs,
to properly recognize and process date sensitive information related to the year
2000 and beyond. While the Company anticipates that the upgrades referred to in
the preceding paragraph will result in systems that are Year 2000 compliant, the
Company has also developed plans to address the possible exposures of its
existing systems to the Year 2000 Problem. Key financial, management information
and operational systems, including equipment with embedded microprocessors,
have been inventoried and assessed, and plans are in place for the necessary
systems modifications or replacements. Progress against these plans is monitored
and reported to senior management on a regular basis. Implementation of
necessary changes to critical systems is expected to be completed during fiscal
1999.
Costs to remedy the Year 2000 Problem for certain key financial and
operational systems are expected to total approximately $130,000, of which
approximately 50% has been spent to date and are charged to expense as incurred.
The Company intends to remedy its Year 2000 Problem in its computer-related
hardware and other commercially available software as part of its overall
systems upgrade discussed above. The Company is also assessing the potential
impact on operations if key third parties are not successful in making their
systems Year 2000 compliant in a timely manner. The effect, if any, on the
Company's results of operations if the Company's customers or its suppliers are
not fully Year 2000 compliant is not reasonably estimable.
The Company's emergency backup and recovery procedures to be followed in the
event of a failure of a business-critical system will be expanded to include
specific procedures for potential Year 2000 issues. Contingency plans to protect
the business from Year 2000-related interruptions are being developed and are
expected to be complete by June 1999.
FACTORS TO BE CONSIDERED
The information set forth above contains forward-looking statements, which
involve risks and uncertainties. The Company's actual results could differ
materially from the results anticipated in these forward-looking statements.
Readers should refer to discussion under "Risk Factors" contained in the
Company's Registration Statement on Form S-4 (No. 333-59599) filed with the
Securities and Exchange Commission concerning certain factors which could cause
the Company's actual results to differ materially from the results anticipated
in the forward-looking statements contained herein.
11
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds:
In the Report on Form 10-Q for the quarterly period ended May 31, 1998 and
its Report on Form 10-K/A for the year ended November 30, 1997, the Company
reported on the use of proceeds from the sale of 3,335,000 shares of its Common
Stock pursuant to the Company's Registration Statement on Form S-1 (File
No. 333-22651), which was declared effective on May 27, 1997, in connection with
the IPO. The Company used all of the remaining net proceeds from the IPO for
acquisitions during the quarter ended August 31, 1998.
Item 5. Other Information
On October 2, 1998, the Company, through a wholly-owned subsidiary, Airport
Limousine Acquisition Corp., acquired certain assets and the business of Airport
Limousine Partners, Inc. d/b/a American Airport Limousine Corporation
("American") and its affiliate, American Limousine Repair Service, Inc., as well
as all outstanding shares of capital stock of American's affiliates, Syd's
Limousine, Inc., Limos "R" Us, Inc. and A.L. Transportation, Inc. (The
"Acquisition"). American and its affiliated companies operated a chauffeured
vehicle services business in Chicago. The Acquisition was effected pursuant to
the terms of the amended and Restated Purchase Agreement dated as of October 2,
1998 among the Company, airport Limousine Acquisition Corp., American, American
Limousine Repair Service, Inc., George Jacobs, Aurbrey Jacobs, Hyma Levin and
Harriet Jacobs. The purchase price in Acquisition was determined by negotiations
between the parties and consisted of $20 million paid in the form of a Note, $19
million of which is due on November 4, 1998 and $1 million of which is due on
January 2, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit:
2 Amended and Restated Purchase Agreement dated as of
October 2, 1998 by and among Carey International, Inc.,
Airport Limousine Acquisition Corp., Airport Limousine
Partners, Inc. d/b/a American Airport Limousine
Corporation, American Limousine Repair Service, Inc.,
George Jacobs, Aubrey Jacobs, Hyma Levin and Harriet
Jacobs.
27 Financial Data Schedule (for the nine months ended August
31, 1997 and 1998)
12
<PAGE>
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.
Carey International, Inc.
Date: October 15, 1998 By: /s/ Vincent A. Wolfington
------------------------------------
Vincent A. Wolfington
Chairman, Chief Executive Officer
Date: October 15, 1998 By: /s/ David H. Haedicke
------------------------------------
David H. Haedicke
Executive Vice President,
Chief Financial Officer
13
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION
2 Amended and Restated Purchase Agreement dated as of October 2, 1998 by
and among Carey International, Inc., Airport Limousine Acquisition
Corp., Airport Limousine Partners, Inc. d/b/a American Airport
Limousine Corporation, American Limousine Repair Service, Inc., George
Jacobs, Aubrey Jacobs, Hyma Levin and Harriet Jacobs.
27 Financial Data Schedule (for the nine months ended August 31, 1997 and
1998)
14
<PAGE>
Exhibit 2
AMENDED AND RESTATED
PURCHASE AGREEMENT
MADE AS OF
OCTOBER 2, 1998
BY AND AMONG
CAREY INTERNATIONAL, INC.
AIRPORT LIMOUSINE ACQUISITION CORP.
AND
AIRPORT LIMOUSINE PARTNERS, INC.
D/B/A AMERICAN AIRPORT LIMOUSINE CORPORATION
AMERICAN LIMOUSINE REPAIR SERVICE, INC.
GEORGE JACOBS
AUBREY JACOBS
HYMA LEVIN
HARRIET JACOBS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTIONS PAGE
- -------- ----
<S> <C>
1. PURCHASE AND SALE OF SHARES........................................ 2
2. PURCHASE AND SALE OF ASSETS........................................ 2
2.1 Purchased Assets.............................................. 2
2.2 Excluded Assets............................................... 4
2.3 Assumption of Certain Liabilities............................. 4
2.4 Liabilities Not Assumed....................................... 4
3. OTHER PROVISIONS RELATING TO THE PURCHASE AND SALE OF THE SHARES
AND PURCHASED ASSETS............................................... 5
3.1 Further Assurances............................................ 5
3.2 Further Consents to Assignment................................ 6
3.3 Employees..................................................... 6
3.4 Operation of Business......................................... 6
4. PURCHASE PRICE..................................................... 7
4.1 Purchase Price................................................ 7
4.2 Escrow Payment................................................ 7
4.3 Tax Adjustment to Escrow Payment.............................. 8
4.4 Purchase Price Allocation..................................... 8
5. CLOSING............................................................ 8
6. TRANSACTIONS AT THE CLOSING........................................ 8
6.1 Closing Deliveries of the Sellers and Stockholders............ 8
6.2 Closing Deliveries of Carey and the Acquisition Sub........... 10
6.3 Joint Deliveries.............................................. 10
6.4 Taxes......................................................... 11
7. CONDITIONS OF CLOSING.............................................. 11
7.1 Conditions to Obligations of Carey and the Acquisition Sub.... 11
7.2 Conditions to Obligations of the Sellers and Stockholders..... 12
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
SECTIONS PAGE
- -------- ----
<S> <C>
8. COVENANTS OF THE STOCKHOLDERS AND SELLERS.......................... 13
8.1 Confidentiality.............................................. 13
8.2 Covenant Not To Compete...................................... 14
8.3 Conduct of the Companies' Business........................... 16
8.4 GJ's Cooperation............................................. 18
8.5 338(h)(10) Election.......................................... 18
8.6 Exclusive Negotiating Rights................................. 18
8.7 Further Assurances........................................... 19
8.8 Access And Information....................................... 19
8.9 Voting....................................................... 19
8.10 Customer Database............................................ 19
8.11 Accounts Receivable.......................................... 19
8.12 Discharge of Liabilities..................................... 19
8.13 Name Change.................................................. 20
9. COVENANTS OF CAREY AND THE ACQUISITION SUB......................... 20
9.1 Confidentiality.............................................. 20
9.2 Discharge of Liabilities..................................... 20
9.3 Retention of Records Litigation Aid.......................... 21
10. JOINT COVENANTS OF THE SELLERS, STOCKHOLDERS, CAREY AND THE
ACQUISITION SUB.................................................... 21
10.1 Best Efforts................................................. 21
10.2 Public Announcements......................................... 21
10.3 Approvals; Consents; Permits; Licenses....................... 21
10.4 Hart-Scott-Rodino Filings.................................... 22
10.5 Notification Of Certain Matters.............................. 22
11. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND
SELLERS............................................................ 22
11.1 Organization, Power, Etc..................................... 22
11.2 Effect of Agreement.......................................... 22
11.3 Capitalization............................................... 23
11.4 Ownership and Title to the Shares............................ 24
11.5 Financial Statements......................................... 24
11.6 Books and Records............................................ 25
11.7 Absence of Undisclosed Liabilities........................... 25
</TABLE>
(ii)
<PAGE>
<TABLE>
<CAPTION>
SECTIONS PAGE
- -------- ----
<S> <C>
11.8 Absence of Adverse Change.................................... 25
11.9 Receivables; Banking Relationships........................... 26
11.10 Tax Matters.................................................. 26
11.11 Tangible Properties and Vehicles............................. 28
11.12 Premises..................................................... 29
11.13 Environmental Matters........................................ 30
11.14 Insurance.................................................... 30
11.15 Outstanding Commitments...................................... 31
11.16 Certain Payments............................................. 31
11.17 Transactions With Related Parties............................ 32
11.18 Licenses, Permits, Authorizations, Etc....................... 32
11.19 Employees.................................................... 33
11.20 Employee Benefits............................................ 33
11.21 Compliance with Law.......................................... 35
11.22 Litigation................................................... 35
11.23 Customer Database and Proprietary Assets..................... 36
11.24 Brokerage.................................................... 37
11.26 Disclosure................................................... 37
11.27 Year 2000.................................................... 37
12. REPRESENTATIONS AND WARRANTIES OF CAREY AND THE ACQUISITION
SUB................................................................ 38
12.1 Organization, Power, Etc..................................... 38
12.2 Authority Relative to Agreement.............................. 38
12.3 Conflicts.................................................... 38
12.4 Litigation................................................... 39
13. INDEMNIFICATION.................................................... 39
13.1 Agreements to Indemnify...................................... 39
13.2 Terms of Indemnity Obligations............................... 40
13.3 Notice of Claim.............................................. 40
13.4 Defense and Settlement of Third-Party Claims................. 41
13.5 Control of Tax Proceedings................................... 41
14. TERMINATION; AMENDMENTS; WAIVERS................................... 42
14.1 Termination.................................................. 42
14.2 Effect of Termination........................................ 43
14.3 Amendment.................................................... 43
</TABLE>
(iii)
<PAGE>
<TABLE>
<CAPTION>
SECTIONS PAGE
- -------- ----
<S> <C>
14.4 Extension; Waiver............................................ 43
15. MISCELLANEOUS...................................................... 43
15.1 Expenses..................................................... 43
15.2 Certain Tax Matters.......................................... 43
15.3 Definitions.................................................. 44
15.4 Entire Agreement............................................. 45
15.5 Binding Effect; Benefit...................................... 45
15.6 Section and Other Headings................................... 45
15.7 Notices...................................................... 45
15.8 Governing Law................................................ 46
15.9 Counterparts................................................. 46
15.10 Severability................................................. 46
</TABLE>
SCHEDULES
- ---------
Schedule 2.2: Excluded Assets
Schedule 2.3: Assumed Liabilities
Schedule 4.1(a): Cash Payment
Schedule 4.4: Allocation of Purchase Price
Schedule 11.2: Effects of Agreement
Schedule 11.4: Ownership and Title to Shares of Capital Stock
Schedule 11.5(a): Financial Statements
Schedule 11.5(b): Pro Forma Earnings
Schedule 11.8: Adverse Changes
Schedule 11.9: Accounts Receivables
Schedule 11.10: Taxes
Schedule 11.11(a): Personal Property
Schedule 11.11(b): Vehicle Descriptions/Vehicle Obligations
Schedule 11.12: Leased Premises
Schedule 11.14: Insurance
Schedule 11.15: Company Contracts
Schedule 11.17: Transactions with Related Parties
Schedule 11.19: Licenses, Permits, Authorizations
Schedule 11.19: Employee List
Schedule 11.20: Employee Benefits/Plans
Schedule 11.22: Litigation
Schedule 11.23(a): Customer Database
Schedule 11.23(b): Proprietary Assets
Schedule 11.23(c): Unlawful Use of Proprietary Assets
(iv)
<PAGE>
Schedule 11.23(d): Telephone Numbers
EXHIBITS
- --------
Exhibit 6.1(a) - Form of Opinion of Counsel to Stockholders and Sellers
Exhibit 6.1(i) - Form of Bill of Sale
Exhibit 6.2(c) - Form of Opinion of Counsel to Carey and the Acquisition Sub
Exhibit 6.3(a) - Form of George Jacobs Executive Management and Non-
Competition Agreement
Exhibit 6.3(b) - Form of Escrow Agreement
Exhibit 6.3(d) - Form of Assignment and Assumption Agreement
(v)
<PAGE>
PURCHASE AGREEMENT
THIS AMENDED AND RESTATED PURCHASE AGREEMENT (the "AGREEMENT") is made as
---------
of the 2nd day of October 1998 by and among Carey International, Inc., a
Delaware corporation ("CAREY"), Airport Limousine Acquisition Corp., a Delaware
-----
corporation and wholly owned subsidiary of Carey (the "ACQUISITION SUB"),
---------------
Airport Limousine Partners, Inc. d/b/a American Airport Limousine Corporation,
an Illinois corporation ("AMERICAN"), American Limousine Repair Service, Inc.
--------
("ALR" and together with American the "SELLERS" and each individually a
- ----- -------
"SELLER"), George Jacobs, a resident of Burr Ridge, Illinois ("GJ"), Aubrey
------ --
Jacobs, Hyma Levin and Harriet Jacobs, (together with GJ, the "STOCKHOLDERS" and
------------
each individually, a "STOCKHOLDER").
-----------
W I T N E S S E T H
WHEREAS, the Stockholders are the sole record and beneficial owners of all
of the issued and outstanding capital stock of the Sellers;
WHEREAS, the Stockholders are the sole record and beneficial owners of all
of the issued and outstanding capital stock of Syd's Limousine, Inc., Limos "R"
Us, Inc. and A.L. Transportation, Inc. (collectively, the "PURCHASED COMPANIES"
-------------------
and each a "PURCHASED COMPANY");
-----------------
WHEREAS, the Stockholders desire to sell and Carey and the Acquisition Sub
desire to purchase the above-referenced shares of capital stock of the Purchased
Companies (the "SHARES");
------
WHEREAS, each Stockholder owns beneficially and of record the number of
Shares set forth opposite such Stockholder's name on Schedule A attached hereto
----------
WHEREAS, American operates a chauffeured car-for-hire business under the
names "Airport Limousine Partners, Inc." and "American Airport Limousine
Corporation," and American, ALR and the Purchased Companies (collectively, the
"COMPANIES" and each individually a "COMPANY") operate ancillary services to the
- ---------- -------
foregoing under the names of "American Limousine Repair Service", "Syd's Limo",
and "Limos "R" Us" (collectively the "BUSINESS");
--------
WHEREAS, Carey and the Acquisition Sub desire to purchase and the Sellers
desire to sell substantially all of their respective assets, including without
limitation, goodwill, customer databases, personal property, books and records
of the Business, company names, contract rights, accounts receivable and
operating cash upon the terms and subject to the conditions set forth herein;
<PAGE>
WHEREAS, Carey, Acquisition Sub (under the name "CLC, Inc."), the Sellers
and the Stockholders entered into a Purchase Agreement dated August 20, 1998
which contemplated a closing on or before September 15, 1998 which would be
deemed to be effective on September 1, 1998;
WHEREAS, due to delay caused by regulatory and other issues, namely
compliance with the notification and waiting period requirements of the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended, the closing has
been delayed until the date hereof; and
WHEREAS, the parties desire to amend and restate said Purchase Agreement in
order to make certain changes occasioned by the delay and to reconfirm their
respective representations, warranties, covenants and obligations;
WHEREAS, Stockholders wish to cooperate with the Acquisition Sub to provide
for a smooth transfer of the Business, Shares and assets of the Sellers to be
conveyed hereunder to Carey and the Acquisition Sub.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth herein and other good and valuable
consideration the receipt and sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. PURCHASE AND SALE OF SHARES.
Upon the terms and subject to the conditions contained herein, the
Stockholders shall sell and transfer, free and clear of all Encumbrances (as
defined below) to Carey and the Acquisition Sub, and Carey and the Acquisition
Sub shall purchase, at the Closing (as defined below), the Shares, with the
intention that the Business shall be transferred to Carey and the Acquisition
Sub as a going concern.
2. PURCHASE AND SALE OF ASSETS.
2.1 PURCHASED ASSETS. At the Closing, each Seller shall sell, convey,
----------------
transfer and deliver to Carey and the Acquisition Sub the following assets (the
"PURCHASED ASSETS") free and clear of all Encumbrances, all of which shall be
----------------
transferred with the intention that the Business shall be transferred to Carey
and the Acquisition Sub as a going concern:
(a) Goodwill, Tradenames, Etc. Such Seller's goodwill, trade names,
-------------------------
trademarks and service marks utilized in the Business at any time since
inception, including without limitation those described in Schedule 11.23(b)
-----------------
attached hereto.
(b) Proprietary Information. Such Seller's Proprietary Assets (as
-----------------------
defined below) relating to the Business including, but not limited to, the
American Limousine
-2-
<PAGE>
Information System ("ALIS"), and any plan or system utilized by such Seller and
----
furnished in the ordinary course of business to Affiliates (as defined below)
and chauffeurs of such Seller regarding standards and methods of operating,
marketing, advertising and public relations, courtesy and appearance standards,
charge card services, reservations services, dispatch and billing services,
insurance programs and equipment standards for conducting a chauffeured vehicle
service business, including improvements in operating procedures and mix of
products and services which may be promoted and sold to customers of such
Seller, including without limitation those listed in Schedule 11.23(b) attached
-----------------
hereto.
(c) General Intangibles. All of such Seller's general intangibles and
--------------------
stockholders' interests therein including but not limited to the following:
documents of title; Certificates of Public Convenience and Necessity and other
operating certificates applied for and/or currently outstanding and issued by
any and all regulatory bodies, including, but not limited to, the U.S.
Department of Transportation, the Interstate Commerce Commission, the City of
Chicago, the City of Burr Ridge, and the State of Illinois; franchise rights;
contracts; leases; licenses; contract rights; deposits; accounts receivable,
prepaid expenses; operating cash; refunds; barter rights; causes of action;
judgments; license rights, including without limitation license rights arising
out of or in connection with the rental of chauffeurs and chauffeur-driven
vehicles or in the rendering of services in the conduct of such Seller's
chauffeured car-for-hire business. A complete description of the documents of
title and certificates referred to herein and the names of the parties holding
such documents of title and certificates and the names and addresses of relevant
regulatory authorities are set forth in Schedule 11.18 attached hereto.
--------------
(d) Customer Database. The customer database relating to the Business
-----------------
including, for each customer, the name, address, telephone number and name of
contact (and/or such information set forth in Section 11.23 below), including
without limitation those set forth in Schedule 11.23 attached hereto.
--------------
(e) Personal Property. All of the furniture, fixtures, equipment, and
-----------------
computer hardware and software (including ALIS) owned by or leased to such
Seller, and any other personal property owned by such Seller or used in the
Business, including without limitation those items listed on Schedule 11.11(a)
-----------------
and Schedule 11.11(b), each attached hereto.
-----------------
(f) Telephone Numbers. All telephone numbers relating to the Business
-----------------
which have been advertised in the Yellow Pages and/or White Pages as well as any
other telephone numbers used for taking reservations for the Business and pager
numbers, including without limitation those set forth in Schedule 11.23(d)
-----------------
attached hereto.
(g) Business Communications. All of each Seller's rights to receive
-----------------------
mail and other communications relating to the operation of the Business.
-3-
<PAGE>
(h) Books and Records. All the books and records of the Sellers
-----------------
except for those books and records designated as Excluded Assets (as defined
below).
2.2 EXCLUDED ASSETS. The following assets shall not be deemed to be
---------------
Purchased Assets and shall be retained by the Sellers: (i) thoses assets set
forth on Schedule 2.2 attached hereto and (ii) all individual and corporate tax
------------
records, financial statements, other records used in connection with the
preparation of any tax return or audit, minute books, stock record books (except
those minute books and stock record books of the Purchased Companies) and any
other financial books and records of the Sellers and Stockholders relating to
the Business which the Sellers may reasonably deem necessary for the conduct of
the Sellers' affairs after the Closing (collectively, the "STOCKHOLDERS' BOOKS")
-------------------
2.3 ASSUMPTION OF CERTAIN LIABILITIES. Upon and subject to the
---------------------------------
conditions set forth in this Agreement, at the Closing, the Acquisition Sub
shall assume and be liable for the obligations arising on or before the Closing
Date under the operating contracts, leases and other arrangements and trade debt
set forth on Schedule 2.3 attached hereto (the "ASSUMED LIABILITIES").
------------ -------------------
Notwithstanding any other provision contained in this Agreement, the Assumed
Liabilities shall not exceed the value of the Total Assets (as defined herein)
as of the Closing Date less $2.0 million (the "LIABILITIES CAP"). For purposes
---------------
of this Section 2.3, "TOTAL ASSETS" shall mean the assets acquired by the
------------
Acquisition Sub pursuant to this Agreement (including the assets held by the
Purchased Companies), valued as follows: (a) cash at 100%; (b) accounts
receivable as actually received during the 180-day period immediately following
the Closing Date; (c) property and equipment as described on the depreciation
schedule forming a part of Schedule 11.11(a) hereto at depreciated book value;
-----------------
and (d) Vehicles (as defined below) at depreciated book value.
2.4 LIABILITIES NOT ASSUMED. The Acquisition Sub shall not assume any
-----------------------
liabilities of the Sellers other than the Assumed Liabilities. With respect to
each Assumed Liability the Acquisition Sub shall not assume and shall not have
or be under any liability or obligation over and above any amount, or after the
occurrence of any limitation or expiration date, of such liability or obligation
stated on Schedule 2.4 attached hereto. Without limiting the generality of the
------------
foregoing and except as otherwise provided on Schedule 2.4, the Assumed
------------
Liabilities shall not include, and the Acquisition Sub shall not assume under
this Agreement, any liabilities whatsoever accruing or arising during the
Operation Period (as defined below) due to the gross negligence or willful
misconduct of any member of the American Group (as defined below) or any of the
following obligations or liabilities of the Sellers:
(a) Transfer Liability. Any tax liability of a Seller or a
------------------
Stockholder (including liability for bulk sales taxes) arising from or incurred
in connection with the purchase and sale provided for by this Agreement.
(b) Obligations to Employees and Others. Any debt, obligation or
-----------------------------------
liability to any employee, agent, officer, director, or security holder of a
Seller or of any entity owned
-4-
<PAGE>
or controlled in whole or in part by a Seller under any employment, sales,
representation, or similar agreement, or under any employee stock option plan,
stock purchase plan, bonus plan or arrangement, pension plan or other benefit
plan, health plan, or other employee welfare plan or arrangement.
(c) Insurance Obligations. Any debt, liability or obligation of a
---------------------
Seller (or costs and expenses in connection therewith) to the extent that such
debt, liability or obligation is actually satisfied or paid on behalf of a
Seller by an insurer or insurers under a policy issued to a Seller.
(d) Violations of Law. Any liability or obligation arising from any
-----------------
violation by a Stockholder or a Seller or by any of a Seller's officers,
employees or agents of any statute (or rule or regulation thereunder) or
executive regulation of the United States or any state or any political
subdivision or agency thereof or any statutes (or rule or regulation thereunder)
or executive, administrative, or quasi-judicial regulation of any foreign
government.
(e) Breach of Representations and Warranties. Any liability or
----------------------------------------
obligation whose existence violates or is contrary to any representation or
warranty of the Stockholders or the Sellers made in this Agreement.
(f) Tax Liability. Any federal and other domestic or foreign income
-------------
tax or other tax liabilities known or unknown, existing, or arising from the
operations of the Business prior to the Closing Date.
(g) Litigation. Any liability or obligation arising prior to the
----------
Closing Date under any claim for workers' compensation, for the commission of
any tort, breach of any legal duty, breach or violation of any contract,
violation or breach of any law, statute, ordinance, rule, regulation, injunction
or decree, arising under any law created for the protection of the environment
or health, or any liability or obligation for any "product liability" or other
claim including, but not limited to, any claims made by the City of Chicago for
any airport fees or taxes or street use charges connected in any manner with any
products, events, or activities produced or taking place prior to the Closing
Date.
(h) Cap. Any liability the existence of which causes the liabilities
---
assumed by the Acquisition Sub hereunder to exceed the Liabilities Cap.
3. OTHER PROVISIONS RELATING TO THE PURCHASE AND SALE OF THE SHARES AND
PURCHASED ASSETS.
3.1 FURTHER ASSURANCES. At any time and from time to time after the
------------------
Closing, at the request of the Acquisition Sub and without further
consideration, each of the Sellers, Purchased Companies and Stockholders (each a
member of the "AMERICAN GROUP" and collectively, the "AMERICAN GROUP") will take
-------------- --------------
whatever action may be necessary or desirable
-5-
<PAGE>
including but not limited to the execution and delivery of such other
instruments of sale, transfer, conveyance, assignment and confirmation as may be
reasonably requested in order to more effectively transfer, convey and assign to
the Acquisition Sub and to confirm the Acquisition Sub's right, title and
interest to the Shares and Purchased Assets free and clear of all Encumbrances
and to carry out the intent and purposes of the transactions contemplated by
this Agreement.
3.2 FURTHER CONSENTS TO ASSIGNMENT. With respect to any licenses,
------------------------------
permits, authorizations, consents or approvals (or effective waivers thereof)
used in the Business or otherwise necessary for the current operations of the
Business, the transfer to the Acquisition Sub of the Shares, any Purchased Asset
or the operation of the Business or the ownership of the Shares or Purchased
Assets by the Acquisition Sub after the Closing which are not obtained by the
American Group or the Acquisition Sub at or prior to the Closing: (i) GJ and/or
the Acquisition Sub will continue to use reasonable efforts to obtain from the
appropriate person or persons the applicable licenses, permits, authorizations,
consents or approvals (or effective waivers thereof); and (ii) if GJ and/or the
Acquisition Sub are unable to obtain any such license, permit, authorization,
consent, approval or waiver, then (a) neither this Agreement nor any instrument
or agreement delivered at the Closing shall constitute or be deemed to be a
contract to assign or an assignment if an attempted assignment without such
license, permit, authorization, consent, approval or waiver would constitute a
breach of such item or create in any person the right or power to cancel or
terminate such item or a cause of action with respect to such item and (b) GJ
will cooperate with the Acquisition Sub in any reasonable arrangement designed
to provide the Acquisition Sub with the benefit of the American Group's rights
under such item, including enforcement of any and all rights of the American
Group against any such person as the Acquisition Sub may reasonably request.
Carey and the Acquisition Sub acknowledge and agree that GJ shall have no
obligation to transfer or cause the transfer any permit that is not
transferable.
3.3 EMPLOYEES. Except as otherwise expressly provided herein, the
---------
Acquisition Sub may, but shall not be obligated to, offer employment on or after
the date hereof to the Employees (as defined below) that the Acquisition Sub in
its sole discretion elects to so employ. Any such offer of employment shall be
on such terms and conditions as the Acquisition Sub in its reasonable discretion
shall determine, without regard to the terms and conditions under which any
employees of the Companies are currently employed. Neither Carey nor the
Acquisition Sub shall have any obligation of any kind or nature for any
compensation or benefits of any kind or nature with respect to the Employees or
consultants of the Companies for any services rendered or otherwise arising on
or prior to the Closing Date or for such obligations arising during the
Operation Period due to the gross negligence or willful misconduct of any member
of the American Group, including, without limitation, any obligation, liability
or cost associated with the termination by the Companies of any such consultant
or Employee.
-6-
<PAGE>
3.4 OPERATION OF BUSINESS. The Companies shall operate the Business for
---------------------
the benefit of the Acquisition Sub during the period (the "OPERATION PERIOD")
----------------
between the Closing Date and the date on which the payment of the Purchase Price
(as defined below) is made and instruments of transfer have been executed and
delivered as set forth herein (the "PAYMENT DATE"). All revenues generated by
------------
the Purchased Companies or on account of the Purchased Assets on and after the
Closing Date shall be the revenues of the Acquisition Sub and shall be or be
paid, as the case may be, to the Acquisition Sub. All expenditures made by the
Sellers in the operation of the Business in the ordinary course consistent with
past practices after the Closing Date shall be chargeable to the Acquisition Sub
and reimbursed to the Sellers. The Sellers shall promptly calculate all such
revenues received and expenditures made during the Operation Period, and shall
make a reasonable accounting and reconciliation thereof to the Acquisition Sub
by no later than October 31, 1998. Within 15 days following the receipt by the
Acquisition Sub of such accounting and reconciliation, the party owing money
(the "OWED AMOUNT") to the other based on such accounting and reconciliation
-----------
shall pay the other in full the Owed Amount plus simple interest at a rate of
seven percent (7%) per annum thereon for the period commencing on the Closing
Date and ending on the date on which the Owed Amount and interest accruing
thereon have been paid in full. During the Operation Period, the Companies
shall not make any bonus or other payments which are not in the ordinary course
of business consistent with past practices and are not necessary for the conduct
of the Business. From and after the Closing Date, the Acquisition Sub shall be
deemed to have been the owner of the Purchased Companies, the Business and all
Purchased Assets notwithstanding the existence of the Operation Period.
4. PURCHASE PRICE.
4.1 PURCHASE PRICE. In consideration for the Shares, Purchased Assets and
--------------
the other covenants and agreements set forth herein, the Acquisition Sub and
Carey, subject to the adjustments set forth herein, shall pay to the
Stockholders and Sellers an aggregate of Twenty Million Dollars
($20,000,000)(the "PURCHASE PRICE") determined as follows:
-------- -----
(a) Cash Payment. At the Closing, Carey and the Acquisition Sub shall
------------
pay to the Sellers and Stockholders Twenty Million Dollars ($20,000,000) by
delivery of a promissory note (the "CASH PAYMENT") payable to GJ, as agent for
------------
the Stockholders and the Sellers. GJ agrees to distribute the Cash Payment to
the Stockholders and Sellers in accordance with Schedule 4.1(a) attached hereto.
---------------
(b) Intentionally Omitted.
---------------------
(c) Intentionally Omitted.
---------------------
4.2 ESCROW PAYMENT. At the Closing or within thirty-five (35) days
--------------
thereof, GJ shall deliver stock certificates in GJ's name evidencing 333,333 of
shares of Carey Common Stock (the "ESCROW PAYMENT") and duly executed stock
--------------
powers therefor to the Escrow Agent
-7-
<PAGE>
(as defined below) and held in accordance with the provisions of the Escrow
Agreement (as defined below).
4.3 TAX ADJUSTMENT TO ESCROW PAYMENT. Despite the operation of Section
--------------------------------
6.4 below, to the extent that the Acquisition Sub shall be found responsible for
any sales, use or other transfer taxes imposed by federal, state or local law
with respect to the sale of the Shares or Purchased Assets to the Acquisition
Sub, the Escrow Payment shall be subject to a negative adjustment equal to one
hundred percent (100%) of the amount of any such taxes (including fees or
penalties not arising from the gross negligence of the Acquisition Sub) paid by
the Acquisition Sub (the "TAX ADJUSTMENT"). The Tax Adjustment shall be in
--------------
addition to and shall not otherwise negate or abridge the rights and remedies of
the Acquisition Sub under Section 13 below or otherwise; provided, however, that
-------- -------
the provisions hereof are not intended to place any additional liability on the
Sellers and Stockholders than as otherwise agreed to herein and; provided,
--------
further, that the sum of any such Tax Adjustment shall be aggregated with any
- -------
indemnity obligations of the Sellers and Stockholders for the purposes of the
Indemnification Cap.
4.4 PURCHASE PRICE ALLOCATION. The Purchase Price shall be allocated
-------------------------
among the Shares and Purchased Assets as reasonably determined by the parties
and set forth in Schedule 4.4 attached hereto, which the parties agree to attach
------------
to this Agreement on or before the Payment Date (as defined below). The parties
agree that any reporting of the Purchase Price or the allocation thereof on any
federal or state tax return shall be consistent with Schedule 4.4.
------------
5. CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall be deemed to have taken place at 12:01 a.m.
-------
Eastern Standard Time on September 1, 1998, (the "CLOSING DATE"), at the
------------
offices of Nutter, McClennen & Fish, LLP, One International Place, Boston, MA
02110 subject to the satisfaction of all of the conditions to Closing set forth
in Section 7 below on or before October 2, 1998 and notwithstanding the fact
that the Purchase Price may be paid and the Bill of Sale and other closing
documents may be delivered on a date on or before October 2, 1998.
6. TRANSACTIONS AT THE CLOSING.
6.1 CLOSING DELIVERIES OF THE SELLERS AND STOCKHOLDERS. At the Closing,
--------------------------------------------------
the Sellers and Stockholders shall deliver to Carey, the Acquisition Sub or the
Escrow Agent, as the case may be, the following:
(a) Opinion of Counsel. The opinion of counsel to the Sellers and
------------------
Stockholders in substantially the form of Exhibit 6.1(a) attached hereto;
--------------
(b) Charter Documents. Copies of the Companies' Certificates of
-----------------
Incorporation, as certified as of a recent date prior to the Closing by the
Secretary of State of
-8-
<PAGE>
Illinois, certificates of good standing and tax status for each Company, also as
certified by the Secretary of State of Illinois or the Department of Revenue of
Illinois, as the case may be; and certificates of foreign qualification with
respect to all states in which a Company, by the conduct of its business, is
required to be so qualified;
(c) Board and Stockholder Resolutions. Copies of resolutions of the
---------------------------------
Board of Directors and Stockholders of each Company, each certified by such
Company's Secretary as being complete and correct as of the Payment Date and
satisfactory in form and substance to the Acquisition Sub, authorizing and
approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby and the acts of the officers and employees of
such Company in carrying out the terms and provisions hereof;
(d) Bring Down Certificates. A certificate of each Seller's President
-----------------------
and each of the Stockholders, satisfactory in form and substance to the
Acquisition Sub, attesting to the continuing truth as of the Payment Date of the
representations and warranties made by them in this Agreement, and stating that
they have performed and complied with all their covenants and obligations which
were required to have been complied with or satisfied prior to the Payment Date;
(e) Consents. Third party consents to assignment where such consents
--------
are required by law or contract to transfer to the Acquisition Sub all of the
Sellers' rights in and to the Purchased Assets without violation of Section
11.18 (without regard to any exceptions thereto in Schedule 11.18 attached
--------------
hereto);
(f) Company Contracts. A copy of each written Company Contract (as
-----------------
defined below);
(g) Customer Database. The Customer Database (as defined below) and
-----------------
accounts receivable billing profile referenced in Section 11.23 below;
(h) Intentionally Omitted.
---------------------
(i) Bills of Sale. Bills of sale in substantially the form of Exhibit
------------- -------
6.1(i) attached hereto;
- ------
(j) Books and Records. All of the books, data, documents, instruments
-----------------
and other records relating to the Business (except for the Stockholders' Books);
(k) Purchased Assets. Physical possession of all Purchased Assets;
----------------
(l) Stock Certificates. Stock certificates and stock powers therefor
------------------
representing one hundred percent (100%) of the Shares; and
-9-
<PAGE>
(m) Other Documents. Such other certificates, documents and
---------------
instruments as Carey, the Acquisition Sub and their counsel shall reasonably
require.
(n) Stock Payment. Within thirty-five (35) days of the Closing Date,
-------------
GJ shall deliver to the Escrow Agent stock certificates in GJ's name evidencing
333,333 share of Carey Common Stock (the Escrow Payment) and stock transfer
powers therefor.
6.2 CLOSING DELIVERIES OF CAREY AND THE ACQUISITION SUB. At the Closing,
---------------------------------------------------
Carey and the Acquisition Sub will deliver to the Sellers and Stockholders the
following:
(a) Intentionally Omitted.
---------------------
(b) Cash Payment. The Cash Payment;
------------
(c) Opinion of Counsel. The opinion of counsel to Carey and the
------------------
Acquisition Sub substantially in the form of Exhibit 6.2(c) attached hereto;
--------------
(d) Stock Option Agreements. Stock option agreements to purchase an
-----------------------
aggregate of fifty thousand (50,000) shares of Carey Common Stock for employees
of the Companies who are designated by GJ (including himself) in writing at
least five (5) days prior to the Payment Date, to receive a non-qualified option
for the number of such shares stipulated by GJ in such written designation,
which agreements shall provide that the non-qualified options provided for
therein are exercisable at Twenty-Two Dollars ($22.00) and vest over a four-year
period; and
(e) Board Resolutions. Copies of resolutions of the Board of
-----------------
Directors of each of Carey and the Acquisition Sub, each certified by such
company's Secretary as being complete and correct as of the Payment Date and
satisfactory in form and substance to the Sellers and Stockholders, authorizing
and approving the execution, delivery and performance of this Agreement and the
transactions contemplated hereby and the acts of the officers and employees of
such company in carrying out the terms and provisions hereof; and
(f) Other Documents. Such other certificates, documents and
---------------
instruments as the Sellers and Stockholders and their counsel shall reasonably
require.
6.3 JOINT DELIVERIES. At the Closing, the Sellers, Stockholders, Carey
----------------
and the Acquisition Sub as applicable, will exchange or cause the delivery of
the following, which in each case shall be duly executed by the parties thereto:
(a) GJ Management Agreement. An executive management and non-
-----------------------
competition agreement between Carey, the Acquisition Sub and GJ substantially in
the form of Exhibit 6.3(a) attached hereto (the "GJ EXECUTIVE MANAGEMENT
-------------- -----------------------
AGREEMENT");
- ---------
-10-
<PAGE>
(b) Escrow Agreement. An escrow agreement among Carey. GJ and U.S.
----------------
Trust Company of New York, as escrow agent (the "ESCROW AGENT" substantially in
------------
the form of Exhibit 6.3(b) attached hereto (the "ESCROW AGREEMENT").
----------------
(c) Intentionally Omitted.
(d) Assignment and Assumption Agreements. Assignment and Assumption
------------------------------------
Agreements between the Acquisition Sub and each Seller substantially in the form
of Exhibit 6.3(d) attached hereto; and
--------------
(h) Further Documents. Such further documents, resolutions,
-----------------
certificates and instruments as any party or its counsel reasonably requests to
facilitate the consummation of the transactions contemplated hereby.
6.4 TAXES. Notwithstanding any other provision herein, the Stockholders
-----
and Sellers shall be responsible for one hundred percent (100%) of all sales,
use and other transfer taxes imposed by federal, state or local law with respect
to the sale of the Shares or the Purchased Assets to the Acquisition Sub.
7. CONDITIONS OF CLOSING.
7.1 CONDITIONS TO OBLIGATIONS OF CAREY AND THE ACQUISITION SUB. The
----------------------------------------------------------
obligations of Carey and the Acquisition Sub to consummate the transactions
contemplated by this Agreement are subject to the satisfaction at or prior to
the Closing, or waiver by Carey and the Acquisition Sub in writing, in whole or
in part, of each of the following conditions:
(a) Representations and Warranties. All of the representations and
------------------------------
warranties of the Sellers and Stockholders in Section 11 of this Agreement
(considered collectively) and each of those representations and warranties
(considered individually), must have been accurate in all material respects as
of the date of this Agreement and must be accurate in all material respects as
of the Payment Date, as if made on the Payment Date, and the Stockholders shall
have caused the Companies to have delivered to Carey all of the schedules and
exhibits attendant to this Agreement. In the event that any schedules to this
Agreement are not delivered to Carey in connection with the execution of this
Agreement, such schedules must be delivered to Carey at least five (5) business
days before the Payment Date and must be satisfactory to Carey in its sole
satisfaction. The Sellers and Stockholders acknowledge and agree that in the
event that any such schedule is not satisfactory to Carey in its sole
discretion, Carey may seek an appropriate amendment of this Agreement.
(b) Covenants and Agreements. All of the covenants and agreements
------------------------
that the Sellers and Stockholders are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered collectively),
and each of these covenants and
-11-
<PAGE>
obligations (considered individually), must have been duly performed and
complied with in all material respects.
(c) Finalization of Documents; Execution and Delivery of Documents.
--------------------------------------------------------------
The Sellers, Stockholders, Carey and the Acquisition Sub shall have agreed to
the terms and conditions of those documents referenced in Sections 6.1(i),
6.3(a), 6.3(b), and 6.3(d) above; and the Sellers and Stockholders shall have
executed and delivered to Carey and the Acquisition Sub, or caused the execution
and delivery of, all documents, certificates, instruments and items referenced
in Sections 6.1 and 6.3 above, including those referenced in the preceding
clause.
(d) Consents. All approvals, consents, permits or licenses from any
--------
federal, state or local governmental agency or body required in connection with
the consummation of the transactions contemplated hereby shall have been duly
obtained to the extent that such approvals, consents, permits or licenses can be
legally obtained prior to Closing, including, but not limited to, the approval
of any regulatory authority of the transfer to Carey and the Acquisition Sub of
control of each of the Companies' interstate and intrastate common carrier
rights, if any.
(e) Injunctions. No preliminary or permanent injunctive or other
----------
order shall have been issued by any federal or state regulatory body, agency or
court prohibiting the consummation of the transactions contemplated hereby; no
governmental agency or body shall have instituted or notified any party of its
intention to institute or threaten to institute any suit, action, or legal or
administrative proceeding to restrain, enjoin or otherwise question the validity
or legality of the transactions contemplated by this Agreement, and no order or
decree so restraining or enjoining such transactions shall be in effect; and no
other consent or approval required for the consummation of the transactions
contemplated hereby by any third party shall not have been obtained and be duly
effective.
(f) Intentionally Omitted.
---------------------
(g) Board Approval. This Purchase Agreement shall have been approved
--------------
by the Board of Directors of Carey.
(h) Hart-Scott-Rodino Waiting Period. The waiting period for all
--------------------------------
filings made under the Hart-Scott-Rodino Act of 1976, as amended (the "H-S-R
-----
ACT") in connection with this Agreement and the transactions contemplated hereby
shall have passed without objection, or any such objections shall have been
resolved.
7.2 CONDITIONS TO OBLIGATIONS OF THE SELLERS AND STOCKHOLDERS. The
---------------------------------------------------------
obligations of the Sellers and Stockholders to consummate the transactions
contemplated by
-12-
<PAGE>
this Agreement are subject to the satisfaction at or prior to the Closing, or
waiver by such parties in writing, in whole or in part, of each of the following
conditions:
(a) Representations and Warranties. All of the representations and
------------------------------
warranties in Section 12 of this Agreement (considered collectively), and each
of those representations and warranties (considered individually), must have
been accurate in all material respects as of the date of this Agreement, and
must be accurate in all material respects as of the Payment Date, as if made on
the Payment Date.
(b) Covenants and Agreements. All of the covenants and agreements
------------------------
that Carey and the Acquisition Sub are required to perform or to comply with
pursuant to this Agreement at or prior to the Closing (considered collectively),
and each of these covenants and obligations (considered individually), must have
been duly performed and compiled with in all material respects.
(c) Finalization of Certain Documents; Execution and Delivery of
------------------------------------------------------------
Documents. The Sellers, Stockholders, Carey and the Acquisition Sub shall have
- ---------
agreed to the terms and conditions of those documents referenced in Sections
6.1(i), 6.3(a), 6.3(b) and 6.3(d) above; and Carey and the Acquisition Sub shall
have executed and delivered to the Stockholders and the Companies all documents,
certificates, instruments, and items referenced in Sections 6.2 and 6.3 above,
including those referenced in the preceding clause.
(d) Hart-Scott-Rodino Waiting Period. The waiting period for all
--------------------------------
filings made under the H-S-R Act in connection with this Agreement and the
transactions contemplated hereby shall have passed without objection, or any
such objections shall have been resolved.
8. COVENANTS OF THE STOCKHOLDERS AND SELLERS. Each Seller and
Stockholder covenants and agrees with Carey and the Acquisition Sub as follows:
8.1 CONFIDENTIALITY. Each Seller and Stockholder shall and shall
---------------
cause their respective agents and employees to, hold in strict confidence,
unless compelled to disclose by judicial or administrative process or, in the
opinion of their counsel, by other requirements of law, all Carey Confidential
Information (as hereinafter defined) and will not disclose the same to any third
party. Each Seller and Stockholder also will at all times after the Payment
Date take all action and sign and deliver all instruments to the Acquisition Sub
so as to vest or perfect in the Acquisition Sub all right, title and interest in
and to the Carey Proprietary Information, or to assist the Acquisition Sub in
filing or prosecuting any application, in his or her name or any other name, in
any country, for any patent, trademark, service mark, copyright or other right
therein, or any modification, reissue, division, continuation, revival or
extension thereof, or in conducting any legal or administrative proceedings for
securing, protecting or enforcing any of the foregoing. Each Seller and
Stockholder further agrees that he, she or it has disclosed to the Acquisition
Sub in writing all proprietary information
-13-
<PAGE>
conceived or developed in whole or in part by him, her or it relating to either
the Business or the Carey Group (as defined below) prior to the date hereof.
For purposes hereof, "CAREY CONFIDENTIAL INFORMATION" shall mean (i) any
------------------------------
and all inventions, discoveries, ideas, research, engineering methods,
practices, processes, systems, formulae, designs, products, projects,
improvements and developments which (a) have not been generally available, (b)
relate to Carey, the Acquisition Sub or any Affiliate thereof (the "CAREY
-----
GROUP"), and (c) are made, conceived or reduced to practice by any Stockholder
employee of the Carey Group subsequent to the date hereof, or by any other
employee or consultant of the Carey Group, or in whole or in part at the expense
of the Carey Group or on the premises of the Carey Group or with the assistance
of the Carey Group's employees or consultants with the Carey Group's equipment
or supplies or those of the Carey Group's employees or consultants, (ii) any and
all trade secrets, reservation systems, marketing plans, forecasts, unpublished
financial statements, budgets, licenses, prices and employee, lessor, customer
and supplier lists of the Carey Group (iii) Seller Proprietary Information or
like information of the Purchased Companies and (iv) the substance or terms of
any discussions, negotiations or any communications between a Seller or
Stockholder and Carey or the Acquisition Sub related to this Agreement or the
transactions contemplated hereby, including, but not limited to, the terms of
this Agreement or any draft thereof.
Carey Confidential Information shall not include the following: (i)
information ascertainable or obtained from public or published information, (ii)
received from a third party not known to any Stockholder or Seller to be under
an obligation to keep such information confidential, (iii) that is or becomes
known to the public (other than through a breach of this Agreement), (iv) that
was in a Stockholder's or Seller's possession before disclosure thereof to it in
connection with this Agreement (except for the Seller Proprietary Information or
like information of the Purchased Companies) or (v) that was independently
developed by a Seller or Stockholder (except for the Seller Proprietary
Information or like information of the Purchased Companies).
8.2 COVENANT NOT TO COMPETE. GJ agrees that commencing on the Payment
-----------------------
Date and continuing until the later of (i) two (2) years after the termination
of the GJ Executive Management Agreement and (ii) five (5) years after the date
of this Agreement, and each other Stockholder and each Seller agrees that
commencing on the Payment Date and continuing until five (5) years after the
date of this Agreement, they shall not, without the prior written consent of
Carey, directly or indirectly, either on the behalf of the Stockholders, the
Sellers or on behalf of any other person:
(a) attempt in any manner to persuade a customer or client of a
Company, Carey, the Acquisition Sub or their respective Affiliates or licensees
(the "CAREY PROTECTED PARTIES" and each individually a "CAREY PROTECTED PARTY")
----------------------- ---------------------
to cease to do business or to reduce the amount of business which such customer
or client has customarily done or contemplated doing with a Carey Protected
Party;
-14-
<PAGE>
(b) employ or attempt to employ any person who is then, or within one
(1) year prior was, in the employ of or in a contracting relationship with a
Carey Protected Party;
(c) agree to serve as an agent, contractor, joint venture party,
partner, consultant, or employee of a customer or client in a manner which would
have the effect of reducing the amount of business derived by a Carey Protected
Party with such customer or client or diverting away from the business of a
Carey Protected Party from any customer or client of a Carey Protected Party for
any of the products or services of the type usually rendered by a Carey
Protected Party for any such customer or client;
(d) solicit or divert (or attempt to solicit or divert) business of
any customer or client of a Carey Protected Party in the areas of products or
services of the type usually provided by a Carey Protected Party for any such
customer or client for the benefit of anyone other than a Carey Protected Party;
(e) service or attempt to service or perform work for any customer or
client of a Carey Protected Party of the type customarily provided by a Carey
Protected Party or contemplated to be provided by a Carey Protected Party;
(f) disclose or distribute to any third parties customer or client
workpapers, data, software or other written materials (or any copies thereof)
prepared for internal use by a Carey Protected Party or used in connection with
the business or operations of a Carey Protected Party; or
(g) engage in or in any manner be connected with or employed by any
person, firm, corporation, proprietorship, partnership or other entity in
competition with a Carey Protected Party or engaged in the business of providing
automobile or limousine transportation, chauffeured cars for hire, or limousine
rentals or in any other enterprise which is or may be in competition with any
line of business conducted or contemplated to be conducted by a Carey Protected
Party within a radius of one hundred (100) miles of any office of a Carey
Protected Party.
(h) For the purposes of this Section 8.2, the following terms have the
meaning set forth below:
(x) "Customer" or "client" includes any person or entity
(including, but not limited to, state, local, municipal or federal
government entities) who is then a customer or client of a Carey Protected
Party, or anyone who was a customer or client at any time during the prior
twelve (12) months or prospective customers or clients with which the
Stockholders have knowledge (actual or constructive) that a Carey Protected
Party has been negotiating with to become a customer or client of a Carey
Protected Party at any time after the Payment Date.
-15-
<PAGE>
(y) "Solicit" or "divert" (or attempt to solicit or divert) shall
include direct personal calls and distributing announcements, notices or
other materials to a customer or client;
(i) GJ ACKNOWLEDGES THAT IN ANY EVENT HE WILL BE ABLE TO EARN A
LIVELIHOOD WITHOUT VIOLATING THE FOREGOING COVENANTS. GJ REPRESENTS AND WARRANTS
TO CAREY AND THE ACQUISITION SUB THAT HE IS NOT A PARTY TO ANY OTHER AGREEMENT
CONTAINING A NON-COMPETITION AGREEMENT OR OTHER RESTRICTION WITH RESPECT TO ANY
SERVICE OR BUSINESS WHICH HE IS TO PERFORM UNDER THE GJ EXECUTIVE MANAGEMENT
AGREEMENT.
8.3 CONDUCT OF THE COMPANIES' BUSINESS. Between August 20, 1998 and the
----------------------------------
Closing, the Sellers and Stockholders shall cause the Companies to adhere to the
following, unless otherwise agreed to by Carey in writing:
(a) operate the Companies only in the usual, regular and ordinary
manner and, to the extent consistent with such operation, use their best efforts
to preserve their present business organization and goodwill of the Companies
intact, preserve their present relationships with persons having business
dealings with them, and, unless such termination is approved by Carey, keep
available the services of each of the Companies' present officers, employees,
independent contractors and other service providers;
(b) not amend the charter or by-laws of any of the Companies;
(c) maintain the books and records of each of the Companies in the
usual regular and ordinary manner, on a basis consistent with prior practice;
(d) maintain all of the properties relating to each of the Companies
in customary repair, order and condition, reasonable wear and tear and damage by
fire or unavoidable casualty excepted, and maintain insurance upon all of the
properties relating to the Companies and with respect to the conduct of the
Companies on such amounts and of such kinds comparable to that in effect on the
date hereof; and;
(e) take no action that would make any representation or warranty
contained in Section 11 materially untrue or incorrect.
(f) protect and preserve the Customer Database (as defined below) and
customer records of the Companies;
(g) take reasonable measures to prevent interference in the Companies'
businesses and the employment of valued employees, and to ensure the continued
effectiveness after the Closing of all permits from regulatory commissions;
-16-
<PAGE>
(h) make no change in the banking and safe deposit arrangements of any
of the Companies without prior written notice to Carey giving the details of
such change;
(i) grant no powers of attorney, except as disclosed in writing to
Carey;
(j) promptly notify Carey of any material emergency or other material
change in the condition (financial or otherwise), business, properties, assets,
liabilities or prospects of any of the Companies, and of the commencement or
threatened commencement of any litigation or governmental complaints,
investigations or hearings (or communications indicating that the same may be
contemplated);
(k) not issue, redeem or repurchase any shares of the capital stock,
effect any stock split, or otherwise change the capitalization of any of the
Companies;
(l) not grant, confer or award any option, warrant, conversion right
or other right to acquire any shares of the capital stock of any of the
Companies;
(m) not adopt any new Plans (as defined below), including any
severance provisions, stock option, stock benefit or stock purchase plan, or
amend any existing Plan in any respect;
(n) not cancel, terminate, amend or modify (or otherwise impair the
rights of the Companies under) any Company Contracts (defined below);
(o) not sell, lease or otherwise dispose of any of the assets of any
of the Companies except in the ordinary course of business;
(p) not make or revoke any tax election, including without limitation
the election of any of the Companies to be taxed as an "S corporation" as
defined in the Code, under federal law or under any comparable provision of
state, local or foreign law;
(q) not make any capital expenditure except in the ordinary course of
business;
(r) not incur any long-term indebtedness in addition to that
outstanding on the date hereof, except in the ordinary course of business;
(s) not incur or discharge any other indebtedness or liability, other
than in the ordinary course of business;
(t) not make any loans, advances or capital contributions to, or
investments in, any other person, other than reasonable travel or other advances
to employees in the ordinary course of business consistent with past practices;
-17-
<PAGE>
(u) not assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently, or otherwise) for the obligations
of any other person or entity, except to endorse checks for collection or
deposit in the ordinary course of business;
(v) not fail to make any scheduled or other payment by its due date;
and
(w) not declare or pay any dividend or distribution on any shares of
the capital stock of any of the Companies (except distributions for tax payments
consistent with past practices).
8.4 GJ'S COOPERATION. For the period of the GJ Executive Management
----------------
Agreement, GJ agrees to cooperate with Carey and the Acquisition Sub so as to
afford Carey and the Acquisition Sub the full goodwill and ongoing value of the
Companies' assets and operations and to undertake to make telephone calls, write
letters, participate in sales calls, and do whatever else is necessary, in the
judgment of Carey, to assure the Companies' customers that the transaction
contemplated by this Agreement is such that the Companies' customers can be
assured of continued high quality service. GJ shall put forth his best effort to
assure continued use of the Companies' services by their customers.
8.5 338(H)(10) ELECTION. The Stockholders hereby agree that
-------------------
notwithstanding any other provisions of this Agreement to the contrary, the
Stockholders shall join with Carey and the Acquisition Sub in timely making a
joint election (a "Section 338(h)(10) Election") under Sections 338(g) and
338(h)(10) of the Internal Revenue Code of 1986, as amended, and any similar
election as may be available under application state or local law (and in taking
all steps necessary to effectuate the same) with respect to the sale of the
Shares to the Acquisition Sub hereunder.
8.6 EXCLUSIVE NEGOTIATING RIGHTS. Until the earlier of December 31, 1998
----------------------------
or the Closing, the Sellers and Stockholders agree that neither they nor any
officer, director, employee, consultant, advisor, agent or investment banker of
any of the Sellers or Stockholders shall, directly or indirectly, (a) solicit,
initiate or knowingly encourage or take any action knowingly to facilitate the
submission of inquiries, proposals or offers from any person relating to (i) any
acquisition or purchase of any material asset or assets of any of the Companies
or any shares of equity securities of the Companies, (ii) any tender offer
(including a self-tender offer) or exchange offer involving shares of a
Company's capital stock, (iii) any merger, consolidation, business combination,
sale of substantially all assets, recapitalization, liquidation, dissolution or
similar transaction involving any of the Companies other than the transactions
contemplated by this Agreement, or (iv) any other transaction the consummation
of which would or could reasonably be expected to impede, interfere with,
prevent or materially delay the transactions contemplated by this Agreement or
which would or could reasonably be expected to materially dilute the benefits to
Carey and the Acquisition Sub of the transactions contemplated hereby (the
transactions referred to in clauses (i) - (iv) are
-18-
<PAGE>
collectively referred to herein as "ALTERNATIVE TRANSACTIONS" and individually
------------------------
referred to herein as an "ALTERNATIVE TRANSACTION"), or agree to or endorse any
-----------------------
Alternative Transaction, or (b) enter into, continue or participate in any
discussions or negotiations regarding any Alternative Transaction, or furnish to
any person or entity (other than Carey) any information with respect to its
business, properties or assets or any Alternative Transaction, or otherwise
cooperate in any way with, assist or participate in, or facilitate or encourage
any effort or attempt by any person to seek, effect or make any Alternative
Transaction. If any Seller or Stockholder receives an inquiry, proposal or offer
regarding an Alternative Transaction, such Seller or Stockholder shall within
one (1) business day of his, her or its receipt of such proposal inform Carey of
the terms and conditions of such inquiry, proposal or offer and the identity of
the person or entity making it.
8.7 FURTHER ASSURANCES. The Sellers and Stockholders will have all
------------------
present officers and directors of each of the Companies execute whatever minutes
of meetings or other instruments and take whatever action may be necessary or
desirable to, (a) effect, perfect or confirm of record or otherwise the
Acquisition Sub's full right, title and interest in and to the Shares and
respective businesses, properties and assets of the Companies, free and clear of
all Encumbrances except as otherwise disclosed herein, (b) allow the Companies
to collect, realize upon, gain possession of, or otherwise acquire full right,
title and interest in and to such businesses, properties and assets, or to carry
out the intent and purposes of the transactions contemplated hereby, and (c)
permit the Acquisition Sub to take dominion over the assets of the Companies.
8.8 ACCESS AND INFORMATION. The Stockholders will cause the Companies to
----------------------
afford, and the Companies will afford, Carey's representatives with access to
the Companies' management, properties, books and records and furnish to Carey
and its representatives all additional financial and operating data and other
information as to the Companies' businesses and properties as Carey may from
time to time reasonably request.
8.9 VOTING. GJ agrees to vote his shares of capital stock of the
------
Companies to approve this Agreement at any meeting or any written consent of the
Companies' stockholders and to otherwise use his best efforts to obtain the
stockholder approval necessary to effect the purchase.
8.10 CUSTOMER DATABASE. In order to transfer to Carey and the
-----------------
Acquisition Sub full access to the Customer Database, the Stockholders shall
cause the Companies to deliver to Carey, prior to or simultaneous with the
Closing, the nature and location of all materials containing information
relevant to the Customer Database, including, but not limited to, customer
accounts receivable billing profile, rolodex cards, log books, bills, receipts,
electronic data and computer print-outs.
8.11 ACCOUNTS RECEIVABLE. The Sellers and GJ will cause the Companies
-------------------
to issue invoices on account of accounts receivable generated in the ordinary
course of business
-19-
<PAGE>
pursuant to the terms of this Agreement and for services performed up to the
Payment Date. The Sellers and GJ will cause the Companies to take no action with
respect to a client's outstanding account which would have an adverse effect on
the client's relationship with the Acquisition Sub or the Business.
8.12 DISCHARGE OF LIABILITIES. GJ shall cause the Sellers to fully
------------------------
discharge all liabilities and obligations of or relating to the Business not
assumed by the Acquisition Sub hereunder unless such liability or obligation is
being contested in good faith and GJ has provided Carey with written notice
specifying the nature of such liability or obligation and the basis for such
contest.
8.13 NAME CHANGE. Promptly following the Closing, the Sellers shall
-----------
change their names to names that are not in any way similar to "American
Limousine" or "Airport Limousine." From and after the Closing, no Seller or
Stockholder shall, without the prior consent of the Acquisition Sub, create or
cause to be created any corporation, partnership, joint venture or other
business entity which uses all or any part of the name "American" or "Airport"
as all or part of its name.
9. COVENANTS OF CAREY AND THE ACQUISITION SUB.
9.1 CONFIDENTIALITY. Prior to the Payment Date, Carey and the Acquisition
---------------
Sub agree to treat as confidential all American Confidential Information (as
defined below) obtained. Prior to the Payment Date, the American Confidential
Information will be kept confidential by Carey, the Acquisition Sub and their
respective officers, directors, employees, representatives, agents, accountants,
attorneys, advisers, and other representatives; provided, that (i) any of such
--------
American Confidential Information may be disclosed to Carey's and the
Acquisition Sub's officers, directors, employees, representatives, agents, and
advisers who need to know such American Confidential Information for the purpose
of evaluating the transactions contemplated by this Agreement; and (ii) such
Information may be disclosed if so required by law. If the Closing does not
occur, Carey and the Acquisition Sub shall return to the American Group all
material containing or reflecting the Information and will not retain any
copies, extracts, or other reproductions thereof.
"AMERICAN CONFIDENTIAL INFORMATION" shall mean all information obtained by
---------------------------------
Carey and the Acquisition Sub in connection with its due diligence investigation
regarding the Business or the American Group already furnished, or to be
furnished, by or on behalf of the Business or the American Group in connection
with this Agreement. Notwithstanding the foregoing American Confidential
Information shall not include the following: (i) information ascertainable or
obtained from public or published information, (ii) received from a third party
not known to Carey or the Acquisition Sub to be under an obligation to keep such
information confidential, (iii) that is or becomes known to the public (other
than through a breach of this Agreement), (iv) that was in Carey or the
Acquisition Sub's possession before disclosure
-20-
<PAGE>
thereof to it in connection with this Agreement or (v) that was independently
developed by Carey or the Acquisition Sub.
9.2 DISCHARGE OF LIABILITIES. Following the Payment Date, the Acquisition
------------------------
Sub shall promptly and fully discharge all of the Assumed Liabilities as they
become due in the normal course of business unless an Assumed Liability is being
contested in good faith and the Acquisition Sub has provided GJ with written
notice specifying the nature of such Assumed Liability and the basis for such
contest.
9.3 RETENTION OF RECORDS LITIGATION AID. To the extent that the Sellers
-----------------------------------
and Stockholders have transferred the books, data, documents, instruments and
other records relating to the Business, the Acquisition Sub will not discard,
for a period of five (5) years from the Closing Date, such records without
giving thirty (30) days prior written notice to the Stockholders. Further, the
Acquisition Sub shall allow the Stockholders access to such records during
normal business hours upon forty-eight (48) hours prior written notice. Carey
and the Acquisition Sub shall provide GJ with such support as they deem
reasonably necessary and appropriate in connection with those litigation matters
set forth on Schedule 11.22 attached hereto; provided, however, that neither
-------- ----- ------- -------
Carey nor the Acquisition shall be required to incur any expenses or out-of-
pocket costs in connection with such support unless compensated therefor.
10. JOINT COVENANTS OF THE SELLERS, STOCKHOLDERS, CAREY AND THE
ACQUISITION SUB.
10.1 BEST EFFORTS. Subject to the terms and conditions hereof, each
------------
party to this Agreement agrees to fully cooperate with the others and the
others' counsel, accountants and representatives in connection with any steps
required to be taken as part of his, her or its obligations under this
Agreement. Each party to this Agreement agrees that he, she or it will use his,
her or its best efforts consistent with reasonable business practice to cause
all conditions to its obligations and to the other parties under this Agreement
to be satisfied as promptly as possible, and will not undertake a course of
action inconsistent with this Agreement or which would make any of his, her or
its representations, warranties, agreements or covenants in this Agreement
untrue in any material respect or any conditions precedent to its obligations
under this Agreement unable to be satisfied at or prior to the Closing.
10.2 PUBLIC ANNOUNCEMENTS. Carey, the Sellers and the Stockholders
--------------------
shall not make any public announcements, notices or other communications
("PUBLIC ANNOUNCEMENTS") regarding this Agreement and the transactions
- ----------------------
contemplated hereby to parties other than the parties hereto and their
respective advisors without the prior written approval (which shall not be
unreasonably withheld or delayed) of (i) Carey, in the case of proposed Public
Announcements by the Sellers and the Stockholders, and (ii) the Sellers and the
Stockholders, in the case of proposed Public Announcements by Carey.
-21-
<PAGE>
10.3 APPROVALS; CONSENTS; PERMITS; LICENSES. Carey and GJ will use
--------------------------------------
all reasonable efforts to assure that all approvals, consents, permits or
licenses from any federal, state or local governmental agency or body required
in connection with the consummation of the transactions contemplated hereby
shall have been duly obtained, including, but not limited to, the approval of
any regulatory authority of the transfer to Carey and the Acquisition Sub of
control of each of the Companies' interstate and intrastate common carrier
rights, if any, including application for new authority with respect to any
authority which is not subject to transfer.
10.4 HART-SCOTT-RODINO FILINGS. Each of the parties to this Agreement
-------------------------
shall prepare and promptly file or cause the preparation and filing with the
Federal Trade Commission and the Department of Justice of a Pre-Merger
Notification Report Form pursuant to the H-S-R Act (the "REPORT") and shall file
------
such additional information or cause the filing of such additional information
as may be required by the Federal Trade Commission or Department of Justice.
10.5 NOTIFICATION OF CERTAIN MATTERS. Each of the parties to this
-------------------------------
Agreement (the "NOTIFYING PARTY") shall give prompt notice to the other parties
----------------
of (a) the occurrence or non-occurrence of any event that would be likely to
cause any representation or warranty of the Notifying Party contained in this
Agreement to be untrue or inaccurate in any material respect at or prior to the
Closing and (b) any failure of the Notifying Party to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder. The delivery of any notice pursuant to this Section 10.4 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
11. REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AND SELLERS. In
order to induce Carey and the Acquisition Sub to enter into this Agreement, each
of the Stockholders and Sellers hereby jointly and severally represent and
warrant to Carey and the Acquisition Sub as follows:
11.1 ORGANIZATION, POWER, ETC. Each of the Companies is a corporation
------------------------
duly organized and validly existing under the laws of the State of Illinois. To
the Best Knowledge (as defined below) of the Stockholders and Sellers, the
Companies are not required to be qualified as a foreign corporation in any
jurisdiction. Each of the Companies has all requisite power and authority to
own, operate, and lease its properties and to carry on its business as now being
conducted. The Sellers have all requisite corporate power and authority, and
the Stockholders have full power, authority and capacity, to execute and deliver
this Agreement and all other agreements contemplated hereby (the "ANCILLARY
---------
AGREEMENTS") and to consummate the transactions contemplated hereby and thereby.
- ----------
The execution and delivery of this Agreement and the Ancillary Agreements to
which each Seller and Stockholder is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
board of directors and stockholders of each of the Sellers, and no other action
is necessary to authorize this Agreement or the Ancillary Agreements to which
any
-22-
<PAGE>
Seller or Stockholder is a party or the consummation of the transactions
contemplated herein or therein. This Agreement and the Ancillary Agreements have
been duly and validly executed and delivered by each Seller and Stockholder
which is a party hereto and thereto and constitute the legal, valid and binding
obligation of each Seller and Stockholder which is a party hereto or thereto,
enforceable against each in accordance with its terms. The Companies have
previously furnished to Carey true and complete copies of their charters and by-
laws, as amended to date.
11.2 EFFECT OF AGREEMENT. Except as set forth in Schedule 11.2, the
------------------- -------------
execution, delivery and performance of this Agreement or the Ancillary
Agreements to which any Seller or Stockholder is a party and consummation of the
transactions contemplated hereby and thereby will not require the consent,
approval or authorization of any person or public authority, will not violate
any provision of the charter or by-laws of any of the Companies, will not
violate, with or without the giving of notice and/or the passage of time or
both, any provision of law applicable to any member of the American Group, and
will not conflict with or constitute a default under, or result in the creation
of any encumbrance upon, any of the properties or assets of any member of the
American Group pursuant to any indenture, mortgage, deed of trust or other
agreement or instrument, or any order, judgment, award, decree, statute,
ordinance, regulation or any other restriction of any kind or character, to
which any member of the American Group is a party or by which any of member of
the American Group or any of their assets and properties may be bound.
11.3 CAPITALIZATION. The authorized equity securities of American
--------------
consists of 20,000 shares of common stock , each with no par value, of 10,000
shares are issued and outstanding. The authorized equity securities of Limos
"R" Us, Inc. consists of 20,000 shares of common stock, each with no par value
per share, of which 10,000 shares are issued and outstanding. The authorized
equity securities of American Limousine Repair Service, Inc. consists of 20,000
shares of common stock, each with no par value per share of which 10,000 are
issued and outstanding. The authorized equity securities of Syd's Limousine,
Inc. consist of 1,000,000 shares of Common Stock, each with no par value per
share, of which 1,000 are issued and outstanding. The authorized equity
securities of A. L. Transportation, Inc consist of 20,000 shares of Common
Stock, each with no par value per share of which 10,000 are issued and
outstanding. All outstanding shares of the Companies' capital stock have been
duly authorized and validly issued and are fully paid and non-assessable. There
are no outstanding or authorized options, warrants, purchase rights,
subscription rights, conversion rights, exchange rights or other contracts,
commitments, agreements or understandings (written or oral) that require any of
the Companies to issue, sell, transfer, purchase or redeem any of their capital
stock or other securities. There are no outstanding or authorized stock
appreciation, phantom stock, or similar rights with respect to any of the
Companies. There are no agreements, voting trusts, proxies or other agreements
or understandings with respect to the voting or ownership of the capital stock
of any of the Companies.
-23-
<PAGE>
11.4 OWNERSHIP AND TITLE TO THE SHARES. The Stockholders are the sole
---------------------------------
record and beneficial holders of all of the issued and outstanding shares of
capital stock of the Companies. Schedule A and Schedule 11.4, each attached
---------- -------------
hereto, set forth the names of the Stockholders and the number of shares of
capital stock of the Companies owned of record and beneficially by each. The
Stockholders own their respective shares free and clear of any claims. Except
as set forth in Schedule 11.4 attached hereto, the Stockholders have the ability
-------------
to vote their shares. The current addresses and social security number or other
federal tax identification numbers of each of the Stockholders are set forth on
Schedule 11.4 attached hereto. None of the Stockholders or the Companies
- -------------
directly or indirectly controls or owns an interest in any other person,
corporation, partnership, joint venture or other business entity engaged in the
chauffeured car-for-hire or leasing business.
11.5 FINANCIAL STATEMENTS. (a) American has provided to Carey as
--------------------
Schedule 11.5(a) attached hereto the following: (i) the combined and combining
- ----------------
financial statements of the Companies, reviewed and/or audited by a firm of
independent certified public accountants, including a statement of income,
balance sheet, and statement of cash flows, as of and for the twelve (12) months
ended December 31, 1995 and 1996 to be reviewed, and as of and for the 12 months
ended December 31, 1997 to be audited, as well as the combined and combining
financial statements which have been reviewed by a firm of independent certified
public accountants as of and for the six months ending June 30, 1998
(collectively, the "FINANCIAL STATEMENTS"); (ii) the tax returns of the
--------------------
Companies for their fiscal years ending December 31, 1995, 1996 and 1997; and
(iii) a schedule of monthly revenues of the Companies from January 1, 1995
through June 30, 1998, which includes a break-out of revenue by direct bill,
credit card, cash and indicates whether such revenue includes tax, tips, tolls
and commissions . The Financial Statements are complete and correct and
accurately present the financial condition and results of operations of the
Companies and to the Best Knowledge of the Sellers and Stockholders are all in
conformity with GAAP consistently applied.
(b) The pro forma earnings before interest and taxes ("EBIT") for the
----
fiscal year ended December 31, 1997 includes (i) audited EBIT of One Million
Forty-Nine Thousand Dollars ($1,049,000), and (ii) add-backs of One Million
Seven Hundred Ninety-One Thousand Dollars ($1,791,000) contained in Schedule
--------
11.5(b), which reflect special adjustments for the purposes of the transactions
- -------
contemplated by this Agreement that were actually expensed in the said fiscal
period, projected future acquisition EBIT from the Hinsdale acquisition
consummated in January, 1998, and other miscellaneous EBIT.
(c) Within thirty days of the Closing, American shall provide to Carey
a combined pro forma closing balance sheet of the Companies as of August 31,
1998 (the "CLOSING BALANCE SHEET"), which such pro forma closing balance sheet
---------------------
shall be accompanied by a detailed list of accounts receivable, Vehicles and
liabilities of the Companies assumed by the Acquisition Sub in accordance with
this Agreement. The pro forma net worth reflected on the Closing Balance Sheet
as determined in accordance with generally accepted accounting
-24-
<PAGE>
principals by Sellers' regularly-employed firm of certified public accountants
and reviewed by Carey's regularly-employed firm of certified public accountants
on or before December 1, 1998, shall be equal to or greater than $2.0 million
(the "NET WORTH REQUIREMENT").
---------------------
11.6 BOOKS AND RECORDS. To the Best Knowledge of the Stockholders and
-----------------
Sellers, the books and records of each of the Companies are complete and
correct, have been maintained in accordance with good business practices, and
accurately reflect the basis for the financial condition and results of
operations of the Companies as set forth in the Financial Statements.
11.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent of the
----------------------------------
amounts specifically reflected on or reserved against in the Companies' balance
sheet as of June 30, 1998 included in the Financial Statements (the "BALANCE
-------
SHEET"), the Companies do not have any liabilities or obligations of any nature
- -----
whatsoever, due or to become due, accrued, absolute, contingent or otherwise,
except for liabilities and obligations incurred in the ordinary course of
business which are consistent with past practice. The Stockholders and the
Companies do not know of any basis for the assertion against the Companies of
any liability or obligation not fully reflected or reserved against in the
Balance Sheet or not incurred in the ordinary course of business and consistent
with past practice since the date thereof.
11.8 ABSENCE OF ADVERSE CHANGE. Since June 30, 1998, there has been
-------------------------
no material adverse change in the business, financial position, assets,
liabilities, results of operations or prospects of any of the Companies, nor to
the Best Knowledge of the Sellers and Stockholders are there any conditions that
exist which, if they materialized, would adversely affect any of the Companies,
other than transactions expressly contemplated to occur in connection with the
transactions contemplated hereby or as set forth on Schedule 11.8 attached
-------------
hereto. Since June 30, 1998, neither the Stockholders nor the Companies have:
(a) taken any action or made any change in the business or operations
of any of the Companies, other than in the ordinary course of business
consistent with past practice;
(b) entered into or agreed to enter into any transaction, agreement or
commitment, or suffered the occurrence of any event or events (a) that has
interfered or is reasonably likely to interfere with the normal and usual
operations of the business of any of the Companies or (b) that, singly or in the
aggregate, has resulted or is reasonably likely to result in a material adverse
change with respect to any of the Companies;
(c) incurred or increased any indebtedness for borrowed money or any
capital lease obligations, or assumed, guaranteed, endorsed or otherwise become
responsible for the obligations of any other individual, partnership, firm, or
corporation (except to endorse checks for collection for deposit in the ordinary
course of business), or made any loan or
-25-
<PAGE>
advance to any individual, partnership, firm or corporation other than in the
normal course of business;
(d) mortgaged, pledged, or otherwise encumbered, or, other than in the
ordinary course of business consistent with past practice, sold, transferred or
otherwise disposed of, any of the Purchased Assets (or assets of the Purchased
Companies), including any canceled, released, hypothecated or assigned
indebtedness owed to the Companies, or any claims held by the Companies;
(e) made any investment of a capital nature in excess of Two Thousand
Five Hundred Dollars ($2,500) or entered into a commitment for such investment
either by purchase of stock or securities, contributions to capital, property
transfer or otherwise, or by the purchase of any property or assets of any other
individual, partnership, firm or corporation other than in the ordinary course
of business; or made any loans or advances to any other person, other than
reasonable travel or other advances to employees other than in the ordinary
course of business consistent with past practices without the prior written
consent of Carey;
(f) failed to make any scheduled or other payment by its due date;
(g) incurred any material damage, destruction or loss to any asset
owned by any of the Companies or used in any of the Companies' business;
(h) entered into any amendment, waiver or modification to any existing
material agreement, contract, lease, indenture or commitment (whether written or
oral) being assumed by the Acquisition Sub hereby; or
(i) agreed, contracted or committed to do any of the foregoing, or
agreed to pay after the Closing any expenses or fees of counsel, accountants or
consultants for services in preparation for or in connection with this Agreement
or the transactions contemplated hereunder, except as otherwise provided herein.
11.9 RECEIVABLES; BANKING RELATIONSHIPS. Schedule 11.9 attached
---------------------------------- -------------
hereto provides an accurate and complete breakdown and aging of all accounts
receivable, notes receivable and other receivables of the Companies as of
December 31, 1997 and June 30, 1998. All existing receivables of the Companies
represent valid obligations of third parties arising from bona fide transactions
entered into in the ordinary course of business. Schedule 11.9 attached hereto
-------------
lists each account maintained by or for the benefit of either of the Companies
at any bank or other financial institution as of December 31, 1997 and June 30,
1998.
11.10 TAX MATTERS. The Companies and any consolidated, combined or
-----------
unitary group of which the Companies are or were a member, (individually, a "TAX
---
AFFILIATE" and, collectively the "TAX AFFILIATES") have prepared and timely
- --------- --------------
filed with the appropriate United States, state and local government agencies
and all foreign countries and political subdivisions
-26-
<PAGE>
thereof all tax returns, declarations, and reports, estimates, information
returns and statements ("RETURNS") required to be filed and all such returns are
-------
correct and complete. Except for claims brought by the City of Chicago against
the Companies and as more particularly described on Schedule 11.10 attached
--------------
hereto, the Companies and any Tax Affiliates have timely and properly paid, or
entered into executed agreements to pay, in full all Taxes (as defined below)
that are shown to be due on such Returns or claimed to be due by any taxing
authority. The Companies and any Tax Affiliates have complied with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes and timely and properly withheld from employee wages and paid over to
proper government authorities all amounts required to be so withheld and paid
over under all applicable laws.
(a) There are no liens for Taxes upon the assets of the Companies or
of any Tax Affiliate. Neither the Companies nor any of their Tax Affiliates has
requested any extension at time within which to file any Return which Return has
not since been filed. Except as disclosed on Schedule 11.10 attached hereto, no
--------------
adjustment, deficiency or assessment for any Taxes has been proposed, asserted
or assessed against the Companies or any of their Tax Affiliates which has not
been resolved and paid in full. There are no outstanding waivers or consents
given to the Companies or any of their Tax Affiliates regarding the application
of the statute of limitations with respect to any Taxes or Returns.
(b) Except for claims brought by the City of Chicago against the
Companies and as more particularly described on Schedule 11.10 attached hereto,
--------------
none of the Companies or any Tax Affiliate is a party, nor are there any
circumstances that would cause them to be a party, to any pending audit,
examination, investigation, dispute, proceeding or claim, nor is any such action
threatened, by any governmental authority, for assessment or collection of any
Taxes for which any of the Companies or any Tax Affiliate are or may be liable.
(c) None of the Companies or any Tax Affiliate has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f) of the
Code apply to any disposition of a subsection (f) asset, as such term is defined
in Section 341(f)(4) of the Code, owned by such Company or any of its Tax
Affiliates. None of the Companies, or any Tax Affiliate is required to include
in income any adjustment pursuant to Section 481(a) of the Code by reason of a
voluntary change in accounting method initiated by such Company or a Tax
Affiliate, and none of the Companies have any knowledge that the Internal
Revenue Service has proposed any such adjustment or change in accounting method.
All transactions that could give rise to an understatement of federal income tax
within the meaning of Section 6662 of the Code have been adequately disclosed in
accordance with Section 6662 of the Code. None of the Companies, or any Tax
Affiliate is a party to any agreement, contract or arrangement that would
result, separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code.
-27-
<PAGE>
(d) Neither the Companies nor any Tax Affiliate is a party to any
contract, agreement, plan or arrangement that, individually or collectively,
could give rise to any payment that would not be deductible by reason of Section
162, 280G or 404 of the Code.
(e) Copies of (A) any Tax examinations, (B) extensions of statutory
limitations, (C) the federal, state and local income Tax Returns and franchise
Tax Returns of the Companies and each Tax Affiliate, and (D) correspondence
between the Companies and any Tax Affiliate on the one hand, and all taxing
authorities on the other hand, for the Companies' and each Tax Affiliate's last
three (3) taxable years previously have been furnished to Carey and such Tax
Returns are true, correct and complete.
(f) The provision for Taxes and any reserve for Taxes, if any, shown
on the Balance Sheet are adequate to cover the aggregate liability of the
Companies arising out of facts or circumstances occurring on or prior to the
date of such Balance Sheet for all Taxes.
(g) For purposes of this Agreement, "TAXES" shall mean all taxes,
-----
charges, fees, levies or other assessments, including without limitation, all
net income, gross income, gross receipts, sales, use, ad valorem, transfers,
franchise, profits, license, withholding, payroll, employment, excise,
severance, stamp, occupation, property or other taxes, customs, duties, fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by any taxing
authority (domestic or foreign).
(h) The Companies are and at all times since their incorporation have
been S corporations as defined by the Code.
11.11 TANGIBLE PROPERTIES AND VEHICLES.
--------------------------------
(a) Schedule 11.11(a) contains a true list of the tangible personal
-----------------
property used in connection with the operation of the Business, including,
without limitation, furniture, fixtures, equipment, computer hardware and
software (but excluding Vehicles defined below) and owned by or leased to any of
the Companies (together with any other personal property used in connection with
the operation of the Business and owned by or leased to any of the Companies,
the "TANGIBLE PERSONAL PROPERTY"). Except with respect to Tangible Personal
--------------------------
Property listed as being leased on Schedule 11.11, the Companies have good and
--------------
marketable title free and clear of all Encumbrances to the Tangible Personal
Property. With respect to any Tangible Personal Property leased by any of the
Companies, all leases, conditional sale contracts, franchises or licenses
pursuant to which any of the Companies may hold or use (or permit others to hold
or use) such Tangible Personal Property are valid and in full force and effect,
and there is not under any of such instruments any existing default or event of
default or event which with notice or lapse of time or both would constitute
such a default; and the possession and use of such property by the Companies has
not been disturbed and no claim has been asserted against any of the Companies
adverse to its rights in such leasehold interests. The Tangible Personal
Property and the Vehicles constitute all tangible personal property necessary to
conduct the business of each of the Companies in the manner in which they have
been and are being conducted. All Tangible Personal Property is adequate and
usable for the purposes for which it is currently used and each item of Tangible
Personal Property, whether owned or leased, is in good operating condition,
reasonable wear and tear excepted, and has been properly maintained and
-28-
<PAGE>
repaired. During the past three (3) years, there has not been any material
interruption of the operations of the business of any Company due to the
condition of any of the Tangible Personal Property.
(b) Schedule 11.11(b) attached hereto contains a true and complete
-----------------
list of all motor vehicles used in the operation of the business of each of the
Companies ("the "VEHICLES") including, without limitation, Vehicles owned by or
--------
leased to the Companies, or Vehicles for which the Companies are under
obligation of any nature by guarantee or otherwise, and sets forth, with respect
to each Vehicle, the year, make, serial number, model and whether such Vehicle
is owned or leased. Schedule 11.11(b) attached hereto sets forth a description
-----------------
of any outstanding financial obligations of the Stockholders or the Companies
(including financial obligations of third parties which are guaranteed by the
Stockholders or the Companies) on any Vehicles, including the date of
obligation, deposit, financing source, interest rate, term, dates and amounts of
first and last payments, total amount financed, monthly payment, balloon payment
(if any), outstanding balance, and extent and nature of the Companies'
obligations with respect to such Vehicles. Except as shown in Schedule 11.11(b)
-----------------
attached hereto the Companies have good and marketable title, free and clear of
all Encumbrances, to all Vehicles. With respect to Vehicles as to which the
Companies have outstanding financial obligations, all leases, conditional sales
contracts and financing documents pertaining to such Vehicles are in full force
and effect, and there is not under any of such instruments any existing default
or event of default which with notice or lapse of time or both would constitute
such a default. The Vehicles are adequate and useable for the purposes for
which they are currently used and each such Vehicle is in good operating
condition, reasonable wear and tear excepted, and has been properly maintained
and repaired. During the past three (3) years, there has not been any material
interruption of the operations of the Companies' business due to condition of
the Vehicles used in the operation of the Companies' business.
11.12 PREMISES. Schedule 11.12 attached hereto sets forth a true and
-------- --------------
complete list and description of all real property leased by any of the
Companies or used in their business (each a "LEASED PREMISES"). A true and
---------------
correct copy of the lease, as amended to date, with respect to each Leased
Premises has been delivered to Carey. Each lease covering a Leased Premises is
in full force and effect (there existing no default under any such lease which,
with the lapse of time or notice or both, would entitle the lessor to terminate
the same), conveys the leased real estate purported to be conveyed thereunder,
and is enforceable by the Company which is a party thereto. The Companies have
the right to use their respective Leased Premises in accordance with the terms
of such leases free and clear of all Encumbrances or other interests or rights
of third parties, except those which do not or would not have a material adverse
effect on the Leased Premises as used in the Companies' business. To the Best
Knowledge of the Sellers and Stockholders, each of the Leased Premises is
structurally sound, adequately maintained, fully equipped with all necessary
utilities and in good condition and repair, consistent with the uses to which it
is presently being put or intended to be put. To the Best Knowledge of the
Sellers and Stockholders, all structures, improvements and fixtures on the
Leased Premises and the current uses of the Leased Premises conform in all
material respects to any and all applicable federal,
-29-
<PAGE>
state and local laws, building, health and safety and other ordinances, laws,
rules and regulations. To the Best Knowledge of the Sellers and Stockholders,
there is no violation of any material covenant, restriction or other agreement
or understanding, oral or written, affecting or relating to title or use of any
Leased Premises. To the Best Knowledge of the Sellers and Stockholders, there
are no pending or threatened condemnation or similar proceedings or assessments
affecting any of the Leased Premises, nor is any such condemnation or assessment
contemplated by any governmental authority. No Company owns any real property.
11.13 ENVIRONMENTAL MATTERS. Each of the following representations set
---------------------
forth in this Section 11.13 is to the Best Knowledge of the Sellers and
Stockholders.
(a) No governmental or private notice of violation, action, suit or
other proceeding to enforce or impose liability under any Environmental Laws (as
defined below), and no investigation or inquiry under any Environmental Laws, is
pending or threatened against either of the Companies, or any person or entity
for whose conduct any of the Companies are or may be held responsible, which
would affect the business of any of the Companies;
(b) No Leased Premises is contaminated with any Hazardous Materials
(as defined below). There are no on-site or off-site locations used (currently
or in the past) in the Companies' businesses or by the Companies in connection
with their respective businesses for the treatment, storage or disposal of
Hazardous Materials;
(c) Without limiting the generality of the foregoing, there are no
underground storage tanks at any Leased Premises, nor are there any PCLC-
containing transformers at or on any Leased Premises;
(d) There are no liabilities in connection with any of the Companies'
businesses relating to the off-site treatment, storage or disposal of Hazardous
Materials; and
(e) There are no asbestos-containing materials located at any Leased
Premises.
11.14 INSURANCE. Except as disclosed on Schedule 11.14 attached
---------- --------------
hereto, the Companies have since June 30, 1995 through the date hereof, insured
with reasonable amounts of coverage by responsible insurers in respect to their
properties, assets and businesses against risks normally insured against by
companies in similar lines of business under similar circumstances. Schedule
--------
11.14 attached hereto, correctly describes (by, type, carrier, policy number,
- -----
limits, premium and expiration date) the insurance coverage carried by the
Companies at any time during the last fiscal year and up to and through June 30,
1998, and coverage carried by the Companies on the date hereof, each of which
current coverage will remain in full force and effect through the Closing. None
of the Companies (i) has failed to give any notice or present any claim under
any such policy or binder in due and timely fashion, (ii) has received notice of
cancellation or non-renewal of any such policy or binder, (iii) is aware of any
threatened or proposed cancellation or non-renewal of any such policy or binder,
(iv) has received notice or is
-30-
<PAGE>
aware of any insurance premiums which will be materially increased in the future
or (v) has permitted any such policy to lapse for any period of time. There are
no outstanding claims under any such policy which have gone unpaid for more than
forty-five (45) days, or as to which the insurer has disclaimed liability.
11.15 OUTSTANDING COMMITMENTS. Schedule 11.15 attached hereto sets
----------------------- --------------
forth a list of all existing contracts, agreements, understandings,
arrangements, leases, commitments, licenses, and installment and conditional
sales agreements, whether written or oral, relating to each of the Companies
(collectively, the "COMPANY CONTRACTS"), including without limitation any
-----------------
contracts or agreements which provide third parties with any options to buy
assets or stock of any of the Companies or grant a right of first refusal to
purchase any assets or stock of any of the Companies and, with respect to oral
Company Contracts, an accurate and complete summary of the material provisions.
The Stockholders have caused the Companies to deliver or make available to Carey
true, correct and complete copies of all written Company Contracts. The
execution, delivery and performance by the Companies of each of their Company
Contracts has been authorized by all necessary corporate action. All of the
Company Contracts are in full force and effect. The Companies and each other
party to each of the Company Contracts have performed all the obligations
required to be performed by them to date, have received no notice of default and
are not in default (with due notice or lapse of time or both) under any of the
Company Contracts. The Stockholders and the Companies have no present
expectation or intention of not fully performing all their obligations under
each of the Company Contracts, and neither the Stockholders nor the Companies
have any knowledge of any breach or anticipated breach by any other party to any
of the Company Contracts. None of the Company Contracts have been terminated,
and neither the Stockholders nor the Companies are aware of any intention or
right of any party to any Company Contract to default another party to any
Company Contract. There exists no actual or, to the Best Knowledge of the
Stockholders or the Companies, threatened termination, cancellation or
limitation of the business relationship of the Companies with any party to any
Company Contract.
11.16 CERTAIN PAYMENTS. None of the Companies and no director,
----------------
officer, agent, or employee of the Companies, or any other person associated
with or acting for or on behalf of the Companies, has directly or indirectly,
(i) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback, or other payment to any person, entity or agency, private or public,
regardless of form, whether in money, property, or services (a) to obtain
favorable treatment in securing business, (b) to pay for favorable treatment for
business secured, (c) to obtain special concessions or for special concessions
already obtained, for or in respect of the Companies or (d) in violation of any
federal, state or local law, or (ii) established or maintained any fund or asset
that has not been recorded in the books and records of the Company.
11.17 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on
---------------------------------
Schedule 11.17 attached hereto, no stockholder, director, officer or employee of
- --------------
any of the Companies, or member of the family of any such person, or any
corporation, partnership, trust or other entity in which any such person, or any
member of the family of any such person, has an interest,
-31-
<PAGE>
beneficial or otherwise, or is an officer, director, trustee, partner or holder
of any equity interest, is a party to any transaction with the Companies that
will represent an obligation of the Companies after the Closing, including any
contract, agreement or other arrangement providing for the employment of,
furnishing of services by, rental of real or personal property from, or
otherwise requiring payments or involving other obligations to or from, any such
person or firm.
11.18 LICENSES, PERMITS, AUTHORIZATIONS, ETC. Schedule 11.18 attached
-------------------------------------- --------------
hereto identifies and provides a brief description, with appropriate identifying
numbers and letters, of all licenses, permits, pending applications, consents,
approvals and authorizations of or from any public, governmental or regulatory
agency, used in the conduct of the business of each of the Companies, including,
without limitation, radio frequencies and radio stations, Certificates of Public
Convenience and Necessity and other operating certificates applied for and/or
currently outstanding and issued by any and all regulatory bodies (including,
without limitation, the U.S. Department of Transportation, the Interstate
Commerce Commission, the City of Chicago, the City of Burr Ridge and the State
of Illinois) (collectively, the "PERMITS"), providing with respect to each
-------
Permit the name of the agency issuing the Permit and, if the holder is other
than the Companies, the holder's relationship to the Companies. Each chauffeur
who operates a Vehicle, and every Vehicle, has all required Permits. The holder
of each Permit, the holder of which is a Company or a Stockholder has complied
with all conditions and requirements imposed by the Permits and the Companies
have not received any notice, and neither the Companies nor the Stockholders
have any knowledge, that any appropriate authority intends to cancel or
terminate any of the Permits or that valid grounds for such cancellation or
termination exist. To the Best Knowledge of the Stockholders and Sellers. The
holder of each Permit, the holder of which is not a Company or a Stockholder,
has complied with all conditions and requirements imposed by the Permits and the
Companies have not received any notice, and neither the Companies nor the
Stockholders have any knowledge, that any appropriate authority intends to
cancel or terminate any of the Permits or that valid grounds for such
cancellation or termination exist. Each of the Companies owns or has the right
to use its respective Permits in accordance with the terms thereof without any
conflict or alleged conflict or infringement with the rights of others and
subject to no Encumbrance, and each Permit is valid and in full force and
effect, and will not be terminated or adversely affected by the transactions
contemplated hereby.
11.19 EMPLOYEES.
---------
(a) Schedule 11.19 attached hereto sets forth a true and complete list
--------------
including the name, address, telephone number, job description, current salary
and anticipated salary for 1998, amount of accrued vacation and other benefits,
as of the date hereof, of all full-time and all part-time employees of each of
the Companies (the "EMPLOYEES"). No Employee has an employment agreement or
---------
understanding, whether oral or written, with a Company that is not terminable on
thirty (30) days or less notice by such Company without cost or other liability
to such Company. No Employee has indicated that he or she intends to terminate
his or her employment with a Company or seek a material change in his or her
duties or status either before
-32-
<PAGE>
or after the Closing. Each Employee or independent contractor of the Companies
who is required to be licensed under any applicable federal, state or local law
is so licensed.
(b) None of the Companies is a party to or bound by any collective
bargaining agreement with any labor organization, group or association covering
any of its employees, and none of the Companies nor any of the Stockholders has
any knowledge of any attempt to organize any employees of any of the Companies
by any person, unit or group seeking to act as their bargaining agent. There
are no pending or threatened charges (by employees, their representatives or
governmental authorities) of unfair labor practices or of employment
discrimination or of any other wrongful action with respect to any aspect of
employment of any person employed or formerly employed by any of the Companies.
No event has occurred or circumstance exists that could provide a reasonable
basis for any work stoppage or labor dispute.
11.20 EMPLOYEE BENEFITS. Each of the following representations set
-----------------
forth in this Section 11.20 is to the Best Knowledge of the Sellers and
Stockholders.
(a) Schedule 11.20 attached hereto sets forth a true and complete list
--------------
of each benefit plan, arrangement or agreement under which benefits (including,
but not limited to, severance benefits) are provided to employees or other
providers of services that is maintained as of the date of this Agreement (the
"PLANS") by each of the Companies or by any trade or business, whether or not
- ------
incorporated (an "ERISA AFFILIATE"), all of which together with any of the
---------------
Companies would be deemed a "single employer" within the meaning of Sections
414(b), (c), (m) or (o) of the Code or Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA").
-----
(b) The Stockholders have heretofore caused the Companies to deliver
to Carey true and complete copies (or, if not in written form, summaries) of
each of the Plans and all related documents, including, but not limited to, (a)
the actuarial report for such Plan (if applicable) for each of the last two (2)
years, (b) the annual report for such Plan (if applicable) for each of the last
two (2) years and (c) the most recent determination letter from the Internal
Revenue Service (if applicable) for such Plan (and any application for such
determination letter, if one is pending), and Schedule 11.20 attached hereto
--------------
sets forth a true and complete list of all of such documents.
(c) Except as set forth in Schedule 11.20 attached hereto (a) each of
--------------
the Plans has been operated and administered in all material respects in
compliance with applicable laws, including, but not limited to, ERISA and the
Code; (b) each of the Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and there is and has been no event,
condition or circumstance that may adversely affect the qualified status of any
such Plan, and each Plan which is intended to meet the requirements for tax-
favored treatment under Subchapter B of Chapter 1 of Subtitle A of the Code
meets such requirements in all material respects; (c) with respect to each Plan
which is subject to Title IV of ERISA, the present value of accrued benefits
under such Plan, based upon the actuarial assumptions used for funding
-33-
<PAGE>
purposes in the most recent actuarial report prepared by such Plan's actuary
with respect to such Plan, did not, as of its latest valuation date, exceed the
then current value of the assets of such Plan allocable to such accrued
benefits; (d) no Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of any of the Companies or any ERISA Affiliate beyond their retirement
or other termination of service, other than (i) coverage mandated by applicable
law, (ii) death benefits or retirement benefits under any "employee pension
plan", as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of the Companies or
(iv) benefits, the full cost of which is borne by the current or former employee
(or his beneficiary); (e) no liability under Title IV of ERISA has been incurred
by any of the Companies or any ERISA Affiliate that has not been satisfied in
full, and no condition exists that presents a material risk to any of the
Companies or any ERISA Affiliate of incurring a liability thereunder; (f) no
Plan is a "multi employer pension plan," as such term is defined in Section
3(37) or 4001(a)(3) of ERISA; (g) all contributions or other amounts payable by
the Companies as of the Closing Date with respect to each Plan in respect of
current or prior plan years have been paid or accrued in accordance with GAAP,
Section 302 of ERISA and Section 412 of the Code, and there is no accumulated
funding deficiency with respect to any Plan; (h) neither the Stockholders, the
Companies, nor any ERISA Affiliate, has engaged in a prohibited transaction in
connection with the Companies or any ERISA Affiliate, or any other person or
entity, which could subject any of the Companies or any ERISA Affiliate to a
material liability under Section 409 of ERISA, a material civil penalty assessed
pursuant to Section 502(i) or (l) of ERISA or a material tax imposed pursuant to
Section 4975 of the Code; (i) no event has occurred and no condition exists with
respect to any Plan that could subject any of the Companies or any ERISA
Affiliate to any material tax, fine or penalty imposed by the Code or ERISA; (j)
there are no pending or threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans or any trusts
related thereto; (k) neither the Stockholders, the Companies nor any ERISA
Affiliate has any material liability or contingent liability to the Pension
Benefit Guaranty Corporation, the Internal Revenue Service, any multi-employer
plan or the Department of Labor with respect to any employee pension benefit
plan currently or previously maintained by any of the Companies or any ERISA
Affiliate; and (l) all required reports and descriptions (including Form 5500
Annual Reports, Summary Annual Reports and summary plan descriptions) with
respect to the employee pension benefit plans and employee welfare benefit plans
maintained by any of the Companies or any ERISA Affiliate for its employees have
been properly and timely filed with the appropriate government agency and
distributed to participants as required, and each of the Companies has complied
in all material respects with the requirements of COBRA.
(d) Except as set forth in Schedule 11.20 neither the execution and
--------------
delivery of this Agreement nor the consummation of the transactions contemplated
hereby will (a) result in any material payment (including, without limitation,
deferred compensation, severance, unemployment compensation, golden parachute or
otherwise) becoming due to any director or any employee of any of the Companies,
or any of their Affiliates under any Plan or otherwise, (b)
-34-
<PAGE>
materially increase any benefits otherwise payable under any Plan or otherwise,
or (c) result in any acceleration of the time of payment or vesting of any such
benefits to any material extent.
11.21 COMPLIANCE WITH LAW. To the Best Knowledge of the Sellers and
-------------------
Stockholders, each of the Companies has complied with, (and is not in default
under), all laws, ordinances, legal requirements, rules, regulations and orders
applicable to it, its assets and the business conducted by it where the failure
to comply would, in the aggregate, have a material adverse effect on the
business, financial condition and results of operations of any of the Companies.
To the Best Knowledge of the Sellers and the Stockholders, there is no existing
law, rule, regulation or order, and neither the Companies nor the Stockholders
are aware of any proposed law, rule, regulation or order, whether federal or
state, which would prohibit or materially restrict any of the Companies from, or
otherwise materially adversely affect any of the Companies in, conducting its
respective business.
11.22 LITIGATION. Except as described in Schedule 11.22, there are no
---------- --------------
(i) actions, suits or proceedings pending or threatened against or otherwise
materially and adversely affecting any of the Stockholders or any of the
Companies, at law or in equity, or before or by any federal, state, municipal or
other governmental or non-governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign (nor does any Stockholder or
Company know or have grounds to know of any basis for any such action, suit, or
other form of proceeding or dispute or any governmental investigation relating
to such Company or the Business); (ii) arbitration proceedings relating to any
of the Stockholders or any of the Companies; (iii) governmental inquiries
pending or threatened against or involving any of the Stockholders or any of the
Companies. There are no outstanding orders, writs, judgments, injunctions,
settlement agreements, consent decrees, or decrees of any court, governmental
agency or arbitration tribunal against, involving or affecting either the
Stockholders or any of the Companies. None of the Stockholders or Companies is
in default with respect to any order, writ injunction or decree known to or
served upon it from any court or of any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign. Except as set forth on Schedule 11.22 attached hereto,
--------------
there is no action or suit by either the Stockholders or the Companies pending
or threatened against others, nor is there a basis for any such action, suit or
proceeding other than as previously disclosed in writing to Carey.
11.23 CUSTOMER DATABASE AND PROPRIETARY ASSETS.
----------------------------------------
(a) The customer database (including but not limited to the customer
accounts receivable billing profile, rolodex cards, log books, bills, receipts,
electronic data and computer printouts) delivered at the Closing as Schedule
--------
11.23(a) (the "CUSTOMER DATABASE") is a correct, complete and current customer
- -------- -----------------
list containing the name, address and telephone number of all customers,
customer liaisons and arrangers currently serviced by the Companies and, to the
extent maintained by the Companies, the same information with respect to all
customers, customer liaisons and arrangers serviced by the Companies and its
predecessors since June 30, 1995. The Stockholders and the Companies have
never, and no other party has ever, sold, leased,
-35-
<PAGE>
traded, or revealed the Customer Database to any competitor of the Companies or
any other person, corporation, or entity except for software system vendors.
(b) Schedule 11.23(b) identifies and provides a brief description of
-----------------
all Proprietary Assets (as hereinafter defined), including without limitation
computer hardware and software programs and products (including ALIS), as well
as code, owned or licensed to, or otherwise used by each Company regarding:
standards and methods of operating, marketing, advertising and public relations,
courtesy and appearance standards, charge card services, reservation services,
dispatch services, invoice and billing services, insurance programs and
equipment standards for conducting a chauffeured vehicle service business,
including improvements in operating procedures and mix of products and services
which may be promoted and sold to customers of each Company. Schedule 11.23(b)
-----------------
lists each trademark and service mark owned by or licensed to, or otherwise used
by, each Company and states with respect to each such trademark or service mark,
whether it is registered with the U.S. Patent and Trademark Office or any state
governmental agency. Except as set forth in Schedule 11.23(b), each Company has
-----------------
good, valid and marketable title to all of its Proprietary Assets (including,
but not limited to, the Customer Database), free and clear of all Encumbrances,
and has a valid right to use all such Proprietary Assets. Except as set forth
in Schedule 11.23(b), no Company is obligated to make any payment to any person
-----------------
or entity for the use of any of its Proprietary Assets. Except as set forth in
Schedule 11.23(b), no Company has developed jointly with any other person or
- -----------------
entity any of its Proprietary Assets with respect to which such other person has
any rights. Each Company has taken reasonably prudent steps to protect and
maintain the confidentiality and secrecy of the Customer Database and otherwise
to maintain and protect the value of all Proprietary Assets.
(c) Unlawful Use of Company Proprietary Assets. The Proprietary
------------------------------------------
Assets of each Company do not infringe or conflict with any Proprietary Asset
owned or used by any other person or entity. Except as set forth on Schedule
--------
11.23(c) attached hereto, no Company is infringing, misappropriating or making
- --------
any unlawful use of, and no Company has at any time infringed, misappropriated
or made any unlawful use of, or received any notice or other communication (in
writing or otherwise) of, any actual, alleged, possible or potential
infringement, misappropriation or unlawful use of, any Proprietary Asset owned
or used by any other person or entity. To the Best Knowledge of the Sellers and
the Stockholders, no other person or entity is infringing, misappropriating or
making any unlawful use of, and no proprietary asset owned or used by any other
person or entity infringes or conflicts with, any of the Proprietary Assets of
the Companies.
(d) Schedule 11.23(d) lists all telephone numbers relating to the
-----------------
business of each of the Companies that have been advertised in the Yellow Pages
and/or White Pages as well as any other telephone numbers used by any of the
Companies for the purpose of taking reservations for its business since 1995.
All telephone numbers listed on Schedule 11.23(d) are in good working order and
-----------------
no claim has been asserted against either of the Companies adverse to its rights
in any such telephone numbers.
-36-
<PAGE>
11.24 BROKERAGE. The Stockholders and the Companies represent and
---------
warrant to Carey that they have not incurred an obligation or liability,
contingent or otherwise, for brokerage, finder's fees or agents' commissions or
other similar payment in connection with this Agreement.
11.26 DISCLOSURE. No representation or warranty by the Stockholders or
----------
the Companies contained in this Agreement and no statement contained in any
Exhibit or Schedule attached hereto contains or will contain any untrue
statement of material fact or omits or will omit to state a material fact
necessary to prevent any such statements from being misleading. The
representations and warranties set forth in this Section 11.26 shall be true and
correct on the date of this Agreement and on the Closing Date.
11.27 YEAR 2000. To the Best Knowledge of the Sellers and
---------
Stockholders, none of the computer software, computer firmware, computer
hardware (whether general or special purpose), and other similar or related
items of automated, computerized, and/or software system(s) that are used or
relied on by any of the Companies in the conduct of its business (the "COMPUTER
--------
SYSTEMS") will malfunction, cease to function, generate incorrect data, or
- -------
produce incorrect results when processing, providing, and/or receiving (i) date-
related data into and between the twentieth and twenty-first centuries and (ii)
date-related data in connection with any valid date in the twentieth and twenty-
first centuries (the "YEAR 2000 PROBLEM"). To the Best Knowledge of the Sellers
-----------------
and Stockholders, the Companies' Computer Systems are in compliance with all
regulations and applicable trade organization guidelines concerning the Year
2000 Problem. None of the Companies has any contract with, or commitment to,
any third party with respect to its Computer Systems relating to the Year 2000
Problem, and no Company is aware of any expense that it will incur in connection
with the resolution of any Year 2000 Problem. To the Best Knowledge of the
Sellers and Stockholders, the Companies are not aware of inabilities on the part
of customers, insurance companies or service providers with which the Companies
transact business to timely remedy their own deficiencies in respect of the Year
2000 Problem, which inabilities, individually or in the aggregate, will have a
material adverse effect on the business, financial condition and results of
operations of any of the Companies.
11.28 VALID PRIVATE PLACEMENT. The stockholders of the Companies other
-----------------------
than GJ and Aubrey Jacobs (the "OTHER STOCKHOLDERS") have had an opportunity:
------------------
(i) to review Carey's Annual Report to Stockholders for its fiscal year ended
November 30, 1997, its related Proxy Statement, its Annual Report on Form 10-K
for its fiscal year ended November 30, 1997, and its periodic reports filed
pursuant to the Securities Exchange Act of 1934, as amended, during its 1998
fiscal year; (ii) to request for their review material exhibits to the Annual
Report on Form 10-K; and (iii) to ask questions concerning the terms and
conditions of this Agreement and any additional information regarding Carey. GJ
and the Other Stockholders specifically represent and warrant that GJ has been
and is acting as the Other Stockholders' purchaser representative in connection
with the negotiation and execution of this Agreement.
-37-
<PAGE>
12. REPRESENTATIONS AND WARRANTIES OF CAREY AND THE ACQUISITION SUB.
Carey and the Acquisition Sub hereby jointly and severally represent and warrant
to the Stockholders and the Companies as follows:
12.1 ORGANIZATION, POWER, ETC. Each of Carey and the Acquisition Sub
------------------------
is a corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has the corporate power and authority to enter
into this Agreement and all other agreements contemplated hereby and to perform
its obligations hereunder.
12.2 AUTHORITY RELATIVE TO AGREEMENT. The execution, delivery and
-------------------------------
performance of this Agreement and the documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby by Carey and
the Acquisition Sub have been, or prior to the Closing will be, duly and
effectively authorized by all necessary corporation action. This Agreement and
each of the other agreements, documents and instruments to be executed and
delivered by Carey and the Acquisition Sub have been or will be duly executed
and delivered by, and constitute the valid and binding obligation of Carey and
the Acquisition Sub, as the case may be, enforceable against them in accordance
with their terms.
12.3 CONFLICTS. Neither Carey nor the Acquisition Sub is subject to
---------
any order, judgment, decree or any charter or by-law provisions or a party to or
bound by any material mortgage, deed of trust, lease, agreement or other
instrument which would prevent the consummation of the transactions contemplated
hereunder, or compliance by it with the terms, conditions and provisions hereof,
and such consummation and compliance will not, and will not with the giving of
notice or the passage of time, constitute a default or the event of default
under or a violation of or grounds for termination of or any other change to any
such order, judgment, decree, provision, mortgage, deed of trust, lease,
agreement, or any other instrument.
12.4 LITIGATION. No litigation, administrative proceedings or
----------
governmental investigations are pending or, to the knowledge of Carey or the
Acquisition Sub, threatened against or relating to Carey or the Acquisition Sub
or their properties or businesses which would materially affect the transactions
contemplated by this Agreement.
13. INDEMNIFICATION.
13.1 AGREEMENTS TO INDEMNIFY.
-----------------------
(a) As used in this Section 13: (i) "DAMAGES" means claims, damages,
-------
liabilities, losses, judgments, settlements, and expenses, including, without
limitation, all reasonable fees and disbursements of counsel incident to the
investigation or defense of any claim or proceeding or threatened claim or
proceeding; (ii) "INDEMNIFYING PARTIES" means the parties obligated to provide
--------------------
indemnification under this Section 13.1; and (iii) "INDEMNIFIED PARTY" means the
-----------------
party entitled to indemnification under this Section 13.1.
-38-
<PAGE>
(b) On the terms and subject to the limitations set forth in this
Agreement, the Sellers and the Stockholders shall jointly and severally
indemnify, defend and hold Carey and the Acquisition Sub harmless from, against
and in respect of any and all Damages incurred by Carey or the Acquisition Sub
arising from or in connection with: (i) any breach of any representation,
warranty, covenant or agreement made by the Stockholders or the Sellers in this
Agreement; (ii) any Taxes of a Company or Stockholder imposed as a result of the
transactions contemplated by this Agreement (iii) any Damages in connection with
workers compensation-related claims against any Company arising from
circumstances occurring before the Closing Date; (iv) any claims of the City of
Chicago for city taxes based on services provided or trips made by the Companies
before the Closing Date (whether or not disclosed on a disclosure schedule to
this Agreement); (v) any liabilities whatsoever accruing or arising during the
Operation Period due to the gross negligence or willful misconduct of any member
of the American Group; (vi) any liabilities assumed by the Acquisition Sub
pursuant to this Agreement over and above the Liabilities Cap; (vii) any
liabilities arising in connection with the litigation and disputes described in
Schedule 11.22 attached hereto except for the costs of defending the claims made
- --------------
by the City of Chicago as more particularly described in Schedule 11.22 attached
--------------
hereto; and (viii) any failure by the Sellers or the Stockholders to obtain any
necessary third party consent.
(c) The representations, warranties, covenants and agreements of the
Stockholders and the Companies set forth in this Agreement shall, for purposes
of this Section 13, be deemed to have survived the Closing Date notwithstanding
any contrary terms of this Agreement, for the period during which claims for
indemnification may be made pursuant to Section 13, except that the covenants
made in Sections 8.1 and 8.2 shall survive for the periods specified therein,
and the indemnity obligations hereunder with respect to the breach of any tax or
environmental representation or warranty, covenant or agreement set forth herein
shall survive for the period of the applicable statute of limitations, and
whenever such representations, warranties, covenants and agreements are referred
to in this Section 13, the text of the same shall be deemed to be set forth in
their entirety herein, and the same are hereby incorporated herein by such
references. Each such representation, warranty, covenant and agreement shall be
deemed to have been relied upon by the party or parties to which made,
notwithstanding any investigation or inspection made by or on behalf of such
party or parties, and notwithstanding any knowledge acquired (or capable of
being acquired) by such party or parties, whether before or after the execution
and delivery of this Agreement or the Payment Date, with respect to the accuracy
or inaccuracy of or compliance with any such representation, warranty, covenant
or agreement, and shall not be affected in any respect by any such
investigation, inspection or knowledge.
13.2 TERMS OF INDEMNITY OBLIGATIONS. The indemnity obligations of the
------------------------------
Indemnifying Parties under this Agreement shall be subject to the following
terms:
(a) Except as otherwise provided in Subsection (c) above, the
indemnity obligations of the Indemnifying Parties shall expire no later than two
(2) years following the Payment Date with respect to any matter for which a
claim for indemnification has not been made by such date, and provided that the
indemnity obligations of the Indemnifying Parties for
-39-
<PAGE>
claims timely asserted by an Indemnified Party in the manner provided in this
Agreement shall continue until such claims are finally resolved and discharged.
With respect to any breach involving fraud on the part of the Indemnifying Party
or any other remedies to which the Indemnified Parties may otherwise be entitled
at law or in equity, the remedies of the Indemnified Parties provided herein
shall be in addition to, and not in lieu of, any other remedies to which the
Indemnified Parties are entitled.
(b) Certificates representing the Escrow Payment otherwise issuable
shall be registered in the name of GJ and shall be placed in an Escrow Account
in accordance with the terms and conditions of the Escrow Agreement for the
purpose of providing collateral funds for indemnifying Carey and the Acquisition
Sub for any and all Damages for which Carey and the Acquisition Sub are entitled
to be indemnified pursuant to this Section 13. Such Stock Payment will be held
in an Escrow Account for a period of up to three (3) years or as otherwise
provided in the Escrow Agreement. Carey's recourse for indemnification under
this Agreement shall be limited to the Escrow Fund (as defined in the Escrow
Agreement).
13.3 NOTICE OF CLAIM. The Indemnified Party shall promptly notify the
---------------
Indemnifying Parties in writing of any Claim asserted by a third person that
might give rise to any indemnity obligation hereunder (a "THIRD PARTY CLAIM").
-----------------
Failure of any Indemnified Party to promptly give such notice shall not relieve
the Indemnifying Parties of their obligation to indemnify under this Section 13
except to the extent that the Indemnifying Party is damaged thereby. Together
with or following such notice, the Indemnified Party shall deliver to the
Indemnifying Parties copies of all notices and documents received by Carey
relating to the Third Party Claim (including court papers).
13.4 DEFENSE AND SETTLEMENT OF THIRD-PARTY CLAIMS. The Indemnifying
--------------------------------------------
Parties shall have the right (without prejudice to the right of the Indemnified
Parties to participate at their own expense through counsel of their own
choosing) to defend against any Third Party Claim at their expense and through
counsel of their own choosing that is reasonably acceptable to the Indemnified
Parties, and to control such defense if they give written notice of their
intention to do so within fifteen (15) business days of their receipt of notice
of Third Party Claim, and in such event the Indemnified Parties shall cooperate
fully in the defense of such Third Party Claim and shall make available to the
Indemnifying Parties or their counsel all pertinent information under its
control relating thereto. The Indemnified Parties shall have the right to elect
to settle any Third Party Claim; provided, however, the Indemnifying Parties
shall not have any indemnification obligation with respect to any monetary
payment to any third party required by such settlement unless they shall have
consented thereto in writing. The Indemnifying Parties shall have the right to
elect to settle any Third Party Claim subject to the consent of the Indemnified
Parties; provided, however, that if the Indemnified Parties fail to give such
consent within fifteen (15) business days of being requested to do so, the
Indemnified Parties shall, at their expense, assume the defense of such Third
Party Claim and regardless of the outcome of such matter, the Indemnifying
Parties' liability hereunder shall be limited to the amount of any such proposed
settlement. The foregoing provisions notwithstanding, in no event may the
-40-
<PAGE>
Indemnifying Parties (a) adjust, compromise or settle any Third Party Claim (i)
unless such adjustment, compromise or settlement unconditionally releases Carey
and the Acquisition Sub from all liability or (ii) if such adjustment,
compromise or settlement affects the absolute and sole right of Carey or the
Acquisition Sub to own or use any of any their assets (including, without
limitation, contract rights) or (b) defend any Third Party Claim which, if
adversely determined, would materially impair the financial condition (as
defined below), results of operations, business or prospects of Carey or the
Acquisition Sub. To the extent that the Indemnified Parties assume the defense
of a Third Party Claim, the Indemnifying Parties shall have the right to
participate at their own expense in the defense or settlement of such claim.
13.5 CONTROL OF TAX PROCEEDINGS. (a) If a claim shall be made by any
--------------------------
taxing authority which, if successful, would result in an indemnity payment by
the Stockholders or Sellers pursuant to this Section 13 (a "TAX CLAIM"), or if
---------
an audit or administrative proceeding is commenced by any taxing authority with
respect to Taxes that could give rise to a Tax Claim (a "TAX AUDIT"), the
---------
Stockholders and/or the Sellers shall have the right, at their option, upon
timely notice to Carey, to assume and control the conduct of any such Tax Audit
and the defense of any suit, action or proceeding with respect to any such Tax
Claim at their own expense and with their own counsel (without prejudice to the
right of Carey to participate at its own expense through counsel of its own
choosing), so long as the Stockholders and Sellers have and acknowledge full
indemnification responsibility under this Section 13 for all of the Taxes which
are asserted by the tax authority to be the subject of the Tax Audit or Tax
Claim.
(b) In any case in which the Sellers or Stockholders are entitled to
and elect to control the contest, as provided in Section 13.5(a) above, the
Sellers and Stockholders, at their sole option, may pursue or forego any and all
administrative appeals, proceedings, hearings, and conferences with the taxing
authority with respect to any Tax Claim; may, at their sole option, either pay
the Taxes claimed and sue for a refund where applicable law permits such refund
suits; or may contest the Tax Claim in any permissible manner, and prosecute
such contest to a determination in court of initial jurisdiction, and to
determination in an appellate court, and may settle the Tax Claim at any stage
in the judicial process unless such settlement would materially impair the
financial condition, results of operations, business or prospects of the
Companies or Carey or the Acquisition Sub, in which case Carey may withhold such
consent in its sole discretion (either initially or at some later time) at any
stage of the administrative and judicial process.
13.6 LIMITATIONS ON INDEMNIFICATION. The aggregate indemnity obligations
------------------------------
of the Sellers and the Stockholders under this Agreement shall not in any event
exceed the value of the Escrow Fund (as defined in the Escrow Agreement) as of
the date on which a final determination or award is made or granted with
reference to the claim asserting damage hereunder (the "INDEMNIFICATION CAP").
-------------------
In accordance with the foregoing, it is the understanding of the parties that
Carey's and the Acquisition Sub's indemnification rights shall entitle Carey and
the Acquisition Sub to seek indemnification for liabilities of up to the value
of the Escrow Fund.
-41-
<PAGE>
14. TERMINATION; AMENDMENTS; WAIVERS.
14.1 TERMINATION. This Agreement may be terminated at any time prior
-----------
to the Closing Date:
(a) by mutual consent of Carey, the Acquisition Sub, the Stockholders
and the Sellers;
(b) by Carey, the Acquisition Sub or the Companies if the Closing
shall not have occurred on or before November 30, 1998, unless the failure of
the Closing to occur by such date shall be due to the failure of the party
seeking to terminate this Agreement to perform or observe the covenants and
agreements of such party set forth herein;
(c) by Carey if there has been a material misrepresentation or
material breach of the representations, warranties, covenants or obligations of
the Sellers and Stockholders set forth herein; provided, that in the case of a
---------
breach of any such covenant or obligation, such breach has not been cured within
thirty (30) days of the Stockholders' and the Sellers' receipt of a written
notice thereof delivered by Carey;
(d) by the Stockholders and the Sellers if there has been a material
misrepresentation or material breach of the representations, warranties,
covenants and obligations of Carey or the Sellers set forth herein, provided
that in the case of a breach of any such covenant or obligation, such breach has
not been cured within thirty (30) days of Carey's and the Acquisition Sub's
receipt of written notice thereof delivered by GJ.
The power of termination provided for by this Section 14.1 will be
effective only after written notice thereof shall have been given to the other
parties. If this Agreement is terminated in accordance with this Section 14.1,
this Agreement shall be abandoned without further action by the parties.
14.2 EFFECT OF TERMINATION. In the event of termination of this
---------------------
Agreement pursuant to Section 14.1, this Agreement shall forthwith become void
and have no effect, and no party shall have any liability of any nature
whatsoever hereunder, or in connection with the transactions contemplated
hereby, except (a) Sections 8.1 and 8.2 shall survive any termination of this
Agreement, and (b) notwithstanding anything to the contrary contained in this
Agreement, no party shall be relieved of or released from any liabilities or
damages arising out of its breach of any provision of this Agreement.
14.3 AMENDMENT. This Agreement may not be amended except by an
---------
instrument in writing signed on behalf of each of the parties hereto.
14.4 EXTENSION; WAIVER. At any time prior to the Closing Date, the
-----------------
parties hereto may, subject to Section 14.1, (a) extend the time for the
performance of any of the obligations or
-42-
<PAGE>
other acts of the parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in a written
instrument signed by or on behalf of such party, but such extension or waiver or
failure to insist on strict compliance with an obligation, covenant, agreement
or condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
15. MISCELLANEOUS.
15.1 EXPENSES. The Companies, Carey and the Acquisition Sub shall pay
--------
the fees and expenses of their respective counsel, accountants, other experts
and all other expenses incident to the negotiation, preparation and execution of
this Agreement, it being the understanding of the parties that the fees of
counsel, accountants, other experts and other such expenses of the Companies
shall be accrued as of August 31, 1998 and included as Assumed Liabilities
subject to the Liabilities Cap.
15.2 CERTAIN TAX MATTERS. The Stockholders shall cause the Companies
-------------------
to prepare and file any required Return for any taxable period ending on or
before the Closing Date and that is due on or before the Closing Date. Carey
shall cause the Companies to prepare and file all required returns due after the
Closing Date.
15.3 DEFINITIONS. As used in this Agreement:
-----------
An "Affiliate" of any entity shall mean any person, corporation,
partnership or business organization which, directly or indirectly, Controls, is
Controlled by or is under Common control with, such entity.
"Best Knowledge" shall include (i) actual knowledge and (ii) that knowledge
which a prudent business person (including in the case of the Sellers the
officers, directors and management employees of the Sellers) would have obtained
in the reasonable management of his or her business affairs after exercising due
diligence with respect thereto. In connection therewith, the knowledge (both
actual and constructive) of any director, officer, stockholder or management
employee of a Seller shall be deemed to be knowledge of such Seller.
"Control" shall mean direct or, either together with others acting as a
group or otherwise, indirect ownership or possession of the right or power, by
vote of stockholders or directors, or by contract, agreement or other
arrangement, to direct, determine, prevent or otherwise dictate managerial,
operational or other actions or activities of any firm, corporation or business
organization.
"Encumbrance" means any charge, claim, right, property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind,
-43-
<PAGE>
including, without limitation, any restriction of use, voting, transfer, receipt
of income, or exercise of any other attribute of ownership held by another
party.
"Environmental Laws" means, individually and collectively, the Clean Air
Act, the Clean Water Act, the Resource Conservation and Recovery Act of 1976,
the Hazardous Materials Transportation Act, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, the Emergency Planning and
Community Right-to-Know Act or any other federal, state or local law,
regulation, ordinance, rule or by-law regulating the use, presence, storage,
transportation or disposal of Hazardous Materials.
"Hazardous Materials" means, individually and collectively, toxic,
hazardous, explosive or otherwise dangerous materials, substances, pollutants,
contaminants or wastes (as those terms are used in the Environmental Laws),
petroleum products, polychlorinated biphenyls, asbestos, ureaformaldehye foam,
waste oil or radioactive materials.
"Proprietary Asset" means any (a) patent, patent application, trademark
(whether registered or unregistered), trademark application, trade name,
fictitious business name, service mark (whether registered or unregistered),
service mark application, copyright (whether registered or unregistered),
copyright application, mask work, mask work application, trade secret, know-how,
confidential information, customer list, franchise, system, computer software,
computer program, invention, design, blueprint, engineering drawing, proprietary
product, technology, proprietary right or other intellectual property right or
intangible asset; or (b) license or right to use or exploit any of the
foregoing.
15.4 ENTIRE AGREEMENT. This Agreement and the other agreements to be
----------------
delivered pursuant hereto constitute the entire agreement among the parties
hereto with respect to the subject matter hereof.
15.5 BINDING EFFECT; BENEFIT. This Agreement shall inure to the
-----------------------
benefit of and be binding upon the parties hereto and their respective heirs,
successors and assigns. Nothing in this Agreement, expressed or implied, is
intended to confer on any person other than the parties hereto, or their
respective heirs, successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement. As used herein, the
successors of Carey shall be deemed to include any affiliate of Carey conducting
a chauffeured car-for-hire business.
15.6 SECTION AND OTHER HEADINGS. The section and other headings
--------------------------
contained in this Agreement are for reference purposes only and shall not affect
the meaning or interpretation of this Agreement.
15.7 NOTICES. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been duly given if delivered in person or
sent by certified mail, postage and certification charges prepaid, as follows:
-44-
<PAGE>
If to the Stockholders
or the Sellers: George Jacobs
President
American Airport Limousine Corporation
200 Frontage Road
Burr Ridge, IL 60521-6916
with a copy to
Phil Wolin, Esq.
Wolin & Rosen, Ltd.
Two N. La Salle Street, Suite 1776
Chicago, IL 60602
If to Carey: Carey International, Inc.
4530 Wisconsin Avenue, N.W.
Washington, DC 20016
Fax: (202) 895-1201
Attn: Vincent A. Wolfington, Chairman of the Board
Attn: Michael P. O'Callaghan, Director of
Acquisitions
with a copy to:
Nutter, McClennen & Fish, LLP
One International Place
Boston, MA 02110
Attn: James E. Dawson, Esq.
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
15.8 GOVERNING LAW. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Delaware.
15.9 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
15.10 SEVERABILITY. In the event that any provision of this Agreement
------------
or the application thereof to any person or in any circumstances shall be
determined to be invalid, unlawful or unenforceable to any extent, the remainder
of this Agreement and the application of such provision to persons or
circumstances other than that to those as to which it is determined to be
invalid, unlawful, or unenforceable, shall not be affected thereby and each
remaining provision of this Agreement shall continue to be valid and may be
enforced to the fullest extent permitted by law.
-45-
<PAGE>
15.11 REMEDIES
--------
(a) Right to Injunction. The breach by any of the Stockholders of any
-------------------
of the provisions of Sections 8.1 and 8.2 shall entitle Carey to a permanent
injunction or other injunctive relief in order to prevent or restrain any such
breach or threatened breach by any of the Stockholders or their partners,
agents, representatives, employees, independent contractors or any entity of
which they are a partner, joint venturer, stockholder, contractor, proprietor,
officer, director, employee or agent, or any and all persons or entities
directly or indirectly acting for or with them. The rights and remedies of
Carey under Sections 8.1 and 8.2 shall be in addition to and not in limitation
of any of the rights, remedies, or damages available to it at law or equity.
The prevailing party shall be entitled to collect from the non-prevailing party
reasonable costs and attorneys' fees in addition to any other rights or claims
the prevailing party may have against the non-prevailing party.
(b) Survival. The provisions of Sections 8.1 and 8.2 shall survive
--------
the termination of this Agreement.
(c) Severability. The Stockholders have carefully read and considered
------------
the provisions of Section 8.2 and, having done so, agree that the restrictions
set forth herein (including, but not limited to, the time period of the
restrictions and the geographical areas of the restrictions) are fair and
reasonable and are reasonably required for the protection of the interests of
Carey. In the event that any provision of Section 8.2 related to a time period
or areas of restriction shall be declared by a court of competent jurisdiction
to exceed the maximum time period or area such court deems reasonable and
enforceable, said time period or areas of restriction shall be deemed to become
and hereafter shall be the maximum time period or areas which such court deems
reasonable and enforceable.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
-46-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as an instrument under seal as of the date first above written.
CAREY INTERNATIONAL, INC.
By:/s/ Vincent A. Wolfington
----------------------------------------------
Vincent A. Wolfington, Chairman
AIRPORT LIMOUSINE ACQUISITION CORP.
By:/s/ Vincent A. Wolfington
-----------------------------------------------
Vincent A. Wolfington, President
AIRPORT LIMOUSINE PARTNERS, INC.
By:/s/ George Jacobs
-----------------------------------------------
George Jacobs, President
/s/ George Jacobs
--------------------------------------------------
George Jacobs
/s/ George Jacobs
as attorney in fact for Aubrey Jacobs
--------------------------------------------------
Aubrey Jacobs
/s/ George Jacobs
as attorney in fact for Hyman Levin
--------------------------------------------------
Hyma Levin
/s/ George Jacobs
as attorney in fact for Harriet Jacobs
--------------------------------------------------
-47-
<PAGE>
AMERICAN LIMOUSINE REPAIR SERVICE, INC.
By:/s/ George Jacobs
----------------------------------------------
George Jacobs, President
-48-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-START> DEC-01-1997
<PERIOD-END> AUG-31-1998
<CASH> 31,497,934
<SECURITIES> 0
<RECEIVABLES> 17,056,598
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 50,264,136
<PP&E> 9,095,343
<DEPRECIATION> 0
<TOTAL-ASSETS> 122,666,274
<CURRENT-LIABILITIES> 18,253,674
<BONDS> 0
0
0
<COMMON> 94,488
<OTHER-SE> 78,730,451
<TOTAL-LIABILITY-AND-EQUITY> 122,666,274
<SALES> 0
<TOTAL-REVENUES> 84,797,598
<CGS> 57,160,077
<TOTAL-COSTS> 76,788,556
<OTHER-EXPENSES> (852,121)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 328,257
<INCOME-PRETAX> 8,532,906
<INCOME-TAX> 3,541,156
<INCOME-CONTINUING> 4,991,750
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,991,750
<EPS-PRIMARY> .60
<EPS-DILUTED> .56
</TABLE>
