--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF ORGANIZATION
dated as of May 9, 1997
by and among
TRAVEL SERVICES INTERNATIONAL, INC.
CRUISES, INC.
and
the STOCKHOLDERS named herein
--------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
1. PURCHASE AND SALE................................................. 3
2. [INTENTIONALLY DELETED]........................................... 3
3. DELIVERY OF CONSIDERATION......................................... 3
4. CLOSING........................................................... 4
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND
STOCKHOLDERS...................................................... 6
5.1 Due Organization......................................... 7
5.2 Authorization............................................ 8
5.3 Capital Stock of the COMPANY............................. 8
5.4 Transactions in Capital Stock............................ 9
5.5 No Bonus Shares.......................................... 9
5.6 Subsidiaries............................................. 9
5.7 Predecessor Status; etc.................................. 10
5.8 Spin-off by the COMPANY.................................. 10
5.9 Financial Statements..................................... 10
5.10 Liabilities and Obligations.............................. 11
5.11 Accounts and Notes Receivable............................ 12
5.12 Permits and Intangibles.................................. 13
5.13 Environmental Matters.................................... 14
5.14 Personal Property........................................ 16
5.15 Significant Customers; Material Contracts and
Commitments.............................................. 17
5.16 Real Property............................................ 18
5.17 Insurance................................................ 19
5.18 Compensation; Employment Agreements; Organized
Labor Matters............................................ 20
5.19 Employee Plans........................................... 21
5.20 Compliance with ERISA.................................... 23
5.21 Conformity with Law; Litigation.......................... 24
5.22 Taxes.................................................... 25
5.23 No Violations............................................ 26
5.24 Government Contracts..................................... 27
5.25 Absence of Changes....................................... 27
5.26 Deposit Accounts; Powers of Attorney..................... 30
5.27 Validity of Obligations.................................. 30
5.28 Relations with Governments............................... 31
5.29 Disclosure............................................... 31
5.30 Prohibited Activities.................................... 32
5.31 Authority; Ownership..................................... 32
5.32 Preemptive Rights........................................ 33
5.33 No Intention to Dispose of TSII Stock.................... 33
6. REPRESENTATIONS OF TSII........................................... 33
6.1 Due Organization......................................... 34
-i-
6.2 Authorization............................................ 34
6.3 Capital Stock of the TSII................................ 34
6.4 Transactions in Capital Stock............................ 35
6.5 Subsidiaries............................................. 36
6.6 Financial Statements..................................... 36
6.7 Liabilities and Obligations.............................. 37
6.8 Conformity with Law; Litigation.......................... 37
6.9 No Violations............................................ 38
6.10 Validity of Obligations.................................. 38
6.11 TSII Stock............................................... 39
6.12 No Side Agreements....................................... 39
6.13 Business; Real Property; Material Agreements............. 40
6.14 Taxes.................................................... 40
6.15 No Intention to Dispose of Shares........................ 41
7. COVENANTS PRIOR TO CLOSING........................................ 41
7.1 Access and Cooperation; Due Diligence.................... 41
7.2 Conduct of Business Pending Closing...................... 43
7.3 Prohibited Activities.................................... 44
7.4 No Shop.................................................. 46
7.5 Notice to Bargaining Agents.............................. 47
7.6 Agreements............................................... 47
7.7 Notification of Certain Matters.......................... 47
7.8 Amendment of Schedules................................... 48
7.9 Cooperation in Preparation of Registration
Statement............................................... 50
7.10 Final Financial Statements............................... 52
7.11 Further Assurances....................................... 52
7.12 Authorized Capital....................................... 53
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY........................................................... 53
8.1 Representations and Warranties........................... 53
8.2 Performance of Obligations............................... 54
8.3 No Litigation............................................ 54
8.4 Opinion of Counsel....................................... 54
8.5 Registration Statement................................... 54
8.6 Consents and Approvals................................... 55
8.7 Good Standing Certificates............................... 55
8.8 No Material Adverse Change............................... 55
8.9 Closing of IPO........................................... 55
8.10 Secretary's Certificate.................................. 56
8.11 Employment Agreements.................................... 56
8.12 Directors and Officers Insurance......................... 56
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF TSII....................... 56
9.1 Representations and Warranties........................... 57
9.2 Performance of Obligations............................... 57
9.3 No Litigation............................................ 57
9.4 Secretary's Certificate.................................. 58
9.5 No Material Adverse Effect............................... 58
9.6 STOCKHOLDERS' Release.................................... 58
-ii-
9.7 Termination of Related Party Agreements................... 59
9.8 Opinion of Counsel........................................ 59
9.9 Consents and Approvals.................................... 59
9.10 Good Standing Certificates................................ 59
9.11 Registration Statement.................................... 60
9.12 Employment Agreements..................................... 60
9.13 Closing of IPO............................................ 60
9.14 FIRPTA Certificate........................................ 60
10. COVENANTS OF TSII AND THE STOCKHOLDERS AFTER CLOSING............... 61
10.1 Release From Guarantees; Repayment of Certain
Obligations............................................... 61
10.2 Preservation of Tax and Accounting Treatment.............. 61
10.3 Preparation and Filing of Tax Returns..................... 62
10.4 Directors and Officers.................................... 63
10.5 Preservation of Employee Benefit Plans.................... 63
10.6 Maintenance of Books...................................... 64
11. INDEMNIFICATION.................................................... 64
11.1 General Indemnification by STOCKHOLDERS................... 64
11.2 Indemnification by TSII................................... 66
11.3 Third Person Claims....................................... 67
11.4 Exclusive Remedy.......................................... 69
11.5 Limitations on Indemnification............................ 70
12. TERMINATION OF AGREEMENT........................................... 72
12.1 Termination............................................... 72
12.2 Liabilities in Event of Termination....................... 72
13. NONCOMPETITION..................................................... 73
13.1 Prohibited Activities..................................... 73
13.2 Damages................................................... 75
13.3 Reasonable Restraint...................................... 75
13.4 Severability; Reformation................................. 75
13.5 Independent Covenant...................................... 76
13.6 Materiality............................................... 76
13.7 Limitations............................................... 76
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.......................... 77
14.1 STOCKHOLDERS.............................................. 77
14.2 TSII...................................................... 78
14.3 Damages................................................... 79
14.4 Survival.................................................. 80
15. TRANSFER RESTRICTIONS.............................................. 80
15.1 Transfer Restrictions..................................... 80
15.2 Certain Transfers............................................. 81
16. FEDERAL SECURITIES ACT REPRESENTATIONS............................. 82
16.1 Compliance with Law....................................... 82
16.2 Economic Risk; Sophistication............................. 82
-iii-
17. REGISTRATION RIGHTS............................................... 83
17.1 Piggyback Registration Rights............................ 83
17.2 Demand Registration Rights............................... 85
17.3 Registration Procedures.................................. 86
17.4 Underwriting Agreement................................... 87
17.5 Availability of Rule 144................................. 87
18. GENERAL........................................................... 87
18.1 Cooperation.............................................. 87
18.2 Successors and Assigns................................... 88
18.3 Entire Agreement......................................... 88
18.4 Counterparts............................................. 88
18.5 Brokers and Agents....................................... 89
18.6 Expenses................................................. 89
18.7 Notices.................................................. 90
18.8 Governing Law............................................ 91
18.9 Exercise of Rights and Remedies.......................... 91
18.10 Time..................................................... 92
18.11 Reformation and Severability............................. 92
18.12 Remedies Cumulative...................................... 92
18.13 Captions................................................. 92
18.14 Amendments and Waivers................................... 93
18.15 Incorporation by Reference............................... 93
18.16 Defined Terms............................................ 93
ANNEX I
INTENTIONALLY DELETED...................................................... 99
ANNEX II
CERTIFICATE OF INCORPORATION AND BY-LAWS OF TSII.......................... 100
ANNEX III
CONSIDERATION TO BE PAID TO STOCKHOLDERS.................................. 101
ANNEX IV
STOCKHOLDERS AND STOCK OWNERSHIP OF THE COMPANY........................... 102
ANNEX V
STOCKHOLDERS AND STOCK OWNERSHIP OF TSII.................................. 103
ANNEX VI
FORM OF OPINION OF COUNSEL TO TSII........................................ 104
ANNEX VII
FORM OF OPINION OF COUNSEL TO COMPANY AND STOCKHOLDERS.................... 108
ANNEX VIII
FORM OF EMPLOYMENT AGREEMENT.............................................. 112
-iv-
AGREEMENT AND PLAN OF ORGANIZATION
THIS AGREEMENT AND PLAN OF ORGANIZATION (the "Agreement") is made as of
May 9, 1997, by and among TRAVEL SERVICES INTERNATIONAL, INC., a Delaware
corporation ("TSII"), CRUISES, INC., a New York corporation (the "COMPANY"),
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual residing in Bridgeport, New York, ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇, an individual residing in Bridgeport, New York, and ▇▇▇▇▇▇ ▇. ▇▇▇▇, an
individual residing in Manlius, New York. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and ▇▇▇▇▇▇ ▇. ▇▇▇▇ are referred to collectively herein as the "STOCKHOLDERS."
WHEREAS, the respective Boards of Directors of TSII and the
COMPANY and the STOCKHOLDERS deem it advisable and in the best
interests of TSII and the COMPANY and their respective stockholders
that the STOCKHOLDERS contribute all of the COMPANY Stock owned by the
STOCKHOLDERS to TSII in exchange for stock of TSII and cash pursuant to
this Agreement and in accordance with the applicable provisions of the
laws of the State of Delaware and the State in which the COMPANY is
incorporated;
WHEREAS, TSII is entering into an Agreement and Plan of
Organization (collectively, the "Other Agreements") with Auto- Europe,
Inc. (Maine), a Maine corporation, Cruises Only, Inc., a Florida
corporation, D-FW Tours, Inc., a Texas corporation, D-FW Travel
Arrangements, Inc., a Texas corporation, and 800- Ideas, Inc., a Nevada
corporation, and their respective stockholders in order to acquire
additional businesses (the COMPANY, together with each of the entities
with which TSII
has entered into the Other Agreements, are collectively referred to
herein as the "Founding Companies");
WHEREAS, this Agreement, the Other Agreements and the IPO of
TSII Stock constitute the "TSII Plan of Organization;"
WHEREAS, the STOCKHOLDERS and the Boards of Directors and the
stockholders of TSII and each of the Other Founding Companies that are
parties to the Other Agreements have approved and adopted the TSII Plan
of Organization as an integrated plan pursuant to which (1)
Auto-Europe, Inc., Cruises Only, Inc. and 800-Ideas, Inc. will
contribute the ownership of substantially all of their respective
assets to TSII, (2) the stockholders of the COMPANY, D-FW Tours, Inc.
and D-FW Travel Arrangements, Inc. will transfer the capital stock of
such companies to TSII and (3) Auto-Europe, Inc. (Maine), Cruises Only,
Inc., 800-Ideas, Inc., the public, and the stockholders of the COMPANY,
D-FW Tours, Inc. and D-FW Travel Arrangements, Inc. will acquire the
stock of TSII as a tax-free transfer of property under Section 351 of
the Internal Revenue Code of 1986, as amended; and
WHEREAS, in consideration of the agreements of the Other
Founding Companies pursuant to the Other Agreements, the STOCKHOLDERS
and the Board of Directors of the COMPANY have approved this Agreement
as part of the TSII Plan of Organization in order to transfer the
ownership of all of the outstanding COMPANY Stock to TSII.
2
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements, representations, warranties, provisions and covenants herein
contained, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE
On the Funding and Consummation Date, (a) each of the STOCKHOLDERS
shall transfer, convey, assign and deliver to TSII, and TSII shall acquire and
accept from the STOCKHOLDERS, as a contribution to TSII under Section 351 of the
Code, all of the shares of COMPANY Stock owned by each of the STOCKHOLDERS (the
"Shares"), free and clear of all liens, security interests, pledges, charges,
voting trusts, restrictions, encumbrances and claims of every kind.
2. [INTENTIONALLY DELETED]
3. DELIVERY OF CONSIDERATION
3.1 On the Funding and Consummation Date the STOCKHOLDERS, who are on
that date the holders of all outstanding certificates representing shares of
COMPANY Stock, shall, upon surrender of such certificates, receive the number of
shares of TSII Stock and the amount of cash set forth on Annex III hereto, said
cash to be payable by certified check or wire transfer.
3.2 The STOCKHOLDERS shall deliver to TSII at the Closing the
certificates representing all of the Shares, duly endorsed in blank by the
STOCKHOLDERS, or accompanied by blank stock powers, and with
3
all necessary transfer tax and other revenue stamps, acquired at the
STOCKHOLDERS' expense, affixed and cancelled. The STOCKHOLDERS agree promptly to
cure any deficiencies with respect to the endorsement of the stock certificates
or other documents of conveyance with respect to such Shares or with respect to
the stock powers accompanying the Shares.
3.3 All TSII Stock received by the STOCKHOLDERS pursuant to this
Agreement shall, except for restrictions on resale or transfer described in
Sections 15 and 16 hereof, have the same rights as all of the other shares of
outstanding TSII Stock by reason of the provisions of the Certificate of
Incorporation of TSII or as otherwise provided by the Delaware GCL. All voting
rights of such TSII Stock received by the STOCKHOLDERS shall be fully
exercisable by the STOCKHOLDERS and the STOCKHOLDERS shall not be deprived nor
restricted in exercising those rights. On the Funding and Consummation Date,
TSII shall have no class of capital stock issued and outstanding other than the
TSII Stock and the Restricted Common Stock.
4. CLOSING
At or prior to the Pricing, the parties shall take all actions
necessary to prepare to (i) effect the transfer and delivery of the Shares as
contemplated by Section 1 hereof and (ii) effect the delivery of the
consideration referred to in Section 3 hereof; provided, however, that such
actions shall not include the actual completion of the transfer and delivery of
the Shares or the
4
delivery of the consideration by certified check(s) or wire transfer(s) referred
to in Section 3 hereof, each of which actions shall only be taken upon the
Funding and Consummation Date as herein provided. The taking of the actions
described in clauses (i) and (ii) above (the "Closing") shall take place on the
closing date (the "Closing Date") at the offices of Akin, Gump, Strauss, ▇▇▇▇▇ &
▇▇▇▇, L.L.P., ▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇. On the
Funding and Consummation Date (x) all transactions contemplated by this
Agreement, including the delivery of the Shares and the delivery of shares of
TSII Stock and certified check(s) or wire transfer(s) in an amount equal to the
cash portion of the consideration which the STOCKHOLDERS shall be entitled to
receive pursuant to Section 3 hereof shall occur and (y) the closing with
respect to the IPO shall be completed. The date on which the actions described
in the preceding clauses (x) and (y) occur shall be referred to as the "Funding
and Consummation Date." Except as provided in Sections 8 and 9 hereof with
respect to actions to be taken on the Funding and Consummation Date, during the
period from the Closing Date to the Funding and Consummation Date this Agreement
may only be terminated by a party if the underwriting agreement in respect of
the IPO is terminated pursuant to the terms of such agreement. This Agreement
shall in any event terminate if the Funding and Consummation Date has not
occurred within 15 business days of the Closing Date. Time is of the essence.
5
5. REPRESENTATIONS AND WARRANTIES OF COMPANY AND STOCKHOLDERS
(A) Representations and Warranties of COMPANY and
STOCKHOLDERS.
Each of the COMPANY and the STOCKHOLDERS jointly and severally
represents and warrants that all of the following representations and warranties
in this Section 5(A) are true at the date of this Agreement and, subject to
Section 7.8 hereof, shall be true at the time of Closing and the Funding and
Consummation Date. Each of the COMPANY and the STOCKHOLDERS agrees that such
representations and warranties shall survive the Funding and Consummation Date
for a period of two years (the last day of such period being the "Expiration
Date"), except that (i) the warranties and representations set forth in Section
5.22 hereof shall survive until such time as the limitations period has run for
all Tax periods ended on or prior to the Funding and Consummation Date, which
shall be deemed to be the Expiration Date for Section 5.22 and (ii) solely for
purposes of determining whether a claim for indemnification under Section
11.1(iii) hereof has been made on a timely basis, and solely to the extent that
in connection with the IPO, TSII actually incurs liability under the 1933 Act,
the 1934 Act, or any other federal or state securities laws as a result of a
breach of a representation or warranty by the COMPANY or a STOCKHOLDER, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such
6
purposes. For purposes of this Section 5, the term "COMPANY" shall mean and
refer to the COMPANY and all of its Subsidiaries.
5.1 Due Organization. The COMPANY is a corporation duly organized,
validly existing and in good standing under the laws of the state of its
incorporation, and the COMPANY is duly authorized and qualified to do business
under all applicable laws, regulations, ordinances and orders of public
authorities to carry on its business in the places and in the manner as now
conducted, except (i) as set forth on Schedule 5.1 or (ii) where the failure to
be so authorized or qualified would not have a material adverse effect on the
business, operations, affairs, prospects, properties, assets or condition
(financial or otherwise), of the COMPANY taken as a whole (as used herein with
respect to the COMPANY, or with respect to any other person, a "Material Adverse
Effect"). Schedule 5.1 sets forth the jurisdiction in which the COMPANY is
incorporated and contains a list of all such jurisdictions in which the COMPANY
is authorized or qualified to do business. True, complete and correct copies of
the Certificate of Incorporation and By-laws, each as amended, of the COMPANY
(the "Charter Documents") are all attached hereto as Schedule 5.1. The stock
records of the COMPANY, as heretofore made available to TSII, are correct and
complete in all material respects. There are no minutes in the possession of the
COMPANY or the STOCKHOLDERS which have not been made available to TSII, and all
of such minutes are correct and complete in all respects. Except as set forth on
Schedule 5.1, the most recent minutes of the COMPANY, which are dated no earlier
than
7
ten business days prior to the date hereof, affirm and ratify all prior acts of
the COMPANY, and of its officers and directors on behalf of the COMPANY.
5.2 Authorization. (i) The representatives of the COMPANY executing
this Agreement have the authority to enter into and bind the COMPANY to the
terms of this Agreement and (ii) the COMPANY has the full legal right, power and
authority to enter into and perform this Agreement, and all required approvals
of the shareholders and the Board of Directors of the COMPANY have been
obtained.
5.3 Capital Stock of the COMPANY. The authorized capital stock of the
COMPANY is as set forth on Schedule 5.3. The Shares, which are all of the issued
and outstanding shares of the capital stock of the COMPANY, are owned by the
STOCKHOLDERS in the amounts set forth in Annex IV and further, except as set
forth on Schedule 5.3, are owned free and clear of all liens, security
interests, pledges, charges, voting trusts, restrictions, encumbrances and
claims of every kind. All of the issued and outstanding shares of the capital
stock of the COMPANY have been duly authorized and validly issued, are fully
paid and nonassessable, are owned of record and beneficially by the STOCKHOLDERS
and further, such shares were offered, issued, sold and delivered by the COMPANY
in compliance with all applicable state and federal laws concerning the issuance
of securities. Further, none of such shares were issued in violation of the
preemptive rights of any past or present stockholder.
8
5.4 Transactions in Capital Stock. Except as set forth on Schedule 5.4,
the COMPANY has not acquired any COMPANY Stock since January l, 1994. Except as
set forth on Schedule 5.4, (i) no option, warrant, call, conversion right or
commitment of any kind exists which obligates the COMPANY to issue any of its
authorized but unissued capital stock; (ii) the COMPANY has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof; and (iii) neither the voting stock structure of
the COMPANY nor the relative ownership of shares among any of its respective
stockholders has been altered or changed in contemplation of the transactions
contemplated hereby and/or the TSII Plan of Organization. Schedule 5.4 also
includes complete and accurate copies of all stock option or stock purchase
plans, including a list of all outstanding options, warrants or other rights to
acquire shares of the COMPANY's stock and the material terms of such outstanding
options, warrants or other rights.
5.5 No Bonus Shares. Except as set forth on Schedule 5.5, none of the
shares of COMPANY Stock was issued pursuant to awards, grants or bonuses.
5.6 Subsidiaries. Schedule 5.6 attached hereto lists the name of each
of the COMPANY's subsidiaries (each, a "Subsidiary"), and sets forth the number
and class of the authorized capital stock of each Subsidiary and the number of
shares or interests of each Subsidiary which are issued and outstanding, all of
which shares
9
(except as set forth on Schedule 5.6) are owned by the COMPANY, free and clear
of all liens, security interests, pledges, voting trusts, equities,
restrictions, encumbrances and claims of every kind. Except as set forth on
Schedule 5.6, the COMPANY does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity nor is the COMPANY, directly or indirectly, a participant in any
joint venture, partnership or other non-corporate entity.
5.7 Predecessor Status; etc. Set forth on Schedule 5.7 is a listing of
all names of all predecessor companies of the COMPANY, including the names of
any entities acquired by the COMPANY (by stock purchase, merger or otherwise) or
owned by the COMPANY or from whom the COMPANY previously acquired material
assets. Except as disclosed on Schedule 5.7, the COMPANY has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
5.8 Spin-off by the COMPANY. Except as set forth on Schedule 5.8, there
has not been any sale, spin-off or split-up of material assets of either the
COMPANY or any other person or entity that directly, or indirectly through one
or more intermediaries, controls, or is controlled by, or is under common
control with, the COMPANY ("Affiliates") since January 1, 1994.
5.9 Financial Statements. Attached hereto as Schedule 5.9 are copies of
the following financial statements (the "COMPANY
10
Financial Statements") of the COMPANY: the COMPANY's unaudited Consolidated
Balance Sheets, if any, as of September 30, 1996, 1995 and 1994 and Statements
of Income, Cash Flows and Retained Earnings, if any, for each of the years in
the three-year period ended September 30, 1996 (September 30, 1996 being
hereinafter referred to as the "Balance Sheet Date"). Except as set forth on
Schedule 5.9, such Financial Statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as noted thereon or on Schedule 5.9).
Except as set forth on Schedule 5.9, such Consolidated Balance Sheets as of
September 30, 1996, 1995 and 1994 present fairly the financial position of the
COMPANY as of the dates indicated thereon, and such Consolidated Statements of
Income, Cash Flows and Retained Earnings present fairly the results of
operations for the periods indicated thereon.
5.10 Liabilities and Obligations. The COMPANY has delivered to TSII an
accurate list (which is set forth on Schedule 5.10) as of the Balance Sheet Date
of (i) all liabilities of the COMPANY which are not reflected on the balance
sheet of the COMPANY at the Balance Sheet Date or otherwise reflected in the
COMPANY Financial Statements at the Balance Sheet Date, (ii) any material
liabilities of the COMPANY (including all liabilities in excess of $10,000) and
(iii) all loan agreements, indemnity or guaranty agreements, bonds, mortgages,
liens, pledges or other security agreements. Except as set forth on Schedule
5.10, since the Balance Sheet Date the COMPANY has not incurred any material
liabilities of any kind,
11
character and description, whether accrued, absolute, secured or unsecured,
contingent or otherwise, other than liabilities incurred in the ordinary course
of business. The COMPANY has also delivered to TSII on Schedule 5.10, in the
case of those contingent liabilities related to pending or threatened
litigation, or other liabilities which are not fixed or are being contested, the
following information:
(i) a summary description of the liability together with the
following:
(a) copies of all relevant documentation relating thereto;
(b) amounts claimed and any other action or relief sought; and
(c) name of claimant and all other parties to the claim, suit or
proceeding;
(ii) the name of each court or agency before which such claim, suit or
proceeding is pending; and
(iii) the date such claim, suit or proceeding was instituted; and
(iv) a good faith and reasonable estimate of the maximum amount, if
any, which is likely to become payable with respect to each such liability.
If no estimate is provided, the estimate shall for purposes of this
Agreement be deemed to be zero.
5.11 Accounts and Notes Receivable. The COMPANY has delivered to TSII
an accurate list (which is set forth on Schedule 5.11) of
12
the accounts and notes receivable of the COMPANY, as of the Balance Sheet Date,
including any such amounts which are not reflected in the balance sheet as of
the Balance Sheet Date, and including receivables from and advances to employees
and the STOCKHOLDERS. The COMPANY shall also provide to TSII (x) an accurate
list of all receivables obtained subsequent to the Balance Sheet Date up to the
Closing Date and (y) an aging of all accounts and notes receivable showing
amounts due in 30 day aging categories (the "A/R Aging Reports"). Except to the
extent reflected on Schedule 5.11 or as disclosed by the COMPANY to TSII in a
writing accompanying the A/R Aging Reports, the accounts, notes and other
receivables shown on Schedule 5.11 and on the A/R Aging Reports are and shall be
collectible in the amounts shown, net of reserves reflected in the balance sheet
as of the Balance Sheet Date with respect to accounts receivable as of the
Balance Sheet Date, and net of reserves reflected in the books and records of
the COMPANY (consistent with the methods used for the balance sheet) with
respect to accounts receivable of the COMPANY after the Balance Sheet Date.
5.12 Permits and Intangibles. The COMPANY holds all licenses,
franchises, permits and other governmental authorizations the absence of any of
which could have a Material Adverse Effect on its business, and the COMPANY has
delivered to TSII an accurate list and summary description (which is set forth
on Schedule 5.12) of all such licenses, franchises, permits and other
governmental authorizations, including permits, titles, licenses, franchises,
certificates, trademarks, trade names, patents, patent applications
13
and copyrights owned or held by the COMPANY (including interests in software or
other technology systems, programs and intellectual property) (it being
understood and agreed that a list of all environmental permits and other
environmental approvals is set forth on Schedule 5.13). To the knowledge of the
COMPANY, the licenses, franchises, permits and other governmental authorizations
listed on Schedules 5.12 and 5.13 are valid, and the COMPANY has not received
any notice that any governmental authority intends to cancel, terminate or not
renew any such license, franchise, permit or other governmental authorization.
The COMPANY has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in the licenses,
franchises, permits and other governmental authorizations listed on Schedules
5.12 and 5.13 and is not in violation of any of the foregoing except where such
noncompliance or violation would not have a Material Adverse Effect on the
COMPANY. Except as specifically provided on Schedule 5.12, the transactions
contemplated by this Agreement will not result in a default under or a breach or
violation of, or adversely affect the rights and benefits afforded to the
COMPANY by, any such licenses, franchises, permits or government authorizations.
5.13 Environmental Matters. Except as set forth on Schedule 5.13, (i)
the COMPANY has complied with and is in compliance with all federal, state,
local and foreign statutes (civil and criminal), laws, ordinances, regulations,
rules, notices, permits, judgments, orders and decrees applicable to any of them
or any of
14
their respective properties, assets, operations and businesses relating to
environmental protection (collectively "Environmental Laws") including, without
limitation, Environmental Laws relating to air, water, land and the generation,
storage, use, handling, transportation, treatment or disposal of Hazardous
Wastes and Hazardous Substances including petroleum and petroleum products (as
such terms are defined in any applicable Environmental Law); (ii) the COMPANY
has obtained and adhered to all necessary permits and other approvals necessary
to treat, transport, store, dispose of and otherwise handle Hazardous Wastes and
Hazardous Substances, a list of all of which permits and approvals is set forth
on Schedule 5.13, and has reported to the appropriate authorities, to the extent
required by all Environmental Laws, all past and present sites owned and
operated by the COMPANY where Hazardous Wastes or Hazardous Substances have been
treated, stored, disposed of or otherwise handled; (iii) there have been no
releases or threats of releases (as defined in Environmental Laws) at, from, in
or on any property owned or operated by the COMPANY except as permitted by
Environmental Laws; (iv) the COMPANY knows of no on-site or off-site location to
which the COMPANY has transported or disposed of Hazardous Wastes and Hazardous
Substances or arranged for the transportation of Hazardous Wastes and Hazardous
Substances, which site is the subject of any federal, state, local or foreign
enforcement action or any other investigation which could lead to any claim
against the COMPANY or TSII for any clean-up cost, remedial work, damage to
natural resources, property damage or
15
personal injury, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended; and (v) the COMPANY has no contingent liability in connection with any
release of any Hazardous Waste or Hazardous Substance into the environment.
5.14 Personal Property. The COMPANY has delivered to TSII an accurate
list (which is set forth on Schedule 5.14) of (x) all personal property included
in "depreciable plant, property and equipment" on the balance sheet of the
COMPANY as of the Balance Sheet Date or that will be included on any balance
sheet of the COMPANY prepared after the Balance Sheet Date, (y) all other
personal property owned by the COMPANY with a value in excess of $10,000 (i) as
of the Balance Sheet Date and (ii) acquired since the Balance Sheet Date and (z)
all leases and agreements in respect of personal property, including, true,
complete and correct copies of all such leases and agreements. The COMPANY shall
indicate on Schedule 5.14 those assets currently owned, or that were formerly
owned, by STOCKHOLDERS, relatives of STOCKHOLDERS, or Affiliates of the COMPANY.
Except as set forth on Schedule 5.14, (i) all personal property used by the
COMPANY in its business is either owned by the COMPANY or leased by the COMPANY
pursuant to a lease included on Schedule 5.14, (ii) all of the personal property
listed on Schedule 5.14 is in good working order and condition, ordinary wear
and tear excepted and (iii) all leases and agreements included on Schedule 5.14
are in full force and effect and constitute valid
16
and binding agreements of the parties (and their successors) thereto in
accordance with their respective terms.
5.15 Significant Customers; Material Contracts and Commitments. The
COMPANY has delivered to TSII an accurate list (which is set forth on Schedule
5.15) of (i) all significant customers, it being understood and agreed that a
"significant customer," for purposes of this Section 5.15, means a customer (or
person or entity) representing 5% or more of the COMPANY's annual revenues as of
the Balance Sheet Date. Except to the extent set forth on Schedule 5.15, none of
the COMPANY's significant customers (or persons or entities that are sources of
a significant number of customers) have cancelled or substantially reduced or,
to the knowledge of the COMPANY, are currently attempting or threatening to
cancel a contract or substantially reduce utilization of the services provided
by the COMPANY.
The COMPANY has listed on Schedule 5.15 all material contracts,
commitments and similar agreements to which the COMPANY is a party or by which
it or any of its properties are bound (including, but not limited to, contracts
with significant customers, joint venture or partnership agreements, contracts
with any labor organizations, strategic alliances and options to purchase land),
other than contracts, commitments and agreements otherwise listed on Schedules
5.10, 5.14 or 5.16, (a) in existence as of the Balance Sheet Date and (b)
entered into since the Balance Sheet Date, and in each case has delivered true,
complete and correct copies of such agreements to TSII. The COMPANY has
17
complied with all material commitments and obligations pertaining to it, and is
not in default under any contracts or agreements listed on Schedule 5.15 and no
notice of default under any such contract or agreement has been received. The
COMPANY has also indicated on Schedule 5.15 a summary description of all plans
or projects involving the opening of new operations, expansion of existing
operations, the acquisition of any personal property, business or assets
requiring, in any event, the payment of more than $25,000 by the COMPANY.
5.16 Real Property. Schedule 5.16 includes a list of all real property
owned or leased by the COMPANY (i) as of the Balance Sheet Date and (ii)
acquired since the Balance Sheet Date, and all other property, if any, used by
the COMPANY in the conduct of its business. The COMPANY has good and insurable
title to the real property owned by it, including those reflected on Schedule
5.14, subject to no mortgage, pledge, lien, conditional sales agreement,
encumbrance or charge, except for:
(i) liens reflected on Schedules 5.10 or 5.16 as securing specified
liabilities (with respect to which no default exists);
(ii) liens for current Taxes not yet payable and assessments not in
default;
(iii) easements for utilities serving the property only; and
(iv) easements, covenants and restrictions and other exceptions to
title shown of record in the office of the
18
County Clerks in which the properties, assets and leasehold estates are
located which do not adversely affect the current use of the property.
Schedule 5.16 contains, without limitation, true, complete and correct copies of
all title reports and title insurance policies currently in possession of the
COMPANY with respect to real property owned by the COMPANY.
The COMPANY has also delivered to TSII an accurate list of real
property leased by the COMPANY (which list is set forth on Schedule 5.16),
together with true, complete and correct copies of all leases and agreements in
respect of such real property leased by the COMPANY (which copies are attached
to Schedule 5.16), and an indication as to which such properties, if any, are
currently owned, or were formerly owned, by STOCKHOLDERS or business or personal
affiliates of the COMPANY or STOCKHOLDERS. Except as set forth on Schedule 5.16,
all of such leases included on Schedule 5.16 are in full force and effect and
constitute valid and binding agreements of the parties (and their successors)
thereto in accordance with their respective terms.
5.17 Insurance. The COMPANY has delivered to TSII, as set forth on and
attached to Schedule 5.17, (i) an accurate list as of the Balance Sheet Date of
all insurance policies carried by the COMPANY, (ii) an accurate list of all
insurance loss runs and workers compensation claims received for the past three
(3) policy years and (iii) true, complete and correct copies of all insurance
policies currently in effect. Such insurance policies evidence all
19
of the insurance that the COMPANY is required to carry pursuant to all of its
contracts and other agreements and pursuant to all applicable laws. All of such
insurance policies are currently in full force and effect and shall remain in
full force and effect through the Funding and Consummation Date. No insurance
carried by the COMPANY has ever been cancelled by the insurer and the COMPANY
has never been unable to obtain insurance coverage for its assets and
operations.
5.18 Compensation; Employment Agreements; Organized Labor Matters. The
COMPANY has delivered to TSII an accurate list (which is set forth on Schedule
5.18) showing all officers, directors and key employees of the COMPANY, listing
all employment agreements with such officers, directors and key employees and
the rate of compensation (and the portions thereof attributable to salary, bonus
and other compensation, respectively) of each of such persons (i) as of the
Balance Sheet Date and (ii) as of the date hereof. The COMPANY has provided to
TSII true, complete and correct copies of any employment agreements for persons
listed on Schedule 5.18. Since the Balance Sheet Date, there have been no
increases in the compensation payable or any special bonuses to any officer,
director, key employee or other employee, except ordinary salary increases
implemented on a basis consistent with past practices, except as set forth on
Schedule 5.18.
Except as set forth on Schedule 5.18, (i) the COMPANY is not bound by
or subject to (and none of its assets or properties is bound by or subject to)
any arrangement with any labor union, (ii)
20
no employees of the COMPANY are represented by any labor union or covered by any
collective bargaining agreement, (iii) no campaign to establish such
representation is in progress and (iv) there is no pending or, to the best of
the COMPANY's knowledge, threatened labor dispute involving the COMPANY and any
group of its employees nor has the COMPANY experienced any labor interruptions
over the past three years. The COMPANY believes its relationship with employees
to be good.
5.19 Employee Plans. The COMPANY has delivered to TSII an accurate
schedule (Schedule 5.19) showing all employee benefit plans currently sponsored
or maintained or contributed to by, or which cover the current or former
employees or directors of the COMPANY, all employment agreements and other
agreements or arrangements containing "golden parachute" or other similar
provisions, and all deferred compensation agreements, together with true,
complete and correct copies of such plans, agreements and any trusts related
thereto, and classifications of employees covered thereby as of the Balance
Sheet Date. Except for the employee benefit plans, if any, described on Schedule
5.19, the COMPANY does not sponsor, maintain or contribute to any plan program,
fund or arrangement that constitutes an "employee pension benefit plan," nor has
the COMPANY any obligation to contribute to or accrue or pay any benefits under
any deferred compensation or retirement funding arrangement on behalf of any
employee or employees (such as, for example, and without limitation, any
individual retirement account or annuity, any "excess benefit plan" (within the
meaning
21
of Section 3(36) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") or any non-qualified deferred compensation arrangement). For
the purposes of this Agreement, the term "employee pension benefit plan" shall
have the same meaning as is given that term in Section 3(2) of ERISA. The
COMPANY has not sponsored, maintained or contributed to any employee pension
benefit plan other than the plans, agreements, arrangement and trusts set forth
on Schedule 5.19, nor is the COMPANY required to contribute to any retirement
plan pursuant to the provisions of any collective bargaining agreement
establishing the terms and conditions or employment of any of the COMPANY's
employees.
The COMPANY is not now, and cannot as a result of its past activities
become, liable to the Pension Benefit Guaranty Corporation or to any
multiemployer employee pension benefit plan under the provisions of Title IV of
ERISA.
All employee benefit plans, agreements, arrangements and trusts listed
on Schedule 5.19 and the administration thereof are in substantial compliance
with their terms and all applicable provisions of ERISA and the regulations
issued thereunder, as well as with all other applicable federal, state and local
statutes, ordinances and regulations.
All accrued contribution obligations of the COMPANY with respect to any
plan listed on Schedule 5.19 have either been fulfilled in their entirety or are
fully reflected on the balance sheet of the COMPANY as of the Balance Sheet
Date.
22
5.20 Compliance with ERISA. All such plans, agreements, arrangements
and trusts of the COMPANY that are currently maintained or contributed to by the
COMPANY or cover employees or former employees of the COMPANY listed on Schedule
5.19 that are intended to qualify under Section 401(a) of the Code (the
"Qualified Plans") are, and have been so qualified and have been determined by
the Internal Revenue Service to be so qualified, and copies of such
determination letters are included as part of Schedule 5.19 hereof. Except as
disclosed on Schedule 5.19, all reports and other documents required to be filed
with any governmental agency or distributed to plan participants or
beneficiaries (including, but not limited to, actuarial reports, audit reports
or Tax Returns) have been timely filed or distributed, and copies thereof for
the three most recent plan years are included as part of Schedule 5.19 hereof.
Neither STOCKHOLDERS, any such plan listed on Schedule 5.19, nor the COMPANY has
engaged in any transaction prohibited under the provisions of Section 4975 of
the Code or Section 406 of ERISA. No such plan listed on Schedule 5.19 has
incurred an accumulated funding deficiency, as defined in Section 412(a) of the
Code and Section 302(1) of ERISA; and the COMPANY has not incurred any liability
for excise tax or penalty due to the Internal Revenue Service nor any liability
to the Pension Benefit Guaranty Corporation. The STOCKHOLDERS further represent
that:
(i) there have been no terminations, partial terminations or
discontinuance of contributions to any such
23
Qualified Plan intended to qualify under Section 401(a) of the Code without
notice to and approval by the Internal Revenue Service;
(ii) no such plan listed on Schedule 5.19 subject to the provisions of
Title IV of ERISA has been terminated;
(iii) there have been no "reportable events" (as that phrase is
defined in Section 4043 of ERISA) with respect to any such plan listed on
Schedule 5.19;
(iv) the COMPANY has not incurred liability under Section 4062 of
ERISA; and
(v) no circumstances exist pursuant to which the COMPANY could have
any direct or indirect liability whatsoever (including, but not limited to,
any liability to any multiemployer plan or the Pension Benefit Guaranty
Corporation under Title IV of ERISA or to the Internal Revenue Service for
any excise tax or penalty, or being subject to any Statutory Lien to secure
payment of any such liability) with respect to any plan now or heretofore
maintained or contributed to by any entity other than the COMPANY that is,
or at any time was, a member of a "controlled group" (as defined in Section
412(n)(6)(B) of the Code) that includes the COMPANY.
5.21 Conformity with Law; Litigation. Except to the extent set forth on
Schedules 5.21 or 5.13, the COMPANY is not in violation of any law or regulation
which would have a Material Adverse Effect, or of any order of any court or
federal, state, municipal or other governmental department, commission, board,
24
bureau, agency or instrumentality having jurisdiction over the COMPANY; and
except to the extent set forth on Schedules 5.10 or 5.13, there are no claims,
actions, suits or proceedings, commenced or, to the knowledge of the COMPANY,
threatened, against or affecting the COMPANY, at law or in equity, or before or
by any federal, state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality having jurisdiction over the COMPANY
and no notice of any claim, action, suit or proceeding, whether pending or
threatened, has been received. The COMPANY has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in applicable federal, state and local statutes, ordinances, permits,
licenses, orders, approvals, variances, rules and regulations, including all
such permits, licenses, orders and other governmental approvals set forth on
Schedules 5.12 and 5.13, and is not in violation of any of the foregoing.
5.22 Taxes. The COMPANY has timely filed all requisite federal, state
and other Tax returns or extension requests for all fiscal periods ended on or
before the Balance Sheet Date; and except as set forth on Schedule 5.22, there
are no examinations in progress or claims against the COMPANY for federal, state
and other Taxes (including penalties and interest) for any period or periods
prior to and including the Balance Sheet Date and no notice of any claim for
Taxes, whether pending or threatened, has been received. All Tax, including
interest and penalties (whether or not shown on
25
any Tax Return) owed by the COMPANY, any member of an affiliated or consolidated
group which includes or included the COMPANY, or with respect to any payment
made or deemed made by the COMPANY, required to be paid by the date hereof has
been paid. The amounts shown as accruals for Taxes on the COMPANY Financial
Statements are sufficient for the payment of all Taxes of the kinds indicated
(including penalties and interest) for all fiscal periods ended on or before
that date. Copies of (i) the federal and local income tax returns and franchise
tax returns of the COMPANY for its last three (3) fiscal years, or such shorter
period of time as the COMPANY shall have existed, (ii) any Tax examinations
commenced or closed or outstanding during their three (3) most recent fiscal
years, and (iii) currently outstanding extensions of statutory limitations, are
attached hereto as Schedule 5.22. The COMPANY has a taxable year ended on the
date set forth as such on Schedule 5.22. Except as disclosed on Schedule 5.22,
the COMPANY's methods of accounting have not changed in the past five years. The
COMPANY is not an investment company as defined in Section 351(e)(1) of the
Code.
5.23 No Violations. The COMPANY is not in violation of any Charter
Document. Neither the COMPANY nor, to the knowledge of the COMPANY, any other
party thereto, is in default under any lease, instrument, agreement, license or
permit set forth on Schedules 5.12, 5.13, 5.14, 5.15 or 5.16, or any other
material agreement to which it is a party or by which its properties are bound
(the "Material Documents"); and, except as set forth on
26
Schedule 5.23, (a) the rights and benefits of the COMPANY under the Material
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any violation or breach or constitute a default under, any of the
terms or provisions of the Material Documents or the Charter Documents. Except
as set forth on Schedule 5.23, none of the Material Documents requires notice
to, or the consent or approval of, any governmental agency or other third party
with respect to any of the transactions contemplated hereby in order to remain
in full force and effect, and consummation of the transactions contemplated
hereby will not give rise to any right to termination, cancellation or
acceleration or loss of any right or benefit. Except as set forth on Schedule
5.23, none of the Material Documents prohibits the use or publication by the
COMPANY or TSII of the name of any other party to such Material Document, and
none of the Material Documents prohibits or restricts the COMPANY from freely
providing services to any other customer or potential customer of the COMPANY,
TSII or any Other Founding Company.
5.24 Government Contracts. Except as set forth on Schedule 5.24, the
COMPANY is not now a party to any governmental contract subject to price
redetermination or renegotiation.
5.25 Absence of Changes. Since the Balance Sheet Date, except as set
forth on Schedule 5.25, there has not been:
27
(i) any material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), income or business of the COMPANY;
(ii) any damage, destruction or loss (whether or not covered by
insurance) materially adversely affecting the properties or business of the
COMPANY;
(iii) any change in the authorized capital of the COMPANY or its
outstanding securities or any change in its ownership interests or any
grant of any options, warrants, calls, conversion rights or commitments;
(iv) any declaration or payment of any dividend or distribution in
respect of the capital stock or any direct or indirect redemption, purchase
or other acquisition of any of the capital stock of the COMPANY;
(v) any increase in the compensation, bonus, sales commissions or fee
arrangement payable or to become payable by the COMPANY to any of its
officers, directors, STOCKHOLDERS, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice;
(vi) any work interruptions, labor grievances or claims filed, or any
event or condition of any character, materially adversely affecting the
business of the COMPANY;
(vii) any sale or transfer, or any agreement to sell or transfer, any
material assets, property or rights of the
28
COMPANY to any person, including, without limitation, the STOCKHOLDERS and
their affiliates;
(viii) any cancellation, or agreement to cancel, any indebtedness or
other obligation owing to the COMPANY, including without limitation any
indebtedness or obligation of any STOCKHOLDER or any affiliate thereof;
(ix) any plan, agreement or arrangement granting any preferential
rights to purchase or acquire any interest in any of the assets, property
or rights of the COMPANY or requiring consent of any party to the transfer
and assignment of any such assets, property or rights;
(x) any purchase or acquisition of, or agreement, plan or arrangement
to purchase or acquire, any property, rights or assets outside of the
ordinary course of the COMPANY's business;
(xi) any waiver of any material rights or claims of the COMPANY;
(xii) any material breach, amendment or termination of any contract,
agreement, license, permit or other right to which the COMPANY is a party;
(xiii) any transaction by the COMPANY outside the ordinary course of
its business;
(xiv) any cancellation or termination of a material contract with a
customer or client prior to the scheduled termination date; or
29
(xv) any other distribution of property or assets by the COMPANY.
5.26 Deposit Accounts; Powers of Attorney. The COMPANY has delivered to
TSII an accurate schedule (which is set forth on Schedule 5.26) as of the date
of the Agreement of:
(i) the name of each financial institution in which the COMPANY has
accounts or safe deposit boxes;
(ii) the names in which the accounts or boxes are held;
(iii) the type of account and account number; and
(iv) the name of each person authorized to draw thereon or have access
thereto.
Schedule 5.26 also sets forth a complete list of the names of each person,
corporation, firm or other entity holding a general or special power of attorney
from the COMPANY and a description of the terms of such power.
5.27 Validity of Obligations. The execution and delivery of this
Agreement by the COMPANY and the performance of the transactions contemplated
herein have been duly and validly authorized by the Board of Directors of the
COMPANY and this Agreement has been duly and validly authorized by all necessary
corporate action and is a legal, valid and binding obligation of the COMPANY,
enforceable against the Company in accordance with its terms except as limited
by bankruptcy, insolvency or other similar laws of general application relating
to or affecting the enforcement of creditors' rights generally, and the
individual(s)
30
signing this Agreement on behalf of the Company have the legal power, authority
and capacity to bind the Company.
5.28 Relations with Governments. The COMPANY has not made, offered or
agreed to offer anything of value to any governmental official, political party
or candidate for government office nor has it otherwise taken any action which
would cause the COMPANY to be in violation of the Foreign Corrupt Practices Act
of 1977, as amended, or any law of similar effect.
5.29 Disclosure. (a) This Agreement, including the schedules hereto,
together with the completed Directors and Officers Questionnaires and
Registration Statement Questionnaires attached hereto as Schedule 5.29 and all
other documents and information made available to TSII and its representatives
in writing pursuant hereto or thereto, present fairly the business and
operations of the COMPANY for the time periods with respect to which such
information was requested. The COMPANY'S rights under the documents delivered
pursuant hereto would not be materially adversely affected by, and no statement
made herein would be rendered untrue in any material respect by, any other
document to which the COMPANY is a party, or to which its properties are
subject, or by any other fact or circumstance regarding the COMPANY (which fact
or circumstance was, or should reasonably, after due inquiry, have been known to
the COMPANY) that is not disclosed pursuant hereto or thereto.
(b) The COMPANY and the STOCKHOLDERS acknowledge and agree (i) that
there exists no firm commitment, binding agreement,
31
or promise or other assurance of any kind, whether express or implied, oral or
written, that a Registration Statement will become effective or that the IPO
pursuant thereto will occur at a particular price or within a particular range
of prices or occur at all; and (ii) that neither TSII or any of its officers,
directors, agents or representatives nor any Underwriter shall have any
liability to the COMPANY, the STOCKHOLDERS or any other person affiliated or
associated with the COMPANY for any failure of the Registration Statement to
become effective, the IPO to occur at a particular price or within a particular
range of prices or to occur at all.
5.30 Prohibited Activities. Except as set forth on Schedule 5.30, the
COMPANY has not, between the Balance Sheet Date and the date hereof, taken any
of the actions set forth in Section 7.3 (Prohibited Activities).
(B) Representations and Warranties of STOCKHOLDERS
Each STOCKHOLDER severally represents and warrants that the
representations and warranties set forth below are true as of the date of this
Agreement and, subject to Section 7.8 hereof, shall be true at the time of
Closing and on the Funding and Consummation Date, and that the representations
and warranties set forth in Sections 5.31, 5.32 and 5.33 shall survive until the
second anniversary of the Funding and Consummation Date, which shall be the
Expiration Date for purposes of those Sections.
5.31 Authority; Ownership. Such STOCKHOLDER has the full legal right,
power and authority to enter into this Agreement.
32
Such STOCKHOLDER owns beneficially and of record all of the shares of the
COMPANY Stock identified on Annex IV as being owned by such STOCKHOLDER, and,
except as set forth on Schedule 5.31, such COMPANY Stock is owned free and clear
of all liens, encumbrances and claims of every kind.
5.32 Preemptive Rights. Such STOCKHOLDER does not have, or hereby
waives, any preemptive or other right to acquire shares of COMPANY Stock or TSII
Stock that such STOCKHOLDER has or may have had on the date hereof other than
rights of any STOCKHOLDER to acquire TSII Stock pursuant to any option granted
by TSII.
5.33 No Intention to Dispose of TSII Stock. The STOCKHOLDERS do not
have any present plan, intention, commitment, binding agreement or arrangement
to dispose of any shares of TSII Stock received as described in Section 3.1.
6. REPRESENTATIONS OF TSII
TSII represents and warrants that all of the following representations
and warranties in this Section 6 are true at the date of this Agreement and,
subject to Section 7.8 hereof, shall be true at the time of Closing and the
Funding and Consummation Date, and that such representations and warranties
shall survive the Funding and Consummation Date for a period of two years (the
last day of such period being the "Expiration Date"), except that (i) the
warranties and representations set forth in Section 6.14 hereof shall survive
until such time as the limitations period has run for all Tax periods ended on
or prior to the Funding and Consummation
33
Date, which shall be deemed to be the Expiration Date for Section 6.14 and (ii)
solely for purposes of determining whether a claim for indemnification under
Section 11.2(iv) hereof has been made on a timely basis, and solely to the
extent that in connection with the IPO, TSII actually incurs liability under the
1933 Act, the 1934 Act, or any other federal or state securities laws, the
representations and warranties set forth herein shall survive until the
expiration of any applicable limitations period, which shall be deemed to be the
Expiration Date for such purposes.
6.1 Due Organization. TSII is a corporation duly organized, validly
existing and in good standing under the laws of the state of Delaware, and is
duly authorized and qualified to do business under all applicable laws,
regulations, ordinances and orders of public authorities to carry on its
business in the places and in the manner as now conducted except where the
failure to be so authorized or qualified would not have a Material Adverse
Effect. True, complete and correct copies of the Certificate of Incorporation
and By-laws, each as amended, of TSII (the "TSII Charter Documents") are all
attached hereto as Annex III.
6.2 Authorization. (i) The representative of TSII executing this
Agreement has the authority to enter into and bind TSII to the terms of this
Agreement and (ii) TSII has the full legal right, power and authority to enter
into and perform this Agreement.
6.3 Capital Stock of the TSII. Immediately prior to the Funding and
Consummation Date, the authorized capital stock of TSII will consist of
50,000,000 shares of TSII Stock, of which the
34
number of issued and outstanding shares will be as set forth in the Registration
Statement, [_________________] shares of Restricted Common Stock, of which the
number of issued and outstanding shares will be as set forth in the Registration
Statement, and 1,000,000 shares of preferred stock, $.01 par value, of which no
shares will be issued and outstanding. All of the issued and outstanding shares
of the capital stock of TSII are owned by the persons set forth on Annex V
hereof, in each case, free and clear of all liens, security interests, pledges,
charges, voting trusts, restrictions, encumbrances and claims of every kind.
Upon consummation of the IPO, the number of outstanding shares of TSII will be
as set forth in the Registration Statement. All of the issued and outstanding
shares of the capital stock of TSII have been duly authorized and validly
issued, are fully paid and nonassessable, are owned of record and beneficially
by the persons set forth on Annex V, and further, such shares were offered,
issued, sold and delivered by TSII in compliance with all applicable state and
federal laws concerning the issuance of securities. Further, none of such shares
was issued in violation of the preemptive rights of any past or present
stockholder of TSII.
6.4 Transactions in Capital Stock. Except for the Other Agreements and
except as set forth on Schedule 6.4, (i) no option, warrant, call, conversion
right or commitment of any kind exists which obligates TSII to issue any of its
authorized but unissued capital stock; and (ii) TSII has no obligation
(contingent or otherwise) to purchase, redeem or otherwise acquire any of its
35
equity securities or any interests therein or to pay any dividend or make any
distribution in respect thereof. Schedule 6.4 also includes complete and
accurate copies of all stock option or stock purchase plans, including a list,
accurate as of the date hereof, of all outstanding options, warrants or other
rights to acquire shares of the stock of TSII.
6.5 Subsidiaries. TSII has no subsidiaries except for the companies to
become subsidiaries of TSII pursuant to this Agreement and each of the Other
Agreements as of the Funding and Consummation Date. Except as set forth in the
preceding sentence, TSII does not presently own, of record or beneficially, or
control, directly or indirectly, any capital stock, securities convertible into
capital stock or any other equity interest in any corporation, association or
business entity, and TSII is not, directly or indirectly, a participant in any
joint venture, partnership or other non-corporate entity.
6.6 Financial Statements. Attached hereto as Schedule 6.6 are copies of
the following financial statements (the "TSII Financial Statements") of TSII,
which reflect the results of its operations from inception: TSII's audited
Balance Sheet as of December 31, 1996 and Statements of Income, Cash Flows and
Retained Earnings for the period from inception through December 31, 1996. Such
TSII Financial Statements have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods indicated (except as noted thereon or on Schedule 6.6). Except as set
forth on Schedule 6.6,
36
such Balance Sheets as of December 31, 1996 present fairly the financial
position of TSII as of such date, and such statements of Income, Cash Flows and
Retained Earnings present fairly the results of operations for the period
indicated.
6.7 Liabilities and Obligations. Except as set forth on Schedule 6.7,
TSII has no material liabilities, contingent or otherwise, except as set forth
in or contemplated by this Agreement and the Other Agreements and except for
fees and expenses incurred in connection with the transactions contemplated
hereby and thereby.
6.8 Conformity with Law; Litigation. Except to the extent set forth on
Schedule 6.8, TSII is not in violation of any law or regulation which would have
a Material Adverse Effect, or of any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over TSII; and except to the extent set
forth on Schedule 6.8, there are no material claims, actions, suits or
proceedings, pending or, to the knowledge of TSII, threatened, against or
affecting TSII, at law or in equity, or before or by any federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality having jurisdiction over TSII and no notice of any claim,
action, suit or proceeding, whether pending or threatened, has been received.
TSII has conducted and is conducting its business in compliance with the
requirements, standards, criteria and conditions set forth in applicable
federal, state and local
37
statutes, ordinances, permits, licenses, orders, approvals, variances, rules and
regulations and is not in violation of any of the foregoing.
6.9 No Violations. TSII is not violation of any TSII Charter Document.
Neither TSII or, to the knowledge of TSII, any other party thereto, is in
default under any lease, instrument, agreement, license or permit to which TSII
is a party, or by which TSII or any of its properties are bound (collectively,
the "TSII Documents"); and (a) the rights and benefits of TSII under the TSII
Documents will not be adversely affected by the transactions contemplated hereby
and (b) the execution of this Agreement and the performance of the obligations
hereunder and the consummation of the transactions contemplated hereby will not
result in any violation or breach or constitute a default under, any of the
terms or provisions of the TSII Documents or the TSII Charter Documents. Except
as set forth on Schedule 6.9, none of the TSII Documents requires notice to, or
the consent or approval of, any governmental agency or other third party with
respect to any of the transactions contemplated hereby in order to remain in
full force and effect and consummation of the transactions contemplated hereby
will not give rise to any right to termination, cancellation or acceleration or
loss of any right or benefit.
6.10 Validity of Obligations. The execution and delivery of this
Agreement by TSII and the performance of the transactions contemplated herein
have been duly and validly authorized by the Board of Directors of TSII and this
Agreement has been duly and
38
validly authorized by all necessary corporate action and is a legal, valid and
binding obligation of TSII, enforceable against TSII in accordance with its
terms except as limited by bankruptcy, insolvency or other similar laws of
general application relating to or affecting the enforcement of creditors'
rights generally, and the individual signing this Agreement on behalf of TSII
has the legal power, authority and capacity to bind TSII.
6.11 TSII Stock. At the time of issuance thereof, the TSII Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement will constitute valid
and legally issued shares of TSII, fully paid and nonassessable, and with the
exception of restrictions upon resale set forth in Sections 15 and 16 hereof,
will be identical in all material and substantive respects to the TSII Stock
issued and outstanding as of the date hereof and the TSII Stock to be issued
pursuant to the Other Agreements by reason of the provisions of the Delaware
GCL. The shares of TSII Stock to be issued to the STOCKHOLDERS pursuant to this
Agreement will not be registered under the 1933 Act, except as provided in
Section 17 hereof.
6.12 No Side Agreements. TSII has not entered and will not enter into
any agreement with any of the Founding Companies or any of the stockholders of
the Founding Companies or TSII other than the Other Agreements and the
agreements contemplated by each of the Other Agreements, including the
employment agreements referred to therein, and none of TSII, its equity owners
or its affiliates have received any cash compensation or payments in connection
with this
39
transaction except for reimbursement of out-of-pocket expenses which are
necessary or appropriate to this transaction.
6.13 Business; Real Property; Material Agreements. TSII has not
conducted any operations or business since inception other than activities
related to the TSII Plan of Organization. TSII does not own and has not at any
time owned any real property or any material personal property and is not a
party to any other agreement, except as listed on Schedule 6.13 and except that
TSII is a party to the Other Agreements and the agreements contemplated thereby
and to such agreements as are described in the draft Registration Statement
provided to the STOCKHOLDERS.
6.14 Taxes. TSII has timely filed all requisite federal, state and
other Tax returns or extension requests for all fiscal periods ended on or
before the date hereof; and except as set forth on Schedule 6.14, there are no
examinations in progress or claims against TSII for federal, state and other
Taxes (including penalties and interest) for any period or periods prior to and
including the date hereof, and no notice of any claim for Taxes, whether pending
or threatened, has been received. All Tax, including interest and penalties
(whether or not shown on any Tax return) owed by TSII, any member of an
affiliated or consolidated group which includes or included TSII, or with
respect to any payment made or deemed made by TSII herein has been paid. The
amounts shown as accruals for Taxes on the TSII Financial Statements are
sufficient for the payment of all Taxes of the kinds indicated (including
penalties and interest) for all fiscal periods
40
ended on or before that date. Copies of (i) any Tax examinations, (ii)
extensions of statutory limitations and (iii) the federal and local income tax
returns and franchise tax returns of TSII for its last three (3) fiscal years,
or such shorter period of time as TSII shall have existed, are attached hereto
as Schedule 5.22. TSII is not an investment company as defined in Section
351(e)(1) of the Code.
6.15 No Intention to Dispose of Shares. TSII is acquiring the Shares
pursuant hereto for its own account for investment purposes and does not have
any present plan, intention, commitment, binding agreement, or arrangement to
dispose of the Shares.
7. COVENANTS PRIOR TO CLOSING
7.1 Access and Cooperation; Due Diligence. (a) Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY will afford to the
officers and authorized representatives of TSII and the Other Founding Companies
access to all of the COMPANY's sites, properties, books and records and will
furnish TSII with such additional financial and operating data and other
information as to the business and properties of the COMPANY as TSII or the
Other Founding Companies may from time to time reasonably request. The COMPANY
will cooperate with TSII and the Other Founding Companies and their respective
representatives, including TSII's auditors and counsel, in the preparation of
any documents or other material (including the Registration Statement) which may
be required in connection with any documents or materials
41
required by this Agreement. TSII, the STOCKHOLDERS and the COMPANY shall treat
all information obtained in connection with the negotiation and performance of
this Agreement or the due diligence investigations conducted with respect to the
Other Founding Companies as confidential in accordance with the provisions of
Section 14 hereof. In addition, TSII will cause each of the Other Founding
Companies to enter into a provision similar to this Section 7.1 requiring each
such Other Founding Company, its stockholders, directors, officers,
representatives, employees and agents to keep confidential any information
obtained by such Other Founding Company.
(b) Between the date of this Agreement and the Funding and Consummation
Date, TSII will afford to the officers and authorized representatives of the
COMPANY access to all of TSII's sites, properties, books and records and all due
diligence, agreements, documents and information of or concerning the Founding
Companies and will furnish the COMPANY with such additional financial and
operating data and other information as to the business and properties of TSII
as the COMPANY may from time to time reasonably request. TSII will cooperate
with the COMPANY, its representatives, auditors and counsel in the preparation
of any documents or other material which may be required in connection with any
documents or materials required by this Agreement. The COMPANY will cause all
information obtained in connection with the negotiation and performance of this
Agreement to be treated as
42
confidential in accordance with the provisions of Section 14
hereof.
7.2 Conduct of Business Pending Closing. Between the date of this
Agreement and the Funding and Consummation Date, the COMPANY shall, except (x)
as set forth on Schedule 7.2, (y) as requested by TSII or (z) as consented to by
TSII (which consent shall not be unreasonably withheld):
(i) carry on its business in substantially the same
manner as it has heretofore and not introduce any new method
of management, operation or accounting;
(ii) maintain its properties and facilities, including those
held under leases, in as good working order and condition as at
present, ordinary wear and tear excepted;
(iii) perform in all material respects its obligations
under agreements relating to or affecting its assets,
properties or rights;
(iv) keep in full force and effect present insurance
policies or other comparable insurance coverage;
(v) maintain and preserve its business organization intact,
use its best efforts to retain its present key employees and
relationships with suppliers, customers and others having business
relations with the COMPANY;
(vi) maintain compliance with all permits, laws, rules and
regulations, consent orders, and all other orders of applicable courts,
regulatory agencies and similar governmental authorities;
43
(vii) maintain present debt and lease instruments and not
enter into new or amended debt or lease instruments, provided that debt
and/or lease instruments may be replaced if such replacement
instruments are on terms at least as favorable to the COMPANY as the
instruments being replaced; and
(viii) maintain or reduce present salaries and commission
levels for all officers, directors, employees and agents except for
ordinary and customary bonus and salary increases for employees in
accordance with past practices.
7.3 Prohibited Activities. Except as disclosed on Schedule 7.3, between
the date hereof and the Funding and Consummation Date, the COMPANY shall not,
without prior written consent of TSII:
(i) make any change in its Articles of Incorporation or By-laws;
(ii) issue any securities, options, warrants, calls, conversion rights
or commitments relating to its securities of any kind other than in
connection with the exercise of options or warrants listed on Schedule 5.4;
(iii) declare or pay any dividend, or make any distribution in respect
of its stock whether now or hereafter outstanding, or purchase, redeem or
otherwise acquire or retire for value any shares of its stock;
(iv) enter into any contract or commitment or incur or agree to incur
any liability or make any capital
44
expenditures, except if it is in the normal course of business (consistent
with past practice) or involves an amount not in excess of $10,000;
(v) create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties whether now owned or
hereafter acquired, except: (1) with respect to purchase money liens
incurred in connection with the acquisition of equipment with an aggregate
cost not in excess of $10,000 necessary or desirable for the conduct of the
businesses of the COMPANY; (2)(A) liens for Taxes either not yet due or
being contested in good faith and by appropriate proceedings (and for which
contested Taxes adequate reserves have been established and are being
maintained) or (B) materialmen's, mechanics', workers', repairmen's,
employees' or other like liens arising in the ordinary course of business
(the liens set forth in clause (2) being referred to herein as "Statutory
Liens"), or (3) liens set forth on Schedules 5.10 and/or 5.16 hereto;
(vi) sell, assign, lease or otherwise transfer or dispose of any
property or equipment except in the normal course of business;
(vii) negotiate for the acquisition of any business or the start-up of
any new business;
(viii) merge or consolidate or agree to merge or consolidate with or
into any other corporation;
45
(ix) waive any material rights or claims of the COMPANY, provided that
the COMPANY may negotiate and adjust bills in the course of good faith
disputes with customers in a manner consistent with past practice,
provided, further, that such adjustments shall not be deemed to be included
on Schedule 5.11 unless specifically listed thereon;
(x) commit a material breach or amend or terminate any material
agreement, permit, license or other right of the COMPANY; or
(xi) enter into any other transaction outside the ordinary course of
its business or prohibited hereunder.
7.4 No Shop. None of the STOCKHOLDERS, the COMPANY, or any agent,
officer, director, trustee or any representative of any of the foregoing will,
during the period commencing on the date of this Agreement and ending with the
earlier to occur of the Funding and Consummation Date or the termination of this
Agreement in accordance with its terms, directly or indirectly:
(i) solicit or initiate the submission of proposals or offers from any
person or entity for,
(ii) participate in any discussions pertaining to, or
(iii) furnish any information to any person or entity other than TSII
or its authorized agents relating to any acquisition or purchase of all or
a material amount of the assets of, or any equity interest in, the COMPANY
or a merger, consolidation or business combination of the COMPANY.
46
7.5 Notice to Bargaining Agents. Prior to the Closing Date, the COMPANY
shall satisfy any requirement for notice of the transactions contemplated by
this Agreement under applicable collective bargaining agreements, and shall
provide TSII on Schedule 7.5 with proof that any required notice has been sent.
7.6 Agreements. The STOCKHOLDERS and the COMPANY shall terminate (i)
any stockholders agreements, voting agreements, voting trusts, options, warrants
and employment agreements between the COMPANY and any employee listed on
Schedule 8.11 hereto and (ii) any existing agreement between the COMPANY and any
STOCKHOLDER, on or prior to the Funding and Consummation Date. Copies of such
termination agreements are listed on Schedule 7.6 and copies thereof are
attached hereto.
7.7 Notification of Certain Matters. The STOCKHOLDERS and the COMPANY
shall give prompt notice to TSII of (i) the occurrence or non-occurrence of any
event the occurrence or non-occurrence of which would be likely to cause any
representation or warranty of the COMPANY or the STOCKHOLDERS contained herein
to be untrue or inaccurate in any material respect at or prior to the Closing
and (ii) any material failure of any STOCKHOLDER or the COMPANY to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by such person hereunder. TSII shall give prompt notice to the COMPANY of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty of TSII
contained herein to be untrue or inaccurate in any material respect
47
at or prior to the Closing and (ii) any material failure of TSII 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 7.7 that is
not accompanied by a proposed amendment or supplement to a schedule pursuant to
Section 7.8 shall not be deemed to (i) modify the representations or warranties
hereunder of the party delivering such notice, which modification may only be
made pursuant to Section 7.8, (ii) modify the conditions set forth in Sections 8
and 9, or (iii) limit or otherwise affect the remedies available hereunder to
the party receiving such notice.
7.8 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this Agreement,
such party shall have the continuing obligation until the anticipated
effectiveness of the Registration Statement to supplement or amend promptly the
Schedules hereto with respect to any matter hereafter arising or discovered
which, if existing or known at the date of this Agreement, would have been
required to be set forth or described in the Schedules, provided, however, that
supplements and amendments to Schedules 5.10, 5.11, 5.14, 5.15 and 5.18 shall
only have to be delivered at the Closing Date, unless such Schedule is to be
amended to reflect an event occurring other than in the ordinary course of
business. Notwithstanding the foregoing sentence, no amendment or supplement to
a Schedule prepared by the COMPANY that constitutes or reflects an event or
occurrence that would have a Material Adverse Effect
48
may be made unless TSII and a majority of the Founding Companies other than the
COMPANY consent to such amendment or supplement; and provided further, that no
amendment or supplement to a schedule prepared by TSII that constitutes or
reflects an event or occurrence that would have a Material Adverse Effect may be
made unless a majority of the Founding Companies consent to such amendment or
supplement. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions set forth in Sections 8.1 and 9.1
have been fulfilled, the Schedules hereto shall be deemed to be the schedules as
amended or supplemented pursuant to this Section 7.8. In the event that one of
the Other Founding Companies seeks to amend or supplement a schedule pursuant to
Section 7.8 of one of the Other Agreements, and such amendment or supplement
constitutes or reflects an event or occurrence that would have a Material
Adverse Effect on such Other Founding Company, TSII shall give the COMPANY
notice promptly after it has knowledge thereof. If TSII and a majority of the
Founding Companies consent to such amendment or supplement, which consent shall
have been deemed given by TSII or any Founding Company if no response is
received within 24 hours following receipt of notice of such amendment or
supplement (or sooner if required by the circumstances under which such consent
is requested), but the COMPANY does not give its consent, the COMPANY may
terminate this Agreement pursuant to Section 12.l(iv) hereof. In the event that
the COMPANY seeks to amend or supplement a Schedule pursuant to this Section
7.8, and TSII and a majority of
49
the Other Founding Companies do not consent to such amendment or supplement,
this Agreement shall be deemed terminated by mutual consent as set forth in
Section 12.1(i) hereof. In the event that TSII seeks to amend or supplement a
Schedule pursuant to this Section 7.8 and a majority of the Founding Companies
do not consent to such amendment or supplement, this Agreement shall be deemed
terminated by mutual consent as set forth in Section 12.1(i) hereof. No party to
this Agreement shall be liable to any other party if this Agreement shall be
terminated pursuant to the provisions of this Section 7.8.
7.9 Cooperation in Preparation of Registration Statement. The COMPANY
and STOCKHOLDERS shall furnish or cause to be furnished to TSII and the
Underwriters all of the information concerning the COMPANY and the STOCKHOLDERS
required for inclusion in, and will cooperate with TSII and the Underwriters in
the preparation of, the Registration Statement and the prospectus included
therein (including audited and unaudited financial statements, prepared in
accordance with generally accepted accounting principles, in form suitable for
inclusion in the Registration Statement). The COMPANY and the STOCKHOLDERS agree
promptly to advise TSII if at any time during the period in which a prospectus
relating to the offering is required to be delivered under the 1933 Act, any
information contained in the prospectus concerning the COMPANY or the
STOCKHOLDERS becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy. TSII will give the
COMPANY and the STOCKHOLDERS an
50
opportunity to review and comment on the Registration Statement and all
amendments thereto prior to filing. Insofar as the information relates solely to
the COMPANY or the STOCKHOLDERS, the COMPANY represents and warrants as to such
information with respect to itself, and each STOCKHOLDER represents and
warrants, as to such information with respect to the COMPANY and himself or
herself, that the draft Registration Statement provided to the STOCKHOLDERS will
not include an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading and that
each STOCKHOLDER and the COMPANY has had the opportunity to review and approve
such information. If, prior to the 25th day after the date of the final
prospectus of TSII utilized in connection with the IPO, the COMPANY or the
STOCKHOLDERS become aware of any fact or circumstance which would change (or, if
after the Funding and Consummation Date, would have changed) a representation or
warranty of the COMPANY or the STOCKHOLDERS in this Agreement or would affect
any document delivered pursuant hereto in any material respect, the COMPANY and
the STOCKHOLDERS shall immediately give notice of such fact or circumstance to
TSII. However, subject to the provisions of Section 7.8, such notification shall
not relieve either the COMPANY or the STOCKHOLDERS of their respective
obligations under this Agreement, and, subject to the provisions of Section 7.8,
at the sole option of TSII, the truth and accuracy of any and all warranties and
representations of the COMPANY, or on behalf of the
51
COMPANY and of STOCKHOLDERS at the date of this Agreement and on the Closing
Date and on the Funding and Consummation Date, shall be a precondition to the
consummation of this transaction.
7.10 Final Financial Statements. The COMPANY shall provide prior to the
Funding and Consummation Date, and TSII shall have had sufficient time to
review, the unaudited consolidated balance sheets of the COMPANY as of the end
of all fiscal quarters following the Balance Sheet Date, and the unaudited
consolidated statement of income, cash flows and retained earnings of the
COMPANY for all fiscal quarters ended after the Balance Sheet Date, disclosing
no material adverse change in the financial condition of the COMPANY or the
results of its operations from the financial statements as of the Balance Sheet
Date. Except as set forth on Schedule 7.10, such financial statements shall have
been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated (except as noted
therein). Except as noted in such financial statements, all of such financial
statements will present fairly the results of operations of the COMPANY for the
periods indicated thereon and shall be for such dates and time periods as
required by Regulation S-X under the 1933 Act and the 1934 Act.
7.11 Further Assurances. The parties hereto agree to execute and
deliver, or cause to be executed and delivered, such further instruments or
documents or take such other action as may be reasonably necessary or convenient
to carry out the transactions contemplated hereby.
52
7.12 Authorized Capital. TSII shall maintain its authorized capital
stock as set forth in the draft Registration Statement furnished to the
STOCKHOLDERS except for such changes in authorized capital stock as are made to
respond to comments made by the SEC or requirements of any exchange or automated
trading system for which application is made to register the TSII Stock.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF STOCKHOLDERS AND
COMPANY
The obligations of STOCKHOLDERS and the COMPANY with respect to actions
to be taken on the Closing Date are subject to the satisfaction or waiver on or
prior to the Closing Date of all of the following conditions. The obligations of
the STOCKHOLDERS and the COMPANY with respect to actions to be taken on the
Funding and Consummation Date are subject to the satisfaction or waiver on or
prior to the Funding and Consummation Date of the conditions set forth in
Sections 8.2, 8.3, 8.8 and 8.9. From and after the Closing Date or, with respect
to the conditions set forth in Sections 8.2, 8.3, 8.8 and 8.9, from and after
the Funding and Consummation Date, all conditions not satisfied shall be deemed
to have been waived, except that no such waiver shall be deemed to affect the
survival of the representations and warranties of TSII contained in Section 6
hereof:
8.1 Representations and Warranties. All representations and warranties
of TSII contained in Section 6 shall be true and correct in all material
respects as of the Closing Date as though such representations and warranties
had been made as of that time; and
53
a certificate to the foregoing effect dated the Closing Date and signed by the
President or any Vice President of TSII shall have been delivered to the
STOCKHOLDERS.
8.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with and performed by TSII on or
before the Closing Date and the Funding and Consummation Date shall have been
duly complied with and performed in all material respects; and certificates to
the foregoing effect dated the Closing Date and the Funding and Consummation
Date and signed by the President or any Vice President of TSII shall have been
delivered to the STOCKHOLDERS.
8.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated hereby or the IPO and no governmental
agency or body shall have taken any other action or made any request of the
COMPANY as a result of which the management of the COMPANY deems it inadvisable
to proceed with the transactions hereunder.
8.4 Opinion of Counsel. The COMPANY and the Underwriters shall have
received an opinion from counsel for TSII, dated the Closing Date, in the form
annexed hereto as Annex VI.
8.5 Registration Statement. The Registration Statement shall have been
declared effective by the SEC and the underwriters named therein shall have
agreed to acquire on a firm commitment basis, subject to the conditions set
forth in the underwriting agreement, on terms such that the aggregate value of
the cash and the number
54
of shares of TSII Stock to be received by the STOCKHOLDERS is not less than the
Minimum Value set forth on Annex III.
8.6 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transaction contemplated herein shall have been obtained and made.
8.7 Good Standing Certificates. TSII shall have delivered to the
COMPANY a certificate, dated as of a date no later than ten days prior to the
Closing Date, duly issued by the Delaware Secretary of State and in each state
in which TSII is authorized to do business, showing that TSII is in good
standing and authorized to do business and that all state franchise and/or
income tax returns and taxes for TSII for all periods prior to the Closing have
been filed and paid.
8.8 No Material Adverse Change. No event or circumstance shall have
occurred with respect to TSII which would constitute a Material Adverse Effect,
and TSII shall not have suffered any material loss or damages to any of its
properties or assets, whether or not covered by insurance, which change, loss or
damage materially affects or impairs the ability of TSII to conduct its
business.
8.9 Closing of IPO. The closing of the sale of the TSII Stock to the
Underwriters in the IPO and the acquisitions of the Other Founding Companies
pursuant to the Other Agreements shall have occurred simultaneously with the
Funding and Consummation Date hereunder.
55
8.10 Secretary's Certificate. The COMPANY shall have received a
certificate or certificates, dated the Closing Date and signed by the secretary
of TSII, certifying the truth and correctness of attached copies of TSII's
Certificate of Incorporation (including amendments thereto), By-Laws (including
amendments thereto), and resolutions of the board of directors and, if required,
the stockholders of TSII approving TSII's entering into this Agreement and the
consummation of the transactions contemplated hereby. Such certificate or
certificates also shall be addressed to the Underwriters and copies thereof
shall be delivered to the Underwriters.
8.11 Employment Agreements. Each of the persons listed on Schedule 8.11
shall have been afforded the opportunity to enter into an employment agreement
substantially in the form of Annex VIII hereto.
8.12 Directors and Officers Insurance. TSII shall have obtained
Directors and Officers Liability Insurance in amounts that are customary and
commercially reasonable.
9. CONDITIONS PRECEDENT TO OBLIGATIONS OF TSII
The obligations of TSII with respect to actions to be taken on the
Closing Date are subject to the satisfaction or waiver on or prior to the
Closing Date of all of the following conditions. The obligations of TSII with
respect to actions to be taken on the Funding and Consummation Date are subject
to the satisfaction or waiver on or prior to the Funding and Consummation Date
of the
56
conditions set forth in Sections 9.2, 9.3, 9.5 and 9.13. From and after the
Closing Date or, with respect to the conditions set forth in Sections 9.2, 9.3,
9.5 and 9.13, from and after the Funding and Consummation Date, all conditions
not satisfied shall be deemed to have been waived, except that no such waiver
shall be deemed to affect the survival of the representations and warranties of
the COMPANY contained in Section 5 hereof.
9.1 Representations and Warranties. All representations and warranties
of the STOCKHOLDERS and the COMPANY contained in this Agreement shall be true
and correct in all material respects as of the Closing Date and the Funding and
Consummation Date with the same effect as though such representations and
warranties had been made on and as of such date; and the STOCKHOLDERS shall have
delivered to TSII certificates dated the Closing Date and signed by them to such
effect.
9.2 Performance of Obligations. All of the terms, covenants and
conditions of this Agreement to be complied with or performed by the
STOCKHOLDERS and the COMPANY on or before the Closing Date or the Funding and
Consummation Date, as the case may be, shall have been duly performed or
complied with in all material respects; and the STOCKHOLDERS and the COMPANY
shall have delivered to TSII certificates dated the Closing Date and the Funding
and Consummation Date, respectively, and signed by them to such effect.
9.3 No Litigation. No action or proceeding before a court or any other
governmental agency or body shall have been instituted or threatened to restrain
or prohibit the transactions contemplated
57
hereby or the IPO and no governmental agency or body shall have taken any other
action or made any request of TSII as a result of which the management of TSII
deems it inadvisable to proceed with the transactions hereunder.
9.4 Secretary's Certificate. TSII shall have received a certificate,
dated the Closing Date and signed by the secretary of the COMPANY, certifying
the truth and correctness of attached copies of the COMPANY's Certificate of
Incorporation (including amendments thereto), By-Laws (including amendments
thereto), and resolutions of the board of directors and the STOCKHOLDERS
approving the COMPANY's entering into this Agreement and the consummation of the
transactions contemplated hereby. Such certificate also shall be addressed to
the Underwriters and a copy thereof shall be delivered to the Underwriters.
9.5 No Material Adverse Effect. No event or circumstance shall have
occurred with respect to the COMPANY which would constitute a Material Adverse
Effect, and the COMPANY shall not have suffered any material loss or damages to
any of its properties or assets, whether or not covered by insurance, which
change, loss or damage materially affects or impairs the ability of the COMPANY
to conduct its business.
9.6 STOCKHOLDERS' Release. The STOCKHOLDERS shall have delivered to
TSII an instrument dated the Closing Date releasing the COMPANY from (i) any and
all claims of the STOCKHOLDERS against the COMPANY and (ii) obligations of the
COMPANY to the STOCKHOLDERS, except for (x) items specifically identified on
58
Schedules 5.10 and 5.16 as being claims of or obligations to the STOCKHOLDERS,
(y) continuing obligations to STOCKHOLDERS relating to their employment by the
COMPANY and (z) obligations arising under this Agreement or the transactions
contemplated hereby.
9.7 Termination of Related Party Agreements. Except as set forth on
Schedule 9.7, all existing agreements between the COMPANY and the STOCKHOLDERS
shall have been cancelled effective prior to or as of the Funding and
Consummation Date.
9.8 Opinion of Counsel. TSII shall have received an opinion from
Counsel to the COMPANY and the STOCKHOLDERS, dated the Closing Date,
substantially in the form annexed hereto as Annex VII, and the Underwriters
shall have received a copy of the same opinion addressed to the Underwriters.
9.9 Consents and Approvals. All necessary consents of and filings with
any governmental authority or agency relating to the consummation of the
transactions contemplated herein shall have been obtained and made and all
consents and approvals of third parties listed on Schedule 5.23 shall have been
obtained.
9.10 Good Standing Certificates. The COMPANY shall have delivered to
TSII a certificate, dated as of a date no earlier than ten days prior to the
Closing Date, duly issued by the appropriate governmental authority in the
COMPANY's state of incorporation and, unless waived by TSII, in each state in
which the COMPANY is authorized to do business, showing the COMPANY is in good
standing and authorized to do business and that all state franchise and/or
59
income tax returns and taxes for the COMPANY for all periods prior to the
Closing have been filed and paid.
9.11 Registration Statement. The Registration Statement shall have been
declared effective by the SEC.
9.12 Employment Agreements. Each of the persons listed on Schedule 8.11
shall have entered into an employment agreement substantially in the form of
Annex VIII hereto.
9.13 Closing of IPO. The closing of the sale of the TSII Stock to the
Underwriters in the IPO shall have occurred simultaneously with the Funding and
Consummation Date hereunder.
9.14 FIRPTA Certificate. Each STOCKHOLDER shall have delivered to TSII
a certificate to the effect that he or she is not a foreign person pursuant to
Section 1.1445-2(b) of the Treasury regulations.
9.15 Insurance. TSII shall have been named as an additional insured on
all insurance policies of the COMPANY and certificates of insurance to that
effect shall have been delivered to TSII.
9.16 Lockup Agreement. The STOCKHOLDERS shall have signed an agreement
with the Underwriters, in form and substance identical to agreements signed by
the Founding Stockholders in connection with the Other Agreements, by which the
STOCKHOLDERS covenant to hold all of the TSII Stock acquired hereunder for a
period of at least 180 days after the Funding and Consummation Date.
60
10. COVENANTS OF TSII AND THE STOCKHOLDERS AFTER CLOSING
10.1 Release From Guarantees; Repayment of Certain Obligations. TSII
shall, contemporaneously with the Funding and Consummation Date, use its best
efforts to have the STOCKHOLDERS released from any and all guarantees on any
indebtedness that they personally guaranteed and from any and all pledges of
assets that they pledged to secure such indebtedness for the benefit of the
COMPANY, with all such guarantees on indebtedness being assumed by TSII. In the
event that TSII cannot obtain such releases from the lenders of any such
guaranteed indebtedness on the Funding and Consummation Date, TSII shall pay off
or otherwise refinance or retire such indebtedness on the Funding and
Consummation Date. TSII shall indemnify and hold harmless STOCKHOLDERS from the
payment of any guaranties on any indebtedness or contractual obligations that
STOCKHOLDERS had incurred prior to the Closing Date provided that such
indebtedness or obligations are related to the business of the COMPANY as being
conducted at the Closing Date.
10.2 Preservation of Tax and Accounting Treatment. Except as
contemplated by this Agreement or the Registration Statement, after the Funding
and Consummation Date, TSII shall not and shall not permit any of its
subsidiaries to undertake any act that would jeopardize the tax-free status of
the transaction, including:
(a) the retirement or reacquisition, directly or indirectly, of all or
part of the TSII Stock issued in connection with the transactions
contemplated hereby; or
61
(b) the entering into of financial arrangements for the benefit of the
STOCKHOLDERS.
10.3 Preparation and Filing of Tax Returns.
(i) The COMPANY shall, if possible, file or cause to be filed all
separate Returns of any Acquired Party for all taxable periods that end on
or before the Funding and Consummation Date. Each STOCKHOLDER shall pay or
cause to be paid all Tax liabilities (in excess of all amounts already paid
with respect thereto or properly accrued or reserved with respect thereto
on the COMPANY Financial Statements and books and records) shown by such
Returns to be due.
(ii) TSII shall file or cause to be filed all separate Returns of, or
that include, any Acquired Party for all taxable periods ending after the
Funding and Consummation Date.
(iii) Each party hereto shall, and shall cause its subsidiaries and
affiliates to, provide to each of the other parties hereto such cooperation
and information as any of them reasonably may request in filing any Return,
amended Return or claim for refund, determining a liability for Taxes or a
right to refund of Taxes or in conducting any audit or other proceeding in
respect of Taxes. Such cooperation and information shall include providing
copies of all relevant portions of relevant Returns, together with relevant
accompanying schedules and relevant work papers, relevant documents
relating to rulings or other determinations by
62
taxing authorities and relevant records concerning the ownership and Tax
basis of property, which such party may possess. Each party shall make its
employees reasonably available on a mutually convenient basis at its cost
to provide explanation of any documents or information so provided. Subject
to the preceding sentence, each party required to file Returns pursuant to
this Agreement shall bear all costs of filing such Returns.
(iv) Each of the COMPANY, TSII and each STOCKHOLDER shall comply with
the tax reporting requirements of Section 1.351-3 of the Treasury
Regulations promulgated under the Code, and treat the transaction as a
transfer to a controlled corporation under Section 351(a) of the Code.
10.4 Directors and Officers. The persons named in the draft
Registration Statement furnished to the STOCKHOLDERS shall be appointed as
directors and elected as officers of TSII, as and to the extent set forth in the
Registration Statement, promptly following the Funding and Consummation Date,
provided that the transaction contemplated by this Agreement is consummated.
TSII shall make arrangements to compensate each Director for attending meetings
of the Board of Directors and to reimburse them for related expenses.
10.5 Preservation of Employee Benefit Plans. Following the Funding and
Consummation Date, TSII shall not terminate any health insurance, life insurance
or 401(k) plan in effect at the COMPANY until such time as TSII is able to
replace such plan with a plan
63
that is applicable to TSII and all of its then existing subsidiaries. TSII shall
have no obligation to provide replacement plans that have the same terms and
provisions as the existing plans; provided, however, that any new health
insurance plan shall provide for coverage for preexisting conditions.
10.6 Maintenance of Books. TSII will cause the COMPANY (a) to maintain
the books and records of the COMPANY existing prior to the Closing Date for a
period of six years after the Closing Date and (b) to make such books and
records available to the STOCKHOLDERS for any reasonable purpose.
11. INDEMNIFICATION
The COMPANY, STOCKHOLDERS and TSII each make the following covenants
that are applicable to them, respectively:
11.1 General Indemnification by STOCKHOLDERS. The STOCKHOLDERS covenant
and agree that they, jointly and severally, will indemnify, defend, protect and
hold harmless TSII and the COMPANY at all times, from and after the date of this
Agreement until the Expiration Date, from and against all claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses (including specifically, but without limitation, reasonable attorneys'
fees and expenses of investigation) incurred by TSII as a result of or arising
from (i) any breach of the representations and warranties of the STOCKHOLDERS or
the COMPANY set forth herein or on the schedules or certificates delivered in
connection herewith, (ii) any breach of any agreement on the part
64
of the STOCKHOLDERS or the COMPANY under this Agreement, (iii) any liability
under the 1933 Act, the 1934 Act or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to the COMPANY or the
STOCKHOLDERS, and provided to TSII or its counsel by the COMPANY or the
STOCKHOLDERS contained in the Registration Statement or any prospectus forming a
part thereof, or any amendment thereof or supplement thereto, or arising out of
or based upon any omission or alleged omission to state therein a material fact
relating to the COMPANY or the STOCKHOLDERS required to be stated therein or
necessary to make the statements therein not misleading, or (iv) the matters
described on Schedule 11.1(iv) (relating to specifically identified matters such
as ongoing claims and/or litigation), which schedule shall be prepared by TSII;
provided, however, (A) that in the case of any indemnity arising pursuant to
clause (iii) such indemnity shall not inure to the benefit of TSII to the extent
that such untrue statement (or alleged untrue statement) was made in, or
omission (or alleged omission) occurred in, any preliminary prospectus and the
STOCKHOLDERS provided, in writing, corrected information to TSII counsel and to
TSII for inclusion in the final prospectus, and such information was not so
included or properly delivered, and (B) that no STOCKHOLDER shall be liable for
any indemnification obligation pursuant to this Section 11.1 to the extent
attributable to a breach of any representation, warranty or agreement made
herein individually by any other STOCKHOLDER.
65
11.2 Indemnification by TSII. TSII covenants and agrees that it will
indemnify, defend, protect and hold harmless the STOCKHOLDERS at all times from
and after the date of this Agreement until the Expiration Date, from and against
all claims, damages, actions, suits, proceedings, demands, assessments,
adjustments, costs and expenses (including specifically, but without limitation,
reasonable attorneys' fees and expenses of investigation) incurred by the
STOCKHOLDERS as a result of or arising from (i) any breach by TSII of its
representations and warranties set forth herein or on the schedules or
certificates attached hereto, (ii) any nonfulfillment of any agreement on the
part of TSII under this Agreement, (iii) any liabilities which the STOCKHOLDERS
may incur due to TSII's failure to be responsible for the liabilities and
obligations of the COMPANY pursuant to this Agreement; (iv) any liability under
the 1933 Act, the 1934 Act or other federal or state law or regulation, at
common law or otherwise, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact relating to TSII or any of the Other
Founding Companies contained in any preliminary prospectus, the Registration
Statement or any prospectus forming a part thereof, or any amendment thereof or
supplement thereto, or arising out of or based upon any omission or alleged
omission to state therein a material fact relating to TSII or any of the Other
Founding Companies required to be stated therein or necessary to make the
statements therein not misleading, or (v) the matters described on Schedule
66
11.2(v) (relating to specifically identified matters), which schedule shall be
prepared by the STOCKHOLDERS.
11.3 Third Person Claims. Promptly after any party hereto (hereinafter
the "Indemnified Party") has received notice of or has knowledge of any claim by
a person not a party to this Agreement ("Third Person"), or the commencement of
any action or proceeding by a Third Person, the Indemnified Party shall, as a
condition precedent to a claim with respect thereto being made against any party
obligated to provide indemnification pursuant to Section 11.1 or 11.2 hereof
(hereinafter the "Indemnifying Party"), give the Indemnifying Party written
notice of such claim or the commencement of such action or proceeding. Such
notice shall state the nature and the basis of such claim and a reasonable
estimate of the amount thereof. The Indemnifying Party shall have the right to
defend and settle (such settlement to be subject to the consent of the
Indemnified Party, as hereinafter provided), at its own expense and by its own
counsel, any such matter so long as the Indemnifying Party pursues the same in
good faith and diligently, provided that the Indemnifying Party shall not settle
any criminal proceeding without the written consent of the Indemnified Party. If
the Indemnifying Party undertakes to defend or settle, it shall promptly notify
the Indemnified Party of its intention to do so, and the Indemnified Party shall
cooperate with the Indemnifying Party and its counsel in the defense thereof and
in any settlement thereof. Such cooperation shall include, but shall not be
limited to, furnishing the Indemnifying Party with any books, records or
67
information reasonably requested by the Indemnifying Party that are in the
Indemnified Party's possession or control. All Indemnified Parties shall use the
same counsel, which shall be the counsel selected by the Indemnifying Party,
provided that if counsel to the Indemnifying Party shall have a conflict of
interest that prevents counsel for the Indemnifying Party from representing the
Indemnified Party, the Indemnified Party shall have the right to participate in
such matter through counsel of its own choosing and the Indemnifying Party will
reimburse the Indemnified Party for the reasonable expenses of its counsel.
Further, absent a conflict, the Indemnified Party may select counsel and have
such counsel participate in such matter at the sole cost of the Indemnified
Party. After the Indemnifying Party has notified the Indemnified Party of its
intention to undertake to defend or settle any such asserted liability, and for
so long as the Indemnifying Party diligently pursues such defense, the
Indemnifying Party shall not be liable for any additional legal expenses
incurred by the Indemnified Party in connection with any defense or settlement
of such asserted liability, except (i) as set forth in the preceding sentence
and (ii) to the extent such participation is requested by the Indemnifying
Party, in which event the Indemnified Party shall be reimbursed by the
Indemnifying Party for reasonable additional legal expenses and out-of-pocket
expenses. If the Indemnifying Party desires to accept a final and complete
settlement of any such Third Person claim and the Indemnified Party refuses to
consent to such settlement, then the Indemnifying Party's liability under this
68
Section with respect to such Third Person claim shall be limited to the amount
so offered in settlement by said Third Person. If the Indemnifying Party does
not undertake to defend such matter to which the Indemnified Party is entitled
to indemnification hereunder, or fails diligently to pursue such defense, the
Indemnified Party may undertake such defense through counsel of its choice, at
the cost and expense of the Indemnifying Party, and the Indemnifying Party shall
reimburse the Indemnified Party for the amount paid in such settlement and any
other liabilities or expenses incurred by the Indemnified Party in connection
therewith, provided, however, that under no circumstances shall the Indemnified
Party settle any Third Person claim without the written consent of the
Indemnifying Party, which consent shall not be unreasonably withheld or delayed.
All settlements hereunder shall effect a complete release of the Indemnified
Party, unless the Indemnified Party otherwise agrees in writing. The parties
hereto will make appropriate adjustments for insurance proceeds in determining
the amount of any indemnification obligation under this Section.
11.4 Exclusive Remedy. The indemnification provided for in this Section
11 shall (except as prohibited by ERISA) be the exclusive remedy in any action
seeking damages or any other form of monetary relief brought by any party to
this Agreement against another party, provided, however, that nothing herein
shall be construed to limit the right of a party, in a proper case, to seek
injunctive relief for a breach of this Agreement.
69
11.5 Limitations on Indemnification. TSII, the COMPANY and the other
persons or entities indemnified pursuant to Section 11.1 shall not assert any
claim for indemnification hereunder against the STOCKHOLDERS until such time as,
and solely to the extent that, the aggregate of all claims which such persons
may have against such STOCKHOLDERS shall exceed 2.0% of the sum of (i) the cash
paid to the STOCKHOLDERS and (ii) the value of the TSII Stock delivered to the
STOCKHOLDERS (the "Indemnification Threshold"), provided, however, that TSII,
the COMPANY and the other persons or entities indemnified pursuant to Section
11.1 or 11.2 may assert and shall be indemnified for any claim under Section
11.l(iv) at any time, regardless of whether the aggregate of all claims which
such persons may have against any STOCKHOLDER or all STOCKHOLDERS exceeds the
Indemnification Threshold, it being understood that the amount of any such claim
under Section 11.1(iv) shall not be counted towards the Indemnification
Threshold. The STOCKHOLDERS shall not assert any claim for indemnification
hereunder against TSII until such time as, and solely to the extent that, the
aggregate of all claims which the STOCKHOLDERS may have against TSII shall
exceed $50,000, provided, however, that the STOCKHOLDERS and the other persons
or entities indemnified pursuant to Section 11.1 or 11.2 may assert and shall be
indemnified for any claim under Section 11.2(v) at any time, regardless of
whether the aggregate of all claims which such persons may have against any of
TSII exceeds $50,000, it being understood that the amount of any such claim
under Section 11.2(v) shall not be counted towards such
70
$50,000 amount. No person shall be entitled to indemnification under this
Section 11 if and to the extent that: (a) such person's claim for
indemnification is directly or indirectly related to and substantially the
result of a breach by such person of any representation, warranty, covenant or
other agreement set forth in this Agreement; or (b) such person receives a tax
benefit as a result of the claim or loss for which indemnification is sought.
Notwithstanding any other term of this Agreement (except the proviso to
this sentence), none of the STOCKHOLDERS shall be liable under this Section 11
for an amount which exceeds the amount of proceeds received by the STOCKHOLDERS
in connection with the transactions contemplated hereby, provided that each
STOCKHOLDER's indemnification obligations pursuant to Section 11.1(iv) shall not
be limited. Indemnity obligations hereunder may be satisfied through the payment
of cash or the delivery of TSII Stock, or a combination thereof, at the
STOCKHOLDER's election. For purposes of calculating the value of the TSII Stock
received or delivered by a STOCKHOLDER (for purposes of determining the
Indemnification Threshold, the limitation on indemnity set forth in the second
preceding sentence and the amount of any indemnity paid), TSII Stock shall be
valued at its initial public offering price as set forth in the Registration
Statement. Any indemnification payment made by a STOCKHOLDER pursuant to this
Section 11 shall be deemed to be a reduction in the consideration received by
the STOCKHOLDER pursuant to Section 3.
71
12. TERMINATION OF AGREEMENT
12.1 Termination. This Agreement may be terminated by written notice
from the party asserting termination to the other parties at any time prior to
the Funding and Consummation Date solely:
(i) by mutual consent of the boards of directors of TSII and the
COMPANY;
(ii) by the STOCKHOLDERS or the COMPANY (acting through its board of
directors), on the one hand, or by TSII (acting through its board of directors),
on the other hand, if the transactions contemplated by this Agreement to take
place at the Closing shall not have been consummated by September 30, 1997,
unless the failure of such transactions to be consummated is due to the willful
failure of the party seeking to terminate this Agreement to perform any of its
obligations under this Agreement to the extent required to be performed by it
prior to or on the Funding and Consummation Date;
(iii) by the STOCKHOLDERS or COMPANY, on the one hand, or by TSII, on
the other hand, if a material breach or default shall be made by the other party
in the observance or in the due and timely performance of any of the covenants,
agreements or conditions contained herein, and the curing of such default shall
not have been made on or before the Funding and Consummation Date;
(iv) pursuant to Section 7.8 hereof; or
(v) pursuant to Section 4 hereof.
12.2 Liabilities in Event of Termination. Except as provided in Section
7.8 hereof, the termination of this Agreement will in no
72
way limit any obligation or liability of any party based on or arising from a
breach or default by such party with respect to any of its representations,
warranties, covenants or agreements contained in this Agreement including, but
not limited to, legal and audit costs and out of pocket expenses relating to the
transactions contemplated hereby. No party hereto shall be liable to any other
party if the Agreement is terminated under Sections 12.1(i), (ii) (except as set
forth therein), (iv) or (v).
13. NONCOMPETITION
13.1 Prohibited Activities. Provided that TSII shall have complied with
and performed all of its obligations hereunder and that the STOCKHOLDERS shall
have received payment in full of the consideration described in Section 3, the
STOCKHOLDERS shall not, for a period of three (3) years following the Funding
and Consummation Date, for any reason whatsoever, directly or indirectly, for
themselves or on behalf of or in conjunction with any other person, persons,
company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any travel services business in direct competition
with TSII or any of the subsidiaries thereof, within 100 miles of where
the COMPANY or any of its
73
subsidiaries conducted business prior to the effectiveness of
the Funding and Consummation Date (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of TSII (including the subsidiaries thereof) in
a sales representative or managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
TSII (including the subsidiaries thereof), provided that each
STOCKHOLDER shall be permitted to call upon and hire any member of his
or her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (l) year prior to the Funding and
Consummation Date, a customer of TSII (including the subsidiaries
thereof), of the COMPANY or of any of the Other Founding Companies
within the Territory for the purpose of soliciting or selling products
or services in direct competition with TSII within the Territory;
(iv) call upon any prospective acquisition candidate, on the
STOCKHOLDER's own behalf or on behalf of any competitor in the travel
services business, which candidate, to the actual knowledge of such
STOCKHOLDER after due inquiry, was called upon by TSII (including the
subsidiaries thereof) or for which, to the actual knowledge of such
STOCKHOLDER after due inquiry, TSII (or any subsidiary thereof) made an
acquisition analysis, for the purpose of acquiring such entity; or
(v) disclose customers, whether in existence or proposed,
of the COMPANY to any person, firm, partnership,
74
corporation or business for any reason or purpose whatsoever except to
the extent that the COMPANY has in the past disclosed such information
to the types of persons to whom disclosure is then presently
contemplated for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit any STOCKHOLDER from acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter.
13.2 Damages. Because of the difficulty of measuring economic losses to
TSII as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to TSII for which it would
have no other adequate remedy, each STOCKHOLDER agrees that the foregoing
covenant may be enforced by TSII in the event of breach by such STOCKHOLDER, by
injunctions and restraining orders.
13.3 Reasonable Restraint. It is agreed by the parties hereto that the
foregoing covenants in this Section 13 impose a reasonable restraint on the
STOCKHOLDERS in light of the activities and business of TSII (including the
subsidiaries thereof) on the date of the execution of this Agreement and the
current plans of TSII.
13.4 Severability; Reformation. The covenants in this Section 13 are
severable and separate, and the unenforceability of any specific covenant shall
not affect the provisions of any other covenant. Moreover, in the event any
court of competent
75
jurisdiction shall determine that the scope, time or territorial restrictions
set forth are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent which the court deems reasonable,
and the Agreement shall thereby be reformed.
13.5 Independent Covenant. All of the covenants in this Section 13
shall be construed as an agreement independent of any other provision in this
Agreement. It is specifically agreed that the period of three (3) years stated
at the beginning of this Section 13, during which the agreements and covenants
of each STOCKHOLDER made in this Section 13 shall be effective, shall be
computed by excluding from such computation any time during which such
STOCKHOLDER is in violation of any provision of this Section 13. The covenants
contained in Section 13 shall have no effect if the transactions contemplated by
this Agreement are not consummated nor may such covenants be enforced by any
party to this Agreement that is in breach of its obligations hereunder.
13.6 Materiality. The STOCKHOLDERS hereby agree that the covenants in
this Section 13 are a material and substantial part of this transaction.
13.7 Limitations. In the event that any STOCKHOLDER who is employed by
TSII or the COMPANY pursuant to an employment agreement is terminated without
cause (as defined in such employment agreement), the provisions of this Section
13 shall no longer be valid or enforceable by TSII. If such employment agreement
contains provisions relating to the same subject matter as this
76
Section 13 that are less restrictive than set forth in this Section 13, the
provisions of such employment agreement shall control.
14. NONDISCLOSURE OF CONFIDENTIAL INFORMATION
14.1 STOCKHOLDERS. The STOCKHOLDERS recognize and acknowledge that they
had in the past, currently have, and in the future may possibly have, access to
certain confidential information of the COMPANY, the Other Founding Companies,
and/or TSII, such as operational policies, and pricing and cost policies that
are valuable, special and unique assets of the COMPANY's, the Other Founding
Companies' and/or TSII's respective businesses. The STOCKHOLDERS agree that they
shall not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
except (a) to authorized representatives of TSII, (b) following the Closing,
such information may be disclosed by the STOCKHOLDERS as is required in the
course of performing their duties for TSII and (c) to counsel and other
advisers, provided that such advisers (other than counsel) agree to the
confidentiality provisions of this Section 14.1, unless (i) such information is
or becomes known to the public generally or to businesses operating in the
travel industry through no fault of the STOCKHOLDERS, (ii) disclosure is
required by law or the order of any governmental authority under color of law,
provided, however, that prior to disclosing any information pursuant to this
clause (ii), the STOCKHOLDERS shall, if possible, give two days' prior written
notice thereof to TSII and provide
77
TSII with the opportunity within such two-day period to contest such disclosure,
or (iii) the disclosing party reasonably believes that such disclosure is
required in connection with the defense of a lawsuit against the disclosing
party. In the event of a breach or threatened breach by any of the STOCKHOLDERS
of the provisions of this Section, TSII shall be entitled to an injunction
restraining such STOCKHOLDERS from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting TSII
from pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages. In the event the transactions contemplated by
this Agreement are not consummated, the STOCKHOLDERS shall have none of the
above-mentioned restrictions on their ability to disseminate confidential
information with respect to the COMPANY.
14.2 TSII. TSII recognizes and acknowledges that TSII had in the past
and currently has access to certain confidential information of the COMPANY,
such as operational policies, and pricing and cost policies that are valuable,
special and unique assets of the COMPANY's business. TSII agrees that, prior to
the Closing, or if the transactions contemplated by this Agreement are not
consummated, it will not disclose such confidential information to any person,
firm, corporation, association or other entity for any purpose or reason
whatsoever, except (a) to authorized representatives of the COMPANY, (b) to
counsel and other advisers, provided, however, that such advisors (other than
counsel) agree to the confidentiality provisions of this Section 14.2 and (c) to
the
78
Other Founding Companies and their representatives pursuant to Section 7.1(a),
unless (i) such information becomes known to the public generally through no
fault of TSII, (ii) disclosure is required by law or the order of any
governmental authority under color of law, provided, however, that prior to
disclosing any information pursuant to this clause (ii), TSII shall, unless
otherwise required by law or such order, give two days' prior written notice
thereof to the COMPANY and the STOCKHOLDERS and provide the COMPANY and the
STOCKHOLDERS with the opportunity within such two-day period to contest such
disclosure, or (iii) the disclosing party reasonably believes that such
disclosure is required in connection with the defense of a lawsuit against the
disclosing party. In the event of a breach or threatened breach by TSII of the
provisions of this Section, the COMPANY and the STOCKHOLDERS shall be entitled
to an injunction restraining TSII from disclosing, in whole or in part, such
confidential information. Nothing herein shall be construed as prohibiting the
COMPANY and the STOCKHOLDERS from pursuing any other available remedy for as
such breach or threatened breach, including the recovery of damages.
14.3 Damages. Because of the difficulty of measuring economic losses as
a result of the breach of the foregoing covenants in Section 14.1 and 14.2, and
because of the immediate and irreparable damage that would be caused for which
they would have no other adequate remedy, the parties hereto agree that, in the
event of a breach by any of them of the foregoing covenants, the covenant may
79
be enforced against the other parties by injunctions and restraining orders.
14.4 Survival. The obligations of the parties under this Article 14
shall survive the termination of this Agreement for a period of three years from
(a) the Funding and Consummation Date if the transactions contemplated hereby
are consummated or (b) the date hereof if the transactions contemplated hereby
are not consummated.
15. TRANSFER RESTRICTIONS
15.1 Transfer Restrictions. Except for transfers to immediate family
members who agree to be bound by the restrictions set forth in this Section 15.1
(or trusts for the benefit of the STOCKHOLDERS or family members, the trustees
of which so agree), for a period of one year from the Funding and Consummation
Date, except pursuant to Section 17 hereof, the STOCKHOLDERS shall not sell,
assign, exchange, transfer, distribute or otherwise dispose of any shares of
TSII Stock received by the STOCKHOLDERS as described in Section 3.1. The
certificates evidencing the TSII Stock delivered to the STOCKHOLDERS pursuant to
Section 3 of this Agreement shall bear a legend substantially in the form set
forth below and containing such other information as TSII may deem necessary or
appropriate: THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
ASSIGNED, EXCHANGED, TRANSFERRED, ENCUMBERED, PLEDGED, DISTRIBUTED, APPOINTED OR
OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO GIVE EFFECT TO
ANY ATTEMPTED SALE, ASSIGNMENT, EXCHANGE, TRANSFER, ENCUMBRANCE, PLEDGE,
DISTRIBUTION, APPOINTMENT OR OTHER DISPOSITION PRIOR TO [first anniversary of
Closing Date]. UPON THE WRITTEN REQUEST OF THE HOLDER OF THIS CERTIFICATE, THE
ISSUER AGREES TO REMOVE THIS RESTRICTIVE LEGEND (AND ANY STOP ORDER
80
PLACED WITH THE TRANSFER AGENT) AFTER THE DATE SPECIFIED ABOVE (AS IT MAY BE
REDUCED AS PROVIDED HEREIN).
15.2 Certain Transfers. Except for transfers to family members who
agree to bound by the restrictions set forth in Section 15.1 (or trusts for the
benefit of the STOCKHOLDERS or family members, the trustees of which so agree)
and except pursuant to Section 17 hereof, regardless of whether transfers of
such shares are restricted pursuant to the terms of this Agreement, during the
two-year period commencing on the Funding and Consummation Date, none of the
STOCKHOLDERS shall sell, assign, exchange, transfer, distribute or otherwise
dispose of, in any transaction or series of transactions involving more than
5,000 shares (a "Future Sale"), any shares of TSII Stock as described in Section
3.1 received by the STOCKHOLDERS in the transaction contemplated hereby except
in accordance with this Section 15.2. If any STOCKHOLDER desires to make a
Future Sale, the STOCKHOLDER shall first provide written notice thereof to TSII.
As soon as practicable after receipt of such notice by TSII, TSII shall
designate in writing to the STOCKHOLDER the names and other pertinent
information of two investment banks or market makers through whom the Future
Sale may be made. The STOCKHOLDER may not make the Future Sale except through
one of the designated investment banks or market makers for TSII Stock;
provided, however, that the terms of such Future Sale (including commissions)
shall be at least as favorable to the COMPANY as the COMPANY would have received
in the absence of this Section 15.2.
81
16. FEDERAL SECURITIES ACT REPRESENTATIONS
The STOCKHOLDERS acknowledge that the shares of TSII Stock to be
delivered to the STOCKHOLDERS pursuant to this Agreement have not been and will
not be registered under the 1933 Act and therefore may not be resold without
compliance with the 1933 Act. The TSII Stock to be acquired by the STOCKHOLDERS
pursuant to this Agreement is being acquired solely for their own account, for
investment purposes only, and with no present intention of distributing, selling
or otherwise disposing of it in connection with a distribution.
16.1 Compliance with Law. Each of the STOCKHOLDERS covenants, warrants
and represents that none of the shares of TSII Stock issued to the STOCKHOLDERS
will be offered, sold, assigned, pledged, hypothecated, transferred or otherwise
disposed of except after full compliance with all of the applicable provisions
of the 1933 Act and the rules and regulations of the SEC. All of the TSII Stock
shall bear the following legend in addition to the legend required under Section
15 of this Agreement: THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE SECURITIES
LAW.
16.2 Economic Risk; Sophistication. Each STOCKHOLDER is able to bear
the economic risk of an investment in the TSII Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience
82
in financial and business matters that he or she it is capable of evaluating the
merits and risks of the proposed investment in the TSII Stock. The STOCKHOLDERS
have had an adequate opportunity to ask questions and receive answers from the
officers of TSII concerning any and all matters relating to the transactions
described herein including, without limitation, the background and experience of
the current and proposed officers and directors of TSII, the plans for the
operations of the business of TSII, the business, operations and financial
condition of the Founding Companies other than the COMPANY, and any plans for
additional acquisitions and the like. The STOCKHOLDERS have asked any and all
questions in the nature described in the preceding sentence and all questions
have been answered to their satisfaction.
17. REGISTRATION RIGHTS
17.1 Piggyback Registration Rights. At any time following the Funding
and Consummation Date, whenever TSII proposes to register any TSII Stock for its
own or others account under the 1933 Act for a public offering, other than (i)
any shelf registration of shares to be used as consideration for acquisitions of
additional businesses by TSII and (ii) registrations relating to employee
benefit plans, TSII shall give each of the STOCKHOLDERS prompt written notice of
its intent to do so. Upon the written request of any of the STOCKHOLDERS given
within 30 days after receipt of such notice, TSII shall cause to be included in
such registration all of the TSII Stock issued to such STOCKHOLDER pursuant to
this
83
Agreement which any such STOCKHOLDER requests, provided that TSII shall have the
right to reduce the number of shares included in such registration to the extent
that inclusion of such shares could, in the opinion of tax counsel to TSII or
its independent auditors, jeopardize the status of the transactions contemplated
hereby and by the Registration Statement as a tax-free organization. In
addition, if TSII is advised in writing in good faith by any managing
underwriter of an underwritten offering of the securities being offered pursuant
to any registration statement under this Section 17.1 that the number of shares
to be sold by persons other than TSII is greater than the number of such shares
which can be offered without adversely affecting the offering, TSII may reduce
pro rata the number of shares offered for the accounts of such persons (based
upon the number of shares desired to be sold by such person) to a number deemed
satisfactory by such managing underwriter, provided, that, notwithstanding
Section 15.1 hereof, for each such offering made by TSII after the IPO, such
reduction shall be made first by reducing the number of shares to be sold by
persons other than TSII, the STOCKHOLDERS and the Other Founding Companies or
the stockholders thereof who receive shares of TSII Stock pursuant to the Other
Agreements (collectively, the COMPANY and the Other Founding Companies or the
stockholders thereof who receive shares of TSII Stock pursuant to the Other
Agreements being referred to herein as the "Founding Stockholders"), and
thereafter, if a further reduction is required, by reducing the number of shares
to be sold by the Founding Stockholders.
84
17.2 Demand Registration Rights. At any time after the date two years
after the Closing, the holders of a majority of the shares of TSII Stock issued
to the Founding Stockholders pursuant to this Agreement and the Other Agreements
which have not been previously registered or sold and which are not entitled to
be sold under Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act may request in writing that TSII file a registration
statement under the 1933 Act covering the registration of the shares of TSII
Stock issued to the STOCKHOLDERS pursuant to this Agreement and the Other
Agreements then held by such Founding Stockholders (a "Demand Registration").
Within ten (10) days of the receipt of such request, TSII shall give written
notice of such request to all other Founding Stockholders and shall, as soon as
practicable but in no event later than 45 days after notice from any
STOCKHOLDER, file and use its best efforts to cause to become effective a
registration statement covering all such shares. TSII shall be obligated to
effect only one Demand Registration for all Founding Stockholders.
Notwithstanding the foregoing paragraph, following such a demand a
majority of TSII's disinterested directors (i.e., directors who have not
demanded or elected to sell shares in any such public offering) may defer the
filing of the registration statement for a 60 day period.
If at the time of any request by the Founding Stockholders for a Demand
Registration TSII has fixed plans to file within 60 days after such request a
registration statement covering the sale of
85
any of its securities in a public offering under the 1933 Act, no registration
of the Founding Stockholders' TSII Stock shall be initiated under this Section
17.2 until 90 days after the effective date of such registration unless TSII is
no longer proceeding diligently to effect such registration; provided that TSII
shall provide the Founding Stockholders the right to participate in such public
offering pursuant to, and subject to, Section 17.1 hereof.
17.3 Registration Procedures. All expenses incurred in connection with
the registrations under this Article 17 (including all registration, filing,
qualification, legal, printer and accounting fees, but excluding underwriting
commissions and discounts), shall be borne by TSII. In connection with
registrations under Sections 17.1 and 17.2, TSII shall (i) use its best efforts
to prepare and file with the SEC as soon as reasonably practicable, a
registration statement with respect to the TSII Stock and use its best efforts
to cause such registration to promptly become and remain effective for a period
of at least 45 days (or such shorter period during which the Founding
Stockholders shall have sold all TSII Stock which they requested to be
registered); (ii) use its best efforts to register and qualify the TSII Stock
covered by such registration statement under applicable state securities laws as
the holders shall reasonably request for the distribution for the TSII Stock;
and (iii) take such other actions as are reasonable and necessary to comply with
the requirements of the 1933 Act and the regulations thereunder to
86
enable the Founding Stockholders to sell their shares pursuant thereto.
17.4 Underwriting Agreement. In connection with each registration
pursuant to Sections 17.1 and 17.2 covering an underwritten registration public
offering, TSII and each participating holder agree to enter into a written
agreement with the managing underwriters in such form and containing such
provisions (including indemnification provisions) as are customary in the
securities business for such an arrangement between such managing underwriters
and companies of TSII's size and investment stature.
17.5 Availability of Rule 144. TSII shall not be obligated to register
shares of TSII Stock held by any STOCKHOLDER at any time when the resale
provisions of Rule 144(k) (or any similar or successor provision) promulgated
under the 1933 Act are available to such STOCKHOLDER.
18. GENERAL
18.1 Cooperation. The COMPANY, the STOCKHOLDERS and TSII shall each
deliver or cause to be delivered to the other on the Funding and Consummation
Date, and at such other times and places as shall be reasonably agreed to, such
additional instruments as the other may reasonably request for the purpose of
carrying out this Agreement. The COMPANY shall cooperate and use its reasonable
efforts to have the present officers, directors and the employees of the COMPANY
cooperate with TSII on and after the Funding and
87
Consummation Date in furnishing information, evidence, testimony and other
assistance in connection with any tax return filing obligations, actions,
proceedings, arrangements or disputes of any nature with respect to matters
pertaining to all periods prior to the Funding and Consummation Date.
18.2 Successors and Assigns. This Agreement and the rights of the
parties hereunder may not be assigned (except by operation of law) and shall be
binding upon and shall inure to the benefit of the parties hereto, the
successors of TSII, and the heirs and legal representatives of the STOCKHOLDERS.
18.3 Entire Agreement. This Agreement (including the schedules,
exhibits and annexes attached hereto) and the documents delivered pursuant
hereto constitute the entire agreement and understanding among the STOCKHOLDERS,
the COMPANY and TSII and supersede any prior agreement and understanding
relating to the subject matter of this Agreement, including but not limited to
any letter of intent entered into by any of the parties hereto. This Agreement,
upon execution, constitutes a valid and binding agreement of the parties hereto
enforceable in accordance with its terms and may be modified or amended only by
a written instrument executed by the STOCKHOLDERS, the COMPANY and TSII, acting
through their respective officers or trustees, duly authorized by their
respective Boards of Directors.
18.4 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be
88
deemed an original and all of which together shall constitute but one and the
same instrument.
18.5 Brokers and Agents. Except as disclosed on Schedule 18.5, each
party represents and warrants that it employed no broker or agent in connection
with this transaction and agrees to indemnify the other parties hereto against
all loss, cost, damages or expense arising out of claims for fees or commission
of brokers employed or alleged to have been employed by such indemnifying party.
18.6 Expenses. Whether or not the transactions herein contemplated
shall be consummated, TSII will pay the fees, expenses and disbursements of TSII
and its agents, representatives, accountants and counsel incurred in connection
with the subject matter of this Agreement and any amendments thereto, including
all costs and expenses incurred in the performance and compliance with all
conditions to be performed by TSII under this Agreement, including the fees and
expenses of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, LLP, ▇▇▇▇, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P., and
any other person or entity retained by TSII, and the costs of preparing the
Registration Statement. The STOCKHOLDERS shall pay the fees, expenses and
disbursements of the STOCKHOLDERS, the COMPANY and their respective agents,
representatives, accountants and counsel incurred in connection with the subject
matter of this Agreement and any amendments thereto, including all costs and
expenses incurred in the performance and compliance with all conditions to be
performed by the COMPANY and the STOCKHOLDERS under this Agreement, including
89
the fees and expenses of accountants and legal counsel to the COMPANY and the
STOCKHOLDERS. Notwithstanding the foregoing, if the transactions contemplated by
this Agreement are consummated, TSII shall reimburse the STOCKHOLDERS for such
reasonable fees, expenses and disbursements upon the closing of the IPO up to
$25,000. In addition, each STOCKHOLDER shall pay all sales, use, transfer, real
property transfer, recording, gains, stock transfer and other similar taxes and
fees ("Transfer Taxes") imposed in connection with the transactions contemplated
hereby, other than Transfer Taxes, if any, imposed by the State of Delaware.
Each STOCKHOLDER shall file all necessary documentation and Returns with respect
to such Transfer Taxes. In addition, each STOCKHOLDER acknowledges that he or
she, and not the COMPANY or TSII, shall pay all taxes due upon receipt of the
consideration payable pursuant to Section 3 hereof, and shall assume all tax
risks and liabilities of such STOCKHOLDER in connection with the transactions
contemplated hereby.
18.7 Notices. All notices of communication required or permitted
hereunder shall be in writing and may be given by depositing the same in United
States mail, addressed to the party to be notified, postage prepaid and
registered or certified with return receipt requested, or by delivering the same
in person to an officer or agent of such party.
90
(a) If to TSII, addressed to it at:
Travel Services International, Inc.
c/o Alpine Consolidated, LLC
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Elan ▇. ▇▇▇▇▇▇▇▇▇
with copies to:
Akin, Gump, Strauss, ▇▇▇▇▇ &
▇▇▇▇, L.L.P.
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
(b) If to the STOCKHOLDERS, addressed to them at their addresses set
forth on Annex IV, with copies to such counsel as is set forth with
respect to each STOCKHOLDER on such Annex IV;
(c) If to the COMPANY, addressed to it at:
Cruises, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
and marked "Personal and Confidential"
with copy to:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Bond ▇▇▇▇▇▇▇▇▇ & King
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
or to such other address or counsel as any party hereto shall specify pursuant
to this Section 18.7 from time to time.
18.8 Governing Law. This Agreement shall be construed in accordance
with the laws of the State of Delaware.
18.9 Exercise of Rights and Remedies. Except as otherwise provided
herein, no delay of or omission in the exercise of any
91
right, power or remedy accruing to any party as a result of any breach or
default by any other party under this Agreement shall impair any such right,
power or remedy, nor shall it be construed as a waiver of or acquiescence in any
such breach or default, or of any similar breach or default occurring later; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default occurring before or after that waiver.
18.10 Time. Time is of the essence with respect to this Agreement.
18.11 Reformation and Severability. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall, to the extent
possible, be modified in such manner as to be valid, legal and enforceable but
so as to most nearly retain the intent of the parties, and if such modification
is not possible, such provision shall be severed from this Agreement, and in
either case the validity, legality and enforceability of the remaining
provisions of this Agreement shall not in any way be affected or impaired
thereby.
18.12 Remedies Cumulative. No right, remedy or election given by any
term of this Agreement shall be deemed exclusive but each shall be cumulative
with all other rights, remedies and elections available at law or in equity.
18.13 Captions. The headings of this Agreement are inserted for
convenience only, shall not constitute a part of this Agreement or be used to
construe or interpret any provision hereof.
92
18.14 Amendments and Waivers. Any term of this Agreement may be amended
and the observance of any term of this Agreement may be waived only with the
written consent of TSII, the COMPANY and the STOCKHOLDERS. Any amendment or
waiver effected in accordance with this Section 18.14 shall be binding upon each
of the parties hereto, any other person receiving TSII Stock in connection with
the transactions contemplated hereby and each future holder of such TSII Stock.
18.15 Incorporation by Reference. To the extent that an item is
disclosed in a particular schedule or a subsection of a particular schedule and
such item is readily apparent on its face as being applicable to another
schedule or another subsection of the same schedule, such item shall be deemed
incorporated by reference in such schedule or such other subsection under the
same schedule.
18.16 Defined Terms. Unless the context otherwise requires, capitalized
terms used in this Agreement or in any schedule attached hereto and not
otherwise defined shall have the following meanings for all purposes of this
Agreement:
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Acquired Party" means the COMPANY, any Subsidiary and any member of a
Relevant Group.
"Affiliates" has the meaning set forth in Section 5.8.
93
"Agreement" has the meaning set forth in the first paragraph hereof.
"A/R Aging Reports" has the meaning set forth in Section 5.11.
"Assets" has the meaning set forth in Section 7.13.
"Balance Sheet Date" has the meaning set forth in Section 5.9.
"Charter Documents" has the meaning set forth in Section 5.1.
"Closing" has the meaning set forth in Section 4.
"Closing Date" has the meaning set forth in Section 4.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning set forth in the first paragraph of this
Agreement.
"COMPANY Stock" means the capital stock of the COMPANY.
"Delaware GCL" has the meaning set forth in Section 1.5.
"Demand Registration" has the meaning set forth in Section 17.2.
"Environmental Laws" has the meaning set forth in Section 5.13.
"ERISA" has the meaning set forth in Section 5.19.
"Expiration Date" has the meaning set forth in Section 5(A).
"Founding Companies" has the meaning set forth in the third recital of
this Agreement.
"Founding Stockholders" has the meaning set forth in Section 17.1.
"Funding and Consummation Date" has the meaning set forth in Section 4.
94
"Future Sale" has the meaning set forth in Section 15.2.
"Indemnification Threshold" has the meaning set forth in Section 11.5.
"Indemnified Party" has the meaning set forth in Section 11.3.
"Indemnifying Party" has the meaning set forth in Section 11.3.
"IPO" means the initial public offering of TSII Stock pursuant to the
Registration Statement.
"Material Adverse Effect" has the meaning set forth in Section 5.1.
"Material Documents" has the meaning set forth in Section 5.23.
"Other Agreements" has the meaning set forth in the third recital of
this Agreement.
"Other Founding Companies" means all of the Founding Companies other
than the Company.
"Plans" has the meaning set forth in Section 5.19.
"Pricing" means the date of determination by TSII and the Underwriters
of the public offering price of the shares of TSII Stock in the IPO; the parties
hereto contemplate that the Pricing shall take place on the Closing Date.
"Qualified Plans" has the meaning set forth in Section 5.20.
"Registration Statement" means that certain registration statement on
Form S-1 covering the shares of TSII Stock to be issued in the IPO.
95
"Relevant Group" means the COMPANY and any affiliated, combined,
consolidated, unitary or similar group of which the COMPANY is or was a member.
"Restricted Common Stock" means the common stock of TSII, par value
$0.01 per share, having the restricted voting rights and such other rights,
preferences, restrictions and limitations as are set forth in the Certificate of
Incorporation, as amended, of TSII on the Funding and Consummation Date.
"Returns" means any returns, reports or statements (including any
information returns) required to be filed for purposes of a particular Tax.
"Schedule" means each Schedule attached hereto, which shall reference
the relevant sections of this Agreement, on which parties hereto disclose
information as part of their respective representations, warranties and
covenants.
"SEC" means the United States Securities and Exchange Commission.
"Shares" has the meaning set forth in Section 1.
"Statutory Liens" has the meaning set forth in Section 7.3.
"STOCKHOLDERS" has the meaning set forth in the first paragraph of this
Agreement.
"Subsidiary" has the meaning set forth in Section 5.6.
"Tax" or "Taxes" means all federal, state, local or foreign net or
gross income, gross receipts, net proceeds, sales, use, ad valorem, value added,
franchise, bank shares, withholding, payroll, employment, excise, property,
deed, stamp, alternative or add on
96
minimum, environmental or other taxes, assessments, duties, fees, levies or
other governmental charges of any nature whatever, whether disputed or not,
together with any interest, penalties, additions to tax or additional amounts
with respect thereto.
"Territory" has the meaning set forth in Section 13.1.
"Third Person" has the meaning set forth in Section 11.3.
"Transfer Taxes" has the meaning set forth in Section 18.6.
"TSII" has the meaning set forth in the first paragraph of this
Agreement.
"TSII Charter Documents" has the meaning set forth in Section 6.1.
"TSII Financial Statements" has the meaning set forth in Section 6.6.
"TSII Plan of Organization" has the meaning set forth in the fourth
recital of this Agreement.
"TSII Stock" means the common stock, par value $.01 per share, of TSII.
"Underwriters" means the prospective underwriters in the IPO, as
identified in the Registration Statement.
[The next page is the signature page]
97
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name:
Title:
CRUISES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Chairman and Chief Executive Officer
STOCKHOLDERS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Individually
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Individually
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇
----------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇, Individually
98