STOCK PURCHASE AGREEMENT
BY AND AMONG
NAVIGANT INTERNATIONAL, INC.
PROFESSIONAL TRAVEL CORPORATION
ARRINGTON TRAVEL CENTER, INC.
AND
MICHAEL B. ARRINGTON
MADE EFFECTIVE AS OF JULY 28, 1998
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TABLE OF CONTENTS
(CONTINUED)
Page
1. THE ACQUISITION 1
1.1 The Purchase and Sale 1
1.2 Consideration. 1
1.3 Post-Closing Adjustment 2
1.4 Escrow 3
1.5 Delivery of Certificate(s) 4
1.6 Accounting Terms 4
2. CLOSING 4
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER 5
3.1 Due Organization 5
3.2 Authorization; Validity 5
3.3 No Conflicts 5
3.4 Capital Stock of the Company 6
3.5 Transactions in Capital Stock; Accounting Treatment 6
3.6 Subsidiaries, Stock and Notes 6
3.7 Complete Copies of Materials 7
3.8 Absence of Claims Against the Company 7
3.9 Company Financial Conditions 7
3.10 Financial Statements 8
3.11 Liabilities and Obligations 8
3.12 Books and Records 9
3.13 Bank Accounts; Powers of Attorney 9
3.14 Accounts and Notes Receivable 9
3.15 Permits 10
3.16 Real Property 10
3.17 Personal Property 11
3.18 Intellectual Property 12
3.19 Significant Customers; Material Contracts and Commitments 14
3.20 Government Contracts 15
3.21 Insurance 16
3.22 Environmental Matters 16
3.23 Labor and Employment Matters 17
3.24 Employee Benefit Plans 18
3.25 Taxes 22
3.26 Conformity with Law; Litigation 24
3.27 Relations with Governments 25
3.28 Absence of Changes 25
3.29 Disclosure 27
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3.30 Predecessor Status; Etc 27
3.31 Required Governmental Filings and Consents 27
3.32 ARC Accreditation and Bonding Requirements. 28
4. REPRESENTATIONS OF NII AND PTC 28
4.1 Due Organization 28
4.2 Authorization; Validity of Obligations 28
4.3 No Conflicts 29
4.4 Required Governmental Filings and Consents. 29
4.5 Disclosures. 29
5. COVENANTS 29
5.1 Tax Matters 29
5.2 Accounts Receivable 31
5.3 Employee Benefit Plans 32
5.4 Related Party Agreements 32
5.5 Cooperation 32
5.6 Confidentiality 33
5.7 Notification of Certain Matters 33
5.8 Notice to Bargaining Agents. 33
5.9 Soft Dollars. 33
5.10 Permitted Distribution. 34
5.11 Transfer of Nonoperating Assets. 34
5.12 Consents. 34
5.13 Stock Option Grants. 34
5.14 Payment of Interest Income. 35
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF NII AND PTC 35
6.1 Representations and Warranties; Performance of Obligations 35
6.2 No Litigation 35
6.3 No Material Adverse Change 35
6.4 Consents and Approvals 35
6.5 Opinion of Counsel 36
6.6 Charter Documents 36
6.7 FIRPTA Compliance 36
6.8 Due Diligence Review 36
6.9 Delivery of Closing Financial Certificate 36
6.10 Employment Agreements 37
6.11 Transfer of Nonoperating Assets 37
6.12 Escrow Agreement. 37
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF THE SHAREHOLDER AND THE COMPANY 37
7.1 Representations and Warranties; Performance of Obligations 37
7.2 No Litigation 37
7.3 Consents and Approvals 38
7.4 Employment Agreements 38
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TABLE OF CONTENTS
(continued)
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7.5 No Material Adverse Change 38
7.6 Escrow Agreement. 38
8. INDEMNIFICATION 38
8.1 General Indemnification by the Shareholder 38
8.2 General Indemnification by NII and PTC. 40
8.3 Limitation and Expiration 40
8.4 Indemnification Procedures 41
8.5 Claims Against the Escrow Fund; Termination of Escrow 43
8.6 Survival of Representations; Warranties and Covenants 44
8.7 Remedies Cumulative 44
8.8 Right to Set Off 44
9. NONCOMPETITION 44
9.1 Prohibited Activities 44
9.2 Confidentiality 45
9.3 Damages 46
9.4 Reasonable Restraint 46
9.5 Severability; Reformation 46
9.6 Independent Covenant 46
9.7 Materiality 46
10. GENERAL 47
10.1 Successors and Assigns 47
10.2 Entire Agreement; Amendment; Waiver 47
10.3 Counterparts 47
10.4 Brokers and Agents 47
10.5 Expenses 47
10.6 Specific Performance; Remedies 47
10.7 Notices 48
10.8 Governing Law 48
10.9 Severability 49
10.10 Absence of Third Party Beneficiary Rights 49
10.11 Mutual Drafting 49
10.12 Further Representations 49
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EXHIBITS AND SCHEDULES
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Exhibit A - Escrow Agreement
EXHIBIT B - Employment Agreement - M. Arrington
EXHIBIT C - Employment Agreement - K. Kuhn
SCHEDULE 1.2 -- Interim Period Add-Backs
SCHEDULE 1.3 -- Post-Closing Audit Checklist
SCHEDULE 3.1 -- Due Organization
SCHEDULE 3.6 -- Subsidiaries, Stock and Notes
SCHEDULE 3.9 -- Fiscal 1997 Add-Backs
SCHEDULE 3.10 -- Financial Statements
SCHEDULE 3.11 -- Liabilities and Obligations
SCHEDULE 3.13 -- Bank Accounts; Powers of Attorney
SCHEDULE 3.16 -- Real Property
SCHEDULE 3.17 -- Personal Property
SCHEDULE 3.18 -- Intellectual Property
SCHEDULE 3.19 -- Significant Customers; Material Contracts and Commitments
SCHEDULE 3.20 -- Government Contracts
SCHEDULE 3.21 -- Insurance
SCHEDULE 3.22 -- Environmental Matters
SCHEDULE 3.24 -- Employee Benefit Plans
SCHEDULE 3.25 -- Taxes
SCHEDULE 3.26 -- Conformity with Law; Litigation
SCHEDULE 3.28 -- Absence of Changes
SCHEDULE 3.30 -- Predecessor Status; Etc.
SCHEDULE 3.32 -- ARC Accreditation and Bonding
SCHEDULE 5.9 -- Soft Dollars
SCHEDULE 5.11 -- Nonoperating Assets
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made and entered into
as of this 28th day of July, 1998, by and among Navigant International, Inc., a
Delaware corporation ("NII"), Professional Travel Corporation ("PTC"), a
Colorado corporation and a wholly-owned subsidiary of NII, Arrington Travel
Center, Inc., an Illinois corporation (the "Company"), and Michael B. Arrington
(the "Shareholder").
BACKGROUND
NII and PTC desire to acquire the Company, and the Shareholder desires to
sell to NII or PTC, all of the outstanding capital stock of the Company (the
"Acquisition").
NOW, THEREFORE, in consideration of the premises and of the
representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
1. THE ACQUISITION
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1.1 THE PURCHASE AND SALE. At the Closing (as defined in Section
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2) and subject to and upon the terms and conditions of this Agreement,
the Shareholder shall sell and deliver to PTC and PTC shall purchase from the
Shareholder all of the outstanding shares of common stock, no par value, of the
Company (the "Company Common Stock"), free and clear of all Liens (as defined in
Section 3.4).
1.2 CONSIDERATION.
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(a) For purposes of this Agreement, the "Consideration" shall
be, subject to adjustment pursuant to this Section 1.2 and Section 1.3, the
dollar amount obtained as a result of the foregoing calculation (i) (A) the
Company's earnings before interest and taxes for the twelve (12) month period
ended March 31, 1998, determined in accordance with generally accepted
accounting principles ("GAAP") and adjusted to reflect the add-back of those
nonrecurring expenses specified on SCHEDULE 1.2 attached hereto (the "Interim
Period Add-Backs"), but excluding any goodwill amortization related to the
Acquisition, if any, times (B) a multiple agreed upon by the parties, minus (ii)
the amount of interest bearing liabilities owed by the Company to banks or other
financial institutions or current or former shareholders of the Company, the
resulting dollar amount which the parties agree is $17,097,911, subject to
adjustment as set forth herein. The Consideration shall be paid in immediately
available funds at Closing.
(b) The Consideration has been calculated based upon several
factors, including the assumption that the tangible net worth of the Company as
of June 30, 1998, calculated in accordance with GAAP consistently applied and
determined after giving effect to the Permitted Distribution (as defined in
Section 5.10), is equal to or greater than the greater of
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$930,000 or six percent (6%) of net revenues during the twelve (12) months ended
June 30, 1998 (the "Net Worth Target").
(c) If on the Closing Financial Certificate (as defined in
Section 6.9), the Certified Closing Net Worth (as defined in Section 6.9) is
less than the Net Worth Target, the Consideration to be delivered to the
Shareholder may, at NII's election, be reduced either (i) at the Closing, or
(ii) after completion of the Post-Closing Audit (as defined in Section 1.3), by
the difference between the Net Worth Target and the Certified Closing Net Worth
set forth on the Closing Financial Certificate.
1.3 POST-CLOSING ADJUSTMENT. The Consideration shall be subject
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to adjustment after the Closing Date as specified in this Section 1.3.
(a) Within one hundred twenty (120) days following the Closing
Date, NII shall cause PricewaterhouseCoopers LLP ("NII's Accountant") to audit
the Company's books to determine the accuracy of the information set forth in
the Closing Financial Certificate (the "Post-Closing Audit"). Such audit shall
be conducted in accordance with Generally Accepted Auditing Standards. The
parties acknowledge and agree that for purposes of determining the tangible net
worth of the Company as of June 30, 1998 and the earnings before interest and
taxes, after giving effect to the Interim Period Add-Backs ("Adjusted EBIT") for
the twelve months ended March 31, 1998, the value of the assets of the Company
and the earnings of the Company shall, except with prior written consent of NII,
be calculated as provided in the last paragraph of Section 6.9. In addition,
the parties agree that the Post-Closing Audit will be limited to only a
verification of the actual numbers and not whether an add-back adjustment is
properly included as an add-back item. The Shareholder shall cooperate and
shall use his reasonable efforts to cause the officers and employees of the
Company to cooperate with NII and NII's Accountant after the Closing Date in
furnishing information, documents, evidence and other assistance to NII's
Accountant to facilitate the completion of the Post-Closing Audit within the
aforementioned time period. Without limiting the generality of the foregoing,
within two (2) weeks after the Closing, the Shareholder shall provide NII's
Accountant with the information and/or documents requested on the Post-Closing
Audit Checklist set forth as Schedule 1.3 hereto in order to facilitate the
completion of the Post-Closing Audit by NII's Accountant within the
aforementioned time period. In the event that NII's Accountant determines that
the actual tangible net worth of the Company as of June 30, 1998 was less than
the Certified Closing Net Worth or that the actual net income for the twelve
months ended June 30, 1998 was less than $2,430,000 (the "Earnings Threshold"),
NII shall deliver a written notice ("Financial Adjustment Notice") to the
Shareholder setting forth (i) the determination made by NII's Accountant of the
actual tangible net worth of the Company as of June 30, 1998 (the "Actual
Company Net Worth") and the actual net income for the twelve months ended June
30, 1998 (the "June 30, 1998 Earnings"), and (ii) the amount of the adjustment
to the Consideration (the "Consideration Adjustment") that would have been
applicable pursuant to Section 1.2(c) had the Actual Company Net Worth been
reflected on the Closing Financial Certificate instead of the Certified Closing
Net Worth or had the Adjusted EBIT for the twelve months ended March 31, 1998
been adjusted by the amount that the Earnings Threshold exceeds the June 30,
1998 Earnings, as applicable. The Consideration Adjustment shall take account
of the reduction, if any, to the Consideration already taken pursuant to Section
1.2(c) and any adjustments made for breaches of Section 3.9.
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(b) The Shareholder shall have thirty (30) days from the receipt
of the Financial Adjustment Notice to notify NII if the Shareholder disputes
such Financial Adjustment Notice. If NII has not received notice of such a
dispute within such 30-day period, NII shall be entitled to receive from the
Shareholder the Consideration Adjustment. The Consideration Adjustment shall at
Shareholder's election either be paid directly by him or shall be paid out of
the Escrow Fund (as defined in Section 1.4). Any remaining unpaid amount of
the Consideration Adjustment after such payment out of the Escrow Fund shall be
promptly paid by the Shareholder in immediately available funds. To the extent
Shareholder elects to pay such amount directly, the parties agree that the
Escrow Fund shall be deemed to be reduced by such amount and Shareholder, at his
option shall be entitled at any time thereafter to withdraw said amount from the
Escrow Fund. If Shareholder elects to pay such amount directly and fails to
remit such amount within two (2) Business Days (as defined in Section 8.5(a),
the parties agree that said amount shall be paid out of the Escrow Fund. If,
however, the Shareholder has delivered notice of such a dispute to NII within
such thirty (30)-day period, then NII's Accountant shall select an independent
accounting firm of nationally recognized standing that has not represented any
of the parties hereto within the preceding two (2) years to review the Company's
books, Closing Financial Certificate and Financial Adjustment Notice (and
related information) to determine the amount, if any, of the Consideration
Adjustment. Such independent accounting firm shall be subject to approval by
the Shareholder and NII, which approval shall not be unreasonably withheld,
within five (5) days of its selection, unless there is an actual conflict of
interest. The independent accounting firm shall be directed to consider only
those agreements, contracts, commitments or other documents (or summaries
thereof) that were either (i) delivered or made available to NII's Accountant in
connection with the transactions contemplated hereby, or (ii) reviewed by NII's
Accountant during the course of the Post-Closing Audit. The independent
accounting firm shall make its determination of the Consideration Adjustment, if
any, within thirty (30) days of its selection. The determination of the
independent accounting firm shall be final and binding on the parties hereto,
and upon such determination, NII shall be entitled to receive from the
Shareholder the Consideration Adjustment, payable as set forth above in this
Section 1.3(c). The costs of the independent accounting firm shall be borne by
the party (either NII or the Shareholder) whose determination of the Company's
net worth at Closing was further from the determination of the independent
accounting firm, or equally by NII and the Shareholder in the event that the
determination by the independent accounting firm is equidistant between the
Certified Closing Net Worth and the Actual Company Net Worth.
1.4 ESCROW. Upon Closing, NII shall deliver, or shall cause to
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be delivered, directly to Northern Trust, Attn: Paul Hoefert, as escrow agent
(the "Escrow Agent"), 10% of the Consideration, as such may be adjusted pursuant
to Section 1.2, to be held in an escrow fund (collectively with all interest and
earnings thereon, the "Escrow Fund") pursuant to the terms set forth herein and
in an escrow agreement to be entered into by and among the Shareholder, NII and
the Escrow Agent, substantially in form attached hereto as EXHIBIT A (the
"Escrow Agreement"). Subject to the terms of this Agreement, the Escrow Fund
shall be available to satisfy any post-Closing adjustment to the Consideration
under Section 1.3, amounts which the Shareholder may be required to pay under
Section 5.1(a)(i) or any indemnification obligations of the Shareholder pursuant
to Article 8 for Claims (as defined in Section 8.4) made on or prior to
<PAGE>
the twelve (12)-month anniversary of the Closing Date (the "Escrow Release
Date") and shall be paid out as provided in Section 8.5 hereof.
1.5 DELIVERY OF CERTIFICATE(S).
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(a) PTC to Provide Consideration. In exchange for the outstanding
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shares of the Company Common Stock, PTC shall cause to be made available to the
Shareholder (subject to the holdback of the Escrow Fund), the Consideration, as
adjusted pursuant to Section 1.2 and Section 1.3. Immediately prior to the
Closing, NII shall provide to PTC the funds to pay the Consideration, as
adjusted.
(b) Certificate Delivery Requirements. On the Closing Date, the
---------------------------------
Shareholder shall deliver to PTC the certificates (the "Certificates")
representing Company Common Stock, duly endorsed in blank by the Shareholder, or
accompanied by blank stock powers duly executed by the Shareholder and with all
necessary transfer tax and other revenue stamps, acquired at the Shareholder's
expense, affixed and canceled. The Shareholder shall promptly cure any
deficiencies with respect to the endorsement of the Certificates or other
documents of conveyance with respect to the stock powers accompanying such
Certificates.
(c) Lost, Stolen or Destroyed Certificates. In the event any
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certificates evidencing shares of Company Common Stock shall have been lost,
stolen or destroyed, PTC shall cause payment to be made in exchange for such
lost, stolen or destroyed certificates, upon the making of an affidavit of that
fact by the holder thereof, the Consideration as provided in Section 1.2;
provided, however, that NII or PTC may, in their discretion and as a condition
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precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificates to deliver a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against NII or PTC with respect
to the certificates alleged to have been lost, stolen or destroyed.
(d) No Liability. Notwithstanding anything to the contrary in this
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Section 1.5, no party hereto shall be liable to a holder of shares of Company
Common Stock for any amount paid to a public official pursuant to any applicable
abandoned property, escheat or similar law.
1.6 ACCOUNTING TERMS. Except as otherwise expressly provided herein
----------------
or in the schedules (the "Schedules"), all accounting terms used in this
Agreement shall be interpreted, and all financial statements, Schedules,
certificates and reports as to financial matters required to be delivered
hereunder shall be prepared, in accordance with GAAP consistently applied.
2. CLOSING
The consummation of the Acquisition and the other transactions contemplated
by this Agreement (the "Closing") shall take place at the offices of Wilson
Sonsini Goodrich & Rosati, P.C., Palo Alto, California 94304 on July __, 1998,
providing that all conditions to Closing shall have been satisfied or waived, or
at such other time, place and date as NII, PTC, the Company and the Shareholder
may mutually agree, which date shall be referred to as the "Closing Date."
<PAGE>
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE SHAREHOLDER
To induce NII and PTC to enter into this Agreement and consummate the
transactions contemplated hereby, each of the Company and the Shareholder,
jointly and severally, represents and warrants to NII and PTC as follows (for
purposes of this Agreement, the phrases "knowledge of the Company" or the
"Company's knowledge," or words of similar import, mean the knowledge of the
Shareholder and the directors and officers of the Company, including facts of
which the directors and officers, in the reasonably prudent exercise of their
duties, should be aware, and for purposes of the indemnification provisions set
forth in Section 8, none of this Section 3 shall be deemed a covenant):
3.1 DUE ORGANIZATION. The Company is a corporation duly organized,
----------------
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation and is duly authorized and qualified to do business under all
applicable laws, regulations, ordinances and orders of public authorities to
own, operate and lease its properties and 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 could not, individually or in the aggregate, reasonably be expected
to have a material adverse effect on the business, operations or condition
(financial or otherwise) of the Company. SCHEDULE 3.1 hereto contains a list of
all jurisdictions in which the Company is authorized or qualified to do
business. The Company is in good standing as a foreign corporation in each
jurisdiction it which it does business. The Company has delivered to NII true,
complete and correct copies of the Articles of Incorporation and Bylaws of the
Company. Such Articles of Incorporation and Bylaws are collectively referred to
as the "Charter Documents." The Company is not in violation of any Charter
Documents. The minute books of the Company have been made available to NII (and
have been delivered, along with the Company's original stock ledger and
corporate seal, to NII) and are correct and, except as set forth in SCHEDULE
3.1, complete in all material respects.
3.2 AUTHORIZATION; VALIDITY. The Company has requisite corporate
-----------------------
power and authority to enter into and perform its obligations pursuant to this
Agreement. The Company has the full legal right, corporate power and authority
to enter into this Agreement and the transactions contemplated hereby and to
perform its obligations pursuant to the terms of this Agreement. The Shareholder
has the full legal right and authority to enter into this Agreement and the
transactions contemplated hereby. The execution and delivery of this Agreement
by the Company and the performance by the Company of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of the Company and the Shareholder, and this Agreement has been duly
and validly authorized by all necessary corporate action. This Agreement is a
legal, valid and binding obligation of the Company and the Shareholder,
enforceable in accordance with its terms.
3.3 NO CONFLICTS. The execution, delivery and performance of this
------------
Agreement, the consummation of the transactions contemplated hereby, and the
<PAGE>
(a) conflict with, or result in a breach or violation of, any of
the Charter Documents;
(b) (i) conflict with, or result in a default (or would
constitute a default but for any requirement of notice or lapse of time or both)
under, any material document, agreement or other instrument to which the Company
or the Shareholder is a party or by which the Company or the Shareholder is
bound, or (ii) result in the creation or imposition of any lien, charge or
encumbrance on any of the Company's properties pursuant to (x) any law or
regulation to which the Company or the Shareholder or any of their respective
property is subject, or (y) any judgment, order or decree to which the Company
or the Shareholder is bound or any of their respective property is subject;
(c) result in termination or any impairment of any Permit (as
defined in Section 3.15), contractual right or other authorization of the
Company; or
(d) violate any law, order, judgment, rule, regulation, decree
or ordinance to which the Company or the Shareholder is subject or by which the
Company or the Shareholder is bound including, without limitation, the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), together with
all rules and regulations promulgated thereunder.
3.4 CAPITAL STOCK OF THE COMPANY. The authorized capital stock
----------------------------
of the Company consists of 1,000 shares of common stock, no par value, of which
100 shares are issued and outstanding, and no shares of preferred stock. 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 and are
owned of record and beneficially by the Shareholder free and clear of all Liens
(defined below). All of the issued and outstanding shares of the capital stock
of the Company 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 was issued in violation of any
preemptive rights. There are no voting agreements or voting trusts with respect
to any of the outstanding shares of the capital stock of the Company. No shares
of capital stock of the Company are subject to repurchase upon termination of
employment. For purposes of this Agreement, "Lien" means any mortgage, security
interest, pledge, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or otherwise), charge, preference, priority or other security
agreement, option, warrant, attachment, right of first refusal, preemptive,
conversion, put, call or other claim or right, restriction on transfer (other
than restrictions imposed by federal and state securities laws), or preferential
arrangement of any kind or nature whatsoever (including any restriction on the
transfer of any assets, any conditional sale or other title retention agreement,
any financing lease involving substantially the same economic effect as any of
the foregoing and the filing of any financing statement under the Uniform
Commercial Code or comparable law of any jurisdiction).
3.5 TRANSACTIONS IN CAPITAL STOCK; ACCOUNTING TREATMENT. No
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option, warrant, call, subscription right, conversion right or other contract or
commitment of any kind exists of any character, written or oral, which may
obligate the Company to issue, sell or otherwise become outstanding any shares
of capital stock. 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.
<PAGE>
3.6 SUBSIDIARIES, STOCK AND NOTES.
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(a) Except as set forth on SCHEDULE 3.6, the Company has no
subsidiaries.
(b) Except as set forth on SCHEDULE 3.6, 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
noncorporate entity.
(c) Except as set forth on SCHEDULE 3.6, there are no promissory
notes that have been issued to, or are held by, the Company.
3.7 COMPLETE COPIES OF MATERIALS. The Company has delivered to
----------------------------
NII true and complete copies of each agreement, contract, commitment or other
document (or summaries thereof) that is referred to in the Schedules or that has
been requested by NII.
3.8 ABSENCE OF CLAIMS AGAINST THE COMPANY. Except for the
-------------------------------------
Permitted Distribution, the Shareholder does not have any claims against the
Company.
3.9 COMPANY FINANCIAL CONDITIONS.
----------------------------
(a) The Company's net worth, after giving effect to the
Permitted Distribution, as of December 31, 1997 was not less than $930,000.
(b) The Company's (i) revenues for the fiscal year ended
December 31, 1997 were not less than $16,100,000, and (ii) revenues (the
"Interim Period Revenues") for the twelve (12)-month period ended March 31, 1998
(the "Interim Period") were not less than $15,900,000;
(c) The Company's (i) earnings before interest and taxes (after
adjustment for any add-backs for the year ended December 31, 1997 as set forth
on SCHEDULE 3.9 (the "Fiscal 1997 Add-Backs")) for the fiscal year ended
December 31, 1997, were not less than $2,750,000 (or 16.90% of revenues for such
fiscal year), (ii) earnings before interest and taxes for the Interim Period
(after the addition of Interim Period Add-Backs set forth on SCHEDULE 1.2
("Interim Period EBIT")) were not less than the greater of $2,900,000 or 18.17%
of the Company's revenues for the Interim Period and (iii) earnings before
interest and taxes (after adjustment for any add-backs set forth on SCHEDULE
3.9) (the "June Add-Backs") for the three (3)-month period ending June 30, 1998
shall be no less than $900,000.
(d) The Company shall have no outstanding long-term or short-
term indebtedness to banks, the Shareholder or other financial institutions and
creditors (in each case including the current portion thereof, but excluding
trade payables, the Company's telephone lease with AT&T and other ordinary
course accounts payable) as of the Closing Date.
<PAGE>
For purposes of Section 3.9(a) and (c), calculation of amounts shall be
made in accordance with the last paragraph of Section 6.9, and for purposes of
this Agreement "revenues" shall not include interest or dividend income. The
parties agree that for any breach of this Section 3.9, NII's or PTC's damages
for such breach either (i) to the extent applicable, shall be considered in the
calculation of the Consideration Adjustment pursuant to Section 1.3, or (ii) if
not considered in such calculation, shall be limited to the actual dollar amount
by which the Company fails to meet the financial covenants set forth above and
shall not cause any recalculation or reduction of the Consideration to be paid
under this Agreement.
3.10 FINANCIAL STATEMENTS. The Company has provided to NII (a)
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true, complete and correct copies of the Company's compiled balance sheet as of
December 31, 1997 and income statement for the year ended December 31, 1997
(collectively, the "Compiled Financials") and (b) true, complete and correct
copies of the Company's unaudited balance sheet (the "Interim Balance Sheet") as
of March 31, 1998 and income statement, for the twelve (12)-month period then
ended (collectively, the "Interim Financials," and together with the Compiled
Financials, the "Company Financial Statements"). The Company Financial
Statements have been prepared in accordance with GAAP consistently applied,
subject in the case of the Interim Financials to (i) normal year-end
adjustments, which individually or in the aggregate will not be material, (ii)
the exceptions stated on SCHEDULE 3.10, and (iii) the omission of footnote
information. Each unaudited balance sheet included in the Company Financial
Statements presents fairly the financial condition of the Company as of the date
indicated thereon, and each of the income statements included in the Company
Financial Statements presents fairly the results of its operations for the
periods indicated thereon. Since the dates of the Company Financial Statements,
there have been no material changes in the Company's accounting policies other
than as requested by NII to conform the Company's accounting policies to GAAP.
3.11 LIABILITIES AND OBLIGATIONS.
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(a) The Company is not liable for or subject to any liabilities
except for:
(i) those liabilities reflected on the Interim Balance
Sheet and not previously paid or discharged;
(ii) those liabilities arising in the ordinary course of its
business consistent with past practice under any contract, commitment or
agreement specifically disclosed on any Schedule to this Agreement or not
required to be disclosed thereon because of the term or amount involved or
otherwise; and
(iii) those liabilities incurred since March 31, 1998 in the
ordinary course of business consistent with past practice, which liabilities are
not, individually or in the aggregate, material.
<PAGE>
(b) The Company has delivered to NII, in the case of those
liabilities which are not fixed or are contested, a reasonable estimate of the
maximum amount which may be payable.
(c) SCHEDULE 3.11 includes a summary description of all plans or
projects involving the opening of new operations, expansion of any existing
operations or the acquisition of any real property or existing business, to
which management of the Company has made any material expenditure in the two-
year period prior to the date of this Agreement, which if pursued by the Company
would require additional material expenditures of capital.
(d) For purposes of this Section 3.11, the term "liabilities"
shall include without limitation any direct or indirect liability, indebtedness,
guaranty, endorsement, claim, loss, damage, deficiency, cost, expense,
obligation or responsibility, either accrued, absolute, contingent, mature,
unmature or otherwise and whether known or unknown, fixed or unfixed, choate or
inchoate, liquidated or unliquidated, secured or unsecured. SCHEDULE 3.11
contains a complete list of all the Company's indebtedness.
3.12 BOOKS AND RECORDS. The Company has made and kept books and
-----------------
records and accounts, which, in reasonable detail, accurately and fairly reflect
the activities of the Company. The Company has not engaged in any transaction,
maintained any bank account, or used any corporate funds except for
transactions, bank accounts, and funds which have been and are reflected in its
normally maintained books and records.
3.13 BANK ACCOUNTS; POWERS OF ATTORNEY. SCHEDULE 3.13 sets forth a
---------------------------------
complete and accurate list as of the date of this Agreement, of:
(a) the name of each financial institution in which the Company
has any account or safe deposit box;
(b) the names in which the accounts or boxes are held;
(c) the type of account;
(d) the name of each person authorized to draw thereon or have
access thereto; and
(e) the name 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.
3.14 ACCOUNTS AND NOTES RECEIVABLE. The Company has delivered to
-----------------------------
NII a complete and accurate list as of the date delivered of the accounts and
notes receivable of the Company (including without limitation receivables from
and advances to employees and the Shareholder, override receivables, hotel and
car receivables (if any), and financial assistance segment bonus receivable),
which includes an aging of all accounts and notes receivable showing amounts due
in 30-day aging categories (collectively, the "Accounts Receivable"). All
Accounts
<PAGE>
Receivable represent valid obligations arising from sales actually made
or services actually performed in the ordinary course of business. The Accounts
Receivable are current and collectible net of any respective reserves shown on
the Company's books and records (which reserves are adequate and calculated
consistent with past practice). Subject to such reserves, each of the Accounts
Receivable, except for the segment fees from Apollo Travel Services which shall
be paid promptly in accordance with such entity's agreement with the Company,
will be collected in full, without any set-off, within one hundred twenty (120)
days after the Closing Date (except for the financial assistance segment bonus
receivable). There is no contest, claim, or right of set-off, other than
rebates and returns in the ordinary course of business, under any contract with
any obligor of an Account Receivable relating to the amount or validity of such
Account Receivable.
3.15 PERMITS. The Company owns or holds all licenses, franchises,
-------
permits and other governmental authorizations, including without limitation
permits, titles (including without limitation motor vehicle titles and current
registrations), fuel permits, licenses and franchises necessary for the
continued operation of its business as it is currently being conducted, except
where the failure to own or hold the same could not, individually or in the
aggregate, reasonably be expected to result in a material adverse effect on the
business, operations or condition (financial or otherwise) of the Company (the
"Permits"). The Permits are valid, and the Company has not received any notice
that any governmental authority intends to modify, cancel, terminate or fail to
renew any Permit. No present or former officer, manager, member or employee of
the Company or any affiliate thereof, or any other person, firm, corporation or
other entity, owns or has any proprietary, financial or other interest (direct
or indirect) in any Permits. The Company has conducted and is conducting its
business in compliance with the requirements, standards, criteria and conditions
set forth in the Permits and other applicable orders, approvals, variances,
rules and regulations and is not in violation of any of the foregoing, except
where the failure to be in compliance could not, individually or in the
aggregate, reasonably be expected to result in a material adverse effect on the
business, operations or condition (financial or otherwise) of the Company. 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 Permit.
3.16 REAL PROPERTY.
-------------
(a) For purposes of this Agreement, "Real Property" means all
interests in real property including, without limitation, fee estates,
leaseholds and subleaseholds, purchase options, rights of first refusal,
licenses and all buildings and other improvements thereon, used by the Company,
together with any additions thereto or replacements thereof. The Company does
not own and never has owned any Real Estate.
(b) SCHEDULE 3.16 contains a complete and accurate description
of all Real Property (including street address, legal description (where known),
owner and Company's use thereof) and, to the Company's knowledge, any claims,
liabilities, security interests, mortgages, liens, pledges, conditions, charges,
covenants, easements, restrictions, encroachments, leases or encumbrances of any
nature thereon (but including only those on the Company's leasehold interests
unless expressly set forth in the lease agreement). The Real
<PAGE>
Property listed on SCHEDULE 3.16 includes all interests in real property
necessary to conduct the business and operations of the Company.
(c) Except as set forth in SCHEDULE 3.16:
(i) The Company has obtained all approvals of governmental
authorities (including certificates of use and occupancy, licenses and permits)
required in connection with its use, occupation and operation of the Real
Property.
(ii) To the Company's knowledge, the Real Property and its
continued use, occupancy and operation as used, occupied and operated in the
conduct of the Company's business does not constitute a nonconforming use and is
not the subject of a special use permit under any applicable law.
(iii) No notice from any governmental authority has been
served upon the Company claiming any violation of any law (including any code,
rule, regulation, zoning or building ordinance or health or safety ordinance),
or requiring or calling attention to the need for any work, repairs,
construction, alterations or installations on or in connection with such Real
Property which has not been complied with.
(iv) To the Company's knowledge, neither the structures,
facilities and improvements on the Real Property leased by the Company have
suffered any damage by fire or other casualty which has not heretofore been
completely repaired and restored to its original condition in accordance with
the term of the Leases (as defined below).
(v) There are no parties other than the Company in
possession of any of the Real Property or any portion thereof used exclusively
by the Company, and there are no subleases, licenses, concessions or other
agreements, written or oral, granting to any party or parties the right of use
or occupancy of any portion of such Real Property or any portion thereof.
(vi) All oral or written leases, subleases, licenses,
concession agreements or other use or occupancy agreements pursuant to which the
Company leases from any other party any real property, including all
amendments, renewals, extensions, modifications or supplements to any of the
foregoing or substitutions for any of the foregoing (collectively, the "Leases")
are valid and in full force and effect. The Company has provided NII with true
and complete copies of all of the Leases, all amendments, renewals, extensions,
modifications or supplements thereto, and all material correspondence related
thereto, including all correspondence pursuant to which any party to any of the
Leases declared a default thereunder or provided notice of the exercise of any
option granted to such party under such Lease. The Leases and the Company's
interests in the Leases are free of all Liens. The Company has received no
notice of default under any Leases, and the Company is in full compliance with
the terms and provisions of the Leases and, except as set forth in the Leases,
there are no material maintenance or capital improvement obligations thereon.
<PAGE>
(vii) Except as set forth on SCHEDULE 3.16 none of the Leases
requires the consent or approval of any party thereto in connection with the
consummation of the transactions contemplated hereby.
3.17 PERSONAL PROPERTY.
-----------------
(a) SCHEDULE 3.17 sets forth a complete and accurate list of all
categories of personal property included on the Interim Balance Sheet and all
other personal property owned or leased by the Company with in each case a
current book value in excess of $25,000 both (i) as of June 30, 1998 and (ii)
acquired since June 30, 1998, and a list of all leases for material equipment
(true, correct and complete copies of which have been provided to NII) and an
indication as to which assets are currently owned, or were formerly owned, by
the Shareholder or business or personal affiliates of the Shareholder or of the
Company have been provided to NII.
(b) The Company currently owns or leases all personal property
necessary to conduct the business and operations of the Company as they are
currently being conducted.
(c) All of the trucks and other material, machinery and
equipment of the Company, including those listed on SCHEDULE 3.17, are in good
working order and condition, ordinary wear and tear excepted. All leases set
forth on SCHEDULE 3.17 are in full force and effect and constitute valid and
binding agreements of the Company, and the Company is not in breach of any of
their terms. All fixed assets used by the Company that are material to the
operation of its business are either owned by the Company or leased under an
agreement listed on SCHEDULE 3.17.
(d) SCHEDULE 3.17 also contains a list of personal property
owned by the Shareholder and currently located at the Company's principal place
of business. Ownership of all such personal property shall remain vested in the
Shareholder.
3.18 INTELLECTUAL PROPERTY.
---------------------
(a) The Company is the true and lawful owner of, or is licensed
or otherwise possesses legally enforceable rights to use, the registered and
unregistered Marks (as defined below) listed on SCHEDULE 3.18. Such schedule
lists (i) all of the Marks registered in the United States Patent and Trademark
Office ("PTO") or the equivalent thereof in any state of the United States or in
any foreign country, and (ii) all of the unregistered Marks, that the Company
now owns or uses in connection with its business. Except with respect to those
Marks shown as licensed on SCHEDULE 3.18, the Company owns all of the registered
and unregistered trademarks, service marks, and trade names that it uses. The
Marks listed on SCHEDULE 3.18 will not cease to be valid rights of the Company
by reason of the execution, delivery and performance of this Agreement or the
consummation of the transactions contemplated hereby. For purposes of this
Section 3.18, the term "Mark" shall mean all right, title and interest in and to
any United States or foreign trademarks, service marks and trade names now held
by the Company, including any registration or application for registration of
any trademarks and services marks in the PTO or the equivalent thereof in any
state of the United States or in any foreign country, as well as any
unregistered marks used by the Company, and any trade dress (including logos,
designs,
<PAGE>
company names, business names, fictitious names and other business identifiers)
used by the Company in the United States or any foreign country.
(b) The Company is the true and lawful owner of, or is licensed
or otherwise possesses legally enforceable rights to use, all rights in the
Patents listed on SCHEDULE 3.18 and in the Copyright registrations listed on
SCHEDULE 3.18. Such Patents and Copyrights constitute all of the Patents and
material Copyrights that the Company now owns or is licensed to use. The
Company owns or is licensed to practice under all patents and copyright
registrations that the Company now owns or uses in connection with its business.
For purposes of this Section 3.18, the term "Patent" shall mean any United
States or foreign patent to which the Company has title as of the date of this
Agreement, as well as any application for a United States or foreign patent made
by the Company; the term "Copyright" shall mean any United States or foreign
copyright owned by the Company as of the date of this Agreement, including any
registration of copyrights, in the United States Copyright Office or the
equivalent thereof in any foreign county, as well as any application for a
United States or foreign copyright registration made by the Company.
(c) The Company is the true and lawful owner of, or is licensed
or otherwise possesses legally enforceable rights to use, all rights in the
trade secrets, franchises, or similar rights (collectively, "Other Rights")
listed on SCHEDULE 3.18. Those Other Rights constitute all of the Other Rights
that the Company now owns or is licensed to use. The Company owns or is
licensed to practice under all trade secrets, franchises or similar rights that
it owns, uses or practices under.
(d) The Marks, Patents, Copyrights, and Other Rights listed on
SCHEDULE 3.18 are referred to collectively herein as the "Intellectual
Property." The Intellectual Property owned by the Company is referred to herein
collectively as the "Company Intellectual Property." All other Intellectual
Property is referred to herein collectively as the "Third Party Intellectual
Property." Except as indicated on SCHEDULE 3.18, the Company has no obligations
to compensate any person for the use of any Intellectual Property nor has the
Company granted to any person any license, option or other rights to use in any
manner any Intellectual Property, whether requiring the payment of royalties or
not.
(e) The Company is not, nor will it be as a result of the
execution and delivery of this Agreement or the performance of its obligations
hereunder, in violation of any Third Party Intellectual Property license,
sublicense or agreement described in SCHEDULE 3.18. Except as set forth on
SCHEDULE 3.18, no claims with respect to the Company Intellectual Property or
Third Party Intellectual Property are currently pending or, to the knowledge of
the Company, are threatened by any person, nor, to the Company's knowledge, do
any grounds for any claims exist: (i) to the effect that the manufacture, sale,
licensing or use of any product as now used, sold or licensed or proposed for
use, sale or license by the Company infringes on any copyright, patent,
trademark, service mark or trade secret; (ii) against the use by the Company of
any trademarks, trade names, trade secrets, copyrights, patents, technology,
know-how or computer software programs and applications used in the Company's
business as currently conducted by the Company; (iii) challenging the ownership,
validity or effectiveness of any of the Company Intellectual Property or other
trade secret material to the Company; or (iv) challenging the Company's license
or legally enforceable right to use of the Third Party
<PAGE>
Intellectual Property. To the Company's knowledge, there is no unauthorized use,
infringement or misappropriation of any of the Company Intellectual Property by
any third party. Neither the Company nor any of its subsidiaries (x) has been
sued or charged in writing as a defendant in any claim, suit, action or
proceeding which involves a claim or infringement of trade secrets, any patents,
trademarks, service marks, or copyrights and which has not been finally
terminated or, except as set forth on SCHEDULE 3.18, been informed or notified
by any third party that the Company may be engaged in such infringement or (y)
has knowledge of any infringement liability with respect to, or infringement by,
the Company or any of its subsidiaries of any trade secret, patent, trademark,
service mark, or copyright of another.
3.19 SIGNIFICANT CUSTOMERS; MATERIAL CONTRACTS AND COMMITMENTS.
---------------------------------------------------------
(a) SCHEDULE 3.19 sets forth a complete and accurate list of all
Significant Customers and Significant Suppliers. For purposes of this
Agreement, "Significant Customers" are the twenty (20) customers that have
effected the most purchases, in dollar terms, from the Company during each of
the past four (4) fiscal quarters, and "Significant Suppliers" are the twenty
(20) suppliers who supplied the largest amount by dollar volume of products or
services to the Company during the twelve (12) months ending on June 30, 1998.
(b) SCHEDULE 3.19 contains a complete and accurate list of all
contracts, commitments, leases, instruments, agreements, licenses or permits,
written or oral, to which the Company is a party or by which it or its
properties are bound (including without limitation contracts with Significant
Customers, joint venture or partnership agreements, contracts with any labor
organizations, employment agreements, consulting agreements, loan agreements,
indemnity or guaranty agreements, bonds, mortgages, options to purchase land,
liens, pledges or other security agreements) (i) to which the Company and any
affiliate of the Company or any officer, director or stockholder of the Company
are parties ("Related Party Agreements"); (ii) that may give rise to obligations
or liabilities exceeding, during the current term thereof, $25,000, or (iii)
that may generate revenues or income exceeding, during the current term thereof,
$25,000 (collectively with the Related Party Agreements, the "Material
Contracts"). The Company has delivered to NII true, complete and correct copies
of the Material Contracts.
(c) Except to the extent set forth on SCHEDULE 3.19, (i) none of
the Company's Significant Customers has canceled or substantially reduced or, to
the knowledge of the Company, is currently attempting or threatening to cancel
or substantially reduce, any material purchases from the Company, (ii) none of
the Company's Significant Suppliers has canceled or substantially reduced or, to
the knowledge of the Company, is currently attempting to cancel or substantially
reduce, the supply of material products or services to the Company, (iii) the
Company has complied with all of its commitments and obligations and is not in
default under any of the Material Contracts, and no notice of default has been
received with respect to any thereof, and (iv) there are no Material Contracts
that were not negotiated at arm's length. The Company has not received any
customer complaints of a material nature concerning its products and/or
services, nor has it had any of its products returned by a purchaser thereof
except for normal warranty returns consistent with past history and those
returns that would not result in a reversal of any material revenue.
<PAGE>
(d) Each Material Contract, except those terminated pursuant to
Section 5.4, is valid and binding on the Company and is in full force and effect
and is not subject to any default thereunder by any party obligated to the
Company pursuant thereto. Except for such required consents specifically noted
on SCHEDULE 3.19 (the "Unobtained Consents"), the Company has obtained all
necessary consents, waivers and approvals of parties to any Material Contracts
that are required in connection with any of the transactions contemplated
hereby, or are required by any governmental agency or other third party or in
order that any such Material Contract remain in effect without modification
after the transactions and without giving rise to any right to termination,
cancellation or acceleration or loss of any right or benefit ("Third Party
Consents"). All Third Party Consents are listed on SCHEDULE 3.19. To the
extent that the Company has failed to obtain any Third Party Consent in advance
of the Closing Date, the failure of the Company to obtain such Third Party
Consent will not, individually or in the aggregate, have an adverse effect on
the business or operations of the Company after the Closing Date.
(e) The Company is not a "women's business enterprise" ("WBE")
or "woman-owned business concern" as defined in 48 C.F.R. (S) 52.204-5, or a
"minority business enterprise" ("MBE") or "minority-owned business concern" as
defined in 48 C.F.R. (S) 52.219-8, nor has it held itself out to be such to
any of its customers.
(f) The outstanding balance on all loans or credit agreements
either (i) between the Company and any person in which the Shareholder owns a
material interest, or (ii) guaranteed by the Company for the benefit of any
person in which the Shareholder owns a material interest, are set forth in
SCHEDULE 3.19.
3.20 GOVERNMENT CONTRACTS.
--------------------
(a) Except as set forth on SCHEDULE 3.20, the Company is not a
party to any government contracts.
(b) The Company has not been suspended or debarred from bidding
on contracts or subcontracts for any agency or instrumentality of the United
States Government or any state or local government, nor, to the knowledge of the
Company, has any suspension or debarment action been threatened or commenced.
There is, to the Company's best knowledge, no valid basis for the Company's
suspension or debarment from bidding on contracts or subcontracts for any agency
of the United States Government or any state or local government.
(c) Except as set forth in SCHEDULE 3.20, the Company has not
been, nor is it now being, audited, or investigated by any government agency, or
the inspector general or auditor general or similar functionary of any agency or
instrumentality, nor, to the knowledge of the Company, has such audit or
investigation been threatened.
(d) The Company has no dispute pending before a contracting
office of, nor any current claim (other than the Accounts Receivable) pending
against, any agency or instrumentality of the United States Government or any
state or local government, relating to a contract.
<PAGE>
(e) The Company has not, with respect to any government
contract, received a cure notice advising the Company that it is or was in
default or would, if it failed to take remedial action, be in default under such
contract.
(f) The Company has not submitted any inaccurate, untruthful, or
misleading cost or pricing data, certification, bid, proposal, report, claim, or
any other information relating to a contract to any agency or instrumentality of
the United States Government or any state or local government.
(g) No employee, agent, consultant, representative, or affiliate
of the Company is in receipt or possession of any competitor or government
proprietary or procurement sensitive information related to the Company's
business under circumstances where there is reason to believe that such receipt
or possession is unlawful or unauthorized.
(h) Each of the Company's government contracts has been issued,
awarded or novated to the Company in the Company's name.
3.21 INSURANCE. SCHEDULE 3.21 sets forth a complete and accurate
---------
list, as of June 30, 1998, of all insurance policies carried by the Company and
all insurance loss runs or workmen's compensation claims received for the past
two (2) policy years. The Company has delivered to NII true, complete and
correct copies of all current insurance policies, all of which are in full force
and effect. All premiums payable under all such policies have been paid and the
Company is otherwise in full compliance with the terms of such policies. Such
policies of insurance are of the type and in amounts customarily carried by
persons conducting businesses similar to that of the Company. To the knowledge
of the Company, there have been no threatened terminations of, or material
premium increases with respect to, any of such policies.
3.22 ENVIRONMENTAL MATTERS.
---------------------
(a) Hazardous Material. To the Company's knowledge,
------------------
other than as set forth on SCHEDULE 3.22, no underground storage tanks and no
amount of any substance that has been designated by any Governmental Entity or
by applicable federal, state, local or other applicable law to be radioactive,
toxic, hazardous or otherwise a danger to health or the environment, including,
without limitation, PCBs, asbestos, petroleum, urea-formaldehyde and all
substances listed as hazardous substances pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, or
defined as a hazardous waste pursuant to the United States Resource Conservation
and Recovery Act of 1976, as amended, and the regulations promulgated pursuant
to said laws, but excluding office and janitorial supplies properly and safely
maintained (a "Hazardous Material"), are present on that portion of any property
that the Company has at any time owned, operated, occupied or leased. SCHEDULE
3.22 identifies all underground and aboveground storage tanks, and the capacity,
age and contents of such tanks, located on that portion of any real property
leased by the Company.
(b) Hazardous Materials Activities. To the Company's
------------------------------
knowledge, the Company has not transported, stored, used, manufactured, disposed
of or released, or exposed its employees or others to, Hazardous Materials in
violation of any law in effect on or before the
<PAGE>
Closing Date, nor has the Company disposed of, transported, sold, or
manufactured any product containing a Hazardous Material (collectively, "Company
Hazardous Materials Activities") in violation of any rule, regulation, treaty or
statute promulgated by any Governmental Entity in effect prior to or as of the
date hereof to prohibit, regulate or control Hazardous Materials or any
Hazardous Material Activity.
(c) Permits. The Company does not hold any environmental
-------
approvals, permits, licenses, clearances and consents (the "Environmental
Permits") and, to the Company's knowledge, none are required for the conduct of
the Company's business as such business is currently being conducted. The
Company is in compliance in all material respects with all other limitations,
restrictions, conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the laws of all Governmental Entities
relating to pollution or protection of the environment or contained in any
regulation, code, plan, order, decree, judgment, notice or demand letter issued,
entered, promulgated or approved thereunder.
(d) Environmental Liabilities. No action, proceeding,
-------------------------
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to the knowledge of the Company, threatened concerning any
Environmental Permit, Hazardous Material or any Company Hazardous Materials
Activity. To the Company's knowledge, there are no past or present actions,
activities, circumstances, conditions, events, or incidents that could involve
the Company (or any person or entity whose liability the Company has retained or
assumed, either by contract or operation of law) in any environmental
litigation, or impose upon the Company (or any person or entity whose liability
the Company has retained or assumed, either by contract or operation of law) any
environmental liability including, without limitation, common law tort
liability.
3.23 LABOR AND EMPLOYMENT MATTERS. With respect to employees of
----------------------------
and service providers to the Company:
(a) for purposes of this Section 3.23 and Section 3.24, the
phrases "Company's knowledge," "to the knowledge of the Company" or words of
similar import include the knowledge of anyone responsible for the Company's
human resources;
(b) the Company is and has been in compliance in all material
respects with all applicable laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, including
without limitation any such laws respecting employment discrimination, workers'
compensation, family and medical leave, the Immigration Reform and Control Act,
and occupational safety and health requirements, and has not and is not engaged
in any unfair labor practice;
(c) there is not now, nor within the past three (3) years has
there been, any unfair labor practice complaint against the Company pending or,
to the Company's knowledge, threatened, before the National Labor Relations
Board or any other comparable authority;
<PAGE>
(d) there is not now, nor within the past three (3) years has
there been, any labor strike, slowdown or stoppage actually pending or, to the
Company's knowledge, threatened, against or directly affecting the Company;
(e) to the Company's knowledge, no labor representation
organization effort exists nor has there been any such activity within the past
three (3) years;
(f) no grievance or arbitration proceeding arising out of or
under collective bargaining agreements is pending and, to the Company's
knowledge, no claims therefor exist or have been threatened;
(g) the employees of the Company are not and have never been
represented by any labor union, and no collective bargaining agreement is
binding and in force against the Company or currently being negotiated by the
Company; and
(h) all persons classified by the Company as independent
contractors do satisfy and have satisfied the requirements of law to be so
classified, and the Company has fully and accurately reported their compensation
on IRS Forms 1099 when required to do so.
3.24 EMPLOYEE BENEFIT PLANS.
----------------------
(a) Definitions.
(i) "Benefit Arrangement" means any benefit arrangement,
obligation, custom, or practice, whether or not legally enforceable, to provide
benefits, other than salary, as compensation for services rendered, to present
or former directors, employees, agents, or independent contractors, other than
any obligation, arrangement, custom or practice that is an Employee Benefit
Plan, including, without limitation, employment agreements, severance
agreements, executive compensation arrangements, incentive programs or
arrangements, sick leave, vacation pay, severance pay policies, plant closing
benefits, salary continuation for disability, consulting, or other compensation
arrangements, workers' compensation, retirement, deferred compensation, bonus,
stock option or purchase, hospitalization, medical insurance, life insurance,
tuition reimbursement or scholarship programs, any plans subject to Section 125
of the Code, and any plans providing benefits or payments in the event of a
change of control, change in ownership, or sale of a substantial portion
(including all or substantially all) of the assets of any business or portion
thereof, in each case with respect to any present or former employees,
directors, or agents.
(ii) "Company Benefit Arrangement" means any Benefit
Arrangement sponsored or maintained by the Company or with respect to which the
Company has or may have any liability (whether actual, contingent, with respect
to any of its assets or otherwise) as of the Closing Date, in each case with
respect to any present or former directors, employees, or agents of the Company.
(iii) "Company Plan" means, as of the Closing Date, any
Employee Benefit Plan for which the Company is the "plan sponsor" (as defined in
Section 3(16)(B) of ERISA) or any Employee Benefit Plan maintained by the
Company or to which the
<PAGE>
Company is obligated to make payments, in each case with respect to any present
or former employees of the Company.
(iv) "Employee Benefit Plan" has the meaning given in
Section 3(3) of ERISA.
(v) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended, and all regulations and rules issued thereunder, or any
successor law.
(vi) "ERISA Affiliate" means any person that, together with
the Company, would be or was at any time treated as a single employer under
Section 414 of the Code or Section 4001 of ERISA and any general partnership of
which the Company is or has been a general partner.
(vii) "Multiemployer Plan" means any Employee Benefit Plan
described in Section 3(37) of ERISA.
(viii) "Qualified Plan" means any Employee Benefit Plan that
meets, purports to meet, or is intended to meet the requirements of Section
401(a) of the Code.
(ix) "Welfare Plan" means any Employee Benefit Plan
described in Section 3(1) of ERISA.
(b) SCHEDULE 3.24 contains a complete and accurate list of all
Company Plans and Company Benefit Arrangements. SCHEDULE 3.24 specifically
identifies all Company Plans (if any) that are Qualified Plans.
(c) With respect, as applicable, to Employee Benefit Plans and
Benefit Arrangements:
(i) true, correct, and complete copies of all the following
documents with respect to each Company Plan and Company Benefit Arrangement, to
the extent applicable and in existence, have been delivered to NII or its
designee: (A) all documents constituting the Company Plans and Company Benefit
Arrangements, including but not limited to, trust agreements, insurance
policies, service agreements, and formal and informal amendments thereto; (B)
the most recent Forms 5500 or 5500C/R and any financial statements attached
thereto and those for the prior three (3) years; (C) the last Internal Revenue
Service determination letter, the last IRS determination letter that covered the
qualification of the entire plan (if different), and the materials submitted by
the Company to obtain those letters; (D) the most recent summary plan
description; (E) the most recent written descriptions of all non-written
agreements relating to any such plan or arrangement; (F) summary reports
submitted within the three (3) years preceding the date of this Agreement by
third-party administrators, actuaries, investment managers, consultants, or
other independent contractors; (G) all notices that were given within the four
(4) years preceding the date of this Agreement by the IRS, Department of Labor,
or any other governmental agency or entity with respect to any plan or
arrangement; and (H) employee manuals or handbooks containing personnel or
employee relations policies;
<PAGE>
(ii) the Putnam Investment 401(k) Plan (the "Company 401(k)
Plan") is the only Qualified Plan. Except as set forth on SCHEDULE 3.24, the
Company has never maintained or contributed to another Qualified Plan. The
Company 401(k) Plan qualifies under Section 401(a) of the Code, and any trusts
maintained pursuant thereto are exempt from federal income taxation under
Section 501 of the Code, and nothing has occurred with respect to the design or
operation of any Qualified Plans that could cause the loss of such qualification
or exemption or the imposition of any liability, lien, penalty, or tax under
ERISA or the Code;
(iii) the Company has never sponsored or maintained, had any
obligation to sponsor or maintain, or had any liability (whether actual or
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code
or Title IV of ERISA (including any Multiemployer Plan);
(iv) except as set forth on SCHEDULE 3.24, each Company Plan
and each Company Benefit Arrangement has been maintained in accordance with its
constituent documents and with all applicable provisions of the Code, ERISA and
other laws, including federal and state securities laws;
(v) there are no pending claims or lawsuits by, against, or
relating to any Employee Benefit Plans or Benefit Arrangements that are not
Company Plans or Company Benefit Arrangements that would, if successful, result
in liability of the Company or the Shareholder, and no claims (other than
routine claims for benefits) or lawsuits have been asserted, instituted or, to
the knowledge of the Company, threatened by, against, or relating to any Company
Plan or Company Benefit Arrangement, against the assets of any trust or other
funding arrangement under any such Company Plan, by or against the Company with
respect to any Company Plan or Company Benefit Arrangement, or by or against the
plan administrator or any fiduciary of any Company Plan or Company Benefit
Arrangement, and the Company does not have knowledge of any fact that could form
the basis for any such claim or lawsuit. The Company Plans and Company Benefit
Arrangements are not presently under audit or examination (nor has notice been
received of a potential audit or examination) by the IRS, the Department of
Labor, or any other governmental agency or entity, and no matters are pending
with respect to the Company 401(k) Plan under the IRS's Voluntary Compliance
Resolution program, its Closing Agreement Program, or other similar programs;
(vi) no Company Plan or Company Benefit Arrangement contains
any provision or is subject to any law that would prohibit the transactions
contemplated by this Agreement or that would give rise to any vesting of
benefits, severance, termination, or other payments or liabilities as a result
of the transactions contemplated by this Agreement;
(vii) with respect to each Company Plan, there has occurred
no non-exempt "prohibited transaction" (within the meaning of Section 4975 of
the Code) or transaction prohibited by Section 406 of ERISA or breach of any
fiduciary duty described in Section 404 of ERISA that would, if successful,
result in any material liability for the Company or the Shareholder, officer,
director, or employee of the Company;
<PAGE>
(viii) except as set forth on SCHEDULE 3.24, all reporting,
disclosure, and notice requirements of ERISA and the Code have been fully and
completely satisfied with respect to each Company Plan and each Company Benefit
Arrangement;
(ix) all amendments and actions required to bring the
Company Benefit Plans into conformity with the applicable provisions of ERISA,
the Code, and other applicable laws have been made or taken except to the extent
such amendments or actions (A) are not required by law to be made or taken until
after the Effective Date and (B) are disclosed on SCHEDULE 3.24;
(x) payment has been made of all amounts that the Company
is required to pay as contributions to the Company Benefit Plans as of the last
day of the most recent fiscal year of each of the plans ended before the date of
this Agreement; all benefits accrued under any unfunded Company Plan or Company
Benefit Arrangement will have been paid, accrued, or otherwise adequately
reserved in accordance with GAAP as of June 30, 1998; and all monies withheld
from employee paychecks with respect to Company Plans have been transferred to
the appropriate plan within thirty (30) days of such withholding;
(xi) the Company has not prepaid or prefunded any Welfare
Plan through a trust, reserve, premium stabilization, or similar account, nor
does it provide benefits through a voluntary employee beneficiary association as
defined in Section 501(c)(9);
(xii) no statement, either written or oral, has been made by
an employee of the Company with authority to disseminate communications
regarding Company Plans to any person with regard to any Company Plan or Company
Benefit Arrangement that was not in accordance with the Company Plan or Company
Benefit Arrangement and that could have an adverse economic consequence to the
Company;
(xiii) the Company has no liability (whether actual,
contingent, with respect to any of its assets or otherwise) with respect to any
Employee Benefit Plan or Benefit Arrangement that is not a Company Benefit
Arrangement or with respect to any Employee Benefit Plan sponsored or maintained
(or which has been or should have been sponsored or maintained) by any ERISA
Affiliate;
(xiv) all group health plans of the Company and its
affiliates have been operated in material compliance with the requirements of
Sections 4980B (and its predecessor) and 5000 of the Code, and the Company has
provided, or will have provided before the Closing Date, to individuals entitled
thereto all required notices and coverage pursuant to Section 4980B with respect
to any "qualifying event" (as defined therein) occurring before or on the
Closing Date;
(xv) no employee or former employee of the Company or
beneficiary of any such employee or former employee is, by reason of such
employee's or former employee's employment, entitled to receive any benefits,
including, without limitation, death or medical benefits (whether or not
insured) beyond retirement or other termination of employment as described in
Statement of Financial Accounting Standards No. 106, other than (i) death,
<PAGE>
long-term disability or retirement benefits under a Qualified Plan, (ii)
deferred compensation benefits accrued as liabilities on the Closing Statement
or (iii) continuation coverage mandated under Section 4980B of the Code or other
applicable law.
(d) SCHEDULE 3.24 hereto contains the most recent quarterly
listing of workers' compensation claims and a schedule of workers' compensation
claims of the Company for the last three (3) fiscal years.
(e) SCHEDULE 3.24 hereto sets forth an accurate list, as of the
date hereof, of all employees of the Company who may earn more than $75,000 in
fiscal 1998, all officers and all directors, and lists all employment agreements
with such employees, officers and directors and the rate of compensation (and
the portions thereof attributable to salary, bonus, and other compensation
respectively) of each such person as of June 30, 1998.
(f) The Company has not declared or paid any bonus compensation
in contemplation of the transactions contemplated by this Agreement.
(g) Except as set forth on SCHEDULE 3.24, there are no
Contingent Deferred Sales Charges ("CDSC's") or similar surrender fees, asset
charges or other penalties that will become payable as a result of the
termination of any Company Plan or Company Benefit Arrangement or the merger of
the assets of such Company Plan or Company Benefit Arrangement into a plan or
benefit arrangement of NII. To the extent that any such CDSC's or similar
charges or penalties are payable upon such event, the Shareholder shall pay such
amounts at Closing or, with the concurrence of NII, NII may pay such amounts and
the Consideration shall be reduced accordingly.
3.25 TAXES.
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(a) (i) The Company has timely filed all Tax Returns due on or
before the Closing Date, and such Tax Returns are true, correct and complete in
all respects.
(ii) Except as set forth on SCHEDULE 3.25, the Company has
paid in full on a timely basis all Taxes owed by it, whether or not shown on any
Tax Return. No claim has been made by any authority in a jurisdiction where the
Company has not filed tax returns that the Company is, or may be, subject to
taxation by that jurisdiction.
(iii) The amount of the Company's liability for unpaid Taxes
as of March 31, 1998 did not exceed the amount of the current liability accruals
for Taxes (excluding reserves for deferred Taxes) shown on the Interim Balance
Sheet, and the amount of the Company's liability for unpaid Taxes for all
periods or portions thereof ending on or before the Closing Date will not exceed
the amount of the current liability accruals for Taxes (excluding reserves for
deferred Taxes) as such accruals are reflected on the books and records of the
Company on the Closing Date.
(iv) Except as set forth on SCHEDULE 3.25, there are no
ongoing examinations or claims against the Company for Taxes, and no notice of
any audit, examination, or claim for Taxes, whether pending or threatened, has
been received.
<PAGE>
(v) The Company has a taxable year ending on December 31 in
each year.
(vi) The Company currently utilizes the cash method of
accounting for income Tax purposes and such method of accounting has not changed
in the past five (5) years. The Company has not agreed to, and is not and will
not be required to, make any adjustments under Code Section 481(a) as a result
of a change in accounting methods.
(vii) Except as set forth in SCHEDULE 3.25, the Company has
withheld all Taxes required to have been withheld and paid over all Taxes
required to have been paid prior to the Closing Date, and complied with all
information reporting and backup withholding requirements, including maintenance
of required records with respect thereto, in connection with amounts paid to any
employee, independent contractor, creditor, or other third party.
(viii) Copies of (a) any Tax examinations, (b) extensions of
statutory limitations for the collection or assessment of Taxes, and (c) the Tax
Returns of the Company filed (and drafts of Tax Returns not yet filed, if
available) for the last fiscal year have been delivered to NII.
(ix) There are (and as of immediately following the Closing
there will be) no Liens on the assets of the Company relating to or attributable
to Taxes, or out of the failure, or an alleged failure, to pay taxes.
(x) To the Company's knowledge, there is no basis for the
assertion of any claim relating or attributable to Taxes which, if adversely
determined, would result in any Lien on the assets of the Company or otherwise
have a material adverse effect on the Company or its business.
(xi) None of the Company's assets are treated as "tax exempt
use property" within the meaning of Section 168(h) of the Code.
(xii) There are no contracts, agreements, plans or
arrangements, including but not limited to the provisions of this Agreement,
covering any employee or former employee of the Company that, individually or
collectively, could give rise to the payment of any amount (or portion thereof)
that would not be deductible pursuant to Sections 280G, 404 or 162 of the Code.
(xiii) The Company has not filed any consent agreement under
Section 341(f) of the Code or agreed to have Section 341(f)(2) of the Code apply
to any disposition of a subsection (f) asset (as defined in Section 341(f)(4) of
the Code) owned by the Company.
<PAGE>
agreement to be complied with or satisfied by such party hereunder.
The delivery of any notice pursuant to this Section 5.7 shall not, without the
express written consent of the other parties be deemed to (x) modify the
representations or warranties hereunder of the party delivering such notice, (y)
modify the conditions set forth in Articles 6 and 7, or (z) limit or otherwise
affect the remedies available hereunder to the party receiving such notice.
5.8 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, if requested by NII, and shall provide NII with proof that any
required notice has been sent.
5.9 SOFT DOLLARS. All "soft dollars" (whether in the form of
------------
free airline tickets, free airline upgrade certificates, credit cards paid for
by airlines or airline override revenue converted to the Company's "soft dollar"
accounts, or other similar arrangements) allocated to the Company from airlines
and other vendors of the Company, or that may be awarded to the Company in
connection with the Company's business, shall be used only for the Company's
legitimate business purposes and not for the personal benefit or use of the
Shareholder (or his family or friends) or any of the Company's other employees.
Notwithstanding the above, the Shareholder may continue to be eligible for
travel benefits set forth in SCHEDULE 5.9.
5.10 PERMITTED DISTRIBUTION. Prior to or at the Closing, the
----------------------
Company may, in its sole discretion, make a cash distribution (a "Permitted
Distribution") to the Shareholder in an amount equal to (i) the net worth of the
Company, determined in accordance with GAAP, but not taking into account any
adjustments for Interim Period Add-Backs, as of June 30, 1998, minus (ii) six
percent (6%) of the Company's revenues, determined in accordance with GAAP, for
the twelve (12) months ending June 30, 1998. The parties agree that, to the
extent that the Company does not have available funds to pay the full amount of
the Permitted Distribution to the Shareholder, PTC or NII shall pay such excess
amounts to the Shareholder at Closing.
5.11 TRANSFER OF NONOPERATING ASSETS. On or before the Closing
-------------------------------
Date, the Company shall have transferred to the Shareholder the Company's
nonoperating assets (including without limitation personal use vehicles and
pleasure craft), as more specifically set forth on SCHEDULE 5.11 (the
"Nonoperating Assets"), and the Shareholder shall have assumed all outstanding
liabilities and/or credit arrangements with respect to any of the Nonoperating
Assets included on SCHEDULE 5.11, which liabilities and credit arrangements are
more specifically set forth on SCHEDULE 5.11. Except as otherwise set forth in
this Section 5.11, the purchase price for the Nonoperating Assets shall be equal
to the greater of (a) the current book value of the Nonoperating Assets, as
reflected on the Company's books as of the Closing Date, determined in
accordance with GAAP, and (b) the amount of the current outstanding indebtedness
secured by such Nonoperating Asset. Notwithstanding the preceding sentence, the
price paid by the Shareholder for the two personal use vehicles that comprise a
portion of the Nonoperating Assets shall be equal to the current market value of
such vehicles as of the Closing Date determined by reference to NADA valuations.
Notwithstanding the foregoing, in the event the transfer of the boat is not
completed as of the Closing Date, the Shareholder will take all commercially
reasonable efforts to complete such transfer, and the assumption of related
liabilities, as promptly as possible following the Closing, and in no event more
than 45 days following the Closing. In
<PAGE>
(xiv) The Company is not, and has not been at any time, a
party to a tax sharing, tax indemnity or tax allocation agreement, and the
Company has not assumed the tax liability of any other person under contract.
(xv) The Company is not, and has not been at any time, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code.
(xvi) The Company's tax basis in its assets for purposes of
determining its future amortization, depreciation and other federal income tax
deductions is accurately reflected on the Company's tax books and records.
(xvii) The Company has not been a member of an affiliated
group filing a consolidated federal income Tax Return and does not have any
liability for the Taxes of another person under Treas. Reg. (S) 1.1502-6 (or
any similar provision of state, local or foreign law), as a transferee or
successor, by contract or otherwise.
(b) (i) The Company has been a valid S Corporation within the
meaning of Sections 1361 and 1362 of the Code at all times since December 23,
1986, and the Company will be a valid S Corporation up to and including the
Closing Date.
(ii) The Company does not have a net recognized built-in
gain within the meaning of Section 1374 of the Code.
(iii) The Company will not be liable for any Tax under
Section 1374 of the Code in connection with the deemed sale of the Company's
assets (including the assets of any qualified subchapter S subsidiary) caused by
the Section 338(h)(10) Election (as defined in Section 5.1). Neither the
Company nor any qualified subchapter S subsidiary of the Company has, in the
past ten (10) years, (A) acquired assets from another corporation in a
transaction in which the Company's Tax basis for the acquired assets was
determined, in whole or in part, by reference to the Tax basis of the acquired
assets (or any other property) in the hands of the transferor or (B) acquired
the stock of any corporation which is a qualified subchapter S subsidiary.
(c) For purposes of this Agreement:
(i) the term "Tax" shall include any tax or similar
governmental charge, impost or levy (including without limitation income taxes,
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes or windfall
profit taxes) together with any related penalties, fines, additions to tax or
interest imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof; and
(ii) the term "Tax Return" shall mean any return (including
any information return), report, statement, schedule, notice, form, estimate, or
declaration of
<PAGE>
estimated tax relating to or required to be filed with any
governmental authority in connection with the determination, assessment,
collection or payment of any Tax.
3.26 CONFORMITY WITH LAW; LITIGATION .
-------------------------------
(a) The Company has not violated any law or regulation or any
order of any court or federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality having
jurisdiction over it, except for any such violations that would not have a
material adverse effect on the Company's business, operations, affairs,
prospects, properties, assets, existing and potential liabilities, obligations,
profits or condition (financial or otherwise) of the Company.
(b) The Shareholder has not, at any time: (i) committed any
criminal act (except for minor traffic violations); (ii) engaged in acts of
fraud, dishonesty, gross negligence or moral turpitude; (iii) filed for personal
bankruptcy; or (iv) been an officer, director, manager, trustee or controlling
stockholder of a company that filed for bankruptcy or Chapter 11 protection.
(c) Except as set forth on SCHEDULE 3.26, there are no claims,
actions, suits or proceedings, pending 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 it and no
notice of any claim, action, suit or proceeding, whether pending or threatened,
has been received. There are no judgments, orders, injunctions, decrees,
stipulations or awards (whether rendered by a court or administrative agency or
by arbitration) against the Company or against any of its properties or
business.
3.27 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 that would cause the Company to be in violation of the Foreign
Corrupt Practices Act of 1977, as amended, or any law of similar effect.
3.28 ABSENCE OF CHANGES . Since March 31, 1998, the Company has
------------------
conducted its business in the ordinary course and, except as contemplated herein
or as set forth on SCHEDULE 3.28, there has not been:
(a) any change, by itself or together with other changes, that
has adversely affected, or is likely to adversely affect, the business,
operations, affairs, prospects, properties, assets, profits or condition
(financial or otherwise) of the Company;
(b) any damage, destruction or loss (whether or not covered by
insurance) adversely affecting the properties or business of the Company;
(c) any change in the authorized capital of the Company or in
its outstanding securities or any change in its ownership interests or any grant
of any options, warrants, calls, conversion rights or commitments;
<PAGE>
(d) other than the Permitted Distribution, 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;
(e) any increase in the compensation, bonus, sales commissions
or fee arrangements payable or to become payable by the Company to any of its
officers directors, the Shareholder, employees, consultants or agents, except
for ordinary and customary bonuses and salary increases for employees in
accordance with past practice including the salary increase for the Company's
President, nor has the Company entered into or amended any Company Benefit
Arrangement, Company Plan, employment, severance or other agreement relating to
compensation or fringe benefits;
(f) any work interruptions, labor grievances or claims filed, or
any similar event or condition of any character, materially adversely affecting
the business or future prospects of the Company;
(g) any sale or transfer, or any agreement to sell or transfer,
any material assets, property or rights of the Company to any person, including
without limitation the Shareholder and its affiliates;
(h) any cancellation, or agreement to cancel, any indebtedness
or other obligation owing to the Company, including without limitation any
indebtedness or obligation of the Shareholder and its affiliates, 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;
(i) 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;
(j) 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 business of the Company;
(k) any waiver of any material rights or claims of the Company;
(l) any breach (which has not been cured), amendment or
termination (except for normal course expirations) of any material contract,
agreement, license, permit or other right to which the Company is a party;
(m) any transaction by the Company outside the ordinary course
of business;
(n) any capital commitment by the Company, either individually
or in the aggregate, exceeding $25,000;
<PAGE>
(o) any change in accounting methods or practices (including any
change in depreciation or amortization policies or rates) by the Company or the
revaluation by the Company of any of its assets;
(p) any creation or assumption by the Company of any mortgage,
pledge, security interest or lien or other encumbrance on any asset (other than
liens arising under existing lease financing arrangements which are not material
and liens for Taxes not yet due and payable);
(q) any entry into, amendment of, relinquishment, termination or
non- renewal by the Company of any contract, lease transaction, commitment or
other right or obligation requiring aggregate payments by the Company in excess
of $25,000, except in the ordinary course of business;
(r) except as set forth in SCHEDULE 3.28, any loan by the
Company to any person or entity, incurring by the Company, of any indebtedness,
guaranteeing by the Company of any indebtedness, issuance or sale of any debt
securities of the Company or guaranteeing of any debt securities of others;
(s) except as set forth in SCHEDULE 3.28, the commencement or
notice or, to the knowledge of the Company, threat of commencement, of any
lawsuit or proceeding against, or, to the best knowledge of the Company,
investigation of, the Company or any of its affairs; or
(t) negotiation or agreement by the Company or any officer or
employee thereof to do any of the things described in the preceding clauses (a)
through (s) (other than negotiations with NII and its representatives regarding
the transactions contemplated by this Agreement).
3.29 DISCLOSURE. All written agreements, lists, schedules,
----------
instruments, exhibits, documents, certificates, reports, statements and other
writings furnished to NII or PTC pursuant hereto or in connection with this
Agreement or the transactions contemplated hereby, are and will be complete and
accurate in all material respects. No representation or warranty by the
Shareholder or the Company contained in this Agreement, in the Schedules
attached hereto or in any certificate furnished or to be furnished by the
Shareholder or the Company to NII or PTC in connection herewith or pursuant
hereto contains or will contain any untrue statement of a material fact or omits
or will omit to state any material fact necessary in order to make any statement
contained herein or therein not misleading. There is no fact known to the
Shareholder that has specific application to the Shareholder or the Company
(other than general economic or industry conditions) and that materially
adversely affects or, as far as the Shareholder can reasonably foresee,
materially threatens, the assets, business, prospects, financial condition, or
results of operations of the Company that has not been set forth in this
Agreement or any Schedule hereto.
3.30 PREDECESSOR STATUS; ETC. SCHEDULE 3.30 sets forth a listing
-----------------------
of all legal names, trade names, fictitious names or other names (including,
without limitation, any names of
<PAGE>
PAGE>
divisions or operations) of the Company and all of its predecessor companies
during the five-year period immediately preceding the Closing, including without
limitation the names of any entities from whom the Company has acquired material
assets. During the five-year period immediately preceding the Closing, the
Company has operated only under the names set forth on SCHEDULE 3.30 in the
jurisdiction or jurisdictions set forth on SCHEDULE 3.30 and has not been a
subsidiary or division of another corporation or a part of an acquisition which
was later rescinded.
3.31 REQUIRED GOVERNMENTAL FILINGS AND CONSENTS . The execution,
------------------------------------------
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby, will not require any consent, approval,
authorization or permit of, or filing with or notification to, any governmental
or regulatory authority, domestic or foreign, on the part of the Company, except
(a) for applicable requirements, if any, of the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), state securities or Blue Sky laws, and the Bylaws of the
National Association of Securities Dealers, Inc., and the notification
requirements of the HSR Act, and (b) where the failure to obtain such consents,
approvals, authorization or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Acquisition or otherwise prevent
the Company from performing its obligations under this Agreement.
3.32 ARC ACCREDITATION AND BONDING REQUIREMENTS. The Company is,
------------------------------------------
and at the Closing will be, accredited with the Airlines Reporting Company
("ARC"), and has no knowledge of any fact, matter or circumstance which by
itself, or with the passage of time, may give rise to an action by ARC
terminating the Company's accreditation. SCHEDULE 3.32 includes a list of
representative correspondence between the Company and ARC during the twelve (12)
month period ending as of the date hereof, copies of which have been provided to
NII, except such correspondence dealing solely with additions or deletions of
locations for the Company. The Company does, and at Closing will, have the bond
required by ARC, in the amount required by ARC. SCHEDULE 3.32 sets forth the
amount of the bond, the expiration date of the bond, the name of the company
issuing the bond and the premium for the bond. SCHEDULE 3.32 lists a
representative sample of contested debit memoranda the Company had with ARC or
any airline during the twelve (12) month period ending on the date hereof.
4. REPRESENTATIONS OF NII AND PTC
To induce the Company and the Shareholder to enter into this Agreement and
consummate the transactions contemplated hereby, NII and PTC represent and
warrant to the Company and the Shareholder as follows:
4.1 DUE ORGANIZATION . NII is a corporation duly organized,
----------------
validly existing and in good standing under the laws of the States of Delaware,
and PTC is a corporation duly organized, validly existing and in good standing
under the laws of the State of Colorado. Each of NII and PTC is duly authorized
and qualified to do business under all applicable laws, regulations, ordinances
and orders of public authorities to own, operate and lease its properties and to
carry on its businesses in the places and in the manner as now conducted, except
where the failure to be so authorized or qualified could not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
business, operations or condition (financial or otherwise) of NII and its
subsidiaries (including PTC), taken as a whole. Copies of the
<PAGE>
Certificate of Incorporation and the Bylaws, each as amended, of NII and PTC
(collectively, the "NII Charter Documents" and the "PTC Charter Documents"
respectively) have been made available to the Company. Neither NII nor PTC is in
violation of any NII Charter Document or PTC Charter Document, respectively.
4.2 AUTHORIZATION; VALIDITY OF OBLIGATIONS . The representatives
--------------------------------------
of NII and PTC executing this Agreement have all requisite corporate power and
authority to enter into and bind NII and PTC to the terms of this Agreement.
NII and PTC have the requisite corporate power and authority to enter into this
Agreement and the transactions contemplated hereby and to perform their
obligations pursuant to this Agreement. The execution and delivery of this
Agreement by NII and PTC and the performance by NII and PTC of the transactions
contemplated herein have been duly and validly authorized by the Board of
Directors of NII and PTC respectively, and this Agreement has been duly and
validly authorized by all necessary corporate action. This Agreement is a
legal, valid and binding obligation of each of NII and PTC enforceable in
accordance with its terms.
4.3 NO CONFLICTS . The execution, delivery and performance of this
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Agreement, the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not:
(a) conflict with, or result in a breach or violation of the NII
Charter Documents or PTC Charter Documents;
(b) (i) conflict with, or result in a default (or would
constitute a default but for a requirement of notice or lapse of time or both)
under any document, agreement or other instrument to which NII or PTC is a party
or by which NII or PTC is bound, or (ii) result in the creation or imposition of
any lien, charge or encumbrance on any of NII's or PTC's properties pursuant to
(x) any law or regulation to which NII or PTC or any of their property is
subject, or (y) any judgment, order or decree to which NII or PTC is bound or
any of their property is subject;
(c) result in termination or any impairment of any material
permit, license, franchise, contractual right or other authorization of NII or
PTC; or
(d) violate any law, order, judgment, rule, regulation, decree
or ordinance to which NII or PTC is subject, or by which NII or PTC is bound,
(including, without limitation, the HSR Act, together with all rules and
regulations promulgated thereunder).
4.4 REQUIRED GOVERNMENTAL FILINGS AND CONSENTS. The execution,
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delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby and thereby, will not require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, on the part of NII or
PTC except (a) for applicable requirements, if any, of the Securities Act, the
Exchange Act, state securities or Blue Sky laws, and the Bylaws of the National
Association of Securities Dealers, Inc., and the notification requirements of
the HSR Act, and (b) where the failure to
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obtain such consents, approvals, authorization or permits, or to make such
filings or notifications, would not prevent or delay consummation of the
Acquisition or otherwise prevent NII or PTC from performing its obligations
under this Agreement.
4.5 DISCLOSURES. This Agreement, as of the date hereof, does
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not contain any untrue statement of a material fact or omits to state any
material fact required to be stated therein or herein or necessary in order to
make any statement contained therein or herein, in the light of the
circumstances under which such statement was made, not misleading.
5. COVENANTS
5.1 TAX MATTERS.
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(a) The following provisions shall govern the allocation of
responsibility as between the Company, on the one hand, and the Shareholder, on
the other, for certain tax matters following the Closing Date:
(i) At the Company's expense, the Shareholder shall prepare
or cause to be prepared and file or cause to be filed, within the time and in
the manner provided by law, all Tax Returns of the Company for all periods
ending on or before the Closing Date that are due after the Closing Date. NII
and its accountants shall have the right to review and comment on any and all
Tax Returns (including the the applicable portion of Tax Returns filed by the
Shareholder concerning the election contemplated by Section 5.1(c)) prior to
filing. NII, the Company and the Shareholder shall diligently cooperate to
resolve such comments prior to the filing of the applicable Tax Return. The
Shareholder shall pay on or before the due date of such Tax Returns the amount
of all Taxes shown as due on such Tax Returns to the extent that such Taxes are
not reflected in the current liability accruals for Taxes (excluding reserves
for deferred Taxes) shown on the Company's books and records as of the Closing
Date. Notwithstanding the foregoing, the Company agrees to pay to the
Shareholder at Closing $60,000 for Taxes for the period beginning on July 1,
1998 and ending on the Closing Date. Such Returns shall be prepared and filed
in accordance with applicable law and in a manner consistent with past practices
and shall be subject to review and approval by NII. To the extent reasonably
requested by the Shareholder or required by law, NII, PTC and the Company shall
participate in the filing of any Tax Returns filed pursuant to this paragraph.
(ii) At the Company's expense, the Company shall prepare or
cause to be prepared and file or cause to be filed any Tax Returns for Tax
periods which begin before the Closing Date and end after the Closing Date. For
purposes of this Section 5.1, in the case of any Taxes that are imposed on a
periodic basis and are payable for a Taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such Taxable period ending on the Closing Date shall (x) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire Taxable period multiplied by a fraction
the numerator of which is the number of days in the Taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
Taxable period, and (y) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
Taxable period ended on the Closing Date. Any credits relating to a Taxable
period that begins
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before and ends after the Closing Date shall be taken into account as though the
relevant Taxable period ended on the Closing Date. All determinations necessary
to give effect to the foregoing allocations shall be made in a manner consistent
with prior practice of the Company.
(iii) NII, PTC and the Company on one hand and the
Shareholder on the other hand shall (a) cooperate fully, as reasonably
requested, in connection with the preparation and filing of Tax Returns pursuant
to this Section 5.1 and any audit, litigation or other proceeding with respect
to Taxes; (b) make available to the other, as reasonably requested, all
information, records or documents with respect to Tax matters pertinent to the
Company for all periods ending prior to or including the Closing Date; and (c)
preserve information, records or documents relating to Tax matters pertinent to
the Company that is in their possession or under their control until the
expiration of any applicable statute of limitations or extensions thereof.
(iv) The Shareholder shall timely pay all transfer,
documentary, sales, use, stamp, and registration tax and fees arising from or
relating to the transactions contemplated by this Agreement, and the Shareholder
shall, at his own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
and registration tax and fees. If required by applicable law, NII, PTC and the
Company will join in the execution of any such Tax Returns and other
documentation.
(b) The Company shall, prior to the Closing, maintain its status
as an S Corporation for federal and state income tax purposes.
(c) (i) NII and PTC may make an election under Section 338 of
the Code (and any corresponding election under state, local and foreign tax law)
and the Company and shareholder will cooperate in making such elections; (ii) at
NII's or PTC's option, the Company and the Shareholder shall join with NII or
PTC in making an election under Section 338(h)(10) of the Code (and any
corresponding election under state, local and foreign tax law) with respect to
the purchase and sale of the stock of the Company hereunder (a "Section
338(h)(10) Election"). The Shareholder shall include any income, gain, loss
deduction or other tax item resulting from the Section 338(h)(10) Election on
his Tax Returns to the extent permitted by applicable law. The Shareholder
shall also pay any Tax imposed on the Company or its subsidiaries attributable
to the making of the Section 338(h)(10) Election, including but not limited to,
(a) any Tax imposed under Section 1374 of the Code, (b) any Tax imposed under
Section 1.338(h)(10)-1(e)(5) of the Treasury Regulations, or (c) any state,
local or foreign Tax imposed on the Company's or its subsidiaries' gain, and the
Shareholder shall indemnify NII, the Company and their subsidiaries against any
Tax or other liability arising out of any failure to pay any such Taxes. In the
event NII or PTC exercises its option under this subsection (ii), NII or PTC
shall pay to the Shareholder the difference between (A) the Tax paid by the
Shareholder as a result of the Section 338(h)(10) election and (B) the Tax which
would have been paid by the Shareholder if no Section 338(h)(10) election had
been made and consented to by the Shareholder plus any additional Tax incurred
by the Shareholder with respect to the receipt of such difference. Any payment
by NII or PTC hereunder shall be made ten (10) days prior to the
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due date of the Shareholder's Tax Return in which the income, gain, loss
deduction or other tax item resulting from Section 338(h)(10) election is
reported.
(d) NII, PTC, the Company and the Shareholder agree that the
Consideration and the liabilities of the Company and its qualified subchapter S
subsidiaries (plus other relevant items) will be allocated to the assets of the
Company and its qualified subchapter S subsidiaries for all purposes (including
Tax and financial accounting) as determined by NII. NII, PTC, the Company, the
Company subsidiaries and the Shareholder shall file all Tax Returns (including
amended returns and claims for refund and information reports in an manner
consistent with such values.
5.2 ACCOUNTS RECEIVABLE. The Shareholder shall deliver to NII a
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complete and accurate list o