Opinion ID: 1214373
Heading Depth: 1
Heading Rank: 4

Heading: TSI's Contacts With CVC and Citibank

Text: Section 4.1(c) of the Agreement provided that until closing or termination, none of the sellers would discuss, negotiate, or deal with any other corporation, firm, or other person, or entertain, solicit, accept, or consider any inquiries, offers, or proposals relating to the sale of any common stock or assets of TSI or any of the Subsidiaries. In early March 1993, Paul invited Zeko and Luikart to return to Kansas City. Buyers assert that Zeko actually requested the meeting. A meeting between Zeko, Luikart, and Paul was scheduled for March 10, 1993, to discuss TSI. Zeko testified that he set up the meeting and that Luikart wanted him to attend. They were in Kansas City to follow up on the October conversations concerning CVC's interest in making an investment in TSI. A mutual acquaintance related to Hood that Paul had told him Paul was talking to CVC. When Jenkins asked about discussions with CVC, Paul said that representatives of CVC might be in town and might stop by to see him. Paul told Jenkins he thought continued contact with Citibank and CVC would be advantageous. Jenkins inquired if Paul was negotiating to sell TSI to Citibank and CVC. Paul denied sale negotiations. Paul testified that he did not feel it would be appropriate for Jenkins to attend the meeting with Luikart and Zeko. Jenkins did not request to attend the meeting. Sometime after March 10, 1993, Jenkins asked Paul about the meeting and, according to Jenkins, Paul told him that there was no meeting because the CVC and Citibank people did not have time to see him while they were in Kansas City. Paul claims to have told Jenkins about the meeting. The testimony of what was said at the March 10, 1993, meeting concerning the status of the Agreement was contradictory. Paul testified that he told Luikart and Zeko that he had a contract to sell a percentage of the business to Hood and Jenkins. The general terms of the Agreement were outlined. Paul expressed concerns about his difficulties in closing with Jenkins and Hood. He was unsure that he could complete the transaction. According to Luikart and Zeko, Paul told them the transaction could not close. Paul denied telling Luikart and Zeko that the transaction was no longer viable. The length of the March 10 meeting was described by Zeko: [T]hey were there all day. Zeko had discussed with the president of CVC his interest in going to Kansas City and pursuing a new career with TSI. Luikart testified, Well, we had gone out there, because [Zeko] was possibly interested in joining [TSI], and I think I made it clear to him that we would beCiticorp Venture Capital would be interested in investing only if someone like himself were to join the company. Upon returning to New York, Luikart completed an internal memorandum dated March 12, 1993, to present to CVC's investment committee at its weekly meeting on March 15, 1993. Luikart proposed that CVC invest in TSI on essentially the same terms as the Agreement with Jenkins and Hood, subject to performance of due diligence. On March 15, 1993, CVC's investment committee gave preliminary approval to Luikart's recommendation. CVC claims this preliminary approval was not expressed to Paul or any other TSI representative before March 23, 1993. However, telephone records of TSI, Citibank, and CVC show 12 telephone calls between TSI and CVC or Citibank from March 10 through 22, 1993. On March 23 and 24, there were at least nine calls between TSI and CVC or Citibank. Citibank was billed for time spent by its attorneys on the CVC-TSI matter as early as March 23, 1993, before buyers were informed by sellers of the Agreement termination. Paul notified CVC on March 24, 1993, that the TSI/Jenkins and Hood deal was dead. On March 24, 1993, at 9:20 a.m., David Chaffin, chief financial officer of TSI, faxed to Luikart 5-year forecasts of the TSI companies prepared for CVC's review. The fax was sent minutes after Paul's attorney had faxed a letter to buyers' attorney terminating the Agreement. On March 25, 1993, to reduce the cost of redrafting a new agreement, Paul's attorney forwarded to counsel for CVC, by overnight mail, a copy of the Agreement and a copy of the financial disclosures made by TSI to buyers. Paul told Zeko that the Bank held his TSI common stock and that he could not get it released. Zeko told him that it was nothing to worry about. We can handle that. On March 29, 1993, Luikart sent Paul a letter confirming that Paul and Luikart had agreed that CVC would invest up to $2.5 million in TSI. Luikart expressed delight that CVC was to become Paul's partner in TSI. Luikart would not characterize his letter as a commitment. On or about April 2, 1993, Zeko was advised by a telephone call from counsel for buyers that they still had a binding Agreement to purchase TSI. Zeko later received a letter to that effect. On April 8, 1993, counsel for CVC advised counsel for buyers that CVC was under the impression that the Agreement had been terminated and asked for an explanation. Counsel reiterated buyers' claim. By a May 4, 1993, letter, counsel for CVC advised all interested parties that CVC was canceling discussions with TSI because of the ongoing dispute.