1
EX 10.38
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STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL VACATION GROUP, INC.,
("BUYER")
FRIENDLY HOLIDAYS, INC.
(THE "COMPANY")
AND
THE SHAREHOLDERS OF FRIENDLY HOLIDAYS, INC.
(THE "SELLERS")
DATED MARCH 17, 1999
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 6
1.1 DEFINITIONS 6
ARTICLE II AGREEMENT OF PURCHASE AND SALE; CLOSING 9
2.1 AGREEMENT TO SELL AND PURCHASE 9
2.2 PURCHASE PRICE AND ASSUMPTION OF INDEBTEDNESS 9
2.3 PAYMENT OF PURCHASE PRICE 9
2.4 CLOSING 9
2.5 ESCROW ARRANGEMENTS 10
2.6 CLOSING AUDIT 10
2.7 POST-CLOSING NET WORTH ADJUSTMENT TO PURCHASE PRICE 10
2.8 EARNED PAYOUT AMOUNT 11
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE
SELLERS 12
3.1 CAPITALIZATION 12
3.2 NO LIENS ON SHARES 12
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK 12
3.4 DUE ORGANIZATION 12
3.5 SUBSIDIARIES 12
3.6 DUE AUTHORIZATION 12
3.7 FINANCIAL STATEMENTS 13
3.8 CERTAIN ACTIONS 13
3.9 PROPERTIES 14
3.10 LICENSES AND PERMITS 14
3.11 INTELLECTUAL PROPERTY 14
3.12 COMPLIANCE WITH LAWS 15
3.13 INSURANCE 15
3.14 EMPLOYEE BENEFIT PLANS 15
(a) Employee Welfare Benefit Plans 15
(b) Employee Pension Benefit Plans 15
(c) Employment and Non-Tax Qualified Deferred Compensation Arrangements 16
3.15 CONTRACTS AND AGREEMENTS 16
3.16 CLAIMS AND PROCEEDINGS 16
3.17 TAXES 17
3.18 PERSONNEL 17
3.19 BUSINESS RELATIONS 18
3.20 CUSTOMER DEPOSITS AND BOOKINGS 18
3.21 BANK ACCOUNTS; INVESTMENTS 18
3.22 CUSTOMER CLAIMS 18
3.23 BROKERS 19
3.24 AFFILIATED TRANSACTIONS 19
3.25 FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED LIABILITIES 19
(a) Funded Indebtedness 19
(b) Letters of Credit 19
(c) Undisclosed Liabilities 19
3.26 YEAR 2000 19
3.27 ARC COMPLIANCE 19
3.28 INFORMATION FURNISHED 19
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES 20
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4.1 DUE ORGANIZATION 20
4.2 DUE AUTHORIZATION. 20
4.3 NO BROKERS 20
4.4 INVESTMENT 20
ARTICLE V COVENANTS 20
5.1 CONSENTS OF OTHERS 20
5.2 SELLERS' EFFORTS 20
5.3 POWERS OF ATTORNEY 20
5.4 CONDUCT OF BUSINESS PENDING CLOSING 20
5.5 ACCESS TO RECORDS BEFORE EFFECTIVE DATE. 21
5.6 PAYMENTS TO THE COMPANY BY THE SELLERS 21
ARTICLE VI POST-CLOSING COVENANTS 21
6.1 GENERAL. 21
6.2 TRANSITION. 22
6.3 CONFIDENTIALITY. 22
6.4 COVENANT NOT TO COMPETE 22
6.5 ADDITIONAL MATTERS 23
6.6 LITIGATION SUPPORT. 23
6.7 AUDITS. 23
6.8 AEROMEXICO LAWSUIT. 24
6.9 ARC CONSENT 24
6.10 RECEIVABLES COLLECTION 24
6.11 CONDUCT DURING EARNOUT PERIOD 24
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
24
7.1 CONDITIONS TO BUYER'S OBLIGATIONS 24
(a) Covenants, Representations and Warranties 24
(b) Consents 24
(c) Leases 24
(d) Discharge of Indebtedness and Liens 24
(e) Transfer Taxes 25
(f) Intentionally Left Blank 25
(g) Intentionally Left Blank. 25
(h) Documents to be Delivered by the Sellers and the Company 25
(i) Opinion of Sellers' Counsel 25
(ii) Certificates 25
(iii) Release 25
(iv) Escrow Agreement 25
(v) Termination of Employment Agreements 25
(vi) Stock Certificates 25
(vii) Resignation of Directors 25
7.2 CONDITIONS TO THE SELLERS' AND THE COMPANY'S OBLIGATIONS 25
(a) Covenants, Representations and Warranties 25
(b) Consents 26
(c) Escrow Agent 26
(d) Documents to be Delivered by the Buyer 26
(i) Opinion of Buyer's Counsel 26
(ii) Certificates 26
(iii) Release of Personal Guarantees 26
(iv) Escrow Agreement 26
(v) Employment Agreements 26
(e) Payments to the Sellers 26
(f) Payments to the Company 26
7.3 WAIVER 26
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ARTICLE VIII INDEMNIFICATION 27
8.1 INDEMNIFICATION OF BUYER 27
8.2 DEFENSE OF THIRD PARTY CLAIMS 28
8.3 PROCEDURE FOR CLAIMS 28
(a) Escrow Claims. 28
(b) Other Claims 28
8.4 TAX AUDITS, ETC. 28
8.5 INDEMNIFICATION OF SELLERS 28
8.6 LIMITS ON INDEMNIFICATION 29
ARTICLE IX TERMINATION 29
9.1 TERMINATION 29
9.2 EFFECT OF TERMINATION 30
ARTICLE X MISCELLANEOUS 30
10.1 MODIFICATIONS; WAIVERS 30
10.2 NOTICES 30
10.3 COUNTERPARTS; FACSIMILE TRANSMISSION 31
10.4 EXPENSES 31
10.5 BINDING EFFECT; ASSIGNMENT 31
10.6 ENTIRE AND SOLE AGREEMENT 31
10.7 GOVERNING LAW 32
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 32
10.9 DISPUTE RESOLUTION 32
10.10 INVALID PROVISIONS 32
10.11 PUBLIC ANNOUNCEMENTS 32
10.12 REMEDIES CUMULATIVE 32
10.13 THIRD PARTIES 32
10.14 STRICT CONSTRUCTION 33
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LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Opinion of Sellers' and the Company's Counsel
Exhibit C-1 Form of Sellers' Officer's and Stockholder's Certificate
Exhibit C-2 Form of Sellers' Secretary's Certificate
Exhibit D Form of Release
Exhibit E Sellers' Account and Wire Transfer Instructions (Section 2.3)
Exhibit F Articles (F-1) and Bylaws (F-2) and Qualified
Jurisdictions (F-3) (Section 3.4)
Exhibit G List of Properties (Section 3.9)
Exhibit H List of Licenses and Permits (Section 3.10)
Exhibit I List of Intellectual Property (Section 3.11)
Exhibit J List of Insurance (Section 3.13)
Exhibit K List of Contracts (Section 3.15)
Exhibit L List of Personnel (Section 3.18)
Exhibit M List of Bookings, Customer Deposits, Prepayments
and Refunds and Customer Claims (Section 3.20)
Exhibit N List of Bank Accounts and Investments (Section 3.21)
Exhibit O List of Letters of Credit (Section 3.25(b))
Exhibit P List of Funded Indebtedness (Section 7.1(d))
Exhibit Q Form of Employment Agreements
Exhibit R Form of Consulting Agreement
Exhibit S Form of Opinion of Buyer's Counsel
Exhibit T-1 Form of Buyer's Officer's Certificate
Exhibit T-2 Form of Buyer's Secretary's Certificate
LIST OF SCHEDULES
Disclosure Schedule
Ownership Schedule
Annex I - Determination of Earned Payout Amount
Annex II - Preliminary Closing Balance Sheet
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STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered
into as of March 17, 1999, by and among GLOBAL VACATION GROUP, INC., a New York
corporation ("BUYER"), FRIENDLY HOLIDAYS, INC., a New York corporation (the
"COMPANY"), and THE SHAREHOLDERS OF THE COMPANY LISTED ON THE SIGNATURE PAGE
HEREOF (each a "SELLER" and collectively, the "SELLERS").
RECITALS
A. The Company is engaged in the business of providing wholesale travel
sales and vacation packaging services (the "TOUR BUSINESS") to travel agents and
other customers located in the United States of America (the "BUSINESS"); and
B. The Sellers collectively own all of the issued and outstanding shares of
capital stock of the Company (the "SHARES"); and
C. Buyer desires to purchase from the Sellers, and the Sellers desire to
sell to Buyer, all of the Shares owned by the Sellers on the terms and subject
to the conditions hereinafter set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual premises and covenants contained
herein and for other good and valuable consideration, the receipt and adequacy
of which are hereby acknowledged, the parties hereto covenant and agree as
follows:
ARTICLE I
DEFINITIONS
1.1 DEFINITIONS. In this Agreement, the following terms
have the meanings specified or referred to in this Section 1.1 and shall be
equally applicable to both the singular and plural forms. Any agreement referred
to below shall mean such agreement as amended, supplemented and modified from
time to time to the extent permitted by the applicable provisions thereof and by
this Agreement.
"AA" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
"ADDITIONAL EARNOUT AMOUNT" has the meaning specified in Section
2.8.
"AFFILIATE" means, with respect to any Person, any other Person
which directly or indirectly controls, is controlled by or is under common
control with such Person.
"ACQUISITION PROPOSAL" has the meaning specified in Section
5.4(d).
"ARC" means the Airlines Reporting Corporation and any successors
thereto.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in
Section 2.6.
"BOOKINGS" has the meaning specified in Section 3.20(b).
"BUSINESS" has the meaning specified in the first recital of the
Agreement.
"BUYER" has the meaning specified in the first paragraph of this
Agreement.
"CLOSING" means the closing of the transfer of the Shares from
the Sellers to Buyer.
"CLOSING DATE" has the meaning specified in Section 2.4.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANY" has the meaning specified in the first paragraph of
this Agreement.
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"CONFIDENTIAL INFORMATION" means (i) terms and provisions of this
Agreement or the transactions to be consummated pursuant hereto, and (ii)
confidential information and trade secrets of the Company or Buyer including,
without limitation, any of the same comprising the identity, lists or
descriptions of any customers, referral sources or organizations; financial
statements, cost reports or other financial information (and any analyses or
compilations thereof or reports thereon); contract proposals, or bidding
information; business plans and training and operations methods and manuals;
personnel records; fee structure; computer software; and management systems,
policies or procedures, including related forms and manuals. Confidential
Information shall not include any information (i) which is disclosed pursuant to
subpoena or other legal process, (ii) which has been publicly disclosed by means
other than by a breach of a confidentiality agreement, or (iii) which is
subsequently disclosed by any third party not in breach of a confidentiality
agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
"COURT ORDER" means any judgment, order, award or decree of any
foreign, federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"CUSTOMER CLAIMS" has the meaning specified in Section 3.20(b).
"CUSTOMER DEPOSITS" has the meaning specified in Section 3.20(b).
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached to
this Agreement pursuant to which exceptions to the Sellers' and the Company's
specific representations and warranties set forth in Article III and other
applicable provisions (and listed on a Section-by-Section basis) are disclosed
to Buyer pursuant to said Article III. Any exception set forth to one Section of
the Disclosure Schedule shall apply to other Sections of the Disclosure Schedule
to the extent that such exception would, on its face, reasonably apply to such
other Sections.
"EARNED PAYOUT AMOUNT" has the meaning specified in Section 2.8.
"EARNOUT PERIOD" has the meaning specified in Section 2.8.
"EFFECTIVE DATE" has the meaning set forth in Section 2.4.
"ENCUMBRANCE" means any lien, claim, charge, security interest,
mortgage, pledge, easement, conditional sale or other title retention agreement,
defect in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL AND OSHA OBLIGATIONS" has the meaning specified in
Section 3.12.
"EQUITABLE EXCEPTIONS" shall have the meaning specified in
Section 3.6.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ESCROW AGENT" means The Bank of New York.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by
and among the Sellers, Buyer and the Escrow Agent in the form of Exhibit A.
"ESCROW PERIOD" has the meaning specified in Section 2.5.
"ESCROW SUM" has the meaning specified in Section 2.5.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Company
for borrowed money or other interest-bearing indebtedness (ii) obligations of
the Company to pay the deferred purchase or acquisition price for goods or
services, other than trade accounts payable or accrued expenses in the ordinary
course of business on no more than 90 day payment terms; (iii) indebtedness of
others guaranteed by the Company or secured by an Encumbrance on the Company's
property; and (iv) indebtedness of the Company under extended credit terms of
more than 90 days from vendors provided to the Company; provided, however, that
Funded Indebtedness shall not include any Letter of Credit unless actually drawn
upon by the beneficiary thereof.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
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"GOVERNMENTAL BODY" means any foreign, federal, state, local or
other governmental authority or regulatory body.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
"INTELLECTUAL PROPERTY" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"KNOWLEDGE" (whether or not capitalized) shall mean, in respect
of the Company, actual knowledge of Sellers and the executive officers; in
respect of the Sellers, "Knowledge" shall mean actual knowledge of the Sellers.
"MATERIAL" (whether or not capitalized) shall, where appropriate
in context of its use in making the representations and warranties set forth in
Article III, be deemed to mean an amount of money greater than $40,000.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a
material adverse change or effect on the assets, properties, Business,
operations, liabilities, financial condition or prospects of the Company and its
subsidiaries, taken as a whole. In determining whether a "Material Adverse
Change" or "Material Adverse Effect" has occurred in the context of the use of
such terms in the Company's and the Sellers' representations and warranties set
forth in Article III, such terms shall refer to the occurrence of any single
event, or any series of related events, or set of related circumstances, which
results or is likely to result in a loss to the Company, taken as a whole, in
excess of $40,000 per occurrence or $75,000 in the aggregate shall be
conclusive.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning specified in
Section 3.7.
"NET WORTH" means the difference between the Company's total
assets and its total liabilities (including shareholders' equity), determined in
accordance with GAAP.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C.
Sections 651 et seq., any amendment thereto, and any regulations promulgated
thereunder.
"PERMITTED EXCEPTIONS" means (a) liens for Taxes and other
governmental charges and assessments which are not yet due and payable, (b)
liens of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like liens arising in the ordinary course of business for
sums not yet due and payable, (c) liens arising out of the acquisition of
equipment or other purchase money securities interests to the extent such liens
are specifically limited to the equipment or other collateral which is the
subject thereof, or (d) other liens or imperfections on property which are not
material in amount or do not materially detract from the value or the existing
use of the property affected by such lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Company's best
estimate of the Company's balance sheet as of September 30, 1998 included as
part of the Company's Most Recent Financial Statements for the 12 months ended
September 30, 1998 attached hereto as Annex II.
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"PTI" shall mean the pre-tax income of the Company, as calculated
in accordance with GAAP and consistent with past practices, as adjusted in
accordance with the provisions of Section 2.8 hereof.
"PTI TARGET" has the meaning specified in Section 2.8.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and
local laws, statutes, regulations, rules, codes or ordinances enacted, adopted,
issued or promulgated by any Governmental Body (including, without limitation,
those pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLERS" has the meaning set forth in the first paragraph of
this Agreement.
"SHARES" means all of the issued and outstanding shares of the
capital stock of the Company.
"TAX" or "TAXES" means any federal, state, local or foreign
income, alternative or add-on minimum, gross income, gross receipts, windfall
profits, severance or parachute, property, production, sales, use, transfer,
gains, license, excise, employment, payroll, withholding or minimum tax,
transfer, goods and services, or any other tax, custom, duty, governmental fee
or other like assessment or charge of any kind whatsoever, together with any
interest or any penalty, addition to tax or additional amounts imposed thereon
by any Governmental Body.
"TAX RETURN" means any return, report or similar statement
required to be filed with respect to any Taxes (including any attached
schedules), including, without limitation, any information return, claim for
refund, amended return and declaration of estimated Tax.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
2.1 AGREEMENT TO SELL AND PURCHASE. Upon the basis of the
representations and warranties, for the consideration, and subject to the terms
and conditions set forth in this Agreement, the Sellers agree to sell the Shares
to Buyer and Buyer agrees to purchase the Shares from Sellers.
2.2 PURCHASE PRICE. The total purchase price for the Shares
(the "PURCHASE PRICE") shall be equal to $13,000,000, as adjusted by (i) the Net
Worth adjustment provided in Sections 2.3(a) and 2.7 below and (ii) the amount,
if any, by which the Earned Payout Amount is less than $2,750,000 as provided in
Section 2.8 below.
2.3 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be
payable by Buyer at the Closing (as defined in Section 2.4) as follows:
(a) $9,750,000, as adjusted downward by $7,298,000,
the estimated amount necessary to increase the Company's Net Worth reflected on
the Preliminary Closing Balance Sheet as of September 30, 1998 to $0 (which Net
Worth estimated deficit amount of $7,298,000 shall be paid by Buyer to an
account of the Company at Closing), will be paid, at the direction of the
Sellers, in cash by wire transfer of funds to the Sellers' accounts as specified
in Exhibit E (including the payment of $50,000 for the Sellers' covenant not to
compete provided in Section 6.4);
(b) up to $2,250,000 shall be paid to Sellers in
accordance with the earnout payments described in Section 2.8 below (with an
additional potential earnout payment of up to $500,000); and
(c) $500,000 of the Purchase Price will be paid in
cash by wire transfer of funds to the Escrow Agent to be held in escrow pursuant
to Section 2.5 for satisfaction of Sellers' indemnification obligations
specified in Section 8.1.
2.4 CLOSING. The Closing of the purchase and sale of the
Shares contemplated by this Agreement shall take place at 10:00 a.m., Eastern
Time, at the offices of Certilman Balin ▇▇▇▇▇ & ▇▇▇▇▇, L.L.P., ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on March 24, 1999, or on the date
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selected by Buyer (which date shall be as soon as practicable following the date
on which all of the conditions to Closing set forth in Sections 7.1 and 7.2 have
been satisfied, but not later than March 31, 1999), or on such other date and
time as the parties shall agree (the "CLOSING DATE"), effective as of March 17,
1999 (the EFFECTIVE DATE"). It is understood and agreed by the Buyer and Sellers
that operation and control of the Company shall pass to the Buyer as of the
Effective Date and that ▇▇▇▇▇▇ ▇▇▇▇▇▇ shall be deemed to be interim Chief
Executive Officer of the Company as of the Effective Date.
2.5 ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to
be entered into among the Sellers, Buyer and the Escrow Agent, the portion of
the Purchase Price specified in Section 2.3(c) shall be delivered to the Escrow
Agent at Closing in immediately available funds. Such monies (which, together
with all interest accrued thereon, is hereinafter referred to as the "ESCROW
SUM") shall be held pursuant to the terms of the Escrow Agreement for payment
from such Escrow Sum of the amounts, if any, owing by the Sellers to Buyer
pursuant to the indemnification provisions of Article VIII below. At the
conclusion of the period ending on the first anniversary of the Closing Date
(such period being referred to herein as the "ESCROW PERIOD"), such remaining
portion of the Escrow Sum not theretofore claimed by or paid to Buyer in
accordance with the terms of the Escrow Agreement and this Agreement shall be
disbursed to the Sellers. The Sellers and Buyer agree that each will execute and
deliver such reasonable instruments and documents as are furnished by any other
party to enable such furnishing party to receive those portions of the Escrow
Sum to which the furnishing party is entitled under the provisions of the Escrow
Agreement and this Agreement.
2.6 CLOSING AUDIT. Within 120 days following the Closing
Date, there shall be delivered to Buyer and to the Sellers an audit of the
Preliminary Closing Balance Sheet (the "AUDITED CLOSING BALANCE SHEET"). In
connection therewith, AA shall make available to Buyer and the Seller's all the
customary and non-proprietary work papers of AA utilized in connection with the
preparation of the Audited Closing Balance Sheet. The Preliminary Closing
Balance Sheet shall be audited by AA in accordance with GAAP. AA shall also
determine and review the Company's results (a) for the fiscal year ended
September 30, 1998, for (b) the period from September 30, 1998 through the
Effective Date, and AA will review the methodology and procedures utilized to
determine the Company's fiscal 1999 budget to ensure that it is consistent with
fiscal 1998 expenditures and GAAP. The cost of preparing the Audited Closing
Balance Sheet shall be paid by the Buyer. In the event that the Sellers dispute
any items or assumptions or methodologies regarding the Audited Closing Balance
Sheet within thirty (30) days after the Sellers' receipt thereof and access to
AA's working papers, the parties shall jointly select and retain an independent
"Big Five" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review the
disputed matter(s) on the Audited Closing Balance Sheet. The final determination
of such disputed matter(s) by the Independent Accountants shall be reflected on
the Audited Closing Balance Sheet, which shall be final and binding on the
parties for all purposes. The cost of retaining the Independent Accountants
shall be borne by the Sellers, except that the Company shall reimburse the
Sellers for one-half the cost of the Independent Accountants in the event that
such review results in at least a $100,000 increase in the Company's Net Worth
as reflected on the Audited Closing Balance Sheet prepared by AA. In determining
Net Worth as of September 30, 1998, (i) all accruals on the Preliminary Closing
Balance Sheet for commissions, accounts payables or other accrued liabilities
shall be adjusted upward or downward based on actual payments of such
commissions, accounts payable and accrued liabilities during the period
following September 30, 1998 through the completion of the audit and (ii) any
accounts receivable of the Company as of September 30, 1998 not collected in
full by the Company as of the completion of such audit in excess of the
allowance for doubtful accounts on the Preliminary Closing Balance Sheet shall
be deducted from the Audited Closing Balance Sheet.
2.7 POST-CLOSING NET WORTH ADJUSTMENT TO PURCHASE PRICE. In
connection with the determination of the Earned Payout Amount pursuant to
Section 2.8 below, AA and the Independent Accountants, if any, shall review the
Net Worth reflected on the Audited Closing Balance Sheet and shall give effect
to the payment of commissions, accounts payables and accrued liabilities, and to
the collection of accounts receivable, so reflected through January 31, 2000. If
such final review determines that the Company's September 30, 1998 Net Worth is
more or less than $0 (after taking into account the Buyer's contribution of cash
at Closing and any contribution by Sellers required by the last sentence of this
Section 2.7), then the Purchase Price shall be adjusted upward or downward, as
the case may be, by an amount equal to such excess or deficiency. The
post-closing adjustment to the Purchase Price, if any, shall be paid
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by the Sellers to Buyer or by Buyer to Sellers, as the case may be, in
immediately available funds on or prior to January 31, 2000. Notwithstanding the
foregoing, in the event that the Net Worth reflected on the Audited Closing
Balance Sheet as of September 30, 1998 (after review by the Independent
Accountants, if any) is less than ($7,698,000), then Sellers shall pay Buyer
such the amount by which the Company's Net Worth is less than ($7,698,000)
within 10 days after the final completion of the Audited Closing Balance Sheet.
2.8 EARNED PAYOUT AMOUNT. In addition to the Cash Portion of
the Purchase Price, the Buyer agrees to pay to the Sellers, if earned, an earned
payout amount (the "EARNED PAYOUT AMOUNT"), if any, of up to $2,250,000 based
upon the attainment of at least $861,000 in PTI of the Company (the "PTI
TARGET") during the 12 month period commencing October 1, 1998 (the "EARNOUT
PERIOD"). The Earned Payout Amount, if any, shall be paid in cash by Buyer on or
before January 31, 2000 after completion of an audit or review by AA of the
Company's financial statements for the Earnout Period (which audit or review
shall be consistent with the methodologies and standards utilized to prepare the
Audited Closing Balance Sheet) and in accordance with the terms and conditions
of Annex I attached hereto. Notwithstanding the foregoing, the full Earned
Payout Amount shall still be made if the Company achieves at least $836,000 in
PTI during the Earnout Period; provided, however, that in the event that the
Company achieves PTI during the Earnout Period in an amount less than $836,000
but not less than $688,000, then the Earned Payout Amount shall be equal to the
product of (i) the amount by which PTI during the Earnout Period exceeds
$688,000 and (ii) 13. In addition, in the event that the Company's PTI during
the Earnout Period exceeds the PTI Target, then Sellers shall be paid an
additional amount (the "ADDITIONAL EARNOUT PAYMENT") equal to the product of (i)
the amount by which PTI during the Earnout Period exceeds the PTI Target and
(ii) two (2); provided, however, that in no event will the Additional Earnout
Payment exceed $500,000. Notwithstanding the foregoing, in the event that any
unforeseen external events occur such as a major travel strike, catastrophic
hurricane(s) in any Friendly destination regions, war, insurrection or any other
external event that materially and adversely affects the travel industry as a
whole and/or the Company, then the parties shall mutually agree to extend the
Earnout Period for a period equal to the period of time during which such
material adverse event occurred or to an adjustment of the PTI Target such that
the Company's ability to meet the PTI Target is not burdened thereby. The
parties hereto agree that the PTI Target has been determined based on the
principles in the budget model set forth as Annex I hereto. However, in
determining PTI during the Earnout Period, the actual revenues and expenses of
the Company in accordance with GAAP consistently applied during the Earnout
Period and updated through January 2000 for the actual experience and the
anticipated patterns (based upon prior trends). However, certain adjustments
shall be made to actual revenues and expenses. First, all budgeted bank charges,
audit and tax fees, employee salaries for Sellers and ▇▇▇▇ ▇▇▇▇▇▇ set forth in
the budget schedule attached to Annex I hereto shall be utilized in determining
the Company's expenses for such items during the Earnout Period. Second, no
changes in costs or expenses of the Company during the Earnout Period based on
actions taken by the Buyer or by the Company, at the request of the Buyer, shall
be utilized to determine the Earned Payout Amount (e.g., the infusion of funds
to cover the negative Net Worth or any change in the Company's employee benefit
programs), in which event the estimated impact (whether positive or negative)
will not be included in computing the actual revenues or expenses for such
modified items. In addition, all reductions in other operating costs of the
Company during the Earnout Period by Sellers below the amounts budgeted for such
items during the Earnout Period on the budget schedule attached to Annex I shall
be ignored unless they (i) have occurred in the ordinary course of business,
(ii) are consistent with, are sustainable and will not impair the long-term
growth of the business and (iii) are not as a result of delays in payment or
incurring of costs to periods beyond the Earnout Period; provided, however, that
a list of approved changes to operating costs will be maintained by Buyer and
▇▇▇▇ ▇▇▇▇▇▇ on a monthly basis. Finally, no adjustments shall be made by Buyer
or Sellers, except in the ordinary course of business, in the pricing of the
Company's products, advertising, cooperative funding or other revenues of the
business without the mutual consent of Buyer and Sellers. Subject to the
modifications contained in this Section 2.8, AA and the Independent Accountants,
if so retained, shall conduct their review of PTI in accordance with Annex I
hereto consistent with GAAP on an accrual basis of accounting and in a manner
consistent with the determination of Net Worth conducted by them pursuant to
Section 2.6 above and consistent with their preparation of a balance sheet of
the Company as of September 30, 1998.
12
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
Except as set forth on the Disclosure Schedule attached hereto (which
Disclosure Schedule contains a reasonably detailed description of each such
exception and references the applicable representation(s) so qualified), the
Company and the Sellers jointly and severally represent and warrant to Buyer
that:
3.1 CAPITALIZATION. The authorized capital stock of the
Company consists of 200 shares of Common Stock, no par value per share, one of
which is issued and outstanding and such share constitutes the Shares hereunder.
All of the Shares are duly authorized, validly issued, fully paid, and
nonassessable except to the extent set forth in Section 630 of the Business
Corporation Law of the State of New York. All of the Shares are owned of record
and beneficially by the Sellers. None of the Shares was issued or will be
transferred under this Agreement in violation of any preemptive or preferential
rights of any Person.
3.2 NO LIENS ON SHARES. The Sellers own the Shares, free and
clear of any Encumbrances other than the rights and obligations arising under
this Agreement, and none of the Shares is subject to any outstanding option,
warrant, call, or similar right of any other Person to acquire the same, and
none of the Shares is subject to any restriction on transfer thereof except for
restrictions imposed by applicable federal and state securities laws. At
Closing, the Sellers will have full power and authority to convey good and
marketable title to the Shares, free and clear of any Encumbrances other than
the restrictions imposed by federal and state securities laws.
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set
forth in this Agreement in respect of Buyer's rights to acquire the Shares,
there are no authorized or outstanding warrants, options, or rights of any kind
to acquire from the Company any equity or convertible debt securities of the
Company, or securities convertible into or exchangeable for equity or
convertible debt securities of the Company, and there are no shares of capital
stock of the Company reserved for issuance for any purpose nor any contracts,
commitments, understandings or arrangements which require the Company to issue,
sell or deliver any additional shares of its capital stock.
3.4 DUE ORGANIZATION. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
New York and has full corporate power and authority to own and lease its
properties and assets and to carry on the Business as now conducted and as
proposed to be conducted through Closing. Complete and correct copies of the
Articles of Incorporation and Bylaws of the Company, and all amendments thereto,
have been delivered to Buyer and are attached hereto as Exhibits F-1 and F-2.
The Company is qualified to do business as a foreign corporation in the State of
California and in each other jurisdiction in which the nature of the Business or
the ownership of its properties requires such qualification, except where the
failure to be so qualified does not and could not reasonably be expected to have
a Material Adverse Effect. The jurisdictions in which the Company is so
qualified are listed on Exhibit F-3 attached hereto.
3.5 SUBSIDIARIES. The Company does not own, directly or
indirectly, any capital stock or ownership interests in any Person and the
Sellers do not own any capital stock or ownership interest in any other Person
engaged in the Tour Business.
3.6 DUE AUTHORIZATION. The Company and the Sellers each have
full power and authority to execute, deliver and perform this Agreement and to
carry out the transactions contemplated hereby. The execution, delivery, and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of the Company.
This Agreement has been duly and validly executed and delivered by the Company
and the Sellers and constitutes the valid and binding obligations of the Company
and the Sellers, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights and debtors' obligations generally, and legal
limitations relating to remedies of specific performance and injunctive and
other forms of equitable relief (the "EQUITABLE EXCEPTIONS"). The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements,
13
certificates, or other documents contemplated hereby) by the Company and the
Sellers, do not (a) violate any Requirements of Laws or any Court Order of any
Governmental Body applicable to the Company or the Sellers, or their respective
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under, any Contract or any other material agreement to
which the Company or Sellers are a party, or by which any of them or their
respective property is bound, (c) permit the acceleration of the maturity of any
material indebtedness of, or indebtedness secured by the property of, the
Company or the Sellers, (d) violate or conflict with any provision of the
charter or bylaws of the Company, or (e) except for filings or approvals under
the HSR Act and such consents, approvals, or registrations as may be required
under applicable state securities laws, require any consent, approval or
authorization of, or notice to, or declaration, filing or registration with, any
Governmental Body or other third party.
3.7 FINANCIAL STATEMENTS. The following financial statements
of the Company have been delivered to Buyer by the Company: unaudited balance
sheets of the Company as of September 30, 1998 and as of December 31, 1998, and
unaudited statements of income of the Company for the fiscal year ended
September 30, 1998 and for the three months ended December 31, 1998 and the
Company's budget for the fiscal year ending September 30, 1999 (collectively,
the "FINANCIAL STATEMENTS"). The Financial Statements, including the Financial
Statements as of and for the fiscal year ending September 30, 1998 (the "MOST
RECENT FINANCIAL STATEMENTS"), have been prepared in accordance with GAAP
(except for the absence of footnotes). The historical Financial Statements have
been prepared on a consistent basis throughout the periods indicated and fairly
present, in all Material respects, the financial position and results of
operations of the Company as of the indicated dates and for the indicated
periods and are consistent with the books and records of the Company (which
books and records are correct and complete in all Material respects). Since the
date of the last of such historical Financial Statements, the Company has no
material liabilities required by GAAP to be reflected on the Company's balance
sheet or notes thereto that are not so reflected in the Financial Statements,
nor any other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) material (in amount or to the conduct of the
Business) except for those incurred in the ordinary course of the Business; and
neither the Company nor the Sellers have Knowledge of any basis for the
assertion of any such liability or obligation. Since September 30, 1998, the
Company has not suffered a Material Adverse Change. The December 31, 1998
Financial Statements reflect a Net Worth as of December 31, 1998 of more than a
negative ($7,298,000).
3.8 CERTAIN ACTIONS. Since the date of the Most Recent
Financial Statements, the Company has not, except as disclosed on any of the
Financial Statements or notes thereto: (a) paid or declared any dividends or
distributions, or purchased, redeemed, acquired, or retired any stock or
indebtedness from any stockholder (other than distributions to pay estimated
income taxes of the Sellers associated with the income of the Company); (b) made
or agreed to make any loans or advances or guaranteed or agreed to guarantee any
loans or advances to any party whatsoever; (c) suffered or permitted any
Encumbrance to arise or be granted or created against or upon any of its assets,
real or personal, tangible or intangible; (d) canceled, waived, or released or
agreed to cancel, waive, or release any of its debts, rights, or claims against
third parties in excess of $25,000 individually or $100,000 in the aggregate;
(e) sold, assigned, pledged, mortgaged, or otherwise transferred, or suffered
any material damage, destruction, or loss (whether or not covered by insurance)
to, any assets (except in the ordinary course of the Business); (f) amended its
charter or bylaws; (g) paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (h) made any material change
in its method of management, operation, accounting or reporting income or
deductions for tax purposes; (i) made any material acquisitions, capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the aggregate,
exceed $25,000 individually or $100,000 in the aggregate; (j) made any
investment or commitment therefor in any Person; (k) made any payment or
contracted for the payment of any bonus or other compensation or personal
expenses, other than (A) wages and salaries and business expenses paid in the
ordinary course of the Business, and (B) wage and salary adjustments made in the
ordinary course of the Business for employees who are not officers, directors,
or stockholders of the Company; (l) made, amended, or entered into any written
employment contract or created or made any material change in any bonus, stock
option, pension, retirement, profit sharing or other employee benefit plan or
arrangement; (m) made or entered into any vendor, supply, sales, distribution,
franchise, consortia or travel agency agreement which involves annual
consideration (or commissions) in excess of $50,000; (n) made or entered into
any agreement granting any Person any registration or offer
14
rights in respect of the Company's capital stock; (o) entered into any
non-competition agreement; (p) made or entered into any agreement or other
arrangement with any officer, director, stockholder, or Affiliate of the Company
or, other than in the ordinary course of business, any employee of the Company;
(q) materially amended, experienced a termination or received notice of actual
or threatened termination or non-renewal of any material contract, agreement,
lease, franchise or license to which the Company is a party that would or could
reasonably be expected to have a Material Adverse Effect; or (r) entered into
any other material transactions that would or could reasonably be expected to
have a Material Adverse Effect except in the ordinary course of the Business.
3.9 PROPERTIES. Attached hereto as Exhibit G is a list
containing a description of each interest in real property (including, without
limitation, leasehold interests pertaining to the Company's headquarters in the
Lake Success, New York and its call centers in California) and each item of
personal property utilized by the Company in the conduct of the Business having
a book or fair market value in excess of $20,000 as of the date hereof. Except
for Permitted Exceptions, such real and personal properties are free and clear
of Encumbrances. The Sellers and the Company have delivered to Buyer copies of
all real property leases and a lien search obtained from the counties where the
Company conducts business and the New York and California Secretary of State
offices of all UCC liens of record against the Company's personal property in
such jurisdictions. All of the properties and assets necessary for continued
operation of the Business as currently conducted (including, without limitation,
all books, records, computers and computer software and data processing systems)
are owned, leased or licensed by the Company and are suitable for the purposes
for which they are currently being used. The physical properties of the Company,
including the real properties leased by the Company, are in good operating
condition and repair, normal wear and tear excepted, and are free from any
defects of a material nature. Except for Permitted Exceptions, the Company has
full and unrestricted legal and equitable title to all such properties and
assets. The operation of the properties and Business of the Company in the
manner in which they are now and have been operated does not violate any zoning
ordinances, municipal regulations, or other Requirements of Laws, except for any
such violations which would not, individually or in the aggregate, have a
Material Adverse Effect. Except for Permitted Exceptions, no restrictive
covenants, easements, rights-of-way, or regulations of record impair the uses of
the properties of the Company for the purposes for which they are now operated.
All leases of real or personal property by the Company are legal, valid,
binding, enforceable and in full force and effect and will remain legal, valid,
binding, enforceable and in full force and effect on identical terms immediately
following the Closing, except for the Equitable Exceptions. Except as would not
individually or in the aggregate have a Material Adverse Effect, all facilities
leased by the Company have received all approvals of any Governmental Body
(including Governmental Permits) required in connection with the operation
thereof and have been operated and maintained in accordance with all
Requirements of Laws. The Company owns no real property.
3.10 LICENSES AND PERMITS. Attached hereto as Exhibit H is a
list of all licenses, certificates, privileges, immunities, approvals,
franchises, authorizations and permits held or applied for by the Company from
any Governmental Body (herein collectively called "Governmental Permits") the
absence of which could, individually or in the aggregate, have a Material
Adverse Effect. The Company has complied in all material respects with the terms
and conditions of all such Governmental Permits, and the Company has not
received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof. All of such Governmental Permits are valid and in
full force and effect. No additional Governmental Permit is required from any
Governmental Body thereof in connection with the conduct of the Business which
Governmental Permit, if not obtained, would have a Material Adverse Effect.
3.11 INTELLECTUAL PROPERTY. Attached hereto as Exhibit I is a
list and brief description of all Intellectual Property owned or utilized by the
Company. The Company has furnished Buyer with copies of all license agreements
to which the Company is a party, either as licensor or licensee, with respect to
any Intellectual Property. The Company has good title to or the right to use all
the Intellectual Property and all inventions, processes, designs, formulae,
trade secrets and know-how necessary for the conduct of the Business, in the
Business as presently conducted without the payment of any royalty or similar
payment, and the Company is not infringing on any Intellectual Property right of
others, and neither the Company nor the Sellers are aware of any infringement by
others of any such rights owned by the Company. All material licenses set forth
on Exhibit I are valid and binding obligations of the
15
Company, and to the Knowledge of the Company the other parties thereto, and
enforceable against the Company, and to the Knowledge of the Company the other
parties thereto in accordance with their respective terms, except for the
Equitable Exceptions. The Company owns and possesses all right, title and
interest in and to, or has the right to use pursuant to a valid license, all
Intellectual Property necessary for the operation of the business of the Company
as presently conducted, except for such exceptions that would not individually
or in the aggregate have a Material Adverse Effect.
3.12 COMPLIANCE WITH LAWS. The Company has (i) complied in
all material respects with all Requirements of Laws, Governmental Permits and
Court Orders applicable to the Business and has filed with the proper
Governmental Bodies all statements and reports required by all Requirements of
Laws, Governmental Permits and Court Orders to which the Company or any of its
employees (because of their activities on behalf of the Company) are subject and
(ii) conducted the Business and is in compliance in all material respects with
all federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, the Solid Waste Act, the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA, the
Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "Environmental and OSHA Obligations") and all other Governmental
Body requirements, except where any such failure to comply or file would not, in
the aggregate, have a Material Adverse Effect. No claim has been made by any
Governmental Body (and, to the Knowledge of the Company and the Sellers, no such
claim is anticipated) to the effect that the Business fails to comply, in any
respect, with any Requirements of Laws, Governmental Permit or Environmental and
OSHA Obligation or that a Governmental Permit or Court Order is necessary in
respect thereto.
3.13 INSURANCE. Attached hereto as Exhibit J is a list of all
coverages for fire, liability, or other forms of insurance and all fidelity
bonds held by or applicable to the Company. Copies of the binders for all such
insurance policies have been delivered to Buyer. To the Company's and the
Sellers' Knowledge, the insurance maintained by the Company is adequate for its
business. To the Knowledge of the Company and the Sellers, no event relating to
the Company has occurred which will result in (i) cancellation of any such
insurance coverages; (ii) a retroactive upward adjustment of premiums under any
such insurance coverages; or (iii) any prospective upward adjustment in such
premiums, except for such occurrences that would not individually or in the
aggregate have a Material Adverse Effect. All of such insurance coverages will
remain in full force and effect following the Closing. The Company is not in
default under any such insurance policies in any Material respect.
3.14 EMPLOYEE BENEFIT PLANS.
(a) EMPLOYEE WELFARE BENEFIT PLANS. Other than as
listed in Section 3.14(a) of the Disclosure Schedule, the Company does not
maintain or contribute to any "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA. With respect to any plan listed in Section
3.14(a) of the Disclosure Schedule, (i) the plan is in material compliance with
ERISA and all other applicable Requirements of Laws; (ii) the plan has been
administered in accordance with its governing documents; (iii) neither the plan,
nor any fiduciary with respect to the plan, has engaged in any "prohibited
transaction" as defined in Section 406 of ERISA other than any transaction
subject to a statutory or administrative exemption; (iv) except for the
processing of routine claims in the ordinary course of administration, there is
no material litigation, arbitration or disputed claim outstanding; and (v) all
premiums due on any insurance contract through which the plan is funded have
been paid.
(b) EMPLOYEE PENSION BENEFIT PLANS. Other than as
listed in Section 3.14(b) of the Disclosure Schedule, the Company does not
maintain or contribute to any arrangement that is or may be an "employee pension
benefit plan" relating to employees, as such term is defined in Section 3(2) of
ERISA. With respect to any plan listed in Section 3.14(b) of the Disclosure
Schedule: (i) the plan is qualified under Section 401(a) of the Code, and any
trust through which the plan is funded meets the requirements to be exempt from
federal income tax under Section 501(a) of the Code; (ii) the plan is in
material compliance with ERISA and all other applicable Requirements of Laws;
(iii) the plan has been administered in accordance with its governing documents
as modified by applicable law; (iv) the plan has not suffered an "accumulated
funding deficiency" as defined in Section 412(a) of the Code; (v) the plan has
not engaged in, nor has any fiduciary with respect to the plan engaged in, any
"prohibited transaction" as
16
defined in Section 406 of ERISA or Section 4975 of the Code other than a
transaction subject to statutory or administrative exemption; (vi) the plan has
not been subject to a "reportable event" (as defined in Section 4043(b) of
ERISA), the reporting of which has not been waived by regulation of the Pension
Benefit Guaranty Corporation; (vii) no termination or partial termination of the
plan has occurred within the meaning of Section 411(d)(3) of the Code; (viii)
all contributions required to be made to the plan or under any applicable
collective bargaining agreement have been made to or on behalf of the plan; (ix)
there is no material litigation, arbitration or disputed claim outstanding; (x)
all applicable premiums due to the Pension Benefit Guaranty Corporation for plan
termination insurance have been paid in full on a timely basis; and (xi) a
favorable determination letter from the IRS has been received by the Company
with respect to such plan stating that such plan is so qualified; and there are
no circumstances which would cause such plan to lose such qualified status.
(c) EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED
COMPENSATION ARRANGEMENTS. The Company does not maintain or contribute to any
retirement or deferred or incentive compensation or stock purchase, stock grant
or stock option arrangement entered into between the Company and any current or
former officer, consultant, director or employee of the Company that is not
intended to be a tax qualified arrangement under Section 401(a) of the Code.
3.15 CONTRACTS AND AGREEMENTS. Exhibit K hereto contains a
list and brief description of (i) all promissory notes, loan agreements, and
other evidences of indebtedness for borrowed money (other than equipment
leases), guarantees, hedging agreements, off-balance sheet financing
arrangements, indemnity agreements, vendor contracts with airlines and other
carriers, hotels and resorts, agreements with rental car companies, consortia
agreements, interface or similar agreements pertaining to various airline or
other computer reservation systems to which the Company is a party or by which
the Company or its properties are bound, (ii) all written or oral contracts,
commitments, leases, and other agreements that are material to the business of
the Company (including, without limitation, marketing agreements, coop
agreements and travel agency agreements, but excluding individual hotel
contracts) to which the Company is a party or by which the Company or its
properties are bound pursuant to which (a) the obligations thereunder of the
Company are, or are contemplated as being as of the commencement date thereof,
for any one contract $50,000 or greater irrespective of the level of usage, or
(b) the obligations thereunder of the other party to such Contract are, or are
anticipated as representing, for any one contract $50,000 or greater of the
Company's gross revenues or net profits for fiscal year 1998 (as determined in
accordance with past practices and procedures on the Company's monthly profit
and loss statements), and (iii) any non-competition agreement or other similar
agreement prohibiting the Company from freely engaging in any business or
competing anywhere in the world (collectively, the "CONTRACTS"). The Company is
not and, to the Knowledge of the Sellers and the Company, no other party thereto
is in default (and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a default by the Company) under any
of the Contracts, and the Company has not waived any material right under any of
the Contracts. All of the Contracts to which the Company is a party are legal,
valid, binding, enforceable and in full force and effect and will remain legal,
valid, binding, enforceable and in full force and effect on identical terms
immediately after the Closing, except for the Equitable Exceptions. The Company
has not guaranteed any obligations of any other Person. The Company has no
present expectation or intention of not fully performing all of its obligations
under any Contract, the Company has no Knowledge of any breach or anticipated
breach by the other parties to any Contract and the Company has not received
notice of actual or threatened termination or non-renewal of any Contract. The
Company has utilized or is utilizing all cash and payment-in-kind services
received in connection with cooperative marketing support from suppliers (i) for
their intended purpose, (ii) in accordance with the terms under which they were
received, and (iii) consistent with past practices.
3.16 CLAIMS AND PROCEEDINGS. There are no claims, actions,
suits or proceedings pending or, to the Knowledge of the Sellers or the Company,
threatened against or affecting the Company or any of its properties or assets,
at law or in equity, before or by any court, municipality or other Governmental
Body. Except as disclosed on the Disclosure Schedule, none of such claims,
actions, suits, proceedings, or investigations, if adversely determined, will
result in any material liability or loss to the Company. The Company has not
been during the past three years and the Company is not now, subject to any
Court Order, stipulation, or consent of or with any court or Governmental Body.
No inquiry, action or proceeding has been instituted or, to the Knowledge and
belief of the Sellers or the Company, threatened or
17
asserted against the Sellers or the Company to restrain or prohibit the carrying
out of the transactions contemplated by this Agreement or to challenge the
validity of such transactions or any part thereof or seeking damages on account
thereof. To the Knowledge of the Company and the Sellers there is no basis for
any such valid claim or action.
3.17 TAXES.
(a) All Federal, foreign, state, county and local and
other Taxes due from the Company on or before the Closing have been paid and all
Tax Returns which are required to be filed by the Company on or before the date
hereof have been filed within the time and in the manner provided by all
Requirements of Laws. All non-income Tax Returns are true and correct and
accurately reflect the Tax liabilities of the Company. No Tax Returns of the
Company or the Sellers are presently subject to an extension of the time to
file. All Taxes, assessments, penalties, and interest of the Company which have
become due pursuant to such Tax Returns or any assessments received have been
paid or adequately accrued on the Company's Financial Statements. The provisions
for Taxes reflected on the balance sheets contained in the Financial Statements
are adequate to cover all of the Company's Tax liabilities for the respective
periods then ended and all prior periods. The Company has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collection of Taxes, and there are no pending or threatened
claims, assessments, notices, proposals to assess, deficiencies, or audits with
respect to any such Taxes of which the Sellers or the Company are aware. For
Governmental Bodies with respect to which the Company does not file Tax Returns,
no such Governmental Body has given the Company written notification that the
Company is or may be subject to taxation by that Governmental Body. The Company
has withheld and paid all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, stockholder, creditor,
independent contractor or other party. There are no Tax liens on any of the
property or assets of the Company.
(b) Neither the Company nor any other corporation has
filed an election under Section 341(f) of the Code that is applicable to the
Company or any assets held by the Company. The Company has not made any
payments, is not obligated to make any payments, and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Section 280G of the Code. The Company
has not been a United States real property holding corporation within the
meaning of Code Sec. 897(c)(2) during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code. The Company is not a party to any Tax allocation
or sharing agreement. The Company has not and has never been (nor does the
Company have any liability for unpaid Taxes because it once was) a member of an
affiliated group during any part of which return year any corporation other than
the Company also was a member of the affiliated group.
(c) No transaction contemplated by this Agreement is
subject to withholding under Section 1445 of the Code and no material stock
transfer taxes, or any real estate transfer taxes or similar taxes will be
imposed upon the transfer and sale of the Shares pursuant to this Agreement.
(d) The Company has never made an election under
Section 1362 of the Code and any corresponding state or local provisions to be
taxed as an S corporation within the meaning of Section 1361 of the Code.
(e) The Company will not be required to include any
amount in taxable income or exclude any item of deduction or loss from taxable
income for any taxable period (or portion thereof) ending after the Effective
Date (i) as a result of a change in method of accounting for a taxable period
ending on or prior to the Effective Date, (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign income Tax law) entered into on or prior to
the Effective Date, (iii) as a result of any sale reported on the installment
method where such sale occurred on or prior to the Effective Date, and (iv) as a
result of any prepaid amount received on or prior to the Effective Date.
3.18 PERSONNEL. Attached hereto as Exhibit L is a list of the
names and annual rates of compensation of the directors and executive officers
of the Company, and of the employees of the Company whose annual rates of
compensation during the fiscal year ended September 30, 1998 (including base
salary, bonus and incentive pay) exceed (or by September 30, 1999 are expected
to exceed) $50,000. Exhibit L also summarizes the bonus, profit sharing,
percentage compensation, company automobile, club
18
membership, and other like benefits, if any, paid or payable to such directors,
officers, and employees during the Company's fiscal year ended September 30,
1998 and to the date hereof. Exhibit L also contains a brief description of all
material terms of employment agreements to which the Company is a party and all
severance benefits which any director, officer or employee of the Company is or
may be entitled to receive. To the Knowledge of the Sellers and the Company, the
employee relations of the Company are generally good and there is no pending or
threatened labor dispute or union organization campaign. None of the employees
of the Company is represented by any labor union or organization. The Company is
in compliance in all material respects with all Requirements of Laws respecting
employment and employment practices, terms and conditions of employment, and
wages and hours, and are not engaged in any unfair labor practices. Neither the
Company or the Sellers has been advised or otherwise has Knowledge that any key
employee will not agree to remain employed by the Company after the consummation
of the transactions contemplated hereby. There is no unfair labor practice claim
against the Company before the National Labor Relations Board, or any strike,
dispute, slowdown, or stoppage pending or, to the Knowledge of the Company and
the Sellers, threatened against or involving the Company, and none has
previously occurred.
3.19 BUSINESS RELATIONS. Neither the Company nor the Sellers
has Knowledge or has received notice that any customer, supplier, travel agency,
resort operator or lodging or transportation company engaged in doing business
with the Company will cease to do business with the Company after the
consummation of the transactions contemplated hereby in the same manner and at
the same levels as previously conducted with the Company except for any
reductions which do not result in a Material Adverse Change. Neither the Sellers
nor the Company has received any notice of cancellation of or Material adverse
modification to any Material business arrangement between any Person and the
Company nor is the Company or the Sellers aware of any facts which could lead
them to believe that the Business will be subject to cancellation or such a
modification of any such business arrangement.
3.20 CUSTOMER DEPOSITS AND BOOKINGS. Exhibit M sets forth, as
of the date specified therein, (i) all customer bookings as of such date on an
aggregate basis ("BOOKINGS"), (ii) all deposits received from customers in
connection with such Bookings as of such date on an aggregate basis ("CUSTOMER
DEPOSITS"), and (iii) the aggregate amount of all prepayments to vendors and
suppliers and refunds to customers made by the Company in connection with such
Bookings as of such date. As of February 28, 1999, the Company's aggregate
exposure (net of third party reimbursements) for all claims by customers of
$1,000 or more for refunds as of such date ("CUSTOMER CLAIMS") did not exceed
$30,000. The Customer Deposits are recognized and included on the Company's
balance sheet only to the extent of cash received from the customers in respect
thereof, and each Customer Deposit so recognized and included is matched by a
deferred liability on such balance sheet. All cancellations by customers of
Bookings are recognized on the Company's financial statements promptly within
three (3) business days upon the Company's receipt of notice of such
cancellation from the customer. The number of Customer Claims, and the projected
cost to the Company in respect of such Customer Claims, and the level of
Bookings (and its projected revenues for future periods in which such Bookings
will be converted into revenues) for the period since September 30, 1998 through
the Effective Date are consistent with past practices of the Company in all
material respects.
3.21 BANK ACCOUNTS; INVESTMENTS. Attached hereto as Exhibit N
is a list of all banks or other financial institutions with which the Company
has an account or maintains a safe deposit box, showing the type and account
number of each such account and safe deposit box and the names of the persons
authorized as signatories thereon or to act or deal in connection therewith.
Exhibit N also contains a list of all material investments by the Company in any
funds, accounts, securities, certificates of deposit or instruments of any
Person. All of such investments are customary in form and amount for reasonably
prudent treasury investments of comparable businesses. None of such investments
involve any type of derivative, option, hedging or other speculative instrument.
3.22 CUSTOMER CLAIMS. No written or oral claim for breach of
contract or otherwise by any customer has been made against the Company since
January 1, 1998 which could, individually or in the aggregate, result in any
Material Adverse Effect. To the Knowledge of the Sellers and the Company, no
state of facts exists, and no event has occurred, which could reasonably be
expected to form the basis of any present claim against the Company for
liability to any third party in connection with vacation packages sold or
services rendered by the Company, other than Customer Claims arising in the
ordinary course of the
19
Business.
3.23 BROKERS. Neither the Company nor the Sellers have
engaged, or caused to be incurred any liability to any finder, broker, or sales
agent in connection with the origin, negotiation, execution, delivery, or
performance of this Agreement or the transactions contemplated hereby.
3.24 AFFILIATED TRANSACTIONS. No officer, director,
stockholder (including the Sellers) or Affiliate of the Company or any
individual related by blood or marriage to any such Person, or any entity in
which any such Person owns any beneficial interest, is a party to any agreement,
contract, arrangement or commitment with the Company or engaged in any
transaction with the Company or has any interest in any property used by the
Company. No officer, director, or stockholder of the Company or any Affiliate of
any such officer, director, or stockholder, has any ownership interest in any
competitor, supplier, or customer of the Company (other than ownership of
securities of a publicly-held corporation of which such Person owns, or has real
or contingent rights to own, less than one percent of any class of outstanding
securities) or any property used in the operation of the Business.
3.25 FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED
LIABILITIES.
(a) FUNDED INDEBTEDNESS. Other than such Funded
Indebtedness which is to be repaid and discharged prior to Closing in accordance
with Section 7.1(d) and outstanding equipment leases set forth in Section
3.25(a) of the Disclosure Schedule, the Company does not have any Funded
Indebtedness.
(b) LETTERS OF CREDIT. Other than those listed on
Exhibit O, the Company has no letters of credit, performance bonds or similar
instruments issued on or for its account for the benefit of any of its vendors
or otherwise.
(c) UNDISCLOSED LIABILITIES. The Company does not
have any Material liabilities (whether absolute, accrued, contingent or
otherwise), of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except such liabilities which are
accrued or reserved against in the Most Recent Financial Statements or disclosed
in the notes thereto, including without limitation any accounts payable or
service liabilities of the Company, other than those arising subsequent to
September 30, 1998 in the ordinary course of the Business.
3.26 YEAR 2000. All of the material computer software,
computer firmware, computer hardware (whether general or special purpose), and
other similar or related items of automated, computerized, and/or software
system(s) that are used or relied on by the Company in the conduct of its
business will not malfunction, will not cease to function, will not generate
incorrect data, and will not produce incorrect results when processing,
providing, and/or receiving (i) date-related data into and between the twentieth
and twenty-first centuries and (ii) date-related data in connection with any
valid date in the twentieth and twenty-first centuries, except for any such
problems that would not individually or in the aggregate have a Material Adverse
Effect.
3.27 ARC COMPLIANCE. The Company maintains all of its
ticketing stock utilized in the Tour Business in full compliance with the safety
standards required by ARC. None of the Company's ticketing stock utilized for
the conduct of the Tour Business has ever been lost or stolen and no claim has
ever been made by any airline, hotel, tour operator or other travel vendor
against the Company with respect to any lost or stolen tickets, except for such
prior claims that would not individually or in the aggregate have a Material
Adverse Effect.
3.28 INFORMATION FURNISHED. The Company and the Sellers have
made available to Buyer true and correct copies of all material corporate
records of the Company and all material agreements, documents, and other items
listed on the Exhibits and Disclosure Schedule to this Agreement or referred to
in Article III of this Agreement, and neither this Agreement, the Schedules
hereto, nor any written information, instrument, or document delivered to Buyer
pursuant to this Agreement contains any untrue statement of a material fact or
omits any material fact necessary to make the statements herein or therein, as
the case may be, not misleading.
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ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to the Sellers as follows:
4.1 DUE ORGANIZATION. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York
and has full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
4.2 DUE AUTHORIZATION. The execution, delivery and
performance of this Agreement and the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action of Buyer and the
Agreement has been duly and validly executed and delivered by Buyer and
constitutes the valid and binding obligation of Buyer, enforceable in accordance
with its terms, except for the Equitable Exceptions. The execution, delivery,
and performance of this Agreement (as well as all other instruments, agreements,
certificates or other documents contemplated hereby) by Buyer, do not (a)
violate any Requirements of Laws or Court Order of any Governmental Body
applicable to Buyer or its property, (b) violate or conflict with, or permit the
cancellation of, or constitute a default under any agreement to which Buyer is a
party or by which it or its property is bound, (c) permit the acceleration of
the maturity of any indebtedness of, or any indebtedness secured by the property
of, Buyer, (d) violate or conflict with any provision of the charter or bylaws
of Buyer, or (e) except for filings or appraisals under the HSR Act and such
consents, approvals or registrations as may be required under applicable state
securities laws, require any consent, approval or authorization of, or notice
to, or declaration, filing or registration with, any Governmental Body or other
third party. No inquiry, action or proceeding has been instituted or, to the
Knowledge and belief of the Buyer, threatened or asserted against the Buyer to
restrain or prohibit the carrying out of the transactions contemplated by this
Agreement or to challenge the validity of such transactions or any part thereof
or seeking damages on account thereof. To the Knowledge of the Buyer there is no
basis for any such valid claim or action.
4.3 NO BROKERS. Buyer has not engaged, or caused to be
incurred any liability for which the Company or the Sellers may be liable to any
finder, broker or sales agent in connection with the origin, negotiation,
execution, delivery, or performance of this Agreement or the transactions
contemplated hereby.
4.4 INVESTMENT. Buyer will acquire the Shares for investment
and for its own account and not with a view to the distribution thereof.
ARTICLE V
COVENANTS
5.1 CONSENTS OF OTHERS. Prior to the Closing, the Company
and the Sellers shall use their best efforts to obtain and to cause the Company
to obtain all authorizations, consents and permits required of the Company and
the Sellers (including under the Contracts and real property leases) to permit
them to consummate the transactions contemplated by this Agreement. To the
extent required to consummate such transactions or to ensure that the Contracts
shall remain in place following the Closing, the Sellers shall use their best
efforts to obtain the written consent (or waiver of any "change of control"-type
termination rights) of any third party to any Contract. As promptly as
practicable after the date hereof, Buyer, the Company and the Sellers shall
make, or shall cause to be made, such filings as may be required pursuant to the
HSR Act with respect to the consummation of the transactions contemplated by
this Agreement.
5.2 SELLERS' EFFORTS. The Buyer, the Company and the Sellers
shall use all reasonable efforts to cause all conditions for the Closing set
forth in Section 7.1 to be met.
5.3 POWERS OF ATTORNEY. The Company and the Sellers shall
cause the Company to revoke and terminate at or prior to Closing all powers of
attorney granted by the Company, other than those relating to service of
process, qualification or pursuant to governmental regulatory or licensing
agreements, or representation before the IRS or other Government Bodies.
5.4 CONDUCT OF BUSINESS PENDING CLOSING. From the date of
this Agreement to the
21
Effective Date:
(a) Except as otherwise contemplated by this
Agreement, or as Buyer may otherwise consent to in writing, the Company and the
Sellers shall conduct the Business only in the ordinary course and shall not
engage in any material activity or enter into any material transaction which
would cause a breach of the representations and warranties contained in Article
III.
(b) The Sellers and the Company shall use all
reasonable best efforts to cause the Business to preserve substantially intact
its current business organization and present relationships with its customers,
vendors, suppliers and employees and to maintain all of its insurance currently
in effect.
(c) The Sellers and the Company shall give prompt
notice to Buyer of any notice of any Material default received by the Company or
the Business subsequent to the date of this Agreement under any Material
Contract or any Material Adverse Change occurring prior to the Effective Date in
the operation of the Company or the Business.
(d) Neither the Company nor the Sellers, nor any of
their representatives, shall solicit, encourage or discuss any Acquisition
Proposal (as hereinafter defined) or supply any non-public information
concerning the Company or the Business or the Company's assets to any party
other than Buyer or its representatives. As used herein, "ACQUISITION PROPOSAL"
means any proposal other than the transactions herein contemplated, for (i) any
merger or other business combination involving the Company or the Business, (ii)
the acquisition of the Company or a material equity interest in the Company or a
material portion of its assets, or (iii) the dissolution or liquidation of the
Company.
5.5 ACCESS TO RECORDS BEFORE EFFECTIVE DATE. Prior to the
Effective Date, the Sellers and the Company agree that they will give, or cause
to be given, to Buyer and their representatives, during normal business hours
and at Buyer's expense, access to the Company's personnel, officers, agents,
employees, assets, properties, titles, contracts, corporate minute and other
books, records, files and documents of the Company with respect to the Business
(including financial, tax basis, budget projections, accountants' work papers
and other information as Buyer may request) and to the Business' personnel,
customers, suppliers and independent accountants, to allow Buyer to obtain such
information as they shall desire, and to make copies of such information, to the
extent reasonably necessary. Additionally, the Sellers and the Company will
provide Buyer opportunities to meet with key employees of the Business, to visit
facilities of the Business and to otherwise conduct due diligence in respect of
the Company and the Business. Buyer shall have the right, with the Company's
assistance, to interview the five largest suppliers of the business. All
materials copied by Buyer and all Confidential Information shall be maintained
in confidence by Buyer and returned to the Sellers and/or the Company, as
appropriate, in accordance with the terms of the Confidentiality Agreement
executed by Buyer dated July, 1998, if the Closing of the transactions
contemplated hereunder fails to occur. The exercise of Buyer's rights hereunder
shall be conducted at such times and in such a manner as shall not unreasonably
interfere with the Company's conduct of the Business.
5.6 PAYMENTS TO THE COMPANY BY THE SELLERS.
(a) The Sellers agree to reimburse the Company prior
to the Closing Date for any and all legal, accounting and other expenses, which
(i) were paid or accrued by the Company and (ii) incurred by the Sellers or the
Company in connection with the preparation and negotiation of this Agreement and
the consummation of the transactions contemplated hereby. All such expenses are
disclosed in Section 5.6(a) of the Disclosure Schedule.
(b) The Sellers agree to repay or caused to be repaid
to the Company as of the Closing any and all indebtedness owed by the Sellers or
any Affiliate of the Sellers. All such indebtedness is disclosed in Section
5.6(b) of the Disclosure Schedule.
ARTICLE VI
POST-CLOSING COVENANTS
6.1 GENERAL. In case at any time after the Closing any
further action is legally necessary or reasonably desirable (as determined by
Buyer and the Sellers) to carry out the purposes of this
22
Agreement, each of the parties will take such further action (including the
execution and delivery of such further instruments and documents) as any other
party reasonably may request, all at the sole cost and expense of the requesting
party (unless the requesting party is entitled to indemnification therefor under
Article VIII below). The Sellers acknowledge and agree that from and after the
Closing, Buyer will be entitled to possession of all documents, books, records,
agreements, and financial data of any sort relating to the Company, which shall
be maintained at the headquarters of the Company; provided, however, that the
Sellers shall be entitled to reasonable access to and to make copies of such
books and records at their sole cost and expense and Buyer will maintain all of
the same for a period of at least three (3) years after Closing. Thereafter, the
Company will offer such documentation to the Sellers before disposal thereof.
6.2 TRANSITION. For a period of four (4) years following
Closing, the Sellers will not take any action (or cause any such action to be
taken by another Person) that primarily is designed or intended to have the
effect of discouraging any vendor (including without limitation any airline or
other carrier, hotel, resort or rental car company), lessor, licensor, customer,
travel agency, consortia member, supplier, or other business associate of the
Company from maintaining the same business relations with the Company or the
Buyer after the Closing as it maintained with the Company prior to the Closing.
For a period of four (4) years following Closing, the Sellers will refer all
customer inquiries relating to the Tour Business to the Company or the Buyer.
6.3 CONFIDENTIALITY. The Sellers will treat and hold in
confidence and not disclose all Confidential Information and refrain from using
any of the Confidential Information except in connection with this Agreement or
otherwise for the benefit of the Company or Buyer for a period of four (4) years
from the date of this Agreement, and deliver promptly to Buyer or destroy, at
the written request and option of Buyer, all tangible embodiments (and all
copies) of the Confidential Information which are in their possession except as
otherwise permitted herein. In the event that the Sellers are requested or
required (by oral question or written request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar legal proceeding) to disclose any Confidential Information, the Sellers
will notify Buyer promptly of the request or requirement.
6.4 COVENANT NOT TO COMPETE. For and in consideration of the
allocation of $50,000 of the Purchase Price paid to the Sellers by Buyer, each
Seller, by signing this Agreement, covenants and agrees, for a period of (i)
four (4) years from and after the Closing Date with respect to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
or (ii) three (3) years from and after the Closing Date with respect to all
other Sellers, that she will not, directly or indirectly without the prior
written consent of Buyer, for or on behalf of any entity:
(a) become interested or engaged, directly or
indirectly, as a shareholder, bondholder, creditor, officer, director, partner,
agent, contractor with, employer or representative of, or in any manner
associated with, or give financial, technical or other assistance to, any
Person, firm or corporation for the purpose of (i) engaging in the Tour Business
in competition with the Company or any of its Affiliates or (ii) providing
wholesale travel sales or vacation package services directly to consumers (or
indirectly to consumers through other travel agents or wholesalers) for travel
to North America or from North America to other countries.
(b) enter into any agreement with, service, assist or
solicit the business of any customers of the Company or any of its Affiliates
for the purpose of providing wholesale travel or vacation package services to
such customers in competition with the Company or any of its Affiliates or to
cause them to reduce or end their business with the Company or any of its
Affiliates; or
(c) hire, retain, or solicit the employment or
services of employees, consultants or representatives of the Company or any of
its Affiliates for the purpose of causing them to leave the employment of the
Company or any of its Affiliates; provided, however, that in respect of
employees, consultants or representatives of any Affiliate of the Company, the
nonsolicitation covenant contained in this paragraph (c) shall only apply in
those situations where the affected person is being hired or solicited by
Sellers to work for a business or entity that is competitive with the Company or
any Affiliate;
provided, however, that the Sellers' ownership of less than five percent (5%) of
the outstanding stock of any publicly-traded corporation that engages in
competition with the Company or any of its Affiliates shall not
23
be deemed to be a violation of this Section 6.4 solely by reason thereof.
6.5 ADDITIONAL MATTERS.
(a) The Sellers shall cause the Company to file with
the appropriate governmental authorities all Tax Returns required to be filed by
it for any taxable period ending prior to the Effective Date and the Company
shall remit any Taxes due in respect of such Tax Returns. In addition, the Buyer
shall cause AA to prepare the Company's Tax Returns for the year ended September
30, 1998 and a short period tax return for the Company covering the period
October 1, 1998 through the Effective Date (the "AA RETURNS"). The cost of
preparation of the AA Returns shall be paid for by the Company. The Buyer agrees
to provide the Sellers with a copy of the AA Returns.
(b) Buyer and the Sellers recognize that each of them
will need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by Buyer and/or the Company to
the extent such records and information pertain to events occurring on or prior
to the Effective Date; therefore, Buyer agrees to cause the Company to (A) use
its best efforts to properly retain and maintain such records for a period of
six (6) years from the date the Tax Returns for the year in which the Closing
occurs are filed or until the expiration of the statute of limitations with
respect to such year, whichever is later, and (B) each party agrees to allow the
other party and her or its agents and representatives at times and dates
mutually acceptable to the parties, to inspect, review and make copies of such
records as such other party may deem necessary or appropriate from time to time,
such activities to be conducted during normal business hours and at the
requesting party's expense.
(c) AMENDED RETURNS. If, in Buyer's sole discretion,
the Company shall amend any prior federal, state or local income Tax return for
any period ending on or prior to the Effective Date, then the Sellers and Buyer
shall join in making a timely filing on behalf of the Company to amend such
prior Tax Returns, and each party shall provide the others all necessary
information to permit such amended Tax Returns to be filed. Buyer and the
Sellers shall, as promptly as practicable following the Effective Date, take all
actions necessary and appropriate (including filing such forms, returns,
schedules and other documents as may be required) to effect and preserve timely
amended Tax Returns; provided, however, that Buyer shall be the party
responsible for preparing and filing the forms, returns, schedules and other
documents necessary therefor. All refunds for income Taxes paid prior to the
Effective Date shall be the property of the Company.
(d) INDEMNITY. The Sellers shall be liable for, and
shall indemnify and hold Buyer and the Company harmless against, any Taxes or
other costs attributable solely to a failure on the part of the Sellers to take
all actions required of him under Section 6.5(c) above to assist the Company
with the amendment of prior Tax Returns requested by Buyer pursuant to Section
6.5(c) above. The indemnity set forth in this Section 6.5(d) shall not be
subject to the conditions and limitations set forth in Section 8.6 of this
Agreement.
6.6 LITIGATION SUPPORT. In the event and for so long as any
party is actively contesting or defending against any claim, suit, action or
charge, complaint, or demand in connection with (i) any transaction contemplated
under this Agreement or (ii) any fact, circumstance, status, condition,
activity, practice, occurrence, event, action, failure to act, or transaction on
or prior to the Effective Date involving the Company, each of the other parties
will cooperate and make available themselves or their personnel, as applicable,
and provide such testimony and access to their books and records as shall be
necessary in connection with the contest or defense.
6.7 AUDITS. Following the Closing, if requested by the
Buyer, the Sellers shall cooperate with Buyer's efforts to cause the Company, at
the Company's expense, to deliver, or cause to be delivered, to Buyer an
unqualified and unmodified audit report of AA on the balance sheets of the
Company as of September 30, 1997, September 30, 1998 and December 31, 1998, and
audited statements of operations and cash flows of the Company for the fiscal
years or periods then ended, which report shall be without limitation as to the
scope of the audit. The Sellers, in their capacities as officers and directors
of the Company during such periods, shall assist Buyer, at no cost or expense to
Sellers, by providing all management letters, reports or representations
reasonably requested by such auditors in connection with such audits.
24
6.8 AEROMEXICO LAWSUIT. All costs and expenses associated
with, together with any proceeds received from, any judgment or settlement in
connection with that certain pending litigation claim against AeroMexico shall
be borne, or be the property of, as the case may be, the Sellers or other
Persons other than the Buyer or the Company. Sellers shall also indemnify the
Company for any costs or expenses associated with the AeroMexico legal action
arising on or after the Effective Date.
6.9 ARC CONSENT. The Company, Buyer and Sellers shall each
use their reasonable best efforts to cooperate and to work together to obtain
any and all consents required by ARC in connection with this Agreement and the
transactions contemplated hereby including the sales of the Shares to Buyer.
6.10 RECEIVABLES COLLECTION. In the event that any
receivables of the Company as of September 30, 1998 are written-off by AA and/or
the Independent Accountants in connection with their determination of Net Worth
as of September 30, 1998, then Sellers shall have the right to require that the
Company shall assign to them such uncollected receivables and thereafter any
collections of such uncollected receivables after January 31, 2000 shall be the
property of the Sellers.
6.11 CONDUCT DURING EARNOUT PERIOD. Buyer also agrees that it
will provide the Company with sufficient working capital to continue to conduct
its business during the Earnout Period. In addition, Buyer and Seller will
operate the Company during the Earnout Period in accordance with the terms and
provisions of Section 2(d) of Annex I attached hereto.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
7.1 CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of
Buyer under this Agreement to consummate the Closing is subject to the
conditions that:
(a) COVENANTS, REPRESENTATIONS AND WARRANTIES. The
Company and the Sellers shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by each
of them prior to or at the Effective Date. The representations and warranties of
the Company and the Sellers set forth in this Agreement shall be accurate in all
material respects at and as of the Effective Date with the same force and effect
as though made on and as of the Effective Date.
(b) CONSENTS. All statutory requirements for the
valid consummation by the Company and the Sellers of the transactions
contemplated by this Agreement shall have been fulfilled and all authorizations,
consents and approvals, including expiration or early termination of all waiting
periods under the HSR Act, if applicable, and those of all federal, state, local
and foreign governmental agencies and regulatory authorities required to be
obtained in order to permit the consummation of the transactions contemplated
hereby shall have been obtained in form and substance reasonably satisfactory to
Buyer. No claims or proceedings shall be pending against any party hereto
relating to this Agreement or the transactions contemplated hereby and Buyer on
the one hand, and Company and Sellers on the other hand, hereby represent and
warrant to each other that they have no Knowledge of any such claims or
proceedings as of the date of this Agreement.
(c) LEASES. Leases for the Company's headquarters and
call centers shall continue to remain in full force and effect following the
Closing in form and substance satisfactory to Buyer.
(d) DISCHARGE OF INDEBTEDNESS AND LIENS. The Sellers
and the Company shall have provided for the payment in full by the Company of
all Funded Indebtedness of the Company and all extended credit from vendors at
the Closing (other than customary accounts payable outstanding on 90 day or less
payment terms in accordance with past practices) with the proceeds of the monies
paid by Buyer pursuant to Section 2.3(a) to satisfy the Net Worth deficit. Such
Funded Indebtedness, if any, as of December 31, 1998, is listed on Exhibit P
hereto. The Sellers shall have also provided for the termination of all
Encumbrances of record on the properties of the Company, except for Permitted
Exceptions. All liens or UCC filings against the Company, other than for
Permitted Exceptions, shall have been terminated
25
as of the Closing.
(e) TRANSFER TAXES. The Sellers shall have paid all
stock transfer or gains taxes imposed on the
Sellers incurred in connection with this
Agreement.
(f) INTENTIONALLY LEFT BLANK.
(g) INTENTIONALLY LEFT BLANK.
(h) DOCUMENTS TO BE DELIVERED BY THE SELLERS AND THE
COMPANY. The following documents shall be
delivered at the Closing by the Sellers and the
Company:
(i) OPINION OF SELLERS' COUNSEL. Buyer shall
have received an opinion of counsel to
Sellers and the Company, dated the Closing
Date, in substantially the same form as
the form of opinion that is Exhibit B
hereto.
(ii) CERTIFICATES. Buyer shall have received
(i) an officer's and stockholder's
certificate and (ii) a secretary's
certificate of the Company executed by
officers of the Company and the Sellers,
as appropriate and dated the Closing Date,
in substantially the same forms as the
forms of certificates that are attached as
Exhibit C-1 and Exhibit C-2, respectively,
hereto.
(iii) RELEASE. The Sellers shall have furnished
the Company with a duly executed general
release of liabilities in the form
attached as Exhibit D hereto.
(iv) ESCROW AGREEMENT. The Sellers shall have
delivered to Buyer at the Closing the duly
executed Escrow Agreement.
(v) TERMINATION OF EMPLOYMENT AGREEMENTS. The
Company shall have provided evidence
satisfactory to Buyer of the complete
termination, without liability to the
Company, of all employment agreements in
existence prior to the Closing among the
Company, on the one hand, and the Sellers
or any other employees of the Company;
provided, however, that the parties to
this Agreement acknowledge and agree that
for purposes of this Agreement an
employee-at-will shall not be considered
to be bound and subject to an employment
agreement. In addition, (a) new Employment
Agreements with (i) ▇▇▇▇ ▇▇▇▇▇▇ (in the
form of Exhibit Q-1 hereto) and (ii)
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ (in the form of Exhibit Q-2 hereto)
shall have been executed and delivered by
such persons and (b) a new consulting
agreement (effective as of January 1,
2000) with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (in the form
of Exhibit R hereto) shall have been
executed and delivered by ▇▇▇. ▇▇▇▇▇▇▇▇.
(vi) STOCK CERTIFICATES. The Sellers shall have
delivered the Shares accompanied by duly
executed stock powers, together with any
stock transfer stamps or receipts for any
transfer taxes required to be paid
thereon.
(vii) RESIGNATION OF DIRECTORS. The Company
shall have delivered the written
resignations of all directors of the
Company effective as of the Closing;
provided that Buyer shall cause
replacement director(s) to be duly elected
and appointed upon such resignations.
7.2 CONDITIONS TO THE SELLERS' AND THE COMPANY'S
OBLIGATIONS. The obligation of the Sellers and the
Company under this Agreement to consummate the Closing
is subject to the conditions that:
(a) COVENANTS, REPRESENTATIONS AND WARRANTIES. Buyer
shall have performed in
26
all material respects all obligations and
agreements and complied in all material respects
with all covenants contained in this Agreement to
be performed and complied with by Buyer prior to
or at the Closing and the representations and
warranties of Buyer set forth in Article IV
hereof shall be accurate in all material
respects, at and as of the Effective Date, with
the same force and effect as though made on and
as of the Effective Date.
(b) CONSENTS. All statutory requirements for the
valid consummation by Buyer, the Company and
Sellers of the transactions contemplated by this
Agreement shall have been fulfilled and all
authorizations, consents and approvals, including
expiration or early termination of all waiting
periods under the HSR Act (if applicable) and
those of all federal, state, local and foreign
governmental agencies and regulatory authorities
required to be obtained in order to permit the
consummation by Buyer, the Company and/or Sellers
of the transactions contemplated hereby shall
have been obtained.
(c) ESCROW AGREEMENT. Buyer shall have delivered to
the Sellers at the Closing the duly executed
Escrow Agreement required pursuant to Section 2.5
hereof.
(d) DOCUMENTS TO BE DELIVERED BY THE BUYER. The
following documents shall be delivered at the
Closing by the Buyer:
(i) OPINION OF BUYER'S COUNSEL. Sellers shall
have received an opinion of the general
counsel of Buyer, dated the Closing Date,
in substantially the same form as the form
of opinion that is Exhibit S hereto.
(ii) CERTIFICATES. Sellers shall have received
(i) an officer's certificate and (ii) a
secretary's certificate of the Buyer
executed by officers of the Buyer and
dated the Closing Date, in substantially
the same forms as the forms of
certificates that are attached as Exhibit
T-1 and Exhibit T-2, respectively, hereto.
(iii) RELEASE OF PERSONAL GUARANTEES. All
personal guarantees by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ of
any bank indebtedness of the Company shall
have been released at Closing.
(iv) ESCROW AGREEMENT. The Buyer shall have
delivered to Sellers at the Closing the
duly executed Escrow Agreement and paid
the portion of the Purchase Price required
to be paid to the Escrow Agent therefor.
(v) EMPLOYMENT AGREEMENTS. The Buyer shall
have executed and delivered (a) new
Employment Agreements with (i) ▇▇▇▇ ▇▇▇▇▇▇
(in the form of Exhibit Q-1 hereto) and
(ii) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ (in the form of Exhibit Q-2 hereto)
and (b) a new consulting agreement
(effective as of January 1, 2000) with
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ (in the form of Exhibit R
hereto).
(e) PAYMENTS TO THE SELLERS. The Sellers shall have
received the portion of the Purchase Price
payable at Closing to the Sellers.
(f) PAYMENTS TO THE COMPANY. The Company shall have
received the amount payable at Closing equal to
the Net Worth deficit reflected on the
Preliminary Closing Balance Sheet.
7.3 WAIVER. Buyer can waive satisfaction of any condition
set forth in Section 7.1 and the Sellers can waive any
condition set forth in Section 7.2
27
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION OF BUYER. Except as provided in and
subject to Section 8.6, the Sellers agree to indemnify
and hold harmless Buyer, the Company, each officer and
director of the Company and Buyer and any successor of
the Company or Buyer (collectively, the "INDEMNIFIED
PARTIES") from and against any and all damages, losses,
claims, liabilities, demands, charges, suits, penalties,
costs and expenses (including court costs and reasonable
attorneys' fees and expenses incurred in investigating
and preparing for any litigation or proceeding)
(collectively, the "INDEMNIFIABLE COSTS"), which any of
the Indemnified Parties may sustain, or to which any of
the Indemnified Parties may be subjected, arising out of
(A) any misrepresentation, breach or default by the
Sellers or the Company of or under any of the
representations, warranties, covenants, agreements or
other provisions of this Agreement or any agreement or
document executed in connection herewith, or (B) any
litigation, claim or liability against the Company or
any of the Indemnified Parties involving the Company
asserted as of the Effective Date (including those
disclosed on Schedule 3.16 of the Disclosure Schedule)
by any Person based upon facts or circumstances arising
prior to the Effective Date which form the basis for any
litigation, claim or liability, except to the extent
that such litigation, claim or liability is covered by
the Company's insurance carriers. Notwithstanding the
foregoing, any claim for Indemnifiable Costs pursuant to
(A) or (B) above shall be net of any reserves for such
matters contained in the Audited Closing Balance Sheet
or any costs or expenses for such Indemnifiable Costs
that result in a reduction in the Earned Payout Amount
pursuant to Section 2.8.
8.2 DEFENSE OF THIRD PARTY CLAIMS. If any legal proceeding
shall be instituted, or any claim or demand made, by any
third party against any Indemnified Party in respect of
which the Sellers may be liable hereunder (and such
determination shall be made without regard to the
limitations set forth in Section 8.6), such Indemnified
Party shall give prompt written notice thereof to the
Sellers and, except as otherwise provided in Section 8.4
below, the Sellers shall have the right to defend, or
cause the Company or its successors to defend, any
litigation, action, suit, demand, or claim for which
such Indemnified Party may seek indemnification with
counsel satisfactory to the Sellers; provided, however,
that the Sellers may not settle any such litigation,
action, suit, demand, or claim without the prior written
consent of Buyer, which shall not be unreasonably
withheld. Notwithstanding the foregoing, if in the
reasonable judgment of Buyer, (i) such litigation,
action, suit, demand or claim, or the resolution
thereof, would have a Material Adverse Effect on Buyer
or the Company in excess of $50,000 not covered as an
Indemnifiable Cost or (ii) Sellers have a conflict of
interest in defending such action on Buyer's or the
Company's behalf, at Buyer's election, Buyer may defend
itself with counsel reasonably satisfactory to the
Sellers, and in either of such instances Sellers shall
be liable for all expenses reasonably incurred in
connection therewith (including, without limitation,
settlement payments and reasonable attorney's fees). If
neither (i) nor (ii) are applicable but Buyer desires to
participate in the defense of an action Sellers are
defending because in Buyer's reasonable judgment the
outcome of such action could have an ongoing effect on
Buyer, the Company or its successors, the Buyer may
participate but at its own expense. In the event the
Sellers fail or refuse to defend any legal proceeding
she is required to defend under this Article VIII within
a reasonable length of time, the Indemnified Parties
shall be entitled to assume the defense thereof with
counsel reasonably satisfactory to the Sellers, and the
Sellers shall be liable to repay the Indemnified Parties
for all expenses reasonably incurred in connection with
said defense (including, without limitation, settlement
payments and reasonable attorney's fees). If the Sellers
do not or refuse to assume the defense of any
litigation, action, suit, demand, or claim in any legal
proceeding she is required to defend under this Article
VIII, the Indemnified Parties shall have the absolute
right, at Sellers' expense, to control the defense of
and to settle, in their sole discretion and without the
consent of Sellers, such litigation, action, suit,
demand, or
28
claim, but Sellers shall be entitled, at their own
expense, to participate in such litigation, action,
suit, demand, or claim, and if the Sellers elect to
participate in such litigation the Indemnified Parties
shall consult with the Sellers prior to settling such
litigation. The party controlling any defense pursuant
to this Section 8.2 shall deliver, or cause to be
delivered to the other party, copies of all
correspondence, pleadings, motions, briefs appeals or
other written statements relating to or submitted in
connection with the defense of any such litigation,
action, suit, demand, or claim, and timely notices of
any hearing or other court proceeding relating to such
litigation, action, suit, demand, or claim.
8.3 PROCEDURE FOR CLAIMS.
(a) ESCROW CLAIMS.If any claim for indemnification is
made by an Indemnified Party pursuant to this Article VIII prior to the
expiration of the Escrow Period, such Indemnified Party shall first apply to the
Escrow Agent provided in Section 2.5 of this Agreement for reimbursement of such
claim in accordance with the provisions of the Escrow Agreement; provided,
however, the Escrow Sum is not intended to be an exclusive remedy in the event
Buyer has indemnification claims hereunder which exceed such amount.
(b) OTHER CLAIMS. If pursuant to this Article
VIII any claim for indemnification is made by (i) an Indemnified Party after the
expiration of the Escrow Period, other than claims of third parties which are
governed by Section 8.2 hereof, or (ii) the Sellers, the Indemnified Party or
the Sellers, as the case may be (in either instance, the "CLAIMANT"), shall send
written notice to the other Person (by certified mail, return receipt requested
or by personal service as provided in Section 10.2 hereof) setting forth in
reasonable detail a description of the facts upon which the claim is based and a
reasonable estimate of the amount of the claim (a "CLAIM", with the notice
thereof referred to as the "CLAIM NOTICE"). The Person against whom the Claim is
brought (the RESPONDENT") shall have thirty (30) calendar days from receipt of
the Claim Notice to respond to such Claim. Such response shall be in writing and
shall (i) set forth in reasonable detail the Respondent's objection to the Claim
and the basis for such objection, or (ii) the efforts undertaken or to be
undertaken by the Respondent to cure the Claim. In the event the Respondent
fails to respond to the Claim Notice in the manner set forth above within such
30-day period, the Respondent shall be deemed to have conceded the Claim in
full. In the event the parties are unable to resolve the Claim within thirty
(30) calendar days from the date of receipt of the Claim Notice, the Claim shall
be submitted to arbitration in accordance with Section 10.9 below.
8.4 TAX AUDITS, ETC. In the event of an audit of a Tax
Return of the Company with respect to which an
Indemnified Party might be entitled to indemnification
pursuant to this Article VIII, (i) Buyer shall have the
right to control any and all such audits which may
result in the assessment of additional income Taxes
against the Company and any and all subsequent
proceedings in connection therewith, including appeals
(subject to the prior written consent of the Sellers,
which shall not unreasonably be withheld and subject to
the right of the Sellers to have their accountants and
attorneys consult with Buyer on such audits or
procedures at the Sellers' expense) or (ii) Sellers
shall have the right to control any and all such audits
which may result in the assessment of additional
non-income Taxes against the Company and any and all
subsequent proceedings in connection therewith,
including appeals (subject to the prior written consent
of Buyer, which shall not unreasonably be withheld and
subject to the right of the Buyer to have its
accountants and attorneys consult with Sellers on such
audits or procedures at Buyer's expense). The Sellers,
Buyer and the Company shall cooperate fully in all
matters relating to any such audit or other Tax
proceeding (including according access to all records
pertaining thereto), and will execute and file any and
all consents, powers of attorney, and other documents as
shall be reasonably necessary in connection therewith.
8.5 INDEMNIFICATION OF SELLERS. Buyer agrees to indemnify
and hold harmless the Sellers and the Company and each
officer, director, stockholder or affiliate of the
Company, from and against any Indemnifiable Costs
arising out of any misrepresentation, breach or default
by Buyer of or under any of the covenants, agreements or
other provisions of this Agreement or any agreement or
document executed in connection herewith.
29
8.6 LIMITS ON INDEMNIFICATION. All Indemnifiable Costs
sought by any party hereunder shall be net of any
insurance proceeds or tax benefits received by such
Person with respect to such claim (less the present
value of any premium increases occurring as a result of
such claim). Except for any claims for breach of the
representations, warranties and covenants of the Sellers
under Sections 3.1, 3.2, 3.3, 3.6, 3.14, 3.17 or Article
VI hereof (for which indemnification claims must be made
prior to the expiration of the applicable statute of
limitations or the expiration date set forth in such
Sections and if so made, such claims shall continue
after such date until finally resolved), the right to
make claims for indemnification provided under this
Article VIII shall expire on the second anniversary of
the Closing Date (except for claims made prior to such
date which shall continue after such date until finally
resolved). The Sellers shall not be obligated to pay any
amounts for indemnification under this Article VIII
until the aggregate indemnification obligation sought by
Buyer hereunder exceeds $50,000, whereupon the Sellers
shall be liable for all amounts for which
indemnification may be sought in excess of such $50,000
deductible; provided, however, that any Indemnifiable
Costs resulting from a breach by the Sellers of any of
her obligations under Section 5.6 hereof, shall not be
subject to the limitations set forth in this sentence,
but shall be reimbursable by the Sellers to the
Indemnified Parties on a dollar-for-dollar basis. Buyer
shall not be obligated to pay any amounts for
indemnification under this Article VIII until the
aggregate indemnification obligation sought by the
Sellers hereunder exceeds $50,000, whereupon Buyer shall
be liable for all amounts for which indemnification may
be sought. Notwithstanding the foregoing, in no event
shall the aggregate liability of the Sellers to Buyer or
Buyer to the Sellers exceed the Purchase Price except
for claims with respect to ownership or rights to
ownership of the Company's capital stock. However
nothing in this Article VIII shall limit Buyer or the
Sellers in exercising or securing any remedies provided
by applicable statutory or common law with respect to
the conduct of the Sellers or Buyer in connection with
this Agreement or in the amount of damages that it can
recover from the other in the event that Buyer
successfully proves intentional fraud or intentional
fraudulent conduct in connection with this Agreement.
All Indemnifiable Costs paid by the Sellers shall be
deemed to be a reduction of the Purchase Price paid by
Buyer under this Agreement.
ARTICLE IX
TERMINATION
9.1 TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
(a) by the mutual written consent of the Company, the
Sellers and Buyer;
(b) in writing by Buyer, if the Company or any of the
Sellers has breached in any material respect any
representation, warranty or covenant contained in
this Agreement, and in each case such breach has
not been remedied within ten (10) business days
after receipt of notice specifying such breach
and demanding such breach to be remedied; or
(c) in writing by the Sellers and the Company, if
Buyer has breached in any material respect any
representation, warranty or covenant contained in
this Agreement, and in each case such breach has
not been remedied within ten (10) business days
after receipt of notice specifying such breach
and demanding such breach to be remedied; or
(d) in writing by either the Company and the Sellers,
on the one hand, or Buyer, on the other hand, in
the event the Closing has not occurred on or
before March 31, 1999, unless the failure of such
consummation or the failure to satisfy such
condition, as applicable, shall be due to a
breach of any representation or
30
warranty made by the party or parties seeking to
terminate this Agreement or the failure of such
party or parties to comply in all material
respects with the agreements and covenants
contained herein to be performed by such party or
parties.
9.2 EFFECT OF TERMINATION. If the transactions contemplated
by this Agreement are terminated pursuant to Section 9.1
by notice in writing to the non-terminating party or
parties, this Agreement shall become void and of no
further force and effect, except that such termination
shall not relieve (i) any party from its covenants in
respect of confidentiality contained in Section 6.3 and
the second to last sentence of Section 5.5 and (ii) any
party then in breach of any representation, warranty,
covenant or agreement contained in this Agreement from
liability in respect of such breach.
ARTICLE X
MISCELLANEOUS
10.1 MODIFICATIONS; WAIVERS. Any amendment, change or
modification of this Agreement shall be void unless in
writing and signed by all parties hereto. No failure or
delay by any party hereto in exercising any right, power
or privilege hereunder (and no course of dealing between
or among any of the parties) shall operate as a waiver
of any such right, power or privilege. No waiver of any
default on any one occasion shall constitute a waiver of
any subsequent or other default. No single or partial
exercise of any such right, power or privilege shall
preclude the further or full exercise thereof.
10.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed to have been
duly given when personally delivered, or 48 hours after
deposited in the United States mail, first-class,
postage prepaid, or by facsimile addressed to the
respective parties hereto as follows:
Buyer:
Global Vacation Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
31
The Company or the Sellers:
c/o Friendly Holidays, Inc.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇-▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Certilman, Balin, ▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
Fax No.: (▇▇▇) ▇▇▇-▇▇▇▇
Tel No.: (▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as to any party hereto as such party shall designate by
like notice to the other parties hereto.
10.3 COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement may
be executed in several counterparts, each of which shall
be deemed an original but all of which counterparts
collectively shall constitute one instrument, and in
making proof of this Agreement, it shall never be
necessary to produce or account for more than one such
counterpart. Signatures of a party to this Agreement or
other documents executed in connection herewith which
are sent to the other parties by facsimile transmission
shall be binding as evidence of acceptance of the terms
hereof or thereof by such signatory party, with
originals to be circulated to the other parties in due
course.
10.4 EXPENSES. Each of the parties hereto will bear all
costs, charges and expenses incurred by such party in
connection with this Agreement and the consummation of
the transactions contemplated herein, provided, however,
that the Sellers shall bear all costs and expenses of
(i) any broker involved in this transaction on behalf of
the Sellers or the Company and (ii) all legal and other
expenses of the Sellers or the Company with respect to
this Agreement and the transactions contemplated hereby.
10.5 BINDING EFFECT; ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the Company,
Buyer and the Sellers, their heirs, representatives,
successors, and permitted assigns, in accordance with
the terms hereof. This Agreement shall not be assignable
by the Company or the Sellers without the prior written
consent of Buyer. This Agreement shall be assignable by
Buyer to either (a) any lender providing financing to
Buyer or its Affiliates or (b) an Affiliate of Buyer, in
each case without the prior written consent of Sellers,
but any such assignment shall not relieve Buyer of its
obligations hereunder. In addition, Buyer may assign any
or all of its rights and obligations hereunder, without
the consent of the Sellers following the Closing, in
connection with any sale of all or substantially all of
the assets, capital stock or business of Buyer or the
Company (whether effected by sale, exchange, merger,
consolidation or other transaction); provided, however,
that any sale of all or substantially all of the assets,
capital stock or business of the Company prior to
October 1, 1999 shall result in the guaranteed payment
of at least the Earned Payout Amount in accordance with
the terms and provisions set forth in Annex I hereto;
provided, further, that in no event shall Buyer be
relieved of its obligations under this Agreement after
such assignment without the express written consent of
the Sellers.
10.6 ENTIRE AND SOLE AGREEMENT. This Agreement and the other
schedules and agreements referred to herein, constitute
the entire agreement between the parties hereto and
supersede all prior agreements, representations,
warranties, statements, promises,
32
information, arrangements and understandings, whether
oral or written, express or implied, with respect to the
subject matter hereof.
10.7 GOVERNING LAW. This Agreement and its validity,
construction, enforcement, and interpretation shall be
governed by the substantive laws of the State of New
York, without giving effect to the principles of
conflicts of laws thereof.
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS.
Regardless of any investigation at any time made by or
on behalf of any party hereto or of any information any
party may have in respect thereof, all covenants,
agreements, representations, and warranties and the
related indemnities made hereunder or pursuant hereto or
in connection with the transactions contemplated hereby
shall survive the Closing for a period of two (2) years,
provided (a) the representations and warranties
contained in Sections 3.14 and 3.17 of this Agreement,
and the related indemnities, shall survive the Closing
until the expiration of the applicable statutes of
limitations for determining or contesting Tax
liabilities, (b) the representations, warranties and
covenants contained in Sections 3.1, 3.2, 3.3, 3.6 and
6.5(d) of this Agreement, and the related indemnities,
shall survive the Closing indefinitely and not expire,
(c) all covenants in Article VI which have an expiration
date contained therein shall expire as of such date, and
(d) all other covenants in this Agreement that do not
have an expiration date shall expire upon the expiration
of the applicable statutes of limitations.
10.9 DISPUTE RESOLUTION. ALL DISPUTES BETWEEN THE SELLERS AND
BUYER WITH RESPECT TO ANY PROVISION OF THIS AGREEMENT OR
THE RIGHTS AND OBLIGATIONS OF THE SELLERS AND BUYER
HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD AND DISPUTES ARISING UNDER SECTION 6.4
OF THIS AGREEMENT), WHICH CANNOT BE RESOLVED BY MUTUAL
AGREEMENT, WILL BE RESOLVED IN THE STATE OF NEW YORK
(NASSAU COUNTY) BY BINDING ARBITRATION IN ACCORDANCE
WITH THE RULES OF THE AMERICAN ARBITRATION ASSOCIATION
IN THE STATE OF NEW YORK (NASSAU COUNTY) OR BY ANY OTHER
MEANS OF ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED
UPON BY THE PARTIES.
10.10 INVALID PROVISIONS. If any provision of this Agreement
is deemed or held to be illegal, invalid or
unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the
extent it is deemed to be illegal, invalid or
unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided,
however, that if any provision of this Agreement is
deemed or held to be illegal, invalid or unenforceable
there shall be added hereto automatically a provision as
similar as possible to such illegal, invalid or
unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in
this Agreement ever be reformed or rewritten by any
judicial body of competent jurisdiction, such provision
as so reformed or rewritten shall be binding upon all
parties hereto.
10.11 PUBLIC ANNOUNCEMENTS. Neither the Sellers nor the
Company shall make any public announcement of the
transactions contemplated hereby without the prior
written consent of Buyer, which consent shall not be
unreasonably withheld. Except as required by law, the
Buyer shall not make any public announcement of the
transactions contemplated hereby without the prior
written consent of either ▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, which consent shall not be unreasonably
withheld.
10.12 REMEDIES CUMULATIVE. Except as otherwise provided
herein, the remedies of the parties under this Agreement
are cumulative and shall not exclude any other
non-monetary remedies to which any party may be lawfully
entitled.
10.13 THIRD PARTIES. Except as specifically set forth or
referred to herein, nothing herein expressed or implied
is intended or shall be construed to confer upon or give
to any Person, other than the parties hereto and their
permitted successors or assigns, any rights
33
or remedies under or by reason of this Agreement.
10.14 STRICT CONSTRUCTION. The parties hereto have
participated jointly in the negotiation and drafting of
this Agreement. In the event of any ambiguity or
question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by
the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by
virtue of authorship of any of the provisions of this
Agreement.
34
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be duly executed as of the date and year first above
written.
BUYER:
GLOBAL VACATION GROUP, INC.
By:
--------------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Executive Vice President and Chief Financial
Officer
THE COMPANY:
FRIENDLY HOLIDAYS, INC.
By:
------------------------------------
▇▇▇▇ ▇▇▇▇▇▇
President
SELLERS:
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
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