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TYPE>EX 10.42
NOTE PURCHASE AGREEMENT
DATED
JUNE 20, 2000
BETWEEN
GV INVESTMENT LLC
AND
GLOBAL VACATION GROUP, INC.
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NOTE PURCHASE AGREEMENT
This is an agreement dated June 20, 2000 between GV Investment LLC (the
"Buyer"), a Delaware limited liability company, and Global Vacation Group, Inc.
(the "Company"), a New York corporation, relating to the purchase by the Buyer
from the Company of $27,500,000 principal amount of the Company's 9% Convertible
Subordinated Notes due 2007 ("Notes"), which agreement is as follows:
(2)
PURCHASE OF NOTES
1.1 Purchase of Notes. At the Closing described in Paragraph 2.1, the
Buyer will purchase the Notes from the Company and the Company will sell the
Notes to the Buyer.
1.2 Purchase Price. The purchase price to be paid by the Buyer for the
Notes will be $27,500,000.
(3)
THE CLOSING
1.3 Time and Place of Closing. The closing (the "Closing") of the
purchase of the Notes will take place at the offices of ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, at 10:00 a.m., New York City
time, on the day (the "Closing Date") which is the last to occur of (i) June 20,
2000, and (ii) the business day after the day on which all the conditions in
Article V (other than conditions which it is contemplated will be satisfied at
the Closing) have been satisfied or waived.
1.4 Company's Actions at Closing. At the Closing, the Company will
deliver the following to the Buyer:
(a) The Notes, which will be substantially in the form of Exhibit 2.2-A.
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(b) A copy, executed by the Company, of Amendment No. 1 to a Registration
Rights Agreement (the "Registration Agreement") substantially in the
form of Exhibit 2.2-B.
(c) A copy, executed by ▇▇▇▇▇▇ Equity Investors III, L.P. ("▇▇▇▇▇▇") of a
Shareholders Agreement (the "Shareholders Agreement") substantially in
the form of Exhibit 2.2-C.
1.5 Buyer's Actions at Closing. At the Closing, the Buyer will deliver
the following to the Company:
(a) A certified or bank cashier's check, or evidence of a wire transfer of
immediately available funds to an account or accounts specified at
least 24 hours before the Closing by the Company, in an amount equal to
the purchase price of the Notes specified in Paragraph 1.2.
(b) A letter acknowledging that the Buyer will be acquiring the Notes for
investment, and not with a view to their resale or distribution.
(c) A copy, executed by the Buyer, of the Registration Agreement.
(d) A copy, executed by the Buyer, of the Stockholders Agreement.
(4)
REPRESENTATIONS AND WARRANTIES
1.6 Company's Representations and Warranties. The Company represents
and warrants to the Buyer as follows:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of New York.
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(b) The Company has all corporate power and authority necessary to enable
it to enter into this Agreement and carry out the transactions
contemplated by this Agreement. All corporate actions necessary to
authorize the Company to enter into this Agreement and carry out the
transactions contemplated by it have been taken, except that under the
rules of the New York Stock Exchange, the Company's shareholders are
required to approve the issuance of the shares of common stock ("Common
Stock"), par value $.01 per share of the Company upon conversion of the
Notes (the "Conversion Shares"). This Agreement has been duly executed
by the Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms.
(c) If the consents described on Exhibit 3.1-C are obtained and the
Company's stockholders approve the issuance of the Conversion Shares,
neither the execution or delivery of this Agreement or of any document
to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document
to be delivered in accordance with this Agreement will violate, result
in a breach of, or constitute a default (or an event which, with notice
or lapse of time or both would constitute a default) under, the
Certificate of Incorporation or by-laws of the Company, any agreement
or instrument to which the Company or any subsidiary of the Company is
a party or by which any of them is bound, any law, or any order, rule
or regulation of any court or governmental agency or other regulatory
organization having jurisdiction over the Company or any of its
subsidiaries, except that issuance of Conversion Shares upon conversion
of Notes may require filings and expiration or termination of waiting
periods, under the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇
(▇▇▇ "▇▇▇ ▇▇▇").
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(d) When Notes are issued and delivered to the Buyer as contemplated by
this Agreement, the Notes will evidence valid and binding obligations
of the Company, and will be enforceable against the Company in
accordance with their terms. When shares of common stock, par value
$.01 per share, of the Company ("Common Stock") are issued upon
conversion of Notes, those shares will be duly authorized and issued,
fully paid and non-assessable, and will not be subject to, or have been
issued in violation of, pre-emptive rights of any shareholders of the
Company or any other persons.
(e) When the Registration Agreement is delivered by the Company at the
Closing, it will be a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms. When the
Shareholders Agreement is delivered by the Company at the Closing, it
will be a valid and binding agreement of ▇▇▇▇▇▇, enforceable against
▇▇▇▇▇▇ in accordance with its terms.
(f) The Company and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
state of its incorporation. Copies of the Certificate of Incorporation
and all amendments, and of the by-laws, of the Company, as currently in
effect, are attached as Exhibit 3.1-F. The Company and each of its
subsidiaries is qualified to do business as a foreign corporation in
each state in which it is required to be qualified, except states in
which the failure to qualify, in the aggregate, would not have a
Material Adverse Effect upon the Company. As used in this Agreement,
the term "Material Adverse Effect" upon the Company means a material
adverse effect upon (i) the consolidated financial position of the
Company and its subsidiaries, or (ii) the consolidated results of
operations of the Company and its subsidiaries compared
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with the consolidated results of their operations during the same
period of the prior year.
(g) The only authorized stock of the Company is 60,000,000 shares of Common
Stock and 6,000,000 shares of preferred stock, par value $.01 per
share. At the date of this Agreement, the only outstanding stock of the
Company is not more than 14,400,000 shares of Common Stock. All those
shares have been duly authorized and issued and are fully paid and
non-assessable. Except as shown on Exhibit 3.1-G, the Company has not
issued any options, warrants or convertible or exchangeable securities,
and is not a party to any other agreements, which require, or upon the
passage of time, the payment of money or the occurrence of any other
event may require, the Company to issue or sell any of its stock.
(h) (i) Each of the corporations and other entities of which the Company
owns directly or indirectly 50% or more of the equity (each corporation
or other entity of which a company owns directly or indirectly 50% or
more of the equity being a "subsidiary" of that company) has been duly
organized, and is validly existing and in good standing under the laws
of its state of incorporation, (ii) all the shares of stock of each of
the Company's subsidiaries which are owned by the Company or any of its
subsidiaries are duly authorized, validly issued, fully paid and
non-assessable and are not subject to any preemptive rights, and (iii)
except as shown on Exhibit 3.1-H, neither the Company nor any of its
subsidiaries has issued any options, warrants or convertible or
exchangeable securities, or is a party to any other agreements, which
require, or upon the passage of time, the payment of money or the
occurrence of any other event may require, the Company or any
subsidiary to issue or sell any stock or other equity interests in any
of the Company's
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subsidiaries and, there are no registration covenants or transfer or
voting restrictions with respect to outstanding securities of any of
the Company's subsidiaries.
(i) Since January 1, 1997, the Company has filed with the SEC all forms,
statements, reports and documents it has been required to file under
the Securities Act of 1933, as amended, the Securities Exchange Act of
1934, as amended, or the rules under either of them.
(j) The Company's Annual Report on Form 10-K for the year ended December
31, 1999 (the "Company 10-K") and its Report on Form 10-Q for the
period ended March 31, 2000 (the "March 10-Q") which were filed with
the SEC, including the documents incorporated by reference in each of
them, each contained all the information required to be included in it
and, when it was filed, did not contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements made in it, in light of the circumstances under
which they were made, not misleading. Without limiting what is said in
the preceding sentence, the financial statements included in the
Company 10-K all were prepared, and the financial information included
in the March 10-Q was derived from financial statements which were
prepared, in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except
that financial information included in the March 10-Q does not contain
notes and is subject to normal year end adjustments) and present fairly
the consolidated financial condition and the consolidated results of
operations of the Company and its subsidiaries at the dates, and for
the periods, to which they relate. The Company has not filed any
reports with the Securities and Exchange
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Commission with regard to any period which ended, or any event which
occurred, after March 31, 2000.
(k) Since March 31, 2000, (i) the Company and its subsidiaries have
conducted their businesses in the ordinary course and in the same
manner in which they were conducted prior to March 31, 2000, and (ii)
except as set forth on Exhibit 3.2-K, nothing has occurred which,
individually or in aggregate, has had a Material Adverse Effect upon
the Company.
(l) The assets of the Company and its subsidiaries constitute, in the
aggregate, all the material assets (including, but not limited to,
intellectual property rights) used in or necessary to the conduct of
their businesses as they currently are being conducted.
(m) The Company and it subsidiaries have at all times complied, and
currently are complying, with all applicable Federal, state, local and
foreign laws and regulations, except failures to comply which would not
reasonably be expected, in the aggregate, to have a Material Averse
Effect upon the Company.
(n) The Company and its subsidiaries have all licenses and permits which
are required at the date of this Agreement to enable them to conduct
their businesses as they currently are being conducted, except licenses
or permits the lack of which would not reasonably be expected, in the
aggregate, to have a Material Adverse Effect upon the Company.
(o) Except as shown on Exhibit 3.1-O, the Company and each of its
subsidiaries has filed when due all Tax Returns which it has been
required to file and has paid all Taxes shown on those returns to be
due. Those Tax Returns accurately reflect all
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Taxes required to have been paid, except to the extent of items which
may be disputed by applicable taxing authorities but for which there is
substantial authority to support the position taken by the Company or
the subsidiary and which have been adequately reserved against in
accordance with GAAP on the balance sheet at March 31, 2000 included in
the March 10-Q and except as would not, in the aggregate, have a
Material Adverse Effect upon the Company. Except as shown on Exhibit
3.1-O, (i) no extension of time given by the Company or any of its
subsidiaries for completion of the audit of any of its Tax Returns is
in effect, (ii) no tax lien has been filed by any taxing authority
against the Company or any of its subsidiaries or any of their assets,
(iii) no Federal, state or local audits or other administrative
proceedings or court proceedings with regard to Taxes are presently
pending with regard to the Company or any of its subsidiaries, (iv)
neither the Company nor any subsidiary is a party to any agreement
providing for the allocation or sharing of Taxes, (v) neither the
Company nor any subsidiary has participated in or cooperated with an
international boycott as that term is used in Section 999 of the
Internal Revenue Code of 1986, as amended (the "Code") and (vi) neither
the Company nor any subsidiary has filed a consent pursuant to Section
341(f) of the Code or agreed to have Section 341(f)(2) of the Code
apply to any disposition of a Subsection (f) asset (as that term is
defined in Section 341(f)(4) of the Code) owned by the Company or any
subsidiary. For the purposes of this Agreement, the term "Taxes" means
all taxes (including, but not limited to, withholding taxes),
assessments, fees, levies and other governmental charges, and any
related interest or penalties. For the purposes of this Agreement, the
term "Tax Return" means any report, return or other information
required to be supplied to a taxing authority in connection with Taxes.
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(p) (i) The Company and its subsidiaries have all material environmental
permits which are necessary to enable them to conduct their businesses
as they currently are being conducted without violating any
Environmental Laws, (ii) the Company has not received any notice of
material noncompliance or material liability under any Environmental
Law, (iii) neither the Company nor any subsidiary has performed any
acts, including but not limited to releasing, storing or disposing of
hazardous materials, there is no condition on any property owned or
leased by the Company or a subsidiary, and there was no condition on
any property formerly owned or leased by the Company or a subsidiary
while the Company or a subsidiary owned or leased that property, that
could result in material liability by the Company or a subsidiary under
any Environmental Law and (iv) neither the Company nor any subsidiary
is subject to any order of court or governmental agency requiring the
Company or any subsidiary to take, or refrain from taking, any actions
in order to comply with any Environmental Law and no action or
proceeding seeking such an order is pending or, insofar as any officer
of the Company is aware, threatened against the Company. As used in
this Agreement, the term "Environmental Law" means any Federal, state
or local law, rule, regulation, guideline or other legally enforceable
requirement of a governmental authority relating to protection of the
environment or to environmental conditions which affect human health or
safety.
(q) Failures of systems or equipment used by the Company to be Y2K
Compliant will not result in liabilities or costs to the Company after
March 31, 2000 which, in aggregate, will have a Material Adverse Effect
upon the Company. As used in this Agreement, systems and equipment were
Y2K compliant if they were capable of recognizing that dates in the
year 2000 were subsequent to December 31,
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1999 and were otherwise able to operate without being adversely
affected by the change from the twentieth to the twenty-first century.
(r) Except as shown on Exhibit 3.1-R, the Company has no agreements, and
does not engage in any business, with ▇▇▇▇▇▇ or with any entity
controlled or advised by it, or with any other entity controlled by any
officer or director of the Company (other than the Company or its
subsidiaries).
(s) The Company's Board of Directors has approved the purchase of the Notes
by the Buyer, the acquisition of some or all of the Notes by members of
the Buyer if the Buyer distributes Notes to its members, the
acquisition of some or all of the Conversion Shares upon conversion of
Notes by the Buyer or by persons who received Notes as distributions by
the Buyer to its members, and the acquisition of some or all of the
Conversion Shares by members of the Buyer if the Buyer distributes
Conversion Shares to its members. Because of that, the acquisition of
Notes or Conversion Shares by the Buyer or by members of the Buyer will
not cause the Buyer or any of its members to be subject to the
prohibitions of Section 912(b) or (c) of the New York Business
Corporation Law.
1.7 Buyer's Representations and Warranties. The Buyer represents and
warrants to the Company as follows:
(a) The Buyer is a limited liability company duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) The Buyer has all power and authority necessary to enable it to enter
into this Agreement and carry out the transactions contemplated by this
Agreement. All actions necessary to authorize the Buyer to enter into
this Agreement and carry
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out the transactions contemplated by it have been taken. This Agreement
has been duly executed by the Buyer and is a valid and binding
agreement of the Buyer, enforceable against the Buyer in accordance
with its terms.
(c) Neither the execution and delivery of this Agreement or of any document
to be delivered in accordance with this Agreement nor the consummation
of the transactions contemplated by this Agreement or by any document
to be delivered in accordance with this Agreement will violate, result
in a breach of, or constitute a default (or an event which, with notice
or lapse of time or both, would constitute a default) under, the
Certificate of Incorporation or by-laws of the Buyer, any agreement or
instrument to which the Buyer is a party or by which it is bound, any
law, or any order, rule or regulation of any court or governmental
agency or other regulatory organization having jurisdiction over the
Buyer.
(d) No governmental filings, authorizations, approvals or consents are
required to permit the Buyer to fulfill all its obligations under this
Agreement.
(e) The Buyer has, or has access through commitments from its members and
from financial institutions, to, all the funds it will require to
purchase the Notes.
1.8 Remedy for Breaches of Representations and Warranties. The
indemnification in Paragraphs 9.1 and 9.2 will be the only remedies available to
the Buyer or the Company for breaches of representations or warranties contained
in Paragraph 3.1 or 3.2. Any claim for that indemnification must be made as
provided in Paragraph 9.3.
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(5)
ACTIONS PRIOR TO THE CLOSING
1.9 Activities Until Closing Date. From the date of this Agreement to
the Closing Date, the Company will ensure that the Company and its subsidiaries
will, except with the written consent of the Buyer:
(a) Operate their respective businesses in the ordinary course and in a
manner consistent with the manner in which they are being operated at
the date of this Agreement.
(b) Take all reasonable steps available to them to maintain the goodwill of
their businesses and, except as otherwise requested by the Buyer, the
continued employment of their executives and other employees.
(c) At their expense, maintain all their assets in good repair and
condition, except to the extent of reasonable wear and use and damage
by fire or other unavoidable casualty.
(d) Not make any borrowings other than borrowings in the ordinary course of
business under working capital lines (including the Company's Restated
Credit Agreement with lenders for which Bank of New York is the
administrative agent) which are disclosed on the consolidated balance
sheet at March 31, 2000 included in March 10-Q.
(e) Not enter into any contractual commitments involving capital
expenditures, loans or advances, and not voluntarily incur any
contingent liabilities, except in each case in the ordinary course of
business.
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(f) Not pay any dividends, or make any other distributions (other than to
the Company or its wholly owned subsidiaries).
(g) Not make any loans or advances (other than advances for travel and
other normal business expenses) to stockholders, directors, officers or
employees.
(h) Maintain their books of account and records in the usual manner, in
accordance with GAAP applied on a consistent basis, subject to normal
year-end adjustments and accruals.
(i) Comply in all material respects with all applicable laws and
regulations of governmental agencies.
(j) Not sell, dispose of or encumber any property or assets, or engage in
any activities or transactions, except in each case in the ordinary
course of business.
1.10 Company's Efforts to Fulfill Conditions. The Company will use its
best efforts to cause all the conditions set forth in Paragraph 5.1 to be
fulfilled prior to or at the Closing.
1.11 Buyer's Efforts to Fulfill Conditions. The Buyer will use its best
efforts to cause all the conditions contained in Paragraph 5.2 to be fulfilled
prior to or at the Closing.
(6)
CONDITIONS PRECEDENT TO CLOSING
1.12 Conditions to Buyer's Obligations. The obligations of the Buyer at
the Closing are subject to satisfaction of the following conditions (any or all
of which may be waived by the Buyer):
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(a) The representations and warranties of the Company contained in this
Agreement will, except as contemplated by this Agreement, be true and
correct in all material respects (except that representations and
warranties which are qualified as to materiality or as to absence of
Material Adverse Effect upon the Company will be true and correct in
all respects) at the Closing Date with the same effect as though made
on that date (unless a representation and warranty refers to a specific
earlier date, in which case it will have been true and correct in all
material respects at that earlier date), and the Company will have
delivered to the Buyer a certificate dated that date and signed by the
President or a Vice President of the Company to that effect.
(b) The Company will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled prior
to or at the Closing.
(c) No order will have been entered by any court or governmental authority
and be in force which invalidates this Agreement or restrains the Buyer
from completing the transactions which are the subject of this
Agreement and no action will be pending against the Buyer or the
Company relating to the transactions which are the subject of this
Agreement which presents a reasonable likelihood of resulting in an
award of damages against the Buyer or the Company which would be
material to the Buyer and its subsidiaries taken as a whole, or to the
Company and its subsidiaries taken as a whole.
(d) The consents described in Exhibit 3.1-C will have been obtained.
(e) The Buyer will have received an opinion from ▇▇▇▇▇ & ▇▇▇▇▇▇▇, counsel
to the Company, substantially in the form of Exhibit 5.1-E
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(f) The Closing Date will be not later than July 31, 2000.
1.13 Conditions to Company's Obligations. The obligations of the
Company at the Closing are subject to the following conditions (any or all of
which may be waived by the Company):
(a) The representations and warranties of the Buyer contained in this
Agreement will, except as contemplated by this Agreement, be true and
correct in all material respects (except that representations and
warranties which are qualified as to materiality or as to absence of
Material Adverse Effect will be true and correct in all respects) at
the Closing Date with the same effect as though made on that date, and
the Buyer will have delivered to the Company a certificate dated that
date and signed by the President or a Vice President of the Buyer to
that effect.
(b) The Buyer will have fulfilled in all material respects all its
obligations under this Agreement required to have been fulfilled prior
to or at the Closing.
(c) No order will have been entered by any court or governmental authority
and be in force which invalidates this Agreement or restrains the
Company from completing the transactions which are the subject of this
Agreement and no action will be pending against the Company relating to
the transactions which are the subject of this Agreement which presents
a reasonable likelihood of resulting in an award of damages against the
Company which would be material to the Company and its subsidiaries
taken as a whole.
(d) The Company will have received an opinion from ▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ &
▇▇▇▇▇ LLP, counsel to the Buyer, substantially in the form of Exhibit
5.2-D.
(e) The Closing Date will be not later than July 31, 2000.
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(7)
SHAREHOLDERS MEETING
1.14 Proxy Statement and Shareholders Meeting. (a) The Company will
cause a meeting of its shareholders (the "Shareholders Meeting") to be held
within one year after the date of this Agreement at which the Company's
shareholders will be asked to vote upon a proposal to approve the issuance of
shares of the Conversion Shares upon conversion of the Notes. The Company will
(i) cause a proxy statement (the "Proxy Statement") relating to the Shareholders
Meeting to be filed with the SEC not less than 60 days before the scheduled date
of the Shareholders Meeting, (ii) use its best efforts to cause review of the
Proxy Statement by the SEC staff to be completed as promptly as practicable,
(iii) describe in the Proxy Statement the recommendation of its Board of
Directors that the shareholders approve the issuance of Conversion Shares upon
conversion of the Notes (unless the Company's Board of Directors, after
consultation with its counsel about the nature of its fiduciary duties,
determines that it is required by its fiduciary duties to state that it no
longer recommends that the shareholders vote in favor of the issuance of those
shares), (iv) as promptly as practicable, and in any event within 10 days after
the Company is informed that the SEC staff has no further comments about the
Proxy Statement, cause the Proxy Statement to be mailed to its shareholders and
(v) cause the Shareholders Meeting to be held not later than the scheduled date
of the Shareholders Meeting or such later day as is the 20th business day after
the day on which the Proxy Statement is mailed.
(b) The Buyer will supply to the Company all information in the Buyer's
possession which the Company is required to include in the Proxy
Statement and in all other respects cooperate with the Company in its
efforts to file the Proxy Statement with the SEC and cause review of
the Proxy Statement to be completed as promptly as practicable after it
is filed with the SEC.
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(8)
AGREEMENTS REGARDING SHARE PURCHASES
1.15 Limit on Share Purchases. Until the third anniversary of the date
of this Agreement, the Buyer and its Affiliates (as defined in the Shareholders
Agreement) will not, without the prior approval of the Company's Board of
Directors, acting alone or as part of a group (as that term is defined for
purposes of Section 13(d) of the Securities Exchange Act of 1934, as amended,
(i) acquire or offer or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities or securities convertible into voting
securities of the Company, (ii) propose to enter into, directly or indirectly,
any merger or business combination involving the Company or its assets, or (iii)
assist, advise or encourage (including by knowingly providing or arranging
financing for that purpose), or participate with, any other person in doing any
of the foregoing, except that (i) the Buyer and its Affiliates may purchase up
to 1,000,000 shares of Common Stock, (ii) the Buyer and its Affiliates may
acquire voting stock of the Company upon conversion of Notes, and (iii) the
Buyer and its Affiliates may acquire voting stock of the Company through
exercise of options granted in accordance with Paragraph 7.2
Right of First Refusal. While more than 10% of the aggregate principal amount
of the Notes are outstanding, the Company will not sell any Common
Stock for a sale price which is less than the then conversion price of
the Notes, unless the Company grants the holders of the Notes the
option to purchase a portion of the shares it proposes to sell equal to
the fraction of which (i) the numerator is the number of shares of
Common Stock owned by holders of Notes or which holders of Notes have
the right to purchase by converting Notes, and (ii) the denominator is
the total number of outstanding shares of Common Stock (giving effect
to the issuance of all the shares which are issuable on conversion of
Notes and to the issuance of all the shares which are the subject of
options granted under the
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Company's stock option plan as it is in effect on the date of this
Agreement). Notwithstanding the foregoing, the provisions of this
Section 7.2 shall not apply to (i) any issuance of any Common Stock or
options or other rights to purchase Common Stock of the Company to
officers, directors or employees of the Company and/or its subsidiaries
pursuant to any stock or option plans or grants approved by the
Company's board of directors; (ii) any issuance of warrants to purchase
Common Stock (and the shares of Common Stock exercisable pursuant to
such warrants) in connection with any financing transaction; (iii)
shares of Common Stock issued pursuant to any public offering
registered under the Securities Act of 1933, as amended; (iv) shares of
Common Stock issued in connection with any stock split or stock
dividend of the Company; and (v) shares of Common Stock issued in
connection with any acquisition by the Company approved by at least one
of the directors nominated by the holders of the Notes. The Company
will give the holders of the Notes a notice of any option granted in
accordance with this Paragraph, which will state (v) the total number
of shares the Company proposes to sell, (w) the number of those shares
which will be subject to the option granted to the holder of Notes, (x)
the per share exercise price of the option, (y) the day on which the
option will expire (which will be not less than 30 days after the day
on which the notice is given) and (z) the day on which the purchase of
the shares will take place if the option is exercised. If there is more
than one holder of Notes, the option will be granted to the holders of
the Notes pro rata to the principal amounts held by each of them. The
Company may, within six months after an option granted in accordance
with this Paragraph expires, sell all the shares described in the
notice of that option which are not purchased by exercise of the option
(including both shares which were not the subject of the option and
shares as to which the option was not
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exercised) on terms which are not materially more favorable to the
purchaser than the terms described in the notice of the grant of the
option.
1.16 Right to Purchase Notes. The Buyer will not sell any Notes for a
sale price which is equal to or less than the principal amount of the Notes
being sold, together with accrued but unpaid interest, unless the Buyer grants
the Company the option to purchase all of such Notes to be sold at the purchase
price for which the Buyer proposes to sell the Notes. Notwithstanding the
foregoing, the provisions of this Section 7.3 shall not apply to any transfers
by Buyer to any of its Affiliates (as defined in the Shareholders Agreement) if
the Affiliate agrees to be bound by the provisions of this Paragraph to the same
extent as though it were the Buyer. The Buyer will give the Company a notice of
any option granted in accordance with this Paragraph, which will state (v) the
aggregate principal amount of Notes which the Buyer proposes to sell, (x) the
purchase price of the Notes to be sold, (y) the day on which the option will
expire (which will be not less than 30 days after the day on which the notice is
given) and (z) the day on which the sale of the Notes will take place if the
option is exercised. The Buyer may, within six months after an option granted in
accordance with this Paragraph expires, sell all the Notes described in the
notice of that option which are not purchased by exercise of the option on terms
which are not materially more favorable to the purchaser than the terms
described in the notice of the grant of the option.
(9)
TERMINATION
1.17 Right to Terminate. This Agreement may be terminated at any time
prior to the Closing:
(a) By mutual consent of the Buyer and the Company.
21
(b) By either the Buyer or the Company if, without fault of the terminating
party, the Closing does not occur on or before July 31, 2000.
(c) By the Buyer if (i) it is determined that any of the representations or
warranties of the Company contained in this Agreement was not complete
and accurate in all material respects on the date of this Agreement or
(ii) any of the conditions in Paragraph 5.1 is not satisfied or waived
by the Buyer prior to or on the Closing Date.
(d) By the Company if (i) it is determined that any of the representations
or warranties of the Buyer contained in this Agreement was not complete
and accurate in all material respects on the date of this Agreement or
(ii) any of the conditions in Paragraph 5.2 is not satisfied or waived
by the Company prior to or on the Closing Date.
1.18 Effect of Termination. If this Agreement is terminated pursuant to
Paragraph 8.1, after this Agreement is terminated, neither party will have any
further rights or obligations under this Agreement. Nothing contained in this
Paragraph will, however, relieve either party of liability for any breach of
this Agreement which occurs before this Agreement is terminated.
(10)
INDEMNIFICATION
1.19 Indemnification Against Loss Due to Inaccuracies in Company's
Representations and Warranties. The Company indemnifies the Buyer against, and
agrees to hold the Buyer harmless from, all losses, liabilities and expenses
(including, but not limited to, reasonable fees and expenses of counsel and
expenses of investigation) incurred directly or indirectly because (i) any
matter which is the subject of
22
a representation and warranty contained in Paragraph 3.1 is not as represented
and warranted, or (ii) the Company fails to fulfill in any respect any of its
obligations under this Agreement or under any document delivered in accordance
with this Agreement which is required to be fulfilled after the Closing.
1.20 Indemnification Against Loss Due to Inaccuracies in Buyer's
Representations and Warranties. The Buyer indemnifies the Company against, and
agrees to hold the Company harmless from, all losses, liabilities and expenses
(including, but not limited to, reasonable fees and expenses of counsel and
expenses of investigation) incurred directly or indirectly because (i) any
matter which is the subject of a representation and warranty contained in
Paragraph 3.2 is not as represented and warranted, or (ii) the Buyer fails to
fulfill in any respect any of its obligations under this Agreement or under any
document delivered in accordance with this Agreement which is required to be
fulfilled after the Closing.
1.21 Limitation on Company's Liability; Claims Net of Insurance
Proceeds and Tax Benefits. The Company will not be liable under Paragraph 9.1
because any facts are not as represented and warranted in Paragraph 3.1, other
than in Paragraph 3.1(d) or 3.1(g), (i) until the Buyer has suffered aggregate
losses because facts were not as represented and warranted in excess of $400,000
(at which point the Company will be obligated to indemnify the Buyer only for
aggregate losses above the $400,000 threshold) or (ii) to pay the Buyer a total
of more than $5,000,000 for losses suffered by the Buyer in excess of the
$400,000 threshold because facts were not as represented and warranted (after
which point the Company will have no obligation to indemnify the Buyer from and
against any further such losses). Any losses which are the subject of
indemnification claims made under Paragraph 9.1 or 9.2 will, in each case, be
net of any insurance proceeds received, or tax benefits accrued, by the Buyer or
the Company, as
23
the case may be, as a result of the incident that is the subject of the
indemnification claim.
1.22 Indemnification Sole Remedy. The indemnification in Paragraph 9.1
or 9.2, as the case may be, will be the sole remedy of the Buyer or the Company
because any matter which is the subject of a representation or warranty
contained in Paragraph 3.1 or 3.2 is not as represented and warranted. Any claim
for that indemnification, other than a claim for indemnification with regard to
Paragraph 3.1(d), must be made not later than February 15, 2002 in a written
notification to the party from which indemnification is sought which describes
in reasonable detail the claim and the facts on which it is based. A claim for
indemnification with regard to Paragraph 3.1(d) may be made at any time in a
written notification containing the information described in the preceding
sentence. Neither the Company nor the Buyer will have any liability because any
matter which is the subject of a representation and warranty contained in
Paragraph 3.1 or 3.2 is not as represented or warranted unless it is described
in a notification given as provided in this Paragraph.
(11)
ABSENCE OF BROKERS
1.23 Representations and Warranties Regarding Brokers and Others. The
Buyer and the Company each represents and warrants to the other of them that
except as shown on Exhibit 10.1(1) as to the Company or Exhibit 10.1(2) as to
the Buyer, nobody acted as a broker, a finder or in any similar capacity on its
behalf in connection with the transactions which are the subject of this
Agreement. The Company will pay the fees of anybody named on Exhibit 10.1(1) and
the Buyer will pay the fees of anybody named on Exhibit 10.1(2) The Buyer and
the Company each indemnifies the other of them against, and agrees to hold the
other of them harmless from, all losses, liabilities
24
and expenses (including, but not limited to, reasonable fees and expenses of
counsel and costs of investigation) incurred because of any claim by anyone for
compensation as a broker, a finder or in any similar capacity by reason of
services allegedly rendered to the indemnifying party in connection with the
transactions which are the subject of this Agreement.
(12)
GENERAL
1.24 Expenses. The Company will reimburse the Buyer for all the Buyer's
reasonable expenses in connection with the transactions which are the subject of
this Agreement, including legal fees and disbursements.
1.25 Access to Properties, Books and Records. From the date of this
Agreement until the Closing Date, the Company will cause the Company and each of
its subsidiaries to give representatives of the Buyer or of anyone from whom the
Buyer is seeking financing full access during normal business hours to all of
their respective properties, books and records. The Buyer will, and will cause
its representatives to, hold all information it receives as a result of its
access to the properties, books and records of the Company or its subsidiaries
in confidence, except to the extent that information (i) is or becomes available
to the public (other than through a breach of this Agreement), (ii) becomes
available to the Buyer from a third party which, insofar as the Buyer is aware,
is not under an obligation to the Company or to a subsidiary to keep the
information confidential, (iii) was known to the Buyer before it was made
available to the Buyer or its representative by the Company or a subsidiary, or
(iv) otherwise is independently developed by the Buyer. If this Agreement is
terminated prior to the Closing, the Buyer will, at the Company's request,
deliver to the Company all documents and other material obtained by the Buyer
from the Company, or a subsidiary in connection with the
25
transactions which are the subject of this Agreement or evidence that that
material has been destroyed by the Buyer.
1.26 Press Releases. The Buyer and the Company will consult with each
other before issuing any press releases or otherwise making any public
statements with respect to this Agreement, except that nothing in this Paragraph
will prevent either party from making any statement when and as required by law
or by the rules of any securities exchange or securities quotation system on
which securities of that party or an affiliate are listed or quoted.
1.27 Entire Agreement. This Agreement and the documents to be delivered
in accordance with this Agreement (including the Notes) contain the entire
agreement between the Buyer and the Company relating to the transactions which
are the subject of this Agreement and those other documents. All prior
negotiations, understandings and agreements between the Buyer and the Company
are superseded by this Agreement and those other documents, and there are no
representations, warranties, understandings or agreements concerning the
transactions which are the subject of this Agreement or those other documents
other than those expressly set forth in this Agreement or those other documents.
1.28 Effect of Disclosures. Any information disclosed by a party in
connection with any representation or warranty contained in this Agreement
(including exhibits to this Agreement) will be treated as having been disclosed
in connection with each representation and warranty made by that party in this
Agreement.
1.29 Captions. The captions of the articles and paragraphs of this
Agreement are for reference only, and do not affect the meaning or
interpretation of this Agreement.
26
1.30 Assignments. Neither this Agreement nor any right of any party
under it may be assigned, except that the Buyer may assign its rights and
obligations under this Agreement to an entity which is wholly owned by the Buyer
or by persons or entities which own all the outstanding stock of the Buyer, if
the Buyer unconditionally guarantees that the corporation to which the Buyer's
rights and obligations are assigned will perform fully all the obligations of
the Buyer under this Agreement.
1.31 Notices and Other Communications. Any notice or other
communication under this Agreement must be in writing and will be deemed given
when delivered in person or sent by facsimile (with proof of receipt at the
number to which it is required to be sent), or on the third business day after
the day on which mailed by registered mail, return receipt requested, from
within the United States of America, to the following addresses (or such other
address as may be specified after the date of this Agreement by the party to
which the notice or communication is sent):
If to the Company:
Global Vacation Group, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: President
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇ & ▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile No.: ▇▇▇-▇▇▇-▇▇▇▇
If to the Buyer:
GV Investment LLC
c/o Three Cities Research, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇
27
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
1.32 Governing Law. This Agreement will be governed by, and construed
under, the substantive laws of the State of New York.
1.33 Amendments. This Agreement may be amended only by a document in
writing signed by both the Buyer and the Company.
1.34 Counterparts. This Agreement may be executed in two or more
counterparts, some of which may be signed by fewer than all the parties or may
contain facsimile copies of pages signed by some of the parties. Each of those
counterparts will be deemed to be an original copy of this Agreement, but all of
them together will constitute one and the same agreement.
28
IN WITNESS WHEREOF, the Buyer and the Company have executed this Agreement,
intending to be legally bound by it, on the day shown on the first page of this
Agreement.
GV INVESTMENT LLC
By:
--------------------------------------------
Title:
GLOBAL VACATION GROUP, INC.
By:
--------------------------------------------
Title:
29
ARTICLE I PURCHASE OF NOTES 1
1.1 PURCHASE OF NOTES 1
1.2 PURCHASE PRICE 1
ARTICLE II THE CLOSING 1
2.1 TIME AND PLACE OF CLOSING 1
2.2 COMPANY'S ACTIONS AT CLOSING 2
2.3 BUYER'S ACTIONS AT CLOSING 2
ARTICLE III REPRESENTATIONS AND WARRANTIES 2
3.1 COMPANY'S REPRESENTATIONS AND WARRANTIES 2
3.2 BUYER'S REPRESENTATIONS AND WARRANTIES 9
3.3 REMEDY FOR BREACHES OF REPRESENTATIONS AND WARRANTIES 10
ARTICLE IV ACTIONS PRIOR TO THE CLOSING 11
4.1 ACTIVITIES UNTIL CLOSING DATE 11
4.2 HSR ACT FILINGS 12
4.3 COMPANY'S EFFORTS TO FULFILL CONDITIONS 12
4.4 BUYER'S EFFORTS TO FULFILL CONDITIONS 12
ARTICLE V CONDITIONS PRECEDENT TO CLOSING 13
5.1 CONDITIONS TO BUYER'S OBLIGATIONS 13
5.2 CONDITIONS TO COMPANY'S OBLIGATIONS 14
ARTICLE VI SHAREHOLDERS MEETING 15
6.1 PROXY STATEMENT AND SHAREHOLDERS MEETING 15
ARTICLE VII AGREEMENT REGARDING SHARE PURCHASES 16
7.1 LIMIT ON SHARE PURCHASES 16
ARTICLE VIII TERMINATION 16
8.1 RIGHT TO TERMINATE 16
8.2 EFFECT OF TERMINATION 17
ARTICLE IX INDEMNIFICATION 17
9.1 INDEMNIFICATION AGAINST LOSS DUE TO INACCURACIES IN COMPANY'S REPRESENTATIONS AND
WARRANTIES 17
9.2 INDEMNIFICATION AGAINST LOSS DUE TO INACCURACIES IN BUYER'S REPRESENTATIONS AND
WARRANTIES 17
9.3 LIMITATION ON COMPANY'S LIABILITY 17
9.4 INDEMNIFICATION SOLE REMEDY 18
ARTICLE X ABSENCE OF BROKERS 18
10.1 REPRESENTATIONS AND WARRANTIES REGARDING BROKERS AND OTHERS 18
ARTICLE XI GENERAL 19
11.1 EXPENSES 19
11.2 ACCESS TO PROPERTIES, BOOKS AND RECORDS 19
11.3 PRESS RELEASES 20
11.4 ENTIRE AGREEMENT 20
11.5 EFFECT OF DISCLOSURES 20
11.6 CAPTIONS 20
11.7 ASSIGNMENTS 20
11.8 NOTICES AND OTHER COMMUNICATIONS 21
30
11.9 GOVERNING LAW 22
11.10 AMENDMENTS 22
11.11 COUNTERPARTS 22
31
Exhibits to Note Purchase Agreement
These Exhibits (the "EXHIBITS") relate to the Note Purchase Agreement
dated as of June 20, 2000 (the "NOTE PURCHASE AGREEMENT"), by and among Global
Vacation Group, Inc., a New York corporation (the "COMPANY"), and GV Investment
LLC, a Delaware limited liability company ("GVI"). The information disclosed in
any of these Exhibits shall be deemed disclosure for all purposes, shall apply
to the entire Note Purchase Agreement (as well as to all Exhibits), and shall
not be limited to those section headings under which it appears herein. All
capitalized terms used in these Exhibits have the meanings used in the Note
Purchase Agreement, unless otherwise indicated.
32
EXHIBIT 2.2-A
9% CONVERTIBLE SUBORDINATED NOTES
$27,500,000 June 20, 2000
Global Vacation Group, Inc. (the "Company"), a New York
corporation, promises to pay to GV Investment LLC or its assigns (the "Holder"),
at the time described below, the principal sum of $27,500,000. The Company also
promises to pay interest on the balance of that principal sum which is unpaid
from time to time at the rate of 9% per annum, based on the actual number of
days elapsed in a year of 365 or 366 days. This Note, any notes which may be
issued as a result of transfers, partial payments or partial conversions, and
any notes issued in payment of interest as provided below, are referred to as
"Notes."
1. The entire unpaid principal balance of the sum
evidenced by this Note will be due and payable on July 1, 2007 (the
"Maturity Date").
2. Interest will be payable on the first day of
January, April, July and October of each year (each an "Interest Payment
Date"), with the first interest payment to be made on October 1, 2000 (or
such later day as is the first Interest Payment Date after the date of
this Note). If any Interest Payment Date is not a Business Day, the
Interest Payment Date will be deferred until the next Business Day, and
interest will be payable through that next Business Day. A "Business Day"
is a day on which banks in New York, New York are open generally for
banking business.
3. Each payment of principal or interest will be made
to the Holder by certified or bank cashier's check or wire transfer of
immediately available funds, at such address or to such account as the
Holder specifies to the Company in writing at least three business days
before the payment is to be made, except that (a) the Company may make
the interest payments due on October 1, 2000 and January 2 and April 1,
2001 with notes which bear interest at 9% per annum and mature on July 1,
2001, and (b) the Company may, at its option, make any interest payment
due on or before August 1, 2003, or any principal or interest payment
with regard to a note described in clause (a), (i) by certified or bank
cashier's check or wire transfer of immediately available funds, (ii)
with an additional Note (with the same terms as this Note) in a principal
amount equal to the amount of the interest payment, or (iii) with common
stock of the Company ("Common Stock"), par value $.01 per share, with a
value, based upon the Current Market Price of the Common Stock (defined
in Paragraph 11) on the applicable Interest Payment Date, equal to the
amount of the interest payment.
4. Any payment of principal or interest which is not
made when it is due will bear interest from the day it is due until it is
paid at the rate which is 200 basis points higher than the interest rate
in effect on the day the payment is due, or such lower rate as is the
maximum rate permitted by law.
5. Subject to the provisions of Paragraph 10(c), the
Company may at any time after either (a) the second anniversary of the
date of this Note or (b) there is a Change of Control (defined below),
prepay the principal of all the Notes in whole, but not in part, by
giving the Holders not less than forty days
33
notice of intention to prepay the Notes, which notice may be given before
the earliest date on which Notes may be prepaid and which notice will (i)
specify the date on which the principal of the Notes will be prepaid and
(ii) state that the Holders will be entitled at any time up to 5:00 p.m.,
New York City time, on the tenth day before the day on which the Notes
are to be prepaid, to surrender Notes for conversion into Common Stock as
provided in the Notes. If the Company gives a notice that it will prepay
the Notes, other than because of a Change of Control, the Company will be
obligated to pay all the principal of the Notes, together with all
accrued but unpaid interest on the Notes to the date of the payment, on
the later of (i) the date specified in the notice of prepayment, or (ii)
if either the Holder or the Company notifies the other of them prior to
the date specified in the notice of prepayment that, in its opinion
(based on advice of counsel), the shares the Company is required to issue
upon conversion of this Note may not be issued until filings have been
made under the ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇ Antitrust Improvements Act of ▇▇▇▇ (▇▇▇
"▇▇▇ ▇▇▇") and the waiting periods required by the HSR Act have either
expired or been terminated, the day specified in clause (z) of
Subparagraph 13(a). If the Company gives a notice that it will prepay the
Notes because of a Change of Control, (i) the Company will not be
obligated to prepay the Notes unless the Change of Control occurs, and
(ii) if the Holder presents this Note for conversion within 30 days after
the Company gives a notice that it will prepay the Notes because of a
Change of Control, the Holder may specify that the conversion is subject
to the Change of Control's occurring, and will be effective immediately
before the Change of Control occurs.
6. The Company may not sell all or substantially all
its assets or consent to or participate in a transaction which involves a
sale of a majority of its outstanding stock, unless (a) at least forty
days before the record date for the transaction (or if there is no record
date, at least 40 days before the date of the transaction) the Company
has notified the Holder that (i) the transaction will take place
(describing the transaction in reasonable detail), (ii) this Note will be
prepaid on the date the transaction takes place (specifying the expected
date), and (iii) the Holder will have the right to convert this Note into
Common Stock at any time before 5:00 p.m. on the tenth day before the
record date for determining the stockholders of the Company entitled to
participate in the transaction (or if there is no record date, the tenth
day before the expected date of the transaction) and (b) if not later
than ten days after the Company gives the notice to the Holder, either
the Holder or the Company notifies the other of them that, in its opinion
(based upon advice of counsel), the shares the Company is required to
issue upon conversion of this Note may not be issued until filings have
been made under the HSR Act and the waiting periods required by the HSR
Act have either expired or terminated, the record date for the
transaction (or if there is no record date, the date of the transaction)
will be not earlier than the day specified in clause (z) of Subparagraph
13(a). If the Holder presents this Note for conversion within 30 days
after the Company gives a notice of the type described in the preceding
sentence, the Holder may specify that the conversion will be subject to,
and will be effective immediately before, completion of the transaction
described in the notice.
7. The Company covenants and agrees that at all times
until Notes evidencing at least 75% of the original principal sum
evidenced by all the
34
Notes have been paid in full (together with all accrued interest) or
converted into Common Stock:
7.1 The Company will not permit the ratio, at the end of
any calendar quarter, of its Net Total Indebtedness to its Net Worth to exceed
2:1
1. Beginning October 1, 2000, the Company will not
permit its Fixed Charge Coverage Ratio to be less than 1:1.
2. The number of persons constituting the entire Board
of Directors of the Company will not, without the prior written consent
of the Holders of a majority in outstanding principal amount of the
Notes, exceed eight persons.
3. The Company will not borrow any money or otherwise
consummate any financing which would cause its Net Total Indebtedness,
excluding liabilities with regard to the Notes, to exceed $30 million
without the prior written consent of the Holders of a majority in
outstanding principal amount of the Notes (or if the Company's Board of
Directors includes one or two persons designated by the Holders of a
majority in outstanding principal amount of the Notes, the borrowing or
other financing which would cause the Net Total Indebtedness to exceed
$30 million, excluding liabilities with regard to the Notes, is approved
by that person, or both of those persons).
4. The Company will not acquire any company or any
assets, in a single transaction or a series of related transactions, with
a purchase price above $5 million without the prior written consent of
the Holders of a majority in outstanding principal amount of the Notes
(or, if the Company's Board of Directors includes one or two persons
designated by the Holders of a majority in outstanding principal amount
of the Notes, the acquisition is approved by that person, or both of
those persons).
5. There will not be any amendment to the Company's
Certificate of Incorporation or by-laws unless the amendment has been
approved in advance in writing by the Holders of a majority in
outstanding principal amount of the Notes (or, if the Company's Board of
Directors includes one or two persons designated by the Holders of a
majority in outstanding principal amount of the Notes, the amendment is
approved by that person, or both of those persons).
As used in this Note, the following terms have the following meanings:
"Net Total Indebtedness" means the sum of (i) all the liabilities
of Company or its subsidiaries (other than liabilities to the Company or to
wholly-owned subsidiaries of the Company) (x) for borrowed money or (y) to
reimburse persons for payments made under letters of credit or similar
instruments, (ii) all the obligations of the Company or its subsidiaries to pay
rent or other amounts under leases to the extent they are required to be
capitalized for financial reporting purposes in accordance with generally
accepted accounting principles ("GAAP") and (iii) the aggregate liability of the
Company for customer deposits (net of any prepayments to suppliers) minus the
aggregate Liquid Funds of the Company and its subsidiaries. For purposes of the
preceding sentence, "Liquid Funds" means cash, cash equivalents and marketable
securities.
35
"Net Worth" means (i) the consolidated shareholders equity of the
Company and its subsidiaries determined in accordance with GAAP, plus (ii) any
restructuring charges relating to a company the accounts of which were included
in the consolidated balance sheet of the Company and its subsidiaries at March
31, 2000, plus (iii) any goodwill or other intangible assets which were
reflected on that balance sheet but are written down after March 31, 2000, (iv)
if the rate at which goodwill which was reflected on that balance sheet is being
amortized exceeds the rate at which it was being amortized at March 31, 2000,
the amount by which the accelerated amortization exceeds what the amortization
would have been if the rate had not been accelerated, and plus (v) any
extraordinary losses from dispositions approved by the Company's Board of
Directors of assets or properties which assets or properties were reflected on
that balance sheet which are not made in the ordinary course of business.
"Fixed Charge Coverage Ratio" means, with regard to a
determination made as of a date, the ratio of (A) the consolidated EBITDA of the
Company and its subsidiaries for the four full calendar quarters immediately
preceding the calendar quarter in which the determination date falls (or, with
regard to determination dates before July 1, 2001, for all the full calendar
quarters beginning July 1, 2000 and ending before the calendar quarter in which
the determination date falls) to (B) the obligations, calculated on a
consolidated basis, of the Company and its subsidiaries to pay cash interest,
and to pay rent or other amounts under leases to the extent the leases are
required to be capitalized for financial reporting purposes in accordance with
GAAP, during the four full calendar quarters immediately preceding the calendar
quarter in which the determination date falls (or, with regard to determination
dates before July 1, 2001, during all the full calendar quarters beginning July
1, 2000 and ending before the calendar quarter in which the determination date
falls).
"EBITDA" means, for any period, (i) the consolidated net income of
the Company and its subsidiaries for that period, determined in accordance with
GAAP, plus, (ii) to the extent they were deducted in calculating that net
income, all interest expense, income taxes, depreciation and amortization
expenses and other non-cash charges, plus (iii) to the extent they were deducted
in calculating that net income, all restructuring charges relating to companies
which the accounts of which were included in the consolidated balance sheet of
the Company and its subsidiaries at March 31,2000, write downs of goodwill which
goodwill was reflected on that balance sheet, and extraordinary losses from
dispositions approved by the Company's Board of Directors of assets or
properties which were reflected on that balance sheet which are not made in the
ordinary course of business, plus or minus (iv) any losses or gains from
non-recurring extraordinary or unusual transactions or events not in the
ordinary course of business (unless the Company's Board of Directors unanimously
determines that the losses or gains with regard to particular non-recurring
transactions or events should be included in EBITDA), to the extent they are not
added to consolidated net income under clause (ii) or (iii).
8. If at any time there is a Change of Control, the
Holder will have the option, which the Holder may exercise upon notice to
the Company given not later than 30 days after the Company notifies the
Holder of the Change of Control, to require the Company to repurchase
this Note for an amount equal to 100% of its principal amount plus
accrued but unpaid interest to the date of repurchase. A "Change of
Control" will occur when (a) any person or group (as that term is defined
for purposes of Section 13 of the Securities Exchange Act of
36
1934, as amended), other than ▇▇▇▇▇▇ Equity Investors III, L.P.
("▇▇▇▇▇▇"), any Holder of Notes, any person to whom a Holder of Notes
transfers Notes, or any of their respective affiliates, becomes the owner
of 40% or more of the outstanding Common Stock, or obtains the right to
acquire 40% or more of the outstanding stock of the Company within 60
days, or (b) there is a change of membership of the Company's Board of
Directors such that a majority of the members of the Board are persons
who (i) have not been members of the Board for at least 12 months (ii)
whose election was not approved by a majority of the persons who had been
members of the Board at the beginning of that 12 month period and (iii)
are not designated by the Holders of the Notes. Notwithstanding the
foregoing, a "Change of Control" will not be deemed to occur as a result
of a "tag-along sale" or a "drag along sale," as those terms are
described in a Shareholders Agreement dated June 20, 2000, between GV
Investment LLC and ▇▇▇▇▇▇.
9. Each of the following events will constitute an
Event of Default:
6. The Company fails to make any payment of principal
with respect to this Note on or before the day on which it is due; or
7. The Company fails to make any payment of interest
with respect to this Note within ten days after the day on which is it
due; or
8. The Company defaults in any of its obligations under
this Note other than obligations described in subparagraphs (a) and (b)
and fails to cure that default within 30 days after a written demand from
the Holder that the Company do so; or, if the default is not capable of
being cured within that 30 days, the Company fails to provide the Holder
with a reasonable plan to cure the default within a reasonable time after
the notice or the Company fails diligently to carry out that plan; or
9. The Company or a significant subsidiary (as that
term is defined in Securities and Exchange Commission Regulation S-X)
commences a proceeding seeking relief as a debtor under the Bankruptcy
Code or any state or foreign insolvency law; or
10. An order is entered in a proceeding under the
Bankruptcy Code or any state or foreign insolvency law declaring the
Company or a significant subsidiary to be insolvent or appointing a
receiver or similar official for substantially all the Company's or a
significant subsidiary's properties, and that order is not dismissed
within 90 days; or
11. Because of an event of default with regard to Senior
Indebtedness, a holder of Senior Indebtedness (other than an issuer
solely of letters of credit as to which no reimbursement obligation is
overdue) accelerates the time when the principal of the Senior
Indebtedness is due and payable; and that acceleration is not rescinded,
or the Senior Indebtedness paid, within 60 days after the acceleration
occurs; or
37
12. Because of events of default with regard to
indebtedness which is not Senior Indebtedness, holders of indebtedness
aggregating $ 5,000,000 which is not Senior Indebtedness accelerate the
time when that indebtedness is due and payable.
13. (i) While the number of shares of Common Stock owned
by the Holders of Notes, or which the Holders of Notes have the right to
acquire by conversion of Notes, exceeds both (x) 50% of the shares
issuable upon conversion of the Notes on the date the Notes initially are
issued and (y) 15% of the Company's outstanding Common Stock (giving
effect to the conversion of all the Notes and to the exercise of all
options which have been granted under the Company's employee stock option
plan as it is in effect on June 20, 2000, but not to the exercise,
conversion or exchange of any other options or convertible or
exchangeable securities), the Company's Board of Directors does not
include two persons designated by the Holders of a majority in
outstanding principal amount of the Notes (other than because the Holders
fail to designate such persons) or (ii) while the number of shares of
Common Stock owned by the Holders Notes or which the Holders of Notes
have the right to acquire upon conversion of Notes does not exceed both
the levels described in clauses (x) and (y), but both (A) is more than
25% of the shares issuable on conversion of the Notes on the date the
Notes initially are issued and (B) is more than 5% of the total number of
outstanding shares of Common Stock (giving effect to the conversion of
all the Notes and to the exercise of all options which have been granted
under the Company's employee stock option plan as it is in effect on June
20, 2000, but not to the exercise, conversion or exchange of any other
options or convertible or exchangeable securities), the Company's Board
of Directors does not include at least one person designated by the
Holders of a majority in outstanding principal amount of the Notes (other
than because the Holders failed to designate such a person).
14. The Company's stockholders do not, by June 20, 2001,
approve the issuance of Conversion Shares upon conversion of this Note.
15. Company fails to fulfill any of its obligations
under a Note Purchase Agreement dated June 20, 2000 between GV Investment
LLC and the Company which are required to be fulfilled after the initial
issuance of Notes.
Upon the occurrence of an Event of Default, the Holder may,
by a notice to the Company given while the Event of Default is continuing,
declare the entire unpaid balance of the principal sum evidenced by this Note
and all accrued but unpaid interest to be due and payable, in which event that
principal balance and accrued but unpaid interest will be immediately due and
payable, except that if the Event of Default is of the type described in
Subparagraph (d) or (e), the entire unpaid balance of the principal sum
evidenced by this Note and all accrued but unpaid interest will be immediately
due and payable when the Event of Default occurs, without requiring any notice
or other action by the Holder.
10. 10.1 The Company's obligations to make payments
of principal of, interest on or any repayments or prepayments of this
Note, or to repurchase this Note at the option of the Holder in
accordance with Paragraph 8, are subordinate and subject in right of
payment to the prior payment in full in cash of all Senior Indebtedness,
whether outstanding at the date of this Note or thereafter created,
incurred assumed or guaranteed. These subordination provisions are for
the benefit of the holders of Senior Indebtedness.
38
16. For the purposes of this Note:
- "Senior Indebtedness" means all obligations
of the Company to pay the principal, premium, interest (including all
interest accruing subsequent to the commencement of a bankruptcy or
similar proceeding, whether or not a claim for post-petition interest is
allowed as a claim in any such proceeding), and all letters of credit,
reimbursement obligations in respect thereof and all fees, costs,
expenses and other amounts and liabilities accrued or due on or in
connection with the Senior Indebtedness and other sums due with regard to
all indebtedness of the Company for borrowed money, whether now existing
or hereafter arising (including the obligation to reimburse for amounts
drawn against letters of credit) from banks, insurance companies or other
financial institutions which the Company states, in the instrument
governing the indebtedness or a document delivered to the holder of the
indebtedness, to be Senior Indebtedness with regard to the Notes, whether
or not evidenced by bonds, debentures, notes or other written instruments
and (ii) any indebtedness of the type described in clause (i) which is
guaranteed by the Company and which the Company states in a document
delivered to the holder of the indebtedness to be Senior Indebtedness
with regard to the Notes. The Company designates the obligations of the
Company under the Credit Facility to be Senior Indebtedness.
- "Credit Facility" means that certain Second
Amended and Restated Credit Agreement, dated as of October 28, 1999, by
and among the Company, the lenders party thereto and The Bank of New
York, as administrative agent, as such agreement has heretofore been, or
may hereafter be, amended restated, supplemented, modified, renewed,
refunded, replaced or refinanced from time to time (whether with the
original agents and lenders or other agents and lenders or otherwise, and
whether provided under the original credit agreement or other credit
agreements or otherwise), including any notes, guarantees, security or
pledge agreements, letters of credit, control agreements and any other
documents or instruments executed pursuant thereto and any exhibits or
schedules to any of the foregoing, as the same may be in effect from time
to time, in each case, as such agreements have heretofore been, or may
hereafter be, amended, restated, supplemented or otherwise modified, from
time to time (whether with the original agents and lenders or other
agents and lenders or otherwise, and whether provided under the original
credit agreements or otherwise).
17. No payment may be made by the Company on account of
the principal of, interest on, or any other obligations under or with respect
to, this Note or on account of the prepayment or repurchase provisions of this
Note (collectively, the "Subordinated Obligations") (i) upon the maturity of any
Senior Indebtedness by lapse of time, acceleration (unless waived) or otherwise,
unless and until all principal of, interest on, reimbursement obligations with
respect to letters of credit, and fees, charges, expenses, indemnifications (to
the extent claims have been made with respect to those indemnifications) and all
other amounts payable in respect of the matured Senior Indebtedness are first
paid in full in cash, or (ii) in the event of default in the payment of any
principal of, or interest on, reimbursement obligations with respect to letters
of credit and fees, charges, expenses, indemnifications (to the extent claims
have been made with respect to those indemnifications) and all other amounts
payable in respect of Senior Indebtedness
39
when it becomes due and payable, whether at maturity or at a date fixed for
prepayment or by declaration or otherwise (collectively, a "Payment Default"),
unless and until such Payment Default has been cured or waived or otherwise has
ceased to exist.
18. Upon (i) the happening of an event of default (other
than a Payment Default) that permits, or would permit, with (w) the passage of
time, (x) the giving of notice, (y) the making of any payment of this Note then
required to be made, or (z) any combination thereof (collectively, a
"Non-Payment Default"), the holders of Senior Indebtedness immediately to
accelerate its maturity, and (ii) written notice of such Non-Payment Default is
given to the Company at the address for notices specified in the applicable
credit document governing the Senior Indebtedness (including, as to obligations
under the Credit Agreement, the notice address specified in the Credit
Agreement) and to the Holder c/o Three Cities Research, Inc. ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (or at the address of the Holder shown on the Note register
described in Paragraph 14), by the holders of the Senior Indebtedness or their
representative (a "Payment Notice"), then, unless and until such Non-Payment
Default has been cured or waived or otherwise has ceased to exist, no payment
(by set-off or otherwise) may be made by or on behalf of the Company directly or
through any subsidiary on account of the Subordinated Obligations.
Notwithstanding the foregoing, unless (A) the Senior Indebtedness has been
declared due and payable in its entirety within 270 days after the Payment
Notice is given as set forth above (the "Blockage Period") and (B) such
declaration has not been rescinded or waived, the Company will be required to
pay to the Holder of this Note all sums not paid to the Holder of this Note
during the Blockage Period due to the prohibitions in this Paragraph (and upon
the making of such payments any acceleration of the Company's obligations with
regard to this Note which made during the Blockage Period because of the
Company's failure to make payments due to the prohibitions in this Paragraph
will be of no further force or effect) and to resume all other payments due
under this Note as and when they are due. Not more than one Payment Notice may
be given in any consecutive 365 day period, irrespective of the number of
defaults with respect to Senior Indebtedness that may occur during such period.
In no event may the number of days during which any Blockage Period is, or
Blockage Periods are, in effect exceed 270 days in the aggregate during any
consecutive 365 day period.
19. During a Blockage Period with respect to a
Non-Payment Default and during the period of 270 days following the occurrence
of a Payment Default, the Holder of this Note will not demand or take any action
(including instituting any suit or insolvency proceeding) to attempt to collect
any sum which is due under this Note.
20. Upon any distribution of assets of the Company as a
result of any dissolution, winding up, liquidation or reorganization (whether in
a bankruptcy or insolvency proceeding or otherwise), (i) all Senior Indebtedness
must be paid in full in cash before any payment is made on account of the
Subordinated Obligations, (ii) any payment or distribution of assets of the
Company to which the Holder would be entitled except for this Paragraph must be
paid or delivered by the Company or by any trustee in bankruptcy, receiver,
assignee for the benefit of creditors or other liquidating agent, directly to
the holders of the Senior Indebtedness, in proportion to the respective amounts
of Senior Indebtedness they hold (or in accordance with any
40
subordination agreements or other agreements among them), to the extent
necessary to pay all Senior Indebtedness in full after giving effect to any
concurrent payments or distributions to the holders of the Senior Indebtedness
or provision for payment or distribution to them, and (iii) if, notwithstanding
the foregoing, the Holder receives any payment or distribution of property of
the Company before all Senior Indebtedness is paid in full, or provision made
for its payment, the Holder will receive the cash or property paid or
distributed to the Holder in trust for the holders of the Senior Indebtedness,
and, upon a request made to the Holder by a holder of Senior Indebtedness within
one year after the cash or property is paid or distributed to the Holder, the
Holder will pay or deliver that cash or property to the holders of the Senior
Indebtedness, for application to the payment of any Senior Indebtedness
remaining unpaid after giving effect to any concurrent payment or distribution
to the holders of the Senior Indebtedness or provision for payment or
distribution to them. If no claim is made by holders of Senior Indebtedness to
cash or property paid or distributed to the Holder within one year after the
payment or distribution to the Holder, after the end of the one year period, the
Holder will hold the cash or property free of any trust.
21. While any bankruptcy or insolvency proceeding with
regard to the Company is continuing:
- The Holder will, at the request of any
holder of Senior Indebtedness, (A) take all reasonable actions to collect
the principal sum evidenced by this Note and any accrued but unpaid
interest for the account of the holders of Senior Indebtedness and (B)
file appropriate proofs of claim in respect of this Note;
- The Holder irrevocably authorizes each
holder of Senior Indebtedness to file in the Holder's name or otherwise
any required proof of claim relating to this Note if the Holder fails to
file that proof of claim at least 30 days before the last day on which it
may be filed.
22. Payments which are paid to holders of Senior
Indebtedness solely because of this Paragraph 10 (and but for this Paragraph 10
would have been paid to the Holders of the Notes) will not, with regard to any
creditors other than the holders of the Senior Indebtedness and the Holders of
the Notes, be deemed to reduce the amount due with regard to the Senior
Indebtedness.
23. When all Senior Indebtedness has been paid in full
in cash, all sums which, but for this Paragraph 10, would have been paid to the
holders of the Senior Indebtedness (as well as all sums to which the Holders of
the Notes are directly entitled) will be paid to the Holders of the Notes, until
they have received all principal and interest due with regard to the Notes.
24. No right of any present or future holders of any
Senior Indebtedness to enforce the subordination provisions contained in this
Paragraph 10 shall at any time in any way be prejudiced or impaired by (i) any
act or failure to act on the part of the Company, (ii) any act or failure to
act, in good faith, by any holder of such Senior Indebtedness, (iii) any
noncompliance by the Company with the terms of this Note, regardless of any
knowledge thereof which any holder of such Senior Indebtedness may have or
otherwise be charged with, including any failure to
41
enforce any rights or remedies (including any rights to foreclose security
interests or mortgages) to which the holder of Senior Indebtedness may be
entitled with regard to the Senior Indebtedness, (iv) any rescission of a demand
for payment of the Senior Indebtedness, (v) any extension of the time by which
the Company must make any payment or perform any other act with regard to Senior
Indebtedness or under any agreement or instrument governing it, or (vi) any
amendment of any agreement or instrument governing Senior Indebtedness
(including any amendment which increases the amount of the Senior Indebtedness).
Without the consent of or notice to the Holder, the holders of Senior
Indebtedness may extend, renew, modify or amend the terms of the Senior
Indebtedness or any security therefor and release, sell or exchange such
security and otherwise deal freely with the Company, all without impairing the
liabilities and obligations of the Holder and the Company.
25. Nothing in this Paragraph 10 is intended to impair,
as between the Company, its creditors other than the holders of Senior
Indebtedness, and the Holder, the obligation of the Company, which is absolute
and unconditional, to pay the principal and interest on this Note when they
become due. Nothing in this Paragraph 10, other than subparagraph (c), prevents
the Holder from exercising all remedies otherwise permitted by law upon default
under this Note, subject to the rights of holders of Senior Indebtedness under
this Paragraph 10.
26. Any person who becomes the Holder of this Note, or
an interest in it, will be deemed to have agreed by acquiring this Note, or the
interest in it, to be bound by the provisions of this Paragraph 10.
Notwithstanding anything in this Note to the contrary, the provisions of this
Paragraph 10 may not be amended, supplemented or otherwise modified without the
express prior written consent of each holder of Senior Indebtedness which is
outstanding at the time of the modification. No waiver of the provisions of this
Paragraph 10 will be effective unless it is in writing and signed by all holders
of Senior Indebtedness who are giving the waiver.
27. Should any payment, distribution or other amount be
received by the Holder (directly or indirectly, by way of setoff, by reason of
any other obligation, indebtedness or liability of the Company being
subordinated to the Company's obligations with regard to this Note, or in any
other manner) upon or in respect to this Note in contravention of the provisions
of this Paragraph 10, the Holder will promptly pay what it has received over,
and deliver it, to the holders of any Senior Indebtedness of whom the Holder has
been given notice as their interests may appear, and until it is so delivered,
the Holder will hold the cash or other assets it has received in trust for the
holders of the Senior Indebtedness. If, however, no holder of Senior
Indebtedness claims cash or other assets within one year after the Holder
receives them, the Holder will be entitled to retain the cash or other assets
free of any trust.
28. Notwithstanding any partial or entire payment of all
or any of the Senior Indebtedness, the subordination provisions of this Note
will remain in effect or be reinstated, as the case may be, as though such
payment had never been made, with respect to any payment which is rescinded or
recovered from or restored or returned by the holder of any Senior Indebtedness
as a result of any law, rule, regulation or order of any court or governmental
agency, or in connection with any compromise or settlement relating thereto or
relating to any action, suit or proceeding
42
relating thereto, whether arising out of any proceedings under the United States
Bankruptcy Code or otherwise.
11. The Holder will have the right at any time (subject
to the provisions of Paragraphs 5, 6 and 8), at the Holder's option, to
convert all or any of the principal of this Note into the number of fully
paid and non-assessable shares of common stock, par value $.01 per share,
of the Company ("Common Stock") (calculated as to each conversion to the
nearest 1/100th of a share) equal to (x) the principal amount of this
Note being converted divided by (y) the Conversion Price (as defined in
Subparagraph 11(c)), or such other securities or assets as the holder is
entitled to receive in accordance with Subparagraph 11(c).
2. 3. In order to exercise the conversion
privilege, the Holder must surrender this Note, with the Notice of Election to
Convert duly completed and signed, to the Company at its principal office (or,
if the Company has appointed a conversion agent other than itself, to the
conversion agent at the office specified by the Company in a notice to the
Holder). If less than the entire principal of this Note is converted, the
Company will issue to the Holder a new Note, with the same terms as this Note,
in a principal amount equal to the portion of the principal of this Note which
is not being converted.
- Each conversion will be at the
Conversion Price in effect at the close of business on the day when all
the conditions in Subparagraph 11(a)(i) and Paragraph 13(a) have been
satisfied.
- The Company will not make any payment
or adjustment for accrued interest (including overdue interest) with
regard to principal of this Note which is converted, or for dividends on
the shares of Common Stock issued upon the conversion.
- As promptly as practicable after this
Note is surrendered and all the other conditions in Subparagraph 11(a)(i)
and Paragraph 13(a) have been satisfied, the Company will issue and will
deliver to the holder at the office of the Company, or on the holder's
written order, a certificate or certificates for the number of full
shares of Common Stock issuable upon the conversion. Any fractional
interest in respect of a share of Common Stock arising upon a conversion
will be settled as provided in Subparagraph 11(b).
- A conversion of principal of this Note
will be deemed to be effected immediately prior to the close of business
on the day on which all the conditions specified in Subparagraph 11(a)(i)
and Paragraph 13(a) have been satisfied, and the Holder will be deemed to
have become the holder of record at that time of the shares of Common
Stock into which principal of this Note is converted, regardless of when
certificates representing those shares are issued. All shares of Common
Stock delivered upon conversion of this Note will upon delivery be duly
and validly issued and fully paid and nonassessable, free of all liens
and charges and not subject to any preemptive rights.
4. No fractional shares of Common Stock will be issued
upon conversion of this Note. Any fractional interest in a share of Common Stock
resulting
43
from conversion of this Note will be paid in cash (computed to the nearest cent)
based on the Current Market Price of the Common Stock on the Trading Day (as
defined in Subparagraph 11(d)(vii)) next preceding the day of conversion.
5. The "Conversion Price" initially will be $5.25, and
will be adjusted as follows from time to time if any of the events described
below occurs after June 20, 2000.
- If the Company (A) pays a stock
dividend or makes a distribution on its Common Stock in shares of its
Common Stock, (B) subdivides its outstanding Common Stock into a greater
number of shares, or (C) combines its outstanding Common Stock into a
smaller number of shares, the Conversion Price in effect immediately
prior to that event will be adjusted so that upon conversion of a
specified principal amount of this Note after that event, the Holder will
receive the number of shares of Common Stock which the Holder would have
received if that principal amount had been converted immediately before
the happening of the event (or, if there is more than one such event, if
that principal amount had been converted immediately before the first of
those events and the holder had retained all the Common Stock or other
securities or assets received after the conversion). An adjustment made
pursuant to this Subparagraph 11(c) will become effective immediately
after the record date in the case of a dividend or distribution, except
as provided in Subparagraph 11(viii), and will become effective
immediately after the effective date in the case of a subdivision or
combination. If a dividend or distribution is declared but is not paid or
made, the Conversion Price then in effect will be appropriately
readjusted. However, a readjustment of the Conversion Price will not
affect any conversion which takes place before the readjustment.
- If the Company issues rights or
warrants to the holders of its Common Stock as a class entitling them
(for a period expiring within 45 days after the record date for issuance
of the rights or warrants) to subscribe for or purchase Common Stock at a
price per share less than the Conversion Price at the record date for the
determination of stockholders entitled to receive the rights or warrants,
the Conversion Price in effect immediately before the issuance of the
rights or warrants will be reduced so that it will be the amount
determined by multiplying the Conversion Price in effect immediately
before the record date for the issuance of the rights or warrants by a
fraction of which the numerator is the number of shares of Common Stock
outstanding on the record date for the issuance of the rights or warrants
plus the number of shares of Common Stock which the aggregate exercise
price of all the rights or warrants would purchase at the Conversion
Price at that record date, and of which the denominator is the number of
shares of Common Stock outstanding on the record date for the issuance of
the rights or warrants plus the number of additional shares of Common
Stock issuable on exercise of all the rights or warrants. The adjustment
provided for in this Subparagraph 11(c)(ii) will be made successively
whenever any rights or warrants are issued, and will become effective
immediately, except as provided in Subparagraph 11(c)(viii), after each
record date. In determining whether any rights or warrants entitle the
holders of the Common Stock to subscribe for or purchase shares of Common
Stock at less than the Conversion Price, and in determining the aggregate
sale price of the shares of Common Stock issuable on the exercise of
rights or warrants, there will
44
be taken into account any consideration received by the Company for the
rights or warrants, with the value of that consideration, if other than
cash, to be determined by the Board of Directors of the Company (whose
determination, if made in good faith, will be conclusive). If any rights
or warrants which lead to an adjustment of the Conversion Price expire or
terminate without having been exercised, the Conversion Price then in
effect will be appropriately readjusted. However, a readjustment of the
Conversion Price will not affect any conversions which take place before
the readjustment.
- If the Company distributes to the
holders of its Common Stock as a class any shares of capital stock of the
Company (other than Common Stock) or evidences of indebtedness or assets
(other than cash dividends or distributions of cash paid from retained
earnings of the Company) or rights or warrants (other than those referred
to in Subparagraph 11(c)(ii)) to subscribe for or purchase any of its
securities, then, in each such case, the Conversion Price will be reduced
so that it will equal the price determined by multiplying the Conversion
Price in effect immediately prior to the record date for the distribution
by a fraction of which the numerator is the Current Market Price of the
Common Stock on the record date for the distribution less the then fair
market value (as determined by the Board of Directors, whose
determination, if made in good faith, will be conclusive) of the capital
stock, evidences of indebtedness, assets, rights or warrants which are
distributed with respect to one share of Common Stock, and of which the
denominator is the Current Market Price of the Common Stock on that
record date. Each adjustment will, except as provided in Subparagraph
11(c)(viii), become effective immediately after the record date for the
determination of the stockholders entitled to receive the distribution.
If any distribution is declared but not made, or if any rights or
warrants expire or terminate without having been exercised, effective
immediately after the decision is made not to make the distribution or
the rights or warrants expire or terminate, the Conversion Price then in
effect will be appropriately readjusted. However, a readjustment will not
affect any conversions which take place before the readjustment.
- If there is a reclassification or
change of outstanding shares of Common Stock (other than a change in par
value, or as a result of a subdivision or combination), or a merger or
consolidation of the Company with any other entity that results in a
reclassification, change, conversion, exchange or cancellation of
outstanding shares of Common Stock, or a sale or transfer of all or
substantially all of the assets of the Company, upon any subsequent
conversion this Note, the Holder will be entitled to receive the kind and
amount of securities, cash and other property which the holder would have
received if the holder had converted this Note into Common Stock
immediately before the first of those events and had retained all the
securities, cash and other assets received as a result of all those
events.
- For the purpose of any computation
under this Note, the "Current Market Price" of the Common Stock on a day
will be the average of the last reported sale price per share of the
Common Stock on each of the twenty consecutive Trading Days (as defined
below) preceding the date of the computation. The last reported sale
price of the Common Stock on a day will be (A) the last sale price of the
Common Stock before 4:00 p.m. reported on the
45
principal stock exchange on which the Common Stock is listed, or (B) if
the Common Stock is not listed on a stock exchange, the last sale price
of the Common Stock before 4:00 p.m. reported on the principal automated
securities price quotation system on which sale prices of the Common
Stock are reported, or (C) if the Common Stock is not listed on a stock
exchange and sale prices of the Common Stock are not reported on an
automated quotation system, the mean of the high bid and low asked price
quotations for the Common Stock as reported by National Quotation Bureau
Incorporated if at least two securities dealers have inserted both bid
and asked quotations for the Common Stock on at least five of the ten
preceding Trading Days. If the Common Stock is not traded or quoted as
described in any of clause (A), (B) or (C), the Current Market Price of
the Common Stock on a day will be the fair market value of the Common
Stock on that day as determined in good faith by the Company's Board of
Directors based upon (and consistent with) written advice from a member
firm of the New York Stock Exchange, Inc. selected by the Board of
Directors. As used in this Note, the term "Trading Day" means (x) if the
Common Stock is listed on at least one stock exchange, a day on which
there is trading on the principal stock exchange on which the Common
Stock is listed, (y) if the Common Stock is not listed on a stock
exchange, but sale prices of the Common Stock are reported on an
automated quotation system, a day on which trading is reported on the
principal automated quotation system on which sales of the Common Stock
are reported, or (z) if the Common Stock is not listed on a stock
exchange and sale prices of the Common Stock are not reported on an
automated quotation system, a day on which quotations are reported by
National Quotation Bureau Incorporated.
- No adjustment in the Conversion Price
will be required unless the adjustment would require a change of at least
1% in the Conversion Price; provided, however, that any adjustments which
are not made because of this Subparagraph 11(c)(viii) will be carried
forward and taken into account in any subsequent adjustment. All
calculations under this Paragraph 11 will be made to the nearest cent or
to the nearest one hundredth of a share, as the case may be.
- Whenever the Conversion Price is
adjusted, the Company will promptly send the Holder of this Note a notice
of the adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which the adjustment becomes effective
and containing a brief description of the events which caused the
adjustment.
- In any case in which this Paragraph 11
provides that an adjustment will become effective immediately after a
record date for an event, the Company may defer until the occurrence of
the event (A) issuing to the Holder of this Note, if principal is
converted after the record date and before the occurrence of the event,
the additional shares of Common Stock issuable upon the conversion by
reason of the adjustment and (B) paying to the holder any cash in lieu of
any fractional share required by Subparagraph 11(c).
6. If:
46
- the Company declares a dividend (or
any other distribution) on the Common Stock (other than a dividend
payable in cash out of retained earnings); or
- the Company authorizes the granting to
the holders of the Common Stock of rights or warrants to subscribe for or
purchase any shares of any class or any other rights or warrants; or
- the Company issues, or changes the
conversion, exchange or exercise price of, any Convertible Securities
(other than the Notes), rights, options (other than stock options issued
to employees or directors of the Company or its subsidiaries under a plan
approved by the Company's stockholders) or warrants; or
- the Company sells any Common Stock for
less than the Conversion Price on the date of the sale; or
- there is any reclassification of the
Common Stock (other than a subdivision or combination of the outstanding
Common Stock and other than a change in the par value, or from par value
to no par value, or from no par value to par value), or any
consolidation, merger, or statutory share exchange to which the Company
is a party and for which approval of any stockholders of the Company is
required, or any sale or transfer of all or substantially all the assets
of the Company; or
- there is a voluntary or an involuntary
dissolution, liquidation or winding up of the Company, then the Company
will mail to the Holder, at least 15 days before the applicable date
specified below, a notice stating the applicable one of (A) the date on
which a record is to be taken for the purpose of the dividend,
distribution or grant of rights or warrants, or, if no record is to be
taken, the date as of which the holders of Common Stock of record who
will be entitled to the dividend, distribution or rights or warrants will
be determined, (B) the date on which it is expected the Convertible
Securities will be issued or the date on which the change in the
conversion, exchange or exercise price of the Convertible Securities,
rights, options or warrants will be effective, or (C) the date on which
the reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up is expected to become
effective, and the date as of which it is expected that holders of record
of Common Stock will be entitled to exchange their shares of Common Stock
for securities or other property deliverable upon the reclassification,
consolidation, merger, share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give any such notice or any defect
in the notice will not affect the legality or validity of the
reclassification, consolidation, merger, share exchange, sale, transfer,
dissolution, liquidation or winding up.
7. If the Company sends the Holders of the Notes a
notice that the Company will prepay the Notes, or a notice required by Paragraph
6, the Holder will remain entitled to convert this Note into Common Stock until
5:00 New York City time on the day before the day specified in the notice on
which the Notes are to be prepaid.
47
12. If at the end of any calendar month, 12.1 the
Company's EBITDA during the twelve month period ending with, and
including, that month exceeded $25 million, and (b) the Company's most
recent twelve month rolling forecast which was presented to the Company's
Board of Directors forecasts that the Company's EBITDA for the twelve
month period to which it relates (which will include at least eight
months which are after the month end with regard to which the
determination is made) will exceed $25 million, on the later of (i) the
day on which the Company notifies the Holder that the conditions in
clauses (a) and (b) have been fulfilled (providing reasonably detailed
financial statements reflecting the Company's EBITDA for the 12 month
period described in clause (a)) and (ii) the day specified in Paragraph
13, this Note will automatically be converted into shares of Common Stock
at the Conversion Price in effect on that day.
13. 13.1 If (i) at or after the time when the Holder
surrenders this Note for conversion into Common Stock and before the
Common Stock is issued, or (ii) under the circumstances described in any
of Paragraph 5, 6, 8 or 12, either the Holder or the Company notifies the
other of them that, in its opinion (based on advice of counsel), shares
the Company is required to issue upon conversion of this Note may not be
issued until filings have been made under the HSR Act and the waiting
periods required by the HSR Act have either expired or been terminated,
(w) the Holder and the Company will each make as promptly as practicable
the filing it is required to make under the HSR Act with regard to the
issuance of those shares upon conversion of this Note, (x) each of them
will provide information and cooperate in all other respects to assist
the other of them in making its filing under the HSR Act, (y) each of
them will take all reasonable steps within its control (including
providing information to the Federal Trade Commission or the Department
of Justice) to cause the waiting periods required by that Act to be
terminated or to expire as promptly as practicable, and (z) the time when
the Company will issue the shares of Common Stock which are the subject
of the filing under the HSR Act will be deferred until the day after the
day on which the waiting periods under the HSR Act expire or the Company
is notified that the waiting periods under the HSR Act have been
terminated.
8. If at the time when the Holder surrenders this Note
for conversion into Common Stock (i) the Company's stockholders have not
approved the issuance upon conversion of this Note of the shares into which the
Holder has elected to convert this Note, and (ii) the issuance of those shares
on conversion of this Note without approval of the Company's stockholders would
violate the rules of any stock exchange or automated quotation system, the time
when the Company will issue the shares of Common Stock into which the Holder has
elected to convert this Note will be deferred until the day after the day on
which the Company's stockholders approve the issuance of those shares.
9. The Company will at all times reserve and keep
available, free from preemptive rights, out of the authorized but unissued
shares of Common Stock or the issued shares of Common Stock held in its
treasury, or both, for the purpose of effecting conversion of the Note, the
maximum number of shares of Common Stock, if any, which the Company would be
required to deliver upon the conversion of the entire principal sum evidenced by
this Note.
10. Before taking any action which would cause an
adjustment
48
reducing the Conversion Price below the then par value (if any) of the shares of
Common Stock deliverable upon conversion of this Note, the Company will take all
corporate action which may, in the opinion of its counsel, be necessary in order
that the Company may validly and legally issue fully paid and non-assessable
shares of Common Stock at the adjusted Conversion Price.
11. The Company will endeavor to list the shares of
Common Stock it may be required to deliver upon conversion of this Note, as
promptly as practicable after the date of this Note, and in any event before
they are delivered, upon each national securities exchange, if any, upon which
the Common Stock is listed at the time of delivery.
12. Before the Company delivers any securities upon
conversion of this Note, the Company will endeavor, in good faith and as
expeditiously as possible, to comply with all federal and state laws and
regulations requiring the registration of those securities with, or any approval
of or consent to the delivery of those securities by, any governmental
authority. Inability of the Company to issue securities on conversion of this
Note within 90 days after it is presented for conversion, because of failure to
cause registration of those securities to become effective or to obtain any
approval of or consent to the delivery of those securities will constitute a
failure by the Company to fulfill its obligations under this Note, even if the
failure to cause a registration to become effective or to obtain an approval or
consent was due to factors beyond the Company's control, unless the registration
did not become effective or the approval or consent was not obtained because of
acts or failures to act by the Holder.
13. The Company will pay any documentary stamp or
similar issue or transfer taxes payable in respect of the issue or delivery of
shares of Common Stock on conversion of this Note; except that the Company will
not be required to pay any foreign tax or any other tax which may be payable in
respect of any transfer involved in the issue or delivery of shares of Common
Stock in a name other than that of the Holder and no such issue or delivery will
be made unless and until the person requesting the issue or delivery has paid to
the Company the amount of any such tax or has established to the reasonable
satisfaction of the Company that the tax has been paid.
14. The Company will maintain a register in which it
will record the names and addresses of the Holders of the Notes. If the
Holder surrenders this Note to the Company with a request that it be
replaced by one or more new Notes in a total principal amount equal to
the principal sum evidenced by this Note, and the Holder pays to the
Company a sum equal to any tax due as a result of any transfer involved
in the issue of the new Notes, or establishes to the reasonable
satisfaction of the Company that the tax has been paid, the Company will
issue the new Note or Notes as requested by the Company, including
recording the persons requested by the Company as the Holders of the new
Notes.
15. No amendment of this Note, waiver of any provision
of this Note, or extension of the time by which the Company must make any
payment of principal or interest required by this Note, will be effective
unless it is made in writing by the Holders of a majority in principal
amount of all the Note. Any waiver or extension will be effective only in
the instance and for the purpose for which it is given.
49
16. The remedies provided in this Note are cumulative
and are not exclusive of any other remedies provided by law. The Company
will pay on demand any expenses (including reasonable attorneys fees and
expenses) incurred by the Holder in enforcing its rights under this Note.
17. Any notice or other communication required or
permitted to be given under this Note must be in writing and will be
deemed given on the day when it is delivered in person or sent by
facsimile (with proof of receipt at the number to which it is required to
be sent), or on the third business day after the day on which it is
mailed by first class mail from within the United States of America,
addressed (i) if to the Company, to the Company's principal executive
offices and to the principal facsimile number at those executive offices,
Attention: Chief Executive Officer, or at such other address or facsimile
number as the Company may specify to the Holder in writing, and (ii) if
to the Holder, at the address or facsimile number specified by the Holder
to the Company in writing.
18. This Note will be binding upon the Company and its
assigns, and will inure to the benefit of the Holder and the Holder's
assigns. This Note will be governed by, and construed under, the laws of
the State of New York.
IN WITNESS WHEREOF, the Company is executing this Note on the date
shown on the first page.
GLOBAL VACATION GROUP, INC.
By:
-----------------------------------------
Title:
50
NOTICE OF ELECTION TO CONVERT
The undersigned holder of a 9% Convertible Subordinated Note due
2007 (the "Note") of Global Vacation Group, Inc. (the "Company") elects to
convert $______________ principal amount of the Note into shares of common stock
of the Company or other assets, as provided in the Note, at the Conversion Rate
in effect at the date of this Notice.
Date: ____________________
----------------------------
51
EXHIBIT 2.2-B
AMENDMENT NO. 1 TO REGISTRATION RIGHTS AGREEMENT
THIS AMENDMENT NO. 1 TO THE REGISTRATION RIGHTS AGREEMENT (this
"AMENDMENT") is made as of June 20, 2000, by and among Global Vacation Group,
Inc., a New York corporation (the "COMPANY"), ▇▇▇▇▇▇ Equity Investors III, L.P.,
a Delaware limited partnership (the "INVESTOR"), and GV Investment, LLC, a
Delaware limited liability company ("GVI").
RECITALS:
A. The Company, the Investor and certain stockholders of the
Company (the "STOCKHOLDERS") are parties to a Registration Rights Agreement (the
"REGISTRATION AGREEMENT"), made as of June 12, 1998, pursuant to which the
Investor and the Stockholders are provided certain rights to registration of
their shares of Common Stock, par value $0.01 per share, of the Company ("COMMON
STOCK").
B. Pursuant to a Note Purchase Agreement, dated as of June 20, 2000,
by and among the Company and GVI, the Company has issued and sold $27,500,000 of
its 9% Convertible Subordinated Notes (the "CONVERTIBLE NOTES") to GVI, which
Convertible Notes are convertible into shares of Common Stock.
C. In connection with the issuance to GVI of the Convertible Notes,
the Company, the Investor and GVI have determined to amend certain provisions of
the Registration Agreement on the terms specified herein to provide the
registration rights set forth herein for the shares of Common Stock issuable to
GVI upon conversion of the Convertible Notes.
D. Unless otherwise provided in this Amendment, capitalized terms
used herein shall have the meanings set forth in the Registration Agreement.
AGREEMENT:
In consideration of the foregoing and of the mutual covenants and
agreements set forth herein, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. AMENDMENTS.
A. Section 1(c) of the Registration Agreement shall be amended
to read in its entirety as follows:
" (c) SHORT-FORM REGISTRATIONS. In addition to the
Long-Form Registrations provided pursuant to Section l(b),
the holders of twenty-five percent (25%) or more of the
Registrable Securities shall be entitled to request four
registrations under the Securities Act of all or part of
their Registrable Securities on Forms S-2 or S-3 or any
similar short-form registration ("SHORT-FORM
REGISTRATIONS") in which the Company shall pay all
Registration Expenses. After the Company has become subject
to the reporting requirements of the Securities Exchange
Act, the Company shall use its best efforts to make
Short-Form Registrations on Form S-3 available for the sale
of Registrable Securities, including, without limitation,
as a "shelf registration" if so requested by the holders of
twenty-five percent (25%) or more of the Registrable
Securities."
52
B. Section 7(a) of the Registration Agreement shall be amended
to read in its entirety as follows:
" (a) in the case of a registration which is
underwritten, agrees to sell such Person's securities on
the basis provided in the applicable underwriting
arrangement; provided, however, that no holder of less than
20% of all Registrable Securities included in any
underwritten registration (other than an executive officer
or director of the Company) shall be required to make any
representations or warranties to the Company or the
underwriters (other than representations and warranties
regarding such holder, such holder's ownership of stock and
such holder's intended method of distribution) or to
undertake any indemnification obligations to the Company or
the underwriters with respect thereto, except as otherwise
provided in Section 6 hereof."
C. To Section 8 of the Registration Agreement shall be added
the following subsections and the remaining subsections of Section 8 shall be
renumbered accordingly:
" (a) The term "CONVERTIBLE NOTES" means the
$27,500,000 of 9% Convertible Subordinated Notes issued by
the Company to GVI, pursuant to the Note Purchase
Agreement, dated as of June 20, 2000, by and among the
Company and GVI."
" (b) The term "GVI" means GV Investment LLC, a
Delaware limited liability company, or its successors or
permitted assigns."
D. Section 8(a) of the Registration Agreement shall be
amended to read in its entirety as follows:
" (d) The term "INVESTOR REGISTRABLE SECURITIES"
means all Registrable Securities (i) initially issued by
the Company to the Investor and the other purchasers under
the Purchase Agreement or the Recapitalization Agreement;
(ii) initially issued by the Company to GVI upon conversion
of the Convertible Notes; and (iii) all other Registrable
Securities subsequently acquired by holders of Investor
Registrable Securities. Investor Registrable Securities
will continue to be Investor Registrable Securities if held
or acquired by any holder of Registrable Securities other
than a holder of Management Registrable Securities.
Notwithstanding anything in this Agreement to the contrary,
for purposes of determining priority in registrations among
Investor Registrable Securities pursuant to Sections 1(e),
2(c) and 2(d) of this Agreement, in the first registration
to occur after June 20, 2000 and before June 20, 2003, the
Investor shall have one hundred fifty percent (150%) of its
pro rata allocation (and GVI's allocation shall be reduced
to accommodate such preference), but in no event shall
GVI's allocation be reduced without its consent below ten
percent (10%) of the aggregate Registrable Securities to be
sold by the Investor and GVI in such registration. All pro
rata calculations made pursuant to Sections 1(e), 2(c) and
2(d) of this Agreement shall be based upon the number of
Registrable Securities held by each of the Investor and GVI
at the time of the registration (and not on an as-converted
basis)."
E. Section 8(h) of the Registration Agreement shall be amended
to read in its entirety as follows:
" (j) The term "REGISTRABLE SECURITIES" means
(i) any Common Stock issued pursuant to the
Recapitalization Agreement, the Purchase Agreement, any
Management Agreement or any Seller Subscription Agreement
53
(whether issued before or after the date hereof), (ii) any
Common Stock actually issued upon conversion of the
Convertible Notes; (iii) any other Common Stock issued with
respect to the securities referred to in clauses (i) and
(ii) by way of a stock dividend or stock split or in
connection with an exchange or combination of shares,
recapitalization, merger, consolidation or other
reorganization, and (iv) any other shares of Common Stock
held by Persons holding securities described in clauses
(i), (ii) and (iii), inclusive above, including, without
limitation, any shares of Common Stock issued upon
conversion of the Company's preferred stock. As to any
particular Registrable Securities, such securities shall
cease to be Registrable Securities when they have been
distributed to the public pursuant to a offering registered
under the Securities Act or sold to the public through a
broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in
force)."
2. SCOPE OF AMENDMENT. Except as expressly modified hereby,
the Registration Agreement is hereby ratified and confirmed and shall continue
in full force and effect.
3. JOINDER TO REGISTRATION AGREEMENT. GVI acknowledges, agrees
and confirms that, by its execution of this Amendment, GVI will be deemed to be
a party to the Registration Agreement and shall have all of the rights and
obligations of a "SHAREHOLDER" thereunder as if it had executed the Registration
Agreement, as amended by this Amendment. GVI hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
contained in the Registration Agreement, as amended by this Amendment. The
Company, the Investor and GVI acknowledge, agree and confirm that all shares of
Common Stock received by GVI upon conversion of the Convertible Notes shall be,
upon issuance to GVI, deemed Investor Registrable Securities for all purposes
under the Registration Agreement.
4. GOVERNING LAW. This Amendment shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to any choice of law or conflict of law rules or provisions (whether of
the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.
5. SIGNATURE IN COUNTERPARTS; FACSIMILE TRANSMISSION. This
Amendment may be executed in separate counterparts, none of which need contain
the signatures of all parties, each of which shall be deemed to be an original,
and all of which taken together constitute one and the same instrument. It shall
not be necessary in making proof of this Amendment to produce or account for
more than the number of counterparts containing the respective signatures of, or
on behalf of, all the parties hereto. Signatures of any party to this Amendment
which are sent to the other parties hereto by facsimile transmission shall be
binding as evidence of acceptance of the terms hereof by such signatory party,
with originals to be circulated to the other parties in due course.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
54
IN WITNESS WHEREOF, each of the parties hereto has executed this
Amendment No. 1 to the Registration Rights Agreement as of the date first
written above.
GLOBAL VACATION GROUP, INC.
By:
------------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
▇▇▇▇▇▇ EQUITY INVESTORS III, L.P.
By: TC Equity Partners, LLC
Its: General Partner
By:
------------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
GV INVESTMENT, LLC
By:
------------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
55
EXHIBIT 2.2-C
SHAREHOLDERS AGREEMENT
This SHAREHOLDERS AGREEMENT (this "AGREEMENT") is made and entered into as of
June 20, 2000, by and between ▇▇▇▇▇▇ Equity Investors III, L.P., a Delaware
limited partnership ("▇▇▇▇▇▇"), and GV Investment LLC, a Delaware limited
liability company ("GVI"). Certain capitalized terms used herein are defined in
Article I.
RECITALS:
A. Pursuant to a Note Purchase Agreement (the "PURCHASE AGREEMENT"), dated
as of June 20, 2000, by and between Global Vacation Group, Inc., a New York
corporation (the "COMPANY"), and GVI, the Company has issued and sold
$27,500,000 of its 9% Convertible Subordinated Notes (the "CONVERTIBLE NOTES")
to GVI, which Convertible Notes are convertible into shares of the Company's
common stock (the "COMMON STOCK").
▇. ▇▇▇▇▇▇ is the owner of a majority of the Common Stock of the Company.
C. In connection with the Purchase Agreement, ▇▇▇▇▇▇ and GVI have determined
that it is in their respective best interests to enter into, and perform under,
this Agreement for the purposes, among others, of: (i) assuring continuity in
the ownership of the Company; and (ii) limiting the manner and terms by which
the Shareholders' Common Stock may be transferred.
AGREEMENT:
In consideration of the foregoing and the covenants set forth herein and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement, in addition to terms defined elsewhere
herein, the following terms when used herein shall have the following meanings:
1.1 "AFFILIATE," with respect to
any Person, shall mean: (i) any other Person
that directly or indirectly, controls, is
controlled by, or is under common control
with, such Person; or (ii) a general or
limited partner or member of such Person. With
respect to GVI, the term "Affiliate" shall
mean any investment fund to which Three Cities
Research, Inc. acts as the principal
investment advisor and manager.
1.2 "BOARD" shall mean the Board
of Directors of the Company.
56
1.3 "EQUITY SECURITIES" shall
mean: (i) any securities of the Company having
voting rights with respect to the election of
the Board not contingent upon default
(including, without limitation, shares of the
Common Stock); (ii) any other securities
evidencing any equity ownership interest in
the Company; and (iii) any securities
convertible into or exercisable or
exchangeable for any of the foregoing
securities (including, without limitation, the
Convertible Notes).
1.4 "FAMILY MEMBERS" with respect to an
individual, shall mean such individual's spouse, parents,
siblings and children.
1.5 "PERMITTED TRANSFER" shall mean a Public Sale or a
Transfer of Convertible Notes or shares of Common Stock by a
Shareholder to: (i) one or more Family Members of such Shareholder, or
to such Shareholder's estate; (ii) a trust or limited liability
company created and maintained solely for the benefit of one or more
Family Members of such Shareholder; or (iii) an Affiliate of such
Shareholder. Prior to any such Transfer, each transferee shall execute
and deliver a Joinder Agreement to this Agreement. Upon such execution
and delivery, each such transferee (other than a Public Transferee)
shall be included within the definition of "SHAREHOLDER" for purposes
of this Agreement.
1.6 "PERSON" means any individual, corporation, partnership,
joint venture, association, joint-stock company, limited liability
company, trust, unincorporated organization or government body.
1.7 "PUBLIC TRANSFEREE" means a transferee of a Shareholder
pursuant to a Public Sale.
1.8 "PUBLIC SALE" means any sale of Common Stock sold
pursuant to a registration statement in compliance with the Securities
Act of 1933, as amended, or sold pursuant to Rule 144 promulgated
under the Securities Act of 1933, as amended.
1.9 "SHAREHOLDERS" shall mean collectively the Persons named in
the recitals and each other Person, other than a Public Transferee, that becomes
a holder of Equity Securities and agrees in writing to be bound by and comply
with the terms of this Agreement.
1.10 "TRANSFER" shall mean any actual or proposed disposition
of all or a portion of an interest (legal or equitable) by any means,
direct or indirect, absolute or conditional, voluntary or involuntary,
including, but not limited to, by sale, assignment, put, transfer,
pledge, hypothecation, mortgage or other encumbrance, operation of law,
distribution, settlement, exchange, waiver, abandonment, gift,
alienation, bequest or disposal.
ARTICLE II
BOARD OF DIRECTORS
2.1 SIZE AND COMPOSITION OF THE BOARD. Each Shareholder shall
vote all of his or its shares of Common Stock and any other voting Equity
Securities of the Company over which such Shareholder has voting control and
shall take all other necessary or desirable actions within his or its control
(whether in his or its capacity as a Shareholder, director, member of a board
committee or officer of the Company or otherwise, and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written resolutions in lieu of meetings), to
ensure that: (i) the authorized number of directors on the Board shall be
established and maintained at eight (8) directors; (ii) of the eight (8)
directors,
57
▇▇▇▇▇▇ shall have six (6) nominees on the Board; and (iii) of the eight (8)
directors, GVI shall have two (2) nominees on the Board, provided, however that:
(a) if at any point in time GVI holds, on an
as-converted basis: 2,619,047 or fewer shares of Common Stock (as adjusted from
time to time for any stock splits, stock dividends, combinations or any similar
events); or fifteen percent (15%) or less of the total outstanding Common Stock,
on a Fully-Diluted Basis (as defined below), but more than 1,309,523 shares of
Common Stock and more than five (5%) percent of the outstanding Common Stock, on
a Fully-Diluted Basis, then ▇▇▇▇▇▇ and GVI shall each vote all of their
respective shares and each shall take all other necessary or desirable actions
within its control to cause only one (1) of GVI's nominees to become or continue
to be a member of the Board; and
(b) if at any point in time GVI holds, on an as-converted
basis: (i) 1,309,523 or fewer shares of Common Stock (as adjusted from time to
time for any stock splits, stock dividends, combinations or any similar events);
or (ii) five percent (5%) or less of the total outstanding Common Stock, on a
Fully-Diluted Basis, then ▇▇▇▇▇▇ shall not be required to vote its shares or to
take any other action to cause any of GVI's nominees to become or continue to be
members of the Board.
The Shareholders shall vote all of their voting Equity Securities
to ensure that the number of directors comprising the Board shall not be
increased without the prior written consent of: (i) GVI and (ii) ▇▇▇▇▇▇.
Notwithstanding anything in this Agreement to the contrary, the parties to this
Agreement acknowledge and agree that the Board shall have the right, pursuant to
the Company's By-laws, to select and recommend individuals for election to the
Board and nothing contained in this Section 2.1 shall conflict with such right.
Solely for the purposes of this Section 2.1, the term "Fully-Diluted Basis"
shall mean giving effect to the conversion of all of the Convertible Notes and
to the exercise of all options which have been granted under the Company's
employee stock option plan (as such plan is in effect on June 20, 2000), but not
to the exercise, conversion or exchange of any other options or convertible or
exchangeable securities.
2.2 REMOVAL. ▇▇▇▇▇▇ and GVI shall each vote all of their
respective shares and each shall take all other necessary or desirable actions
within its control to ensure that the removal from the Board (with or without
cause) of any of the nominees of ▇▇▇▇▇▇ and GVI, respectively, set forth above
is made only upon the written request of the Person or Persons entitled to
designate such director pursuant to Section 2.1; provided, however, that in the
event that GVI is no longer entitled to the number of directors that it then
currently has on the Board as provided pursuant to Section 2.1(a) or (b) above,
then at ▇▇▇▇▇▇'▇ request, GVI shall use its reasonable best efforts to cause its
nominee(s) not entitled to be a director of the Company to resign from the
Board.
2.3 VACANCY. In the event that any director nominated hereunder
for any reason ceases to serve as a member of the Board during his term of
office, ▇▇▇▇▇▇ and GVI shall each vote all of their respective shares and each
shall take all other necessary or desirable actions within its control to cause
the resulting vacancy on the Board to be filled by a director nominated by the
Person or Persons entitled to nominate such director pursuant to Section 2.1.
2.4 REPRESENTATIONS. Each Shareholder represents that he, she
or it has not granted and is not a party to any proxy, voting trust or other
agreement which is inconsistent with or conflicts with the provisions of this
Agreement, and no holder of Equity Securities shall grant any proxy or become
party to any voting trust or other agreement which is inconsistent with or
conflicts with the provisions of this Agreement.
(i) ARTICLE III
VOTING COMMITMENT; OFFICERS
3.1 VOTING COMMITMENT. ▇▇▇▇▇▇ shall vote all of its shares of
Common Stock and
58
any other voting Equity Securities of the Company over which ▇▇▇▇▇▇ has voting
control, and will take all other actions within its control to ensure that a
meeting of the shareholders of the Company is held not later than within one (1)
year after the date of this Agreement, at which the Company's shareholders are
asked to vote on a proposal to approve the issuance of the shares of Common
Stock issuable upon conversion of the Convertible Notes. At such shareholder
meeting, ▇▇▇▇▇▇ shall vote all of its shares of Common Stock and any other
voting Equity Securities of the Company over which ▇▇▇▇▇▇ has voting control,
and will take all other actions within its control to cause such proposal to be
approved by the shareholders. In connection with any Transfer of shares of
Common Stock by ▇▇▇▇▇▇ to one or more third parties prior to such shareholder
meeting that would cause the amount of Common Stock held by ▇▇▇▇▇▇ and its
Affiliates to fall below fifty percent (50%) of the outstanding shares of common
stock of the Company as of such date (excluding any shares of Common Stock
issued upon conversion of the Convertible Notes), ▇▇▇▇▇▇ shall require the
transferee of such shares of Common Stock to agree to vote those shares and take
other actions as required by this Section 3.1.
3.2 OFFICERS. If either ▇▇▇▇▇▇ or GVI requests a change in the
Chief Executive Officer or Chief Financial Officer of the Company, then
the other party shall do all things in its power to effect that change.
Both parties shall support only such replacement candidates for the
offices of Chief Executive Officer or Chief Financial Officer of the
Company as are mutually agreed upon. Notwithstanding the foregoing, the
parties acknowledge and agree that the Company's Board shall have the
sole right to elect or remove officers of the Company and nothing
contained in this Section 3.2 shall conflict with such right.
ARTICLE IV
GENERAL TRANSFERABILITY RESTRICTIONS
Except for Permitted Transfers and other Transfers in compliance with
Articles V and VI of this Agreement, no Shareholder shall Transfer or cause or
permit to be Transferred any Equity Securities owned or controlled by such
Shareholder, and any purported Transfer in violation hereof shall be null and
void and the Shareholders shall use their reasonable best efforts to cause the
Company not to record such transfer on the Company's books or treat any
purported transferee of such Equity Securities as the owner of such shares for
any purpose. Prior to Transferring any Equity Securities to any Person (other
than pursuant to a Public Sale), the transferring Shareholder shall cause the
prospective transferee to execute and deliver to the Company, ▇▇▇▇▇▇ and GVI a
Joinder to this Agreement. All references to ▇▇▇▇▇▇ and GVI in Articles V or VI
hereunder shall include their respective Affiliates and transferees pursuant to
a Permitted Transfer (other than to one or more Public Transferees).
ARTICLE V
TAG ALONG RIGHTS
5.1 ▇▇▇▇▇▇ TRANSFER. ▇▇▇▇▇▇ shall not engage in any transaction
or transactions (including a merger, consolidation or similar business
combination) that involves the Transfer by ▇▇▇▇▇▇ (together with any Affiliates
of ▇▇▇▇▇▇) to a third party of greater than 2,837,175 shares of Common Stock, as
adjusted from time to time for any stock splits, stock dividends, combinations
or any similar events (other than a "DRAG ALONG SALE" as defined in Article VI
below and other than a Permitted Transfer), without first offering to GVI the
right to participate in such Transfer as set forth in this Article V (a "▇▇▇▇▇▇
TRANSFER").
5.2 GVI STOCK TRANSFER. GVI shall not engage in any transaction
or transactions (including a merger, consolidation or similar business
combination) that involves the Transfer by GVI (together with any Affiliates of
GVI) to a third party of greater than 1,571,429 shares of Common Stock, as
59
adjusted from time to time for any stock splits, stock dividends, combinations
or any similar events (other than a "DRAG ALONG SALE" as defined in Article VI
below and other than a Permitted Transfer), without first offering to ▇▇▇▇▇▇ the
right to participate in such Transfer as set forth in this Article V (a "GVI
STOCK TRANSFER").
5.3 GVI NOTES TRANSFER. GVI shall not engage in any transaction
or transactions that involves the Transfer by GVI (together with any Affiliates
of GVI) to a third party of Convertible Notes in an aggregate principal amount
of greater than $8,250,000 (other than a Permitted Transfer), without first
offering to ▇▇▇▇▇▇ the right to participate in such Transfer as set forth in
this Article V (a "GVI NOTES TRANSFER"). Notwithstanding the foregoing, a
Transfer of Convertible Notes to a third party shall be deemed not to be a GVI
Notes Transfer for purposes of this Article V if: (a) the aggregate
consideration paid or payable for the Convertible Notes is not more than the
outstanding principal and interest due on such Convertible Notes as of the date
of such Transfer; and (b) the consideration per share paid or payable for any
shares of Common Stock Transferred in any contemporaneous or related Transfers
of Common Stock by GVI is less than the Conversion Price (as defined in the
Convertible Notes).
5.4. AGGREGATION. In any series of contemporaneous or related
Transfers of Common Stock and/or Convertible Notes that would: (a) in the case a
series of Transfers of Common Stock by ▇▇▇▇▇▇, result in the Transfer of an
aggregate of 2,837,175 or more shares of Common Stock; and (b) in the case of a
series of Transfers by GVI: (i) result in the Transfer of an aggregate of
1,571,429 or more shares of Common Stock; (ii) result in the Transfer of
Convertible Notes with an aggregate principal amount greater than $8,250,000; or
(iii) result in the Transfer of any combination of Common Stock or Convertible
Notes constituting, on an as-converted basis, 1,571,429 or more shares of Common
Stock, such series of Transfers shall be deemed to constitute a single Transfer
and the amounts of Common Stock and/or Convertible Notes Transferred thereby
shall be aggregated together so that such series of Transfers trigger the
provisions of either Section 5.1, in the case of a series of Transfers by
▇▇▇▇▇▇, or Section 5.2 or Section 5.3, in the case of a series of Transfers by
GVI. All share amounts in the preceding sentence shall be as adjusted from time
to time for any stock splits, stock dividends, combinations or any similar
events.
5.5 NOTICE. Before consummating a ▇▇▇▇▇▇
Transfer, a GVI Stock Transfer or a GVI Notes Transfer (each, a "TAG ALONG
SALE"), either ▇▇▇▇▇▇ or GVI, as the case may be (the "SELLING PARTY"), shall
first deliver a written notice (a "TRANSFER NOTICE") to the other party (the
"TAGGING PARTY") stating: (i) in the case of a ▇▇▇▇▇▇ Transfer or a GVI Stock
Transfer, the Selling Party's desire to Transfer shares of Common Stock to a
third party, the number of shares of Common Stock proposed to be Transferred,
and the price per share of Common Stock and other general terms of the proposed
Transfer, including any escrow of funds from such Transfer; or (ii) in the case
of a GVI Notes Transfer, the Selling Party's desire to Transfer one or more
Convertible Notes to a third party, the number of Convertible Notes proposed to
be Transferred, and the price per share of Common Stock that such proposed
Transfer of Convertible Notes represents, computed by dividing the aggregate
purchase price for the Convertible Notes proposed to be Transferred by the
number of shares of Common Stock for which those Convertible Notes could have
been converted at the time of Transfer.
5.6 TAGGING PARTY RIGHT. The Tagging Party may elect, by
delivering to the Selling Party a written notice (a "TAG ALONG NOTICE") of its
election within fifteen (15) days after receipt of the Transfer Notice (the "TAG
ALONG PERIOD"), to participate in the Selling Party's Transfer of Common Stock
or Convertible Notes on the same terms and conditions specified in the Transfer
Notice. In the case of a GVI Notes Transfer, the "same terms and conditions"
shall mean that the Tagging Party shall have the right to sell shares of Common
Stock for the price per share of Common Stock determined by dividing the
aggregate purchase price for Convertible Notes proposed to be sold by the number
of shares of Common Stock for which those Convertible Notes could have been
converted at the time of sale. The Tag Along Notice shall specify the maximum
number of Common Stock shares that the Tagging Party may elect to Transfer,
which number shall not exceed the product (rounded down to the nearest whole
number) obtained by multiplying (x) the number of shares of Common Stock owned
by the Tagging Party (excluding any shares of Common Stock receivable upon
conversion of Convertible Notes) by (y) a fraction, the numerator of which is
the number of shares of Common Stock and/or shares receivable upon conversion of
Convertible Notes, as the case may be, proposed to be Transferred by the Selling
Party, and the
60
denominator of which is the aggregate number of shares of Common Stock either
owned by the Selling Party or receivable by the Selling Party upon conversion of
any Convertible Notes held by the Selling Party. If the Selling Party is selling
shares of Common Stock and the Tagging Party holds Convertible Notes, the
Tagging Party shall convert all such Convertible Notes to shares of Common Stock
prior to or concurrently with the Tag Along Sale. The Selling Party shall use
its commercially reasonable best efforts to interest the third party in
purchasing all the shares of Common Stock specified by the Tagging Party in the
Tag Along Notice, in addition to the Common Stock or Convertible Notes, as the
case may be, that the third party may already have agreed to purchase from the
Selling Party. If the third party refuses to purchase all of such additional
shares of Common Stock then the Selling Party must reduce the amount of Common
Stock or Convertible Notes, as the case may be, that it proposes to sell to such
third party by the amount necessary to enable the Tagging Party to sell to such
third party an amount of Common Stock equal to the product (rounded down to the
nearest whole number) obtained by multiplying (x) the aggregate number of shares
of Common Stock such third party is willing to acquire by (y) a fraction, the
numerator of which is the number of shares of Common Stock owned by the Tagging
Party and the denominator of which is the aggregate number of shares of Common
Stock owned by the Selling Party and the Tagging Party.
5.7 CONSUMMATION.
(a) At least ten (10) days prior to the
consummation of a Transfer by the Selling Party described in a
Transfer Notice and not before the earlier of (x) the end of the
Tag Along Period and (y) the receipt by the Selling Party of a Tag
Along Notice, the Selling Party shall provide written notice (a
"CONSUMMATION NOTICE") to the Tagging Party stating (i) the
identity of the third party transferee, (ii) the number of shares
of Common Stock that such the Tagging Party will be entitled to
sell to such third party pursuant to this Article V, and (iii) the
date the Transfer will be consummated. At least five (5) days
prior to the date of such consummation, the Tagging Party shall
deliver to the Selling Party for Transfer to the third party one
or more certificates, properly endorsed for Transfer, which
represent the number of shares of Common Stock such Tagging Party
is entitled to sell, as provided in the Consummation Notice. The
certificate(s) delivered to the Selling Party by the Tagging Party
shall be Transferred to the third party identified in the
Consummation Notice, as part of the consummation of the Transfer
of Common Stock pursuant to the terms and conditions specified in
the Transfer Notice and the Consummation Notice. Upon receipt of
the proceeds of the Transfer, the Selling Party shall promptly
remit to the Tagging Party that portion of such proceeds to which
such Tagging Party is entitled by reason of such Shareholder's
participation in such Transfer together with any stock
certificates for any shares not sold in the Transfer.
(b) In connection with a Transfer
pursuant to this Article V, the Tagging Party shall be
required to make representations and warranties regarding
the Common Stock or Convertible Notes that the Tagging
Party proposes to Transfer (including, without limitation,
the Tagging Party's ownership of and authority to Transfer
such Common Stock or Convertible Notes, the absence of any
liens or other encumbrances on such Common Stock or
Convertible Notes, and the compliance of such Transfer with
the federal and state securities laws and all other
applicable laws and regulations). In addition, if the
Tagging Party is a holder of more than ten percent (10%) of
the outstanding Common Stock, on an as-converted basis, it
shall also be required to provide customary representations
and warranties regarding the Company.
5.8 SECURITIES LAWS. Notwithstanding anything to the contrary
in this Article V, the Selling Party shall have no obligation to permit a
Tagging Party, and no Tagging Party shall have the right, to participate as a
Tagging Party in a ▇▇▇▇▇▇ Transfer, a GVI Stock Transfer or a GVI Notes Transfer
if such Transfer (i) would not be exempt from all registration requirements
under federal and state securities laws or (ii) would violate, or cause the
Transfer to violate, any applicable federal or state laws.
61
ARTICLE VI
DRAG ALONG RIGHTS
6.1 DRAG ALONG SALE. Subject to Section 6.3, if either ▇▇▇▇▇▇
or GVI (the "DRAGGING PARTY") in its sole discretion determines to accept an
offer from a third party that is not an Affiliate of such Dragging Party to
purchase all of the shares of Common Stock then held by the Dragging Party, then
the other party (the "DRAGGED PARTY") shall be required to sell all the shares
of Common Stock either held or receivable upon conversion of any Convertible
Notes held by such party pursuant to such offer (the "DRAG ALONG SALE"). Prior
to commencing any Drag Along Sale, the Dragging Party shall convert all
Convertible Notes held by such Dragging Party to shares of Common Stock. If a
Drag Along Sale is structured as a: (i) merger or consolidation, each Dragged
Party shall waive any dissenters' rights, appraisal rights or similar rights in
connection with such merger or consolidation; or (ii) sale of stock, then each
Dragged Party shall agree to sell all of its shares of Common Stock and to
either (a) convert all Convertible Notes and sell all shares of Common Stock
received upon such conversion, on the terms and conditions approved by the
Dragging Party or (b) elect to receive on the Drag Along Sale Date from the
purchaser in the Drag Along Sale the aggregate principal and accrued interest on
all outstanding Convertible Notes held by such Dragged Party (a "FORCED
REDEMPTION") as of such date. Each Dragged Party in such Drag Along Sale: (i)
shall be subject to the same terms and conditions of sale; and (ii) shall
execute such documents and take such actions as may be reasonably required by
the Dragging Party.
6.2 DRAG NOTICE. The Dragging Party shall provide the Dragged
Party with written notice (the "DRAG NOTICE") of a Drag Along Sale at least
fifteen (15) days prior to the date of consummation of such sale (the "DRAG
ALONG SALE DATE"). The Drag Notice shall set forth: (i) the identity of the
third party transferee in a Drag Along Sale; (ii) the price and the other
general terms of the proposed Transfer; and (iii) the Drag Along Sale Date.
6.3 FORM OF CONSIDERATION. Upon the consummation of a Drag
Along Sale: (i) each holder of Common Stock (including the Dragging Party) shall
receive the same form of consideration and the same amount of consideration per
share as each other holder of Common Stock; (ii) if any holders of Common Stock
are given an option as to the form and amount of consideration to be received,
then each other holder of Common Stock shall be given the same option; and (iii)
any non-cash consideration received by holders of Common Stock pursuant to the
terms of a Drag Along Sale shall be allocated among the Dragged Party and the
Dragging Party pro rata based upon each transferor's percentage ownership of the
aggregate shares of Common Stock held by the Dragging Party and the Dragged
Party. If any portion of the consideration in a Drag Along Sale is subject to
escrow or a future contingency, the Dragged Party's right to the proceeds of the
Drag Along Sale shall be proportionally subject to such escrow and/or
contingency and the future payments due therefrom.
6.4 CONSUMMATION.
(a) At least five (5) days prior to the
Drag Along Sale Date, the Dragged Party shall either (i)
convert all Convertible Notes held by such Dragged Party
and deliver to the Dragging Party for Transfer to the third
party one or more certificates, properly endorsed for
Transfer, which represent all of the shares of Common Stock
held by such Dragged Party; or (ii) elect to proceed with a
Forced Redemption in compliance with Section 6.1. Such
certificate(s) shall be Transferred to the third party
transferee identified in the Drag Notice, as part of the
consummation of the Drag Along Sale. Upon receipt of the
proceeds of the Drag Along Sale, the Dragging Party shall
promptly remit to the Dragged Party that portion of such
proceeds to which such Dragged Party is entitled by reason
of such Dragged Party's participation in such Drag Along
Sale.
(b) In connection with a Drag
Along Sale, the Dragged Party shall be required to make
representations and warranties
62
regarding the shares of Common Stock that such Dragged
Party Transfers in such sale (including, without
limitation, such Dragged Party's ownership of and authority
to Transfer such shares of Common Stock and the absence of
any liens or other encumbrances on such shares of Common
Stock). In addition, any Dragged Party who is a holder of
more than ten percent (10%) of the outstanding Common
Stock, on an as-converted basis, shall also be required to
provide customary representations and warranties regarding
the Company.
ARTICLE VII
TERMINATION; ADDITIONAL PARTIES
7.1 TERMINATION. All rights and obligations set forth in this
Agreement, to the extent not previously terminated, shall terminate upon the
earlier of: (i) the written agreement of ▇▇▇▇▇▇ and GVI; (ii) the closing of a
Drag Along Sale; (iii) the closing of any Transfer or series of related
Transfers of shares of Common Stock, Convertible Notes or any combination of
shares of Common Stock and Convertible Notes that results in ▇▇▇▇▇▇ and GVI and
their respective Affiliates holding together, on an as-converted basis, less
than 7,347,672 shares of Common Stock, as adjusted from time to time for any
stock splits, stock dividends, combinations or any similar events; or (iv) at
such time that either (a) ▇▇▇▇▇▇'▇ or its Affiliates' holdings of Common Stock,
on a fully-diluted and as-converted basis, are less than five percent (5%) of
the outstanding common stock of the Company; or (b) GVI's or its Affiliates'
holdings of Common Stock, on a fully-diluted and as-converted basis, are less
than five percent (5%) of the outstanding common stock of the Company.
7.2 ADDITIONAL PARTIES. All additional shares of capital stock
issued by the Company to a Shareholder shall be deemed to be "Equity Securities"
owned by such Shareholder for purposes of this Agreement.
ARTICLE VIII
MISCELLANEOUS
8.1 LEGEND. All certificates evidencing Equity Securities
restricted by this Agreement shall bear a legend indicating the existence of the
restrictions imposed hereby and a stop transfer order may be placed with respect
to such securities. The legend referred to in the preceding sentence shall be
substantially in the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
TRANSFER RESTRICTIONS AND OTHER TERMS OF A SHAREHOLDERS AGREEMENT
DATED AS OF JUNE 20, 2000, AMONG CERTAIN SHAREHOLDERS OF GLOBAL
VACATION GROUP, INC. (THE "COMPANY") AND MAY NOT BE TRANSFERRED
EXCEPT IN ACCORDANCE WITH SUCH AGREEMENT. A COPY OF SUCH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
FURNISHED UPON REQUEST TO THE HOLDER OF RECORD OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE.
8.2 COMPLIANCE WITH ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ANTITRUST IMPROVEMENTS
ACT. Conversion of the Convertible Notes into shares of Common Stock pursuant to
this Agreement may not be made without a filing under the ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR ACT") and the
expiration or termination of the applicable waiting periods under the HSR Act.
All time periods concerning conversion of the Convertible Notes and actions to
be taken after conversion of the Convertible Notes shall be equitably extended
to reflect delays caused by such filing and the expiration or termination of
such waiting periods.
63
8.3 NO WAIVER OF RIGHTS. No failure or delay on the part of any
party in the exercise of any power or right hereunder shall operate as a waiver
thereof. No single or partial exercise of any right or power hereunder shall
operate as a waiver of such right or power or of any other right or power. The
waiver by any party of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any other or subsequent breach hereunder.
Except as otherwise expressly provided herein, all rights and remedies existing
under this Agreement are cumulative with, and not exclusive of, any rights or
remedies otherwise available.
8.4 AMENDMENT. Except as otherwise expressly set forth in this
Agreement, this Agreement may be amended or supplemented only by the written
agreement of ▇▇▇▇▇▇ and GVI. Any amendment approved by ▇▇▇▇▇▇ and GVI pursuant
to the preceding sentence shall be binding upon all other Shareholders.
8.5 ENTIRE AGREEMENT; SUCCESSORS; THIRD PARTIES. This Agreement
contains the entire agreement among the parties with respect to the transactions
contemplated hereby and supersedes all prior arrangements or understandings with
respect thereto, written or oral. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the parties hereto and their
respective successors, heirs, executors, administrators and permitted assigns.
Except as specifically set forth herein, nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto and
their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities.
8.6 NO ASSIGNMENT. No party hereto may assign any of its rights
or obligations under this Agreement to any other person, except that ▇▇▇▇▇▇ and
GVI may assign part or all of their respective rights and obligations hereunder
to one or more of their respective Affiliates, and their respective successors
and assigns.
8.7 NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally, by facsimile or sent by overnight express or by registered or
certified mail, postage prepaid, addressed as follows:
If to the Company:
Global Vacation Group, Inc.
▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to ▇▇▇▇▇▇:
▇▇▇▇▇▇ Equity Investors III, L.P.
c/▇ ▇▇▇▇▇▇ Capital Partners
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
64
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
If to GVI:
GV Investment LLC
c/0 Three Cities Research, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: J. ▇▇▇▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ Chance ▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
All notices to any of the parties hereto shall be sent to the
addresses set forth above, return receipt requested. All deliveries of notice
shall be deemed effective when received by the persons entitled to such receipt
or when delivery has been attempted but refused by such person or persons.
8.8 CAPTIONS. The captions contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
8.9 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
8.10 GOVERNING LAW AND VENUE. All questions concerning the
construction, validity and interpretation of this Agreement and the exhibits
hereto will be governed by and construed in accordance with the laws of the
State of New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York. Any party bringing any action under this Agreement shall only
be entitled to choose the state or federal courts located in the Borough of
Manhattan in New York City as the venue for such action, and each party hereto
consents to the jurisdiction of the court chosen in such manner for such action.
8.11 SEVERABILITY. The provisions of this Agreement are
severable, and the unenforceability of any provision of this Agreement shall not
affect the enforceability of the remainder of this Agreement. The parties
acknowledge that it is their intention that if any provision of this Agreement
is determined by a court to be invalid, illegal or unenforceable as drafted,
that provision should be construed in a manner designed to effectuate the
purpose of that provision to the greatest extent possible under applicable law.
8.12 SPECIFIC PERFORMANCE. The rights of the parties under this
Agreement are unique and the failure of a party to perform its obligations
hereunder would irreparably harm the other parties hereto. Accordingly, the
parties shall, in addition to such other remedies as may be available at law
65
or in equity, have the right to enforce their rights hereunder by actions for
specific performance to the extent permitted by law.
8.13 FURTHER ASSURANCES. Each of the parties hereto agrees to
execute all such further instruments and documents and to take all such further
action as any other party may reasonably require in order to effectuate the
terms and purposes of this Agreement.
8.14 FIDUCIARY DUTY. Notwithstanding the foregoing, nothing
contained in this Agreement shall in any way impair any fiduciary duties of the
Shareholders or any directors of the Company to the Company and no Shareholder
shall be required to take any action hereunder for which the Company receives
legal advice that such action could violate such Shareholder's fiduciary duties
to the Company.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
66
IN WITNESS WHEREOF, the parties hereto, intending to be legally
bound hereby, have caused this Agreement to be executed as of the day and year
first above written.
▇▇▇▇▇▇:
▇▇▇▇▇▇ EQUITY INVESTORS III, L.P.
By: TC Equity Partners, L.L.C.
Its: General Partner
By:
-----------------------------
Name:
-----------------------------
Title:
-----------------------------
GVI:
GV INVESTMENT LLC
By:
------------------------------------
Name:
------------------------------------
Title:
------------------------------------
67
EXHIBIT 3.1-C
REQUIRED CONSENTS
CREDIT AGREEMENT. The Credit Agreement, dated as of March 27, 1998, by and among
the Company, the Lenders party thereto, and The Bank of New York, as
Administrative Agent, as amended, requires lender approval of a transaction of
the type contemplated by the Note Purchase Agreement. The Company is currently
in the process of obtaining this consent.
SHAREHOLDER APPROVAL. Although the sale of Convertible Notes pursuant to the
Note Purchase Agreement will not require shareholder approval, New York Stock
Exchange rules require the Company to obtain shareholder approval for certain
issuances of shares of Company common stock, including the issuance of Company
common stock upon conversion of the Convertible Notes. In accordance with
Section 6.1 of the Note Purchase Agreement, the Company plans to call a
shareholder meeting within the first year after the signing of the Note Purchase
Agreement for the purpose of obtaining such shareholder consent.*
HSR ACT. Certain provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act
of 1976, as amended (the "HSR ACT"), require certain filings to be made and
certain waiting periods to be observed prior to certain sales of securities.
Although the sale of Convertible Notes pursuant to the Note Purchase Agreement
will not constitute such a sale of securities under the HSR Act, those
provisions will be applicable to the issuance of shares of Company common stock
upon conversion of the Convertible Notes. As a result, the Company must make
certain filings and observe certain waiting periods prior to any such issuance
of shares of Company common stock.*
* THESE CONSENTS WILL BE OBTAINED AFTER THE CLOSING DATE AND ARE NOT INCLUDED IN
THE CONSENTS REQUIRED TO BE OBTAINED AS A CONDITION OF CLOSING PURSUANT TO
SECTION 5.1(d) OF THE NOTE PURCHASE AGREEMENT.
68
EXHIBIT 3.1-G
OPTIONS, WARRANTS AND CONVERTIBLE SECURITIES
The Company has an employee stock option plan which provides the
reservation of twelve percent (12%) of the number of outstanding shares of
common stock for issuance to eligible individuals pursuant to grants of Company
stock options. The following table summarizes information about Company stock
options outstanding as of December 31, 1999. The Company has not issued any
stock options since December 31, 1999.
OPTIONS OUTSTANDING
-------------------
RANGE NUMBER WEIGHTED
OF OUTSTANDING AS OF AVERAGE
EXERCISE PRICE DECEMBER 31, 1999 EXERCISE PRICE
$2.94 - 2.94 300,000 $2.94
$6.00 - 8.00 180,000 $6.22
$9.25 - 11.63 57,500 $10.30
$13.63 - 13.63 40,000 $13.63
$14.00 - 14.00 794,686 $14.00
------- ------
1,372,186 $10.40
========= ======
Other than the stock options discussed above, there are no other
outstanding options, warrants or convertible or exchangeable securities of the
Company and the Company is not a party to any other agreements which require, or
upon the passage of time, the payment of money or the occurrence of any other
event will require, the Company to issue or sell any of its stock (other than
the Convertible Notes).
69
EXHIBIT 3.1-H
TRANSFER RESTRICTIONS ON SHARES
All shares of the common stock of each of the Company's subsidiaries are subject
to restrictions on transfer imposed by the Company's credit agreement. See
Exhibit 3.1-C for discussion of the Company's credit agreement.
70
EXHIBIT 3.1-K
MATERIAL ADVERSE EFFECT
NYSE LISTING. The Company has been advised by the New York Stock Exchange
("NYSE") that the Company currently falls below the NYSE's continued listing
standards, which require: (i) total market capitalization of not less than $50
million, and (ii) total shareholders' equity of not less than $50 million. At
the market close on June 8, 2000, the Company's total market capitalization was
approximately $38.7 million. On March 31, 2000, the Company's total
shareholders' equity was approximately $46.1 million. In accordance with NYSE
rules, the Company submitted a plan on June 9, 2000 demonstrating how the
Company will attempt to comply with NYSE rules (the "PLAN"). If the Plan is
accepted by NYSE's Listing and Compliance Committee, the Company will be subject
to quarterly monitoring for compliance. If the Plan is not accepted, the Company
will be subject to the NYSE trading suspension and delisting. Should the
Company's shares cease to be traded on the NYSE, the Company will attempt to
find an alternative trading venue.
GLOBETROTTERS DIVISION; POSSIBLE WRITE-OFF OF NET OPERATING LOSS TAX ASSET.
Since March 31, 2000, the Company has revised and shared with GVI its internal
consolidated forecast, with the principal shortfall to the prior forecast being
the results at its Globetrotters Vacations, Inc. subsidiary. In response to the
shortfall, the Company is considering various options, including the closure of
the Globetrotters subsidiary and related entities, which would entail abandoning
certain assets of those entities. If this option is undertaken and the Company
fails to generate taxable income during the 2000 tax year, accounting
conventions may require that the Company write off certain income tax
receivables resulting from net operating losses carryforwards from previous tax
years that are presently recorded on the Company's books. It might also require
write-offs or accelerated amortization of goodwill or other intangible assets
currently on the Company's balance sheet and related restructuring expenses.
FRIENDLY HOLIDAYS LEASE TERMINATION. One of the Company's wholly-owned
subsidiaries, Friendly Holidays, Inc., is negotiating a Termination of Lease
Agreement with the landlord of the office space that it leases in Lake Success,
New York pursuant to which Friendly will surrender possession of the demised
premises to the landlord and pay $528,300 directly to the landlord and $131,700
to the real estate agent.
71
EXHIBIT 3.1-O
TAX ISSUES
The Company and its subsidiaries file consolidated federal tax returns. Each
subsidiary files individual state and local tax returns. The Company filed
applications for extensions for its consolidated federal tax return for the 1999
tax year on or about March 15, 2000. Each subsidiary filed applications for
extensions for their respective state and local tax returns for the 1999 tax
year on or about March 15, 2000. The City of New York notified the Company that
the applications for extensions filed by certain subsidiaries were postmarked by
the U.S.P.S. after March 15, 2000 and were consequently deemed to be filed late.
As a result, the City of New York denied those applications for extensions. The
other applications for extensions filed by the Company and its subsidiaries have
not, to the Company's knowledge, been deemed late or denied. It is possible,
however, that those applications for extensions will be deemed to be filed late.
The aggregate effect of the City of New York's action and any resulting late
filing fees levied by that or any other jurisdiction will, the Company believes,
be de minimus.
The following table lists the taxing authorities with whom the Company and its
subsidiaries have filed applications for extensions for the 1999 tax year.
---------------------------------------------------------------------------------
GLOBAL VACATION GROUP, INC. & SUBSIDIARIES
EXTENSIONS FOR FILING INCOME TAX RETURNS
FOR THE TAX YEAR ENDED DECEMBER 31, 1999
---------------------------------------------------------------------------------
GLOBAL VACATION GROUP, INC. & SUBSIDIARIES
------------------------------------------
---------------------------------------------------------------------------------
U.S. INTERNAL REVENUE SERVICE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
CALIFORNIA FRANCHISE TAX BOARD
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
HAWAII HAWAII STATE TAX COLLECTOR
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
ILLINOIS ILLINOIS DEPARTMENT OF REVENUE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
FLORIDA FLORIDA DEPARTMENT OF REVENUE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW JERSEY STATE OF NEW JERSEY
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW YORK NEW YORK STATE CORPORATION TAX
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW YORK CITY NYC DEPARTMENT OF FINANCE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
FRIENDLY HOLIDAYS
-----------------
---------------------------------------------------------------------------------
NEW YORK NEW YORK STATE CORPORATION TAX
---------------------------------------------------------------------------------
72
---------------------------------------------------------------------------------
GLOBETROTTERS, INC.
-------------------
---------------------------------------------------------------------------------
MASSACHUSETTS COMMONWEALTH OF MASSACHUSETTS
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW YORK NEW YORK STATE CORPORATION TAX
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW YORK CITY NYC DEPARTMENT OF FINANCE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
PENNSYLVANIA PA DEPARTMENT OF REVENUE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
GVG MANAGEMENT COMPANY, INC.
----------------------------
---------------------------------------------------------------------------------
DC D.C. TREASURER
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
HADDON HOLIDAYS, INC.
---------------------
---------------------------------------------------------------------------------
NEW JERSEY STATE OF NEW JERSEY
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
INTERNATIONAL TRAVEL & RESORTS, INC.
------------------------------------
---------------------------------------------------------------------------------
NEW YORK NEW YORK STATE CORPORATION TAX
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW YORK CITY NYC DEPARTMENT OF FINANCE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
ISLAND RESORT TOURS, INC.
-------------------------
---------------------------------------------------------------------------------
NEW YORK NEW YORK STATE CORPORATION TAX
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
NEW YORK CITY NYC DEPARTMENT OF FINANCE
---------------------------------------------------------------------------------
---------------------------------------------------------------------------------
MTI VACATIONS, INC.
-------------------
---------------------------------------------------------------------------------
WISCONSIN WISCONSIN DEPARTMENT OF REVENUE
---------------------------------------------------------------------------------
73
EXHIBIT 3.1-R
AFFILIATED PARTY TRANSACTIONS
▇▇▇▇▇▇▇▇.▇▇▇ AGREEMENTS. Two wholly-owned subsidiaries of the Company (Classic
Custom Vacations and Globetrotters Vacations, Inc.) have entered into preferred
supplier agreements with ▇▇▇▇▇▇▇▇.▇▇▇, Inc., a New York corporation
("▇▇▇▇▇▇▇▇.▇▇▇"). ▇▇▇▇▇▇ Capital Partners holds indirect majority interests in
both ▇▇▇▇▇▇▇▇.▇▇▇ and the Company, making the Company and ▇▇▇▇▇▇▇▇.▇▇▇
affiliates of each other. Pursuant to the preferred supplier agreements,
▇▇▇▇▇▇▇▇.▇▇▇'s member travel agencies receive preferential commissions for the
sale of vacation products offered by the Company, as well as incentive
commissions if they meet or exceed specified sales targets. If such sales
targets are met or exceeded, ▇▇▇▇▇▇▇▇.▇▇▇ will be paid an incentive commission.
The Company believes that the terms of the preferred supplier contracts are no
more favorable to ▇▇▇▇▇▇▇▇.▇▇▇ than similar contracts that the Company has
entered into with non-affiliated third parties.
PROMISSORY NOTE BETWEEN ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ AND THE COMPANY. In connection with the
accelerated vesting of shares of Company common stock held by ▇▇▇▇▇ ▇. ▇▇▇▇▇▇,
Chairman, President and CEO of the Company, the Company a made loan to ▇▇.
▇▇▇▇▇▇ in an amount sufficient to enable ▇▇. ▇▇▇▇▇▇ to make tax payments
triggered by the accelerated vesting. The principal amount of ▇▇. ▇▇▇▇▇▇'▇ loan
is $1.2 million, it bears interest at a rate of 6% per year and must be repaid
either when his employment is terminated or by March 15, 2003, whichever comes
first. The Company intends, however, to forgive and extinguish ▇▇. ▇▇▇▇▇▇'▇
obligation to repay 10.56% of the maximum principal amount of his loan then
outstanding on each March 16 that ▇▇. ▇▇▇▇▇▇ remains employed with the Company,
ending March 16, 2003. In addition, if the Company achieves aggregate net
income, after income taxes, equal to or greater than $69.0 million for the
four-year period beginning January 1, 1999 and ending December 31, 2002, the
Company has agreed to forgive and extinguish all interest payable on ▇▇.
▇▇▇▇▇▇'▇ loan on March 16, 2003. If the Company achieves aggregate net income,
after income taxes, between $60.0 million and $69.0 million over that period,
the Company has agreed to forgive and extinguish a portion of the interest
payable on ▇▇. ▇▇▇▇▇▇'▇ loan, with 0% forgiven at $60.0 million, increasing
proportionally until 100% of the interest payable is forgiven at $69.0 million.
For example, if the Company achieves $64.5 million in aggregate net income,
after income taxes, during that period, the Company will forgive 50% of the
interest payable on ▇▇. ▇▇▇▇▇▇'▇ loan on March 16, 2003. In addition, the
Company has agreed to forgive all interest payable on ▇▇. ▇▇▇▇▇▇'▇ loan if the
Company is sold in a transaction in which the fair value of the consideration
paid to the Company's shareholders would produce a 30% annualized return to the
shareholders of record of the Company as of March 16, 1999, based on the closing
price of a share of the Company common stock of $8.4375 on that date. To the
extent that ▇▇. ▇▇▇▇▇▇ has paid any interest due on his loan before all or any
portion of that interest is forgiven, the Company has agreed to apply all
amounts previously paid to reduce the principal balance of ▇▇. ▇▇▇▇▇▇'▇ loan due
on March 16, 2003.
SENIOR MANAGEMENT AGREEMENTS. The Company has entered into senior management
agreements with its senior executives which provide for the employment of the
senior executives by the Company and, in certain cases, the purchase by the
senior executives of common and preferred stock of the Company.
74
EXHIBIT 5.1-E
OPINION OF ▇▇▇▇▇ & ▇▇▇▇▇▇▇, LLP
75
EXHIBIT 5.2-D
OPINION OF ▇▇▇▇▇▇▇▇ CHANCE ▇▇▇▇▇▇ & ▇▇▇▇▇, LLP
76
EXHIBIT 10.1(1)
BROKERS USED BY THE COMPANY
The Company owes certain fees and expenses to CS First Boston Corporation in
connection with the transaction.
77
EXHIBIT 10.1(2)
BROKERS USED BY THE BUYER
None.
