1
EX 10.39
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STOCK PURCHASE AGREEMENT
BY AND AMONG
GLOBAL VACATION GROUP, INC.,
("BUYER")
ISLAND RESORT TOURS, INC.
AND
INTERNATIONAL TRAVEL & RESORTS, INC.
(COLLECTIVELY, THE "COMPANIES")
AND
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
AND
▇▇▇▇▇▇▇▇▇▇▇ HOLDING, CO.
(COLLECTIVELY, THE "SELLERS")
DATED APRIL 1, 1999
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS 61
1.1 DEFINITIONS 61
ARTICLE II AGREEMENT OF PURCHASE AND SALE; CLOSING 64
2.1 AGREEMENT TO SELL AND PURCHASE 64
2.2 PURCHASE PRICE AND ASSUMPTION OF INDEBTEDNESS 64
2.3 PAYMENT OF PURCHASE PRICE 64
2.4 CLOSING 65
2.6 CLOSING AUDIT 65
2.7 POST-CLOSING NET WORTH ADJUSTMENT TO PURCHASE PRICE 65
2.8 EARNED PAYOUT AMOUNT 34
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANIES AND THE SELLERS 66
3.1 CAPITALIZATION 66
3.2 NO LIENS ON SHARES 66
3.3 OTHER RIGHTS TO ACQUIRE CAPITAL STOCK 66
3.4 DUE ORGANIZATION 67
3.5 SUBSIDIARIES 67
3.6 DUE AUTHORIZATION 67
3.7 FINANCIAL STATEMENTS 67
3.8 CERTAIN ACTIONS 68
3.9 PROPERTIES 68
3.10 LICENSES AND PERMITS 69
3.11 INTELLECTUAL PROPERTY 69
3.12 COMPLIANCE WITH LAWS 69
3.13 INSURANCE 69
3.14 EMPLOYEE BENEFIT PLANS 69
(a) Employee Welfare Benefit Plans 69
(b) Employee Pension Benefit Plans 70
(c) Employment and Non-Tax Qualified Deferred Compensation Arrangements 70
3.15 CONTRACTS AND AGREEMENTS 70
3.16 CLAIMS AND PROCEEDINGS 71
3.17 TAXES 71
3.18 PERSONNEL 72
3.19 BUSINESS RELATIONS 72
3.20 ACCOUNTS RECEIVABLE; CUSTOMER DEPOSITS AND BOOKINGS; FINANCIAL RESULTS DURING CURRENT STUB PERIOD 72
(a) Accounts Receivable 72
(b) Customer Deposits; Bookings 72
(c) Financial Results During Current Stub Period 73
3.21 BANK ACCOUNTS; INVESTMENTS 73
3.22 CUSTOMER CLAIMS 73
3.23 BROKERS 73
3.24 AFFILIATED TRANSACTIONS 73
3.25 FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED LIABILITIES 73
(a) Funded Indebtedness 73
(b) Letters of Credit 73
(c) Undisclosed Liabilities 73
3.26 YEAR 2000 74
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3.27 ARC COMPLIANCE 74
3.28 INFORMATION FURNISHED 74
ARTICLE IV BUYER'S REPRESENTATIONS AND WARRANTIES 74
4.1 DUE ORGANIZATION 74
4.2 DUE AUTHORIZATION. 74
4.3 NO BROKERS 74
4.4 INVESTMENT 74
ARTICLE V COVENANTS 75
5.1 CONSENTS OF OTHERS 75
5.2 SELLERS' EFFORTS 75
5.3 POWERS OF ATTORNEY 75
5.4 CONDUCT OF BUSINESS PENDING CLOSING 75
5.5 ACCESS TO RECORDS BEFORE CLOSING. 75
5.6 PAYMENTS TO THE COMPANIES BY THE SELLERS 76
ARTICLE VI POST-CLOSING COVENANTS 76
6.1 GENERAL. 76
6.2 TRANSITION. 76
6.3 CONFIDENTIALITY. 76
6.4 COVENANT NOT TO COMPETE 76
6.5 ADDITIONAL MATTERS 77
6.6 LITIGATION SUPPORT. 78
6.7 AUDITS. 78
6.8 BOCA RATON BRANCH. 78
ARTICLE VII CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING 79
7.1 CONDITIONS TO BUYER'S OBLIGATIONS 79
(a) Covenants, Representations and Warranties 79
(b) Consents 79
(c) Leases 79
(d) Discharge of Indebtedness and Liens 79
(e) Transfer Taxes 79
(f) Financial Condition 79
(g) Preliminary Closing Balance Sheet. 79
(j) Documents to be Delivered by the Sellers and the Companies 79
(i) Opinion of Sellers' Counsel 79
(ii) Certificates 79
(iii) Release 80
(iv) Escrow Agreement 80
(v) Termination of Employment Agreements 80
(vi) Stock Certificates 80
(vii) Resignation of Directors 80
7.2 CONDITIONS TO THE SELLERS' AND THE COMPANIES' OBLIGATIONS 80
(a) Covenants, Representations and Warranties 80
(b) Consents 80
(c) Escrow Agent 80
(d) Payments to the Sellers 80
7.3 WAIVER 80
ARTICLE VIII INDEMNIFICATION 80
8.1 INDEMNIFICATION OF BUYER 80
8.2 DEFENSE OF THIRD PARTY CLAIMS 81
8.3 PROCEDURE FOR CLAIMS 81
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(a) Escrow Claims. 81
(b) Other Claims 81
8.4 TAX AUDITS, ETC. 82
8.5 INDEMNIFICATION OF SELLERS 82
ARTICLE IX TERMINATION 83
9.1 TERMINATION 83
9.2 EFFECT OF TERMINATION 83
ARTICLE X MISCELLANEOUS 83
10.1 MODIFICATIONS; WAIVERS 83
10.2 NOTICES 83
10.3 COUNTERPARTS; FACSIMILE TRANSMISSION 84
10.4 EXPENSES 84
10.5 BINDING EFFECT; ASSIGNMENT 85
10.6 ENTIRE AND SOLE AGREEMENT 85
10.7 GOVERNING LAW 85
10.8 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS 85
10.9 DISPUTE RESOLUTION 85
10.10 INVALID PROVISIONS 85
10.11 PUBLIC ANNOUNCEMENTS 85
10.12 REMEDIES CUMULATIVE 85
10.13 THIRD PARTIES 85
10.14 STRICT CONSTRUCTION 86
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LIST OF EXHIBITS
Exhibit A Form of Escrow Agreement
Exhibit B Form of Opinion of Sellers' and the Companies' Counsel
Exhibit C-1 Form of Sellers' Officer's and Stockholder's Certificate
Exhibit C-2 Form of Sellers' Secretary's Certificate
Exhibit D Form of Release
Exhibit E Sellers' Account and Wire Transfer Instructions (Section 2.3)
Exhibit F Articles (F-1) and Bylaws (F-2) and Qualified
Jurisdictions (F-3) (Section 3.4)
Exhibit G List of Properties (Section 3.9)
Exhibit H List of Licenses and Permits (Section 3.10)
Exhibit I List of Intellectual Property (Section 3.11)
Exhibit J List of Insurance (Section 3.13)
Exhibit K List of Contracts (Section 3.15)
Exhibit L List of Personnel (Section 3.18)
Exhibit M List of Bookings, Customer Deposits, Prepayments
and Refunds and Customer Claims (Section 3.20)
Exhibit N List of Bank Accounts and Investments (Section 3.21)
Exhibit O List of Letters of Credit (Section 3.25(b))
Exhibit P List of Funded Indebtedness (Section 7.1(d))
Exhibit Q ▇▇▇▇▇ Employment Agreement
Exhibit R ▇▇▇▇▇▇▇ Boca Raton Agreement
LIST OF SCHEDULES
Preliminary Balance Sheet
Disclosure Schedule
Ownership Schedule
Tax Payments Schedule
Annex I - Determination of Earned Payout ▇▇▇▇▇▇
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▇▇▇▇▇ ▇▇▇▇▇▇▇▇ AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "AGREEMENT") is entered into as of
April 1, 1999, by and among GLOBAL VACATION GROUP, INC., a New York corporation
("BUYER"), ISLAND RESORT TOURS, INC., a New York corporation ("ISLAND") and
INTERNATIONAL TRAVEL & RESORTS, INC., a New York corporation ("ITR,"
collectively, Island and ITR are referred to herein as the "COMPANIES") and
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ ("▇▇▇▇▇"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇▇▇▇▇▇▇
HOLDING, CO. ("▇▇▇▇▇▇▇▇▇▇▇," collectively, ▇▇▇▇▇, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇ are
referred to herein as the "SELLERS").
RECITALS
A. The Companies are engaged in the business of providing wholesale travel
sales and vacation packaging services (the "TOUR BUSINESS") to travel agents
and other customers located in the United States of America (the "BUSINESS");
and
B. The Sellers own all of the issued and outstanding shares of capital stock
of the Companies (the "SHARES"); and
C. Buyer desires to purchase from the Sellers, and the Sellers desire to
sell to Buyer, all of the Shares owned by the Sellers on the terms and subject
to the conditions hereinafter set forth in this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual premises and covenants
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto covenant and
agree as follows:
ARTICLE I
DEFINITIONS
A. DEFINITIONS. In this Agreement, the following terms have the meanings
specified or referred to in this Section 1.1 and shall be equally applicable to
both the singular and plural forms. Any agreement referred to below shall mean
such agreement as amended, supplemented and modified from time to time to the
extent permitted by the applicable provisions thereof and by this Agreement.
"AA" means ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ LLP.
"AFFILIATE" means, with respect to any Person, any other Person which directly
or indirectly controls, is controlled by or is under common control with such
Person.
"ACQUISITION PROPOSAL" has the meaning specified in Section 5.4(d).
"ADDITIONAL EARNOUT PAYMENT" has the meaning specified in Section 2.8.
"ARC" means the Airlines Reporting Corporation, or any successor thereto.
"AUDITED CLOSING BALANCE SHEET" has the meaning specified in Section 2.6.
"▇▇▇▇▇▇▇" has the meaning specified in the first paragraph of this Agreement.
"BOOKINGS" has the meaning specified in Section 3.20(b).
"BUSINESS" has the meaning specified in the first recital of the Agreement.
"BUYER" has the meaning specified in the first paragraph of this Agreement.
"CASH AND CASH EQUIVALENTS" means cash and short term investments, which have
maturities of ninety (90) days or less, in each case as reflected on the
Preliminary Closing Balance Sheet.
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"CLOSING" means the closing of the transfer of the Shares from the Sellers to
Buyer.
"CLOSING DATE" has the meaning specified in Section 2.4.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMPANIES" has the meaning specified in the first paragraph of this Agreement.
"CONFIDENTIAL INFORMATION" means (i) terms and provisions of this Agreement or
the transactions to be consummated pursuant hereto, and (ii) confidential
information and trade secrets of the Companies or Buyer including, without
limitation, any of the same comprising the identity, lists or descriptions of
any customers, referral sources or organizations; financial statements, cost
reports or other financial information (and any analyses or compilations
thereof or reports thereon); contract proposals, or bidding information;
business plans and training and operations methods and manuals; personnel
records; fee structure; computer software; and management systems, policies or
procedures, including related forms and manuals. Confidential Information
shall not include any information (i) which is disclosed pursuant to subpoena
or other legal process, (ii) which has been publicly disclosed by means other
than by a breach of a confidentiality agreement, or (iii) which is subsequently
disclosed by any third party not in breach of a confidentiality agreement.
"CONTRACTS" has the meaning specified in Section 3.15.
"COURT ORDER" means any judgment, order, award or decree of any foreign,
federal, state, local or other court or tribunal and any award in any
arbitration proceeding.
"CUSTOMER CLAIMS" has the meaning specified in Section 3.20(b).
"CUSTOMER DEPOSITS" has the meaning specified in Section 3.20(b).
"DISCLOSURE SCHEDULE" means the Disclosure Schedule attached to this Agreement
pursuant to which exceptions to the Sellers' and the Companies' specific
representations and warranties set forth in Article III and other applicable
provisions (and listed on a Section-by-Section basis) are disclosed to Buyer
pursuant to said Article III.
"EARNED PAYOUT AMOUNT" has the meaning set forth in Section 2.8.
"EARNOUT PERIOD" has the meaning set forth in Section 2.8.
"EBIT" shall mean the earnings of the Companies before interest expenses and
taxes, as calculated in accordance with GAAP and consistent with past
practices.
"EBIT TARGET" has the meaning specified in Section 2.8.
"EFFECTIVE DATE" has the meaning set forth in Section 2.4.
"ENCUMBRANCE" means any lien, claim, charge, security interest, mortgage,
pledge, easement, conditional sale or other title retention agreement, defect
in title, restrictive covenant or other restrictions of any kind.
"ENVIRONMENTAL AND OSHA OBLIGATIONS" has the meaning specified in Section 3.12.
"EQUITABLE EXCEPTIONS" shall have the meaning specified in Section 3.6.
"ERISA" means the Employee Retirement Income Security Act of 1974, as amended.
"ESCROW AGENT" means The Bank of New York.
"ESCROW AGREEMENT" means the Escrow Agreement to be executed by and among the
Sellers, Buyer and the Escrow Agent in the form of Exhibit A.
"ESCROW PERIOD" has the meaning specified in Section 2.5.
"ESCROW SUM" has the meaning specified in Section 2.5.
"▇▇▇▇▇▇▇▇▇▇▇" has the meaning specified in the first paragraph of this
Agreement.
"FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
"FUNDED INDEBTEDNESS" means all (i) indebtedness of the Companies for borrowed
money or other interest-bearing indebtedness; (ii) capital lease obligations of
the Companies; (iii) obligations of the Companies to pay
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the deferred purchase or acquisition price for goods or services, other than
trade accounts payable or accrued expenses in the ordinary course of business
on no more than 90 day payment terms; (iv) indebtedness of others guaranteed by
the Companies or secured by an Encumbrance on the Companies' property; and (v)
indebtedness of the Companies under extended credit terms of more than 30 days
from vendors provided to the Companies; provided, however, that Funded
Indebtedness shall not include any Letter of Credit unless actually drawn upon
by the beneficiary thereof.
"GAAP" shall mean generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL BODY" means any foreign, federal, state, local or other
governmental authority or regulatory body, including ARC.
"GOVERNMENTAL PERMITS" has meaning specified in Section 3.10.
"▇▇▇▇▇" has the meaning specified in the first paragraph of this Agreement.
"HSR ACT" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended and the rules and regulations promulgated thereunder.
"IRS" means the Internal Revenue Service.
"INDEMNIFIABLE COSTS" has the meaning specified in Section 8.1.
"INDEMNIFIED PARTIES" has the meaning specified in Section 8.1.
"INTELLECTUAL PROPERTY" shall mean all of the following: (i) patents,
patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; (v) trade secrets, confidential information
and know-how (including but not limited to ideas, formulae, compositions,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, business and marketing plans,
and customer and supplier lists and related information); and (vi) computer
software (including but not limited to data, data bases and documentation).
"ISLAND" has the meaning specified in the first paragraph of this
Agreement.
"ISLAND SELLERS" means collectively ▇▇▇▇▇ and ▇▇▇▇▇▇▇.
"ISLAND SHARES" means all of the issued and outstanding capital stock of
Island, which shares constitute a portion of the Shares to be transferred
pursuant to this Agreement.
"ITR" has the meaning specified in the first paragraph of this Agreement.
"ITR SELLERS" means collectively ▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇▇▇.
"ITR SHARES" means all of the issued and outstanding capital stock of ITR,
which shares constitute a portion of the Shares to be transferred pursuant to
this Agreement.
"KNOWLEDGE" (whether or not capitalized) shall mean, in respect of the
Companies, actual knowledge of Sellers and the executive officers and employees
of the Companies with responsibility for the applicable subject matter after
reasonable inquiry; in respect of the Sellers, "Knowledge" shall mean actual
knowledge of the Sellers after reasonable inquiry.
"MATERIAL" (whether or not capitalized) shall, where appropriate in context of
its use in making the representations and warranties set forth in Article III,
be deemed to mean an amount of money greater than $25,000.
"MATERIAL ADVERSE CHANGE" or "MATERIAL ADVERSE EFFECT" means a material adverse
change or effect on the assets, properties, Business, operations, liabilities,
financial condition or prospects of the Companies and its subsidiaries, taken
as a whole. In determining whether a "Material Adverse Change" or "Material
Adverse Effect" has occurred in the context of the use of such terms in the
Companies' and the Sellers' representations and warranties set forth in Article
III, such terms shall refer to the occurrence of any single event, or any
series of related events, or set of related circumstances, which results or may
result in a loss to the Companies, taken
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as a whole, in excess of $25,000 per occurrence or $50,000 in the aggregate
shall be conclusive.
"MINIMUM EBIT TARGET" has the meaning specified in Section 2.8.
"MOST RECENT FINANCIAL STATEMENTS" has the meaning specified in Section 3.7.
"NET WORTH" means the difference between the Companies' combined total assets
and its combined total liabilities (excluding all retained earnings or other
shareholders' equity, if any), determined in accordance with GAAP.
"OSHA" means the Occupational Safety and Health Act, 29 U.S.C. Sections 651 et
seq., any amendment thereto, and any regulations promulgated thereunder.
"PERMITTED EXCEPTION" means (a) liens for Taxes and other governmental charges
and assessments which are not yet due and payable, (b) liens of landlords and
liens of carriers, warehousemen, mechanics and materialmen and other like liens
arising in the ordinary course of business for sums not yet due and payable, or
(c) other liens or imperfections on property which are not material in amount
or do not materially detract from the value or the existing use of the property
affected by such lien or imperfection.
"PERSON" means any individual, corporation, partnership, joint venture,
association, joint-stock Companies, limited liability Companies, trust,
unincorporated organization or Governmental Body.
"PRELIMINARY CLOSING BALANCE SHEET" shall mean the Companies' best estimate of
the Companies' combined balance sheet and combined income statement as of
December 31, 1998. The Preliminary Closing Balance Sheet is attached to this
Agreement.
"PROJECTED CLOSING DATE NET WORTH" means $0.
"PURCHASE PRICE" has the meaning specified in Section 2.2.
"REQUIREMENTS OF LAWS" means any foreign, federal, state and local laws,
statutes, regulations, rules, codes or ordinances enacted, adopted, issued or
promulgated by any Governmental Body (including, without limitation, those
pertaining to electrical, building, zoning, environmental and occupational
safety and health requirements) or common law.
"SELLERS" has the meaning set forth in the first paragraph of this Agreement.
"SHARES" means all of the issued and outstanding shares of the capital stock of
the Companies.
"TAX" or "TAXES" means any federal, state, local or foreign income, alternative
or add-on minimum, gross income, gross receipts, windfall profits, severance or
parachute, property, production, sales, use, transfer, gains, license, excise,
employment, payroll, withholding or minimum tax, transfer, goods and services,
or any other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or any penalty,
addition to tax or additional amounts imposed thereon by any Governmental Body.
"TAX RETURN" means any return, report or similar statement required to be filed
with respect to any Taxes (including any attached schedules), including,
without limitation, any information return, claim for refund, amended return
and declaration of estimated Tax.
ARTICLE II
AGREEMENT OF PURCHASE AND SALE; CLOSING
A. AGREEMENT TO SELL AND PURCHASE. Upon the basis of the representations
and warranties, for the consideration, and subject to the terms and conditions
set forth in this Agreement, the Sellers agrees to sell the Shares to Buyer and
Buyer agrees to purchase the Shares from Sellers.
B. PURCHASE PRICE. The total purchase price for the Shares (the "PURCHASE
PRICE") shall be equal to $6,250,000, subject to any adjustment required to be
made pursuant to Sections 2.7 and 2.8 below.
C. PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable by Buyer
at the Closing (as defined in Section 2.4) as follows:
1. $4,200,000 (as adjusted downward by the
amount, if any, of all Funded
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Indebtedness of the Companies on the Closing Date) will be paid, at the
direction of the Sellers, in cash by wire transfer of funds to the Sellers'
accounts as specified in Exhibit E (including the payment of $50,000 for the
Sellers' covenant not to compete provided in Section 6.4);
2. $500,000 of the Purchase Price will be paid in
cash by wire transfer of funds to the Escrow Agent to be held in escrow for a
period of 120 days pursuant to Section 2.5 for satisfaction of any post-Closing
Net Worth adjustment pursuant to Section 2.7;
3. $300,000 of the Purchase Price will be paid in
cash by wire transfer of funds to the Escrow Agent to be held in escrow for one
year following the Closing Date pursuant to Section 2.5 for satisfaction of
Sellers' indemnification obligations specified in Section 8.1; and
4. up to $1,250,000 shall be paid to Sellers in
accordance with the earnout payments described in Section 2.8 below.
D. CLOSING. The Closing of the purchase and sale of the Shares contemplated
by this Agreement shall take place at 10:00 a.m., Eastern Time, at the offices
of ▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P., ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇. in Washington, D.C. on April
5, 1999, or on the date selected by Buyer (which date shall be as soon as
practicable following the date on which all of the conditions to Closing set
forth in Sections 7.1 and 7.2 have been satisfied, but not later than the tenth
(10th) business day after such date), or on such other date and time as the
parties shall agree (the "CLOSING DATE"), effective as of April 1, 1999 (the
"EFFECTIVE DATE").
E. ESCROW ARRANGEMENTS. Pursuant to the Escrow Agreement to be entered into
among the Sellers, Buyer and the Escrow Agent, the portion of the Purchase
Price specified in Sections 2.3(b) and (c) shall be delivered to the Escrow
Agent at Closing in immediately available funds. Such monies (which, together
with all interest accrued thereon, is hereinafter referred to as the "ESCROW
SUM") shall be held pursuant to the terms of the Escrow Agreement for payment
from such Escrow Sum of the amounts, if any, owing by the Sellers to Buyer
pursuant to Section 2.7 below and the indemnification provisions of Article
VIII below. After the final determination of the Audited Closing Balance Sheet
(including any review by the Independent Accountants), an amount equal to the
difference between (i) $500,000 and (ii) the aggregate amount of any Net Worth
adjustment payable to the Buyer pursuant to Section 2.7 below, shall be paid to
the Sellers. At the conclusion of the period ending on the first anniversary
of the Closing Date (such period being referred to herein as the "ESCROW
PERIOD"), such remaining portion of the Escrow Sum not theretofore claimed by
or paid to Buyer in accordance with the terms of the Escrow Agreement and this
Agreement shall be disbursed to the Sellers. The Sellers and Buyer agree that
each will execute and deliver such reasonable instruments and documents as are
furnished by any other party to enable such furnishing party to receive those
portions of the Escrow Sum to which the furnishing party is entitled under the
provisions of the Escrow Agreement and this Agreement.
F. CLOSING AUDIT. Within 120 days following the Closing Date, there shall
be delivered to Buyer and to the Sellers an audit of the Preliminary Closing
Balance Sheet (the "AUDITED CLOSING BALANCE SHEET"). The Preliminary Closing
Balance Sheet shall be audited by AA in accordance with GAAP. The cost of
preparing the Audited Closing Balance Sheet shall be paid by Buyer. In the
event that the Sellers disputes any items or assumptions or methodologies
regarding the Audited Closing Balance Sheet within ten (10) business days after
the Sellers' receipt thereof, the parties shall jointly select and retain an
independent "Big Six" accounting firm (the "INDEPENDENT ACCOUNTANTS") to review
the disputed matter(s) on the Audited Closing Balance Sheet. The final
determination of such disputed matter(s) by the Independent Accountants shall
be reflected on the Audited Closing Balance Sheet, which shall be final and
binding on the parties for all purposes. The cost of retaining the Independent
Accountants shall be borne by the Sellers, except that the Companies shall
reimburse the Sellers for one-half the cost of the Independent Accountants in
the event that such review results in at least a $100,000 increase in the
Companies' Net Worth as reflected on the Audited Closing Balance Sheet prepared
by AA. Notwithstanding the foregoing, in determining the Companies' Net Worth,
both the determination of Net Worth and intercompany balances shall be
conducted on a combined basis across both Companies (i.e., the combined
balances must equal $0, not the individual balances for each of Island and
ITR).
G. POST-CLOSING NET WORTH ADJUSTMENT TO PURCHASE PRICE. In the event the
Projected Closing Date Net Worth exceeds the amount of Net Worth reflected on
the Audited Closing Balance Sheet, then the
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Purchase Price shall be adjusted downward by an amount equal to the amount of
Net Worth reflected on the Audited Closing Balance Sheet is less than $0. The
post-closing adjustment to the Purchase Price, if any, shall be paid by the
Sellers to Buyer in immediately available funds within ten (10) business days
of delivery of the Audited Closing Balance Sheet as finally determined in
accordance with Section 2.6 above.
H. EARNED PAYOUT AMOUNT. In addition to the Cash Portion of the Purchase
Price, the Buyer agrees to pay to the Sellers, if earned, an earned payout
amount (the "EARNED PAYOUT AMOUNT"), if any, of up to $1,250,000 based upon the
attainment of at least two times the audited calendar 1998 EBIT of the combined
Companies on a net basis across all of the Companies during the two-year period
commencing January 1, 1999 (the "EARNOUT PERIOD"). The Earned Payout Amount,
if any, shall be paid in cash by Buyer on or before April 30, 2001. The full
Earned Payout Amount shall be made only if the Companies' achieve at least two
times the greater of (a) $469,000 or (b) audited 1998 EBIT (the "EBIT TARGET")
during the Earnout Period; provided, however, that in the event that the
Companies achieve an amount less than the EBIT Target but not less than
$113,000 less than the EBIT Target (the "MINIMUM EBIT TARGET") during the
Earnout Period, then the Earned Payout Amount shall be equal to the product of
(i) the amount by which EBIT during the Earnout Period exceeds the Minimum EBIT
Target and (ii) 9.955. In addition, in the event that the Companies attain
more than the EBIT Target in aggregate EBIT of the combined Companies during
the Earnout Period, then Sellers shall be paid an additional amount (the
"ADDITIONAL EARNOUT PAYMENT") equal to the product of (i) the amount by which
EBIT during the Earnout Period exceeds the EBIT Target and (ii) nine (9);
provided, however that in no event will the Additional Earnout Payment exceed
$500,000. Notwithstanding the foregoing, in the event that any unforeseen
external events occur such as a major travel strike, catastrophic hurricane(s)
in the Caribbean/Mexico regions, war, insurrection or any other external event
that materially and adversely effects the travel industry as a whole, then the
parties shall mutually agree to extend the Earnout Period for a period equal to
the period of time during which such material adverse event occurred (but in no
event more than three months). For example, the American Airlines strike for
11 days in Feburary 1999 shall deemed to be an event that will require
extension of the Earnout Period. In determining EBIT during the Earnout
Period, the historical costs and expenses of the Companies, as adjusted for
inflation, shall be utilized in determining the Companies' expenses during the
Earnout Period as determined in accordance with the Determination of Earned
Payout Amount attached as Annex I hereto.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANIES AND THE SELLERS
Except as set forth on the Disclosure Schedule attached hereto (which
Disclosure Schedule contains a reasonably detailed description of each such
exception and references the applicable representation so qualified), the
Companies and the Sellers jointly and severally represent and warrant to Buyer
that:
A. CAPITALIZATION. The authorized capital stock of Island consists of 200
shares of Common Stock, no par value per share, 200 of which are issued and
outstanding and such shares constitute the Island Shares hereunder. All of the
Island Shares are duly authorized, validly issued, fully paid, and
nonassessable. All of the Island Shares are owned of record and beneficially
by the Island Sellers in the amounts set forth in the Ownership Schedule
attached hereto. None of the Island Shares was issued or will be transferred
under this Agreement in violation of any preemptive or preferential rights of
any Person. The authorized capital stock of ITR consists of 200 shares of
Common Stock, no par value per share, 100 of which are issued and outstanding
and such shares constitute the ITR Shares hereunder. All of the ITR Shares are
duly authorized, validly issued, fully paid, and nonassessable. All of the ITR
Shares are owned of record and beneficially by the ITR Sellers in the amounts
set forth in the Ownership Schedule attached hereto. None of the ITR Shares
was issued or will be transferred under this Agreement in violation of any
preemptive or preferential rights of any Person.
B. NO LIENS ON SHARES. The Sellers own the Shares, free and clear of any
Encumbrances other than the rights and obligations arising under this
Agreement, and none of the Shares is subject to any outstanding option,
warrant, call, or similar right of any other Person to acquire the same, and
none of the Shares is subject to any restriction on transfer thereof except for
restrictions imposed by applicable federal
12
and state securities laws. At Closing, the Sellers will have full power and
authority to convey good and marketable title to the Shares, free and clear of
any Encumbrances other than the restrictions imposed by federal and state
securities laws.
C. OTHER RIGHTS TO ACQUIRE CAPITAL STOCK. Except as set forth in this
Agreement in respect of Buyer's rights to acquire the Shares, there are no
authorized or outstanding warrants, options, or rights of any kind to acquire
from either of the Companies any equity or debt securities of the Companies, or
securities convertible into or exchangeable for equity or debt securities of
the Companies, and there are no shares of capital stock of the Companies
reserved for issuance for any purpose nor any contracts, commitments,
understandings or arrangements which require either of the Companies to issue,
sell or deliver any additional shares of its capital stock.
D. DUE ORGANIZATION. Each of Island and ITR is a corporation duly organized,
validly existing, and in good standing under the laws of the State of New York
and has full corporate power and authority to own and lease its properties and
assets and to carry on the Business as now conducted and as proposed to be
conducted through Closing. Complete and correct copies of the Articles of
Incorporation and Bylaws of the Companies, and all amendments thereto, have
been delivered to Buyer and are attached hereto as Exhibits F-1 and F-2.
Island is qualified to do business in the State of Florida and the Companies
are qualified in each other jurisdiction in which the nature of the Business or
the ownership of its properties requires such qualification, except where the
failure to be so qualified does not and could not reasonably be expected to
have a Material Adverse Effect. The jurisdictions in which the Companies are
so qualified are listed on Exhibit F-3 attached hereto.
E. SUBSIDIARIES. The Companies do not own, directly or indirectly, any
capital stock or ownership interests in any Person and the Sellers does not own
any capital stock or ownership interest in any other Person engaged in the Tour
Business.
F. DUE AUTHORIZATION. The Companies and the Sellers each have full power
and authority to execute, deliver and perform this Agreement and to carry out
the transactions contemplated hereby. The execution, delivery, and performance
of this Agreement and the transactions contemplated hereby have been duly and
validly authorized by all necessary corporate action of the Companies. This
Agreement has been duly and validly executed and delivered by the Companies and
the Sellers and constitutes the valid and binding obligations of the Companies
and the Sellers, enforceable in accordance with its terms, except to the extent
that enforceability may be limited by bankruptcy, insolvency or other laws
affecting creditors' rights and debtors' obligations generally, and legal
limitations relating to remedies of specific performance and injunctive and
other forms of equitable relief (the "EQUITABLE EXCEPTIONS"). The execution,
delivery, and performance of this Agreement (as well as all other instruments,
agreements, certificates, or other documents contemplated hereby) by the
Companies and the Sellers, do not (a) violate any Requirements of Laws or any
Court Order of any Governmental Body applicable to the Companies or the
Sellers, or their respective property, (b) violate or conflict with, or permit
the cancellation of, or constitute a default under, any Contract or any other
material agreement to which the Companies or Sellers are a party, or by which
any of them or their respective property is bound, (c) permit the acceleration
of the maturity of any material indebtedness of, or indebtedness secured by the
property of, the Companies or the Sellers, (d) violate or conflict with any
provision of the charter or bylaws of the Companies, or (e) except for filings
or approvals under the HSR Act and such consents, approvals, or registrations
as may be required under applicable state securities laws, require any consent,
approval or authorization of, or notice to, or declaration, filing or
registration with, any Governmental Body or other third party.
G. FINANCIAL STATEMENTS. The following financial statements of the
Companies have been delivered to Buyer by the Companies: unaudited balance
sheets of Island as of December 31, 1997 and December 31, 1998 and ITR as of
February 28, 1998 and as of and December 31, 1998, and unaudited statements of
income and cash flows of Island for the fiscal years ended December 31, 1997
and December 31, 1998 and of ITR for the fiscal year ended February 28, 1998
and for the 10 month period ending December 31, 1998 (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements, including the Financial
Statements as of and for the year or period ending December 31, 1998 (the "MOST
RECENT FINANCIAL STATEMENTS"), have been prepared in accordance with GAAP. The
Financial Statements (including the notes thereto) have been prepared on a
consistent basis throughout the periods indicated and fairly present the
financial position, results of operations and changes in financial position of
the Companies as of the indicated dates
13
and for the indicated periods and are consistent with the books and records of
the Companies (which books and records are correct and complete). Since the
date of the last of such Financial Statements, the Companies have no material
liabilities required by GAAP to be reflected on the Companies' balance sheet or
notes thereto that are not so reflected in the Financial Statements, nor any
other obligations (whether absolute, contingent, or otherwise) which are
(individually or in the aggregate) material (in amount or to the conduct of the
Business); and neither the Companies nor the Sellers have Knowledge of any
basis for the assertion of any such liability or obligation. Since December
31, 1997, the Companies have not suffered a Material Adverse Change. The Most
Recent Financial Statements reflect a Net Worth as of December 31, 1998 of not
less than $0.
H. CERTAIN ACTIONS. Since the date of the Most Recent Financial Statements,
the Companies have not, except as disclosed on any of the Financial Statements
or notes thereto: (a) paid or declared any dividends or distributions, or
purchased, redeemed, acquired, or retired any stock or indebtedness from any
stockholder (other than distributions to pay estimated income taxes of the
Sellers associated with the income of the Companies); (b) made or agreed to
make any loans or advances or guaranteed or agreed to guarantee any loans or
advances to any party whatsoever; (c) suffered or permitted any Encumbrance to
arise or be granted or created against or upon any of its assets, real or
personal, tangible or intangible; (d) canceled, waived, or released or agreed
to cancel, waive, or release any of its debts, rights, or claims against third
parties in excess of $25,000 individually or $100,000 in the aggregate; (e)
sold, assigned, pledged, mortgaged, or otherwise transferred, or suffered any
material damage, destruction, or loss (whether or not covered by insurance) to,
any assets (except in the ordinary course of the Business); (f) amended its
charter or bylaws; (g) paid or made a commitment to pay any severance or
termination payment to any employee or consultant; (h) made any material change
in its method of management, operation, accounting or reporting income or
deductions for tax purposes; (i) made any material acquisitions, capital
expenditures, including, without limitation, replacements of equipment in the
ordinary course of the Business, or entered into commitments therefor, except
for capital expenditures or commitments therefor which do not, in the
aggregate, exceed $25,000 individually or $100,000 in the aggregate; (j) made
any investment or commitment therefor in any Person; (k) made any payment or
contracted for the payment of any bonus or other compensation or personal
expenses, other than (A) wages and salaries and business expenses paid in the
ordinary course of the Business, and (B) wage and salary adjustments made in
the ordinary course of the Business for employees who are not officers,
directors, or stockholders of the Companies; (l) made, amended, or entered into
any written employment contract or created or made any material change in any
bonus, stock option, pension, retirement, profit sharing or other employee
benefit plan or arrangement; (m) made or entered into any vendor, supply,
sales, distribution, franchise, consortia or travel agency agreement which
involves annual consideration (or commissions) in excess of $50,000; (n) made
or entered into any agreement granting any Person any registration or offer
rights in respect of the Companies' capital stock; (o) entered into any
non-competition agreement; (p) made or entered into any agreement or other
arrangement with any officer, director, stockholder, or Affiliate of the
Companies or, other than in the ordinary course of business, any employee of
the Companies; (q) materially amended, experienced a termination or received
notice of actual or threatened termination or non-renewal of any material
contract, agreement, lease, franchise or license to which the Companies are a
party that would or could reasonably be expected to have a Material Adverse
Effect; or (r) entered into any other material transactions that would or could
reasonably be expected to have a Material Adverse Effect except in the ordinary
course of the Business.
I. PROPERTIES. Attached hereto as Exhibit G is a list containing a
description of each interest in real property (including, without limitation,
leasehold interests pertaining to the Companies' offices in New York, New York)
and each item of personal property utilized by the Companies in the conduct of
the Business having a book or fair market value in excess of $20,000 as of the
date hereof. Except for Permitted Exceptions, such real and personal
properties are free and clear of Encumbrances. The Sellers and the Companies
have delivered to Buyer copies of all real property leases and a lien search
obtained from the counties where the Companies conducts business and the New
York and Florida Secretary of State offices of all UCC liens of record against
the Companies' personal property in such jurisdictions. All of the properties
and assets necessary for continued operation of the Business as currently
conducted (including, without limitation, all books, records, computers and
computer software and data processing systems) are owned, leased or licensed by
the Companies and are suitable for the purposes for which they are currently
being used. The physical properties of the Companies, including the real
properties leased by the
14
Companies, are in good operating condition and repair, normal wear and tear
excepted, and are free from any defects of a material nature. Except for
Permitted Exceptions, the Companies have full and unrestricted legal and
equitable title to all such properties and assets. The operation of the
properties and Business of the Companies in the manner in which they are now
and have been operated does not violate any zoning ordinances, municipal
regulations, or other Requirements of Laws, except for any such violations
which would not, individually or in the aggregate, have a Material Adverse
Effect. Except for Permitted Exceptions, no restrictive covenants, easements,
rights-of-way, or regulations of record impair the uses of the properties of
the Companies for the purposes for which they are now operated. All leases of
real or personal property by the Companies are legal, valid, binding,
enforceable and in full force and effect and will remain legal, valid, binding,
enforceable and in full force and effect on identical terms immediately
following the Closing, except for the Equitable Exceptions. All facilities
leased by the Companies have received all approvals of any Governmental Body
(including Governmental Permits) required in connection with the operation
thereof and have been operated and maintained in accordance with all
Requirements of Laws. The Companies own no real property.
J. LICENSES AND PERMITS. Attached hereto as Exhibit H is a list of all
licenses, certificates, privileges, immunities, approvals, franchises,
authorizations and permits held or applied for by the Companies from any
Governmental Body (herein collectively called "GOVERNMENTAL PERMITS") the
absence of which could, individually or in the aggregate, have a Material
Adverse Effect. The Companies have complied in all material respects with the
terms and conditions of all such Governmental Permits, and the Companies have
not received notification from any Governmental Body of violation of any such
Governmental Permit or the Requirements of Laws governing the issuance or
continued validity thereof. All of such Governmental Permits are valid and in
full force and effect. No additional Governmental Permit is required from any
Governmental Body thereof in connection with the conduct of the Business which
Governmental Permit, if not obtained, would have a Material Adverse Effect.
K. INTELLECTUAL PROPERTY. Attached hereto as Exhibit I is a list and brief
description of all Intellectual Property owned or utilized by the Companies.
The Companies have furnished Buyer with copies of all license agreements to
which the Companies are a party, either as licensor or licensee, with respect
to any Intellectual Property. The Companies have good title to or the right to
use all the Intellectual Property and all inventions, processes, designs,
formulae, trade secrets and know-how necessary for the conduct of the Business,
in the Business as presently conducted without the payment of any royalty or
similar payment, and the Companies are not infringing on any Intellectual
Property right of others, and neither the Companies nor the Sellers are aware
of any infringement by others of any such rights owned by the Companies. All
material licenses set forth on Exhibit I are valid and binding obligations of
the Companies, and to the Knowledge of the Companies the other parties thereto,
and enforceable against the Companies, and to the Knowledge of the Companies
the other parties thereto in accordance with their respective terms, except for
the Equitable Exceptions. The Companies owns and possesses all right, title
and interest in and to, or has the right to use pursuant to a valid license,
all Intellectual Property necessary for the operation of the business of the
Companies as presently conducted.
L. COMPLIANCE WITH LAWS. The Companies have (i) complied in all material
respects with all Requirements of Laws, Governmental Permits and Court Orders
applicable to the Business and has filed with the proper Governmental Bodies
all statements and reports required by all Requirements of Laws, Governmental
Permits and Court Orders to which the Companies or any of its employees
(because of their activities on behalf of the Companies) are subject and (ii)
conducted the Business and is in compliance in all material respects with all
federal, state and local energy, public utility, health, safety and
environmental Requirements of Laws, Governmental Permits and Court Orders
including the Clean Air Act, the Clean Water Act, the Solid Waste Act, the
Comprehensive Environmental Response Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Safe Drinking Water Act, OSHA, the
Toxic Substances Control Act and any similar state, local or foreign laws
(collectively "Environmental and OSHA Obligations") and all other Governmental
Body requirements, except where any such failure to comply or file would not,
in the aggregate, have a Material Adverse Effect. No claim has been made by
any Governmental Body (and, to the Knowledge of the Companies and the Sellers,
no such claim is anticipated) to the effect that the Business fails to comply,
in any respect, with any Requirements of Laws, Governmental Permit or
Environmental and OSHA Obligation or that a Governmental Permit or Court Order
is necessary in respect thereto.
15
M. INSURANCE. Attached hereto as Exhibit J is a list of all coverages for
fire, liability, or other forms of insurance and all fidelity bonds held by or
applicable to the Companies. Copies of the binders for all such insurance
policies have been delivered to Buyer. To the Companies' and the Sellers'
Knowledge, the insurance maintained by the Companies are adequate for its
business. To the Knowledge of the Companies and the Sellers, no event relating
to the Companies have occurred which will result in (i) cancellation of any
such insurance coverages; (ii) a retroactive upward adjustment of premiums
under any such insurance coverages; or (iii) any prospective upward adjustment
in such premiums. All of such insurance coverages will remain in full force
and effect following the Closing. The Companies are not in default under any
such insurance policies.
N. EMPLOYEE BENEFIT PLANS.
1. EMPLOYEE WELFARE BENEFIT PLANS. Other than as
listed in Section 3.14(a) of the Disclosure Schedule, the Companies do not
maintain or contribute to any "employee welfare benefit plan" as such term is
defined in Section 3(1) of ERISA. With respect to any plan listed in Section
3.14(a) of the Disclosure Schedule, (i) the plan is in material compliance with
ERISA and all other applicable Requirements of Laws; (ii) the plan has been
administered in accordance with its governing documents; (iii) neither the
plan, nor any fiduciary with respect to the plan, has engaged in any
"prohibited transaction" as defined in Section 406 of ERISA other than any
transaction subject to a statutory or administrative exemption; (iv) except for
the processing of routine claims in the ordinary course of administration,
there is no material litigation, arbitration or disputed claim outstanding; and
(v) all premiums due on any insurance contract through which the plan is funded
have been paid.
2. EMPLOYEE PENSION BENEFIT PLANS. Other than as
listed in Section 3.14(b) of the Disclosure Schedule, the Companies do not
maintain or contribute to any arrangement that is or may be an "employee
pension benefit plan" relating to employees, as such term is defined in Section
3(2) of ERISA. With respect to any plan listed in Section 3.14(b) of the
Disclosure Schedule: (i) the plan is qualified under Section 401(a) of the
Code, and any trust through which the plan is funded meets the requirements to
be exempt from federal income tax under Section 501(a) of the Code; (ii) the
plan is in material compliance with ERISA and all other applicable Requirements
of Laws; (iii) the plan has been administered in accordance with its governing
documents as modified by applicable law; (iv) the plan has not suffered an
"accumulated funding deficiency" as defined in Section 412(a) of the Code; (v)
the plan has not engaged in, nor has any fiduciary with respect to the plan
engaged in, any "prohibited transaction" as defined in Section 406 of ERISA or
Section 4975 of the Code other than a transaction subject to statutory or
administrative exemption; (vi) the plan has not been subject to a "reportable
event" (as defined in Section 4043(b) of ERISA), the reporting of which has not
been waived by regulation of the Pension Benefit Guaranty Corporation; (vii) no
termination or partial termination of the plan has occurred within the meaning
of Section 411(d)(3) of the Code; (viii) all contributions required to be made
to the plan or under any applicable collective bargaining agreement have been
made to or on behalf of the plan; (ix) there is no material litigation,
arbitration or disputed claim outstanding; (x) all applicable premiums due to
the Pension Benefit Guaranty Corporation for plan termination insurance have
been paid in full on a timely basis; and (xi) a favorable determination letter
from the IRS has been received by the Companies with respect to such plan
stating that such plan is so qualified; and there are no circumstances which
would cause such plan to lose such qualified status.
3. EMPLOYMENT AND NON-TAX QUALIFIED DEFERRED
COMPENSATION ARRANGEMENTS. The Companies do not maintain or contribute to any
retirement or deferred or incentive compensation or stock purchase, stock grant
or stock option arrangement entered into between the Companies and any current
or former officer, consultant, director or employee of the Companies that is
not intended to be a tax qualified arrangement under Section 401(a) of the
Code.
O. CONTRACTS AND AGREEMENTS. Exhibit K hereto contains a list and brief
description of (i) all promissory notes, loan agreements, and other evidences
of indebtedness for borrowed money (other than equipment leases), guarantees,
hedging agreements, off-balance sheet financing arrangements, indemnity
agreements, vendor contracts with airlines and other carriers, hotels and
resorts, agreements with rental car companies, consortia agreements, interface
or similar agreements pertaining to various airline or other computer
reservation systems to which the Companies are a party or by which the
Companies or its properties are bound, (ii) all written or oral contracts,
commitments, leases, and other agreements that are
16
material to the business of the Companies (including, without limitation,
marketing agreements, coop agreements and travel agency agreements) to which
the Companies are a party or by which the Companies or its properties are bound
pursuant to which (a) the obligations thereunder of the Companies are, or are
contemplated as being as of the commencement date thereof, for any one contract
$50,000 or greater irrespective of the level of usage, or (b) the obligations
thereunder of the other party to such Contract are, or are anticipated as
representing, for any one contract $50,000 or greater of the Companies' gross
margin for fiscal year 1998 (as determined in accordance with past practices
and procedures on the Companies' monthly profit and loss statements), and (iii)
any non-competition agreement or other similar agreement prohibiting the
Companies from freely engaging in any business or competing anywhere in the
world (collectively, the "CONTRACTS"). The Companies are not and, to the
Knowledge of the Sellers and the Companies, no other party thereto is in
default (and no event has occurred which, with the passage of time or the
giving of notice, or both, would constitute a default by the Companies) under
any of the Contracts, and the Companies have not waived any material right
under any of the Contracts. All of the Contracts to which the Companies are a
party are legal, valid, binding, enforceable and in full force and effect and
will remain legal, valid, binding, enforceable and in full force and effect on
identical terms immediately after the Closing, except for the Equitable
Exceptions. The Companies have not guaranteed any obligations of any other
Person. The Companies have no present expectation or intention of not fully
performing all of its obligations under any Contract, the Companies have no
Knowledge of any breach or anticipated breach by the other parties to any
Contract and the Companies have not received notice of actual or threatened
termination or non-renewal of any Contract. The Companies have utilized or is
utilizing all cash and payment-in-kind services received in connection with
cooperative marketing support from suppliers (i) for their intended purpose,
(ii) in accordance with the terms under which they were received, and (iii)
consistent with past practices.
P. CLAIMS AND PROCEEDINGS. There are no claims, actions, suits,
proceedings, or investigations pending or, to the Knowledge of the Sellers or
the Companies, threatened against or affecting the Companies or any of its
properties or assets, at law or in equity, before or by any court, municipality
or other Governmental Body. To the extent any are disclosed on the Disclosure
Schedule, none of such claims, actions, suits, proceedings, or investigations,
if adversely determined, will result in any material liability or loss to the
Companies. The Companies have not been and the Companies are not now, subject
to any Court Order, stipulation, or consent of or with any court or
Governmental Body. No inquiry, action or proceeding has been instituted or, to
the Knowledge and belief of the Sellers or the Companies, threatened or
asserted against the Sellers or the Companies to restrain or prohibit the
carrying out of the transactions contemplated by this Agreement or to challenge
the validity of such transactions or any part thereof or seeking damages on
account thereof. To the Knowledge of the Companies and the Sellers there is no
basis for any such valid claim or action.
Q. TAXES.
1. All Federal, foreign, state, county and local
and other Taxes due from the Companies on or before the Closing have been paid
and all Tax Returns which are required to be filed by the Companies on or
before the date hereof have been filed within the time and in the manner
provided by all Requirements of Laws, and all such Tax Returns are true and
correct and accurately reflect the Tax liabilities of the Companies. No Tax
Returns of the Companies or the Sellers are presently subject to an extension
of the time to file. All Taxes, assessments, penalties, and interest of the
Companies which have become due pursuant to such Tax Returns or any assessments
received have been paid or adequately accrued on the Companies' Financial
Statements. The provisions for Taxes reflected on the balance sheets contained
in the Financial Statements are adequate to cover all of the Companies' Tax
liabilities for the respective periods then ended and all prior periods. The
Companies have not executed any presently effective waiver or extension of any
statute of limitations against assessments and collection of Taxes, and there
are no pending or threatened claims, assessments, notices, proposals to assess,
deficiencies, or audits with respect to any such Taxes of which the Sellers or
the Companies are aware. For Governmental Bodies with respect to which the
Companies do not file Tax Returns, no such Governmental Body has given the
Companies written notification that the Companies are or may be subject to
taxation by that Governmental Body. The Companies have withheld and paid all
Taxes required to have been withheld and paid in connection with amounts paid
or owing to any employee, stockholder, creditor, independent contractor or
other party. There are no Tax liens on any of the property or assets of the
Companies.
17
2. Neither the Companies nor any other
corporation has filed an election under Section 341(f) of the Code that is
applicable to the Companies or any assets held by the Companies. The Companies
have not made any payments, is not obligated to make any payments, and is not a
party to any agreement that under certain circumstances could obligate it to
make any payments that will not be deductible under Section 280G of the Code.
The Companies have not been a United States real property holding corporation
within the meaning of Code Sec. 897(c)(2) during the applicable period
specified in Section 897(c)(1)(A)(ii) of the Code. The Companies are not a
party to any Tax allocation or sharing agreement. The Companies have not and
has never been (nor does the Companies have any liability for unpaid Taxes
because it once was) a member of an affiliated group during any part of which
return year any corporation other than the Companies also was a member of the
affiliated group.
3. No transaction contemplated by this Agreement
is subject to withholding under Section 1445 of the Code and no stock transfer
taxes, real estate transfer taxes or similar taxes will be imposed upon the
transfer and sale of the Shares pursuant to this Agreement.
4. Island has made a valid election under Section
1362 of the Code and any corresponding state or local provisions to be an S
corporation within the meaning of Section 1361 of the Code for all taxable
years (or portions thereof) beginning on or after January 1, 1990, no such S
election has been terminated (whether voluntarily, involuntarily or
inadvertently, including, without limitation, by taking any action defined in
Section 1362(d) of the Code) since such time.
5. The Companies will not be required to include
any amount in taxable income or exclude any item of deduction or loss from
taxable income for any taxable period (or portion thereof) ending after the
Closing Date (i) as a result of a change in method of accounting for a taxable
period ending on or prior to the Closing Date, (ii) as a result of any "closing
agreement," as described in Section 7121 of the Code (or any corresponding
provision of state, local or foreign income Tax law) entered into on or prior
to the Closing Date, (iii) as a result of any sale reported on the installment
method where such sale occurred on or prior to the Closing Date, and (iv) as a
result of any prepaid amount received on or prior to the Closing Date.
R. PERSONNEL. Attached hereto as Exhibit L is a list of the names and
annual rates of compensation of the directors and executive officers of the
Companies, and of the employees of the Companies whose annual rates of
compensation during the calendar year ended December 31, 1998 (including base
salary, bonus and incentive pay) exceed (or by December 31, 1999 are expected
to exceed) $50,000. Exhibit L also summarizes the bonus, profit sharing,
percentage compensation, Companies automobile, club membership, and other like
benefits, if any, paid or payable to such directors, officers, and employees
during the Companies' calendar year ended December 31, 1998 and to the date
hereof. Exhibit L also contains a brief description of all material terms of
employment agreements to which the Companies are a party and all severance
benefits which any director, officer or employee of the Companies are or may be
entitled to receive. To the Knowledge of the Sellers and the Companies, the
employee relations of the Companies are generally good and there is no pending
or threatened labor dispute or union organization campaign. None of the
employees of the Companies are represented by any labor union or organization.
The Companies are in compliance in all material respects with all Requirements
of Laws respecting employment and employment practices, terms and conditions of
employment, and wages and hours, and are not engaged in any unfair labor
practices. Neither the Companies or the Sellers have been advised or otherwise
has Knowledge that any employee will not agree to remain employed by the
Companies after the consummation of the transactions contemplated hereby. There
is no unfair labor practice claim against the Companies before the National
Labor Relations Board, or any strike, dispute, slowdown, or stoppage pending
or, to the Knowledge of the Companies and the Sellers, threatened against or
involving the Companies, and none has previously occurred.
S. BUSINESS RELATIONS. Neither the Companies or the Sellers have Knowledge
or has received notice that any customer, supplier, travel agency, resort
operator or lodging or transportation company engaged in doing business with
the Companies will cease to do business with the Companies after the
consummation of the transactions contemplated hereby in the same manner and at
the same levels as previously conducted with the Companies except for any
reductions which do not result in a Material Adverse Change. In addition,
neither the Companies or the Sellers have Knowledge that any Material hotel or
resort customer will cancel its contract with the Company. Neither the
Companies or Sellers have received any notice of
18
cancellation of or Material adverse modification to any Material business
arrangement between any Person and the Companies nor is the Companies or the
Sellers aware of any facts which could lead them to believe that the Business
will be subject to cancellation or such a modification of any such business
arrangement.
T. ACCOUNTS RECEIVABLE; CUSTOMER DEPOSITS AND BOOKINGS; FINANCIAL RESULTS
DURING CURRENT STUB PERIOD.
1. ACCOUNTS RECEIVABLE. All of the accounts,
notes, and loans receivable that have been recorded on the books of the
Companies are bona fide and represent amounts validly due for goods sold or
services rendered and all such amounts (net of any allowance for doubtful
accounts) will be collected in full within 180 days following the Closing Date.
With respect to such accounts, notes and loans receivable, (i) all of such
accounts, notes, and loans receivable are free and clear of any Encumbrances;
(ii) no claims of offset have been asserted in writing against any of such
accounts, notes, or loans receivable; and (iii) none of the obligors of such
accounts, notes, or loans receivable has given written notice that it will or
may refuse to pay the full amount or any portion thereof.
2. CUSTOMER DEPOSITS; BOOKINGS. Exhibit M sets
forth, as of the date specified therein, (i) all customer bookings as of such
date on an aggregate basis ("BOOKINGS"), (ii) all deposits received from
customers in connection with such Bookings as of such date on an aggregate
basis ("CUSTOMER DEPOSITS"), and (iii) the aggregate amount of all prepayments
to vendors and suppliers and refunds to customers made by the Companies in
connection with such Bookings as of such date. As of the Closing Date, the
Companies' aggregate exposure (net of third party reimbursements) for all
claims by customers for refunds as of such date ("CUSTOMER CLAIMS") does not
exceed $5,000. The Customer Deposits are recognized and included on the
Companies' balance sheet only to the extent of cash received from the customers
in respect thereof, and each Customer Deposit so recognized and included is
matched by a deferred liability on such balance sheet. All cancellations by
customers of Bookings are recognized on the Companies' financial statements
promptly within three (3) business days upon the Companies' receipt of notice
of such cancellation from the customer. The number of Customer Claims, and the
projected cost to the Companies in respect of such Customer Claims, and the
level of Bookings (and its projected revenues for future periods in which such
Bookings will be converted into revenues) for the period since December 31,
1997 through the Closing Date are consistent with past practices of the
Companies.
3. FINANCIAL RESULTS DURING CURRENT STUB PERIOD.
On the Effective Date, Bookings shall exceed $3,000,000 million. The
Companies' working capital (determined in accordance with GAAP) shall not be
less than $0 on the Effective Date. Such levels of Bookings, working capital
and EBIT for the Companies are not materially less than the levels of Bookings
and working capital for the comparable 1997 period, computed on a basis
consistent with past practice.
U. BANK ACCOUNTS; INVESTMENTS. Attached hereto as Exhibit N is a list of
all banks or other financial institutions with which the Companies have an
account or maintains a safe deposit box, showing the type and account number of
each such account and safe deposit box and the names of the persons authorized
as signatories thereon or to act or deal in connection therewith. Exhibit N
also contains a list of all material investments by the Companies in any funds,
accounts, securities, certificates of deposit or instruments of any Person.
All of such investments are customary in form and amount for reasonably prudent
treasury investments of comparable businesses. None of such investments
involve any type of derivative, option, hedging or other speculative
instrument.
V. CUSTOMER CLAIMS. No written or oral claim for breach of contract or
otherwise by any customer has been made against the Companies since January 1,
1998 which could, individually or in the aggregate, result in any Material
Adverse Effect. To the Knowledge of the Sellers and the Companies, no state of
facts exists, and no event has occurred, which could reasonably be expected to
form the basis of any present claim against the Companies for liability to any
third party in connection with vacation packages sold or services rendered by
the Companies, other than Customer Claims arising in the ordinary course of the
Business.
W. BROKERS. Neither the Companies nor the Sellers have engaged, or caused
to be incurred any liability to any finder, broker, or sales agent in
connection with the origin, negotiation, execution, delivery, or performance of
this Agreement or the transactions contemplated hereby.
X. AFFILIATED TRANSACTIONS. Except for ▇▇▇▇▇▇▇'▇ ownership of certain
entities set forth in Section
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3.24 of the Disclosure Schedule, no officer, director, stockholder (including
the Sellers) or Affiliate of the Companies or any individual related by blood
or marriage to any such Person, or any entity in which any such Person owns any
beneficial interest, is a party to any agreement, contract, arrangement or
commitment with the Companies or engaged in any transaction with the Companies
or has any interest in any property used by the Companies. No officer,
director, or stockholder of the Companies or any Affiliate of any such officer,
director, or stockholder, has any ownership interest in any competitor,
supplier, or customer of the Companies (other than ownership of securities of a
publicly-held corporation of which such Person owns, or has real or contingent
rights to own, less than one percent of any class of outstanding securities) or
any property used in the operation of the Business.
Y. FUNDED INDEBTEDNESS; LETTERS OF CREDIT; UNDISCLOSED LIABILITIES.
1. FUNDED INDEBTEDNESS. Other than such Funded
Indebtedness which is to be repaid and discharged prior to Closing in
accordance with Section 7.1(d) and outstanding equipment leases set forth in
Section 3.25(a) of the Disclosure Schedule, the Companies do not have any
Funded Indebtedness.
2. LETTERS OF CREDIT. Other than those listed on
Exhibit O, the Companies have no letters of credit, performance bonds or
similar instruments issued on or for its account for the benefit of any of its
vendors or otherwise.
3. UNDISCLOSED LIABILITIES. The Companies do not
have any Material liabilities (whether absolute, accrued, contingent or
otherwise), of a nature required by GAAP to be reflected on a corporate balance
sheet or disclosed in the notes thereto, except such liabilities which are
accrued or reserved against in the Most Recent Financial Statements or
disclosed in the notes thereto, including without limitation any accounts
payable or service liabilities of the Companies.
Z. YEAR 2000. All of the material computer software, computer firmware,
computer hardware (whether general or special purpose), and other similar or
related items of automated, computerized, and/or software system(s) that are
used or relied on by the Companies in the conduct of its business will not
malfunction, will not cease to function, will not generate incorrect data, and
will not produce incorrect results when processing, providing, and/or receiving
(i) date-related data into and between the twentieth and twenty-first centuries
and (ii) date-related data in connection with any valid date in the twentieth
and twenty-first centuries.
AA. ARC COMPLIANCE. The Companies maintains all of its ticketing stock
utilized in the Tour Business in full compliance with the safety standards
required by ARC. None of the Companies' ticketing stock utilized for the
conduct of the Tour Business has ever been lost or stolen and no claim has ever
been made by any airline, hotel, tour operator or other travel vendor against
the Companies with respect to any lost or stolen tickets.
BB. INFORMATION FURNISHED. The Companies and the Sellers have made available
to Buyer true and correct copies of all material corporate records of the
Companies and all material agreements, documents, and other items listed on the
Exhibits and Disclosure Schedule to this Agreement or referred to in Article
III of this Agreement, and neither this Agreement, the Schedules hereto, nor
any written information, instrument, or document delivered to Buyer pursuant to
this Agreement contains any untrue statement of a material fact or omits any
material fact necessary to make the statements herein or therein, as the case
may be, not misleading.
ARTICLE IV
BUYER'S REPRESENTATIONS AND WARRANTIES
Buyer represents and warrants to the Sellers as follows:
A. DUE ORGANIZATION. Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the State of New York and has
full corporate power and authority to execute, deliver and perform this
Agreement and to carry out the transactions contemplated hereby.
B. DUE AUTHORIZATION. The execution, delivery and performance of this
Agreement and the
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transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action of Buyer and the Agreement has been duly and validly
executed and delivered by Buyer and constitutes the valid and binding
obligation of Buyer, enforceable in accordance with its terms, except for the
Equitable Exceptions. The execution, delivery, and performance of this
Agreement (as well as all other instruments, agreements, certificates or other
documents contemplated hereby) by Buyer, do not (a) violate any Requirements of
Laws or Court Order of any Governmental Body applicable to Buyer or its
property, (b) violate or conflict with, or permit the cancellation of, or
constitute a default under any agreement to which Buyer is a party or by which
it or its property is bound, (c) permit the acceleration of the maturity of any
indebtedness of, or any indebtedness secured by the property of, Buyer, (d)
violate or conflict with any provision of the charter or bylaws of Buyer, or
(e) except for filings or appraisals under the HSR Act and such consents,
approvals or registrations as may be required under applicable state securities
laws, require any consent, approval or authorization of, or notice to, or
declaration, filing or registration with, any Governmental Body or other third
party.
C. NO BROKERS. Buyer has not engaged, or caused to be incurred any
liability for which the Companies or the Sellers may be liable to any finder,
broker or sales agent in connection with the origin, negotiation, execution,
delivery, or performance of this Agreement or the transactions contemplated
hereby.
D. INVESTMENT. Buyer will acquire the Shares for investment and for its own
account and not with a view to the distribution thereof.
ARTICLE V
COVENANTS
E. CONSENTS OF OTHERS. Prior to the Closing, the Companies and the Sellers
shall use their best efforts to obtain and to cause the Companies to obtain all
authorizations, consents and permits required of the Companies and the Sellers
(including under the Contracts and real property leases) to permit them to
consummate the transactions contemplated by this Agreement. To the extent
required to consummate such transactions or to ensure that the Contracts shall
remain in place following the Closing, the Sellers shall have obtained the
written consent (or waiver of any "change of control"-type termination rights)
of any third party to any Contract. As promptly as practicable after the date
hereof, Buyer, the Companies and the Sellers shall make, or shall cause to be
made, such filings as may be required pursuant to the HSR Act with respect to
the consummation of the transactions contemplated by this Agreement.
▇. ▇▇▇▇▇▇▇' EFFORTS. The Companies and the Sellers shall use all reasonable
efforts to cause all conditions for the Closing set forth in Section 7.1 to be
met.
▇. ▇▇▇▇▇▇ OF ATTORNEY. The Companies and the Sellers shall cause the
Companies to revoke and terminate at or prior to Closing all powers of attorney
granted by the Companies, other than those relating to service of process,
qualification or pursuant to governmental regulatory or licensing agreements,
or representation before the IRS or other Government Bodies.
H. CONDUCT OF BUSINESS PENDING CLOSING. From the date of this Agreement to
the Closing Date:
1. Except as otherwise contemplated by this
Agreement, or as Buyer may otherwise consent to in writing, the Companies and
the Sellers shall conduct the Business only in the ordinary course and shall
not engage in any material activity or enter into any material transaction
which would cause a breach of the representations and warranties contained in
Article III.
2. The Sellers and the Companies shall use all
reasonable best efforts to cause the Business to preserve substantially intact
its current business organization and present relationships with its customers,
vendors, suppliers and employees and to maintain all of its insurance currently
in effect.
3. The Sellers and the Companies shall give
prompt notice to Buyer of any notice of material default received by the
Companies or the Business subsequent to the date of this Agreement under any
Contract or any Material Adverse Change occurring prior to the Closing Date in
the operation of the Companies or the Business.
4. Neither the Companies nor the Sellers, nor any
of their representatives,
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shall solicit, encourage or discuss any Acquisition Proposal (as hereinafter
defined) or supply any non-public information concerning the Companies or the
Business or the Companies' assets to any party other than Buyer or its
representatives. As used herein, "ACQUISITION PROPOSAL" means any proposal
other than the transactions herein contemplated, for (i) any merger or other
business combination involving the Companies or the Business, (ii) the
acquisition of the Companies or a material equity interest in the Companies or
a material portion of its assets, or (iii) the dissolution or liquidation of
the Companies.
I. ACCESS TO RECORDS BEFORE CLOSING. Prior to the Closing Date, the Sellers
and the Companies agree that they will give, or cause to be given, to Buyer and
their representatives, during normal business hours and at Buyer's expense,
access to the Companies' personnel, officers, agents, employees, assets,
properties, titles, contracts, corporate minute and other books, records, files
and documents of the Sellers with respect to the Business (including financial,
tax basis, budget projections, accountants' work papers and other information
as Buyer may request) and to the Business' personnel, customers, suppliers and
independent accountants, to allow Buyer to obtain such information as they
shall desire, and to make copies of such information, to the extent reasonably
necessary. Buyer shall have the right, with the Companies' assistance, to
interview the three largest properties that ITR represents and six additional
properties mutually agreed upon by Buyer and ITR. Additionally, the Sellers and
the Companies will provide Buyer opportunities to meet with key employees of
the Business, to visit facilities of the Business and to otherwise conduct due
diligence in respect of the Companies and the Business. All materials copied
by Buyer and all Confidential Information shall be maintained in confidence by
Buyer and returned to the Sellers and/or the Companies, as appropriate, if the
Closing of the transactions contemplated hereunder fails to occur. The
exercise of Buyer's rights hereunder shall be conducted at such times and in
such a manner as shall not unreasonably interfere with the Companies' conduct
of the Business.
J. PAYMENTS TO THE COMPANIES BY THE SELLERS.
1. The Sellers agrees to reimburse the Companies
prior to the Closing Date for any and all legal, accounting and other expenses,
which (i) were paid or accrued by the Companies and (ii) incurred by the
Sellers or the Companies in connection with the preparation and negotiation of
this Agreement and the consummation of the transactions contemplated hereby.
All such expenses are disclosed in Section 5.6(a) of the Disclosure Schedule.
2. The Sellers agrees to repay or caused to be
repaid to the Companies as of the Closing any and all indebtedness owed by the
Sellers or any Affiliate of the Sellers. All such indebtedness is disclosed in
Section 5.6(b) of the Disclosure Schedule. All intercompany or affiliated
accounts of the Companies shall be settled and cleared prior to the Closing
Date.
ARTICLE VI
POST-CLOSING COVENANTS
A. GENERAL. In case at any time after the Closing any further action is
legally necessary or reasonably desirable (as determined by Buyer and the
Sellers) to carry out the purposes of this Agreement, each of the parties will
take such further action (including the execution and delivery of such further
instruments and documents) as any other party reasonably may request, all at
the sole cost and expense of the requesting party (unless the requesting party
is entitled to indemnification therefor under Article VIII below). The Sellers
acknowledges and agrees that from and after the Closing, Buyer will be entitled
to possession of all documents, books, records, agreements, and financial data
of any sort relating to the Companies, which shall be maintained at the
headquarters of the Companies; provided, however, that the Sellers shall be
entitled to reasonable access to and to make copies of such books and records
at their sole cost and expense and Buyer will maintain all of the same for a
period of at least three (3) years after Closing. Thereafter, the Companies
will offer such documentation to the Sellers before disposal thereof.
B. TRANSITION. For a period of four (4) years following Closing, the
Sellers will not take any action (or cause any such action to be taken by
another Person) that primarily is designed or intended to have the effect of
discouraging any vendor (including without limitation any airline or other
carrier, hotel, resort or rental car Companies), lessor, licensor, customer,
travel agency, consortia member, supplier, or other business associate of the
Companies from maintaining the same business relations with the Companies after
the Closing as it maintained with the Companies prior to the Closing. For a
period of four (4) years following Closing, ▇▇▇▇▇ will refer all customer
inquiries relating to the Tour Business to the Companies.
22
C. CONFIDENTIALITY. The Sellers will treat and hold in confidence and not
disclose all Confidential Information and refrain from using any of the
Confidential Information except in connection with this Agreement or otherwise
for the benefit of the Companies or Buyer for a period of four (4) years from
the date of this Agreement, and deliver promptly to Buyer or destroy, at the
written request and option of Buyer, all tangible embodiments (and all copies)
of the Confidential Information which are in their possession except as
otherwise permitted herein. In the event that the Sellers are requested or
required (by oral question or written request for information or documents in
any legal proceeding, interrogatory, subpoena, civil investigative demand, or
similar legal proceeding) to disclose any Confidential Information, the Sellers
will notify Buyer promptly of the request or requirement.
D. COVENANT NOT TO COMPETE. For and in consideration of the allocation of
$50,000 of the Purchase Price paid to the Sellers by Buyer, the Sellers, by
signing this Agreement, covenants and agrees, for a period of four (4) years
from and after the Closing Date, that he will not, directly or indirectly
without the prior written consent of Buyer, for or on behalf of any entity:
1. become interested or engaged, directly or
indirectly, as a shareholder, bondholder, creditor (other than as a trade
creditor in the ordinary course of ▇▇▇▇▇▇▇'▇ business, consistent with past
practice), officer, director, partner, agent, contractor with, employer or
representative of, or in any manner associated with, or give financial,
technical or other assistance to, any Person, firm or corporation for the
purpose of (i) engaging in the Tour Business in competition with the Companies
or any of its Affiliates or (ii) providing wholesale travel sales or vacation
package services directly to consumers (or indirectly to consumers through
other travel agents or wholesalers) for travel to North America or from North
America to other countries;
2. enter into any agreement with, service, assist
or solicit the business of any customers of the Companies or any of its
Affiliates for the purpose of providing wholesale travel or vacation package
services to such customers in competition with the Companies or any of its
Affiliates or to cause them to reduce or end their business with the Companies
or any of its Affiliates; or
3. hire, retain, or solicit the employment or
services of employees, consultants or representatives of the Companies or any
of its Affiliates for the purpose of causing them to leave the employment of
the Companies or any of its Affiliates; provided, however, that in respect of
employees, consultants or representatives of any Affiliate of the Companies,
the nonsolicitation covenant contained in this paragraph (c) shall only apply
in those situations where the affected person is being hired or solicited by
Sellers to work for a business or entity that is competitive with the Companies
or any Affiliate;
provided, however, that neither of the following shall be deemed to be a
violation of this Section 6.4 solely by reason thereof: (i) the same type of
travel services as currently provided by ▇▇▇▇▇▇▇ or any companies
majority-owned by ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇ COMPANIES") to resorts, hotels or airlines
which he or any ▇▇▇▇▇▇▇ Companies currently, or in the future, hold a
controlling ownership interest, or actively manage or actively operate (it
being agreed by ▇▇▇▇▇▇▇ that this exclusion shall not apply to any resort or
hotel, consisting of more than 75 guest rooms, and located in any of the
following geographic locations: Aruba, Bahamas, Bermuda, Caymans, Dominican
Republic, Jamaica, Mexico, Puerto Rico, or U.S. Virgin Islands), or (ii) the
Sellers' ownership of less than three percent (3%) of the outstanding stock of
any publicly-traded corporation that engages in competition with the Companies
or any of its Affiliates; provided, further, that ▇▇▇▇▇▇▇ and the ▇▇▇▇▇▇▇
Companies agree not to provide reservation services to any hotel, resort or
airline unless he or a ▇▇▇▇▇▇▇ Company own a controlling majority interest, or
actively manage and operate such hotel, resort or airline. In addition,
▇▇▇▇▇▇▇ agrees to offer to Buyer, for any of his resorts, hotels or airlines,
the best net rates available in the marketplace (other than occasional
case-by-case special marketing promotions lasting less than 60 days in
duration).
E. ADDITIONAL MATTERS.
1. The Sellers shall cause the Companies to file
with the appropriate governmental authorities all Tax Returns required to be
filed by it for any taxable period ending prior to the Effective Date and the
Companies shall remit any Taxes due in respect of such Tax Returns. In
addition, the Sellers shall cause Kass & ▇▇▇▇▇, P.C. to prepare short period
tax returns for the Companies covering the period from their respective most
recent fiscal year-ends through the Effective Date (the "SHORT PERIOD
23
RETURNS"). The cost of preparation of the Short Period Returns shall be paid
for by the Sellers. The Sellers agrees to provide the Companies and the Buyer
with copies of the Companies' Tax Returns and the Short Period Returns.
2. Buyer and the Sellers recognize that each of
them will need access, from time to time, after the Closing Date, to certain
accounting and Tax records and information held by Buyer and/or the Companies
to the extent such records and information pertain to events occurring on or
prior to the Closing Date; therefore, Buyer agrees to cause the Companies to
(A) use its best efforts to properly retain and maintain such records for a
period of six (6) years from the date the Tax Returns for the year in which the
Closing occurs are filed or until the expiration of the statute of limitations
with respect to such year, whichever is later, and (B) each party agrees to
allow the other party and his or its agents and representatives at times and
dates mutually acceptable to the parties, to inspect, review and make copies of
such records as such other party may deem necessary or appropriate from time to
time, such activities to be conducted during normal business hours and at the
requesting party's expense.
3. SECTION 338(h)(10) ELECTION. If in Buyer's
sole discretion such an election is deemed to be desirable, the Island Sellers
and Buyer shall join in making a timely election (but in no event later than
the 15th day of the ninth full calendar month after the month in which the
Closing Date occurs) under Section 338(h)(10) of the Code (including the
prerequisite election under Section 338 of the Code) and any similar state law
provisions in all applicable states which permit corporations to make such
elections, with respect to the sale and purchase of the Island Shares pursuant
to this Agreement, and each party shall provide the others all necessary
information to permit such elections to be made. Buyer and the Island Sellers
shall, as promptly as practicable following the Closing Date, take all actions
necessary and appropriate (including filing such forms, returns, schedules and
other documents as may be required) to effect and preserve timely elections;
provided, however, that Buyer shall be the party responsible for preparing and
filing the forms, returns, schedules and other documents necessary for making
an effective and timely election. All Taxes attributable to the elections made
pursuant to this Section 6.5(c) shall be the liability of the Island Sellers;
provided, however, that Buyer shall reimburse Sellers for 66.67% of any
additional Taxes incurred as a result of such elections (up to a maximum
reimbursement of $200,000). Such reimbursement shall be made in accordance
with the Tax Payments Schedule attached hereto. In connection with such
elections, following the Closing Date, Buyer and the Island Sellers shall act
together in good faith to determine and agree upon the "deemed sales price" to
be allocated to each asset of Island in accordance with Treasury Regulation
Section 1.338(h)(10)-1(f) and the other regulations under Section 338 of the
Code. The portion of the Purchase Price allocable to ITR shall be equal to the
difference between $1,000,000 and the total liabilities of ITR assumed by the
Buyer. The balance of the Purchase Price, including the entire Earned Payout
Amount, if any, shall be allocated to Island. Notwithstanding the generality
of the immediately preceding two sentences, Buyer and the Island Sellers agree
that the "deemed sales price" allocated to Island shall be allocated as
follows: (i) the monetary assets of Island shall be allocated at their fair
market value as of the Effective Date as determined as part of the
determination of the Net Worth of the Companies in accordance with Section 2.7
hereof, (ii) $50,000 shall be allocated to the covenant not to compete
contained in Section 6.4 hereof, and (iii) the balance of the "deemed sales
price" allocated to Island shall be allocated to the fixed assets, goodwill and
other intangible assets of Island. Both Buyer and the Sellers shall report the
tax consequences of the transactions contemplated by this Agreement
consistently with such allocations and shall not take any position inconsistent
with such allocations in any Tax Return or otherwise. In the event that Buyer
and the Island Sellers are unable to agree as to such allocations, Buyer's
reasonable positions with respect to such allocations shall control.
4. INDEMNITY. The Sellers shall be liable for,
and shall indemnify and hold Buyer and the Companies harmless against, any
Taxes or other costs attributable solely to (i) a failure on the part of the
Island Sellers to take all actions required of him under Section 6.5(c); or
(ii) a failure on the part of Island to qualify, at or prior to the Closing, as
an "S corporation" for federal and/or state income Tax purposes. The indemnity
set forth in this Section 6.5(d) shall not be subject to the conditions and
limitations set forth in Section 8.6 of this Agreement.
F. LITIGATION SUPPORT. In the event and for so long as
any party is actively contesting or defending against any claim, suit, action
or charge, complaint, or demand in connection with
24
(i) any transaction contemplated under this Agreement or (ii) any fact,
circumstance, status, condition, activity, practice, occurrence, event, action,
failure to act, or transaction on or prior to the Closing Date involving the
Companies, each of the other parties will cooperate and make available
themselves or their personnel, as applicable, and provide such testimony and
access to their books and records as shall be necessary in connection with the
contest or defense.
G. AUDITS. Following the Closing, the Sellers shall
cooperate with Buyer's efforts to cause the Companies, at Buyer's expense, to
deliver, or cause to be delivered, to Buyer an unqualified and unmodified audit
report of AA on the balance sheets of the Companies as of December 31, 1997 and
December 31, 1998, and audited statements of operations and cash flows of the
Companies for the fiscal years then ended, which report shall be without
limitation as to the scope of the audit. The Sellers, in his capacity as an
officer and directors of the Companies during such periods, shall assist Buyer,
at no cost or expense to Sellers, by providing all management letters, reports
or representations reasonably requested by such auditors in connection with
such audits.
H. BOCA RATON BRANCH. Buyer agrees that, at ▇▇▇▇▇▇▇'▇ sole option, ▇▇▇▇▇▇▇
may continue to maintain and operate the Companies' Boca Raton branch office
(which is currently operated by ▇▇▇▇▇▇▇) for a period of up to 10 years;
provided, however, that ▇▇▇▇▇▇▇ shall not have the right to assign his rights
to operate the Boca Raton branch office without the prior written consent of
the Buyer; provided, further, that operation of the Companies' Boca Raton
branch shall cease if American Airlines terminates the Companies' status as a
tour operator for American Airlines. ▇▇▇▇▇▇▇ shall bear all costs associated
with the Boca Raton branch office. All upfront commissions shall be paid to
▇▇▇▇▇▇▇ and override commissions shall be paid to the Companies from the Boca
Raton branch. ▇▇▇▇▇▇▇ shall pay the Companies a monthly fee of $1,000 (as
adjusted annually as mutually agreed upon by ▇▇▇▇▇▇▇ and Buyer in order to
maintain the current economic terms of such arrangement), for certain sales
report filing and accounting services to the Boca Raton branch currently
provided by the Companies. The above new arrangement with ▇▇▇▇▇▇▇ assumes that
the monthly fee of $1,000 is equal to or greater than those currently charged
to ▇▇▇▇▇▇▇ by the Companies and that the current arrangement is, and the future
arrangement will be, in compliance with all applicable industry or governmental
regulatory bodies and all applicable laws, rules and regulations. A mutually
agreeable operating agreement shall be entered into between ▇▇▇▇▇▇▇ and the
Companies to formalize the arrangement described in this Section 6.8.
I. ARC CONSENT. The Companies, Buyer and Sellers shall
each use their reasonable best efforts to cooperate and to work together to
obtain any and all consents required by ARC in connection with this Agreement
and the transactions contemplated hereby, including the sale of the Shares to
Buyer.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF PARTIES TO CONSUMMATE CLOSING
A. CONDITIONS TO BUYER'S OBLIGATIONS. The obligation of Buyer under this
Agreement to consummate the Closing is subject to the conditions that:
1. COVENANTS, REPRESENTATIONS AND WARRANTIES.
The Companies and the Sellers shall have performed in all material respects all
obligations and agreements and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by each
of them prior to or at the Closing Date. The representations and warranties of
the Companies and the Sellers set forth in this Agreement shall be accurate in
all material respects at and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. In addition, Buyer shall
have determined from its due diligence review of the Companies that no Material
Adverse Change or Material Adverse Effect shall have occurred in the financial
condition, business, operations or prospects of the Companies from those
presented to Buyer prior to execution of this Agreement.
2. CONSENTS. All statutory requirements for the
valid consummation by the Companies and the Sellers of the transactions
contemplated by this Agreement shall have been fulfilled and all
authorizations, consents and approvals, including expiration or early
termination of all waiting periods under the HSR Act, if applicable, and those
of all federal, state, local and foreign governmental
25
agencies and regulatory authorities required to be obtained in order to permit
the consummation of the transactions contemplated hereby shall have been
obtained in form and substance reasonably satisfactory to Buyer. All approvals
of the Board of Directors and stockholders of the Companies necessary for the
consummation of this Agreement and the transactions contemplated hereby shall
have been obtained.
3. LEASES. Leases for the Companies'
headquarters and call centers shall continue to remain in full force and effect
following the Closing in form and substance satisfactory to Buyer.
4. DISCHARGE OF INDEBTEDNESS AND LIENS. The
Sellers and the Companies shall have provided for the payment in full by the
Companies of all Funded Indebtedness of the Companies and all extended credit
from vendors at the Closing (other than customary accounts payable outstanding
on 90 day or less payment terms in accordance with past practices). Such
Funded Indebtedness, if any, as of December 31, 1998, is listed on Exhibit P
hereto. The Sellers shall have also provided for the termination of all
Encumbrances of record on the properties of the Companies, except for Permitted
Exceptions. All liens or UCC filings against the Companies shall have been
terminated as of the Closing.
5. TRANSFER TAXES. The Sellers shall have paid
all stock transfer or gains taxes imposed on the Sellers incurred in connection
with this Agreement.
6. FINANCIAL CONDITION. The Companies shall
continue to have Cash and Cash Equivalents on the Closing Date in an amount not
less than $385,000.
7. PRELIMINARY CLOSING BALANCE SHEET. The
Companies and the Sellers shall have delivered to Buyer the Preliminary Closing
Balance Sheet and Buyer shall be reasonably satisfied in all respects with the
content of the Preliminary Closing Balance Sheet.
8. DOCUMENTS TO BE DELIVERED BY THE SELLERS AND
THE COMPANIES. The following documents shall be delivered at the Closing by
the Sellers and the Companies:
a) OPINION OF SELLERS' COUNSEL. Buyer shall have received
an opinion of counsel to Sellers and the Companies, dated the
Closing Date, in substantially the same form as the form of
opinion that is Exhibit B hereto.
b) CERTIFICATES. Buyer shall have received (i) an
officer's and stockholder's certificate and (ii) a secretary's
certificate of the Companies executed by officers of the
Companies and the Sellers, as appropriate and dated the Closing
Date, in substantially the same forms as the forms of
certificates that are attached as Exhibit C-1 and Exhibit C-2,
respectively, hereto.
c) RELEASE. The Sellers shall have furnished the
Companies with a duly executed general release of liabilities
in the form attached as Exhibit D hereto.
d) ESCROW AGREEMENT. The Sellers shall have delivered to
Buyer at the Closing the duly executed Escrow Agreement.
e) TERMINATION OF EMPLOYMENT AGREEMENTS. The Companies
shall have provided evidence satisfactory to Buyer of the
complete termination, without liability to the Companies, of
all employment agreements in existence prior to the Closing
among the Companies, on the one hand, and the Sellers or any
other employees of the Companies; provided, however, that the
parties to this Agreement acknowledge and agree that for
purposes of this Agreement an employee-at-will shall not be
considered to be bound and subject to an employment agreement.
In addition, ▇▇▇▇▇ will have entered into a new Employment
Agreement with the Buyer and the Companies in substantially the
form of Exhibit Q hereto.
f) STOCK CERTIFICATES. The Sellers shall have delivered
the Shares accompanied by duly executed stock powers, together
with any stock transfer stamps or receipts for any transfer
taxes required to be paid thereon.
g) RESIGNATION OF DIRECTORS. The Companies shall deliver
the written
26
resignations of all directors of the Companies effective as of
the Closing; provided that Buyer shall cause replacement
director(s) to be duly elected and appointed upon such
resignations.
B. CONDITIONS TO THE SELLERS' AND THE COMPANIES' OBLIGATIONS. The
obligation of the Sellers and the Companies under this Agreement to consummate
the Closing is subject to the conditions that:
1. COVENANTS, REPRESENTATIONS AND WARRANTIES.
Buyer shall have performed in all material respects all obligations and
agreements and complied in all material respects with all covenants contained
in this Agreement to be performed and complied with by Buyer prior to or at the
Closing and the representations and warranties of Buyer set forth in Article IV
hereof shall be accurate in all material respects, at and as of the Closing
Date, with the same force and effect as though made on and as of the Closing
Date.
2. CONSENTS. All statutory requirements for the
valid consummation by Buyer of the transactions contemplated by this Agreement
shall have been fulfilled and all authorizations, consents and approvals,
including expiration or early termination of all waiting periods under the HSR
Act (if applicable) and those of all federal, state, local and foreign
governmental agencies and regulatory authorities required to be obtained in
order to permit the consummation by Buyer of the transactions contemplated
hereby shall have been obtained unless such failure shall not have a Material
Adverse Effect on the Business.
3. ESCROW AGREEMENT. Buyer shall have delivered
to the Sellers at the Closing the duly executed Escrow Agreement required
pursuant to Section 2.5 hereof.
4. PAYMENTS TO THE SELLERS. The Sellers shall
have received the portion of the Purchase Price payable at Closing to the
Sellers.
C. WAIVER. Buyer can waive satisfaction of any condition set forth in
Section 7.1 and the Sellers can waive any condition set forth in Section 7.2
ARTICLE VIII
INDEMNIFICATION
A. INDEMNIFICATION OF BUYER. Except as provided in and subject to Section
8.6, the Sellers agrees to indemnify and hold harmless Buyer, the Companies,
each officer and director of the Companies and Buyer and any successor of the
Companies or Buyer (collectively, the "INDEMNIFIED PARTIES") from and against
any and all damages, losses, claims, liabilities, demands, charges, suits,
penalties, costs and expenses (including court costs and reasonable attorneys'
fees and expenses incurred in investigating and preparing for any litigation or
proceeding) (collectively, the "INDEMNIFIABLE COSTS"), which any of the
Indemnified Parties may sustain, or to which any of the Indemnified Parties may
be subjected, arising out of (A) any misrepresentation, breach or default by
the Sellers or the Companies of or under any of the representations,
warranties, covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith, (B) the assertion of any
claim or liability against the Companies or any of the Indemnified Parties
involving the Companies by any Person based upon facts or circumstances arising
prior to the Closing Date which form the basis for any claim or litigation, (C)
the Companies' tortious acts or omissions to act prior to Closing for which the
Companies did not carry liability insurance for itself as the insured party
sufficient to satisfy such claim or liability, whether or not such acts or
omissions to act result in a breach or violation of any representation or
warranty, or (D) any accounts payable or accrued liabilities of the Companies
incurred prior to the Closing Date but paid by Buyer or the Companies on or
after the Closing Date to the extent not reflected on the Audited Closing
Balance Sheet.
B. DEFENSE OF THIRD PARTY CLAIMS. If any legal proceeding shall be
instituted, or any claim or demand made, by any third party against any
Indemnified Party in respect of which the Sellers may be liable hereunder (and
such determination shall be made without regard to the limitations set forth in
Section 8.6), such Indemnified Party shall give prompt written notice thereof
to the Sellers and, except as otherwise provided in Section 8.4 below, the
Sellers shall have the right to defend, or cause the Companies or its
successors to defend, any litigation, action, suit, demand, or claim for which
such Indemnified Party may seek indemnification with counsel satisfactory to
the Sellers; provided, however, that the Sellers may not
27
settle any such litigation, action, suit, demand, or claim without the prior
written consent of Buyer, which shall not be unreasonably withheld.
Notwithstanding the foregoing, if in the reasonable judgment of Buyer, (i) such
litigation, action, suit, demand or claim, or the resolution thereof, would
have a Material Adverse Effect on Buyer or the Companies in excess of $50,000
not covered as an Indemnifiable Cost or (ii) Sellers have a conflict of
interest in defending such action on Buyer's or the Companies' behalf, at
Buyer's election, Buyer may defend itself , and in either of such instances
Sellers shall be liable for all expenses reasonably incurred in connection
therewith (including, without limitation, settlement payments and reasonable
attorney's fees). If neither (i) nor (ii) are applicable but Buyer desires to
participate in the defense of an action Sellers are defending because in
Buyer's reasonable judgment the outcome of such action could have an ongoing
effect on Buyer, the Companies or its successors, the Buyer may participate but
at its own expense. In the event the Sellers fails or refuses to defend any
legal proceeding he is required to defend under this Article VIII within a
reasonable length of time, the Indemnified Parties shall be entitled to assume
the defense thereof, and the Sellers shall be liable to repay the Indemnified
Parties for all expenses reasonably incurred in connection with said defense
(including, without limitation, settlement payments and reasonable attorney's
fees). If the Sellers does not or refuses to assume the defense of any
litigation, action, suit, demand, or claim in any legal proceeding he is
required to defend under this Article VIII, the Indemnified Parties shall have
the absolute right, at Sellers' expense, to control the defense of and to
settle, in their sole discretion and without the consent of Sellers, such
litigation, action, suit, demand, or claim, but Sellers shall be entitled, at
his own expense, to participate in such litigation, action, suit, demand, or
claim, and if the Sellers elects to participate in such litigation the
Indemnified Parties shall consult with the Sellers prior to settling such
litigation. The party controlling any defense pursuant to this Section 8.2
shall deliver, or cause to be delivered to the other party, copies of all
correspondence, pleadings, motions, briefs appeals or other written statements
relating to or submitted in connection with the defense of any such litigation,
action, suit, demand, or claim, and timely notices of any hearing or other
court proceeding relating to such litigation, action, suit, demand, or claim.
C. PROCEDURE FOR CLAIMS.
(a) ESCROW CLAIMS. If any claim for indemnification is made by an
Indemnified Party pursuant to this Article VIII prior to the expiration of the
Escrow Period, such Indemnified Party shall first apply to the Escrow Agent
provided in Section 2.5 of this Agreement for reimbursement of such claim in
accordance with the provisions of the Escrow Agreement; provided, however, the
Escrow Sum is not intended to be an exclusive remedy in the event Buyer has
indemnification claims hereunder which exceed such amount.
(b) OTHER CLAIMS. If pursuant to this Article
VIII any claim for indemnification is made by (i) an Indemnified Party after
the expiration of the Escrow Period, other than claims of third parties which
are governed by Section 8.2 hereof, or (ii) the Sellers, the Indemnified Party
or the Sellers, as the case may be (in either instance, the "CLAIMANT"), shall
send written notice to the other Person (by certified mail, return receipt
requested or by personal service as provided in Section 10.2 hereof) setting
forth in reasonable detail a description of the facts upon which the claim is
based and a reasonable estimate of the amount of the claim (a "CLAIM", with the
notice thereof referred to as the "CLAIM NOTICE"). The Person against whom the
Claim is brought (the RESPONDENT") shall have fifteen (15) calendar days from
receipt of the Claim Notice to respond to such Claim. Such response shall be
in writing and shall (i) set forth in reasonable detail the Respondent's
objection to the Claim and the basis for such objection, or (ii) the efforts
undertaken or to be undertaken by the Respondent to cure the Claim. In the
event the Respondent fails to respond to the Claim Notice in the manner set
forth above within such 15-day period, the Respondent shall be deemed to have
conceded the Claim in full. In the event the parties are unable to resolve the
Claim within thirty (30) calendar days from the date of receipt of the Claim
Notice, the Claim shall be submitted to arbitration in accordance with Section
10.9 below.
D. TAX AUDITS, ETC. In the event of an audit of a Tax Return of the
Companies with respect to which an Indemnified Party might be entitled to
indemnification pursuant to this Article VIII, the indemnifying parties shall
have the right to control any and all such audits which may result in the
assessment of additional Taxes against the Companies and any and all subsequent
proceedings in connection therewith, including appeals (subject to the prior
written consent of Buyer, which shall not unreasonably be withheld); provided,
however, that the Sellers and the Buyer shall jointly control, and shall
cooperate with each other in connection with, any and all such audits which may
result in the assessment of additional Taxes against the Companies for periods
both before and after the Closing Date. The Sellers shall cooperate fully in
all
28
matters relating to any such audit or other Tax proceeding (including according
access to all records pertaining thereto), and will execute and file any and
all consents, powers of attorney, and other documents as shall be reasonably
necessary in connection therewith. If additional Taxes are payable by the
Companies as a result of any such audit or other proceeding, the Sellers shall
be responsible for and shall promptly pay all Taxes, interest, and penalties
for which any of the Indemnified Parties shall be entitled to indemnification.
E. INDEMNIFICATION OF SELLERS. Buyer agrees to indemnify and hold harmless
the Sellers and the Companies and each officer, director, stockholder or
affiliate of the Companies, from and against any Indemnifiable Costs arising
out of (A) any misrepresentation, breach or default by Buyer of or under any of
the covenants, agreements or other provisions of this Agreement or any
agreement or document executed in connection herewith; (B) any claim against a
Seller after the Closing Date as a result of any guarantee by a Seller of any
lease or other obligation of the Companies in existence as of the Closing Date
to the extent that such guarantee has been disclosed to Buyer pursuant to the
Disclosure Schedule and such guarantee was made by Seller(s) in the ordinary
course of business; and (C) any accounts payable, accrued liabilities or other
obligations incurred by the Companies after the Closing Date in the ordinary
course of business, except for any such liabilities or obligations that are a
direct result of the negligence or willful misconduct of Sellers.
F. LIMITS ON INDEMNIFICATION. All Indemnifiable Costs sought by any party
hereunder shall be net of any insurance proceeds received by such Person with
respect to such claim (less the present value of any premium increases
occurring as a result of such claim). Except for any claims for breach of the
representations, warranties and covenants of the Sellers under Sections 3.1,
3.2, 3.3, 3.6, 3.14, 3.17 or 6.5(d) hereof (for which indemnification claims
must be made prior to the expiration of the applicable statute of limitations
and if so made, such claims shall continue after such date until finally
resolved), the right to make claims for indemnification provided under this
Article VIII shall expire on the third anniversary of the Closing Date (except
for claims made prior to such date which shall continue after such date until
finally resolved). The Sellers shall not be obligated to pay any amounts for
indemnification under this Article VIII (other than indemnification required
pursuant to Section 8.1(E) above) until the aggregate indemnification
obligation sought by Buyer hereunder exceeds $25,000, whereupon the Sellers
shall be liable for all amounts for which indemnification may be sought;
provided, however, that any Indemnifiable Costs resulting from a breach by the
Sellers of any of his obligations under Section 5.6 or Section 6.5 hereof,
shall not be subject to the limitations set forth in this sentence, but shall
be reimbursable by the Sellers to the Indemnified Parties on a
dollar-for-dollar basis. Buyer shall not be obligated to pay any amounts for
indemnification under this Article VIII until the aggregate indemnification
obligation sought by the Sellers hereunder exceeds $25,000, whereupon Buyer
shall be liable for all amounts for which indemnification may be sought. For
purposes of Section 8.1 or 8.5, any requirement in any representation or
warranty that an event or fact be material or have a Material Adverse Effect,
as appropriate, in order for such event or fact to constitute a
misrepresentation or breach of such representation or warranty shall be
ignored. Notwithstanding the foregoing, in no event shall the aggregate
liability of the Sellers to Buyer or Buyer to the Sellers exceed the Purchase
Price. However nothing in this Article VIII shall limit Buyer or the Sellers
in exercising or securing any remedies provided by applicable statutory or
common law with respect to the conduct of the Sellers or Buyer in connection
with this Agreement or in the amount of damages that it can recover from the
other in the event that Buyer successfully proves intentional fraud or
intentional fraudulent conduct in connection with this Agreement. All
Indemnifiable Costs paid by the Sellers shall be deemed to be a reduction of
the Purchase Price paid by Buyer under this Agreement.
ARTICLE IX
TERMINATION
A. TERMINATION. This Agreement may be terminated at any
time prior to the Closing:
1. by the mutual written consent of the Companies
and Buyer;
29
2. in writing by Buyer, if the Companies or any
of the Sellers have breached in any material respect any representation,
warranty or covenant contained in this Agreement, and in each case such breach
has not been remedied within ten (10) business days after receipt of notice
specifying such breach and demanding such breach to be remedied; or
3. in writing by the Sellers and the Companies,
if Buyer has breached in any material respect any representation, warranty or
covenant contained in this Agreement, and in each case such breach has not been
remedied within ten (10) business days after receipt of notice specifying such
breach and demanding such breach to be remedied; or
4. in writing by either the Companies and the
Sellers, on the one hand, or Buyer, on the other hand, in the event the Closing
has not occurred on or before April 30, 1999, unless the failure of such
consummation or the failure to satisfy such condition, as applicable, shall be
due to a breach of any representation or warranty made by the party or parties
seeking to terminate this Agreement or the failure of such party or parties to
comply in all material respects with the agreements and covenants contained
herein to be performed by such party or parties.
B. EFFECT OF TERMINATION. If the transactions
contemplated by this Agreement are terminated pursuant to Section 9.1 by notice
in writing to the non-terminating party or parties, this Agreement shall become
void and of no further force and effect, except that such termination shall not
relieve (i) any party from its covenants in respect of confidentiality
contained in Section 6.3 and the second to last sentence of Section 5.5 and
(ii) any party then in breach of any representation, warranty, covenant or
agreement contained in this Agreement from liability in respect of such breach.
ARTICLE X
MISCELLANEOUS
A. MODIFICATIONS; WAIVERS. Any amendment, change or modification of this
Agreement shall be void unless in writing and signed by all parties hereto. No
failure or delay by any party hereto in exercising any right, power or
privilege hereunder (and no course of dealing between or among any of the
parties) shall operate as a waiver of any such right, power or privilege. No
waiver of any default on any one occasion shall constitute a waiver of any
subsequent or other default. No single or partial exercise of any such right,
power or privilege shall preclude the further or full exercise thereof.
B. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given when personally delivered,
or 48 hours after deposited in the United States mail, first-class, postage
prepaid, or by facsimile addressed to the respective parties hereto as follows:
Buyer:
Global Vacation Group, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Chairman
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
Fax No.:(▇▇▇) ▇▇▇-▇▇▇▇
Tel No.:(▇▇▇) ▇▇▇-▇▇▇▇
30
With a copy to:
▇▇▇▇▇ & ▇▇▇▇▇▇▇ L.L.P.
Columbia Square
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax No.:(▇▇▇) ▇▇▇-▇▇▇▇
Tel No.:(▇▇▇) ▇▇▇-▇▇▇▇
The Companies or the Sellers:
c/o Island Resort Tours, Inc.
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Fax No.:(▇▇▇) ▇▇▇-▇▇▇▇
Tel No.:(▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
Alter & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax No.:(▇▇▇) ▇▇▇-▇▇▇▇
Tel No.:(▇▇▇) ▇▇▇-▇▇▇▇
or to such other address as to any party hereto as such party shall designate
by like notice to the other parties hereto.
C. COUNTERPARTS; FACSIMILE TRANSMISSION. This Agreement may be
executed in several counterparts, each of which shall be deemed an
original but all of which counterparts collectively shall constitute one
instrument, and in making proof of this Agreement, it shall never be
necessary to produce or account for more than one such counterpart.
Signatures of a party to this Agreement or other documents executed in
connection herewith which are sent to the other parties by facsimile
transmission shall be binding as evidence of acceptance of the terms
hereof or thereof by such signatory party, with originals to be
circulated to the other parties in due course.
D. EXPENSES. Each of the parties hereto will bear all costs, charges
and expenses incurred by such party in connection with this Agreement and
the consummation of the transactions contemplated herein, provided,
however, that the Sellers shall bear all costs and expenses of (i) any
broker involved in this transaction on behalf of the Sellers or the
Companies and (ii) all legal and other expenses of the Sellers or the
Companies with respect to this Agreement and the transactions
contemplated hereby.
E. BINDING EFFECT; ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Companies, Buyer and the Sellers, their
heirs, representatives, successors, and permitted assigns, in accordance
with the terms hereof. This Agreement shall not be assignable by the
Companies or the Sellers without the prior written consent of Buyer. This
Agreement shall be assignable by Buyer to either (a) any lender providing
financing to Buyer or its Affiliates or (b) an Affiliate of Buyer, in
each case without the prior written consent of Sellers, but any such
assignment shall not relieve Buyer of its obligations hereunder. In
addition, Buyer may assign any or all of its rights and obligations
hereunder, without the consent of the Sellers following the Closing, in
connection with any sale of all or substantially all of the assets,
capital stock or business of Buyer or the Companies (whether effected by
sale, exchange, merger, consolidation or other transaction).
F. ENTIRE AND SOLE AGREEMENT. This Agreement and the other schedules
and agreements referred to herein, constitute the entire agreement
between the parties hereto and supersede all prior agreements,
representations, warranties, statements, promises, information,
arrangements and understandings, whether
31
oral or written, express or implied, with respect to the subject matter hereof.
G. GOVERNING LAW. This Agreement and its validity, construction,
enforcement, and interpretation shall be governed by the substantive laws of
the State of New York, without giving effect to the principles of conflicts of
laws thereof.
H. SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS. Regardless of any
investigation at any time made by or on behalf of any party hereto or of any
information any party may have in respect thereof, all covenants, agreements,
representations, and warranties and the related indemnities made hereunder or
pursuant hereto or in connection with the transactions contemplated hereby
shall survive the Closing for a period of three (3) years, provided (a) the
representations and warranties contained in Sections 3.14 and 3.17 of this
Agreement, and the related indemnities, shall survive the Closing until the
expiration of the applicable statutes of limitations for determining or
contesting Tax liabilities, (b) the representations, warranties and covenants
contained in Sections 3.1, 3.2, 3.3, 3.6 and 6.5(d) of this Agreement, and the
related indemnities, shall survive the Closing indefinitely and not expire, (c)
all covenants in Article VI which have an expiration date contained therein
shall expire as of such date, and (d) all other covenants in this Agreement
that do not have an expiration date shall expire upon the expiration of the
applicable statutes of limitations.
I. DISPUTE RESOLUTION. ALL DISPUTES BETWEEN THE SELLERS AND BUYER WITH
RESPECT TO ANY PROVISION OF THIS AGREEMENT OR THE RIGHTS AND OBLIGATIONS OF THE
SELLERS AND BUYER HEREUNDER (OTHER THAN DISPUTES INVOLVING ALLEGATIONS OF
INTENTIONAL FRAUD AND DISPUTES ARISING UNDER SECTION 6.4 OF THIS AGREEMENT),
WHICH CANNOT BE RESOLVED BY MUTUAL AGREEMENT, WILL BE RESOLVED IN THE DISTRICT
OF COLUMBIA BY BINDING ARBITRATION IN ACCORDANCE WITH THE RULES OF THE AMERICAN
ARBITRATION ASSOCIATION IN THE DISTRICT OF COLUMBIA OR BY ANY OTHER MEANS OF
ALTERNATIVE DISPUTE RESOLUTION MUTUALLY AGREED UPON BY THE PARTIES.
J. INVALID PROVISIONS. If any provision of this Agreement is deemed or held
to be illegal, invalid or unenforceable, this Agreement shall be considered
divisible and inoperative as to such provision to the extent it is deemed to be
illegal, invalid or unenforceable, and in all other respects this Agreement
shall remain in full force and effect; provided, however, that if any provision
of this Agreement is deemed or held to be illegal, invalid or unenforceable
there shall be added hereto automatically a provision as similar as possible to
such illegal, invalid or unenforceable provision and be legal, valid and
enforceable. Further, should any provision contained in this Agreement ever be
reformed or rewritten by any judicial body of competent jurisdiction, such
provision as so reformed or rewritten shall be binding upon all parties hereto.
K. PUBLIC ANNOUNCEMENTS. Neither the Sellers nor the Companies shall make
any public announcement of the transactions contemplated hereby without the
prior written consent of Buyer, which consent shall not be unreasonably
withheld.
L. REMEDIES CUMULATIVE. Except as otherwise provided herein, the remedies
of the parties under this Agreement are cumulative and shall not exclude any
other remedies to which any party may be lawfully entitled.
M. THIRD PARTIES. Except as specifically set forth or referred to herein,
nothing herein expressed or implied is intended or shall be construed to confer
upon or give to any Person, other than the parties hereto and their permitted
successors or assigns, any rights or remedies under or by reason of this
Agreement.
N. STRICT CONSTRUCTION. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event of any ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of authorship of
any of the provisions of this Agreement.
32
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be duly executed as of the date and year first above written.
BUYER:
GLOBAL VACATION GROUP, INC.
By:
------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
President and Chief Executive Officer
THE COMPANIES:
ISLAND RESORT TOURS, INC.
By:
---------------------------------------
Name:
President
INTERNATIONAL TRAVEL & RESORTS, INC.
By:
---------------------------------------
Name:
President
SELLERS:
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ HOLDING, CO.
By:
---------------------------------------
Name:
President