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Exhibit 10.16
SENIOR MANAGEMENT AGREEMENT
THIS AGREEMENT is made as of March 30, 1998, between GLOBAL VACATION
GROUP, INC. (formerly Allied Bus Corp.), a New York corporation (the "COMPANY"),
and XXXXXXX XXXXX ("EXECUTIVE").
RECITALS
A. The Company and Executive desire to enter into an agreement
pursuant to which Executive will purchase, and the Company will sell, 9,500
shares of the Company's Common Stock, par value $.01 per share (the "COMMON
STOCK") and 105 shares of the Company's Class A Preferred Stock, par value $.01
per share (the "PREFERRED STOCK"). All of such shares of Preferred Stock and
Common Stock and all shares of Preferred Stock and Common Stock hereafter
acquired by Executive are referred to herein as "EXECUTIVE STOCK." (as further
defined in Section 10).
B. The execution and delivery of this Agreement by the Company and
Executive is a condition to the purchase of shares of Common Stock and Preferred
Stock by Xxxxxx Equity Investors III, L.P. (the "INVESTOR") pursuant to a
purchase agreement between the Company and the Investor and certain other
investors (collectively, the "PURCHASERS") dated as of the date hereof (the
"PURCHASE AGREEMENT"). Certain provisions of this Agreement are intended for the
benefit of, and will be enforceable by, the Investor.
C. Certain definitions are set forth in Section 10 of this
Agreement.
AGREEMENT
The parties hereto agree as follows:
PROVISIONS RELATING TO EXECUTIVE STOCK
1. PURCHASE AND SALE OF EXECUTIVE STOCK.
(a) Pursuant to the terms of this Agreement, Executive will
purchase, and the Company will sell, an aggregate of 8,333 shares of Common
Stock at a price of $10.00 per share (sometimes referred to herein as the
"VESTING STOCK") upon the closing of the Recapitalization. At the time of such
purchase, the Company will deliver to Executive the certificates representing
such Executive Stock, and Executive will deliver to the Company a cashier's or
certified check or wire transfer of funds in the aggregate amount of $83,333.
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(b) Upon the purchase from time to time by the Purchasers of
additional shares of Common Stock and Preferred Stock pursuant to Article I of
the Purchase Agreement, Executive will purchase and the Company will sell to
Executive up to an aggregate of (i) 1,167 shares of Common Stock at a price of
$10.00 per share (the "NON-VESTING COMMON STOCK") and (ii) 105 shares of
Preferred Stock at a price of $1,000.00 per share (the "NON-VESTING PREFERRED
STOCK") (each of (i) and (ii) as adjusted from time to time as a result of stock
splits, stock dividends, recapitalizations and similar events). The number of
shares of Non-Vesting Common Stock and Non-Vesting Preferred Stock to be sold by
the Company and purchased by the Executive shall be as determined by the Company
and the Investor, provided, however, that in no event will such purchase occur
later than (i) with respect to the Non-Vesting Common Stock, at the time that
the Purchasers purchase their remaining commitment of Common Stock pursuant to
the Purchase Agreement and (ii) with respect to the Non-Vesting Preferred Stock,
at the time that the Purchasers have purchased all of their remaining commitment
of Preferred Stock pursuant to the Purchase Agreement. The Company will deliver
to Executive the certificates representing such shares of Executive Stock
purchased by Executive, and Executive will deliver to the Company a cashiers or
certified check or a wire transfer of funds in an aggregate amount equal to the
product of (x) the price per share of such Executive Stock and (y) the number of
shares so purchased by the Executive.
(c) Within 30 days after Executive purchases any Executive
Stock from the Company, Executive will make an effective election with the
Internal Revenue Service under Section 83(b) of the Internal Revenue Code and
the regulations promulgated thereunder in the form of Annex A attached hereto.
(d) In connection with the purchase and sale of the Executive
Stock hereunder, Executive represents and warrants to the Company that:
(i) The Executive Stock to be acquired by Executive
pursuant to this Agreement will be acquired for Executive's own
account and not with a view to, or intention of, distribution
thereof in violation of the Securities Act, or any applicable state
securities laws, and the Executive Stock will not be disposed of in
contravention of the Securities Act or any applicable state
securities laws.
(ii) Executive is an executive officer of the Company,
is sophisticated in financial matters and is able to evaluate the
risks and benefits of the investment in the Executive Stock.
(iii) Executive is able to bear the economic risk of his
investment in the Executive Stock for an indefinite period of time
because the Executive Stock has not been registered under the
Securities Act and, therefore, cannot be sold unless subsequently
registered under the Securities Act or an exemption from such
registration is available.
(iv) Executive has had an opportunity to ask questions
and receive answers concerning the terms and conditions of the
offering of Executive
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Stock and has had full access to such other information concerning
the Company as he has requested.
(v) This Agreement constitutes the legal, valid and
binding obligation of Executive, enforceable in accordance with its
terms, and the execution, delivery and performance of this Agreement
by Executive does not and will not conflict with, violate or cause a
breach of any agreement, contract or instrument to which Executive
is a party or any judgment, order or decree to which Executive is
subject.
(vi) Executive is a resident of the District of
Columbia.
(e) As an inducement to the Company to issue the Executive
Stock to Executive, as a condition thereto, Executive acknowledges and agrees
that neither the issuance of the Executive Stock to Executive nor any provision
contained herein shall entitle Executive to remain in the employment of the
Company and its Subsidiaries or affect the right of the Company to terminate
Executive's employment at any time for any reason.
2. VESTING OF CERTAIN EXECUTIVE STOCK.
(a) Except as otherwise provided in Section 2(d) below, 5,555
shares or 67% of the Vesting Stock issued pursuant to Section 1(a) above (the
"TIME VESTING SHARES") shall become vested in accordance with the following
schedule, if as of each such date Executive is still employed by the Investor or
the Company or any of its Affiliates:
Cumulative Percentage of
Date Common Stock to be Vested
------------------------------- -------------------------
Closing of the Recapitalization 20%
1st Anniversary of Closing
of the Recapitalization 40%
2nd Anniversary of Closing
of the Recapitalization 60%
3rd Anniversary of Closing
of the Recapitalization 80%
4th Anniversary of Closing
of the Recapitalization 100%
If Executive ceases to be employed by the Investor or the Company or its
Affiliates on any date prior to the fourth anniversary of the Closing (other
than any anniversary date prior thereto), the cumulative percentage of Time
Vesting Shares to become vested will be determined on a pro rata basis according
to the number of days elapsed since the prior anniversary date. Notwithstanding
the foregoing sentence, (i) all Time Vesting Shares shall become vested in the
event that Executive (A) has been terminated without Cause or Performance Cause
at any time after the effective date of an Initial Public Offering; (B)
terminated his employment with the Company for Good Reason at any time after the
effective date of an Initial Public Offering; or (C) dies or is "disabled" (as
such term is defined in Section 7(c) hereof) and (ii) 50% of all Time Vesting
Shares which are Unvested Shares (as hereinafter defined) shall be become vested
in the event
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that Executive has been terminated without Cause or Performance Cause or if
Executive terminated his employment with the Company for Good Reason within
three months prior to the effective date of an Initial Public Offering.
(b) Except as otherwise provided in Section 2(d) below, 2,778
shares or 33% of the Vesting Stock issued pursuant to Section 1(a) above (the
"PERFORMANCE VESTING SHARES") shall become vested in accordance with the
following schedule if the Investor shall have earned or deemed to have earned
the Return set forth below as of the date of determination:
Cumulative Percentage
of Performance
Return Vesting Shares "Vested"
------ -----------------------
30% 50%
31% 55%
32% 60%
33% 65%
34% 70%
35% 75%
36% 80%
37% 85%
38% 90%
39% 95%
40% or more 100%
In addition to the other times set forth in this Agreement in which the Return
will be calculated, the Return will also be calculated for purposes of
determining vesting under this Section 2(b) upon the following circumstances:
(i) if the Investor has sold or transferred more than 50% of its highest total
ownership interest in the Company to any non-Affiliate of the Investor; (ii) if
Executive has been terminated without Cause or Performance Cause; (iii) if
Executive terminates his employment for Good Reason; or (iv) if Executive has
been terminated because of disability or death. Notwithstanding anything in this
Agreement to the contrary, all Performance Vesting Shares then outstanding will
become Vested Shares on April 1, 2005.
(c) All other shares of Executive Stock (i.e., shares of
Non-Vesting Common Stock and Non-Vesting Preferred Stock (if any)) to be
purchased by Executive hereunder will vest immediately upon such purchase.
(d) Upon the occurrence of a Sale of the Company, all shares
of Executive Stock which have not yet become vested shall become vested at the
time of such event. Shares of Executive Stock which have become vested (whether
pursuant to Section 2(a) or 2(b) above) or upon purchase thereof (i.e., the
shares referred to in Section 2(c) above) are referred to herein as "VESTED
SHARES," and all other shares of Common Stock are referred to herein as
"UNVESTED SHARES").
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3. REPURCHASE OPTION.
(a) In the event that Executive ceases to be employed by the
Company and its Affiliates for any reason (the "TERMINATION"), then all of the
Executive Stock (whether held by Executive or one or more of Executive's
Permitted Transferees) will be subject to repurchase by the Company and the
Investor pursuant to the terms and conditions set forth in this Section 3 (the
"REPURCHASE OPTION").
(b) In the event of Termination, (i) the purchase price for
each Unvested Share of Common Stock will be Executive's Original Cost for such
share, (ii) the purchase price for each Vested Share of Common Stock will be the
Fair Market Value for such share; provided, however, that if Executive's
employment is terminated with Cause, the purchase price for each Vested Share of
Vesting Common Stock will be Executive's Original Cost for such share and (iii)
the purchase price for each share of Preferred Stock will be the Liquidation
Value of such share (as defined in the Company's Certificate of Incorporation)
plus all accrued and unpaid dividends thereon.
(c) The Board may elect to purchase all or any portion of the
Unvested Shares and the Vested Shares subject to repurchase by delivering
written notice (the "REPURCHASE NOTICE") to the holder or holders of the
Executive Stock within 120 days after the Termination Event. The Repurchase
Notice will set forth the number of Unvested Shares and Vested Shares of each
class to be acquired from each holder, the aggregate consideration to be paid
for such shares and the time and place for the closing of the transaction. The
number of shares to be repurchased by the Company shall first be satisfied to
the extent possible from the shares of Executive Stock held by Executive at the
time of delivery of the Repurchase Notice. If the number of shares of any class
of Executive Stock then held by Executive is less than the total number of
shares of such class of Executive Stock which the Company has elected to
purchase, then the Company shall purchase the remaining shares of such class
elected to be purchased from the other holder(s) of Executive Stock issued under
this Agreement (i.e., Permitted Transferees), pro rata according to the number
of shares of such class of Executive Stock held by such other holder(s) at the
time of delivery of such Repurchase Notice (determined as nearly as practicable
to the nearest share).
(d) If for any reason the Company does not elect to purchase
all of the Executive Stock pursuant to the Repurchase Option, the Investor shall
be entitled to exercise the Repurchase Option for the shares of any class of
Executive Stock the Company has not elected to purchase (the "AVAILABLE
SHARES"). As soon as practicable after the Company has determined that there
will be Available Shares, but in any event within ninety (90) days after the
Termination Event, the Company shall give written notice (the "OPTION NOTICE")
to the Investor setting forth the number of Available Shares and the purchase
price for the Available Shares. The Investor may elect to purchase any or all of
the Available Shares by giving written notice to the Company within twenty (20)
days after the Option Notice has been given by the Company. As soon as
practicable, and in any event within ten (10) days, after the expiration of the
twenty (20) day period set forth above, the Company shall notify each holder of
Executive Stock as to the number of shares of each class being purchased from
such holder by the Investor (the
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"SUPPLEMENTAL REPURCHASE NOTICE"). At the time the Company delivers the
Supplemental Repurchase Notice to the holder(s) of Executive Stock, the Company
shall also deliver written notice to the Investor setting forth the number of
shares of each class the Investor will purchase, the aggregate purchase price
and the time and place of the closing of the transaction.
(e) The closing of the purchase of the Executive Stock pursuant
to the Repurchase Option shall take place on the date designated by the Company
in the Repurchase Notice or Supplemental Repurchase Notice, which date shall not
be more than 150 days after the delivery of the Repurchase Notice. The Company
will pay for the Executive Stock to be purchased by it pursuant to the
Repurchase Option by first offsetting amounts outstanding under any bona fide
debts owed by Executive to the Company. The Investor will pay for the Executive
Stock to be purchased by it pursuant to the Repurchase Option by delivery of a
check or wire transfer of funds in the aggregate amount of the purchase price
for such shares. The Company and the Investor will be entitled to receive
customary representations and warranties from the sellers regarding such sale.
(f) Notwithstanding anything to the contrary contained in this
Agreement, all repurchases of Executive Stock by the Company shall be subject to
any customary restrictions contained in applicable corporate and securities laws
and in the Company's and its Subsidiaries' debt and equity financing agreements.
If any such restrictions prohibit the repurchase of Executive Stock hereunder
which the Company is otherwise entitled or required to make, the Company may
make such repurchases as soon as it is permitted to do so under such
restrictions.
4. RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK. The Executive Stock
is subject to certain restrictions on transfer and certain tag-along and
drag-along rights which are provided for in the Shareholders Agreement of even
date herewith between the Company, Executive and certain other shareholders of
the Company (the "SHAREHOLDERS AGREEMENT"), and nothing in this Agreement shall
be deemed to amend, modify or limit in any way the restrictions on the issuance
of shares of Preferred Stock or Common Stock set forth in the Purchase
Agreement, in the Shareholders Agreement or in any other Agreement to which the
Company is bound.
5. ADDITIONAL RESTRICTIONS ON TRANSFER OF EXECUTIVE STOCK.
(a) LEGEND. The certificates representing the Executive Stock
will bear a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE ACT OR AN EXEMPTION FROM REGISTRATION THEREUNDER. THE
SECURITIES REPRESENTED BY THIS
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CERTIFICATE ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON
TRANSFER, CERTAIN REPURCHASE OPTIONS AND CERTAIN OTHER
AGREEMENTS SET FORTH IN A (1) SENIOR MANAGEMENT AGREEMENT
BETWEEN THE COMPANY AND AN EXECUTIVE OF THE COMPANY DATED
MARCH 30, 1998 AND (2) SHAREHOLDERS AGREEMENT AMONG THE
COMPANY AND CERTAIN OF ITS SHAREHOLDERS, DATED AS OF MARCH
27, 1998, AS AMENDED FROM TIME TO TIME. COPIES OF SUCH
AGREEMENTS MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE."
(b) OPINION OF COUNSEL. No holder of Executive Stock may sell,
transfer or dispose of any Executive Stock (except pursuant to an effective
registration statement under the Securities Act) without first delivering to the
Company an opinion of counsel (reasonably acceptable in form and substance to
the Company) that neither registration nor qualification under the Securities
Act and applicable state securities laws is required in connection with such
transfer.
6. SHAREHOLDER AGREEMENTS. Nothing contained in this Agreement shall
be deemed to limit in any way the restrictions on the shares of Preferred Stock
or Common Stock set forth in the Purchase Agreement, in the Shareholders
Agreement or in any other agreement to which the Company is bound. By execution
of this Agreement, Executive hereby agrees to execute a joinder to and to be
bound by the terms and conditions of the Shareholders Agreement.
PROVISIONS RELATING TO EMPLOYMENT
7. EMPLOYMENT. The Company hereby engages Executive to serve as
President and Chief Operating Officer of the Company, and Executive agrees to
serve the Company, during the Service Term (as defined in Section 7(d) hereof)
in the capacities, and subject to the terms and conditions, set forth in this
Agreement.
(a) SERVICES. During the Service Term, Executive, as President
and Chief Operating Officer of the Company, shall have all the duties and
responsibilities customarily rendered by Chief Operating Officers of companies
of similar size and nature and as may be delegated from time to time by the
Board in its sole discretion. Executive will devote his best efforts and
substantially all of his business time and attention (except for vacation
periods and periods of illness or other incapacity) to the business of the
Company and its Affiliates. Notwithstanding the foregoing, and provided that
such activities do not interfere with the fulfillment of Executive's obligations
hereunder, Executive may (A) serve as a director or trustee of any charitable or
non-profit entity; (B) acquire investment interests in one or more entities
which are not, directly or indirectly, in competition with the Company or its
Subsidiaries and
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which do not have a material business relationship with the Company, except with
the written consent of the Investor; or (C) own up to 3% of the outstanding
voting securities of any publicly-held company. Unless the Company and Executive
agree to the contrary, Executive's place of employment shall be at the Company's
principal executive offices in Washington, D.C.; provided, however, that
Executive will travel to such other locations of the Company and its Affiliates
as may be reasonably necessary and/or as required by the Board in its sole
discretion in order to discharge his duties hereunder.
(b) SALARY, BONUS AND BENEFITS.
(i) SALARY AND BONUS. During the Service Term, the Company will
pay Executive a base salary (the "ANNUAL BASE Salary") as the Board may
designate from time to time, at the rate of not less than $200,000 per
annum; provided, however, that the Annual Base Salary shall be subject
to review annually by the Board for upward increases thereon. The
Executive will be eligible to receive an annual bonus in an amount not
to exceed 100% of Executive's Annual Base Salary for such year, as
determined by the Board based upon the Company's achievement of
budgetary and other objectives set by the Board, which objectives shall
be reasonable in light of the Company's past year's performance and
shall be communicated to Executive by the Board prior to the start of
the Company's fiscal year. Executive's Annual Base Salary and bonus for
any partial year will be prorated based upon the number of days elapsed
in such year, except that Executive's bonus payment for the first year
of employment shall not be prorated.
(ii) BENEFITS. During the Service Term, Executive will be
entitled to such other benefits approved by the Board and made available
to the Company's top three senior executives.
(iii) OPTION. In addition, the Company agrees that effective
upon the closing of an Initial Public Offering, the Company shall grant
to Executive, so long as he remains employed by the Company or any of
its Subsidiaries as of such date, an option (the "OPTION") to purchase
2.5% of the Company's Common Stock outstanding at the time of an Initial
Public Offering at an exercise price per share equal to the initial
offering price per share of the Initial Public Offering. The Option
shall vest in four equal installments on the first, second, third and
fourth anniversaries of the date of grant. All other terms of the Option
shall be as set forth in the Company's stock option plan to be adopted
prior to the Initial Public Offering and an option agreement to be
entered into as of the date of grant.
(c) TERMINATION.
(i) EVENTS OF TERMINATION. Executive's employment with the
Company shall cease upon:
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(A) Executive's death.
(B) Executive's voluntary retirement.
(C) Executive's disability, which means his
incapacity due to physical or mental illness such that he is
unable to perform the essential functions of his previously
assigned duties for a period of six months in any twelve month
period and such incapacity has been determined to exist by
either (x) the Company's disability insurance carrier or (y)
by the Board in good faith based on competent medical advice
in the event that the Company does not maintain disability
insurance on the Executive.
(D) Termination by the Company by the delivery to
Executive of a written notice from the Board that Executive
has been terminated ("NOTICE OF Termination") with or without
Cause or with Performance Cause. "CAUSE" shall mean:
(1) Executive's (aa) conviction of a felony
or Executive's commission of any other act or omission
involving dishonesty or fraud with respect to the
Company or any of its Affiliates or any of their
customers, vendors or suppliers or involving harassment
or discrimination with respect to the employees of the
Company or its Subsidiaries, (bb) misappropriation of
funds or assets of the Company for personal use or (cc)
engaging in any conduct relating to the Company's
business or involving moral turpitude that actually
brought the Company or any of its Affiliates into public
disgrace or disrepute;
(2) Executive's continued substantial and
repeated neglect of his duties, after written notice
thereof from the Board, and such neglect has not been
cured within 30 days after Executive receives notice
thereof from the Board;
(3) Executive's gross negligence or willful
misconduct in the performance of his duties hereunder
that results, or is reasonably expected to result, in
material damage to the Company; or
(4) Executive's engaging in conduct
constituting a breach of Sections 8 or 9 hereof or
Executive's failure to purchase any Non-Vesting
Preferred Stock required to be purchased by him pursuant
to Section 1(b) above within 15 days of any notice of
default thereof from the Company or Investor.
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"PERFORMANCE CAUSE" shall mean Executive's termination within
90 days after the Company's failure to achieve at least 75% of
its budgeted net income as determined in accordance with
generally accepted accounting principles for any four
consecutive fiscal quarters for which financial statements are
available and such failure is reasonably expected to continue
for at least two additional fiscal quarters thereafter;
provided, however, that the Board shall determine in good
faith if any adjustments thereto are necessary or appropriate
to account for extraordinary or nonrecurring events (including
but not limited to Acts of God, substantive travel industry
events (e.g., materially adverse tax or regulatory changes),
travel industry strikes, wars, terrorism) or other
circumstances that should be included or disregarded in order
to fairly determine whether the Company has failed to achieve
such budgeted net income; and provided, however, that in no
fiscal year will budgeted income growth be greater than 30%.
In order for the termination to be effective: Executive must
be notified in writing (which writing shall specify the cause
in reasonable detail) of any termination of his employment for
Cause or Performance Cause. Executive will then have the
right, within ten days of receipt of such notice, to file a
written request for review by the Company. In such case,
Executive will be given the opportunity to be heard,
personally or by counsel, by the Board and a majority of the
Directors must thereafter confirm that such termination is
either for Cause or Performance Cause. If the Directors do not
provide such confirmation, the termination shall be treated as
other than for Cause or Performance Cause. Notwithstanding
anything to the contrary contained in this paragraph,
Executive shall have the right after termination has occurred
to appeal any determination by the Board to arbitration in
accordance with the provisions of Section 9(h) hereof.
The delivery by the Company of notice to Executive
that it does not intend to renew this Agreement as provided in
Section 7(d) shall constitute a termination by the Company
without Cause unless such notice fulfills the requirements of
Section 7(c)(i)(D)(1), (2), (3) or (4) above.
(E) Executive's voluntary resignation by the
delivery to the Board of a written notice from Executive that
Executive has resigned with or without Good Reason. "GOOD
REASON" shall mean Executive's resignation from employment
with the Company within 45 days after the occurrence of any
one of the following:
(1) the failure of the Company to pay an
amount owing to Executive hereunder after Executive has
provided the Company with written notice of such failure
and such payment has
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not thereafter been made within 15 days of the delivery
of such written notice;
(2) the required relocation of Executive
from the Washington, D.C. area without his consent; or
(3) any material reduction or diminution in
Executive's duties and responsibilities as set forth in
Section 7(a) and as developed during the course of
employment.
The delivery by the Executive of notice to the
Company that he does not intend to renew this Agreement as
provided in Section 7(d) shall constitute a resignation by the
Execution without Good Reason unless such notice fulfills the
requirements of Section 7(c)(i)(E)(1) or (2) above.
(ii) RIGHTS ON TERMINATION.
(A) In the event that termination is by Executive
with Good Reason or by the Company without Cause (including by
operation of the last paragraph of Section 7(c)(i)(D)) or
Performance Cause, the Company will continue to pay Executive
a monthly portion of the Annual Base Salary plus a monthly
portion of the Executive's bonus for the prior year for a
period equal to twelve-months commencing on the date of
termination on regular salary payment dates. In the event that
termination is by the Company for Performance Cause, the
Company will continue to pay Executive a monthly portion of
the Annual Base Salary for a period equal to three-months
commencing on the date of termination on regular salary
payment dates. The payments to Executive pursuant to the
foregoing two sentences are referred to as the "SEVERANCE
PAYMENTS."
(B) If the Company terminates Executive's
employment for Cause, if Executive retires or if Executive
resigns without Good Reason (including by operation of the
last paragraph of Section 7(c)(i)(E)), the Company's
obligations to pay any compensation or benefits under this
Agreement will cease effective as of the date of termination.
Executive's right to receive any other health or other
benefits will be determined under the provisions of applicable
plans, programs or other coverages.
(C) If Executive's employment terminates because
of Executive's death or disability, the Company will pay
Executive or his estate an amount, if any, equal to his bonus
for the current year prorated to reflect the number of days
Executive has worked during the year in which he dies or
becomes disabled (such amount to be paid after the end of such
year when bonuses are normally paid to other senior executives
of the Company).
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Notwithstanding the foregoing, the Company's obligation to
Executive for severance pay or other rights under either subparagraphs (A) or
(B) above (the "SEVERANCE PAY") shall cease if Executive is in violation of the
provisions of Sections 8 or 9 hereof. Until such time as Executive has received
all of his Severance Payments, he will be entitled to continue to receive any
health, life, accident and disability insurance benefits provided by the Company
to Executive under this Agreement. If Executive dies or is permanently disabled,
then Executive or his estate shall be entitled to any disability income or life
insurance payments from any insurance policies paid for by the Company or its
Affiliates as specified in such policies.
(d) TERM OF EMPLOYMENT. Unless Executive's employment under
this Agreement is sooner terminated as a result of Executive's termination in
accordance with the provisions of Section 7(c) above, Executive's employment
under this Agreement shall commence on April 1, 1998 and shall terminate on the
third anniversary of the date hereof (the "SERVICE TERM"); provided, however,
that Executive's employment under this Agreement, and the Service Term, shall be
automatically renewed for one-year periods commencing on the third anniversary
of the date hereof and, thereafter, on each successive anniversary of such date
unless either the Company or Executive notifies the other party in writing
within sixty (60) days prior to any such anniversary that it or he desires to
terminate Executive's employment under this Agreement. All references herein to
"SERVICE TERM" shall include any renewals thereof after the third anniversary of
the date hereof.
8. CONFIDENTIAL INFORMATION AND GOODWILL; INVENTIONS.
Executive acknowledges and agrees that:
(a) As a necessary function of Executive's employment
hereunder, Executive will have access to and utilize Confidential Information
which constitutes a valuable and essential asset of the Company's business.
(b) The Confidential Information, observations and data
obtained by him during the course of his performance under this Agreement
concerning the business and affairs of the Company are the property of the
Company, including information concerning the acquisition opportunities in or
reasonably related to the Business of which Executive becomes aware during the
Service Term. Therefore, Executive agrees that he will not disclose to any
unauthorized person or use for his own account any of the Confidential
Information without the Board's written consent. Executive agrees to deliver to
the Company at the termination of his employment, or at any other time the
Company may request, all memoranda, notes, plans, records, reports and other
documents (including copies thereof) relating to the Company, the Business or
any other Confidential Information.
(c) All inventions, innovations, developments, improvements,
methods, designs, analyses, drawings, software, reports and all similar or
related information (whether or not patented or patentable) developed by
Executive during the Service Term which (i) directly or indirectly relate to the
Company or its Affiliates or the Business, or (ii) result from any work
performed by Executive while employed by the Company or its Affiliates shall
belong to the Company and its Affiliates. Executive shall promptly disclose all
such inventions to the
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Board and perform all actions reasonably requested by the Board (whether during
or after the Service Term) to establish and confirm such ownership (including,
without limitation, assignments, consents, powers of attorney and other
instruments).
9. NONCOMPETITION AND NONSOLICITATION.
(a) NONCOMPETITION. Executive acknowledges that in the course
of his employment with the Company he will become familiar with the Company's
and its Affiliates' trade secrets and with other confidential information
concerning the Company and that his services will be of special, unique and
extraordinary value to the Company and its Affiliates. Therefore, Executive
agrees that, during the Service Term and for a period of one (1) year after
termination thereof (collectively, the "NONCOMPETE PERIOD"), he shall not
directly or indirectly own, manage, control, participate in, consult with,
render services for, or in any manner engage in any business competing with the
business of the Company and its Subsidiaries or any businesses with which the
Company or its Subsidiaries have firm plans to engage in at the time of the
termination of the Executive's employment with the Company.
(b) NONSOLICITATION. During the Noncompete Period and for a
period of one (1) year thereafter, Executive shall not directly or indirectly
through another entity (i) induce or attempt to induce any senior management
employee of the Company or any Subsidiary or, to the actual knowledge of the
Executive, any other employee of the Company or any Subsidiary, to leave the
employ of the Company or such Subsidiary, or in any way interfere with the
relationship between the Company or any Subsidiary and any employee thereof or
(ii) induce or attempt to induce any customer, supplier, vendor, licensee or
other business relation of the Company or any Subsidiary to cease doing business
with the Company or such Subsidiary, or to modify its business relationship with
the Company in a manner adverse to the Company or any Subsidiary, or in any way
disparage the Company or its Subsidiaries to any such customer, supplier,
vendor, licensee or business relation of the Company or any Subsidiary.
(c) ENFORCEMENT. The Executive understands and agrees that the
sale of the Executive Stock to Executive pursuant to Section 1 of this Agreement
and the terms and conditions of Executive's employment hereunder are in
consideration for Executive's covenants contained in Section 8 and 9 of this
Agreement. If, at the time of enforcement of Section 8 or 9 of this Agreement, a
court holds that the restrictions stated herein are unreasonable under
circumstances then existing the parties hereto agree that the maximum duration,
scope or geographical area reasonable under such circumstances shall be
substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
duration, scope and area permitted by law. Because Executive's services are
unique and because Executive has access to confidential information, the parties
hereto agree that money damages would be an inadequate remedy for any breach of
this Agreement. Therefore, in the event a breach or threatened breach of this
Agreement, the Company or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to
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14
enforce, or prevent any violations of, the provisions hereof (without posting a
bond or other security).
GENERAL PROVISIONS
10. DEFINITIONS.
"AFFILIATE" of any Person means any other Person which
directly or indirectly controls, is controlled by or is under common control
with such Person.
"BOARD" means the Company's board of directors or the board of
directors or similar management body of any successor of the Company.
"BUSINESS" means any business of the Company or its
Subsidiaries now or hereafter engaged in, including without limitation the
business of providing travel products.
"COMPETITIVE ACTIVITY" means any business or activity of
Executive or any third party that is the same as the Business or competitive
with the Business.
"CONFIDENTIAL INFORMATION" means all confidential information
and trade secrets of the Company and its Affiliates including, without
limitation, the following: the identity, written lists, or descriptions of any
customers, referral sources or Organizations; financial statements, cost
reports, or other financial information; contract proposals or bidding
information; business plans; training and operations methods and manuals;
personnel records; fee structures; and management systems, policies or
procedures, including related forms and manuals. "Confidential Information"
shall not include any information or knowledge which: (a) is in the public
domain other than by Executive's breach of this Agreement or (b) is disclosed to
Executive lawfully by a third party who is not under any obligation of
confidentiality.
"EXECUTIVE STOCK" will mean all shares of Vesting Stock and
Non-Vesting Stock. Such shares will continue to be Executive Stock in the hands
of any holder other than Executive (except for the Company, any transferee
permitted by the Shareholders Agreement (other than to a Permitted Transferee)
and except for transferees in a Public Sale), and except as otherwise provided
herein, each such other holder of Executive Stock will succeed to all rights and
obligations attributable to Executive as a holder of Executive Stock hereunder.
Executive Stock will also include shares of the Company's capital stock issued
with respect to Executive Stock by way of a stock split, stock dividend or other
recapitalization. Notwithstanding the foregoing, all Unvested Shares shall
remain Unvested Shares after any Transfer thereof.
"FUND$" shall mean the aggregate amount invested by Investor
to purchase shares of the Company's Common Stock and Preferred Stock pursuant to
the Purchase Agreement and in the Recapitalization Agreement.
"FAIR MARKET VALUE" of each share of Executive Stock means the
average of the closing prices of the sales of Common Stock on all securities
exchanges on which
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15
such Common Stock may at the time be listed, or, if there have been no sales on
any such exchange on any day, the average of the highest bid and lowest asked
prices on all such exchanges at the end of such day, or, if on any day such
Common Stock is not so listed, the average of the representative bid and asked
prices quoted in the NASDAQ System as of 4:00 P.M., New York time, or, if on any
day such Common Stock is not quoted in the NASDAQ System, the average of the
highest bid and lowest asked prices on such day in the domestic over-the-counter
market as reported by the National Quotation Bureau Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which the Fair Market Value is being determined and
the 20 consecutive business days prior to such day. If at any time such Common
Stock is not listed on any securities exchange or quoted in the NASDAQ System or
the over-the-counter market, the Fair Market Value will be the fair value of
such Common Stock determined in good faith by the Board.
"INITIAL PUBLIC OFFERING" shall mean the completion of the
first Public Offering of the Company's Common Stock with net proceeds to the
Company or the sellers of such Common Stock of not less than $15 million.
"MARKET LIQUIDITY" shall be deemed to exist after the earlier
of (i) two years following the effective date of an Initial Public Offering, if,
and so long as, a Public Market exists for the Common Stock or (ii) the day
prior to the date that Executive has been terminated by the Company without
Cause or Performance Cause.
"ORGANIZATION" means any organization that has contracted with
the Company for the performance of services in connection with the Business.
"ORIGINAL COST" means with respect to each share of Common
Stock purchased hereunder, $10.00 (as proportionately adjusted for all
subsequent stock splits, stock dividends and other recapitalizations).
"PERMITTED TRANSFEREE" shall have the meaning assigned to such
term in the Shareholders Agreement.
"PERSON" means an individual, a partnership, a limited
liability company, a corporation, an association, a joint stock company, a
trust, a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"PUBLIC OFFERING" means the sale in an underwritten public
offering registered under the Securities Act of shares of the Company's Common
Stock.
"PUBLIC MARKET" for the Common Stock of the Company shall mean
such Common Stock is traded on a national exchange, the NASDAQ National Market
System or any registered interdealer quotation system involving at least three
registered market makers.
"PUBLIC MARKET PRICE" shall mean the average of the closing
trading prices of the Common Stock in the Public Market averaged over the
four-calendar week period
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16
immediately preceding the date upon which the determination of whether a "PUBLIC
MARKET" exists is made.
"PUBLIC SALE" means any sale pursuant to a registered public
offering under the Securities Act or any sale to the public pursuant to Rule 144
promulgated under the Securities Act effected through a broker, dealer or market
maker.
"RECAPITALIZATION" means the recapitalization transactions
involving the Company pursuant to that certain Recapitalization Agreement dated
March 18, 1998 among the Company, the Investor and certain other shareholders of
the Company.
"RETURN" shall mean the annual rate of return which, when used
to calculate the net present value of the Cash Inflows and the Cash Outflows as
of the date of determination, causes such net amount to equal zero. As used in
this definition, "CASH INFLOWS" shall include, without duplication, (i) all cash
payments received by the Investor on or prior to the date of determination with
respect to Common Stock and Preferred Stock acquired with the Fund$ on or prior
to the date of determination (whether such payments are received from the
Company or any third party and whether such payments are received as interests,
dividends, proceeds with respect to sale or redemption of such securities, upon
a liquidation of the Company or otherwise), (ii) the fair market value of all
non-cash consideration received by the Investor in connection with the sale of
any Common Stock or Preferred Stock acquired by the Investor with Fund$ and
(iii) if Market Liquidity exists on the date of determination, the Public Market
Price on the date of determination of any shares of Common Stock (including
Common Stock issuable upon conversion of Preferred Stock) acquired with Fund$
held by the Investor on the date of determination. As used in this definition,
"CASH OUTFLOWS" shall include the sum of all cash payments and investments made
by the Investor to and in the Company to purchase Common Stock and/or Preferred
Stock acquired with Fund$.
"SALE OF THE COMPANY" means any transaction or series of
transactions pursuant to which any Person(s) other than the Investor and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights acquiring only in the
event of a default, breach or event of noncompliance) to elect a majority of the
Board (whether by merger, consolidation, reorganization, combination, sale or
transfer of the Company's capital stock, shareholder or voting agreement, proxy,
power of attorney or otherwise) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
"SECURITIES ACT" means the Securities Act of 1933, as amended
from time to time.
"SHAREHOLDERS AGREEMENT" means the Shareholders Agreement
dated as of the date hereof among the Company, the Executive, the Investor and
other shareholders of the Company that may become a party thereto, as amended or
restated from time to time.
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17
"SUBSIDIARY" means any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the board
of directors directly or through one or more subsidiaries.
"TRANSFER" means to sell, transfer, assign, pledge or
otherwise dispose of all or any portion of any interest (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law,
including upon death).
11. NOTICES. Any notice provided for in this Agreement must be in
writing and must be either personally delivered, mailed by first class United
States mail (postage prepaid, return receipt requested) or sent by reputable
overnight courier service (charges prepaid) or by facsimile to the recipient at
the address below indicated:
If to the Executive:
Xxxxxxx Xxxxx
c/o Global Vacation Group, Inc.
0000 Xxxxxxxxxxxx Xxxxxx, X.X., Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Tel No.: (000) 000-0000
With a copy to:
Vladeck, Xxxxxxx, Xxxxx & Engelhard, P.C.
0000 Xxxxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
If to the Investor or the Company:
c/x Xxxxxx Equity Investors III, L.P.
0000 Xxxxxxxxxxxx Xxxxxx, XX
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx Xxxxxx
Xxxxxxxxxxx Xxxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
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18
with a copy to:
Xxxxx & Xxxxxxx, LLP
000 Xxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxxxxxxx X. Xxxxx
Tel No.: (000) 000-0000
Fax No.: (000) 000-0000
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party.
12. GENERAL PROVISIONS.
(a) EXPENSES. The Company agrees to pay Executive's reasonable
legal, accounting and other expenses incurred in connection with the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated by this Agreement; provided, however, that the Company will in no
event be responsible for any such expenses incurred in excess of $10,000 for all
Executives.
(b) TRANSFERS IN VIOLATION OF AGREEMENTS. Any Transfer or
attempted Transfer of any Executive Stock in violation of any provision of this
Agreement or the Shareholders Agreement shall be void, and the Company shall not
record such Transfer on its books or treat any purported transferee of such
Executive Stock as the owner of such stock for any purpose.
(c) SEVERABILITY. Whenever possible, each provision of this
Agreement will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
(d) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith embody
the complete agreement and understanding among the parties and supersede and
preempt any prior understandings, agreements or representations by or among the
parties, written or oral, which may have related to the subject matter hereof in
any way.
(e) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.
(f) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be enforceable
by Executive, the
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19
Company, the Investor and their respective successors and assigns (including
subsequent holders of Executive Stock); provided that the rights and obligations
of Executive under this Agreement shall not be assignable except in connection
with a permitted transfer of Executive Stock hereunder.
(g) CHOICE OF LAW. The corporate law of the Company's state of
incorporation will govern all questions concerning the relative rights of the
Company and its shareholders. All other questions concerning the construction,
validity and interpretation of this Agreement and the exhibits hereto will be
governed by and construed in accordance with the internal laws of the State of
New York, without giving effect to any choice of law or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of New York.
(h) REMEDIES AND ARBITRATION. Each of the parties to this
Agreement (including the Investor) will be entitled to enforce its rights under
this Agreement to recover damages and costs (including reasonable attorney's
fees) caused by any breach of any provision of this Agreement and to exercise
all other rights existing in its favor. Except for the remedies of the Company
provided in Section 9(c) hereof, the parties hereto agree to submit any disputes
arising out of or relating to this Agreement to binding arbitration in
Washington, D.C. administered by the American Arbitration Association under its
Commercial Arbitration Rules, before a panel of three arbitrators, and judgment
on the award rendered by the arbitrators may be entered into any court having
jurisdiction thereof. The prevailing party in any arbitration shall be entitled
to recover its reasonable attorneys' fees and costs from the other party or
parties.
(i) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Company,
Executive and the Investor.
(j) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or holiday
in the state in which the Company's chief executive office is located, the time
period shall be automatically extended to the business day immediately following
such Saturday, Sunday or holiday.
(k) TERMINATION. This Agreement (except for the
provisions of Section 7) shall survive the termination of Executive's
employment with the Company and shall remain in full force and effect after
such termination.
(l) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES; ADJUSTMENTS OF
NUMBERS. Where any accounting determination or calculation is required to be
made under this Agreement or the exhibits hereto, such determination or
calculation (unless otherwise provided) shall be made in accordance with
generally accepted accounting principles, consistently applied, except that if
because of a change in generally accepted accounting principles the Company
would have to alter a previously utilized accounting method or policy in order
to remain in compliance with generally accepted accounting principles, such
determination or calculation shall continue to be made in accordance with the
Company's previous accounting methods and
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20
policies. All numbers set forth herein which refer to share prices or amounts
will be appropriately adjusted to reflect stock splits, stock dividends,
combinations of shares and other recapitalizations affecting the subject class
of stock.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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21
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the date first written above.
GLOBAL VACATION GROUP, INC.
By: /s/ Xxxxx X. Xxxxxx
-----------------
Xxxxx X. Xxxxxx
Member
/s/ Xxxxxxx Xxxxx
-----------------
XXXXXXX XXXXX
Agreed and Accepted:
XXXXXX EQUITY INVESTORS III, L.P.
By: TC Equity Partners, L.L.C.
Its: General Partner
By: /s/ Xxxxxxxxxxx Xxxxxx
----------------------
Xxxxxxxxxxx Xxxxxx
Member
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