EXHIBIT 2.1
-----------
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of August___, 2000, by and among 800 TRAVEL SYSTEMS, INC. ("800
TRAVEL"), a Delaware corporation, 800 TRAVEL ACQUISITION SUB, INC., a Florida
corporation ("MERGER CORP."), PRESTIGE TRAVEL SYSTEMS, INC., a Florida
corporation ("PRESTIGE"); XXXXX X. XXXXXXX ("AK XXXXXXX"), an individual, XXX
XXXXXXX ("R XXXXXXX"), an individual and XXXXXXXX X. XXXXXXX ("XX XXXXXXX"), an
individual (AK XxXxxxx, R XxXxxxx and XX XxXxxxx are collectively referred to as
the "SHAREHOLDERS"). 800 Travel, Merger Corp., Prestige and the Shareholders are
collectively referred to herein as the "PARTIES."
RECITALS:
WHEREAS, Shareholders were the owners of a travel company known as
Prestige Travel Service II, Inc. ("PTS II"), a Florida corporation incorporated
June 14, 1993;
WHEREAS, Shareholders sold 100% of the issued and outstanding stock in
PTS II to Affinity Travel Systems International, Inc. ("AFFINITY") effective
January 1, 1999;
WHEREAS, Shareholders formed Prestige in October 1999;
WHEREAS, Shareholders repurchased PTS II from Affinity effective
December 31, 1999;
WHEREAS, Shareholders dissolved PTS II in March 2000;
WHEREAS, all of the assets utilized by PTS II to operate its business
were properly and legally transferred to Prestige as the successor business to
PTS II;
WHEREAS, Prestige is engaged in the business of providing travel
booking and reservation services;
WHEREAS, the Shareholders are the owners of all of the issued and
outstanding shares of capital stock of Prestige;
WHEREAS, 800 Travel is engaged in the business of providing travel
booking and reservation services and through its newly-formed, wholly-owned
subsidiary, Merger Corp., desires to effect a business combination and merger of
Prestige with and into Merger Corp. upon the terms and subject to the
satisfaction of the conditions precedent contained herein (the "MERGER"); and
WHEREAS, it is intended that for federal income tax purposes the Merger
shall qualify as a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code.
NOW, THEREFORE, in consideration of the recitals and of the respective
covenants, representations, warranties and agreements herein contained, and
intending to be legally bound hereby, the Parties hereto agree as follows:
29
ARTICLE I
CERTAIN DEFINITIONS
-------------------
"BALANCE SHEET" means the most recent balance sheet contained within
the Financial Statements.
"BALANCE SHEET DATE" means the effective date of the Balance Sheet.
"CLOSING" has the meaning set forth in SECTION 2.2 below.
"CLOSING DATE" has the meaning set forth in SECTION 2.2 below.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CORPORATION LAW" means the statutes, regulations and laws governing
business corporations in the State of Florida.
"800 TRAVEL SHARE" means a share of the common stock, $.01 par value,
of 800 Travel.
"800 TRAVEL SHARES" means shares of the common stock, $.01 par value,
of 800 Travel.
"EFFECTIVE TIME" means the time as of which the Merger of Prestige with
and into Merger Corp. is effective, which for purposes of this Agreement is
intended to be and may be used interchangeably with the Closing Date on which
the Parties will file the Articles of Merger as defined herein.
"EMPLOYEE BENEFIT PLAN" means any (a) nonqualified deferred
compensation or retirement plan or arrangement, (b) qualified defined
contribution retirement plan or arrangement which is an Employee Pension Benefit
Plan (as defined in Section 3(2) of ERISA), (c) qualified defined benefit
retirement plan or arrangement which is an Employee Pension Benefit Plan
(including any Multi-employer Plan as defined in Section 3(37) of ERISA), or (d)
Employee Welfare Benefit Plan (as defined in Section 3(37) of ERISA) or material
fringe benefit or other retirement, bonus, or incentive plan or program.
"ENVIRONMENTAL, HEALTH, AND SAFETY REQUIREMENTS" shall mean all
federal, state, local and foreign statutes, regulations, ordinances and other
provisions having the force or effect of law, all judicial and administrative
orders and determinations, all contractual obligations and all common law
concerning public health and safety, worker health and safety, and pollution or
protection of the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"FINANCIAL STATEMENTS" has the meaning set forth in SECTION 3.1(g).
"GAAP" means United States generally accepted accounting principles as
in effect from time to time.
"INTELLECTUAL PROPERTY" means any or all of the following and all
rights in, arising out of, or associated therewith: (a) all United States and
foreign patents and applications therefor and all reissues, divisions, renewals,
extensions, provisionals, continuations and continuations-in-part thereof; (b)
all inventions (whether patentable or not), invention disclosures, improvements,
trade secrets, proprietary information, proprietary processes or formulae,
franchises, licenses, know how, technology, technical data and customer lists,
and all documentation relating to any of the foregoing; (c) all copyrights,
30
copyright registrations and applications therefore and all other rights
corresponding thereto throughout the world; (d) all trade names, logos, domain
names, URL's, common law trademarks and service marks; trademark and service
xxxx registrations and applications therefor and all goodwill associated
therewith throughout the world; (e) all databases and data collections and all
rights therein throughout the world; (f) all computer software including all
source code, object code, algorithms, display screens, layouts, firmware,
development tools, files, records and data, all media on which any of the
foregoing is recorded, all Web addresses, sites and domain names; (g) any
similar, corresponding or equivalent rights to any of the foregoing; and (h) all
documentation related to any of the foregoing.
"KNOWLEDGE", unless otherwise specifically noted in this Agreement,
means the actual knowledge of AK XxXxxxx, R XxXxxxx and XX XxXxxxx as all of the
Shareholders, directors and officers of Prestige, after having made such due and
diligent inquiry and investigation as a reasonable person would deem necessary
and appropriate as to the subject matter.
"LIABILITY" means any liability (whether known or unknown, whether
asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become
due).
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"PRESTIGE SHARE" means a share of the common stock, $1.00 par value, of
Prestige.
"PRESTIGE SHARES" means shares of common stock, $1.00 par value, of
Prestige.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance,
charge, or other security interest.
"TAX" or "TAXES" means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental, customs duties, capital
stock, franchise, profits, withholding, social security (or similar),
unemployment, disability, real property, personal property, sales, use,
transfer, registration, value added, alternative or add-on minimum, estimated,
or other tax of any kind whatsoever, including any interest, penalty, or
addition thereto, whether disputed or not.
"TAX RETURN" means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
ARTICLE II
THE MERGER AND RELATED TRANSACTIONS
-----------------------------------
2.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time Prestige will merge with and into Merger Corp. Merger
Corp. shall be the corporation surviving the Merger (the "Surviving
Corporation") and shall continue to be governed by the laws of the State of
Florida and the separate corporate existence of Merger Corp. with all its
rights, privileges, powers, immunities, purposes and franchises shall continue
unaffected by the Merger except as set forth herein and in the Articles of
Merger and Plan of Merger (the "ARTICLES OF MERGER") in the forms attached
hereto as EXHIBIT A.
31
2.2 THE CLOSING. The Closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxxxxxxx, Loop &
Xxxxxxxx, LLP following the satisfaction or waiver of all other conditions to
the obligations of the Parties to consummate the transactions contemplated
hereby. The date of the Closing (the "CLOSING DATE") shall be a date mutually
agreed to by the parties hereto. All of the parties hereto expressly acknowledge
and agree that time is of the essence in closing the transactions contemplated
herein.
2.3 ACTIONS AT THE CLOSING. At the Closing, (i) the Shareholders and
Prestige will deliver to 800 Travel the various certificates, instruments, and
documents referred to in Section 6.1 below; (ii) 800 Travel and Merger Corp.
will deliver to the Shareholders the various certificates, instruments and
documents referred to in Section 6.2 below; and (iii) Prestige and 800 Travel
will file the Articles of Merger with the Florida Secretary of State.
2.4 EFFECT OF MERGER. The Merger shall become effective at the time the
Articles of Merger are filed with the Florida Secretary of State. The Merger
shall have the effect set forth in ss.607.1106 of the Florida Statutes. The
Surviving Corporation may, at any time after the Effective Time, take any action
(including executing and delivering any document) in the name and on behalf of
such entity or the entity with which it merged in order to carry out and
effectuate the transactions contemplated by this Agreement.
2.5 EFFECTIVE TIME. The Merger shall become effective on the Closing
Date, to be designated as the Effective Time of the Merger.
2.6 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. Effective at
the Effective Time, the Articles of Incorporation of Merger Corp. shall be the
Articles of Incorporation of the Surviving Corporation unless and until duly
amended in accordance with their terms.
2.7 BYLAWS OF SURVIVING CORPORATION. The Bylaws of the Merger Corp. in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation, unless and until duly amended in accordance with their
terms.
2.8 DIRECTORS OF THE SURVIVING CORPORATION. The persons who are
directors of Merger Corp. immediately prior to the Effective Time shall, from
and after the Effective Time, be the directors of the Surviving Corporation
until their successors have been elected or appointed and qualified or until
their earlier death, resignation or removal in accordance with the Surviving
Corporation's Articles of Incorporation and Bylaws.
2.9 OFFICERS OF THE SURVIVING CORPORATION. The persons who are officers
of Merger Corp. immediately prior to the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation and shall hold
their same respective offices until their successors have been duly elected or
appointed and qualified or until their earlier death, resignation or removal.
2.10 CONVERSION OF PRESTIGE SHARES. The manner of converting Prestige
Shares in the Merger shall be as follows:
(a) As a result of the Merger and without any action on the
part of the holder thereof, all shares of Prestige common stock issued and
outstanding at the Effective Time shall cease to exist, and each holder of a
certificate representing any such Prestige Shares shall thereafter cease to have
any rights with respect to such Prestige Shares except the right to receive upon
the surrender of such certificate on the Closing Date: (i) the number of 800
32
Travel Shares set forth on SCHEDULE 2.10(a), (the "STOCK CONSIDERATION"), and
(ii) cash in the amount set forth on SCHEDULE 2.10(a) (the "CASH CONSIDERATION,"
and together with the Stock Consideration, the "MERGER CONSIDERATION"). The
Stock Consideration shall be delivered to the Shareholders at Closing or as soon
as practicable following the Closing in certificate form bearing a restrictive
legend. The Cash Consideration shall be paid at the Closing by wire transfer or
cashier's or bank check. Except for the right to receive the Merger
Consideration, after the Effective Time no Prestige Shares shall be deemed to be
outstanding or to have any rights whatsoever.
(b) Each of the Prestige Shares held in Prestige's treasury at
the Effective Time, by virtue of the Merger, shall cease to be outstanding and
shall be canceled and retired without payment of any consideration therefor and
shall cease to exist.
(c) At the Effective Time, each share of Merger Corp. common
stock issued and outstanding as of the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereto, continue
unchanged and remain outstanding as a validly issued, fully paid, nonassessable
share of Merger Corp. common stock.
2.11 EXCHANGE OF CERTIFICATES REPRESENTING PRESTIGE SHARES. The
Shareholders shall deliver to 800 Travel at Closing the certificate or
certificates representing the Prestige Shares owned by them, duly endorsed in
blank by the Shareholders, or accompanied by duly endorsed stock powers in
blank. The Shareholders agree to cure any deficiencies with respect to the
endorsement of the certificates or other documents of conveyance with respect to
such Prestige Shares or with respect to the stock powers accompanying any
Prestige Shares. Upon such a delivery, the Shareholders shall receive in
exchange therefor, a certificate representing that number of 800 Travel Shares
that the Shareholders are entitled to receive pursuant to SECTION 2.10 hereof.
Until the certificate or certificates representing the Prestige Shares have been
surrendered by the Shareholders and replaced by a certificate or certificates
representing 800 Travel Shares, the certificate or certificates representing the
Prestige Shares shall for all purposes be deemed to evidence ownership of the
number of 800 Travel Shares determined in accordance with the provisions of
SCHEDULE 2.10 attached hereto. All 800 Travel Shares issuable to the
Shareholders in the Merger shall be deemed for all purposes to have been issued
by 800 Travel at the Effective Time, although the Merger Consideration shall not
actually be paid by 800 Travel to the Shareholders until the Closing Date.
2.12 FRACTIONAL SHARES. Notwithstanding any other provision herein, no
fractional 800 Travel Shares will be issued. Fractional shares shall be rounded
down to the nearest whole number of shares.
2.13 NAME CHANGE. In connection with the consummation of the Merger,
the Surviving Corporation shall change its name to Prestige Travel Systems,
Inc., which the Shareholders acknowledge and agree shall be the name of 800
Travel's wholly owned subsidiary.
33
ARTICLE III
REPRESENTATIONS AND WARRANTIES
------------------------------
3.1 REPRESENTATIONS AND WARRANTIES OF PRESTIGE AND THE SHAREHOLDERS.
Prestige and the Shareholders jointly and severally represent and warrant to 800
Travel and Merger Corp. that the statements contained in this SECTION 3.1 are
correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date. Nothing in the Schedules attached hereto shall
be deemed adequate to disclose an exception to a representation or warranty made
herein unless the Schedule identifies the exception with reasonable
particularity the relevant facts in reasonable detail. Without limiting the
generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to
a representation or warranty made herein.
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER. Prestige
is a corporation duly organized, validly existing, and in good standing under
the laws of the State of Florida. Prestige is duly authorized to conduct
business and is in good standing under the laws of each jurisdiction where such
qualification is required. Prestige has full corporate power and authority and
all licenses, permits, and authorizations necessary to carry on the business in
which it is engaged and to own and use the properties owned and used by it.
Prestige is not in default under or in violation of any provision of its
articles of incorporation or bylaws.
(b) CAPITALIZATION. The entire authorized capital stock of
Prestige consists of Seven Thousand Five Hundred (7,500) shares of common stock,
of which one hundred (100) shares of common stock are issued and outstanding.
All of the issued and outstanding Prestige Shares have been duly authorized, are
validly issued, fully paid, and nonassessable, and are held of, and have always
been held of, record by the Shareholders. The Shareholders are the lawful owner
of 100% of the issued and outstanding capital stock of Prestige, free and clear
of all liens, encumbrances, restrictions and claims of every kind. AK XxXxxxx
owns fifty-one (51) Prestige Shares, R XxXxxxx owns twenty-nine (29) Prestige
Shares and XX XxXxxxx owns twenty (20) Prestige Shares. The Shareholders have
the legal right, power and capacity to enter into this Agreement and to
consummate the transactions contemplated hereby. No Shareholder is owed any
amount from Prestige and no Shareholder is owed, or entitled to receive, any
property from Prestige. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require Prestige to issue,
sell, or otherwise cause to become outstanding any of its capital stock. There
are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Prestige. There are no voting
trusts, proxies, or other agreements or understandings with respect to the
voting of the capital stock of Prestige. The Shareholders hold of record and own
beneficially all of the issued and outstanding Prestige Shares free and clear of
any restrictions on transfer (other than any restrictions under the Securities
Act and state securities laws), Taxes, Security Interests, options, warrants,
purchase rights, contracts, commitments, equities, claims, and demands. None of
the Shareholders is a party to any option, warrant, purchase right, or other
contract or commitment that could require such Shareholder to sell, transfer, or
otherwise dispose of any capital stock of Prestige (other than this Agreement).
None of the Shareholders is a party to any voting trust, proxy, or other
agreement or understanding with respect to the voting of the Prestige Shares.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Prestige is subject or any provision of
the Articles of Incorporation or Bylaws of Prestige or (ii) conflict with,
result in a breach of, constitute a default under, result in the acceleration
34
of, create in any party the right to accelerate, terminate, modify, or cancel,
or require any notice under any agreement, contract, lease, license, instrument,
or other arrangement to which Prestige is a party or by which it is bound or to
which any of its assets is subject (or result in the imposition of any Security
Interest upon any of its assets). Except for the filing of appropriate
certificates to effect the Merger, Prestige does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order to consummate the transactions
contemplated by this Agreement.
(d) BROKERS' FEES. None of the Shareholders or Prestige has
any Liability or obligation to pay any fees or commissions to any broker,
finder, or agent with respect to the transactions contemplated by this Agreement
(e) TITLE TO ASSETS. Prestige has good and marketable title
to, or a valid leasehold interest in, the properties and assets used by it,
located on its premises, or shown on the Balance Sheet or acquired after the
date thereof, free and clear of all Security Interests, except for liens
disclosed in SCHEDULE 3.1(E) and except for properties and assets disposed of in
the ordinary course of business since the Balance Sheet Date.
(f) SUBSIDIARIES AND INVESTMENTS. Prestige has no
subsidiaries. None of Prestige or the Shareholders, owns, directly or
indirectly, any capital stock or other equity or ownership or proprietary
interest in any other corporation, partnership, association, trust, joint
venture or other entity which is engaged in a business similar to or in
competition with the business of Prestige.
(g) FINANCIAL STATEMENTS. The Shareholders and Prestige have
provided to 800 Travel the following financial statements (collectively the
"FINANCIAL STATEMENTS"): (i) Prestige's predecessor PTS II's balance sheets,
statements of income, as of and for the fiscal year ended December 31, 1999; and
(ii) Prestige's balance sheet and statements of income as of and for the six (6)
month period ended June 30, 2000. The Financial Statements set forth in SCHEDULE
3.1(g) have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis, present fairly the financial condition
of Prestige as of such dates and the results of operations of Prestige for such
periods, are correct and complete, and are consistent with the books and records
of Prestige (which books and records are correct and complete).
(h) EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE. Since the
Balance Sheet Date, there has not been any adverse change in the business,
financial condition, operations, results of operations, future prospects or
anticipated profitability of Prestige. Without limiting the generality of the
foregoing, since that date:
(i) Prestige has not sold, leased, transferred, or
assigned any of its assets, tangible or intangible, other than in the ordinary
course of business;
(ii) Prestige has not entered into any agreement,
contract, loan, lease, or license (or series of related agreements, contracts,
leases, and licenses) either involving more than Ten Thousand Dollars ($10,000)
or other than in the ordinary course of business;
(iii) No party (including Prestige) has accelerated,
terminated, modified, or canceled any agreement, contract, lease, or license (or
series of related agreements, contracts, leases, and licenses) involving more
than Ten Thousand Dollars ($10,000) to which Prestige is a party or by which it
is bound;
(iv) Prestige has not imposed any Security Interest
upon any of its assets, tangible or intangible;
35
(v) Prestige has not made any capital expenditure (or
series of related capital expenditures) either involving more than Ten Thousand
Dollars ($10,000) or other than in the ordinary course of business;
(vi) Prestige has not issued any note, bond, or other
debt security or created, incurred, assumed, or guaranteed any indebtedness for
borrowed money or capitalized lease obligation involving more than Ten Thousand
Dollars ($10,000) in the aggregate;
(vii) Prestige has not delayed or postponed the
payment of accounts payable and other Liabilities other than in the ordinary
course of business;
(viii) Prestige has not canceled, compromised,
waived, or released any right or claim (or series of related rights and claims)
either involving more than Ten Thousand Dollars ($10,000) or other than in the
ordinary course of business;
(ix) Prestige has not issued, sold, or otherwise
disposed of any of its capital stock, or granted any options, warrants, or other
rights to purchase or obtain (including upon conversion, exchange, or exercise)
any of its capital stock;
(x) Except for the distribution to Shareholders of an
aggregate amount of $80,000.00 prior to Closing (the "Distribution"), Prestige
has not declared, set aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or redeemed,
purchased, or otherwise acquired any of its capital stock and with respect to
the Distribution, all rquisite corporate actions were taken to legally authorize
and properly make the Distribution;
(xi) Prestige has not experienced any damage,
destruction, or loss (whether or not covered by insurance) to its property;
(xii) Prestige has not made any loan to, or entered
into any other transaction with, any of its directors, officers, and employees;
(xiii) Prestige has not granted any increase in the
base compensation of any of its directors, officers, and employees other than in
the ordinary course of business;
(xiv) Prestige has not adopted, amended, modified, or
terminated any bonus, profit-sharing, incentive, severance, or other plan,
contract, or commitment for the benefit of any of its directors, officers, and
employees (or taken any such action with respect to any other Employee Benefit
Plan); and
(xv) There has not been any other occurrence, event,
incident, action, failure to act, or transaction other than in the ordinary
course of business involving Prestige and Prestige has not committed to any of
the foregoing.
(i) UNDISCLOSED LIABILITIES. Prestige has no Liability (and
there is no basis for any present or future action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand against Prestige giving rise
to any Liability), except for: (i) Liabilities set forth in the Balance Sheet,
(and) (ii) Liabilities which have arisen after the Balance Sheet Date in the
ordinary course of business (none of which results from, arises out of, relates
to, is in the nature of, or was caused by any breach of contract, breach of
warranty, tort, infringement, or violation of law), and (iii) Liabilities or
other obligations as disclosed on SCHEDULE 3.1(i) hereto.
36
(j) LEGAL COMPLIANCE. Prestige and its respective predecessors
and affiliates have complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state, local, and foreign governments (and all
agencies thereof), and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply.
(k) TAX MATTERS.
(i) Prestige has filed all Tax Returns that it was
required to file through the date hereof. All such Tax returns were correct and
complete in all respects. All Taxes owed by Prestige through the date hereof
(whether or not shown on any Tax Return) have been paid. Prestige currently is
not the beneficiary of any extension of time within which to file any Tax
Return. No claim has ever been made by an authority in a jurisdiction where
Prestige does not file Tax Returns that it is or may be subject to taxation by
that jurisdiction. There are no Security Interests on any of the assets of
Prestige that arose in connection with any failure (or alleged failure) to pay
any Tax.
(ii) Prestige has withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor, Shareholder, or other third
party.
(iii) None of the Shareholders or any director or
officer (or employee responsible for Tax matters) of Prestige expects any
authority to assess any additional Taxes for any period for which Tax Returns
have been filed. There is no dispute or claim concerning any Tax Liability of
Prestige either: (A) claimed or raised by any authority in writing or (B) as to
which any of the Shareholders or any of the directors and officers (and
employees responsible for Tax matters) of Prestige has Knowledge based upon
personal contact with any agent of such authority. The Shareholders have
delivered to 800 Travel and Merger Corp. correct and complete copies of all
federal income Tax Returns, examination reports, and statements of deficiencies
assessed against or agreed to by Prestige since January 1, 1995.
(iv) Prestige has not waived any statute of
limitations in respect of Taxes or agreed to any extension of time with respect
to a Tax assessment or deficiency.
(v) Prestige has not filed a consent under Code
Section 341(f) concerning collapsible corporations. Prestige has not made any
payments, is not obligated to make any payments and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under Code Section 280G. Prestige has not
been a United States real property holding corporation within the meaning of
Code Section 897(c)(2) during the applicable period specified in Code Section
897(c)(1)(A)(ii). Prestige has disclosed on its federal income Tax Returns all
positions taken therein that could give rise to a substantial understatement of
federal income Tax within the meaning of Code Section 6662. Prestige is not a
party to any Tax allocation or sharing agreement. Prestige: (A) has not been a
member of an affiliated group filing a consolidated federal income Tax Return
(other than a group the common parent of which was Prestige) and (B) has no
Liability for the Taxes of any Person (other than Prestige) under Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(vi) Any unpaid Taxes of Prestige: (A) did not, as of
the Balance Sheet Date, exceed the reserve for Tax Liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) set forth in the Balance Sheet and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Prestige in filing its Tax
Returns.
37
(vii) SCHEDULE 3.1(k)(vii) sets forth the federal
income Tax basis of Prestige in its assets.
(viii) Prestige operates at least one significant
historic business line, or owns at least a significant portion of its historic
business
assets, in each case within the meaning of Treasury Regulation Section
1.368-1(d) promulgated under the Code.
(ix) Prior to the Merger, no Prestige shareholder had
a portion of such shareholder's Prestige interest redeemed by Prestige, or
received an extraordinary distribution with respect to such shareholder's
Prestige interest, and no corporation "related to Prestige" (within the meaning
of Treasury Regulation Section 1.368-1(e)(3)(i)(B) promulgated under the Code)
has acquired any stock of Prestige held by such Prestige shareholder, where such
disposition or acquisition would reduce the aggregate fair market value of the
800 Travel Shares to be received by the Shareholders (with such fair market
value measured as of the Effective Time of the Merger) to an amount less than
fifty-one percent (51%) of the fair market value of the Prestige Shares held by
all Prestige shareholders immediately before any such distribution, disposition
or acquisition.
(l) REAL PROPERTY. Prestige does not own any real property.
SCHEDULE 3.1(1) lists and describes all real property leased or subleased to
Prestige. The Shareholders have delivered to 800 Travel and Merger Corp. correct
and complete copies of the leases and subleases listed in SCHEDULE 3.1(1). With
respect to each lease and sublease listed in SCHEDULE 3.1(1):
(i) The lease or sublease is legal, valid, binding,
enforceable, and in full force and effect;
(ii) The lease or sublease will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the consummation of the transactions contemplated hereby;
(iii) No party to the lease or sublease is in breach
or default, and no event has occurred which, with notice or lapse of time, would
constitute a breach or default or permit termination, modification, or
acceleration thereunder;
(iv) Prestige has not assigned, transferred,
conveyed, mortgaged, deeded in trust, or encumbered any interest in the
leasehold or subleasehold; and
(v) All facilities leased or subleased thereunder
have received all approvals of governmental authorities (including licenses and
permits) required in connection with the operation thereof and have been
operated and maintained in accordance with applicable laws, rules, and
regulations.
(m) INTELLECTUAL PROPERTY.
(i) Prestige owns or has the right to use pursuant to
license, sublicense, agreement, or permission all Intellectual Property
necessary or desirable for the operation of the businesses of Prestige as
presently conducted and as presently proposed to be conducted. Each item of
Intellectual Property owned or used by Prestige immediately prior to the Closing
hereunder will be owned or available for use by Prestige on identical terms and
conditions immediately subsequent to the Closing hereunder. Prestige has taken
all necessary and desirable action to maintain and protect each item of
Intellectual Property that it owns or uses.
38
(ii) Prestige has not interfered with, infringed
upon, misappropriated, or otherwise come into conflict with any Intellectual
Property rights of third parties, and none of the Shareholders or the directors
and officers (and employees with responsibility for Intellectual Property
matters) of Prestige have ever received any charge, complaint, claim, demand, or
notice alleging any such interference, infringement, misappropriation, or
violation (including any claim that Prestige must license or refrain from using
any Intellectual Property rights of any third party). To the Knowledge of the
Shareholders and the directors and officers (and employees with responsibility
for Intellectual Property matters) of Prestige, no third party has interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
Intellectual Property rights of Prestige.
(iii) SCHEDULE 3.1(m)(iii) identifies each patent or
registration which has been issued to Prestige with respect to any of its
Intellectual Property, identifies each pending patent application or application
for registration which Prestige has made with respect to any of its Intellectual
Property, and identifies each license, agreement, or other permission which
Prestige has granted to any third party with respect to any of its Intellectual
Property (together with any exceptions). The Shareholders have delivered to 800
Travel and Merger Corp. correct and complete copies of all such patents,
registrations, applications, licenses, agreements, and permissions (as amended
to date) and have made available to 800 Travel and Merger Corp. correct and
complete copies of all other written documentation evidencing ownership and
prosecution (if applicable) of each such item. SCHEDULE 3.1(m)(iii) also
identifies each trade name or unregistered trademark used by Prestige in
connection with any of its businesses. With respect to each item of Intellectual
Property required to be identified in SCHEDULE 3.1(m)(iii):
(A) Prestige possesses all right, title, and
interest in and to the item, free and clear of any Security Interest, license,
or other restriction;
(B) The item is not subject to any
outstanding injunction, judgment, order, decree, ruling, or charge;
(C) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of the Shareholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Prestige, is threatened
which challenges the legality, validity, enforceability, use, or ownership of
the item; and
(D) Prestige has never agreed to indemnify
any Person for or against any interference, infringement, misappropriation, or
other conflict with respect to the item.
(iv) SCHEDULE 3.1(m)(iv) identifies each item of
Intellectual Property that any third party owns and that Prestige uses pursuant
to license, sublicense, agreement, or permission. The Shareholders have
delivered to 800 Travel and Merger Corp. correct and complete copies of all such
licenses, sublicenses, agreements, and permissions (as amended to date). With
respect to each item of Intellectual Property required to be identified in
SCHEDULE 3.1(m)(iv):
(A) The license, sublicense, agreement, or
permission covering the item is legal, valid, binding, enforceable, and in full
force and effect;
39
(B) The license, sublicense, agreement, or
permission will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby;
(C) No party to the license, sublicense,
agreement, or permission is in breach or default, and no event has occurred
which with notice or lapse of time would constitute a breach or default or
permit termination, modification, or acceleration thereunder;
(D) The underlying item of Intellectual
Property is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;
(E) No action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand is pending or, to the
Knowledge of the Shareholders and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Prestige, is threatened
which challenges the legality, validity, or enforceability of the underlying
item of Intellectual Property; and
(F) Prestige has not granted any sublicense
or similar right with respect to the license, sublicense, agreement, or
permission.
(n) TANGIBLE ASSETS. Prestige owns or leases all buildings,
machinery, equipment, training materials and other tangible assets necessary for
the conduct of its business as presently conducted and as presently proposed to
be conducted as set forth on SCHEDULE 3.1(n). Each such tangible asset is free
from defects (patent and latent), has been maintained in accordance with normal
industry practice, is in good operating condition and repair (subject to normal
wear and tear), and is suitable for the purposes for which it presently is used
and presently is proposed to be used.
(o) INVENTORY. Prestige does not have any inventory.
(p) CONTRACTS. SCHEDULE 3.1(p) lists the following contracts
and other agreements to which Prestige is a party:
(i) Any agreement (or group of related agreements)
for the lease of personal property to or from any Person providing for lease
payments in excess of Ten Thousand Dollars ($10,000) per annum;
(ii) Any agreement (or group of related agreements)
for the purchase or sale of raw materials, commodities, supplies, products, or
other personal property, or for the furnishing or receipt of services, the
performance of which will extend over a period of more than one (1) year, result
in a material loss to Prestige, or involve consideration in excess of Ten
Thousand Dollars ($10,000);
(iii) Any agreement concerning a partnership or joint
venture;
(iv) Any agreement (or group of related agreements)
under which Prestige has created, incurred, assumed, or guaranteed any
indebtedness for borrowed money, or any capitalized lease obligation, in excess
of Ten Thousand Dollars ($10,000) or under which Prestige has imposed a Security
Interest on any of its assets, tangible or intangible;
(v) Any agreement concerning confidentiality or
noncompetition;
40
(vi) Any agreement with the Shareholders or any of
their affiliates (other than Prestige);
(vii) Any profit sharing, stock option, stock
purchase, stock appreciation, deferred compensation, severance, or other
material plan or arrangement for the benefit of Prestige's current or former
directors, officers, and employees;
(viii) Any collective bargaining agreement;
(ix) Any agreement over One Thousand ($1,000) Dollars
under which Prestige has advanced or loaned any amount to any of its directors,
officers, and employees other than in the ordinary course of business;
(x) Any agreement under which the consequences of a
default or termination could have a material adverse effect on the business,
financial condition, operations, results of operations, or future prospects of
Prestige; and
(xi) Any other agreement (or group of related
agreements) the performance of which involves consideration in excess of Ten
Thousand Dollars ($10,000).
The Shareholders have delivered to 800 Travel and Merger Corp. a correct and
complete copy of each written agreement listed in SCHEDULE 3.1(p) and a written
summary setting forth the terms and conditions of each oral agreement referred
to in SCHEDULE 3.1(p). With respect to each such agreement: (A) the agreement is
legal, valid, binding, enforceable, and in full force and effect; (B) the
agreement will continue to be legal, valid, binding, enforceable, and in full
force and effect on identical terms following the consummation of the
transactions contemplated hereby; and (C) no party is in breach or default, and
no event has occurred which with notice or lapse of time would constitute a
breach or default, or permit termination, modification, or acceleration, under
the agreement.
(q) ACCOUNTS RECEIVABLE. To the Knowledge of Prestige and
Shareholders all accounts receivable of Prestige are reflected properly on its
books and records, are valid receivables for goods actually sold and services
actually provided subject to no setoffs or counterclaims, are current and
collectible, and will be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth in the
Balance Sheet as adjusted for the passage of time through the Closing Date in
accordance with the past custom and practice of Prestige.
(r) POWERS OF ATTORNEY. There are no outstanding powers of
attorney executed on behalf of Prestige.
(s) INSURANCE. Prestige has in place and has had in place
insurance(including policies providing property, casualty, liability, and
workers' compensation coverage and bond and surety arrangements) to which
Prestige has been a party, a named insured, or otherwise the beneficiary of
coverage since its formation. With respect to each such insurance policy to
which Prestige is a party, named insured or beneficiary: (A) the policy is
legal, valid, binding, enforceable, and in full force and effect; (B) the policy
will continue to be legal, valid, binding, enforceable, and in full force and
effect on identical terms following the consummation of the transactions
contemplated hereby; (C) neither Prestige nor any other party to the policy is
in breach or default (including with respect to the payment of premiums or the
giving of notices), and no event has occurred which, with notice or the lapse of
time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; and (D) no party to the policy
41
has repudiated any provision thereof. Prestige has been covered during the past
five (5) years by insurance in scope and amount customary and reasonable for the
businesses in which it has engaged during the aforementioned period. SCHEDULE
3.1(s) describes any self-insurance arrangements affecting Prestige. Except as
set forth on Schedule 3.1(s), there are no claims against Prestige that could
give rise to any insurance claims or, to the Shareholder's Knowledge, there are
no claims threatened to be made or any facts or circumstances existing or that
have occurred that could give rise to any potential claims against Prestige.
(t) LITIGATION. SCHEDULE 3.1(t) sets forth each instance in
which Prestige: (i) is subject to any outstanding injunction, judgment, order,
decree, ruling, or charge or (ii) is a party or, to the Knowledge of the
Shareholders and the directors and officers (and employees with responsibility
for litigation matters) of Prestige, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator. None of the actions, suits,
proceedings, hearings, and investigations set forth in SCHEDULE 3.1(t) could
result in any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of Prestige. The
Shareholders and the directors and officers (and employees with responsibility
for litigation matters) of Prestige do not have any reason to believe that any
such action, suit, proceeding, hearing, or investigation may be brought or
threatened against Prestige.
(u) EMPLOYEES. To the Knowledge of the Shareholders and the
directors and officers (and employees with responsibility for employment
matters) of Prestige, no executive, key employee, or group of employees has any
plans to terminate employment with Prestige. Prestige is not a party to or bound
by any collective bargaining agreement, nor has Prestige experienced any
strikes, grievances, claims of unfair labor practices, or other collective
bargaining disputes. Prestige has not committed any unfair labor practice. The
Shareholders and the directors and officers (and employees with responsibility
for employment matters) of Prestige do not have any Knowledge of any
organizational effort presently being made or threatened by or on behalf of any
labor union with respect to employees of Prestige. Prestige has either paid (or
reserved for amounts accruing but not yet due and payable with respect to) its
employees all wages, commissions and accruals for vacation, personal days and
sick leave owing through the Closing Date. The consummation of the transactions
contemplated hereby will not cause Prestige to incur or suffer any Liability
relating to, or obligation to pay, any severance, termination or other payment
to any person or entity, and any such claim made against Prestige or 800 Travel
and Merger Corp. for reason of any termination or separation of any employee of
Prestige on or before Closing, or otherwise resulting from the Merger, shall be
the sole responsibility of the Shareholders. Except as set forth in SCHEDULE
3.1(u), no employee of Prestige has any contractual right to continued
employment by Prestige following the Merger, and 800 Travel and Merger Corp.
shall be free to terminate or continue the employment of such employees of
Prestige as 800 Travel and Merger Corp. may determine and on such terms and
conditions as 800 Travel and Merger Corp. may determine. Set forth in SCHEDULE
3.1(u) is an accurate and complete list of all employees employed by Prestige
showing as to each the nature of the employee's job, years of service, the
current amount or rate of annualized compensation, the immediately preceding
rate of annualized compensation and the date of the last change thereof, any
earned vacation, any defined contribution employee benefit plan, pension plan,
401(k) plan, and medical or dental insurance benefits due the employee and other
matters which may be reasonably required by 800 Travel and Merger Corp.
(v) EMPLOYEE BENEFITS.
(i) LIST AND STATUS OF PLANS. Set forth on SCHEDULE
3.1(v) is an accurate and complete list of all Employee Benefit Plans currently
maintained or contributed to by Prestige. Prestige does not maintain or
contribute to any Employee Benefit Plan subject to ERISA which is not in
substantial compliance with ERISA, or which has incurred any accumulated funding
deficiency within the meaning of Section 412 or 418B of the Code, or which has
applied for or obtained a waiver from the Internal Revenue Service of any
42
minimum funding requirement under Section 412 of the Code. Prestige has not
incurred any liability to the Pension Benefit Guaranty Corporation ("PBGC") in
connection with any Employee Benefit Plan covering any employees of Prestige or
of any entity treated as a single employer with Prestige under Section 414 of
the Code or ceased operations at any facility or withdrawn from any such
Employee Benefit Plan in a manner which could subject Prestige to Liability
under Sections 4062(f), 4063 of 4064 of ERISA, and Prestige does not know of any
facts or circumstances which could reasonably be expected to give rise to any
liability of Prestige to the PBGC under Title IV of ERISA. Prestige is not a
party to any pension plan that is a "multi-employer plan" (within the meaning of
Section 4001(a)(3) of ERISA) and has not incurred any withdrawal Liability
(including any contingent or secondary withdrawal liability), within the meaning
of Sections 4201 and 4202 of ERISA, to any Employee Benefit Plan which is a
multi-employer plan. No event has occurred, and, to the best knowledge of
Prestige, there exists no condition or set of circumstances, which presents a
material risk of the occurrence of any withdrawal from or the partition,
termination, reorganization or insolvency of any multi-employer plan which could
result in any liability to a multi-employer plan.
(ii) CONTRIBUTIONS. Prestige has made on a timely
basis all payments and contributions which Prestige is required to make and
which are currently due with respect to all Employee Benefit Plans in accordance
with applicable law, the terms of the Employee Benefit Plans or any agreement
relating to any Employee Benefit Plan to which Prestige is a party as of the
last day of the most recent fiscal year of such Employee Benefit Plan ended
prior to the date hereof. Prestige has made adequate provisions for reserves
required to be reflected in accordance with GAAP consistently applied in the
Balance Sheet to meet contributions that have not been made because they are not
yet due under the terms of any Employee Benefit Plan or related agreements.
Benefits under all Employee Benefit Plans are as set forth in the documents
evidencing such Plans and have not been materially increased subsequent to the
date as of which documents have been provided. No contributions have been made
nor are any contributions contemplated to be made to any Employee Benefit Plan
for the period subsequent to the Balance Sheet Date except for regular premiums
paid and payable on group life, health and disability plans.
(iii) TAX QUALIFICATION. Each Employee Benefit Plan
required to be qualified under Section 401(a) of the Code has been determined to
be so qualified by the Internal Revenue Service and Prestige is not aware of any
facts or circumstances that have occurred since the date of the last such
determination which resulted or is likely to result in the revocation of such
determination. Except as disclosed on SCHEDULE 3.1(v), Prestige has not sought
relief with respect to the continued qualification of any Employee Benefit Plan
from the Internal Revenue Service under the Internal Revenue Service's Closing
Agreement Program or Voluntary Compliance Resolution Program.
(iv) TRANSACTIONS. No "prohibited transaction" (as
defined in Section 406 of ERISA and Section 4975 of the Code) and no "reportable
event" (as defined in Section 4043 of ERISA) for which the 30-day notice
requirement has not been waived by the PBGC has occurred with respect to any
Employee Benefit Plan and Prestige has not engaged in any transaction with
respect to the Employee Benefit Plans which would subject it to a tax, penalty
or Liability for prohibited transactions under ERISA or the Code, nor has any of
its directors, officers or employees to the extent they or any of them are
fiduciaries with respect to such plans, materially breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or which would result in any claim being made under or by or on behalf of any
such plans by any party with standing to make such claim.
(v) DOCUMENTS. Prestige has delivered or caused to be
delivered to 800 Travel and Merger Corp. and their counsel true and complete
copies of: (A) all Employee Benefit Plans as in effect, together with all
amendments thereto which will become effective at a later date, as well as the
latest Internal Revenue Service determination letter obtained with respect to
any such Employee Benefit Plan intended to be qualified under Section 401 or 501
43
of the Code and (B) completed Form 5500s for each of the last two (2) fiscal
years for each Employee Benefit Plan with respect to which such Forms were
required to be filed and will provide when completed a Form 5500 for the most
recently completed fiscal year for each Employee Benefit Plan required to file
such form. All annual reports on Form 5500 required by ERISA with respect to any
Employee Benefit Plan have been filed in a timely manner and are complete and
accurate in all material aspects.
(vi) NO SELF-INSURED MEDICAL BENEFITS. Except as
disclosed on SCHEDULE 3.1(v), Prestige has no material monetary obligation,
contingent or otherwise, under any Employee Benefit Plan providing
hospitalization, major medical or other medical coverage, other than the payment
of premiums to insurance carriers, health maintenance organizations or preferred
provider organizations, which is not fully insured or substantially covered by
adequate stop loss policies currently in force.
(vii) RETIREE BENEFITS. Prestige has no obligations
under any Employee Benefit Plan, or under any oral or written agreement with any
present or former employees, to provide: (A) ongoing medical or life insurance
coverage or similar post-termination benefits to any former employee (other than
COBRA continuation coverage required by law), or (B) severance payments (other
than accrued salary and vacation pay) to any employee upon retirement or other
termination of employment.
(w) GUARANTIES. Except as disclosed in Schedule 3.1(w),
Prestige is not a guarantor or otherwise liable for any Liability or obligation
(including indebtedness) of any other Person.
(x) ENVIRONMENTAL, HEALTH, AND SAFETY MATTERS.
(i) Prestige and its predecessors have complied and
Prestige is in compliance with all Environmental, Health, and Safety
Requirements.
(ii) Without limiting the generality of the
foregoing, Prestige and its predecessors have obtained and complied with, and
Prestige is in compliance with, all permits, licenses and other authorizations
that are required pursuant to Environmental, Health, and Safety Requirements for
the occupation of Prestige's facilities and the operation of Prestige's
business; a list of all such permits, licenses and other authorizations is set
forth in SCHEDULE 3.1(x).
(iii) Neither Prestige nor its predecessors have
received any written or oral notice, report or other information regarding any
actual or alleged violation of Environmental, Health, and Safety Requirements,
or any Liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any investigatory, remedial or corrective obligations,
relating to any of them or Prestige's facilities arising under Environmental,
Health, and Safety Requirements.
(iv) None of the following exists at any property or
facility owned or operated by Prestige: (A) underground storage tanks, (B)
asbestos-containing material in any form or condition, (C) materials or
equipment containing polychlorinated biphenyls, or (D) landfills, surface
impoundments, or disposal areas.
(v) Neither Prestige nor its predecessors have
treated, stored, disposed of, arranged for or permitted the disposal of,
transported, handled, or released any substance, including without limitation
any hazardous substance, or owned or operated any property or facility (and no
such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to Liabilities, including any Liability for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorney fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended, the
Solid Waste Disposal Act, as amended, or any other Environmental, Health, and
Safety Requirements.
44
(vi) Neither this Agreement nor the consummation of
the transaction that is the subject of this Agreement will result in any
obligations for site investigation or cleanup, or notification to or consent of
government agencies or third parties, pursuant to any of the so-called
"transaction-triggered" or "responsible property transfer" Environmental,
Health, and Safety Requirements.
(vii) Neither Prestige nor any of its predecessors
have, either expressly or by operation of law, assumed or undertaken any
Liability, including without limitation any obligation for corrective or
remedial action, of any other Person relating to Environmental, Health, and
Safety Requirements.
(viii) No facts, events or conditions relating to the
past or present facilities, properties or operations of Prestige, or any of its
predecessors will prevent, hinder or limit continued compliance with
Environmental, Health, and Safety Requirements, give rise to any investigatory,
remedial or corrective obligations pursuant to Environmental, Health, and Safety
Requirements, or give rise to any other Liabilities (whether accrued, absolute,
contingent, unliquidated or otherwise) pursuant to Environmental, Health, and
Safety Requirements, including without limitation any relating to onsite or
offsite releases or threatened releases of hazardous materials, substances or
wastes, personal injury, property damage or natural resources damage.
(y) YEAR 2000 COMPLIANCE. To the Knowledge of Prestige and
Shareholders none of the assets owned or used by Prestige, including, but not
limited to, computer software, databases, hardware, controls and peripherals,
has characteristics or qualities that may cause or have caused it to fail to
operate and produce data based on time periods on and after January 1, 2000,
accurately and without delay, interruption or error (collectively, a "YEAR 2000
DEFECT"). None of the assets owned or used by Prestige will fail or have failed
to perform in any material respect due in any way to, a Year 2000 Defect. No
software contains a Year 2000 Defect. No commitment contains any provision,
enforceable against Prestige for liquidated damages, consequential damages or
incidental damages as a result of a Year 2000 Defect. Prestige has no
obligations under any commitments including, but not limited to, warranty
agreements, service agreements, supply agreements, purchase orders, sales orders
or other similar arrangements to correct or rectify a Year 2000 Defect of any
customer, vendor or supplier or to indemnify any customer, vendor or supplier in
the event Prestige experiences a Year 2000 Defect. Prestige has no knowledge
that a customer, vendor or supplier of Prestige may experience a Year 2000
Defect that could cause an adverse effect on the assets, liabilities, financial
position, results of operation, cash flows, business or business prospects of
Prestige.
(z) CERTAIN BUSINESS RELATIONSHIPS WITH PRESTIGE. None of the
Shareholders nor any of their affiliates have been involved in any business
arrangement or relationship with Prestige within the past 12 months, and neither
of the Shareholders nor any of their affiliates own any asset, tangible or
intangible, which is used in the business of Prestige. At Closing Prestige shall
have no Liability to Shareholders.
(aa) INVESTMENT REPRESENTATIONS AND COVENANTS. (i) Each of the
Shareholders understands that the 800 Travel Shares which shall comprise a
portion of the Merger Consideration have not been and shall not be registered
under the Securities Act, or any state securities laws on the grounds that the
issuance of the 800 Travel Shares is exempt from registration pursuant to
Section 4(2) of the Securities Act and applicable state securities laws, and
that the reliance of 800 Travel and Merger Corp. on such exemptions is
45
predicated in part on the Shareholders' representations, warranties, covenants
and acknowledgments set forth in this Section. The Shareholders acknowledge
that: (A) 800 Travel and Merger Corp. have made no assurances that a public
market will continue to exist, (B) the 800 Travel Shares are a highly
speculative investment involving a high degree of risk, (C) the Shareholders are
able, without impairing their respective financial conditions, to hold the 800
Travel Shares for an indefinite period of time and suffer the complete loss
thereof, and (D) after one year and one day from the Effective Time, the
exemption available through Rule 144 of the Securities Act may be accessed by
the Shareholders, provided all of the terms and conditions of such exemption
have been met.
(ii) Each of the Shareholders represents and warrants
that: (A) he or she is an "accredited investor" or "sophisticated investor" as
defined under the Securities Act and state "Blue Sky" laws, or that the
Shareholder has utilized, to the extent necessary to be deemed a sophisticated
investor under the Securities Act and State "Blue Sky" laws, the assistance of a
professional advisor, and (B) he or she, either alone or together with the
assistance of the Shareholder's own professional advisor, has such knowledge and
experience in financial and business matters such that the Shareholder is
capable of evaluating the merits and risks of the Shareholder's investment in
the 800 Travel Shares to be acquired by the Shareholder upon consummation of the
Merger.
(iii) Each of the Shareholders represents and
warrants that the 800 Travel Shares to be acquired by the Shareholder upon
consummation of the transactions described in this Agreement will be acquired by
the Shareholder for the Shareholder's own account, not as a nominee or agent,
and without a view to resale or other distribution within the meaning of the
Securities Act and the rules and regulations thereunder, except as contemplated
in this Agreement, and that the Shareholder will not distribute any of the 800
Travel Shares in violation of the Securities Act. All shares of the 800 Travel
Shares shall bear a restrictive legend in substantially the following form:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY ONLY BE SOLD OR OTHERWISE
TRANSFERRED IF THE HOLDER HEREOF COMPLIES WITH THE ACT AND APPLICABLE
SECURITIES LAWS."
In addition, the 800 Travel Shares shall bear any legend required by
the securities or "Blue Sky" laws of the State of Florida as well as any other
legend deemed appropriate by 800 Travel and Merger Corp. or its counsel.
(iv) Each of the Shareholders represents and warrants
that his or her principal residence is within the State of Florida.
(v) Each of the Shareholders: (A) acknowledges that
the 800 Travel Shares issued to the Shareholder at the Closing must be held at
least one (1) year plus one (1) day after the Effective Time of this Agreement
by the Shareholder unless subsequently registered under the Securities Act or an
exemption from registration is available, (B) is aware that any routine sales of
800 Travel Shares made pursuant to Rule 144 under the Securities Act may be made
only in limited amounts and in accordance with the terms and conditions of that
Rule and that in such cases where the Rule is not applicable, compliance with
some other registration exemption will be required, and (C) is aware that Rule
144 is not currently available for use by the Shareholder for resale of any of
the 800 Travel Shares to be acquired by the Shareholder upon consummation of the
transactions described in this Agreement.
(vi) Each of the Shareholders confirms that the
Shareholders have had the opportunity to ask questions of and receive answers
from 800 Travel and Merger Corp.'s management concerning the terms and
conditions of the Shareholders' investment in the 800 Travel Shares, and the
Shareholders have received, to the Shareholders' satisfaction, such additional
information, in addition to that set forth herein, about 800 Travel and Merger
Corp.'s operations as the Shareholders have requested.
46
(vii) In order to ensure compliance with the
provisions of paragraph (iii) hereof, the Shareholders agree that after the
Closing the Shareholders will not sell or otherwise transfer or dispose of any
shares of the 800 Travel Shares or any interest therein (unless such shares have
been registered under the Securities Act) without first complying with
applicable federal and state securities laws.
In connection with any such proposed transfer by Shareholders, 800 Travel and
Merger Corp. shall have also received an opinion from their own counsel to the
effect that the proposed transfer will not be in violation of any of the
registration provisions of the Securities Act and the rules and regulations
promulgated thereunder, the expenses and cost of which are to be borne by 800
Travel.
The Shareholders also agree that the certificates or instruments representing
the 800 Travel Shares to be issued to the Shareholders pursuant to this
Agreement may contain a restrictive legend noting the restrictions on transfer
described in this Section and required by federal and applicable state
securities laws, and that appropriate "stop-transfer" instructions will be given
to 800 Travel' transfer agent, if any, provided that this SECTION 3.1(AA)(VII)
shall no longer be applicable to any shares of the 800 Travel Shares following
their transfer pursuant to a registration statement effective under the
Securities Act or in compliance with Rule 144 or if the opinion of counsel
referred to above is to the further effect that transfer restrictions and the
legend referred to herein are no longer required in order to establish
compliance with any provisions of the Securities Act.
(bb) PROSPECTS OF PRESTIGE. To the Knowledge of the
Shareholders, no material adverse changes have occurred between the Balance
Sheet Date and the Closing with respect to the business of Prestige, Prestige's
financial condition, or its anticipated profitability.
(cc) INTERESTS IN CLIENTS, SUPPLIERS, ETC. Except as set forth
in SCHEDULE 3.1(CC), as of the Closing Date, none of the Shareholders or any
officer or director of Prestige owns or possesses, directly or indirectly, any
financial interest in, or is a director, officer or employee of, any
corporation, firm, association or business organization which is engaged in the
same or similar business as Prestige, or is a competitor or potential competitor
of Prestige. Ownership of securities of a company whose securities are
registered under the Securities Exchange Act of 1934, not in excess of 1% of any
class of such securities, shall not be deemed to be a financial interest for
purposes of this SECTION 3.1 (cc).
(dd) BANK ACCOUNTS. Set forth in SCHEDULE 3.1(dd) is an
accurate and complete list showing the name and address of each bank in which
Prestige has an account or safe deposit box, the number of any such account or
any such box, the names of all persons authorized to draw thereon or to have
access thereto and the current balances maintained in all such accounts.
(ee) DISCLOSURE. The representations and warranties contained
in this SECTION 3.1 do not contain any untrue statement of fact or omit to state
any fact necessary in order to make the statements and information contained in
this SECTION 3.1 not misleading. There is no fact to the Knowledge of Prestige
or the Shareholders which materially and adversely affects the businesses,
prospects or financial condition of Prestige, its properties or assets, which
has not been disclosed and set forth in this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF 800 TRAVEL AND MERGER CORP. 800
Travel and Merger Corp. represent and warrant to the Shareholders that the
statements contained in this SECTION 3.2 are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date:
47
(a) ORGANIZATION OF 800 TRAVEL AND MERGER CORP. 800 Travel and
Merger Corp. are corporations duly organized, validly existing, and in good
standing under the laws of the State of Delaware and Florida, respectively.
(b) AUTHORIZATION OF MERGER. 800 Travel and Merger Corp. each
have full power and authority (including full corporate power and authority) to
execute and deliver this Agreement and to perform their obligations hereunder.
This Agreement constitutes the valid and legally binding obligation of 800
Travel and Merger Corp., enforceable in accordance with its terms and
conditions. Except for the filing of the Articles of Merger to effect the
Merger, 800 Travel and Merger Corp. need not give any notice to, make any filing
with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this
Agreement.
(c) NONCONTRAVENTION. Neither the execution and the delivery
of this Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which 800 Travel and Merger Corp. are subject
or any provision of their respective articles of incorporation or bylaws.
ARTICLE V
POST-CLOSING COVENANTS
----------------------
5.1 The Parties agree as follows with respect to the period following
the Closing:
(a) GENERAL. In case at any time after the Closing any further
action is necessary or desirable 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 VII). The Shareholders acknowledge and agree that from and after the
Closing, 800 Travel and Merger Corp. will be entitled to possession of all
documents, books, records (including Tax records), agreements, and financial
data of any sort relating to Prestige.
(b) LITIGATION SUPPORT. In the event and for so long as any
Party actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving Prestige, each of the other Parties will cooperate
with him, or it and his, or its counsel in the contest or defense, make
available their personnel, and provide such testimony and access to their books
and records as shall be necessary in connection with the contest or defense, all
at the sole cost and expense of the contesting or defending Party (unless the
contesting or defending Party is entitled to indemnification therefor pursuant
to ARTICLE VII).
(c) TRANSITION. The Shareholders shall not take any action
that is designed or intended to have the effect of discouraging any lessor,
licensor, customer, supplier, or other business associate of Prestige from
maintaining the same business relationships with Prestige after the Closing as
it maintained with Prestige prior to the Closing. The Shareholders will refer
all customer inquiries relating to the businesses of Prestige to 800 Travel and
Merger Corp. or 800 Travel and Merger Corp.'s subsidiary from and after the
Closing.
48
(d) CONFIDENTIALITY. The Shareholders shall: (i) treat and
hold as such all of the confidential information of Prestige, 800 Travel, Merger
Corp., and 800 Travel's direct subsidiaries, (ii) refrain from using any of the
confidential information of Prestige, 800 Travel, Merger Corp. and 800 Travel's
direct subsidiaries except in connection with this Agreement, and (iii) deliver
promptly to 800 Travel and Merger Corp. or destroy, at the request and option of
800 Travel, all tangible embodiments (and all copies) of the confidential
information of Prestige, 800 Travel, Merger Corp., or 800 Travel's direct
subsidiaries which are in their possession. In the event that either of the
Shareholders is requested or required (by oral question or request for
information or documents in any legal proceeding, interrogatory, subpoena, civil
investigative demand, or similar process) to disclose any confidential
information of Prestige, 800 Travel, Merger Corp. or 800 Travel's direct
subsidiaries, such Shareholder will notify 800 Travel and Merger Corp. promptly
of the request or requirement so that 800 Travel and Merger Corp. may seek an
appropriate protective order or waive compliance with the provisions of this
SECTION 5.1(d). If, in the absence of a protective order or the receipt of a
waiver hereunder, any of the Shareholders are, on the advice of counsel,
compelled to disclose any confidential information of Prestige, 800 Travel,
Merger Corp. or 800 Travel's direct subsidiaries to any tribunal or else stand
liable for contempt, then such Shareholder may disclose the confidential
information to the tribunal; provided, however, that the disclosing Shareholder
shall use his or her reasonable best efforts to obtain, at the reasonable
request of 800 Travel, Merger Corp. or 800 Travel's direct subsidiaries, an
order or other assurance that confidential treatment will be accorded to such
portion of the confidential information required to be disclosed as 800 Travel,
Merger Corp. or 800 Travel's direct subsidiaries shall designate. The foregoing
provisions shall not apply to any confidential information of Prestige, 800
Travel, Merger Corp. or 800 Travel's direct subsidiaries which is generally
available to the public immediately prior to the time of disclosure.
(e) NON-COMPETE, NON-SOLICITATION. For a period of THREE (3)
years from and after the Closing Date (as such period may be extended in
accordance with any employment agreement in effect between 800 Travel or 800
Travel's direct subsidiaries and any of the Shareholders), the Shareholders
shall not: (i) engage directly or indirectly in any travel and cruise related
reservation businesses in the areas described in SCHEDULE 5.1(e); provided,
however, that the Shareholders may own less than 1% of the outstanding stock of
any publicly-traded corporation engaged in part or in whole in the travel and
cruise reservation businesses, (ii) solicit or attempt to induce any employee of
800 Travel or merger Corp. to leave the employ of 800 Travel or Merger Corp., or
in any way interfere with the relationship between 800 Travel or Merger Corp.
and any employee thereof, (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of 800 Travel or Merger Corp. to
cease doing business with 800 Travel or Merger Corp., or in any way interfere
with the relationship between any such customer, supplier, licensee or business
relation and 800 Travel or Merger Corp. If the final judgment of a court of
competent jurisdiction declares that any term or provision of this Section or
SCHEDULE 5.1(e) is invalid or unenforceable, the Parties agree that the court
making the determination of invalidity or unenforceability shall have the power
to reduce the scope, duration, or area of the term or provision, to delete
specific words or phrases, or to replace any invalid or unenforceable term or
provision with a term or provision that is valid and enforceable and that comes
closest to expressing the intention of the invalid or unenforceable term or
provision, and this Agreement shall be enforceable as so modified.
(f) RELEASE OF THE SHAREHOLDERS FROM PRESTIGE'S LIABILITIES.
After the Closing, 800 Travel and Merger Corp. shall use good faith efforts to
obtain from third party creditors the release of the Shareholders from any
personal liabilities relating to Prestige which are identified on SCHEDULE
5.1(f) and assumed by Merger Corp. in connection with the Merger. In the event
that 800 Travel and Merger Corp. cannot obtain such releases, 800 Travel and
Merger Corp. shall indemnify the Shareholders from all such liabilities
disclosed on SCHEDULE 5.1(f).
49
(g) POST CLOSING AUDIT. In the event that the Financial
Statements are audited after the Closing Date at the discretion of 800 Travel or
Merger Corp., the Shareholders represent, warrant and covenant to 800 Travel and
Merger Corp. that the Financial Statements are supported by underlying
accounting records which are in proper order and are able to be audited, and
that the audited financial statements, prepared on a consistent basis, will not
materially differ from the Financial Statements. Each of the Shareholders agrees
to fully cooperate with any such audit.
(h) SECURITIES AND EXCHANGE ACT REPORTS. Rule 144 of the
Securities Act of 1933 requires under certain circumstances that current public
information be available with respect to registrants whose restricted securities
are sought to be transferred by Shareholders in reliance upon the exemption
provided by such rule for resales of restricted securities. Following the
consummation of the transactions contemplated hereby, 800 Travel covenants that
it will timely file, in accordance with its obligations under the Securities and
Exchange Act of 1934, as amended from time to time, all of its required filings
such that Shareholders may have access to Rule 144 for purposes of resales of
the 800 Travel Shares.
Shareholders acknowledge and covenant that in connection with
any resale of their 800 Travel Shares pursuant to an available exemption
provided by securities laws they will make certain representations to the
Company and to their broker to the extent necessary, including, but not limited
to, the following:
(i) the Shareholder is not an affiliate;
(ii) the Shareholder has filed Form 144 with the
Securities and Exchange Commission on or before any sale;
(iii) the Shareholder is not in possession of any
material non-public information;
(iv) the Shareholder nor any immediate family member
of Shareholder or any others with whom Shareholder is acting in concert, have
not sold any 800 Travel Shares during the past three months;
(v) the Shareholder has not solicited or arranged for
the solicitation of orders to buy their 800 Travel Shares in anticipation or in
connection with any sale transaction;
(vi) the Shareholder has held the shares for at least
one year and one day in accordance with the requirements of Rule 144.
(vii) the broker and 800 Travel's counsel are able to
rely on such representations.
800 Travel covenants that upon receipt of the above
representations of Shareholder and representation letter from Shareholder's
broker, it will not intentionally hinder Shareholders' ability to resell their
800 Travel Shares in reliance upon Rule 144, subject to their compliance with
the Rule and 800 Travel's personnel policy with respect to xxxxxxx xxxxxxx. 800
Travel shall make its counsel available to Shareholders, at no cost to
Shareholders, for purposes of assisting them with their compliance with Rule
144. The covenants by 800 Travel in this Section 5.1(h) shall no longer apply
upon the expiration of two years from Closing when Rule 144(k) is available to
Shareholders for the resale of their 800 Travel Shares and any restricted
legends have been removed.
50
ARTICLE VI
CONDITIONS TO OBLIGATION TO CLOSE
---------------------------------
6.1 CONDITIONS TO OBLIGATIONS OF 800 TRAVEL AND MERGER CORP. The
obligations of 800 Travel and Merger Corp. to consummate the transactions to be
performed by them in connection with the Closing are subject to satisfaction of
the following conditions:
(a) The representations and warranties set forth in SECTION
3.1 above shall be true and correct in all material respects at and as of the
Closing Date;
(b) The Shareholders shall have performed and complied with
all of their respective covenants hereunder in all material respects through the
Closing;
(c) Prestige shall have procured all necessary third party
consents;
(d) No action, suit, or proceeding shall be pending or
threatened before any court or quasi-judicial or administrative agency of any
federal, state, local, or foreign jurisdiction or before any arbitrator wherein
an unfavorable injunction, judgment, order, decree, ruling, or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement,
(ii) cause any of the transactions contemplated by this Agreement to be
rescinded following consummation, (iii) affect adversely the right of 800 Travel
and Merger Corp. to own the Prestige Shares and to control Prestige, or (iv)
affect adversely the right of Prestige to own its assets and to operate its
businesses (and no such injunction, judgment, order, decree, ruling, or charge
shall be in effect);
(e) The Parties shall have received any and all other
necessary authorizations, consents, and approvals of landlords, governments and
governmental agencies;
(f) 800 Travel and Merger Corp. shall have received the
resignations, effective as of the Closing, of each director and officer of
Prestige;
(g) 800 Travel and Merger Corp. shall have obtained on terms
and conditions satisfactory to them in their sole discretion and judgment
approvals and consents in order to consummate the transactions contemplated
hereby;
(h) 800 Travel and Merger Corp. shall have completed to their
satisfaction a due diligence review of Prestige and received from Shareholders
and Prestige adequate evidence of insurance;
(i) AK XxXxxxx, R XxXxxxx and XX XxXxxxx shall have entered
into employment agreements with the Surviving Corporation, each of which shall
contain a confidentiality agreement and covenant not to compete in the forms
attached hereto as Exhibits B, C and D respectively;
(j) The Shareholders shall have delivered to 800 Travel: (i)
copies of Prestige's Articles of Incorporation, including all amendments
thereto, certified by the Secretary of State or other appropriate official of
the State of Florida, (ii) certificates from the Secretary of State or other
appropriate official of the State of Florida to the effect that Prestige is in
good standing or existing in such jurisdiction and listing all charter documents
of Prestige on file, (iii) a certificate from the Secretary of State or other
appropriate official in each state in which Prestige is qualified to do business
to the effect that Prestige is in good standing in such state and (iv)
certificates as to the tax status of Prestige in the State of Florida and each
state in which Prestige is qualified to do business;
51
(k) 800 Travel and Merger Corp. shall have obtained a consent
and estoppel certificate agreement from the landlord for the lease of the real
estate and improvements upon which the primary office of Prestige is situated or
entered into a satisfactory assignment and assumption of lease agreement with
the landlord;
(l) The amount of cash Shareholders shall have withdrawn as a
distribution from Prestige prior to Closing shall be acceptable to 800 Travel
and Merger Corp.; and
(m) All actions to be taken by the Shareholders in connection
with consummation of the transactions contemplated hereby and all certificates,
instruments, and other documents required to effect the transactions
contemplated hereby will be reasonably satisfactory in form and substance to 800
Travel and Merger Corp.
6.2 CONDITIONS TO OBLIGATIONS OF PRESTIGE AND THE SHAREHOLDERS. The
obligations of Prestige and the Shareholders to consummate the transactions to
be performed by them in connection with the Closing are subject to satisfaction
of the following conditions:
(a) The representations and warranties set forth in SECTION
3.2 above shall be true and correct in all material respects at and as of the
Closing Date;
(b) 800 Travel and Merger Corp. shall have performed and
complied with all of their covenants hereunder in all material respects through
the Closing;
(c) No action, suit, or proceeding shall be pending before any
court or quasi-judicial or administrative agency of any federal, state, local,
or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (i) prevent
consummation of any of the transactions contemplated by this Agreement or (ii)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(d) The Parties shall have received any and all necessary
authorizations, consents, and approvals of governments and governmental
agencies;
(e) The Surviving Corporation shall have entered into the
employment agreements with AK XxXxxxx, R XxXxxxx and XX XxXxxxx; and
(f) All actions to be taken by 800 Travel and Merger Corp. in
connection with consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably satisfactory in form and
substance to the Shareholders.
ARTICLE VII
REMEDIES FOR BREACHES OF THIS AGREEMENT
---------------------------------------
7.1 INDEMNIFICATION OBLIGATION OF THE SHAREHOLDERS. From and after the
Closing, the Shareholders shall jointly and severally reimburse, indemnify and
hold harmless 800 Travel, Merger Corp. and their respective successors and
assigns (an "Indemnified 800 Travel Party") against and in respect of:
52
(a) Any and all damages, losses, deficiencies, Liabilities,
costs and expenses incurred or suffered by any Indemnified 800 Travel Party that
result from, relate to or arise out of:
(i) Any and all Liabilities and obligations of
Prestige of any nature whatsoever not disclosed herein to 800 Travel and Merger
Corp.; or
(ii) Any and all actions, suits, claims, or legal,
administrative, arbitration, governmental or other proceedings or investigations
against any Indemnified 800 Travel Party that relate to the Shareholders or
Prestige in which the principal event giving rise thereto occurred prior to the
Closing Date or which result from or arise out of any action or inaction of the
Shareholders, Prestige or any employee, agent, representative or subcontractor
of Prestige prior to the Closing Date not disclosed herein to 800 Travel and
Merger Corp.; or
(iii) Any misrepresentation, breach of warranty or
nonfulfillment of any agreement or covenant on the part of the Shareholders or
Prestige under this Agreement or from any misrepresentation in or omission from
any certificate, schedule, exhibit, statement, document or instrument furnished
to 800 Travel and Merger Corp. pursuant hereto or in connection with the
negotiation, execution or performance hereof; and
(b) Any and all actions, suits, claims, proceedings,
investigations, demands, assessments, audits, fines, judgments, costs and other
expenses (including, without limitation, reasonable legal fees and expenses and
court costs) incident to any of the foregoing or to the enforcement of this
Section 7.1.
provided, however, no claim for indemnification under this SECTION 7.1 shall be
initiated by an Indemnified 800 Travel Party unless and until the aggregate
amount of any such claim arising from any of the foregoing exceeds Fifteen
Thousand ($15,000) Dollars.
7.2 INDEMNIFICATION OBLIGATION OF 800 TRAVEL AND MERGER CORP. >From and
after the Closing, 800 Travel and Merger Corp. shall jointly and severally
reimburse, indemnify and hold harmless the Shareholders and their respective
successors and assigns (an "Indemnified Shareholder Party") against and in
respect of:
(a) Any and all damages, losses, deficiencies, liabilities,
costs and expenses incurred or suffered by any Indemnified Shareholder Party
that result from, relate to or arise out of any misrepresentation, breach of
warranty or nonfulfillment of any agreement or covenant on the part of 800
Travel or Merger Corp. under this Agreement or from any misrepresentation in or
omission from any certificate, schedule, exhibit, statement, document or
instrument furnished to Shareholders pursuant hereto or in connection with the
negotiation, execution or performance hereof; and
(B) ANY AND ALL ACTIONS, SUITS, CLAIMS, PROCEEDINGS,
INVESTIGATIONS, DEMANDS, ASSESSMENTS, AUDITS, FINES, JUDGMENTS, COSTS AND OTHER
EXPENSES (INCLUDING, WITHOUT LIMITATION, REASONABLE LEGAL FEES AND EXPENSES AND
COURT COSTS) INCIDENT TO ANY OF THE FOREGOING OR TO THE ENFORCEMENT OF THIS
SECTION 7.2;
PROVIDED, HOWEVER, NO CLAIM FOR INDEMNIFICATION UNDER THIS SECTION 7.2 SHALL BE
INITIATED BY AN INDEMNIFIED SHAREHOLDER PARTY UNLESS AND UNTIL THE AGGREGATE
AMOUNT OF ANY SUCH CLAIM ARISING FROM ANY OF THE FOREGOING EXCEEDS FIFTEEN
THOUSAND ($15,000) DOLLARS.
53
7.3 PROCEDURE FOR INDEMNIFICATION CLAIMS. If at any time a claim shall
be made or threatened, or an action or proceeding shall be commenced or
threatened, against a party hereto (the "Aggrieved Party") which could result in
liability of the other party (the "Indemnifying Party") under its
indemnification obligations hereunder, the Aggrieved Party shall give to the
Indemnifying Party prompt notice of such claim, action or proceeding. Such
notice shall state the basis for the claim, action or proceeding and the amount
thereof (to the extent such amount is determinable at the time when such notice
is given) and shall permit the Indemnifying Party to assume the defense of any
such claim, action or proceeding (including any action or proceeding resulting
from any such claim). Failure by the Indemnifying Party to notify the Aggrieved
Party of its election to defend any such claim, action or proceeding within a
reasonable time shall be deemed a waiver by the Indemnifying Party of its right
to defend such claim, action or proceeding; provided, however, that the
Indemnifying Party shall not be deemed to have waived its right to contest and
defend against any claim of the Aggrieved Party for indemnification hereunder
based upon or arising out of such claim, action or proceeding.
If the Indemnifying Party assumes the defense of any such claim, action
or proceeding, the obligation of the Indemnifying Party as to such claim, action
or proceeding shall be limited to taking all steps necessary in the defense or
settlement thereof and, to the extent the Indemnifying Party is liable for
indemnification hereunder, to holding the Aggrieved Party harmless from and
against any and all losses, damages and liabilities caused by or arising out of
any settlement approved by the Indemnifying Party or any judgment or award
rendered in connection with such claim, action or proceeding. The Aggrieved
Party agrees to cooperate and make available to the Indemnifying Party all books
and records and such officers, employees and agents as are reasonably necessary
and useful in connection with the defense. The Aggrieved Party may participate,
at its expense, in the defense of such claim, action or proceeding provided that
the Indemnifying Party shall direct and control the defense of such claim,
action or proceeding; provided, however, if in the reasonable opinion of the
Aggrieved Party any such claim, action or proceeding involves an issue or matter
which, if adversely determined, would have a materially adverse effect on the
Aggrieved Party, then the Aggrieved Party shall have the right to control the
defense or settlement of any such claim, action or proceeding and its reasonable
costs and expenses shall be included as a part of the indemnification obligation
of the Indemnifying Party. The Indemnifying Party shall not, with respect to any
such claim, action or proceeding, consent to the entry of any judgment or award,
or enter into any settlement, except with the prior written consent of the
Aggrieved Party, which consent shall not be unreasonably withheld; provided,
however, in the case of any such judgment, award or settlement for money, it
shall be a condition thereto that the Indemnifying Party shall acknowledge its
obligation to indemnify the Aggrieved Party pursuant to this ARTICLE VII; and
provided, further, that any such judgment, award or settlement include, as an
unconditional term thereof, the release of the Aggrieved Party from all
Liability by the third party claimant or plaintiff.
7.4 CANCELLATION OF SHARES. 800 Travel is hereby authorized without
further action by Shareholders to cancel on its books and records that number of
800 Travel Shares of Shareholders on a pro rata basis, equal to the amount owed
to it or Surviving Corporation by Shareholders as a result of Shareholders'
indemnification obligations under this ARTICLE VII. To the extent that the
foregoing calculation would result in a greater number of 800 Travel Shares than
Shareholders collectively own, then all such 800 Travel Shares of Shareholders
shall be canceled on the books and records of 800 Travel, and to the extent that
any portion of Shareholders indemnification obligation remains unpaid after
cancellation of the 800 Travel Shares, Shareholders agree to pay such remaining
balance to 800 Travel or Surviving Corporation, as the case may be, upon demand.
7.5 OTHER RIGHTS AND REMEDIES NOT AFFECTED. The indemnification rights
of the parties under this ARTICLE VII are independent of and in addition to such
rights and remedies as the parties may have at law or in equity or otherwise for
any misrepresentation, breach of warranty or failure to fulfill any agreement or
54
covenant hereunder on the part of any party hereto, including, without
limitation the right to seek an injunction against a violation of any of the
terms hereof or in aid of the exercise of any power granted hereby or by law,
the right to seek specific performance, rescission or restitution, none of which
rights or remedies shall be affected or diminished hereby. All rights, powers,
options or remedies afforded to the parties either hereunder or by law shall be
cumulative and not alternative and the exercise of a party's right, power,
option or remedy shall not bar other rights, powers, options or remedies allowed
herein or by law. The indemnification obligations hereunder shall survive the
consummation of the transactions described herein. Should any party hereto
employ an attorney or attorneys to enforce any of the provisions hereof, or to
protect its interest in any matter arising hereunder, or to recover damages for
the breach hereof, the party prevailing shall be entitled to recover from the
other party all reasonable costs, charges and expenses, including attorney's
fees, the value of time charged by paralegal and/or other staff members
operating under the supervision of an attorney, and other legal costs, expended
or incurred in connection therewith, before, during and subsequent to any
litigation, including arbitration and appellate proceedings, bankruptcy or
similar debtor/creditor proceedings, and proceedings to enforce any indemnity
agreement herein contained.
ARTICLE VIII
TAX MATTERS
-----------
8.1 The following provisions shall govern the allocation of
responsibility as between 800 Travel, the Surviving Corporation and the
Shareholders for certain tax matters following the Closing Date:
(a) TAX PERIODS ENDING ON OR BEFORE THE CLOSING DATE.
Shareholders shall prepare or cause to be prepared and file or cause to be filed
all Tax Returns for Prestige for all periods ending on or prior to the Closing
Date which are filed after the Closing Date. Shareholders shall permit 800
Travel and Merger Corp. to review and comment on each such Tax Return described
in the preceding sentence prior to filing. Recognizing that Prestige is
designated as a Sub-Chapter S corporation under the tax laws of the United
States, Shareholders shall be responsible for the reporting of all income and
other tax preparation and compliance relative to Prestige until the date of
Closing. Shareholders agree to promptly file all necessary returns and to pay
any associated taxes. 800 Travel and/or Merger Corp. shall be responsible for
the reporting of all income and other tax preparation and compliance and to pay
any associated taxes for all periods from the date of Closing forward.
(b) TAX PERIODS BEGINNING BEFORE AND ENDING AFTER THE CLOSING
DATE. 800 Travel and Merger Corp. shall prepare or cause to be prepared and file
or cause to be filed any Tax Returns of Prestige for Tax periods, which begin
before the Closing Date and end after the Closing Date. The Shareholders shall
pay to 800 Travel and Merger Corp. within fifteen (15) days after the date on
which Taxes are paid with respect to such periods an amount equal to the portion
of such Taxes which relates to the portion of such taxable period ending on the
Closing Date to the extent such Taxes are not reflected in the reserve for Tax
liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) shown on the Balance Sheet. For
purposes of this Section, in the case of any Taxes that are imposed on a
periodic basis and are payable for a taxable period that includes (but does not
end on) the Closing Date, the portion of such Tax which relates to the portion
of such taxable period ending on the Closing Date shall (i) in the case of any
Taxes other than Taxes based upon or related to income or receipts, be deemed to
be the amount of such Tax for the entire taxable period multiplied by a fraction
the numerator of which is the number of days in the taxable period ending on the
Closing Date and the denominator of which is the number of days in the entire
taxable period, and (ii) in the case of any Tax based upon or related to income
or receipts be deemed equal to the amount which would be payable if the relevant
taxable period ended on the Closing Date. Any credits relating to a taxable
55
period that begins before and ends after the Closing Date shall be taken into
account as though the relevant taxable period ended on the Closing Date. All
determinations necessary to give effect to the foregoing allocations shall be
made in a manner consistent with prior practice of Prestige. Prestige has since
its inception elected Sub Chapter S status for federal and state income tax
purposes.))
(c) COOPERATION ON TAX MATTERS.
(i) 800 Travel, Merger Corp., Prestige and the
Shareholders shall cooperate fully, as and to the extent reasonably requested by
the other Parties, in connection with the filing of Tax Returns pursuant to this
Section and any audit, litigation or other proceeding with respect to Taxes.
Such cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably relevant
to any such audit, litigation or other proceeding and making employees available
on a mutually convenient basis to provide additional information and explanation
of any material provided hereunder. Prestige and the Shareholders agree: (A) to
retain all books and records with respect to Tax matters pertinent to Prestige
relating to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by 800
Travel and Merger Corp. or the Shareholders, any extensions thereof) of the
respective taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other Parties
reasonable written notice prior to transferring, destroying or discarding any
such books and records and, if the other Parties so request, Prestige or the
Shareholders, as the case may be, shall allow the other Parties to take
possession of such books and records.
(ii) 800 Travel, Merger Corp. and the Shareholders
further agree, upon request, to use their best efforts to obtain any certificate
or other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions contemplated
hereby).
(iii) 800 Travel, Merger Corp. and the Shareholders
further agree, upon request, to provide the other party with all information
that either party may be required to report pursuant to Section 6043 of the Code
and all Treasury Department Regulations promulgated thereunder.
(d) CERTAIN TAXES. All other Taxes (including any penalties
and interest) incurred in connection with this Agreement shall be paid by the
Shareholder when due, and the Shareholders will, at their own expense, file all
necessary Tax Returns and other documentation with respect to all such transfer,
documentary, sales, use, stamp, registration and other Taxes and fees, and, if
required by applicable law, 800 Travel and Merger Corp. will, and will cause
their respective affiliates to, join in the execution of any such Tax Returns
and other documentation.
ARTICLE IX
TERMINATION
-----------
9.1 TERMINATION OF AGREEMENT. This Agreement may be terminated as
provided below:
(a) 800 Travel and Merger Corp. and Shareholders may terminate
this Agreement by mutual written consent at any time prior to the Closing;
(b) 800 Travel and Merger Corp. may terminate this Agreement
by giving written notice to Shareholders prior to the Closing if 800 Travel and
Merger Corp. are not reasonably satisfied with the results of their continuing
business, legal, environmental, and accounting due diligence regarding Prestige;
56
(c) 800 Travel and Merger Corp. may terminate this Agreement
by giving written notice to Shareholders at any time prior to the Closing (i) in
the event Shareholders and/or Prestige have breached any representation,
warranty, or covenant contained in this Agreement in any material respect, 800
Travel and Merger Corp. have notified Shareholders and Prestige of the breach,
and the breach has continued without cure for a period of ten (10) days after
the notice of breach, or (ii) if the Closing shall not have occurred on or
before August 15, 2000 by reason of the failure of any condition precedent under
SECTION 6.1 hereof (unless the failure results primarily from 800 Travel and
Merger Corp. themselves breaching any representation, warranty, or covenant
contained in this Agreement); and
(d) Shareholders and Prestige may terminate this Agreement by
giving written notice to 800 Travel and Merger Corp. at any time prior to the
Closing (i) in the event 800 Travel and/or Merger Corp. have breached any
material representation, warranty, or covenant contained in this Agreement in
any material respect, Shareholders and Prestige have notified 800 Travel and
Merger Corp. of the breach, and the breach has continued without cure for a
period of ten (10) days after the notice of breach, or (ii) if the Closing shall
not have occurred on or before August 15, 2000 by reason of the failure of any
condition precedent under SECTION 6.2 hereof (unless the failure results
primarily from any of Shareholders themselves breaching any representation,
warranty, or covenant contained in this Agreement).
9.2 EFFECT OF TERMINATION. If any Party terminates this Agreement
pursuant to SECTION 9.1, above, all rights and obligations of the Parties
hereunder shall terminate without any Liability of any Party to any other Party
(except for any Liability of any Party then in breach and the provisions with
respect to confidentiality which shall remain in full force and effect).
ARTICLE X
MISCELLANEOUS
-------------
10.1 NATURE OF CERTAIN OBLIGATIONS. The representations, warranties,
and covenants of the Shareholders and Prestige in this Agreement are made by the
Shareholders and as such they are each jointly and severally responsible to the
extent provided in ARTICLE VII above for the entirety of any adverse
consequences 800 Travel and Merger Corp. may suffer as a result of any breach
thereof. The Recitals set forth at the forepart of this Agreement are
incorporated herein by reference. The Shareholders represent and warrant that
the Recitals are true and correct.
10.2 PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the subject matter of
this Agreement prior to the Closing without the prior written approval of 800
Travel, Merger Corp., Prestige and the Shareholders; provided, however, that any
Party may make any public disclosure it believes in good faith is required by
applicable law (in which case the disclosing Party will use its reasonable best
efforts to advise the other Parties prior to making the disclosure).
10.3 NO THIRD-PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their respective
successors and permitted assigns.
10.4 ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement among the Parties and supersedes any
prior understandings, agreements, or representations by or among the Parties,
written or oral, to the extent they related in any way to the subject matter
hereof.
57
10.5 SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon
and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his, her or its rights, interests, or obligations hereunder without the
prior written approval of 800 Travel, Merger Corp., Prestige and the
Shareholders; provided, however, that 800 Travel and Merger Corp. may: (a)
assign any or all of their rights and interests hereunder to one or more of
their affiliates and (b) designate one or more of their affiliates to perform
their obligations hereunder (in any or all of which cases 800 Travel and Merger
Corp. nonetheless shall remain responsible for the performance of all of their
obligations hereunder).
10.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
10.7 HEADINGS. The Section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.8 NOTICES. Any notice or other communications required or permitted
hereunder shall be sufficiently given if delivered in person or sent by
overnight mail or by registered or certified mail, postage prepaid, addressed as
follows:
If to the Shareholders: Copy to:
Xxxxx X. XxXxxxx Xxxxxxx X. Xxxxxxxx, Xx.
0000 Xxxxxxxx Xxx 0000-X 00xx Xxxxxx Xxxxx, Xxxxx 000
Xxxxx, XX 00000 Xx. Xxxxxxxxxx, XX 00000
Xxx XxXxxxx
0000 Xxxxxxxx Xxx
Xxxxx, XX 00000
Xxxxxxxx X. XxXxxxx
0000 Xxxxxxxx Xxx
Xxxxx, XX 00000
If to 800 Travel and Merger Corp.: Copy to:
800 Travel Systems, Inc. Xxxx X. Xxxxxxx, Esq.
0000 Xxxx Xxxxxxx Xxxxxxxx, Loop & Xxxxxxxx, LLP
Suite 140 Suite 2800
Xxxxx, Xxxxxxx 00000 000 X. Xxxxxxx Xxxxxxxxx
Attn: Chief Executive Officer Xxxxx, XX 00000
or such other address as shall be furnished in writing by any such Party in
accordance with this Section 10.8, and such notice or communication shall be
deemed to have been given on the date personally delivered, one (1) business day
after delivered by overnight mail or three (3) business days after deposited in
the U.S. Mail.
10.9 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the domestic laws of the State of Florida without giving
effect to any choice or conflict of law provision or rule that would cause the
application of the laws of any jurisdiction other than the State of Florida. The
venue for any proceeding hereunder shall be Hillsborough County, Florida.
58
10.10 AMENDMENTS AND WAIVERS. No amendment of any provision of this
Agreement shall be valid unless the same shall be in writing and signed by 800
Travel, Merger Corp., Prestige and the Shareholders. No waiver by any Party of
any default, misrepresentation, or breach of warranty or covenant hereunder,
whether intentional or not, shall be deemed to extend to any prior or subsequent
default, misrepresentation, or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent such
occurrence.
10.11 SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall not affect
the validity or enforceability of the remaining terms and provisions hereof or
the validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
10.12 EXPENSES. Each of the Parties will bear his, her or its own costs
and expenses (including legal fees and expenses) incurred in connection with
this Agreement and the transactions contemplated hereby. The Shareholders
acknowledge and agree that Prestige has not borne and will not bear any of the
Shareholder' or Prestige's costs and expenses (including any of Shareholders'
legal fees and expenses) incurred in connection with this Agreement or any of
the transactions contemplated hereby.
10.13 CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign statute or law shall be deemed also to refer to all rules and
regulations promulgated thereunder, unless the context requires otherwise. The
word "including" shall mean "including without limitation." The Parties intend
that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation,
warranty, or covenant contained herein in any respect, the fact that there
exists another representation, warranty, or covenant relating to the same
subject matter (regardless of the relative levels of specificity) which the
Party has not breached shall not detract from or mitigate the fact that the
Party is in breach of the first representation, warranty, or covenant.
10.14 INCORPORATION OF EXHIBITS, ANNEXES, AND SCHEDULES. The Exhibits
and Schedules identified in this Agreement are incorporated herein by reference
and made a part hereof.
10.15 SPECIFIC PERFORMANCE. Each of the Parties acknowledges and agrees
that the other Parties would be damaged irreparably in the event any of the
provisions of this Agreement are not performed in accordance with their specific
terms or otherwise are breached. Accordingly, each of the Parties agrees that
the other Parties shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions hereof in any action instituted in any
court of the United States or any state thereof having jurisdiction over the
Parties and the matter in addition to any other remedy to which they may be
entitled, at law or in equity.
10.16 AUDIT. 800 Travel and Merger Corp. or Shareholders may cause an
audit of the Financial Statements to be conducted by Xxxxx Xxxxxxxx LLP or such
other comparable accounting firm of 800 Travel's or Shareholders' selection, the
cost of which shall be borne one hundred percent (100%) by the requesting party.
Except as otherwise provided in this Section, all items prepared by Xxxxx
Xxxxxxxx LLP in connection with the audit shall be for use solely by 800 Travel
and Merger Corp. The Shareholders agree to fully cooperate (and to cause
Prestige to fully cooperate) with any such audit and provide any documentation
reasonably requested by the auditor in order to complete such audit.)
59
IN WITNESS WHEREOF, each of the Parties hereto has executed this
Agreement as of the date and year first above written.
Witnesses: "800 TRAVEL"
800 TRAVEL SYSTEMS, INC.
By:
------------------------- -----------------------------------------
Its:
------------------------- ----------------------------------------
"MERGER CORP."
800 TRAVEL ACQUISITION SUB, INC.
By:
------------------------- -----------------------------------------
Its:
------------------------- ----------------------------------------
"PRESTIGE"
PRESTIGE TRAVEL SYSTEMS, INC.
By: /S/ Xxxxx X. XxXxxxx
------------------------- -----------------------------------------
Xxxxx X. XxXxxxx
Its: President
------------------------- ----------------------------------------
WITNESSES: "SHAREHOLDERS"
"AK XXXXXXX"
/S/ Xxxxx X. XxXxxxx
------------------------- -----------------------------------
Xxxxx X. XxXxxxx
-------------------------
"R XXXXXXX"
/S/ Xxx XxXxxxx
------------------------- -----------------------------------
Xxx XxXxxxx
-------------------------
"XX XXXXXXX"
/S/ Xxxxxxxx X. XxXxxxx
------------------------- -----------------------------------
Xxxxxxxx X. XxXxxxx
-------------------------
60
Schedule 2.10(a)
to the Agreement and Plan of Reorganization (the "Agreement") by and
among 800 Travel Systems, Inc. ("800 Travel"), 800 Travel
Acquisition Sub, Inc. ("Merger Corp."), Prestige Travel Systems,
Inc. ("Prestige"); Xxxxx X. XxXxxxx, Xxx XxXxxxx and Xxxxxxxx X.
XxXxxxx (collectively referred to as the "Shareholders").
Stock Consideration
-------------------
The Shareholders shall be paid in the aggregate 229,240 800 Travel
Shares which shall be paid to the Shareholders at Closing or as soon
as practicable following Closing on the basis of their respective
percentage capital stock ownership in Prestige as set forth below.
Cash Consideration
------------------
The Shareholders shall be paid in the aggregate Two Hundred Thousand
Dollars ($200,000) payable at Closing by 800 Travel's corporate
checks to the Shareholders on the basis of their respective capital
stock ownership in Prestige as set forth below.
Percentage
Ownership of 800 Travel
Prestige Shares Cash
--------------- ------------ ------------
Xxxxx X. XxXxxxx 51% 116,912 $ 102,000
Xxx XxXxxxx 29% 66,480 58,000
Xxxxxxxx XxXxxxx 20% 45,848 40,000
--------------- ------------ ------------
100% 229,240 $ 200,000
=============== ============ ============
61
