Exhibit 10.5
MANAGEMENT AGREEMENT AND OPTION TO PURCHASE
THIS AGREEMENT (the "Agreement") is entered into effective April 5, 1999, by and
among Affinity International Travel Systems, Inc. ("Affinity"), a Nevada
corporation with its principal place of business at 000 Xxxxxx Xxxxxx Xxxxx,
Xxxxx 000X, Xx. Xxxxxxxxxx, XX 00000, Prestige Travel Services II, Inc.
("Prestige"), a Florida corporation with its principal place of business at 0000
Xxxx Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxx, XX 00000, Travel Systems
International, Inc. ("TSI"), a Florida corporation with its principal place of
business at 00 0xx Xxxxxx Xxxxx, Xxxxx X, Xx. Xxxxxxxxxx, XX 00000, Xxxxxxx X.
Xxxxxxx and Xxxxxxxx X. Xxxxxxx (collectively, "Shareholders"), residing at 0000
Xxxxxxxxx Xxxxx, Xxxxxxxxxx, XX 00000.
W I T N E S S E T H
A. WHEREAS, Affinity is a publicly-traded company (OTC BB: TRIP) engaging in
a broad-based travel services business through various affiliates and
subsidiaries;
B. WHEREAS, Prestige is a wholly-owned subsidiary of Affinity with division
encompassing retail travel agency, outside agent, and cruise brokerage
operations;
C. WHEREAS, TSI is a retail travel agency that includes an outside agent
program (the "Assumed Business");
D. WHEREAS, Shareholder Xxxxxxx X. Xxxxxxx is the chief executive officer,
director, and the 51% shareholder of TSI; and
E. WHEREAS, the parties wish to enter into an arrangement whereby Prestige
will assume the operations of TSI pending an agreement for the eventual
acquisition of the assets of TSI by Affinity.
NOW THEREFORE, in consideration of the mutual covenants and undertakings herein
and of other good and valuable consideration, the receipt and sufficiency of
which being hereby acknowledged, the parties agree as follows:
1. Management of Assumed Business TSI hereby engages Prestige to manage the
Assumed Business and all of TSI's rights and duties therein as expressly
described herein to Prestige on the terms and conditions contained herein.
Prestige hereby accepts such management rights and duties in the Assumed
Business.
2. Rights and Obligations Assumed Prestige agrees to assume, so long as this
Agreement remains in effect, responsibility for the following obligations
relative to the Assumed Business:
a. the lease of premises at 00 0xx Xxxxxx Xxxxx, Xxxxx X, Xx.
Xxxxxxxxxx, Xxxxxxx. A copy of such lease is attached hereto as
Exhibit "A";
b. employment of staff deemed by the parties hereto sufficient to
transact the Assumed Business in a manner consistent with its
operating standards heretofore;
c. telephone numbers and associated directory advertising costs;
d. the existing contract for communications/booking services with
Amadeus, subject to Prestige's discretion in modifying, converting,
or terminating such agreement; provided, however, that Prestige and
Affinity shall indemnify TSI and its principals from any liability
arising out of any such action on the part of Prestige. A copy of
such agreement is attached hereto as Exhibit "B";
e. performance under any existing outside agent agreements, a standard
form of which agreement is attached hereto as Exhibit "C" and a
listing of agents subject to any such existing agreement is attached
as Exhibit "D";
f. forward bookings and any deposits and accounts, including bank
accounts, relative thereto but not including accounts receivables
(whether known or unknown) as of the date of this Agreement; and
g. the existing Airlines Reporting Corporation (ARC) appointment and
account of TSI, subject to Prestige's discretion in modifying,
converting, or deactivating such arrangement; provided, however,
that Prestige and Affinity shall indemnify TSI and its principals
from any liability of TSI or the Shareholders under the ARC account
arising out of any act or omission on the part of Prestige or
Affinity.
3. Rights and Obligations Not Assumed Except as expressly provided herein,
neither Prestige, Affinity, nor any affiliate or subsidiary of Affinity shall
have any obligation to assume any debt of TSI, including, by way of illustration
and not limitation, any debt to the U.S. Small Business Administration, Colonial
Bank (formerly First Central Bank), Tampa Bay Black Investment Corporation, or
any other lender. TSI and Shareholder each expressly agree that they shall be
bound to pay or otherwise satisfy all such debts, liens, and obligations timely
so as to fully discharge their obligations with respect thereto.
4. Consideration In addition to Prestige's assumption of those obligations
specified in section 2 above, the parties agree that each will receive the
following monetary benefits for the transaction contemplated hereunder:
a. Prestige and Affinity agree that each shall be obligated to pay to
TSI for the benefits derived hereunder the sum total of eighty-two
thousand dollars $82,000.00 (the "Cash Obligation"). To satisfy the
Cash Obligation, Affinity has advanced to TSI the sum of $10,000.00,
such advance taking the form of a promissory note (the "Note", a
copy of which is attached hereto as Exhibit "E") in said principal
amount, and further Prestige shall pay to TSI monthly a sum equal to
twenty percent (20%) of the Adjusted Gross Revenues (defined as
gross revenues less cost of sales and commissions paid to parties
other than Prestige, Affinity, or any of Affinity's affiliates or
subsidiaries) of the Assumed Business up to the sum of $72,000.00
(this payment obligation shall be deemed "Earned Revenue"). At such
time as TSI's Earned Revenue meets the sum of $72,000.00, all
further such Earned Revenue shall be applied against the Note until
the full principal amount of the Note has been satisfied. At that
time, the Cash Obligation will be deemed fully satisfied. It is
further provided that the
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Cash Obligation shall be paid in full within eighteen (18) months
from the date of this Agreement so long as TSI and Shareholder have
not materially breached this Agreement.
b. Prestige shall retain as its compensation for the management
services provided hereunder eighty percent (80%) of Adjusted Gross
Revenues until the Cash Obligation has been paid, after which time
Prestige shall retain one hundred percent of Adjusted Gross Revenues
subject to the termination provisions at paragraph 7 below.
5. Option to Purchase Assets In addition to the consideration above, Affinity
shall have the exclusive option to acquire the assets of TSI (the "Option") as
described at Exhibit "F" hereto for the amount of eighty-two thousand dollars
($82,000.00), which amount shall be payable in preferred convertible stock of
Affinity stock to TSI, Shareholders, or their designee.
6. Exercise of Option The Option must be exercised by Affinity, and Affinity
shall be obligated to purchase the assets of the Assumed Business, upon
satisfaction of the Cash Obligation unless:
a. TSI and/or Shareholders have failed to satisfy in full all liens
and/or debts related to the Assumed Business by the end of the 18th
month of this Agreement; or
b. If prior to exercise of the Option, there should arise a condition
or circumstance that adversely affects the Assumed Business which
condition or circumstance was known or should reasonably have been
known to TSI or Shareholders prior to execution of this Agreement.
The parties acknowledge that TSI and Shareholder have not disclosed
the existence of any such condition or circumstance as of the date
or execution of this Agreement.
If there exists a condition that relieves Affinity of its obligation to
exercise the Option, then Affinity, at its sole discretion, may terminate the
Option and this Agreement. Alternatively, if Affinity and TSI consent, the
parties may agree to extend the time for performance and the term of this
Agreement.
7. Term and Termination
a. This Agreement shall commence on the date written above and shall
terminate at the earlier of the time of the transaction completing
the exercise of the Option or on October 6, 2000.
b. This Agreement may be otherwise terminated only in the event of i) a
material breach hereunder following notice to the breaching party,
or ii) in the event that Affinity or Prestige shall terminate
without cause that certain employment agreement with Shareholder
Xxxxxxx X. Xxxxxxx (the "Employment Agreement") of even date in
which event TSI may terminate, in its sole discretion, this
Agreement upon notice to Prestige. Barring such termination by TSI,
this Agreement shall remain in full force and effect.
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c. Upon termination, Prestige and Affinity shall act deliberately and
promptly to reassign the rights and duties associated with the
Assumed Business to TSI or its designees and shall return to TSI or
its designee any and all rights in
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IN WITNESS WHEREOF, this Agreement has been executed and delivered on the date
first written above.
WITNESSES: PRESTIGE TRAVEL SERVICES II, INC.
BY:
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Xxxxx XxXxxxx, President
WITNESSES: AFFINITY INT'L TRAVEL SYSTEMS, INC.
/s/ Xxxxx Xxxxxxx BY: /s/ Xxxxxx X. Xxxxxxxx, Xx.
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Xxxxxx X. Xxxxxxxx, Xx., Chief
Executive Officer
TRAVEL SERVICES INTERNATIONAL, INC.
/s/ Xxxx Xxxxxxxx BY: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx, President
/s/ Xxxx Xxxxxxxx BY: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx, individually
/s/ Xxxxxxxx X. Xxxxxxx
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Xxxxxxxx X. Xxxxxxx, individually
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