Exhibit 10.1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
FAREQUEST HOLDINGS, INC.,
XXXXXXX X. XXXXXXXXX,
WTI ACQUISITION, INC.,
AND
RCG COMPANIES INCORPORATED
DATED AS OF NOVEMBER __, 2004
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER is dated as of November __, 2004 (the
"AGREEMENT"), by and among FAREQUEST HOLDINGS, INC., a Delaware corporation
("FAREQUEST"), XXXXXXX X. XXXXXXXXX, an individual resident of the State of
Georgia and the major Stockholder of Farequest ("SELLER"), RCG COMPANIES
INCORPORATED, a Delaware corporation ("RCG"), and WTI ACQUISITION, INC., a
Delaware corporation ("SUB"), which is a direct wholly-owned subsidiary of RCG.
Farequest and SUB are hereinafter sometimes collectively referred to as the
"CONSTITUENT CORPORATIONS."
RECITALS
A. The Boards of Directors of Farequest, RCG and SUB deem it advisable and
in the best interests of each corporation and its respective stockholders that
Farequest and RCG combine in order to advance their long-term business
interests, all upon the terms and subject to the conditions of this Agreement.
B. It is intended that the combination be effected by a merger of SUB with
and into Farequest with Farequest surviving as a wholly-owned subsidiary of RCG
and the stockholders of Farequest becoming stockholders of RCG, which for
Federal income tax purposes shall be a tax-free reorganization as described in
the Internal Revenue Code of 1986, as amended (the "CODE").
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants, agreements and conditions contained
herein, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1. The Merger.
(a) In accordance with the provisions of this Agreement and the
Delaware General Corporation Law ("DGCL"), at the Effective Time, SUB shall be
merged (the "MERGER") with and into Farequest, and Farequest shall be the
surviving corporation (hereinafter sometimes called the "SURVIVING CORPORATION")
and shall continue its corporate existence under the laws of the State of
Delaware. The name of the Surviving Corporation shall be Farequest Holdings,
Inc. At the Effective Time, the separate existence of Farequest shall cease.
(b) In accordance with Section 259 of the DGCL, the Merger shall
terminate the separate existence of Farequest and SUB, as constituent
corporations of the Merger and the Surviving Corporation shall have such rights
and obligations as are provided for under the DGCL.
Section 1.2. Effective Time. The Merger shall become effective at the time
of filing of, or at such later time as specified in, a certificate of merger, in
the form required by and executed in accordance with the DGCL and with the
Secretary of State of the State of Delaware in accordance with the provisions of
Section 251 of the DGCL (the "CERTIFICATE OF MERGER"). The date and time when
the Merger shall become effective is herein referred to as the "EFFECTIVE TIME."
Section 1.3. Certificate of Incorporation and Bylaws of Surviving
Corporation. The Certificate of Incorporation and Bylaws of Farequest as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation until thereafter amended
in accordance with their terms and as provided by law.
Section 1.4. Directors and Officers of Surviving Corporation.
(a) The directors of the Surviving Corporation at the Effective Time
shall be Xxxx Xxxxxx and Xxxxxxx X. Xxxxxxxxx or such other individuals as the
parties hereto shall mutually agree upon in writing prior to the Effective Time,
consistent with this Agreement and will hold office from and after the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation and Bylaws
of the Surviving Corporation or as otherwise provided by law or until their
earlier resignation or removal.
(b) The officers of Farequest immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and each will
hold office from and after the Effective Time until their respective successors
are duly appointed and qualified in the manner provided in the Bylaws of the
Surviving Corporation or as otherwise provided by law or until their earlier
resignation or removal.
(c) As of the Effective Time the Board of Directors shall be eight
(8) members as set forth on Schedule 1.4(c). Xxxxxxx X. Xxxxxxxxx shall have
been appointed as Chairman of the Board of Directors.
Section 1.5. Escrow Agreement. At the Closing, RCG and the Stockholders'
Representative, on behalf of the stockholders of Farequest shall enter into an
escrow agreement, by and among RCG, the Escrow Agent and the Stockholders
Representative, on behalf of the Farequest stockholders substantially in the
form attached as Exhibit 1.5 (the "ESCROW AGREEMENT"). At the Closing, RCG shall
deliver to the Escrow Agent the Escrow Shares which shall be held in an escrow
account in accordance with the terms of the Escrow Agreement for purposes of
securing the stockholders' indemnification obligations hereof. The Escrow Shares
that remain at the end of the term of the escrow period that is then not subject
to an unresolved claim pursuant to the Escrow Agreement shall be distributed to
the Farequest stockholders in proportion to their respective ownership
interests.
Section 1.6. Further Assurances. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that consistent with the
terms of this Agreement any deeds, bills of sale, assignments, assurances or any
other actions or things are necessary or desirable to vest, perfect or confirm
of record or otherwise in the Surviving Corporation its right, title or interest
in, to or under any of the rights, properties or assets of either of the
Constituent Corporations acquired or to be acquired by the Surviving Corporation
as a result of, or in connection with, the Merger or otherwise to carry out the
purposes of this Agreement, the officers and directors of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such deeds,
bills of sale, assignments and assurances and to take and do, in the name and on
behalf of each of the Constituent Corporations or otherwise, all such other
actions and things as may be necessary or desirable to vest, perfect or confirm
any and all right, title and interest in, to and under such rights, properties
or assets in the Surviving Corporation or otherwise to carry out this Agreement.
ARTICLE II
CONVERSION OF SHARES
Section 2.1. Effect on Farequest Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holders thereof:
(a) Every share of Farequest's common stock, par value $.001 per
share (the "FAREQUEST SHARES"), issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive (i) a share of RCG
common stock, $.04 par value per share multiplied by the Exchange Ratio (the
"RCG COMMON STOCK"), which will result in an aggregate of 17,321,146 shares to
be issued as of the Effective Time (the result of which the holders of the
Farequest Shares shall own initially 45% of the outstanding common stock of RCG
as of the Effective Time), (ii) a right to receive additional shares of RCG
Common Stock if and when there are issuances of shares of RCG Common Stock upon
the conversion of the Series A 6% Convertible Preferred Stock of RCG (the
"CONTINGENT SHARES" as defined below) and (iii) a pro rata interest in a
Promissory Note in the form attached hereto as Exhibit 2.1(a) (the "PROMISSORY
NOTE"), payable, within one year of the Effective Time, at the option of RCG, in
either (A) an amount in cash equal to the lesser of (x) $6,037,872.00 or (y) 19%
of the value of the total maximum consideration payable under this Section
2.1(a), with the RCG Common Stock valued for this purpose at Market Value at the
Effective Time, or (B) 3,018,936 shares of RCG Common Stock (resulting in the
issuance of shares that when aggregated with all the RCG Common Stock issued to
holders of Farequest Shares in the Merger, result in the Farequest stockholders
immediately prior to the Effective Time owning the equivalent of 49% of the
outstanding common stock of RCG as of the Effective Time). The Promissory Note
shall bear interest at four percent (4%) per annum. Any interest shall be
payable at maturity at RCG's option in either cash or RCG Common Stock valued at
the greater of (i) $2.00 per share or (ii) Market Value at the maturity date.
Ten percent (10%) of the number of shares of RCG Common Stock each Farequest
stockholder is entitled to receive based upon clause (i) shall be placed in
escrow (the "FAREQUEST ESCROW SHARES") and distributed in accordance with the
terms of the Escrow Agreement. The Option Proportion of (i) the total number of
shares of RCG Common Stock to be delivered to the Farequest stockholders and
(ii) the Contingent Shares to be delivered to the Farequest stockholders, and
the Promissory Note, shall be placed in an additional escrow account
("ADDITIONAL ESCROW ACCOUNT") whose sole purposes are to satisfy the rights of
any option or warrant holders upon any exercise of options or warrants held by
Farequest option or warrant holders identified on Schedule 2.1(a) and to
administratively distribute the proceeds from the Promissory Note to the
Farequest stockholders after its maturity date and in accordance with the terms
of the Additional Escrow Account. Such Additional Escrow Account shall be
sufficient to satisfy the exercise of all outstanding options and warrants of
Farequest, including any anti-dilution provisions thereof. For purposes of this
Agreement, the "CONTINGENT Shares" shall mean for each Farequest Share, the
fraction of an RCG share of Common Stock equal to the quotient of (I) the
Additional RCG Shares, divided by (II) the number of Farequest Shares
outstanding as of the Effective Time, that are issuable to the holder thereof
from time to time in accordance with Section 2.4 below to keep the Farequest
stockholders' ownership percentage from being diluted by the issuance of any
shares of RCG common stock issuable upon conversion of the Series A 6%
Convertible Preferred Stock of RCG. For purposes of this Agreement, "ADDITIONAL
RCG SHARES" shall mean that number of shares determined by multiplying (x) the
number of shares of RCG common stock issued upon the conversion of the Series A
6% Convertible Preferred Stock of RCG from time to time on or before the date
that is five (5) years following the Effective Time, by (y) .96. For avoidance
of doubt Exhibit 2.1(b) shall set forth an example of this calculation.
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(b) All Farequest Shares shall be canceled and retired, and each
certificate representing any such Farequest Shares shall thereafter (i)
represent only the right to receive the RCG Common Stock, the Contingent Shares
and the Promissory Notes issuable in exchange for such Farequest Shares and (ii)
entitle the holder thereof to vote with respect to, and receive dividends ,if
declared, on, such number of shares of RCG Common Stock which such holder is
entitled to receive in exchange for such certificates, provided that dividends
shall be paid to such holder, without interest, only upon surrender of
certificates in accordance with Section 2.4.
(c) Notwithstanding anything to the contrary in this Agreement, any
holder of Farequest Shares who shall exercise the rights of a dissenting
stockholder pursuant to and strictly in accordance with the provisions of
Section 262 of the DGCL shall be entitled to receive only the payment therein
provided for and shall not be entitled to receive RCG Common Stock. Such payment
shall be made directly by the Surviving Corporation.
(d) In the event of any change in RCG Common Stock by reason of any
stock split, readjustment, stock dividend, or similar event including, any such
change after the Effective Time, the amounts set forth in Section 2.1 shall be
appropriately adjusted.
Section 2.2. Effect on Farequest Options and Warrants. Every Farequest
option or warrant issued and outstanding immediately prior to the Effective Time
shall be revised to provide that any outstanding options or warrants shall only
be exercisable for the aggregate per share merger consideration including the
shares of RCG Common Stock, Contingent Shares and a pro rata interest in the
proceeds of the Promissory Note held in the Additional Escrow Account. At the
Effective Time, the Stockholder Representative, on behalf of the Farequest
stockholders, option holders and warrant holders, RCG and Xxx Xxxxxxxx and Xxxx
Xxxxxxx (the "ADDITIONAL ESCROW AGENT") shall enter into an escrow agreement
substantially in the form of Exhibit 2.2 hereof (the "ADDITIONAL ESCROW
AGREEMENT") and establish the Additional Escrow Account. At the Effective Time,
RCG shall deliver to the Additional Escrow Agent the Option Proportion of the
total number of shares of RCG Common Stock to be delivered to the Farequest
stockholders[, a certificate representing the Contingent Shares] and an Option
Proportion interest in the Promissory Note, as directed by the Stockholders'
Representative, which also shall be held in an escrow account in accordance with
the terms of the Additional Escrow Agreement for the purpose of permitting the
Farequest option and warrant holders listed on Schedule 2.1(a) to exercise their
options and warrants in return for shares of RCG common stock (including their
interest in the Contingent Shares) and their pro rata interest in the Promissory
Note. The number of shares of RCG Common Stock (including the related interest
in the Contingent Shares) and interest in the Promissory Note remaining at the
end of the escrow period that are not subject to a claim of a Farequest option
or warrant holder shall be distributed, pursuant to the terms of the Additional
Escrow Agreement, to the Farequest stockholders (including those who received
RCG Common Stock from the Additional Escrow Account), in proportion to their
respective percentage interests immediately prior to the Effective Time,
assuming for this purpose that option and warrant holders who exercised their
options and warrants in the Additional Escrow Account had exercised such options
and warrants immediately prior to the Effective Time .
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Section 2.3. SUB Common Stock. Each share of common stock, $.01 par value,
of SUB issued and outstanding immediately prior to the Effective Time shall
remain outstanding and shall be converted into and become one fully paid and non
assessable share of common stock, $0.01 par value, of the Surviving Corporation.
Section 2.4. Exchange Procedures.
(a) RCG shall authorize its transfer agent to act as exchange agent
hereunder (the "EXCHANGE AGENT") for the purposes of exchanging certificates
representing Farequest Shares, the Contingent Shares, the Promissory Note and
shares of RCG Common Stock. Reasonably contemporaneous with the Effective Time,
RCG shall deposit with the Exchange Agent, in trust for the holders of
Certificates (as defined in Section 2.4(b) below), certificates representing the
shares of RCG Common Stock issuable pursuant to Section 2.1(a) in exchange for
Farequest Shares, less the Farequest Escrow Shares that RCG is required to
deposit into the escrow in accordance with the Escrow Agreement (the "FAREQUEST
CLOSING CERTIFICATES").
(b) Promptly after the Effective Time, the Exchange Agent shall mail
or cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented Farequest Shares (the "CERTIFICATES"), a letter of transmittal
and instructions for use in effecting the surrender of the Certificates for
exchange therefore. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefore that number of
shares of RCG Common Stock (less any Farequest Escrow Shares that RCG is
required to deposit into the escrow in accordance with the Escrow Agreement)
together with the Contingent Share and an interest in the Promissory Note which
such holder has the right to receive under Section 2.1(a) and such Certificate
shall forthwith be canceled. If any such shares are to be issued to a Person
other than the Person in whose name the Certificate surrendered in exchange
therefore is registered, it shall be a condition of exchange that the
Certificate so surrendered shall be properly endorsed or otherwise in proper
form for transfer and that the Person requesting such exchange shall pay any
transfer or other taxes required by reason of the exchange to a Person other
than the registered holder of the Certificate surrendered or such Person shall
establish to the satisfaction of the Surviving Corporation that such tax has
been paid or is not applicable.
Following the Effective Time, RCG will cause its Exchange Agent to
issue to the Farequest stockholders any shares of RCG Common Stock issuable as a
result of the Contingent Shares granted hereunder upon each of the following
events: (a) each instance in which RCG issues an aggregate of 1,000,000 shares
of its common stock as a result of the conversion from time to time by the
holders of RCG's Series A 6% Convertible Preferred Stock; (b) the first day of
each calendar quarter following the Effective Time, except if the fair market
value of the RCG Common Stock to be issued for the Contingent Shares as of such
date is less than $200,000, then such issuance may be delayed to the first day
of that next following calendar quarter; (c) not less than five (5) days prior
to any time RCG or its Board of Directors declares a record date entitling
holders of its common stock to vote in any annual or special meeting of its
Stockholders; provided, however, that notwithstanding the foregoing, any shares
required to be issued as a result of the Contingent Shares shall be issued no
later than the date that is five (5) years following the Effective Time (the
date upon which each issuance is triggered being referred to as a "CONTINGENT
SHARE EVENT"). Upon the occurrence of a Contingent Share Event, RCG shall cause
its transfer agent to distribute the number of shares of RCG common stock that
are issuable pursuant to the terms of the Contingent Shares and this Agreement
based upon the cumulative number of shares of RCG Series A 6% Convertible
Preferred Stock converted into RCG common stock at such time less any shares of
RCG Common Stock previously distributed to the Farequest stockholders as a
result of the Contingent Shares.
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(c) No dividends or other distributions with respect to the RCG
Common Stock constituting all or a portion of the consideration payable to the
holders of Farequest Shares shall be paid to the holder of any unsurrendered
Certificate representing Farequest Shares until such Certificate is surrendered
as provided for in this Section 2.4. Subject to the effect of applicable Laws,
following such surrender, there shall be paid, without interest, to the record
holder of the certificates representing RCG Common Stock (i) at the time of such
surrender, the amount of dividends or other distributions with a record date
after the Effective Time payable prior to or on the date of such surrender with
respect to such whole shares of RCG Common Stock, less the amount of any
withholding taxes which may be required thereon under any provision of federal,
state, local or foreign tax law and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time, but prior to the date of surrender and a payment date subsequent
to the date of surrender payable with respect to such shares of RCG Common
Stock, less the amount of any withholding taxes which may be required thereon
under any provision of federal, state, local or foreign tax law. Any fractional
shares shall be rounded up to the next whole share.
(d) Any portion of the RCG Common Stock made available to the
Exchange Agent pursuant to Section 2.4(a) that remains unclaimed by the holders
of Farequest Shares six (6) months after the date on which Certificates
representing such shares were deposited with the Exchange Agent by RCG shall be
returned to RCG and any such holder who has not exchanged his, her or its
Farequest Shares in accordance with this Section 2.4 prior to that time shall
thereafter look only to RCG for his, her or its claim for RCG Common Stock, and
applicable dividends or other distributions. Neither RCG nor SUB shall be liable
to any holder of Farequest Shares with respect to any RCG Common Stock delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law.
(e) If any Certificate representing Farequest Shares shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
Person claiming such Certificate to be lost, stolen or destroyed and, if
required by RCG, an indemnification undertaking, without the necessity of
posting of a bond, against any claim that may be made against it with respect to
such Certificate, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed Certificate the consideration payable under Section 2.1(a)
and, if applicable, any unpaid dividends and distributions on shares of RCG
Stock deliverable in respect thereof including taking account for any stock
dividend, stock split or other such action relating to the RCG shares, in each
case pursuant to this Agreement.
Section 2.5. Transfers. From and after the Effective Time, there shall be
no transfers on the stock transfer books of Farequest or the Surviving
Corporation of Farequest Shares. If, after the Effective Time, Certificates are
presented to the Surviving Corporation, they shall be canceled and exchanged as
provided in this Article II.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF FAREQUEST AND SELLER
Farequest hereby represents and warrants the following:
Section 3.1. Corporate Organization; Authority.
(a) Each of Farequest and its subsidiaries (the "FAREQUEST
SUBSIDIARIES") is a corporation, duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to (i) own, lease, operate or otherwise
hold its properties and assets and to carry on its business as now being
conducted and (ii) execute, deliver and perform its obligations under this
Agreement and the other agreements and instruments to be executed and delivered
by it hereunder or in connection herewith and to carry out its respective
obligations hereunder and thereunder. The execution and delivery of this
Agreement and the other agreements and instruments to be executed and delivered
by Farequest and the Farequest Subsidiaries hereunder or in connection herewith,
and the consummation by it of the transactions contemplated hereby, subject to
obtaining approval of the Farequest stockholders, have been duly authorized by
all necessary corporate and other actions of Farequest and the Farequest
Subsidiaries pursuant to and in accordance with the Laws governing Farequest and
the Farequest Subsidiaries.
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(b) Each of the Farequest and the Farequest Subsidiaries is duly
qualified or licensed and in good standing as a foreign corporation, authorized
to do business under the Laws of each jurisdiction where the character of the
properties owned, leased or used by it or the nature of its activities makes
such qualification or licensing necessary, except where the failure to be so
qualified or licensed, would not have a Material Adverse Effect on Farequest.
Schedule 3.1(b) sets forth a true, complete and correct list of all
jurisdictions in which each of the Farequest and the Farequest Subsidiaries is
presently qualified or licensed to do business.
(c) True, correct and complete copies of the certificate of
incorporation of Farequest (the "FAREQUEST CHARTERS") and bylaws of Farequest
(the "FAREQUEST BYLAWS") and the charter documents and bylaws (and all
amendments thereto), of each of the Farequest Subsidiaries, each as currently in
effect, have been delivered to RCG. Farequest is not in violation of any term of
the Farequest Charter or the Farequest Bylaws. None of the Farequest
Subsidiaries is in violation of any term of its charter documents or bylaws.
(d) This Agreement and the other agreements and instruments to be
executed and delivered by Farequest and the Farequest Subsidiaries hereunder or
in connection herewith have been or will be duly executed and delivered by
Farequest and the Farequest Subsidiaries, and constitute or will constitute
valid and binding obligations of Farequest and the Farequest Subsidiaries,
enforceable against Farequest and the Farequest Subsidiaries in accordance with
their respective terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
other similar Laws now or hereafter in effect relating to creditors' rights
generally or by general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity).
Section 3.2. Capitalization.
(a) The authorized, issued and outstanding capital stock of
Farequest consists of shares of capital stock as set forth on Schedule 3.2(a).
All of the capital stock has been duly authorized and validly issued, and are
fully paid and nonassessable. None of the securities have been issued in
violation of any preemptive or subscription rights, or is subject to any
preemptive or subscription rights. All of the capital stock has been issued in
compliance with all applicable federal and state securities laws.
(b) Schedule 3.2(b) sets forth a true, correct and complete
description of the name, jurisdiction of organization or creation, authorized
and outstanding capitalization and ownership thereof of each of the Farequest
Subsidiaries. All of the issued and outstanding shares of capital stock or other
equity or beneficial interests of the Farequest Subsidiaries (the "FAREQUEST
SUBSIDIARY SHARES") are owned of record and beneficially by Farequest. Farequest
has good and valid title to the Farequest Subsidiary Shares, free and clear of
all Liens. Each issued and outstanding share of capital stock or other equity
interests of each of the Farequest Subsidiaries has been duly authorized and
validly issued, is fully paid and nonassessable, and has not been issued in
violation of, and is not subject to, any preemptive or subscription rights.
Other than the Farequest Subsidiaries, neither Farequest, nor the Farequest
Subsidiaries, owns capital stock or other equity or beneficial interests in any
entity.
(c) Schedule 3.2(c) sets forth a true, correct and complete list of
all options, warrants or other rights, arrangements, agreements or other
commitments of any kind whatsoever to which Farequest or any of the Farequest
Subsidiaries obligating Farequest or any Farequest Subsidiary to grant, issue or
sell any shares of the capital stock or equity or beneficial interest of any of
Farequest or the Farequest Subsidiaries by sale, lease, license or otherwise.
Farequest and the Farequest Subsidiaries have made available to RCG copies of
all such agreements listed on Schedule 3.2(c). Except as set forth on Schedule
3.2(c), (i) there is no obligation, contingent or otherwise, of any of Farequest
or the Farequest Subsidiaries to (A) repurchase, redeem or otherwise acquire any
share of the capital stock or other equity or beneficial interests of any of
Farequest or the Farequest Subsidiaries, or (B) provide funds to, or make any
investment in (in the form of a loan, capital contribution or otherwise), or
provide any guarantee with respect to the obligations of any of Farequest or the
Farequest Subsidiaries or any other Person; (ii) neither Farequest nor any of
the Farequest Subsidiaries, directly or indirectly, owns, or has agreed to
purchase or otherwise acquire, the capital stock or other equity or beneficial
interests of, or any interest convertible into or exchangeable or exercisable
for such capital stock or such equity or beneficial interests of any corporation
or other entity; (iii) neither Farequest nor any Farequest Subsidiary is a party
to any arrangement, contract or other commitment of any kind whatsoever
(contingent or otherwise) pursuant to which any Person is or may become entitled
to receive any payment from Farequest or the Farequest Subsidiaries based on the
revenues or earnings, or calculated in accordance therewith, of Farequest or the
Farequest Subsidiaries; (iv) neither Farequest nor any Farequest Subsidiary is a
party to any arrangement, contract or other commitment of any kind whatsoever by
which any of Farequest or the Farequest Subsidiaries, or any of their respective
properties or assets, is bound with respect to the voting of any share of
capital stock or other equity or beneficial interest of any of Farequest or the
Farequest Subsidiaries; and (v) neither Farequest nor any Farequest Subsidiary
is a party to and have not granted any outstanding rights, subscriptions,
warrants, puts, calls, preemptive rights, options or other agreements,
instruments or undertakings of any kind relating to any capital stock or other
equity security of any of Farequest or the Farequest Subsidiaries, nor have they
issued any security convertible into or exchangeable for any such capital stock
or other equity or beneficial interest.
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Section 3.3. Financial Statements.
(a) Attached as Schedule 3.3(a) are the audited consolidated balance
sheets of Farequest and its consolidated Farequest Subsidiaries as of December
31, 2003 (the "2003 BALANCE SHEET"), together with audited consolidated
statements of operations, stockholders' equity and cash flows for the period
then ended, all certified by Farequest' independent public accountants, whose
reports thereon are included therein (the "AUDITED FINANCIAL STATEMENTS").
(b) Attached as Schedule 3.3(b) are the unaudited consolidated
balance sheets of Farequest and its consolidated Farequest Subsidiaries as of
September 30, 2004, together with the unaudited consolidated statement of
operations, stockholders' equity and cash flows for the nine-month period then
ended (the "SEPTEMBER FINANCIAL STATEMENTS").
(c) Except as set forth on Schedule 3.3(c), the Audited Financial
Statements and the September Financial Statements have been prepared from, and
are in accordance, in all material respects, with the books and records of
Farequest and the Farequest Subsidiaries, have been prepared in accordance with
GAAP applied on a consistent basis during the periods involved (except as may be
stated in the notes thereto and except, in the case of the September Financial
Statements, for normal year-end adjustments and the absence of footnote
disclosure), and fairly present, in all material respects, the financial
position and the results of operations, stockholders' equity and cash flows (and
changes in financial position, if any) of Farequest and the Farequest
Subsidiaries as of the times and for the periods referred to therein.
Section 3.4. Directors, Officers, Employees, Employee Benefit Plans;
ERISA.
(a) Schedule 3.4(a) contains a complete and accurate list as of the
date hereof of the name, title, current annual base salary and bonuses paid or
earned with respect to the last completed fiscal year for each current employee,
independent contractor, director and officer of Farequest and the Farequest
Subsidiaries.
(b) Except as set forth in Schedule 3.4(b), since January 1, 2004,
there has not been, nor to Farequest's Knowledge is there pending or threatened,
(i) any labor dispute between Farequest and the Farequest Subsidiaries and any
labor organization, or any strike, slowdown, jurisdictional dispute, work
stoppage or other similar organized labor activity involving any employee of
Farequest and the Farequest Subsidiaries or affecting Farequest and the
Farequest Subsidiaries or (ii) any union organizing, or election activity
involving, any employee of Farequest and the Farequest Subsidiaries.
(c) There exists no pending or to the Knowledge of Farequest,
threatened lawsuit, administrative proceeding or investigation between any of
Farequest and the Farequest Subsidiaries and any current or former director,
officer or employee of Farequest and the Farequest Subsidiaries, including any
claim for wrongful termination, breach of express or implied contract of
employment or for violation of equal employment opportunity laws. There exists
no pending or, to the Knowledge Farequest, threatened lawsuit, administrative
proceeding or investigation of Farequest and the Farequest Subsidiaries or any
employee thereof regarding allegations of hostile work environment, sexual
discrimination or racial discrimination.
7
(d) Schedule 3.4(d) sets forth a true and complete list of each
bonus, deferred compensation, incentive compensation, stock purchase, stock
option, severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing, pension or
retirement plan, program, agreement or arrangement, and each other employee
benefit plan, program, agreement or arrangement, or any employment, severance,
consulting or similar agreement, sponsored, maintained or contributed to or
required to be contributed to, or entered into by Farequest or any Farequest
Subsidiaries or any trade or business ("FAREQUEST ERISA AFFILIATE"), that
together with Farequest would be deemed a "single employer" within the meaning
of Section 4001(b) of ERISA, for the benefit of any employee or former employee,
or director or former director, of Farequest or any Farequest Subsidiaries or
any Farequest ERISA Affiliate, whether formal or informal (collectively, the
"FAREQUEST PLANS"). Schedule 3.4(d) identifies each of the Farequest Plans that
is an "employee benefit plan," as that term is defined in Section 3(3) of ERISA
(such plans being hereinafter referred to collectively as the "FAREQUEST ERISA
PLANS"). Except as set forth in Schedule 3.4(d), neither Farequest nor any
Farequest Subsidiaries nor any Farequest ERISA Affiliate has any commitment to
create any additional Farequest Plan or materially increase the benefits
provided under any existing Farequest Plan.
(e) No liability under Title IV of ERISA has been incurred by
Farequest or any Farequest Subsidiaries or any Farequest ERISA Affiliate that
has not been satisfied in full, and, to Farequest's Knowledge, no condition
exists that presents a risk to Farequest or any Farequest Subsidiaries or any
Farequest ERISA Affiliate of incurring a liability under Title IV of ERISA,
other than liability for premiums due the PBGC (which premiums have been paid
when due).
(f) Farequest has not received written notice that the PBGC has
instituted or intends to institute any proceeding to terminate any Farequest
ERISA Plan, and to Farequest's Knowledge no condition exists which presents a
risk that any such proceeding will be instituted.
(g) No Farequest ERISA Plan is subject to Section 412 of the Code or
Title IV of ERISA, and neither Farequest, any Farequest Subsidiaries nor any
Farequest ERISA Affiliate has sponsored, maintained or contributed to any plan
or arrangement subject to Section 412 of the Code or Title IV of ERISA during
the past six (6) years. No Farequest ERISA Plan is a plan described in Section
4063(a) of ERISA.
(h) Neither Farequest nor the Farequest Subsidiaries nor any
Farequest ERISA Affiliate nor any Farequest ERISA Plan, nor any trust created
thereunder nor, to Farequest's Knowledge, any trustee or administrator thereof,
has engaged in a transaction in connection with which Farequest, any Farequest
Subsidiaries, any Farequest ERISA Affiliate or any Farequest ERISA Plan, or any
such trust or any trustee or administrator thereof or any party dealing with any
Farequest ERISA Plan or any such trust, could be subject to either a civil
penalty assessed pursuant to Section 409 or 502(i) of ERISA or a tax imposed
pursuant to Section 4975 or 4976 of the Code.
(i) Full payment has been made of all amounts that Farequest or any
Farequest Subsidiaries or any Farequest ERISA Affiliate is required to pay under
the terms of each Farequest ERISA Plan as of the last day of the most recent
Plan year thereof ended prior to the date of this Agreement, and all such
amounts properly accrued through the Effective Time with respect to the current
plan year thereof will be paid by Farequest or the applicable Farequest
Subsidiaries on or prior to the Closing Date or will be properly recorded in
Farequest's combined financial statements in accordance with GAAP consistently
applied.
(j) Each Farequest Plan has been created, operated and administered
in all material respects in accordance with its terms and in material compliance
with applicable Laws, including, but not limited to, ERISA and the Code.
8
(k) Each Farequest ERISA Plan that is intended to be "qualified"
within the meaning of Section 401(a) of the Code has received a favorable
determination letter to the effect that it is so qualified-and that the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the Code,
and neither Farequest nor Seller is aware of any circumstances that would likely
result in such Farequest Plan no longer being qualified. All such Farequest
ERISA Plans have been amended for the Tax Laws commonly known as "GUST" and
"EGTRRA" and each such Farequest ERISA Plan has been submitted to the Internal
Revenue Service for a favorable determination letter within the remedial
amendment period prescribed under GUST.
(l) Except as set forth in Schedule 3.4(l), no Farequest Plan
provides benefits, including death or medical benefits (whether or not insured),
with respect to current or former employees of Farequest or any Farequest
Subsidiaries or any Farequest ERISA Affiliate beyond their retirement or other
termination of service (other than coverage mandated by applicable Laws), and
neither Farequest nor any Farequest Subsidiaries nor any Farequest ERISA
Affiliate has any binding obligation to provide any employee or group of
employees with any such benefits upon their retirement or termination of
employment.
(m) Except as set forth in Schedule 3.4(m), neither the execution
and delivery of this Agreement by Farequest nor the performance by Farequest of
this Agreement nor the consummation of the transactions contemplated hereby will
(i) entitle any current or former director, officer or employee of Farequest or
the Farequest Subsidiaries or any Farequest ERISA Affiliate to severance pay,
unemployment compensation or any other payment from Farequest or any Farequest
Subsidiaries, (ii) accelerate the time of payment or vesting, or increase the
amount of compensation due any such director, officer or employee, or (iii)
result in any prohibited transaction described in Section 406 of ERISA or
Section 4975 of the Code for which an exemption is not available. No amounts
payable under the Farequest Plans will fail to be deductible for federal Income
tax purposes by virtue of Section l62(a)(1) or 280G of the Code.
Section 3.5. Intellectual Property.
(a) As used herein, the term "INTELLECTUAL PROPERTY" means the
following items, in each case held for use in, used in, or necessary for the
businesses of Farequest and the Farequest Subsidiaries as currently conducted:
trademarks, service marks, trade names, Internet domain names, designs, logos,
slogans, and general intangibles of like nature, together with all goodwill,
registrations and applications related to the foregoing (collectively,
`TRADEMARKS"); patents and industrial designs (including any continuations,
divisionals, continuations-in-part renewals, reissues, and applications for any
of the foregoing); copyrights (including any registrations and applications for
any of the foregoing); Software; "mask works" (as defined under 17 U.S.C. ss.
901) and any registrations and applications for "mask works"; technology, trade
secrets and other confidential information, know-how, proprietary processes,
inventions, formulae, algorithms, models, and methodologies (collectively,
"TRADE SECRETS"); and rights of publicity and privacy relating to the use of the
names, likenesses, voices, signatures and biographical information of real
persons, As used herein, the term "SOFTWARE" means any and all (i) computer
programs (other than "off-the-shelf" or shrinkwrap software), including, but not
limited to, any and all software implementation of algorithms, models and
methodologies, whether in source code or object code form, (ii) computerized
databases and compilations of data, and (iii) all documentation, including, but
not limited to, user manuals and training materials, relating to any of the
foregoing.
(b) Schedule 3.5(b) sets forth a true, complete and accurate list of
all U.S. and foreign (i) patents and patent applications; (ii) trademark
registrations, trademark applications and Internet domain names; and (iii)
copyright and mask work registrations and copyright and mask work applications
in each case owned by Farequest or the Farequest Subsidiaries.
(c) Except as set forth on Schedule 3.5(c) or in accordance with the
terms of any License Agreement described on Schedule 3.5(e), (i) Farequest or
one of the Farequest Subsidiaries owns or has the right to use all Material
Intellectual Property and, to Seller's or Farequest's Knowledge, all other
Intellectual Property, free and clear of all Liens and Asset Liens and (ii)
Farequest or one of the Farequest Subsidiaries is listed in the records of the
appropriate United States, state, or foreign registry as the sole current owner
of record for each application and registration listed on Schedule 3.5(b), and
(iii) any Material Intellectual Property which is registered and owned by
Farequest and the Farequest Subsidiaries has not been cancelled, expired or
abandoned. With respect to any assets, rights or properties, an "ASSET LIEN"
shall mean all restrictions, rights of first refusal, conditions, covenants and
similar rights that materially impair the use of such asset, right or property
by Farequest or the Farequest Subsidiaries in connection with the conduct of
Farequest' or the Farequest Subsidiaries' businesses.
9
(d) Schedule 3.5(d) sets forth, with respect to the Material
Intellectual Property, a true, complete and accurate list of all Software (other
than readily available, "off-the-shelf" commercial or shrinkwrap software
programs having an acquisition price of less than $5,000) which is owned,
licensed or leased by Farequest and the Farequest Subsidiaries, describing which
Software is owned, licensed or leased, as the case may be. The Software owned
and not licensed by Farequest and the Farequest Subsidiaries was developed by
(i) employees of Farequest or the Farequest Subsidiaries or (ii) independent
contractors who have created such Software as "work for hire" (as such term is
defined in 17 U.S.C. ss. 101) and/or assigned their rights in such Software to
Farequest or the Farequest Subsidiaries by written agreement.
(e) Schedule 3.5(e) sets forth a true, complete and accurate list of
all agreements (whether oral or written, and whether between Farequest or
inter-corporate) to which Farequest or the Farequest Subsidiaries is a party or
otherwise bound, (i) granting or obtaining any right to use or practice any
rights under any Material Intellectual Property (other than licenses for readily
available, "off-the-shelf" commercial or shrinkwrap software programs having an
acquisition price of less than $5,000), or (ii) restricting Farequest' or the
Farequest Subsidiaries' rights to use any Material Intellectual Property or, to
Farequest's Knowledge, any other Intellectual Property, including, but not
limited to, license agreements, development agreements, distribution agreements,
settlement agreements, consent to use agreements, and covenants not to xxx
(collectively, the "LICENSE AGREEMENTS"). No royalties or other fees (other than
fees of the appropriate agency or government office for maintaining and
protecting the Material Intellectual Property or other Intellectual Property)
are payable by Farequest or the Farequest Subsidiaries to any third parties for
the use of or right to use any Material Intellectual Property. The License
Agreements are valid and binding obligations of Farequest or the Farequest
Subsidiaries, enforceable in accordance with their respective terms except as
enforceability thereof may be limited by bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium, or other similar Laws now or hereafter
in effect relating to creditors' rights generally or by general principles of
equity (regardless of whether enforceability is considered in a proceeding at
law or in equity). To Farequest's Knowledge, there exists no event or condition
which will result in a material violation or breach of or constitute (with or
without due notice or lapse of time or both) a default by Farequest or the
Farequest Subsidiaries or, to Farequest's Knowledge, the other party thereto,
under any such License Agreements.
(f) Except as set forth on Schedule 3.5(f), to Farequest's
Knowledge, there has been no prior use of the Trademarks by any third party that
would confer upon said third party superior rights in such Trademarks.
(g) Except as set forth on Schedule 3.5(g), there is no pending or,
to Farequest's Knowledge, threatened claim, suit, arbitration or other
adversarial proceeding before any court, agency, arbitral tribunal, or
registration authority, in any jurisdiction, and neither Farequest nor the
Farequest Subsidiaries have received notice regarding any of the foregoing,
involving the Material Intellectual Property owned by Farequest or the Farequest
Subsidiaries or, to Farequest's Knowledge, the Material Intellectual Property
licensed to Farequest or the Farequest Subsidiaries, including, but not limited
to, any claim, suit, arbitration or other adversarial proceeding alleging that
the activities or the conduct of Farequest's or the Farequest Subsidiaries'
business infringes upon, violates or constitutes the unauthorized use of the
intellectual property or other proprietary rights of any third party or
challenging Farequest's or the Farequest Subsidiaries' ownership or use of any
Intellectual Property, or the validity, enforceability or registrability of any
Intellectual Property owned by Farequest or the Farequest Subsidiaries.
(h) To Farequest's Knowledge, no third party is misappropriating,
infringing, diluting or violating any Material Intellectual Property and no such
claims, suits, arbitrations or other adversarial proceedings have been brought
or threatened against any third party by Farequest or the Farequest
Subsidiaries.
(i) To Farequest's Knowledge, the conduct of Farequest's and the
Farequest Subsidiaries' businesses as currently conducted does not
misappropriate, infringe upon (either directly or indirectly such as through
contributory infringement or inducement to infringe) or dilute any intellectual
property rights owned or controlled by any third party.
10
(j) Except as set forth on Schedule 3.5(j), Farequest and the
Farequest Subsidiaries take reasonable measures to protect the confidentiality
of Trade Secrets which is material to Farequest. To Farequest's Knowledge, no
Trade Secret which is material to Farequest has been disclosed or authorized to
be disclosed to any third party other than pursuant to a written confidentiality
and non-disclosure agreement. To Farequest's Knowledge, no party to any
non-disclosure agreement relating to its Trade Secrets is in breach or default
thereof.
(k) Except as set forth on Schedule 3.5(k), (i) the consummation of
the transactions contemplated by this Agreement will not result in the loss or
impairment of Farequest's rights to own, use, or bring any action for the
infringement of any of the Material Intellectual Property, nor will such
consummation require the consent of any third party in respect of any Material
Intellectual Property and (ii) to Farequest's Knowledge, the consummation of the
transactions contemplated by this Agreement will not result in the loss or
impairment of Farequest's rights to own, use, or bring any action for the
infringement of any of the other Intellectual Property, nor will such
consummation require the consent of any third party in respect of any other
Intellectual Property. Except as set forth on Schedule 3.5(k), no current or
former director, officer, employee, contractor or consultant of Farequest or the
Farequest Subsidiaries (or any of its predecessors in interest) will, after
giving effect to the transactions contemplated by this Agreement, own or retain
any rights to use any of the Material Intellectual Property or, to Farequest's
Knowledge, any Intellectual Property.
(l) The NPorta License is in full force and effect and a valid and
binding obligation of Farequest and NPorta enforceable against each of Farequest
and NPorta according to its terms. No default or circumstance exists, with the
giving of notice or the passage of time, or both, which would constitute a
default by any party thereto to the NPorta license. The NPorta License shall
provide at Closing for perpetual renewals at Farequest's option, at rates which
are arms length rates, but no less than the rates currently payable by Farequest
to NPorta. The fees and costs payable under the NPorta License are at rates
currently believed to be fair market rates.
Section 3.6. Assets.
(a) Schedule 3.6(a)(i) sets forth a true, correct and complete list
of all tangible assets, properties and rights owned, leased or licensed by
Farequest or any of the Farequest Subsidiaries having an individual current fair
market value in excess of $25,000. All of the buildings, improvements, machinery
and equipment currently used in connection with the businesses of Farequest and
the Farequest Subsidiaries are in good and working condition and sufficient
repair to permit the continual operation and conduct of the businesses of
Farequest and its Farequest Subsidiaries as presently conducted, ordinary wear
and tear excepted. Except as set forth on Schedule 3.6(a)(ii) Farequest and the
Farequest Subsidiaries have good and valid title to all assets, properties and
rights owned by Farequest and the Farequest Subsidiaries reflected in the
Audited Financial Statements (except inventory and other properties disposed of
in the ordinary course of business since January 1, 2004, and accounts
receivable paid since January 1, 2004), free and clear of all Liens and Asset
Liens, except for (i) statutory Liens imposed by Law for taxes that are not yet
due and payable, (ii) landlords', carriers', vendors', warehousemen's,
mechanics', materialmen's, repairmen's or other like Liens arising by operation
of Law in the ordinary course of business, consistent with past practice, and
with respect to amounts not overdue for a period of more than 30 calendar days,
(iii) pledges or deposits in connection with workers' compensation, unemployment
insurance and other social security Laws, (iv) zoning laws and ordinances,
easements, rights-of-way, restrictions and other similar encumbrances which do
not, individually or in the aggregate, interfere with the use of the relevant
assets as being used on the date hereof, and (v) liens arising from travel
agency regulations relating to customer funds (collectively, "PERMITTED LIENS").
(b) All material assets, properties, interests and rights used or
held for use in the conduct of the businesses of Farequest and the Farequest
Subsidiaries (the "BUSINESS ASSETS") are owned, leased or licensed by Farequest
and the Farequest Subsidiaries. The Business Assets include all of the material
assets, properties, interests and rights material to, or used for the conduct of
the businesses of Farequest and the Farequest Subsidiaries as presently
conducted. Farequest and the Farequest Subsidiaries have such technology
sufficient for the operations of its business as it is presently conducted.
Farequest and the Farequest Subsidiaries have the right to use all of the
assets, properties, interests and rights used in the conduct of the businesses
of Farequest and the Farequest Subsidiaries as presently conducted
(notwithstanding any Asset Liens on such assets, properties, interests and
rights) the absence of which would result in a Material Adverse Effect on
Farequest.
11
Section 3.7. Litigation.
(a) Except as set forth on Schedule 3.7, (i) Farequest or the
Farequest Subsidiaries have not received written notice of any pending or, to
Farequest's Knowledge, threatened Action and, there is no Action pending, or to
Farequest's Knowledge, threatened, in each case, by or against Farequest or the
Farequest Subsidiaries before any Governmental Authority, and (ii) there is no
Order outstanding against Farequest or any Farequest Subsidiaries, except in
each of case (i) and (ii) such Action or Order that would not have a Material
Adverse Effect against either Farequest individually or Farequest and the
Farequest Subsidiaries taken as a whole.
(b) There is no Action pending or, to Farequest's Knowledge,
threatened against Farequest or any Farequest Subsidiaries which (i) challenges
the transactions contemplated hereby, (ii) would prevent or materially interfere
with or delay the consummation of the transactions contemplated hereby, or (iii)
seeks damages in connection with the transactions contemplated hereby.
Section 3.8. Title to Properties.
(a) Schedule 3.8(a) is a true, correct and complete list of all
leases, subleases, licenses and other agreements (collectively, the "REAL
PROPERTY LEASES") under which Farequest or the Farequest Subsidiaries use or
occupy, or have the right to use or occupy, any real property (the land,
buildings and other improvements covered by the Real Property Leases are
referred to herein as the "LEASED REAL PROPERTY"), including the date, address,
lessor and lessee (or sublessor or sublessee, as the case may be) and use of the
premises under each Real Property Lease. Farequest have heretofore made
available to RCG true, correct and complete copies of each of the Real Property
Leases. Farequest holds good and valid leasehold interests to the Leased Real
Property, in each case subject to the provisions of the applicable Real Property
Lease. To Farequest's Knowledge, each Real Property Lease is valid, binding and
enforceable and in full force and effect and no material default or circumstance
exists which, with the giving of notice or the passage of time, or both, would
constitute a material default by Farequest or any Farequest Subsidiaries, or to
Farequest's Knowledge, any other party to any Real Property Lease.
(b) Farequest and the Farequest Subsidiaries do not own any real
property.
Section 3.9. Consents, Notices and Approvals.
(a) Except for Consents, notices and approvals set forth on Schedule
3.9(a), no consent, approval, Permit, waiver, authorization of or notice or
filing with, any Governmental Authority is required to be made or obtained by
Farequest or any of the Farequest Subsidiaries in connection with the execution,
delivery and performance by Farequest or any of the Farequest Subsidiaries of
this Agreement and the other agreements and instruments to be executed and
delivered by Farequest or any of the Farequest Subsidiaries hereunder or in
connection herewith and the consummation of the transactions contemplated hereby
or thereby.
(b) Except as set forth on Schedule 3.9(b), neither the execution
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will (i) require the consent of or notice to, any party to
any Material Contract, or (ii) violate, or conflict with, or result in a breach
of any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or give rise to a
right of termination, cancellation, modification or acceleration of the
performance required by or a loss of a benefit under, any Material Contract.
12
Section 3.10. Contracts.
(a) Set forth on Schedule 3.10(a)(i)-(xix) is a true, correct and
complete list of the following types of Contracts, to which Farequest or the
Farequest Subsidiaries, as the case may be, is a party or by which it or its
properties are bound, or pursuant to which it obtains benefits or incurs
obligations in the conduct of its businesses as of the date hereof (the
"MATERIAL CONTRACTS"):
(i) Contracts for the purchase of goods by, or for the
furnishing of services to, Farequest and the Farequest Subsidiaries that provide
for, or are reasonably likely to provide for, remaining payments by Farequest
and the Farequest Subsidiaries in excess of $75,000 during the term of any such
Contract, including all contracts with airlines;
(ii) Contracts between (x) Farequest or any Farequest
Subsidiaries and (y) any of its Affiliates, officers or directors (or any
Affiliates of any of the foregoing);
(iii) Contracts containing any guaranties by Farequest or any
Farequest Subsidiaries of the obligations of any third parties;
(iv) any lease agreement between Farequest or any Farequest
Subsidiaries and any Person for leasing equipment, which has an aggregate rental
value in excess of $75,000 during the term of the lease;
(v) Contracts under which Farequest or the Farequest
Subsidiaries provides consulting services to any Person;
(vi) any employment, severance, non-competition, consulting or
other Contracts with any current or former stockholder, director, officer or
employee of Farequest and the Farequest Subsidiaries that has remaining payments
by Farequest to such Person and cannot be terminated by Farequest without any
remaining payments;
(vii) joint venture, partnership, stockholder, voting trust or
other Contracts whereby Farequest or the Farequest Subsidiaries have agreed with
any other Person (A) to enter into a joint business arrangement for profit or
(B) to vote any shares of capital stock or other equity or beneficial interests
in any other Person in any particular manner;
(viii) Contracts entered into since December 31, 2003
providing for the acquisition or disposition of assets having a value in excess
of $75,000, other than such acquisitions or dispositions in the ordinary course
of business, consistent with past practice;
(ix) licenses and agreements relating to Material Intellectual
Property;
(x) Contracts for the lease of personal property to or from
any Person requiring payments in excess of $75,000;
(xi) Contracts requiring Farequest or any Farequest
Subsidiaries to indemnify or hold harmless any Person in respect of which the
aggregate potential obligation is reasonably likely to exceed $75,000;
(xii) Contracts contemplating the referral of any services to
any Person or to Farequest or any Farequest Subsidiaries, as the case may be,
the performance of which involves consideration in excess of $75,000;
(xiii) any Contracts (A) relating to indebtedness for borrowed
money or other financing transactions or (B) restricting the ability of
Farequest or any Farequest Subsidiaries to incur indebtedness for borrowed money
or make any loan or advance or own, operate, sell, transfer, pledge or otherwise
dispose of any assets;
13
(xiv) Contracts under which any other Person has directly or
indirectly guaranteed any indebtedness, liability or obligation of Farequest or
any Farequest Subsidiaries, or letter of credit issued to guarantee any
obligation of Farequest or any Farequest Subsidiaries, or any vendor or customer
of Farequest or any Farequest Subsidiaries;
(xv) mortgages, pledges, security agreements, deeds of trust
or other documents granting a Lien;
(xvi) Contracts (A) providing for the payment of any bonus or
commission based on sales or earnings or (B) providing for any bonus or other
payment based on the sale of Farequest or any Farequest Subsidiaries or any
portion thereof or any other change of control of Farequest or any Farequest
Subsidiaries;
(xvii) Contracts that provide for a payment, or that the terms
and conditions that would otherwise govern the relationship of the parties
thereto will be altered, upon a change of control of Farequest or any Farequest
Subsidiaries;
(xviii) Contracts with any Governmental Authority; and
(xix) Contracts containing covenants which restrict Farequest
or the Farequest Subsidiaries from engaging in any business or in any
geographical area or containing any exclusivity provision with respect to any
business or geographic area.
(b) Farequest and the Farequest Subsidiaries have made available to
RCG copies of all of the Material Contracts. Each of the Material Contracts is
in full force and effect and is a valid and binding obligation of Farequest and
the Farequest Subsidiaries, enforceable against Farequest and the Farequest
Subsidiaries in accordance with its terms, except as enforceability thereof may
be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or other similar Laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity). To
Farequest's Knowledge, each of the Material Contracts is a valid and binding
obligation of the other parties thereto, enforceable against such other parties
in accordance with its terms, except as enforceability thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, or
other similar Laws now or hereafter in effect relating to creditors' rights
generally or by general principles of equity (regardless of whether
enforceability is considered in a proceeding at law or in equity). Except as set
forth on Schedule 3.10(b), with respect to the Material Contracts, no default or
circumstances exist which, with the giving of notice or the passage of time, or
both, would constitute a material default by Farequest or any of the Farequest
Subsidiaries or, to Farequest's Knowledge, by the other party or parties
thereto. None of the parties to any Material Contract has terminated such
Material Contract, and Farequest and the Farequest Subsidiaries have not given,
to its Knowledge, any oral or written notice of termination of any Material
Contract or received, to its Knowledge, any oral or written notice of
termination of any such Material Contract from any other party thereto, nor has
Farequest or any Farequest Subsidiaries received, to its Knowledge, any oral or
written notice of any such party's intention to discontinue its business
relationship with Farequest or any Farequest Subsidiaries or written notice of
such party's intention to reduce the volume of business it conducts with
Farequest or any Farequest Subsidiaries under any of the Material Contracts.
Section 3.11. Absence of Undisclosed Liabilities. Except as set forth on
Schedule 3.11 or except for Material Contracts listed, or contracts not required
to be listed, in Schedule 3.10, as of the date hereof neither Farequest nor any
Farequest Subsidiaries has any contractual liability or any other liability,
whether accrued, contingent, absolute, determined, indeterminable or otherwise,
which was not (i) reflected or reserved against in the Audited Financial
Statements or (ii) incurred in the ordinary course of business consistent with
past practice since September 30, 2004, in each case, in an amount less than
$50,000 individually and $100,000 in the aggregate. Except as set forth in
Schedule 3.11, the reserves for such liabilities and obligations reflected on
the 2003 Balance Sheet are adequate in accordance with GAAP consistent with past
practice.
14
Section 3.12. Compliance with Laws; Permits.
(a) To the Knowledge of Farequest, neither Farequest nor any
Farequest Subsidiaries has violated in any respect any Orders and each of
Farequest and the Farequest Subsidiaries has complied and is presently in
compliance in all material respects with all applicable Laws that are material
to the conduct of Farequest's or the Farequest Subsidiaries' respective
businesses or ownership of their respective properties or assets.
(b) Farequest and the Farequest Subsidiaries and their respective
employees have all licenses, franchises, permits and authorizations of any
Governmental Authority for the lawful conduct of the business of Farequest and
the Farequest Subsidiaries as presently conducted, except for such permits or
authorizations, as to which the failure to possess would not result in a
Material Adverse Effect on Farequest (collectively, "PERMITS"), and such Permits
are in full force and effect. Schedule 3.12(b) sets forth a true, complete and
accurate list of all of the material Permits. Neither Farequest nor any
Farequest Subsidiaries nor any of their employees has received any notice of
revocation of or default under, any Permits.
Section 3.13. Tax Matters.
(a) Except as set forth on Schedule 3.13(a)(i) through Schedule
3.13(a)(x):
(i) Each of Farequest and the Farequest Subsidiaries has (x)
timely filed (or there has been filed on its behalf) Tax Returns required to be
filed by it (taking into account valid extensions) and all Tax Returns are true
and correct, (y) paid (or there has been paid on its behalf) in full all Taxes
required to be paid by it, and (z) established (or there has been established on
its behalf) on the 2003 Balance Sheet reserves that are adequate for the payment
of any Taxes not yet due and payable. Since the date of the 2003 Balance Sheet,
none of Farequest or any of the Farequest Subsidiaries has incurred any
liability for Taxes other than in the ordinary course of business, consistent
with past practice;
(ii) There are no recorded liens or to the Knowledge of
Farequest, any other liens for Taxes upon any assets of Farequest or any of the
Farequest Subsidiaries, except Permitted Liens;
(iii) No deficiency for any Taxes has been proposed, asserted
or assessed against Farequest or any of the Farequest Subsidiaries that has not
been resolved and paid in full. No waiver, extension or comparable consent given
by Farequest or any of the Farequest Subsidiaries regarding the application of
the statute of limitations with respect to any Taxes or Tax Return is
outstanding, nor is any request for any such waiver or consent pending;
(iv) There are no federal, state, local or foreign audits,
actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of Farequest or any of the
Farequest Subsidiaries now pending, and none of Farequest or any of the
Farequest Subsidiaries has received any notice of any proposed audits,
investigations, claims or administrative proceedings relating to Taxes or any
Tax Returns;
(v) Each of Farequest and the Farequest Subsidiaries have
complied in all material respects with all applicable Laws relating to the
payment, collection or withholding of any Tax, and the remittance thereof,
including, but not limited to, Sections 1441, 1442, 1445 and 3402 of the Code;
(vi) None of Farequest or any of the Farequest Subsidiaries
has received any written ruling from any Tax authority. No closing agreement
pursuant to Section 7121 of the Code (or any similar provision of state, local
or foreign Law) has been entered into by or with respect to Farequest or any of
the Farequest Subsidiaries;
(vii) None of Farequest or any of the Farequest Subsidiaries
(A) is a party to, is bound by or has any obligation under, any Tax sharing
agreement, Tax indemnification agreement or similar contract or arrangement,
whether written or unwritten (collectively, "TAX SHARING AGREEMENTS") or (B) has
any potential liability or obligation to any Person as a result of or pursuant
to, any such Tax Sharing Agreement;
15
(viii) None of Farequest or any of the Farequest Subsidiaries
has agreed or is required to make any adjustments under Section 481(a) of the
Code (or any similar provision of state, local or foreign Law) by reason of a
change in accounting method or otherwise for any Tax period for which the
applicable statute of limitations has not yet expired;
(ix) No jurisdiction where Farequest or any of the Farequest
Subsidiaries does not file a Tax Return has made a Claim that Farequest or any
of the Farequest Subsidiaries is required to file a Tax Return for such
jurisdiction or that any Taxes are due as a result of doing any business in such
jurisdiction; and
(x) Since their formation, none of Farequest or any of the
Farequest Subsidiaries have been a "distributing corporation" or a "controlled
corporation" in a distribution intended to qualify under Section 355(a) of the
Code.
(b) Other than any Tax Returns which have not yet been required to
be filed, each of Farequest and the Farequest Subsidiaries has made available to
the RCG true and correct copies of the United States federal income Tax Return
and any state, local or foreign Tax Return for the taxable year ended December
31, 2003 and the period ended September 30, 2004.
Section 3.14. No Material Adverse Change.
(a) Except as set forth on Schedule 3.14(a), since January 1, 2004,
the businesses of Farequest and the Farequest Subsidiaries have been conducted
in the ordinary course of business, consistent with past practice.
(b) Except as set forth in Schedule 3.14(b), since January 1, 2004,
there has not occurred any event, change or development which has had or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Farequest.
Section 3.15. Affiliated Transactions.
(a) Except as set forth on Schedule 3.15(a), no (x) officer,
director, or employee or any Affiliate of Farequest or any Farequest
Subsidiaries, or (y) spouse, child, or Affiliate of the foregoing:
(i) has any direct or indirect financial interest in any
competitor, supplier or customer of Farequest or any Farequest Subsidiaries
(other than ownership of less than 1% of the outstanding securities of a company
that is publicly listed on a national securities exchange ("PERMITTED
INVESTMENTS") or has had, since January 1, 2004, any material direct or indirect
financial interest in any competitor, supplier or customer of Farequest or any
Farequest Subsidiaries (other than Permitted Investments);
(ii) owns, directly or indirectly, in whole or in part, or has
any interest in any tangible or intangible property which Farequest or any
Farequest Subsidiaries uses in the conduct of its business or otherwise or,
since January 1, 2004, has owned, directly or indirectly, in whole or in part,
or had any interest in any material tangible or intangible property which
Farequest or any Farequest Subsidiaries uses or has used in the conduct of its
business or otherwise;
(iii) has outstanding borrowings of any amount of money or
other property from Farequest or any Farequest Subsidiaries or has, since
January 1, 2004, borrowed any material amount of money or other property from
Farequest or any Farequest Subsidiaries; or
16
(iv) is participating or engaging or has, since January 1,
2004, participated or engaged in any business substantially similar to the
businesses of Farequest or any Farequest Subsidiaries other than such business
as will be acquired by RCG pursuant to this Agreement.
(b) Except as set forth on Schedule 3.15(b), (i) Farequest and the
Farequest Subsidiaries have no liabilities, debts or any other obligation of any
nature whatsoever (whether absolute, accrued or contingent or otherwise and
whether due or to become due) to any officer, director or employee of Farequest
or any Farequest Subsidiaries or to any spouse or child, stockholder, director,
officer or Affiliate of any of the foregoing, and (ii) since January 1, 2004,
Farequest and the Farequest Subsidiaries have had no liabilities, debts or any
other obligation of any nature whatsoever (whether absolute, accrued or
contingent or otherwise and whether due or to become due) to any officer,
director or employee of Farequest or any Farequest Subsidiaries or to any spouse
or child, stockholder, director, officer, or Affiliate of any of the foregoing,
other than, with respect to (i) and (ii) above, in the case of any such officer,
director or employee of Farequest or any Farequest Subsidiaries, in respect of
accrued wages, the reimbursement of expenses and the extension of benefits to
such person made in the ordinary course of business consistent with past
practice.
Section 3.16. Brokers and Finders. Except as set forth on Schedule 3.16,
there are no broker, finder or investment banker fees or commissions owed or to
be owed by or on behalf of Farequest or any Farequest Subsidiaries in connection
with the transactions contemplated by this Agreement.
Section 3.17. Books and Records. The books of account, stock record books,
minute books and other records of Farequest or any Farequest Subsidiaries, all
of which have been made available to RCG, are complete and correct in all
material respects.
Section 3.18. Receivables. Except as set forth in Schedule 3.18, all
accounts receivable and notes receivable of Farequest and the Farequest
Subsidiaries (i) are valid obligations of the obligors, (ii) have arisen from
bona fide transactions in the ordinary course of business consistent with past
practices, (iii) are collected during and collectible in the ordinary course of
business subject to reserves for doubtful accounts and (iv) have been adequately
reserved for in the Financial Statements in accordance with GAAP.
Section 3.19. Affiliate. Schedule 3.19 sets forth the name and address of
each Person who is, in Farequest's reasonable judgment, an Affiliate of
Farequest (as such term is used in Rule 145 under the Securities Act).
Section 3.20. Proxy Statement Prospectus; Registration Statement. None of
the information regarding Farequest to be supplied by Farequest for inclusion or
incorporation by reference in the Registration Statement or Proxy Statement
will, in the case of the Registration Statement at the time it becomes effective
and at the Effective Time and in the case of the Proxy Statement, at the time it
is first mailed to Stockholders of RCG and at the time of RCG Stockholders'
meetings, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein not misleading in light of the circumstances when made. If at
any time prior to the Effective Time any event with respect to Farequest shall
occur which is required to be described in the Proxy Statement or Registration
Statement, such event shall be so described immediately in writing to RCG, and
an amendment or supplement shall be promptly filed with the Securities and
Exchange Commission ("SEC") and, as required by law.
Section 3.21. Stockholder Approval. Seller has delivered a voting
agreement and irrevocable proxy to RCG in the form attached hereto as Exhibit
3.21. The vote of a majority of the outstanding shares of Farequest Common Stock
is required to approve the Merger and has been obtained on or before the date
hereof, as has the approval of Farequest's board of directors.
Section 3.22. No Violation. The execution and delivery by Farequest and
the Farequest Subsidiaries of this Agreement and the other agreements and
instruments to be executed by Farequest and the Farequest Subsidiaries hereunder
and the consummation of the transactions contemplated hereby and thereby, do not
and will not (i) conflict with or result in a breach of any provision of the
Farequest Charter, Farequest Bylaws, or comparable organizational documents of
any of the Farequest Subsidiaries; (ii) violate, or conflict with, or result in
a material breach of any provisions of or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a default) under,
or give rise to a right of termination, cancellation, modification or
acceleration of the performance required by or a loss of a benefit under, any
note, bond, mortgage, indenture, deed of trust, lease, license, Permit,
franchise, agreement, commitment, contract or other instrument or obligation to
which Farequest or any of the Farequest Subsidiaries is a party or by which its
properties are bound or affected; (iii) violate in any material respect any Laws
or material Order applicable to Farequest or any of the Farequest Subsidiaries,
or by which any of their properties is bound or affected; (iv) constitute a
violation of any Law, Order, judgment or decree to which Farequest or the
Farequest Subsidiaries is bound or (v) result in the creation of any Lien or
Asset Lien on any Business Assets, other than the case of clauses (ii), (iii),
(iv) and (v) any such violations, defaults, rights, losses or Liens that,
individually, or in the aggregate, could not be reasonably expected to have a
Material Adverse Effect on Farequest.
17
Section 3.23. State Takeover Laws. The Board of Directors of Farequest has
taken all actions so that the restrictions contained in Section 203 of the DGCL
applicable to a "business combination" (as defined in Section 203), and any
other similar legal requirement, will not apply to RCG or SUB as applicable
during the pendency of this Agreement, including execution, delivery or
performance of this Agreement and the voting agreement contemplated hereby and
in the consummation of the Merger and the other transactions contemplated hereby
including the voting agreements.
Section 3.24. Disclosure. No representation or warranty of Seller or
Farequest contained in this Agreement contains or will contain any untrue
statement of material fact, or omits or will omit to state any material fact
necessary in order to make the statements herein or therein, in light of the
circumstances under which it was or will be made, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF RCG AND SUB
RCG and SUB hereby jointly and severally represent and warrant to
Farequest and Seller the following:
Section 4.1. Corporate Organization; Authority.
(a) Each of RCG and SUB is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and except
as set forth in Schedule 4.1, has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and the other
agreements and instruments to be executed and delivered by it hereunder or in
connection herewith and to carry out its respective obligations hereunder and
thereunder. The execution and delivery of this Agreement and the other
agreements and instruments to be executed and delivered by RCG and SUB hereunder
or in connection herewith, and the consummation by it of the transactions
contemplated hereby, have been duly authorized by all necessary corporate and
other actions of RCG and SUB pursuant to and in accordance with the Laws
governing RCG and SUB.
(b) This Agreement and the other agreements and instruments to be
executed and delivered by RCG and SUB hereunder or in connection herewith have
been duly executed and delivered by RCG and SUB, and constitute valid and
binding obligations of RCG and SUB, enforceable against RCG and SUB in
accordance with their respective terms, except as enforceability thereof may be
limited by bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium, or other similar Laws now or hereafter in effect relating to
creditors' rights generally or by general principles of equity (regardless of
whether enforceability is considered in a proceeding at law or in equity).
Section 4.2. Capitalization.
(a) Schedule 4.2 sets forth as of the date hereof, the authorized,
issued and outstanding capital stock of RCG. All of the capital stock has been
duly authorized and validly issued, and are fully paid and nonassessable. None
of the securities have been issued in violation of any preemptive or
subscription rights, or is subject to any preemptive or subscription rights.
18
(b) All of the subsidiaries of RCG are as set forth on Schedule
4.2(b) (the "RCG SUBSIDIARIES"). All of the issued and outstanding shares of
capital stock or other equity or beneficial interests of the RCG Subsidiaries
(the "RCG SUBSIDIARY SHARES") are owned of record and beneficially by RCG. RCG
has good and valid title to the RCG Subsidiary Shares, free and clear of all
Liens. Each issued and outstanding share of capital stock or other equity
interests of each of the RCG Subsidiaries has been duly authorized and validly
issued, is fully paid and nonassessable, and has not been issued in violation
of, and is not subject to, any preemptive or subscription rights.
(c) Schedule 4.2(c) sets forth a true, correct and complete list of
all options, warrants or other rights, arrangements, agreements or other
commitments of any kind whatsoever which RCG or any of the RCG Subsidiaries
obligating RCG or any RCG Subsidiary to grant, issue or sell any shares of the
capital stock or equity or beneficial interest of any of RCG or the RCG
Subsidiaries by sale, lease, license or otherwise. Except as set forth on
Schedule 4.2(c), (i) there is no obligation, contingent or otherwise, of any of
RCG or the RCG Subsidiaries to (A) repurchase, redeem or otherwise acquire any
share of the capital stock or other equity or beneficial interests of any of RCG
or the RCG Subsidiaries, or (B) provide funds to, or make any investment in (in
the form of a loan, capital contribution or otherwise), or provide any guarantee
with respect to the obligations of any of RCG or the RCG Subsidiaries or any
other Person; (ii) neither RCG nor any of the RCG Subsidiaries, directly or
indirectly, owns, or has agreed to purchase or otherwise acquire, the capital
stock or other equity or beneficial interests of, or any interest convertible
into or exchangeable or exercisable for such capital stock or such equity or
beneficial interests of any corporation or other entity; (iii) neither RCG nor
any RCG Subsidiary is a party to any arrangement, contract or other commitment
of any kind whatsoever (contingent or otherwise) pursuant to which any Person is
or may become entitled to receive any payment from RCG or the RCG Subsidiaries
based on the revenues or earnings, or calculated in accordance therewith, of RCG
or the RCG Subsidiaries; (iv) neither RCG nor any RCG Subsidiary is a party to
any arrangement, contract or other commitment of any kind whatsoever by which
any of RCG or the RCG Subsidiaries, or any of their respective properties or
assets, is bound with respect to the voting of any share of capital stock or
other equity or beneficial interest of any of RCG or the RCG Subsidiaries; and
(v) neither RCG nor any RCG Subsidiary is a party to and have not granted any
outstanding rights, subscriptions, warrants, puts, calls, preemptive rights,
options or other agreements, instruments or undertakings of any kind relating to
any capital stock or other equity security of any of RCG or the RCG
Subsidiaries, nor have they issued any security convertible into or exchangeable
for any such capital stock or other equity or beneficial interest.
Section 4.3. Financial Statements. The financial statements of RCG
included in the RCG SEC Documents comply in all material respects with the rules
and regulations of the SEC with respect to the rules and regulations in effect
at the time of filing and have been prepared from, and are in accordance with
the books and records of RCG and the RCG Subsidiaries, have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved
(except as may be stated in the notes thereto and except for normal and
recurring year-end adjustments and the absence of footnote disclosure), and
fairly present the financial position and the results of operations,
stockholders' equity and cash flows (and changes in financial position, if any)
of RCG and the RCG Subsidiaries as of the times and for the periods referred to
therein. Schedule 4.3 contains the unaudited balance sheet of RCG as of
September 30, 2004, and the unaudited related statements of income (both
consolidated and broken out by division), shareholders' equity and cash flows
for the portion of the RCG's fiscal year then ended (collectively, the "INTERIM
FINANCIAL STATEMENTS").
Section 4.4. Consents and Approvals. Except for Consents and approvals set
forth on Schedule 4.4, no consent, approval, permit, waiver, authorization of,
or notice or filing with, any Governmental Authority or other Person is required
to be made or obtained in connection with the execution, delivery and
performance by RCG or SUB of this Agreement or the other agreements and
instruments to be executed by RCG or SUB hereunder or the consummation of the
transactions contemplated hereby or thereby.
Section 4.5. SEC Documents. RCG has filed on a timely basis with the SEC
all documents required to be filed under the Securities Act of 1933 ("SECURITIES
ACT") and the Securities and Exchange Act of 1934 ("EXCHANGE ACT") for the 2
years preceding the date hereof (the "RCG SEC DOCUMENTS"). As of their
respective dates, the RCG SEC Documents complied in all material respects with
the requirements of the Securities Act and the Exchange Act, as the case may be,
and none of the RCG SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.
19
Section 4.6. Internal Accounting Controls; Disclosure Controls and
Procedures. RCG and each of the RCG Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principals and to maintain asset accountability, (ii) access to
assets is permitted only in accordance with management's general or specific
authorization and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences. RCG has timely filed all certifications and
statements required by (x) Rule13a-14 or Rule 15d-14 under the 1934 Act or (y)
18 U.S.C. Section 1350 (Section 906 of Xxxxxxxx-Xxxxx) with respect to any RCG
SEC documents. RCG maintains disclosure controls and procedures required by Rule
13a-15 or Rule 15d-15(e) under the 1934 Act; such controls and procedures are to
its Knowledge effective to ensure that material information concerning RCG and
the RCG Subsidiaries is made known on a timely basis to the individuals
responsible for the preparation of the RCG's SEC filings and other public
disclosure documents. To the Knowledge of RCG, as of the date hereof, (x) there
exists no outstanding SEC comments with respect to any of the RCG SEC documents
and (y) there are no SEC inquiries or investigations, other inquiries or
investigations by an Governmental Entity or internal investigations pending or
threatened, in each case regarding any accounting practices of RCG or any of its
Subsidiaries.
Section 4.7. Brokers and Finders. Except as set forth on Schedule 4.7,
there are no broker, finder or investment broker fees or commissions owed or to
be owed by RCG or SUB in connection with the transactions contemplated by this
Agreement for which RCG or the SUB are or may be responsible. Except as set
forth on Schedule 4.7, Neither RCG nor any of its Subsidiaries has any ongoing
obligation or commitment to utilize the services of any investment bank or
underwriters after the Closing Date.
Section 4.8. Proxy Statement. None of the information regarding RCG and
SUB to be supplied by RCG and SUB for inclusion or incorporation by reference in
the (i) the registration statement on Form S-4 (as it may be amended or
supplemented from time to time, (the "REGISTRATION STATEMENT") relating to the
Common Stock to be issued in the Merger or (ii) the proxy statement to be
distributed in connection with the stockholders' meetings of RCG as contemplated
hereby (as it may be amended or supplemented from time to time (the "PROXY
STATEMENT") and together with the prospectus to be included in the Registration
Statement (the "PROXY STATEMENT/PROSPECTUS") will in the case of the
Registration Statement, at the time it becomes effective, and at the Effective
Time, and, in the case of the Proxy Statement, at the time of its mailing to
stockholders of RCG and at the time of its stockholders' meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading in light of the circumstances when made. If at any time prior to the
Effective Time any event with respect to RCG or SUB shall occur which is
required to be described in the Proxy Statement or Registration Statement, such
event shall be so described, and an amendment or supplement shall be promptly
filed with the SEC and, as required by law, disseminated to the stockholders of
RCG. The Proxy Statement and the Registration Statement will (with respect to
RCG) comply as to form in all material respects with the provisions of the
Securities Act and the Exchange Act.
Section 4.9. Compliance with Laws; Permits.
(a) Neither RCG nor the RCG Subsidiaries has violated in any
material respect any Orders and each of RCG and the RCG Subsidiaries has
complied and is presently in compliance in all material respects with all
applicable Laws that are material to the conduct of RCG's or the RCG
Subsidiaries' respective businesses or ownership of their respective properties
or assets.
(b) RCG and the RCG Subsidiaries and their respective employees have
all licenses, franchises, permits and authorizations of any Governmental
Authority as are material for the lawful conduct of the business of RCG and the
RCG Subsidiaries as presently conducted (collectively, "PERMITS"), and such
Permits are in full force and effect.
20
Section 4.10. Tax Matters. Except as set forth on Schedule 4.10(a)(i)
through Schedule 4.10(a)(x):
(i) Each of RCG and the RCG Subsidiaries has (x) timely filed
(or there has been filed on its behalf) all Tax Returns required to be filed by
it (taking into account valid extensions) and all Tax Returns are true and
correct, (y) paid (or there has been paid on its behalf) in full all Taxes
required to be paid by it, and (z) established (or there has been established on
its behalf) on the June 30, 2004 Balance Sheet contained in RCG's Form 10-K (the
"RCG Balance Sheet") reserves that are adequate for the payment of any Taxes not
yet due and payable. Since the date of the RCG Balance Sheet, none of RCG or any
of the RCG Subsidiaries has incurred any liability for Taxes other than in the
ordinary course of business, consistent with past practice;
(ii) There are no Liens for Taxes upon any assets of RCG or
any of the RCG Subsidiaries, except Permitted Liens;
(iii) No deficiency for any Taxes has been proposed, asserted
or assessed against RCG or any of the RCG Subsidiaries that has not been
resolved , reserved for or paid in full. No waiver, extension or comparable
consent given by RCG or any of the RCG Subsidiaries regarding the application of
the statute of limitations with respect to any Taxes or Tax Return is
outstanding, nor is any request for any such waiver or consent pending;
(iv) There are no federal, state, local or foreign audits,
actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of RCG or any of the RCG
Subsidiaries now pending, and none of RCG or any of the RCG Subsidiaries has
received any notice of any proposed audits, investigations, claims or
administrative proceedings relating to Taxes or any Tax Returns;
(v) Each of RCG and the RCG Subsidiaries have complied in all
material respects with all applicable Laws relating to the payment, collection
or withholding of any Tax, and the remittance thereof, including, but not
limited to, Sections 1441, 1442, 1445 and 3402 of the Code;
(vi) None of RCG or any of the RCG Subsidiaries has received
any written ruling from any Tax authority. No closing agreement pursuant to
Section 7121 of the Code (or any similar provision of state, local or foreign
Law) has been entered into by or with respect to RCG or any of the RCG
Subsidiaries;
(vii) None of RCG or any of the RCG Subsidiaries (A) is a
party to, is bound by or has any obligation under, any Tax Sharing Agreements or
(B) has any potential liability or obligation to any Person as a result of or
pursuant to, any such Tax Sharing Agreements;
(viii) None of RCG or any of the RCG Subsidiaries has agreed
or is required to make any adjustments under Section 481(a) of the Code (or any
similar provision of state, local or foreign Law) by reason of a change in
accounting method or otherwise for any Tax period for which the applicable
statute of limitations has not yet expired;
(ix) No jurisdiction where RCG or any of the RCG Subsidiaries
does not file a Tax Return has made a Claim that RCG or any of the RCG
Subsidiaries is required to file a Tax Return for such jurisdiction or that any
Taxes are due as a result of doing any business in such jurisdiction; and
(x) Since their formation, none of RCG or any of the RCG
Subsidiaries have been a "distributing corporation" or a "controlled
corporation" in a distribution intended to qualify under Section 355(a) of the
Code.
21
Section 4.11. Affiliated Transactions.
(a) Except as set forth on Schedule 4.11(a), no (x) executive
officer or director or any Affiliate of RCG or any RCG Subsidiaries:
(i) has or, since July 1, 2004, has had any material direct or
indirect financial interest in any competitor, supplier or customer of RCG or
any RCG Subsidiaries (other than Permitted Investments);
(ii) owns, directly or indirectly, in whole or in part, or has
any interest in any tangible or intangible property which RCG or any RCG
Subsidiaries uses in the conduct of its business or otherwise or, since July 1,
2004, has owned, directly or indirectly, in whole or in part, or had any
interest in any material tangible or intangible property which RCG or any RCG
Subsidiaries uses or has used in the conduct of its business or otherwise;
(iii) has outstanding borrowings of any amount of money or
other property from RCG or any RCG Subsidiaries or has, since July 1, 2004,
borrowed any material amount of money or other property from RCG or any RCG
Subsidiaries; or
(iv) is participating or engaging or has, since July 1, 2004,
participated or engaged in any business substantially similar to the businesses
of RCG or any RCG Subsidiaries.
(b) Except as set forth on Schedule 4.11(b), (i) RCG and the RCG
Subsidiaries have no liabilities, debts or any other obligation of any nature
whatsoever (whether absolute, accrued or contingent or otherwise and whether due
or to become due) to any executive officer or director of RCG or any RCG
Subsidiaries or Affiliate of any of the foregoing, and (ii) since July 1, 2004,
RCG and the RCG Subsidiaries have had no liabilities, debts or any other
obligation of any nature whatsoever (whether absolute, accrued or contingent or
otherwise and whether due or to become due) to any officer, director or employee
of RCG or any RCG Subsidiaries or Affiliate of any of the foregoing, other than,
with respect to (i) and (ii) above, in the case of any such executive officer or
director of RCG or any RCG Subsidiaries, in respect of accrued wages, the
reimbursement of expenses and the extension of benefits to such Person made in
the ordinary course of business consistent with past practice.
Section 4.12. Litigation.
(a) Except as set forth in the RCG SEC documents, or on Schedule
4.12, (i) RCG or the RCG Subsidiaries have not received notice of any pending
or, to RCG's Knowledge, threatened Action and there is no Action pending, or to
RCG's Knowledge, threatened in each case, by or against RCG or the RCG
Subsidiaries before any Governmental Authority, and (ii) there is no Order
outstanding against RCG or any RCG Subsidiary, except in each of case (i) and
(ii) such Action or Order that would not have a Material Adverse Effect against
either RCG individually or RCG and its Subsidiaries taken as a whole.
(b) That there is no Action pending, to RCG's Knowledge threatened
against RCG or any RCG Subsidiary which (i) challenges the transactions
contemplated by hereby, (ii) would prevent or materially interfere with or delay
the consummation of the transactions contemplated hereby, or (iii) seeks damages
in connection with the transactions contemplated hereby.
Section 4.13. No Violation. The execution and delivery by RCG and SUB of
this Agreement and the other agreements and instruments to be executed by RCG
and SUB hereunder and the consummation of the transactions contemplated hereby
and thereby do not and will not (i) conflict with or result in any material
breach of any provision of the respective articles of incorporation or by-laws
of RCG and SUB; (ii) violate, or conflict with, or result in a breach of any
provisions of or constitute a default (or an event which, with notice or lapse
of time or both, would constitute a default) under, or give rise to a right of
termination, cancellation, modification or acceleration of the performance
required by, any material note, bond, mortgage, indenture, deed of trust, lease,
license, permit, franchise, agreement, commitment, contract or other instrument
or obligation by which RCG or SUB is bound; (iii) constitute a material
violation of any Law, Order, judgment or decree to which RCG or SUB is bound; or
(iv) result in the creation of any material Lien., other than the case of
clauses (ii), (iii), (iv) and (v) any such violations, defaults, rights, losses
or Liens that, individually, or in the aggregate, could not be reasonable
expected to have a Material Adverse Effect on RCG or SUB.
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Section 4.14. Contracts.
(a) Set forth on Schedule 4.14(a) is a true, correct list of the
following types of Contracts to which RCG and the RCG Subsidiaries, as the case
may be, is a party or by which it or its parties are bound or pursuant to which
it obtains benefits or incurs obligations in the conduct of its businesses as of
the date hereof (the "RCG MATERIAL CONTRACTS").
(i) Contracts between (x) RCG or any its Subsidiaries and (y)
any of its executive officers or directors (or any Affiliates of any of the
foregoing);
(ii) Contracts that provide for a payment, or that the terms
and conditions that would otherwise govern the relationship of the parties
thereto will be altered, upon a change of control of RCG or any of its
Subsidiaries;
(iii) Contracts containing covenants which restrict RCG or its
Subsidiaries from engaging in any business or in any geographical area or
containing any exclusivity provision with respect to any business or geographic
area;
(iv) Any contracts with any aircraft company, hotel, or
airline that provide for payments in excess of $75,000;
(v) Joint venture, partnership, stockholder, voting trust or
other Contracts whereby RCG or the RCG Subsidiaries have agreed with any other
Person (A) to enter into a joint business arrangement for profit or (B) to vote
any shares of capital stock or other equity or beneficial interests in any other
Person in any particular manner;
(vi) Contracts entered into since July 2004 providing for the
acquisition or disposition of assets having a value in excess of $75,000, other
than such acquisitions or dispositions in the ordinary course of business,
consistent with past practice;
(vii) any Contracts (A) relating to indebtedness for borrowed
money or other financing transactions or (B) restricting the ability of RCG or
any RCG Subsidiaries to incur indebtedness for borrowed money or make any loan
or advance or own, operate, sell, transfer, pledge or otherwise dispose of any
assets;
(viii) Contracts (A) providing for the payment of any bonus or
commission based on sales or earnings or (B) providing for any bonus or other
payment based on the sale of RCG or any RCG Subsidiaries or any portion thereof
or any other change of control of RCG or any RCG Subsidiaries;
(ix) Contracts with any Governmental Authority; and
(x) Contracts that RCG has to register any of its securities
with the Securities and Exchange Commission pursuant to the Securities Act other
than pursuant to the terms of this Agreement and whether such securities are
currently issued or to be issued in the future and whether registration is for
resales or otherwise.
(b) RCG and the its Subsidiaries have made available to Farequest
copies of all of the RCG Material Contracts. Each of the RCG Material Contracts
is in full force and effect and is a valid and binding obligation of RCG and its
Subsidiaries, enforceable against RCG and its Subsidiaries in accordance with
its terms, except as enforceability thereof may be limited by bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium, or other similar
Laws now or hereafter in effect relating to creditors' rights generally or by
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity). To RCG's Knowledge, each of the RCG
Material Contracts is a valid and binding obligation of the other parties
thereto, enforceable against such other parties in accordance with its terms,
except as enforceability thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium, or other similar Laws now or
hereafter in effect relating to creditors' rights generally or by general
principles of equity (regardless of whether enforceability is considered in a
proceeding at law or in equity). Except as set forth on Schedule 4.14(b), with
respect to the RCG Material Contracts, no default or circumstances exist which,
with the giving of notice or the passage of time, or both, would constitute a
material default by RCG or any of its Subsidiaries or, to RCG's Knowledge, by
the other party or parties thereto. None of the parties to any RCG Material
Contract has terminated such RCG Material Contract, and RCG and its Subsidiaries
have not given written notice of termination of any RCG Material Contract or
received written notice of termination of any such RCG Material Contract from
any other party thereto, nor has RCG or any of its Subsidiaries received any
written notice of any such party's intention to discontinue its business
relationship with RCG or any of its Subsidiaries or written notice of such
party's intention to reduce the volume of business it conducts with RCG or any
of its Subsidiaries under any of the RCG Material Contracts.
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Section 4.15. Undisclosed Liabilities. Except as set forth on Schedule
4.15, or except for Material Contracts listed, or contracts not required to be
listed on Schedule 4.14(a), as of the date hereof neither RCG nor any of its
Subsidiaries has any liability or obligation of any kind, whether accrued,
common, contingent, absolute, determined or indeterminable which was not (i)
reflected or reserved against in the Audited Financial Statements or (ii)
incurred in the ordinary course of business consistent with the past practice
since July 1, 2004, in each case, in an amount less than $50,000 individually
and $100,000 in the aggregate.
Section 4.16. State Takeover Laws. The Board of Directors of RCG has taken
all actions so that the restrictions contained in Section 203 of DGCL applicable
to a "business combination" (as defined in Section 203), and any other similar
legal requirement, will not apply to Farequest during the pendency of this
Agreement, including the execution, delivery or performance of this Agreement
and the consummation of the Merger and the other transactions contemplated
hereby including the voting agreements.
Section 4.17. No Material Adverse Change.
(a) Except as set forth on Schedule 4.17(a), since July 1, 2004, the
businesses of RCG and its Subsidiaries have been conducted in the ordinary
course of business, consistent with past practice.
(b) Except as set forth in Schedule 4.17(b), since July 1, 2004,
there has not occurred any event, change or development which has had or could
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on RCG or its Subsidiaries.
ARTICLE V
COVENANTS
Section 5.1. Conduct of Business of Farequest and RCG. Except as
contemplated by this Agreement or as expressly agreed to in writing by the other
party or as set forth on Schedule 5.1, during the period from the date of this
Agreement to the Effective Time, Farequest and RCG will conduct their operations
substantially as presently operated and only in the ordinary course of business,
in a normal manner consistent with past practices and will use commercially
reasonable efforts to preserve intact its business organization, to keep
available the services of its officers and employees and to maintain
satisfactory relationships with suppliers, distributors, customers and others
having business relationships with it and will take no action which would
adversely affect its ability to consummate the transactions contemplated by this
Agreement. Without limiting the generality of the foregoing, except as otherwise
expressly provided in this Agreement or on Schedule 5.1, prior to the Effective
Time, each party will not, without the prior written consent of the other party:
(a) amend its Certificate of Incorporation or Bylaws;
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(b) authorize for issuance, issue, sell, deliver, grant any options
or warrants for, or otherwise agree or commit to issue, sell or deliver any
shares of its capital stock (except under the terms of any presently outstanding
options, warrants or other convertible securities) or any securities convertible
into shares of its capital stock, other than in the case of RCG pursuant to and
in accordance with the terms of its stock option plans and RCG warrants issued
in the ordinary course of business consistent with past practice;
(c) recapitalize, split, combine or reclassify any shares of its
capital stock; declare, set aside or pay any dividend (other than RCG to its
preferred stockholders) or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock; or
purchase, redeem or otherwise acquire any shares of its own capital stock;
(d) (i) create, incur, assume, maintain or permit to exist any
long-term debt or any short-term debt for borrowed money other than under
existing lines of credit (which amounts permitted or drawn thereunder shall not
be increased), relating to purchase money security interests or obligations as a
lessee under leases recorded as capital leases, each as incurred in the ordinary
course of business and in amounts less than $25,000; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other Person; or (iii)
make any loans, advances or capital contributions to, or investments in, any
other Person;
(e) (i) increase in any manner the rate of compensation of any of
its directors, officers or other employees, except as otherwise may be
contractually required pursuant to existing Contracts; or (ii) pay or agree to
pay any bonus, pension, retirement allowance, severance or other employee
benefit except as required under currently existing employee benefit plans or
existing employment Contracts of RCG;
(f) sell or otherwise dispose of, or encumber, or agree to sell or
otherwise dispose of or encumber, any assets other than inventory in the
ordinary course of business;
(g) enter into any other agreement, commitment or contract, except
agreements, commitments or Contracts for the purchase, sale or lease of goods or
services in the ordinary course of business consistent with past practice;
(h) authorize, recommend, propose or announce an intention to
authorize, recommend or propose, or enter into any agreement in principle or an
agreement with respect to, any (i) plan of liquidation or dissolution, (ii)
acquisition of an amount of assets or securities in excess of $25,000, (iii)
disposition of assets or securities in amounts greater than $25,000 or (iv)
material change in its capitalization, or enter into a material contract or any
amendment or modification of any material contract or release or relinquish any
material contract right except as set forth on Schedule 5.1;
(i) engage in any unusual or novel method of transacting business or
change any accounting procedure or practice or its financial structure; or
(j) authorize or enter into any formal or informal agreement or
otherwise make any commitment to do any of the foregoing or to take any action
which would make any of the representations or warranties of Farequest or RCG
contained in this Agreement untrue or incorrect or prevent Farequest or RCG from
performing or cause Farequest or RCG not to perform its covenants hereunder in
any material respect or result in any of the conditions to the Merger set forth
herein not being satisfied.
Section 5.2. No Shelf Registration. RCG shall not be required to amend or
maintain the effectiveness of the Registration Statement for the purpose of
permitting resale of the shares of RCG Common Stock received pursuant hereto by
the Persons who may be deemed to be "Affiliates" of Farequest.
Section 5.3. No Solicitation. Each party agrees that, prior to the
Effective Time, it shall not, and shall not authorize or permit any of its
directors, officers, employees, agents or representatives to, directly or
indirectly, solicit, initiate, facilitate or encourage (including by way of
furnishing or disclosing information), or take any other action to facilitate,
any inquiries or the making of any proposal that constitutes, or may reasonably
be expected to lead to any Transaction Proposal (as defined below), or enter
into or maintain or continue discussions or negotiate with any Person in
furtherance of such inquiries or to obtain a Transaction Proposal or agree to or
endorse any Transaction Proposal or authorize or permit any of its officers,
directors or employees or any investment banker, financial advisor, attorney,
accountant or other representative retained by it to take any such action.
"TRANSACTION PROPOSAL" shall mean any of the following (other than the
transactions between Farequest, RCG and SUB contemplated by this Agreement)
involving RCG or Farequest: (i) any merger, consolidation, share exchange,
recapitalization, business combination or other similar transaction; (ii) any
sale, lease, exchange, mortgage, pledge, transfer or other disposition of any
material, in the case of Farequest, or more than twenty percent (20%) or more of
the assets of RCG, in a single transaction or series of transactions; (iii) any
offer for, or the acquisition (or right to acquire) of "beneficial ownership" by
any Person, or "group" (as such terms are defined under Section 13(d) of the
Securities Exchange Act of 1934), of any, in the case of Farequest, or more than
twenty percent (20%) or more of the outstanding shares of capital stock of RCG,
; or (iv) any public announcement of a proposal, plan or intention to do any of
the foregoing or any agreement to engage in any of the foregoing, provided,
however, in the case of RCG, a Transaction Proposal shall not include those
items set forth on Schedule 5.3.
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Section 5.4. Access to Information.
(a) From the date of this Agreement until the Effective Time,
Farequest will provide RCG and RCG will provide Farequest, and their respective
lenders and authorized representatives (including counsel, environmental and
other consultants, accountants and auditors) full reasonable access during
normal business hours to all facilities, personnel and operations and to all
books and records of Farequest, RCG and SUB, will permit the other party to make
such inspections as it may reasonably require and will cause its officers to
furnish the other party with such financial and operating data and other
information with respect to its business and properties as the other party may
from time to time reasonably request.
(b) RCG and Farequest will hold and will cause their representatives
to hold in confidence, all documents and information furnished in connection
with this Agreement, other than documents or information which (i) are available
to the public, (ii) are or become known by RCG or Farequest from a source other
than Farequest or RCG, as the case may be, other than by a breach of a
confidentiality obligation owed to Farequest or RCG, respectively, or (iii) are
required by law to be disclosed.
Section 5.5. Registration Statement and Proxy Statement. RCG shall use all
commercially reasonable efforts to file with the SEC on or before December 31,
2004, a Proxy/Proxy Statement/Prospectus and RCG shall file a Registration
Statement in which a Proxy Statement/Prospectus are included. Farequest shall
cooperate with RCG with regard to such filings. RCG and Farequest shall use all
commercially reasonable efforts to have the Registration Statement declared
effective by the SEC as promptly as practicable. RCG shall use its reasonable
best efforts to obtain, prior to the effective date of the Registration
Statement, any and all necessary state securities law or "Blue Sky" permits or
approvals in connection with the issuance of RCG Common Stock in the Merger.
Section 5.6. Stockholder Meeting. RCG shall, as soon as reasonably
practicable following the date hereof, establish a record date for, duly call,
give notice of, convene and hold (and reconvene and hold if adjourned for any
reason) a meeting of its stockholders for the purpose of the approval of the
issuance in excess of 20% of RCG's Common Stock in compliance with the AMEX
rules. RCG shall, through its Board of Directors, recommend to its Stockholders
approval of such matters and will coordinate and cooperate with respect to the
timing of such meeting and shall use all commercially reasonable efforts to hold
such meetings as soon as practicable after the date hereof.
Section 5.7. Reasonable Efforts; Other Actions. Farequest, RCG and SUB
each shall use all commercially reasonable efforts promptly to take, or cause to
be taken, all other actions and do, or cause to be done, all other things
necessary, proper or appropriate under applicable Law to consummate and make
effective the transactions contemplated by this Agreement, including, without
limitation, (i) the taking of any actions required to qualify the Merger
treatment as a tax-free reorganization and (ii) the obtaining of all necessary
Consents, approvals or waivers under their respective material Contracts.
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Section 5.8. Public Announcements. Before issuing any press release or
otherwise making any public statement with respect to the Merger, RCG, SUB and
Farequest will consult with each other as to its form and substance and shall
not issue any such press release or make any such public statement prior to such
consultation, except as may be required by Law (it being agreed that the parties
hereto are entitled to disclose all requisite information concerning the
transaction in any filings required with the SEC).
Section 5.9. Notification of Certain Matters. Each of Farequest and RCG
shall give prompt notice to the other party of (i) any written notice of a
default or event which, with notice or lapse of time or both, would become a
default, received by it subsequent to the date of this Agreement and prior to
the Effective Time, under any contract material to the financial condition,
properties, businesses or results of operations of Farequest or RCG, as the case
may be, to which it is a party or is subject, (ii) any notice or other
communication from any third party alleging that the consent of such third party
is or may be required in connection with the transactions contemplated by this
Agreement, (iii) any material adverse change in the financial condition,
properties, businesses or results of operations or the occurrence of any event
which is reasonably likely to result in any such change from the date hereof, or
(iv) the occurrence or existence of any event which would, or could with the
passage of time or otherwise, make any representation or warranty contained
herein untrue; provided, however, that the delivery of notice pursuant to this
Section 5.9 shall not limit or otherwise affect the remedies available
hereunder. Each party shall use its commercially reasonable efforts to prevent
or promptly remedy the same.
Section 5.10. Expenses. RCG and SUB, on the one hand, and Farequest, on
the other hand, shall bear their respective expenses incurred in connection with
the Merger, including, without limitation, the preparation, execution and
performance of this Agreement, the Proxy Statement/Prospectus and the
transactions contemplated hereby, including all fees and expenses of its
representatives, bankers, counsel and accountants, provided, however, that
notwithstanding the foregoing, Farequest shall be entitled to a reimbursement of
legal fees and expenses of up to $100,000. Such fees shall be paid only in the
event of consummation of the Merger. Any remaining legal fees and expenses shall
be paid by the shareholders prior to closing.
Section 5.11. Affiliates. Schedule 5.11 lists all Persons who, as of the
date hereof, may be deemed to be "Affiliates" of Farequest . Farequest shall
advise RCG in writing of any other Persons who become Affiliates prior to the
Effective Time. Farequest shall cause each Person who is so identified as an
Affiliate to deliver to RCG, prior to the Effective Time, a written agreement
substantially in the form of Exhibit 5.11 hereto.
Section 5.12. Stock Exchange Listing. RCG shall prepare and submit to the
AMEX a listing application covering the shares of RCG Common Stock issuable in
the Merger (including the Contingent Shares and any shares issued pursuant to
the Promissory Note), and shall use its commercially reasonable efforts to
obtain, prior to the Effective Time, approval for the listing of such shares,
subject to official notice of issuance.
Section 5.13. State Antitakeover Laws. If any "fair price" or "control
share acquisition" statute or other similar antitakeover regulation shall become
applicable to the transactions contemplated hereby, RCG and Farequest and their
respective Board of Directors shall use their reasonable best efforts to grant
such approvals and to take such other actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as practicable
on the terms contemplated hereby and shall otherwise use their reasonable best
efforts to eliminate the effects of any such statute or regulation on the
transactions contemplated hereby.
Section 5.14. Satisfaction of Conditions. Farequest agrees to use its
reasonable commercial efforts to the extent matters are reasonably within their
control to cause each of the conditions set forth in Article VII to RCG and SUB
proceeding with the Closing to be satisfied on or before the Closing Date. RCG
and SUB agree to use their respective reasonably commercial efforts to the
extent matters are reasonably within their control to cause each of the
conditions set forth in Article VIII to Farequest proceeding with the Closing to
be satisfied on or before the Closing Date.
Section 5.15. Tax Matters. Each of the parties hereto acknowledges and
agrees that the transactions contemplated by this Agreement are intended to
qualify as a tax-free reorganization described in Section 368 of the Code. Each
of the parties hereto agrees to report such transactions for federal, state and
local income tax purposes and file its respective income tax returns in a manner
consistent with this Section 5.15.
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ARTICLE VI
CONDITIONS TO THE OBLIGATIONS OF RCG, SUB AND FAREQUEST
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment at or prior to the Closing of each of the following
conditions, any one or more of which may be waived in a writing signed by each
of RCG, SUB and Farequest:
Section 6.1. Stockholder Approval. The requisite vote of the stockholders
of Farequest and RCG necessary to consummate the transactions contemplated by
this Agreement shall have been obtained.
Section 6.2. Consents and Approvals. All necessary Consents and approvals
of any United States or any other Governmental Authority required for the
consummation of the transactions contemplated by this Agreement shall have been
obtained.
Section 6.3. Listing. RCG's Common Stock including the Shares issuable in
the Merger (including the Contingent Shares) shall have been authorized for
listing on the AMEX.
Section 6.4. Legal Action. There shall be no pending Action or inquiry
which challenges the validity or the legality of or seeks or could reasonably be
expected to prevent, delay or impose adverse material conditions on the
consummation of the Merger.
Section 6.5. Injunction Illegality. No preliminary or permanent
injunction, or other Order decreed by any federal or state court which prevents
the consummation of this Agreement shall have been issued and remain in effect
(each party agrees to use its reasonable efforts to have any such injunction,
Order or decree lifted). No Governmental Authority shall have enacted any
statute, rule or regulation that would prevent consummation of this Agreement or
make the merger illegal.
Section 6.6. Documents Completed. RCG and Farequest shall have agreed upon
final definitive copies of each additional agreement referenced herein and the
disclosure Schedules required to be provided under Article III and IV hereof.
ARTICLE VII
CONDITIONS TO THE OBLIGATIONS OF RCG AND SUB
The obligation of RCG and SUB to effect the Merger and to perform under
this Agreement is subject to the fulfillment on or before to the Closing Date of
the following additional conditions, any one or more of which may be waived, in
writing, by RCG and SUB:
Section 7.1. Representations Accurate. Each of the representations and
warranties of Farequest contained in this Agreement (i) which is qualified by
materiality shall be true and correct in all respects and (ii) which is not so
qualified, shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though such
representations and warranties were made at and as of the Closing Date, except
for such representations and warranties which speak as a specific date which
shall be true as of such date.
Section 7.2. Performance. Farequest shall have complied, in all material
respects, with all agreements, obligations and conditions required by this
Agreement to be complied with by it on or prior to the Closing Date.
Section 7.3. Officer's Certificate. RCG and SUB shall have received a duly
executed certificate signed by the Chairman of Farequest certifying as to (i)
satisfaction of the conditions set forth in Sections 7.1 and 7.2; (ii) the
accuracy and completeness of the Farequest Charter and Bylaws of Farequest and
the director and Stockholder resolutions of Farequest approving this Agreement,
the Merger and the transactions contemplated hereby; and (iii) the identity and
authority of the officers and other persons executing documents on behalf of
Farequest.
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Section 7.4. Good Standing. Farequest shall have received a certificate of
good standing, or its equivalent, dated no more than ten (10) days prior to the
Closing Date, from the State of incorporation of Farequest.
Section 7.5. Consents. RCG and SUB shall have received copies of consents
set forth on Schedule 7.5 necessary for Farequest to execute, deliver and
perform this Agreement and consummate the Merger.
Section 7.6. Dissenting Shares. On the Closing Date, the aggregate number
of Farequest Shares with respect to which the holders shall be dissenting
Stockholders entitled to relief under Section 262 of the DGCL shall not exceed
five percent (5%) of all outstanding Farequest Shares.
Section 7.7. Due Diligence. The results of RCG's due diligence shall be
satisfactory to it in its sole and absolute discretion and RCG shall promptly
notify Farequest of any issues or questions discovered as a result of such due
diligence. RCG shall have until thirty (30) days from the date of this Agreement
to exercise its rights to not proceed based upon this Section 7.7.
Section 7.8. Agreements with Affiliates. RCG and SUB shall have received
from each Person who is an Affiliate under Section 5.11 an executed copy of the
written agreement referred to in Section 5.11 and such agreements shall be in
full force and effect and there shall be no breach, or in existence any facts
which with passage of time or otherwise could constitute a breach, thereof.
Section 7.9. Certificate of Merger. Farequest shall have delivered to RCG
the Certificate of Merger as executed by duly authorized officers of Farequest.
Section 7.10. Convertible Promissory Note. The convertible promissory note
in the principal amount of $1,217,800 issued to CS Holdings, Inc. (the "CS
Note") shall be restructured so that there will not be an acceleration or event
of default as a result of the transactions contemplated by this Agreement or
claims as a result of the transactions contemplated hereby. The CS Note shall be
subordinated to any secured lender for any future financing.
Section 7.11. Lidrock Agreement. The agreement titled 2004-2006 Lidrock
1-800 Cheap Tickets Partnership shall be restructured on terms satisfactory to
RCG or terminated.
Section 7.12. Related Party Transactions. Except as provided in the
following sentence, any and all amounts due under the Affiliated transactions
including those set forth on Schedule 7.12 hereto shall have been paid prior to
Closing. RCG shall receive from each Affiliated Party a statement indicating
that no sums are due and owing at the Closing, other than for payments due under
the license agreement with NPorta incurred in the ordinary course of business
within 30 days prior to Closing.
Section 7.13. Working Capital at the Closing. RCG shall have received
evidence that the working capital of Farequest shall be sufficient to fund the
operations of Farequest for the earlier of (i) 60 days after the Closing or (ii)
March 31, 2005.
Section 7.14. Employment Agreements. Farequest shall have entered into
employment agreements with each of Xxxxx Xxxx, Xxxxxx Stoechel, Xxx Spognolia,
and such other employees as RCG deems necessary, each on terms acceptable to
RCG.
Section 7.15. CS Note Indemnity. Seller shall have entered into an
agreement to indemnify Farequest for losses from any action to foreclose on the
assets of Farequest by the holder of the CS Note until such time as Farequest
and RCG shall have raised, after the Closing, new equity financing of in excess
of $5.0 million.
Section 7.16. General. All required action hereunder shall have been taken
by Farequest in connection with the consummation of the transactions
contemplated hereby, and all certificates, opinions and other documents required
to affect the Merger and the transactions contemplated herein shall be
reasonably satisfactory in form and substance to RCG.
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ARTICLE VIII
CONDITIONS TO THE OBLIGATIONS OF FAREQUEST
The obligations of Farequest to effect the Merger and to perform under
this Agreement is subject to the fulfillment on or before the Closing Date of
the following additional conditions, any one or more of which may be waived, in
writing, by Farequest:
Section 8.1. Representations Accurate. Each of the representations and
warranties of RCG contained in this Agreement (i) which is qualified by
materiality shall be true and correct in all respects and (ii) which is not so
qualified, shall be true and correct in all material respects, in each case as
of the date of this Agreement and as of the Closing Date as though such
representations and warranties were made at and as of the Closing Date, except
for such warranties which speak as any specific date which shall be true as of
such date.
Section 8.2. Performance. RCG and SUB shall have complied, in all material
respects, with all agreements, obligations and conditions required by this
Agreement to be complied with by them on or prior to the Closing Date.
Section 8.3. Compliance Certificate. Farequest shall have received a
certificate signed by the President or Chairman of each of RCG and SUB
certifying as to (i) satisfaction of the conditions set forth in Sections 8.1
and 8.2; (ii) the accuracy and completeness of the Charter and Bylaws of RCG and
Sub and, as applicable, the director and Stockholder resolutions of RCG and SUB
approving this Agreement, the Merger and the transactions contemplated hereby;
and (iii) the identity and authority of the officers and other persons executing
documents on behalf of RCG and SUB.
Section 8.4. Good Standing. Farequest shall have received a certificate of
good standing, or its equivalent, from the state of incorporation of RCG.
Section 8.5. Consents. Farequest shall have received copies of consents of
all third parties necessary for RCG and Sub to execute, deliver and perform this
Agreement and consummate the Merger.
Section 8.6. Certificate of Merger. SUB shall have delivered to Farequest
the Certificate of Merger, executed by duly authorized officers of SUB.
Section 8.7. Due Diligence. The results of Farequest's due diligence shall
be satisfactory to it in its sole and absolute discretion and Farequest shall
promptly notify RCG of any issues or questions discovered as a result of such
due diligence. Farequest shall have thirty (30) days from the date of this
Agreement to exercise its rights not to proceed based upon this Section 8.7.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
Section 9.1. Survival of Representations, Warranties and Covenants. The
representations, and warranties in this Agreement shall not survive the
Effective Time, provided, however, that the representations and warranties set
forth in Sections 3.2, 3.3, 3.5, 3.6, 3.7, 3.11, 3.13, 4.2, 4.3, 4.5, 4.10,
4.12, and 4.15 shall survive the period of one year after the Effective Time and
only the covenants that by their terms survive the Effective Time (including
Section 5.10) and this Article IX and Article XII shall survive the Effective
Time. Notwithstanding anything to the contrary contained herein, all
representations and warranties which extend beyond the Closing shall not
terminate with respect to any claim, whether or not fixed as to liability or
liquidated as to amount, with respect to which such party has been given a claim
notice prior to the date on which such representation or warranty expires.
Notwithstanding anything to the contrary contained in this Agreement, no
investigation by a party shall affect the representations, warranties, covenants
and agreements of the other parties under this Agreement or in any certificate,
schedule, listing, exhibit, agreement, document or other writing delivered
pursuant hereto in connection with the transactions contemplated hereby
furnished or to be furnished to the other parties and such representations,
warranties, covenants and agreements shall not be affected or deemed waived by
reason the fact that the other party or parties knew or should have known that
any of the same is or might be inaccurate in any respect.
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Section 9.2. Indemnification by the Farequest Stockholders. After the
Effective Time, the stockholders of Farequest shall, jointly and severally,
indemnify, defend, protect and hold harmless RCG and its officers, directors,
divisions, subdivisions, Affiliates (including, the Surviving Corporation),
stockholders, agents, employees, successors and assigns (collectively, the "RCG
INDEMNIFIED PARTIES") from and against all Losses (as defined below) that arise
as a result of or incident to: (a) any breach of, misrepresentation in, untruth
in or inaccuracy in the representations and warranties by Farequest or Seller
set forth in this Agreement or in any exhibit or in any other document delivered
pursuant to this Agreement; or (b) any claim by any third party that, if true,
would mean that a condition for indemnification set forth in subsection (a) of
this Section 9.2 had been satisfied. Notwithstanding the foregoing, however,
such indemnification obligations shall in all events be limited solely to the
extent of shares of RCG Common Stock as set forth in Section 9.7 below. For
purposes of this Article IX, "LOSSES" means liabilities, claims, damages,
actions, demands, assessments, adjustments, penalties, losses, costs and
expenses whatsoever (including court costs, reasonable attorneys' fees and
expenses of investigation), whether equitable or legal, matured or continued,
known or unknown, foreseen or unforeseen, ordinary or extraordinary, patent or
latent.
Section 9.3. Indemnification by RCG. After the Effective Time, RCG shall
indemnify, defend, protect and hold harmless the stockholders of Farequest
(collectively, the "FAREQUEST INDEMNIFIED PARTIES"), from and against all Losses
that arise as a result of or incident to: (a) any breach of, misrepresentation,
untruth in or inaccuracy, the representations and warranties of RCG and SUB set
forth in this Agreement; or (b) any claim by a third party that is true, would
mean that a condition for indemnification set forth in Subsection (a) of this
Section 9.3 had been satisfied. Notwithstanding the foregoing, however, such
indemnification obligations shall in all events be limited to shares of RCG
Common Stock as set forth in Section 9.7 below.
Section 9.4. Indemnification Procedure. Upon the occurrence of any claim
for which indemnification is believed to be due under this Agreement, other than
any claim discussed in Section 9.5 below, the party seeking indemnification (the
"INDEMNIFIED PARTY") shall provide notice of such claim (a "CLAIM NOTICE") to
the party from whom indemnification is sought (the "INDEMNIFYING PARTY"). The
Claim Notice shall state in general terms the circumstances giving rise to the
claim, specify the amount of the claim (or an estimate thereof), and make a
request for any payment then believed due. A Claim Notice shall be conclusive
against the Indemnifying Party in all respects 20 days after receipt by the
Indemnifying Party unless, within such period, the Indemnifying Party sends the
Indemnified Party a notice disputing the propriety or amount of the claim (a
"DISPUTE NOTICE"). Any Dispute Notice shall describe the basis for such
objection and the amount of the claim that the Indemnifying Party does not
believe should be subject to indemnification. Upon receipt of any Dispute
Notice, the Indemnified Party and the Indemnifying Party shall use reasonable
efforts to cooperate and arrive at a mutually acceptable resolution of the
dispute within the next 30 days. If a resolution is not reached within the 30
day period, either party may submit the dispute to a court with proper
jurisdiction.
Section 9.5. Indemnification Procedure with Respect to Third Party Claims.
(a) If any third party shall notify an Indemnified Party pursuant to
this Agreement with respect to any matter (a "THIRD PARTY CLAIM") that may give
rise to a claim for indemnification against any Indemnifying Party, then the
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying Party from
any obligation under this Agreement unless, and then solely to the extent that,
the Indemnifying Party is thereby prejudiced.
(b) The Indemnifying Party will have the right to defend the
Indemnified Party against a Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as: (i) the Indemnifying Party
notifies the Indemnified Party in writing within a reasonable time after the
Indemnified Party has given notice of the Third Party Claim that the
Indemnifying Party will indemnify the Indemnified Party; (ii) the Indemnifying
Party provides the Indemnified Party with evidence acceptable to the Indemnified
Party that the Indemnifying Party will have the financial resources to defend
against the Third Party Claim and fulfill its indemnification obligations under
this Agreement; (iii) the Third Party Claim involves only monetary damages and
does not seek an injunction or equitable relief or involve the possibility of
criminal penalties; (iv) settlement of or adverse judgment with respect to the
Third Party Claim is not, in the good faith judgment of the Indemnified Party,
likely to establish a precedential custom or practice adverse to the continuing
business interests of the Indemnified Party, and (v) the Indemnifying Party
conducts the defense of the Third Party Claim actively and diligently.
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(c) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Section 9.5(b), (i) the Indemnified
Party may retain separate co-counsel at its sole cost and expense and
participate in the defense of the Third Party Claim, (ii) the Indemnified Party
will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the
Indemnifying Party (which will not be unreasonably withheld), and (iii) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (which will not be unreasonably withheld).
(d) If or to the extent that any of the conditions set forth in
Section 9.5(b) is or becomes unsatisfied: (i) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim and any matter it may deem appropriate in
its sole discretion and the Indemnified Party need not consult with, or obtain
any consent from, any Indemnifying Party in connection therewith (but will keep
the Indemnifying Party reasonably informed regarding the progress and
anticipated cost thereof); (ii) the Indemnifying Party will reimburse the
Indemnified Party promptly and periodically for the reasonable cost of defending
against the Third Party Claim (including attorneys' fees and expenses); (iii)
unless the indemnified party elects to assume the defense due to clause (iv) of
Section 9.5(b), the Indemnifying Party will remain responsible for any Losses
the Indemnified Party may suffer that arise as a result of or incident to the
Third Party Claim to the fullest extent provided in this Section 9; and (iv) the
Indemnifying Party shall be deemed to have waived any claim that its
indemnification obligations should be reduced because of the manner in which
counsel for the Indemnified Party handled the Third Party Claim.
Section 9.6. Threshold Funds. The Farequest Escrow Shares shall be the
only source available to satisfy the indemnification claims of the RCG
Indemnified Parties pursuant to this Article IX. Issuance by RCG of a number of
shares of RCG Common Stock equal to the number of the Farequest Escrow Shares
shall be the only source available to satisfy indemnification claims of the
Farequest Indemnified Parties pursuant to Article IX.
Section 9.7. Basket and Limitation. Notwithstanding anything to the
contrary in the foregoing provisions of this Article 9, no party shall be
required to indemnify another party until the aggregate of the Losses of the
party seeking indemnification reaches $150,000, at which point (i) RCG shall be
liable for all such Losses of the Farequest Indemnified Parties in excess of
$150,000 up to a maximum liability of the Shares, and (ii) the Farequest
stockholders shall be liable for all such Losses of the RCG Indemnified Parties
in excess of $150,000 up to a maximum liability of the Escrow Shares, which
shares shall be held in escrow. For purposes of this Section 9.7, "Escrow
Shares" as to RCG and Farequest shall be such number of shares of RCG Common
Stock as shall equal 10% of the number of shares of RCG Common Stock to be
received by the Farequest stockholders at Closing. For purposes of this Article
9, the shares of RCG Common Stock shall be valued at the average of closing
price of RCG's common stock for the ten (10) trading days prior to the
distribution of the shares from the escrow or issuance by RCG with respect to
the Loss. Notwithstanding the foregoing, the Stockholder's Representative shall
be able to satisfy any Losses by a cash payment to RCG (and in such event an
equivalent value of Escrow Shares shall be released from the Escrow under the
Escrow Agreement), only in the event that (i) the fair market value of RCG's
Common Stock is less than $2.00 per share at the time of payment of such Loss
and (ii) the Stockholder's Representative agrees to indemnify and hold RCG
harmless from any claims including those of Farequest stockholders as a result
of the Stockholder's Representative ability to make such payments.
Section 9.8. Other Indemnification Provisions. Except in the case of fraud
or as provided in Article XI following the Effective Time, the right to
indemnification set forth in this Article IX (subject to all limitations
provided herein) shall be the sole and exclusive remedy of the parties and all
parties entitled to indemnification under or by reason of this Agreement or any
representation, warranty, covenant or agreement set forth in this Agreement or
any other agreement contemplated hereby, other than the covenants contained in
Article II, Section 5.10, Section 12.15, and Section 12.16 hereof.
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ARTICLE X
CLOSING
Section 10.1. Time and Place. Subject to the provisions of Articles VI,
VII, VIII, IX and XI, the closing of the Merger (the "CLOSING") shall take place
at the offices of RCG, as soon as practicable, but in no event later than the
second Business Day after the date on which each of the conditions set forth in
Articles VI, VII and VIII (other than those conditions that by their nature are
to be satisfied at the Closing but subject to such conditions) have been
satisfied or waived, in writing, by the party or parties entitled to the benefit
of such conditions; or at such other place, at such other time, or on such other
date as RCG, SUB and Farequest may mutually agree. The date on which the Closing
actually occurs is herein referred to as the "CLOSING DATE." The Closing shall
be deemed to be effective concurrently with the Effective Time. All proceedings
to be taken and all documents to be executed at the Closing shall be deemed to
have been taken, delivered, executed and filed simultaneously and simultaneously
with the Effective Time, no proceeding shall be taken or documents deemed
executed or delivered until all have been taken, delivered, executed and filed.
Section 10.2. Filings at the Closing. Subject to the provisions of
Articles VI, VII, VIII and XI hereof, Farequest, RCG and SUB shall cause to be
executed and filed at the Closing the Certificate of Merger and shall cause the
Certificate of Merger to be recorded in accordance with the applicable
provisions of the DGCL and shall take any and all other lawful actions and do
any and all other lawful things necessary to cause the Merger to become
effective.
ARTICLE XI
TERMINATION AND ABANDONMENT
Section 11.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Farequest and RCG:
(a) by mutual consent of RCG and Farequest;
(b) by either RCG or Farequest, if any court of competent
jurisdiction in the United States or other governmental body in the United
States shall have issued an Order (other than a temporary restraining order),
decree or ruling or taken any other Action restraining, enjoining or otherwise
prohibiting the Merger, and such Order, decree, ruling or other Action shall
have become final and nonappealable;
(c) by RCG or Farequest, if a meeting of RCG stockholders has been
duly convened to approve the transactions contemplated by this Agreement and, if
the requisite stockholder approval of the stockholders of RCG is not obtained at
such meeting of stockholders duly called and held therefore;
(d) by either RCG or Farequest if the Merger shall not have been
consummated by March 31, 2005, provided that a party in material breach of this
Agreement may not terminate this Agreement; or
(e) at any time after January 1, 2005, by either RCG or Farequest if
the conditions in Sections 8.7, 7.7, or 6.6 hereof have not been satisfied or
waived in writing.
Section 11.2. Termination by RCG. This Agreement may be terminated and the
Merger may be abandoned, at any time prior to the Effective Time, before or
after the approval of the stockholders of RCG, by RCG if (a) Farequest shall
have failed to comply in any material respect with any of the covenants or
agreements contained in Articles I, II and V of this Agreement to be complied
with by Farequest at or prior to such date of termination, (b) there exists a
breach of any representation or warranty of Farequest contained in this
Agreement such that the closing conditions set forth in Article VII could not be
satisfied, provided, however, that with respect to either (a) or (b), if such
failure or breach is capable of being cured prior to the Effective Time, such
failure or breach shall not have been cured within ten (10) days of delivery to
Farequest of written notice of such failure or breach, (c) the Board of
Directors of Farequest shall have failed to recommend, or shall have withdrawn,
modified or changed its recommendation of this Agreement or the Merger in a
manner adverse to RCG or shall have recommended or issued a neutral
recommendation with respect to any proposal in respect of a Transaction Proposal
(as defined in Section 5.3 above) with a Person other than RCG or any Affiliate
of RCG (or the Farequest Board of Directors resolves to do any of the
foregoing), or (d) the Board of Directors of Farequest shall furnish or disclose
nonpublic information or negotiate, explore or communicate in any way with a
third party with respect to any Transaction Proposal, or shall have resolved to
do any of the foregoing and publicly disclosed such resolution.
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Section 11.3. Termination by Farequest. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval by the stockholders of RCG or Farequest, by Farequest, if
(a) RCG or SUB shall have failed to comply in any material respect with any of
the covenants or agreements contained in Articles I, II and V of this Agreement
to be complied with by RCG or SUB at or prior to such date of termination, (b)
there exists a material breach of any representation or warranty of RCG or SUB
contained in this Agreement such that the closing conditions set forth in
Article VIII would not be satisfied, provided, however, that, with respect to
either (a) or (b), if such failure or breach is capable of being cured prior to
the Effective Time, such failure or breach shall not have been cured within ten
(10) days of delivery to RCG or SUB of written notice of such failure or breach.
Section 11.4. Procedure for Termination. In the event of termination and
abandonment of the Merger by RCG or Farequest pursuant to this Article XI,
written notice thereof shall forthwith be given to the other.
Section 11.5. Effect of Termination and Abandonment. In the event of
termination of this Agreement and abandonment of the Merger pursuant to this
Article XI, no party hereto (or any of its directors or officers) shall have any
liability or further obligation to any other party to this Agreement, except as
provided in this Section 11.5 and in Sections 5.10 and 5.4(b) hereof.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Notices. All notices shall be in writing delivered as
follows:
If to RCG or SUB, to:
RCG Companies Incorporated
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxx Xxxxxx
With a copy to:
Xxxxxx & Xxxx, P.A.
000 Xxxx Xxx Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxx Xxxxxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxx, Esq.
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If to Farequest, to:
Farequest Holdings, Inc.
c/o JC Nationwide, Inc.
0000 Xxxxxxx Xxxxx, Xxxxx X-0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxxxx
With a copy to:
Xxxxxx Xxxxxx Xxxxx Xxxxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxx, Esq. and Xxxxxxx X. Xxxxx, Esq.
or to such other address as may have been designated in a prior notice pursuant
to this Section. Notices shall be deemed to be effectively served and delivered
(a) when delivered personally; (b) when given by facsimile against confirmation
(with a copy mailed by first-class U.S. mail); (c) one (1) Business Day
following deposit with a recognized national air courier service; or (d) three
(3) Business Days after being deposited in the United States mail in a sealed
envelope, postage prepaid, return receipt requested, to the appropriate party.
Section 12.2. Binding Effect. Except as may be otherwise provided herein,
this Agreement will be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted assigns, but neither this
Agreement nor any of the rights or obligations hereunder shall be assigned by
any of the parties hereto without the prior written consent of the other
parties. Except as otherwise specifically provided in this Agreement, nothing in
this Agreement is intended or will be construed to confer on any Person other
than the parties hereto any rights or benefits hereunder.
Section 12.3. Headings. The headings in this Agreement are intended solely
for convenience of reference and will be given no effect in the construction or
interpretation of this Agreement.
Section 12.4. Exhibits and Schedules. The exhibits and schedules referred
to in this Agreement will be deemed to be a part of this Agreement.
Section 12.5. Counterparts. This Agreement may be executed in multiple
counterparts, each of which will be deemed an original, and all of which
together will constitute one and the same document.
Section 12.6. Governing Law. This Agreement will be governed by the laws
of the State of Delaware without regard to conflict of laws principles thereof.
Section 12.7. Waivers. Compliance with the provisions of this Agreement
may be waived only by a written instrument specifically referring to this
Agreement and signed by the party waiving compliance. No course of dealing, nor
any failure or delay in exercising any right, will be construed as a waiver, and
no single or partial exercise of a right will preclude any other or further
exercise of that or any other right.
Section 12.8. Pronouns. The use of a particular pronoun herein will not be
restrictive as to gender or number but will be interpreted in all cases as the
context may require.
Section 12.9. Time Periods. Any action required hereunder to be taken
within a certain number of days will be taken within that number of calendar
days unless otherwise provided; provided, however, that if the last day for
taking such action falls on a weekend or a holiday, the period during which such
action may be taken will be automatically extended to the next Business Day.
35
Section 12.10. Modification. No supplement, modification or amendment of
this Agreement will be binding unless made in a written instrument that is
signed by all of the parties hereto and that specifically refers to this
Agreement.
Section 12.11. Entire Agreement. This Agreement and the agreements and
documents referred to in this Agreement or delivered hereunder are the exclusive
statement of the agreement among the parties concerning the subject matter
hereof. All negotiations among the parties are merged into this Agreement, and
there are no representations, warranties, covenants, understandings, or
agreements, oral or otherwise, in relation thereto among the parties other than
those incorporated herein and to be delivered hereunder.
Section 12.12. Severability. If any one or more of the provisions of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity,
legality or enforceability of the remaining provisions of this Agreement shall
not be affected thereby. To the extent permitted by applicable law, each party
waives any provision of law which renders any provision of this Agreement
invalid, illegal or unenforceable in any respect.
Section 12.13. Investigation. The respective representations and
warranties of RCG, SUB and Farequest contained herein or in any certificate or
other documents delivered prior to or at the Closing shall not be deemed waived
or otherwise affected by any investigation made by any party hereto.
Section 12.14. Appointment and Duties of Stockholders' Representative.
(a) Farequest hereby irrevocably appoints Xxxxxxx X. Xxxxxxxxx to
act as "STOCKHOLDERS' REPRESENTATIVE" on behalf of all of the stockholders of
Farequest under this Agreement and all other agreements, certificates and
documents contemplated by this Agreement. Farequest covenants that it has the
authority to appoint such Stockholders' Representative on behalf of the
Farequest stockholders. To give and receive notices and communications, to
authorize delivery to RCG Indemnified Parties of the Escrowed Shares and
satisfaction of claims by any RCG Indemnified Parties, to object to such
deliveries, to agree to, negotiate, enter into settlements and compromises of,
initiate and defend actions and comply with Orders of the courts with respect to
such claims, and to take all necessary and appropriate in the judgment of the
Stockholders Representative for the accomplishment of the foregoing, subject to
the terms and conditions of this Section 12.14. Farequest hereby irrevocably
authorizes Stockholders' Representative to take such actions on behalf of the
Farequest stockholders and to exercise such powers as are designated to
Stockholders' Representative by the terms and provisions of this Agreement,
together with such actions as are reasonably incidental thereto. Xxxxxxx X.
Xxxxxxxxx has accepted such appointment as Stockholders' Representative.
(b) RCG and Farequest shall be entitled to rely upon instructions
from Stockholders' Representative, and shall be entitled to give any notice
required to be given to the Stockholders of Farequest under this Agreement and
all other agreements, certificates and documents contemplated by this Agreement
solely to Stockholders' Representative. Neither RCG, SUB nor Farequest shall be
liable for any acts or omissions of Stockholders' Representative in connection
with the performance by Stockholders' Representative of his obligations under
this Agreement. By approval of this Agreement, each stockholder of Farequest
hereby irrevocably appoints Stockholders' Representative as his, her or its
agent for purposes of the first sentence of Section 12.14(a), for purposes of
acting on behalf of the Stockholders of Farequest, and for all other purposes
contemplated by this Section 12.14
(c) If Stockholders' Representative resigns from such position, the
resulting vacancy shall be filled by Xxxx Xxxxxxx and, in such case, if he
resigns or declines to accept such appointment to the resulting vacancy, the
position will immediately be filled by approval of the beneficial holders of a
majority of the Farequest shares of common stock outstanding immediately before
the Effective Time.
No bond shall be required of Stockholders' Representative. Stockholders'
Representative shall not be liable to the Stockholders for any act taken or
omitted under this Agreement as Stockholders' Representative while acting in
good faith and in accordance with this Agreement.
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Section 12.15. Nomination of Directors. For the next three (3) annual
meetings after the Effective Time, RCG's board of directors shall nominate, and
recommend for election by the stockholders, Xxxxxxx X. Xxxxxxxxx, as Chairman of
the Board of Directors, and provided Xx. Xxxxxxxxx shall continue to own at
least ten percent (10%) of the outstanding Common Stock of RCG, RCG's Board of
Directors shall also nominate and recommend for election by the stockholders,
two (2) additional directors named by Xx. Xxxxxxxxx who shall be "independent
directors" and reasonably acceptable to the then existing board of directors.
Xx. Xxxxxxxxx agrees to vote Xx. Xxxxxxxxx'x shares of RCG Common Stock (i)
during such three (3) year period, for Xxxxxxx Xxxxxx as a member of the RCG
board of directors, provided Xx. Xxxxxx holds 750,000 shares of RCG common stock
at the time of the applicable vote, and (ii) for the remaining nominees
nominated by the RCG board for a one-year term beginning with the Effective
Time.
Section 12.16. Broker Fee. Seller shall pay in cash one half of the fees
referenced in Schedule 3.16 on or prior to Closing, and RCG shall at Closing
issue 315,000 shares of RCG Common Stock to the Person as described on Schedule
3.16; provided for each $1.00 less than $315,000 paid by Farequest for such
fees, RCG shall pay one less share.
ARTICLE XIII
DEFINITIONS
Section 13.1. The following terms, when used in this Agreement, have the
meaning as set forth below:
"ACTION" shall mean any claim, action, suit, inquiry, judicial or
administrative proceeding, or arbitration by or before any Governmental
Authority.
"AFFILIATE" shall mean with respect to any Person, any other Person
controlling, controlled by or under common control with such Person, with
"control" for such purpose meaning the possession, directly or indirectly, of
the power to direct or cause the direction of the management and policies of
such Person, whether through ownership of voting securities or voting interests,
by contract or otherwise.
"BUSINESS DAY" shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in Atlanta, Georgia are required or authorized to
be closed.
"CONSENTS" shall mean all authorizations, notices, waivers, approvals and
consents required by any Governmental Authority or under any Contracts for a
party to execute and deliver this Agreement and consummate the transactions
contemplated hereby.
"CONTRACTS" shall mean all contracts, agreements, leases, license
agreements, obligations, promises or undertakings (whether written or oral and
whether expressed or implied).
"EXCHANGE RATIO" shall mean the fraction which has a numerator of
17,509,090 and the denominator which is the number of outstanding common shares
of Farequest as of immediately prior to the Effective Time.
"ERISA" shall mean the Employment Retirement Security Act of 1974, as
amended.
"GAAP" shall mean generally accepted accounting principles as in effect
from time to time in the United States of America.
"GOVERNMENTAL AUTHORITY" shall mean any court, governmental, regulatory or
administrative body, agency or authority, department, commission, agency,
self-regulatory organization, instrumentality or arbitrator, whether federal,
state, local or foreign.
"KNOWLEDGE OR KNOWLEDGE OF FAREQUEST" or "KNOWLEDGE OR KNOWLEDGE OF
FAREQUEST" shall mean the actual knowledge after reasonable inquiry of the
officers of Farequest, Seller and Xxxx Xxxxxxx.
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"KNOWLEDGE OR KNOWLEDGE OF RCG" or "KNOWLEDGE OR KNOWLEDGE OF RCG" shall
mean the actual knowledge after reasonable inquiry of the executive officers of
RCG.
"LAWS" shall mean all federal, state, local and foreign laws, statutes,
regulations or other requirements.
"LIENS" shall mean liens, charges, pledges, security interests, claims,
mortgages, options, encumbrances, rights of first refusal, conditions, covenants
and other restrictions.
"MARKET VALUE" shall mean the average closing price of the RCG Common
Stock for the 10 trading days immediately preceding the applicable reference
date of determination of Market Value.
"MATERIAL ADVERSE EFFECT" shall mean a materially adverse effect on the
business, results of operations, assets, liabilities or condition (financial or
otherwise) of Farequest or RCG, as the case may be, and in each case including
its respective Subsidiaries taken as a whole, other than any change, event or
occurrence resulting from any change to the extent generally affecting the
national or any local economy or the industries in which Farequest or RCG, as
the case may be, and their Subsidiaries operate.
"MATERIAL INTELLECTUAL PROPERTY" shall mean all Intellectual Property that
is material to the conduct of RCG or Farequest, as the case may be, and their
respective Subsidiaries' businesses, taken as a whole, as currently conducted,
whether owned, licensed or used by RCG or Farequest, as the case may be, or
their respective Subsidiaries.
"OPTION PROPORTION" shall mean the fraction which has a numerator equal to
the total number of shares of Farequest Common stock which are issuable upon the
exercise of all options and warrants for the purchase of Farequest common stock
which are outstanding immediately prior to the Effective Time, and a denominator
which is the sum of (i) the number of outstanding common shares of Farequest as
of immediately prior to the Effective Time, plus (ii) the total number of shares
of Farequest common stock which are issuable upon the exercise of all options
and warrants for the purchase of Farequest common stock which are outstanding
immediately prior to the Effective Time.
"ORDER" shall mean any order, judgment, writ, injunction or decree of any
Governmental Authority.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, joint venture, estate, trust, association or entity of any
kind whatsoever, including any Governmental Authority.
"TAX" OR "TAXES" shall mean (w) any and all taxes, assessments, customs,
duties, levies, fees, tariffs, imposts, deficiencies and other governmental
charges of any kind whatsoever (including, but not limited to, taxes on or with
respect to net or gross income, franchise, profits, gross receipts, capital,
sales, use, ad valorem, value added, transfer, real property transfer, transfer
gains, inventory, capital stock, license, payroll, employment, social security,
unemployment, severance, occupation, real or personal property, estimated taxes,
rent, excise, occupancy, recordation, bulk transfer, intangibles, alternative
minimum, doing business, withholding and stamp), together with any interest
thereon, penalties, fines, damages costs, fees, additions to tax or additional
amounts with respect thereto, imposed by the United States or any state or local
or other applicable jurisdiction; (x) any liability or obligations to a
Governmental Authority as a result of any escheat or similar law, (y) any
liability for the payment of any amounts described in clause (w) or (x) as a
result of being a member of an affiliated, consolidated, combined, unitary or
similar group or as a result of transferor or successor liability; and (z) any
liability for the payments of any amounts as a result of being a party to any
Tax Sharing Agreement or as a result of any express or implied obligation to
indemnify any other Person with respect to the payment of any amounts of the
type described in clause (w), (x) or (y).
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"TAX RETURN" shall mean all returns (whether federal, state, local or
otherwise) and reports (including elections, declarations, disclosures,
schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065)) required to be supplied to a Tax
authority relating to Taxes.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their respective duly authorized officers as of the date first above
written.
RCG COMPANIES INCORPORATED
By: /s/
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WTI ACQUISITION, INC.
By: /s/
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FAREQUEST HOLDINGS, INC.
By: /s/
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Xxxxxxx X. Xxxxxxxxx
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