UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997 OR
| | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File No. 0-29296
TRAVEL SERVICES INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-2030324
- --------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
220 Congress Park Drive
Delray Beach, Florida 33445
(Address of principal executive offices)
(Zip Code)
(561) 266-0860
(Registrant's telephone number, including area code)
515 FLAGLER DRIVE, SUITE 300-PAVILLION, WEST PALM BEACH,
FL 33401 (Former name, former address and former fiscal year, if
changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No __
The number of shares outstanding of the issuer's Common Stock, par
value $.01 per share, as of November 7, 1997, was 8,781,726.
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TRAVEL SERVICES INTERNATIONAL, INC.
FORM 10-Q
INDEX
PAGE
<S> <C> <C>
PART I FINANCIAL INFORMATION...........................................................................3
Item 1. Financial Statements
General Information ............................................................................3
Balance Sheets as of December 31, 1996 and September 30, 1997 ..................................4
Statements of Income for the Three Months Ended September 30, 1996
and 1997, and the Nine Months Ended September 30, 1996 and 1997.................................5
Statements of Pro Forma Combined Income for the Three Months Ended
September 30, 1996 and 1997, and the Nine Months Ended
September 30, 1996 and 1997.....................................................................6
Statements of Cash Flows for the Nine Months Ended September 30, 1996
and 1997........................................................................................7
Notes to Financial Statements...................................................................8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..........................................................................14
PART II OTHER INFORMATION..............................................................................24
Item 1. Legal Proceedings..............................................................................24
Item 2. Changes in Securities and Use of Proceeds .....................................................24
Item 5. Other Information..............................................................................25
Item 6. Exhibits and Reports on Form 8-K...............................................................27
SIGNATURES.......................................................................................................29
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2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GENERAL INFORMATION
Travel Services International, Inc. ("TSI" or the "Company") was established to
create a leading single source distributor of specialized leisure travel
services to both travel agents and travelers. On July 28,1997, simultaneously
with the closing of its initial public offering (the "Offering") of its common
stock (the "Common Stock"), TSI acquired five specialized distributors of travel
services in separate combination transactions (the "Combinations"). As a result
of the Combinations, TSI acquired the outstanding capital stock of Cruises Inc.
("Cruises Inc.") and D- FW Tours, Inc. and D-FW Travel Arrangements, Inc.
(collectively, "D-FW Tours"), and acquired substantially all of the assets of
Auto Europe, Inc. (Maine) ("Auto Europe"), Cruises Only, Inc. ("Cruises Only")
and 800-Ideas, Inc. ("Travel 800") (each a "Founding Company" and collectively
the "Founding Companies").
The consideration for the Combinations consisted of cash and Common Stock. The
Combinations are accounted for under the purchase method of accounting. Auto
Europe has been designated as the accounting acquiror for financial statement
presentation purposes in accordance with Securities and Exchange Commission
("SEC") Staff Accounting Bulletin No. 97, which states that the combining
company which receives the largest portion of voting rights in the combined
corporation is presumed to be the acquiror for accounting purposes. Accordingly,
the historical financial statements represent those of Auto Europe prior to the
Combinations and the Offering, and include balances and transactions of the
Founding Companies and TSI since July 28, 1997. Unless the context otherwise
requires, all references herein to the Company include Auto Europe and the other
Founding Companies.
Operating results for interim periods are not necessarily indicative of the
results for full years. The financial statements included herein should be read
in conjunction with the Pro Forma Combined Financial Statements of the Company
and the related notes thereto, the Financial Statements of TSI, Auto Europe,
Cruises Inc., Cruises Only and Travel 800 and related notes thereto, and
management's discussion and analysis of financial condition and results of
operations related thereto, all of which are included in the Company's
Registration Statement on Form S-1 (No. 333-27125), as amended (the
"Registration Statement"), filed with the SEC in connection with the Offering.
3
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TRAVEL SERVICES INTERNATIONAL, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31, SEPTEMBER 30,
1996 1997
(UNAUDITED)
------------ -------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ - $ 14,389
Trade and other receivables, net of
allowance of $194 for September 1997 - 2,554
Receivables from affiliates and employees 370 491
Other current assets 52 1,370
----------- -------------
Total current assets 422 18,804
Property and equipment, net 4,825 9,230
Goodwill - 41,435
Other assets 2,203 674
----------- -------------
Total assets $ 7,450 $ 70,143
=========== =============
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
Current Liabilities:
Bank overdraft $ 672 $ -
Line of credit and short-term debt 2,300 -
Current maturities of long-term debt
and capital lease obligations 204 472
Due to founding companies' stockholders - 1,780
Trade payables, customer deposits
and deferred income 1,774 10,705
Due to travel service providers 1,790 4,251
----------- -------------
Total current liabilities 6,740 17,208
Long-term debt, net of current maturities
and capital lease obligations 1,880 4,050
Deferred income - 145
Commitments and contingencies
Stockholders' Equity (Deficit):
"Preferred stock, $0.01 par value;
1,000,000 shares authorized;
none outstanding - -
Common stock, $0.01 par value;
50,000,000 shares authorized; 1,083,334 and
8,781,726 shares outstanding, respectively 10 88
Additional paid-in capital 127 49,322
Retained earnings (deficit) (1,307) (670)
----------- -------------
Total stockholders' equity (deficit) (1,170) 48,740
----------- -------------
Total liabilities and stockholders'
equity (deficit) $ 7,450 $ 70,143
=========== =============
The accompanying notes are an integral part of these financial statements.
</TABLE>
4
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<CAPTION>
TRAVEL SERVICES INTERNATIONAL, INC.
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SEPT 30, NINE MONTHS ENDED SEPT 30,
--------------------------- --------------------------
1996 1997 1996 1997
------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net revenues $ 6,927 $ 14,613 $ 22,464 $ 34,855
Operating expenses 4,876 9,404 16,146 23,122
------------ ------------ ------------ ------------
Gross profit 2,051 5,209 6,318 11,733
General and administrative expenses 1,826 3,372 5,668 8,446
Goodwill amortization - 202 - 202
------------ ------------ ------------ ------------
Income for operations 225 1,635 650 3,085
Interest expense and other, net 28 (45) 124 81
------------ ------------ ------------ ------------
Income before income taxes 197 1,680 526 3,004
Provision for income taxes - 101 - 101
------------ ------------ ------------ ------------
Net income $ 197 $ 1,579 $ 526 $ 2,903
============ ============ ============ ============
Earnings per share $ 0.18 $ 0.23 $ 0.49 $ 0.97
Shares used in computing earnings
per share 1,083,334 6,741,270 1,083,334 2,997,048
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
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<CAPTION>
TRAVEL SERVICES INTERNATIONAL, INC.
STATEMENTS OF PRO FORMA COMBINED INCOME
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(UNAUDITED)
THREE MONTHS ENDED SEPT 30, NINE MONTHS ENDED SEPT 30,
--------------------------- --------------------------
1996 1997 1996 1997
----------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Net revenues $ 13,342 $ 17,260 $ 42,543 $ 55,198
Operating expenses 8,535 11,228 27,553 34,614
----------- ------------ ------------ -----------
Gross profit 4,807 6,032 14,990 20,584
General and administrative expenses 2,621 3,918 7,585 9,877
Goodwill amortization 303 303 909 909
----------- ------------ ------------ -----------
Income from operations 1,883 1,811 6,496 9,798
Interest expense and other, net 71 (48) 152 152
Income before income taxes 1,812 1,859 6,344 9,646
Provision for income taxes 761 781 2,664 4,051
----------- ------------ ------------ -----------
Net income $ 1,051 $ 1,078 $ 3,680 $ 5,595
=========== ============ ============ ===========
Pro forma net income per share $ 0.12 $ 0.12 $ 0.42 $ 0.63
=========== ============ ============ ===========
Shares used in computing pro forma
net income per share 8,781,726 9,000,581 8,781,726 8,855,750
=========== ============ ============ ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
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<CAPTION>
TRAVEL SERVICES INTERNATIONAL, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------
1996 1997
-------------- --------------
<S> <C> <C>
Cash from operating activities:
Net income $ 526 $ 2,903
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation and amortization 482 850
Changes in operating assets and liabilities:
Trade and other receivables - (264)
Receivables from stockholder and employees (182) (93)
Other current assets (6) (1,015)
Other assets 1 474
Due to travel service providers (2,949) 6,612
Trade payables, customer deposits and
deferred income 4,885 (1,522)
-------------- --------------
Net cash provided by operating activites 2,757 7,945
Cash flows from investing activities:
Purchase of property and equipment (2,597) (1,129)
Proceeds from sale of property and equipment 25 54
Cash paid for business acquisitions net of cash acquired - (17,348)
-------------- --------------
Net cash used in investing activities (2,572) (18,423)
Cash flows from financing activities:
Net payments on short-term debt (693) (2,300)
Proceeds from long-term debt 2,415 -
Payments on long-term debt (845) (980)
Net proceeds from initial public offering - 33,349
Distributions to founding companies
stockholders (110) (5,202)
-------------- --------------
Net cash provided by financing activities 767 24,867
Net increase in cash and cash equivalents 952 14,389
Cash and cash equivalents, beginning of period 14 -
-------------- --------------
Cash and cash equivalents, end of period $ 966 $ 14,389
-------------- --------------
Supplemental disclosure of non-cash financing and
investing activites:
Cash paid for interest $ 211 $ 258
============== ==============
Receivable from stockholder exchanged for
non-operating assets $ 2,200 $ -
============== ==============
Assets distributed to founding companies stockholders:
Other assets $ - $ 2,120
============== ==============
Fixed assets $ - $ 82
============== ==============
Capital lease obligations $ - $ 25
============== ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
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TRAVEL SERVICES INTERNATIONAL
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(UNAUDITED)
1. BASIS OF PRESENTATION
TSI was established to create a leading single source distributor of specialized
leisure travel services to both travel agents and travelers. On July 28, 1997,
TSI acquired the Founding Companies for consideration consisting of cash and
Common Stock. The closing of the Offering also occurred on that date.
For financial statement purposes, Auto Europe, one of the Founding Companies,
has been identified as the accounting acquiror. Accordingly, the historical
financial statements represent those of Auto Europe prior to the Combinations
and the Offering, and include balances and transactions of the Founding
Companies and TSI since July 28, 1997. The Combinations were accounted for using
the purchase method of accounting. Allocations of the purchase price to the
assets acquired and liabilities assumed of the Founding Companies have been
initially assigned and recorded based on preliminary estimates of fair values
and may be revised as additional information concerning the valuation of such
assets and liabilities becomes available.
The interim financial statements as of September 30, 1997 and for the three and
nine month periods ended September 30, 1996 and 1997 are unaudited, and certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments necessary to fairly present the financial position,
results of operations and cash flows with respect to the interim financial
statements, have been included. The results of operations for the interim
periods are not necessarily indicative of the results for the entire fiscal
year.
The unaudited pro forma combined financial information for the three and nine
month periods ended September 30, 1996 and 1997 includes the results of TSI
combined with the Founding Companies as if the Combinations had occurred at the
beginning of each respective three and nine month period. The pro forma combined
financial information includes the effects of : (i) the Combinations; (ii)
distributions of certain assets prior to the Combinations to the former owners
of the Founding Companies; (iii) certain adjustments to salaries, bonuses, and
benefits to former owners and key management of the Founding Companies, to which
such persons have agreed prospectively (the "Compensation Differential"); (iv)
reversal of the non-recurring, non-cash compensation charge of $7.1 million
recorded by TSI in the three months ended March 31, 1997 related to Common Stock
issued to founders and management of TSI; (v) provision for income taxes as if
income was subject to corporate federal and state income taxes during the
8
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periods; (vi) repayment of long-term debt of $730,000; and (vii) amortization of
goodwill resulting from the Combinations. Prior to the Combinations, the
Founding Companies were not under common control or management; accordingly, the
pro forma combined financial information may not be indicative of or comparable
to the Company's post-Combination results of operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
There have been no significant changes in the accounting policies of the Company
during the periods presented. For a description of these policies, refer to Note
2 to Financial Statements of Auto Europe, Cruises Inc., Cruises Only and Travel
800 included in the Financial Statements in the Company's Registration
Statement.
3. LONG-TERM DEBT AND CREDIT FACILITY
On July 28, 1997, former stockholders of Cruises Only were released from
personal guarantees of outstanding long-term debt and, in exchange for this
release, TSI pledged $3.4 million as additional security for the debt. In early
1998, the Company plans to draw down on the term loan that is part of the credit
agreement discussed below in order to simultaneously pay off the existing
Cruises Only mortgage of approximately $2 million, and also to borrow on the
line of credit to repay existing Cruises Only term loans totaling approximately
$1.4 million.
Also on July 28, 1997, outstanding long-term debt of Cruises Inc. totaling
$52,000 was prepaid and the former stockholders were released from personal
guarantees of such debt.
On August 19, 1997, Auto Europe was required, in accordance with government
regulations, to prepay a second mortgage loan from the U.S. Small Business
Administration (SBA) with an outstanding balance of $730,000. The original
maturity date was October 2016 and a prepayment penalty of $54,000 was incurred.
In connection with this prepayment, the holder of the first mortgage notified
Auto Europe that the maturity date of its mortgage would be changed to August
2002, from the current maturity date of September 2011. The accelerated maturity
date will not impact the 15-year amortization schedule for the first mortgage.
On October 15, 1997, the Company entered into a credit agreement (the "Credit
Agreement") with NationsBank, N.A. with respect to a $20 million revolving line
of credit (the "Credit Facility") and a term loan facility of approximately $2
million (the "Term Loan"). The Credit Facility may be used for acquisitions,
capital expenditures, refinancing of Founding Companies' debt, and for general
corporate purposes. The Credit Agreement requires the Company to comply with
various loan covenants, which include maintenance of certain financial ratios,
restrictions on additional indebtedness and restrictions on liens, guarantees,
advances, capital expenditures, sale of assets, and dividends. Interest on
outstanding balances of the Credit Facility will be computed based on the
Eurodollar Rate plus a margin ranging from 1.25 percent to 2.0 percent,
depending on certain financial ratios. The Credit Agreement requires the Company
to secure an interest rate hedge on 50% of the outstanding principal amount of
the
9
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Credit Facility and 100% of the outstanding balance on the Term Loan.
Availability fees of 25 basis points per annum will be payable on the unused
portion of the Credit Facility and a facility fee will be paid equal to 5/8 of
one percent of the aggregate principal amount on the Term Loan. The Credit
Facility has a three-year term and is secured by substantially all the assets of
the Company, including the stock and membership interests in the Founding
Companies and any future material subsidiaries. The Company, each Founding
Company and all other future material subsidiaries are required to guarantee
repayment of all amounts due under the Credit Facility. There have been no
borrowings under the Credit Facility or Term Loan to date.
4. CAPITAL STOCK
On July 28, 1997, the TSI issued an aggregate of 6,297,225 shares of Common
Stock in connection with the Combinations (3,422,225 shares) and the Offering
(2,875,000 shares). Shares issued in connection with the Offering were sold at a
price to the public of $14.00 per share. The net proceeds to TSI from the
Offering (after deducting underwriting discounts, commissions and offering
expenses) were approximately $33.3 million. Of this amount, $29.1 million
represents the cash portion of the purchase price relating to the Combinations
(including working capital adjustments and estimated reimbursements to
stockholders of two of the Founding Companies that had elected S Corporation
status under the Internal Revenue Code for certain taxes that will be incurred
by them in connection with the Combinations). The remaining approximately $4.2
million is being used for acquisitions and general corporate purposes.
5. EARNINGS PER SHARE
The historical periods ended September 30, 1996 represents the results of
operations of Auto Europe, the accounting acquiror, under its historical capital
and income tax structure (and do not include adjustments for the Compensation
Differential related to Auto Europe). Accordingly, the outstanding shares of
Auto Europe are utilized to calculate earnings per share for these periods.
The historical periods ended September 30, 1997 represent the results of
operations of Auto Europe, the accounting acquiror, under its historical capital
and income tax structure through July 27, 1997 (see note 6), and include
balances and transactions of the Founding Companies and TSI since July 28, 1997.
The computation of historical earnings per share for the three and nine month
historical periods ended September 30, 1997 reflects the shares of Common Stock
attributable to Auto Europe through July 27, 1997, and the number of shares
outstanding of TSI from July 28, 1997 through September 30, 1997.
The pro forma earnings per share computations are the most meaningful because
pro forma combined financial information for the three and nine month periods
ended September 30, 1996 and 1997 includes the results of TSI combined with the
Founding Companies as if the Combinations had occurred at the beginning of each
respective three and nine month period.
10
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The pro forma earnings per share for the three and nine month periods ended
September 30, 1997 and 1996 are based on 8,781,726 shares outstanding, which
includes the following shares:
<TABLE>
<S> <C>
Issued in consideration for acquisitions of Founding Companies 3,422,225
Issued to founders and management of TSI 2,484,501
Sold pursuant to the Offering 2,875,000
---------
8,781,726
=========
</TABLE>
The computations of earnings per share (except for the historical periods ended
September 30, 1996) also assume the exercise of options for 838,900 shares
granted to management, directors, and employees, and assume the proceeds are
used to repurchase shares in the open market based on the average per share
closing price during periods ended September 30, 1997.
In February 1997, the Financial Accounting Standards Board issued Statement of
Accounting Standard No. 128, "Earnings Per Share" ("SFAS No. 128"), which for
the Company will be effective for the year ended December 31, 1997. SFAS No. 128
simplifies the standards required under current accounting rules and replaces
the presentation of primary earnings per share and fully diluted earnings per
share with a presentation of basic earnings per share ("Basic EPS") and diluted
earnings per share ("Diluted EPS"). Basic EPS excludes dilution and is
determined by dividing net income available to common stockholders by the
weighted average of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that could occur if securities and other
contracts to issue common shares were exercised or converted into common stock.
Diluted EPS is computed similarly to fully diluted earnings per share under
current accounting rules and will be required to be disclosed.
Implementation of SFAS No. 128 is not expected to have a material effect on the
Company's earnings per share as determined under current accounting rules.
6. INCOME TAXES
Prior to the Combinations, the stockholders of Auto Europe, Cruises Only and
Travel 800 elected to be taxed under the provisions of Subchapter S of the
Internal Revenue Code. Under these provisions, the entities were not subject to
taxation for federal purposes. Under S Corporation status, stockholders report
their share of taxable earnings or losses in their personal tax returns.
Commencing with the Combinations and the Offering, the Company began to be taxed
at applicable federal and state income tax rates.
Auto Europe recorded a reduction of income tax expense of approximately $600,000
on July 28, 1997 representing net deferred taxes at that date which were not
previously recorded because of Auto Europe's previous status under Subchapter S
of the Internal Revenue Code.
The Company intends to file a consolidated federal income tax return which
includes the operations of the Founding Companies for periods commencing on the
date of the Combinations
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(July 28, 1997). The Founding Companies will be individually responsible for
filing federal income tax returns based on earnings through July 27, 1997.
The provision for income taxes included in the pro forma statements of combined
income for the three and nine month periods ended September 30, 1996 and 1997
assumes the application of statutory federal and state income tax rates, the
partial non-deductibility of goodwill amortization related to Founding
Companies.
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various legal actions arising in the ordinary course
of business. The Company believes that none of the actions currently pending
will have a material adverse effect on its business, financial condition and
results of operations.
The Company carries a broad range of insurance coverage, including directors and
officers, prospectus liability, general and business liability, commercial
property, workers' compensation, and general umbrella policies. The Company has
not incurred significant claims or losses on any of its insurance policies
during the periods presented in the accompanying financial statements.
The Company conducts a portion of its operations in leased facilities under
leases accounted for as operating leases. Minimum future lease payments under
noncancelable operating leases as of December 31, 1996 are as follows, for years
ending December 31:
1997 $ 486,000
1998 328,000
1999 212,000
2000 180,000
2001 168,000
Thereafter 701,000
=======
The leases provide for payment of taxes and other expenses by the Company. Total
rent expense for all operating leases was approximately $600,000 and $700,000
for the nine month periods ended September 30, 1996 and 1997, respectively.
TSI entered into a lease in September 1997 for a new corporate headquarters,
with a five-year initial term, two five-year renewal options, and expansion
options on adjacent rental space. Minimum annual lease payments will be
approximately $75,000 commencing in December 1997, plus a proportionate share of
building operating costs.
The existing reservations system at Auto Europe is not Year 2000 compliant;
however, changes are currently being implemented to correct this deficiency.
Additionally, management believes that the integrated systems environment under
development by the Company will be implemented at Auto Europe prior to the time
needed to process transactions requiring Year 2000
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capabilities. Management believes that the core reservation and back-end systems
of the other Founding Companies are Year 2000 compliant, and costs that may be
incurred to ameliorate Year 2000 issues in support systems will not be material.
8. SUBSEQUENT EVENTS - ACQUISITIONS
In October 1997 the Company entered into definitive agreements to acquire five
specialized distributors of leisure travel services (four cruise reservation
companies and one international airline ticket reservation company) and a
software development company. Aggregate consideration for the acquisitions will
consist of 1,399,105 million shares of common stock and cash of $2.2 million.
The cash portion will be financed primarily with the Credit Facility. The
Company expects to account for four of the acquisitions using the pooling of
interests method of accounting for business combinations and to account for two
of the acquisitions as purchases. The acquisitions, which are subject to
customary closing conditions, are expected to be completed by November 30, 1997
and are not included in financial results for the periods ended September 30,
1997.
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ITEM2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
The following discussion should be read in conjunction with the Pro Forma
Financial Statements of the Company and related notes thereto and the Financial
Statements of TSI and the Founding Companies and related notes thereto included
in the Company's Registration Statement. Statements contained in this discussion
regarding future financial performance and results and other statements that are
not historical facts are forward-looking statements. The forward looking
statements are subject to numerous risks and uncertainties to the Company,
including but not limited to the risks associated with: successful integration
of the Founding Companies, factors affecting internal growth and management of
growth, the Company's acquisition strategy and availability of financing, the
travel industry, seasonality, quarterly fluctuations and general economic
conditions, dependence on technology and travel providers, and other factors
discussed in the Registration Statement.
RESULTS OF OPERATIONS - COMBINED
The combined results of operations of the Founding Companies for the periods
discussed herein do not represent the combined results of operations presented
in accordance with generally accepted accounting principles, but are only a
summation of the net revenues, operating expenses, gross profit, and general and
administrative expenses of the individual Founding Companies on a historical
basis, and do not include the effects of pro forma adjustments. This data may
not be comparable to and may not be indicative of the Company's post-Combination
results of operations due to a variety of factors, including: (i) the Founding
Companies were not under common control or management and had different tax and
capital structures during the periods presented; (ii) certain key management of
the Founding Companies have agreed to prospective reductions in salaries,
bonuses and benefits (Compensation Differential); (iii) the Company will incur
incremental costs related to its new corporate management and costs of being a
public company; (iv) the Company will use the purchase method of accounting and
establish a new basis of accounting to record the Combinations; and (v) the
combined data do not reflect potential benefits and cost savings the Company may
realize when operating as a combined entity. Future quarterly results may also
be materially affected by the timing and magnitude of acquisitions, integration
costs, variation in product mix, and seasonality of the travel industry. See "-
Seasonality and Quarterly Fluctuations - Combined." Accordingly, the operating
results for interim periods shown or for any other interim periods are not
necessarily indicative of the results that may be achieved for any subsequent
interim period or for a full fiscal year.
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THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997 - COMBINED
The following table sets forth certain selected combined financial data as a
percentage of net revenues for the periods indicated (dollars in thousands):
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30,
--------------------------------
1996 1997
----------------- --------------
<S> <C> <C> <C> <C>
Net revenues $13,342 100.0% $17,260 100.0%
Operating expenses 8,535 64.0 11,228 65.1
------- ----- ------- -----
Gross profit 4,807 36.0 6,032 34.9
General and administrative expenses 3,730 28.0 4,033 23.4
</TABLE>
Combined net revenues increased $3.9 million, or 29.4%, from $13.3 million for
the three months ended September 30, 1996 to $17.3 million for the three months
ended September 30, 1997. This increase is primarily attributable to increased
sales of travel services by the Company, including an increase in the number of
airline reservations from 60,000 in 1996 to 77,000 in 1997, an increase in the
number of European car rental reservations from 59,000 in 1996 to 74,000 in
1997, and an increase in the number of cruise reservations from 23,000 in 1996
to 33,000 in 1997. In addition, Cruises Only's bookings were negatively impacted
in the first six months of 1996 as a result of its move to a new headquarters
and unanticipated problems with call center software installed as part of a new
telephone system. This situation negatively impacted net revenues recognized in
the three months ended September 30, 1996 since bookings are often made months
before final payment is received and the related net revenues are recognized.
The telephone system was removed by the vendor and replaced with a new telephone
system in early July 1996.
Combined operating expenses increased $2.7 million, or 31.6%, from $8.5 million
in 1996 to $11.2 million in 1997. Operating expenses include compensation of
sales and sales support personnel, commissions, telecommunications, mail and
courier, marketing, and other expenses that vary with net revenues.
Approximately 70% of operating expenses in 1996 and 1997 are for salaries,
benefits and commissions to travel agencies, independent contractors and
employees. As a percentage of net revenues, total operating expenses increased
from 64% in 1996 to 65.1% in 1997, primarily as a result of an increase in
commission expense as a percentage of net revenues at Auto Europe.
Combined general and administrative expenses increased $300,000, or 8.1%, from
$3.7 million in 1996 to $4.0 million in 1997, and were 28.0% and 23.4%,
respectively, of net revenues. Excluding the Compensation Differential of $1.1
million in 1996 and $115,000 in 1997, general and administrative expenses
increased $1.3 million, or 50%, from $2.6 million in 1996 to $3.9 million in
1997, and were 19.6% and 22.7%, respectively, of net revenues. This increase as
a percentage of net revenues was primarily the result of expenses associated
with being a public company and corporate overhead which did not exist prior to
the Offering. General and
15
<PAGE>
administrative expenses recorded at operating subsidiaries, excluding the
Compensation Differential, were 19.7 % and 17.7% of net revenues in the three
months ended September 30, 1996 and 1997, respectively. This decrease was as a
result of spreading overhead of operating companies over a larger revenue base.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997 - COMBINED
The following table sets forth certain selected combined financial data as a
percentage of net revenues for the periods indicated (dollars in thousands):
<TABLE>
NINE MONTHS ENDED SEPTEMBER 30,
-------------------------------------
1996 1997
----------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $ 42,543 100.0% $ 55,198 100.0%
Operating expenses 27,553 64.8 34,614 62.7
-------- ----- -------- -----
Gross profit 14,990 35.2 20,584 37.3
General and administrative expenses 11,084 26.1 12,922 23.4
</TABLE>
Combined net revenues increased $12.7 million, or 29.7%, from $42.5 million for
the nine months ended September 30, 1996 to $55.2 million for the nine months
ended September 30, 1997. This increase is primarily attributable to increased
sales of travel services by the Company, including an increase in the number of
airline reservations from 179,000 in 1996 to 216,000 in 1997, an increase in the
number of European car rental reservations from 180,000 in 1996 to 228,000 in
1997, and an increase in the number of cruise reservations from 70,000 in 1996
to 96,000 in 1997. In addition, Cruises Only's bookings and net revenues in the
nine months ended September 30, 1996 were negatively impacted by its move to a
new headquarters and unanticipated problems with call center software installed
as part of a new telephone system. The telephone system was removed by the
vendor and replaced with a new telephone system in early July 1996.
Combined operating expenses increased $7.1 million, or 25.6%, from $27.6 million
in 1996 to $34.6 million in 1997. Approximately 71% and 72% of operating
expenses in 1996 and 1997, respectively, are for salaries and benefits, and
commissions to travel agencies, independent contractors and employees. As a
percentage of net revenues, total operating expenses decreased from 64.8% in
1996 to 62.7% in 1997, primarily due to lower salaries and commission expenses
as a percentage of net revenues.
Combined general and administrative expenses increased $1.8 million, or 16.6%,
from $11.1 million in 1996 to $12.9 million in 1997, and were 26.1% and 23.4%,
respectively, of net revenues. Excluding the Compensation Differential of $3.5
million in 1996 and $3.0 million in 1997, general and administrative expenses
increased $2.3 million, or 30.1%, from $7.6 million in 1996 to $9.9 million in
1997, and were 17.8% and 18.0%, respectively, of net revenues. For the nine
months ended September 30, 1997, approximately one percent of net revenues
relates to
16
<PAGE>
expenses associated with being a public company and corporate overhead which did
not exist prior to the Offering.
LIQUIDITY AND CAPITAL RESOURCES - COMBINED
LIQUIDITY AND CAPITAL TRANSACTIONS
During the nine month period ended September 30, 1997, net cash provided by
operating activities of the Founding Companies was approximately $14.2 million,
on a historical basis, before the impact of the Compensation Differential of $3
million. Capital expenditures were $1.2 million and net repayment of debt was
$2.9 million, including short-term debt repayments of $2.3 million. Capital
distributions by the Founding Companies totaled $10.8 million during the nine
month period ended September 30, 1997, including assets distributed in
connection with the Combinations of $7.7 million.
OFFERING AND COMBINATIONS
On July 28, 1997, the TSI issued an aggregate of 6,297,225 shares of Common
Stock in connection with the Combinations (3,422,225 shares) and the Offering
(2,875,000 shares). Shares sold in the Offering were sold at a price to the
public of $14.00 per share. The net proceeds to TSI from the Offering (after
deducting underwriting discounts, commissions and offering expenses) were
approximately $33.3 million. Of this amount, $29.1 million was used to pay the
cash portion of the purchase price of the Combinations (including working
capital adjustment, and estimated reimbursements to stockholders of two of the
Founding Companies which had elected S Corporation status under the Internal
Revenue Code for certain taxes that will be incurred by them in connection with
the Combinations). The remaining approximately $4.2 million is being used for
acquisitions and general corporate purposes.
On July 28, 1997, former stockholders of Cruises Only were released from
personal guarantees of outstanding long-term debt and, in exchange for this
release, TSI pledged $3.4 million as additional security for the debt. In early
1998, the Company plans to draw down on the Term Loan (which is part of the
credit facility discussed below) in order to simultaneously pay off this
existing Cruises Only debt.
On July 28, 1997, outstanding long-term debt of Cruises Inc. totaling $52,000
was prepaid and the former stockholders were released from personal guarantees
of the debt.
On August 19, 1997, Auto Europe was required, in accordance with government
regulations, to prepay a second mortgage loan from the US Small Business
Administration (SBA) with an outstanding balance of $730,000. The original
maturity date was October 2016; a prepayment penalty of $54,000 was incurred. In
connection with this prepayment, the holder of the first mortgage notified Auto
Europe the maturity date of the first mortgage will be changed to August 2002,
from the current maturity date of September 2011. The accelerated maturity date
will not impact the 15 year amortization schedule for this first mortgage.
17
<PAGE>
CREDIT FACILITY
On October 15, 1997, the Company entered into a credit agreement (the "Credit
Agreement") with NationsBank, N.A. with respect to a $20 million revolving line
of credit (the "Credit Facility") and a term loan facility of approximately $2
million (the "Term Loan"). The Credit Facility may be used for acquisitions,
capital expenditures, refinancing of Founding Companies' debt, and for general
corporate purposes. The Credit Agreement requires the Company to comply with
various loan covenants, which include maintenance of certain financial ratios,
restrictions on additional indebtedness and restrictions on liens, guarantees,
advances, capital expenditures, sale of assets, and dividends. Interest on
outstanding balances of the Credit Facility will be computed based on the
Eurodollar Rate plus a margin ranging from 1.25 percent to 2.0 percent,
depending on certain financial ratios. The Credit Agreement requires the Company
to secure an interest rate hedge on 50% of the outstanding principal amount of
the Credit Facility and 100% of the outstanding balance on the Term Loan.
Availability fees of 25 basis points per annum will be payable on the unused
portion of the Credit Facility and a facility fee will be paid equal to 5/8 of
one percent of the aggregate principal amount on the Term Loan. The Credit
Facility has a three-year term and is secured by substantially all the assets of
the Companies, including the stock and membership interests in the Founding
Companies and any future material subsidiaries. The Company, each Founding
Company and all other future material subsidiaries are required to guarantee
repayment of all amounts due under the Credit Facility. There have been no
borrowings under the Credit Facility or Term Loan to date.
ACQUISITIONS
In October 1997, the Company entered into definitive agreements to acquire five
specialized distributors of leisure travel services (four cruise reservation
companies and one international airline ticket reservation company) and a
software development company. Aggregate consideration for the acquisitions
consists of approximately 1.4 million shares of common stock and cash of $2.2
million. The number of shares of stock to be delivered as consideration was
determined based on averages of closing trading prices of the Company's stock
for periods ranging from five to ten days prior to the date of the definitive
agreements. The Company expects to account for four of the acquisitions using
the pooling of interests method of accounting for business combinations and to
account for the other two acquisitions as purchases. The acquisitions, which are
subject to customary closing conditions, are expected to be completed by
November 30, 1997.
The Company will continue to pursue strategic acquisition opportunities. The
Company cannot predict the timing, size or success of any acquisition effort,
nor the associated potential capital commitments. The Company plans to fund
future acquisitions primarily through a combination of the remaining net
proceeds from the Offering, cash flows from operations and borrowings, including
borrowings under the Credit Facility, and the issuance of additional equity
securities. The Company plans to register approximately 3,000,000 shares of its
Common Stock under the Securities Act for use as consideration in future
acquisitions. To the extent other new sources of financing are necessary to fund
future acquisitions, there can be no assurance that the Company
18
<PAGE>
can secure such additional financing if and when it is needed or on terms
acceptable to the Company.
TECHNOLOGY
Continued growth of the Founding Companies and of companies to be acquired in
the future will require ongoing capital investments, particularly in the area of
information systems and technology. The Company expects that the software
acquired in connection with the acquisition of TraX Software, Inc. will be
enhanced, using a rapid systems design and development methodology, to provide
an integrated selling, fulfillment and customer information environment which
accommodates the unique requirements of the Company's specialized travel
products and services. The final product will allow customers of all types (e.g.
consumers, travel agents, independent contractors, travel providers) to book
reservations and interface with the Company directly through the World Wide Web.
This ability to significantly increase distribution channels through
technology-enabled tools is consistent with the Company's overall business
strategy.
In addition to the applications software described above, the Company's planned
technology architecture also includes common data bases of customer information,
product specifications and reservations history, and, eventually, "virtual
packaging" of diverse travel components.
While the Company has not yet finalized its capital budget for technology,
management believes incremental systems development and implementation costs
totaling in excess of $5 million will be required over the next two to three
years. The systems will be implemented in phases, and it is expected the first
phase will be implemented during the first quarter of 1998. Estimated capital
needs for technology are likely to change as additional acquisitions are made.
In accordance with Proposed Statement of Position, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use, the Company plans to
capitalize external and internal costs directly related to computer software
developed as a long-lived asset, and amortize such costs over the estimated
useful life of the asset.
The existing reservations system at Auto Europe is not Year 2000 compliant;
however, changes are currently being implemented to correct this deficiency.
Additionally, management believes that its integrated systems environment under
development will be implemented at Auto Europe in time to process transactions
requiring Year 2000 capabilities. The Company believes that the core reservation
and back-end systems of the other Founding Companies are Year 2000 compliant,
and costs that may be incurred to ameliorate Year 2000 issues in support systems
will not be material.
SEASONALITY AND QUARTERLY FLUCTUATIONS - COMBINED
The domestic and international leisure travel industry is extremely seasonal.
The results of each of the Founding Companies have been subject to quarterly
fluctuations caused primarily by the seasonal variations in the travel industry,
especially the leisure travel segment. Net revenues and net income for the
Founding Companies are generally higher in the second and third quarters.
19
<PAGE>
The Company expects this seasonality to continue in the future on a combined
basis. One of the Founding Companies experienced an operating loss in the fourth
quarter of 1996. Founding Companies or other companies acquired by the Company
may experience quarterly losses in the future.
The Company's quarterly results of operations may also be subject to
fluctuations as a result of the timing and cost of acquisitions, fare wars by
travel providers, changes in relationships with certain travel providers
(including commission rates and programs), changes in the mix of services
offered by the Company, changes in timing of measurement and payment of volume
bonuses by travel providers, extreme weather conditions or other factors
affecting travel or the economy. Unexpected variations in quarterly results
could adversely affect the Company's results of operations, as well as the price
of the Common Stock, which in turn could limit the ability of the Company to
make acquisitions.
The Company believes that the commission caps recently implemented by major
airlines will have limited effect on the Company's financial position. The
Company has a diversified product line with commissions on international and
domestic airline ticket reservations representing less than 20% of combined net
revenues. Furthermore, none of the Company's international and only a minority
of its domestic airline ticket reservation commissions are based on retail
commission rates paid by airlines to traditional travel agents.
RESULTS OF OPERATIONS - TSI
The Combinations are accounted for under the purchase method of accounting, and
Auto Europe has been designated as the accounting acquiror in accordance with
Securities and Exchange Commission Staff Accounting Bulletin No. 97. Therefore,
selected financial data of TSI (Auto Europe as accounting acquiror) for the
three month and nine month periods ended September 30, 1996 and 1997 are
presented below, which reflects the acquisitions of Cruises Only, Travel 800,
Cruises Inc. and D-FW Tours effective July 28, 1997.
THREE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1997 - TSI
The following table sets forth certain selected financial data for TSI (Auto
Europe as accounting acquiror) as a percentage of net revenues for the periods
indicated and reflects the acquisitions of Cruises Only, Travel 800, Cruises
Inc. and D-FW Tours effective July 28, 1997 (dollars in thousands):
<TABLE>
THREE MONTHS ENDED SEPTEMBER 30,
-----------------------------------
1996 1997
---------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $ 6,927 100.0% $ 14,613 100.0%
Operating expenses 4,876 70.4 9,404 64.4
------- ----- -------- -----
Gross profit 2,051 29.6 5,209 35.7
General and administrative expenses 1,826 26.4 3,372 23.1
</TABLE>
20
<PAGE>
Net revenues increased $7.7 million, from $6.9 million for the three months
ended September 30, 1996 to $14.6 million for the three months ended September
30, 1997. This increase is attributable to a 26.3% increase in net revenues at
Auto Europe, as well as the acquisition of Cruises Only, Travel 800, Cruises
Inc. and D-FW Tours on July 28, 1997.
Operating expenses increased $4.5 million, from $4.9 million in 1996 to $9.4
million in 1997. Approximately 69% in 1996 and 72% in 1997 of operating expenses
are for salaries and benefits, and commissions to travel agencies, independent
contractors and employees. As a percentage of net revenues, total operating
expenses decreased from 70.4% in 1996 to 64.4% in 1997, primarily due to the
acquisitions of specialized distributors of cruise reservations which have lower
operating costs as a percentage of net revenues than Auto Europe.
General and administrative expenses increased $1.6 million, from $1.8 million in
1996 to $3.4 million in 1997. Excluding the Compensation Differential of
$763,000 in 1996 and $115,000 in 1997, general and administrative expenses
increased $2.2 million, from $1.1 million in 1996 to $3.3 million in 1997, and
were 15.3 % and 22.3 %, respectively, of net revenues. This increase as a
percentage of net revenues was the result of the companies acquired generally
having higher general and administrative expenses as a percentage of net
revenues than Auto Europe, and the result of expenses associated with being a
public company and corporate overhead which did not exist prior to the Offering.
Prior to the Combinations, the stockholders of Auto Europe elected to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under these
provisions, Auto Europe was not subject to taxation for federal purposes. Under
S Corporation status, stockholders report their share of taxable earnings or
losses in their personal tax returns. Auto Europe recorded a reduction of income
tax expense of approximately $600,000 on July 28, 1997 representing net deferred
taxes at that date which were not previously recorded because of Auto Europe's
previous status under Subchapter S of the Internal Revenue Code.
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1997 - TSI
The following table sets forth certain selected financial data for TSI (Auto
Europe as accounting acquiror) as a percentage of net revenues for the periods
indicated and effects the acquisitions of Cruises Only, Travel 800, Cruises Inc.
and D-FW Tours, effective July 28, 1997 (dollars in thousands):
<TABLE>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------------
1996 1997
----------------- ----------------
<S> <C> <C> <C> <C>
Net revenues $22,464 100.0% $34,855 100.0%
Operating expenses 16,146 71.9 23,122 66.3
------ ----- ------ -----
Gross profit 6,318 28.1 11,733 33.7
General and administrative expenses 5,568 25.2 8,446 24.2
</TABLE>
21
<PAGE>
Net revenues increased $12.4 million, from $22.4 million for the nine months
ended September 30, 1996 to $34.9 million for the nine months ended September
30, 1997. This increase is attributable to a 30.3% increase in net revenues at
Auto Europe, as well as the acquisition of Cruises Only, Travel 800, Cruises
Inc. and D-FW Tours on July 28, 1997.
Operating expenses increased $7.0 million, from $16.1 million in 1996 to $22.1
million in 1997. Approximately 71% of operating expenses in 1996 and 1997 are
for salaries and benefits, and commissions to travel agencies, independent
contractors and employees. As a percentage of net revenues, total operating
expenses decreased from 71.9% in 1996 to 66.3% in 1997, primarily due to lower
salaries and commission expenses as a percentage of net revenues at Auto Europe,
and also because operating expenses of the companies acquired are lower as a
percentage of net revenues than at Auto Europe.
General and administrative expenses increased $2.8 million, from $5.7 million in
1996 to $8.4 million in 1997, and were 25.2% and 24.2%, respectively, of net
revenues. Excluding the Compensation Differential of $2.7 million in 1996 and
$2.6 million in 1997, general and administrative expenses increased $3.3
million, from $2.8 million in 1996 to $5.8 million in 1997, and were 13.3% and
17.6%, respectively, of net revenues. This increase as a percentage of net
revenues was the result of the companies acquired generally having higher
general and administrative expenses as a percentage of net revenues than Auto
Europe, and the result of expenses associated with being a public company and
corporate overhead which did not exist prior to the Offering.
Prior to the Combinations, the stockholders of Auto Europe elected to be taxed
under the provisions of Subchapter S of the Internal Revenue Code. Under these
provisions, Auto Europe was not subject to taxation for federal purposes. Under
S Corporation status, stockholders report their share of taxable earnings or
losses in their personal tax returns. Auto Europe recorded a reduction of income
tax expense of approximately $600,000 on July 28, 1997 representing net deferred
taxes at that date which were not previously recorded because of Auto Europe's
previous status under Subchapter S of the Internal Revenue Code.
LIQUIDITY AND CAPITAL RESOURCES - TSI
During the nine month period ended September 30, 1997, net cash provided by
operating activities was $7.9 million, before the impact of the Compensation
Differential of $2.6 million. Capital expenditures were $1.1 million and net
payments on debt were $3.3 million, including payments of $2.3 million on
short-term debt. Capital distributions were $5.2 million, which includes $5
million paid to the former stockholders of Auto Europe in connection with the
Combinations. In connection with the Combinations, stockholders of Auto Europe
retained certain non-operating assets with a net book value of $2.2 million.
TSI is a holding company that conducts all its operations through its
subsidiaries. Accordingly, the primary internal source of liquidity is the cash
flow of Auto Europe, the accounting acquiror, and the other Founding Companies.
See " - Liquidity and Capital Resources - Combined" for a
22
<PAGE>
further discussion of the liquidity and capital resources of the Company,
including the Credit Facility, acquisitions and technology.
SEASONALITY AND QUARTERLY FLUCTUATIONS - TSI
Net revenues and net income are generally higher in the second and third
quarters. The Company expects this seasonality to continue in the future. Auto
Europe, the accounting acquiror, experienced an operating loss in the fourth
quarter of 1996 and may continue to do so in the future. See " - Seasonality and
Quarterly Fluctuations - Combined" for a further discussion of seasonality and
quarterly fluctuations of the Company.
23
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On June 29, 1995, the U.S. Department of Labor filed suit against Cruises Only,
Wayne Heller and Judy Heller in the U.S. District Court of the Middle District
of Florida, the Orlando Division, based on a claim that Cruises Only was not
entitled to pay its commission sales people under a provision of the Federal
Labor Standards Act of 1938 established for commission sales people in retail
and service businesses. The complaint did not specify a dollar amount of relief
sought. In late 1996, both parties filed a motion for summary judgement. On June
5, 1997, the Court granted the motion for summary judgement in favor of Cruises
Only. The U.S. Department of Labor initially filed a motion to appeal the
decision, but on August 22, 1997 the Department filed a motion to voluntarily
dismiss that appeal, with prejudice. The motion was granted and an Order of
Dismissal, dismissing the case, with prejudice, was issued on October 22, 1997.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In connection with the Offering, the Company's Registration Statement on Form
S-1 (File No. 333-27125) was declared effective on July 17, 1997. The managing
underwriters of the Offering were Montgomery Securities and Furman Selz. The
Offering commenced on July 22, 1997, all securities offered thereby were sold
and the Offering has terminated. The securities registered and sold in the
Offering consisted of 2,875,000 shares (the "Offered Shares") of common stock,
$.01 par value per share, all of which were sold for the account of the Company.
The Offered Shares were sold at a price to the public of $14.00 per share, for
aggregate gross proceeds of $40,250,000. The total expenses incurred in
connection with the Offering, including underwriting discounts and commissions,
are estimated to be approximately $6,075,393. Such expenses did not include any
direct or indirect payments to directors, officers, 10% stockholders or
affiliates of the Company. As of September 30, 1997, the net proceeds have been
used as follows: (i) $23,933,000 to pay the cash portion of the consideration
for the Combinations, (ii) $3,529,147 to pay certain adjustments and
reimbursements relating to the Combinations, (iii) $52,007 to repay
indebtedness, and (iv) $644,114 for general corporate and working capital
purposes. Cash consideration paid in connection with the Combinations include
payments made directly or indirectly to individuals that are either directors,
officers or 10% stockholders of the Company.
Also in connection with the consummation of the Combinations, the Company issued
an aggregate of 3,422,225 shares of common stock as the stock portion of the
Consideration. Such shares were not registered under the Securities Act of
1933, as amended, and were issued in reliance on the exemption provided by
Section 4(2) of such Act.
24
<PAGE>
ITEM 5. OTHER INFORMATION
OFFERING AND COMBINATIONS
On July 28, 1997, the TSI issued an aggregate of 6,297,225 shares of Common
Stock in connection with the Combinations (3,422,225 shares) and the Offering
(2,875,000 shares). Shares issued in the Offering were sold at a price to the
public of $14.00 per share. Pursuant to the Combinations, the Company
consummated the acquisitions of the Founding Companies for an aggregate of
approximately $29.1 million in cash and 3,422,225 shares of Common Stock.
CREDIT FACILITY
On October 15, 1997, the Company entered into a credit agreement (the "Credit
Agreement") with NationsBank, N.A. with respect to a $20 million revolving line
of credit (the "Credit Facility") and a term loan facility of approximately $2
million (the "Term Loan"). The Credit Facility may be used for acquisitions,
capital expenditures, refinancing of Founding Companies' debt, and for general
corporate purposes. The Credit Agreement requires the Company to comply with
various loan covenants, which include maintenance of certain financial ratios,
restrictions on additional indebtedness and restrictions on liens, guarantees,
advances, capital expenditures, sale of assets, and dividends. Interest on
outstanding balances of the Credit Facility will be computed based on the
Eurodollar Rate plus a margin ranging from 1.25 percent to 2.0 percent,
depending on certain financial ratios. The Credit Agreement requires the Company
to secure an interest rate hedge on 50% of the outstanding principal amount of
the Credit Facility and 100% of the outstanding balance on the Term Loan.
Availability fees of 25 basis points per annum will be payable on the unused
portion of the Credit Facility and a facility fee will be paid equal to 5/8 of
one percent of the aggregate principal amount on the Term Loan. The Credit
Facility has a three-year term and is secured by substantially all the assets of
the Companies, including the stock and membership interests in the Founding
Companies and any future material subsidiaries. The Company, each Founding
Company and all other future material subsidiaries are required to guarantee
repayment of all amounts due under the Credit Facility. There have been no
borrowings under the Credit Facility or Term Loan to date.
The foregoing description of the Credit Agreement is qualified in its entirety
by reference to the copy of the Credit Agreement filed as an exhibit to this
Form 10-Q.
ACQUISITIONS
In October 1997, the Company entered into definitive agreements to acquire five
specialized distributors of leisure travel services (four cruise reservation
companies and one international airline ticket reservation company) and a
software development company. Aggregate consideration for the acquisitions
consists of approximately 1.4 million shares of common stock and cash of $2.2
million. The number of shares to be issued as consideration was determined based
on averages of closing trading prices of the Company's common stock for periods
ranging from five to ten days prior to the date of the definitive agreements.
The Company expects to account for four of the acquisitions using the pooling of
interests method of accounting for business combinations and to account for two
of the acquisitions as purchases. The acquisitions, which are subject to
customary closing conditions, are expected to be completed by November 30, 1997.
CRUISE WORLD, INC. ("CRUISE WORLD"), founded in 1989, is a specialized
distributor of cruises in New York, New Jersey and Connecticut. It operates from
eight cruise-only outlets and has a central reservation center. In accordance
with the terms of a Stock Purchase Agreement dated as of October 28, 1997, all
of the common stock of CruiseWorld will be acquired in exchange for shares of
common stock of the Company. The closing of the acquisition of CruiseWorld is
contingent upon the closing of the acquisition of CruiseOne, Inc.
25
<PAGE>
CRUISEONE, INC. ("CRUISEONE"), founded in 1993 and based in Deerfield Beach,
Florida, is a specialized distributor of cruises which operates a franchise
system with over 325 home based franchisees located in 45 states. In accordance
with the terms of a Stock Purchase Agreement dated as of October 28, 1997, all
of the common stock of CruiseOne will be acquired in exchange for shares of
common stock of the Company. The closing of the acquisition of CruiseOne is
contingent upon the closing of the acquisition of Cruise World.
The acquisitions of Cruise World and CruiseOne, both of which are currently
owned by the same controlling stockholder, are expected to be accounted for as a
single pooling of interests transaction.
SHIP 'N' SHORE CRUISES, INC., CRUISE TIME, INC., SNS COACHLINE, INC., CRUISE
MART, INC. AND SNS TRAVEL MARKETING, INC. (COLLECTIVELY, "SHIP 'N' SHORE"),
founded in 1987 and based in Englewood, Florida, is a specialized distributor of
cruises and land packages and an operator of motor coach tour programs,
specializing in the Alaska market. In accordance with the terms of a Stock
Purchase Agreement dated as of October 28, 1997, all of the common stock of Ship
'N' Shore will be acquired in exchange for shares of common stock of the
Company. The acquisition is expected be accounted for using the pooling of
interests method of accounting.
ANTHONY DEAN CORPORATION, D/B/A/ CRUISE FAIRS OF AMERICA ("Cruise Fairs"),
founded in 1987 and located in Los Angeles, California, is a specialized
distributor of cruises with Mexico as its most popular cruise destination. In
accordance with the terms of a Stock Purchase Agreement dated as of October 28,
1997, all of the common stock of Cruise Fairs will be acquired in exchange for
shares of common stock of the Company. The acquisition is expected to be
accounted for using the pooling of interests method of accounting.
DIPLOMAT TOURS INC. ("DIPLOMAT"), formed in 1982 and incorporated in 1995, is
located in Sacramento, California, and is a specialized distributor of
international airline tickets, concentrating on European travel. In accordance
with the terms of an Asset Purchase Agreement dated as of October 29, 1997,
substantially all of Diplomat's assets and liabilities will be acquired in
exchange for a combination of shares of common stock of the Company and cash.
The acquisition will be accounted for as a purchase.
TRAX SOFTWARE, INC. ("TRAX"), founded in 1995 and currently located in Falls
Church, Virginia, is a software development company that has developed software
designed for specialized distributors of leisure travel services. In accordance
with the terms of a Stock Purchase Agreement dated October 29, 1997, all of the
stock of Trax will be acquired in exchange for a combination of shares of common
stock of the Company and cash. The acquisition will be accounted for as a
purchase.
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
This filing contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act and Section 21E of the Securities Exchange Act
of 1934, as amended, which are intended to be covered by the safe harbors
created thereby. Investors are cautioned that all forward-looking statements
involve risks and uncertainties, including but not limited to the risks
associated with: successful integration of the Founding Companies and additional
required companies factors affecting internal growth and management of growth,
the Company's acquisition strategy and availability of financing, the travel
industry, seasonality, quarterly fluctuations and general economic conditions,
dependence on technology and travel providers, and other factors discussed in
the Registration Statement. Although the Company believes that the assumptions
underlying the forward-looking statements contained herein are reasonable, any
of the assumptions could be inaccurate, and, therefore, there can be no
assurance that the forward-looking statements included in this filing will prove
to be accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by the Company or any other person
that the objectives and plans of the Company will be achieved.
26
<PAGE>
<TABLE>
<CAPTION>
ITEM 6. EXHIBITS AND REPORTS ON FORM 10-Q
(a) Exhibits:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C> <C>
4.2 Form of Restriction and Registration Rights Agreement, dated
as of July 28, 1997, between Travel Services International,
Inc. and the each of the persons listed on the schedule
thereto.
10.1 Amended and Restated Employment Agreement, dated as of July
22, 1997, between Travel Services International, Inc. and
Joseph V. Vittoria.
-- Amended and Restated Employment Agreement, dated as of May 12,
1997, between Travel Services, International, Inc. and Jill M.
Vales.
-- Amended and Restated Employment Agreement, dated as of June 6,
1997, between Travel Services International, Inc. and Michael
J. Moriarty.
-- Employment Agreement, dated July 22, 1997, between Travel
Services International, Inc. and Mel Robinson.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Auto Europe, LLC and Imad
Khalidi.
-- Employment Agreement, dated July 18, 1997, among Travel
Services International, Inc., Auto Europe, LLC and Alex Cecil.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises, Inc. and Robert
Falcone.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises, Inc. and Judith
Falcone.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises, Inc. and Holley
Christen.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises Only, LLC and Wayne
Heller.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises Only, LLC and Judy
Heller.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., D-FW Tours, Inc. and John
Przywara.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Travel 800, LLC and Susan
Parker.
27
<PAGE>
10.2 Form of Indemnification Agreement, dated July 28, 1997,
between Travel Services International, Inc. and each of the
persons set forth on the schedule thereto.
10.6 Employment Agreement, dated July 25, 1997, between Travel
Services International, Inc. and Suzanne B. Bell.
10.7 Employment Agreement, dated as of July 25, 1997, between
Travel Services International, Inc. and Maryann Bastnagel.
10.8 Credit Agreement, dated as of October 15, 1997, by and between
Travel Services International, Inc. and NationsBank, N.A.
11 Schedule of Computations of Earnings Per Share
27 Financial Data Schedule
(b) Reports on Form 8-K:
None.
</TABLE>
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRAVEL SERVICES
INTERNATIONAL, INC.
Date: November 12, 1997 By: /S/ JILL M. VALES
--------------------
Jill M. Vales
Senior Vice President and Chief
Financial Officer
(as both a duly authorized
officer of the registrant and
the principal financial officer
or chief accounting officer of
the registrant)
29
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
------- -----------
4.2 Form of Restriction and Registration Rights Agreement, dated
as of July 28, 1997, between Travel Services International,
Inc. and the each of the persons listed on the schedule
thereto.
10.1 Amended and Restated Employment Agreement, dated as of July
22, 1997, between Travel Services International, Inc. and
Joseph V. Vittoria.
-- Amended and Restated Employment Agreement, dated as of May 12,
1997, between Travel Services, International, Inc. and Jill M.
Vales.
-- Amended and Restated Employment Agreement, dated as of June 6,
1997, between Travel Services International, Inc. and Michael
J. Moriarty.
-- Employment Agreement, dated July 22, 1997, between Travel
Services International, Inc. and Mel Robinson.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Auto Europe, LLC and Imad
Khalidi.
-- Employment Agreement, dated July 18, 1997, among Travel
Services International, Inc., Auto Europe, LLC and Alex Cecil.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises, Inc. and Robert
Falcone.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises, Inc. and Judith
Falcone.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises, Inc. and Holley
Christen.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises Only, LLC and Wayne
Heller.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Cruises Only, LLC and Judy
Heller.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., D-FW Tours, Inc. and John
Przywara.
-- Employment Agreement, dated July 22, 1997, among Travel
Services International, Inc., Travel 800, LLC and Susan
Parker.
<PAGE>
10.2 Form of Indemnification Agreement, dated July 28, 1997,
between Travel Services International, Inc. and each of the
persons set forth on the schedule thereto.
10.6 Employment Agreement, dated July 25, 1997, between Travel
Services International, Inc. and Suzanne B. Bell.
10.7 Employment Agreement, dated as of July 25, 1997, between
Travel Services International, Inc. and Maryann Bastnagel.
10.8 Credit Agreement, dated as of October 15, 1997, by and between
Travel Services International, Inc. and NationsBank, N.A.
11.1 Schedule of Computations of Earnings Per Share
27 Financial Data Schedule
A Registration Rights Agreement has been executed by and between Travel Services
International, Inc. and the following:
Alpine Consolidated, LLC
Capstone Partners
Suzanne Bell
Joseph Vittoria
Jill Vales
Imad Khalidi
Maryanne Bastnagel
Michael J. Moriarty
Tommaso Zanzotto
<PAGE>
RESTRICTION AND REGISTRATION RIGHTS AGREEMENT
RESTRICTION AND REGISTRATION RIGHTS AGREEMENT, dated as of July 28,
1997 (the "Agreement"), between Travel Services International, Inc., a Delaware
corporation ("TSII") and _______ (the "Stockholder").
WHEREAS, Stockholder has made and will make significant contributions to
TSII and currently owns a large portion of the issued and outstanding shares of
common stock, $.01 par value, of TSII (the "Common Stock"); and
WHEREAS, in connection with the proposed initial public offering (the
"Initial Public Offering") of the Common Stock, TSII wishes to grant to the
Stockholder certain registration rights with respect to the shares of Common
Stock that the Stockholder currently owns or may acquire in the future, as
provided further herein.
NOW THEREFORE, in consideration of the capital contributions made by the
Stockholder to TSII and of the promises herein contained, the parties hereto
agree as follows:
1. Definitions.
As used in this Agreement:
(i) the terms "register," "registered" and "registration" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Act (and any post-effective amendments filed or required to
be filed) and the declaration or ordering of effectiveness of such registration
statement;
(ii) the term "Registrable Securities" means (A) all shares of Common Stock
owned by the Stockholder as of the date hereof, (B) any additional shares of
Common Stock acquired by the Stockholder and (C) any capital stock of TSII
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of, the shares of Common Stock referred to in clause (A) or
(B) above;
(iii) the term "Holder" shall mean the Stockholder or any other holder of
Registrable Securities to whom the rights under this Agreement have been
assigned and the term "Holders" shall mean all such Holders collectively;
(iv) the term "Initiating Holders" shall mean any Holder or Holders who in
the aggregate are Holders of a majority of the Registrable Securities issued to
the Founding Stockholders;
<PAGE>
(v) "Commission" shall mean the Securities and Exchange Commission or any
other federal agency at the time administering the Act;
(vi) "Registration Expenses" shall mean all third-party expenses incurred
by TSII in compliance with Sections 3 and 4 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for TSII and the underwriters, if any, blue sky fees
and expenses and the third-party expenses of any special audits incident to or
required by any such registration (but excluding the compensation of regular
employees of TSII, which shall be paid in any event by TSII);
(vii) "Selling Expenses" shall mean all underwriting discounts and selling
commissions applicable to the sale of Registrable Securities and all fees and
disbursements of counsel for each of the Holders;
(viii) "Act" shall mean the Securities Act of 1933, as amended; and
(ix) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
2. Restrictions. Except for transfers to affiliates of the Stockholder, who
agree to be bound by the restrictions set forth in this Section 2, for a period
of one year from the completion of the Initial Public Offering, except pursuant
to this Agreement, the Stockholder shall not sell, assign, exchange, transfer,
distribute or otherwise dispose of any shares of Registrable Securities received
by the Stockholder.
3. Requested Registration.
(i) Request for Registration. If TSII shall receive from an Initiating
Holder, no sooner that two years following the completion of the Initial Public
Offering, a written request that TSII effect any registration with respect to
all or a part of the Registrable Securities, TSII will:
(A) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
(B) as soon as practicable, use its diligent best efforts to effect
such registration (including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification
under applicable blue sky or other state securities laws and appropriate
compliance with applicable regulations issued under the Act) as may be so
requested and as would permit or facilitate the sale and distribution as
soon as is practicable
2
<PAGE>
of all or such portion of such Registrable Securities as are specified in
such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are
specified in a written request received by TSII within 10 business days
after written notice from TSII is given under Section 3(i) (A) above;
provided that TSII shall not be obligated to effect, or take any action to
effect, any such registration pursuant to this Section 3:
(x) In any particular jurisdiction in which TSII would be
required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless TSII
is already subject to service in such jurisdiction and except as may
be required by the Act or applicable rules or regulations thereunder;
(y) After TSII has effected three (3) such registrations pursuant
to this Section 3 and such registrations have been declared or ordered
effective and the sales of such Registrable Securities shall have
closed; or
(z) If the Registrable Securities requested by all Holders to be
registered pursuant to such request do not have an anticipated
aggregate public offering price (before any underwriting discounts and
commissions) of not less than $10,000,000.
The registration statement filed pursuant to the request of the Initiating
Holders may, subject to the provisions of Section 3(ii) below, include other
securities of TSII which are held by officers or directors of TSII, or which are
held by persons who, by virtue of agreements with TSII are entitled to include
their securities in any such registration, but TSII shall have no absolute right
to include any of its securities in any such registration.
The registration rights set forth in this Section 3 shall be assignable, in
whole or in part, to any transferee of Common Stock (who shall be bound by all
obligations of this Section 3).
(ii) Underwriting. If the Initiating Holders intend to distribute the
Registrable Securities covered by their request by means of an underwriting,
they shall so advise TSII as a part of their request made pursuant to Section 3.
If officers or directors of TSII holding other securities of TSII shall
request inclusion in any registration pursuant to Section 3, or if holders of
securities of TSII other than Registrable Securities who are entitled, by
contract with TSII or otherwise, to have securities included in such a
registration (the "Other Stockholders") request such inclusion, the Holders
shall
3
<PAGE>
offer to include the securities of such officers, directors and Other
Stockholders in the underwriting and may condition such offer on their
acceptance of the further applicable provisions of this Section 2. The Holders
whose shares are to be included in such registration and TSII shall (together
with all officers, directors and Other Stockholders proposing to distribute
their securities through such underwriting) enter into an underwriting agreement
in customary form with the representative of the underwriter or underwriters
selected for such underwriting by the initiating Holders and reasonably
acceptable to TSII. Notwithstanding any other provision of this Section 3, if
the representative advises the Holders in writing that marketing factors require
a limitation on the number of shares to be underwritten, the securities of TSII
held by officers or directors of TSII and the securities held by Other
Stockholders shall be excluded from such registration to the extent so required
by such limitation. If, after the exclusion of such shares, further reductions
are still required, the number of shares included in the registration by each
Holder shall be reduced on a pro rata basis (based on the number of shares
proposed to be sold by such Holder), by such minimum number of shares as is
necessary to comply with such request. No Registrable Securities or any other
securities excluded from the underwriting by reason of the underwriter's
marketing limitation shall be included in such registration. If any officer,
director or Other Stockholder who has requested inclusion in such registration
as provided above disapproves of the terms of the underwriting, such person may
elect to withdraw therefrom by written notice to TSII, the underwriter and the
Initiating Holders. The securities so withdrawn shall also be withdrawn from
registration. If the underwriter has not limited the number of Registrable
Securities or other securities to be underwritten, TSII may include its
securities for its own account in such registration if the representative so
agrees and if the number of Registrable Securities and other securities which
would otherwise have been included in such registration and underwriting will
not thereby be limited.
(iii) Notwithstanding the foregoing, if TSII shall furnish to Holders
requesting the filing of a registration statement pursuant to Section 3 (i), a
certificate signed by the president or Chief Executive Officer of TSII stating
that in the good faith judgment of the Board of Directors of TSII, it would be
seriously detrimental to TSII and its stockholders for such registration
statement to be filed and it is therefore essential to defer the filing of such
registration statement, then TSII shall have the right to defer such filing for
a period of not more than 60 days after receipt of the request of the Initiating
Holders; provided, however, that TSII may not utilize this right more than once
in any twelve (12) month period.
4. TSII Registration.
(i) If TSII shall determine to register any of its equity
4
<PAGE>
securities either for its own account or for the account of a security holder or
holders exercising their respective demand registration rights, other than a
registration relating solely to employee benefit plans, or a registration
relating solely to a Commission Rule 145 transaction, or a registration on any
registration form which does not permit secondary sales or does not include
substantiallY the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, TSII will:
(A) promptly give to each of the Holders a written notice thereof
(which shall include a list of the jurisdictions in which TSII intends to
attempt to qualify such securities under the applicable blue sky or other
state securities laws); and
(B) include in such registration (and any related qualification under
blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made by the Holders within fifteen (15) days after receipt of the
written notice from TSII described in clause (i) above, except as set forth
in section 3(ii) below. Such written request may specify all or a part of
the Holders' Registrable Securities.
(ii) Underwriting. If the registration of which TSII gives notice is for a
registered public offering involving an underwriting, TSII shall so advise each
of the Holders as a part of the written notice given pursuant to Section
4(i)(A). In such event, the right of each of the Holders to registration
pursuant to this Section 4 shall be conditioned upon such Holders' participation
in such underwriting and the inclusion of such Holders' Registrable Securities
in the underwriting to the extent provided herein. The Holders whose shares are
to be included in such registration shall (together with TSII and the Other
Stockholders distributing their securities through such underwriting) enter into
an underwriting agreement in customary form with the representative of the
underwriter or underwriters selected for underwriting by TSII. Notwithstanding
any other provision of this Section 4, if the representative determines that
marketing factors require a limitation on the number of shares to be
underwritten, the representative may (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the
registration and underwriting. TSII shall so advise all holders of securities
requesting registration, and the number of shares of securities that are
entitled to be included in the registration and underwriting shall be allocated
in the following manner: The securities of TSII held by officers, directors and
Other Stockholders of TSII (other than securities held by holders who by
contractual right initiated the demand for such registration ("Demanding
Holders")) shall be excluded from such registration and underwriting to the
extent
5
<PAGE>
required by such limitation, and, if a limitation on the number of shares is
still required, the number of shares that may be included in the registration
and underwriting by each of the Holders and Demanding Holders shall be reduced,
on a pro rata basis (based on the number of shares proposed to be sold by such
Holder or Demanding Holder), by such minimum number of shares as is necessary to
comply with such limitation. If any of the Holders or Demanding Holders or any
officer, director or Other Stockholder disapproves of the terms of any such
underwriting, he may elect to withdraw there from by written notice to TSII and
the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
(iii) Number and Transferability. Each of the Holders shall be entitled to
have its shares included in an unlimited number of registrations pursuant to
this Section 4. The registration rights granted pursuant to this Section 4 shall
be assignable, in whole or in part, to any transferee of the Common Stock (who
shall be bound by all obligations of this Section 4).
5. Expenses of Registration. All Registration Expenses and Selling Expenses
incurred in connection with any registration, qualification or compliance
pursuant to Section 3 of this Agreement shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of shares so
registered. Without limiting the generality of the foregoing, in the event TSII
includes shares in any registration, qualification or compliance pursuant to
Section 3 of this Agreement, TSII shall pay the Registration Expenses in
proportion to TSII's share of the total number of shares included in such
registration. All Registration Expenses incurred in connection with any
registration, qualification or compliance pursuant to Section 4 of this
Agreement shall be borne by TSII, and all Selling Expenses incurred in
connection with any such registration, qualification or compliance shall be
borne by the Holders of securities so registered pro rata on the basis of the
number of shares so registered.
6. Registration procedures. In the case of each registration effected by
TSII pursuant to this Agreement, TSII will keep the Holders, as applicable,
advised in writing as to the initiation of each registration and as to the
completion thereof. TSII will:
(i) keep such registration effective for a period of one hundred
eighty (180) days or until the Holders, as applicable, have completed the
distribution described in the registration statement relating thereto,
whichever first occurs; provided, however, that (A) such 180-day period
shall be extended for a period of time equal to the period during which the
Holders, as applicable, refrain from selling any securities included in
such registration in accordance with provisions in Section 10 hereof; and
(B) in the case of any registration of Registrable
6
<PAGE>
Securities on Form S-3 which are intended to be offered on a continuous or
delayed basis, such 180-day period shall be extended until all such
Registrable Securities are sold, provided that Rule 418, or any successor
rule under the Act, permits an offering on a continuous or delayed basis,
and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment which (y) includes any prospectus required by
Section 10(a) of the Act or reflects facts or events representing a
material or fundamental change in the information set forth in the
registration statement, the incorporation by reference of information
required to be included in (y) and (z) above to be contained in periodic
reports filed pursuant to Section 12 or 15(d) of the Exchange Act in the
registration statement; and
(ii) furnish such number of prospectuses and other documents incident
thereto as each of the Holders, as applicable, from time to time may
reasonably request;
provided, however, that the Holders, pro rata on the basis of the number of
their shares so included in such registration, reimburse TSII for expenses
incurred in performing its obligations under this Section 6
7. Indemnification.
(i) TSII will indemnify each of the Holders, as applicable, each of its
officers, directors and partners, and each person controlling each of the
Holders, with respect to each registration which has been effected pursuant to
this Agreement, and each underwriter, if any, and each person who controls any
underwriter, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular or other document (including any related registration statement,
notification or the like) incident to any such registration, qualification or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by TSII of the Act or any rule or
regulation thereunder applicable to TSII and relating to action or inaction
required of TSII in connection with any such registration, qualification or
compliance, and will reimburse each of the Holders, each of its officers,
directors and partners, and each person controlling each of the Holders, each
such underwriter and each person who controls any such underwriter, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action,
provided that TSII will not be liable in any such case to the extent that any
such claim, loss, damage, liability or expense arises out of or is based on any
7
<PAGE>
untrue statement or omission based upon written information furnished to TSII by
the Holders or underwriter and stated to be specifically for use therein.
(ii) Each of the Holders will, if Registrable Securities held by it are
included in the securities as to which such registration, qualification or
compliance is being effected, indemnify TSII, each of its directors and officers
and each underwriter, if any, of TSII's securities covered by such a
registration statement, each person who controls TSII or such underwriter within
the meaning of the Act and the rules and regulations thereunder, each Other
Stockholder and each of their officers, directors, and partners, and each person
controlling such Other Stockholder against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other document
made by such Holder, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
by such Holder therein not misleading, and will reimburse TSII and such Other
Stockholders, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to TSII by such Holder and stated to be specifically for use therein; provided,
however, that the obligations of each of the Holders hereunder shall be limited
to an amount equal to the net proceeds to such Holder of securities sold as
contemplated herein.
(iii) Each party entitled to indemnification under this Section 7 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld) and the Indemnified Party may participate in such
defense at such party's expense (unless the Indemnified Party shall have
reasonably concluded that there may be a conflict of interest between the
Indemnifying Party and the Indemnified Party in such action, in which case the
fees and expenses of counsel shall be at the expense of the Indemnifying Party),
and provided further that the failure of any Indemnified Party to give notice as
provided
8
<PAGE>
herein shall not relieve the Indemnifying Party of its obligations under this
Section 7 unless the Indemnifying Party is materially prejudiced thereby. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation. Each
Indemnified Party shall furnish such information regarding itself or the claim
in question as an Indemnifying Party may reasonably request in writing and as
shall be reasonably required in connection with the defense of such claim and
litigation resulting therefrom.
(iv) If the indemnification provided for in this Section 7 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any loss, liability, claim, damage or expense referred to herein,
then the Indemnifying Party, in lieu of indemnifying such Indemnified Party
hereunder, shall contribute to the amount paid or payable by such Indemnified
Party as a result of such loss, liability, claim, damage or expense in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions which resulted in such loss, liability, claim,
damage or expense, as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission.
(v) Notwithstanding the foregoing, to the extent that the provisions on
indemnification and contribution contained in the underwriting agreement entered
into in connection with any underwritten public offering contemplated by this
Agreement are in conflict with the foregoing provisions, the provisions in such
underwriting agreement shall be controlling.
(vi) The foregoing indemnity agreement of TSII and Holders is subject to
the condition that, insofar as they relate to any loss, claim, liability or
damage made in a preliminary prospectus but eliminated or remedied in the
amended prospectus on file with the Commission at the time the registration
statement in question becomes effective or the amended prospectus filed with the
Commission pursuant to Commission Rule 424(b) (the "Final Prospectus"), such
indemnity agreement shall not inure to the benefit of any underwriter if a copy
of the Final Prospectus was furnished to the underwriter and was not furnished
to the person asserting the loss, liability, claim or damage at or prior to the
9
<PAGE>
time such action is required by the Act.
8. Information by the Holders. Each of the Holders and each Other
Stockholder holding securities included in any registration, shall furnish to
TSII such information regarding such Holder or Other Stockholder and the
distribution opposed by such Holder or Other Stockholder as TSII may reasonably
request in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Agreement.
9. Rule 144 Reporting.
With a view to making available the benefits of certain rules and
regulations of the Commission which may permit the sale of restricted securities
to the public without registration, TSII agrees to:
(i) make and keep public information available as those terms are
understood and defined in Rule 144, at all times from and after ninety (90)
days following the effective date of the first registration under the Act
filed by TSII for an offering of its securities to the general public;
(ii) use its best efforts to file with the Commission in a timely
manner all reports and other documents required of TSII under the Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(iii) so long as the Holder owns any Registrable Securities, furnish
to the Holder upon request, a written statement by TSII as to its
compliance with the reporting requirements of Rule 144 (at any time from
and after ninety (90) days following the effective date of the first
registration statement filed by TSII for an offering of its securities to
the general public), and of the Act and the Exchange Act (at any time after
it has become subject to such reporting requirements), a copy of the most
recent annual or quarterly report of TSII, and such other reports and
documents so filed as the Holder may reasonably request in availing itself
of any rule or regulation of the Commission allowing the Holder to sell any
such securities without registration.
10. "Market Stand-off" Agreement. The Stockholder agrees, if requested by
TSII and an underwriter of Common Stock (or other securities) of TSII, not to
sell or otherwise transfer or dispose of any Common Stock (or other securities)
of TSII held by such Holder during the 180 day period following the effective
date of the initial registration statement of TSII filed under the Act and
during the 90 day period following any subsequent registration statement filed
under the Act, provided that all executive officers and directors of TSII enter
into similar agreements.
10
<PAGE>
If requested by the underwriters, the Holders shall execute a separate
agreement to the foregoing effect. TSII may impose stop-transfer instructions
with respect to the shares (or securities) subject to the foregoing restriction
until the end of such period. The provisions of this Section 10 shall be binding
upon any transferee who acquires Registrable Securities, whether or not such
transferee is entitled to the registration rights provided hereunder.
11. Termination. The registration rights set forth in this Agreement shall
not be available to any Holder if, in the opinion of counsel to TSII, all of the
Registrable Securities then owned by such Holder could be sold in any 90-day
period pursuant to Rule 144 under the Act (without giving effect to the
provisions of Rule 144 (k)).
12. Notices. All communications provided for hereunder shall be sent by
first-class mail and (a) if addressed to the Stockholder, addressed to the
Stockholder, at 515 No. Flagler Drive, Suite 300-Pavilion, West Palm Beach,
Florida 33401, Attention: Imad Khalidi, or at such other address as such party
shall have furnished to TSII in writing, or if addressed to any other Holder of
Registrable Securities, at the address that such Holder shall have furnished to
TSII in writing, or, until any such other Holder so furnishes to the company an
address, then to and at the address of the last Holder of such Registrable
Securities who has furnished an address to TSII, or (c) if addressed to TSII, at
515 N. Flagler Drive, Suite 300, West Palm Beach, Florida 33401-4321, Attention:
President, or at such other address, or to the attention of such other officer,
as TSII shall have furnished to each Holder of Registrable Securities at the
time outstanding.
13. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and, with respect to TSII,
its respective successors and assigns and, with respect to the Stockholder, any
Holder of any Registrable Securities, subject to the provisions respecting the
minimum numbers or percentages of shares of Registrable Securities required in
order to be entitled to certain rights, or take certain actions, contained
herein.
14. Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
limit or otherwise affect the meaning hereof.
15. Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights of the parties shall be governed by, the laws of
the State of Delaware.
16. Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall
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be deemed an original, but all such counterparts shall together constitute one
and the same instrument.
17. Other Registration Rights. For so long as the Stockholder
holds at least 20% of the Registrable Shares, TSII shall not, without the prior
written consent of the Stockholder, enter into any agreement, understanding or
arrangement pursuant to which TSII grants registration or other similar rights
to any shareholder unless the Holders shall be entitled to have included in any
registration effected pursuant to Section 4 hereof all Registrable Shares
requested by them to be so included prior to the inclusion of any securities
requested to be registered by the shareholders entitled to any such other
registration or other similar rights.
IN WITNESS WHEREOF, the parties have caused this agreement to
be executed and delivered by their respective officers thereunto duly authorized
as of the date first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By:
--------------------------------
Name:
Title:
By:
--------------------------------
EXECUTION COPY
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement"), by and
between Travel Services International, Inc., a Delaware corporation ("TSI"), and
Joseph Vittoria ("Employee"), is hereby entered into as of this 14th day of
October, 1997. This Agreement amends and restates the Employment Agreement
between the parties hereto dated as of July 22, 1997, and was effective as of
the date (the "Effective Date") of the consummation of the initial public
offering of the common stock of TSI (the "IPO").
R E C I T A L S
A. As of the date of this Agreement, TSI is engaged primarily in the business of
providing travel services.
B. Employee is employed hereunder by TSI in a confidential relationship wherein
Employee, in the course of Employee's employment with TSI, has and will continue
to become familiar with and aware of information as to TSI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by TSI, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to TSI; this information
is a trade secret and constitutes the valuable goodwill of TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) TSI hereby employs Employee as Chairman and Chief Executive Officer of
TSI. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Chairman and Chief Executive Officer of
TSI and will report directly to the Board of Directors of TSI (the "Board").
Employee hereby accepts this employment upon the terms and conditions herein
contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's
full business time, attention and efforts to promote and further the business of
TSI.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Board.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 4 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, TSI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $200,000 per
year, payable on a regular basis in accordance with TSI's standard payroll
procedures but not less than monthly. On at least an annual basis, the Board
will review Employee's performance and may make increases to such base salary
if, in its discretion, any such increase is warranted. Such recommended increase
would, in all likelihood, require approval by the Board or a duly constituted
committee thereof. In no event shall Employee's base salary be reduced.
(b) Incentive Bonus Plan. For 1997 and subsequent years, TSI shall develop,
as soon as practicable after the Effective Date, a written Incentive Bonus Plan
setting forth the criteria and performance standards under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards. TSI contemplates that the maximum bonus for which Employee may be
eligible will be 100% of Employee's base salary.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee shall
be entitled to receive additional benefits and compensation from TSI in such
form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and Employee's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that TSI may have in effect from time to
time.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of Employee's
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with TSI's expense reporting policy.
(iii) TSI shall provide Employee with other executive perquisites as
may be available to or deemed appropriate for Employee by the Board and
participation in all other TSI-wide employee benefits as available from
time to time.
3. OPTIONS.
At the Effective Date, TSI shall grant to Employee options to acquire
100,000 shares of TSI common stock at the price per share at which such stock is
offered to the public in the IPO. Such options shall vest in installments of
25,000 shares on each of the first, second, third and fourth anniversaries of
the Effective Date.
4. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with TSI,
and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for himself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
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(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor or as a sales representative,
in any travel service business in direct competition with TSI or any
subsidiary of TSI, within the United States or within 100 miles of any
other geographic area in which TSI or any of TSI's subsidiaries conducts
business, including any territory serviced by TSI or any of its
subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of TSI (including the subsidiaries thereof) in a managerial
capacity for the purpose or with the intent of enticing such employee away
from or out of the employ of TSI (including the subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of TSI
(including the respective subsidiaries thereof) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with TSI or any subsidiary of TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by TSI
(including the respective subsidiaries thereof) or for which TSI made an
acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent (2%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of TSI (including TSI's subsidiaries) on the date of the execution
of this Agreement and the current plans of TSI (including TSI's subsidiaries);
but it is also the intent of TSI and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of TSI (including TSI's subsidiaries) throughout the term of this Agreement,
whether before or after the date of termination of the employment of Employee.
For example, if, during the term of this Agreement, TSI (including TSI's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that Employee
shall cease to be employed hereunder, and shall enter into a business or pursue
other activities not in competition with TSI (including TSI's subsidiaries), or
similar activities, or business in locations the operation of which, under
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such circumstances, does not violate clause (i) of this paragraph 4, and in any
event such new business, activities or location are not in violation of this
paragraph 4 or of employee's obligations under this paragraph 4, if any,
Employee shall not be chargeable with a violation of this paragraph 4 if TSI
(including TSI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against TSI, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by TSI of such covenants. It is specifically agreed that the period
of two (2) years following termination of employment stated at the beginning of
this paragraph 4, during which the agreements and covenants of Employee made in
this paragraph 4 shall be effective, shall be computed by excluding from such
computation any time during which Employee is in violation of any provision of
this paragraph 4.
5. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board to relocate
from Employee's present residence to another geographic location in order to
more efficiently carry out Employee's duties and responsibilities under this
Agreement. In such event, TSI will pay all actual reasonable relocation costs to
move Employee, Employee's immediate family and their personal property and
effects. Such costs may include, but are not limited to, moving expenses,
temporary lodging expenses prior to moving into a new permanent residence; all
closing costs on the purchase of a residence (comparable to Employee's present
residence) in the new location. The general intent of the foregoing is that
Employee shall not personally bear any out-of-pocket cost as a result of the
relocation, with an understanding that Employee will use Employee's best efforts
to incur only those costs which are reasonable and necessary to effect a smooth,
efficient and orderly relocation with minimal disruption to the business affairs
of TSI and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 6(c).
6. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue for
three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. As used herein, the word
"Term" shall mean (i) during the three-year period referred to in the preceding
sentence, such three-year period, and (ii) during any one-year renewal pursuant
to the terms hereof, such one-year period. This Agreement and Employee's
employment may be terminated in any one of the following ways:
(a) Death. The death of Employee shall immediately terminate this Agreement
with no severance compensation due to Employee's estate.
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(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, as reasonably determined by Employee's physician, Employee
shall have been absent from Employee's full-time duties hereunder for four (4)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such four (4) month period, but
which shall not be effective earlier than the last day of such four (4) month
period), TSI may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if his or
her health should become impaired to an extent that makes the continued
performance of Employee's duties hereunder hazardous to Employee's physical or
mental health or life, provided that Employee shall have furnished TSI with a
written statement from a qualified doctor to such effect and provided, further,
that, at TSI's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by TSI
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated by either party as a result of Employee's disability,
Employee shall receive from TSI, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater.
(c) Good Cause. TSI may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of TSI which materially and adversely affects the operations or reputation of
TSI; (4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse
or illegal drug abuse by Employee. In the event of a termination for good cause,
as enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to TSI. Employee may
only be terminated without cause by TSI during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board.
Should Employee's employment be terminated by TSI without cause during the Term,
Employee shall receive from TSI, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, plus any accrued salary and declared but unpaid
bonus and reimbursement of expenses. Should Employee's employment be terminated
by TSI without cause at any time after the Term, Employee shall receive from
TSI, in a lump-sum payment due on the effective date of termination, the base
salary rate then in effect equivalent to one (1) year of salary, plus any
accrued salary and declared but unpaid bonus and reimbursement of expenses.
Further, any termination without cause by TSI shall operate to shorten the
period set forth in paragraph 4(a) and during which the terms of paragraph 4
apply to one (1) year from the date of termination of employment. If Employee
resigns or otherwise terminates Employee's employment without cause pursuant to
this paragraph 6(d), Employee shall receive no severance compensation.
(e) Change in Control of TSI. In the event of a "Change in Control of TSI"
(as defined below) during the Term, refer to paragraph 13 below.
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Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 13 hereof. All other rights and obligations of TSI and Employee under
this Agreement shall cease as of the effective date of termination, except that
TSI's obligations under paragraph 10 hereof and Employee's obligations under
paragraphs 4, 7, 8, 9 and 11 hereof shall survive such termination in accordance
with their terms.
If termination of Employee's employment arises out of TSI's failure to pay
Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other material breach of this Agreement by TSI
(including but not limited to a material reduction in Employee's
responsibilities hereunder), as determined by a court of competent jurisdiction
or pursuant to the provisions of paragraph 17 below, such termination shall be
deemed a termination without cause, and TSI shall pay to Employee severance
compensation pursuant to the applicable provisions of paragraph 6(d) and all
amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce Employee's rights hereunder.
Further, none of the provisions of paragraph 4 hereof shall apply in the event
this Agreement is terminated as a result of a breach by TSI.
In the event of any termination of Employee's employment for any reason
provided above, Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due to Employee under this
Agreement on account of any remuneration attributable to any subsequent
employment that Employee may obtain. Any amounts due under this paragraph 6 are
in the nature of severance payments, or liquidated damages, or both, and are not
in the nature of a penalty.
7. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of TSI, or its representatives, vendors or customers
which pertain to the business of TSI shall be and remain the property of TSI,
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other
similar data pertaining to the business, activities or future plans of TSI which
is collected by Employee shall be delivered promptly to TSI without request by
it upon termination of Employee's employment.
8. INVENTIONS.
Employee shall disclose promptly to TSI any and all significant conceptions
and ideas for inventions, improvements and valuable discoveries, whether
patentable or not, which are conceived or made by Employee, solely or jointly
with another, during the period of employment, and which are directly related to
the business or activities of TSI and which Employee conceives as a result of
Employee's employment by TSI. Employee hereby assigns and agrees to assign all
of Employee's interests therein to TSI or its nominee. Whenever requested to do
so by TSI, Employee shall execute any and all applications, assignments or other
instruments that TSI shall deem necessary to apply for and obtain Letters Patent
of the United States or any foreign country or to otherwise protect TSI's
interest therein.
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9. TRADE SECRETS.
Employee agrees that he will not, other than as required by court order,
during or after the Term of this Agreement with TSI, disclose the confidential
terms of TSI's or its subsidiaries' relationships or agreements with its
significant vendors or customers or any other significant and material trade
secret of TSI or its subsidiaries, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
10. INDEMNIFICATION.
In connection with any threatened, pending or completed claim, demand,
liability, action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by TSI against Employee), by reason of
the fact that Employee is or was performing services (including an act, omission
or failure to act) under this Agreement, TSI shall indemnify and hold harmless,
to the maximum extent permitted by law, Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and TSI are made a party to the same third-party action,
complaint, suit or proceeding, TSI agrees to engage competent legal
representation reasonably acceptable to Employee, and Employee agrees to use the
same representation, provided that if counsel selected by TSI shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to TSI for errors or omissions made in
good faith where Employee has not exhibited gross, willful or wanton negligence
or misconduct or performed criminal and fraudulent acts which materially damage
the business of TSI. TSI shall pay, on behalf of Employee upon presentation of
proper invoices, all fees, costs and expenses (including attorneys' fees)
incurred in connection with any matter referenced in this paragraph 10.
11. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to TSI that the execution of this
Agreement by Employee and his employment by TSI and the performance of
Employee's duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity. Further, Employee
agrees to indemnify TSI for any claim, including but not limited to attorneys'
fees and expenses of investigation, by any such third party that such third
party may now have or may hereafter come to have against TSI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
12. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by TSI on the
basis of Employee's personal qualifications, experience and skills. Employee,
therefore, shall not assign all or any portion of Employee's performance under
this Agreement. Subject to the preceding two (2) sentences and the express
provisions of paragraph 13 below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
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13. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that TSI may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of TSI hereunder or that TSI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this paragraph 13 shall be applicable.
(b) In the event of a pending Change in Control wherein TSI and Employee
have not received written notice at least five (5) business days prior to the
anticipated closing date of the transaction giving rise to the Change in Control
from the successor to all or a substantial portion of TSI's business and/or
assets that such successor is willing as of the closing to assume and agree to
perform TSI's obligations under this Agreement in the same manner and to the
same extent that TSI is hereby required to perform, then such Change in Control
shall be deemed to be a termination of this Agreement by TSI without cause
during the Term and the applicable portions of paragraph 6(d) will apply;
however, under such circumstances, the amount of the lump-sum severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to TSI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of paragraph 6(d)
will apply as though TSI had terminated the Agreement without cause during the
Term; however, under such circumstances, the amount of the lump-sum severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall all apply
for a period of two (2) years from the effective date of termination.
(d) For purposes of applying paragraph 6 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by TSI at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, or group of persons or entities acting
together, other than TSI or an employee benefit plan of TSI, acquires
directly or indirectly the Beneficial Ownership (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of TSI and immediately after such acquisition such person, entity
or group is, directly or indirectly, the Beneficial Owner of voting
securities representing 33% or more of the total voting power of all of the
then-outstanding voting securities of TSI and has a larger percentage of
voting securities of TSI than any other person, entity or group holding
voting securities of TSI, unless the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3) of the Board;
or
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(ii) the following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the closing date of
TSI's initial public offering, constitute the Board (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
and whose election, or nomination for election, to the Board was approved
by a vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election).
(iii) the stockholders of TSI shall approve a merger, consolidation,
recapitalization or reorganization of TSI, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of TSI immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI of
all or a substantial portion of TSI's assets (i.e., 50% or more of the
total assets of TSI).
(f) Employee must be notified in writing by TSI at any time that TSI or any
member of its Board anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by TSI or its successor, on a grossed up
basis, for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such amount
will be due and payable by TSI or its successor within ten (10) days after
Employee delivers a written request for reimbursement accompanied by a copy of
Employee's tax return(s) showing the excise tax actually incurred by Employee.
14. COMPLETE AGREEMENT.
To the extent that the IPO may not occur, this Agreement is not a promise
of future employment. This Agreement supersedes any other agreements or
understandings, written or oral, between TSI and Employee, and Employee has no
oral representations, understandings or agreements with TSI or any of its
officers, directors or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between TSI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of TSI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
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15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To TSI: Travel Services International, Inc.
220 Congress Park Drive, Suite 300
Delray Beach, FL 33445
To Employee: Joseph Vittoria
1616 South Ocean Blvd.
Palm Beach, Florida 33480
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the other
portions of this Agreement shall be deemed valid and operative and, so far as is
reasonable and possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration, conducted before a
panel of three (3) arbitrators in the community where the corporate headquarters
of TSI is located on the Effective Date, in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall not have
the authority to add to, detract from or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 6(b) and 6(c) hereof, respectively, or that TSI
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by TSI.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws of
the State of Delaware without regard to the conflicts of laws principles of such
state.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/ Michael J. Moriarty
--------------------------------
Name:
------------------------------
Title:
-----------------------------
/s/ Joseph Vittoria
------------------------------------
Joseph Vittoria, Individually
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EXECUTION COPY
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Amended and Restated Employment Agreement (the "Agreement"), by and
between Travel Services International, Inc., a Delaware corporation ("TSI"), and
Jill M. Vales ("Employee"), is hereby entered into as of this 14th day of
October, 1997. This Agreement amends and restates the Employment Agreement
between the parties hereto originally dated as of May 12, 1997, and was
effective as of the date (the "Effective Date") of the consummation of the
initial public offering of the common stock of TSI (the "IPO").
R E C I T A L S
A. As of the date of this Agreement, TSI is engaged primarily in the business of
providing travel services.
B. Employee is employed hereunder by TSI in a confidential relationship wherein
Employee, in the course of Employee's employment with TSI, has and will continue
to become familiar with and aware of information as to TSI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by TSI, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to TSI; this information
is a trade secret and constitutes the valuable goodwill of TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) TSI hereby employs Employee as Senior Vice President and Chief
Financial Officer of TSI. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Senior Vice President and
Chief Financial Officer of TSI and will report directly to the President of TSI.
Employee hereby accepts this employment upon the terms and conditions herein
contained and, subject to paragraph 1(c) hereof, agrees to devote Employee's
full business time, attention and efforts to promote and further the business of
TSI.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Board of Directors of TSI (the "Board").
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 4 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, TSI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $150,000 per
year, payable on a regular basis in accordance with TSI's standard payroll
procedures but not less than monthly. On at least an annual basis, the Board
will review Employee's performance and may make increases to such base salary
if, in its discretion, any such increase is warranted. Such recommended increase
would, in all likelihood, require approval by the Board or a duly constituted
committee thereof. In no event shall Employee's base salary be reduced.
(b) Incentive Bonus Plan. For 1997 and subsequent years, TSI shall develop,
as soon as practicable after the Effective Date, a written Incentive Bonus Plan
setting forth the criteria and performance standards under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards. TSI contemplates that the maximum bonus for which Employee may be
eligible will be 50% of Employee's base salary.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee shall
be entitled to receive additional benefits and compensation from TSI in such
form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and Employee's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that TSI may have in effect from time to
time. Reimbursement for COBRA payments for coverage for Employee and
Employee's dependent family members in the event that TSI is unable to
provide insurance coverage at the Effective Date.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of Employee's
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with TSI's expense reporting policy.
(iii) TSI shall provide Employee with other executive perquisites as
may be available to senior management of TSI and participation in all other
TSI-wide employee benefits as available from time to time, including
vacation benefits in accordance with TSI's established policies.
(iv) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee at TSI's request in connection
with the activities of TSI prior to the IPO.
3. OPTIONS.
At the Effective Date, TSI shall grant to Employee options to acquire
50,000 shares of TSI common stock at the price per share at which such stock is
offered to the public in the IPO. Such options shall vest in installments of
12,500 shares on each of the first, second, third and fourth anniversaries of
the Effective Date.
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4. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with TSI,
and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for herself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor or as a sales representative,
in any travel service business in direct competition with TSI or any
subsidiary of TSI, within the United States or within 100 miles of any
other geographic area in which TSI or any of TSI's subsidiaries conducts
business, including any territory serviced by TSI or any of its
subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of TSI (including the subsidiaries thereof) in a managerial
capacity for the purpose or with the intent of enticing such employee away
from or out of the employ of TSI (including the subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of TSI
(including the respective subsidiaries thereof) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with TSI or any subsidiary of TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by TSI
(including the respective subsidiaries thereof) or for which TSI made an
acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent (2%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by her, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of TSI (including TSI's subsidiaries) on the date of the execution
of this Agreement and the current plans of TSI (including TSI's subsidiaries);
but it is also the intent of TSI and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of TSI (including TSI's subsidiaries) throughout the term of this Agreement. For
example, if, during the term of this Agreement, TSI (including TSI's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
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It is further agreed by the parties hereto that, in the event that Employee
shall cease to be employed hereunder, and shall enter into a business or pursue
other activities not in competition with TSI (including TSI's subsidiaries), or
similar activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 4, and in any event
such new business, activities or location are not in violation of this paragraph
4 or of employee's obligations under this paragraph 4, if any, Employee shall
not be chargeable with a violation of this paragraph 4 if TSI (including TSI's
subsidiaries) shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
(d) The covenants in this paragraph 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against TSI, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by TSI of such covenants. It is specifically agreed that the period
of two (2) years following termination of employment stated at the beginning of
this paragraph 4, during which the agreements and covenants of Employee made in
this paragraph 4 shall be effective, shall be computed by excluding from such
computation any time during which Employee is in violation of any provision of
this paragraph 4.
5. PLACE OF PERFORMANCE.
(a) Employee understands that she may be requested by the Board to relocate
from Employee's present residence to another geographic location in order to
more efficiently carry out Employee's duties and responsibilities under this
Agreement. In such event, TSI will pay all actual reasonable relocation costs to
move Employee, Employee's immediate family and their personal property and
effects. Such costs may include, but are not limited to, moving expenses,
temporary lodging expenses prior to moving into a new permanent residence; all
closing costs on the purchase of a residence (comparable to Employee's present
residence) in the new location. The general intent of the foregoing is that
Employee shall not personally bear any out-of-pocket cost as a result of the
relocation, with an understanding that Employee will use Employee's best efforts
to incur only those costs which are reasonable and necessary to effect a smooth,
efficient and orderly relocation with minimal disruption to the business affairs
of TSI and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 6(c).
6. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue for
three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. As used herein, the word
"Term" shall mean (i) during the three-year period referred to in the preceding
sentence, such three-year period, and
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(ii) during any one year renewal pursuant to the terms hereof, such one-year
period. This Agreement and Employee's employment may be terminated in any one of
the following ways:
(a) Death. The death of Employee shall immediately terminate this Agreement
with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, as reasonably determined by Employee's physician, Employee
shall have been absent from Employee's full-time duties hereunder for four (4)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such four (4) month period, but
which shall not be effective earlier than the last day of such four (4) month
period), TSI may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if his or
her health should become impaired to an extent that makes the continued
performance of Employee's duties hereunder hazardous to Employee's physical or
mental health or life, provided that Employee shall have furnished TSI with a
written statement from a qualified doctor to such effect and provided, further,
that, at TSI's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by TSI
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated by either party as a result of Employee's disability,
Employee shall receive from TSI, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater.
(c) Good Cause. TSI may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of TSI which materially and adversely affects the operations or reputation of
TSI; (4) Employee's conviction of a felony crime; or (5) chronic alcohol abuse
or illegal drug abuse by Employee. In the event of a termination for good cause,
as enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to TSI. Employee may
only be terminated without cause by TSI during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board.
Should Employee's employment be terminated by TSI without cause during the Term,
Employee shall receive from TSI, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, plus any accrued salary and declared but unpaid
bonus and reimbursement of expenses. Should Employee's employment be terminated
by TSI without cause at any time after the Term, Employee shall receive from
TSI, in a lump-sum payment due on the effective date of termination, the base
salary rate then in effect equivalent to one (1) year of salary, plus any
accrued salary and declared but unpaid bonus and reimbursement of expenses.
Further, any termination without cause by TSI shall operate to shorten the
period set forth in paragraph 4(a) and during which the terms of paragraph 4
apply to one (1) year from the date of termination of employment. If Employee
resigns or otherwise terminates Employee's
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employment without cause pursuant to this paragraph 6(d), Employee shall receive
no severance compensation.
(e) Change in Control of TSI. In the event of a "Change in Control of TSI"
(as defined below) during the Term, refer to paragraph 13 below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 13 hereof. All other rights and obligations of TSI and Employee under
this Agreement shall cease as of the effective date of termination, except that
TSI's obligations under paragraphs 10 and 17 hereof and Employee's obligations
under paragraphs 4, 7, 8, 9, 11 and 17 hereof shall survive such termination in
accordance with their terms.
If termination of Employee's employment arises out of TSI's failure to pay
Employee on a timely basis the amounts to which she is entitled under this
Agreement or as a result of any other material breach of this Agreement by TSI
(including but not limited to a material reduction in Employee's
responsibilities hereunder), as determined by a court of competent jurisdiction
or pursuant to the provisions of paragraph 17 below, such termination shall be
deemed a termination without cause, and TSI shall pay to Employee severance
compensation pursuant to the applicable provisions of paragraph 6(d) and all
amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce Employee's rights hereunder.
Further, none of the provisions of paragraph 4 hereof shall apply in the event
this Agreement is terminated as a result of a breach by TSI.
In the event of any termination of Employee's employment for any reason
provided above, Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due to Employee under this
Agreement on account of any remuneration attributable to any subsequent
employment that Employee may obtain. Any amounts due under this paragraph 6 are
in the nature of severance payments, or liquidated damages, or both, and are not
in the nature of a penalty.
7. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of TSI, or its representatives, vendors or customers
which pertain to the business of TSI shall be and remain the property of TSI,
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other
similar data pertaining to the business, activities or future plans of TSI which
is collected by Employee shall be delivered promptly to TSI without request by
it upon termination of Employee's employment.
8. INVENTIONS.
Employee shall disclose promptly to TSI any and all significant conceptions
and ideas for inventions, improvements and valuable discoveries, whether
patentable or not, which are conceived or made by Employee, solely or jointly
with another, during the period of employment, and which are directly related to
the business or activities of TSI and which Employee conceives as a result of
Employee's employment by TSI. Employee hereby assigns and agrees to assign all
of Employee's interests therein to
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TSI or its nominee. Whenever requested to do so by TSI, Employee shall execute
any and all applications, assignments or other instruments that TSI shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect TSI's interest therein.
9. TRADE SECRETS.
Employee agrees that she will not, other than as required by court order,
during or after the Term of this Agreement with TSI, disclose the confidential
terms of TSI's or its subsidiaries' relationships or agreements with its
significant vendors or customers or any other significant and material trade
secret of TSI or its subsidiaries, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
10. INDEMNIFICATION.
In connection with any threatened, pending or completed claim, demand,
liability, action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by TSI against Employee), by reason of
the fact that Employee is or was performing services (including an act, omission
or failure to act) under this Agreement, then TSI shall indemnify and hold
harmless, to the maximum extent permitted by law, Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and TSI are made a party to the same third-party
action, complaint, suit or proceeding, TSI agrees to engage competent legal
representation reasonably acceptable to Employee, and Employee agrees to use the
same representation, provided that if counsel selected by TSI shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to TSI for errors or omissions made in
good faith where Employee has not exhibited gross, willful or wanton negligence
or misconduct or performed criminal and fraudulent acts which materially damage
the business of TSI. TSI shall pay, on behalf of Employee upon presentation of
proper invoices, all fees, costs and expenses (including attorneys' fees)
incurred in connection with any matter referenced in this paragraph 10.
11. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to TSI that the execution of this
Agreement by Employee and her employment by TSI and the performance of
Employee's duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity. Further, Employee
agrees to indemnify TSI for any claim, including but not limited to attorneys'
fees and expenses of investigation, by any such third party that such third
party may now have or may hereafter come to have against TSI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
12. ASSIGNMENT; BINDING EFFECT.
Employee understands that she has been selected for employment by TSI on
the basis of her personal qualifications, experience and skills. Employee,
therefore, shall not assign all or any portion of Employee's performance under
this Agreement. Subject to the preceding two (2) sentences and the express
provisions of paragraph 13 below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
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13. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that TSI may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of TSI hereunder or that TSI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this paragraph 13 shall be applicable.
(b) In the event of a pending Change in Control wherein TSI and Employee
have not received written notice at least five (5) business days prior to the
anticipated closing date of the transaction giving rise to the Change in Control
from the successor to all or a substantial portion of TSI's business and/or
assets that such successor is willing as of the closing to assume and agree to
perform TSI's obligations under this Agreement in the same manner and to the
same extent that TSI is hereby required to perform, then such Change in Control
shall be deemed to be a termination of this Agreement by TSI without cause
during the Term and the applicable portions of paragraph 6(d) will apply;
however, under such circumstances, the amount of the lump-sum severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to TSI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of paragraph 6(d)
will apply as though TSI had terminated the Agreement without cause during the
Term; however, under such circumstances, the amount of the lump-sum severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall all apply
for a period of two (2) years from the effective date of termination.
(d) For purposes of applying paragraph 6 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by TSI at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, or group of persons or entities acting
together, other than TSI or an employee benefit plan of TSI, acquires
directly or indirectly the Beneficial Ownership (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of TSI and immediately after such acquisition such person, entity
or group is, directly or indirectly, the Beneficial Owner of voting
securities representing 33% or more of the total voting power of all of the
then-outstanding voting securities of TSI and has a larger percentage of
voting securities of TSI than any other person, entity or group holding
voting securities of TSI, unless the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3) of the Board;
or
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(ii) the following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the closing date of
TSI's initial public offering, constitute the Board (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
and whose election, or nomination for election, to the Board was approved
by a vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election); or
(iii) the stockholders of TSI shall approve a merger, consolidation,
recapitalization or reorganization of TSI, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of TSI immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI of
all or a substantial portion of TSI's assets (i.e., 50% or more of the
total assets of TSI).
(f) Employee must be notified in writing by TSI at any time that TSI or any
member of its Board anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by TSI or its successor, on a grossed up
basis, for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such amount
will be due and payable by TSI or its successor within ten (10) days after
Employee delivers a written request for reimbursement accompanied by a copy of
Employee's tax return(s) showing the excise tax actually incurred by Employee.
14. COMPLETE AGREEMENT.
To the extent that the IPO may not occur, this Agreement is not a promise
of future employment. This Agreement supersedes any other agreements or
understandings, written or oral, between TSI and Employee, and Employee has no
oral representations, understandings or agreements with TSI or any of its
officers, directors or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between TSI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of TSI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
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15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To TSI: Travel Services International, Inc.
220 Congress Park Drive, Suite 300
Delray Beach, FL 33445
To Employee: Jill M. Vales
8734 Indian River Run South
Boynton Beach, Florida 33437
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the other
portions of this Agreement shall be deemed valid and operative and, so far as is
reasonable and possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration, conducted before a
panel of three (3) arbitrators in the community where the corporate headquarters
of TSI is located on the Effective Date, in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall not have
the authority to add to, detract from or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 6(b) and 6(c) hereof, respectively, or that TSI
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by TSI.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws of
the State of Delaware without regard to the conflicts of laws principles of such
state.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By:/s/ MICHAEL J. MORIARTY
--------------------------------
Name: Michael J. Moriarty
------------------------------
Title: President
-----------------------------
/s/ Jill M. Vales
-----------------------------------
Jill M. Vales
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EXECUTION COPY
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and between Travel Services
International, Inc., a Delaware corporation ("TSI"), and Michael J. Moriarty
("Employee"), is hereby entered into as of this 14th day of October, 1997. This
Agreement amends and restates the Employment Agreement between the parties
hereto dated as of June 6, 1997, and was effective as of the date (the
"Effective Date") of the consummation of the initial public offering of the
common stock of TSI (the "IPO").
R E C I T A L S
A. As of the date of this Agreement, TSI is engaged primarily in the business of
providing travel services.
B. Employee is employed hereunder by TSI in a confidential relationship wherein
Employee, in the course of Employee's employment with TSI, has and will continue
to become familiar with and aware of information as to TSI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by TSI, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to TSI; this information
is a trade secret and constitutes the valuable goodwill of TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) TSI hereby employs Employee as President and Chief Operating Officer of
TSI. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a President and Chief Operating Officer
and will report directly to the Chief Executive Officer of TSI. Employee hereby
accepts this employment upon the terms and conditions herein contained and,
subject to paragraph 1(c) hereof, agrees to devote Employee's full business
time, attention and efforts to promote and further the business of TSI.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Board of Directors of TSI (the "Board").
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 4 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, TSI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $150,000 per
year, payable on a regular basis in accordance with TSI's standard payroll
procedures but not less than monthly. On at least an annual basis, the Board
will review Employee's performance and may make increases to such base salary
if, in its discretion, any such increase is warranted. Such recommended increase
would, in all likelihood, require approval by the Board or a duly constituted
committee thereof. In no event shall Employee's base salary be reduced.
(b) Incentive Bonus Plan. For 1997 and subsequent years, TSI shall develop,
as soon as practicable after the Effective Date, a written Incentive Bonus Plan
setting forth the criteria and performance standards under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards. During the first year of this Agreement, the minimum bonus that Employee
shall receive hereunder shall be $75,000, payable in two equal installments on
the six- and twelve-month anniversaries of the Effective Date. TSI contemplates
that the maximum bonus for which Employee may be eligible will be 100% of
Employee's base salary.
(c) Executive Perquisites, Benefits and Other Compensation. Employee shall
be entitled to receive additional benefits and compensation from TSI in such
form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and Employee's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that TSI may have in effect from time to
time.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of Employee's
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with TSI's expense reporting policy.
(iii) TSI shall provide Employee with other executive perquisites as
may be available to or deemed appropriate for Employee by the Chief
Executive Officer or the Board and participation in all other TSI-wide
employee benefits as available from time to time.
3. OPTIONS.
At the Effective Date, TSI shall grant to Employee options to acquire
75,000 shares of TSI common stock at the price per share at which such stock is
offered to the public in the IPO. Such options shall vest in installments of
18,750 shares on each of the first, second, third and fourth anniversaries of
the Effective Date.
4. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with TSI,
and for a period of two (2) years immediately following the termination of
Employee's employment under this
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Agreement, for any reason whatsoever, directly or indirectly, for himself or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any travel service business (except a hospitality
service business) in direct competition with TSI or any subsidiary of TSI,
within the United States or within 100 miles of any other geographic area
in which TSI or any of TSI's subsidiaries conducts business, including any
territory serviced by TSI or any of its subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of TSI (including the subsidiaries thereof) in a managerial
capacity for the purpose or with the intent of enticing such employee away
from or out of the employ of TSI (including the subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of TSI
(including the respective subsidiaries thereof) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with TSI or any subsidiary of TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by TSI
(including the respective subsidiaries thereof) or for which TSI made an
acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent (2%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of TSI (including TSI's subsidiaries) on the date of the execution
of this Agreement and the current plans of TSI (including TSI's subsidiaries);
but it is also the intent of TSI and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of TSI (including TSI's subsidiaries) throughout the term of this Agreement,
whether before or after the date of termination of the employment of Employee.
For example, if, during the term of this Agreement, TSI (including TSI's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
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It is further agreed by the parties hereto that, in the event that Employee
shall cease to be employed hereunder, and shall enter into a business or pursue
other activities not in competition with TSI (including TSI's subsidiaries), or
similar activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 4, and in any event
such new business, activities or location are not in violation of this paragraph
4 or of employee's obligations under this paragraph 4, if any, Employee shall
not be chargeable with a violation of this paragraph 4 if TSI (including TSI's
subsidiaries) shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
(d) The covenants in this paragraph 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 4 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against TSI, whether
predicated on this Agreement or otherwise, shall not constitute a defense to the
enforcement by TSI of such covenants. It is specifically agreed that the period
of two (2) years following termination of employment stated at the beginning of
this paragraph 4, during which the agreements and covenants of Employee made in
this paragraph 4 shall be effective, shall be computed by excluding from such
computation any time during which Employee is in violation of any provision of
this paragraph 4.
5. PLACE OF PERFORMANCE.
Employee understands that he may be requested by the Board to relocate from
Employee's present residence to another geographic location in order to more
efficiently carry out Employee's duties and responsibilities under this
Agreement. TSI will pay all actual reasonable relocation costs, not to exceed
$30,000, to move Employee, Employee's immediate family and their personal
property and effects. Such costs may include, but are not limited to, moving
expenses, temporary lodging expenses prior to moving into a new permanent
residence (such expenses not to exceed lodging beyond a period of 180 days), and
all closing costs on the purchase of a residence (comparable to Employee's
present residence) in the new location. Employee will use Employee's best
efforts to incur only those costs which are reasonable and necessary to effect a
smooth, efficient and orderly relocation with minimal disruption to the business
affairs of TSI and the personal life of Employee and Employee's family.
6. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the Effective Date and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. As used herein, the word
"Term" shall mean (i) during the three-year period referred to in the preceding
sentence, such three-year period, and (ii) during any one-year renewal pursuant
to the terms hereof, such one-year period. This Agreement and Employee's
employment may be terminated in any one of the following ways:
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(a) Death. The death of Employee shall immediately terminate this Agreement
with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, as reasonably determined by Employee's physician, Employee
shall have been absent from Employee's full-time duties hereunder for four (4)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such four (4) month period, but
which shall not be effective earlier than the last day of such four (4) month
period), TSI may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if his
health should become impaired to an extent that makes the continued performance
of Employee's duties hereunder hazardous to Employee's physical or mental health
or life, provided that Employee shall have furnished TSI with a written
statement from a qualified doctor to such effect and provided, further, that, at
TSI's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by TSI
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated by either party as a result of Employee's disability,
Employee shall receive from TSI, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater.
(c) Good Cause. TSI may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days (after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of TSI which materially and adversely affects the operations or
reputation of TSI; (4) Employee's conviction of a felony crime; or (5) chronic
alcohol abuse or illegal drug abuse by Employee. In the event of a termination
for good cause, as enumerated above, Employee shall have no right to any
severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to TSI. Employee may
only be terminated without cause by TSI during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board.
Should Employee's employment be terminated by TSI without cause during the Term,
Employee shall receive from TSI, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, plus any accrued salary and declared but unpaid
bonus and reimbursement of expenses. Should Employee's employment be terminated
by TSI without cause at any time after the Term, Employee shall receive from
TSI, in a lump-sum payment due on the effective date of termination, the base
salary rate then in effect equivalent to one (1) year of salary, plus any
accrued salary and declared but unpaid bonus and reimbursement of expenses.
Further, any termination without cause by TSI shall operate to shorten the
period set forth in paragraph 4(a) and during which the terms of paragraph 4
apply to one (1) year from the date of termination of employment. If Employee
resigns or otherwise terminates Employee's employment without cause pursuant to
this paragraph 6(d), Employee shall receive no severance compensation.
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(e) Change in Control of TSI. In the event of a "Change in Control of TSI"
(as defined below) during the Term, refer to paragraph 13 below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 13 hereof. All other rights and obligations of TSI and Employee under
this Agreement shall cease as of the effective date of termination, except that
TSI's obligations under paragraph 10 hereof and Employee's obligations under
paragraphs 4, 7, 8, 9 and 11 hereof shall survive such termination in accordance
with their terms.
If termination of Employee's employment arises out of TSI's failure to pay
Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other material breach of this Agreement by TSI
(including but not limited to a material reduction in Employee's
responsibilities hereunder), as determined by a court of competent jurisdiction
or pursuant to the provisions of paragraph 17 below, such termination shall be
deemed a termination without cause, and TSI shall pay to Employee severance
compensation pursuant to the applicable provisions of paragraph 6(d) and all
amounts and damages to which Employee may be entitled as a result of such
breach, including interest thereon and all reasonable legal fees and expenses
and other costs incurred by Employee to enforce Employee's rights hereunder.
Further, none of the provisions of paragraph 4 hereof shall apply in the event
this Agreement is terminated as a result of a breach by TSI.
In the event of any termination of Employee's employment for any reason
provided above, Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due to Employee under this
Agreement on account of any remuneration attributable to any subsequent
employment that Employee may obtain. Any amounts due under this paragraph 6 are
in the nature of severance payments, or liquidated damages, or both, and are not
in the nature of a penalty.
7. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of TSI, or its representatives, vendors or customers
which pertain to the business of TSI shall be and remain the property of TSI,
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of TSI which
is collected by Employee shall be delivered promptly to TSI without request by
it upon termination of Employee's employment.
8. INVENTIONS.
Employee shall disclose promptly to TSI any and all significant conceptions
and ideas for inventions, improvements and valuable discoveries, whether
patentable or not, which are conceived or made by Employee, solely or jointly
with another, during the period of employment, and which are directly related to
the business or activities of TSI and which Employee conceives as a result of
Employee's employment by TSI. Employee hereby assigns and agrees to assign all
of Employee's interests therein to TSI or its nominee. Whenever requested to do
so by TSI, Employee shall execute any and all applications, assignments or other
instruments that TSI shall deem necessary to apply for and
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obtain Letters Patent of the United States or any foreign country or to
otherwise protect TSI's interest therein.
9. TRADE SECRETS.
Employee agrees that he will not, other than as required by court order,
during or after the Term of this Agreement with TSI, disclose the confidential
terms of TSI's or its subsidiaries' relationships or agreements with its
significant vendors or customers or any other significant and material trade
secret of TSI or its subsidiaries, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
10. INDEMNIFICATION.
In connection with any threatened, pending or completed claim, demand,
liability, action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by TSI against Employee), by reason of
the fact that Employee is or was performing services (including an act, omission
or failure to act) under this Agreement, then TSI shall indemnify and hold
harmless, to the maximum extent permitted by law, Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and TSI are made a party to the same third-party
action, complaint, suit or proceeding, TSI agrees to engage competent legal
representation reasonably acceptable to Employee, and Employee agrees to use the
same representation, provided that if counsel selected by TSI shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to TSI for errors or omissions made in good faith
where Employee has not exhibited gross, willful or wanton negligence or
misconduct or performed criminal and fraudulent acts which materially damage the
business of TSI. TSI shall pay, on behalf of Employee upon presentation of
proper invoices, all fees, costs and expenses (including attorneys' fees)
incurred in connection with any matter referenced in this paragraph 10.
11. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to TSI that the execution of this
Agreement by Employee and his employment by TSI and the performance of
Employee's duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity. Further, Employee
agrees to indemnify TSI for any claim, including but not limited to attorneys'
fees and expenses of investigation, by any such third party that such third
party may now have or may hereafter come to have against TSI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
12. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by TSI on the
basis of Employee's personal qualifications, experience and skills. Employee,
therefore, shall not assign all or any portion of Employee's performance under
this Agreement. Subject to the preceding two (2) sentences and the express
provisions of paragraph 13 below, this Agreement shall be binding upon, inure to
the
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benefit of, and be enforceable by the parties hereto and their respective heirs,
legal representatives, successors and assigns.
13. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that TSI may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of TSI hereunder or that TSI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this paragraph 13 shall be applicable.
(b) In the event of a pending Change in Control wherein TSI and Employee
have not received written notice at least five (5) business days prior to the
anticipated closing date of the transaction giving rise to the Change in Control
from the successor to all or a substantial portion of TSI's business and/or
assets that such successor is willing as of the closing to assume and agree to
perform TSI's obligations under this Agreement in the same manner and to the
same extent that TSI is hereby required to perform, then such Change in Control
shall be deemed to be a termination of this Agreement by TSI without cause
during the Term and the applicable portions of paragraph 6(d) will apply;
however, under such circumstances, the amount of the lump-sum severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to TSI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of paragraph 6(d)
will apply as though TSI had terminated the Agreement without cause during the
Term; however, under such circumstances, the amount of the lump-sum severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall all apply
for a period of two (2) years from the effective date of termination.
(d) For purposes of applying paragraph 6 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by TSI at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, or group of persons or entities acting
together, other than TSI or an employee benefit plan of TSI, acquires
directly or indirectly the Beneficial Ownership (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of TSI and immediately after such acquisition such person, entity
or group is, directly or indirectly, the Beneficial Owner of voting
securities representing 33% or more of the total voting power of all of the
then-outstanding voting securities of TSI and has a larger percentage of
voting
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securities of TSI than any other person, entity or group holding voting
securities of TSI, unless the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3) of the Board;
or
(ii) the following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the closing date of
TSI's initial public offering, constitute the Board (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
and whose election, or nomination for election, to the Board was approved
by a vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election).
(iii) the stockholders of TSI shall approve a merger, consolidation,
recapitalization or reorganization of TSI, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of TSI immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI of
all or a substantial portion of TSI's assets (i.e., 50% or more of the
total assets of TSI).
(f) Employee must be notified in writing by TSI at any time that TSI or any
member of its Board anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by TSI or its successor, on a grossed up
basis, for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such amount
will be due and payable by TSI or its successor within ten (10) days after
Employee delivers a written request for reimbursement accompanied by a copy of
Employee's tax return(s) showing the excise tax actually incurred by Employee.
14. COMPLETE AGREEMENT.
To the extent the IPO may not occur, this Agreement is not a promise of
future employment. This Agreement supersedes any other agreements or
understandings, written or oral, between TSI and Employee, and Employee has no
oral representations, understandings or agreements with TSI or any of its
officers, directors or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between TSI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly
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authorized officer of TSI and Employee, and no term of this Agreement may be
waived except by a written instrument signed by the party waiving the benefit of
such term.
15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To TSI: Travel Services International, Inc.
220 Congress Park Drive, Suite 300
Delray Beach, FL 33445
To Employee: Michael J. Moriarty
10701 Wynkoop Drive
Great Falls, Virginia 22066
Notice shall be deemed given and effective three (3) days after the deposit
in the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the other
portions of this Agreement shall be deemed valid and operative and, so far as is
reasonable and possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration, conducted before a
panel of three (3) arbitrators in the community where the corporate headquarters
of TSI is located on the Effective Date, in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall not have
the authority to add to, detract from, or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 6(b) and 6(c) hereof, respectively, or that TSI
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration panel shall be final and binding. Judgment may be entered on the
arbitrators' award in any court having jurisdiction. The direct expense of any
arbitration proceeding shall be borne by TSI.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws of
the State of Delaware without regard to the conflicts of laws principles of such
state.
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19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By:/s/ JOSEPH V. VITTORIA
----------------------------------------
Name: Joseph V. Vittoria
--------------------------------------
Title: Chairman and Chief Executive Officer
-------------------------------------
/s/ Michael J. Moriarty
-----------------------------------
Michael J. Moriarty
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and between Travel Services
International, Inc., a Delaware corporation ("TSI"), and Mel Robinson
("Employee"), is hereby entered into as of this 22nd day of July, 1997, and
shall be effective as of a date (the "Effective Date") to be agreed upon by the
parties hereto as soon as practicable after the consummation of the initial
public offering of the common stock of TSI (the "IPO").
R E C I T A L S
A. As of the date of this Agreement, TSI is engaged primarily in the business of
providing travel services.
B. Employee is employed hereunder by TSI in a confidential relationship wherein
Employee, in the course of Employee's employment with TSI, has and will continue
to become familiar with and aware of information as to TSI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by TSI, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to TSI; this information
is a trade secret and constitutes the valuable goodwill of TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) TSI hereby employs Employee as a Vice President of Development of TSI.
As such, Employee shall have responsibilities, duties and authority reasonably
accorded to and expected of a Vice President of Development of TSI and will
report directly to the Chief Executive Officer of TSI or such other
representative as he shall designate. Employee acknowledges that TSI is a
start-up company and that Employee's responsibilities may extend beyond the
traditional responsibilities of a Vice President of Development. Employee hereby
accepts this employment upon the terms and conditions herein contained and,
subject to paragraph 1(c) hereof, agrees to devote Employee's full business
time, attention and efforts to promote and further the business of TSI.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Board of Directors of TSI (the "Board").
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 4 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, TSI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $125,000 per
year, payable on a regular basis in accordance with TSI's standard payroll
procedures but not less than monthly. On at least an annual basis, the Board
will review Employee's performance and may make increases to such base salary
if, in its discretion, any such increase is warranted. Such recommended increase
would, in all likelihood, require approval by the Board or a duly constituted
committee thereof. In no event shall Employee's base salary be reduced.
(b) Incentive Bonus Plan. For 1997 and subsequent years, TSI shall develop,
as soon as practicable after the Effective Date, a written Incentive Bonus Plan
setting forth the criteria and performance standards under which Employee and
other officers and key employees will be eligible to receive year-end bonus
awards. During the Term of this Agreement (as defined below), TSI shall pay to
Employee a guaranteed minimum bonus in the amount of 25% of the base salary
(being a total of $31,250 per year) payable annually at the time bonuses are
paid. TSI contemplates that the maximum bonus for which Employee may be eligible
will be 50% of Employee's base salary.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee shall
be entitled to receive additional benefits and compensation from TSI in such
form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and Employee's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that TSI may have in effect from time to
time; reimbursement for COBRA payments for coverage and premiums on any gap
insurance for Employee and Employee's dependent family members in the event
that TSI is unable to provide insurance coverage at the Effective Date.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of Employee's
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with TSI's expense reporting policy.
(iii) TSI shall provide Employee with other executive perquisites as
may be available to senior management of TSI and participation in all other
TSI-wide employee benefits as available from time to time, including
vacation benefits in accordance with TSI's established policies.
3. OPTIONS.
At the date of the IPO, TSI shall grant to Employee options to acquire
50,000 shares of TSI common stock at the price per share at which such stock is
offered to the public in the IPO, subject to forfeiture if Employee does not
commence employment with TSI. Such options shall vest in installments of 12,500
shares on each of the first, second, third and fourth anniversaries of the
Effective Date. When issued, such options shall contain, among other things, a
provision for full and immediate vesting of all shares covered by the options
(whether already vested or not) in the event of a Change in Control, as
described in Section 13(e) of this Agreement.
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4. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with TSI,
and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for himself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature (other than a subsidiary or affiliate of TSI):
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor or as a sales representative,
in any travel service business in direct competition with TSI or any
subsidiary of TSI, within the United States or within 100 miles of any
other geographic area in which TSI or any of TSI's subsidiaries conducts
business, including any territory serviced by TSI or any of its
subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of TSI (including the subsidiaries thereof) in a managerial
capacity for the purpose or with the intent of enticing such employee away
from or out of the employ of TSI (including the subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of TSI
(including the respective subsidiaries thereof) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with TSI or any subsidiary of TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by TSI
(including the respective subsidiaries thereof) or for which TSI made an
acquisition analysis, for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent (2%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter. Additionally, none of the
above restrictions in Section 4(a) subsections (i) through (iv), shall apply to
Employee's endeavors relating to companies which are either suppliers to the
Company or any of its subsidiaries (such as airlines, cruise lines, hotel
operators, etc.) or customers of the Company or any of its subsidiaries,
inasmuch as suppliers and customers of TSI are not deemed by the Company to be
in direct competition with TSI or its subsidiaries.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by his, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of TSI (including TSI's subsidiaries) on the date of the execution
of this Agreement and the current plans of TSI (including TSI's subsidiaries);
but it is also the intent of TSI and Employee that such covenants be construed
and enforced
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in accordance with the changing activities, business and locations of TSI
(including TSI's subsidiaries) throughout the term of this Agreement. For
example, if, during the term of this Agreement, TSI (including TSI's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that Employee
shall cease to be employed hereunder, and shall enter into a business or pursue
other activities not in competition with TSI (including TSI's subsidiaries), or
similar activities, or business in locations the operation of which, under such
circumstances, does not violate clause (i) of this paragraph 4, and in any event
such new business, activities or location are not in violation of this paragraph
4 or of employee's obligations under this paragraph 4, if any, Employee shall
not be chargeable with a violation of this paragraph 4 if TSI (including TSI's
subsidiaries) shall thereafter enter the same, similar or a competitive (i)
business, (ii) course of activities or (iii) location, as applicable.
(d) The covenants in this paragraph 4 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
All of the covenants in this paragraph 4 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of Employee against TSI, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by TSI
of such covenants. It is specifically agreed that the period of two (2) years
following termination of employment stated at the beginning of this paragraph 4,
during which the agreements and covenants of Employee made in this paragraph 4
shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this paragraph 4.
5. PLACE OF PERFORMANCE.
(a) Employee understands that he shall relocate from Employee's present
residence to another geographic location near TSI's headquarters in Palm Beach
in order to more efficiently carry out Employee's duties and responsibilities
under this Agreement. TSI will, for the initial year of the Term (as defined
below) hereof, pay all actual reasonable relocation costs to move Employee,
Employee's immediate family and their personal property and effects. Such costs
may include, but are not limited to, moving expenses, air fare, temporary
lodging expenses prior to moving into a new permanent residence and other
associated expenses; provided, the maximum total amount to be paid by TSI
hereunder shall be $20,000.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 6(c).
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6. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue for
three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. As used herein, the word
"Term" shall mean (i) during the three year period referred to in the preceding
sentence, such three year period, and (ii) during any one year renewal pursuant
to the terms hereof, such one year period. This Agreement and Employee's
employment may be terminated in any one of the following ways:
(a) Death. The death of Employee shall immediately terminate this Agreement
with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, as reasonably determined by Employee's physician, Employee
shall have been absent from Employee's full-time duties hereunder for four (4)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such four (4) month period, but
which shall not be effective earlier than the last day of such four (4) month
period), TSI may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if his
health should become impaired to an extent that makes the continued performance
of Employee's duties hereunder hazardous to Employee's physical or mental health
or life, provided that Employee shall have furnished TSI with a written
statement from a qualified doctor to such effect and provided, further, that, at
TSI's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by TSI
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated by either party as a result of Employee's disability,
Employee shall receive from TSI, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in
effect, plus the guaranteed minimum annual bonus described in Section 2(b)
herein, for whatever time period is remaining under the Term of this Agreement
or for one (1) year, whichever amount is greater.
(c) Good Cause. TSI may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of TSI which materially and adversely affects the operations or
reputation of TSI; (4) Employee's conviction of a felony crime; or (5) chronic
alcohol abuse or illegal drug abuse by Employee. In the event of a termination
for good cause, as enumerated above, Employee shall have no right to any
severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to TSI. Employee may
only be terminated without cause by TSI during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board.
Should Employee's employment be terminated by TSI without cause during the Term,
Employee shall receive from TSI, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, plus any accrued salary, guaranteed minimum annual
bonus per Section 2(b), and declared but unpaid bonus and reimbursement of
expenses. Should Employee's employment be terminated by TSI without cause at any
time after the Term, Employee shall receive from TSI, in a lump-sum payment due
on the effective date of termination, the base salary rate then in effect
equivalent to one (1) year of salary, plus any accrued salary, guaranteed
minimum annual bonus per
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Section 2(b), and declared but unpaid bonus and reimbursement of expenses.
Further, any termination without cause by TSI shall operate to shorten the
period set forth in paragraph 4(a) and during which the terms of paragraph 4
apply to one (1) year from the date of termination of employment. If Employee
resigns or otherwise terminates Employee's employment without cause pursuant to
this paragraph 6(d), Employee shall receive no severance compensation.
(e) Change in Control of TSI. In the event of a "Change in Control of TSI"
(as defined below) during the Term, refer to paragraph 13 below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 13 hereof. All other rights and obligations of TSI and Employee under
this Agreement shall cease as of the effective date of termination, except that
TSI's obligations under paragraph 10 hereof and Employee's obligations under
paragraphs 4, 7, 8, 9 and 11 hereof shall survive such termination in accordance
with their terms.
If termination of Employee's employment arises out of TSI's failure to pay
Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other material breach of this Agreement by TSI
(including but not limited to a material reduction in Employee's
responsibilities hereunder), as mutually agreed to by Employee and TSI or as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 17 below, such termination shall be deemed a termination without
cause, and TSI shall pay to Employee severance compensation pursuant to the
applicable provisions of paragraph 6(d) and all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder. Further, none of the provisions of
paragraph 4 hereof shall apply in the event this Agreement is terminated as a
result of a breach by TSI.
In the event of any termination of Employee's employment for any reason
provided above, Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due to Employee under this
Agreement on account of any remuneration attributable to any subsequent
employment that Employee may obtain. Any amounts due under this paragraph 6 are
in the nature of severance payments, or liquidated damages, or both, and are not
in the nature of a penalty.
7. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of TSI, or its representatives, vendors or customers
which pertain to the business of TSI shall be and remain the property of TSI,
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other
similar data pertaining to the business, activities or future plans of TSI which
is collected by Employee shall be delivered promptly to TSI without request by
it upon termination of Employee's employment.
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8. INVENTIONS.
Employee shall disclose promptly to TSI any and all significant conceptions
and ideas for inventions, improvements and valuable discoveries, whether
patentable or not, which are conceived or made by Employee, solely or jointly
with another, during the period of employment, and which are directly related to
the business or activities of TSI and which Employee conceives as a result of
Employee's employment by TSI. Employee hereby assigns and agrees to assign all
of Employee's interests therein to TSI or its nominee. Whenever requested to do
so by TSI, Employee shall execute any and all applications, assignments or other
instruments that TSI shall deem necessary to apply for and obtain Letters Patent
of the United States or any foreign country or to otherwise protect TSI's
interest therein.
9. TRADE SECRETS.
Employee agrees that he will not, other than as required by court order,
during or after the Term of this Agreement with TSI, disclose the confidential
terms of TSI's or its subsidiaries' relationships or agreements with its
significant vendors or customers or any other significant and material trade
secret of TSI or its subsidiaries, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
10. INDEMNIFICATION.
In connection with any threatened, pending or completed claim, demand,
liability, action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by TSI against Employee), by reason of
the fact that Employee is or was performing services (including an act, omission
or failure to act) under this Agreement, TSI shall indemnify and hold harmless,
to the maximum extent permitted by law, Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and TSI are made a party to the same third-party action,
complaint, suit or proceeding, TSI agrees to engage competent legal
representation reasonably acceptable to Employee, and Employee agrees to use the
same representation, provided that if counsel selected by TSI shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to TSI for errors or omissions made in good faith
where Employee has not exhibited gross, willful or wanton negligence or
misconduct or performed criminal and fraudulent acts which materially damage the
business of TSI. TSI shall pay, on behalf of Employee upon presentation of
proper invoices, all fees, costs and expenses (including attorneys' fees)
incurred in connection with any matter referenced in this paragraph 10.
11. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to TSI that the execution of this
Agreement by Employee and his employment by TSI and the performance of
Employee's duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity. Further, Employee
agrees to indemnify TSI for any claim, including but not limited to attorneys'
fees and expenses of investigation, by any such third party that such third
party may now have or may hereafter come to have against TSI based upon or
arising out of any noncompetition agreement, invention or
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secrecy agreement between Employee and such third party which was in existence
as of the date of this Agreement.
12. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by TSI on the
basis of Employee's personal qualifications, experience and skills. Employee,
therefore, shall not assign all or any portion of Employee's performance under
this Agreement. Subject to the preceding two (2) sentences and the express
provisions of paragraph 13 below, this Agreement shall be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
heirs, legal representatives, successors and assigns.
13. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that TSI may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of TSI hereunder or that TSI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this paragraph 13 shall be applicable.
(b) In the event of a pending Change in Control wherein TSI and Employee
have not received written notice at least five (5) business days prior to the
anticipated closing date of the transaction giving rise to the Change in Control
from the successor to all or a substantial portion of TSI's business and/or
assets that such successor is willing as of the closing to assume and agree to
perform TSI's obligations under this Agreement in the same manner and to the
same extent that TSI is hereby required to perform, then such Change in Control
shall be deemed to be a termination of this Agreement by TSI without cause
during the Term and the applicable portions of paragraph 6(d) will apply;
however, under such circumstances, the amount of the lump-sum severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to TSI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of paragraph 6(d)
will apply as though TSI had terminated the Agreement without cause during the
Term; however, under such circumstances, the amount of the lump-sum severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall all apply
for a period of two (2) years from the effective date of termination.
(d) For purposes of applying paragraph 6 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by TSI at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
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(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, or group of persons or entities acting
together, other than TSI or an employee benefit plan of TSI, acquires
directly or indirectly the Beneficial Ownership (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of TSI and immediately after such acquisition such person, entity
or group is, directly or indirectly, the Beneficial Owner of voting
securities representing 33% or more of the total voting power of all of the
then-outstanding voting securities of TSI and has a larger percentage of
voting securities of TSI than any other person, entity or group holding
voting securities of TSI, unless the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3) of the Board;
or
(ii) the following individuals no longer constitute a majority of the
members of the Board: (A) the individuals who, as of the closing date of
TSI's initial public offering, constitute the Board (the "Original
Directors"); (B) the individuals who thereafter are elected to the Board
and whose election, or nomination for election, to the Board was approved
by a vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election); and (C) the individuals who are
elected to the Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of the Original
Directors and Additional Original Directors then still in office (such
directors also becoming "Additional Original Directors" immediately
following their election); or
(iii) the stockholders of TSI shall approve a merger, consolidation,
recapitalization or reorganization of TSI, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of TSI immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI of
all or a substantial portion of TSI's assets (i.e., 50% or more of the
total assets of TSI).
(f) Employee must be notified in writing by TSI at any time that TSI or any
member of its Board anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by TSI or its successor, on a grossed up
basis, for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such amount
will be due and payable by TSI or its successor within ten (10) days after
Employee delivers a written request for reimbursement accompanied by a copy of
Employee's tax return(s) showing the excise tax actually incurred by Employee.
14. COMPLETE AGREEMENT.
If the IPO does not occur, this Agreement is not a promise of future
employment. This Agreement supersedes any other agreements or understandings,
written or oral, between TSI and
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Employee, and Employee has no oral representations, understandings or agreements
with TSI or any of its officers, directors or representatives covering the same
subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between TSI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of TSI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To TSI: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: Mel Robinson
424 Wilderness Drive
Longwood, Florida 32779
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the other
portions of this Agreement shall be deemed valid and operative and, so far as is
reasonable and possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration, conducted before a
panel of three (3) arbitrators in the community where the corporate headquarters
of TSI is located on the Effective Date, in accordance with the rules of the
American Arbitration Association then in effect. The arbitrators shall not have
the authority to add to, detract from or modify any provision hereof nor to
award punitive damages to any injured party. The arbitrators shall have the
authority to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 6(b) and 6(c) hereof, respectively, or that TSI
has otherwise materially breached this Agreement. A decision by a majority of
the arbitration
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panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by TSI.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws of
the State of Delaware without regard to the conflicts of laws principles of such
state.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/
--------------------------------
Name:
------------------------------
Title:
-----------------------------
/s/ Mel Robinson
------------------------------------
Mel Robinson
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel Services
International, Inc., a Delaware corporation ("TSI"), Auto Europe, LLC, a Maine
limited liability company and a wholly-owned subsidiary of TSI (the "Company"),
and Imad Khalidi ("Employee"), is hereby entered into as of this 22nd day of
July, 1997, and shall be effective as of the date of the consummation of the
initial public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chief Executive Officer of the
Company. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a President of the Company and will
report directly to the Board of Directors of the Company (the "Board"). Employee
hereby accepts this employment upon the terms and conditions herein contained
and, subject to paragraph 1(c) hereof, agrees to devote Employee's time,
attention and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Board.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
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2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $140,000 per
year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than monthly. On at least an annual basis, the
Board will review Employee's performance and may make increases to such base
salary if, in its discretion, any such increase is warranted. Such recommended
increase would, in all likelihood, require approval by the Board or a duly
constituted committee thereof.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee shall
be entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and Employee's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that the Company or TSI may have in effect
from time to time, benefits provided to Employee under this clause (i) to
be at least equal to such benefits provided to TSI executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of Employee's
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by
the Board and participation in all other Company-wide or TSI-wide employee
benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with the
Company, and for a period of two (2) years immediately following the termination
of Employee's employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any travel service business in direct competition with
the Company or TSI or any subsidiary of either the Company or TSI, within
the United States or within 100 miles of any other geographic area in which
the Company or TSI or any of the Company's or TSI's subsidiaries conducts
business, including any territory serviced by the Company or TSI or any of
such subsidiaries (the "Territory");
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(ii) call upon any person who is, at that time, within the Territory,
an employee of the Company or TSI (including the respective subsidiaries
thereof) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or TSI
(including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of the Company
or TSI (including the respective subsidiaries thereof) within the Territory
for the purpose of soliciting or selling products or services in direct
competition with the Company or TSI or any subsidiary of the Company or TSI
within the Territory; or
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or TSI (including the respective subsidiaries thereof) or for which
the Company or TSI made an acquisition analysis, for the purpose of
acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent (2%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and TSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company and TSI for
which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the changing
activities, business and locations of the Company and TSI (including TSI's other
subsidiaries) throughout the term of this Agreement, whether before or after the
date of termination of the employment of Employee. For example, if, during the
term of this Agreement, the Company or TSI (including TSI's other subsidiaries)
engages in new and different activities, enters a new business or establishes
new locations for its current activities or business in addition to or other
than the activities or business enumerated under the Recitals above or the
locations currently established therefor, then Employee will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within 100
miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that Employee
shall cease to be employed hereunder, and shall enter into a business or pursue
other activities not in competition with the Company or TSI (including TSI's
other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or TSI (including TSI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities, or (iii) location, as applicable.
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(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or TSI to
relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue for
three (3) years (the "Term"), and, unless terminated sooner as herein provided,
shall continue thereafter on a year-to-year basis on the same terms and
conditions contained herein in effect as of the time of renewal. This Agreement
and Employee's employment may be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate this Agreement
with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive
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months, then thirty (30) days after receiving written notice (which notice may
occur before or after the end of such four (4) month period, but which shall not
be effective earlier than the last day of such four (4) month period), the
Company may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if his
health should become impaired to an extent that makes the continued performance
of Employee's duties hereunder hazardous to Employee's physical or mental health
or life, provided that Employee shall have furnished the Company with a written
statement from a qualified doctor to such effect and provided, further, that, at
the Company's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by the
Company who is reasonably acceptable to Employee or Employee's doctor and such
doctor shall have concurred in the conclusion of Employee's doctor. In the event
this Agreement is terminated as a result of Employee's disability, Employee
shall receive from the Company, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater, and, in the event that Employee accepts such lump sum payment, the
period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time after the Term, Employee shall be entitled to receive from the Company, in
a lump-sum payment due on the effective date of termination, the base salary
rate then in effect equivalent to one (1) year of salary, and, in the event that
Employee accepts such lump sum payment, the period set forth in paragraph 3(a)
and during which the terms of paragraph 3 apply shall be shortened to one (1)
year from the date of termination of employment. Should Employee be terminated
by the Company without cause at any time during or after the Term, Employee
shall be entitled to waive Employee's right to receive severance compensation
(by a written waiver delivered to the Company on the effective date of
termination), and, in such case, the noncompetition provisions of paragraph 3
shall not apply. If Employee resigns or otherwise terminates Employee's
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation. A termination without cause within the meaning of
this paragraph 5(d) shall be deemed to have occurred if any person or entity,
other than TSI or an employee benefit plan of TSI, acquires directly or
indirectly the Beneficial Ownership (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of any voting security of the
Company or TSI and immediately after such acquisition such person or entity is,
directly or
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indirectly, the Beneficial Owner of voting securities representing 50% or more
of the total voting power of all of the then-outstanding voting securities of
the Company or TSI and the transaction pursuant to which such acquisition is
made is approved by at least two-thirds (2/3) of the Board of Directors of TSI
but is not approved by Employee.
(e) Change in Control of TSI. In the event of a "Change in Control of TSI"
(as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of TSI, the Company and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder. Further, none of the provisions of
paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors,
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or TSI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
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8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of this
Agreement with the Company, disclose the specific terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative
or investigative (other than an action by the Company or TSI against Employee),
by reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company or TSI for errors or omissions
made in good faith where Employee has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of the Company.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the execution
of this Agreement by Employee and his employment by the Company and the
performance of Employee's duties hereunder will not violate or be a breach of
any agreement with a former employer, client or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including but
not limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement,
invention, or secrecy agreement between Employee and such third party which was
in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by the
Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity
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and that such entity shall automatically succeed to the rights and obligations
of the Company hereunder or that the Company may undergo another type of Change
in Control. In the event such a merger or consolidation or other Change in
Control is initiated prior to the end of the Term, then the provisions of this
paragraph 12 shall be applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on the effective date of the termination), in
which case the noncompetition provisions of paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee benefit plan
of TSI, acquires directly or indirectly the Beneficial Ownership (as
defined in Section 13(d) of the Securities Exchange Act of 1934, as
amended) of any voting security of the Company or TSI and immediately after
such acquisition such person or entity is, directly or indirectly, the
Beneficial Owner of voting securities representing 50% or more of the total
voting power of all of the then-outstanding voting securities of the
Company or TSI, unless the transaction pursuant to which such acquisition
is made is approved by at least two-thirds (2/3) of the Board of Directors
of TSI;
(ii) the following individuals no longer constitute a majority of the
members of the Board of Directors of TSI: (A) the individuals who, as of
the closing date of TSI's initial public offering, constitute the Board of
Directors of TSI (the "Original Directors"); (B) the individuals
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who thereafter are elected to the Board of Directors of TSI and whose
election, or nomination for election, to the Board of Directors of TSI was
approved by a vote of at least two-thirds (2/3) of the Original Directors
then still in office (such directors becoming "Additional Original
Directors" immediately following their election); and (C) the individuals
who are elected to the Board of Directors of TSI and whose election, or
nomination for election, to the Board of Directors of TSI was approved by a
vote of at least two-thirds (2/3) of the Original Directors and Additional
Original Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger, consolidation,
recapitalization or reorganization of TSI, a reverse stock split of
outstanding voting securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such transaction which
would result in at least 75% of the total voting power represented by the
voting securities of the surviving entity outstanding immediately after
such transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of TSI immediately prior to the transaction,
with the voting power of each such continuing holder relative to other such
continuing holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI of
all or a substantial portion of TSI's assets (i.e., 50% or more of the
total assets of TSI).
(f) Employee must be notified in writing by the Company at any time that
the Company or any member of its Board anticipates that a Change in Control may
take place.
(g) Employee shall be reimbursed by the Company or its successor for any
excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement and
expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
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To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: Auto Europe, LLC
59 Commercial Street
Portland, ME 04112
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the other
portions of this Agreement shall be deemed valid and operative and, so far as is
reasonable and possible, effect shall be given to the intent manifested by the
portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define, or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection with
this Agreement shall be settled exclusively by arbitration, conducted before a
panel of three (3) arbitrators in Washington, D.C., in accordance with the rules
of the American Arbitration Association then in effect. The arbitrators shall
not have the authority to add to, detract from, or modify any provision hereof
nor to award punitive damages to any injured party. The arbitrators shall have
the authority to order back-pay, severance compensation, vesting of options (or
cash compensation in lieu of vesting of options), reimbursement of costs,
including those incurred to enforce this Agreement, and interest thereon in the
event the arbitrators determine that Employee was terminated without disability
or good cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or
that the Company has otherwise materially breached this Agreement. A decision by
a majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws of
the State of Delaware.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
Auto Europe, LLC
By: /s/ Imad Khalidi
---------------------------------
Name: Imad Khalidi
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By: /s/ Elan Blutinger
---------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
------------------------------
/s/ Imad Khalidi
--------------------------------------
Imad Khalidi, Individually
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EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel Services
International, Inc., a Delaware corporation ("TSI"), Auto Europe, LLC, a Maine
limited liability company and a wholly-owned subsidiary of TSI (the "Company"),
and Alex Cecil ("Employee"), is hereby entered into as of this 28th day of July,
1997, and shall be effective as of the date of the consummation of the initial
public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants, and conditions
set forth herein and the performance of each, the parties hereto hereby agree as
follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as a Special Marketing Advisor of
the Company. As such, Employee shall have responsibilities, duties, and
authority reasonably accorded to and expected of a Special Marketing Advisor of
the Company and will report directly to the President Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's time, attention, and efforts
to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all policies
established by the Board of Directors of the Company (the "Board").
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit, or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
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2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $80,000 per
year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than monthly. On at least an annual basis, the
Board will review Employee's performance and may make increases to such base
salary if, in its discretion, any such increase is warranted. Such recommended
increase would, in all likelihood, require approval by the Board or a duly
constituted committee thereof.
(b) Perquisites, Benefits and Other Compensation. Employee shall be
entitled to receive additional benefits and compensation from the Company in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and Employee's
dependent family members under health, hospitalization, disability, dental,
life and other insurance plans that the Company or TSI may have in effect
from time to time.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of Employee's
services pursuant to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by Employee upon submission
of any request for reimbursement, and in a format and manner consistent
with the Company's expense reporting policy.
(iii) The Company shall provide Employee with other perquisites as may
be available to or deemed appropriate for Employee by the Board and
participation in all other Company-wide or TSI-wide employee benefits as
available from time to time.
3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with the
Company, and for a period of two (2) years immediately following the termination
of Employee's employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation, or business of
whatever nature:
(i) engage, as an officer, director, shareholder, owner, partner,
joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales
representative, in any travel service business in direct competition with
the Company or TSI or any subsidiary of either the Company or TSI, within
the United States or within 100 miles of any other geographic area in which
the Company or TSI or any of the Company's or TSI's subsidiaries conducts
business, including any territory serviced by the Company or TSI or any of
such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the Territory,
an employee of the Company or TSI (including the respective subsidiaries
thereof) in a managerial capacity for the purpose or with the intent of
enticing such employee away from or out of the employ of the Company or TSI
(including the respective subsidiaries thereof);
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(iii) call upon any person or entity which is, at that time, or which
has been, within one (1) year prior to that time, a customer of the Company
or TSI (including the respective subsidiaries thereof) within the Territory
for the purpose of soliciting or selling products or services in direct
competition with the Company or TSI or any subsidiary of the Company or TSI
within the Territory; or
(iv) call upon any prospective acquisition candidate, on Employee's
own behalf or on behalf of any competitor, which candidate was, to
Employee's actual knowledge after due inquiry, either called upon by the
Company or TSI (including the respective subsidiaries thereof) or for which
the Company or TSI made an acquisition analysis, for the purpose of
acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed to
prohibit Employee from acquiring as an investment not more than two percent (2%)
of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the Company
and TSI as a result of a breach of the foregoing covenant, and because of the
immediate and irreparable damage that could be caused to the Company and TSI for
which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the changing
activities, business, and locations of the Company and TSI (including TSI's
other subsidiaries) throughout the term of this Agreement, whether before or
after the date of termination of the employment of Employee. For example, if,
during the term of this Agreement, the Company, or TSI (including TSI's other
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that Employee
shall cease to be employed hereunder, and shall enter into a business or pursue
other activities not in competition with the Company or TSI (including TSI's
other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or TSI (including TSI's other subsidiaries) shall
thereafter enter the same, similar, or a competitive (i) business, (ii) course
of activities, or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time, or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
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(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or TSI to
relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient, and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue for
three (3) years (the "Term"), and, unless terminated sooner as herein provided,
shall continue thereafter on a year-to-year basis on the same terms and
conditions contained herein in effect as of the time of renewal. This Agreement
and Employee's employment may be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate this Agreement
with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his or her health should become impaired to
an extent that
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makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company, in a
lump-sum payment due within ten (10) days of the effective date of termination,
the base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud, or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater, and, in the event that Employee accepts such lump sum payment, the
period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time after the Term, Employee shall be entitled to receive from the Company, in
a lump-sum payment due on the effective date of termination, the base salary
rate then in effect equivalent to one (1) year of salary, and, in the event that
Employee accepts such lump sum payment, the period set forth in paragraph 3(a)
and during which the terms of paragraph 3 apply shall be shortened to one (1)
year from the date of termination of employment. Should Employee be terminated
by the Company without cause at any time during or after the Term, Employee
shall be entitled to waive Employee's right to receive severance compensation
(by a written waiver delivered to the Company on the effective date of
termination), and, in such case, the noncompetition provisions of paragraph 3
shall not apply. If Employee resigns or otherwise terminates Employee's
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation. A termination without cause within the meaning of
this paragraph 5(d) shall be deemed to have occurred if any person or entity,
other than TSI or an employee benefit plan of TSI, acquires directly or
indirectly the Beneficial Ownership (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of any voting security of the
Company or TSI and immediately after such acquisition such person or entity is,
directly or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding voting
securities of the Company or TSI and the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3) of the Board of
Directors of TSI but is not approved by Employee.
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(e) Change in Control of TSI. In the event of a "Change in Control of TSI"
(as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above, Employee
shall be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of TSI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the Company,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, the Company shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder. Further, none of the provisions of
paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors,
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities, or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or TSI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
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8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of this
Agreement with the Company, disclose the specific terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation, or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by the Company or TSI against Employee),
by reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement,
as actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit, or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to the Company or TSI for errors or
omissions made in good faith where Employee has not exhibited gross, willful,
and wanton negligence and misconduct or performed criminal and fraudulent acts
which materially damage the business of the Company.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the execution
of this Agreement by Employee and his or her employment by the Company and the
performance of Employee's duties hereunder will not violate or be a breach of
any agreement with a former employer, client, or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including but
not limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement,
invention, or secrecy agreement between Employee and such third party which was
in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by the
Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives, successors, and assigns.
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12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on the effective date of the termination), in
which case the noncompetition provisions of paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or TSI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or TSI, unless the transaction
pursuant to which such acquisition is made is approved by at least
two-thirds (2/3) of the Board of Directors of TSI;
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(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI, and Employee, and Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete, and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted, or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
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14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: Auto Europe, LLC
59 Commercial Street
Portland, ME 04112
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define, or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Washington, D.C., in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in paragraphs 5(b) and
5(c) hereof, respectively, or that the Company has otherwise materially breached
this Agreement. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware.
18. COUNTERPARTS
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Auto Europe, LLC
By: /s/ Imad Khalidi
--------------------------------
Name: Imad Khalidi
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By:/s/ Elan Blutinger
---------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
-------------------------------
/s/ Alex Cecil
-----------------------------------
Alex Cecil, Individually
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel
Services International, Inc., a Delaware corporation ("TSI"), Cruises, Inc., a
New York corporation and a wholly-owned subsidiary of TSI (the "Company"), and
Robert Falcone ("Employee"), is hereby entered into as of this 22nd day of July,
1997, and shall be effective as of the date of the consummation of the initial
public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants, and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chief Executive Officer of
the Company. As such, Employee shall have responsibilities, duties, and
authority reasonably accorded to and expected of a Chief Executive Officer of
the Company and will report directly to the Board of Directors of the Company
(the "Board"). Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph 1(c) hereof, agrees to
devote Employee's time, attention, and efforts to promote and further the
business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company. During the term of Employee's employment
hereunder, Employee shall be entitled to be a director on the Board.
(c) Employee shall not, during the term of his or her employment
hereunder, be engaged in any other business activity pursued for gain, profit,
or other pecuniary advantage if such activity interferes with Employee's duties
and responsibilities hereunder. The foregoing limitations shall not be construed
as prohibiting Employee from making personal investments in such form or manner
as will neither require
<PAGE>
Employee's services in the operation or affairs of the companies or enterprises
in which such investments are made nor violate the terms of paragraph 3 hereof.
(d) Employee shall be entitled to take "familiarization cruises" for
the purpose of researching, becoming familiar with, and writing about cruise
lines, cruise ships and destinations, all as part of Employee's duties under
this Agreement. Time spent on familiarization cruises shall not be counted as
vacation time, and all expenses related thereto (other than expenses for items
of a personal nature) shall be reimbursed by the Company (to the extent not
absorbed by the cruise line) in a manner consistent with the past practices of
the Company.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable hereunder to Employee plus the
base salary payable to Judith Falcone under that certain Employment Agreement of
even date herewith by and among the Company, TSI and Judith Falcone shall equal
$138,000.00 per year for the first three years of the Term, such salary to be
divided between Employee and Judith Falcone as shall be designated in writing to
the Company by Employee and Judith Falcone (and if no such designation is made
to the Company, such salary shall be divided equally between Employee and Judith
Falcone). The base salary payable hereunder to Employee shall be payable on a
regular basis in accordance with the Company's standard payroll procedures but
not less than monthly. The combined base salary payable hereunder for the fourth
and fifth years of the Term shall be subject to renegotiation, but in no event
shall such combined salary be less than $138,000. Employee shall have the right
to terminate Employee's employment hereunder at the end of the third year of the
Term.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life, and other insurance plans that the Company or
TSI may have in effect from time to time, benefits provided to Employee
under this clause (i) to be at least equal to such benefits provided to
TSI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board, including the use of one luxury vehicle consistent with
the Company's past practice (which practice has been to provide a new
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vehicle under a lease every two years), and participation in all other
Company-wide or TSI-wide employee benefits as available from time to
time. Employee shall be entitled to four weeks of vacation per year.
3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation,
or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any travel service business in direct competition
with the Company or TSI or any subsidiary of either the Company or TSI,
within the United States or within 100 miles of any other geographic
area in which the Company or TSI or any of the Company's or TSI's
subsidiaries conducts business, including any territory serviced by the
Company or TSI or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or TSI (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
the Company or TSI (including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Company or TSI (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products
or services in direct competition with the Company or TSI or any
subsidiary of the Company or TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by the Company or TSI (including the respective subsidiaries
thereof) or for which the Company or TSI made an acquisition analysis,
for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and TSI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
TSI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such
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covenants be construed and enforced in accordance with the changing activities,
business, and locations of the Company and TSI (including TSI's other
subsidiaries) throughout the term of this Agreement, whether before or after the
date of termination of the employment of Employee. For example, if, during the
term of this Agreement, the Company, or TSI (including TSI's other subsidiaries)
engages in new and different activities, enters a new business or establishes
new locations for its current activities or business in addition to or other
than the activities or business enumerated under the Recitals above or the
locations currently established therefor, then Employee will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within 100
miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or TSI (including
TSI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or TSI (including TSI's other subsidiaries) shall
thereafter enter the same, similar, or a competitive (i) business, (ii) course
of activities, or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time, or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient, and
orderly relocation with minimal
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disruption to the business affairs of the Company and the personal life of
Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for five (5) years (the "Term"), and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal. This
Agreement and Employee's employment may be terminated in any one of the
followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his or her health should become impaired to
an extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term of this Agreement or for one
(1) year, whichever amount is greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud, or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
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the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater, and, in the event that Employee accepts such lump sum payment, the
period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time after the Term, Employee shall be entitled to receive from the Company, in
a lump-sum payment due on the effective date of termination, the base salary
rate then in effect equivalent to one (1) year of salary, and, in the event that
Employee accepts such lump sum payment, the period set forth in paragraph 3(a)
and during which the terms of paragraph 3 apply shall be shortened to one (1)
year from the date of termination of employment. Should Employee be terminated
by the Company without cause at any time during or after the Term, Employee
shall be entitled to waive Employee's right to receive severance compensation
(by a written waiver delivered to the Company on the effective date of
termination), and, in such case, the noncompetition provisions of paragraph 3
shall not apply. If Employee resigns or otherwise terminates Employee's
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation. A termination without cause within the meaning of
this paragraph 5(d) shall be deemed to have occurred if any person or entity,
other than TSI or an employee benefit plan of TSI, acquires directly or
indirectly the Beneficial Ownership (as defined in Section 13(d) of the
Securities Exchange Act of 1934, as amended) of any voting security of the
Company or TSI and immediately after such acquisition such person or entity is,
directly or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding voting
securities of the Company or TSI and the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3) of the Board of
Directors of TSI but is not approved by Employee.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination, including any
benefits accrued under the Incentive Bonus Plan but not yet paid. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of TSI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of the provisions
of paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
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6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors,
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities, or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company or TSI and which
Employee conceives as a result of Employee's employment by the Company. Employee
hereby assigns and agrees to assign all of Employee's interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments, or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the confidential terms of the
Company's or TSI's relationships or agreements with their respective significant
vendors or customers or any other significant and material trade secret of the
Company or TSI, whether in existence or proposed, to any person, firm,
partnership, corporation, or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by the Company or TSI against Employee),
by reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement,
as actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit, or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to the Company or TSI for errors or
omissions made in good faith where Employee has not exhibited gross, willful,
and wanton negligence and misconduct or performed criminal and fraudulent acts
which materially damage the business of the Company.
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10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention, or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives, successors, and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this
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paragraph 12(c) (by a written waiver delivered to the Company on the effective
date of the termination), in which case the noncompetition provisions of
paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee, unless waived,
must be paid in full by the Company at or prior to such closing. Further,
Employee will be given sufficient time and opportunity to elect whether to
exercise all or any of Employee's vested options to purchase TSI Common Stock,
including any options with accelerated vesting under the provisions of TSI's
1997 Long-Term Incentive Plan, such that Employee may convert the options to
shares of TSI Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or TSI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or TSI, unless the transaction
pursuant to which such acquisition is made is approved by at least
two-thirds (2/3) of the Board of Directors of TSI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
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(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI, and Employee, and Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete, and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted, or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: c/o Cruises, Inc.
5000 Campus Wood Drive
Syracuse, NY 13057
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define, or limit the extent or intent of the Agreement or of any part hereof.
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16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Washington, D.C., in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in paragraphs 5(b) and
5(c) hereof, respectively, or that the Company has otherwise materially breached
this Agreement. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Cruises, Inc.
By: /s/ Pamela C. Cole
-----------------------------
Name: Pamela C. Cole
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By:/s/ Elan Blutinger
------------------------------
Name: Elan Blutinger
------------------------------
Title: President
------------------------------
/s/ Robert Falcone
------------------------------------
Robert Falcone, Individually
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel
Services International, Inc., a Delaware corporation ("TSI"), Cruises, Inc., a
New York corporation and a wholly-owned subsidiary of TSI (the "Company"), and
Judith Falcone ("Employee"), is hereby entered into as of this 22nd day of July,
1997, and shall be effective as of the date of the consummation of the initial
public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Vice President of the
Company. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Vice President of the Company and will
report directly to the President of the Company. Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's time, attention and efforts
to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board of Directors of the Company (the "Board").
During the term of Employee's employment hereunder, Employee shall be entitled
to be a director on the Board.
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
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(d) Employee shall be entitled to take "familiarization cruises" for
the purpose of researching, becoming familiar with, and writing about cruise
lines, cruise ships and destinations, all as part of Employee's duties under
this Agreement. Time spent on familiarization cruises shall not be counted as
vacation time, and all expenses related thereto (other than expenses for items
of a personal nature) shall be reimbursed by the Company (to the extent not
absorbed by the cruise line) in a manner consistent with the past practices of
the Company.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable hereunder to Employee plus the
base salary payable to Robert Falcone under that certain Employment Agreement of
even date herewith by and among the Company, TSI and Robert Falcone shall equal
$138,000.00 per year for the first three years of the Term, such salary to be
divided between Employee and Robert Falcone as shall be designated in writing to
the Company by Employee and Robert Falcone (and if no such designation is made
to the Company, such salary shall be divided equally between Employee and Robert
Falcone). The base salary payable hereunder to Employee shall be payable on a
regular basis in accordance with the Company's standard payroll procedures but
not less than monthly. The combined base salary payable hereunder for the fourth
and fifth years of the Term shall be subject to renegotiation, but in no event
shall such combined salary be less than $138,000. Employee shall have the right
to terminate Employee's employment hereunder at the end of the third year of the
Term.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that the Company or
TSI may have in effect from time to time, benefits provided to Employee
under this clause (i) to be at least equal to such benefits provided to
TSI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board, including the use of one luxury vehicle consistent with
the Company's past practice (which practice has been to provide a new
vehicle under a lease every two years) and participation in all other
Company-wide or TSI-wide employee benefits as available from time to
time. Employee shall be entitled to four weeks of vacation per year.
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3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement, for any reason
whatsoever, directly or indirectly, for herself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any travel service business in direct competition
with the Company or TSI or any subsidiary of either the Company or TSI,
within the United States or within 100 miles of any other geographic
area in which the Company or TSI or any of the Company's or TSI's
subsidiaries conducts business, including any territory serviced by the
Company or TSI or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or TSI (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
the Company or TSI (including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Company or TSI (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products
or services in direct competition with the Company or TSI or any
subsidiary of the Company or TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by the Company or TSI (including the respective subsidiaries
thereof) or for which the Company or TSI made an acquisition analysis,
for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and TSI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
TSI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by her, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the changing
activities, business and locations of the Company and TSI (including TSI's other
subsidiaries) throughout the term of this Agreement, whether before or after the
date of termination of the employment of Employee. For example, if, during the
term of
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this Agreement, the Company, or TSI (including TSI's other subsidiaries) engages
in new and different activities, enters a new business or establishes new
locations for its current activities or business in addition to or other than
the activities or business enumerated under the Recitals above or the locations
currently established therefor, then Employee will be precluded from soliciting
the customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or TSI (including
TSI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or TSI (including TSI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time, or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that she may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
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(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for five (5) years (the "Term"), and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal. This
Agreement and Employee's employment may be terminated in any one of the
followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if her health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term of this Agreement or for one
(1) year, whichever amount is greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater, and, in the event that Employee
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accepts such lump sum payment, the period set forth in paragraph 3(a) and during
which the terms of paragraph 3 apply shall be shortened to one (1) year from the
date of termination of employment. Should Employee be terminated by the Company
without cause at any time after the Term, Employee shall be entitled to receive
from the Company, in a lump-sum payment due on the effective date of
termination, the base salary rate then in effect equivalent to one (1) year of
salary, and, in the event that Employee accepts such lump sum payment, the
period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time during or after the Term, Employee shall be entitled to waive Employee's
right to receive severance compensation (by a written waiver delivered to the
Company on the effective date of termination), and, in such case, the
noncompetition provisions of paragraph 3 shall not apply. If Employee resigns or
otherwise terminates Employee's employment without cause pursuant to this
paragraph 5(d), Employee shall receive no severance compensation. A termination
without cause within the meaning of this paragraph 5(d) shall be deemed to have
occurred if any person or entity, other than TSI or an employee benefit plan of
TSI, acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of the Company or TSI and immediately after such acquisition such
person or entity is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company or TSI and the transaction
pursuant to which such acquisition is made is approved by at least two-thirds
(2/3) of the Board of Directors of TSI but is not approved by Robert G. Falcone.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination, including any
benefits accrued under the Incentive Bonus Plan but not yet paid. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of TSI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of the provisions
of paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
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6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors,
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities, or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company or TSI and which
Employee conceives as a result of Employee's employment by the Company. Employee
hereby assigns and agrees to assign all of Employee's interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments, or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the confidential terms of the
Company's or TSI's relationships or agreements with their respective significant
vendors or customers or any other significant and material trade secret of the
Company or TSI, whether in existence or proposed, to any person, firm,
partnership, corporation, or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by the Company or TSI against Employee),
by reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement,
as actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit, or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to the Company or TSI for errors or
omissions made in good faith where Employee has not exhibited gross, willful,
and wanton negligence and misconduct or performed criminal and fraudulent acts
which materially damage the business of the Company.
7
<PAGE>
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention, or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives, successors, and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this
8
<PAGE>
paragraph 12(c) (by a written waiver delivered to the Company on the effective
date of the termination), in which case the noncompetition provisions of
paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee, unless waived,
must be paid in full by the Company at or prior to such closing. Further,
Employee will be given sufficient time and opportunity to elect whether to
exercise all or any of Employee's vested options to purchase TSI Common Stock,
including any options with accelerated vesting under the provisions of TSI's
1997 Long-Term Incentive Plan, such that Employee may convert the options to
shares of TSI Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or TSI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or TSI unless the transaction pursuant
to which such acquisition is made is approved by at least two-thirds
(2/3) of the Board of Directors of TSI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
9
<PAGE>
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI, and Employee, and Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete, and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted, or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: c/o Cruises, Inc.
5000 Campus Wood Drive
Syracuse, NY 13057
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define, or limit the extent or intent of the Agreement or of any part hereof.
10
<PAGE>
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Washington, D.C., in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in paragraphs 5(b) and
5(c) hereof, respectively, or that the Company has otherwise materially breached
this Agreement. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
11
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Cruises, Inc.
By: /s/ Pamela C. Cole
--------------------------------
Name: Pamela C. Cole
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By:/s/ Elan Blutinger
---------------------------------
Name: Elan Blutinger
------------------------------
Title: President
------------------------------
/s/ Judith Falcone
------------------------------------
Judith Falcone
<PAGE>
EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel
Services International, Inc., a Delaware corporation ("TSI"), Cruises, Inc., a
New York corporation and a wholly-owned subsidiary of TSI (the "Company"), and
Holley Christen ("Employee"), is hereby entered into as of this 22nd day of
July, 1997, and shall be effective as of the date of the consummation of the
initial public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chief Financial Officer of
the Company. As such, Employee shall have responsibilities, duties and authority
reasonably accorded to and expected of a Chief Financial Officer of the Company
and will report directly to the President of the Company. Employee hereby
accepts this employment upon the terms and conditions herein contained and,
subject to paragraph 1(c) hereof, agrees to devote Employee's time, attention
and efforts to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board of Directors of the Company (the "Board").
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $47,120
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than monthly. On at least an annual basis, the
Board or the President will review Employee's performance and may make increases
to such base salary if, in its discretion, any such increase is warranted.
(b) Executive Perquisites, Benefits and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(ii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board or the President and participation in all other
Company-wide or TSI-wide employee benefits as available from time to
time.
3. [INTENTIONALLY DELETED]
4. PLACE OF PERFORMANCE.
(a) Employee understands that she may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient, and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
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5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for one (1) year (the "Term"), unless terminated sooner as herein provided. This
Agreement and Employee's employment may be terminated prior to the end of such
Term in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if her health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term of this Agreement or for one
(1) year, whichever amount is greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud, or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Should Employee be terminated by the Company without cause during the Term,
Employee shall receive from the Company, in a lump-sum payment due on the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term of this Agreement or for one
(1) year, whichever amount is greater. Any termination without cause by the
Company shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment. If Employee resigns or otherwise terminates
Employee's employment without cause pursuant to this paragraph 5(d), Employee
shall receive no severance compensation.
3
<PAGE>
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. All other
rights and obligations of TSI, the Company, and Employee under this Agreement
shall cease as of the effective date of termination, except that the Company's
obligations under paragraph 9 hereof and Employee's obligations under paragraphs
3, 6, 7, 8 and 10 hereof shall survive such termination in accordance with their
terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which she is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 15 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of the provisions
of paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment, and which are
directly related to the business or activities of the Company or TSI and which
Employee conceives as a result of Employee's employment by the Company. Employee
hereby assigns and agrees to assign all of Employee's interests therein to the
Company or its nominee. Whenever requested to do so by the Company, Employee
shall execute any and all applications, assignments or other instruments that
the Company shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Company's
interest therein.
8. TRADE SECRETS.
Employee agrees that she will not, during or after the Term of this
Agreement with the Company, disclose the confidential terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
4
<PAGE>
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or TSI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge her duties under this Agreement,
Employee cannot be held liable to the Company or TSI for errors or omissions
made in good faith where Employee has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of the Company.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and her employment by the Company and
the performance of Employee's duties hereunder will not violate or be a breach
of any agreement with a former employer, client or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including but
not limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement, invention
or secrecy agreement between Employee and such third party which was in
existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that she has been selected for employment by the
Company on the basis of Employee's personal qualifications, experience and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2), this
Agreement shall be binding upon, inure to the benefit of, and be enforceable by
the parties hereto and their respective heirs, legal representatives, successors
and assigns.
12. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
5
<PAGE>
13. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: Cruises, Inc.
5000 Campus Wood Drive
Syracuse, NY 13057
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 13.
14. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
15. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Washington, D.C., in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in paragraphs 5(b) and
5(c) hereof, respectively, or that the Company has otherwise materially breached
this Agreement. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company.
16. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware.
6
<PAGE>
17. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Cruises, Inc.
By: /s/ Pamela C. Cole
--------------------------------
Name: Pamela C. Cole
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By:/s/ Elan Blutinger
---------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
------------------------------
/s/ Holley Christen
------------------------------------
Holley Christen, Individually
8
<PAGE>
EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), by and among TRAVEL
SERVICES INTERNATIONAL, INC., a Delaware corporation ("TSI"), CRUISES ONLY, LLC,
a Delaware limited liability company and a wholly-owned subsidiary of TSI (the
"Company"), and WAYNE HELLER ("Employee"), is hereby entered into as of this
22nd day of July, 1997, and shall be effective as of the date of the
consummation of the initial public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chairman and Chief Executive
Officer of the Company. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Chairman and Chief
Executive Officer of the Company and will report directly to the Board of
Directors of the Company (the "Board"), all in accordance with instructions and
authorizations from the Board. Employee hereby accepts this employment upon the
terms and conditions herein contained and, subject to paragraph 1(c) hereof,
agrees to devote 70% of time, attention and efforts devoted by Employee to work
to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board.
(c) During the term of his employment hereunder, Employee may spend up
to 30% of the time Employee devotes to work to any other business activity which
he may pursue for gain, profit or other pecuniary advantage, provided that such
activity does not interfere with Employee's duties and responsibilities
hereunder. The foregoing limitations shall not be construed as prohibiting
Employee from making personal investments in such form or manner as will neither
require Employee's services in the
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operation or affairs of the companies or enterprises in which such investments
are made nor violate the terms of paragraph 3 hereof.
2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable hereunder to Employee shall be
$125,000 per year. The base salary payable hereunder to Employee shall be
payable on a regular basis in accordance with the Company's standard payroll
procedures but not less than monthly. If Judy Heller shall cease to be employed
by the Company, the base salary payable hereunder to Employee shall remain at
$125,000 per year. For any renewal periods following the Term, the salary set
forth above is subject to adjustment as may be agreed by the parties.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards,
subject to Board approval.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that the Company or
TSI may have in effect from time to time, which coverage shall be
sufficient to cover procedures and hospitalizations to Florida Hospital
and treatment by the Florida Heart Group at levels consistent with the
levels received by Employee as President of Cruises Only, Inc. prior to
this date, all such benefits provided to Employee under this clause (i)
to be at least equal to such benefits provided to TSI executives and
subject to the Board's discretion with respect to such plans. Any such
life insurance under these plans shall provide $1 million of coverage
with AD&D for Employee. If this Agreement is terminated and thereafter
Employee remains a member of the Board of Directors of TSI, TSI shall
make available high quality health care and accident insurance for
Employee and his immediate family for so long as Employee is a member
of the Board of Directors of TSI.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board, including (A) membership fees for Employee's American
Express, VISA and Master Charge Platinum Cards, (B) all reasonable
charges in connection with Employee's cellular telephone service
(except that Employee shall be responsible for all personal charges in
connection with such telephone service in excess of $37.50 per month),
(C) upgrades of all computers used by Employee in connection with the
business of the Company, (D) the 5th Floor office currently being used
by Employee in the Company's building as
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long as Employee is employed by the Company, (E) first class business
travel, provided that Employee uses his best efforts to obtain
discounted prices through TSI, (F) four weeks vacation per year, (G)
contributions to Employee's 401(k) plan at a level equal to the
contributions made for all other employees of the Company and (H) being
listed on TSI's ARC list for purposes of travel and travel discounts,
(I) being an authorized user on the Company's Citrus Club membership,
(J) being eligible to participate in any car allowance program
developed by TSI for its senior executives and (K) participation in all
other Company-wide or TSI-wide employee benefits as available from time
to time.
3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in the same or similar business as the Company prior to
the Effective Date in direct competition with the Company or TSI or any
subsidiary of either the Company or TSI, within the United States of
America (the "Territory"), provided, however, that Employee shall have
the right to be an investor in any entity engaged in the cruise line
business, and provided further, however, that after the termination or
expiration of Employee's employment hereunder, Employee may engage as
an employee of a cruise line business so long as (A) Employee is not
employed to sell cruise reservations for such cruise line business and
(B) any trade services or products (e.g., software programs) developed
in whole or part by Employee while in the employ of such cruise line
business are offered to the Company on a preferential basis;
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or TSI (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
the Company or TSI (including the respective subsidiaries thereof),
provided that Employee shall be permitted to call upon and hire any
member of his immediate family;
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Company or TSI (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products
or services in direct competition with the Company or TSI or any
subsidiary of the Company or TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by the Company or TSI (including the respective subsidiaries
thereof) or for which the Company or TSI made an acquisition analysis,
for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
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(b) Because of the difficulty of measuring economic losses to the
Company and TSI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
TSI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the changing
activities, business and locations of the Company and TSI (including TSI's other
subsidiaries) throughout the term of this Agreement, whether before or after the
date of termination of the employment of Employee. For example, if, during the
term of this Agreement, the Company or TSI (including TSI's other subsidiaries)
engages in new and different activities, enters a new business or establishes
new locations for its current activities or business in addition to or other
than the activities or business enumerated under the Recitals above or the
locations currently established therefor, then Employee will be precluded from
soliciting the customers or employees of such new activities or business or from
such new location and from directly competing with such new business within 100
miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or TSI (including
TSI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or TSI (including TSI's other subsidiaries) shall
thereafter enter the same, similar or a competitive (i) business, (ii) course of
activities or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in
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duties and responsibilities. In such event, if Employee agrees to relocate, the
Company will pay all relocation costs to move Employee, Employee's immediate
family, and their personal property and effects. Such costs may include, by way
of example, but are not limited to, pre-move visits to search for a new
residence, investigate schools or for other purposes; temporary lodging and
living costs prior to moving into a new permanent residence; duplicate home
carrying costs; all closing costs on the sale of Employee's present residence
and on the purchase of a comparable residence in the new location; and added
income taxes that Employee may incur if any relocation costs are not deductible
for tax purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years (the "Term"), and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal. Either
party may request modification of this Agreement during any term by serving
written notice to the other party not less than sixty (60) days prior to the
expiration of any term; provided that neither party shall be obligated to agree
to any modification hereof, in which case this Agreement (unless terminated as
herein provided) shall continue unmodified. This Agreement and Employee's
employment may be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's duties
hereunder for six (6) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume Employee's full-time duties at
the conclusion of such notice period. Also, Employee may terminate Employee's
employment hereunder if his health should become impaired to an extent that
makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company, in a
lump-sum payment due within ten (10) days of the effective date of termination,
the base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater. Benefits, including insurance benefits, and pro rata bonuses shall
continue to be paid for such period.
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(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary applicable to Employee at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, and, in the event that Employee accepts such lump
sum payment, the period set forth in paragraph 3(a) and during which the terms
of paragraph 3 apply shall be shortened to one (1) year from the date of
termination of employment. Benefits, including insurance benefits, and pro rata
bonuses shall continue to be paid for such remaining or one-year period,
whichever is greater. Should Employee be terminated by the Company without cause
at any time after the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary rate applicable to Employee then in effect equivalent to one (1)
year of salary, and, in the event that Employee accepts such lump sum payment,
the period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time during or after the Term, Employee shall be entitled to waive Employee's
right to receive severance compensation (by a written waiver delivered to the
Company on the effective date of termination), and, in such case, the
noncompetition provisions of paragraph 3 shall not apply. If Employee resigns or
otherwise terminates Employee's employment without cause pursuant to this
paragraph 5(d), Employee shall receive no severance compensation. A termination
without cause within the meaning of this paragraph 5(d) shall be deemed to have
occurred if any person or entity, other than TSI or an employee benefit plan of
TSI, acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of the Company or TSI and immediately after such acquisition such
person or entity is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company or TSI and the transaction
pursuant to which such acquisition is made is approved by at least two-thirds
(2/3) of the Board of Directors of TSI but is not approved by Employee.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation, benefits and pro rata bonuses subsequent to termination, if any,
will be due and payable to Employee only to the extent and in the manner
expressly provided above or in paragraph 12 hereof. All other rights and
obligations of TSI, the Company and Employee under this
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Agreement shall cease as of the effective date of termination, except that the
Company's obligations under paragraph 9 hereof and Employee's obligations under
paragraphs 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance
with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of the provisions
of paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI or their representatives, vendors
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or TSI
which are collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment. Employee shall
have the opportunity to buy any equipment utilized by Employee at the time of
his termination at its depreciated value.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or TSI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that he will not, during or after the Term of this
Agreement with the Company, disclose the specific terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
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9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or TSI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his duties under this Agreement,
Employee cannot be held liable to the Company or TSI for errors or omissions
made in good faith where Employee has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of the Company.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his employment by the Company and
the performance of Employee's duties hereunder will not violate or be a breach
of any agreement with a former employer, client or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including but
not limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement, invention
or secrecy agreement between Employee and such third party which was in
existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by the
Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives and successors. The Company shall
not assign this Agreement without Employee's written consent, which consent may
be withheld by Employee.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction
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giving rise to the Change in Control from the successor to all or a substantial
portion of the Company's business and/or assets that such successor is willing
as of the closing to assume and agree to perform the Company's obligations under
this Agreement in the same manner and to the same extent that the Company is
hereby required to perform, then such Change in Control shall be deemed to be a
termination of this Agreement by the Company without cause during the Term and
the applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the lump-sum severance payment due to Employee
shall be triple the amount calculated under the terms of paragraph 5(d) and the
noncompetition provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on the effective date of the termination), in
which case the noncompetition provisions of paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee, unless waived,
must be paid in full by the Company at or prior to such closing. Further,
Employee will be given sufficient time and opportunity to elect whether to
exercise all or any of Employee's vested options to purchase TSI Common Stock,
including any options with accelerated vesting under the provisions of TSI's
1997 Long-Term Incentive Plan, such that Employee may convert the options to
shares of TSI Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company, unless the transaction pursuant to
which such acquisition is made is approved by at least two-thirds (2/3)
of the Board of Directors of TSI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional
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Original Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, Maryland 20816
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To Employee: Wayne Heller
Cruises Only, LLC
1011 East Colonial Drive
Orlando, Florida 32083
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in the community where the corporate
headquarters of TSI is located, in accordance with the rules of the American
Arbitration Association then in effect. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. The arbitrators shall have the authority
to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the
Company has otherwise materially breached this Agreement. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Florida.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Elan Blutinger
--------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
------------------------------
CRUISES ONLY, LLC
By: /s/ Wayne Heller
--------------------------------
Wayne Heller
Chief Executive Officer
/s/ Wayne Heller
---------------------------------
WAYNE HELLER, Individually
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (the "Agreement"), by and among TRAVEL
SERVICES INTERNATIONAL, INC., a Delaware corporation ("TSI"), CRUISES ONLY, LLC,
a Delaware limited liability company and a wholly-owned subsidiary of TSI (the
"Company"), and JUDY HELLER ("Employee"), is hereby entered into as of this 22nd
day of July, 1997, and shall be effective as of the date of the consummation of
the initial public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Vice Chairman and President
of the Company. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a Vice Chairman and President
of the Company and will report directly to the Chief Executive Officer of the
Company. Employee hereby accepts this employment upon the terms and conditions
herein contained and, subject to paragraph 1(c) hereof, agrees to devote 70% of
time, attention and efforts devoted by Employee to work to promote and further
the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board of Directors of the Company (the "Board").
(c) During the term of her employment hereunder, Employee may spend up
to 30% of the time Employee devotes to work to any other business activity which
she may pursue for gain, profit or other pecuniary advantage, provided that such
activity does not interfere with Employee's duties and responsibilities
hereunder. The foregoing limitations shall not be construed as prohibiting
Employee from making personal investments in such form or manner as will neither
require Employee's services in the operation or affairs of the companies or
enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
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2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable hereunder to Employee shall be
$13,000 per year. The base salary payable hereunder to Employee shall be payable
on a regular basis in accordance with the Company's standard payroll procedures
but not less than monthly. If Wayne Heller shall cease to be employed by the
Company, the base salary payable hereunder to Employee shall be increased to
$125,000 per year. For any renewal periods following the Term, the salary set
forth above is subject to adjustment as may be agreed by the parties.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards,
subject to Board approval.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that the Company or
TSI may have in effect from time to time, which coverage shall be
sufficient to cover procedures and hospitalizations to Florida Hospital
and treatment by the Florida Heart Group at levels consistent with the
levels received by Employee as Vice President of Cruises Only, Inc.
prior to this date, all such benefits provided to Employee under this
clause (i) to be at least equal to such benefits provided to TSI
executives and subject to the Board's discretion with respect to such
plans. Any such life insurance under these plans shall provide $1
million of coverage with AD&D for Employee. If this Agreement is
terminated and thereafter Employee remains a member of the Board of
Directors of TSI, TSI shall make available high quality health care and
accident insurance for Employee and her immediate family for so long as
Employee is a member of the Board of Directors of TSI at TSI's expense.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board, including (A) membership fees for Employee's American
Express, VISA and Master Charge Platinum Cards, (B) all reasonable
charges in connection with Employee's cellular telephone service
(except that Employee and Wayne Heller, collectively, shall be
responsible for all personal charges in connection with such telephone
service in excess of $75 per month), (C) upgrades of all computers used
by Employee in connection with the business of the Company, (D) the 5th
Floor office currently being used by Employee in the Company's building
as long as Employee is employed by the Company, (E) first class
business travel, provided that Employee uses her best efforts to obtain
discounted prices
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through TSI, (F) four weeks vacation per year, (G) contributions to
Employee's 401(k) plan at a level equal to the contributions made for
all other employees of the Company and (H) being listed on TSI's ARC
list for purposes of travel and travel discounts, (I) being an
authorized user on the Company's Citrus Club membership, (J) being
eligible to participate in any car allowance program developed by TSI
for its senior executives and (K) participation in all other
Company-wide or TSI-wide employee benefits as available from time to
time.
3. NON-COMPETITION.
(a) Provided that TSI shall have complied with and performed all of its
obligations under the Agreement and Plan of Organization, dated as of May 9,
1997, among the Company, TSI and the Stockholders named therein and that the
Company shall have received payment in full of the consideration described in
Section 3 thereof, Employee shall not, during the period of Employee's
employment with the Company, and for a period of two (2) years immediately
following the termination of Employee's employment under this Agreement, for any
reason whatsoever, directly or indirectly, for herself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in the same or similar business of the Company on the
Effective Date in direct competition with TSI or any of the
subsidiaries thereof, in the United States of America (the
"Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of TSI (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of TSI
(including the subsidiaries thereof), provided that Employee shall be
permitted to call upon and hire any member of her immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to the Effective Date, a
customer of TSI (including the subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services
in direct competition with TSI or any subsidiary of TSI within the
Territory in the same or similar business of the Company on the
Effective Date; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the travel
services business, which candidate, to the actual knowledge of Employee
after due inquiry, was called upon by TSI (including the subsidiaries
thereof) or for which, to the actual knowledge of Employee after due
inquiry, TSI (or any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity.
(v) disclose customers, whether in existence or proposed, of
the Company to any person, firm, partnership, corporation or business
for any reason or purpose whatsoever except to the extent that the
Company has in the past disclosed such information to the types of
persons to whom disclosure is then presently contemplated for valid
business reasons.
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Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by Employee, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this paragraph 3 impose a reasonable restraint on Employee in light of the
activities and business of TSI (including the subsidiaries thereof) on the date
of the execution of this Agreement and the current plans of TSI.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) It is specifically agreed that the period of two (2) years stated
at the beginning of this paragraph 3, during which the agreements and covenants
of Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3. The covenants contained in this paragraph
3 shall have no effect if the transactions contemplated by the Agreement and
Plan of Organization referenced above are not consummated nor may such covenants
be enforced by any party to this Agreement that is in breach of its obligations
hereunder.
(f) The parties hereto hereby agree that the covenants in this
paragraph 3 are a material and substantial part of this Agreement.
4. PLACE OF PERFORMANCE.
(a) Employee understands that she may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
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(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years (the "Term"), and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal. Either
party may request modification of this Agreement during any term by serving
written notice to the other party not less than sixty (60) days prior to the
expiration of any term; provided that neither party shall be obligated to agree
to any modification hereof, in which case this Agreement (unless terminated as
herein provided) shall continue unmodified. This Agreement and Employee's
employment may be terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's duties
hereunder for six (6) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Company may terminate Employee's employment
hereunder provided Employee is unable to resume Employee's full-time duties at
the conclusion of such notice period. Also, Employee may terminate Employee's
employment hereunder if her health should become impaired to an extent that
makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company, in a
lump-sum payment due within ten (10) days of the effective date of termination,
the base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater. Benefits, including insurance benefits, and pro rata bonuses shall
continue to be paid for such period.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
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(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary applicable to Employee at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, and, in the event that Employee accepts such lump
sum payment, the period set forth in paragraph 3(a) and during which the terms
of paragraph 3 apply shall be shortened to one (1) year from the date of
termination of employment. Benefits, including insurance benefits, and pro rata
bonuses shall continue to be paid for such remaining or one-year period,
whichever is greater. Should Employee be terminated by the Company without cause
at any time after the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary rate applicable to Employee then in effect equivalent to one (1)
year of salary, and, in the event that Employee accepts such lump sum payment,
the period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time during or after the Term, Employee shall be entitled to waive Employee's
right to receive severance compensation (by a written waiver delivered to the
Company on the effective date of termination), and, in such case, the
noncompetition provisions of paragraph 3 shall not apply. If Employee resigns or
otherwise terminates Employee's employment without cause pursuant to this
paragraph 5(d), Employee shall receive no severance compensation. A termination
without cause within the meaning of this paragraph 5(d) shall be deemed to have
occurred if any person or entity, other than TSI or an employee benefit plan of
TSI, acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of the Company or TSI and immediately after such acquisition such
person or entity is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company or TSI and the transaction
pursuant to which such acquisition is made is approved by at least two-thirds
(2/3) of the Board of Directors of TSI but is not approved by Employee.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation, benefits and pro rata bonuses subsequent to termination, if any,
will be due and payable to Employee only to the extent and in the manner
expressly provided above or in paragraph 12 hereof. All other rights and
obligations of TSI, the Company and Employee under this Agreement shall cease as
of the effective date of termination, except that the Company's obligations
under paragraph 9 hereof and Employee's obligations under paragraphs 3, 6, 7, 8
and 10 hereof shall survive such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which she is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of
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the provisions of paragraph 3 hereof shall apply in the event this Agreement is
terminated as a result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI or their representatives, vendors
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials and other similar data
pertaining to the business, activities or future plans of the Company or TSI
which are collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment. Employee shall
have the opportunity to buy any equipment utilized by Employee at the time of
her termination at its depreciated value.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or TSI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that she will not, during or after the Term of this
Agreement with the Company, disclose the specific terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or TSI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement, as
actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge her duties under this Agreement,
Employee cannot be held liable to the Company or TSI for errors or omissions
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made in good faith where Employee has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of the Company.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and her employment by the Company and
the performance of Employee's duties hereunder will not violate or be a breach
of any agreement with a former employer, client or any other person or entity.
Further, Employee agrees to indemnify the Company for any claim, including but
not limited to attorneys' fees and expenses of investigation, by any such third
party that such third party may now have or may hereafter come to have against
the Company based upon or arising out of any noncompetition agreement, invention
or secrecy agreement between Employee and such third party which was in
existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that she has been selected for employment by the
Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives and successors. The Company shall
not assign this Agreement without Employee's written consent, which consent may
be withheld by Employee.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall
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be double the amount calculated under the terms of paragraph 5(d) and the
noncompetition provisions of paragraph 3 shall all apply for a period of two (2)
years from the effective date of termination. Employee shall have the right to
waive Employee's right to receive the severance compensation payable under this
paragraph 12(c) (by a written waiver delivered to the Company on the effective
date of the termination), in which case the noncompetition provisions of
paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee, unless waived,
must be paid in full by the Company at or prior to such closing. Further,
Employee will be given sufficient time and opportunity to elect whether to
exercise all or any of Employee's vested options to purchase TSI Common Stock,
including any options with accelerated vesting under the provisions of TSI's
1997 Long-Term Incentive Plan, such that Employee may convert the options to
shares of TSI Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company, unless the transaction pursuant to
which such acquisition is made is approved by at least two-thirds (2/3)
of the Board of Directors of TSI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
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(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI and Employee, and Employee has no oral representations,
understandings or agreements with the Company or any of its officers, directors
or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, Maryland 20816
To Employee: Judy Heller
Cruises Only, LLC
1011 East Colonial Drive
Orlando, Florida 32083
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
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15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in the community where the corporate
headquarters of TSI is located, in accordance with the rules of the American
Arbitration Association then in effect. The arbitrators shall not have the
authority to add to, detract from, or modify any provision hereof nor to award
punitive damages to any injured party. The arbitrators shall have the authority
to order back-pay, severance compensation, vesting of options (or cash
compensation in lieu of vesting of options), reimbursement of costs, including
those incurred to enforce this Agreement, and interest thereon in the event the
arbitrators determine that Employee was terminated without disability or good
cause, as defined in paragraphs 5(b) and 5(c) hereof, respectively, or that the
Company has otherwise materially breached this Agreement. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Florida.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Elan Blutinger
--------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
------------------------------
CRUISES ONLY, LLC
By: /s/ Wayne Heller
--------------------------------
WAYNE HELLER
CHIEF EXECUTIVE OFFICER
By: /s/ Judy Heller
--------------------------------
JUDY HELLER, INDIVIDUALLY
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel
Services International, Inc., a Delaware corporation ("TSI"), D-FW Tours, Inc.,
a Texas corporation and a wholly-owned subsidiary of TSI (the "Company"), and
John Przywara ("Employee"), is hereby entered into as of this 22nd day of July,
1997, and shall be effective as of the date of the consummation of the initial
public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants, and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company. As
such, Employee shall have responsibilities, duties, and authority reasonably
accorded to and expected of a President of the Company and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's time, attention, and efforts
to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Company.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit, or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
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2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $100,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than monthly.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life, and other insurance plans that the Company or
TSI may have in effect from time to time, benefits provided to Employee
under this clause (i) to be at least equal to such benefits provided to
TSI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or TSI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement, for any reason
whatsoever, directly or indirectly, for himself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation,
or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any travel service business in direct competition
with the Company or TSI or any subsidiary of either the Company or TSI,
within the United States or within 100 miles of any other geographic
area in which the Company or TSI or any of the Company's or TSI's
subsidiaries conducts business, including any territory serviced by the
Company or TSI or any of such subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or TSI (including the respective
subsidiaries thereof) in a managerial capacity for the
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purpose or with the intent of enticing such employee away from or out of the
employ of the Company or TSI (including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Company or TSI (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products
or services in direct competition with the Company or TSI or any
subsidiary of the Company or TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by the Company or TSI (including the respective subsidiaries
thereof) or for which the Company or TSI made an acquisition analysis,
for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and TSI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
TSI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the changing
activities, business, and locations of the Company and TSI (including TSI's
other subsidiaries) throughout the term of this Agreement, whether before or
after the date of termination of the employment of Employee. For example, if,
during the term of this Agreement, the Company, or TSI (including TSI's other
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or TSI (including
TSI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the Company or TSI (including TSI's other subsidiaries) shall
thereafter enter the same, similar, or a competitive (i) business, (ii) course
of activities, or (iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any
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court of competent jurisdiction shall determine that the scope, time, or
territorial restrictions set forth are unreasonable, then it is the intention of
the parties that such restrictions be enforced to the fullest extent which the
court deems reasonable, and the Agreement shall be reformed in accordance
therewith.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient, and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years (the "Term"), and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal. This
Agreement and Employee's employment may be terminated in any one of the
followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4)
month period, but which shall not be effective earlier than the last
day of such four (4)
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month period), the Company may terminate Employee's employment hereunder
provided Employee is unable to resume Employee's full-time duties at the
conclusion of such notice period. Also, Employee may terminate Employee's
employment hereunder if his or her health should become impaired to an extent
that makes the continued performance of Employee's duties hereunder hazardous to
Employee's physical or mental health or life, provided that Employee shall have
furnished the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request made within thirty
(30) days of the date of such written statement, Employee shall submit to an
examination by a doctor selected by the Company who is reasonably acceptable to
Employee or Employee's doctor and such doctor shall have concurred in the
conclusion of Employee's doctor. In the event this Agreement is terminated as a
result of Employee's disability, Employee shall receive from the Company, in a
lump-sum payment due within ten (10) days of the effective date of termination,
the base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud, or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater, and, in the event Employee accepts such lump sum payment, the period
set forth in paragraph 3(a) and during which the terms of paragraph 3 apply
shall be shortened to one (1) year from the date of termination of employment.
Should Employee be terminated by the Company without cause at any time after the
Term, Employee shall be entitled to receive from the Company, in a lump-sum
payment due on the effective date of termination, the base salary rate then in
effect equivalent to one (1) year of salary, and, in the event that Employee
accepts such a lump sum payment, the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply shall be shortened to one (1) year
from the date of termination of employment. Should Employee be terminated by the
Company without cause at any time during or after the Term, Employee shall be
entitled to waive Employee's right to receive severance compensation (by a
written waiver delivered to the Company on the effective date of termination),
and, in such case, the non-competition provisions of paragraph 3 shall not
apply. If Employee resigns or otherwise terminates Employee's employment without
cause pursuant to this paragraph 5(d), Employee shall receive no severance
compensation. A termination without cause within the meaning of this paragraph
5(d) shall be deemed to have occurred if any person or entity, other than TSI or
an employee benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act of 1934,
as amended) of any voting security of the Company or TSI and immediately after
such acquisition such person or entity is, directly or indirectly, the
Beneficial Owner of voting securities representing 50% or more of the total
voting power of
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all of the then-outstanding voting securities of the Company or TSI and the
transaction pursuant to which such acquisition is made is approved by at least
two-thirds (2/3) of the Board of Directors of TSI but is not approved by
Employee.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of TSI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which he is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of the provisions
of paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors,
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities, or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or TSI and which Employee conceives as a result of
Employee's employment by the Company. Employee hereby assigns and agrees to
assign all of Employee's interests therein to the Company or its nominee.
Whenever requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
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8. TRADE SECRETS.
Employee agrees that he or she will not, during or after the Term of
this Agreement with the Company, disclose the specific terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation, or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal, administrative,
or investigative (other than an action by the Company or TSI against Employee),
by reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement,
as actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit, or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to the Company or TSI for errors or
omissions made in good faith where Employee has not exhibited gross, willful,
and wanton negligence and misconduct or performed criminal and fraudulent acts
which materially damage the business of the Company.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention, or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he or she has been selected for employment by
the Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives, successors, and assigns.
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12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on the effective date of the termination), in
which case the noncompetition provisions of paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee must be paid in
full by the Company at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or TSI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or TSI, unless the transaction
pursuant to which such acquisition is made is approved by at least
two-thirds (2/3) of the Board of Directors of TSI;
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(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI, and Employee, and Employee has no oral representations,
understandings, or agreements with the Company or any of its officers,
directors, or representatives covering the same subject matter as this
Agreement.
This written Agreement is the final, complete, and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted, or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
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14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: D-FW Tours, Inc.
7616 LBJ Freeway, Suite 524
Dallas, TX 75251
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define, or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Washington, D.C., in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in paragraphs 5(b) and
5(c) hereof, respectively, or that the Company has otherwise materially breached
this Agreement. A decision by a majority of the arbitration panel shall be final
and binding. Judgment may be entered on the arbitrators' award in any court
having jurisdiction. The direct expense of any arbitration proceeding shall be
borne by the Company.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Texas.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
D-FW Tours, Inc.
By: /s/ John Przywara
--------------------------------
Name: John Przywara
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By: /s/ Elan Blutinger
--------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
------------------------------
/s/ John Przywara
-----------------------------------
John Przywara, Individually
<PAGE>
EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and among Travel
Services International, Inc., a Delaware corporation ("TSI"), Travel 800, LLC, a
Delaware limited liability corporation and a wholly-owned subsidiary of TSI (the
"Company"), and Susan Parker ("Employee"), is hereby entered into as of this
22nd day of July, 1997, and shall be effective as of the date of the
consummation of the initial public offering of the common stock of TSI.
R E C I T A L S
A. As of the date of this Agreement, the Company is engaged primarily in the
business of providing travel services.
B. Employee is employed hereunder by the Company in a confidential relationship
wherein Employee, in the course of Employee's employment with the Company, has
and will continue to become familiar with and aware of information as to the
Company's and TSI's customers, specific manner of doing business, including the
processes, techniques and trade secrets utilized by the Company and TSI, and
future plans with respect thereto, all of which has been and will be established
and maintained at great expense to the Company and TSI; this information is a
trade secret and constitutes the valuable good will of the Company and TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants, and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as President of the Company. As
such, Employee shall have responsibilities, duties, and authority reasonably
accorded to and expected of a President of the Company and will report directly
to the Board of Directors of the Company (the "Board"). Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) hereof, agrees to devote Employee's time, attention and efforts
to promote and further the business of the Company.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board.
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity materially interferes with Employee's
duties and responsibilities hereunder. The foregoing limitations shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will neither require Employee's services in the operation or
affairs of the companies or enterprises in which such investments are made nor
violate the terms of paragraph 3 hereof.
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2. COMPENSATION.
For all services rendered by Employee, the Company shall compensate
Employee as follows:
(a) Base Salary. The base salary payable to Employee shall be $150,000
per year, payable on a regular basis in accordance with the Company's standard
payroll procedures but not less than monthly.
(b) Incentive Bonus Plan. For 1997 and subsequent years, it is the
Company's intent to develop a written Incentive Bonus Plan (which may be TSI's
Incentive Bonus Plan) setting forth the criteria under which Employee and other
officers and key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from the
Company in such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life, and other insurance plans that the Company or
TSI may have in effect from time to time, benefits provided to Employee
under this clause (i) to be at least equal to such benefits provided to
TSI executives.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with the Company's expense
reporting policy.
(iii) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other Company-wide or TSI-wide
employee benefits as available from time to time.
3. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
the Company, and for a period of two (2) years immediately following the
termination of Employee's employment under this Agreement, for any reason
whatsoever, directly or indirectly, for herself or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation,
or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any travel service business in direct competition
with the Company or TSI or any subsidiary of either the Company or TSI,
within the United States or within 100 miles of any other geographic
area in which the Company or TSI or any of the Company's or TSI's
subsidiaries conducts business, including any territory serviced by the
Company or TSI or any of such subsidiaries (the "Territory"); provided,
however, that Employee shall not be considered in breach of this
provision with respect to the marketing, sale and promotion of the
Agent software program through 800-Ideas, Inc., a Nevada corporation,
of which Employee is the sole officer, director and shareholder, so
long as Employee herself does not engage in such activities to the
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extent that it would materially interfere with Employee's duties and
responsibilities under this Agreement;
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company or TSI (including the respective
subsidiaries thereof) in a managerial capacity for the purpose or with
the intent of enticing such employee away from or out of the employ of
the Company or TSI (including the respective subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Company or TSI (including the respective subsidiaries thereof)
within the Territory for the purpose of soliciting or selling products
or services in direct competition with the Company or TSI or any
subsidiary of the Company or TSI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by the Company or TSI (including the respective subsidiaries
thereof) or for which the Company or TSI made an acquisition analysis,
for the purpose of acquiring such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company and TSI as a result of a breach of the foregoing covenant, and because
of the immediate and irreparable damage that could be caused to the Company and
TSI for which they would have no other adequate remedy, Employee agrees that the
foregoing covenant may be enforced by TSI or the Company in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company or TSI (including TSI's other subsidiaries) on the
date of the execution of this Agreement and the current plans of TSI (including
TSI's other subsidiaries); but it is also the intent of the Company and Employee
that such covenants be construed and enforced in accordance with the changing
activities, business, and locations of the Company and TSI (including TSI's
other subsidiaries) throughout the term of this Agreement, whether before or
after the date of termination of the employment of Employee. For example, if,
during the term of this Agreement, the Company, or TSI (including TSI's other
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with the Company or TSI (including
TSI's other subsidiaries), or similar activities, or business in locations the
operation of which, under such circumstances, does not violate clause (i) of
this paragraph 3, and in any event such new business, activities or location are
not in violation of this paragraph 3 or of employee's obligations under this
paragraph 3, if any, Employee shall not be chargeable with a violation of this
paragraph 3 if the
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Company or TSI (including TSI's other subsidiaries) shall thereafter enter the
same, similar, or a competitive (i) business, (ii) course of activities, or
(iii) location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time, or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company or
TSI, whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by TSI or the Company of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that she may be requested by the Board or TSI
to relocate from Employee's present residence to another geographic location in
order to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Company
will pay all relocation costs to move Employee, Employee's immediate family, and
their personal property and effects. Such costs may include, by way of example,
but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use Employee's best efforts to incur only those
costs which are reasonable and necessary to effect a smooth, efficient, and
orderly relocation with minimal disruption to the business affairs of the
Company and the personal life of Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c), and in such
circumstance Employee shall continue to be employed hereunder.
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for five (5) years (the "Term"), and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal. This
Agreement and Employee's employment may be terminated in any one of the
followings ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
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(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for four (4) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
four (4) month period, but which shall not be effective earlier than the last
day of such four (4) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his or her health should become impaired to
an extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provided that
Employee shall have furnished the Company with a written statement from a
qualified doctor to such effect and provided, further, that, at the Company's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Company who
is reasonably acceptable to Employee or Employee's doctor and such doctor shall
have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated as a result of Employee's disability, Employee shall
receive from the Company, in a lump-sum payment due within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Term of this Agreement or for one
(1) year, whichever amount is greater.
(c) Good Cause. The Company may terminate the Agreement ten (10) days
after delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material, and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
continuing for ten (10) days after receipt of written notice of need to cure) of
any of Employee's material duties and responsibilities hereunder; (3) Employee's
willful dishonesty, fraud, or misconduct with respect to the business or affairs
of the Company or TSI which materially and adversely affects the operations or
reputation of the Company or TSI; (4) Employee's conviction of a felony crime;
or (5) chronic alcohol abuse or illegal drug abuse by Employee. In the event of
a termination for good cause, as enumerated above, Employee shall have no right
to any severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to the Company.
Employee may only be terminated without cause by the Company during the Term
hereof if such termination is approved by at least two-thirds of the members of
the Board of Directors of TSI. Should Employee be terminated by the Company
without cause during the Term, Employee shall be entitled to receive from the
Company, in a lump-sum payment due on the effective date of termination, the
base salary at the rate then in effect for whatever time period is remaining
under the Term of this Agreement or for one (1) year, whichever amount is
greater, and, in the event that Employee accepts such lump sum payment, the
period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply shall be shortened to one (1) year from the date of termination of
employment. Should Employee be terminated by the Company without cause at any
time after the Term, Employee shall be entitled to receive from the Company, in
a lump-sum payment due on the effective date of termination, the base salary
rate then in effect equivalent to one (1) year of salary, and, in the event that
Employee accepts such lump sum payment, the period set forth in paragraph 3(a)
and during which the terms of paragraph 3 apply shall be shortened to one (1)
year from the date of termination of employment. Should Employee be terminated
by the Company without cause at any time during or after the Term, Employee
shall be entitled to waive Employee's right to receive severance compensation
(by a written waiver delivered to the Company on the effective date of
termination), and, in such case, the noncompetition provisions of paragraph 3
shall not apply. If Employee resigns or otherwise terminates Employee's
employment without cause pursuant to this paragraph 5(d), Employee shall receive
no severance compensation. A termination
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without cause within the meaning of this paragraph 5(d) shall be deemed to have
occurred if any person or entity, other than TSI or an employee benefit plan of
TSI, acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of any voting
security of the Company or TSI and immediately after such acquisition such
person or entity is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Company or TSI and the transaction
pursuant to which such acquisition is made is approved by at least two-thirds
(2/3) of the Board of Directors of TSI but is not approved by Employee.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12 hereof. All other rights and obligations of TSI, the Company, and
Employee under this Agreement shall cease as of the effective date of
termination, except that the Company's obligations under paragraph 9 hereof and
Employee's obligations under paragraphs 3, 6, 7, 8 and 10 hereof shall survive
such termination in accordance with their terms.
If termination of Employee's employment arises out of the Company's
failure to pay Employee on a timely basis the amounts to which she is entitled
under this Agreement or as a result of any other breach of this Agreement by the
Company, as determined by a court of competent jurisdiction or pursuant to the
provisions of paragraph 16 below, the Company shall pay all amounts and damages
to which Employee may be entitled as a result of such breach, including interest
thereon and all reasonable legal fees and expenses and other costs incurred by
Employee to enforce Employee's rights hereunder. Further, none of the provisions
of paragraph 3 hereof shall apply in the event this Agreement is terminated as a
result of a breach by the Company.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists, and other property delivered to or compiled by
Employee by or on behalf of the Company, TSI, or their representatives, vendors,
or customers which pertain to the business of the Company or TSI shall be and
remain the property of the Company or TSI, as the case may be, and be subject at
all times to their discretion and control. Likewise, all correspondence,
reports, records, charts, advertising materials, and other similar data
pertaining to the business, activities, or future plans of the Company or TSI
which is collected by Employee shall be delivered promptly to the Company
without request by it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to TSI and the Company any and all
significant conceptions and ideas for inventions, improvements, and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of the Company or TSI and which Employee conceives as a result of
Employee's employment by the Company except for inventions or improvements in
connection with the Agent Program software (which is owned by 800-Ideas,
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Inc. and licensed to the Company). Employee hereby assigns and agrees to assign
all of Employee's interests therein to the Company or its nominee. Whenever
requested to do so by the Company, Employee shall execute any and all
applications, assignments, or other instruments that the Company shall deem
necessary to apply for and obtain Letters Patent of the United States or any
foreign country or to otherwise protect the Company's interest therein.
8. TRADE SECRETS.
Employee agrees that she will not, during or after the Term of this
Agreement with the Company, disclose the specific terms of the Company's or
TSI's relationships or agreements with their respective significant vendors or
customers or any other significant and material trade secret of the Company or
TSI, whether in existence or proposed, to any person, firm, partnership,
corporation, or business for any reason or purpose whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by the Company or TSI against Employee), by
reason of the fact that Employee is or was performing services under this
Agreement, then the Company shall indemnify Employee against all expenses
(including attorneys' fees), judgments, fines, and amounts paid in settlement,
as actually and reasonably incurred by Employee in connection therewith. In the
event that both Employee and the Company are made a party to the same
third-party action, complaint, suit, or proceeding, the Company or TSI agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by TSI shall have a conflict
of interest that prevents such counsel from representing Employee, Employee may
engage separate counsel and the Company or TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge his or her duties under this
Agreement, Employee cannot be held liable to the Company or TSI for errors or
omissions made in good faith where Employee has not exhibited gross, willful,
and wanton negligence and misconduct or performed criminal and fraudulent acts
which materially damage the business of the Company. In the event that the
Company breaches its agreement to indemnify Employee under this paragraph 9, the
noncompetition provisions of paragraph 3 shall thereafter not apply to Employee.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to the Company that the
execution of this Agreement by Employee and his or her employment by the Company
and the performance of Employee's duties hereunder will not violate or be a
breach of any agreement with a former employer, client, or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including but not limited to attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any noncompetition
agreement, invention, or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
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11. ASSIGNMENT; BINDING EFFECT.
Employee understands that she has been selected for employment by the
Company on the basis of Employee's personal qualifications, experience, and
skills. Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 12 below, this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the parties hereto and
their respective heirs, legal representatives, successors, and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Company may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Company hereunder or
that the Company may undergo another type of Change in Control. In the event
such a merger or consolidation or other Change in Control is initiated prior to
the end of the Term, then the provisions of this paragraph 12 shall be
applicable.
(b) In the event of a pending Change in Control wherein the Company and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of the Company's
business and/or assets that such successor is willing as of the closing to
assume and agree to perform the Company's obligations under this Agreement in
the same manner and to the same extent that the Company is hereby required to
perform, then such Change in Control shall be deemed to be a termination of this
Agreement by the Company without cause during the Term and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the lump-sum severance payment due to Employee shall be triple the
amount calculated under the terms of paragraph 5(d) and the noncompetition
provisions of paragraph 3 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to the Company at least five (5)
business days prior to the anticipated closing of the transaction giving rise to
the Change in Control. In such case, the applicable provisions of paragraph 5(d)
will apply as though the Company had terminated the Agreement without cause
during the Term; however, under such circumstances, the amount of the lump-sum
severance payment due to Employee shall be double the amount calculated under
the terms of paragraph 5(d) and the noncompetition provisions of paragraph 3
shall all apply for a period of two (2) years from the effective date of
termination. Employee shall have the right to waive Employee's right to receive
the severance compensation payable under this paragraph 12(c) (by a written
waiver delivered to the Company on the effective date of the termination), in
which case the noncompetition provisions of paragraph 3 shall not apply.
(d) For purposes of applying paragraph 5 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements, and lump-sum payments due Employee, unless waived,
must be paid in full by the Company at or prior to such closing. Further,
Employee will be given sufficient time and opportunity to elect whether to
exercise all or any of Employee's vested options to purchase TSI Common Stock,
including any options with accelerated vesting under the provisions of TSI's
1997 Long-Term Incentive Plan, such that Employee may convert the options to
shares of TSI Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if Employee so desires.
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(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, other than TSI or an employee
benefit plan of TSI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of the Company or TSI and
immediately after such acquisition such person or entity is, directly
or indirectly, the Beneficial Owner of voting securities representing
50% or more of the total voting power of all of the then-outstanding
voting securities of the Company or TSI, unless the transaction
pursuant to which such acquisition is made is approved by at least
two-thirds (2/3) of the Board of Directors of TSI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of TSI: (A) the individuals
who, as of the closing date of TSI's initial public offering,
constitute the Board of Directors of TSI (the "Original Directors");
(B) the individuals who thereafter are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board of
Directors of TSI and whose election, or nomination for election, to the
Board of Directors of TSI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original Directors then
still in office (such directors also becoming "Additional Original
Directors" immediately following their election).
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization, or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by the Company at any time
that the Company or any member of its Board anticipates that a Change in Control
may take place.
(g) Employee shall be reimbursed by the Company or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Company or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of Employee's
tax return(s) showing the excise tax actually incurred by Employee.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, among the
Company, TSI, and Employee, and Employee has
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no oral representations, understandings, or agreements with the Company or any
of its officers, directors, or representatives covering the same subject matter
as this Agreement.
This written Agreement is the final, complete, and exclusive statement
and expression of the agreement between the Company and Employee and of all the
terms of this Agreement, and it cannot be varied, contradicted, or supplemented
by evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of the Company and Employee, and no term of
this Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: 10146 El Capitan Real
El Cajon, CA 92020
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define, or limit the extent or intent of the Agreement or of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Washington, D.C., in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from, or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in paragraphs 5(b) and
5(c) hereof, respectively, or that the Comp any has otherwise materially
breached this Agreement. A decision by a majority of the arbitration panel shall
be final and binding. Judgment may be entered on the arbitrators' award in any
court having jurisdiction. The direct expense of any arbitration proceeding
shall be borne by the Company. The substantially prevailing party in any
proceeding hereunder shall be entitled to recover
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from the losing party reasonable attorneys' fees for services rendered to the
prevailing party in such proceeding.
17. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
[The next page is the signature page.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Travel 800, LLC
By:/s/ Susan Parker
---------------------------------
Name: Susan Parker
-------------------------------
Title: President
------------------------------
Travel Services International, Inc.,
a Delaware corporation
By:/s/ Elan Blutinger
---------------------------------
Name: Elan Blutinger
-------------------------------
Title: President
------------------------------
Susan Parker
------------------------------------
Susan Parker, Individually
12
An Indemnification Agreement has been executed by and between Travel Services
International, Inc. and the following individuals:
Mel Robinson
Suzanne Bell
Joseph Vittoria
Jill Vales
Imad Khalidi
Maryann Bastnagel
Michael J. Moriarty
Tommaso Zanzotto
Wayne Heller
Susan Parker
John Przywara
Elan Blutinger
Len Potter
D. Fraser Bullock
Robert Falcone
Tommaso Zanzotto
<PAGE>
INDEMNIFICATION AGREEMENT
THIS INDEMNIFICATION AGREEMENT (the "Agreement") dated as of July 28,
1997, between Travel Services International, Inc., a Delaware corporation (the
"Company"), and _____________ ("Indemnitee").
RECITALS
A. Indemnitee is an officer and member of the Board of Directors of the
Company and in such capacity is performing a valuable service to the Company.
B. The Company's Bylaws (the "Bylaws") provide for the indemnification
of the directors, advisory directors, officers, employees and agents of the
Company to the extent set forth in the Amended and Restated Certificate of
Incorporation of the Company (the "Certificate").
C. The Certificate provides that the Company shall indemnify the
directors, advisory directors, officers, employees and agents of the Company to
the fullest extent permitted by Section 145 of the Delaware General Corporation
Law, as amended to date (the "Corporation Law").
D. The Corporation Law specifically provides that indemnification and
advancement of expenses provided in such statute shall not be exclusive of any
other rights under any agreement, and thereby contemplates that agreements may
be entered into between the Company and members of, or advisory directors to,
the Board of Directors or officers of the Company with respect to the
indemnification of such directors or officers.
E. In accordance with the authorization provided in the Corporation
Law, the Company intends to purchase and maintain a policy or policies of
directors' and officers' liabilities insurance (the "Insurance") covering
certain liabilities which may be incurred by the Company's directors, advisory
directors and officers in the performance of their services to the Company.
F. The general availability of directors' and officers' liability
insurance covering certain liabilities which may be incurred by the Company's
directors, advisory directors and officers in the performance of their services
to the Company and the applicability, amendment and enforcement of statutory and
bylaw provisions have raised questions concerning the adequacy and reliability
of the protection afforded to directors, advisory directors and officers.
G. In order to induce Indemnitee to serve as an officer and member of
the Board of Directors of the Company for the
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<PAGE>
current term and for any subsequent term to which he is elected or nominated,
the Company has deemed it to be in its best interest to enter into this
Agreement with Indemnitee.
NOW, THEREFORE, in consideration of Indemnitee's agreement to serve as
an officer and member of the Board of Directors of the Company after the date
hereof, the parties hereto agree as follows:
1. Definitions.
As used in this Agreement, the following terms shall have the following
meanings:
(a) Change in Control. A "Change in Control" shall be deemed
to have occurred if:
(i) any person or entity, or group of persons or
entities acting together, other than the Company or an
employee benefit plan of the Company, acquires directly or
indirectly the Beneficial Ownership (as defined in Section
13(d) of the Securities Exchange Act of 1934, as amended) of
any voting security of the Company and immediately after such
acquisition such person, entity or group is, directly or
indirectly, the Beneficial Owner of voting securities
representing 33% or more of the total voting power of all of
the then-outstanding voting securities of the Company and has
a larger percentage of voting securities of the Company than
any other person, entity or group holding voting securities of
the Company, unless the transaction pursuant to which such
acquisition is made is approved by at least two-thirds (2/3)
of the Board of Directors (the "Board");
(ii) the following individuals no longer constitute a
majority of the members of the Board: (A) the individuals who,
as of the closing date of the Company's initial public
offering, constitute the Board (the "Original Directors"); (B)
the individuals who thereafter are elected to the Board and
whose election, or nomination for election, to the Board was
approved by a vote of at least two-thirds (2/3) of the
Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following
their election); and (C) the individuals who are elected to
the Board and whose election, or nomination for election, to
the Board was approved by a vote of at least two-thirds (2/3)
of the Original Directors and Additional Original Directors
then still in office (such directors also becoming "Additional
Original Directors" immediately following their election);
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<PAGE>
(iii) the stockholders of the Company shall approve a
merger, consolidation, recapitalization or reorganization of
the Company, a reverse stock split of outstanding voting
securities, or consummation of any such transaction if
stockholder approval is not obtained, other than any such
transaction which would result in at least 75% of the total
voting power represented by the voting securities of the
surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the
holders of outstanding voting securities of the Company
immediately prior to the transaction, with the voting power of
each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of the Company shall approve a
plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company of all or a
substantial portion of the Company's assets (i.e., 50% or more
of the total assets of the Company).
(b) Reviewing Party. A "Reviewing Party" means (i) the Board
or a committee of directors of the Company, who are not officers,
appointed by the Board, provided that a majority of such directors are
not parties to the claim or (ii) special, independent counsel selected
and appointed by the Board or by a committee of directors of the
Company who are not officers.
2. Indemnification of Indemnitee.
The Company hereby agrees that it shall hold harmless and indemnify
Indemnitee to the fullest extent authorized and permitted by the provisions of
the Certificate and Bylaws and the provisions of the Corporation Law, or by any
amendment thereof, but in the case of any such amendment, only to the extent
that such amendment permits the Company to provide broader indemnification
rights than the Certificate, Bylaws or Corporation Law permitted the Company to
provide prior to such amendment, or other statutory provisions authorizing or
permitting such indemnification which is adopted after the date hereof.
3. Insurance.
3.1 Insurance Policies. So long as Indemnitee may be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that Indemnitee is or was a director, advisory director or officer, to the
extent that the Company maintains one or more insurance policy or policies
providing directors' and officers' liability
4
<PAGE>
insurance, Indemnitee shall be covered by such policy or policies in accordance
with its or their terms, to the maximum extent of the coverage applicable to any
director, advisory director or officer then serving the Company.
3.2 Maintenance of Insurance. The Company shall not be required to
maintain the Insurance or any policy or policies of comparable insurance, as the
case may be, if such insurance is not reasonably available or if, in the
reasonable business judgment of the Board of the Company which shall be
conclusively established by such determination by the Board, or any appropriate
committee thereof, either (i) the premium cost for such insurance is
substantially disproportionate to the amount of coverage thereunder or (ii) the
coverage provided by such insurance is so limited by exclusions that there is
insufficient benefit from such insurance.
3.3 Self-Insurance. To the extent Indemnitee is not indemnified under
other Sections of this Agreement and is not fully, by reason of deductible or
otherwise, covered by directors' and officers' liability insurance, the Company
shall maintain self-insurance for, and thereby indemnify and hold harmless,
Indemnitee from and against any and all expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably incurred
by Indemnitee in connection with any possible claim or threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which Indemnitee was or is made party or was or is involved by
reason of the fact that Indemnitee is or was a director or officer of the
Company. Notwithstanding the foregoing, payments of self-insurance under this
Section to Indemnitee by the Company shall not exceed the amount of $5,000,000
for any event and further shall be limited in accordance with Section 5 hereof.
An "event" as used in the preceding sentence in reference to a limitation on
self-insurance shall include the same acts or omissions by Indemnitee and
interrelated, repeated or continuous acts or omissions.
4. Additional Indemnification.
Subject only to the exclusions set forth in Section 5 hereof, the
Company hereby agrees that it shall hold harmless and indemnify Indemnitee.
(a) against any and all expenses, including attorneys' fees,
judgments, fines and amounts paid in settlement actually and reasonably
incurred by Indemnitee in connection with any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, including an action by or on behalf of
stockholders of the Company or by or in the right of the Company, to
which Indemnitee is a party or is involved by reason of the fact that
Indemnitee is, was or at any time becomes a director, advisory
director, officer, employee or
5
<PAGE>
agent of the Company, or is or was serving or at any time serves at the
request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise; and
(b) otherwise to the fullest extent as may be provided to
Indemnitee by the Company under the non-exclusivity provisions of the
Corporation Law.
5. Limitations on Additional Indemnification.
No indemnification pursuant to this Agreement shall be paid by the
Company:
(a) in respect to any transaction if it shall be determined by
the Reviewing Party, or by final judgment or other final adjudication,
that Indemnitee derived an improper personal benefit;
(b) on account of Indemnitee's conduct which is determined by
the Reviewing Party, or by final judgment or other final adjudication,
to have involved acts or omissions not in good faith, intentional
misconduct or a knowing violation of law; or
(c) if the Reviewing Party or a court having jurisdiction in
the matter shall determine that such indemnification is in violation of
the Certificate, the Bylaws or the law.
6. Advancement of Expenses.
In the event of any threatened or pending action, suit or proceeding in
which Indemnitee is a party or is involved and which may give rise to a right of
indemnification under this Agreement, following written request to the Company
by Indemnitee the Company shall promptly pay to Indemnitee amounts to cover
expenses incurred by Indemnitee in such proceeding in advance of its final
disposition upon the receipt by the Company of (i) a written undertaking
executed by or on behalf of Indemnitee to repay the advance if it shall
ultimately be determined that Indemnitee is not entitled to be indemnified by
the Company as provided in this Agreement and (ii) satisfactory evidence as to
the amount of such expenses.
7. Repayment of Expenses.
Indemnitee agrees that Indemnitee shall reimburse the Company for all
reasonable expenses paid by the Company in defending any civil, criminal,
administrative or investigative action, suit or proceeding against Indemnitee in
the event and only to the extent that it shall be determined by final judgment
or other final adjudication that Indemnitee is not entitled to be indemnified by
the Company for such expenses under the provisions
6
<PAGE>
of the Corporation Law or any applicable law.
8. Determination of Indemnification; Burden of Proof.
With respect to all matters concerning the rights of Indemnitee to
indemnification and payment of expenses under this Agreement or under the
provisions of the Certificate and Bylaws now or hereafter in effect, the Company
shall appoint a Reviewing Party and any determination by the Reviewing Party
shall be conclusive and binding on the Company and Indemnitee. If under
applicable law, the entitlement of Indemnitee to be indemnified under this
Agreement depends on whether a standard of conduct has been met, the burden of
proof of establishing that Indemnitee did not act in accordance with such
standard of conduct shall rest with the Company. Indemnitee shall be presumed to
have acted in accordance with such standard and entitled to indemnification or
advancement of expenses hereunder, as the case may be, unless, based upon a
preponderance of the evidence, it shall be determined by the Reviewing Party
that Indemnitee did not meet such standard. For purposes of this Agreement,
unless otherwise expressly stated herein, the termination of any action, suit or
proceeding by judgment, order, settlement, whether with or without court
approval, or conviction, or upon a plea of nolo contendere or its equivalent
shall not create a presumption that Indemnitee did not meet any particular
standard of conduct or have any particular belief or that a court has determined
that indemnification is not permitted by applicable law.
9. Effect of Change in Control.
If there has not been a Change in Control after the date of this
Agreement, the determination of: (i) the rights of Indemnitee to indemnification
and payment of expenses under this Agreement or under the provisions of the
Certificate and the Bylaws; (ii) standard of conduct; and (iii) evaluation of
the reasonableness of amounts claimed by Indemnitee shall be made by the
Reviewing Party or such other body or persons as may be permitted by the
Corporation Law. If there has been a Change in Control after the date of this
Agreement, such determination and evaluation shall be made by a special,
independent counsel who is selected by Indemnitee and approved by the Company,
which approval shall not be unreasonably withheld, and who has not otherwise
performed services for Indemnitee or the Company.
10. Continuation of Indemnification.
All agreements and obligations of the Company contained herein shall
continue during the period that Indemnitee is a director, advisory director,
officer, employee or agent of the Company, or is or was serving at the request
of the Company as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, and shall continue
thereafter so long as Indemnitee shall be subject to any possible claim or
threatened, pending or completed action, suit
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<PAGE>
or proceeding, whether civil, criminal, administrative or investigative, by
reason of the fact that Indemnitee was a director, advisory director or officer
of the Company or serving in any other capacity referred to herein.
11. Notification and Defense of Claim.
Promptly after receipt by Indemnitee of notice of the commencement of
any action, suit or proceeding, Indemnitee shall, if a claim in respect hereof
is to be made against the Company under this Agreement, notify the Company of
the commencement thereof; provided, however, that delay in so notifying the
Company shall not constitute a waiver or release by Indemnitee of rights
hereunder and that omission by Indemnitee to so notify the Company shall not
relieve the Company from any liability which it may have to Indemnitee otherwise
than under this Agreement. With respect to any such action, suit or proceeding
as to which Indemnitee notifies the Company of the commencement thereof:
(a) The Company shall be entitled to participate therein at its own
expense; and
(b) Except as otherwise provided below, to the extent that it may wish,
the Company, jointly with any other indemnifying party similarly
notified, shall be entitled to assume the defense thereof and to employ
counsel reasonably satisfactory to Indemnitee. After notice from the
Company to Indemnitee of its election to so assume the defense thereof,
the Company shall not be liable to Indemnitee under this Agreement for
any legal or other expenses subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the
right to employ counsel of his own choosing in such action, suit or
proceeding but the fees and expenses of such counsel incurred after
notice from the Company of assumption by the Company of the defense
thereof shall be at the expense of Indemnitee unless (i) the employment
of counsel by Indemnitee has been specifically authorized by the
Company, such authorization to be conclusively established by action by
disinterested members of the Board though less than a quorum; (ii)
representation by the same counsel of both Indemnitee and the Company
would, in the reasonable judgment of Indemnitee and the Company, be
inappropriate due to an actual or potential conflict of interest
between the Company and Indemnitee in the conduct of the defense of
such action, such conflict of interest to be conclusively established
by an opinion of counsel to the Company to such effect; (iii) the
counsel employed by the Company and reasonably satisfactory to
Indemnitee has advised Indemnitee in writing that such counsel's
representation of Indemnitee would likely involve such counsel in
representing differing interests which could adversely affect the
judgment or loyalty of such counsel to Indemnitee, whether it be a
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<PAGE>
conflicting, inconsistent, diverse or other interest; or (iv) the
Company shall not in fact have employed counsel to assume the defense
of such action, in each of which cases the fees and expenses of counsel
shall be paid by the Company. The Company shall not be entitled to
assume the defense of any action, suit or proceeding brought by or on
behalf of the Company or as to which a conflict of interest has been
established as provided in (ii) hereof. Notwithstanding the foregoing,
if an insurance company has supplied directors' and officers' liability
insurance covering an action, suit or proceeding, then such insurance
company shall employ counsel to conduct the defense of such action,
suit or proceeding unless Indemnitee and the Company reasonably concur
in writing that such counsel is unacceptable.
(c) The Company shall not be liable to indemnify Indemnitee under this
Agreement for any amounts paid in settlement of any action or claim
effected without its written consent. The Company shall not settle any
action or claim in any manner which would impose any liability or
penalty on Indemnitee without Indemnitee's written consent. Neither the
Company nor Indemnitee shall unreasonably withhold consent to any
proposed settlement.
12. Enforcement.
(a) The Company expressly confirms and agrees that it has entered into
this Agreement and assumed the obligations imposed on the Company hereby in
order to induce Indemnitee to serve as a director, advisory director or officer
of the Company and acknowledges that Indemnitee is relying upon this Agreement
in continuing in such capacity.
(b) If a claim for indemnification or advancement of expenses is not
paid in full by the Company within thirty (30) days after a written claim by
Indemnitee has been received by the Company, Indemnitee may at any time assert
the claim and bring suit against the Company to recover the unpaid amount of the
claim. In the event Indemnitee is required to bring any action to enforce rights
or to collect moneys due under this Agreement and is successful in such action,
the Company shall reimburse Indemnitee for all of Indemnitee's reasonable
attorneys' fees and expenses in bringing and pursuing such action.
13. Proceedings by Indemnitee.
The Company shall not be liable to make any payment under this
Agreement in connection with any action, suit or proceeding, or any part
thereof, initiated by Indemnitee unless such action, suit or proceeding, or part
thereof, (i) was authorized by the Company, such authorization to be
conclusively established by action by disinterested members of the Board though
less than a quorum or (ii) was brought by Indemnitee pursuant to Section
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12(b) hereof.
14. Effectiveness.
This Agreement is effective for, and shall apply to, (i) any claim
which is asserted or threatened before, on or after the date of this Agreement
but for which no action, suit or proceeding has been brought prior to the date
hereof and (ii) any action, suit or proceeding which is threatened before, on or
after the date of this Agreement but which is not pending prior to the date
hereof. This Agreement shall not apply to any action, suit or proceeding which
was brought before the date of this Agreement. So long as the foregoing is
satisfied, this Agreement shall be effective for, and be applicable to, acts or
omissions occurring prior to, on or after the date hereof.
15. Non-exclusivity.
The rights of Indemnitee under this Agreement shall not be deemed
exclusive, or in limitation of, any rights to which Indemnitee may be entitled
under any applicable common or statutory law, or pursuant to the Certificate,
the Bylaws, a vote of the stockholders or otherwise.
16. Other Payments.
The Company shall not be liable to make any payment under this
Agreement in connection with any action, suit or proceeding against Indemnitee
to the extent Indemnitee has otherwise received payment of the amounts otherwise
payable by the Company hereunder.
17. Subrogation.
In the event the Company makes any payment under this Agreement, the
Company shall be subrogated, to the extent of such payment, to all rights of
recovery of Indemnitee with respect thereto, and Indemnitee shall execute all
agreements, instruments, certificates or other documents and do or cause to be
done all things necessary or appropriate to secure such recovery rights to the
Company including, without limitation, executing such documents as shall enable
the Company to bring an action or suit to enforce such recovery rights.
18. Survival; Continuation.
The rights of Indemnitee under this Agreement shall inure to the
benefit of Indemnitee, his heirs, executors, administrators, personal
representatives and assigns, and this Agreement shall be binding upon the
Company, its successors and assigns. The rights of Indemnitee under this
Agreement shall continue so long as Indemnitee may be subject to any action,
suit or proceeding because of the fact that Indemnitee is or was a director,
advisory director, officer, employee or agentof the Company or
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is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise. If the Company, in a single transaction or series of related
transactions, sells, leases, exchanges, or otherwise disposes of all or
substantially all of its property and assets, the Company shall, as a condition
precedent to any such transaction, cause effective provision to be made so that
the persons or entities acquiring such property and assets shall become bound by
and replace the Company under this Agreement.
19. Amendment and Termination.
No amendment, modification, termination or cancellation of this
Agreement shall be effective unless made in writing signed by both parties
hereto.
20. Headings.
Section headings of the sections and paragraphs of this Agreement have
been inserted for convenience of reference only and do not constitute a part of
this Agreement.
21. Notices.
All notices and other communications hereunder shall be in writing and
shall be deemed to have been duly given if delivered personally, mailed by
certified mail (return receipt requested) or sent by overnight delivery service,
cable, telegram, facsimile transmission or telex to the parties at the following
addresses or at such other addresses as shall be specified by the parties by
like notice:
(a) if to the Company:
Travel Services International, Inc.
515 No. Flagler Drive
Suite 300 - Pavilion
West Palm Beach, Florida 33401
Attn: President
with a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, N.W.
Washington, DC 20036
Attn: Bruce S. Mendelsohn
(b) if to the Indemnitee
Travel Services International, Inc.
515 No. Flagler Drive
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Suite 300 - Pavilion
West Palm Beach, Florida 33401
Attn:
Notice so given shall, in the case of notice so given by mail, be deemed to be
given and received on the fourth calendar day after posting, in the case of
notice so given by overnight delivery service, on the date of actual delivery
and, in the case of notice so given by cable, telegram, facsimile transmission,
telex or personal delivery, on the date of actual transmission or, as the case
may be, personal delivery.
22. Severability.
If any provision of this Agreement shall be held to be illegal, invalid
or unenforceable under any applicable law, then such contravention or invalidity
shall not invalidate the entire Agreement. Such provision shall be deemed to be
modified to the extent necessary to render it legal, valid and enforceable, and
if no such modification shall render it legal, valid and enforceable, then this
Agreement shall be construed as if not containing the provision held to be
invalid, and the rights and obligations of the parties shall be construed and
enforced accordingly.
23. Complete Agreement.
This Agreement, those documents expressly referred to herein and other
documents of even date herewith embody the complete agreement and understanding
among the parties and supersede and preempt any prior understandings, agreements
or representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
24. Counterparts.
This Agreement may be executed in any number of counterparts and by
different parties hereto in separate counterparts, with the same effect as if
all parties had signed the same document. All such counterparts shall be deemed
an original, shall be construed together and shall constitute one and the same
instrument.
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25. CHOICE OF LAW. THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW,
AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By:
--------------------------------
Michael J. Moriarty,
President
--------------------------------
Indemnitee
--------------,
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EXECUTION COY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and between Travel
Services International, Inc., a Delaware corporation ("TSI"), and Suzanne B.
Bell ("Employee"), is hereby entered into as of this 22nd day of July 1997, and
shall be effective as of a date (the "Effective Date") to be agreed upon by the
parties hereto as soon as practicable after the consummation of the initial
public offering of the common stock of TSI (the "IPO").
R E C I T A L S
A. As of the date of this Agreement, TSI is engaged primarily in the business
of providing travel services.
B. Employee is employed hereunder by TSI in a confidential relationship wherein
Employee, in the course of Employee's employment with TSI, has and will continue
to become familiar with and aware of information as to TSI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by TSI, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to TSI; this information
is a trade secret and constitutes the valuable goodwill of TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) TSI hereby employs Employee as a Senior Vice President, General
Counsel and Secretary of TSI. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a Senior Vice
President, General Counsel and Secretary of TSI and will report only directly to
the Chief Executive Officer of TSI. Employee acknowledges that TSI is a start-up
company and that Employee's responsibilities may extend beyond the traditional
responsibilities of a General Counsel. Employee hereby accepts this employment
upon the terms and conditions herein contained and, subject to paragraph 1(c)
hereof, agrees to devote Employee's full business time, attention and efforts to
promote and further the business of TSI.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board of Directors of TSI (the "Board"), subject
only to those laws governing TSI and Employee's ethical and professional
responsibilities.
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 4 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, TSI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $125,000
per year, payable on a regular basis in accordance with TSI's standard payroll
procedures but not less than monthly. On at least an annual basis, the Board
will review Employee's performance and may make increases to such base salary
if, in its discretion, any such increase is warranted. Such recommended increase
would, in all likelihood, require approval by the Board or a duly constituted
committee thereof. In no event shall Employee's base salary be reduced.
(b) Incentive Bonus Plan. For 1997 and subsequent years, TSI shall
develop, as soon as practicable after the Effective Date, a written Incentive
Bonus Plan setting forth the criteria and performance standards under which
Employee and other officers and key employees will be eligible to receive
year-end bonus awards. TSI contemplates that the maximum bonus for which
Employee may be eligible will be 50% of Employee's base salary.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from TSI in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that TSI may have in
effect from time to time. Reimbursement for COBRA payments for coverage
for Employee and Employee's dependent family members in the event that
TSI is unable to provide insurance coverage at the Effective Date.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with TSI's expense reporting
policy.
(iii) TSI shall provide Employee with other executive
perquisites as may be available to senior management of TSI and
participation in all other TSI-wide employee benefits as available from
time to time, including vacation benefits in accordance with TSI's
established policies.
(iv) TSI will provide for Employee's annual professional
association fees and dues for the States of New York, New Jersey and
Florida and required continuing legal education expenses.
3. OPTIONS.
At the date of the IPO, TSI shall grant to Employee options to acquire
25,000 shares of TSI common stock at the price per share at which such stock is
offered to the public in the IPO, subject to forfeiture if Employee does not
commence employment with TSI. Such options shall vest in installments of 6,250
shares on each of the first, second, third and fourth anniversaries of the
Effective Date.
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4. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
TSI, and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for herself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor or as a sales
representative, in any travel service business in direct competition
with TSI or any subsidiary of TSI, within the United States or within
100 miles of any other geographic area in which TSI or any of TSI's
subsidiaries conducts business, including any territory serviced by TSI
or any of its subsidiaries (the "Territory"), except that Employee may
be employed by a law firm that represents clients in direct competition
with TSI; provided that Employee is not personally involved in the
representation of such clients;
(ii) call upon any person who is, at that time, within the
Territory, an employee of TSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of TSI (including the
subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of TSI (including the respective subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services
in direct competition with TSI or any subsidiary of TSI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by TSI (including the respective subsidiaries thereof) or for
which TSI made an acquisition analysis, for the purpose of acquiring
such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by her, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of TSI (including TSI's subsidiaries) on the date of the execution
of this Agreement and the current plans of TSI (including TSI's subsidiaries);
but it is also the intent of TSI and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of TSI (including TSI's subsidiaries) throughout the term of this Agreement. For
example, if, during the term of this Agreement, TSI (including TSI's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
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<PAGE>
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with TSI (including TSI's
subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (i) of this paragraph
4, and in any event such new business, activities or location are not in
violation of this paragraph 4 or of employee's obligations under this paragraph
4, if any, Employee shall not be chargeable with a violation of this paragraph 4
if TSI (including TSI's subsidiaries) shall thereafter enter the same, similar
or a competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 4 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
All of the covenants in this paragraph 4 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of Employee against TSI, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by TSI
of such covenants. It is specifically agreed that the period of two (2) years
following termination of employment stated at the beginning of this paragraph 4,
during which the agreements and covenants of Employee made in this paragraph 4
shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this paragraph 4.
5. PLACE OF PERFORMANCE.
(a) Employee shall not be requested by the Board to relocate from
Employee's present residence for a period of twelve months from and after the
Effective Date. After such twelve-month period, by notice given at least 60 days
prior to the requested date of relocation, Employee may be requested by the
Board to relocate from Employee's present residence to another geographic
location in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement. In such event, TSI will pay all actual
reasonable relocation costs to move Employee, Employee's immediate family and
their personal property and effects. Such costs may include, but are not limited
to, moving expenses, temporary lodging expenses prior to moving into a new
permanent residence; all closing costs on the purchase of a residence
(comparable to Employee's present residence) in the new location. The general
intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of the relocation, with an understanding that
Employee will use Employee's best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of TSI and the personal life of
Employee and Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate during the twelve-month period immediately following the Effective Date
and Employee refuses, Employee's employment hereunder shall terminate on the
requested date of relocation and Employee shall be entitled to receive from TSI,
in a lump-sum payment due on the effective date of termination, the base salary
at the rate then in effect for whatever time period is remaining under the Term
of this Agreement or for one year, whichever amount is greater, plus any accrued
salary and declared but unpaid bonus and reimbursement of expenses. In any
event, if Employee is requested by the Board to relocate during the Term of this
Agreement and Employee refuses, such refusal (i) shall not constitute "cause"
for termination of this Agreement under the terms of paragraph 6(c), and (ii)
shall operate to shorten the period set forth in paragraph 4(a) and during which
the terms of paragraph 4 apply to one (1) year from the date of termination of
employment.
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6. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. As used herein, the word
"Term" shall mean (i) during the three year period referred to in the preceding
sentence, such three year period, and (ii) during any one year renewal pursuant
to the terms hereof, such one year period. This Agreement and Employee's
employment may be terminated in any one of the following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, as reasonably determined by Employee's physician, Employee
shall have been absent from Employee's full-time duties hereunder for four (4)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such four (4) month period, but
which shall not be effective earlier than the last day of such four (4) month
period), TSI may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if her
health should become impaired to an extent that makes the continued performance
of Employee's duties hereunder hazardous to Employee's physical or mental health
or life, provided that Employee shall have furnished TSI with a written
statement from a qualified doctor to such effect and provided, further, that, at
TSI's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by TSI
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated by either party as a result of Employee's disability,
Employee shall receive from TSI, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater.
(c) Good Cause. TSI may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of TSI which materially and adversely affects the operations or
reputation of TSI; (4) Employee's conviction of a felony crime; or (5) chronic
alcohol abuse or illegal drug abuse by Employee. In the event of a termination
for good cause, as enumerated above, Employee shall have no right to any
severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to TSI. Employee may
only be terminated without cause by TSI during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board.
Should Employee's employment be terminated by TSI without cause during the Term,
Employee shall receive from TSI, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, plus any accrued salary and declared but unpaid
bonus and reimbursement of expenses. Should Employee's employment be terminated
by TSI without cause at any time after the Term, Employee shall receive from
TSI, in a lump-sum payment due on the effective date of termination, the base
salary rate then in
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effect equivalent to one (1) year of salary, plus any accrued salary and
declared but unpaid bonus and reimbursement of expenses. Further, any
termination without cause by TSI shall operate to shorten the period set forth
in paragraph 4(a) and during which the terms of paragraph 4 apply to one (1)
year from the date of termination of employment. If Employee resigns or
otherwise terminates Employee's employment without cause pursuant to this
paragraph 6(d), Employee shall receive no severance compensation.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 13 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 13 hereof. All other rights and obligations of TSI and Employee under
this Agreement shall cease as of the effective date of termination, except that
TSI's obligations under paragraph 10 hereof and Employee's obligations under
paragraphs 4, 7, 8, 9 and 11 hereof shall survive such termination in accordance
with their terms.
If termination of Employee's employment arises out of TSI's failure to
pay Employee on a timely basis the amounts to which she is entitled under this
Agreement or as a result of any other material breach of this Agreement by TSI
(including but not limited to a material reduction in Employee's
responsibilities hereunder), as mutually agreed to by Employee and TSI or as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 17 below, such termination shall be deemed a termination without
cause, and TSI shall pay to Employee severance compensation pursuant to the
applicable provisions of paragraph 6(d) and all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder. Further, none of the provisions of
paragraph 4 hereof shall apply in the event this Agreement is terminated as a
result of a breach by TSI.
In the event of any termination of Employee's employment for any reason
provided above, Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due to Employee under this
Agreement on account of any remuneration attributable to any subsequent
employment that Employee may obtain. Any amounts due under this paragraph 6 are
in the nature of severance payments, or liquidated damages, or both, and are not
in the nature of a penalty.
7. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of TSI, or its representatives, vendors or customers
which pertain to the business of TSI shall be and remain the property of TSI,
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other
similar data pertaining to the business, activities or future plans of TSI which
is collected by Employee shall be delivered promptly to TSI without request by
it upon termination of Employee's employment.
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8. INVENTIONS.
Employee shall disclose promptly to TSI any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment, and which are directly
related to the business or activities of TSI and which Employee conceives as a
result of Employee's employment by TSI. Employee hereby assigns and agrees to
assign all of Employee's interests therein to TSI or its nominee. Whenever
requested to do so by TSI, Employee shall execute any and all applications,
assignments or other instruments that TSI shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect TSI's interest therein.
9. TRADE SECRETS.
Employee agrees that she will not, other than as required by court
order, during or after the Term of this Agreement with TSI, disclose the
confidential terms of TSI's or its subsidiaries' relationships or agreements
with its significant vendors or customers or any other significant and material
trade secret of TSI or its subsidiaries, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
10. INDEMNIFICATION.
In connection with any threatened, pending or completed claim, demand,
liability, action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by TSI against Employee), by reason of
the fact that Employee is or was performing services (including an act, omission
or failure to act) under this Agreement, TSI shall indemnify and hold harmless,
to the maximum extent permitted by law, Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and TSI are made a party to the same third-party action,
complaint, suit or proceeding, TSI agrees to engage competent legal
representation reasonably acceptable to Employee, and Employee agrees to use the
same representation, provided that if counsel selected by TSI shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge her duties under this Agreement,
Employee cannot be held liable to TSI for errors or omissions made in good faith
where Employee has not exhibited gross, willful or wanton negligence or
misconduct or performed criminal and fraudulent acts which materially damage the
business of TSI. TSI shall pay, on behalf of Employee upon presentation of
proper invoices, all fees, costs and expenses (including attorneys' fees)
incurred in connection with any matter referenced in this paragraph 10.
11. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to TSI that the execution of
this Agreement by Employee and her employment by TSI and the performance of
Employee's duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity. Further, Employee
agrees to indemnify TSI for any claim, including but not limited to attorneys'
fees and expenses of investigation, by any such third party that such third
party may now have or may hereafter come to have against TSI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
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12. ASSIGNMENT; BINDING EFFECT.
Employee understands that she has been selected for employment by TSI
on the basis of Employee's personal qualifications, experience and skills.
Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 13 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
13. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that TSI may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of TSI hereunder or that TSI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this paragraph 13 shall be applicable.
(b) In the event of a pending Change in Control wherein TSI and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of TSI's business
and/or assets that such successor is willing as of the closing to assume and
agree to perform TSI's obligations under this Agreement in the same manner and
to the same extent that TSI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by TSI without
cause during the Term and the applicable portions of paragraph 6(d) will apply;
however, under such circumstances, the amount of the lump-sum severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to TSI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of paragraph 6(d)
will apply as though TSI had terminated the Agreement without cause during the
Term; however, under such circumstances, the amount of the lump-sum severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall all apply
for a period of two (2) years from the effective date of termination.
(d) For purposes of applying paragraph 6 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by TSI at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, or group of persons or entities
acting together, other than TSI or an employee benefit plan of TSI,
acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of
any voting security of TSI and immediately after such acquisition such
person, entity or group is, directly or indirectly, the Beneficial
Owner of voting securities representing 33% or more of the total voting
power of all of
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the then-outstanding voting securities of TSI and has a larger
percentage of voting securities of TSI than any other person, entity
or group holding voting securities of TSI, unless the transaction
pursuant to which such acquisition is made is approved by at least
two-thirds (2/3) of the Board; or
(ii) the following individuals no longer constitute a majority
of the members of the Board: (A) the individuals who, as of the closing
date of TSI's initial public offering, constitute the Board (the
"Original Directors"); (B) the individuals who thereafter are elected
to the Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds (2/3) of the
Original Directors then still in office (such directors becoming
"Additional Original Directors" immediately following their election);
and (C) the individuals who are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election); or
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by TSI at any time that TSI or
any member of its Board anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by TSI or its successor, on a grossed
up basis, for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such amount
will be due and payable by TSI or its successor within ten (10) days after
Employee delivers a written request for reimbursement accompanied by a copy of
Employee's tax return(s) showing the excise tax actually incurred by Employee.
14. COMPLETE AGREEMENT.
If the IPO does not occur, this Agreement is not a promise of future
employment. This Agreement supersedes any other agreements or understandings,
written or oral, between TSI and Employee, and Employee has no oral
representations, understandings or agreements with TSI or any of its officers,
directors or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between TSI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of TSI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
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15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To TSI: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
To Employee: Suzanne B. Bell
3047 Lakewood Drive
Weston, Florida 33332
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in the community where the corporate
headquarters of TSI is located on the Effective Date, in accordance with the
rules of the American Arbitration Association then in effect. The arbitrators
shall not have the authority to add to, detract from or modify any provision
hereof nor to award punitive damages to any injured party. The arbitrators shall
have the authority to order back-pay, severance compensation, vesting of options
(or cash compensation in lieu of vesting of options), reimbursement of costs,
including those incurred to enforce this Agreement, and interest thereon in the
event the arbitrators determine that Employee was terminated without disability
or good cause, as defined in paragraphs 6(b) and 6(c) hereof, respectively, or
that TSI has otherwise materially breached this Agreement. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by TSI.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware without regard to the conflicts of laws principles of
such state.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By:/s/ Elan Blutinger
--------------------------------
Name: Elan Blutinger
------------------------------
Title: President
-----------------------------
/s/ Suzanne B. Bell
--------------------------------
Suzanne B. Bell
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EXECUTION COPY
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), by and between Travel
Services International, Inc., a Delaware corporation ("TSI"), and Maryann
Bastnagel ("Employee"), is hereby entered into as of this 25th day of July,
1997, and shall be effective as of a date (the "Effective Date") to be agreed
upon by the parties hereto as soon as practicable after the consummation of the
initial public offering of the common stock of TSI (the "IPO").
R E C I T A L S
A. As of the date of this Agreement, TSI is engaged primarily in the business of
providing travel services.
B. Employee is employed hereunder by TSI in a confidential relationship wherein
Employee, in the course of Employee's employment with TSI, has and will continue
to become familiar with and aware of information as to TSI's customers, specific
manner of doing business, including the processes, techniques and trade secrets
utilized by TSI, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to TSI; this information
is a trade secret and constitutes the valuable goodwill of TSI.
A G R E E M E N T S
In consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, the parties hereto
hereby agree as follows:
1. EMPLOYMENT AND DUTIES.
(a) TSI hereby employs Employee as a Senior Vice President and Chief
Information Officer of TSI. As such, Employee shall have responsibilities,
duties and authority reasonably accorded to and expected of a Senior Vice
President and Chief Information Officer of TSI and will report directly to the
President of TSI. Employee acknowledges that TSI is a start-up company and that
Employee's responsibilities may extend beyond the traditional responsibilities
of a Senior Vice President and Chief Information Officer. Employee hereby
accepts this employment upon the terms and conditions herein contained and,
subject to paragraph 1(c) hereof, agrees to devote Employee's full business
time, attention and efforts to promote and further the business of TSI.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by the Board of Directors of TSI (the "Board").
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 4 hereof.
<PAGE>
2. COMPENSATION.
For all services rendered by Employee, TSI shall compensate Employee as
follows:
(a) Base Salary. The base salary payable to Employee shall be $150,000
per year, payable on a regular basis in accordance with TSI's standard payroll
procedures but not less than monthly. On at least an annual basis, the Board
will review Employee's performance and may make increases to such base salary
if, in its discretion, any such increase is warranted. Such recommended increase
would, in all likelihood, require approval by the Board or a duly constituted
committee thereof. In no event shall Employee's base salary be reduced.
(b) Incentive Bonus Plan. For 1997 and subsequent years, TSI shall
develop, as soon as practicable after the Effective Date, a written Incentive
Bonus Plan setting forth the criteria and performance standards under which
Employee and other officers and key employees will be eligible to receive
year-end bonus awards. TSI contemplates that the maximum bonus for which
Employee may be eligible will be 75% of Employee's base salary.
(c) Executive Perquisites, Benefits, and Other Compensation. Employee
shall be entitled to receive additional benefits and compensation from TSI in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee and
Employee's dependent family members under health, hospitalization,
disability, dental, life and other insurance plans that TSI may have in
effect from time to time. Reimbursement for COBRA payments for coverage
for Employee and Employee's dependent family members in the event that
TSI is unable to provide insurance coverage at the Effective Date.
(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with TSI's expense reporting
policy.
(iii) TSI shall provide Employee with other executive
perquisites as may be available to senior management of TSI and
participation in all other TSI-wide employee benefits as available from
time to time, including vacation benefits in accordance with TSI's
established policies.
3. OPTIONS.
At the date of the IPO, TSI shall grant to Employee options to acquire
110,000 shares of TSI common stock at the price per share at which such stock is
offered to the public in the IPO, subject to forfeiture if Employee does not
commence employment with TSI. Such options shall vest in installments of 27,500
shares on each of the first, second, third and fourth anniversaries of the
Effective Date.
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4. NON-COMPETITION.
(a) Employee will not, during the period of Employee's employment with
TSI, and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for herself or on behalf of or in conjunction with any other
person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor or as a sales
representative, in any travel service business that was formed to
acquire, or whose business plan contemplates the acquisition of,
specialized distributors of leisure travel services, within the United
States or within 100 miles of any other geographic area in which TSI or
any of TSI's subsidiaries conducts business, including any territory
serviced by TSI or any of its subsidiaries (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of TSI (including the subsidiaries thereof) in a
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of TSI (including the
subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of TSI (including the respective subsidiaries thereof) within the
Territory for the purpose of soliciting or selling products or services
in direct competition with TSI or any subsidiary of TSI within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate
was, to Employee's actual knowledge after due inquiry, either called
upon by TSI (including the respective subsidiaries thereof) or for
which TSI made an acquisition analysis, for the purpose of acquiring
such entity.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than two percent
(2%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to TSI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to TSI for which it would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
TSI in the event of breach by her, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 4 impose a reasonable restraint on Employee in light of the activities
and business of TSI (including TSI's subsidiaries) on the date of the execution
of this Agreement and the current plans of TSI (including TSI's subsidiaries);
but it is also the intent of TSI and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of TSI (including TSI's subsidiaries) throughout the term of this Agreement. For
example, if, during the term of this Agreement, TSI (including TSI's
subsidiaries) engages in new and different activities, enters a new business or
establishes new locations for its current activities or business in addition to
or other than the activities or business enumerated under the Recitals above or
the locations currently established therefor, then Employee will be precluded
from soliciting the customers or employees of such new activities or business or
from such new location and from directly competing with such new business within
100 miles of its then-established operating location(s) through the term of this
Agreement.
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It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with TSI (including TSI's
subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (i) of this paragraph
4, and in any event such new business, activities or location are not in
violation of this paragraph 4 or of employee's obligations under this paragraph
4, if any, Employee shall not be chargeable with a violation of this paragraph 4
if TSI (including TSI's subsidiaries) shall thereafter enter the same, similar
or a competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 4 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall be reformed in accordance therewith.
All of the covenants in this paragraph 4 shall be construed as an agreement
independent of any other provision in this Agreement, and the existence of any
claim or cause of action of Employee against TSI, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the enforcement by TSI
of such covenants. It is specifically agreed that the period of two (2) years
following termination of employment stated at the beginning of this paragraph 4,
during which the agreements and covenants of Employee made in this paragraph 4
shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this paragraph 4.
5. PLACE OF PERFORMANCE.
(a) Employee understands that she shall relocate from Employee's
present residence to another geographic location near TSI's headquarters in Palm
Beach in order to more efficiently carry out Employee's duties and
responsibilities under this Agreement; provided that Employee may commute from
her existing residence to TSI's headquarters during the initial year of the Term
hereof (as defined below). TSI will, for the initial year of the Term hereof,
pay all actual reasonable relocation costs to move Employee, Employee's
immediate family and their personal property and effects. Such costs may
include, but are not limited to, moving expenses, air fare, temporary lodging
expenses prior to moving into a new permanent residence and other associated
expenses; provided, the maximum total amount to be paid by TSI hereunder shall
be $20,000.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 6(c).
6. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the date hereof and continue
for three (3) years, and, unless terminated sooner as herein provided, shall
continue thereafter on a year-to-year basis on the same terms and conditions
contained herein in effect as of the time of renewal. As used herein, the word
"Term" shall mean (i) during the three year period referred to in the preceding
sentence, such three year period, and (ii) during any one year renewal pursuant
to the terms hereof, such one year period. This Agreement and Employee's
employment may be terminated in any one of the following ways:
(a) Death. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
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(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, as reasonably determined by Employee's physician, Employee
shall have been absent from Employee's full-time duties hereunder for four (4)
consecutive months, then thirty (30) days after receiving written notice (which
notice may occur before or after the end of such four (4) month period, but
which shall not be effective earlier than the last day of such four (4) month
period), TSI may terminate Employee's employment hereunder provided Employee is
unable to resume Employee's full-time duties at the conclusion of such notice
period. Also, Employee may terminate Employee's employment hereunder if her
health should become impaired to an extent that makes the continued performance
of Employee's duties hereunder hazardous to Employee's physical or mental health
or life, provided that Employee shall have furnished TSI with a written
statement from a qualified doctor to such effect and provided, further, that, at
TSI's request made within thirty (30) days of the date of such written
statement, Employee shall submit to an examination by a doctor selected by TSI
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated by either party as a result of Employee's disability,
Employee shall receive from TSI, in a lump-sum payment due within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Term of this Agreement or for
one (1) year, whichever amount is greater.
(c) Good Cause. TSI may terminate the Agreement ten (10) days after
delivery of written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of TSI which materially and adversely affects the operations or
reputation of TSI; (4) Employee's conviction of a felony crime; or (5) chronic
alcohol abuse or illegal drug abuse by Employee. In the event of a termination
for good cause, as enumerated above, Employee shall have no right to any
severance compensation.
(d) Without Cause. At any time after the commencement of employment,
Employee may, without cause, terminate this Agreement and Employee's employment,
effective thirty (30) days after written notice is provided to TSI. Employee may
only be terminated without cause by TSI during the Term hereof if such
termination is approved by at least two-thirds of the members of the Board.
Should Employee's employment be terminated by TSI without cause during the Term,
Employee shall receive from TSI, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for whatever time
period is remaining under the Term of this Agreement or for one (1) year,
whichever amount is greater, plus any accrued salary and declared but unpaid
bonus and reimbursement of expenses. Should Employee's employment be terminated
by TSI without cause at any time after the Term, Employee shall receive from
TSI, in a lump-sum payment due on the effective date of termination, the base
salary rate then in effect equivalent to one (1) year of salary, plus any
accrued salary and declared but unpaid bonus and reimbursement of expenses.
Further, any termination without cause by TSI shall operate to shorten the
period set forth in paragraph 4(a) and during which the terms of paragraph 4
apply to one (1) year from the date of termination of employment. If Employee
resigns or otherwise terminates Employee's employment without cause pursuant to
this paragraph 6(d), Employee shall receive no severance compensation.
(e) Change in Control of TSI. In the event of a "Change in Control of
TSI" (as defined below) during the Term, refer to paragraph 13 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee
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only to the extent and in the manner expressly provided above or in paragraph 13
hereof. All other rights and obligations of TSI and Employee under this
Agreement shall cease as of the effective date of termination, except that TSI's
obligations under paragraph 10 hereof and Employee's obligations under
paragraphs 4, 7, 8, 9 and 11 hereof shall survive such termination in accordance
with their terms.
If termination of Employee's employment arises out of TSI's failure to
pay Employee on a timely basis the amounts to which she is entitled under this
Agreement or as a result of any other material breach of this Agreement by TSI
(including but not limited to a material reduction in Employee's
responsibilities hereunder), as mutually agreed to by Employee and TSI or as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 17 below, such termination shall be deemed a termination without
cause, and TSI shall pay to Employee severance compensation pursuant to the
applicable provisions of paragraph 6(d) and all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce Employee's rights hereunder. Further, none of the provisions of
paragraph 4 hereof shall apply in the event this Agreement is terminated as a
result of a breach by TSI.
In the event of any termination of Employee's employment for any reason
provided above, Employee shall be under no obligation to seek other employment
and there shall be no offset against any amounts due to Employee under this
Agreement on account of any remuneration attributable to any subsequent
employment that Employee may obtain. Any amounts due under this paragraph 6 are
in the nature of severance payments, or liquidated damages, or both, and are not
in the nature of a penalty.
7. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of TSI, or its representatives, vendors or customers
which pertain to the business of TSI shall be and remain the property of TSI,
and be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials, and other
similar data pertaining to the business, activities or future plans of TSI which
is collected by Employee shall be delivered promptly to TSI without request by
it upon termination of Employee's employment.
8. INVENTIONS.
Employee shall disclose promptly to TSI any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment, and which are directly
related to the business or activities of TSI and which Employee conceives as a
result of Employee's employment by TSI. Employee hereby assigns and agrees to
assign all of Employee's interests therein to TSI or its nominee. Whenever
requested to do so by TSI, Employee shall execute any and all applications,
assignments or other instruments that TSI shall deem necessary to apply for and
obtain Letters Patent of the United States or any foreign country or to
otherwise protect TSI's interest therein.
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9. TRADE SECRETS.
Employee agrees that she will not, other than as required by court
order, during or after the Term of this Agreement with TSI, disclose the
confidential terms of TSI's or its subsidiaries' relationships or agreements
with its significant vendors or customers or any other significant and material
trade secret of TSI or its subsidiaries, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
10. INDEMNIFICATION.
In connection with any threatened, pending or completed claim, demand,
liability, action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by TSI against Employee), by reason of
the fact that Employee is or was performing services (including an act, omission
or failure to act) under this Agreement, TSI shall indemnify and hold harmless,
to the maximum extent permitted by law, Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and TSI are made a party to the same third-party action,
complaint, suit or proceeding, TSI agrees to engage competent legal
representation reasonably acceptable to Employee, and Employee agrees to use the
same representation, provided that if counsel selected by TSI shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and TSI shall pay all attorneys' fees of
such separate counsel. Further, while Employee is expected at all times to use
Employee's best efforts to faithfully discharge her duties under this Agreement,
Employee cannot be held liable to TSI for errors or omissions made in good faith
where Employee has not exhibited gross, willful or wanton negligence or
misconduct or performed criminal and fraudulent acts which materially damage the
business of TSI. TSI shall pay, on behalf of Employee upon presentation of
proper invoices, all fees, costs and expenses (including attorneys' fees)
incurred in connection with any matter referenced in this paragraph 10.
11. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to TSI that the execution of
this Agreement by Employee and her employment by TSI and the performance of
Employee's duties hereunder will not violate or be a breach of any agreement
with a former employer, client or any other person or entity. Further, Employee
agrees to indemnify TSI for any claim, including but not limited to attorneys'
fees and expenses of investigation, by any such third party that such third
party may now have or may hereafter come to have against TSI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
12. ASSIGNMENT; BINDING EFFECT.
Employee understands that she has been selected for employment by TSI
on the basis of Employee's personal qualifications, experience and skills.
Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of paragraph 13 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
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13. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that TSI may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of TSI hereunder or that TSI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this paragraph 13 shall be applicable.
(b) In the event of a pending Change in Control wherein TSI and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of TSI's business
and/or assets that such successor is willing as of the closing to assume and
agree to perform TSI's obligations under this Agreement in the same manner and
to the same extent that TSI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by TSI without
cause during the Term and the applicable portions of paragraph 6(d) will apply;
however, under such circumstances, the amount of the lump-sum severance payment
due to Employee shall be triple the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall not apply.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to TSI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of paragraph 6(d)
will apply as though TSI had terminated the Agreement without cause during the
Term; however, under such circumstances, the amount of the lump-sum severance
payment due to Employee shall be double the amount calculated under the terms of
paragraph 6(d) and the noncompetition provisions of paragraph 4 shall all apply
for a period of two (2) years from the effective date of termination.
(d) For purposes of applying paragraph 6 hereof under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by TSI at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of
Employee's vested options to purchase TSI Common Stock, including any options
with accelerated vesting under the provisions of TSI's 1997 Long-Term Incentive
Plan, such that Employee may convert the options to shares of TSI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if:
(i) any person or entity, or group of persons or entities
acting together, other than TSI or an employee benefit plan of TSI,
acquires directly or indirectly the Beneficial Ownership (as defined in
Section 13(d) of the Securities Exchange Act of 1934, as amended) of
any voting security of TSI and immediately after such acquisition such
person, entity or group is, directly or indirectly, the Beneficial
Owner of voting securities representing 33% or more of the total voting
power of all of the then-outstanding voting securities of TSI and has a
larger percentage of voting securities of TSI than any other person,
entity or group holding voting securities of TSI, unless the
transaction pursuant to which such acquisition is made is approved by
at least two-thirds (2/3) of the Board; or
(ii) the following individuals no longer constitute a majority
of the members of the Board: (A) the individuals who, as of the closing
date of TSI's initial public offering, constitute the Board (the
"Original Directors"); (B) the individuals who thereafter are elected
to the Board and whose election, or nomination for election, to the
Board was approved by a vote of at least two-thirds
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(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) the individuals who are elected to the Board and
whose election, or nomination for election, to the Board was approved
by a vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election); or
(iii) the stockholders of TSI shall approve a merger,
consolidation, recapitalization or reorganization of TSI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least 75% of the total
voting power represented by the voting securities of the surviving
entity outstanding immediately after such transaction being
Beneficially Owned by at least 75% of the holders of outstanding voting
securities of TSI immediately prior to the transaction, with the voting
power of each such continuing holder relative to other such continuing
holders not substantially altered in the transaction; or
(iv) the stockholders of TSI shall approve a plan of complete
liquidation of TSI or an agreement for the sale or disposition by TSI
of all or a substantial portion of TSI's assets (i.e., 50% or more of
the total assets of TSI).
(f) Employee must be notified in writing by TSI at any time that TSI or
any member of its Board anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by TSI or its successor, on a grossed
up basis, for any excise taxes that Employee incurs under Section 4999 of the
Internal Revenue Code of 1986, as a result of any Change in Control. Such amount
will be due and payable by TSI or its successor within ten (10) days after
Employee delivers a written request for reimbursement accompanied by a copy of
Employee's tax return(s) showing the excise tax actually incurred by Employee.
14. COMPLETE AGREEMENT.
If the IPO does not occur, this Agreement is not a promise of future
employment. This Agreement supersedes any other agreements or understandings,
written or oral, between TSI and Employee, and Employee has no oral
representations, understandings or agreements with TSI or any of its officers,
directors or representatives covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between TSI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of TSI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
15. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To TSI: Travel Services International, Inc.
c/o Alpine Consolidated, LLC
4701 Sangamore Road, P15
Bethesda, MD 20816
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To Employee: Maryann Bastnagel
3 Bloomingdale Court
Bethesda, Maryland 20852
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 15.
16. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative, the
other portions of this Agreement shall be deemed valid and operative and, so far
as is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
17. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in the community where the corporate
headquarters of TSI is located on the Effective Date, in accordance with the
rules of the American Arbitration Association then in effect. The arbitrators
shall not have the authority to add to, detract from or modify any provision
hereof nor to award punitive damages to any injured party. The arbitrators shall
have the authority to order back-pay, severance compensation, vesting of options
(or cash compensation in lieu of vesting of options), reimbursement of costs,
including those incurred to enforce this Agreement, and interest thereon in the
event the arbitrators determine that Employee was terminated without disability
or good cause, as defined in paragraphs 6(b) and 6(c) hereof, respectively, or
that TSI has otherwise materially breached this Agreement. A decision by a
majority of the arbitration panel shall be final and binding. Judgment may be
entered on the arbitrators' award in any court having jurisdiction. The direct
expense of any arbitration proceeding shall be borne by TSI.
18. GOVERNING LAW.
This Agreement shall in all respects be construed according to the laws
of the State of Delaware without regard to the conflicts of laws principles of
such state.
19. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
TRAVEL SERVICES INTERNATIONAL, INC.
By:/s/ Elan Blutinger
--------------------------------
Name: Elan Blutinger
------------------------------
Title: President
-----------------------------
/s/ Maryann Bastnagel
------------------------------------
Maryann Bastnagel
EXHIBIT 10.8
U.S. $20,000,000
CREDIT AGREEMENT
dated as of October 15, 1997
by and between
TRAVEL SERVICES INTERNATIONAL, INC.,
as Borrower
and
NATIONSBANK, N.A.,
as Lender
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions ......................................1
SECTION 1.02. General .........................................19
ARTICLE II
LOANS
SECTION 2.01. Revolving Credit Facility .......................20
SECTION 2.02. Term Loan .......................................21
SECTION 2.03. Interest on Loans ...............................21
SECTION 2.04. Unavailability of Certain Loans/Funding Losses ..21
SECTION 2.05. Voluntary Reduction of Revolving Commitment;
Funding Losses...................................22
SECTION 2.06. Repayment of Loans ..............................23
SECTION 2.07. Notes ...........................................23
ARTICLE III
OTHER LOAN AND PAYMENT PROVISIONS
SECTION 3.01. Interest on Overdue Payments ....................23
SECTION 3.02. Computations ....................................24
SECTION 3.03. Usury ...........................................24
SECTION 3.04. Payments ........................................24
SECTION 3.05. Insufficient Funds ..............................24
SECTION 3.06. Fees ............................................25
SECTION 3.07. Increased Costs .................................25
SECTION 3.08. Statements of Account ...........................26
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. Conditions Precedent to All Loans ...............26
SECTION 4.02. Conditions Precedent to Term Loan ...............29
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PAGE
SECTION 4.03. Conditions Precedent to All Loans ................30
SECTION 4.04. Conditions as Covenants ..........................31
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties ...................31
SECTION 5.02. Survival of Representations and Warranties, Etc ..36
ARTICLE VI
AFFIRMATIVE COVENANTS
SECTION 6.01. Preservation of Existence and Similar Matters ....37
SECTION 6.02. Compliance with Applicable Law ...................37
SECTION 6.03. Maintenance of Property ..........................37
SECTION 6.04. Conduct of Business ..............................37
SECTION 6.05. Insurance ........................................38
SECTION 6.06. Payment of Taxes and Claims ......................38
SECTION 6.07. Visits and Inspections ...........................38
SECTION 6.08. Use of Proceeds ..................................39
SECTION 6.09. Additional Guarantor/Collateral ..................39
SECTION 6.10. Treasury Contracts ...............................39
ARTICLE VII
INFORMATION
SECTION 7.01. Quarterly Financial Statements ...................40
SECTION 7.02. Year-End Statements ..............................40
SECTION 7.03. Projections ......................................40
SECTION 7.04. Accounts/Inventory Certificate ...................40
SECTION 7.05. Collateral Value Report ..........................41
SECTION 7.06. Appraisals .......................................41
SECTION 7.07. Copies of Certificates and Other Reports .........41
SECTION 7.08. Notice of Litigation and Other Matters ...........42
SECTION 7.09. ERISA ............................................42
ii
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PAGE
ARTICLE VIII
NEGATIVE COVENANTS
SECTION 8.01. Financial Covenants .............................43
SECTION 8.02. Indebtedness for Money Borrowed .................43
SECTION 8.03. Guaranties ......................................44
SECTION 8.04. Investments .....................................44
SECTION 8.05. Liens ...........................................44
SECTION 8.06. Plans ...........................................44
SECTION 8.07. Loans ...........................................44
SECTION 8.08. Certain Agreements ..............................44
SECTION 8.09. Transactions with Affiliates ....................45
SECTION 8.10. Merger, Consolidation and Other Arrangements ....45
SECTION 8.11. No Sale of Assets ...............................45
SECTION 8.12. Sale or Discount of Receivables .................45
SECTION8.13. Dividend Limitation .............................45
SECTION8.14. CapitalExpenditures .............................46
ARTICLE IX
DEFAULT
SECTION 9.01. Events of Default ...............................46
SECTION 9.02. Remedies ........................................49
SECTION 9.03. Rights Cumulative ...............................50
ARTICLE X
MISCELLANEOUS
SECTION 10.01. Notices ........................................50
SECTION 10.02. Expenses .......................................51
SECTION 10.03. Stamp, Intangible and Recording Taxes ..........52
SECTION 10.04. Set-off ........................................53
SECTION 10.05. GOVERNING LAW; ARBITRATION/JURISDICTION ........53
SECTION 10.06. Assignability ..................................54
SECTION 10.07. Amendments .....................................55
SECTION 10.08. Nonliability of the Lender .....................56
SECTION 10.09. Confidential Information .......................56
SECTION 10.10. Indemnification ................................56
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PAGE
SECTION 10.11. Survival........................................57
SECTION 10.12. Titles and Captions.............................57
SECTION 10.13. Severability of Provisions .....................57
SECTION 10.14. Counterparts ...................................57
ANNEX I Lending Office
Schedule 4.01(e) UCC-3 Termination Statements
Schedule 4.01(f) Real Property
Schedule 5.01(b) Corporate Structure
Schedule 5.01(g) Existing Indebtedness for Money Borrowed,
Guaranties, Existing Letters of
Credit and Acceptances and Existing Liens
Schedule 5.01(h) Litigation Schedule
Schedule 5.01(n) Environmental Schedule
Schedule 5.01(o) Intellectual Property Schedule
Schedule 5.01(q) Bank Accounts Schedule
Schedule 6.08 Use of Proceeds to Retire Obligations
Schedule 8.09 Excluded Transactions
Exhibit A Form of Notice of Borrowing
Exhibit B-1 Form of Revolving Note
Exhibit B-2 Form of Term Note
Exhibit C Form of Security Agreement
Exhibit D Form of Trademark Security Agreement
Exhibit E Form of Pledge Agreement
Exhibit F Form of Membership Pledge Agreement
Exhibit G Form of Subsidiary Guaranty
Exhibit H Form of Florida Mortgage
Exhibit I Form of Compliance Certificate
Exhibit J Form of Opinion of Counsel for the
Loan Parties
iv
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THIS CREDIT AGREEMENT, dated as of October 15, 1997, by and between
TRAVEL SERVICES INTERNATIONAL, INC., a Delaware corporation (the "BORROWER") and
NATIONSBANK, N.A. (the "LENDER").
WHEREAS, the Lender desires to make available to the Borrower the
respective credit facilities provided for herein on the terms and conditions
contained herein.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by the parties hereto, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. DEFINITIONS. In addition to terms defined elsewhere
herein, the following terms shall have the following meanings for the purposes
of this Agreement:
"ACCOUNT" shall have the meaning set forth in the Security
Agreement.
"ACQUISITION" means any transaction, or any series of related
transactions, by which the Borrower and/or any of its Subsidiaries
directly or indirectly (a) acquires any ongoing business or all or
substantially all of the assets of any Person or division thereof,
whether through purchase of assets, merger or otherwise, (b) acquires
(in one transaction or as the most recent transaction in a series of
transactions) control of at least a majority in ordinary voting power
of the securities of a Person which have ordinary voting power for the
election of directors or (c) otherwise acquires control of a more than
5% ownership interest in any such Person.
"ADDITIONAL DEBTOR" shall have the meaning set forth in the
Security Agreement.
"ADDITIONAL GUARANTOR" shall have the meaning set forth in the
Subsidiary Guaranty.
"ADDITIONAL LOAN PARTY" means each Subsidiary as shall from
time to time become an Additional Guarantor under the Subsidiary
Guaranty and an Additional Debtor under the Security Agreement in
accordance with Section 6.09.
"ADJUSTED EURODOLLAR RATE" means, with respect to each
Interest Period for any Eurodollar Rate Loan, the rate obtained by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a
percentage equal to 1 MINUS the then stated maximum rate (stated as a
decimal) of all reserves, if any, required to be maintained against
"Eurocurrency liabilities" as specified in Regulation D of the Board of
Governors of the Federal Reserve
<PAGE>
System (or any successor thereto) (or against any other category of
liabilities which includes deposits by reference to which the interest
rate on Eurodollar Loans is determined or any category of extensions of
credit or other assets which includes loans by a nonUnited States
office of any Lender to United States residents).
"AFFILIATE" means, with respect to any Person, any entity
which directly or indirectly controls, is controlled by, or is under
common control with, such Person or any Subsidiary of such Person or
any Person who is a director, officer or partner of such Person or any
Subsidiary of such Person and, with respect to each Loan Party, shall
include all other Loan Parties. For purposes of this definition,
"control" shall mean the possession, directly or indirectly, of the
power to (a) vote ten percent (10%) or more of the securities having
ordinary voting power for the election of directors of such Person or
(b) direct or cause the direction of management and policies of a
business, whether through the ownership of voting securities, by
contract or otherwise and either alone or in conjunction with others or
any group.
"AGREEMENT" means this Credit Agreement as it may be amended,
restated, modified or supplemented from time to time in accordance with
its terms.
"AGREEMENT DATE" means the date as of which this Agreement is
dated.
"APPLICABLE LAW" means all applicable provisions of
constitutions, statutes, rules, regulations and orders of all
governmental bodies and all applicable orders and decrees of all
courts, tribunals and arbitrators.
"BORROWER" has the meaning set forth in the introductory
paragraph hereof and shall include the Borrower's successors and
permitted assigns.
"BORROWING" means a borrowing by the Borrower of Revolving
Loans pursuant to Section 2.01 hereof or the Term Loan made pursuant to
Section 2.02 hereof.
"BUSINESS DAY" means any day other than a Saturday, Sunday or
other day on which banks in Charlotte, North Carolina or West Palm
Beach, Florida are authorized or required to close.
"CAPITAL EXPENDITURES" means, with respect to any Person, all
expenditures made and liabilities incurred for the acquisition of
assets which are not, in accordance with GAAP, treated as expense items
for such Person in the year made or incurred or as a prepaid expense
applicable to a future year or years, and shall include all Capitalized
Lease Obligations, PROVIDED, that, the computation of Capital
Expenditures of the Borrower and its Subsidiaries made at any time
prior to and including the fiscal quarter ending on September 30, 1997
shall be on a Pro Forma Basis.
2
<PAGE>
"CAPITALIZED LEASE OBLIGATION" of any Person means
Indebtedness represented by obligations under a lease that is required
to be capitalized for financial reporting purposes in accordance with
GAAP, and the amount of such Indebtedness shall be the amount accounted
for with respect to such obligations determined in accordance with such
principles.
"CHANGE OF CONTROL" means any of the following events or
circumstances:
(i) if (A) any person (as such term is used in
section 13(d) and section 14(d)(2) of the Exchange Act as in
effect on the date hereof) or related persons constituting a
group (as such term is used in Rule 13d-5 under the Exchange
Act), other than the Founding Members, become the "beneficial
owners" (as such term is used in Rule 13d-3 under the Exchange
Act as in effect on the date hereof), directly or indirectly,
of more than 10% of the total voting power of all classes then
outstanding of the Borrower's voting stock and (B) individuals
who, at the beginning of any period of 13 consecutive months,
constitute the Borrower's board of directors (together with
any new director whose election by the Borrower's board of
directors or whose nomination for election by the Borrower's
stockholders was approved by a vote of at least two-thirds of
the directors then still in office who either were directors
at the beginning of such period or whose election or
nomination for election was previously so approved) cease for
any reason (other than death or disability) to constitute a
majority of the Borrower's board of directors then in office
as a result of the actions of such beneficial owners;
(ii) individuals who, at the beginning of any period
of 13 consecutive months, constitute the Borrower's board of
directors (together with any new director whose election by
the Borrower's board of directors or whose nomination for
election by the Borrower's stockholders was approved by a vote
of at least two-thirds of the directors then still in office
who either were directors at the beginning of such period or
whose election or nomination for election was previously so
approved) cease for any reason (other than death or
disability) to constitute a majority of the Borrower's board
of directors then in office; or
(iii) the failure of the majority of the Founding
Members to be entitled, directly or indirectly, whether
through beneficial or record ownership of stock, contract or
otherwise, to direct or cause the direction of the management
and policies of the Borrower; or
(iv) the failure of the majority of the Founding
Members to be entitled, directly or indirectly, whether
through beneficial or record ownership of stock, contract or
otherwise, to elect a majority of the board of directors of
the Borrower.
3
<PAGE>
All calculations contemplated in this definition involving the capital
stock of any Person, shall be made with the assumption that all
convertible securities of such Person then outstanding and all
securities issuable upon the exercise of any warrants, options and
other rights outstanding at such time were converted at such time and
that all options, warrants and similar rights to acquire shares of
capital stock of such Person were exercised at such time.
"CLOSING DATE" means October 15, 1997.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COLLATERAL" means any collateral security pledged by any Loan
Party to secure the obligations of the Borrower hereunder or under any
other Loan Document or the obligations of such Loan Party under the
Loan Documents to which it is a party and includes, without limitation,
all "COLLATERAL", as defined in the Security Agreement.
"COMMITMENT" means the Lender's obligation to make the
Revolving Loans and the Term Loan hereunder.
"COMPLIANCE CERTIFICATE" has the meaning set forth in Section
7.07 hereof.
"CONSOLIDATED" means the consolidated financial information of
the Borrower and its Subsidiaries under GAAP consistently applied.
"CONSOLIDATED ASSETS" means the assets of the Borrower and its
Subsidiaries, as determined in accordance with GAAP, PROVIDED, that,
such determination for any period prior to and including the fiscal
quarter ending on September 30, 1997 shall be on a Pro Forma Basis.
"CONSOLIDATED CAPITALIZATION" shall mean, at any time, the sum
of (i) Indebtedness for Money Borrowed on a Consolidated basis at such
time PLUS (ii) Consolidated Net Worth at such time.
"CONSOLIDATED INCOME AVAILABLE FOR INTEREST CHARGES" means,
with reference to any period, Consolidated Net Income for such period
plus all amounts deducted in the computation thereof on account of (a)
Interest Charges and (b) taxes imposed on or measured by income or
excess profits, PROVIDED, that, such determination for any period prior
to and including the fiscal quarter ending on September 30, 1997 shall
be on a Pro Forma Basis.
"CONSOLIDATED NET INCOME" means, with reference to any period,
the net income (or loss) of the Borrower and its Subsidiaries for such
period (taken as a cumulative whole), as determined in accordance with
GAAP, after eliminating all offsetting debits and
4
<PAGE>
credits between the Borrower and its Subsidiaries and all other items
required to be eliminated in the course of the preparation of
consolidated financial statements of the Borrower and its Subsidiaries
in accordance with GAAP PROVIDED, that, the computation of Consolidated
Net Income during any period prior to and including the fiscal quarter
ending on September 30, 1997 shall be on a Pro Forma Basis.
"CONSOLIDATED NET WORTH" shall mean, at any time for the
Borrower and its Subsidiaries on a Consolidated basis shareholders'
equity at such time determined in accordance with GAAP, PROVIDED, that,
such determination at any time prior to and including the fiscal
quarter ending on September 30, 1997 shall be on a Pro Forma Basis.
"CONTROL EVENT" means:
(i) the execution by the Borrower or any of its
Subsidiaries or Affiliates of any agreement or letter of
intent with respect to any proposed transaction or event or
series of transactions or events which, individually or in the
aggregate, may reasonably be expected to result in a Change in
Control;
(ii) the execution of any written agreement which,
when fully performed by the parties thereto, would result in a
Change in Control; or
(iii) the acceptance by a sufficient number of the
holders of the common stock of the Borrower of any written
offer by any person (as such term is used in section 13(d) and
section 14(d)(23) of the Exchange Act as in effect on the
Closing Date), or related persons constituting a group (as
such term is used in Rule 13d-5 under the Exchange Act as in
effect on the Closing Date) resulting in any such person or
related persons constituting a group to become the "beneficial
owners" (as such term is used in Rule 13d-3 under the Exchange
Act as in effect on the date hereof), directly or indirectly,
of more than 10% of the total voting power of all classes then
outstanding of the Borrower's voting stock.
"CURRENT ASSETS" means, as at any date of determination, the
Consolidated current assets of the Borrower and its Subsidiaries as
determined in accordance with GAAP consistently applied.
"DEFAULT" means any of the events specified in Section 9.01,
whether or not there has been satisfied any requirement for giving of
notice, lapse of time or the happening of any other condition.
"DOLLARS or "$" means the lawful currency of the United
States.
"EBITDA" means, with reference to any period, Consolidated Net
Income for such period PLUS all amounts deducted in arriving at such
Consolidated Net Income in respect
5
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of interest charges (including amortization of debt discount and
expense and imputed interest on Capitalized Lease Obligations) on
Indebtedness other than any capitalized interest PLUS all amounts
deducted in arriving at such Consolidated Net Income for taxes imposed
on, or measured by, income or excess profits PLUS all amounts of cash
expended by Borrower pursuant to Section 8.13 (c) or (d) PLUS all
amounts deducted in arriving at such Consolidated Net Income for
depreciation and amortization expense of assets in accordance with
GAAP, PROVIDED, that, the computation of EBITDA during any period prior
to and including the fiscal quarter ending on September 30, 1997 shall
be on a Pro Forma Basis.
"EFFECTIVE DATE" means the later of:
(a) the Agreement Date; and
(b) the date on which all of the conditions precedent
set forth in Section 4.01 hereof shall have been fulfilled or
waived in writing by the Lender.
"ENVIRONMENTAL LAWS" means any Applicable Law relating to
environmental protection including, without limitation, the following:
Clean Air Act, 42 U.S.C. Section 7401 ET SEQ; Federal Water Pollution
Control Act, 33 U.S.C. Section 1251 ET SEQ.; Solid Waste Disposal Act,
42 U.S.C. Section 6901 ET SEQ.; Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Section 9601 ET SEQ.;
National Environmental Policy Act, 42 U.S.C. ss. 4321 ET SEQ.;
regulations of the Environmental Protection Agency and any applicable
rule of common law and any judicial interpretation thereof relating
primarily to the environment or Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of
1974, as in effect from time to time.
"ERISA AFFILIATE" means any corporation which is a member of
the same controlled group of corporations as the Borrower within the
meaning of section 414(b) of the Code, or any trade or business which
is under common control with the Borrower within the meaning of section
414(c) of the Code.
"EURODOLLAR BUSINESS DAY" means any day on which banks are
scheduled to be open for business and quoting interest rates for Dollar
deposits on the London interbank market and which is also a Business
Day.
"EURODOLLAR RATE" means, with respect to any Interest Period
for Eurodollar Rate Loans, the offered rate in the London interbank
market for deposits in Dollars of amounts equal or comparable to the
principal amount of such Eurodollar Rate Loan offered for a term
comparable to such Interest Period, as currently shown on the Reuters
Screen LIBO page as of 11:00 a.m., GMT, two Eurodollar Business Days
prior to the first day of such
6
<PAGE>
Interest Period; PROVIDED, HOWEVER, that (a) if more than one offered
rate as described above appears on the Reuters Screen LIBO page, the
rate used to determine the Eurodollar Rate will be the consensus rate,
if any, shown on such LIBO page, and if no consensus rate is available,
the rate used to determine the Eurodollar Rate will be the arithmetic
average (rounded upward, if necessary, to the next higher 1/10 of 1%)
of such offered rates, or (b) if no such offered rates appear, the rate
used for such Interest Period will be the arithmetic average (rounded
upward, if necessary, to the next higher 1/10 of 1%) of rates quoted by
the Lender at approximately 10:00 a.m., New York time, two Eurodollar
Business Days prior to the first day of such Interest Period for
deposits in Dollars offered to leading European banks for a period
comparable to such Interest Period in an amount comparable to the
principal amount of such Eurodollar Rate Loans. If the Lender ceases to
use the Reuters Screen LIBO page for determining interest rates based
on eurodollar deposit rates, a comparable internationally recognized
interest rate reporting service shall be used to determine such offered
rates.
"EURODOLLAR RATE LOAN" means the Term Loan or a Revolving Loan
that bears interest based upon the Eurodollar Rate.
"EURODOLLAR RATE MARGIN" means, on the date of determination:
(a) 2.00 percent, if for the Preceding Period, the
ratio of Indebtedness for Money Borrowed to EBITDA is equal to
or less than 3.25 to 1.00 and greater than 2.5 to 1.0;
(b) 1.75 percent, if for the Preceding Period, the
ratio of Indebtedness for Money Borrowed to EBITDA is equal to
or less than 2.50 to 1.0 and greater than 2.0 to 1.0;
(c) 1.50 percent, if for the Preceding Period, the
ratio of Indebtedness for Money Borrowed to EBITDA is equal to
or less than 2.0 to 1.0 and greater than 1.5 to 1.0; and
(d) 1.25 percent, if for the Preceding Period, the
ratio of Indebtedness for Money Borrowed to EBITDA is equal to
or less than 1.5 to 1.0.
Each change in the applicable Eurodollar Rate Margin will be
effective from the date of delivery of the financial statements and the
certificate described in Sections 7.01 and 7.07(a), respectively.
Notwithstanding the foregoing, at any time during which the Borrower
has failed to deliver the financial statements or the certificate
described in Sections 7.01 and 7.07(a), respectively, with respect to a
fiscal quarter in accordance with the provisions thereof, or at any
time that an Event of Default shall have occurred and shall be
continuing, the Eurodollar Rate Margin shall be reset, if necessary, to
be 2.00
7
<PAGE>
percent until such time as the Borrower shall deliver such financial
statements and certificate or such Event of Default shall be cured or
waived.
"EVENT OF DEFAULT" means any of the events specified in
Section 9.01, provided that any requirement for notice or lapse of time
or any other condition has been satisfied.
"EXISTING DEBT" shall have the meaning set forth in Section
6.08.
"FEDERAL FUNDS RATE" means, for any period, a fluctuating
interest rate per annum equal, for each day during such period, to the
weighted average of the rates on overnight Federal Funds transactions
with members of the Federal Reserve System arranged by Federal Funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Lender from three Federal Funds brokers of
recognized standing selected by it.
"FEES" means the fees and commissions provided for or referred
to in Section 3.06 and any other fees payable by the Borrower hereunder
or under any other Loan Document.
"FINANCING STATEMENTS" means any and all financing statements
executed and delivered by or on behalf of any Loan Party in connection
with the perfection of the Security Interest, together with any
amendments thereto and any continuations thereof.
"FLORIDA MORTGAGE" means that certain Deed to Secure Debt, in
substantially the form of Exhibit H hereto, covering the property of
Cruises Only, LLC located in Orlando, Florida and to be executed by
Cruises Only, LLC and delivered to Lender as a condition to Lender's
obligation to make the Term Loan as provided in Section 4.02 hereof.
"FOUNDING MEMBERS" means collectively, Joseph V. Vittoria,
Robert G. Falcone, Wayne Heller, Imad Khalidi, Susan Parker, John W.
Przywara, Elan J. Blutinger, D. Fraser Bullock, Tommaso Zanzotto, Alex
Cecil, Alpine Consolidated LLC and Capstone
Partners, LLC.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America.
"GOVERNMENTAL APPROVALS" means all authorizations, consents,
approvals, licenses and exemptions of, registrations and filings with,
and reports to, all governmental bodies.
"GOVERNMENTAL AUTHORITY" means any national, state or local
government (whether domestic or foreign), any political subdivision
thereof or any other governmental, quasi-governmental, judicial, public
or statutory instrumentality, authority, body, agency,
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bureau or entity (including, without limitation, the FDIC, the
Comptroller of the Currency or the Federal Reserve Board, any central
bank or any comparable authority or the Securities and Exchange
Commission) or any arbitrator with authority to bind a party at law.
"GUARANTY", "GUARANTEED" or to "GUARANTEE" as applied to any
obligation means and includes
(a) a guaranty (other than by endorsement of
negotiable instruments for collection in the ordinary course
of business), directly or indirectly, in any manner, of any
part or all of such obligation, or
(b) an agreement, direct or indirect, contingent or
otherwise, and whether or not constituting a guaranty, the
practical effect of which is to assure the payment or
performance (or payment of damages in the event of
nonperformance) of any part or all of such obligation whether
by
(i) the purchase of securities or
obligations,
(ii) the purchase, sale or lease of property
or the purchase or sale of services primarily for the
purpose of enabling the obligor with respect to such
obligation to make any payment or performance (or
payment of damages in the event of nonperformance) of
or on account of any part or all of such obligation,
or to assure the owner of such obligation against
loss,
(iii) repayment of amounts drawn down by
beneficiaries of letters of credit, or
(iv) the supplying of funds to or investing
in a Person on account of all or any part of such
Person's obligation under a Guaranty of any
obligation or indemnifying or holding harmless, in
any way, such Person against any part or all of such
obligation.
"GUARANTY SUPPLEMENT" shall have the meaning set forth in the
Subsidiary Guaranty.
"HAZARDOUS MATERIALS" means and includes, without limitation,
(a) hazardous waste as defined in the Resource Conservation and
Recovery Act of 1976, or in any other applicable Environmental Laws,
(b) hazardous substances, as defined in the Comprehensive Environmental
Response, Compensation and Liability Act, or in any other applicable
Environmental Laws, (c) gasoline, or any other petroleum product or
by-product, (d) toxic substances, as defined in the Toxic Substances
Control Act of 1976, or
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in any other applicable Environmental Laws, (e) insecticides,
fungicides, or rodenticides, as defined in the Federal Insecticide,
Fungicide, and Rodenticide Act of 1975, or in any other applicable
Environmental Laws, or (f) any hazardous waste, hazardous substances,
hazardous materials, toxic substances or toxic pollutants, as those
terms are used or defined in the Hazardous Materials Transportation
Act, the Clean Air Act or the Clean Water Act, as each such Act,
statute or regulation may be amended from time to time.
"HOSTILE ACQUISITION" means any Acquisition involving a tender
offer or proxy contest that has not been recommended or approved by the
board of directors (or similar governing body) of the Person that is
the subject of such Acquisition prior to the first public announcement
or disclosure relating to such Acquisition.
"INDEBTEDNESS" as applied to a Person means, without
duplication, (a) all indebtedness of such Person which in accordance
with GAAP would be included in determining total liabilities as shown
on the liability side of a balance sheet of such Person as at the date
as of which Indebtedness is to be determined (other than trade payables
and accrued expenses, customer deposits, deferred revenues and deferred
taxes arising in the ordinary course of business) including, without
limitation, all Capitalized Lease Obligations of such Person and all
reimbursement obligations due or that may become due of such Person
under letters of credit and acceptances issued for its account, and (b)
all obligations of other Persons which such Person has Guaranteed.
"INITIAL PUBLIC OFFERING" means the initial public offering by
the Borrower and the related acquisitions, all as described in its
Final Prospectus, dated July 22, 1997 and filed with the Securities and
Exchange Commission.
"INTEREST CHARGES" means, with respect to any period, all
interest in respect of Indebtedness of the Borrower and its
Subsidiaries in accordance with GAAP (including imputed interest on
Capitalized Lease Obligations) deducted in determining Consolidated Net
Income for such period (eliminating all offsetting debits and credits
between the Borrower and its Subsidiaries and all other items required
to be eliminated in the course of the preparation of consolidated
financial statements of the Borrower and its Subsidiaries in accordance
with GAAP), PROVIDED, that, the calculation of Interest Charges
incurred at any time prior to and including the fiscal period ending on
September 30, 1997 shall be on a Pro Forma Basis.
"INTEREST CHARGES COVERAGE RATIO" means, at any time, the
ratio of (a) Consolidated Income Available for Interest Charges for the
Preceding Period to (b) Interest Charges for such period.
"INTEREST PERIOD" means the period (a "EURODOLLAR INTEREST
PERIOD") commencing on the date of the Borrowing of such Eurodollar
Rate Loan and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of
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each Eurodollar Interest Period shall be one month. In no event shall
an Interest Period extend beyond the Revolving Termination Date.
Whenever the last day of any Interest Period would otherwise occur on a
day other than a Business Day, the last day of such Interest Period
shall be extended to occur on the next succeeding Business Day;
PROVIDED, HOWEVER, that if such extension would cause the last day of
such Interest Period to occur in the next following calendar month, the
last day of such Interest Period shall occur on the next preceding
Business Day.
"INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as amended.
"INVENTORY" shall have the meaning set forth in the Security
Agreement.
"INVESTMENT" means the acquisition of any interest in any
Person or property, a loan or advance to any Person or other
arrangement for the purpose of providing funds or credit to any Person,
a capital contribution in or to any Person, or any other investment in
any Person or property.
"LENDER" means NationsBank, N.A. and its successors and
assigns.
"LENDING OFFICE" means, for the Lender and for each Type of
Loan, the office of the Lender specified for the Lender on Annex I
attached hereto.
"LIEN" as applied to the property of any Person means: (a) any
mortgage, deed to secure debt, deed of trust, lien, pledge, charge,
lease constituting a Capitalized Lease Obligation, conditional sale or
other title retention agreement, or other security interest, security
title or encumbrance of any kind in respect of any property of such
Person, or upon the income or profits therefrom; (b) any arrangement,
express or implied, under which any property of such Person is
transferred, sequestered or otherwise identified for the purpose of
subjecting the same to the payment of Indebtedness or performance of
any other obligation in priority to the payment of the general,
unsecured creditors of such Person; and (c) the filing of any financing
statement under the Uniform Commercial Code or its equivalent in any
jurisdiction.
"LOAN" means any Eurodollar Rate Loan or Prime Rate Loan.
"LOAN DOCUMENT" means this Agreement and, after the execution
and delivery thereof pursuant to the terms of this Agreement, the
Revolving Note, the Term Note, the Subsidiary Guaranty, each Guaranty
Supplement, the Security Agreement, each Security Agreement Supplement,
the Trademark Security Agreement, the Membership Pledge Agreement, the
Florida Mortgage and the Pledge Agreement.
"LOAN PARTY" means each of the Borrower and each of its
Material Subsidiaries.
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"MATERIALLY ADVERSE EFFECT" means a materially adverse effect
upon (a) the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower and its
Material Subsidiaries, taken as a whole, as determined by the Lender in
its sole discretion exercised in good faith or (b) any Loan Party's
ability to perform its obligations under any Loan Document to which it
is a party.
"MATERIAL SUBSIDIARY" means: (a) each of Auto Europe, LLC,
Cruises, Inc., Cruises Only, LLC, Travel 800, LLC, D-FW Tours, Inc. and
D-FW Travel Arrangements, Inc., and any successor thereto; (b) a
Subsidiary of the Borrower that (as of any date of determination), (i)
contributed at least ten percent (10%) to Consolidated Net Income as of
the most recently ended fiscal quarter, or (ii) owned assets
constituting at least ten percent (10%) of Consolidated Assets as of
the most recently ended fiscal quarter; and (c) with respect to any
Subsidiary organized or acquired subsequent to the date hereof, a
Subsidiary that as of (x) the date it becomes a Subsidiary, would have
owned (on a pro forma basis if such Subsidiary had been a Subsidiary of
the Borrower at the end of the preceding fiscal quarter) assets
constituting at least ten percent (10%) of Consolidated Assets at the
end of the fiscal quarter immediately prior to the fiscal quarter in
which it is organized or acquired, or (y) any date of determination
thereafter, (A) contributed at least ten percent (10%) to Consolidated
Net Income as of the most recently ended fiscal quarter, or (B) owned
assets constituting at least ten percent (10%) of Consolidated Assets
as of the most recently ended fiscal quarter.
"MEMBERSHIP PLEDGE AGREEMENT" means that certain Security
Agreement and Pledge of Membership Interest, dated as of the date
hereof, between the Borrower and the Lender in substantially the form
of Exhibit F attached hereto.
"MONEY BORROWED" means, as applied to the Indebtedness of a
Person (excluding reimbursement obligations due or that may become due
of such Person under letters of credit and acceptances issued for its
account),
(a) Indebtedness for money borrowed, or
(b) Indebtedness, whether or not in any such case the
same was for money borrowed, but other than trade indebtedness
of such Person incurred in the ordinary course of business:
(i) represented by notes payable, and drafts
accepted, that represent extensions of credit,
(ii) constituting obligations evidenced by
bonds, debentures, notes or similar instruments, or
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(iii) upon which interest charges are
customarily paid or that was issued or assumed as
full or partial payment for property, or
(c) Indebtedness that constitutes a Capitalized Lease
Obligation, or
(d) Indebtedness that is such by virtue of clause (b)
of the definition of Indebtedness, but only to the extent that
the obligations Guaranteed are obligations that would
constitute Indebtedness for Money Borrowed.
"MORTGAGED PROPERTY" means that certain property described in
and covered by the Florida Mortgage.
"MULTIEMPLOYER PLAN" has the meaning set forth in Section
4001(a)(3) of ERISA, as amended or revised from time to time.
"NOTES" means, collectively, the Revolving Note and the Term
Note.
"NOTICE OF BORROWING" means a notice in the form of Exhibit A
hereto to be delivered to the Lender pursuant to Section 2.01(b)
indicating the Borrower's intention to borrow a Revolving Loan.
"PBGC" means the Pension Benefit Guaranty Corporation and any
successor agency.
"PERMITTED ACQUISITION" means an Acquisition that:
(i) the Person to be acquired is in the same or
complimentary line of business as described in Section 6.04;
and
(ii) the Person to be acquired has formally approved
such Acquisition; and
(iii) the Borrowing requested for such Acquisition
does not exceed the lesser of (x) $4,000,000 and (y) the
difference between (A) $20,000,000 and (B) the principal
amount outstanding as of the date of such Borrowing of all
other Borrowings used for Acquisitions during the Preceding
Period.
"PERMITTED ENCUMBRANCES" means, with respect to the Mortgaged
Property, such restrictions, easements, reservations and exceptions of
title as are set forth in the mortgage policy or title commitment
delivered with respect thereto pursuant to Section 4.02(c)(i) and such
restrictions as are approved by the Lender in writing.
"PERMITTED INVESTMENTS" means any one or more of the
following:
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(i) Investments in property to be used in the
ordinary course of business of the Borrower and its
Subsidiaries;
(ii) Investments in current assets arising from the
sale of goods and services in the ordinary course of business
of the Borrower and its Subsidiaries;
(iii) Investments in cash;
(iv) Investments in United States Governmental
Securities, PROVIDED that such obligations mature within one
(1) year from the date of acquisition thereof;
(v) Investments in commercial paper, banker's
acceptances and asset-backed securities rated "A-1" (or
higher) by Standard & Poor's or "P-1" (or higher) by Moody's
(or any future comparable ratings issued by Standard & Poor's
or Moody's), PROVIDED that such obligations mature within two
hundred seventy (270) days from the date of creation thereof;
(vi) Investments in time deposits and certificates of
deposit of the Lender or any commercial bank organized under
the laws of the United States, any State thereof or the
District of Columbia having, or which is the principal banking
subsidiary of a bank holding company organized under the laws
of the United States, any State thereof, or the District of
Columbia having, combined capital and surplus of at least $200
million and having a long term unsecured debt rating of at
least "A" or the equivalent thereof from Standard & Poor's or
at least "P-1" or the equivalent thereof from Moody's, with
maturities of not more than one (1) year from the date of
acquisition by such Person;
(vii) Investments in overnight repurchase agreements
and repurchase obligations with a term of not more than seven
days for underlying securities of the type described in clause
(iv) above entered into with any bank meet the qualifications
specified in clause (vi) above;
(viii) Investments in money market or mutual funds
substantially all of whose assets are comprised of securities
of the types described in clauses (iv) through (vii) above;
(ix) Investments in demand deposit accounts
maintained in the ordinary course of business;
(x) Capital Expenditures to the extent permitted by
Section 8.14;
(xi) Investments in securities of trade creditors or
customers received in any plan of reorganization or similar
arrangement on the bankruptcy or insolvency
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of such trade creditors or customers or received in settlement
of delinquent obligations of, and other disputes with,
suppliers arising in the ordinary course of business;
(xii) Investments by the Borrower and Material
Subsidiaries in Material Subsidiaries that are wholly owned
Subsidiaries of the Borrower; and
(xiii) Investments by a Subsidiary in the Borrower or
a Material Subsidiary.
"PERMITTED LIENS" means, as to any Person: (a) inchoate Liens
securing taxes, assessments and other governmental charges or levies
(excluding any Lien imposed pursuant to any of the provisions of ERISA)
or the claims of materialmen, mechanics, carriers, warehousemen or
landlords for labor, materials, supplies or rentals incurred in the
ordinary course of business; (b) Liens (excluding any Lien imposed
pursuant to any of the provisions of ERISA) consisting of deposits or
pledges made, in the ordinary course of business, in connection with,
or to secure payment of, obligations under workmen's compensation,
unemployment insurance or similar legislation, or to secure the
performance of tenders, statutory obligations, surety bonds, bids,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of
borrowed money); (c) Permitted Encumbrances and Liens consisting of
encumbrances in the nature of zoning restrictions, easements, and
rights or restrictions of record on the use of property, which do not
materially detract from the value of such property or materially impair
the use thereof in the business of such Person; (d) Liens in existence
as of the date hereof listed on Schedule 5.01(g) and not required to be
terminated pursuant to Section 4.01(e) hereof; (e) Liens in favor of
the Lender or created pursuant to the Loan Documents; (f) Purchase
Money Liens in an aggregate amount at any time less than $500,000; (g)
leases or subleases to providers of services or other equipment to be
located in the respective properties of the Borrower or any of its
Subsidiaries to other Persons in the ordinary course of business; (h)
Liens upon assets or equipment subject to Capitalized Lease
Obligations; (i) Liens arising from precautionary Uniform Commercial
Code financing statements filings in any jurisdiction regarding
operating leases; (j) Liens arising out of judgments or awards
PROVIDED, that the judgments secured shall, within 60 days after the
entry thereof, have been discharged or execution thereof stayed pending
appeal, or shall have been discharged within 60 days after the
expiration of any such stay.
"PERSON" means an individual, corporation, partnership,
association, trust or unincorporated organization, or a government or
any agency or political subdivision thereof.
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<PAGE>
"PLAN" means an employee benefit plan maintained for employees
of the Borrower or any of its Subsidiaries that is covered by Title IV
of ERISA, including such plans as may be established after the
Agreement Date.
"PLEDGE AGREEMENT" means the Pledge Agreement dated as the
date hereof between the Borrower and the Lender pursuant to which the
Borrower has pledged all of its ownership interests in each of its
Material Subsidiaries to the Lender, in substantially the form of
Exhibit E hereto.
"POST-DEFAULT RATE" means, with respect to a Loan, a rate
equal to five percent (5%) per annum above the then applicable interest
rate of such Loan.
"PRECEDING PERIOD" means, with respect to any Person, as of
the date of determination, the most recently completed four fiscal
quarters of such Person, PROVIDED, that any calculations made with
reference to a fiscal period of the Borrower or any Subsidiary thereof
ending on or prior to September 30, 1997 shall be made on a Pro-Forma
Basis.
"PREFERRED STOCK", as applied to any corporation, shall mean
shares of stock of such corporation which are entitled to preference or
priority over any other shares of such corporation in respect of the
payment of dividends or distribution of assets upon liquidation or
dissolution or both.
"PRIME RATE" means the rate of interest publicly announced by
the Lender from time to time as its "PRIME RATE" (it being understood
that the Prime Rate may not be the lowest rate the Lender charges its
customers); PROVIDED, HOWEVER, that in no event shall the Prime Rate
charged hereunder be lower than the Federal Funds Rate PLUS .5 of one
percent in effect on such date.
"PRIME RATE LOAN" means the Term Loan or a Revolving Loan that
bears interest based upon the Prime Rate.
"PRINCIPAL OFFICE" means the office of the Lender located at
1555 Palm Beach Lakes Boulevard, Suite 310, West Palm Beach, Florida
33401.
"PRO FORMA BASIS" shall mean on a pro forma basis after giving
effect to the Related Transactions prepared on a basis consistent with
the financial statements described in Section 5.01(j)(i) hereof.
"PROJECTIONS" means the Borrower's forecasted consolidated and
consolidating: (a) balance sheets; (b) profit and loss statements and
(c) cash flow statements each on a quarterly and annual basis
consistent with Borrower's (and its Subsidiaries') historical
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financial statements, together with appropriate supporting details and
a statement of underlying assumptions.
"PURCHASE MONEY LIEN" means any Lien created to secure all or
any part of the purchase price, or to secure Indebtedness incurred or
assumed to pay all or any part of the purchase price or cost of
construction, of tangible property (or any improvement thereon)
acquired or constructed by the Borrower or a Subsidiary after the
Closing Date, PROVIDED that
(i) any such Lien shall extend solely to the item or
items of such property (or improvement thereof) so acquired or
constructed and, if required by the terms of the instrument
originally creating such Lien, other property (or improvement
thereon) which is an improvement to or its acquired or
constructed property (or improvement thereof) or which is real
property being improved by such acquired or constructed
property (or improvement thereon);
(ii) the principal amount of the Indebtedness secured
by any such Lien shall at no time exceed an amount equal to
the lesser of (A) the cost to the Borrower or such Subsidiary
of the property (or improvement thereon) so acquired or
constructed and (B) the fair market value (as determined in
good faith by the board of directors of the Borrower) of such
property (or improvement thereon) at the time of such
acquisition or construction; and
(iii) any such Lien shall be created
contemporaneously with, or within 10 days after, the
acquisition or construction of such property.
"RECEIVABLES FINANCING" shall mean a transaction pursuant to
which funds are advanced to the Borrower and/or any of its Subsidiaries
in exchange for which the Borrower and/or any of its Subsidiaries shall
sell, pledge, contribute or place a Lien on any or all of its accounts
or note receivables to repay, in whole or in part, such funds.
"RELATED TRANSACTIONS" means the Initial Public Offering, the
acquisition by the Borrower, in separate combination transactions, of
all of (i) the stock of Cruises, Inc., D-FW Tours, Inc. and D-FW Travel
Arrangements, Inc., (ii) the ownership interests of Auto Europe, LLC,
Cruises Only, LLC, and Travel 800, LLC and (iii) substantially all of
the assets of Auto-Europe, Inc, Cruises Only, Inc. and 1-800-Ideas,
Inc., and the payment of all fees, costs and expenses associated with
all of the foregoing.
"REPORTABLE EVENT" has the meaning set forth in Section
4043(b) of ERISA, but shall not include a Reportable Event as to which
the provision for 30 days' notice to the PBGC is waived under
applicable regulations.
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"RESPONSIBLE OFFICER" means, with respect to any Loan Party,
its President, chief executive officer, chief operating officer, a Vice
President or chief financial officer.
"REVOLVING COMMITMENT" means Twenty Million Dollars
($20,000,000), as the same may be reduced permanently from time to time
pursuant to Section 2.05(a) hereof.
"REVOLVING CREDIT FACILITY" means the revolving loan facility
described in Section 2.01 hereof.
"REVOLVING LOAN" has the meaning set forth in Section 2.01(a)
hereof.
"REVOLVING NOTE" has the meaning set forth in Section 2.07
hereof.
"REVOLVING TERMINATION DATE" means October 15, 2000.
"SECURED OBLIGATIONS" means, individually and collectively:
(a) the Revolving Loans; (b) the Term Loan and (c) all other
indebtedness, liabilities, obligations, covenants and duties of the
Borrower owing to the Lender of every kind, nature and description,
under or in respect of this Agreement, any Note or any of the other
Loan Documents including, without limitation, the Fees, whether direct
or indirect, absolute or contingent, due or not due, contractual or
tortious, liquidated or unliquidated, and whether or not evidenced by
any note.
"SECURITY AGREEMENT" means the Security Agreement executed and
delivered by the Borrower and each of its Material Subsidiaries on the
date hereof, in favor of the Lender, in substantially the form of
Exhibit C hereto, and each other Material Subsidiary made a party
thereto by the execution and delivery of a Security Agreement
Supplement.
"SECURITY AGREEMENT SUPPLEMENT" shall have the meaning set
forth in the Security Agreement.
"SECURITY INTEREST" means the Lien of the Lender upon, and the
collateral assignment to the Lender of, the Collateral effected hereby,
by the execution and delivery of the Security Agreement, the Pledge
Agreement, the Membership Pledge Agreement and by any other Loan
Document or pursuant to the terms hereof or thereof including without
limitation any Security Agreement Supplement and the Florida Mortgage.
"SUBSIDIARY" means each of the Persons specified on Schedule
5.01(b) and any other Person of which an aggregate of 50% or more of
the voting stock of any class or classes or 50% or more of other voting
or equity interests is owned of record or beneficially by another
Person, or by one or more Subsidiaries of such other Person, or by such
other Person and one or more Subsidiaries of such Person.
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"SUBSIDIARY GUARANTY" means the Guaranty Agreement dated as of
the date hereof executed by each Material Subsidiary in favor of the
Lender, in substantially the form of Exhibit G hereto, and each other
Material Subsidiary made a party thereto by the execution and delivery
of a Guaranty Supplement.
"TERM LOAN" means the term loan made to the Borrower pursuant
to Section 2.02 hereof.
"TERM NOTE" has the meaning set forth in Section 2.07 hereof.
"TERMINATION EVENT" means (a) a Reportable Event; (b) the
filing of a notice of intent to terminate a Plan or the treatment of a
Plan amendment as a termination under Section 4041 of ERISA or (c) the
institution of proceedings to terminate a Plan by the PBGC under
Section 4042 of ERISA, or the appointment of a trustee to administer
any Plan.
"TRADEMARK SECURITY AGREEMENT" means the Collateral Assignment
and Trademark Security Agreement, executed and delivered by the
Borrower and each Material Subsidiary on the date hereof, in favor of
Lender, in substantially the form of Exhibit D hereto, and each
additional Trademark Security Agreement executed by each Additional
Loan Party pursuant to Section 6.09 hereof.
"TYPE" with respect to the Term Loan or a Revolving Loan,
refers to whether such Loan is a Eurodollar Rate Loan or a Prime Rate
Loan.
"UNFUNDED VESTED ACCRUED BENEFITS" means with respect to any
Plan at any time, the amount (if any) by which (a) the present value of
all vested nonforfeitable benefits under such Plan EXCEEDS (b) the fair
market value of all Plan assets allocable to such benefits, all
determined as of the then most recent valuation date for such Plan.
"UNIFORM COMMERCIAL CODE" or "UCC" means the Uniform
Commercial Code as in effect from time to time in the State of New
York.
SECTION 1.02. GENERAL. All terms of an accounting nature not
specifically defined herein shall have the meaning ascribed thereto by GAAP.
References in this Agreement to "Sections", "Articles", "Exhibits" and
"Schedules" are to sections, articles, Exhibits and Schedules herein and hereto
unless otherwise indicated. References in this Agreement to any document,
instrument or agreement (a) shall include all Exhibits, Schedules and other
attachments thereto, (b) shall include all documents, instruments or agreements
issued or executed in replacement thereof, and (c) shall mean such document,
instrument or agreement, or replacement or predecessor thereto, as amended,
modified or supplemented from time to time in accordance with its terms and in
effect at any given time. Wherever from the context it appears appropriate, each
term stated in either the singular or plural shall include the singular and
plural, and pronouns
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stated in the masculine, feminine or neuter gender shall include the masculine,
the feminine and the neuter. Unless explicitly set forth to the contrary, a
reference to "Subsidiary" shall mean a Subsidiary of the Borrower or a
Subsidiary of such Subsidiary and a reference to an "Affiliate" shall mean a
reference to an Affiliate of the Borrower. Unless otherwise indicated, all
references to time are references to Eastern Standard Time. Unless otherwise
indicated, all accounting terms, ratios and measurements shall be interpreted or
determined in accordance with GAAP consistently applied.
ARTICLE II
LOANS
SECTION 2.01. REVOLVING CREDIT FACILITY.
(a) REVOLVING LOANS. Subject to the terms and conditions hereof, during
the period from the Effective Date to the Revolving Termination Date, the Lender
agrees at any time and from time to time to make a revolving loan or revolving
loans (each, a "REVOLVING LOAN" and, collectively, the "REVOLVING LOANS") to the
Borrower in an aggregate principal amount at any time outstanding up to, but not
exceeding, the Revolving Commitment; PROVIDED, HOWEVER, that any given Borrowing
of Revolving Loans made pursuant to this Article II shall not exceed the
Revolving Commitment at the time of such Borrowing. Subject to the terms and
conditions of this Agreement, during the period from the Effective Date to the
Revolving Termination Date, the Borrower may borrow, repay and reborrow
Revolving Loans. All Borrowings of Revolving Loans shall be in integral
multiples of $100,000.
(b) BORROWINGS UNDER REVOLVING CREDIT FACILITY. The Borrower shall give
the Lender written notice pursuant to a Notice of Borrowing or telephonic notice
of each Borrowing which notice shall be irrevocable and effective upon receipt.
Any such telephonic notice shall be subsequently confirmed in writing by the
Borrower pursuant to a Notice of Borrowing sent to the Lender by telecopy on the
same day of such telephonic notice by a Responsible Officer of the Borrower. The
Notice of Borrowing shall specify the aggregate principal amount of the
Revolving Loan to be made by the Lender pursuant to the Notice of Borrowing and
the date of such Borrowing. Each Notice of Borrowing shall be irrevocable by and
binding on the Borrower.
(c) DISBURSEMENTS OF REVOLVING LOANS. Provided that the applicable
conditions set forth in Article IV hereof applicable for a Revolving Loan are
fulfilled and the applicable Notice of Borrowing is delivered to the Lender
before 12:00 noon (EST) on any Business Day, the Lender will make such funds
available to the Borrower at the account specified by the Borrower in such
Notice of Borrowing on the Business Day specified in such Notice of Borrowing.
Provided that the applicable conditions set forth in Article IV hereof
applicable for a Revolving Loan are fulfilled and the applicable Notice of
Borrowing is delivered to the Lender later than 12:00 noon (EST) on any Business
Day, the Lender will make such funds available to the
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Borrower at the account specified by the Borrower in such Notice of Borrowing on
the following Business Day.
SECTION 2.02. TERM LOAN. Subject to the terms and conditions of this
Agreement and in reliance upon the representations and warranties of Borrower
contained herein, the Lender agrees to lend to the Borrower on or prior to
February 15, 1998 the Term Loan (after which time the Term Loan can no longer be
requested). The aggregate amount of the Term Loan shall be equal to 75% of the
appraised value of the Mortgaged Property. The Term Loan shall be funded in one
drawing. Amounts borrowed under this Section 2.02 and repaid may not be
reborrowed.
SECTION 2.03. INTEREST ON LOANS. Subject to the provisions of Section
3.01 hereof, interest on each Eurodollar Rate Loan shall be payable on the last
day of each Interest Period with respect thereto and at maturity of such Loan
(whether by acceleration or otherwise or upon demand), at an interest rate per
annum during the Interest Period for such Loan equal to the Adjusted Eurodollar
Rate for the Interest Period in effect for such Eurodollar Rate Loan PLUS the
Eurodollar Rate Margin. The Lender upon determining the Adjusted Eurodollar Rate
for any Interest Period shall promptly notify the Borrower by telephone
(confirmed promptly in writing by facsimile transmission) or in writing by
facsimile transmission thereof and of the amount of interest which will become
payable at the end of such Interest Period. Each determination by the Lender of
an interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error. Subject to the provisions of Section 3.01 hereof,
interest on each Prime Rate Loan shall be payable on the last day of each
calendar month and at maturity of such Loan (whether by acceleration or
otherwise or upon demand), at an interest rate per annum equal to the Prime
Rate.
SECTION 2.04. UNAVAILABILITY OF CERTAIN LOANS/FUNDING LOSSES.
(a) Notwithstanding any other provision of this Article II to the
contrary:
(i) if the Lender is unable to determine (which determination
shall be conclusive and binding upon the Borrower), by reason of
circumstances affecting the interbank Eurodollar market, the Eurodollar
Rate for Eurodollar Rate Loans the Lender shall give telecopy notice
thereof to the Borrower and the right of the Borrower to select or
maintain Eurodollar Rate Loans shall be suspended until the Lender
shall notify the Borrower that the circumstances causing such
suspension no longer exists; and
(ii) if the Lender shall, at least one Business Day before the
date of any requested Borrowing notify the Borrower that the Adjusted
Eurodollar Rate comprising such Borrowing will not adequately reflect
the cost to the Lender of making or funding the Eurodollar Rate Loans,
the right of the Borrower to select Eurodollar Rate Loans shall be
suspended until the Lender notifies the Borrower that such rates in
fact reflect the cost to the Lender of making or funding such Loans.
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If either of the events specified in clauses (i) or (ii) of the preceding
sentence occurs, on the last day of the then existing Interest Period therefor,
the Loans shall convert into Prime Rate Loans. Such Loans may be re-converted
into Eurodollar Rate Loans one Business Day after Lender has notified the
Borrower that such rates reflect the cost to the Lender of making or funding
such Loans and receipt by the Lender of the written request of the Borrower to
re-convert such Loans.
(b) In the case of any Borrowing that the related Notice of Borrowing
specifies is to be comprised of Eurodollar Rate Loans, the Borrower shall
indemnify the Lender against any loss, cost or expense incurred by the Lender as
a result of any failure of the Borrower to fulfill for any reason whatsoever
including the exercise of any remedies under Section 9.02, on or before the date
for such Borrowing specified in such Notice of Borrowing, the applicable
conditions set forth in Article IV hereof or as a result of the failure of the
Borrower to borrow any such requested Eurodollar Rate Loan, including, without
limitation, any loss (including loss of anticipated profits after taking into
account any reinvestment of funds), cost or expense incurred by the Lender by
reason of the liquidation or re-employment of deposits or other funds acquired
by the Lender to fund the Eurodollar Rate Loan to be made by the Lender as part
of such Borrowing, such amount to be determined by the Lender and such
determination by the Lender shall be binding upon the Borrower, absent manifest
error. The Lender shall promptly notify the Borrower of any such amount.
SECTION 2.05. VOLUNTARY REDUCTION OF REVOLVING COMMITMENT; FUNDING
LOSSES.
(a) The Borrower shall have the right to reduce permanently the amount
of the Revolving Commitment at any time and from time to time without penalty or
premium but in no event more frequently than one time during any calendar week
upon not less than twenty-four hours prior written notice to the Lender of each
such reduction, which notice shall specify the effective date thereof and the
amount of any such reduction (which in the case of any partial reduction shall
not be less than $100,000 and integral multiples of $100,000 in excess of that
amount) and shall be irrevocable once given and effective only upon receipt by
the Lender. Notwithstanding the foregoing, in no event shall the Borrower be
permitted to reduce the Revolving Commitment below an aggregate amount equal to
the aggregate principal amount of Revolving Loans outstanding at such time. The
Revolving Commitment once reduced pursuant to this Section shall not be
increased.
(b) The Borrower may prepay any Loan at any time; PROVIDED, HOWEVER,
that in the event the Borrower prepays any Eurodollar Rate Loan prior to the end
of the applicable Interest Period therefor for any reason whatsoever including
the exercise of any remedies under Section 9.02, the Borrower shall indemnify
the Lender against any loss, cost or expense incurred by the Lender as a result
of any such prepayment including, without limitation, any loss (including loss
of anticipated profits after taking into account any reinvestment of funds),
cost or expense incurred by the Lender by reason of the liquidation or
re-employment of deposits or other funds acquired by the Lender to fund the
Eurodollar Rate Loan made by the Lender, such amount to be determined by the
Lender and such determination by the Lender shall be binding upon the
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Borrower, absent manifest error. The Lender shall promptly notify the Borrower
of any such amount. The Borrower may prepay any Prime Rate Loan at any time
without penalty or premium.
SECTION 2.06. REPAYMENT OF LOANS.
(a) REPAYMENT OF REVOLVING LOANS. The Borrower shall repay the entire
outstanding principal amount of, and all accrued but unpaid interest on, the
Revolving Loans on the Revolving Termination Date. If at any time the aggregate
principal amount of Revolving Loans outstanding at such time exceeds the
Revolving Commitment in effect at such time, the Borrower shall immediately pay
to the Lender the amount of such excess. Such payment shall be applied to pay
all amounts of principal outstanding on the Revolving Loans. In the event the
Borrower is required to pay any outstanding Eurodollar Rate Loans by reason of
this Section 2.06(a) prior to the end of the applicable Interest Period
therefor, the Borrower shall indemnify the Lender against the losses, costs and
expenses described in Section 2.05(b) hereof incurred by the Lender.
(b) REPAYMENT OF TERM LOAN. The Borrower agrees to repay the principal
amount of the Term Loan in monthly installments based on a fifteen year equal
amortization of principal, each such installment being payable on the fifth
calendar day of each calendar month, commencing on the fifth day of the month
following the advance of the Term Loan in an amount as set forth in the Term
Note, with the last such installment due and payable on October 5, 2000. Any
repayment or prepayment of the Term Loan prior to the scheduled maturity date
shall be applied in satisfaction of the required payments of principal in
inverse order of their scheduled due dates.
SECTION 2.07. NOTES. The obligation of the Borrower to repay the
Revolving Loans shall be evidenced by a promissory note (the "REVOLVING NOTE").
The Revolving Note shall be payable to the Lender, shall be in the face amount
equal to the Revolving Commitment, and shall be in substantially the form of
Exhibit B-1 hereto. The obligation of the Borrower to repay the Term Loan shall
also be evidenced by a promissory note (the "TERM NOTE"). The Term Note shall be
payable to the Lender, shall be in a face amount equal to 75% of the appraised
value of the Mortgaged Property, and shall be in substantially the form of
Exhibit B-2 hereto.
ARTICLE III
OTHER LOAN AND PAYMENT PROVISIONS
SECTION 3.01. INTEREST ON OVERDUE PAYMENTS. In the event the Borrower
shall fail to pay when due (whether at maturity, by reason of acceleration or
otherwise) any principal of, or interest on, any of the Loans or any other
amount owing hereunder or under any Note or other Loan Document when due or any
other Default or Event of Default shall have occurred and be continuing, all
Loans shall bear interest, to the extent permitted by law, at the Post-Default
Rate
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until such unpaid amount has been paid in full (whether before or after
judgment). All interest provided for in this Section shall be immediately due
and payable.
SECTION 3.02. COMPUTATIONS. Unless otherwise expressly set forth
herein, any accrued interest on any Loan and any Fees due hereunder shall be
computed on the basis of a year of 360 days and the actual number of days
elapsed.
SECTION 3.03. USURY. In no event shall the amount of interest due or
payable on the Loans exceed the maximum rate of interest allowed by Applicable
Law and, in the event any such payment is paid by the Borrower or received by
any Lender, then such excess sum shall be credited as a payment of principal,
unless the Borrower shall notify the Lender in writing that the Borrower elects
to have such excess sum returned to it forthwith. It is the express intent of
the parties hereto that the Borrower not pay and the Lender not receive,
directly or indirectly, in any manner whatsoever, interest in excess of that
which may be lawfully paid by the Borrower under Applicable Law.
SECTION 3.04. PAYMENTS. Except to the extent otherwise provided herein,
all payments of principal, interest and other amounts to be made by the Borrower
under this Agreement, the Notes or any other Loan Document shall be made in
Dollars, in immediately available funds, to the Lender at its Principal Office,
not later than 2:00 p.m. on the date on which such payment shall become due
(each such payment made after such time on such due date to be deemed to have
been made on the next succeeding Business Day) and shall be made in accordance
with the wiring instructions set forth for the Lender on Annex I attached
hereto. The parties agree that if the Borrower makes any payment due hereunder
after 2:00 p.m. but before 5:00 p.m. on the date such payment is due, such late
payment shall not constitute a Default under Section 9.01(a) hereof but shall
nevertheless be deemed to have been paid as of the next succeeding Business Day
as provided in the parenthetical phrase of the preceding sentence. The Lender
may (but shall not be obligated to) debit the amount of any such payment which
is not made by such time from any special or general deposit account of the
Borrower with the Lender (with prior notice to the Borrower, PROVIDED, that the
failure by the Lender to provide such notice shall not in any manner affect the
Lender's rights hereunder). The Borrower shall, at the time of making each
payment under this Agreement or any Note, specify to the Lender the amounts
payable by the Borrower hereunder to which such payment is to be applied and in
the event that it fails to so specify, or an Event of Default has occurred and
is continuing, the Lender may apply such payment to the Loans or any other
obligation of the Borrower under the Loan Documents in such manner as the Lender
may determine to be appropriate. If the due date of any payment under this
Agreement or any Note would otherwise fall on a day which is not a Business Day
such date shall be extended to the next succeeding Business Day and interest
shall be payable for the period of such extension.
SECTION 3.05. INSUFFICIENT FUNDS. If the Lender receives funds
insufficient to pay in full the outstanding principal of any Loans and/or
interest and/or fees and expenses due and payable on any date such amounts are
due, the Lender shall apply any such funds received by it:
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(a) FIRST, to pay all fees and expenses owing to the Lender
under or in connection with this Agreement and the other Loan
Documents;
(b) SECOND, to pay all accrued but unpaid interest on all
outstanding Loans;
(c) THIRD, to pay all amounts of principal outstanding on (i)
FIRST, the Revolving Loans and, (ii) SECOND, the Term Loan in
accordance with the second sentence of Section 2.06(b) hereof.
SECTION 3.06. FEES.
(a) FACILITY FEE. In consideration of the extension of the Term Loan
facility established hereby, the Borrower agrees to pay, on the date the Term
Loan is made, to the Lender, a facility fee equal to the Dollar amount
calculated as 5/8 of 1% of the aggregate initial principal amount of the Term
Loan.
(b) UNUSED FEE. The Borrower shall pay to the Lender a fee for the
period from and including the date of the initial Borrowing of Revolving Loans
to and excluding the Revolving Termination Date (or such earlier date upon which
the Revolving Commitment shall have been terminated) in an amount equal to the
Revolving Commitment less the sum of the average daily balance of the Revolving
Loans outstanding during the preceding fiscal quarter of the Borrower multiplied
by 1/4 of 1 percent per annum, such fee to be payable quarterly in arrears on
the last day of December following the Closing Date and the last day of each
March, June, September and December, thereafter, or on such earlier date upon
which the Revolving Commitment is terminated.
SECTION 3.07. INCREASED COSTS. The Borrower agrees that if: (a) any
change after the Agreement Date in any Applicable Law or in any request,
guideline or directive of any administrative or governmental authority (whether
or not having the force of law) or in the interpretation thereof by any court or
administrative or governmental authority charged with administration thereof,
shall either impose, affect, modify or deem applicable any reserve, special
deposit, capital maintenance or similar requirement against any Loan or impose
on the Lender any other condition regarding any Loan or (b) there shall occur
any change after the Agreement Date in the basis of taxation of payments to the
Lender of any amount owing to the Lender hereunder (except for a change in the
rate or amount of taxation on the overall net income of the Lender), and the
result of any event referred to in clause (a) or (b) above shall be to increase
the cost to the Lender of making or maintaining any Loan or to reduce the rate
of return on capital with respect to any Loan, then, upon demand by the Lender,
the Borrower shall immediately pay to the Lender additional amounts which shall
be sufficient to compensate the Lender for such increased cost, tax or reduced
rate of return, together with interest on such amount from the date five days
after the date the Borrower receives the statement(s) referred to in the next
sentence to the date the Borrower pays such increased cost, tax or reduced rate
of return in full at the Prime Rate. A statement setting forth the basis for
requesting such compensation and the method for determining
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the amount thereof, submitted by the Lender to the Borrower, shall be conclusive
absent manifest error.
SECTION 3.08. STATEMENTS OF ACCOUNT. The Lender will account to the
Borrower upon its request but not more frequently than monthly with a statement
of Loans, interest, fees, expenses, charges and any other payments made pursuant
to this Agreement and the other Loan Documents, and such account rendered by the
Lender shall be deemed final, binding and conclusive upon Borrower unless the
Lender is notified by the Borrower in writing within thirty days after the date
each account is delivered to the Borrower that the Borrower objects to the
information, calculations or items therein contained. Such notice shall only be
deemed an objection to those items specifically objected to therein. The failure
of the Lender to deliver such a statement of accounts shall not relieve or
discharge the Borrower from its obligations hereunder.
ARTICLE IV
CONDITIONS PRECEDENT
SECTION 4.01. CONDITIONS PRECEDENT TO ALL LOANS. This Agreement and the
obligation of the Lender to make the initial Revolving Loan or the Term Loan to
the Borrower in accordance with the terms hereof, are subject to the condition
precedent that the Borrower shall comply with each of the following, such
compliance shall be satisfactory to the Lender and any documents delivered to
the Lender shall be in form and substance reasonably satisfactory to the Lender:
(a) LOAN DOCUMENTS. The following documents shall have been
duly authorized, executed and delivered to the Lender by each Loan
Party a party thereto, shall be in full force and effect on the Closing
Date without any event or condition having occurred or existing which
constitutes, or with the giving of notice or lapse of time or both
would constitute, a default thereunder or breach thereof or would give
any party thereto the right to terminate any thereof:
(i) this Agreement;
(ii) the Revolving Note;
(iii) the Subsidiary Guaranty;
(iv) the Security Agreement;
(v) the Trademark Security Agreement;
(vi) the Membership Pledge Agreement; and
(vii) the Pledge Agreement;
(b) RESOLUTIONS. Each Loan Party shall have delivered to the
Lender certified copies (certified by the respective Secretary or
Assistant Secretary of each Loan Party (such Person shall be the
"AUTHENTICATING PERSON" with respect to such Loan Party)) of all
corporate or other necessary action taken by each Loan Party
authorizing the execution,
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delivery and performance of the Loan Documents (other than the Term
Note and the Florida Mortgage) to which it is a party;
(c) CORPORATE CERTIFICATES. Each Loan Party shall have
delivered to the Lender (i) copies certified by an Authenticating
Person with respect to each Loan Party, as applicable, of (A) the
articles of incorporation certified by the Secretary of State of the
jurisdiction of its incorporation and by-laws of such Loan Party
certified by an Authenticating Person or (B) the operating agreement of
such Loan Party; (ii) with respect to each Loan Party, a certificate of
formation or other good standing certificate issued by the Secretary of
State of the jurisdiction in which such Loan Party was formed and in
the State of its principal place of business and in each State where
such Loan Party is qualified to do business; and (iii) certificates of
incumbency and specimen signatures signed by the appropriate
Authenticating Person with respect to each of the officers or other
Persons of each Loan Party who are authorized to execute and deliver
the Loan Documents to which such Loan Party is a party;
(d) RECORD SEARCHES. Completion of favorable UCC, tax,
judgment and lien search reports with respect to the Borrower and each
Loan Party in all necessary or appropriate jurisdictions and under all
legal and appropriate trade names indicating that there are no prior
Liens on any of the Collateral other than Permitted Liens;
(e) FILINGS AND RECORDINGS. All Uniform Commercial Code
financing statements and other documents or memoranda, if any, in
respect thereof, necessary or advisable, in the opinion of the Lender
shall have been duly filed or recorded including without limitation
each of the following:
(i) UCC-1 financing statements naming each Loan Party
as "DEBTOR" and the Lender as "SECURED PARTY" and covering the
Collateral and filed in all necessary and appropriate
jurisdictions; and
(ii) UCC-3 or UCC-2 termination statements identified
in Schedule 4.01(e) hereto;
(f) CONSENTS AND APPROVALS. All actions, approvals, consents,
waivers, exemptions, variances, franchises, orders, permits,
authorizations, rights and licenses required to be taken, given or
obtained in connection with the execution, delivery and performance of
any Loan Document (other than the Term Note and the Florida Mortgage)
shall have been taken, given or obtained, as the case may be, shall be
in full force and effect in all material respects and shall include
without limitation Agreements, as required by the Lender, with the
landlords of all premises leased by the Borrower or any of its
Subsidiaries and identified on Schedule 4.01(f) containing such
consents and waivers as required by the Lender; and
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(g) INSURANCE CERTIFICATE. Each Loan Party shall have
delivered a certificate of insurance together with copies of each of
the policies of insurance (or binder or certificate of insurance with
respect thereto) covering any of the tangible insurable Collateral of
such Loan Party which comply with Section 6.05.
(h) APPRAISALS. On or before the Closing Date, the Lender
shall have received appraisals with respect to the Collateral, in form
and substance, and performed by appraisers, satisfactory to the Lender.
(i) OPINIONS OF COUNSEL. The Borrower shall have delivered to
the Lender the following legal opinions:
(i) Opinion of Kramer, Levin, Naftalis & Frankel,
counsel to the Loan Parties substantially in the form attached
hereto as Exhibit J;
(ii) Reliance letter of Akin, Gump, Strauss, Havrot
Feld, LLC, counsel to the Loan Parties; and
(iii) Opinions of special local counsel to the
Borrower and its Subsidiaries as required by the Lender.
(j) NOTICE OF BORROWING. With respect to each Borrowing of a
Revolving Loan, the Borrower shall have delivered to the Lender a
Notice of Borrowing executed by the Borrower;
(k) SOLVENCY CERTIFICATE/FINANCIAL INFORMATION. A Responsible
Officer of the Borrower and each Loan Party shall have delivered to the
Lender a certificate as to such Person's solvency, together with the
following financial information:
(i) The financial information required by Section
5.01(j) (other than the information indicated in clauses (a)
and (c) of the definition of "Projections"); and
(ii) The Borrower's forecasted consolidated profit
and loss statements for the period commencing on the date
hereof and concluding on December 31, 1998.
(l) ACCOUNTANTS LETTER. A letter authorizing Arthur Andersen &
Co., the independent certified public accountants of the Borrower and
the Material Subsidiaries to communicate with the Lender and
acknowledging the reliance by the Lender on past, present and future
financial statements audited by Arthur Andersen & Co.
(m) ADDITIONAL DOCUMENTS. Such other documents and instruments
as the Lender may reasonably request.
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SECTION 4.02. CONDITIONS PRECEDENT TO TERM LOAN. The obligation of the
Lender to make the Term Loan to the Borrower, in accordance with the terms
hereof, is subject to the further condition precedent that the Borrower has
complied with each of the following, such compliance shall be satisfactory to
the Lender and any documents delivered to the Lender shall be in form and
substance reasonably satisfactory to the Lender:
(a) TERM NOTE AND FLORIDA MORTGAGE AND RELATED RESOLUTIONS.
The Term Note shall have been duly authorized, executed and delivered
by the Borrower and the Florida Mortgage (or an assignment, in form and
substance acceptable to the Lender, of the mortgage covering the
Mortgaged Property on the date of closing of the Term Loan) shall have
been duly authorized, executed and delivered by Cruises Only, LLC, and
each such Loan Document shall be in full force and effect on the date
the Term Loan is made without any event or condition having occurred or
existing which constitutes, or with the giving of notice or lapse of
time or both would constitute, a default thereunder or breach thereof,
and each Loan Party party to the Term Note or Florida Mortgage shall
have delivered to the Lender copies of evidence of all corporate or
other necessary action taken by such Loan Party authorizing the
execution, delivery and performance of the Term Note or Florida
Mortgage, as the case may be, certified by an Authenticating Person.
(b) FILINGS AND RECORDINGS. The Florida Mortgage and all
Uniform Commercial Code financing statements and other documents or
memoranda, if any, in respect thereof, necessary or advisable, in the
opinion of the Lender, to perfect the security interest granted under
the Florida Mortgage shall have been duly filed or recorded.
(c) REAL ESTATE DOCUMENTS. With respect to the Mortgaged
Property, all reports, searches, evaluations, agreements and such other
documents as the Lender reasonably may request shall have been
delivered to the Lender in form and substance satisfactory to the
Lender including without limitation the following:
(i) An ALTA mortgagee's Policy of Title Insurance (or
binder to issue such a policy) in favor of the Lender for the
Florida Mortgage in an aggregate amount of coverage equal to
an amount satisfactory to the Lender, issued by a title
insurance company acceptable to the Lender, showing fee simple
title to the land and improvements described in each as vested
in Cruises Only, LLC and insuring that the lien granted by the
Florida Mortgage is a valid lien against said real property,
subject only to the Permitted Encumbrances;
(ii) A current as-built boundary survey of the
Mortgaged Property, performed by surveyors licensed in the
State of Florida, or other surveys, drawings or maps
acceptable to the Lender;
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(iii) A satisfactory Phase I environmental audit
report conducted with respect to the Mortgaged Property and
performed by an environmental engineering company acceptable
to the Lender; and
(iv) Evidence of zoning compliance and issuance of
necessary permits and copies of leases and assignments thereof
with respect to the property covered by such Mortgage.
(d) APPRAISAL. On or before the date of the making of the Term
Loan, the Lender shall have received an appraisal with respect to the
Mortgaged Property which shall satisfy all of the applicable
regulations adopted by the Board of Governors of the Federal Reserve
System, the Federal Deposit Insurance Corporation, the office of the
Thrift Supervision and the Office of the Comptroller of the Currency
pursuant to Title XI -- Real Estate Appraisal Reform, Amendments of the
Financial Institution Reform, Recovery and Enforcement Act of 1989.
(e) TERMINATION OF EXISTING DEBT. The Lender shall have
received a pay-off letter from Barnett Bank.
(f) OPINION OF COUNSEL. The Borrower shall have delivered to
the Lender the opinion of special Florida real estate counsel to the
Borrower.
(g) FEES. The Borrower shall have paid in immediately
available funds the fee payable on the date of the making of the Term
Loan and specified in Section 3.06(a).
SECTION 4.03. CONDITIONS PRECEDENT TO ALL LOANS. The obligation of the
Lender to make Revolving Loans and the Term Loan is subject to the further
condition precedent that, as of the date of each such Revolving Loan or the Term
Loan and after giving effect thereto: (a) no Default or Event of Default shall
have occurred and be continuing or would occur as a result of the Borrowing; (b)
the representations and warranties made or deemed made by the Borrower in this
Agreement and the other Loan Documents to which it is a party and by each other
Loan Party in the Loan Documents to which it is a party, shall be true and
correct in all material respects on and as of the date of the making of such
Loan with the same force and effect as if made on and as of such date except to
the extent that such representations and warranties expressly relate solely to
an earlier date (in which case such representations and warranties shall have
been true and correct in all material respects on and as of such earlier date)
and except for changes in factual circumstances specifically permitted
hereunder; and (c) no Materially Adverse Effect has occurred since the Effective
Date. Each Notice of Borrowing delivered by the Borrower to the Lender hereunder
and each Borrowing of Loans shall constitute a certification by the Borrower to
the effect set forth in the preceding sentence (both as of the date of such
instrument and as of the date of such Borrowing, after giving effect to such
Borrowing) and such Notice of Borrowing shall have attached to it a Compliance
Certificate based on the last financial statements delivered to the
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Lender pursuant to Article VII hereof, showing compliance immediately prior to
and after such Borrowing.
SECTION 4.04. CONDITIONS AS COVENANTS. In the event the Lender makes
the initial Revolving Loan or the Term Loan prior to the satisfaction of all
conditions precedent set forth in Section 4.01 hereof and with respect to the
Term Loan, Sections 4.01 and 4.02 hereof, the Borrower shall nevertheless cause
such condition or conditions to be satisfied within thirty days after the date
of the making of such initial Revolving Loan and Term Loan.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. REPRESENTATIONS AND WARRANTIES. The Borrower represents
and warrants to the Lender as follows:
(a) ORGANIZATION; POWER; QUALIFICATION. The Borrower and each
of its Subsidiaries is a corporation or limited liability company, as
the case may be, duly organized, validly existing and in good standing
under the laws of the State of its organization, has the power and
authority to own or lease its properties and to carry on its business
as now being and hereafter proposed to be conducted and is duly
qualified and is in good standing as a corporation or limited liability
company, as the case may be, and authorized to do business, in each
jurisdiction in which the character of its properties or the nature of
its business requires such qualification or authorization and where the
failure to be so qualified or authorized would have a Materially
Adverse Effect.
(b) OWNERSHIP STRUCTURE. Schedule 5.01(b) correctly sets forth
as of the date hereof the corporate structure and ownership interests
of the Borrower and each of its Subsidiaries including the correct
legal name of the Borrower and each of its Subsidiaries and the
shareholders or other Persons holding equity interests in greater than
5% of the total equity interests outstanding in the Borrower and each
of its Subsidiaries and their percentage equity or voting interest in
the Borrower and each of its Subsidiaries. Except as set forth in
Schedule 5.01(b):
(i) neither the Borrower nor any of its Subsidiaries
has issued to any third party any securities convertible into
ownership interests in its capital stock or any options,
warrants or other rights to acquire any securities convertible
into such shares, and
(ii) the outstanding stock and securities of or other
equity interests, as applicable, in each of the Borrower's
Subsidiaries are owned by the Persons indicated on Schedule
5.01(b), free and clear of all Liens, warrants, options and
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rights of others of any kind whatsoever except as contemplated
by the Pledge Agreement.
(c) AUTHORIZATION OF AGREEMENT, NOTES, LOAN DOCUMENTS AND
BORROWINGS. The Borrower has the corporate power, and has taken all
necessary corporate action to authorize it, to borrow hereunder and to
execute, deliver and perform this Agreement, the Notes and the other
Loan Documents to which it is a party in accordance with their
respective terms and to consummate the transactions contemplated
hereby. This Agreement, the Notes and each of the other Loan Documents
to which the Borrower is a party have been duly executed and delivered
by the duly authorized officers of the Borrower and each is the legal,
valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its respective terms, except as
enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or limiting
creditors' rights or by equitable principles generally (regardless of
whether enforcement is sought in equity of at law).
(d) COMPLIANCE OF AGREEMENT, NOTES, LOAN DOCUMENTS AND
BORROWING WITH LAWS, ETC. The execution, delivery and performance of
this Agreement, the Revolving Note and the other Loan Documents (other
than the Term Note and the Florida Mortgage) to which the Borrower is a
party and the Borrowings hereunder do not, the execution, delivery and
performance of the Term Note will not, and, to the knowledge of the
Borrower, the execution, delivery and performance of any Loan Document
will not, by the passage of time, the giving of notice, a determination
of materiality, the satisfaction of any condition, any combination of
the foregoing, or otherwise: (i) require any Governmental Approval or
violate any Applicable Law relating to the Borrower or any of its
Subsidiaries; (ii) conflict with, result in a breach of or constitute a
default under the articles of incorporation or bylaws of the Borrower,
or any indenture, material agreement or other instrument to which the
Borrower is a party or by which it or any of its properties may be
bound; or (iii) result in or require the creation or imposition of any
Lien upon or with respect to any property now owned or hereafter
acquired by the Borrower or any of its Subsidiaries other than
Permitted Liens.
(e) COMPLIANCE WITH LAW; GOVERNMENTAL APPROVALS. The Borrower
and each of its Subsidiaries is in compliance with each Governmental
Approval applicable to it in respect of the conduct of its business and
the ownership of its property and in compliance with all other
Applicable Law relating to the business of the Borrower or any of its
Subsidiaries, except for noncompliances which, and Governmental
Approvals the failure to possess which, would not, singly or in the
aggregate, cause a Default or Event of Default or have a Materially
Adverse Effect and, where appropriate, in respect of which adequate
reserves have been established on the books of the Borrower.
(f) TITLES TO PROPERTIES. Each of the Borrower and each of its
Subsidiaries has good, marketable and legal title to, or a valid
leasehold interest in, its properties and assets
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including, but not limited to, those reflected on the balance sheets of
the Borrower and its Subsidiaries as at March 31, 1997.
(g) INDEBTEDNESS AND GUARANTEES. Schedule 5.01(g) is a
complete and correct listing of all (i) Indebtedness for Money Borrowed
of the Borrower and each of its Material Subsidiaries, (ii) Guarantees
of the Borrower or any of its Material Subsidiaries and (iii) all
letters of credit and acceptances issued or created by any Person for
the account of the Borrower or any of its Material Subsidiaries
existing on the date hereof, excluding any Indebtedness incurred by, or
Guarantees of, the Borrower and its Material Subsidiaries under the
Loan Documents. Each of the Borrower and each of its Material
Subsidiaries has performed and is in compliance with all of the
material terms of such Indebtedness and such Guarantees and all
instruments and agreements relating thereto, and, to the best knowledge
of the Borrower, no default or event of default, or event or condition
which with the giving of notice, the lapse of time, a determination of
materiality, the satisfaction of any other condition or any combination
of the foregoing, would constitute such a default or event of default,
exists with respect to any such Indebtedness or Guaranty.
(h) LITIGATION. Except as set forth on Schedule 5.01(h), there
are no actions, suits or proceedings pending (nor, to the knowledge of
the Borrower, are there any actions, suits or proceedings threatened)
against the Borrower or any of its Subsidiaries or any of their
respective property in any court or before any arbitrator of any kind
or before or by any governmental body which would have a Materially
Adverse Effect. There are no strikes or walkouts in progress relating
to any labor contracts to which the Borrower or any of its Subsidiaries
is a party.
(i) TAX RETURNS AND PAYMENTS. All federal, state and other tax
returns of the Borrower or any of its Subsidiaries required by
Applicable Law to be filed have been duly filed (except where valid
extension of time for filing has been obtained), and all federal, state
and other taxes, assessments and other governmental charges or levies
upon the Borrower or any of its Subsidiaries and its properties,
income, profits and assets which are due and payable have been paid,
other than those contested in good faith and for which adequate
reserves have been established in accordance with GAAP.
(j) FINANCIAL INFORMATION.
(i) FINANCIAL STATEMENTS. The Borrower has furnished
to the Lender copies of the unaudited balance sheets of the
Borrower and its Subsidiaries as at March 31, 1997, and the
related statements of operations, changes in stockholders'
equity and cash flows for the periods covered thereby, and the
unaudited consolidated and consolidating balance sheets of the
Borrower and its Subsidiaries as at June 30, 1997 and the
related consolidated and consolidating statements of
operations, each certified by the chief financial officer of
the Borrower to be in
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compliance with the next succeeding sentence. Such balance
sheets and statements (including in each case related
Schedules and notes) are complete and correct and present
fairly, in accordance with GAAP consistently applied
throughout the period involved, the financial position of the
Borrower and its Subsidiaries as at such date and the results
of operations and the cash flow for such period. Except as
disclosed in such balance sheet or statements, the Borrower
has on the Closing Date no material liabilities, contingent or
otherwise, and nor were there any material unrealized or
anticipated losses of the Borrower or its Subsidiaries.
(ii) PRO FORMAS. The Borrower has furnished to the
Lender copies of (A) the unaudited pro forma combined balance
sheet of the Borrower and its Subsidiaries as at March 31,
1997 and the related statements of income for the periods
covered thereby based on the balance sheets described in the
preceding clause (i) and prepared in accordance with GAAP,
with only such adjustments thereto as would be required in
accordance with GAAP; and (B) Schedules of Add-Backs of the
Borrower and its Subsidiaries for the calendar years 1994,
1995 and 1996 and calendar quarters ending March 31, 1996,
June 30, 1996, September 30, 1996, December 31, 1996, March
31, 1997 and June 30, 1997 based on the balance sheets
described in the preceding clause (i) and prepared in
accordance with GAAP, with only such adjustments thereto as
would be required in accordance with GAAP.
(iii) PROJECTIONS. The Projections delivered on the
Closing Date pursuant to Section 4.01(k)(i) have been prepared
by Borrower in light of the past operations of the business of
Borrower and its Subsidiaries. The Projections reflect as of
the date thereof the good faith estimate of Borrower and its
senior management concerning the most probable course of its
business after taking into account the Related Transactions,
PROVIDED, HOWEVER, the Lender recognizes that actual results
may differ from the Projections and that the Borrower makes no
representation that the Projections will be attained.
(k) ERISA. The Borrower and its ERISA Affiliates are in
compliance with ERISA in all material respects. No material liability
to the PBGC or to a Multiemployer Plan has been, or is expected by the
Borrower or its Affiliates to be, incurred by the Borrower or any ERISA
Affiliates.
(l) ABSENCE OF DEFAULTS. No event has occurred, which has not
been remedied, cured or waived: (i) which constitutes a Default or an
Event of Default; or (ii) which constitutes, or which with the passage
of time, the giving of notice, a determination of materiality, the
satisfaction of any condition, or any combination of the foregoing,
would constitute, a default or event of default by the Borrower or any
of its Subsidiaries of any material agreement (other than this
Agreement) or judgment, decree or order to which the
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Borrower or any of its Subsidiaries is a party or by which the Borrower
or any of its Subsidiaries or any of its respective properties may be
bound.
(m) ACCURACY AND COMPLETENESS OF INFORMATION. All written
information, reports and other papers and data furnished to the Lender
by, on behalf of, or at the direction of, any Loan Party were, at the
time the same were so furnished, true and correct in all material
respects, to the extent necessary to give the recipient a true and
accurate knowledge of the subject matter, or, in the case of financial
statements, present fairly, in accordance with GAAP consistently
applied throughout the periods involved, the financial position of the
Loan Parties involved as at the date thereof and the results of
operations for such periods. No fact is known to the Borrower which has
had, or may in the future have (so far as the Borrower can reasonably
foresee), a Materially Adverse Effect which has not been set forth in
the financial statements referred to in Section 5.01(j) or in such
information, reports or other papers or data or otherwise disclosed in
writing to the Lender prior to the date hereof. No document furnished
or written statement made to the Lender in connection with the
negotiation, preparation and execution of this Agreement or any of the
other Loan Documents contains or, to the Borrower's best knowledge,
will contain any untrue statement of a fact material to the
creditworthiness of the Borrower or any other Loan Party or omits or
will, to the Borrower's best knowledge, omit to state a material fact
necessary in order to make the statements contained therein not
misleading.
(n) ENVIRONMENTAL LAWS. Except as set forth on Schedule
5.01(n), each of the Borrower and each of its Subsidiaries has obtained
all Governmental Approvals required under Environmental Laws and is in
compliance in all material respects with all terms and conditions of
such Governmental Approvals, and each is also in compliance in all
material respects with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules, and
timetables contained in the Environmental Laws. Except as set forth on
Schedule 5.01(n), the Borrower is not aware of, and has not received
notice of, any past, present, or future events, conditions,
circumstances, activities, practices, incidents, actions, or plans
which, with respect to the Borrower or any of its Subsidiaries, may
prevent compliance or continued compliance in all material respects
with Environmental Laws or may require the Borrower or any of its
Subsidiaries to notify any Governmental Authority of any of the
foregoing. There is no civil, criminal, or administrative action, suit,
demand, claim, hearing, notice, or demand letter, notice or violation,
investigation, or proceeding pending or, to the Borrower's knowledge,
threatened, against the Borrower or any of its Subsidiaries relating in
any way to Environmental Laws.
(o) INTELLECTUAL PROPERTY. Each of the Borrower and each of
its Subsidiaries, after the consummation of the Related Transactions,
owns, is licensed to use or otherwise has the right to use, all
patents, trademarks, trade names and copyrights used in or necessary
for the conduct of its business as currently conducted that are
material to the condition (financial or other), business or operations
of the Borrower or its Subsidiaries
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(collectively called "INTELLECTUAL PROPERTY") and all such Intellectual
Property is identified on Schedule 5.01(o) and, in the Borrower's
reasonable discretion, fully protected and/or duly and properly
registered, filed or issued in the appropriate office and jurisdictions
for such registrations, filing or issuances. All Intellectual Property
that is registered or for which application for registration is pending
is identified on Schedule 5.01(o). Except as disclosed in Schedule
5.01(o), no claim has been asserted by any Person with respect to the
use of any Intellectual Property, or challenging or questioning the
validity, use or effectiveness of any Intellectual Property. Except as
disclosed in Schedule 5.01(o), to the Borrower's best knowledge, the
use of such Intellectual Property by Borrower and its Subsidiaries does
not infringe on the rights of any Person, subject to such claims and
infringements as do not, in the aggregate, give rise to any liabilities
on the part of the Borrower and its Subsidiaries that are material to
Borrower or its Subsidiaries.
(p) SOLVENCY. As of and from and after the Agreement Date and
after giving effect to the consummation of the Related Transactions and
Borrowing of the Loans, each of the Borrower and each of its Material
Subsidiaries: (a) owns and will own assets the fair saleable value of
which are (i) greater than the total amount of its liabilities
(including contingent liabilities) and (ii) greater than the amount
that will be required to pay its then existing debts as they become
absolute and matured considering all financing alternatives and
potential asset sales reasonably available to it; (b) has capital that
is not unreasonably small in relation to its business as presently
conducted or any contemplated or undertaken transaction; and (c) does
not intend to incur and does not believe that it will incur debts
beyond its ability to pay such debts as they become due.
(q) BANK ACCOUNTS. Schedule 5.01(q) sets forth the account
numbers and location of all bank accounts of the Borrower and its
Subsidiaries as of the date hereof.
(r) HOLDING COMPANY AND INVESTMENT COMPANY STATUS. Neither the
Borrower nor any Subsidiary is a "holding company", or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", or a
"public utility", within the meaning of the Public Utility Holding
Company Act of 1935, as amended, or a "public utility" within the
meaning of the Federal Power Act, as amended. Neither the Borrower nor
any Subsidiary is an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
SECTION 5.02. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC. All
representations and warranties made under this Agreement shall be deemed to be
made at and as of the Agreement Date, the Effective Date and at and as of the
date of making the Term Loan and each Revolving Loan, except to the extent that
such representations and warranties expressly relate solely to an earlier date
(in which case such representations and warranties shall have been true and
correct in all material respects on and as of such earlier date) and except for
changes in factual circumstances specifically permitted hereunder.
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ARTICLE VI
AFFIRMATIVE COVENANTS
For so long as any of the Secured Obligations remains unpaid or
unperformed, or this Agreement is in effect, unless the Lender shall otherwise
consent in the manner provided for in Section 10.07, the Borrower will:
SECTION 6.01. PRESERVATION OF EXISTENCE AND SIMILAR MATTERS. Subject to
Section 8.10 hereof, preserve and maintain, and cause each Material Subsidiary
to preserve and maintain, its respective existence, rights, franchises, licenses
and privileges in the jurisdiction of its formation and qualify and remain
qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification or authorization and the failure to be so qualified or authorized
would have a Materially Adverse Effect.
SECTION 6.02. COMPLIANCE WITH APPLICABLE LAW. Comply, and cause each
Subsidiary to comply, with all Applicable Laws as the same may be amended from
time to time, and the obtaining of all Governmental Approvals relating to the
Borrower or such Subsidiary where noncompliance would have a Materially Adverse
Effect except where the Borrower or such Subsidiary is challenging in good faith
by appropriate proceedings diligently pursued the application or enforcement of
such Applicable Law or requirement for such Governmental Approval and against
which adequate reserves have been established in accordance with GAAP, where
appropriate.
SECTION 6.03. MAINTENANCE OF PROPERTY. In addition to, and not in
derogation of, the requirements of any of the other Loan Documents, (a) protect
and preserve, and cause each Subsidiary to protect and preserve, all of its
properties necessary for the conduct of its business and maintain in good
repair, working order and condition all of its tangible properties ordinary wear
and tear excepted, and (b) from time to time, in the Borrower's reasonable
discretion, make or cause to be made, and cause each Subsidiary to make or cause
to be made, all needed and appropriate repairs, renewals, replacements and
additions to such properties, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times.
SECTION 6.04. CONDUCT OF BUSINESS. At all times carry on, and cause
each Subsidiary to carry on, its business in the same or complimentary line of
business as engaged in on the date hereof. The Borrower will not, and will not
permit any of its Subsidiaries to, engage to any substantial extent in any
business other than the businesses in which the Borrower and its Subsidiaries
are engaged on the date of this Agreement as described in its Final Prospectus,
dated July 22, 1997 and businesses reasonably related or complimentary thereto
or in furtherance thereof.
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SECTION 6.05. INSURANCE. Maintain, and cause each Subsidiary to
maintain, at all times with such insurance companies as shall be reasonably
satisfactory to the Lender, with all premiums thereon to be paid by the
Borrower, insurance with respect to its properties (including without limitation
the Collateral) and business against such casualties and contingencies
(including but not limited to public liability and business interruption) and in
such amounts as is customary in the case of similarly situated corporations
engaged in the same or similar businesses or as requested by the Lender. Each
such insurance policy shall name the Lender as loss payee and additional insured
and shall provide for at least ten (10) days prior written notice to the Lender
of any default under, termination of or proposed cancellation of such policy due
to non-payment of premium and thirty (30) days prior written notice to the
Lender of any default under, termination of or proposed cancellation of such
policy due to any reason, other than non-payment of premium. Notwithstanding the
Lender being named as loss payee, each such insurance policy shall provide that
amounts paid in respect of such policy up to an aggregate $25,000 per occurrence
(each, a "BORROWER INSURANCE PAYMENT") shall be payable directly to the
Borrower, PROVIDED, that the Borrower shall pay or cause to be paid to the
Lender any Borrower Insurance Payment if the amount of such payment, when
aggregated with all previous Borrower Insurance Payments, would exceed $250,000.
All such amounts paid in respect of such policy in excess of $25,000 per
occurrence shall be paid directly to the Lender and shall become part of the
Collateral. From time to time deliver to the Lender upon its request a detailed
list, together with copies of all policies of the insurance then in effect,
stating the names of the insurance companies, the amounts and rates of the
insurance, the dates of the expiration thereof and the properties and risks
covered thereby.
SECTION 6.06. PAYMENT OF TAXES AND CLAIMS. Pay or discharge when due
(a) all taxes, assessments and governmental charges or levies imposed upon it or
any Subsidiary or upon the income or profits of the Borrower or any Subsidiary
or upon any properties belonging to the Borrower or any Subsidiary, and (b) all
lawful claims of materialmen, mechanics, carriers, warehousemen and landlords
for labor, materials, supplies and rentals which, if unpaid, might become a Lien
on any properties of the Borrower or any Subsidiary or which would otherwise
adversely affect the value of any Collateral; PROVIDED, HOWEVER, that this
Section shall not require the payment or discharge of any such tax, assessment,
charge, levy or claim in an amount less than $10,000 or any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings which operate to suspend the collection thereof and for
which adequate cash reserves have been established in an amount equal to such
tax, assessment, charge, levy or claim; PROVIDED, FURTHER, HOWEVER, neither the
Borrower nor any Subsidiary thereof may contest any such tax, assessment,
charge, levy or claim if the contest thereof will impair the value or
marketability of any Collateral or the Lender's Lien therein.
SECTION 6.07. VISITS AND INSPECTIONS. Permit, and cause its
Subsidiaries to permit, representatives or agents of the Lender, upon reasonable
notice, from time to time, as often as may be reasonably requested, but only
during normal business hours, to: (a) visit and inspect its respective
properties (including the Collateral); (b) inspect and make extracts from its
relevant books and records, including but not limited to management letters
prepared by independent
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accountants; and (c) discuss with its principal officers, and its independent
accountants, matters relating to its business, assets, liabilities, financial
conditions, results of operations and business prospects.
SECTION 6.08. USE OF PROCEEDS. (a) Use the proceeds of the Loans to
retire prior to February 15, 1998 all obligations specified on Schedule 6.08
(the "EXISTING DEBT"); (b) use the proceeds of all other Revolving Loans for
working capital purposes or for Permitted Acquisitions; PROVIDED, HOWEVER, the
Borrowings for working capital purposes shall not exceed $5,000,000 in the
aggregate at any time outstanding; and (c) not use any part of the proceeds of
the Term Loan or the Revolving Loans (x) for a Hostile Acquisition or (y) to
purchase or carry, or to reduce or retire or refinance any credit incurred to
purchase or carry, any margin stock (within the meaning of Regulations U and X
of the Board of Governors of the Federal Reserve System) or to extend credit to
others for the purpose of purchasing or carrying any margin stock.
SECTION 6.09. ADDITIONAL GUARANTOR/COLLATERAL. Within 45 days of the
last date of any fiscal quarter in which any of its Subsidiaries (i) guarantees
any Indebtedness of the Borrower or (ii) satisfies (at any time) the
requirements hereunder which describe a Material Subsidiary, cause such
Subsidiary to execute and deliver in favor of the Lender a Supplement to the
Subsidiary Guaranty, in the form attached as Annex A thereto (the "GUARANTY
SUPPLEMENT") and a Supplement to the Security Agreement, in the form attached as
Annex A thereto (the "SECURITY AGREEMENT SUPPLEMENT") and, where applicable, a
Trademark Security Agreement. Each such Supplement and Trademark Security
Agreement shall be governed by the laws of the State of New York and shall
contain such other terms and provisions as the Lender determines to be necessary
or appropriate (after consulting with legal counsel) in order that such
Supplement or Trademark Security Agreement complies with local laws, rules and
regulations and is fully enforceable against such Additional Loan Party.
In connection with the delivery of any such Supplement by an Additional
Loan Party there shall be delivered an opinion of counsel (which counsel and the
form and substance of such opinion shall be reasonably satisfactory to the
Lender) addressed to the Lender as it relates to such Additional Loan Party and
the Guaranty Supplement and the Security Agreement Supplement and any other Loan
Document and such officers' certificates, financing statements, applications for
registration, directors and shareholders resolutions and other agreements,
instruments and documents as the Lender may reasonably request.
SECTION 6.10. TREASURY CONTRACTS. Within 30 days of the Closing Date
and at all times amounts remain outstanding hereunder or under the Notes, the
Borrower shall maintain sufficient operations and personnel to monitor currency
exchange rate and interest rate changes applicable to its business or the
business of its Subsidiaries and shall engage in a reasonable manner in prudent
currency and interest rate hedging activities to protect it and its Subsidiaries
from changes in such rates and, with respect to interest rates, for an amount
not less than the sum of the entire outstanding principal amount of the Term
Note and 50 percent of the outstanding principal amount of the Revolving Note.
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ARTICLE VII
INFORMATION
For so long as any of the Secured Obligations remains unpaid or
unperformed, or this Agreement is in effect, unless the Lender shall otherwise
consent in the manner set forth in Section 10.07, the Borrower will furnish to
the Lender at its Principal Office:
SECTION 7.01. QUARTERLY FINANCIAL STATEMENTS. Within forty-five days
after the close of each quarterly accounting period of the Borrower, the
consolidated and consolidating balance sheet of the Borrower and its
Subsidiaries as at the end of such period (on a Pro Forma Basis for the period
ending September 30, 1997) and the related statement of income of the Borrower
and its Subsidiaries for such period (on a Pro Forma Basis for the period ending
September 30, 1997), setting forth in each case in comparative form the figures
for the corresponding periods of the previous fiscal year, all of which shall be
certified by the chief financial officer of the Borrower, in his or her opinion,
to present fairly, in accordance with GAAP consistently applied (subject to
changes resulting from normal year-end adjustments), the financial position of
the Borrower and its Subsidiaries as at the date thereof and the results of
operations for such period,
SECTION 7.02. YEAR-END STATEMENTS. Within 120 days after the end of
each fiscal year of the Borrower, the consolidated and consolidating balance
sheet of the Borrower and its Subsidiaries as at the end of such fiscal year and
the related statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, setting forth in comparative form the figures
as at the end of and for the previous fiscal year, all of which shall be
certified by the chief financial officer of the Borrower, in his or her opinion,
to present fairly, in accordance with GAAP consistently applied, the financial
position of the Borrower and its Subsidiaries as at the date thereof and the
results of operations for such period and with respect to the consolidated
financial statements by independent certified public accountants of recognized
national standing or otherwise acceptable to the Lender, whose certificate shall
be in scope and substance satisfactory to the Lender and who shall have
authorized the Borrower to deliver such financial statements and certification
thereof to the Lender pursuant to this Agreement, PROVIDED, that, such
certification by independent certified public accountants shall not be required
hereunder with respect to consolidated financial statements for the period ended
December 31, 1997..
SECTION 7.03. PROJECTIONS. Together with the delivery of financial
statements required by Section 7.02 above, the delivery of Projections, in form
and substance satisfactory to the Lender, for the ensuing fiscal year on an
annual and quarterly basis.
SECTION 7.04. ACCOUNTS/INVENTORY CERTIFICATE. From time to time and in
any event within 45 days after the end of each fiscal quarter during which this
Agreement remains in effect a Schedule of Accounts which shall consist of a
detailed aged trial balance of all of the Borrower's then existing Accounts,
specifying the names, balance due of each Account Debtor obligated on
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an Account so listed, together with an aging summary, and a Schedule of
Inventory, all as certified as true, complete and correct by the chief financial
officer of the Borrower and to be in form reasonably satisfactory to the Lender.
SECTION 7.05. COLLATERAL VALUE REPORT. Not more than once every other
calendar year prior to an Event of Default and at any time while and so long as
an Event of Default shall have occurred and be continuing, the Borrower will
upon the request of the Lender, at the Borrower's expense, obtain and deliver to
the Lender a report of an independent collateral auditor satisfactory to the
Lender with respect to the Accounts and Inventory which report shall include,
with respect to Accounts, verification with respect to the amount, aging,
identity and credit of the respective account debtors and the billing practices
of the Borrower and with respect to Inventory, verification as to the value,
location and respective types.
SECTION 7.06. APPRAISALS. From time to time, if the Lender determines
that obtaining appraisals is necessary in order to comply with Applicable Laws,
the Lender will, at the Borrower's expense, obtain appraisal reports in form and
substance and from appraisers satisfactory to the Lender stating the then
current fair market values of all or any portion of the Collateral owned by the
Borrower or any of its Subsidiaries. In addition, not more than once every other
calendar year prior to an Event of Default and at any time while and so long as
an Event of Default shall have occurred and be continuing, the Borrower will
upon the request of the Lender, at the Borrower's expense, obtain and deliver to
the Lender appraisal reports or updated appraisals in form and substance and
from appraisers satisfactory to the Lender, stating (1) the then current fair
market and orderly liquidation values of all or any portion of the Collateral
and (2) the then current business value of Borrower or any of its Subsidiaries
as a going concern.
SECTION 7.07. COPIES OF CERTIFICATES AND OTHER REPORTS.
(a) Together with each delivery of financial statements required by
Sections 7.01 and Section 7.02 above, a Compliance Certificate, substantially in
the form of Exhibit I hereto, demonstrating (with computations in reasonable
detail) compliance by the Borrower and its Subsidiaries with the provisions of
Section 8.01 and stating that there exists no Event of Default or Default, or,
if any Event of Default or Default exists, specifying the nature and period of
existence thereof and what action the Borrower has taken, is taking or proposes
to take with respect thereto. Together with each delivery of financial
statements required by Section 7.02 above, the Borrower will deliver a
certificate of such accountants stating that, in making the audit necessary for
their report on such financial statements, they have obtained no knowledge of
any Event of Default or Default, or, if they have obtained knowledge of any
Event of Default or Default, specifying the nature and period of existence
thereof to the extent permitted under generally accepted auditing standards.
(b) Promptly upon receipt thereof, copies of all reports, if any,
submitted to the Borrower by the Borrower's independent public accountants
including, without limitation, any management report; and
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(c) From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial condition,
results of operations or business prospects of the Borrower as the Lender may
reasonably request. The rights of the Lender under this Section are in addition
to and not in derogation of its rights under any other provision of this
Agreement or any of the other Loan Documents.
SECTION 7.08. NOTICE OF LITIGATION AND OTHER MATTERS. Prompt notice of
and in any event within 10 Business Days after the occurrence thereof:
(a) to the extent the Borrower is aware of the same, the
commencement of all proceedings and investigations by or before any
governmental or nongovernmental body and all actions and proceedings in
any court or other tribunal or before any arbitrator against or in any
other way relating adversely to, or adversely affecting, the Borrower
or any of its Subsidiaries or any of their respective properties,
assets or businesses which, if adversely determined or resolved, would
have a Materially Adverse Effect, including without limitation, any
claim, action, demand, suit, proceeding, hearing, study, or
investigation, based on or related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, or handling
or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, chemical, or industrial,
toxic, or other Hazardous Material which would result in an aggregate
liability of $100,000 for the Borrower or any of its Subsidiaries;
(b) any amendment to the articles of incorporation of the
Borrower or any of its Material Subsidiaries;
(c) any change in the senior management of the Borrower or any
of its Material Subsidiaries, and any change in the business, assets,
liabilities, financial condition, results of operations or business
prospects of the Borrower or any of its Material Subsidiaries, in
either case which has had or may have Materially Adverse Effect; and
(d) any Default or Event of Default or any event which
constitutes or which with the passage of time, the giving of notice, a
determination of materiality, the satisfaction of any condition or any
combination of any of the foregoing would constitute a default or event
of default by the Borrower or any of its Subsidiaries under any
material agreement (other than this Agreement) to which the Borrower or
such Subsidiary is a party or by which the Borrower or such Subsidiary
or any of its respective properties may be bound.
SECTION 7.09. ERISA. As soon as possible and in any event within 30
days after the Borrower knows, or has reason to know:
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(a) that any Termination Event with respect to a Plan has
occurred or will occur; or
(b) of the existence of any Unfunded Vested Accrued Benefits
under all Plans; or
(c) that the Borrower or any ERISA Affiliate is in "default"
(as defined in Section 4219(c)(5) of ERISA) with respect to payments to
a Multiemployer Plan required by reason of its complete or partial
withdrawal (as described in Section 4203 or 4205 of ERISA) from such
Plan, a certificate of a Responsible Officer of the Borrower setting
forth the details of such of the events described in clauses (a)
through (c) as applicable and the action which is proposed to be taken
with respect thereto, together with any notice or filing which may be
required by the PBGC or other agency of the United States government
with respect to such of the events described in clauses (a) through (c)
as applicable.
ARTICLE VIII
NEGATIVE COVENANTS
So long as any of the Secured Obligations remains unpaid or
unperformed, or this Agreement is in effect, unless the Lender shall otherwise
consent in the manner set forth in Section 10.07, the Borrower will not, and
will not permit any of its Subsidiaries to, directly or indirectly:
SECTION 8.01. FINANCIAL COVENANTS. Permit at any time on a Consolidated
basis:
(a) RATIO OF FUNDED DEBT TO EBITDA. The ratio of Indebtedness
for Money Borrowed to EBITDA for the Preceding Period to be more than
3.25 to 1.0.
(b) COVERAGE REQUIREMENTS. The Interest Charges Coverage Ratio
to be less than 1.50 to 1.00; or
(c) RATIO OF FUNDED DEBT TO CAPITALIZATION. The ratio of
Indebtedness for Money Borrowed to Consolidated Capitalization to be
more than .50 to 1.00.
SECTION 8.02. INDEBTEDNESS FOR MONEY BORROWED. Create, assume, or
otherwise become or remain obligated in respect of, or permit or suffer to exist
or to be created, assumed or incurred or to be outstanding any Indebtedness for
Money Borrowed, except that this Section shall not apply to Indebtedness: (a)
for Money Borrowed represented by the Loans and the Notes, (b) set forth on
Schedule 5.01(g) hereof , (c) Indebtedness incurred in connection with a
Purchase Money Lien and Indebtedness incurred in connection with Capitalized
Lease Obligations, which, in the aggregate, do not exceed at any time $500,000,
(d) intercompany indebtedness among the
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Borrower and its Subsidiaries to the extent permitted by Section 8.07 and (e)
Indebtedness of the Borrower under interest rate agreements establishing a fixed
or maximum interest rate for all or any portion of the Loans; PROVIDED, HOWEVER,
that Indebtedness referred to in clauses (b) (other than with respect to letters
of credit set forth on Schedule 5.01(g)) and (c) above may not be renewed,
extended or refinanced without the prior written consent of the Lender.
SECTION 8.03. GUARANTIES. Become or remain liable on or under any
Guaranty (other than with respect to (a) the Subsidiary Guaranty, (b) Guaranty
Supplements, (c) Indebtedness set forth on Schedule 5.01(g) and (d) Guaranties
by the Borrower of the obligations of the Material Subsidiaries).
SECTION 8.04. INVESTMENTS. After the Agreement Date, make or purchase
any Investment or, after such date, permit any Investment to be outstanding
other than (i) Permitted Investments; (ii) Permitted Acquisitions; (iii)
Investments in existence as of the date hereof; (iv) Investments permitted under
Section 8.07; or (v) Investments made in the ordinary course of business as
conducted by the Borrower and its Subsidiaries on the Effective Date and not in
excess of $250,000, individually or $500,000 in the aggregate for any calendar
year.
SECTION 8.05. LIENS. Create, assume, incur or permit or suffer to exist
(upon the happening of a contingency or otherwise) or to be created, assumed or
incurred, any Lien upon any of its properties or assets of any character whether
now owned or hereafter acquired or any income or profits therefrom or assign or
otherwise convey any right to receive income or profits, except for Permitted
Liens.
SECTION 8.06. PLANS. Take any action which would cause any Unfunded
Vested Accrued Benefits under any Plan of the Borrower to exist.
SECTION 8.07. LOANS. Except as provided in Section 8.04 hereof, extend
credit to, or make any advance, loan or contribution of money or goods to, any
Person, PROVIDED, that, (a) the Borrower may make advances to any Subsidiary
thereof that is not a Material Subsidiary, and any such Subsidiary may make
advances to the Borrower or any Material Subsidiary, if the indebtedness
incurred in connection with any such advance is evidenced by a demand note that
is pledged to the Lender, and (b) the Borrower and any Subsidiary thereof may
make advances in the ordinary course of business to their respective employees,
PROVIDED, that any such advance under clause (a) or (b) of this Section shall be
repaid within one year and the sum of all such advances made under clauses (a)
and (b) of this Section shall not exceed $100,000 at any one time outstanding.
SECTION 8.08. CERTAIN AGREEMENTS. (a) Amend, supplement or otherwise
modify any material term of any material agreement, oral or written, other than
in the ordinary course of business, or (b) permit Auto Europe, LLC to default in
the performance of its obligations under the Credit Enhancement Agreement, dated
as of June 1, 1995, between City of Portland, Maine
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and Auto Europe, Inc. (as predecessor to Auto Europe, LLC) if such default would
result in liability in excess of $100,000.
SECTION 8.09. TRANSACTIONS WITH AFFILIATES. Except as specified on
Schedule 8.09 hereto, enter into any transaction or series of related
transactions, whether or not in the ordinary course of business, with any
Affiliate of the Borrower, other than on terms and conditions substantially as
favorable to the Borrower as would be obtainable by the Borrower at the time in
a comparable arm's length transaction with a Person not an Affiliate
("UNAFFILIATED TRANSACTION") other than any transaction or series of
transactions with respect to assets or services of the Borrower or its
Subsidiaries having a value in an Unaffiliated Transaction equal to or less than
$250,000 individually or $500,000 in the aggregate.
SECTION 8.10. MERGER, CONSOLIDATION AND OTHER ARRANGEMENTS. Merge or
consolidate with any other Person unless the Borrower or a Subsidiary is the
surviving and continuing corporation and the financial condition, business or
operations of the Borrower or such Subsidiary shall not be materially and
adversely affected thereby and at the time of such merger or consolidation and
after giving effect thereto no Default or Event of Default shall have occurred
and be continuing, PROVIDED, that, the Borrower or any Subsidiary may liquidate,
dissolve or wind-up any Subsidiary that is not a Material Subsidiary.
SECTION 8.11. NO SALE OF ASSETS. Sell, lease, assign, transfer or
otherwise dispose of substantially all of its respective assets other than: (i)
Inventory in the ordinary course of its business; and (ii) property no longer
used or useful in the conduct of such Person's business and disposed of in the
ordinary course of business.
SECTION 8.12. SALE OR DISCOUNT OF RECEIVABLES. Sell with recourse, or
discount or otherwise sell for less than the face value thereof, any of its
notes or Accounts including without limitation pursuant to a Receivables
Financing.
SECTION 8.13. DIVIDEND LIMITATION. (i) Pay or declare any cash dividend
on any class of its stock or make any other distribution on account of any class
of its stock; or (ii) redeem, purchase or otherwise acquire, directly or
indirectly, any shares of its stock; except for:
(a) dividends payable in common stock;
(b) any Subsidiary of the Borrower may pay dividends or any
other such distribution to the Borrower or any Material Subsidiary of
the Borrower;
(c) the Borrower may repurchase shares of common stock and/or
options to purchase such common stock held by directors, executive
officers, members of management or employees of the Borrower or any of
its Subsidiaries upon the death, disability, retirement or termination
of employment of such directors, executive officers, members of
management or employees so long as (x) no Default or Event of Default
then
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exists or would result therefrom and (y) the aggregate amount of cash
expended by the Borrower pursuant to this clause (c) does not exceed
$1,000,000 in any fiscal year of the Borrower; and
(d) the Borrower may repurchase shares of its common stock
and/or options to purchase such common shares held by any Person so
long as (x) no Default or Event of Default then exists or would result
therefrom and (y) the aggregate amount of cash expended by the Borrower
pursuant to this clause (d) does not exceed $1,000,000 in any fiscal
year of the Borrower.
The term "STOCK" as used in this Section 8.13 shall include warrants or
options to purchase stock and any Preferred Stock.
SECTION 8.14. CAPITAL EXPENDITURES. During any period of four
consecutive fiscal quarters, not incur on a Consolidated basis, Capital
Expenditures individually or in the aggregate in excess of 25% of Consolidated
Net Income plus depreciation and amortization for such period, PROVIDED, that
the computation of Capital Expenditures and Consolidated Income for periods
ending on or prior to the fiscal quarter ending on September 30, 1997 shall be
on a Pro-Forma Basis.
ARTICLE IX
DEFAULT
SECTION 9.01. EVENTS OF DEFAULT. Each of the following shall constitute
an Event of Default:
(a) DEFAULT IN PAYMENT. The Borrower shall fail to pay when
due (whether upon demand, at maturity, by reason of acceleration or
otherwise) the principal of any of the Loans or the Notes or shall fail
to pay when due, and such failure shall continue for five (5) or more
days, any interest on any of the Loans or any of the Notes or on any of
the other obligations owing by the Borrower under this Agreement or any
other Loan Document or any other Loan Party shall fail to pay when due
any obligation owing by such Loan Party under any Loan Document to
which it is a party.
(b) MISREPRESENTATIONS. Any statement, representation or
warranty made or deemed made by or on behalf of the Borrower or any
other Loan Party under this Agreement or under any other Loan Document,
or any amendment hereto or thereto, or in any other writing or
statement at any time furnished or made or deemed made by or on behalf
of the Borrower or any other Loan Party to the Lender in connection
with any Loan Document or with respect to the transactions contemplated
by the Loan Documents, shall
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at any time prove to have been incorrect or misleading in any material
respect when furnished or made.
(c) DEFAULT IN PERFORMANCE. (i) The Borrower shall fail to
perform or observe any term, covenant, condition or agreement contained
in Article VIII hereof or Section 2.06 or Section 6.09 hereof or (ii)
the Borrower or any Loan Party shall fail to perform or observe any
term, covenant, condition or agreement contained in this Agreement or
any other Loan Document to which it is a party and not otherwise
mentioned in this Section 9.01 and the continuance of such failure
shall have continued for a period of thirty days.
(d) CROSS DEFAULT. The Borrower or any Material Subsidiary
defaults (whether as primary obligor or as guarantor or other surety)
in any payment of principal of or interest on any other obligation for
Money Borrowed (or any Capitalized Lease Obligation, any obligation
under a conditional sale or other title retention agreement, any
obligation issued or assumed as full or partial payment for property
whether or not secured by a purchase money mortgage or any obligation
under notes payable or drafts accepted representing extensions of
credit) beyond any period of grace provided with respect thereto, or
the Borrower or any Material Subsidiary fails to perform or observe any
other agreement, term or condition contained in any agreement under
which any such obligation is created (or if any other event thereunder
or under any such agreement shall occur and be continuing) and the
effect of such failure or other event is to cause, or to permit the
holder or holders of such obligation (or a trustee on behalf of such
holder or holders) to cause, such obligation to become due (or to be
repurchased or defeased by the Borrower or any Material Subsidiary)
prior to any stated maturity; or
(e) VOLUNTARY BANKRUPTCY PROCEEDING. The Borrower or any of
its Subsidiaries shall: (i) commence a voluntary case under the federal
bankruptcy laws (as now or hereafter in effect); (ii) file a petition
seeking to take advantage of any other laws, domestic or foreign,
relating to bankruptcy, insolvency, reorganization, winding up or
composition for adjustment of debts; (iii) consent to or fail to
contest in a timely and appropriate manner any petition filed against
it in an involuntary case under such bankruptcy laws or other laws;
(iv) apply for or consent to, or fail to contest in a timely and
appropriate manner, the appointment of, or the taking of possession by,
a receiver, custodian, trustee, or liquidator of itself or of a
substantial part of its property, domestic or foreign; (v) admit in
writing its inability to pay its debts as they become due; (vi) make a
general assignment for the benefit of creditors; (vii) make a
conveyance fraudulent as to creditors under any state or federal law;
or (viii) take any corporate action for the purpose of effecting any of
the foregoing.
(f) INVOLUNTARY BANKRUPTCY PROCEEDING. A case or other
proceeding shall be commenced against the Borrower or any of its
Subsidiaries in any court of competent jurisdiction seeking: (i) relief
under the federal bankruptcy laws (as now or hereafter in
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effect) or under any other laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding up or adjustment of
debts; or (ii) the appointment of a trustee, receiver, custodian,
liquidator or the like of such Person, or of all or any substantial
part of the assets, domestic or foreign, of such Person and, in either
event, shall not be discharged within 60 days.
(g) LITIGATION. The Borrower or any Loan Party shall challenge
or contest in any action, suit or proceeding in any court or before any
arbitrator or governmental body the validity or enforceability of this
Agreement, any Note or any other Loan Document.
(h) JUDGMENT. A judgment or order for the payment of money
(not paid or fully covered by insurance) individually or in the
aggregate equal to or greater than $100,000 shall be entered against
the Borrower by any court and such judgment or order shall continue
undischarged or unstayed for a period of forty-five days.
(i) ATTACHMENT. A warrant or writ of attachment or execution
or similar process shall be issued against any property of the Borrower
or any of its Subsidiaries which, individually or together with all
other such processes, would have a Materially Adverse Effect and such
processes shall continue undischarged for a period of forty-five days;
PROVIDED, HOWEVER, that if such processes shall require the payment of
money individually or in the aggregate equal to or greater than
$100,000, such forty-five day period shall not be required to pass for
an Event of Default to occur hereunder.
(j) ERISA. (i) Any Termination Event with respect to a Plan
shall occur; (ii) any Plan shall incur an "accumulated funding
deficiency" (as defined in Section 412 of the Internal Revenue Code or
Section 302 of ERISA) for which a waiver has not been obtained in
accordance with the applicable provisions of the Internal Revenue Code
and ERISA; or (iii) the Borrower is in "default" (as defined in Section
4219(c)(5) of ERISA) with respect to payments to a Multiemployer Plan
resulting from the Borrower's complete or partial withdrawal (as
described in Section 4203 or 4205 of ERISA) from such Multiemployer
Plan.
(k) CESSATION OF OPERATIONS. Except as permitted pursuant to
Section 8.10, the business operations as conducted on the Closing Date
of the Borrower or any of its Material Subsidiaries shall be suspended
for a period of 30 consecutive days or longer.
(l) SECURITY INTEREST. The Security Interest shall for any
reason cease to be a valid, enforceable, perfected and first-priority
Lien on any of the Collateral, subject only to Permitted Liens, except
to the extent such failure to perfect arises out of Lender's
negligence.
(m) GUARANTIES. The Subsidiary Guaranty or any Guaranty
Supplement (if any) or any provisions thereof shall be found or held
invalid or unenforceable by a court of
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competent jurisdiction or shall have ceased to be effective as to any
Material Subsidiary of the Borrower or such Subsidiary shall have
repudiated its obligations under the Subsidiary Guaranty or Guaranty
Supplement to which it is a party.
(n) CHANGE OF CONTROL. A Control Event and/or Change of
Control shall occur.
(o) EXECUTIVE OFFICERS. (i) Both of the individuals specified
in (A) below or (ii) any of the individuals specified in (B) below
shall cease to hold the office specified opposite his or her name (x)
for any reason other than his or her death, disability or non-renewal
of the initial term of his or her employment contract, or (y) due to
his or her death, disability or non-renewal of the initial term of his
or her employment contract, and a successor satisfactory to the Lender
does not assume his or her responsibilities and position within 60 days
of cessation:
<TABLE>
<CAPTION>
NAME OFFICE
---- ------
<S> <C> <C>
(A) Joseph V. Vittoria Chief Executive Officer of Borrower and
Michael J. Moriarty Chief Operating Officer of Borrower; or
(B) Robert G. Falcone Chief Executive Officer of Cruises, Inc.
Wayne Heller Chief Executive Officer of Cruises Only,
LLC
Imad Khalidi Chief Executive Officer of Auto Europe,
LLC
Susan Parker Chief Executive Officer of Travel 800, LLC
John W. Przywara Chief Executive Officer of DFW Tours, Inc.
and DFW Travel Arrangements, Inc.
</TABLE>
SECTION 9.02. REMEDIES. Upon the occurrence of an Event of Default the
following provisions shall apply:
(a) AUTOMATIC. Upon the occurrence of an Event of Default
specified in Sections 9.01(e) or (f), the principal of, and the
interest on, the Loans and the Notes at the time outstanding, and (ii)
all of the other obligations of the Borrower hereunder, including, but
not limited to, the other amounts owed to the Lender under this
Agreement, the Notes or any of the other Loan Documents, and all other
Secured Obligations shall become automatically due and payable by the
Borrower without presentment, demand, protest, or other notice of any
kind, all of which are expressly waived by the Borrower and the
Revolving Credit Facility, the obligation of the Lender to make
Revolving Loans under the Revolving Credit Facility, and the Lender's
Commitment shall immediately and automatically terminate.
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(b) OPTIONAL. If any other Event of Default (other than as set
forth in Section 9.01 (e) or (f)) shall have occurred and be
continuing, the Lender may declare the principal of, and interest on,
the Loans and the Notes at the time outstanding, and all of the other
obligations of the Borrower hereunder, including, but not limited to,
the other amounts owed to the Lender under this Agreement, the Notes or
any of the other Loan Documents, and all other Secured Obligations to
be forthwith due and payable, whereupon the same shall immediately
become due and payable without presentment, demand, protest or other
notice of any kind, all of which are expressly waived by the Borrower
and terminate the Lender's Commitment, the Revolving Credit Facility
and the obligation of the Lender to make Revolving Loans under the
Revolving Credit Facility. The Lender shall provide prompt notice of
any such declaration to the Borrower, however, the failure of the
Lender to so notify the Borrower shall not affect Lender's rights
hereunder.
(c) OTHER LOAN DOCUMENTS. The Lender may exercise any and all
rights under any and all of the Loan Documents.
(d) APPLICATION OF PROCEEDS. All proceeds of Collateral and
other sums received by Lender upon the exercise of its rights and
remedies under the Loan Documents, including, without limitation,
proceeds of insurance and proceeds from any condemnation, may be
applied by the Lender, after deduction for any expenses incurred in
connection with such exercise which are reimbursable to the Lender
hereunder, to the Secured Obligations in such manner as the Lender may
determine then to be appropriate.
SECTION 9.03. RIGHTS CUMULATIVE. The rights and remedies of the Lender
under this Agreement, the Notes and each of the other Loan Documents shall be
cumulative and not exclusive of any rights or remedies which it would otherwise
have under Applicable Law. In exercising its rights and remedies the Lender may
be selective and no failure or delay by the Lender in exercising any right shall
operate as a waiver of it, nor shall any single or partial exercise of any power
or right preclude its other or further exercise or the exercise of any other
power or right.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. NOTICES. Unless otherwise provided herein,
communications provided for hereunder or under any other Loan Document shall be
in writing and shall be mailed, telecopied or delivered as follows:
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If to the Borrower:
Travel Services International, Inc.
220 Congress Park Drive
Suite 300
Delray Beach, Florida 33445
Attention: Jill M. Vales, Chief Financial Officer
Telephone: (561) 266-0860
Telecopy: (561) 266-0872
Attention: Suzanne B. Bell, General Counsel
Telephone: (561) 266-0860
Telecopy: (561) 266-0872
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Mark B. Segall, Esq.
Telephone: (212) 715-9176
Telecopier: (212) 715-8000
If to the Lender:
NationsBank, N.A.
1555 Palm Beach Lakes Boulevard
Suite 310
West Palm Beach, Florida 33401
Attention: Commercial Banking Manager
Telephone: (561) 471-7611
Telecopy: (561) 684-2726
or, as to each party at such other address as shall be designated by such party
in a written notice to the other parties. All such notices and other
communications shall be effective (i) if mailed, when received; (ii) if
telecopied, when transmission is confirmed; or (iii) if hand delivered, when
delivered.
SECTION 10.02. EXPENSES. The Borrower will pay all present and future
expenses of the Lender in connection with:
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(a) the negotiation, preparation, execution, delivery and
administration of this Agreement, the Notes and each of the other Loan
Documents, whenever the same shall be executed and delivered, including
appraisers' fees, search fees, recording fees (including any intangible
recording taxes) and the reasonable fees and disbursements of: (i) King
& Spalding, and (ii) each local counsel retained by the Lender;
(b) the negotiation, preparation, execution and delivery of
any waiver, amendment or consent by the Lender relating to this
Agreement, the Notes or any of the other Loan Documents;
(c) any restructuring, refinancing or "workout" of the
transactions contemplated by this Agreement, the Notes and the other
Loan Documents, including the reasonable fees and disbursements of
counsel to the Lender;
(d) consulting with one or more Persons engaged by the Lender,
including appraisers, accountants and lawyers, concerning or related to
the servicing of this Agreement or the nature, scope or value of any
right or remedy of the Lender hereunder, under the Notes or under any
of the other Loan Documents, including any review of factual matters in
connection therewith, which expenses shall include the reasonable fees
and disbursements of such Persons;
(e) the collection or enforcement of the obligations of the
Borrower or any Loan Party under this Agreement, the Notes or any other
Loan Document including the reasonable fees and disbursements of
counsel to the Lender if such collection or enforcement is done by,
through or with the assistance of an attorney;
(f) prosecuting or defending any claim in any way arising out
of, related to, or connected with this Agreement, the Notes or any of
the other Loan Documents, which expenses shall include the reasonable
fees and disbursements of counsel to the Lender and of experts and
other consultants retained by the Lender;
(g) the exercise by the Lender of any right or remedy granted
to it under this Agreement, the Notes or any of the other Loan
Documents including the reasonable fees and disbursements of counsel to
the Lender; and
(h) reasonable costs and expenses incurred by the Lender in
gaining possession of, maintaining, handling, preserving, storing,
shipping, appraising, selling, preparing for sale and advertising to
sell the Collateral, whether or not a sale is consummated.
SECTION 10.03. STAMP, INTANGIBLE AND RECORDING TAXES. The Borrower will
pay any and all applicable stamp, intangible, registration, recordation and
similar taxes, fees or charges and shall indemnify the Lender against any and
all liabilities with respect to or resulting from any delay in the payment or
omission to pay any such taxes, fees or charges, which may be payable
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or determined to be payable in connection with the execution, delivery,
performance or enforcement of this Agreement, the Notes and any of the other
Loan Documents or the perfection of any rights or Liens thereunder, other than
any such liabilities resulting from Lender's gross negligence or willful
misconduct.
SECTION 10.04. SET-OFF. In addition to any rights now or hereafter
granted under Applicable Law and not by way of limitation of any such rights,
upon the occurrence and during the continuance of an Event of Default, the
Lender is hereby authorized by the Borrower, at any time or from time to time,
without notice to the Borrower or to any other Person, any such notice being
hereby expressly waived, to set-off and to appropriate and to apply any and all
deposits (general or special, including, but not limited to, Indebtedness
evidenced by certificates of deposit, whether matured or unmatured) and any
other Indebtedness at any time held or owing by the Lender or any Affiliate of
the Lender, to or for the credit or the account of the Borrower against and on
account of any of the Secured Obligations, irrespective of whether or not the
Lender shall have declared any or all of the Loans and all other Secured
Obligations to be due and payable as permitted by Section 9.02, and although
such obligations shall be contingent or unmatured.
SECTION 10.05. GOVERNING LAW; ARBITRATION/JURISDICTION. (a) THIS
AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF
LAW.
(b) ANY CONTROVERSY OR CLAIM BETWEEN OR AMONG THE PARTIES HERETO
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
INCLUDING ANY CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT, INCLUDING, WITHOUT
LIMITATION, ANY DISPUTE CONCERNING THE SCOPE OF THIS ARBITRATION CLAUSE SHALL BE
RESOLVED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ ENDISPUTE AND
ANY SUCCESSOR THEREOF (J.A.M.S.), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION THEREOF.
ANY PARTY TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR
EXPEDITED PROCEEDING, TO COMPEL ARBITRATION OF ANY CONTROVERSY OR CLAIM TO WHICH
THIS AGREEMENT APPLIES IN ANY COURT HAVING JURISDICTION OVER SUCH ACTION.
(c) SPECIAL RULES. THE ARBITRATION SHALL BE CONDUCTED IN NEW
YORK, NEW YORK AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT THREE
ARBITRATORS, COMPRISED OF AT LEAST ONE ATTORNEY AND ONE
53
<PAGE>
ACCOUNTANT; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATOR SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS.
(d) RESERVATION OF RIGHTS. NOTHING IN THIS AGREEMENT SHALL BE DEEMED TO
(i) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF LIMITATION
OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (ii) BE A WAIVER BY
THE LENDER OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (iii) LIMIT THE RIGHT OF THE LENDER (A)
TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SET-OFF, OR (B) TO
FORECLOSE AGAINST ANY REAL OR PERSONAL PROPERTY COLLATERAL, OR (C) TO OBTAIN
FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT LIMITED TO)
INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A RECEIVER. THE
LENDER MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE UPON SUCH PROPERTY, OR
OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR AFTER THE
PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS AGREEMENT.
NEITHER THIS EXERCISE OF SELF HELP REMEDIES NOR THE INSTITUTION OR MAINTENANCE
OF AN ACTION FOR FORECLOSURE OR PROVISIONAL OR ANCILLARY REMEDIES SHALL
CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE CLAIMANT IN ANY
SUCH ACTION, TO ARBITRATE THE MERITS OF THE CONTROVERSY OR CLAIM OCCASIONING
RESORT TO SUCH REMEDIES.
SECTION 10.06. ASSIGNABILITY.
(a) The Borrower shall not have the right to assign this Agreement or
any interest therein except with the prior written consent of the Lender.
(b) The Lender may make, carry or transfer Loans at, to or for the
account of, any of its United States branch offices or the United States office
of an Affiliate of the Lender or the Lender may pledge any Loans or Notes to any
Federal Reserve Bank.
(c) The Lender may assign to one or more financial institutions all or
a portion of its Commitment, the Loans owing to it and the Note or Notes held by
it and shall provide notice thereof and a copy of the instrument of assignment
to the Borrower, however, the failure by the Lender to so notify the Borrower or
to provide the Borrower with a copy of the instrument of assignment shall not
affect the Lender's rights hereunder. Upon the effectiveness of the assignment,
(x) the assignee thereunder shall be a party hereto, and, to the extent that
rights and
54
<PAGE>
obligations hereunder have been assigned to it, such assignee shall have the
rights and obligations of a "LENDER" hereunder and (y) the assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it, relinquish its rights (other than any rights it may have pursuant to
Sections 10.02 and 10.10 which will survive such assignment) and be released
from its obligations under this Agreement, other than with respect to Section
10.09 hereof (and, in the case of an assignment for all or the remaining portion
of an assigning Lender's rights and obligations under this Agreement, the Notes
and the other Loan Documents the Lender shall cease to be a party hereto). If a
bank syndicate is formed, the Lender agrees to serve as agent thereof.
(d) The Lender may sell participations (without the consent of the
Borrower) to one or more parties in or to all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment, the Loans owing to it and the Note or Notes held by
it); PROVIDED, HOWEVER, that (i) the Lender's obligations under this Agreement
and the other Loan Documents (including, without limitation, its Commitment to
the Borrower hereunder) shall remain unchanged, (ii) the Lender shall remain
solely responsible to the Borrower and the other Loan Parties for the
performance of such obligations, (iii) the Lender shall remain the holder of any
such Note for all purposes of this Agreement, (iv) the Borrower shall continue
to deal solely and directly with the Lender in connection with the Lender's
rights and obligations under this Agreement and (v) the Lender shall not
transfer, grant, assign or sell any participation under which the participant
shall have rights to approve any amendment or waiver of this Agreement except to
the extent such amendment or waiver would (A) extend the final maturity date or
the date of the payments of any installment of fees or principal or interest of
any Loans in which such participant is participating, (B) reduce the amount of
any installment of principal of any Loans in which such participant is
participating, (C) reduce the interest rate applicable to any Loans in which
such participant is participating, or (D) except as otherwise expressly provided
in this Agreement, reduce any fees payable to the Lender hereunder.
(e) The Lender agrees that, without the prior written consent of the
Borrower, it will not make any assignment hereunder in any manner or under any
circumstances that would require registration or qualification of, or filings in
respect of, any Loan or the Notes under the securities laws of the United States
of America or of any other jurisdiction.
(f) In connection with the efforts of the Lender to assign its rights
or obligations or to participate interests, the Lender may disclose to any
proposed participant and their counsel any information in its possession
regarding the Borrower or any Loan Party, subject to the provisions of Section
10.09.
SECTION 10.07. AMENDMENTS. Except as otherwise expressly provided in
this Agreement, any consent or approval required or permitted by this Agreement
or in any Loan Document to be given by the Lender may be given, and any term of
this Agreement or of any other Loan Document may be amended, and the performance
or observance by the Borrower of any terms of this Agreement or such other Loan
Document or the continuance of any Default or Event of Default may be waived
(either generally or in a particular instance and either
55
<PAGE>
retroactively or prospectively) with, but only with, the written consent of the
Borrower and the Lender. No waiver shall extend to or affect any obligation not
expressly waived or impair any right consequent thereon. No course of dealing or
delay or omission on the part of the Lender in exercising any right shall
operate as a waiver thereof or otherwise be prejudicial thereto. Except as
otherwise explicitly provided for herein or in any other Loan Document, no
notice to or demand upon the Borrower shall entitle the Borrower to other or
further notice or demand in similar or other circumstances.
SECTION 10.08. NONLIABILITY OF THE LENDER. The relationship between the
Borrower and the Lender shall be solely that of borrower and lender. The Lender
shall not have any fiduciary responsibilities to the Borrower. The Lender does
not undertake any responsibility to the Borrower to review or inform the
Borrower of any matter in connection with any phase of the Borrower's business
or operations.
SECTION 10.09. CONFIDENTIAL INFORMATION. Except as otherwise provided
by law, the Lender shall utilize all non-public information obtained pursuant to
the requirements of this Agreement which has been identified as confidential or
proprietary by the Borrower in accordance with its customary procedure for
handling confidential information of this nature and in accordance with safe and
sound banking practices but in any event may make disclosure: (i) to any of its
Affiliates (provided they shall agree to keep such information confidential in
accordance with the terms of this Section 10.09); (ii) as reasonably required by
any BONA FIDE transferee or participant in connection with the contemplated
transfer of any of the Revolving Commitment, the Term Loan or participations
therein as permitted hereunder (provided they shall agree to keep such
information confidential in accordance with the terms of this Section 10.09);
(iii) as required by any Governmental Authority or representative thereof or
pursuant to legal process; (iv) to the Lender's independent auditors and other
professional advisors (provided they shall agree to keep such information
confidential in accordance with the terms of this Section 10.09); and (v) after
the happening and during the continuance of an Event of Default, to any other
Person, in connection with the exercise of the Lender's rights hereunder or
under any of the other Loan Documents.
SECTION 10.10. INDEMNIFICATION. The Borrower shall and hereby agrees to
indemnify, defend and hold harmless the Lender and its directors, officers,
agents, employees and counsel from and against (a) any and all losses, claims,
damages, liabilities, deficiencies, judgments or expenses incurred by any of
them (except in each case to the extent that it is judicially determined to have
resulted from their own gross negligence or willful misconduct) arising out of
or by reason of any litigations, investigations, claims or proceedings which
arise out of or are in any way related to: (i) this Agreement or any Loan
Document or the transactions contemplated hereby or thereby including, without
limitation, amounts paid in settlement, Lender's court costs and the reasonable
fees and disbursements of counsel to the Lender incurred in connection with any
such litigation, investigation, claim or proceeding; (ii) the making of Loans;
(iii) any actual or proposed use by the Borrower of the proceeds of the Loans;
and (b) any such losses, claims, damages, liabilities, deficiencies, judgments
or expenses incurred in connection with any remedial or other
56
<PAGE>
action taken by the Borrower or the Lender in connection with compliance by the
Borrower or any of the Subsidiaries, or any of their respective properties, with
any federal, state or local Environmental Laws or other environmental rules,
regulations, orders, directions, ordinances, criteria or guidelines. If and to
the extent that the obligations of the Borrower hereunder are unenforceable for
any reason, the Borrower hereby agrees to make the maximum contribution to the
payment and satisfaction of such obligations which is permissible under
Applicable Law. The Borrower's obligations hereunder shall survive any
termination of this Agreement and the other Loan Documents and the payment in
full of the Secured Obligations, and are in addition to, and not in substitution
of, any other of its obligations set forth in this Agreement.
SECTION 10.11. SURVIVAL. Notwithstanding any termination of this
Agreement, or of the other Loan Documents, the indemnities to which the Lender
is entitled under the provisions of Sections 10.02 and 10.10 and under any other
provision of this Agreement and the other Loan Documents shall continue in full
force and effect and shall protect the Lender against events arising after such
termination as well as before.
SECTION 10.12. TITLES AND CAPTIONS. Titles and captions of Articles,
Sections, subsections and clauses in this Agreement are for convenience only,
and neither limit nor amplify the provisions of this Agreement.
SECTION 10.13. SEVERABILITY OF PROVISIONS. Any provision of this
Agreement or any other Loan Document which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective only to the extent
of such prohibition or unenforceability without invalidating the remainder of
such provision or the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 10.14. COUNTERPARTS. This Agreement and any other Loan Document
may be executed in any number of counterparts, each of which shall be deemed to
be an original and shall be binding upon all parties, their successors and
assigns.
[Signatures on next page]
57
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S-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their authorized officers all as of the day and year first above
written.
TRAVEL SERVICES INTERNATIONAL, INC.
By: /s/ JILL M. VALES
------------------------------------
Name: Jill M. Vales
Title: Senior Vice President and
Chief Financial Officer
NATIONSBANK, N.A.
By: /s/ JOHN M. POWELL
-------------------------------------
Name: John M. Powell
Title:
EXHIBIT 11
TRAVEL SERVICES INTERNATIONAL, INC.
SCHEDULE OF COMPUTATIONS OF EARNINGS PER SHARE
WEIGHTED
AVERAGE
SHARES SHARES
--------- ---------
Three Months Ended September 30, 1996.
Shares attributable to Auto Europe, accounting
acquiror, at beginning of period(1) 1,083,334 1,083,334
--------- ---------
Shares used in computing earnings per share three
months ended September 30, 1996 1,083,334 1,083,334
========= =========
Three Months Ended September 30, 1997.
Shares attributable to Auto Europe, accounting
acquiror, at beginning of period(1) 1,083,334 1,083,334
Shares issued in consideration for acquisition of
Founding Companies 2,338,891 1,652,477
Shares issued to founders and management of TSI 2,484,501 1,755,354
Sold pursuant to the Offering 2,875,000 2,031,250
Options granted during the year 838,900 218,855
--------- ---------
Shares used in computing earnings per share three
months ended September 30, 1997 9,620,626 6,741,270
========= =========
Nine Months Ended September 30, 1996.
Shares attributable to Auto Europe, accounting
acquiror, at beginning of year(1) 1,083,334 1,083,334
--------- ---------
Shares used in computing earnings per share nine
months ended September 30, 1996 1,083,334 1,083,334
========= =========
Nine Months Ended September 30, 1997.
Shares attributable to Auto Europe, accounting
acquiror, at beginning of year(1) 1,083,334 1,083,334
Shares issued in consideration for acquisition of
Founding Companies 2,338,891 558,926
Shares issued to founders and management of TSI 2,484,501 593,723
Sold pursuant to the Offering 2,875,000 687,040
Options granted during the year 838,900 74,024
--------- ---------
Shares used in computing earnings per share nine
months ended September 30, 1997 9,620,626 2,997,047
========= =========
Note
(1) Shares issued to former stockholders of Auto Europe, accounting acquiror, in
connection with combination.
(2) Primary and fully diluted earnings per share are the same.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEETS AND STATEMENTS OF INCOME INCLUDED IN THE COMPANY'S FORM
10-Q FOR THE PERIOD ENDING SEPTEMBER 30, 1997, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS, INCLUDING THE NOTES
THERETO. FINANCIAL INFORMATION CONTAINED IN THIS SCHEDULE IS FOR THE
COMPANY'S ACCOUNTING ACQUIROR. SEE NOTE 1, BASIS OF PRESENTATION, TO THE
NOTES TO FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 14,389
<SECURITIES> 0
<RECEIVABLES> 3,239
<ALLOWANCES> 194
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,230
<DEPRECIATION> 0
<TOTAL-ASSETS> 70,143
<CURRENT-LIABILITIES> 17,208
<BONDS> 0
0
0
<COMMON> 88
<OTHER-SE> 48,652
<TOTAL-LIABILITY-AND-EQUITY> 70,143
<SALES> 0
<TOTAL-REVENUES> 34,855
<CGS> 23,122
<TOTAL-COSTS> 23,122
<OTHER-EXPENSES> 8,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 81
<INCOME-PRETAX> 3,004
<INCOME-TAX> 101
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,903
<EPS-PRIMARY> .97
<EPS-DILUTED> .97
</TABLE>
