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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE YEAR ENDED DECEMBER 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 333-52673
GLOBAL VACATION GROUP, INC.
(Exact name of registrant as specified in its charter)
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NEW YORK 13-1894567
(State of Incorporation) (IRS Employer Identification No.)
1420 NEW YORK AVENUE, N.W., SUITE 550 20005
WASHINGTON, DC (Zip Code)
(Address of registrant's principal executive offices)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (202) 347-1800
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock (par value $.01 per share)
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
Company as of the 11th day of March 1999, was approximately $45,825,095 based on
the $10.25 closing sale price for the Common Stock on the Stock Market on such
date. For purposes of this computation, all executive officers, directors and
persons beneficially owning more than five percent of the Company have been
deemed to be affiliates. Such determination should not be deemed to be an
admission that such directors and officers are, in fact, affiliates of the
Registrant.
The number of shares of Common Stock of the Registrant outstanding as of
the 11th day of March, 1999, was 14,747,576.
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DOCUMENTS INCORPORATED BY REFERENCE
Part of the Registrant's Proxy Statement for the Annual Meeting of Shareholders
to be held on May 12, 1999 are incorporated by reference into Part III of this
Form 10-K Report. (The Compensation Committee Report and the stock performance
graph of the Registrant's Proxy Statement are expressly not incorporated by
reference herein.)
PART I
ITEM 1. BUSINESS
THE COMPANY
The Company is one of the largest U.S. providers of value-added vacation
products and services targeted to higher-income travelers. The Company assembles
air, hotel, rental car and other travel components in bulk and provides complete
vacations to travelers through retail travel distributors, such as travel
agents, and other distribution channels, including the Internet and affinity
groups. The Company provides flexible independent travel programs for
individuals as well as escorted tours and group packages.
The Company intends to achieve the leading market position in selected
high-volume, high-margin travel destinations and will focus initially on the
following sales areas: (i) Hawaii; (ii) in-bound vacations to the United States
for international travelers; (iii) Florida, the Caribbean and Mexico; (iv) other
U.S. destinations such as California and New York; and (v) out-bound travel by
U.S. travelers to Europe. The Company focuses its marketing efforts on travelers
who typically spend more than $750 per person for a vacation. The Company also
provides certain services to travel suppliers, including outsourced vacation
packaging and affinity group marketing and awards program fulfillment.
The Company markets its products and services to U.S. customers under two
specific proprietary brands: one for up-scale, customized vacations (Classic
Custom Vacations) and another for popular-priced vacation packages
(Globetrotters). The Company believes providing expertise and competitive
pricing in multiple destinations through two separate brands targeted to
different consumer groups distinguishes its products and services and provides
the Company with a significant competitive advantage. In addition to serving
multiple destinations, the Company also has achieved a diverse domestic and
international customer base. The Company uses its international scope to create
cross-selling opportunities and expand its relationships with suppliers of
quality travel products and services (primarily airlines, hotel companies and
rental car companies).
INDUSTRY OVERVIEW
Tourism is one of the world's largest industries. The Company participates
in two segments of the tourism industry: (i) in-bound vacation travel to North
American destinations by foreign travelers and (ii) vacation travel by U.S.
travelers. According to the Travel Industry Association of America ("TIA"),
Americans spent a total of $408 billion on all types of domestic travel in 1997.
Also according to TIA, 71% of the domestic trips taken by U.S. travelers in 1997
were for personal or vacation travel, and management believes that approximately
70% of the trips taken by U.S. travelers to Europe were for personal or vacation
travel. According to a survey by the U.S. Department of Commerce, there were 9.9
million U.S. tourists visiting Europe in 1997, an 11.7% increase from 1996. In
addition, TIA, in conjunction with the Tourism Industries, estimates that there
were 47.7 million international visitors to the United States in 1997 who spent
an aggregate of $94.2 billion on such trips. Also according to TIA, the total
amount spent by international travelers to the United States grew by 203%
between 1987 and 1998.
Travel suppliers use package vacation providers such as the Company to sell
their capacity more efficiently and support their yield management. At the same
time, management believes that purchasing travel products and services from
package vacation providers can lower costs, simplify booking and result in
higher commissions for retail travel agents. As a result of the approximately
one-third erosion in stated commissions from airlines for U.S. domestic travel
over the past three years, the Company believes travel agents are seeking to
establish relationships with package vacation providers that will offer better
customer service, competitive prices and attractive commission structures.
Management believes approximately 90% of package tours in 1998 were sold through
retail travel agents.
The U.S. package vacation industry is fragmented, with more than an
estimated 1,600 package vacation providers. The Company believes many of these
businesses generally have made only small investments in technology to improve
operating efficiency and may face significant investment requirements to meet
current information technology demands, including Year 2000 compliance issues.
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Furthermore, most of these companies lack the scale necessary to obtain
preferential pricing and capacity from travel suppliers and to establish a
nationally recognized brand name.
OPERATING STRATEGY
In providing value-added vacation products and services targeted to
higher-income travelers, the Company pursues an operating strategy that includes
the following elements:
Creating Value-added Vacation Products and Services. The Company focuses on
creating vacation packages that provide added value to higher-income travelers.
The Company believes that, because of its size and expertise in certain
destinations, it can (i) generally provide better prices and inventory
availability than can be obtained by an individual travel agency or traveler,
(ii) enhance and simplify access to travel information across multiple
destinations and (iii) assemble vacation travel components into convenient
packages for ease of planning and booking.
Establishing National Brand Name Recognition. The Company believes it can
leverage its presence in leading origination and destination cities to develop
nationally recognized proprietary brand names in the package vacation industry.
The Company believes offering expertise and competitive pricing through common
brands across multiple destinations will provide greater confidence to travelers
in making their vacation choices and engender consumer loyalty and a pattern of
repeat purchases.
Leveraging Strength in Selected Travel Destinations. The Company believes
it has a leading position in the package vacation sales areas for westbound
travel to Hawaii and for in-bound travel to the United States and intends to
achieve the leading position in these and other high-volume, high-margin
vacation destinations. The Company believes having scale and expertise in
selected destinations gives it access to pricing and inventory that provides the
Company with a significant competitive advantage.
Pursuing Revenue Enhancing Opportunities. The Company's revenue enhancing
strategies include (i) improving yield management by obtaining greater access
to high-margin products and services, (ii) expanding ancillary products and
services, such as city tours and travel protection, (iii) securing favorable
pricing and inventory availability through strategic purchasing relationships
and (iv) improving cash management, particularly management of traveler
deposits and advance payments.
Improving Operating Efficiencies. The Company has begun to reduce its
operating expenses by (i) capitalizing on enhanced purchasing efficiencies, (ii)
implementing a more effective utilization program of its physical and other
assets, (iii) implementing best practices in its management and business
systems, (iv) enhancing marketing relationships with travel suppliers and other
related parties and (v) outsourcing certain functions where appropriate.
Implementing Integrated Information Systems. The Company will continue to
integrate its information systems in order to improve its ability to offer
travelers value-added vacation products and services and to leverage maintenance
and development costs across a broader customer base. In addition, integrated
systems will facilitate the use of common operating platforms, reduce the cost
and time requirements of developing external interfaces and accelerate the
integration of subsequent acquisitions.
GROWTH STRATEGY
To complement its operating strategy, the Company has developed a
multi-faceted growth strategy that includes the following elements:
Build Strong Brands. Traditionally, vacation package products have not
achieved brand awareness, which in most cases has reduced consumers perception
of value and credibility. Building strong vacation package brands not only
enhances consumer confidence and perception of value, it creates an opportunity
to more easily introduce new products. The Company intends to generate internal
growth and strengthen brand awareness by (i) implementing an integrated national
marketing program, (ii) increasing its presence in underpenetrated origination
markets and (iii) implementing loyalty programs that stimulate repeat purchases.
Leverage Traditional Distribution Channels. The Company's products
currently are sold through 16,000 travel agents, but 10,000 market only one of
its brands. This creates exceptional opportunities to cross-sell both brands in
an integrated sales and marketing program. The Company already has begun
establishing national contracts with agency chains and consortia. Recently, the
Company announced that Carlson Leisure Group's 1,200 offices nationwide will
sell the products of both of its brands, as will the Travel Associates Network,
the nation's largest travel agent consortium.
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Expand Marketplace Coverage and Introduce Product Extensions. The Company
has a number of initiatives under way to increase leisure travel sales. The
Classic Custom Vacations brand, already a major vacation package provider to
Hawaii, will launch in February 1999 its first Caribbean product offerings and
is expanding its upscale product offerings into new European and U.S.
destinations. Haddon Holiday's program to Hawaii, which is exclusively on United
Airlines, has been expanded from the East Coast to a highly successful national
program.
The Globetrotters brand is expanding its affinity product marketing
relationships with Hyatt and Amtrak. In 1999, the Company also will reposition
and expand its Super Cities products, urban-oriented vacation packages to 13
popular U.S. destinations and London.
Make Accretive Acquisitions. The vacation industry is highly fragmented
with approximately 1,600 companies. No company has more than a 5 percent share
of sales. A number of converging elements point toward accelerating
consolidation. Many of today's owners are approaching retirement and find
selling an attractive exit strategy. Rapid changes in the industry, including
the impact of technology and the Internet, also are major factors. The Company
will generally seek to acquire companies that (i) have desirable destination
concentrations, (ii) have demonstrated growth and profitability, (iii) have an
emphasis on customer service, (iv) have an experienced management team and (v)
are likely to add some other strategic value to the Company.
Enhance Supplier Relationships. The Company is establishing deeper
preferred supplier relationships to improve the value equation for both parties
by generating greater operating efficiencies, developing more unique products
and optimizing marketing efforts. These efforts add value to its brands and
attract more customers.
Penetrate Direct Marketing Channels. The Company seeks to capitalize on the
opportunities presented by the direct selling of vacation products and services
to travelers and the emergence of alternative distribution channels while still
supporting and leveraging its strong relationships with existing retail travel
agents. Only half of all vacations in our target markets are sold by travel
agents. While travel agents are its most important customer and primary
distribution channel, the Company sees a tremendous opportunity to reach out to
those consumers who do not use travel agents. The Company intends to provide
these potential new customers, a $50 billion marketplace, with the products and
distribution channels that best meet their needs.
KEY DESTINATIONS
Hawaii. Westbound travel was up in 1998 after having been relatively flat
the preceding three years according to the Hawaiian Visitor and Convention
Bureau.
The Company is one of the leading providers of vacations to Hawaii for
travelers from the continental United States and has over 15 years of experience
in the Hawaii travel marketplace. The Company has relationships with major
airlines, such as United, Delta, American, Continental and Hawaiian for travel
to Hawaii, and Hawaiian and Aloha for air travel within Hawaii, all of which
provide the Company with access to prices that generally are better than
published fares and to capacity for air travel to Hawaii, as well as marketing
support. In addition, the Company utilizes a staff of over 100 on location in
Hawaii to provide destination management for its Hawaii package vacations
products and services. The Company believes its extensive experience and
established reputation in Hawaii as well as its airline relationships are
significant competitive advantages for it. The Company believes the Hawaii
travel marketplace will continue to present growth opportunities in the future
and to represent a significant portion of its revenues.
In-bound to the United States. According to TIA, in conjunction with the
Tourism Industries, 47.7 million in-bound travelers to the United States spent
$94.2 billion on travel to and within the United States in 1997, making the
United States the most popular tourist destination worldwide. Also according to
TIA, the total amount spent by international travelers to the United States grew
by 203% between 1987 and 1998.
The Company is among the largest package vacation providers for in-bound
travelers to the United States. The Company's customers for these products and
services primarily are international travel distributors who send travelers to
the United States. The Company believes its broad customer base among European
and other international travel distributors and its status as one of a limited
number of designated providers of vacations for in-bound travelers to the
various Disney properties in Florida and California represents a significant
competitive advantage.
Florida, the Caribbean and Mexico. In 1998, according to the Florida
Tourism Industry Marketing Corporation, approximately 48.7 million visitors
traveled to Florida and approximately 8% of these travelers booked their travel
in package form. TIA has reported
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that approximately 3.9 million U.S. travelers visited Caribbean destinations
during 1997 and approximately 17.7 million U.S. travelers visited Mexico during
1997.
The Company has an established presence in the markets for travel to
Florida, the Caribbean and Mexico. The Company has over 15 years of experience
in these destinations and has established key strategic relationships, including
as one of a limited number of designated providers for American Airlines in the
Caribbean. The Company also acts as one of a limited number of designated
providers for Disney World. The Company believes its extensive experience and
established reputation in these markets as well as its supplier relationships
give it a significant competitive advantage over other providers of vacations to
these destinations.
Other U.S. Destinations. The Company offers products and services to a
number of other destinations in the United States in addition to Hawaii and
Florida. The Company is the exclusive provider of vacation products and services
for Amtrak. The Company believes it has significant purchasing power for
destinations throughout the United States due to the volume of U.S. travel
products and services it purchases for both in-bound and domestic travelers. As
a result, the Company is able to create and effectively market products and
services in demand by travelers, including weekend trips and excursions such as
"theater packages" in New York.
Europe. According to a survey by the U.S. Department of Commerce, there
were 9.9 million U.S. tourists visiting Europe in 1997, an 11.7% increase from
1996. The Company has an established presence in the marketplace for travel by
U.S. residents to Europe. The Company intends to increase its presence in this
sales marketplace by cross-selling within its existing customer base, by
leveraging its relationships with travel distributors to create demand for the
Company's brand name products and services and by leveraging its existing
relationships with suppliers to obtain preferential pricing and access to
capacity for European destinations.
PRODUCTS AND SERVICES
The Company focuses on specific destinations in order to become a leading
provider of value-added vacation products and services while at the same time
providing travel suppliers with efficient and cost effective distribution of
their capacity. The Company has expertise in and access to the products and
services of a broad range of travel suppliers. Based on customer research, the
Company designs its products and services to offer travelers a wider choice than
that of an individual supplier. The Company assembles travel products and
services in bulk and combines them to create customized vacations for individual
travelers. The Company creates demand for its products through integrated
marketing programs and handles all reservations, payment processing and supplier
processing interfaces. The Company has developed the in-depth knowledge of these
products and services that a retail travel agent, which acts as a broker or
reseller of the entire spectrum of travel products and services, is unlikely to
acquire.
The Company focuses on ensuring customer satisfaction and cultivating
consumer loyalty to its products and services. The Company has quality control
mechanisms, such as destination management programs, in place to provide
customer support and monitor the quality of the individual travel components and
overall customer satisfaction.
The Company is the exclusive provider of certain private label vacation
products and services for Amtrak and Hyatt. The Company believes there are
significant opportunities to expand its business by assembling package vacations
on behalf of other companies, which seek to leverage their brand names. The
benefits of capitalizing on such opportunities include (i) access to the
customers, (ii) enhanced visibility in the marketplace through association with
other well-recognized brands and (iii) reduced advertising and marketing costs
through sharing arrangements.
The Company also manages bank card reward and other affinity group
marketing programs for several companies, including The Chase Manhattan Bank
N.A. and U.S. Bancorp. The Company has certain proprietary software and
extensive operating experience it believes provide a significant opportunity to
capitalize on this capability. The Company intends to increase sales by
proactively marketing its services to affinity group sponsors. The Company
believes access to affinity groups provides unique opportunities for the direct
marketing of its products and services to targeted travelers.
SALES AND MARKETING
The Company pursues a fully integrated sales and marketing effort in
support of its proprietary travel products and services as well as the private
label products and services the Company manages and markets for other companies.
The Company directs its marketing toward retail distributors and other
intermediaries as well as to travelers directly. By employing a multi-faceted
marketing approach targeted both to travel distributors and to individual
travelers, the Company believes it will increase the demand for its products and
services. In addition, the Company will integrate its own marketing efforts with
the marketing support it receives from certain travel suppliers with whom the
Company has an established relationship. The Company believes it will be able to
leverage its national
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presence and established marketing and sales experience and strength into a
competitive advantage. The Company seeks to identify and cultivate new customers
and create cross-selling opportunities within its existing customer base.
A substantial majority of the Company's products and services are sold
through a broad network of retail travel agencies, including independent firms
and agencies affiliated with travel consortia or national accounts. The Company
typically offers retail travel agencies a base commission on the sale of Company
products with the opportunity to earn additional override commissions on sales
above negotiated threshold amounts. In addition to supplying travel agents with
brochures and merchandising materials, the Company leverages its relationships
through targeted marketing efforts including travel agent training, trade shows,
cooperative advertising and performance incentives. These efforts also will
include strategic distribution and favorable vendor arrangements (both exclusive
and non-exclusive) with other travel intermediaries, national accounts and
travel agency consortia. The Company employs a dedicated sales force to maintain
and expand these relationships.
The Company's marketing focuses on domestic and foreign travel distributors
who market vacation products and services directly to travelers. The Company has
developed numerous important relationships with major travel distributors in
Europe and in certain other key international origination areas. The Company's
marketing efforts with these distributors include direct sales efforts,
brochures, trade advertising and trade shows in addition to effective account
management of existing, long-standing relationships.
The Company will pursue marketing opportunities in other distribution
channels as well. The Company intends to develop marketing programs aimed at
travelers who purchase travel products and services through affinity groups, and
the Company will pursue strategic relationships with the owners of
non-travel-related consumer brands that represent a consumer base the Company
wishes to target. Finally, to reach travelers who prefer to purchase leisure and
travel products and services on the Internet, the Company currently is
finalizing its Internet strategy. This includes developing relationships with
Internet companies to market the Company's products and services on their web
sites or provide links to the Company's existing web sites (gvg.com,
classiccustomvacations.com and globetrottervacations.com), as well as offering
an Internet booking capability.
BUSINESS AND INFORMATION SYSTEMS
The Company believes the successful application of common business and
information systems will be important to its ability to create operating
efficiencies and establish a competitive advantage. The on-going migration of
systems of the Acquired Businesses to a shared system will enable the Company to
spread maintenance and development costs across a broader customer base,
facilitate the use of common operating platforms and reduce the costs and time
requirements of developing external interfaces. In addition, it is likely that
application of system solutions will become increasingly important to enable the
Company to integrate customer identification and profiling capabilities with
reservation and operational business systems. This combination will enable the
Company to leverage each customer encounter into a basis for generating repeat
business and establishing a long-term relationship.
Recognizing the importance of the rapid integration of information systems
to its strategy, on August 14, 1998, the Company, Trase Miller Solutions and the
majority shareholder of Trase Miller Solutions entered into an agreement with a
term ending on April 30, 2006 (the "Outsourcing Agreement") to expand this
outsourcing agreement to provide a common platform system for all the Company's
businesses (other than the business systems associated with the Company's
in-bound business). During the term of the Outsourcing Agreement, Trase Miller
Solutions will provide to the Company information systems and related services,
including operating services, system maintenance, general management and support
and implementation and migration services. From April 1, 1999 through April 30,
2006, The Company will pay Trase Miller Solutions for the services provided
under the Outsourcing Agreement on a cost-plus 20% basis and will pay royalty
fees of $17.5 million in the aggregate. In connection with the Outsourcing
Agreement, the Company also paid $6.8 million to acquire an option, exercisable
through January 10, 1999, to purchase all of the outstanding stock of Trase
Miller Solutions. In January 1999, the Company paid approximately $2.3 million
to extend the option through March 31, 1999. In the event the Company exercises
this option, the purchase price will be $18.8 million, subject to certain
adjustments and to a credit for the amount paid by the Company to acquire the
option and extension. If the Company does not exercise the option, the amounts
paid to acquire the option and extension will be credited over three years
beginning April 1, 1999 against payments owing to Trase Miller Solutions under
the Outsourcing Agreement.
The Company believes that this arrangement will offer a number of
advantages, which include (i) allowing the Company to focus on its core
competencies of creating and marketing value-added vacation packages, (ii)
leveraging third party investments in rapidly evolving technology, (iii)
shortening the required time to develop and implement a shared technology
platform, (iv) containing the costs of such development and implementation and
(v) developing the ability to market and arrange vacations through electronic
distribution systems (including SABRE, Galileo and WORLDSPAN) as well as through
the Internet.
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The Company plans to employ a chief information officer to manage its
outsourced operations as well as to administer, install and maintain the
Company's own network and custom development requirements. Prior to the
achievement of full systems integration, which is expected to be completed in
1999, the Company will operate on several separate systems.
COMPETITION
The Company competes with a variety of other providers of travel and
travel-related products and services. Its principal competitors are other
vacation providers, travel agencies and other retail and wholesale distributors
of travel products and services, some of which are larger and have greater name
recognition and financial resources than the Company. Certain package vacation
providers that compete with the Company may have relationships with travel
suppliers that give them preferred access to capacity or more competitive
pricing than is available to the Company. Other travel providers have a presence
in particular travel destinations that is stronger than that of the Company. The
Company also competes with travel suppliers, including some of the Company's
travel suppliers, that sell directly to individual travelers. The Company
believes it competes for customers based upon the quality of the travel products
and services delivered, price, specialized knowledge, reputation and
convenience. The Company believes it is well-positioned to compete on these
bases.
EMPLOYEES
The Company employs approximately 730 people, a majority of whom are
located at the Company's principal offices in San Jose, CA, New York, NY,
Downers Grove, IL and on location in Hawaii. Approximately 320 of the Company's
employees serve as reservation staff and the remainder serve in customer service
and operations, sales and marketing, information systems and management and
administration. The Company believes it enjoys good relations with its
employees, none of whom are covered by any collective bargaining agreements.
QUALIFICATION OF FORWARD-LOOKING STATEMENTS
The statements contained in this Report that are not purely historical are
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including
without limitation statements regarding the Company's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Company on
the date hereof, and the Company assumes no obligation to update any such
forward-looking statements. The forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause actual results,
experience and the performance or achievements of the Company to be materially
different from those anticipated, expressed or implied by the forward-looking
statements. In evaluating the Company's business, the following factors, in
addition to the Risk Factors set forth below and other information set forth
herein, should be carefully considered: successful integration of systems;
factors affecting internal growth and management of growth; dependence on travel
providers; success of the acquisition strategy and availability of acquisition
financing; success in entering new segments of the travel market and new
geographic areas; dependence on technology; labor and technology costs;
advertising and promotional efforts; risks associated with the travel industry
generally; seasonality and quarterly fluctuations; competition; and general
economic conditions. In addition, the Company's business strategy and growth
strategy involve a number of risks and challenges, and there can be no assurance
that these risks and other factors will not have a material adverse effect on
the Company.
RISK FACTORS
The following factors should be considered in addition to other information
included in this Form 10-K.
SUBSTANTIAL COMPETITION
The package vacation industry is highly competitive and has relatively low
barriers to entry. The Company competes primarily with other vacation providers,
travel agencies and other retail and wholesale distributors of travel products
and services, some of which are larger and have greater brand name recognition
and financial resources than the Company. Competition within the package
vacation industry is increasing as certain of the Company's competitors are
expanding their size and financial resources through consolidation. Certain
package vacation providers that compete with the Company may have relationships
with travel suppliers that give them preferred access to capacity or more
competitive pricing than is available to the Company. Furthermore, some travel
providers have a strong presence in particular geographic areas, which may make
it difficult for the Company to attract customers in those areas. The Company
also competes with travel suppliers, including some of the Company's travel
suppliers, that sell directly to
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individual travelers. These suppliers may restrict the availability of travel
products or services or the ability of the Company to offer such products or
services at preferential prices. Consolidation among travel suppliers has left
the remaining suppliers in a stronger position relative to providers of travel
products and services, such as the Company. As a result of competitive
pressures, the Company's revenues and margins may decline. There can be no
assurance that the Company will be able to compete successfully, and the failure
to compete successfully may have a material adverse effect on the business,
financial condition and results of operations of the Company.
CHANGING INDUSTRY DYNAMICS; NEW METHODS OF DISTRIBUTION
Innovations in on-line technology such as the Internet have increased the
ability of travel suppliers to distribute their travel products and services
directly to travelers. Travelers can now use the Internet to access information
about travel products and services and to purchase such products and services
directly from suppliers, thereby bypassing both vacation providers such as the
Company and retail travel agents through whom the Company receives a substantial
majority of its revenues. In addition, recent erosion of commissions paid by
travel suppliers, particularly airlines, to travel distributors has weakened the
financial condition of many travel agents. Because the Company currently relies
to a large extent on retail travel agencies for access to travelers and
revenues, a shift in consumer purchasing away from travel agencies and toward
direct purchasing from travel suppliers could have an adverse impact on the
Company. Also, although the Company has a strategy to capitalize on the
emergence of the Internet as an alternative distribution channel, there can be
no assurance that such strategy will be successful or will not negatively impact
the Company's relationship with retail travel agents.
ABSENCE OF COMBINED OPERATING HISTORY
Following the recapitalization of the Company in March 1998 (the
"Recapitalization"), the Company completed the acquisitions (together "the
Acquisitions") of Haddon Holidays, Inc. ("Haddon"), Classic Custom Vacations
("Classic"), MTI Vacations, Inc. ("MTI"), and Globetrotters, Inc.
("Globetrotters") (the "Acquired Businesses"). The Acquisitions account for a
substantial majority of the Company's pro forma revenues for 1997. Although the
Company and each of the Acquired Businesses have been in operation for more
than 15 years, they have virtually no history of combined operations. The pro
forma consolidated financial data included in this Form 10-K cover periods when
the Company and the Acquired Businesses were not under common management or
control and are not necessarily indicative of the results that would have been
achieved if the Company and the Acquired Businesses had been operated on an
integrated basis or the results that may be realized on a consolidated basis in
the future.
DEPENDENCE ON TRAVEL SUPPLIERS
The Company is dependent upon travel suppliers for access to their products
and services. Certain travel suppliers, such as American Airlines, Inc.
("American Airlines"), Delta Air Lines, Inc. ("Delta"), United Air Lines, Inc.
("United"), Aloha Airlines, Inc. ("Aloha"), Hawaiian Airlines, Inc. ("Hawaiian
Airlines"), Hyatt Hotels Corporation ("Hyatt"), ITT Starwood Hotels & Resorts
Worldwide, Inc., Marriott International, Inc. and Amtrak, offer the Company (i)
non-exclusive pricing that is preferential to published rates, enabling the
Company to offer complete vacations at prices lower than generally would be
available to individual travelers and retail travel agents, (ii) non-exclusive
preferential access to inventory of their travel products and services, enabling
the Company to assemble more desirable vacations for travelers, or (iii) in the
case of certain travel suppliers, both non-exclusive preferential pricing and
access to inventory. The Company's travel suppliers generally can cancel or
modify their agreements with the Company upon relatively short notice. In
addition, any decline in the quality of travel products and services provided by
these suppliers, or a perception by travelers of such a decline, could adversely
affect the Company's reputation. The loss of contracts, changes in the Company's
pricing agreements, commission schedules or incentive override commission
arrangements, more restricted access to travel suppliers' products and services
or less favorable public opinion of certain travel suppliers and resulting low
demand for the products and services of such travel suppliers could have a
material adverse effect on the business, financial condition and results of
operations of the Company.
CONCENTRATION IN HAWAIIAN MARKETPLACE
In 1998, the Company derived approximately 50% of its gross revenues from
products and services associated with vacations to Hawaii. Westbound travel was
up in 1998 after having been relatively flat the preceding three years according
to the Hawaiian Visitor and Convention Bureau. A downturn in the market for
vacations to Hawaii could have a material adverse effect on the business,
financial condition and results of operations of the Company.
8
<PAGE> 9
MANAGEMENT OF GROWTH; INTEGRATION OF OPERATIONS
The Company has grown rapidly since March 1998 through the Acquisitions,
and the Company expects to continue to grow in part through additional
acquisitions. The Company's executive management group has been assembled in the
past year, and there can be no assurance that the executive management group
will be able to manage effectively the combined entity or implement the
Company's operating and growth strategies. In addition, the rapid pace of
acquisitions has, and will continue to, put pressure on the Company's personnel,
computer systems and other corporate support systems. Any inadequacy of such
systems to manage the increased size and scope of operations resulting from
growth or the inability of the Company to integrate successfully the Acquired
Businesses or future acquisitions could have a material adverse effect on the
business, financial condition and results of operations of the Company.
The Company will continue to improve its profitability by various means,
including a continued reduction of redundant operating and overhead costs,
increased asset utilization and enhanced purchasing power. The Company's ability
to sustain profitability improvements will be affected by various factors, such
as the costs associated with centralizing its administrative functions and its
ability to benefit from enhanced purchasing power, many of which are beyond the
control of the Company. In addition, the Company's ability to achieve its
operating and growth goals will depend in large part on its ability to continue
to consolidate and integrate certain administrative functions common to the
Company and the Acquired Businesses. Such consolidation and integration has
required substantial attention from senior management and may disrupt the
operations of the Company, as management attention is diverted from other tasks,
and as technological, practical or personnel issues arise. In addition, although
no material capital expenditures currently are anticipated in connection with
such consolidation and integration, there can be no assurance that such
consolidation and integration will not result in the requirement to make
material unanticipated capital expenditures. There can be no assurance that such
consolidation and integration will be completed or that, if completed, the
Company will recognize any economic benefit.
DEPENDENCE ON ACQUISITIONS FOR FUTURE GROWTH
One of the Company's strategies is to increase its revenues and the markets
it serves through acquisitions. There can be no assurance that suitable
candidates for acquisitions can be found or, if suitable candidates are
identified, that acquisitions can be completed on acceptable terms. In this
regard, the Company faces competition from other package vacation providers as
well as from travel suppliers and vertically integrated travel companies in its
efforts to identify acquisition targets and complete acquisitions. In addition,
as consolidation in the industry continues, the prices for attractive
acquisition candidates may be bid up to higher levels, and there can be no
assurance that businesses acquired in the future will achieve sales and
profitability that justify the investment therein. The failure of the Company to
acquire additional travel businesses may limit the Company's ability to grow in
the future.
Future acquisitions may involve a number of risks that could adversely
affect the business, results of operations and financial condition of the
Company. These could include adverse short-term effects on the Company's
reported operating results such as those caused by severance payments to
employees of acquired companies, difficulties in eliminating duplicative costs,
restructuring charges associated with the acquisitions and other expenses
associated with a change of control, as well as non-recurring acquisition costs.
Acquisitions also may divert management's attention, create difficulties with
retention, hiring and training of key personnel, raise risks associated with
unanticipated problems or legal liabilities and require non-cash accounting
charges associated with the amortization of acquired intangible assets.
Furthermore, although the Company conducts due diligence and generally requires
representations, warranties and indemnifications from the former owners of
acquired companies, there can be no assurance that such owners will have
accurately represented the financial and operating conditions of their companies
or will have the means to satisfy their indemnification obligations. If an
acquired company's financial or operating results were misrepresented, the
acquisition could have a material adverse effect on the business, financial
condition and results of operations of the Company.
INTEGRATION OF INFORMATION AND BUSINESS SYSTEMS
The Company and each of the Acquired Businesses have operated separate
internal information and business systems. Prior to the acquisition by the
Company of MTI Vacations, Inc. ("MTI"), MTI received information and business
system support on an outsourced basis from Trase Miller Solutions, Inc. ("Trase
Miller Solutions"), and Trase Miller Solutions continues to provide such
services to MTI. In order to migrate the separate support systems which the
Company and the other Acquired Businesses currently operate (other than the
business systems associated with the Company's in-bound business) to a common
platform system, the Company has negotiated to expand the outsourcing agreement
with Trase Miller Solutions throughout the Company's business. The Company
currently estimates the migration to the Trase Miller Solutions system will be
accomplished prior to the end of 1999, subject to the integration of any further
acquisitions. Once this migration is complete, the Company's ability to deliver
its products and services and manage its internal systems will depend
substantially on the Trase Miller Solutions system. There can be no assurance
that the implementation will be completed on a timely cost-effective basis and
without unforeseen difficulties. In addition, while the Company
9
<PAGE> 10
believes that the Trase Miller Solutions system will provide adequately for the
Company's information and business system requirements, there can be no
assurance that the Trase Miller Solutions system will in fact meet the
Company's needs. Prior to the company-wide implementation of the Trase Miller
Solutions system, the operation of multiple separate systems, including the
systems of any businesses hereafter acquired by the Company, could adversely
affect the Company's ability to monitor and manage its operations. The failure
of the Company to effectively manage the Trase Miller Solutions agreement or
otherwise to integrate its separate systems, any delays or difficulties
encountered in implementing the Trase Miller Solutions system or the failure of
the Trase Miller Solutions system to meet the Company's information and
business system requirements could have a material adverse effect on the
business, financial condition and results of operations of the Company (See
Note 8 - Trase Miller Agreement of Notes to Consolidated Financial Statements).
DEPENDENCE ON TECHNOLOGY; YEAR 2000 ISSUE
The Company's business is dependent upon a number of different information
and telecommunications technologies to access information and manage reservation
systems, including handling a high volume of telephone calls on a daily basis.
Rapid changes in these technologies may require greater than anticipated capital
expenditures to improve or upgrade the level of customer service. In addition,
the Company is dependent upon certain third party vendors, including central
reservation system operators such as SABRE Group Holdings, Inc. ("SABRE"),
Galileo International, Inc. ("Galileo") and WORLDSPAN, L.P. ("WORLDSPAN") for
access to certain information and will depend on such vendors in the future for
electronic distribution of vacation products to retail travel agents and other
travel intermediaries. Any failure of these systems could have a material
adverse effect on the business, financial condition and results of operations of
the Company.
The Company's dependence upon information and telecommunications technology
makes the Company particularly sensitive to Year 2000 issues. Because the
Company receives reservations up to a year in advance, the Company must identify
and correct potential Year 2000 problems on a more accelerated basis than
companies in many other industries. While the Company believes that the Trase
Miller Solutions system, as well as any of the Company's systems not integrated
within the Trase Miller Solutions system is Year 2000 compliant, there can be no
assurance that these systems will prevent disruptions of the Company's
operations due to Year 2000 issues. In addition, the Company's information and
telecommunications systems must operate in conjunction with the systems of other
parties, including SABRE, Galileo and WORLDSPAN, and any Year 2000 problems in
these third-party systems could directly affect the Company's own systems.
Finally, travelers who use the Company's products and services may be exposed to
disruptions in their travel as a result of failures by travel suppliers or other
travel businesses to correct Year 2000 problems in their information and
computer systems, and such disruptions could adversely affect demand for
vacation travel generally and may have a material adverse effect on the
business, financial condition and results of operations of the Company.
DEPENDENCE ON CUSTOMER DEPOSITS AND ADVANCE PAYMENTS
The Company derives substantial income from interest on customer deposits
and advance payments. For 1998 on a pro forma basis, the Company had interest
income of $3.7 million (or 35.8% of income before income taxes), substantially
all of which was derived from interest on customer deposits and advance
payments. In addition, the Company's pricing of its products and services is
determined, in part, based upon the interest income expected to be received from
investing these deposits and advance payments. The Company's investment policy
and the terms of the Company's credit facility restrict the Company to investing
these deposits and advance payments only in investment-grade securities. A
failure of these investment securities to perform at their historical levels
could reduce the interest income realized by the Company, which could have a
material adverse effect on the business, financial condition and results of
operations of the Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
QUARTERLY FLUCTUATIONS; SEASONALITY
The Company's operating results have fluctuated from period to period and
likely will continue to fluctuate in the future. The travel industry in general
and the Company's operations in particular are highly seasonal. The Company's
net revenues generally are highest in the second and third quarters of the year,
while its expenses generally are highest in the first and fourth quarters. The
Company's quarterly results of operations also may be subject to fluctuations as
a result of the timing and cost of acquisitions, fare wars by travel suppliers,
changes in relationships with certain travel suppliers, changes in the mix of
services offered by the Company, extreme weather conditions, general economic
conditions or other factors affecting travel generally. As a result of these and
other factors, the Company's quarterly operating results are subject to
fluctuation, and the Company believes quarter-to-quarter comparisons of its
operating results are not necessarily meaningful and should not be relied upon
as an indication of future performance. In
10
<PAGE> 11
addition, due to all of the foregoing factors, the Company's operating results
in future periods may be below the expectations of securities analysts and
investors. In such event, the market price of the Common Stock could be
materially adversely affected.
RELIANCE ON KEY PERSONNEL
The Company's success will depend, in part, on the continued efforts of
Roger H. Ballou, its Chairman and Chief Executive Officer, J. Raymond Lewis,
Jr., its President and Chief Operating Officer, Walter S. Berman, its Executive
Vice President and Chief Financial Officer, and the senior management of the
Acquired Businesses. Furthermore, the Company's operations likely will depend on
the senior management of companies that may be acquired in the future. If any of
these individuals becomes unwilling or unable to continue in his or her present
role, or if the Company is unable to attract and retain other skilled employees,
its business could be adversely affected. The Company does not maintain key
person life insurance on any of its key personnel. Although the Company has
entered into employment agreements with Messrs. Ballou, Lewis and Berman, they,
like all other key employees, may voluntarily terminate their respective
employment relationships with the Company at any time.
GOVERNMENT REGULATION AND TAXATION
Many travel suppliers, particularly airlines, are subject to extensive
regulation by federal, state and foreign governments. In addition, the travel
industry is subject to certain special taxes by federal, state, local and
foreign governments, including hotel bed taxes, car rental taxes, airline excise
taxes and airport taxes and fees. New or different regulatory schemes or changes
in tax policy could have an adverse impact on the travel industry in general and
could have a material adverse effect on the business, financial condition and
results of operations of the Company.
ACQUISITION FINANCING; ADDITIONAL DILUTION
The Company currently intends to finance future acquisitions by using
shares of Common Stock, cash, borrowed funds or a combination thereof. Existing
shareholders will suffer ownership dilution if the Company uses Common Stock as
consideration for future acquisitions. Moreover, the issuance of additional
shares of Common Stock may negatively affect earnings per share and the market
price of the Common Stock. If the Common Stock does not maintain a sufficient
market value, if the price of Common Stock is highly volatile or if potential
acquisition candidates are otherwise unwilling to accept Common Stock as part of
the consideration for the sale of their businesses, the Company may be required
to use more of its cash resources or more borrowed funds in order to execute its
acquisition program. If the Company does not have sufficient cash resources, its
growth could be limited unless it is able to obtain additional capital through
debt or equity offerings. The Company has entered into a credit facility that
will provide a limited source of funds which may be used in connection with
future acquisitions. There can be no assurance that this credit facility will be
sufficient to meet all of the Company's capital requirements to fund
acquisitions or that the Company will be able to obtain additional financing if
and when it is needed or that any such additional financing will be available on
terms it deems acceptable.
ACCOUNTING CHARGES; SIGNIFICANT INTANGIBLE ASSETS
Many business acquisitions must be accounted for under the purchase method
of accounting, and the Company expects that, under current accounting rules, it
will be required for the foreseeable future to account for all acquisitions
under the purchase method. Acquisitions accounted for under the purchase method
are likely to generate goodwill (which, generally, represents the difference
between the purchase price and the fair value of the tangible and separately
measurable intangible net assets) or other intangible assets. Consequently,
acquisitions of new businesses typically would result in substantial
amortization charges to the Company, which, although non-cash in nature, could
have a significant impact on the Company's reported operating results.
Acquisitions also may involve significant one-time acquisition-related charges.
Generally accepted accounting principles require that goodwill and all
other intangible assets be amortized over the period benefited, and the
Company's management has determined that period to be at least 35 years for the
goodwill recorded in connection with the Acquisitions. There can be no assurance
that the Company's management accurately determined the amortization period for
the goodwill recorded in connection with the Acquisitions. If the Company failed
to recognize a separate, material intangible asset having an actual benefit
period of less than 35 years, or if the Company did not give effect to any
accrued shorter benefit periods for certain material portions of the goodwill
recorded in connection with the Acquisitions, then earnings reported in periods
immediately following the Acquisitions will be overstated, and, in later years,
the Company will be burdened by a continuing charge against earnings without an
associated benefit to income which generally would have been factored into the
price paid for the business acquired. Earnings in later years also will be
significantly affected if management determined that the remaining balance of
goodwill at any time was impaired. Management has reviewed with its independent
accountants all of the factors and related cash flows which
11
<PAGE> 12
it considered in arriving at the amount of goodwill in each of the Acquisitions.
Management concluded that the anticipated future cash flows associated with
intangible assets recognized in the Acquisitions will continue indefinitely, and
that there is no persuasive evidence that any material portion will dissipate
over a period shorter than 35 years. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and "Business -- Growth
Strategy."
VACATION TRAVEL INDUSTRY; GENERAL ECONOMIC CONDITIONS
The Company's results of operations will depend upon factors affecting the
vacation travel industry generally. The Company's revenues and earnings are
especially sensitive to events that affect domestic and international air travel
and the level of car rentals and hotel reservations. A number of factors,
including political instability, armed hostilities, international terrorism,
labor disturbances, a rise in fuel prices or other travel costs, excessive
inflation, currency fluctuations, extreme weather conditions and concerns about
passenger safety could result in a temporary or longer-term overall decline in
demand for package vacations. The Company believes price-based competition will
continue for the foreseeable future. The continuation of such competition and
the occurrence of any of the events described above could have a material
adverse effect on the business, financial condition and results of operations of
the Company. In addition, demand for the Company's products and services may be
significantly affected by the general level of economic activity and employment
in the United States and key international markets. Therefore, any significant
economic downturn or recession in the United States or these other markets could
have a material adverse effect on the business, financial condition and results
of operations of the Company.
VOTING CONTROL BY EXISTING MANAGEMENT AND SHAREHOLDERS
Thayer Equity Investors III, L.P. ("Thayer") and its affiliates own and
control a substantial majority of the Common Stock of the Company. As of
December 31, 1998, Thayer and its affiliates own beneficially 64.7% of the
outstanding shares of Common Stock. As a result, Thayer and its affiliates are
able to exercise control over the Company's affairs and are able to elect the
entire Board of Directors and control the disposition of any matter submitted to
a vote of shareholders. In addition, the Company's executive officers and
directors, and entities affiliated with them, including Thayer and its
affiliates, as of December 31, 1998, own beneficially shares of Common Stock
representing 69.7% of the total voting power of the Common Stock.
NO PRIOR PUBLIC TRADING MARKET; POSSIBLE VOLATILITY OF TRADING PRICE
Prior to the initial public offering, there was no public market for the
Common Stock and, although a public market has now been developed, there can be
no assurance that the public market for the Common Stock will be active or
continue. The market price of the Common Stock may be subject to significant
fluctuations in response to numerous factors, including variations of the annual
or quarterly results of the Company or its competitors, changes by financial
research analysts in their estimates of the earnings of the Company or the
failure of the Company to meet such estimates, conditions of the economy in
general or in the travel industry in particular, unfavorable publicity or
changes in applicable laws and regulations (or judicial or administrative
interpretations thereof) affecting the Company or the travel service industry.
From time to time, the stock market experiences significant price and volume
volatility, which may affect the market price of the Common Stock for reasons
unrelated to the Company's performance. In the past, following periods of
volatility in the market price of a company's securities, securities class
action litigation has often been instituted against such a company. Any such
litigation instigated against the Company could result in substantial costs and
a diversion of management's attention and resources, which could have a material
adverse effect on the business, results of operations and financial condition of
the Company.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS AGREEMENT
Sales of substantial amounts of Common Stock in the public market following
the initial public offering could adversely affect the prevailing market price
of the Common Stock and the Company's ability to raise capital in the future.
Upon completion of the initial public offering ("IPO"), the Company had a total
of 14,747,576 shares of Common Stock outstanding, of which the 3,000,000 shares
offered were freely tradable without restriction under the Securities Act of
1933, as amended (the "Securities Act"), by persons other than "affiliates" of
the Company, as defined under the Securities Act. The remaining 11,747,576
shares of Common Stock outstanding were "restricted securities" as that term is
defined by Rule 144 promulgated under the Securities Act. Of these shares,
approximately 740,238 shares are eligible for sale in the public market pursuant
to Rule 144(k) under the Securities Act and the remaining 11,007,338 shares are
eligible for sale in the public market from time to time.
12
<PAGE> 13
On January 14, 1999, the Company registered on Form S-8 under the
Securities Act the shares of Common Stock issuable under the Stock Option Plan.
Of the 2,000,000 shares to be issuable under this Stock Option Plan,
approximately 1,617,819 shares were subject to outstanding options as of
December 31,1998. At any time a number of shares equal to 12% of the then
outstanding shares of Common Stock will be reserved for issuance under the Stock
Option Plan.
Holders of approximately 11,747,576 shares of Common Stock are entitled to
certain registration rights with respect to such shares. If such holders, by
exercising their registration rights, cause a large number of shares to be
registered and sold in the public market, such sales could have an adverse
effect on the trading price of the Common Stock. In addition, if the Company is
required, pursuant to such registration rights, to include shares held by such
persons in a registration statement that the Company files to raise additional
capital, the inclusion of such shares could have an adverse effect on the
Company's ability to raise needed capital.
NO DIVIDENDS
The Company does not expect to pay cash dividends on Common Stock in the
foreseeable future. In addition, under its credit agreement, the Company is
prohibited from paying dividends on its shares of capital stock other than
dividends payable solely in shares of Common Stock.
FORWARD-LOOKING INFORMATION
The matters discussed in this Form 10-K include forward-looking statements
that involve risks or uncertainties. While forward-looking statements are
sometimes presented with numerical specificity, they are based on various
assumptions made by management regarding future circumstances over many of which
the Company has little or no control. A number of important factors, including
those identified above under this caption "Risk Factors" as well as factors
discussed elsewhere in this Form 10-K, could cause the Company's actual results
to differ materially from those in forward-looking statements or financial
information. Actual results may differ from forward-looking results for a number
of reasons, including the following: (i) changes in general economic conditions
and other factors that affect demand for travel products or services; (ii)
changes in the vacation travel industry; (iii) changes in the Company's
relationships with travel suppliers; (iv) competitive factors (including changes
in travel distribution methods); and (v) the success of the Company's operating
and growth strategies (including the ability to integrate acquisitions into
Company operations, the ability of acquired companies to achieve satisfactory
operating results and the ability of the Company to manage the transition to an
integrated information platform). Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those anticipated, estimated or
projected.
EXECUTIVE OFFICERS
Set forth below is certain information concerning the executive officers of
the Company.
Roger H. Ballou, 47, has served as Chairman and Chief Executive Officer of
the Company since March 1998. Immediately prior to joining the Company, Mr.
Ballou served as a Senior Advisor to Thayer. Between May 1995 and September
1997, Mr. Ballou served as Vice Chairman and Chief Marketing Officer, and then
as President and Chief Operating Officer of Alamo. For more than 16 years prior
to joining Alamo, Mr. Ballou held several executive positions with American
Express Travel, serving most recently as President -- Travel Services Group. Mr.
Ballou currently serves as Chairman of the National Tourism Organization, a
travel industry organization chartered by the U.S. Congress, as a member (and
past Chairman) of the Board of Directors of TIA and as a member of the Board of
Directors of the National Academy Foundation. From 1995 through 1997, he served
as Chairman of the Government Affairs Council, the leading travel industry
federal government lobbying arm. Mr. Ballou also is a member of the Board of
Directors of American Medical Security, Inc.
J. Raymond Lewis, Jr, 53, has served as President and Chief Operating
Officer of the Company since March 1998. From September 1996 until January 1998,
Mr. Lewis served as President of Certified Vacations, Inc., a large package
vacation provider headquartered in Florida. From January 1992 through August
1996, Mr. Lewis was Executive Vice President, Worldwide Sales and Marketing and
a director and member of the Executive Committee of Holiday Inn. Mr. Lewis held
several executive-level marketing positions with Holiday Inn between 1985 and
1992.
Walter S. Berman, 56, has served as Executive Vice President and Chief
Financial Officer of the Company since April 1998. From September 1996 until
March 1998, Mr. Berman served as an outside consultant to International Business
Machines, Inc. ("IBM") to provide advice and assistance to IBM's chief financial
officer in several reengineering initiatives in the areas of tax strategy,
utilization of capital and risk management. Between 1965 and 1996, Mr. Berman
held several positions with American Express Travel, most
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<PAGE> 14
recently as Executive Vice President and Chief Financial Officer. Mr. Berman
also served as Treasurer of American Express Corporation, the parent company of
American Express Travel, from 1995 through 1996.
The Company's executive officers are appointed annually by, and serve at
the discretion of, the Board of Directors. Each executive officer is a full-time
employee of the Company. There are no family relationships between any of the
executive officers of the Company.
ITEM 2. PROPERTIES
The Company's headquarters are located in Washington, D.C. As of December
31, 1998, the Company's other principal facilities consist of leased offices, of
which the largest are located in New York, NY, Downers Grove, IL and San Jose,
CA. The Company has other offices in Cambridge, MA and Mount Laurel, NJ that
will be closed by March 31, 1999. The Company believes these facilities are
adequate to meet its anticipated needs. As the Company continues to implement
its growth strategy, certain changes are expected, such as combinations of
facilities, expansion of other facilities, and the implementation of new call
centers or shared services centers.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings other than various
legal actions arising in the ordinary course of business. The Company believes
none of these actions will have a material adverse effect on its business,
financial condition and results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
NONE
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<PAGE> 15
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's Common Stock is traded on The New York Stock Exchange under the
symbol "GVG." The following table sets forth the high and low closing prices for
each quarter (or partial quarter) in 1998, as quoted on The New York Stock
Exchange:
<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Third Quarter (from July 31, 1998) $15 $7 1/4
Fourth Quarter 11 1/4 5 7/16
</TABLE>
The closing price of the Company's Common Stock, as reported by The New
York Stock Exchange, on March 11, 1999 was $10.25. The approximate number of
record holders of the Common Stock as of March 11, 1999 was 55.
The Company intends to retain all of its earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. In addition, the Company's line of credit
includes restrictions on the ability of the Company to pay cash dividends
without the consent of the lender.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data as of December 31, 1998 and 1997, and for the
years ended December 31, 1998, 1997 and 1996, was derived from the financial
statements of the Company audited by Arthur Andersen LLP included elsewhere in
this Form 10-K. The selected financial data as of December 31, 1996 and 1995,
and for the year ended December 31, 1995, were derived from the financial
statements of the Company audited by Arthur Andersen LLP not included in this
Form 10-K. The selected financial data as of December 31, 1994, and for the year
ended December 31, 1994, were derived from unaudited financial statements of the
Company not included in this Form 10-K which, in the opinion of management, have
been prepared in a manner consistent with the audited financial statements. The
results of operations for the year ended December 31, 1998, are not necessarily
indicative of the results to be expected for any future period. The selected pro
forma statement of operations data gives effect to the acquisitions of Haddon
Holidays, Inc., Classic Custom Vacations, MTI Vacations and Globetrotters, Inc.,
as well as the Company's initial public offering and the use of the net proceeds
therefrom to repay certain indebtedness, as if all such events had occurred as
of January 1, 1997. The selected pro forma financial data is not necessarily
indicative of the results of operations and financial position of the Company
had such transactions occurred on the dates specified and is not necessarily
indicative of the results of operations for any future period. The information
in this table should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the historical
financial statements and accompanying notes thereto included elsewhere in this
Form 10-K.
15
<PAGE> 16
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
(in thousands, except per share data)
PRO FORMA PRO FORMA
1998 1997 1996 1995 1994 1998(1) 1997(1)
--------- --------- --------- --------- --------- --------- ---------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net revenues.............................. $ 90,421 $ 24,255 $ 22,259 $ 18,464 $ 13,098 $ 123,501 $ 115,222
Operating expenses ....................... 69,386 17,852 16,025 13,316 8,414 100,465 96,939
--------- --------- --------- --------- --------- --------- ---------
Gross profit ........................ 21,035 6,403 6,234 5,148 4,684 23,036 18,283
--------- --------- --------- --------- --------- --------- ---------
General and administrative
expenses(2) ......................... 10,248 7,797 6,905 5,702 4,758 12,083 10,256
Depreciation and amortization ............ 2,779 182 154 131 166 3,820 3,485
Settlement agreement legal
expense ............................. -- -- -- -- -- -- 1,184
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from operations ............ 8,008 (1,576) (825) (685) (240) 7,133 3,358
--------- --------- --------- --------- --------- --------- ---------
Other income (expense):
Interest income ...................... 2,480 556 581 521 445 3,658 4,324
Interest expense ..................... (1,504) -- -- -- -- (586) (889)
Other, net ........................... 26 41 (4) 67 -- 22 338
--------- --------- --------- --------- --------- --------- ---------
Total other income ............... 1,002 597 577 588 445 3,094 3,773
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item ................... 9,010 (979) (248) (97) 205 10,227 7,131
Provision for income taxes .............. (3,908) (124) (122) (106) (87) (4,025) (2,852)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before extraordinary
item ................................. 5,102 (1,103) (370) (203) 118 6,202 4,279
Extraordinary item, net of income
tax benefit of $244 .................. (379) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ........................ 4,723 (1,103) (370) (203) 118 6,202 4,279
Preferred dividend ....................... (2,519) -- -- -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) available to
common shareholders..................... $ 2,204 $ (1,103) $ (370) $ (203) $ 118 $ 6,202 $ 4,279
========= ========= ========= ========= ========= ========= =========
Net income (loss) per share:
Basic and Diluted.............. $ 0.22 $ (0.21) $ 0.42 $ 0.29
Weighted average
shares outstanding:
Basic ................................ 9,931 5,291 14,746 14,748
Diluted .............................. 9,990 5,291 14,805 14,748
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
(in thousands)
1998 1997 1996 1995 1994
---- ---- ---- ---- ----
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
Cash, cash equivalents and short-term
investments .............................. $ 32,663 $ 7,909 $ 8,256 $ 7,896 $ 6,571
Working capital (deficit)................... (24,867) (78) 1,256 2,710 3,563
Total assets................................ 134,060 19,375 19,677 17,713 13,819
Total debt.................................. 6,663 -- -- -- --
Shareholders' equity........................ 53,585 358 1,673 3,151 4,118
</TABLE>
- - ----------
(1) The pro forma statement of operations data for each period presented gives
effect to (i) the Recapitalization, (ii) the Acquisitions and the issuance
of capital stock in connection therewith, (iii) reductions in salary and
bonuses to the prior owners and key executives of the Company and the
Acquired Businesses, offset in part by expected incremental costs
reflecting the Company's new management structure (the "Compensation
Savings"), (iv) the termination of the Company's status as an S
Corporation, (v) the Conversion of Class A Convertible Preferred Stock into
common stock (the "Conversion"), (vi) the Company's initial public offering
and the use of the net proceeds therefrom to repay certain indebtedness as
if all such events had occurred as of January 1, 1997. The pro forma
results do not eliminate the non-recurring settlement agreement legal
expense of one of the Acquired Businesses of approximately $1.2 million for
the year ended December 31, 1997 as such expense is not directly related to
the Acquisitions.
(2) General and administrative expenses for the years ended December 31, 1997,
1996, 1995 and 1994 include salary and bonuses to the prior owners and
certain key employees of the Company of $5.8 million, $4.8 million, $3.8
million, and $3.1 million, respectively.
16
<PAGE> 17
General and administrative expenses for the year ended December 31, 1998
include approximately $1.1 million of expenses incurred in connection with
the Recapitalization.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Overview
Global Vacation Group, Inc. ("GVG" or the "Company") assembles air, hotel,
rental car and other travel components in bulk and provides complete vacations
to travelers through retail travel distributors, such as travel agents, and
other distribution channels including the Internet and affinity groups. In March
1998 the Company was recapitalized and between March 1998 and May 1998 acquired
the stock or assets of four other vacation providers. GVG acquired the
outstanding capital stock of Haddon Holidays Inc., ("Haddon"), Classic Custom
Vacations, ("Classic") and Globetrotters Inc. ("Globetrotters") and
substantially all the assets of MTI Vacations, Inc. ("MTI") (collectively, the
"Acquisitions"). The consideration for the Acquisitions consisted of cash. Each
acquisition has been accounted for under the purchase method of accounting. The
accompanying consolidated financial statements as of December 31, 1998 and for
the year ended December 31, 1998 include the results of operations for each of
the Acquisitions from their respective acquisition dates in 1998.
Net revenues include commissions and markups on travel products and
services, volume bonuses received from travel suppliers, cancellation fees and
other ancillary fees such as travel protection premiums and are recognized upon
the commencement of travel. For the year ended December 31, 1998, the Company
had net revenues of $90.4 million and net income of $4.7 million derived from a
total dollar value of travel products and services of $410.2 million. For the
year ended December 31, 1997, the Company had net revenues of $24.3 million and
a net loss of $1.1 million derived from a total dollar value of travel products
and services of $125.9 million.
Operating expenses include travel agent commissions, salaries,
telecommunications, advertising and other costs associated with the selling and
processing of travel reservations, products and services. Commission payments to
travel agents are typically based on a percentage of the price paid for the
travel product or service, but in certain circumstances are fixed dollar
amounts. Reservations agents are compensated either on an hourly basis, a
commission basis or a combination of the two. The Company's telephone costs
primarily relate to the cost of incoming calls on toll-free numbers. General and
administrative expenses consist primarily of compensation and benefits to
administrative and other non-sales personnel, fees for professional services,
and other general office expenses.
In connection with the Recapitalization and the Acquisitions, the Company
is restructuring certain operations of the companies acquired in the
Acquisitions (the "Acquired Businesses"). The Company's objective is to realize
certain savings from the combination of the Acquired Businesses as a result of
consolidating certain operating expenses such as telecommunications, advertising
and promotional programs and from consolidating or outsourcing certain
administrative functions, including technology and software development,
insurance, employee benefits and other administrative expenses. The Company
accrued certain costs of restructuring the Acquired Businesses totaling
approximately $2.0 million related to closing redundant acquired facilities and
making severance payments to terminated employees following the Acquisitions.
During 1998, the Company closed four reservation offices, combined four domestic
companies into two U.S. brands and migrated two of the Acquired Businesses'
information systems onto a common technology platform. The restructuring of the
redundant facilities is on-going, and the Company has a remaining accrual of
$1.1 million as of December 31, 1998. The remaining accrual relates primarily to
lease obligations on closed facilities and severance costs expected to be paid
in 1999.
The Company derives a significant portion of its pre-tax income from
interest earned on funds related to customer deposits and prepayments for
vacation products. Generally, the Company requires a deposit within one week of
making a travel reservation. Reservations are typically made two to three months
prior to departure. Additionally, for package tours, the Company generally
requires that the entire cost of the vacation be paid in full 45 to 60 days
before departure, unless reservations are made closer to departure. While terms
vary, the Company generally pays for the vacation components after the
customer's departure. In the period between receipt of a deposit or prepayment
and the payment of related expenses, these funds are invested in cash and
investment-grade securities. This cycle is typical in the package tour industry
and earnings generated on deposits and prepayments are integral to the Company's
operating model and pricing strategies. For the year ended December 31, 1998,
the Company had interest income of $2.5 million (27.5% of income before income
taxes and extraordinary item), all of which was derived from interest on
customer deposits and advance payments. For the year ended December 31, 1997,
the Company had interest income of $556,000 (or
17
<PAGE> 18
56.8% of loss before income taxes). For the year ended December 31, 1998, on
a pro forma basis, the Company had interest income of $3.7 million (35.8% of
income before income taxes and extraordinary item). For the year ended
December 31, 1997, on a pro forma basis, the Company had interest income of
$4.3 million (or 60.6% of income before income taxes).
PRO FORMA RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
Management believes that period-to-period comparisons of the Company's
historical financial results are not necessarily meaningful and should not be
relied upon as an indication of future performance given the impact of the
Acquired Businesses and the Company's 1998 initial public offering on the
Company's financial results.
The pro forma statement of operations data for each period presented give
effect to (i) the Recapitalization, (ii) the Acquisitions and the issuance of
capital stock in connection therewith, (iii) reductions in salary and bonuses
to the prior owners and key executives of the Company and the Acquired
Businesses, offset in part by expected incremental costs reflecting the
Company's new management structure (the "Compensation Savings"), (iv) the
termination of the Company's status as an S Corporation, (v) the Conversion
and (vi) the Company's initial public offering and the use of the net
proceeds therefrom to repay certain indebtedness as if all such events had
occurred as of January 1, 1997. The pro forma results do not eliminate the
non-recurring settlement agreement legal expense of one of the Acquired
Businesses of approximately $1.2 million for the year ended December 31,
1997, as such expense is not directly related to the Acquisitions. The pro
forma consolidated financial data included in this Form 10-K cover periods
when the Company and the Acquired Businesses were not under common management
or control and are not necessarily indicative of the results that would have
been achieved if the Company and the Acquired Businesses had been operated on
an integrated basis or the results that may be realized on a consolidated
basis in the future.
The following table summarizes the Company's pro forma results of
operations as a percentage of pro forma net revenues (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-----------------------------------------------------------
1998 1997
---- ----
PRO FORMA PRO FORMA
Amount % Amount %
-----------------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues ....................... $ 123,501 100.0% $ 115,222 100.0%
Operating expenses ................. 100,465 81.3 96,939 84.1
--------- ------- --------- -----
Gross profit .................. 23,036 18.7 18,283 15.9
--------- ------- --------- -----
General and administrative expenses 12,083 9.8 10,256 8.9
Depreciation and amortization .... 3,820 3.1 3,485 3.0
Settlement agreement legal expense . -- -- 1,184 1.0
--------- ------- --------- -----
Income from operations ........ 7,133 5.8 3,358 3.0
--------- ------- --------- -----
Interest income .................... 3,658 3.0 4,324 3.8
Interest expense ................... (586) (0.5) (889) (0.8)
Other income ....................... 22 - 338 0.3
--------- ------- --------- -----
Income before income taxes ......... 10,227 8.3 7,131 6.3
Provision for income taxes ......... (4,025) (3.3) (2,852) (2.5)
--------- ------- --------- -----
Net income .................... $ 6,202 5.0% $ 4,279 3.8%
========= ======= ========= =====
</TABLE>
Pro forma net revenues for the years ended December 31, 1998 and 1997,
were $123.5 million and $115.2 million, respectively, which reflects the
combined net revenues of the Company and the Acquired Businesses for each
period, less $2.2 million in 1997 of historical net revenues for product
lines discontinued by MTI prior to its acquisition. The increase in net
revenues in 1998 was approximately $8.3 million or 7.2% and is primarily due
to the increase in revenue per passenger traveled.
Pro forma operating expenses for the years ended December 31, 1998 and
1997, were $100.5 million and $96.9 million, respectively, or 81.3% and
84.1%, respectively, of pro forma net revenues. The resulting improvement in
pro forma gross profit as a percentage of net revenues is due primarily to
the increase in net revenue per passenger traveled and the implementation of
certain cost reduction initiatives.
Pro forma general and administrative expenses for the years ended December
31, 1998 and 1997, were $12.1 million and $10.3 million, respectively, or
9.8% and 8.9%, respectively, of pro forma net revenues. The increase is due
to additional costs associated with being a public company and additional
overhead at the Company's headquarters that did not exist prior to the
Recapitalization.
18
<PAGE> 19
The Company expects that general and administrative expenses will increase in
absolute dollars in future periods and may decrease as a percentage of net
revenues.
Pro forma depreciation and amortization for the years ended December 31,
1998 and 1997, was $3.8 million and $3.5 million, respectively, or 3.1% and
3.0%, respectively, of pro forma net revenues.
Pro forma results for the year ended December 31, 1997, included a
non-recurring expense of $1.2 million or 1.0% of net revenues related to a law
suit at one of the acquired companies. Excluding the effect of the non-recurring
expense, net of the related income tax effects, pro forma net income for the
year ended December 31, 1997 would have been approximately $5.0 million.
Pro forma interest income for the years ended December 31, 1998 and 1997,
was $3.7 million and $4.3 million respectively, or 3.0% and 3.8%, respectively,
of pro forma net revenues. The Company experienced a change in rates of return
in the third and fourth quarter of 1998 on certain investments that negatively
impacted interest income for the year. In addition, working capital was used to
repay existing long-term debt earlier than anticipated. Correspondingly, the
reduction in debt resulted in the decrease of pro forma interest expense in
1998. Pro forma interest expense for the years ended December 31, 1998 and 1997
was $586,000 and $889,000, respectively.
The pro forma provision for income taxes for the years ended December 31,
1998 and 1997, was $4.0 million and $ 2.9 million or 3.3% and 2.5%,
respectively, of pro forma net revenues, at an assumed tax rate of 39.4% and
40.0%, respectively, reflecting a termination of the Company's S Corporation
status and implementation of certain tax-planning initiatives.
Pro forma net income for the years ended December 31, 1998 and 1997, was
$6.2 million and $4.3 million, respectively, or 5.0%, and 3.8%, respectively, of
pro forma net revenues. The increase is primarily due to the improved gross
profit percentage, lower interest expense in 1998 and the settlement agreement
legal expenses related to 1997.
HISTORICAL RESULTS OF OPERATIONS
THE COMPANY
The following table sets forth certain historical operating data for the
Company as a percentage of net revenues (in thousands).
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------------------------------------------------
1998 1997 1996
----- ---- ----
Amount % Amount % Amount %
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net revenues....................................... $90,421 100.0% $24,255 100.0% $22,259 100.0%
Operating expenses................................. 69,386 76.7 17,852 73.6 16,025 72.0
---------------------------------------------------------------------------
Gross profit ................................. 21,035 23.3 6,403 26.4 6,234 28.0
General and administrative expenses................ 10,248 11.3 7,797 32.1 6,905 31.0
Depreciation and amortization...................... 2,779 3.1 182 0.8 154 0.7
---------------------------------------------------------------------------
Income (loss) from operations................. 8,008 8.9 (1,576) (6.5) (825) (3.7)
---------------------------------------------------------------------------
Interest income.................................... 2,480 2.7 556 2.3 581 2.6
Interest expense................................... (1,504) (1.7) -- -- -- --
Other, net......................................... 26 -- 41 0.2 (4) --
---------------------------------------------------------------------------
Income (loss) before income taxes, and
extraordinary item............................... 9,010 9.9 (979) (4.0) (248) (1.1)
Provision for income taxes......................... (3,908) (4.3) (124) (0.5) (122) (0.5)
---------------------------------------------------------------------------
Income (loss) before extraordinary item...... 5,102 5.6 (1,103) (4.5) (370) (1.6)
Extraordinary item, net of income tax benefit of
$244......................................... (379) (0.4) -- -- -- --
---------------------------------------------------------------------------
Net Income (loss)................................ 4,723 5.2 (1,103) (4.5) (370) (1.6)
Dividends on Class A Convertible Preferred
Stock........................................ (2,519) (2.8) -- -- -- --
---------------------------------------------------------------------------
Net income (loss) available to common
shareholders................................. $2,204 2.4% $(1,103) (4.5)% $ (370) (1.6)%
===========================================================================
</TABLE>
19
<PAGE> 20
1998 COMPARED TO 1997
Net Revenues. Net revenues for the years ended December 31, 1998 and 1997,
increased to $90.4 million from $24.3 million, respectively, representing an
increase of 272.0%. The increase is due to net revenues generated by the
Acquired Businesses.
Operating expenses. Operating expenses increased to $69.4 million for the
year ended December 31, 1998, from $17.9 million for the year ended December 31,
1997, representing an increase of 287.7%. The increase is a result of additional
operating expenses from the Acquired Businesses. As a percentage of net
revenues, operating expenses increased to 76.7% for the year ended December 31,
1998, from 73.6% for the year ended December 31, 1997. The increase in operating
expenses as a percent of net revenues was primarily due to the combination of
the various gross margins of the Acquired Businesses.
General and administrative expenses. General and administrative expenses
increased to $10.2 million for the year ended December 31, 1998, from $7.8
million for the year ended December 31, 1997, representing an increase of 30.8%.
As a percent of net revenues, general and administrative expenses decreased to
11.3% for the year ended December 31, 1998, from 32.1% in 1997. For the year
ended December 31, 1997, general and administrative expenses included salary and
bonuses paid to shareholders totaling $5.8 million. General and administrative
expenses for the year ended December 31, 1998, also included approximately $1.1
million of transaction expenses related to the Recapitalization. Excluding
compensation and bonuses paid to shareholders and Recapitalization transaction
expenses, general and administrative expenses would have been $9.1 million for
the year ended December 31, 1998, and $2.0 million for the year ended December
31, 1997.
In connection with the early extinguishment of certain term loans under the
credit facility, the Company recognized an extraordinary charge of $379,000, net
of tax benefit of $244,000, to write-off deferred financing costs related to the
term loans repaid.
Net Income. Net income increased to $4.7 million for the year ended December
31, 1998, as compared to a net loss of $1.1 million for the year ended December
31, 1997, or 5.2% and (4.5%) of net revenues, respectively, was attributable
largely to the net income of the Acquired Businesses and $1.1 million in
transaction expenses related to the Recapitalization in 1998 and the reduction
of compensation paid to shareholders in 1997.
1997 COMPARED TO 1996
Net Revenues. Net revenues increased to $24.3 million in 1997 from $22.3
million in 1996, representing an increase of 9.0%. The growth in net revenues
was primarily generated by increased travel volume.
Operating expenses. Operating expenses increased to $17.9 million in 1997
from $16.0 million in 1996, representing an increase of 11.9%. As a percentage
of net revenues, operating expenses increased to 73.6% in 1997 from 72.0% in
1996. The increase in operating expenses as a percentage of net revenues in 1997
over 1996 was due primarily to increases in salaries.
General and administrative expenses. General and administrative expenses
increased to $7.8 million in 1997 from $6.9 million in 1996, representing an
increase of 12.9%. General and administrative expenses included salary and
bonuses paid to shareholders which totaled $5.8 million in 1997, and $4.8
million in 1996. Excluding compensation and bonuses paid to shareholders,
general and administrative expenses would have been $2.0 million in 1997, and
$2.1 million in 1996.
Net loss. Changes in the net loss between years was largely affected by the
factors discussed above. Depreciation and amortization expense and interest
income were consistent between years. The increase in the net loss in 1997 as
compared to 1996 was attributable largely to the $1.0 million increase in
compensation and bonuses to shareholders in 1997 without a corresponding
increase in gross profit over 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company receives advance payments and deposits prior to commencement of
travel. The Company's pricing of its products and services is determined, in
part, based upon the amount and timing of advance payments received. A number of
states have regulations with respect to the management of customer deposits made
in advance of travel. The Company believes it is in compliance with all
applicable regulations relating to customer deposits. The Company manages cash
and investments on a centralized basis. The Company's investment policy and the
Credit Facility restrict investments to investment-grade securities.
20
<PAGE> 21
In March 1998, the Company entered into the credit facility with a commercial
bank. Under the credit facility, the Company may borrow up to $65.0 million. Of
this amount, up to $10.0 million may be in the form of revolving loans,
including letters of credit of up to $5.0 million, and the remaining $55.0
million may be in the form of term loans which may not be reborrowed once
repaid. The Company's obligations under the Credit Facility are secured by
substantially all of the Company's assets and the Company is subject to certain
restrictive covenants. The Company completed its initial public offering August
5, 1998. After deducting expenses, the Company received approximately $35.9
million in proceeds from the initial public offering. The Company used the net
proceeds to repay borrowings under the Company's credit facility. As of December
31, 1998, the Company had outstanding term loans of $6.7 million under its
credit facility and had a total of $16.0 million available under its credit
facility with $7.7 million available as revolving loans and $8.3 available as
term loans.
In February 1999, the Company amended and restated its credit agreement (the
"Amended Agreement"). The Amended Agreement was entered into with three
participating banks and provides for a $45 million revolving credit facility
with a five-year maturity. The Amended Agreement consists of a $10 million
working capital revolving credit facility ("Working Capital Facility") with a
maximum of $5 million available for issuing standby letters of credit and a $35
million revolving credit facility for use in financing acquisitions
("Acquisition Facility"). The Acquisition Facility has a commitment reduction of
$5 million per year for four years commencing December 31, 1999 with the final
$15 million reduction at maturity. Under the Amended Agreement, the Company will
continue to select interest at ABR Advance or Eurodollar Advance rates plus the
applicable margin as previously defined. An annual commitment fee is due on the
unused portion of the aggregate facility. The commitment fee is based on the
leverage ratio of the Company and will be between .375 percent and .500 percent.
Net cash used by operating activities for the year ended December 31, 1998
was $15.5 million as compared to $2.2 million in net cash used by operating
activities in the year ended December 31, 1997. The decrease of approximately
$13.3 million in operating cash flows reflects primarily the decrease in
customer deposits from the respective dates of the Acquisitions to December 31,
1998. The Acquisitions generally occurred during the period preceding peak
travel months when customer deposits are high. A significant portion of the
Company's business occurs in the second and third quarters, and customer
deposits generally decrease following these periods as customer travel is
completed.
The Company also made capital expenditures of $2.3 million in the year ended
December 31, 1998 and $170,000 in the year ended December 31, 1997. The Company
used $29.6 million of cash, net of cash acquired, for acquisitions in the year
ended December 31, 1998.
In January 1999, the Company paid approximately $2.3 million to extend the
option of the Trase Miller agreement to March 31, 1999. Should the option be
exercised, this payment will be credited towards the option price. Otherwise, it
will be credited against future payments owed to Trase Miller under the
Outsourcing Agreement.
The Company intends to pursue attractive acquisition opportunities. The
timing, size or success of any acquisition effort and the associated potential
capital commitments cannot be predicted. The Company expects to fund future
acquisitions primarily through a combination of issuance of equity or debt, cash
flow from operations and borrowings under its credit facility.
The Company anticipates its cash flows from operations combined with
available borrowings under the credit facility are adequate to meet the
Company's capital needs for at least the next 12 months.
YEAR 2000
The Company's business is dependent upon a number of different information
and telecommunications systems to access information, manage reservation data,
and process a high volume of telephone calls on a daily basis. In addressing the
Year 2000 (Y2K) issues relating to the systems that support these processes,
senior management initiated a due diligence review of all internal and external
systems and vendors to ascertain their Y2K compliance readiness. As part of this
process, certain third party vendors on which the Company is heavily dependent
for access to certain reservation information and for the electronic
distribution of vacation products to travel agents and other intermediaries,
including Sabre Group Holdings, Inc. ("SABRE"), Galileo International Inc.
("Galileo"), and WORLDSPAN, L.P. ("WORLDSPAN") have advised the Company that
their Y2K compliance testing is substantially complete and that as of the first
quarter of 1999 were successfully processing reservation bookings for travel
that will occur in the year 2000. However, the Company does not control these
vendors, and no assurance can be given that all of the Company's significant
vendors will be Y2K compliant. In addition, there are very few comparable
vendors available who could provide similar services to the Company on a
contingency basis in the event of a failure by these vendors to achieve Y2K
compliance.
21
<PAGE> 22
As a result, any failure on the part of these significant vendors to
be Y2K compliant may have a material adverse effect on the business, financial
condition, and results of operations for the Company.
In December 1998 the Company initiated a coordinated company wide review of
each business unit to identify dependent systems and to evaluate the potential
exposure of the Y2K issue. To assist senior management in its review, an outside
systems consultant was retained to provide the Company with an independent
analysis. Once the evaluation is completed, management will verify and certify
that these systems are Y2K compliant and if it is determined that there is a
risk for any system, contingency plans will be developed.
Trase Miller Solutions, Inc., another third party vendor, upon which the
Company is dependent to provide a reservation system to one of its subsidiary
companies, has advised the Company that it has completed all of its regression
testing and that its system, "TripsPro," is Y2K compliant. The Company plans to
upgrade this subsidiary to the Y2K compliant version of TripsPro by June 1999.
Another subsidiary is continuing efforts, that began in 1998, to ensure that its
internally developed reservation system, "PCRes", is Y2K compliant. These
efforts are expected to be fully completed and operational by October 1999. The
Company is also engaged in an effort to replace the reservations system used by
its in-bound business with a Y2K compliant system. The new system, "TIMES2," is
being custom developed for the Company by B. Rekencentra, a third party vendor.
The development effort is in its final stages, with a phased implementation
planned for completion by October 1999. The Company does not anticipate material
Y2K problems arising for any of its subsidiaries as a result of the plans to
upgrade and replace its reservation systems.
As part of the due diligence review, the Company ascertained that one of its
accounting systems is not Y2K compliant, and the Company is taking steps to
convert the non-compliant system used by one of its operating units to the
"FLEXI," a vendor software package, system used by one of the other operating
companies. The Company has completed its testing of FLEXI and ascertained that
it is Y2K compliant. The conversion is planned to be completed by October ,
1999. Another operating unit is continuing efforts, began in 1998, to convert to
the "CODA" accounting system, a vendor software package. The Company expects
this conversion to be completed by October, 1999.
While the Company's due diligence has helped to identify and correct many
potential Y2K problems, the review is by no means complete, and additional steps
must be taken on an accelerated basis to resolve all the issues given the
Company's dependence upon information and telecommunications technology. The
Company believes it will be able to determine whether all of its own systems,
including "imbedded technology" within individual systems and components, are
Y2K compliant and to correct any Y2K problems, that exist prior to any material
difficulties arising within these systems. However, no assurance can be given
that the Company will be successful in this regard, and unforeseen difficulties
or delays in implementing solutions may have a material adverse effect on the
business, financial condition, and results of operations of the Company.
Finally, travelers who use the Company's products and services may be exposed
to disruptions in their travel as a result of failures of travel suppliers or
other travel businesses to correct Y2K problems in their information and
computer systems, and such disruptions could adversely affect demand for
vacation travel generally and may have a material adverse effect on the
business, financial condition, and results of operations of the Company.
The Company estimates that the total cost of its Y2K program, including
auditing and monitoring its vendors, inspecting its own systems and, where
necessary, migrating or converting its existing systems to new systems, will be
approximately $2.6 million.
NEW ACCOUNTING STANDARDS
The Company has adopted the Financial Accounting Standards Board ("FASB")
Statement of Financial Accounting Standards ("SFAS") No. 130, "Reporting
Comprehensive Income." SFAS No. 130 establishes standards for reporting and
display of comprehensive income and its components in the financial statements.
The adoption of SFAS No. 130 has not had a material impact on the Company's
results of operations, financial position, or cash flows.
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. After
evaluation, Senior Management concluded that operations occur primarily in one
segment only. The adoption of SFAS No. 131 has had no impact on the Company's
results of operations, financial position, or cash flows.
22
<PAGE> 23
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
133 is effective for fiscal years beginning after June 15, 1999. Management has
not yet determined the impact of adopting this statement, but believes it will
not have a material impact upon the Company's results of operations or financial
position.
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," ("SOP
98-1"). SOP 98-1 requires the Company to capitalize internal computer software
costs once the capitalization criteria are met. SOP 98-1 is effective January 1,
1999, and is applied to all projects in progress upon initial application. The
Company has not yet determined the impact of the adoption of SOP 98-1, however,
a percentage of the Company's historical operating expenses may now be required
to be capitalized under SOP 98-1.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates. The
Company prices its products and services, in part, based upon the interest
income expected to be received from investing customer deposits and advance
payments. The Company's investment policy and the terms of the Company's credit
facility restrict the Company to investing these deposits and advance payments
only in investment-grade securities. A failure of these investment securities to
perform at their historical levels could reduce the interest income realized by
the Company, which could have a material adverse effect on the business,
financial condition and results of operations of the Company.
Borrowings under the Company's credit facility are also sensitive to changes
in interest rates. The fair value of any fixed rate debt is subject to change as
a result of movements in interest rates. Such changes could have material
adverse effect on the Company's financial position, and results of operations
and could also impact the Company's ability to successfully complete
acquisitions.
23
<PAGE> 24
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA; INDEX TO CONSOLIDATED
FINANCIAL STATEMENTS
GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE No.
--------
<S> <C>
Report of Independent Public Accountants...................................................................................25
Consolidated Balance Sheets as of December 31, 1998 and
1997.......................................................................................................................26
Consolidated Statements of Operations for the Years Ended December 31, 1998, 1997 and
1996.......................................................................................................................27
Consolidated Statements of Changes in Shareholders' Equity for the Years Ended December 31, 1998, 1997 and
1996.......................................................................................................................28
Consolidated Statements of Cash Flows for the Years Ended December 31, 1998, 1997 and
1996.......................................................................................................................29
Notes to Consolidated Financial
Statements.................................................................................................................30
</TABLE>
24
<PAGE> 25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Global Vacation Group, Inc.:
We have audited the accompanying consolidated balance sheets of Global Vacation
Group, Inc., (a New York corporation) and subsidiaries as of December 31, 1998
and 1997, and the related consolidated statements of operations, changes in
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1998. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Global Vacation Group, Inc.,
and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Washington D.C.
February 5, 1999 (except with respect to the matters
discussed in Note 11 to the Consolidated
Financial Statements as to which the date is
March 17, 1999).
25
<PAGE> 26
GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
December 31, December 31,
ASSETS 1998 1997
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents (includes $3,248 restricted at December 31, 1998) $ 30,317 $ 7,074
Short-term investments 2,346 835
Accounts receivable, net of allowance of $982, and $861, respectively 14,884 10,637
Loans receivable from shareholders 151 103
Other current assets 6,547 290
----------- -----------
Total current assets 54,245 18,939
----------- -----------
Property and equipment, net 5,158 386
Related party and other long-term receivables 2,490 -
Intangible assets, net 65,131 -
Other assets 7,036 50
----------- -----------
Total assets $ 134,060 $ 19,375
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 39,869 $ 15,759
Customer deposits 33,943 1,541
Loans payable to shareholders - 1,717
Current portion of long-term debt 5,300 -
----------- -----------
Total current liabilities 79,112 19,017
Long-term debt, net of current portion 1,363 -
----------- -----------
Total liabilities 80,475 19,017
Commitments and Contingencies
Shareholders' equity:
Preferred Stock, $.01 par value, 6,000,000 shares authorized,
no shares issued and outstanding. - -
Common Stock, $.01 par value, 60,000,000 shares authorized, 14,747,576,
and 5,291,262 shares issued and outstanding, respectively. 147 53
Deferred compensation (430) -
Additional paid-in capital 95,122 -
Retained earnings (deficit) (41,129) 305
Treasury stock, 12,000 shares, at cost (125) -
----------- -----------
Total shareholders' equity 53,585 358
----------- -----------
Total liabilities and shareholders' equity $ 134,060 $ 19,375
=========== ===========
</TABLE>
- - ----------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE> 27
GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
For the Years Ended December 31,
----------------------------------------------------------------------------
1998 1997 1996
------------------- ------------------- -------------------
<S> <C> <C> <C>
Net revenues $ 90,421 $ 24,255 $ 22,259
Operating expenses 69,386 17,852 16,025
------------------- ------------------- -------------------
Gross profit 21,035 6,403 6,234
General and administrative expenses 10,248 7,797 6,905
Depreciation and amortization 2,779 182 154
------------------- ------------------- -------------------
Income (loss) from operations 8,008 (1,576) (825)
------------------- ------------------- -------------------
Other income (expense)
Interest income 2,480 556 581
Interest expense (1,504) - -
Other, net 26 41 (4)
------------------- ------------------- -------------------
Total 1,002 597 577
------------------- ------------------- -------------------
Income (loss) before income taxes and
extraordinary item 9,010 (979) (248)
Provision for income taxes (3,908) (124) (122)
------------------- ------------------- -------------------
Income (loss) before extraordinary
item 5,102 (1,103) (370)
Extraordinary item, net of income
tax benefit of $244 (379) - -
------------------- ------------------- -------------------
Net income (loss) 4,723 (1,103) (370)
Dividends on Class A Convertible
Preferred Stock (2,519) - -
------------------- ------------------- -------------------
Net income (loss) available to common
shareholders $ 2,204 $ (1,103) $ (370)
=================== =================== ===================
Basic income (loss)per share:
Income (loss) per share before
extraordinary item $ 0.26 $ (0.21) $ (0.07)
Extraordinary item per share $ (0.04) $ - $ -
------------------- ------------------- -------------------
Basic income (loss) per share $ 0.22 $ (0.21) $ (0.07)
=================== =================== ===================
Diluted income (loss)per share:
Income (loss) per share before
extraordinary item $ 0.26 $ (0.21) $ (0.07)
Extraordinary item per share $ (0.04) $ - $ -
------------------- ------------------- -------------------
Diluted income (loss) per share $ 0.22 $ (0.21) $ (0.07)
=================== =================== ===================
Weighted average shares outstanding:
Basic 9,931 5,291 5,291
=================== =================== ===================
Diluted 9,990 5,291 5,291
- - ------------------------------------------- =================== =================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE> 28
GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY (DEFICIT)
REDEEMABLE -------------------------------------------------
CONVERTIBLE ADDITIONAL
PREFERRED STOCK COMMON STOCK PAID-IN DEFERRED
------------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT CAPITAL COMP.
------------------------- ----------------------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 - $ - 5,291,262 $ 53 $ - $ -
Net loss - - - - - -
Distributions - - - - - -
----------- ----------- ------------ -------- ---------- --------
Balance, December 31, 1996 - - 5,291,262 53 - -
Net loss - - - - - -
Distributions - - - - - -
----------- ----------- ------------ -------- ---------- --------
Balance, December 31, 1997 - - 5,291,262 53 - -
Redemption of common stock - - (1,799,025) (18) - -
Class A Convertible
Preferred stock dividend 25,762 25,762 - - - -
Issuance of common and
Class A Convertible
Preferred stock 27,014 27,014 4,305,689 43 3,486 -
Accrued dividend on
Class A Convertible
Preferred stock - 2,519 - - - -
Fair value adjustment for
securities available for
sale, net - - - - - -
Issuance of common stock
from Initial Public Offering - - 3,000,000 30 35,900 -
Conversion of Class A
Convertible Preferred Stock (52,776) (55,295) 3,949,650 39 55,256 -
Deferred compensation - - - - 480 (480)
Amortization of deferred
compensation - - - - - 50
Purchase of treasury stock - - - - - -
Net income - - - - - -
Distributions - - - - - -
----------- ----------- ------------ -------- ---------- --------
Balance, December 31, 1998 - $ - 14,747,576 $ 147 $ 95,122 $ (430)
=========== =========== ============ ======== ========== ========
</TABLE>
<TABLE>
<CAPTION>
SHAREHOLDERS' EQUITY (DEFICIT)
-------------------------------------------
RETAINED TREASURY
EARNINGS STOCK TOTAL
--------- ------------- ------------
<S> <C> <C> <C>
Balance, December 31, 1995 $ 3,098 $ - $ 3,151
Net loss (370) - (370)
Distributions (1,108) - (1,108)
--------- ------------- ------------
Balance, December 31, 1996 1,620 - 1,673
Net loss (1,103) - (1,103)
Distributions (212) - (212)
--------- ------------- ------------
Balance, December 31, 1997 305 - 358
Redemption of common stock (12,873) - (12,891)
Class A Convertible
Preferred stock dividend (25,762) - (25,762)
Issuance of common and
Class A Convertible
Preferred stock - - 3,529
Accrued dividend on
Class A Convertible
Preferred stock (2,519) - (2,519)
Fair value adjustment for
securities available for
sale, net (8) - (8)
Issuance of common stock
from Initial Public Offeri - - 35,930
Conversion of Class A
Convertible Preferred Stoc - - 55,295
Deferred compensation - - -
Amortization of deferred
compensation - - 50
Purchase of treasury stock - (125) (125)
Net income 4,723 - 4,723
Distributions (4,995) - (4,995)
--------- ------------- ------------
Balance, December 31, 1998 $(41,129) $ (125) $ 53,585
========= ============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE> 29
GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Years Ended December 31,
----------------------------------------------------------
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 4,723 $ (1,103) $ (370)
Adjustments to reconcile net income (loss) to net cash (used in)
provided by operating activities:
Write-off of deferred financing costs 623 - -
Depreciation and amortization 2,779 182 154
Amortization of deferred financing costs 95 - -
Amortization of deferred compensation 50 - -
Changes in assets and liabilities, excluding effect of
acquisitions
Accounts receivable 5,870 (470) (1,593)
Other assets (7,024) (74) 29
Accounts payable and accrued expenses (4,467) (606) 2,881
Customer deposits (17,808) (98) 561
Other liabilities (308) - -
................... ................... ................
Net cash (used in) provided by operating activities (15,467) (2,169) 1,662
................... ................... ................
Cash flows from investing activities:
Purchases of property and equipment (2,272) (170) (126)
Net sales (purchases) of investments 20,170 1,744 (1,483)
Acquisitions, net of cash acquired (29,629) - -
................... ................... ................
Net cash (used in) provided by investing activities (11,731) 1,574 (1,609)
................... ................... ................
Cash flows from financing activities:
Net (repayments) borrowings on loans to/from shareholders (3,558) 2,204 (67)
Distributions to shareholders (4,995) (212) (1,108)
Proceeds from borrowings under credit agreement 46,688 - -
Repayment of borrowings from credit agreement (40,025) - -
Repayment of promissory note (4,000) - -
Deferred financing costs (1,126) - -
Redemption of common stock (8,891) - -
Net proceeds from Initial Public Offering 35,930 - -
Proceeds from issuance of common and Class A Convertible
Preferred Stock 30,543 - -
Purchase of treasury stock (125) - -
................... ................... ................
Net cash provided by (used in) financing activities 50,441 1,992 (1,175)
................... ................... ................
Net increase (decrease) in cash and cash equivalents 23,243 1,397 (1,122)
Cash and cash equivalents beginning of period 7,074 5,677 6,799
................... ................... ................
Cash and cash equivalents end of period $ 30,317 $ 7,074 $ 5,677
=================== =================== ================
<CAPTION>
Supplemental disclosures of cash flow information: 1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
Cash paid for:
Income taxes $ 3,289 48 123
Interest $ 1,937 - -
Supplemental disclosures of non cash investing and financing activities:
Issuance of promissory note in connection with the redemption of common stock $ 4,000 - -
Class A Convertible Preferred stock dividend $ 25,762 - -
Dividend accretion on Class A Convertible Preferred stock $ 2,519 - -
- - -----------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
29
<PAGE> 30
GLOBAL VACATION GROUP, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS DESCRIPTION AND ORGANIZATION
The Company is one of the largest U.S. providers of value-added vacation
products and services targeted to higher-income travelers. The Company
assembles air, hotel, rental car and other travel components in bulk and
provides complete vacations to travelers through retail travel distributors,
such as travel agents, and other distribution channels, including the Internet
and affinity groups. The Company provides flexible independent travel programs
for individuals as well as escorted tours and group packages.
Headquartered in Washington D.C., the Company markets its products under
the brand names Classic Custom Vacations, Globetrotters, and Allied Tours.
Classic Custom vacations are customized vacation packages for U.S. travelers
seeking an individualized vacation. The Globetrotters brand is targeted to the
popular priced-vacation buyer. The Allied Tours brand creates packages for
international travelers visiting the U.S. Global Vacation Group, Inc.'s common
stock is traded on the New York Stock Exchange under the symbol GVG.
In March 1998, the Company changed its name from Allied Bus Corp. to Global
Vacation Group, Inc. The Company had previously operated under the trade name
"Allied Tours." The name change was concurrent with a recapitalization of the
Company (the "Recapitalization"). Between March 1998 and May 1998, the Company
completed the acquisitions (together "the Acquisitions") of Haddon Holidays,
Inc. ("Haddon"), Classic Custom Vacations ("Classic"), MTI Vacations, Inc.
("MTI"), and Globetrotters, Inc. ("Globetrotters").
In August 1998, the Company completed an initial public offering (the
"Offering") of its common stock. The Company sold 3,000,000 shares of common
stock at a price of $14.00 per share, yielding net proceeds (after underwriting
discounts, commissions and other professional fees) of approximately $35.9
million. The Company used the net proceeds to repay borrowings under its credit
facility. In connection with the Offering, the Company's outstanding Class A
Convertible Preferred Stock (the "Convertible Preferred") automatically
converted into shares of the Company's common stock at $14.00 per share.
The Company's operations are subject to certain risks and uncertainties,
including, among others, current and potential competitors with greater
resources, dependence on effective information systems, changing industry
dynamics related to new methods of distribution within the travel industry,
seasonal fluctuations in operating results, dependence on rapidly changing
technologies, reliance on key personnel, international political and economic
conditions impacting travel patterns, dependence on travel suppliers, and any
effect on the Company or its customers or suppliers related to the Year 2000
issue.
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. The effects of the Year 2000 issue may be
experienced before, on, or after January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may range from minor errors to
significant systems failures, which could effect the Company's ability to
conduct normal business operations. It is not possible to be certain that all
aspects of the Year 2000 issue affecting the Company, including those related
to the efforts of customers, suppliers, or other third parties will be fully
resolved.
30
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents. Cash and cash
equivalents consist primarily of money market investments. Approximately $3.2
million of cash is restricted due to tour contracts between the Company and its
customers for bulk fare tours that require customer payments for future charter
tours be deposited to an escrow account, in accordance with Department of
Transportation regulations governing public charters. Prior to the departure of
charter tours, funds may be expended only for certain direct charter tour
costs.
Short-Term Investments
Short-term investments consist of bank certificates of deposit with
original maturities in excess of three months. The bank certificates of deposit
are primarily used as pledged collateral for letters of credit. The Company
classifies its certificates of deposit as held-to-maturity. These are
securities with determinable fair values that the Company intends to hold for
an indefinite period. These securities are carried at cost which approximates
market value.
Revenue Recognition
Net revenues consist primarily of markups on travel packages. The Company
recognizes net revenue when earned on the date of travel. The Company estimates
and records accruals for cancellations and changes to reservations booked. For
the years ended December 31, 1998, 1997 and 1996, net revenues are derived from
sale of travel products and services with a value of $410.2 million, $125.8
million and $116.7 million, respectively, net of $319.8 million, $101.6 million
and $94.4 million, respectively, in direct costs to suppliers.
Operating Expenses
Operating expenses include commissions, salaries, benefits and payroll tax
expenses, communications, facilities and other costs associated with the
selling and processing of tour packages.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation
and amortization. Depreciation and amortization are recorded using the
straight-line method for leasehold improvements. The Company uses accelerated
and straight-line methods for recording depreciation on furniture and fixtures
and equipment with lives that range from 5 to 10 years. Leasehold improvements
are depreciated over the shorter of the lease term or the estimated useful life
of the asset.
31
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Property and equipment consist of the following (in thousands):
DECEMBER 31,
-----------------
1998 1997
-------- -------
Equipment...................... $12,365 $ 961
Furniture and fixtures......... 2,228 284
Leasehold improvements......... 895 125
------ ------
15,488 1,370
Accumulated depreciation and
amortization.............. (10,330) (984)
------ ------
Property and equipment,
net....................... $5,158 $ 386
====== ======
Intangible Assets
Intangible assets consist of goodwill from acquisitions and deferred
financing costs incurred in connection with the Company's credit agreement.
Goodwill is amortized over 35 years. Deferred financing costs are charged to
interest expense over the life of the debt using the effective interest method.
Intangible assets as of December 31, 1998 consist of the following (in
thousands):
Goodwill.........................$66,008
Deferred financing costs.......... 408
Accumulated amortization .........(1,285)
-------
$65,131
=======
Long - lived Assets
The Company reviews its long-lived assets, including property and
equipment, identifiable intangibles, and goodwill whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be fully
recoverable. To determine recoverability of its long-lived assets, the Company
evaluates the probability that future undiscounted net cash flows will be less
than the carrying amount of the assets.
Fair Value of Financial Instruments
Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures
about Fair Value of Financial Instruments," and SFAS No. 119, "Disclosure about
Derivative Financial Instruments and Fair Value of Financial Instruments,"
require the disclosure of the fair value of financial instruments, whether or
not recognized in the balance sheet, for which it is practicable to estimate
that value. The carrying value of the Company's financial instruments
approximates fair value due to the relatively short maturities of these
instruments.
In the normal course of business, the Company is a party to letters of
credit which are not reflected in the accompanying balance sheets. Such
financial instruments are valued based on the amount of exposure under the
instrument and the likelihood of performance being required. Based on the
Company's past experience, management does not expect any material losses to
result from these off-balance-sheet instruments and, therefore, is of the
opinion that the fair value of these instruments is zero.
Concentrations
The Company maintains bank accounts with federally insured financial
institutions. Periodically, balances may exceed insured limits.
As of December 31, 1998, and 1997, no individual customer represented more
than 10 percent of net revenues or accounts receivable. Prior to the 1998
acquisitions, the Company's revenues and accounts receivable were principally
with customers outside the United States. For the year ended December 31, 1998,
gross revenues from customers located in Europe and South America/South Pacific
represented approximately 22 percent and 7 percent of the total gross revenues,
respectively. In addition, vacation
32
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
products and services related to Hawaiian destinations accounted for
approximately 50 percent of gross revenues for the year ended December 31,
1998.
Income Taxes
Until March 1998, the Company elected to be taxed under the provisions of
Subchapter S of the Internal Revenue Code. Under those provisions, the Company
did not pay corporate income taxes on its taxable income. Instead, the
shareholders were liable for individual income taxes on their respective shares
of the Company's taxable income. Accordingly, there is no provision for Federal
income taxes in the accompanying financial statements for periods prior to
March 1998. The Company was taxable in certain states and other jurisdictions
that did not recognize S Corporation status. In March 1998, the Company
terminated its S Corporation election and, accordingly, has since been subject
to Federal and state income taxes.
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred tax assets and
liabilities are computed based on the difference between the financial
statement and income tax bases of assets and liabilities using the enacted
marginal tax rate. SFAS No. 109 requires that a net deferred tax asset be
reduced by a valuation allowance if, based on the weight of available evidence,
it is more likely than not that some portion or all of the net deferred tax
asset will not be realized.
Basic and Diluted Net Income (Loss) per Common Share
The Company has implemented SFAS No. 128, "Earnings Per Share". SFAS No.
128 requires dual presentation of basic and diluted earnings per share. Basic
income or loss per share is computed by dividing net income or loss available
to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted income or loss per share includes the
potential dilution that could occur if securities or other contracts to issue
common stock were exercised or converted into common stock.
The treasury stock effect of options to purchase 1,617,819 shares of common
stock outstanding at December 31, 1998 have been included in the computation of
diluted income per share for the year ended December 31, 1998. The effect of
the Convertible Preferred Stock outstanding during the year ended December 31,
1998 has not been included in the computation of diluted income per share as
such effect would be anti-dilutive. The following table sets forth the
calculation of basic and diluted weighted average shares outstanding (in
thousands).
<TABLE>
<CAPTION>
Years Ended
December 31,
-----------------------------------------
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Basic weighted average shares outstanding 9,931 5,291 5,291
Effect of dilutive securities:
Treasury stock effect of outstanding
stock options 59 - -
----------- ------------ -----------
Diluted weighted average shares
outstanding 9,990 5,291 5,291
=========== ============ ===========
</TABLE>
New Accounting Standards
The Company has adopted the Financial Accounting Standards Board ("FASB")
SFAS statement No. 130, "Reporting Comprehensive Income." SFAS No. 130
establishes standards for reporting and display of
33
<PAGE> 34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
comprehensive income and its components in the financial statements. The
adoption of SFAS No. 130 has not had a material impact on the Company's
results of operations, financial position, or cash flows.
The Company has adopted SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information." SFAS No. 131 establishes standards for the
way that public business enterprises report information about operating segments
in annual financial statements and requires that those enterprises report
selected information about operating segments in interim financial reports
issued to shareholders. It also establishes standards for related disclosures
about products and services, geographic areas and major customers. After
evaluation, senior management concluded that operations occur primarily in one
segment only. The adoption of SFAS No. 131 has had no impact on the Company's
results of operations, financial position, or cash flows.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." The Statement establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded in the
balance sheet as either an asset or liability measured at its fair value. SFAS
No. 133 requires that changes in the derivative's fair value be recognized
currently in earnings unless specific hedge accounting criteria are met. SFAS
133 is effective for fiscal years beginning after June 15, 1999. Management has
not yet determined the impact of adopting this statement, but believes it will
not have a material impact upon the Company's results of operations or
financial position.
In March 1998, the AICPA issued Statement of Position 98-1 "Accounting for
the Costs of Computer Software Developed or Obtained for Internal Use," ("SOP
98-1"). SOP 98-1 requires the Company to capitalize internal computer software
costs once the capitalization criteria are met. SOP 98-1 is effective January
1, 1999, and is applied to all projects in progress upon initial application.
The Company has not yet determined the impact of the adoption of SOP 98-1;
however, a percentage of the Company's historical operating expenses may now be
required to be capitalized under SOP 98-1.
3. ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consist of the following (in
thousands):
DECEMBER 31,
-------------------------
1998 1997
---------- ---------
Accounts payable $ 23,756 $ 9,879
Accrued expenses 14,036 1,135
Bank overdraft 2,077 4,745
-------- ---------
$ 39,869 $ 15,759
======== =========
4. SHAREHOLDERS' EQUITY
Recapitalization
In March 1998, the Company was recapitalized pursuant to an agreement
between the Company, its existing shareholders, Allied Tours Holding Corp.
("Allied Holding"), the shareholders of Allied Holding and a new investor (the
"Investor"). Prior to the Recapitalization, the Company had 100 shares of
issued and outstanding common stock, all of which were owned by Allied Holding.
Pursuant to the Recapitalization, the Company redeemed an aggregate of 34
shares of common stock for $14.7 million from Allied Holding and the Investor
purchased 57 shares from Allied Holding for $24.7 million. The redemption price
was paid in cash of $10.7 million and $4.0 million in a 120-day promissory note
bearing interest at 8 percent. The redemption was financed, in part, with $13.0
million in borrowings under the Company's credit agreement.
Following the redemption, the Company amended and restated its certificate
of incorporation to authorize two classes of capital stock: common stock with a
par value of $.01 per share and preferred stock with a par value of $1,000 per
share. At that time, the 66 shares outstanding were converted into 3,492,237
34
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
shares of common stock and 25,762 shares of Convertible Preferred. The
conversion into the Convertible Preferred was accounted for as a noncash
dividend and the conversion into common stock was accounted for as a stock
split. All share and per share amounts have been restated to reflect this
common stock split.
Increase in Authorized Shares, Stock Split, and Conversion
In connection with the Offering, the Company amended and restated its
certificate of incorporation to increase the number of authorized shares of
common stock to 60,000,000, par value $0.01 per share, and authorized 6,000,000
shares of undesignated preferred stock, par value $0.01 per share. The Company
effected a 12.2-for-one stock split of the common stock. All share and per
share amounts have been retroactively adjusted to give effect to these events.
Equity Purchase Agreement
In March 1998, the Company entered into a purchase agreement with the
Investor and certain other parties in which the Company agreed to sell 22,751
shares of Convertible Preferred and 3,083,977 shares of common stock to the
Investor and an aggregate of 1,228 shares of Convertible Preferred and an
aggregate of 166,412 shares of common stock to such other parties at a price of
$1,000 per Convertible Preferred share and $0.82 per common share. These shares
were issued between March and May 1998 to fund, in part, the cash component of
the Company's purchase price for certain of the Acquisitions.
Preferred Stock
Holders of Convertible Preferred were entitled to dividends to be paid in
additional shares of Convertible Preferred at a rate of 15 percent per annum.
Upon completion of the Offering, the Convertible Preferred converted into
common stock at a rate equal to the Liquidation Value plus any accrued but
unpaid dividends divided by the per share offering price of $14.00 per share.
Treasury Stock
In November 1998, the Company's Board of Directors authorized the
repurchase, at management's discretion, of up to 250,000 shares of the
Company's Common Stock in the public market. The Board of Directors also
authorized the purchase of up to 100,000 shares of the Company's common stock
over a one-year period for use in matching employee contributions in the
Company's new 401(k) plan. As of December 31, 1998, the Company had purchased
12,000 shares of common stock for $125,000.
5. STOCK OPTION PLAN
The Company adopted the 1998 Stock Option Plan (the "Stock Option Plan") to
assist the Company in attracting and retaining qualified employees, directors,
consultants and advisors. The Stock Option Plan provides that at any time a
number of shares equal to 12 percent of the number of then outstanding shares
of common stock will be reserved for issuance pursuant to grants of stock
options. Unless sooner terminated by the Company's Board of Directors, the
Stock Option Plan will terminate on March 29, 2008. Options granted under the
Stock Option Plan may be either incentive stock options ("ISOs"), or
nonstatutory stock options ("NSOs"). No option granted under the Stock Option
Plan is exercisable after the tenth anniversary of the option's date of grant.
35
<PAGE> 36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The following table sets forth stock option activity for the year ended
December 31, 1998.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
OPTION PRICE EXERCISE
OPTIONS PER SHARE PRICE
----------- --------- ------
<S> <C> <C> <C>
Options outstanding at December 31, 1997........... -- -- --
Granted............................................ 1,637,819 $ 0.82-14.00 $ 13.21
Canceled........................................... (20,000) $ 14.00 $ 14.00
----------- ------------ -------
Options outstanding as of December 31, 1998 1,617,819 $ 0.82-14.00 $ 13.22
========= ============ =======
</TABLE>
The outstanding options generally vest ratably over a four-year period from
the date of grant at the rate of 25 percent per year. There were no options
exercisable as of December 31, 1998. The weighted average remaining contractual
life of options outstanding at December 31, 1998 was 9.25 years.
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation. SFAS No. 123 defines a "fair value based method" of accounting
for stock-based compensation. Under the fair value based method, compensation
cost is measured at the grant date based on the fair value of the award and is
recognized over the service period. Prior to the issuance of SFAS No. 123,
stock-based compensation was accounted for under the "intrinsic value method"
as defined by Accounting Principles Board ("APB") Opinion No. 25, "Accounting
for Stock Issued to Employees." Under the intrinsic value method, compensation
is the excess, if any, of the market price of the stock at grant date or other
measurement date over the amount an employee must pay to acquire the stock.
SFAS No. 123 allows an entity to continue to use the intrinsic value method
for stock-based compensation to employees. However, entities electing the
accounting in APB Opinion No. 25 must make pro forma disclosures as if the fair
value based method of accounting had been applied. The Company applies APB
Opinion No. 25 and the related interpretations in accounting for its
stock-based compensation to employees. Under APB Opinion No. 25, no
compensation expense has been recognized in the accompanying financial
statements related to stock option grants to employees in 1998 as the exercise
price for such options was equal to the fair value of the Company's common
stock on the date of the grant. In August 1998, the Company granted 58,357
options to several consultants to the Company. As a result, the Company
recorded deferred compensation related to these non-employee options, pursuant
to the fair-value based method, of approximately $480,000, of which $50,000 was
amortized in the year ended December 31, 1998.
Had compensation expense for stock-based compensation to employees been
determined based on the fair value of the options at the grant dates consistent
with the method of accounting under SFAS No. 123, the Company's net income and
net income per share would have been decreased to the pro forma amounts
indicated below for the year ended December 31, 1998 (in thousands, except per
share amounts):
Net income available to common shareholders:
As reported.................$ 2,204
Pro forma...................$ 763
Basic and Diluted Income Per Share:
As reported.................$ 0.22
Pro forma...................$ 0.08
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions used for
grants during the years ended December 31, 1998: no dividend yield, expected
volatility from zero to 80%, risk-free interest rates from 4.2% to 5.7% and an
expected term of 5 years.
36
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
6. CREDIT AGREEMENT
In March 1998, the Company entered into a credit agreement (the "Credit
Facility") with a bank. Under the Credit Facility, the Company may borrow up to
$65.0 million. Of this amount, up to $10.0 million may be in the form of
revolving line of credit, including letters of credit of up to $5.0 million,
and the remaining $55.0 million may be in the form of term loans which may not
be reborrowed once repaid. The amounts available for borrowing under the term
loans may be limited in certain circumstances based upon the level of equity
financing and by the aggregate acquisition consideration to be paid in
connection with permitted acquisitions (as defined in the agreement).The
Company used the net proceeds from the Offering to repay borrowings under the
Credit Facility. In connection with the early extinguishment of this debt, the
Company recognized an extraordinary charge to write-off deferred financing
costs related to the term loans repaid. As of December 31, 1998, the Company
had outstanding term loans of $6.7 million under the Credit Facility. Of the
$6.7 million, $5.2 million is classified as short-term debt and was repaid in
January 1999. The remaining balance of $1.5 million is scheduled for repayment
in quarterly installments as follows (in thousands):
1999............................................ $100
2000............................................ 165
2001............................................ 238
2002............................................ 283
2003............................................ 326
2004............................................ 351
-----
$1,463
=======
As of December 31, 1998, the Company had a total of $16.0 million available
under the Credit Facility with $7.7 million available under the revolving line
of credit and $8.3 million available for term loans.
The Company may be required to prepay unpaid principal amounts on the term
loans and the revolving credit facility upon the occurrence of certain events
including, among others, the disposition of a business or portion thereof, the
sale of equity securities, or a refinancing of the Company's debt. In addition,
the level of the Company's leverage ratio (as defined) for a given year may
result in the required prepayment of certain amounts as specified in the
agreement.
Borrowings under the revolving credit facility and term loans may be
designated by the Company as alternate base rate advances ("ABR Advances") or
eurodollar advances ("Eurodollar Advances"). ABR Advances generally bear
interest at a base rate plus an applicable margin. The base rate is equal to
the higher of the prime rate or the federal funds rate plus 0.5 percent. The
applicable margin generally ranges from 0.25 percent to 1 percent based upon
the Company's leverage ratio (as defined).
Eurodollar Advances generally bear interest at the eurodollar rate plus an
applicable margin. The eurodollar rate is the rate of interest obtained by
dividing (i) the rate quoted by the bank to leading banks in the London
interbank eurodollar market as the rate at which the bank is offering dollar
deposits in an amount approximately equal to the advance and having a period to
maturity approximately equal to the interest period applicable to the
eurodollar advance by (ii) a number equal to one minus the aggregate of the
then stated maximum rates during such interest period of all reserve
requirements established in respect of eurocurrency funding. The interest
period is the period commencing on the borrowing date and ending one, two,
three or six months thereafter as selected by the Company. The applicable
margin generally ranges from 1.25 percent to 2 percent based upon the Company's
leverage ratio (as defined). Interest on Eurodollar Advances is due at the end
of the interest period or at the end of each three-month interval during the
interest period. The number of Eurodollar Advances that the Company is
permitted to have outstanding may be limited in certain circumstances.
The Company's obligations under the credit agreement are secured by
substantially all of the Company's assets and the credit agreement includes
certain restrictive covenants including, among others, limitations on
acquisitions, indebtedness, sales or other asset dispositions, investments,
dividends or distributions, and related party transactions. The credit
agreement also requires that the Company maintain certain operating
37
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
and financial ratios as defined, including a maximum leverage ratio, a minimum
interest coverage ratio, a minimum fixed charge coverage ratio, minimum net
worth and annual limitations on capital expenditures.
7. INCOME TAXES
Prior to March 1998, the provision for income taxes represents amounts owed
in states and other jurisdictions that did not recognize S Corporation status.
For the years ended December 31, 1998, 1997 and 1996, the components of the
(provision for) benefit from income taxes consist of the following:
YEARS ENDED DECEMBER 31,
1998 1997 1996
---------- ---------- -------
Current $ (3,970) $ (136) $ (124)
Deferred 62 12 2
------ ------- -------
$ (3,908) $ (124) $ (122)
======== ======= ========
The components of the Company's net deferred tax asset (liability) are as
follows (in thousands):
DECEMBER 31,
1998 1997 1996
--------- --------- -------
Allowance for doubtful
accounts..................... $405 $ 24 $ 12
Accrued expenses............. 286 6 4
Deferred
revenue....................... 140 - -
Depreciation and
amortization....... (571) - -
Other........................ - (9) (7)
--------- ---- ------
$260 $ 21 $ 9
========= ==== ======
For the years ended December 31, 1997 and 1996, the provision for income
taxes reflects effective rates that differ from the statutory Federal rate as a
result of the effect of income taxed directly to shareholders and the effect of
state and local income taxes. A reconciliation of the tax provision from the
U.S. Federal statutory tax rate to the Company's effective tax rate is as
follows for the year ended December 31, 1998:
Taxes at the statutory Federal
rate...... (35.0)%
Effect of graduated
rates.......................... 1.0
S corporation loss attributable
directly to shareholders....... (3.4)
State and other income taxes,
net of Federal tax benefit..... (4.0)
Nondeductible expenses............ (2.0)
-------
Tax provision at effective
rates....... (43.4)%
=======
8. COMMITMENTS AND CONTINGENCIES
Senior Management Agreements
In March 1998, the Company entered into employment agreements with certain
executives. The agreements prescribe salary and bonus compensation and provide
for severance payments in certain circumstances. The agreements extend to April
2001 with one year renewals thereafter. The agreements also contain various
non-compete and non-solicitation provisions.
Under the terms of the agreements, the Company sold an aggregate of 701,500
shares of common stock at a price of $0.82 per share and an aggregate of 425
shares of Convertible Preferred at a price of $1,000 per share to the three
executives in March 1998. All of the shares of Convertible Preferred are
"Non-Vesting Preferred Stock." Of the shares of common stock sold, 643,879
shares are "Vesting Stock" and 57,621 shares are "Non-Vesting Common Stock."
38
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The Vesting Stock vests based upon both the passage of time and the
performance of the Company. Of the total Vesting Stock, 67 percent, or 429,245
shares, vest 20 percent immediately and the remaining 80 percent generally vests
ratably at 20 percent per year. The remaining 33 percent or 214,634 shares of
the Vesting Stock will become fully vested on April 1, 2005. Such vesting may be
accelerated based upon the performance of the Company (as defined). Subsequent
to December 31, 1998, the Company fully vested senior management in the Vesting
Stock. The Non-Vesting Common Stock and the Non-Vesting Preferred Stock vested
immediately upon purchase.
In the event that an executive ceases to be employed by the Company, the
executive stock will be subject to repurchase by the Company. In the event of
termination, (i) the purchase price for each unvested share of common stock will
be the executive's original cost for such share, and (ii) the purchase price for
each vested share of common stock will be the fair market value for such share,
provided, however that if the executive's employment is terminated for cause (as
defined), the purchase price will be the executive's original cost for such
share. If the Company does not elect to purchase all of the executive's stock
pursuant to the repurchase option, the Investor shall be entitled to exercise
the repurchase option for the shares of any class of executive's stock the
Company has not elected to purchase.
Consulting and Employment Agreements
In March 1998, the Company entered into a consulting agreement with the
former majority stockholder of the Company. The terms of the agreement provide
for a fixed level of compensation and the term of the agreement extends through
December 1999 and can be automatically extended for one month periods
thereafter. The agreement also includes a covenant not to compete for the longer
of four years or one year beyond the engagement of this individual as a
consultant.
In March 1998, the Company entered into employment agreements with two
individuals who are stockholders of the Company. The Company has also entered
into an employment agreement with the spouse of another stockholder. These
agreements generally extend for a term of four years with one year renewals. The
agreements prescribe salary and bonus compensation based upon the performance of
the Company and, in certain circumstances, provide for severance payments. The
agreements also contain various non-compete and non-solicitation provisions.
Trase Miller Agreement
In connection with the acquisition of MTI, the Company entered into an
information and business systems outsourcing arrangement with Trase Miller
Solutions, Inc. ("Trase Miller Solutions"), a former affiliate of MTI. On August
14, 1998, the Company, Trase Miller Solutions and the majority shareholder of
Trase Miller Solutions entered into an agreement with a term ending on April 30,
2006 (the "Outsourcing Agreement") to expand this outsourcing agreement to
provide a common platform system for all the Company's businesses (other than
the business systems associated with the Company's in-bound business). During
the term of the Outsourcing Agreement, Trase Miller Solutions will provide to
the Company information systems and related services, including operating
services, system maintenance, general management and support and implementation
and migration services. From April 1, 1999 through April 30, 2006, The Company
will pay Trase Miller Solutions for the services provided under the Outsourcing
Agreement on a cost-plus 20% basis and will pay royalty fees of $17.5 million in
the aggregate. In connection with the Outsourcing Agreement, the Company also
paid $6.8 million to acquire an option, exercisable through January 10, 1999, to
purchase all of the outstanding stock of Trase Miller Solutions. In January
1999, the Company paid approximately $2.3 million to extend the option through
March 31, 1999. In the event the Company exercises this option, the purchase
price will be $18.8 million, subject to certain adjustments and to a credit for
the amounts paid by the Company to acquire the option and extension. If the
Company does not exercise the option, the amounts paid to acquire the option and
extension will be credited over three years beginning April 1, 1999 against
payments owing to Trase Miller Solutions under the Outsourcing Agreement. The
$6.8 million consideration paid for the option has been included in other assets
in the accompanying balance sheet as of December 31, 1998.
39
<PAGE> 40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Leases
The Company leases its facilities, automobiles and certain equipment under
noncancellable operating leases. The following is a schedule by years of future
minimum rental payments, required under these leases expiring through 2003, as
of December 31, 1998 (in thousands):
1999.................. $ 2,214
2000.................. 1,424
2001.................. 1,236
2002.................. 850
2003.................. 835
Thereafter............ 450
-------
Total............ $ 7,009
=======
Total facilities rent expense for the years ended December 31, 1998, 1997
and 1996 was approximately $2,059,000, $454,000 and $423,000, respectively.
Letters of Credit
As of December 31, 1998 and 1997, the Company had issued letters of credit
totaling $2.3 million and $835,000, respectively, in favor of certain vendors.
Certain certificates of deposit of similar amount and maturity have been pledged
as collateral and are included in the accompanying balance sheet as cash and
cash equivalents or short-term investments, depending on their maturity.
Litigation
The Company is periodically a party to disputes arising from normal business
activities. In the opinion of management, resolution of these matters will not
have a material adverse effect upon the financial position or future operating
results of the Company, and adequate provision for any potential losses has been
made in the accompanying financial statements.
9. RELATED PARTY TRANSACTIONS
Loans receivable from/loans payable to shareholders are related to
borrowings from and advances to shareholders prior to the Recapitalization. In
addition, as of December 31, 1998, the Company has a $2.5 million note
receivable from a former principal shareholder of one of the acquired companies.
The note is secured by certain investments and is due on April 15, 2000.
Interest accrues daily on the unpaid principal at the rate of 9% per annum and
is to be paid on the last day of each calendar quarter during the term of the
note.
During 1998, the Company had an agreement with an affiliate of the Investor
to provide investment banking and support services. Total fees and expense
reimbursements paid under this agreement in 1998 totaled $2.1 million. The
agreement terminated at the completion of the Company's Offering on August 5,
1998.
10. ACQUISITIONS
Since March 1998, the Company has acquired Haddon, Classic and Globetrotters
and substantially all of the assets of MTI. Each of these acquisitions was
acquired with cash and certain assets. The Company financed the Acquisitions
with proceeds from the issuance of additional shares of Convertible Preferred
and common stock and from borrowings under the Credit Facility. The acquisition
of each of these businesses has been accounted for as a purchase for financial
reporting purposes. The Company allocated the excess of the purchase price over
the fair value of net assets acquired to goodwill. The Company amortizes
goodwill over 35 years.
40
<PAGE> 41
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
Haddon
On March 30, 1998, the Company purchased all of the outstanding capital
stock of Haddon, a package vacation provider that historically has provided air,
hotel and ground transportation packages for travelers to Hawaii. The Company
paid a purchase price of approximately $7.5 million. In addition, the Company
incurred direct acquisition costs of approximately $268,000. The Company
financed the cash purchase price and the direct acquisition costs with $4.9
million in proceeds from the issuance of common stock and Convertible Preferred,
and $2.4 million in borrowings under the Credit Facility. In connection with the
acquisition of Haddon, the Company sold 61,000 shares of common stock, valued at
$0.82 per share and 450 shares of Convertible Preferred, valued at $1,000 per
share, to the former shareholders of Haddon.
Classic
In April 1998, the Company purchased all of the outstanding capital stock of
Classic, a package vacation provider. The Company paid a purchase price of $17.1
million, all of which was paid in cash. In addition, the Company incurred direct
acquisition costs of approximately $2.0 million. The Company financed the cash
purchase price and the direct acquisition costs with proceeds from the issuance
of $6.7 million of Convertible Preferred and $13.1 million in borrowings under
the Credit Facility. The proceeds from this sale and borrowing also provided
approximately $700,000 in working capital.
MTI
In May 1998, the Company acquired substantially all of the assets of MTI, a
package vacation provider that (i) provides vacation packages for travelers to
Hawaii (ii) provides packages for Amtrak-sponsored vacations (iii) operates the
reservation system associated with package vacations sponsored by Hyatt and (iv)
provides credit card reward fulfillment programs. The Company paid a purchase
price of $26.4 million. In addition, the Company incurred direct acquisition
costs of approximately $881,000. The Company financed the cash purchase price
and direct acquisition costs with proceeds from the issuance of $15.5 million of
Convertible Preferred and $11.1 million in borrowings under the Credit Facility.
The proceeds from this sale and borrowing also provided approximately $1.7
million in working capital. In connection with the acquisition of substantially
all of the assets of MTI, the Company sold 292,800 shares of common stock,
valued at $0.82 per share, and 2,160 shares of Convertible Preferred, valued at
$1,000 per share, to an affiliate of the seller. The Company also entered into
the Outsourcing Agreement with a former affiliate of MTI, whereby the affiliate
will provide the Company with management information system support relating to
MTI's computer reservation system and related functions (See Note 8).
Globetrotters
In May 1998, the Company purchased all of the outstanding capital stock of
Globetrotters, a package vacation provider that historically has provided
vacation packages, primarily for the Florida, Mexico and Caribbean markets. The
Company paid a purchase price of $5.4 million, of which $3.4 million was paid in
cash, with the remaining $2.0 million paid through the forgiveness of
related-party debt. In addition, the Company incurred direct acquisition costs
of approximately $232,000. The Company financed the cash purchase price and the
direct acquisition costs with proceeds from the issuance of $551,000 of
Convertible Preferred, $1.9 million in borrowings under the Credit Facility and
$1.3 million from working capital.
The purchase price has been allocated on a preliminary basis as follows for each
of the Acquisitions (in thousands):
<TABLE>
<CAPTION>
Haddon Classic MTI Globetrotters Total
------ ------- ----- ------------- ------
<S> <C> <C> <C> <C> <C>
Cash and investments..................... $ 3,475 $ 25,642 $ 19,913 $ 2,663 $ 51,693
Accounts receivable...................... 1,041 8,108 3,920 2,907 15,976
Fixed assets and other assets............ 90 2,426 1,696 1,065 5,277
Goodwill................................. 9,476 18,892 30,732 6,908 66,008
Liabilities assumed and direct
acquisition costs........................ (6,364) (36,008) (28,980) (7,961) (79,313)
-------- -------- -------- -------- --------
Total.......................... $ 7,718 $ 19,060 $ 27,281 $ 5,582 $ 59,641
======== ======== ======== ======== ========
</TABLE>
41
<PAGE> 42
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
The pro forma information presented below (in thousands) reflects the
Acquisitions as if they had occurred on January 1, 1997. These results are not
necessarily indicative of future operating results or what would have occurred
had the Acquisitions been consummated at that date.
<TABLE>
<CAPTION>
Year Ended
December 31
---------------------------
1998 1997
---- ----
<S> <C> <C>
Net revenues........................................... $ 123,501 $ 115,222
Net income............................................. 6,202 4,279
Basic and Diluted income per share .................... $ 0.42 $ 0.29
</TABLE>
In connection with the Acquisitions, the Company recognized
approximately $2.0 million in liabilities assumed in the Acquisitions as the
cost of closing redundant facilities and terminating approximately 110
employees. The accrual included lease and facility costs of $795,000, severance
and other employee termination costs of $907,000, and costs of $300,000 related
to other contractual obligations associated with the Company's consolidation
plan. During 1998, the Company closed redundant reservation centers and
consolidated Haddon and Globetrotters into Classic and MTI, respectively. These
activities resulted in a reduction of approximately 90 employees in connection
with the facility closures, the elimination of duplicate positions and the
restructuring of certain operations. In the year ended December 31, 1998, the
Company charged approximately $859,000 against the accrual for amounts paid
during 1998. The remaining accrual relates primarily to lease and severance
costs, substantially all of which are expected to be paid in 1999.
11. SUBSEQUENT EVENTS
Amended Credit Facility
On February 19, 1999, the Company amended and restated its credit agreement
(the "Amended Agreement"). The Amended Agreement was entered into with three
participating banks and provides for a $45 million revolving credit facility
with a five-year maturity. The Amended Agreement consists of a $10 million
working capital revolving credit facility ("Working Capital Facility") with a
maximum of $5 million available for issuing standby letters of credit and a $35
million revolving credit facility for use in financing acquisitions
("Acquisition Facility"). The Acquisition Facility has a commitment reduction
of $5 million per year for four years commencing December 31, 1999 with the
final $15 million reduction at maturity. Under the Amended Agreement, the
Company will continue to select interest at ABR Advance or Eurodollar Advance
rates plus the applicable margin as previously defined. An annual commitment
fee is due on the unused portion of the aggregate facility. The commitment fee
is based on the leverage ratio of the Company and will be between .375 percent
and .500 percent.
All borrowings under the Amended Agreement will be collateralized by all of
the stock, tangible and intangible assets of subsidiaries or businesses of the
Company with borrowings under the Amended Agreement. The Amended Agreement also
requires the Company to meet certain financial ratios and covenants, including
minimum net worth, fixed charge coverage, interest coverage, leverage ratios
and limitations on capital expenditures.
Acquisition of Friendly Holidays, Inc.
On March 17, 1999, the Company acquired all the outstanding stock of
Friendly Holidays, Inc., a wholesale package tour operator that principally
serves travelers to Mexico, Central America and the Caribbean destinations. The
terms of the purchase include cash consideration of $10.2 million and
additional payments of up to $2.8 million contingent on future operating
results.
42
<PAGE> 43
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
Certain information required by Part III is omitted from this Report in
that the Registrant will file a definitive proxy statement with the
Securities and Exchange Commission (the "Commission") within 120 days
after the end of its fiscal year pursuant to Regulation 14A, as
promulgated by the Commission, for its Annual Meeting of Stockholders to
be held May 12, 1999 (the "Proxy Statement"), and certain information
included therein is incorporated herein by reference. (The Compensation
Committee Report and the stock performance graph of the Registrant's Proxy
Statement are expressly not incorporated by reference herein.)
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement under under the caption "Executive Officers of
the Company," which information is incorporated herein by this reference
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference to the
Company's Proxy Statement under the heading "Executive Compensation and Other
Information."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference to the
Company's Proxy Statement under the heading "Election of Directors" and
"Security Ownership of Certain Beneficial Owners and Management."
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference to the
Company's Proxy Statement under the heading "Certain Relationships and Related
Transactions."
43
<PAGE> 44
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. INDEX TO FINANCIAL STATEMENTS
Reference is made to the index set forth on page 24 of
this Report.
2. FINANCIAL STATEMENT SCHEDULES:
<TABLE>
<CAPTION>
Page No.
--------
Schedule II Valuation and Qualifying Accounts.................................................................... 47
<S> <C> <C> <C>
3. EXHIBITS
a) Consent of Arthur Andersen LLP........................................................48
b) Amended and Restated Credit Facility Dated February 19, 1999..........................49
c) Exhibit Index.........................................................................50
d) Exhibit 27.1 Financial Data Schedule..................................................51
</TABLE>
44
<PAGE> 45
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES ACT
OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF
WASHINGTON, DISTRICT OF COLUMBIA, ON THE 25TH DAY OF MARCH, 1999.
GLOBAL VACATION GROUP, INC.
By: /s/ ROGER H. BALLOU
------------------------
ROGER H. BALLOU
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- - ----------------------------------------------- --------------------------------- ----------------
<S> <C> <C>
/s/ ROGER H. BALLOU Chief Executive Officer March 25, 1999
- - -----------------------------------------------
ROGER H. BALLOU and Chairman
(Principal Executive Officer)
/s/ J. RAYMOND LEWIS, JR. President and Chief March 25, 1999
- - -------------------------------------------------
J. RAYMOND LEWIS, JR. Operating Officer
(Principal Operating Officer)
/s/ WALTER S. BERMAN Executive Vice President March 25, 1999
- - -------------------------------------------------
WALTER S. BERMAN and Chief Financial Officer
(Principal Financial and
Accounting Officer)
/s/ KENNETH M. DUBERSTEIN Director March 25, 1999
- - -------------------------------------------------
KENNETH M. DUBERSTEIN
/s/ FREDERIC V. MALEK Director March 25, 1999
- - -------------------------------------------------
FREDERIC V. MALEK
/s/ CARL J. RICKERTSON Director March 25, 1999
- - -------------------------------------------------
CARL J. RICKERTSEN
/s/ JAMES M. SULLIVAN Director March 25, 1999
- - -------------------------------------------------
JAMES M. SULLIVAN
</TABLE>
45
<PAGE> 46
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Global Vacation Group, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of Global Vacation Group, Inc., (a New York corporation)
and Subsidiaries and have issued our report thereon dated February 5, 1999
(except with respect to the matters discussed in Note 11 to the Consolidated
Financial Statements as to which the date is March 17, 1999). Our audit was made
for the purpose of forming an opinion on the basic financial statements taken as
a whole. The schedule listed in Item 14, Valuation and Qualifying Accounts, is
the responsibility of the Company's management and is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a part
of the basic financial statements. This schedule has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly states in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
ARTHUR ANDERSEN LLP
Washington D.C.
February 5, 1999
46
<PAGE> 47
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
DEDUCTIONS FROM
ADDITIONS RESERVE FOR
BALANCE AT CHARGED PURPOSES FOR
BEGINNING TO COST OR WHICH RESERVE BALANCE AT
DESCRIPTION OF YEAR EXPENSES WAS CREATED END OF YEAR
--------------------------------- ---------- ---------- --------------- -----------
<S> <C> <C> <C> <C>
1998 Allowance for doubtful
accounts
861 121 -- 982
Restructuring reserve -- 2,002 859 1,143
1997 Allowance for doubtful
accounts 448 771 358 861
1996 Allowance for doubtful 310 1,208 1,070 448
accounts
</TABLE>
47
<PAGE> 48
3. EXHIBITS:
<TABLE>
<CAPTION>
c) EXHIBIT INDEX
<S> <C>
3.1++ Restated Certificate of Incorporation of the Registrant
3.2+ Amended and Restated By-laws of the Registrant
4.1+ Form of Specimen Stock Certificate
10.1+ Recapitalization Agreement dated as of March 18, 1998 among the
Registrant, Thayer, Allied Holding and the shareholders of Allied
Holding
10.2+ Equity Purchase Agreement dated as of March 30, 1998 between the
Registrant and Thayer and certain other purchasers.
10.3+ Equity Subscription Agreement dated as of March 30, 1998 by and among
the Registrant, Ralph M. Caliri and William W. Webber.
10.4+ Equity Subscription Agreement dated as of April 30, 1998 between the
Registrant and James F. Miller.
10.5+ Registration Rights Agreement dated as of June 12, 1998 by and among
the Registrant, Thayer and certain shareholders of the Registrant
10.6+ Stock Purchase Agreement dated as of March 30, 1998 by and among
the Registrant, Haddon and the shareholders of Haddon.
10.7+ Stock Purchase Agreement dated as of April 20, 1998 by and among the
Registrant, Classic Custom Vacations, Inc. ("Classic") and the
shareholders of Classic.
10.8+ Asset Purchase Agreement dated as of April 30, 1998 by and among the
Registrant, MTI and James F. Miller.
10.9+ Stock Purchase Agreement dated as of May 4, 1998 by and among
the Registrant, Globetrotters, Inc. and Robert A. Grinberg.
10.10+t Professional Services Agreement dated as of March 30, 1998 between the
Registrant and TC Management Partners, LLC.
10.11+t Credit Agreement dated as of March 27, 1998 by and among the Registrant,
the lenders party thereto and The Bank of New York, as administrative
agent
10.12+t Amendment No. 1 and Consent dated as of April 8, 1998 to Credit
Agreement dated as of March 27, 1998 by and among the Registrant, the
lenders party thereto and The Bank of New York as administrative agent
10.13+t Amendment No. 2 dated as of May 5, 1998 to Credit Agreement dated as
of March 27, 1998 by and among the Registrant, the lenders party
thereto and The Bank of New York as administrative agent
10.14+t Registrant's 1998 Stock Option Plan
10.15+t Senior Management Agreement dated as of March 30, 1998 between the
Registrant and Roger H. Ballou.
10.16+t Senior Management Agreement dated as of March 30, 1998 between the
Registrant and J. Raymond Lewis, Jr.
10.17+t Senior Management Agreement dated as of March 30, 1998 between the
Registrant and Walter S. Berman.
10.18+t Consulting Agreement dated as of March 27, 1998 by and between the
Registrant and Stanley Fisher.
10.19+t Employment Agreement dated as of March 18, 1998 by and between the
Registrant and Michael Fisher.
10.20+t Employment Agreement dated as of March 18, 1998 by and between the
Registrant and Gregory Fisher.
10.21+t Amendment No. 1 dated as of June 24, 1998 to Senior Management
Agreement dated as of March 30, 1998 between the Registrant and
Mr. Ballou.
10.22+t Amendment No. 1 dated as of June 24, 1998 to Senior Management
Agreement dated as of March 30, 1998 between the Registrant and
Mr. Lewis.
10.23+t Amendment No. 1 dated as of June 24, 1998 to Senior Management
Agreement dated as of March 30, 1998 between the Registrant and
Mr. Berman.
10.24* Agreement dated as of August 14, 1998 between the Company and
Trase Miller Solutions
10.25 Restated and Amended Credit Agreement dated as of February 19,
1999 by and among the Registrant, the lenders party thereto and
The Bank of New York, as administrative agent.
21.1+ Subsidiaries of the Registrant
23.1 Consent of Arthur Andersen & Co. Independent Auditors
24.1+ Power of Attorney
27.1 Financial Data Schedule
+ Previously filed as the same exhibit number under a Registration
Statement on Form S-1 (file no 333-52673)
++ Previously filed as the same exhibit number on September 14, 1998
under a Form 10-Q (file no 333-52673)
* Previously filed as the exhibit number 10.1 on September 14, 1998
under a Form 10-Q (file no 333-52673)
t Management Compensation related agreements.
- - --------
</TABLE>
b) The Registrant filed no reports on Form 8-K for the year ended December 31,
1998.
50
<PAGE> 1
EXHIBIT 10.25
Restated and Amended Credit Agreement Dated February 19, 1999
FIRST AMENDED AND RESTATED CREDIT AGREEMENT,
DATED AS OF FEBRUARY 19, 1999
BY AND AMONG
GLOBAL VACATION GROUP, INC.,
THE LENDERS PARTY HERETO,
AND
THE BANK OF NEW YORK, AS ADMINISTRATIVE AGENT
BNY CAPITAL MARKETS, INC.,
AS LEAD ARRANGER AND BOOK MANAGER
49
<PAGE> 2
FIRST AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February
19, 1999, by and among Global Vacation Group, Inc., a New York corporation (the
"BORROWER"), the several banks and other parties from time to time parties
hereto (the "LENDERS") and THE BANK OF NEW YORK ("BNY"), as administrative agent
for each of the other Credit Parties hereto (in such capacity, the
"ADMINISTRATIVE AGENT").
RECITALS
A. On March 27, 1998, the Borrower (then known as Allied Bus
Corp.), the lenders party thereto and the Administrative Agent entered into a
Credit Agreement (as amended up to, but excluding, the First Restatement Date,
the "EXISTING CREDIT AGREEMENT") pursuant to which the Lenders agreed to make
Revolving Loans and Term Loans to the Borrower and the Issuer agreed to issue
Letters of Credit for the account of the Borrower.
B. Immediately prior to the effectiveness of this Agreement, (i)
the Aggregate Revolving Commitment under the Existing Credit Agreement is
$10,000,000, (ii) the unused portion of the Term Commitment under and as
defined in the Existing Credit Agreement is $13,536,585.36 and (iii) the
aggregate outstanding principal balance of the Term Loans made under the
Existing Credit Agreement (the "EXISTING TERM LOANS") is $1,463,414.64.
C. BNY, BANK OF AMERICA FSB ("BofA") AND FIRST UNION NATIONAL BANK
("First Union") HAVE ENTERED OR ARE CONTEMPORANEOUSLY HEREWITH ENTERING INTO
THE MASTER ASSIGNMENT PURSUANT TO WHICH IMMEDIATELY BEFORE THE EFFECTIVENESS OF
THIS AGREEMENT, FIRST UNION SHALL BECOME A LENDER UNDER THE EXISTING CREDIT
AGREEMENT AND BNY, BOFA AND FIRST UNION SHALL SELL AND DELEGATE AND/OR
REALLOCATE, SOME OR ALL OF THEIR RIGHTS AND OBLIGATIONS UNDER THE EXISTING
CREDIT AGREEMENT.
D. The Borrower, the Lenders and the Administrative Agent desire
to amend and restate the Existing Credit Agreement upon the terms, and subject
to the conditions, contained herein.
E. On the First Restatement Date, (i) the Term Commitment of each
Lender is to be renamed the "Acquisition Loan Commitment" and (ii) the
outstanding Existing Term Loans are to be converted to Acquisition Loans.
F. For convenience, this Agreement is dated as of February 19,
1999, and references to certain matters related to the period prior hereto have
been deleted.
In consideration of the Recitals, the terms and conditions herein
contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:
ARTICLE 1. DEFINITIONS AND RULES OF INTERPRETATION
SECTION 1.1.DEFINITIONS
As used in this Agreement, terms defined in the
preamble have the meanings therein indicated, and the following terms have the
following meanings:
<PAGE> 3
"ABR ADVANCES" means the Loans (or any portions
thereof), at such time as they (or such portions) are made and/or being
maintained at a rate of interest based upon the Alternate Base Rate.
"ACCOUNTANTS" means Arthur Andersen, LLP (or any
successor thereto), or such other firm of certified public accountants of
recognized national standing selected by the Borrower and reasonably
satisfactory to the Administrative Agent.
"ACQUISITION" has the meaning set forth in Section 8.5.
"ACQUISITION CONSIDERATION" has the meaning set forth
in Section 8.5(d).
"ACQUISITION LOAN" and "ACQUISITION LOANS" have the
meaning set forth in Section 2.1(b).
"ACQUISITION LOAN COMMITMENT" means, in respect of any
Lender, the amount set forth on the signature page of such Lender under the
heading
"ACQUISITION LOAN COMMITMENT" or in an Assignment and
Acceptance Agreement or other document pursuant to which it became a Lender, as
such amount may be adjusted from time to time in accordance herewith.
"ACQUISITION LOAN EXPOSURE" means, with respect to any
Lender as of any date, the sum as of such date of the outstanding principal
balance of such Lender's Acquisition Loans.
"ACQUISITION LOAN PERCENTAGE" means, as of any date and
with respect to each Lender, the percentage equal to a fraction (i) the
numerator of which is the Acquisition Loan Commitment of such Lender on such
date (or, if there are no Acquisition Loan Commitments on such date, such
Lender's Acquisition Loan Exposure on such date), and (ii) the denominator of
which is the Aggregate Acquisition Loan Commitment on such date (or, if there
are no Acquisition Loan Commitments on such date, the Aggregate Acquisition
Loan Exposure on such date).
"ADDITIONAL PLEDGE AGREEMENT" has the meaning set forth
in Section 7.9(b).
"ADJUSTED NET CASH PROCEEDS" means, with respect to any
Disposition as of any date of determination, the amount equal to the difference
between (i) the Net Cash Proceeds from such Disposition, and (ii) the
Reinvested Proceeds in connection with such Disposition.
"ADVANCE" means an ABR Advance or a Eurodollar Advance.
"AFFILIATE" means as to any Person (i) any other Person
at the time directly or indirectly controlling, controlled by or under direct
or indirect common control with such Person, (ii) any other Person of which
such Person at the time owns, or has the right to acquire, directly or
indirectly, ten percent (10%) or more on a consolidated basis of the equity or
beneficial interest of such Person, (iii) any other Person which at the time
owns, or has the right to acquire, directly or indirectly, ten percent (10%) or
more of any class of the capital stock or beneficial interest of such Person,
(iv) any executive officer, director or trustee of such Person, and (v) when
used with respect to an individual, a spouse, any ancestor or descendant, or
any other relative (by blood, adoption or marriage), within the third degree of
such individual, provided, however, that for purposes of this Agreement,
Persons in which Thayer holds an interest which are not engaged in the Line of
Business shall not be considered Affiliates.
-2-
<PAGE> 4
"AGGREGATE ACQUISITION LOAN COMMITMENT" means, at any
time, the sum at such time of the Acquisition Loan Commitments of all Lenders.
As of the First Restatement Date, the Aggregate Acquisition Loan Commitment is
$35,000,000.
"AGGREGATE ACQUISITION LOAN EXPOSURE" means, at any
time, the aggregate sum at such time of the Acquisition Loan Exposures of all
Lenders.
"AGGREGATE REVOLVING COMMITMENT" means, at any time,
the sum at such time of the Revolving Commitments of all Lenders. As of the
First Restatement Date, the Aggregate Revolving Commitment is $10,000,000.
"AGGREGATE REVOLVING EXPOSURE" means, at any time, the
aggregate sum at such time of the Revolving Exposures of all Lenders.
"AGREEMENT" means this First Amended and Restated
Credit Agreement.
"ALTERNATE BASE RATE" means on any date, a rate of
interest per annum equal to the higher of (i) the Federal Funds Effective Rate
in effect on such date plus 1/2 of 1% or (ii) the Prime Rate in effect on such
date.
"APPLICABLE MARGIN" means, at all times during the
applicable periods set forth below: (a) with respect to ABR Advances, the
percentage setforth below under the heading "ABR Margin" and adjacent to such
period and (b) with respect to Eurodollar Advances, the percentage set forth
below under the heading "Eurodollar Margin" and adjacent to such period and (c)
with respect to the Commitment Fee, the percentage set forth below under the
heading "Fee Margin" and adjacent to such period:
<TABLE>
<CAPTION>
When the
Leverage Ratio is
greater than or equal to Eurodollar
and less than ABR Margin Margin Fee Margin
- - ---------------------------- ---------------------- ------------------------- ------------------------ ----------------------
<S> <C> <C> <C> <C>
2.75:1.00 0.750% 1.750% 0.375%
- - ---------------------------- ---------------------- ------------------------- ------------------------ ----------------------
2.25:1.00 2.75:1.00 0.500% 1.500% 0.375%
- - ---------------------------- ---------------------- ------------------------- ------------------------ ----------------------
2.25:1.00 0.250% 1.250% 0.375%
- - ---------------------------- ---------------------- ------------------------- ------------------------ ----------------------
</TABLE>
Changes in the Applicable Margin resulting from a change in the Leverage
Ratio shall be based upon the Compliance Certificate most recently delivered
under Section 7.1(c) and shall become effective on the day such Compliance
Certificate is delivered to the Administrative Agent. Notwithstanding anything
to the contrary in this definition, if the Borrower shall fail to deliver to the
Administrative Agent such a Compliance Certificate on or prior to any date
required hereby, the Leverage Ratio shall be deemed to be 2.75:1.00 from and
including such date to the date of delivery to the Administrative Agent of such
Compliance Certificate.
"APPLICABLE PROCEEDS" means any and all proceeds of
casualty insurance or condemnation held by the Administrative Agent pursuant to
the Loan Documents in connection with a casualty or condemnation event for
which the conditions for use thereof by the Borrower or any Subsidiary, as set
forth in the Loan Documents, shall not have been satisfied.
"ASSIGNMENT AND ACCEPTANCE AGREEMENT" means an
assignment and acceptance agreement substantially in the form of Exhibit E.
-3-
<PAGE> 5
"AVAILABLE DEBT AMOUNT" means, at any time, an amount
equal to (a) $2,500,000, minus (b) the sum, without duplication, of the
following: (1) the unpaid principal balance of all Indebtedness incurred
pursuant to Section 8.1(e) and 8.1(f), and (2) the fair market value of all
property securing any Lien under Section 8.2(c).
"AVAILABLE INTERCOMPANY INVESTMENT AMOUNT" means, at
any time, an amount equal to (a) $2,500,000, minus, (b) the sum of, without
duplication, the following: (1) the outstanding principal balance of all
Indebtedness of each Subsidiary which is not a Subsidiary Guarantor to the
Borrower or any Subsidiary Guarantor, (2) the outstanding principal balance of
all Indebtedness of Subsidiaries that are not Subsidiary Guarantors, to the
extent that such Indebtedness is Guaranteed by the Borrower or any Subsidiary
Guarantor, (3) the fair market value of all consideration paid by the Borrower
or any Subsidiary Guarantor on or after the Original Effective Date to any
Subsidiary other than a Subsidiary Guarantor in connection with any one or more
of the following: (i) any merger between a Subsidiary that is not a Subsidiary
Guarantor and a Subsidiary Guarantor, (ii) each investment by the Borrower or
any Subsidiary Guarantor in the Capital Stock of or debt issued by any
Subsidiary that is not a Subsidiary Guarantor, (iii) any purchase or
acquisition between a Loan Party, as purchaser, and a Subsidiary that is not a
Subsidiary Guarantor, as seller, to the extent that such purchase or
acquisition is for more than fair market value, (iv) sales, assignments,
leases, transfers or other dispositions of any property or assets by any Loan
Party to any Subsidiary that is not a Subsidiary Guarantor, to the extent that
such sale, assignment, lease, transfer or other disposition is for less than
fair market value, and (v) any Restricted Payment made by a Loan Party to a
Subsidiary which is not a Subsidiary Guarantor.
"AVAILABLE OTHER INVESTMENT AMOUNT" means, at any time
an amount equal to (a) $75,000,000 minus, (b) the sum of, without duplication,
the following: (1) the fair market value of all consideration paid by the
Borrower or any Subsidiary on or after the Original Effective Date in
connection with any one or more of the following: (i) any merger referred to in
Section 8.3(d)(iii)(A), and (ii) any Acquisition referred to in Section 8.5
"BOARD" means the Board of Governors of the Federal
Reserve System of the United States.
"BofA" has the meaning set forth in the Recitals.
"BORROWER OBLIGATIONS" means, collectively, (i) all of
the obligations and liabilities of the Borrower under the Loan Documents, and
(ii) all of the obligations and liabilities of the Borrower under each Secured
Hedging Agreement, in each case whether fixed, contingent, now existing or
hereafter arising, created, assumed, incurred or acquired, and whether before
or after the occurrence of any Event of Default under Section 9.1(h) or (i) and
including any obligation or liability in respect of any breach of any
representation or warranty and all post-petition interest and funding losses,
whether or not allowed as a claim in any proceeding arising in connection with
such an event.
"BORROWER PREFERRED STOCK" means Class A Preferred
Stock of the Borrower, $1.00 par value.
"BORROWING DATE" means any Business Day on which (i)
the Lenders make Revolving Loans or Acquisition Loans or (ii) the Issuer issues
a Letter of Credit.
-4-
<PAGE> 6
"BUSINESS DAY" means any day other than a Saturday, a
Sunday or a day on which commercial banks located in New York City are
authorized or required by law or other governmental action to be closed,
provided that when used in connection with a Eurodollar Advance, the term shall
also exclude any day on which banks are not open for dealings in dollar
deposits in the London interbank market.
"CAPITAL EXPENDITURES" means, for any period, the sum
of the aggregate of all expenditures (whether paid in cash or other
consideration or accrued as a liability) by the Borrower and the Subsidiaries
on a consolidated basis in accordance with GAAP during such period for fixed or
capital assets (excluding any capitalized interest and any such asset acquired
in connection with normal replacement and maintenance programs properly charged
to current operations and excluding any replacement assets acquired with the
proceeds of insurance).
"CAPITAL LEASE OBLIGATIONS" means, with respect to any
Person, the obligations of such Person to pay rent or other amounts under any
lease of (or other arrangement conveying the right to use) real or personal
property, or a combination thereof, (a) which obligations are required to be
classified and accounted for as capital leases on a balance sheet of such
Person under GAAP, and the amount of such obligations shall be the capitalized
amount thereof determined in accordance with GAAP, or (b) which lease does not
qualify as a Tax Operating Lease. For purposes of this definition, "TAX
OPERATING LEASE" means any "synthetic lease", and any other lease (i) that is
treated as a lease for purposes of the Code, and (ii) the lessor under which is
treated as the owner of the assets subject to the lease for purposes of the
Code.
"CAPITAL STOCK" means, as to any Person, all shares,
interests, partnership interests, limited liability company interests,
participations, rights in or other equivalents (however designated) of such
Person's equity (however designated) and any rights, warrants or options
exchangeable for or convertible into such shares, interests, participations,
rights or other equity.
"CASH COLLATERAL ACCOUNT" has the meaning set forth in
Section 2.7.
"CASH EQUIVALENTS" means Dollar denominated investments
in (i) securities issued or directly and fully guaranteed or insured by the
United States or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in full support thereof)
having maturities of not more than one year from the date of acquisition, (ii)
time deposits, certificates of deposit and bankers acceptances of maturing
within 180 days from the date of acquisition thereof issued or guaranteed by or
placed with, and money market deposit accounts issued or offered by, any
domestic office of any commercial bank having a combined capital surplus and
undivided profits of not less than $100,000,000 and whose (or whose parent
company's) unsecured non-credit supported short-term debt rating at the time of
such acquisition is the highest credit rating obtainable from S&P and Moody's
or, if rated by only one such rating agency, the highest credit rating
obtainable from such rating agency, (iii)
-5-
<PAGE> 7
commercial paper maturing within 90 days from the date of acquisition thereof
and having, at such date of acquisition, the highest credit rating obtainable
from S&P or from Moody's, (iv) marketable direct obligations issued by any
state of the United States or any political subdivision of any such state or
any public instrumentality thereof maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either S&P or Moody's, (v) normal business
banking accounts, and (vi) investments in money market funds substantially all
the assets of which are comprised of securities of the types described in
clauses (i) through (iv) above.
"Change in Control" MEANS THE OCCURRENCE OF ONE OR MORE OF THE FOLLOWING EVENTS:
(a) THE ACQUISITION DIRECTLY OR INDIRECTLY BY ANY PERSON, OR TWO OR
MORE PERSONS ACTING IN CONCERT, OTHER THAN THAYER, OF BENEFICIAL OWNERSHIP OF
A PERCENTAGE OF THE OUTSTANDING VOTING STOCK OF THE BORROWER THAT EXCEEDS IN
THE AGGREGATE THE PERCENTAGE OF SUCH VOTING STOCK THEN BENEFICIALLY
OWNED OR CONTROLLED, DIRECTLY OR INDIRECTLY, BY THAYER; AND
(b) THE FAILURE OF (i) THAYER TO OWN OR CONTROL (EITHER DIRECTLY OR
INDIRECTLY) AT LEAST 40% OF THE VOTING STOCK OF THE BORROWER IN THE
AGGREGATE (ON A FULLY DILUTED BASIS AND FREE AND CLEAR OF ALL LIENS), AND
(ii) THE BORROWER TO OWN AND CONTROL 100% OF THE OUTSTANDING SHARES OF
VOTING AND NON-VOTING STOCK OF EACH SUBSIDIARY ON A FULLY DILUTED BASIS AND
FREE AND CLEAR OF ALL LIENS (EXCEPT, IN ALL CASES,
LIENS IN FAVOR OF THE ADMINISTRATIVE AGENT).
For purposes of this definition, (i) the terms "person"
and "group" shall have the respective meanings ascribed thereto in Sections
13(d) and 14(d)(2) of the Exchange Act, (ii) the term "beneficial owner" shall
have the meaning ascribed thereto in Rule 13d-3 under the Exchange Act, and
(iii) the term "voting stock" shall mean all outstanding shares of any class or
classes (however designated) of Capital Stock of the Borrower entitled to vote
generally in the election of members of the Managing Person thereof.
"CHANGE IN LAW" means (i) the adoption of any law, rule
or regulation after the Original Effective Date, (ii) the issuance or
promulgation after the Original Effective Date of any directive, guideline or
request from any Governmental Authority (whether or not having the force of
law), or (iii) any change after the Original Effective Date in the
interpretation of any existing law, rule, regulation, directive, guideline or
request by any Governmental Authority charged with the administration thereof.
"CODE" means the Internal Revenue Code of 1986, as the
same may be amended from time to time, or any successor thereto, and the rules
and regulations issued thereunder, as from time to time in effect.
"COLLATERAL" means any and all "Collateral", as defined
in any Security Document.
"COMMITMENT FEE" has the meaning set forth in Section
3.2(a).
"COMMITMENT TERMINATION DATE" means January 31, 2004,
or such earlier date upon which the Revolving Commitments and the Acquisition
Loan Commitments shall terminate or the Aggregate Revolving Commitment and the
Aggregate Acquisition Loan Commitment shall each otherwise equal zero.
-6-
<PAGE> 8
"COMMITMENTS" means, collectively, the Revolving
Commitments, the Acquisition Loan Commitments and the Letter of Credit
Commitment, each a "COMMITMENT".
"COMPLIANCE CERTIFICATE" has the meaning set forth in
Section 7.1(c).
"CONVERSION DATE" means the date on which: (i) a
Eurodollar Advance is converted to an ABR Advance, (ii) an ABR Advance is
converted to a Eurodollar Advance or (iii) a Eurodollar Advance is converted
to, or continued as, a new Eurodollar Advance.
"CREDIT PARTY" means the Administrative Agent, the
Issuer or a Lender, as the case may be.
"CREDIT REQUEST" means a request for Loans or a Letter
of Credit substantially in the form of Exhibit B.
"CUSTOMARY LIEN" means any of the following: (i) any
Lien imposed by law for Taxes that are not yet due or are being contested in
compliance with Section 7.4, provided that enforcement of such Lien is stayed
pending such contest; (ii) carriers', warehousemen's, mechanics',
materialmen's, repairmen's and other like Liens imposed by law, arising in the
ordinary course of business and securing obligations that are not overdue by
more than 30 days or are being contested in compliance with Section 7.4,
provided that enforcement of each such Lien is stayed pending such contest;
(iii) pledges and deposits made in the ordinary course of business in
compliance with workers' compensation, unemployment insurance and other social
security laws or regulations; (iv) deposits and pledges to secure the
performance of bids, tenders, contracts (other than contracts for the payment
of money), leases, statutory obligations, surety and appeal bonds and other
obligations of like nature arising in the ordinary course of business; (v)
judgment liens in respect of judgments that would not cause an Event of Default
under Section 9.1(j); (vi) zoning ordinances, easements, rights of way, minor
defects, irregularities, and other similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Borrower or any Subsidiary; and (vii) Liens created under the Loan Documents.
"DEFAULT" means any event or condition which
constitutes an Event of Default or which, with the giving of notice, the lapse
of time, or any other condition, would, unless cured or waived, become an Event
of Default.
"DISPOSITION" has the meaning set forth in Section 8.6.
"DISQUALIFIED STOCK" means any Capital Stock of any
Person that, by its terms (or by the terms of any security into which it is
-7-
<PAGE> 9
convertible or for which it is exchangeable at the option of the holder
thereof), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part prior to
four years after the Maturity Date, provided, however, that any Capital Stock
that would constitute Disqualified Stock solely because the holders thereof
have the right to require such Person to repurchase such Capital Stock upon the
occurrence of certain events shall not constitute Disqualified Stock if the
terms of such Capital Stock provide that the Borrower may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such
repurchase or redemption complies with Section 8.7 of this Agreement.
"DOLLARS" and "$" mean lawful currency of the United
States of America.
"DOMESTIC SUBSIDIARY" means any Subsidiary that is not
a Foreign Subsidiary.
"EBITDA" means, for any period, an amount equal to (i)
net income of the Borrower and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP for such period, plus (ii) the sum of, without
duplication, each of the following with respect to the Borrower and its
Subsidiaries to the extent utilized in determining such net income for such
period, (a) cash interest expense, (b) cash income taxes paid, (c)
depreciation, amortization and other non-cash charges, and (d) extraordinary
losses from sales, exchanges and other dispositions of Property not in the
ordinary course of business, minus (iii) the sum of, without duplication, each
of the following with respect to the Borrower and its Subsidiaries, to the
extent utilized in determining such net income for such period: extraordinary
gains from sales, exchanges and other dispositions of property not in the
ordinary course of business; provided, however, that, notwithstanding anything
to the contrary contained herein, such amount shall be subject to such
adjustments (including adjustments with respect to specific items referred to
in clauses (i), (ii) and (iii) of this definition) as the Borrower may request
and the Required Lenders shall approve in its discretion exercised reasonably.
"ENVIRONMENTAL LAWS" has the meaning set forth in
Section 4.7.
"EQUITY ISSUANCE" means the issuance of any equity
securities or the receipt of any capital contribution, in each case by the
Borrower, other than (i) any issuance of equity securities to, or receipt of
any such capital contribution from, the Borrower, (ii) the issuance of stock as
consideration to the seller in connection with a Permitted Acquisition, (iii)
the issuance of any equity securities to, or the receipt of a capital
contribution from, Thayer or any of its Affiliates, the proceeds of which are
expended by the Borrower in connection with such Permitted Acquisition, or (iv)
the issuance of common stock pursuant to a stock option plan, or for executive
compensation, in either case in the ordinary course of business.
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"ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the rules and regulations issued
thereunder, as from time to time in effect.
"ERISA AFFILIATE" means any Person which is a member of
any group of organizations within the meaning of Sections 414(b) or (c) of the
Code (or, solely for purposes of potential liability under Section 302(c)(11)
of ERISA and Section 412(c)(11) of the Code and the lien created under Section
302(f) of ERISA and Section 412(n) of the Code, Sections 414(m) or (o) of the
Code) of which the Borrower or any Subsidiary is a member.
"ERISA EVENT" means (i) a "reportable event", as
defined in Section 4043 of ERISA with respect to a Pension Plan (other than an
event for which the 30-day notice period is waived), (ii) the existence with
respect to any Pension Plan of an "accumulated funding deficiency" (as defined
in Section 412 of the Code or Section 302 of ERISA), whether or not waived;
(ii) the filing pursuant to Section 412(d) of the Code or Section 303(d) of
ERISA of an application for a waiver of the minimum funding standard with
respect to any Pension Plan; (iv) the incurrence by the Borrower or any of its
ERISA Affiliates of any liability under Title IV of ERISA with respect to the
termination of any Pension Plan; (vi) the receipt by the Borrower or any ERISA
Affiliate from the PBGC or a plan administrator of any notice relating to an
intention to terminate any Pension Plan or Pension Plans or to appoint a
trustee to administer any Pension Plan; (vii) the incurrence by the Borrower or
any of its ERISA Affiliates of any liability with respect to the withdrawal or
partial withdrawal from any Pension Plan or Multiemployer Plan; or (viii) the
receipt by the Borrower or any ERISA Affiliate of any notice, or the receipt by
any Multiemployer Plan from the Borrower or any ERISA Affiliate of any notice,
concerning the imposition of Withdrawal Liability or a determination that a
Multiemployer Plan is, or is expected to be, insolvent or in reorganization,
within the meaning of Title IV of ERISA.
"EURODOLLAR ADVANCES" means, collectively, the Loans
(or any portions thereof), at such time as they (or such portions) are made
and/or being maintained at a rate of interest based upon the Eurodollar Rate.
"Eurodollar Rate" MEANS, WITH RESPECT EACH EURODOLLAR ADVANCE, A RATE
OF INTEREST PER ANNUM, AS DETERMINED BY THE ADMINISTRATIVE AGENT, OBTAINED BY
DIVIDING (AND THEN ROUNDING TO THE NEAREST 1/16 OF 1% OR, IF THERE IS NO
NEAREST 1/16 OF 1%, THEN TO THE NEXT HIGHER 1/16 OF 1%).
(a) THE RATE OF INTEREST PER ANNUM AS DETERMINED BY THE
ADMINISTRATIVE AGENT, EQUAL TO THE RATE, AS REPORTED BY BNY TO THE
ADMINISTRATIVE AGENT, QUOTED BY BNY TO LEADING BANKS IN THE LONDON INTERBANK
EURODOLLAR MARKET AS THE RATE AT WHICH BNY IS OFFERING DOLLAR DEPOSITS IN AN
AMOUNT APPROXIMATELY EQUAL TO ITS SPECIFIED PERCENTAGE OF SUCH EURODOLLAR
ADVANCE AND HAVING A PERIOD TO MATURITY APPROXIMATELY EQUAL TO THE INTEREST
PERIOD APPLICABLE TO SUCH EURODOLLAR ADVANCE AT APPROXIMATELY 11:00 A.M.,
LONDON TIME, TWO BUSINESS DAYS PRIOR TO THE COMMENCEMENT OF SUCH
INTEREST PERIOD, BY
(b) A NUMBER EQUAL TO 1.00 MINUS THE AGGREGATE OF THE THEN STATED
MAXIMUM RATES DURING SUCH INTEREST PERIOD OF ALL RESERVE REQUIREMENTS
(INCLUDING MARGINAL, EMERGENCY, SUPPLEMENTAL AND SPECIAL
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RESERVES), EXPRESSED AS A DECIMAL, ESTABLISHED BY THE BOARD AND ANY OTHER
BANKING AUTHORITY TO WHICH BNY AND OTHER MAJOR MONEY CENTER BANKS CHARTERED
UNDER THE LAWS OF THE UNITED STATES OR ANY STATE THEREOF ARE SUBJECT, IN
RESPECT OF EUROCURRENCY FUNDING (CURRENTLY REFERRED TO AS "EUROCURRENCY
LIABILITIES" IN REGULATION D) WITHOUT BENEFIT OF CREDIT FOR PRORATION,
EXCEPTIONS OR OFFSETS WHICH MAY BE AVAILABLE FROM TIME TO TIME TO BNY.
"EVENT OF DEFAULT" has the meaning set forth in Section
9.1.
"EXCESS CASH FLOW" means, in respect of any period, (i)
an amount equal to the sum of EBITDA for such period plus Working Capital
Decreases if any, during such period less (ii) the sum of each of the following
with respect to the Borrower and the Subsidiaries on a consolidated basis in
accordance with GAAP for such period: (a) Fixed Charges, (b) Capital
Expenditures made during such period, (c) Working Capital Increases, if any,
during such period and (d) all prepayments of the Acquisition Loans pursuant to
Section 2.4(b)(ii) resulting from each voluntary and scheduled permanent
reduction of the Aggregate Acquisition Loan Commitment during such period
pursuant to Sections 2.3(a) and (c).
"EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended from time to time.
"EXCLUDED TAX" means as to any Person, a Tax imposed by
one of the following jurisdictions or by any political subdivision or taxing
authority thereof: (i) the United States, (ii) the jurisdiction in which such
Person is organized, (iii) the jurisdiction in which such Person's principal
office is located, (iv) in the case of each Credit Party, any jurisdiction in
which such Credit Party is deemed to be doing business, (v) in the case of any
Foreign Credit Party, any withholding tax that is imposed on amounts payable to
such Foreign Credit Party at the time such Foreign Credit Party becomes a party
to this Agreement (or designates a new lending office) or is attributable to
such Foreign Credit Party's failure to comply with Section 3.7(c), except to the
extent that such Foreign Credit Party (or its assignor, if any) was entitled, at
the time of designation of a new lending office (or assignment), to receive
additional amounts from the Borrower with respect to such withholding tax
pursuant to Section 3.7; which Tax (a) is any income tax or franchise tax
imposed on all or part of the net income or net profits of such Person or (b)
represents interest, fees or penalties for payment of any such income tax or
franchise tax.
"EXISTING CREDIT AGREEMENT" has the meaning set forth
in the Recitals.
"EXISTING LETTERS OF CREDIT" shall mean the letters of
credit set forth on Schedule 8.1 that have not, as of the First Restatement
Date, been substituted by Letters of Credit.
"EXISTING LETTER OF CREDIT EXPOSURE" means at any time,
an amount equal to the sum (without duplication) at such time of (i) the
aggregate undrawn face amount of the outstanding Existing Letters of Credit,
(ii) the aggregate amount of unpaid drafts
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<PAGE> 12
drawn on all Existing Letters of Credit, and (iii) the aggregate unpaid
reimbursement obligations in respect thereof.
"EXISTING TERM LOANS" has the meaning set forth in the
Recitals.
"EXTENSIONS OF CREDIT" means, collectively, the Loans,
the Letters of Credit and any participations therein pursuant to Section
2.5(c).
"FEDERAL FUNDS EFFECTIVE RATE" means, for any day, a
rate per annum (expressed as a decimal, rounded upwards, if necessary, to the
next higher 1/100 of 1%) equal to the weighted average of the rates on
overnight federal funds transactions with members of the Federal Reserve System
arranged by federal funds brokers on such day, as published by the Federal
Reserve Bank of New York on the Business Day next succeeding such day, provided
that (i) if the day for which such rate is to be determined is not a Business
Day, the Federal Funds Effective Rate for such day shall be such rate on such
transactions on the next preceding Business Day as so published on the next
succeeding Business Day, and (ii) if such rate is not so published for any day,
the Federal Funds Effective Rate for such day shall be the average of the
quotations for such day on such transactions received by BNY as determined by
BNY and reported to the Administrative Agent.
"FEES" has the meaning set forth in Section 2.6(a).
"FINANCIAL OFFICER" means, as to any Person, the chief
financial officer or the treasurer of such Person or such other officer as
shall be satisfactory to the Administrative Agent.
"FIRST RESTATEMENT DATE" has the meaning set forth in
Article 5.
"FIRST UNION" has the meaning set forth in the
Recitals.
"FIXED CHARGES" means, for the most recently completed
twelve month period, the sum, without duplication, of each of the following
with respect to the Borrower and the Subsidiaries for such period on a
consolidated basis in accordance with GAAP: (i) all cash interest expense, (ii)
principal amounts that became payable (whether or not paid and whether at the
stated maturity, by acceleration or by reason of or redemption or otherwise but
not by reason of an optional prepayment) by the Borrower or any Subsidiary in
respect of Indebtedness of the Borrower or the Subsidiaries during such period,
and (iii) cash income taxes paid.
"FIXED CHARGE COVERAGE RATIO" means, at any date of
determination, the ratio of (a) EBITDA for Four Quarter Trailing Period, to (b)
Fixed Charges for such period.
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"FOREIGN CREDIT PARTY" means any Credit Party that is
organized under the laws of a country (or political subdivision thereof) other
than the United States.
"FOREIGN SUBSIDIARY" means any Subsidiary that is a
"controlled foreign corporation" within the meaning of Section 957 of the Code.
"FOUR QUARTER TRAILING PERIOD" means, at any date of
determination, the four fiscal quarters ending on such date, or, if such date
is not the last day of a fiscal quarter, the period of the most immediately
completed four fiscal quarters.
"GAAP" means generally accepted accounting principles as
in effect from time to time in the United States.
"GOVERNMENTAL AUTHORITY" means any foreign, federal,
state, municipal or other government, or any department, commission, board,
bureau, agency, public authority or instrumentality thereof, or any court or
arbitrator.
"GUARANTEE" of or by any Person (the "guarantor") means
any obligation, contingent or otherwise, of the guarantor guaranteeing or in
effect guaranteeing any return on any investment made by another Person, or any
Indebtedness, lease, dividend or other obligation (a "primary obligation") of
any other Person (a "primary obligor") in any manner, whether directly or
indirectly, including any obligation of the guarantor, direct or indirect (i) to
purchase any primary obligation or any property constituting direct or indirect
security therefor, (ii) to advance or supply funds (A) for the purchase or
payment of any primary obligation or (B) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency of a primary obligor, (iii) to purchase property, securities or
services primarily for the purpose of assuring the beneficiary of any primary
obligation of the ability of a primary obligor to make payment of a primary
obligation, (iv) otherwise to assure or hold harmless the beneficiary of a
primary obligation against loss in respect thereof, and (v) in respect of the
liabilities of any partnership in which a secondary obligor is a general
partner, except to the extent that such liabilities of such partnership are
nonrecourse to such secondary obligor and its separate property, provided,
however, that the term "Guarantee" shall not include the endorsement of
instruments for deposit or collection in the ordinary course of business. The
amount of any Guarantee shall be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Guarantee is made or,
if not stated or determinable, the maximum reasonably anticipated liability in
respect thereof as determined by the guarantor in good faith.
"GRANT OF SECURITY INTEREST" means a grant of a
security interest in copyrights and trademarks in the forms of Annex B-1 and
B-2, respectively, to the Security Agreement or any other form approved by the
Administrative Agent.
"HADDON" means Haddon Holidays, Inc., a wholly owned
Subsidiary of the Borrower.
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<PAGE> 14
"HEDGING AGREEMENT" means any interest rate swap, cap or collar
arrangement or any other derivative product customarily offered by banks
or other financial institutions to their customers in order to manage the
exposure of such customers to interest rate fluctuations.
"INDEBTEDNESS" means, as to any Person, at a particular time, all
items which constitute, without duplication, (i) indebtedness for borrowed
money, (ii) indebtedness in respect of the deferred purchase price of
property (other than trade payables incurred in the ordinary course of
business), (iii) indebtedness evidenced by notes, bonds, debentures or
similar instruments, (iv) obligations with respect to any conditional sale
or title retention agreement, (v) indebtedness arising under acceptance
facilities and the amount available to be drawn under all letters of
credit issued for the account of such Person and, without duplication, all
drafts drawn thereunder to the extent such Person shall not have
reimbursed the issuer in respect of the issuer's payment thereof, (vi)
liabilities secured by (or for which the holder of such Indebtedness has
an existing right, contingent or otherwise, to be secured by) any Lien on
property owned by such Person (other than carriers', warehousemen's,
mechanics', repairmen's or other like non-consensual statutory Liens
arising in the ordinary course of business), even though such Person has
not assumed or otherwise become liable for the payment thereof, (vii)
Capital Lease Obligations, (viii) all obligations of such Person in
respect of Disqualified Stock, and (ix) all Guarantees by such Person of
Indebtedness of others. The Indebtedness of any Person shall include the
Indebtedness of any other entity (including any partnership in which such
Person is a general partner) to the extent such Person is liable therefor
as a result of such Person's ownership interest in or other relationship
with such entity, except to the extent the terms of such Indebtedness
provide that such Person is not liable therefor. Notwithstanding the
foregoing, Indebtedness shall not include any liability of any Person with
respect to customer deposits.
"INDEMNIFIED TAX" means as to any Person, any Tax, except (i) an
Excluded Tax imposed on such Person and (ii) any interest, fees or
penalties for late payment thereof imposed on such Person.
"INSOLVENT" means, with respect to any Person, (a) the sum of the
assets measured on a "going concern" basis (including goodwill as
accounted for in accordance with GAAP) at a fair valuation, of such Person
does not exceed its debts, (b) such Person has incurred debts beyond its
ability to pay such debts as such debts mature, (c) such Person believes
that, in the ordinary course of its business during the reasonably
foreseeable future, it will incur debts beyond its ability to pay such
debts as such debts mature, and (d) such Person has insufficient capital
with which to conduct its business. For purposes of this definition only,
"DEBT" means any liability on a claim, and "CLAIM" means any (i) right to
payment, whether such a right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (ii) right to an equitable
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<PAGE> 15
remedy for breach of performance if such breach gives rise to a payment,
whether such right to an equitable remedy is reduced to judgment, fixed,
contingent, matured, unmatured, disputed, undisputed, secured, unsecured,
liquidated or unliquidated.
INTELLECTUAL PROPERTY" means all patents, trademarks,
tradenames, copyrights, trade secrets, confidential or proprietary
technical and business information and other similar property and all
licenses related thereto.
"INTERCOMPANY SUBORDINATION AGREEMENT" means a subordination
agreement substantially in the form of Exhibit F.
"INTEREST COVERAGE RATIO" means, as of the last day of any fiscal
quarter, the ratio of EBITDA to cash interest expense, in each case for
the Four Quarter Trailing Period.
"INTEREST PERIOD" means, as to each Eurodollar Advance, the
period commencing on, as the case may be, the Borrowing Date or Conversion
Date with respect thereto and ending one, two, three or six months
thereafter, in each case, as selected by the Borrower in its Credit
Request or Notice of Conversion.
"INVESTMENT GRADE SECURITY" means (i) in respect of a short term
security, any such security rated at least A1/P1 or A2/P2 by S&P or
Moody's (or an equivalent rating issued by a nationally recognized rating
service) and (ii) in respect of a long term security, any such security
rated at least BBB- or Baa3 by S&P or Moody's (or an equivalent rating
issued by a nationally recognized rating service), provided, however, that
any derivative, option, hedging or other speculative instrument shall not
be considered to be an Investment Grade Security.
"ISSUER" means BNY.
"LETTERS OF CREDIT" has the meaning set forth in Section 2.5.
"LETTERS OF CREDIT FEES" has the meaning set forth in Section
3.2(b).
"LETTER OF CREDIT COMMITMENT" means the commitment of the Issuer
to issue Letters of Credit (including the Existing Letters of Credit in
which the Lenders assume a participation pursuant to Section 2.5(c))
having an aggregate outstanding face amount up to $5,000,000.
"LETTER OF CREDIT EXPOSURE" means in respect of any Lender at any
time, an amount equal to (i) the sum (without duplication) at such time of
(x) the aggregate undrawn face amount of the outstanding Letters of
Credit, (y) the aggregate amount of unpaid drafts drawn on all Letters of
Credit, and (z) the aggregate unpaid Reimbursement Obligations, multiplied
by (ii) such Lender's Revolving Percentage at such time.
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"LEVERAGE RATIO" means, as of any date, the ratio of (i) Total
Debt as of such date less to (ii) EBITDA for the Four Quarter Trailing
Period, provided, however, that, notwithstanding anything to the contrary
contained herein, for purposes of this definition, Total Debt shall not
include any Indebtedness in respect of standby letters of credit.
"LIEN" means any mortgage, pledge, hypothecation, assignment,
encumbrance, lien (statutory or other), or other security agreement or
security interest of any kind or nature whatsoever, including any
conditional sale or other title retention agreement and any capital or
financing lease having substantially the same economic effect as any of
the foregoing.
"LINE OF BUSINESS" means, the wholesale tour operators business
serving the leisure travel industry and any business reasonably similar,
complimentary, ancillary or related thereto.
"LOAN DOCUMENTS" means, collectively, this Agreement, the Notes,
the Security Documents, each Secured Hedging Agreement, each subordination
agreement entered into pursuant to Section 8.1(c) and (f) and all other
agreements, instruments and documents executed or delivered in connection
herewith.
"LOAN PARTIES" means, collectively, the Borrower and each
Subsidiary Guarantor.
"LOANS" means Revolving Loans and Acquisition Loans.
"MANAGING PERSON" means, with respect to any Person that is (i) a
corporation, its board of directors, (ii) a limited liability company, its
board of control, managing member or members, (iii) a limited partnership,
its general partner, (iv) a general partnership or a limited liability
partnership, its managing partner or executive committee or (v) any other
Person, the managing body thereof or other Person analogous to the
foregoing.
"MARGIN STOCK" has the meaning set forth in Regulation U.
"MASTER ASSIGNMENT" means the Master Assignment and Assumption
Agreement, substantially in the form of Exhibit G.
"MATERIAL ADVERSE" means, with respect to any change or effect, a
material adverse change in, or effect on, as the case may be, (i) the
business, assets, operations, prospects or condition, financial or
otherwise, of the Borrower and the Subsidiaries taken as a whole, (ii) the
ability of any Loan Party to perform its obligations under the Loan
Documents to which it is a party, (iii) the rights of, or benefits
available to, the Credit Parties under the Loan Documents, or (iv) the
legality or enforceability of any Loan Document.
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<PAGE> 17
"MATERIAL LIABILITIES" means, on any date, with respect to the
Borrower, any Subsidiary or any combination thereof: (i) all Indebtedness
(other than Indebtedness under the Loan Documents), (ii) the net
termination obligations in respect of one or more Hedging Agreements
(calculated as if such Hedging Agreements were terminated as of such
date), and (iii) other liabilities, in each case whether as principal,
guarantor, surety or other obligor, in an aggregate principal amount
exceeding $250,000.
"MATURITY DATE" means January 31, 2004, or such earlier date on
which the Notes shall become due and payable, whether by acceleration or
otherwise.
"MINIMUM AMOUNT" means in respect of (i) ABR Advances, $500,000
or such amount plus a whole multiple of $100,000 in excess thereof, and
(ii) Eurodollar Advances, $1,000,000 or such amount plus a whole multiple
of $500,000 in excess thereof.
"MOODY'S" means Moody's Investors Service, Inc. or any successor
thereto.
"MULTIEMPLOYER PLAN" means a Pension Plan which is a
multiemployer plan as defined in Section 4001(a)(3) of ERISA.
"NET CASH PROCEEDS" means, cash proceeds received from a
Disposition, an Equity Issuance, the incurrence of Refinancing Debt, a
casualty loss or a condemnation after deduction of taxes payable in cash
in connection therewith and net of reasonable transaction expenses.
"NET WORTH" means, at any date of determination, (i) the sum of,
without duplication, all amounts which would be included under
"shareholders' equity" or any analogous entry on a consolidated balance
sheet of the Borrower determined in accordance with GAAP as of such date
minus (ii) any preferred stock or other class of equity securities (other
than the Borrower Preferred Stock) that, by its stated terms (or by the
terms of any class of equity securities issuable upon conversion thereof
or in exchange therefor), or upon the occurrence of any event, matures or
is mandatorily redeemable, or is redeemable at the option of the holders
thereof, in whole or in part prior to the date which is nine months after
the Maturity Date.
"NOTES" means with respect to each Lender in respect of such
Lender's Loans, a promissory note, substantially in the form of Exhibit A,
payable to the order of such Lender, each such promissory note having been
made by the Borrower and dated the First Restatement Date, including all
replacements thereof and substitutions therefor.
"NOTICE OF CONVERSION" has the meaning set forth in Section
3.3(a).
"OTHER TAXES" means any and all current or future stamp or
documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any
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<PAGE> 18
payment made hereunder or from the execution, delivery, registration or
enforcement of, or any amendment, supplement or modification of, or any
waiver or consent under or in respect of, the Loan Documents or otherwise
with respect to, the Loan Documents.
"ORGANIZATIONAL DOCUMENTS" means as to any Person which is (i) a
corporation, the certificate or articles of incorporation and by-laws of
such Person, (ii) a limited liability company, the limited liability
company agreement or similar agreement of such Person, (iii) a
partnership, the partnership agreement or similar agreement of such
Person, or (iv) any other form of entity or organization, the
organizational documents analogous to the foregoing.
"ORIGINAL EFFECTIVE DATE" means March 27, 1998.
"ORIGINAL TRANSACTIONS" means, collectively, (i) the Allied
Recapitalization, the Classic Acquisitions, the MTI Acquisition and the
Haddon Acquisition (each as defined in the Existing Credit Agreement),
(ii) the execution and delivery of the Loan Documents on the Original
Effective Date and (iii) the Extensions of Credit on the Original
Effective Date.
"PAYMENT OFFICE" the office of the Administrative Agent set forth
in Section 11.2(b).
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA, or any Governmental Authority
succeeding to the functions thereof.
"PENSION PLAN" means, at any date of determination, any employee
pension benefit plan (other than a Multiemployer Plan), the funding
requirements of which (under Section 302 of ERISA or Section 412 of the
Code) are, or at any time within the six years immediately preceding such
date, were in whole or in part, the responsibility of the Borrower or any
ERISA Affiliate.
"PERFECTION CERTIFICATE" means a certificate in the form of Annex
A to the Security Agreement or any other form approved by the
Administrative Agent.
"PERMITTED ACQUISITION" means an Acquisition permitted by Section
8.5.
"PERMITTED LIENS" has the meaning set forth in Section 8.2.
"PERSON" means a natural person, firm, partnership, limited
liability company, joint venture, corporation, association, business
enterprise, joint stock company, unincorporated association, trust,
Governmental Authority or any other entity, whether acting in an
individual, fiduciary, or other capacity, and for the purpose of the
definition of "ERISA Affiliate", a trade or business.
"PRIME RATE" means the rate of interest per annum publicly
announced in New York City by BNY from time to time as its prime
commercial lending rate, such rate
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to be adjusted automatically (without notice) on the effective date of any
change in such publicly announced rate.
"REGULATION D, T, U AND X" mean Regulations D, T, U and X,
respectively, of the Board as from time to time in effect and all official
rulings and interpretations thereunder or thereof.
"REFINANCING DEBT" has the meaning set forth in Section 8.1(g).
"REFINANCING DEBT DOCUMENTS" has the meaning set forth in Section
8.1(g).
"REIMBURSEMENT OBLIGATION" means, collectively, the obligation of
the Borrower to the Issuer with respect to each Letter of Credit and all
documents, instruments and other agreements related thereto, including the
obligation of the Borrower to reimburse the Issuer for amounts drawn under
such Letter of Credit.
"REINVESTED PROCEEDS" means, with respect to any Disposition as
of any date of determination, the amount of Net Cash Proceeds from such
Disposition that is used by the Borrower or any Subsidiary to acquire,
during the Reinvestment Period with respect to such Disposition, property
that is to be used in the Line of Business.
"REINVESTMENT PERIOD" means the period beginning on the date that
proceeds from a Disposition are received by the Borrower or any
Subsidiary, as the case may be, and ending 365 days after the receipt of
such proceeds.
"RELATED PARTIES" means, with respect to any Person, such
Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.
"REQUIRED LENDERS" means, at any time, one or more Lenders having
the sum of unused Revolving Commitments, unused Acquisition Loan
Commitments, Revolving Exposures and Acquisition Loan Exposures greater
than or equal to 51% of the sum of the unused Aggregate Revolving
Commitment, unused Aggregate Acquisition Loan Commitment, Aggregate
Revolving Exposure and Aggregate Acquisition Loan Exposure, provided,
however, that if at any time there shall be only two Lenders, the term
"Required Lenders" shall mean both Lenders.
"RESTRICTED PAYMENT" has the meaning set forth in Section 8.7.
"REVOLVING COMMITMENT" means, in respect of any Lender, the
maximum amount of such Lender's Revolving Exposure as set forth on the
signature page of such Lender under the heading "REVOLVING COMMITMENT" or
in an Assignment and Acceptance Agreement or other document pursuant to
which it became a Lender, as such amount may be adjusted from time to time
in accordance herewith.
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"REVOLVING EXPOSURE" means, with respect to any Lender as of any
date, the sum as of such date of (i) the outstanding principal balance of
such Lender's Revolving Loans, plus (ii) such Lender's Letter of Credit
Exposure.
"REVOLVING LOAN" and "REVOLVING LOANS" have the meaning set forth
in Section 2.1(a).
"REVOLVING PERCENTAGE" means, as of any date and with respect to
each Lender, the percentage equal to a fraction (i) the numerator of which
is the Revolving Commitment of such Lender on such date (or, if there are
no Revolving Commitments on such date, on the last date upon which one or
more Revolving Commitments were in effect), and (ii) the denominator of
which is sum of the Revolving Commitments of all Lenders on such date (or,
if there are no Revolving Commitments on such date, on the last date upon
which one or more Revolving Commitments were in effect).
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
"SEC" means the Securities and Exchange Commission or any
Governmental Authority succeeding to the functions thereof.
"SECURED HEDGING AGREEMENT" means any Hedging Agreement entered
into by the Borrower with a counterparty that was a Lender (or an
Affiliate thereof) at the time such Hedging Agreement was entered into.
"SECURED PARTIES" has the meaning set forth in the Security
Agreement.
"SECURITY AGREEMENT" means the Security Agreement, dated as of
March 27, 1998, by and among the Loan Parties party thereto and the
Administrative Agent.
"SECURITY DOCUMENTS" means, collectively, (i) the Security
Agreement and the Subsidiary Guarantee, (ii) upon the execution and
delivery thereof, the Intercompany Subordination Agreement and the Grants
of Security Interest, and (iii) all other instruments and documents
delivered pursuant to Section 7.9 or 7.10 to secure any of the Borrower
Obligations or Guarantor Obligations (as defined in the Subsidiary
Guarantee).
"SPECIFIED PERCENTAGE" means, with respect to any Lender (i) in
connection with Revolving Loans and Eurodollar Advances to the extent
consisting of Revolving Loans, the percentage equal to such Lender's
Revolving Commitment at such time divided by the Aggregate Revolving
Commitment at such time, and (ii) in connection with Acquisition Loans and
Eurodollar Advances to the extent consisting of Acquisition Loans, the
percentage equal to the unpaid principal amount of such Lender's
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<PAGE> 21
Acquisition Loan Exposure at such time divided by the Aggregate
Acquisition Loan Exposure at such time.
"SUBSIDIARY" means, with respect to any Person (the "parent") at
any date, any other Person (i) the accounts of which would be consolidated
with those of the parent in the parent's consolidated financial statements
if such financial statements were prepared in accordance with GAAP as of
such date, (ii) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary
voting power or, in the case of a partnership, more than 50% of the
general partnership interests or more than 50% of the profits or losses of
which are, as of such date, owned, controlled or held by the parent or one
or more subsidiaries of the parent. Unless otherwise qualified, all
references to "Subsidiary" or to "Subsidiaries" in this Agreement shall
refer to a Subsidiary or Subsidiaries of the Borrower.
"SUBSIDIARY GUARANTOR" means each Subsidiary party to the
Subsidiary Guarantee.
"SUBSIDIARY GUARANTEE" means the Subsidiary Guarantee, dated as
of March 27, 1998, by and among the Subsidiary Guarantors, the Borrower
and the Administrative Agent.
"TAX" means any present or future tax, levy, impost, duty,
charge, fee, deduction or withholding of any nature and whatever called,
by a Governmental Authority, on whomsoever and wherever imposed, levied,
collected, withheld or assessed.
"THAYER" means Thayer Equity Investors III, L.P., a Delaware
limited partnership.
"TOTAL DEBT" means, as of any date, the Indebtedness of the
Borrower and the Subsidiaries, to the extent that as at such date such
Indebtedness would appear on a consolidated balance sheet of the Borrower
prepared in accordance with GAAP.
"TOTAL PERCENTAGE" means, as of any date and with respect to each
Lender, the percentage equal to a fraction (i) the numerator of which is
the sum of the Revolving Commitment, Acquisition Loan Commitment,
Revolving Exposure and Acquisition Loan Exposure of such Lender on such
date and (ii) the denominator of which is sum of the Aggregate Revolving
Commitment, Aggregate Acquisition Loan Commitment, Aggregate Revolving
Exposure and Aggregate Acquisition Loan Exposure on such date.
"TRANSACTION DOCUMENTS" means, collectively, the Loan Documents
and all documents, instruments and other agreements executed or delivered
in connection with all Permitted Acquisitions by the Borrower or any
Subsidiary.
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<PAGE> 22
"TRANSACTIONS" means, collectively, the transactions contemplated
by the Transaction Documents.
"UNCONSOLIDATED INVESTMENT" means, as of any date, any investment
made by the Borrower or any Subsidiary in any other Person that, pursuant
to GAAP as in effect on such date, would not be consolidated with the
Borrower for financial reporting purposes immediately after giving effect
to such investment.
"UNITED STATES" means the United States of America.
"WHOLLY OWNED" means, with respect to any Subsidiary of any
Person, 100% of the outstanding Capital Stock of such Subsidiary is owned,
directly or indirectly, by such Person.
"WITHDRAWAL LIABILITY" means, with respect to any Person,
liability of such Person to a Multiemployer Plan as a result of a complete
or partial withdrawal from such Multiemployer Plan, as such terms are
defined in Part I of Subtitle E of Title IV of ERISA.
"WORKING CAPITAL" means, at any date of determination, the
difference between (i) current assets of the Borrower and the Subsidiaries
determined on a consolidated basis in accordance with GAAP minus (ii)
current liabilities of the Borrower and the Subsidiaries determined on a
consolidated in accordance with GAAP less the current portion of long term
debt.
"WORKING CAPITAL DECREASE" means, for any period, the result, if
positive, obtained by subtracting Working Capital at the close of business
on the last day of such period from Working Capital at the opening of
business on the first day of such period.
"WORKING CAPITAL INCREASE" means, for any period, the result, if
positive, obtained by subtracting Working Capital at the opening of
business on the first day of such period from Working Capital at the close
of business on the last day of such period.
SECTION 1.2.ACCOUNTING TERMS
As used in the Loan Documents and in any certificate, opinion oer
document made or delivered pursuant thereto, accounting terms not defined
in Section 1.1, and accounting terms partly defined in Section 1.1, to the
extent not defined, shall have the respective meanings given to them under
GAAP. If any change in GAAP would affect the computation of any financial
ratio or requirement set forth in this Agreement, the Credit Parties and
the Borrower shall negotiate in good faith to amend such ratio or
requirement to reflect such change in GAAP (subject to the approval of the
Required Lenders), provided that, until so amended, (i) such ratio or
requirement shall continue to be computed in accordance with GAAP prior to
such change and (ii) the Borrower shall provide to the Credit Parties
financial statements and other documents required under this Agreement (or
such other items as the Administrative Agent may reasonably request)
setting forth a reconciliation between calculations of such ratio or
requirement before and after giving effect to such change.
SECTION 1.3.RULES OF INTERPRETATION
(a) UNLESS EXPRESSLY PROVIDED IN A LOAN DOCUMENT TO THE CONTRARY, (i)
THE WORDS "HEREOF", "HEREIN", "HERETO" AND "HEREUNDER" AND SIMILAR WORDS
WHEN USED IN EACH LOAN DOCUMENT SHALL REFER TO SUCH LOAN DOCUMENT AS A
WHOLE AND NOT TO ANY PARTICULAR PROVISION THEREOF, (ii) ARTICLE, SECTION,
SUBSECTION, SCHEDULE AND EXHIBIT REFERENCES CONTAINED THEREIN SHALL REFER
TO ARTICLE, SECTION,
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<PAGE> 23
SUBSECTION, SCHEDULE AND EXHIBIT THEREOF OR THERETO, (iii) THE WORDS
"INCLUDE" AND "INCLUDING", SHALL MEAN THAT THE SAME SHALL BE "INCLUDED,
WITHOUT LIMITATION", (iv) ANY DEFINITION OF, OR REFERENCE TO, ANY
AGREEMENT, INSTRUMENT, CERTIFICATE OR OTHER DOCUMENT HEREIN SHALL BE
CONSTRUED AS REFERRING TO SUCH AGREEMENT, INSTRUMENT OR OTHER DOCUMENT AS
FROM TIME TO TIME AMENDED, SUPPLEMENTED OR OTHERWISE MODIFIED, (v) ANY
REFERENCE HEREIN TO ANY PERSON SHALL BE CONSTRUED TO INCLUDE SUCH PERSON'S
SUCCESSORS AND ASSIGNS, (vi) THE WORDS "ASSET" AND "PROPERTY" SHALL BE
CONSTRUED TO HAVE THE SAME MEANING AND TO REFER TO ANY AND ALL TANGIBLE
AND INTANGIBLE ASSETS AND PROPERTIES, INCLUDING CASH, SECURITIES, ACCOUNTS
AND CONTRACT RIGHTS, (vii) WORDS IN THE SINGULAR NUMBER INCLUDE THE
PLURAL, AND WORDS USED THEREIN IN THE PLURAL INCLUDE THE SINGULAR, (viii)
ANY REFERENCE TO A TIME SHALL REFER TO SUCH TIME IN NEW YORK, (ix) IN THE
COMPUTATION OF PERIODS OF TIME FROM A SPECIFIED DATE TO A LATER SPECIFIED
DATE, THE WORD "FROM" MEANS "FROM AND INCLUDING" AND THE WORDS "TO" AND
"UNTIL" EACH MEANS "TO BUT EXCLUDING", AND (x) REFERENCES THEREIN TO A
FISCAL PERIOD SHALL REFER TO THAT FISCAL PERIOD OF THE BORROWER.
(b) ARTICLE AND SECTION HEADINGS HAVE BEEN INSERTED IN THE LOAN
DOCUMENTS FOR CONVENIENCE ONLY AND SHALL NOT BE CONSTRUED TO BE A PART
THEREOF.
ARTICLE 2. AMOUNT AND TERMS OF EXTENSIONS OF CREDIT
SECTION 2.1.LOANS
(a) Revolving Loans. SUBJECT TO THE TERMS AND CONDITIONS HEREOF, EACH
LENDER SEVERALLY AGREES TO MAKE REVOLVING CREDIT LOANS IN DOLLARS (EACH A
"Revolving Loan" AND, AS THE CONTEXT MAY REQUIRE, COLLECTIVELY WITH ALL
OTHER REVOLVING LOANS OF SUCH LENDER AND WITH THE REVOLVING LOANS OF ALL
OTHER LENDERS, THE "Revolving Loans") TO THE BORROWER FROM TIME TO TIME ON
ANY BUSINESS DAY DURING THE PERIOD FROM THE FIRST RESTATEMENT DATE TO THE
COMMITMENT TERMINATION DATE, PROVIDED THAT AFTER GIVING EFFECT THERETO (i)
SUCH LENDER'S REVOLVING EXPOSURE WOULD NOT EXCEED SUCH LENDER'S REVOLVING
COMMITMENT, AND (ii) THE SUM OF (A) THE AGGREGATE REVOLVING EXPOSURE PLUS
(B) THE EXISTING LETTER OF CREDIT EXPOSURE WOULD NOT EXCEED THE AGGREGATE
REVOLVING COMMITMENT. DURING SUCH PERIOD, THE BORROWER MAY BORROW, PREPAY
IN WHOLE OR IN PART AND REBORROW UNDER THE REVOLVING COMMITMENTS, ALL IN
ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE
OUTSTANDING PRINCIPAL BALANCE OF EACH REVOLVING LOAN SHALL BE DUE AND
PAYABLE ON THE MATURITY DATE.
(b) Acquisition Loans. PRIOR TO THE FIRST RESTATEMENT DATE, THE LENDERS
MADE THE EXISTING TERM LOANS TO THE BORROWER. IMMEDIATELY PRIOR TO THE
EFFECTIVENESS OF THIS AGREEMENT, THE AGGREGATE OUTSTANDING PRINCIPAL
BALANCE OF THE EXISTING TERM LOANS WAS $1,463,414.64. SUBJECT TO THE TERMS
AND CONDITIONS HEREOF, THE EXISTING TERM LOANS ARE HEREBY CONVERTED TO
REVOLVING CREDIT LOANS, WHICH REVOLVING CREDIT LOANS SHALL BE COMBINED
WITH OTHER REVOLVING CREDIT LOANS MADE UNDER THIS SECTION 2.1(b). SUBJECT
TO THE TERMS AND CONDITIONS HEREOF, EACH LENDER SEVERALLY AGREES TO MAKE
REVOLVING CREDIT LOANS IN DOLLARS (EACH, TOGETHER WITH A CONVERTED
EXISTING TERM LOAN REFERRED TO IN THE PREVIOUS SENTENCE, AN "Acquisition
Loan" AND, AS THE CONTEXT MAY REQUIRE, COLLECTIVELY WITH ALL OTHER
ACQUISITION LOANS OF SUCH LENDER AND WITH THE ACQUISITION LOANS OF ALL
OTHER LENDERS, THE "Acquisition Loans") TO THE BORROWER FROM TIME TO TIME
ON ANY BUSINESS DAY DURING THE PERIOD FROM THE FIRST RESTATEMENT DATE TO
THE COMMITMENT TERMINATION DATE, PROVIDED THAT AFTER GIVING EFFECT THERETO
(i) SUCH LENDER'S ACQUISITION LOAN EXPOSURE WOULD NOT EXCEED SUCH LENDER'S
ACQUISITION LOAN COMMITMENT, AND (ii) THE AGGREGATE ACQUISITION LOAN
EXPOSURE WOULD NOT EXCEED THE AGGREGATE ACQUISITION LOAN COMMITMENT.
DURING SUCH PERIOD, THE BORROWER MAY BORROW, PREPAY IN WHOLE OR IN PART
AND REBORROW UNDER THE ACQUISITION LOAN COMMITMENTS, ALL IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT. THE OUTSTANDING PRINCIPAL
BALANCE OF EACH ACQUISITION LOAN SHALL BE DUE AND PAYABLE ON THE MATURITY
DATE.
SECTION 2.2.PROCEDURE FOR BORROWING
(a) Credit Request. TO REQUEST A LOAN, THE BORROWER SHALL NOTIFY THE
ADMINISTRATIVE AGENT BY THE DELIVERY OF A CREDIT REQUEST, WHICH SHALL BE
SENT BY FACSIMILE AND SHALL BE IRREVOCABLE (CONFIRMED PROMPTLY, AND IN ANY
EVENT WITHIN FIVE BUSINESS DAYS, BY THE DELIVERY TO THE ADMINISTRATIVE
AGENT OF A CREDIT REQUEST MANUALLY SIGNED BY THE BORROWER), NO LATER THAN
11:00 A.M., THREE BUSINESS DAYS PRIOR TO THE REQUESTED BORROWING DATE IN
THE CASE OF EURODOLLAR ADVANCES AND 10:00 A.M., ON THE REQUESTED BORROWING
DATE IN THE CASE OF ABR ADVANCES, SPECIFYING (A) WHETHER SUCH BORROWING IS
A REVOLVING LOAN, AN ACQUISITION LOAN OR A COMBINATION THEREOF, (B) THE
AGGREGATE PRINCIPAL AMOUNT
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TO BE BORROWED, (C) THE REQUESTED BORROWING DATE, (D) WHETHER SUCH
BORROWING IS TO CONSIST OF ONE OR MORE EURODOLLAR ADVANCES, ABR ADVANCES,
OR A COMBINATION THEREOF AND (E) IF THE LOAN IS TO CONSIST OF ONE OR MORE
EURODOLLAR ADVANCES, THE AMOUNT AND LENGTH OF THE INTEREST PERIOD FOR EACH
EURODOLLAR ADVANCE. THE AMOUNT OF EACH (i) EURODOLLAR ADVANCE TO BE MADE
ON A BORROWING DATE, WHEN AGGREGATED WITH ALL AMOUNTS TO BE CONVERTED TO,
OR CONTINUED AS, A EURODOLLAR ADVANCE ON SUCH DATE AND HAVING THE SAME
INTEREST PERIOD AS SUCH FIRST EURODOLLAR ADVANCE, SHALL EQUAL THE MINIMUM
AMOUNT AND (ii) EACH ABR ADVANCE MADE ON EACH BORROWING DATE SHALL EQUAL
THE MINIMUM AMOUNT OR, IF LESS, THE UNUSED PORTION OF THE AGGREGATE
REVOLVING COMMITMENT OR THE AGGREGATE ACQUISITION LOAN COMMITMENT, AS
APPLICABLE.
(b) Funding by Lenders. UPON RECEIPT OF EACH CREDIT REQUEST, THE
ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY EACH LENDER THEREOF. SUBJECT TO
ITS RECEIPT OF THE NOTICE REFERRED TO IN THE PRECEDING SENTENCE, EACH
LENDER WILL MAKE THE AMOUNT OF ITS SPECIFIED PERCENTAGE OF THE REQUESTED
LOANS AVAILABLE TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF THE
BORROWER AT THE PAYMENT OFFICE NOT LATER THAN 1:00 P.M. ON THE RELEVANT
BORROWING DATE REQUESTED BY THE BORROWER, IN FUNDS IMMEDIATELY AVAILABLE
TO THE ADMINISTRATIVE AGENT AT SUCH OFFICE. THE AMOUNTS SO MADE AVAILABLE
TO THE ADMINISTRATIVE AGENT ON SUCH BORROWING DATE WILL THEN, SUBJECT TO
THE SATISFACTION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT, BE MADE
AVAILABLE ON SUCH DATE TO THE BORROWER BY THE ADMINISTRATIVE AGENT AT THE
PAYMENT OFFICE BY CREDITING THE ACCOUNT OF THE BORROWER ON THE BOOKS OF
THE ADMINISTRATIVE AGENT AT SUCH OFFICE WITH THE AGGREGATE OF SAID AMOUNTS
(IN LIKE FUNDS) RECEIVED BY THE ADMINISTRATIVE AGENT. THE FAILURE OF ANY
LENDER TO PROVIDE SUCH LENDER'S SHARE OF THE REQUESTED LOANS SHALL NOT
RELIEVE ANY OTHER LENDER OF ITS OBLIGATIONS HEREUNDER TO PROVIDE ITS SHARE
OF THE REQUESTED LOANS.
(c) Failure to Fund. UNLESS THE ADMINISTRATIVE AGENT SHALL HAVE
RECEIVED NOTICE PRIOR TO A PROPOSED BORROWING DATE (OR, IN THE CASE OF A
BORROWING OF ABR ADVANCES, PRIOR TO 12:00 NOON ON SUCH BORROWING DATE)
FROM A LENDER (BY TELEPHONE OR OTHERWISE, SUCH NOTICE TO BE PROMPTLY
CONFIRMED BY FACSIMILE OR OTHER WRITING) THAT SUCH LENDER WILL NOT MAKE
AVAILABLE TO THE ADMINISTRATIVE AGENT SUCH LENDER'S SHARE OF THE REQUESTED
LOANS, THE ADMINISTRATIVE AGENT MAY ASSUME THAT SUCH LENDER HAS MADE SUCH
SHARE AVAILABLE TO THE ADMINISTRATIVE AGENT ON THE BORROWING DATE IN
ACCORDANCE WITH THIS SECTION AND, IN RELIANCE UPON SUCH ASSUMPTION, MAKE
AVAILABLE TO THE BORROWER ON SUCH BORROWING DATE A CORRESPONDING AMOUNT.
IF AND TO THE EXTENT SUCH LENDER SHALL NOT HAVE SO MADE SUCH SHARE
AVAILABLE TO THE ADMINISTRATIVE AGENT, SUCH LENDER AND THE BORROWER
SEVERALLY AGREE TO PAY TO THE ADMINISTRATIVE AGENT FORTHWITH ON DEMAND
SUCH CORRESPONDING AMOUNT (TO THE EXTENT NOT PREVIOUSLY PAID BY THE
OTHER), TOGETHER WITH INTEREST THEREON FOR EACH DAY FROM THE DATE SUCH
AMOUNT IS MADE AVAILABLE TO THE BORROWER TO THE DATE SUCH AMOUNT IS PAID
TO THE ADMINISTRATIVE AGENT, AT A RATE PER ANNUM EQUAL TO, IN THE CASE OF
THE BORROWER, THE INTEREST RATE OTHERWISE APPLICABLE TO SUCH LOAN, AND, IN
THE CASE OF SUCH LENDER, AT A RATE OF INTEREST PER ANNUM EQUAL TO THE
GREATER OF THE FEDERAL FUNDS EFFECTIVE RATE AND A RATE DETERMINED BY THE
ADMINISTRATIVE AGENT IN ACCORDANCE WITH BANKING INDUSTRY RATES ON
INTERBANK COMPENSATION. IF SUCH LENDER SHALL PAY TO THE ADMINISTRATIVE
AGENT SUCH CORRESPONDING AMOUNT, SUCH AMOUNT SO PAID SHALL CONSTITUTE SUCH
LENDER'S LOAN AS PART OF THE RELEVANT BORROWING FOR PURPOSES OF THIS
AGREEMENT.
SECTION 2.3.TERMINATION OR REDUCTION OF COMMITMENTS
(a) Voluntary Termination or Reductions. THE BORROWER MAY, UPON AT
LEAST THREE BUSINESS DAYS' PRIOR WRITTEN NOTICE TO THE ADMINISTRATIVE
AGENT, (i) AT ANY TIME WHEN THE AGGREGATE REVOLVING EXPOSURE AND THE
AGGREGATE ACQUISITION LOAN EXPOSURE SHALL BE ZERO, TERMINATE ALL OF THE
REVOLVING COMMITMENTS AND ACQUISITION LOAN COMMITMENTS, (ii) AT ANY TIME
WHEN THE AGGREGATE ACQUISITION LOAN EXPOSURE SHALL BE ZERO, TERMINATE ALL
OF THE ACQUISITION LOAN COMMITMENTS, AND (iii) AT ANY TIME AND FROM TIME
TO TIME WHEN (A) THE AGGREGATE REVOLVING COMMITMENT SHALL EXCEED THE
AGGREGATE REVOLVING EXPOSURE (AFTER GIVING EFFECT TO ANY CONTEMPORANEOUS
PAYMENT OR PREPAYMENT OF REVOLVING LOANS OR REIMBURSEMENT OBLIGATIONS) OR
(B) THE AGGREGATE ACQUISITION LOAN COMMITMENT SHALL EXCEED THE AGGREGATE
ACQUISITION LOAN EXPOSURE (AFTER GIVING EFFECT TO ANY CONTEMPORANEOUS
PAYMENT OR PREPAYMENT OF THE ACQUISITION LOANS), PERMANENTLY REDUCE THE
AGGREGATE REVOLVING COMMITMENT OR THE AGGREGATE ACQUISITION LOAN
COMMITMENT, AS THE CASE MAY BE, BY A SUM NOT GREATER THAN THE AMOUNT OF
SUCH EXCESS, PROVIDED, HOWEVER, THAT EACH SUCH PARTIAL
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REDUCTION SHALL BE IN THE AMOUNT OF $1,000,000 OR SUCH AMOUNT PLUS A WHOLE
MULTIPLE OF $500,000 IN EXCESS THEREOF.
(b) Termination on Commitment Termination Date. UNLESS PREVIOUSLY
TERMINATED, THE REVOLVING COMMITMENTS AND THE ACQUISITION LOAN COMMITMENTS
SHALL TERMINATE ON THE COMMITMENT TERMINATION DATE.
(c) Scheduled Reductions of the Aggregate Acquisition Loan Commitment.
ON EACH DATE SET FORTH BELOW, THE AGGREGATE ACQUISITION LOAN COMMITMENT
SHALL BE AUTOMATICALLY REDUCED TO THE FOLLOWING AMOUNTS:
-------------------------- ----------------------------------
DATE AMOUNT
-------------------------- ----------------------------------
December 31, 1999 $30,000,000
-------------------------- ----------------------------------
December 31, 2000 $25,000,000
-------------------------- ----------------------------------
December 31, 2001 $20,000,000
-------------------------- ----------------------------------
December 31, 2002 $15,000,000
-------------------------- ----------------------------------
Commitment Termination
Date $0
-------------------------- ----------------------------------
(d) Other Commitment Reductions. ON OR BEFORE EACH DATE SET FORTH
BELOW, THE AGGREGATE ACQUISITION LOAN COMMITMENT SHALL BE PERMANENTLY
REDUCED BY THE AMOUNT SET FORTH BELOW AND APPLICABLE TO SUCH DATE
PROVIDED, HOWEVER, THAT IF AFTER APPLYING ALL OR ANY PORTION OF SUCH
AMOUNT TO THE REDUCTION OF THE AGGREGATE ACQUISITION LOAN COMMITMENT, THE
AGGREGATE ACQUISITION LOAN COMMITMENT SHALL EQUAL ZERO, SUCH PORTION OF
SUCH AMOUNT (OR ALL THEREOF) NOT APPLIED TO THE REDUCTION OF THE AGGREGATE
ACQUISITION LOAN COMMITMENT, SHALL BE APPLIED TO THE PERMANENT REDUCTION
OF THE AGGREGATE REVOLVING COMMITMENT:
(i) on the last day of the Reinvestment Period for each Disposition
described in Section 8.6(d), by an amount equal to 100% of the Adjusted
Net Cash Proceeds with respect to such Disposition;
(ii) on the earlier of the date the annual financial statements in
respect of each fiscal year are delivered to the Administrative Agent
pursuant to Section 7.1(a), or the 90th day following the end of each such
fiscal year, by an amount equal to the following: (A) if the Leverage
Ratio at the end of such fiscal year is greater than 2.50:1.00, 75% of
Excess Cash Flow, and (B) if the Leverage Ratio at the end of such fiscal
year is less than or equal to 2.50:1.00, 50% of Excess Cash Flow;
(iii) upon receipt by the Borrower or any Subsidiary Guarantor of
Net Cash Proceeds attributable to any Equity Issuance, by an amount equal
to the amount of such Net Cash Proceeds;
(iv) upon receipt by the Borrower or any Subsidiary of Net Cash Proceeds
of Refinancing Debt, by an amount equal to 100% of such Net Cash Proceeds;
(v) in an amount equal to all Applicable Proceeds (i) in excess of
amounts used to replace or repair any properties or (ii) which are not
used or designated to replace or repair properties within one year after
receipt thereof, provided that the Borrower or the applicable Subsidiary
Guarantor shall have commenced the restoration or replacement process
(including the making of appropriate filings and requests for approval)
within 45 days after such casualty or after the receipt of any such
condemnation proceeds, as the case may be, and diligently pursues the same
through completion; and
(vi) with respect to any Acquisition, upon receipt by the Borrower or
any Subsidiary of proceeds from any reduction, or refund of any portion
of, the Acquisition Consideration paid in respect thereof resulting from
any post-closing adjustment made in connection therewith, by an amount
equal to 100% of such proceeds;
provided, however, that if on the date of any reduction of the Aggregate
Revolving Commitment, the Aggregate Revolving Exposure exceeds the
Aggregate Revolving Commitment after giving effect to such reduction and,
if the Revolving Loans have been paid in full and the Letter of Credit
Exposure of all Lenders is greater than zero, the Borrower shall deposit
into the Cash Collateral Account an amount in cash
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that would cause the balance on deposit in the Cash Collateral Account to
equal or exceed the Letter of Credit Exposure of all Lenders.
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(e) Reductions of Letter of Credit Commitment. THE LETTER OF CREDIT
COMMITMENT SHALL NOT BE REDUCED UNTIL SUCH TIME AS THE AGGREGATE REVOLVING
COMMITMENT SHALL EQUAL SUCH LETTER OF CREDIT COMMITMENT, AND THEREAFTER
SHALL IN EACH CASE BE REDUCED, AUTOMATICALLY, BY A SUM EQUAL TO THE AMOUNT
OF EACH SUCH REDUCTION IN THE AGGREGATE REVOLVING COMMITMENT.
(f) Reductions in General. EACH REDUCTION OF THE AGGREGATE ACQUISITION
LOAN COMMITMENT MADE PURSUANT TO SECTION 2.3(d) SHALL BE APPLIED TO THE
REMAINING SCHEDULED REDUCTIONS OF THE AGGREGATE ACQUISITION LOAN
COMMITMENT SET FORTH IN SECTION 2.3(c) ON A PRO RATA BASIS. EACH REDUCTION
OF THE AGGREGATE REVOLVING COMMITMENT OR THE AGGREGATE ACQUISITION LOAN
COMMITMENT, AS THE CASE MAY BE, SHALL BE MADE BY REDUCING EACH LENDER'S
REVOLVING COMMITMENT OR ACQUISITION LOAN COMMITMENT, AS THE CASE MAY BE,
BY AN AMOUNT EQUAL TO SUCH LENDER'S SPECIFIED PERCENTAGE OF SUCH
REDUCTION. SIMULTANEOUSLY WITH EACH REDUCTION OF THE AGGREGATE REVOLVING
COMMITMENT OR THE AGGREGATE ACQUISITION LOAN COMMITMENT, AS THE CASE MAY
BE, THE BORROWER SHALL PAY THE COMMITMENT FEE ACCRUED ON THE AMOUNT BY
WHICH THE AGGREGATE REVOLVING COMMITMENT OR THE AGGREGATE ACQUISITION LOAN
COMMITMENT HAS BEEN REDUCED.
SECTION 2.4. PREPAYMENTS OF LOANS
(a) Voluntary Prepayments. THE BORROWER SHALL HAVE THE RIGHT AT ANY
TIME AND FROM TIME TO TIME TO PREPAY ALL OR ANY PORTION OF THE LOANS
WITHOUT PREMIUM OR PENALTY (BUT SUBJECT TO SECTION 3.5), BY DELIVERING TO
THE ADMINISTRATIVE AGENT AN IRREVOCABLE WRITTEN NOTICE THEREOF AT LEAST
ONE BUSINESS DAY PRIOR TO THE PROPOSED PREPAYMENT DATE, IN THE CASE OF
LOANS CONSISTING OF ABR ADVANCES, AND AT LEAST THREE BUSINESS DAYS PRIOR
TO THE PROPOSED PREPAYMENT DATE, IN THE CASE OF LOANS CONSISTING OF
EURODOLLAR ADVANCES, SPECIFYING WHETHER THE LOANS TO BE PREPAID ARE
REVOLVING LOANS OR ACQUISITION LOANS, WHETHER THE LOANS TO BE PREPAID
CONSIST OF ABR ADVANCES, EURODOLLAR ADVANCES, OR A COMBINATION THEREOF,
THE AMOUNT TO BE PREPAID AND THE DATE OF PREPAYMENT, WHEREUPON THE AMOUNT
SPECIFIED IN SUCH NOTICE SHALL BE DUE AND PAYABLE ON THE DATE SPECIFIED.
UPON RECEIPT OF EACH SUCH NOTICE, THE ADMINISTRATIVE AGENT SHALL PROMPTLY
NOTIFY EACH LENDER THEREOF. EACH PARTIAL PREPAYMENT OF THE LOANS PURSUANT
TO THIS SUBSECTION SHALL BE IN AN AMOUNT EQUAL TO THE MINIMUM AMOUNT, OR,
IF LESS, THE OUTSTANDING PRINCIPAL BALANCE OF THE LOANS. AFTER GIVING
EFFECT TO ANY PARTIAL PREPAYMENT WITH RESPECT TO EURODOLLAR ADVANCES WHICH
WERE MADE (WHETHER AS THE RESULT OF A BORROWING, A CONVERSION OR A
CONTINUATION) ON THE SAME DATE AND WHICH HAD THE SAME INTEREST PERIOD, THE
OUTSTANDING PRINCIPAL BALANCE OF SUCH EURODOLLAR ADVANCES SHALL EXCEED
(SUBJECT TO SECTION 3.3) THE MINIMUM AMOUNT.
(b) Other Mandatory Prepayments; Cash Collateral. SIMULTANEOUSLY WITH
EACH REDUCTION OR TERMINATION OF:
(i) the Aggregate Revolving Commitment, (1) in the event that the
Letter of Credit Commitment shall exceed the Aggregate Revolving
Commitment as so reduced or terminated, the Letter of Credit Commitment
shall be automatically reduced by an amount equal to such excess, and (2)
the Borrower shall prepay the Revolving Loans by an amount equal to the
lesser of (A) the aggregate outstanding principal balance of the Revolving
Loans, or (B) the excess of the aggregate outstanding principal balance of
the Revolving Loans over the Aggregate Revolving Commitment as so reduced
or terminated;
(ii) the Aggregate Acquisition Loan Commitment, the Borrower shall
prepay the Acquisition Loans by an amount equal to the lesser of (A) the
aggregate outstanding principal balance of the Acquisition Loans, or (B)
the excess of the aggregate outstanding principal balance of the
Acquisition Loans over the Aggregate Acquisition Loan Commitment as so
reduced or terminated; and
(iii) the Letter of Credit Commitment (including pursuant to clause (i)
above), in the event the aggregate Letter of Credit Exposure of all
Lenders exceeds the Letter of Credit Commitment as so reduced or
terminated, the Borrower shall immediately deposit into the Cash
Collateral Account such amount, in cash, as would cause the balance on
deposit in the Cash Collateral Account to equal or exceed the aggregate
Letter of Credit Exposure of all Lenders.
(c) In General. SIMULTANEOUSLY WITH EACH PREPAYMENT OF A LOAN, THE
BORROWER SHALL PREPAY ALL ACCRUED INTEREST ON THE AMOUNT PREPAID THROUGH
THE DATE OF PREPAYMENT.
SECTION 2.5.LETTERS OF CREDIT
(a) Availability; Procedure. THE BORROWER MAY REQUEST THE ISSUER TO
ISSUE STANDBY LETTERS OF CREDIT (THE "Letters of Credit"; EACH,
INDIVIDUALLY, A "Letter of Credit") DURING THE PERIOD FROM THE
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FIRST RESTATEMENT DATE TO THE TENTH BUSINESS DAY PRIOR TO THE MATURITY
DATE, PROVIDED THAT (i) IMMEDIATELY AFTER THE ISSUANCE OF EACH LETTER OF
CREDIT, THE LETTER OF CREDIT EXPOSURE OF ALL LENDERS WOULD NOT EXCEED THE
LETTER OF CREDIT COMMITMENT, AND (ii) THE SUM OF THE AGGREGATE REVOLVING
EXPOSURE PLUS THE EXISTING LETTER OF CREDIT EXPOSURE WOULD NOT EXCEED THE
AGGREGATE REVOLVING COMMITMENT. TO REQUEST THE ISSUANCE OF A LETTER OF
CREDIT, THE BORROWER SHALL NOTIFY THE ADMINISTRATIVE AGENT AND THE ISSUER
BY THE DELIVERY OF A CREDIT REQUEST, WHICH SHALL BE SENT BY FACSIMILE AND
SHALL BE IRREVOCABLE (CONFIRMED PROMPTLY, AND IN ANY EVENT WITHIN FIVE
BUSINESS DAYS, BY THE DELIVERY TO THE ADMINISTRATIVE AGENT OF A CREDIT
REQUEST MANUALLY SIGNED BY THE BORROWER), AT LEAST THREE BUSINESS DAYS
PRIOR TO THE REQUESTED DATE OF ISSUANCE, SPECIFYING (A) THE BENEFICIARY OF
SUCH LETTER OF CREDIT, (B) THE BORROWER'S PROPOSAL AS TO THE CONDITIONS
UNDER WHICH A DRAWING MAY BE MADE UNDER SUCH LETTER OF CREDIT AND THE
DOCUMENTATION TO BE REQUIRED IN RESPECT THEREOF, (C) THE MAXIMUM AMOUNT TO
BE AVAILABLE UNDER SUCH LETTER OF CREDIT, AND (D) THE REQUESTED DATES OF
ISSUANCE AND EXPIRATION. SUCH CREDIT REQUEST SHALL BE ACCOMPANIED BY A
DULY COMPLETED APPLICATION FOR SUCH LETTER OF CREDIT ON SUCH FORMS AS MAY
BE MADE AVAILABLE FROM TIME TO TIME BY THE ISSUER AND SUCH OTHER
CERTIFICATES, DOCUMENTS (INCLUDING A REIMBURSEMENT AGREEMENT) AND OTHER
INFORMATION AS MAY BE REQUIRED BY THE ISSUER IN ACCORDANCE WITH ITS
CUSTOMARY PROCEDURES (COLLECTIVELY, THE "Letter of Credit Documentation").
UPON RECEIPT OF SUCH CREDIT REQUEST FROM THE BORROWER, THE ADMINISTRATIVE
AGENT SHALL PROMPTLY NOTIFY THE EACH LENDER THEREOF. SUBJECT TO THE
SATISFACTION OF THE TERMS AND CONDITIONS OF THIS AGREEMENT, THE ISSUER
SHALL ISSUE EACH REQUESTED LETTER OF CREDIT. IN THE EVENT OF ANY CONFLICT
BETWEEN THE PROVISIONS OF THIS AGREEMENT AND ANY LETTER OF CREDIT
DOCUMENTATION, THE PROVISIONS OF THIS AGREEMENT SHALL CONTROL.
(b) Terms of Letters of Credit. EACH LETTER OF CREDIT SHALL (i) BE
DENOMINATED IN DOLLARS, (ii) BE ISSUED FOR THE ACCOUNT OF THE BORROWER AND
IN SUPPORT OF OBLIGATIONS, CONTINGENT OR OTHERWISE, OF THE BORROWER OR ANY
SUBSIDIARY ARISING IN THE ORDINARY COURSE OF BUSINESS, AND (iii) HAVE AN
EXPIRATION DATE WHICH SHALL BE NOT LATER THAN THE EARLIER OF (A) TWELVE
MONTHS AFTER THE DATE OF ISSUANCE THEREOF OR (B) FIVE BUSINESS DAYS BEFORE
THE MATURITY DATE, PROVIDED THAT THE EXPIRATION DATE OF SUCH LETTER OF
CREDIT MAY BE EXTENDED OR SUCH LETTER OF CREDIT MAY BE RENEWED, PROVIDED,
FURTHER, THAT ANY RENEWAL, OR ANY EXTENSION OF ANY EXPIRY DATE, OF A
LETTER OF CREDIT SHALL CONSTITUTE THE ISSUANCE OF SUCH LETTER OF CREDIT
FOR ALL PURPOSES OF THIS AGREEMENT.
(c) Letter of Credit Participations. IMMEDIATELY UPON THE ISSUANCE OF A
LETTER OF CREDIT, THE ISSUER SHALL BE DEEMED TO HAVE SOLD AND TRANSFERRED
TO EACH LENDER, AND EACH LENDER SHALL BE DEEMED TO HAVE IRREVOCABLY AND
UNCONDITIONALLY PURCHASED AND RECEIVED FROM THE ISSUER, WITHOUT RECOURSE
OR WARRANTY, AN UNDIVIDED INTEREST AND PARTICIPATION, TO THE EXTENT OF
SUCH LENDER'S REVOLVING PERCENTAGE THEREOF, IN SUCH LETTER OF CREDIT AND
THE OBLIGATIONS OF BORROWER WITH RESPECT THERETO AND ANY SECURITY THEREFOR
AND ANY GUARANTY PERTAINING THERETO AT ANY TIME EXISTING.
(d) Drawings on Letters of Credit. THE ISSUER SHALL PROMPTLY NOTIFY (i)
EACH LENDER OF THE ISSUER'S RECEIPT OF A DRAWING REQUEST UNDER ANY LETTER
OF CREDIT, STATING THE AMOUNT OF SUCH LENDER'S REVOLVING PERCENTAGE OF
SUCH DRAWING REQUEST AND THE DATE ON WHICH SUCH REQUEST WILL BE HONORED
AND (ii) BORROWER OF THE AMOUNT OF SUCH DRAWING REQUEST AND THE DATE ON
WHICH SUCH REQUEST WILL BE HONORED. ANY FAILURE OF THE ISSUER TO GIVE OR
ANY DELAY IN THE ISSUER'S GIVING ANY SUCH NOTICE SHALL NOT RELEASE OR
DIMINISH THE OBLIGATIONS OF BORROWER OR ANY LENDER HEREUNDER. IN
DETERMINING WHETHER TO PAY UNDER ANY LETTER OF CREDIT, THE ISSUER SHALL
HAVE NO OBLIGATION TO ANY LENDER OR THE BORROWER OTHER THAN TO CONFIRM
THAT ANY DOCUMENTS REQUIRED TO BE DELIVERED UNDER SUCH LETTER OF CREDIT
HAVE BEEN DELIVERED AND THAT THEY APPEAR TO COMPLY ON THEIR FACE WITH THE
REQUIREMENTS OF SUCH LETTER OF CREDIT. IN THE ABSENCE OF GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT ON THE PART OF THE ISSUER, THE ISSUER SHALL HAVE NO
LIABILITY TO ANY LENDER OR THE BORROWER FOR ANY ACTION TAKEN OR OMITTED TO
BE TAKEN BY IT UNDER OR IN CONNECTION WITH ANY LETTER OF CREDIT, INCLUDING
ANY SUCH ACTION NEGLIGENTLY TAKEN OR NEGLIGENTLY OMITTED TO BE TAKEN BY
IT.
(e) Reimbursement. THE BORROWER SHALL PAY TO THE ADMINISTRATIVE AGENT
FOR THE ACCOUNT OF THE ISSUER ON DEMAND THEREFOR, IN DOLLARS IN
IMMEDIATELY AVAILABLE FUNDS, THE AMOUNT OF ALL REIMBURSEMENT OBLIGATIONS
OWING TO THE ISSUER UNDER ANY LETTER OF CREDIT, TOGETHER WITH INTEREST
THEREON AS PROVIDED IN SECTION 3.1, IRRESPECTIVE OF ANY CLAIM, SETOFF,
DEFENSE OR OTHER RIGHT WHICH THE BORROWER MAY HAVE AT ANY TIME AGAINST THE
ISSUER OR ANY OTHER PERSON. IN THE EVENT THAT THE ISSUER
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MAKES ANY PAYMENT UNDER ANY LETTER OF CREDIT AND BORROWER SHALL NOT HAVE
REPAID SUCH AMOUNT TO THE ISSUER WHEN DUE, THE ISSUER SHALL PROMPTLY
NOTIFY EACH LENDER OF SUCH FAILURE, AND EACH LENDER SHALL PROMPTLY AND
UNCONDITIONALLY PAY TO THE ADMINISTRATIVE AGENT, FOR THE ACCOUNT OF THE
ISSUER, THE AMOUNT OF SUCH LENDER'S REVOLVING PERCENTAGE OF SUCH PAYMENT
IN DOLLARS IN IMMEDIATELY AVAILABLE FUNDS ON THE BUSINESS DAY THE ISSUER
SO NOTIFIES SUCH LENDER IF SUCH NOTICE IS GIVEN PRIOR TO 12:00 NOON OR, IF
SUCH NOTICE IS GIVEN AFTER 12:00 NOON, SUCH LENDER SHALL MAKE ITS
REVOLVING PERCENTAGE OF SUCH PAYMENT AVAILABLE TO THE ISSUER PRIOR TO
12:00 NOON ON THE NEXT SUCCEEDING BUSINESS DAY.
(f) Lenders' Obligations. IF AND TO THE EXTENT ANY LENDER SHALL NOT
MAKE SUCH LENDER'S REVOLVING PERCENTAGE OF ANY REIMBURSEMENT OBLIGATIONS
AVAILABLE TO THE ISSUER WHEN DUE IN ACCORDANCE WITH SECTION 2.5(e), SUCH
LENDER AGREES TO PAY INTEREST TO THE ISSUER ON SUCH UNPAID AMOUNT FOR EACH
DAY FROM THE DATE SUCH PAYMENT IS DUE UNTIL THE DATE SUCH AMOUNT IS PAID
IN FULL TO THE ISSUER AT THE FEDERAL FUNDS EFFECTIVE RATE UNTIL (AND
INCLUDING) THE THIRD BUSINESS DAY AFTER THE DATE DUE AND THEREAFTER AT THE
ALTERNATE BASE RATE. THE OBLIGATIONS OF THE LENDERS UNDER THIS SECTION
2.5(f) ARE SEVERAL AND NOT JOINT OR JOINT AND SEVERAL, AND THE FAILURE OF
ANY LENDER TO MAKE AVAILABLE TO THE ISSUER ITS REVOLVING PERCENTAGE OF ANY
REIMBURSEMENT OBLIGATIONS WHEN DUE IN ACCORDANCE WITH SECTION 2.5(e) SHALL
NOT RELIEVE ANY OTHER LENDER OF ITS OBLIGATION HEREUNDER TO MAKE ITS
REVOLVING PERCENTAGE OF SUCH REIMBURSEMENT OBLIGATIONS SO AVAILABLE WHEN
SO DUE, BUT NO LENDER SHALL BE RESPONSIBLE FOR THE FAILURE OF ANY OTHER
LENDER TO MAKE SUCH OTHER LENDER'S REVOLVING PERCENTAGE OF SUCH
REIMBURSEMENT OBLIGATIONS SO AVAILABLE WHEN SO DUE.
(g) Rescission. WHENEVER THE ISSUER RECEIVES A PAYMENT OF A
REIMBURSEMENT OBLIGATION FROM OR ON BEHALF OF BORROWER AS TO WHICH THE
ISSUER HAS RECEIVED ANY PAYMENT FROM A LENDER PURSUANT TO SECTION 2.5(e),
THE ISSUER SHALL PROMPTLY PAY TO SUCH LENDER AN AMOUNT EQUAL TO SUCH
LENDER'S REVOLVING PERCENTAGE OF SUCH PAYMENT FROM OR ON BEHALF OF
BORROWER. IF ANY PAYMENT BY OR ON BEHALF OF BORROWER AND RECEIVED BY THE
ISSUER WITH RESPECT TO ANY LETTER OF CREDIT IS RESCINDED OR MUST OTHERWISE
BE RETURNED BY THE ISSUER FOR ANY REASON AND THE ISSUER HAS PAID TO ANY
LENDER ANY PORTION THEREOF, EACH SUCH LENDER SHALL FORTHWITH PAY OVER TO
THE ISSUER AN AMOUNT EQUAL TO SUCH LENDER'S REVOLVING PERCENTAGE OF THE
AMOUNT WHICH MUST BE SO RETURNED BY THE ISSUER.
(h) Expenses. EACH LENDER, UPON THE DEMAND OF THE ISSUER, SHALL
REIMBURSE THE ISSUER, TO THE EXTENT THE ISSUER HAS NOT BEEN REIMBURSED BY
BORROWER AFTER DEMAND THEREFOR, FOR THE REASONABLE COSTS AND EXPENSES
(INCLUDING REASONABLE ATTORNEYS' FEES) INCURRED BY THE ISSUER IN
CONNECTION WITH THE COLLECTION OF AMOUNTS DUE UNDER, AND THE PRESERVATION
AND ENFORCEMENT OF ANY RIGHTS CONFERRED BY, ANY LETTER OF CREDIT OR THE
PERFORMANCE OF THE ISSUER'S OBLIGATIONS AS ISSUER OF THE LETTERS OF CREDIT
UNDER THIS AGREEMENT IN RESPECT THEREOF, TO THE EXTENT OF SUCH LENDER'S
REVOLVING PERCENTAGE OF THE AMOUNT OF SUCH COSTS AND EXPENSES PROVIDED,
HOWEVER, THAT NO LENDER SHALL BE LIABLE FOR THE PAYMENT OF ANY PORTION OF
SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES, PENALTIES, ACTIONS,
JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS TO THE EXTENT THE SAME
RESULT SOLELY FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE
ISSUER. THE ISSUER SHALL REFUND ANY COSTS AND EXPENSES REIMBURSED BY SUCH
LENDER THAT ARE SUBSEQUENTLY RECOVERED FROM BORROWER IN AN AMOUNT EQUAL TO
SUCH LENDER'S REVOLVING PERCENTAGE THEREOF.
(i) Obligations Absolute. THE OBLIGATION OF THE BORROWER TO REIMBURSE
THE ISSUER PURSUANT TO THIS SECTION 2.5, AND THE OBLIGATION OF EACH LENDER
TO MAKE AVAILABLE TO THE ISSUER THE AMOUNTS SET FORTH IN THIS SECTION 2.5
SHALL BE ABSOLUTE, UNCONDITIONAL AND IRREVOCABLE UNDER ANY AND ALL
CIRCUMSTANCES, SHALL BE MADE WITHOUT REDUCTION FOR ANY SET-OFF,
COUNTERCLAIM OR OTHER DEDUCTION OF ANY NATURE WHATSOEVER, MAY NOT BE
TERMINATED, SUSPENDED OR DELAYED FOR ANY REASON WHATSOEVER, SHALL NOT BE
SUBJECT TO ANY QUALIFICATION OR EXCEPTION AND SHALL BE MADE IN ACCORDANCE
WITH THE TERMS AND CONDITIONS OF THIS AGREEMENT UNDER ALL CIRCUMSTANCES,
INCLUDING WITHOUT LIMITATION, ANY OF THE FOLLOWING CIRCUMSTANCES: (1) ANY
LACK OF VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY OF THE OTHER
LOAN DOCUMENTS, (2) THE EXISTENCE OF ANY CLAIM, SETOFF, DEFENSE OR OTHER
RIGHT WHICH BORROWER MAY HAVE AT ANY TIME AGAINST A BENEFICIARY NAMED IN A
LETTER OF CREDIT, ANY TRANSFEREE OF ANY LETTER OF CREDIT (OR ANY PERSON
FOR WHOM ANY SUCH TRANSFEREE MAY BE ACTING), THE ISSUER, ANY LENDER OR ANY
OTHER PERSON, WHETHER IN CONNECTION WITH THIS AGREEMENT, ANY OTHER LOAN
DOCUMENT, ANY LETTER OF CREDIT, THE TRANSACTIONS CONTEMPLATED IN THE LOAN
DOCUMENTS OR ANY UNRELATED TRANSACTIONS
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(INCLUDING ANY UNDERLYING TRANSACTION BETWEEN BORROWER AND THE BENEFICIARY
NAMED IN ANY SUCH LETTER OF CREDIT), (3) ANY DRAFT, CERTIFICATE OR ANY
OTHER DOCUMENT PRESENTED UNDER ANY LETTER OF CREDIT PROVING TO BE FORGED,
FRAUDULENT, INVALID OR INSUFFICIENT IN ANY RESPECT OR ANY STATEMENT
THEREIN BEING UNTRUE OR INACCURATE IN ANY RESPECT, (4) THE SURRENDER OR
IMPAIRMENT OF ANY COLLATERAL FOR THE PERFORMANCE OR OBSERVANCE OF ANY OF
THE TERMS OF ANY OF THE LOAN DOCUMENTS, OR (5) THE OCCURRENCE OF ANY
DEFAULT OR EVENT OF DEFAULT. NOTHING CONTAINED IN THIS SECTION 2.5(i),
HOWEVER, SHALL REQUIRE THE BORROWER OR ANY LENDER TO REIMBURSE THE ISSUER
FOR ANY AMOUNTS THAT BECOME DUE BY REASON OF THE ISSUER'S GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT.
SECTION 2.6. PAYMENTS; PRO RATA TREATMENT AND SHARING OF SET-OFFS
(a) Payments Generally. (i) EXCEPT AS PROVIDED BELOW, ALL PAYMENTS,
INCLUDING PREPAYMENTS, OF PRINCIPAL AND INTEREST ON THE LOANS, OF THE
COMMITMENT FEE, THE LETTER OF CREDIT FEES AND OF ALL OTHER AMOUNTS TO BE
PAID BY THE BORROWER UNDER THE LOAN DOCUMENTS (THE COMMITMENT FEE AND THE
LETTER OF CREDIT FEES, TOGETHER WITH ALL OF SUCH OTHER FEES, BEING
SOMETIMES HEREINAFTER COLLECTIVELY REFERRED TO AS THE "Fees") SHALL BE
MADE TO THE ADMINISTRATIVE AGENT, PRIOR TO 1:00 P.M. ON THE DATE SUCH
PAYMENT IS DUE, FOR THE ACCOUNT OF THE APPLICABLE CREDIT PARTIES AT THE
PAYMENT OFFICE, IN DOLLARS AND IN IMMEDIATELY AVAILABLE FUNDS, WITHOUT
SET-OFF, OFFSET, RECOUPMENT OR COUNTERCLAIM. THE FAILURE OF THE BORROWER
TO MAKE ANY SUCH PAYMENT BY SUCH TIME SHALL NOT CONSTITUTE A DEFAULT,
PROVIDED THAT SUCH PAYMENT IS MADE ON SUCH DUE DATE, BUT ANY SUCH PAYMENT
MADE AFTER 1:00 P.M. ON SUCH DUE DATE SHALL BE DEEMED TO HAVE BEEN MADE ON
THE NEXT BUSINESS DAY FOR THE PURPOSE OF CALCULATING INTEREST ON AMOUNTS
OUTSTANDING ON THE LOANS. AS BETWEEN THE BORROWER AND EACH CREDIT PARTY,
ANY PAYMENT BY THE BORROWER TO THE ADMINISTRATIVE AGENT FOR THE ACCOUNT OF
SUCH CREDIT PARTY SHALL BE DEEMED TO BE PAYMENT BY THE BORROWER TO SUCH
CREDIT PARTY. NOTWITHSTANDING THE FOREGOING, ALL PAYMENTS PURSUANT TO
SECTIONS 3.5, 3.6, 3.7, AND 11.4 SHALL BE PAID DIRECTLY TO THE CREDIT
PARTY ENTITLED THERETO. IF ANY PAYMENT UNDER THE LOAN DOCUMENTS SHALL BE
DUE AND PAYABLE ON A DAY WHICH IS NOT A BUSINESS DAY, THE DUE DATE THEREOF
(EXCEPT AS OTHERWISE PROVIDED WITH RESPECT TO INTEREST PERIODS) SHALL BE
EXTENDED TO THE NEXT BUSINESS DAY AND (EXCEPT WITH RESPECT TO PAYMENTS IN
RESPECT OF THE FEES) INTEREST SHALL BE PAYABLE AT THE APPLICABLE RATE
SPECIFIED HEREIN DURING SUCH EXTENSION, PROVIDED, HOWEVER, THAT IF SUCH
NEXT BUSINESS DAY WOULD BE AFTER THE MATURITY DATE, SUCH PAYMENT SHALL
INSTEAD BE DUE ON THE IMMEDIATELY PRECEDING BUSINESS DAY.
(ii) If at any time insufficient funds are received by
and available to the Administrative Agent to pay fully all amounts of
principal, interest and fees then due hereunder, such funds shall be
applied (A) first, towards payment of interest and fees then due under the
Loan Documents, ratably among the parties entitled thereto in accordance
with the amounts of interest and fees then due to such parties, and (B)
second, towards payment of principal then due under the Loan Documents,
ratably among the parties entitled thereto in accordance with the amounts
of principal then due to such parties.
(b) Set-off. IN ADDITION TO ANY RIGHTS AND REMEDIES OF THE CREDIT
PARTIES PROVIDED BY LAW, UPON AND AFTER THE ACCELERATION OF ALL THE
OBLIGATIONS OF THE BORROWER UNDER THE LOAN DOCUMENTS TO WHICH IT IS A
PARTY, OR AT ANY TIME UPON THE OCCURRENCE AND DURING THE CONTINUANCE OF AN
EVENT OF DEFAULT UNDER SECTIONS 9.1(a) OR (b), EACH CREDIT PARTY SHALL
HAVE THE RIGHT, WITHOUT PRIOR NOTICE TO ANY LOAN PARTY, ANY SUCH NOTICE
BEING EXPRESSLY WAIVED BY EACH LOAN PARTY TO THE EXTENT NOT PROHIBITED BY
APPLICABLE LAW, TO SET-OFF AND APPLY AGAINST ANY INDEBTEDNESS, WHETHER
MATURED OR UNMATURED, OF SUCH LOAN PARTY TO SUCH CREDIT PARTY ANY AMOUNT
OWING FROM SUCH CREDIT PARTY TO SUCH LOAN PARTY, AT, OR AT ANY TIME AFTER,
THE HAPPENING OF ANY OF THE ABOVE-MENTIONED EVENTS. TO THE EXTENT NOT
PROHIBITED BY APPLICABLE LAW, THE AFORESAID RIGHT OF SET-OFF MAY BE
EXERCISED BY ANY CREDIT PARTY AGAINST SUCH LOAN PARTY OR AGAINST ANY
TRUSTEE IN BANKRUPTCY, CUSTODIAN, DEBTOR IN POSSESSION, ASSIGNEE FOR THE
BENEFIT OF CREDITORS, RECEIVER, OR EXECUTION, JUDGMENT OR ATTACHMENT
CREDITOR OF SUCH LOAN PARTY, OR AGAINST ANYONE ELSE CLAIMING THROUGH OR
AGAINST SUCH LOAN PARTY, OR SUCH TRUSTEE IN BANKRUPTCY, CUSTODIAN, DEBTOR
IN POSSESSION, ASSIGNEE FOR THE BENEFIT OF CREDITORS, RECEIVER, OR
EXECUTION, JUDGMENT OR ATTACHMENT CREDITOR, NOTWITHSTANDING THE FACT THAT
SUCH RIGHT OF SET-OFF SHALL NOT HAVE BEEN EXERCISED BY SUCH CREDIT PARTY
PRIOR TO THE MAKING, FILING OR ISSUANCE, OR SERVICE UPON SUCH CREDIT PARTY
OF, OR OF NOTICE OF, ANY SUCH PETITION, ASSIGNMENT FOR THE BENEFIT OF
CREDITORS, APPOINTMENT OR APPLICATION FOR THE APPOINTMENT OF A RECEIVER,
OR ISSUANCE OF EXECUTION, SUBPOENA,
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ORDER OR WARRANT. EACH CREDIT PARTY AGREES PROMPTLY TO NOTIFY THE BORROWER
AND THE ADMINISTRATIVE AGENT AFTER ANY SUCH SET-OFF AND APPLICATION MADE
BY SUCH CREDIT PARTY, PROVIDED THAT THE FAILURE TO GIVE SUCH NOTICE SHALL
NOT AFFECT THE VALIDITY OF SUCH SET-OFF AND APPLICATION.
(c) Adjustments. IF ANY LENDER SHALL OBTAIN ANY PAYMENT (WHETHER
VOLUNTARY, INVOLUNTARY, THROUGH THE EXERCISE OF ANY RIGHT OF SET-OFF, OR
OTHERWISE) IN RESPECT OF THE PRINCIPAL OF OR INTEREST ON ITS REVOLVING
LOANS OR ITS ACQUISITION LOANS, RESULTING IN SUCH LENDER RECEIVING PAYMENT
OF A GREATER PROPORTION OF THE AGGREGATE PRINCIPAL AMOUNT OF, OR ACCRUED
INTEREST ON, SUCH TYPE OF LOAN THAN THE PROPORTION RECEIVED BY ANY OTHER
LENDER, THEN THE LENDER RECEIVING SUCH GREATER PROPORTION SHALL PROMPTLY
PURCHASE, AT FACE VALUE FOR CASH, PARTICIPATIONS IN THE LOANS OF THAT TYPE
TO THE EXTENT NECESSARY SO THAT THE BENEFIT OF SUCH PAYMENT SHALL BE SHARED
BY THE LENDERS RATABLY IN ACCORDANCE WITH THE AGGREGATE AMOUNT OF PRINCIPAL
OF AND ACCRUED INTEREST ON THEIR RESPECTIVE LOANS OF SUCH TYPE, PROVIDED,
HOWEVER, THAT (d) IF ALL OR ANY PORTION OF SUCH PAYMENT IS THEREAFTER
RECOVERED, SUCH PARTICIPATIONS SHALL BE RESCINDED AND THE PURCHASE PRICE
RETURNED, IN EACH CASE TO THE EXTENT OF SUCH RECOVERY, AND (e) THE
PROVISIONS OF THIS SECTION 2.6(c) SHALL NOT BE CONSTRUED TO APPLY TO ANY
PAYMENT MADE BY THE BORROWER PURSUANT TO AND IN ACCORDANCE WITH THE EXPRESS
TERMS OF THIS AGREEMENT OR ANY PAYMENT OBTAINED BY A LENDER AS
CONSIDERATION FOR THE ASSIGNMENT OF OR SALE OF A PARTICIPATION IN ANY OF
ITS LOANS TO ANY ASSIGNEE OR PARTICIPANT, OTHER THAN TO THE BORROWER OR ANY
SUBSIDIARY OR AFFILIATE THEREOF (AS TO WHICH THE PROVISIONS OF THIS SECTION
2.6(c) SHALL APPLY). THE BORROWER AGREES THAT ANY LENDER THAT PURCHASED A
PARTICIPATION PURSUANT TO THIS SUBSECTION MAY EXERCISE SUCH RIGHTS TO
PAYMENT (INCLUDING THE RIGHT OF SET-OFF) WITH RESPECT TO SUCH PARTICIPATION
AS FULLY AS SUCH LENDER WERE THE DIRECT CREDITOR OF THE BORROWER IN THE
AMOUNT OF SUCH PARTICIPATION.
SECTION 2.7.CASH COLLATERAL ACCOUNT
At, or at any time before, the time the Borrower shall be
required to make a deposit into the Cash Collateral Account, the
Administrative Agent shall establish and maintain at its offices at One
Wall Street, New York, New York in the name of the Borrower but under the
sole dominion and control of the Administrative Agent, a cash collateral
account designated as "Global Vacation Group, Inc./Cash Collateral
Account" (the "CASH COLLATERAL ACCOUNT"). The Borrower may from time to
time make one or more deposits into the Cash Collateral Account. The
Borrower hereby pledges to the Administrative Agent for the benefit of the
Credit Parties, a Lien on and security interest in the Cash Collateral
Account and all sums at any time and from time to time on deposit therein
(the Cash Collateral Account, together with all sums on deposit therein,
being sometimes hereinafter collectively referred to as the "CASH
COLLATERAL"), as collateral security for the prompt payment in full when
due, whether at stated maturity, by acceleration or otherwise, of the
Borrower Obligations. The Borrower agrees that at any time and from time
to time at its expense, it will promptly execute and deliver to the
Administrative Agent any further instruments and documents, and take any
further actions, that may be necessary or that the Administrative Agent
may reasonably request, in order to perfect and protect any security
interest granted or purported to be granted hereby or to enable the
Administrative Agent to exercise and enforce its rights and remedies
hereunder with respect to any Cash Collateral. The Borrower agrees that it
will not (i) sell or otherwise dispose of any of the Cash Collateral, or
(ii) create or permit to exist any Lien upon any of the Cash Collateral,
except for Permitted Liens. The Borrower hereby authorizes the
Administrative Agent, promptly after each drawing under any Letter of
Credit shall become due and payable, to apply any and all cash on deposit
in the Cash Collateral Account towards the reimbursement of the Issuer for
all sums paid in respect of such drawing, and all other Borrower
Obligations which shall then be due and owing.
ARTICLE 3. INTEREST, FEES, YIELD PROTECTIONS, ETC.
SECTION 3.1.INTEREST RATE AND PAYMENT DATES
(a) Advances. EACH (i) ABR ADVANCE SHALL BEAR INTEREST AT A RATE PER
ANNUM EQUAL TO THE ALTERNATE BASE RATE PLUS THE APPLICABLE MARGIN AND (ii)
EURODOLLAR ADVANCE SHALL BEAR INTEREST AT A RATE PER ANNUM EQUAL TO THE
EURODOLLAR RATE FOR THE APPLICABLE INTEREST PERIOD PLUS THE APPLICABLE
MARGIN.
(b) Event of Default; Late Charges. NOTWITHSTANDING THE FOREGOING,
AFTER THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT,
THE OUTSTANDING PRINCIPAL BALANCE OF THE LOANS SHALL BEAR INTEREST AT A
RATE PER ANNUM EQUAL TO 2% PLUS THE RATE OTHERWISE APPLICABLE TO SUCH
LOANS AS
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PROVIDED IN SUBSECTION (a) ABOVE. IF ANY INTEREST, REIMBURSEMENT
OBLIGATION, FEE OR OTHER AMOUNT PAYABLE UNDER THE LOAN DOCUMENTS IS NOT
PAID WHEN DUE (WHETHER AT THE STATED MATURITY THEREOF, BY ACCELERATION OR
OTHERWISE), SUCH OVERDUE AMOUNT SHALL BEAR INTEREST AT A RATE PER ANNUM
EQUAL TO THE ALTERNATE BASE RATE PLUS 2%, FROM THE DATE OF SUCH NONPAYMENT
UNTIL PAID IN FULL (WHETHER BEFORE OR AFTER THE ENTRY OF A JUDGMENT
THEREON). ALL SUCH INTEREST SHALL BE PAYABLE ON DEMAND.
(c) Payment of Interest. EXCEPT AS OTHERWISE PROVIDED IN SUBSECTION
(b) ABOVE, INTEREST SHALL BE PAYABLE IN ARREARS ON THE FOLLOWING DATES AND
UPON EACH PAYMENT (INCLUDING PREPAYMENT) OF THE LOANS:
(i) in the case of an ABR Advance, on the last Business Day of each
March, June, September and December commencing on the first of such days
to occur after such ABR Advance is made or any Eurodollar Advance is
converted to an ABR Advance;
(ii) in the case of a Eurodollar Advance, on the last day of the
Interest Period applicable thereto and, if such Interest Period is longer
than three months, the last Business Day of each three month interval
occurring during such Interest Period; and
(iii) in the case of all Loans, the Maturity Date.
(d) Computations. INTEREST ON (i) ABR ADVANCES TO THE EXTENT BASED ON
THE PRIME RATE SHALL BE CALCULATED ON THE BASIS OF A 365 OR 366-DAY YEAR
(AS THE CASE MAY BE), AND (ii) ABR ADVANCES TO THE EXTENT BASED ON THE
FEDERAL FUNDS EFFECTIVE RATE AND ON EURODOLLAR ADVANCES SHALL BE
CALCULATED ON THE BASIS OF A 360-DAY YEAR, IN EACH CASE, FOR THE ACTUAL
NUMBER OF DAYS ELAPSED. THE ADMINISTRATIVE AGENT SHALL, AS SOON AS
PRACTICABLE, NOTIFY THE BORROWER AND THE LENDERS OF THE EFFECTIVE DATE AND
THE AMOUNT OF EACH SUCH CHANGE IN THE PRIME RATE, BUT ANY FAILURE TO SO
NOTIFY SHALL NOT IN ANY MANNER AFFECT THE OBLIGATION OF THE BORROWER TO
PAY INTEREST ON THE LOANS IN THE AMOUNTS AND ON THE DATES REQUIRED. EACH
DETERMINATION OF A RATE OF INTEREST BY THE ADMINISTRATIVE AGENT PURSUANT
TO THE LOAN DOCUMENTS SHALL BE CONCLUSIVE AND BINDING ON ALL PARTIES
HERETO ABSENT MANIFEST ERROR. THE BORROWER ACKNOWLEDGES THAT TO THE EXTENT
INTEREST PAYABLE ON ABR ADVANCES IS BASED ON THE PRIME RATE, SUCH RATE IS
ONLY ONE OF THE BASES FOR COMPUTING INTEREST ON LOANS MADE BY THE LENDERS,
AND BY BASING INTEREST PAYABLE ON ABR ADVANCES ON THE PRIME RATE, THE
LENDERS HAVE NOT COMMITTED TO CHARGE, AND THE BORROWER HAS NOT IN ANY WAY
BARGAINED FOR, INTEREST BASED ON A LOWER OR THE LOWEST RATE AT WHICH THE
LENDERS MAY NOW OR IN THE FUTURE MAKE LOANS TO OTHER BORROWERS.
SECTION 3.2. FEES
(a) Commitment Fee. THE BORROWER AGREES TO PAY TO THE ADMINISTRATIVE
AGENT, FOR THE ACCOUNT OF THE LENDERS IN ACCORDANCE WITH SUCH LENDER'S
TOTAL PERCENTAGE, FEES (COLLECTIVELY, THE "Commitment Fee"), DURING THE
PERIOD FROM THE FIRST RESTATEMENT DATE THROUGH THE COMMITMENT TERMINATION
DATE, AT A RATE PER ANNUM EQUAL TO THE APPLICABLE MARGIN ON THE SUM OF THE
AVERAGE DAILY UNUSED AGGREGATE REVOLVING COMMITMENT AND AGGREGATE
ACQUISITION LOAN COMMITMENT. THE COMMITMENT FEE SHALL BE PAYABLE (A)
QUARTERLY IN ARREARS ON THE LAST BUSINESS DAY OF EACH MARCH, JUNE,
SEPTEMBER AND DECEMBER DURING SUCH PERIOD, (B) ON THE DATE OF ANY
REDUCTION IN THE AGGREGATE REVOLVING COMMITMENT OR THE AGGREGATE
ACQUISITION LOAN COMMITMENT (TO THE EXTENT OF SUCH REDUCTION) AND (C) ON
THE MATURITY DATE. THE COMMITMENT FEE SHALL BE CALCULATED ON THE BASIS OF
A 360-DAY YEAR FOR THE ACTUAL NUMBER OF DAYS ELAPSED.
(b) Letter of Credit Fees. THE BORROWER AGREES TO PAY TO THE
ADMINISTRATIVE AGENT, FOR THE ACCOUNT OF THE LENDERS IN ACCORDANCE WITH
EACH LENDER'S REVOLVING PERCENTAGE, COMMISSIONS (THE "Letter of Credit
Fees") WITH RESPECT TO THE LETTERS OF CREDIT FOR THE PERIOD FROM AND
INCLUDING THE DATE OF ISSUANCE OF EACH THEREOF THROUGH THE EXPIRATION DATE
THEREOF, AT A RATE PER ANNUM EQUAL TO THE APPLICABLE MARGIN ON THE AVERAGE
DAILY MAXIMUM AMOUNT AVAILABLE UNDER ANY CONTINGENCY TO BE DRAWN UNDER
SUCH LETTER OF CREDIT. THE LETTER OF CREDIT FEES SHALL BE (i) CALCULATED
ON THE BASIS OF A 360-DAY YEAR FOR THE ACTUAL NUMBER OF DAYS ELAPSED AND
(ii) PAYABLE QUARTERLY IN ARREARS ON THE LAST BUSINESS DAY OF EACH MARCH,
JUNE, SEPTEMBER AND DECEMBER OF EACH YEAR, AND ON THE DATE THAT THE
REVOLVING COMMITMENTS SHALL EXPIRE. IN ADDITION TO THE LETTER OF CREDIT
FEES, THE BORROWER AGREES TO PAY TO THE ISSUER, FOR ITS OWN ACCOUNT, ITS
STANDARD FEES AND CHARGES CUSTOMARILY CHARGED TO CUSTOMERS SIMILAR TO THE
BORROWER WITH RESPECT TO ANY LETTER OF CREDIT.
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(c) Administrative Agent's and Issuer's Fees. THE BORROWER AGREES TO
PAY TO THE ADMINISTRATIVE AGENT AND THE ISSUER, FOR THEIR OWN RESPECTIVE
ACCOUNTS, SUCH OTHER FEES AS HAVE BEEN AGREED TO IN WRITING BY THE
BORROWER, THE ADMINISTRATIVE AGENT AND THE ISSUER.
SECTION 3.3. CONVERSIONS
(a) THE BORROWER MAY ELECT FROM TIME TO TIME TO CONVERT ONE OR MORE
EURODOLLAR ADVANCES TO ABR ADVANCES BY GIVING THE ADMINISTRATIVE AGENT AT
LEAST ONE BUSINESS DAY'S PRIOR IRREVOCABLE NOTICE OF SUCH ELECTION,
SPECIFYING THE AMOUNT TO BE CONVERTED, PROVIDED, THAT ANY SUCH CONVERSION
OF EURODOLLAR ADVANCES SHALL ONLY BE MADE ON THE LAST DAY OF THE INTEREST
PERIOD APPLICABLE THERETO. IN ADDITION, THE BORROWER MAY ELECT FROM TIME
TO TIME TO (i) CONVERT ABR ADVANCES COMPRISING ALL OR A PORTION OF LOANS
TO EURODOLLAR ADVANCES AND (ii) CONTINUE EURODOLLAR ADVANCES AS NEW
EURODOLLAR ADVANCES BY SELECTING A NEW INTEREST PERIOD THEREFOR, IN EACH
CASE BY GIVING THE ADMINISTRATIVE AGENT AT LEAST THREE BUSINESS DAYS'
PRIOR IRREVOCABLE NOTICE OF SUCH ELECTION, IN THE CASE OF A CONVERSION TO,
OR CONTINUATION OF, EURODOLLAR ADVANCES, SPECIFYING THE AMOUNT TO BE SO
CONVERTED OR CONTINUED AND THE INITIAL INTEREST PERIOD RELATING THERETO,
PROVIDED THAT ANY SUCH CONVERSION OF ABR ADVANCES TO EURODOLLAR ADVANCES
SHALL ONLY BE MADE ON A BUSINESS DAY AND ANY SUCH CONTINUATION OF
EURODOLLAR ADVANCES AS NEW EURODOLLAR ADVANCES SHALL ONLY BE MADE ON THE
LAST DAY OF THE INTEREST PERIOD APPLICABLE TO THE EURODOLLAR ADVANCES
WHICH ARE TO BE CONTINUED AS SUCH NEW EURODOLLAR ADVANCES. EACH SUCH
NOTICE (A "Notice of Conversion") SHALL BE SUBSTANTIALLY IN THE FORM OF
EXHIBIT C, SHALL BE IRREVOCABLE AND SHALL BE GIVEN BY FACSIMILE (CONFIRMED
PROMPTLY, AND IN ANY EVENT WITHIN FIVE BUSINESS DAYS, BY THE DELIVERY TO
THE ADMINISTRATIVE AGENT OF A NOTICE OF CONVERSION MANUALLY SIGNED BY THE
BORROWER). THE ADMINISTRATIVE AGENT SHALL PROMPTLY PROVIDE THE LENDERS
WITH NOTICE OF EACH SUCH ELECTION. ADVANCES MAY BE CONVERTED OR CONTINUED
PURSUANT TO THIS SECTION IN WHOLE OR IN PART, PROVIDED THAT THE AMOUNT TO
BE CONVERTED TO, OR CONTINUED AS, EACH EURODOLLAR ADVANCE, WHEN AGGREGATED
WITH ANY EURODOLLAR ADVANCE TO BE MADE ON SUCH DATE IN ACCORDANCE WITH
SECTION 2.2 AND HAVING THE SAME INTEREST PERIOD AS SUCH FIRST EURODOLLAR
ADVANCE, SHALL EQUAL THE MINIMUM AMOUNT.
(b) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, UPON
THE OCCURRENCE AND DURING THE CONTINUANCE OF AN EVENT OF DEFAULT, THE
BORROWER SHALL HAVE NO RIGHT TO ELECT TO CONVERT ANY EXISTING ABR ADVANCE
TO A NEW EURODOLLAR ADVANCE OR TO CONTINUE ANY EXISTING EURODOLLAR ADVANCE
AS A NEW EURODOLLAR ADVANCE. IN SUCH EVENT, ALL ABR ADVANCES SHALL BE
AUTOMATICALLY CONTINUED AS ABR ADVANCES AND ALL EURODOLLAR ADVANCES SHALL
BE AUTOMATICALLY CONVERTED TO ABR ADVANCES ON THE LAST DAY OF THE INTEREST
PERIOD APPLICABLE TO SUCH EURODOLLAR ADVANCE.
(c) EACH CONVERSION OR CONTINUATION SHALL BE EFFECTED BY EACH LENDER
BY APPLYING THE PROCEEDS OF ITS NEW ABR ADVANCE OR EURODOLLAR ADVANCE, AS
THE CASE MAY BE, TO ITS ADVANCES (OR PORTION THEREOF) BEING CONVERTED (IT
BEING UNDERSTOOD THAT ANY SUCH CONVERSION OR CONTINUATION SHALL NOT
CONSTITUTE A BORROWING FOR PURPOSES OF ARTICLES 4, 5 OR 6).
SECTION 3.4. CONCERNING INTEREST PERIODS
(a) NO INTEREST PERIOD IN RESPECT OF A EURODOLLAR ADVANCE SHALL END
AFTER THE COMMITMENT TERMINATION DATE.
(b) WITH RESPECT TO EURODOLLAR ADVANCES, ANY INTEREST PERIOD WHICH
BEGINS ON THE LAST BUSINESS DAY OF A CALENDAR MONTH (OR ON A DAY FOR WHICH
THERE IS NO NUMERICALLY CORRESPONDING DAY IN THE CALENDAR MONTH AT THE END
OF SUCH INTEREST PERIOD) SHALL END ON THE LAST BUSINESS DAY OF A CALENDAR
MONTH.
(c) IF AN INTEREST PERIOD WOULD OTHERWISE END ON A DAY WHICH IS NOT
A BUSINESS DAY, SUCH INTEREST PERIOD SHALL BE EXTENDED TO THE NEXT
SUCCEEDING BUSINESS DAY, UNLESS, IN THE CASE OF A INTEREST PERIOD, THE
RESULT OF SUCH EXTENSION WOULD BE TO CARRY SUCH INTEREST PERIOD INTO
ANOTHER CALENDAR MONTH, IN WHICH EVENT SUCH INTEREST PERIOD SHALL END ON
THE IMMEDIATELY PRECEDING BUSINESS DAY.
(d) IF THE BORROWER SHALL HAVE FAILED TO TIMELY ELECT A EURODOLLAR
ADVANCE UNDER SECTION 2.2 OR 3.3, AS THE CASE MAY BE, IN CONNECTION WITH
ANY BORROWING OF, CONVERSION TO, OR CONTINUATION OF, A EURODOLLAR ADVANCE,
SUCH BORROWING OR SUCH ADVANCE REQUESTED TO BE CONVERTED TO, OR CONTINUED
AS, A EURODOLLAR ADVANCE SHALL THEREAFTER BE AN ABR ADVANCE UNTIL SUCH
TIME, IF ANY, AS THE BORROWER SHALL ELECT A NEW EURODOLLAR ADVANCE
PURSUANT TO SECTION 3.3.
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<PAGE> 34
(e) THE BORROWER SHALL NOT BE PERMITTED TO HAVE MORE THAN EIGHT EURODOLLAR
ADVANCES OUTSTANDING AT ANY ONE TIME, IT BEING AGREED THAT EACH BORROWING OF
A EURODOLLAR ADVANCE PURSUANT TO A SINGLE CREDIT REQUEST SHALL CONSTITUTE THE
MAKING OF ONE EURODOLLAR ADVANCE FOR THE PURPOSE OF CALCULATING SUCH
LIMITATION.
SECTION 3.5.FUNDING LOSS
Notwithstanding anything contained herein to the contrary, if the
Borrower shall fail to borrow, convert or continue a Eurodollar Advance on a
Borrowing Date or Conversion Date after it shall have given notice to do so
in which it shall have requested a Eurodollar Advance, or if a Eurodollar
Advance shall be terminated for any reason prior to the last day of the
Interest Period applicable thereto, or if, while a Eurodollar Advance is
outstanding, any repayment or prepayment of such Eurodollar Advance is made
for any reason (including as a result of acceleration or illegality) on a
date which is prior to the last day of the Interest Period applicable
thereto, the Borrower agrees to indemnify each Lender against, and to pay on
demand directly to such Lender the amount (calculated by such Lender using
any reasonable method chosen by such Lender which is customarily used by such
Lender for such purpose) equal to any loss or out-of-pocket expense suffered
by such Lender as a result of such failure to borrow convert, or continue, or
such termination, repayment or prepayment, including any loss, cost or
expense suffered by such Lender in liquidating or employing deposits acquired
to fund or maintain the funding of such Eurodollar Advance or redeploying
funds prepaid or repaid, in amounts which correspond to such Eurodollar
Advance and any reasonable internal processing charge customarily charged by
such Lender in connection therewith.
SECTION 3.6.INCREASED COSTS; ILLEGALITY, ETC.
(a) Increased Costs. IF ANY CHANGE IN LAW SHALL IMPOSE, MODIFY OR MAKE
APPLICABLE ANY RESERVE, SPECIAL DEPOSIT, COMPULSORY LOAN, ASSESSMENT,
INCREASED COST OR SIMILAR REQUIREMENT AGAINST ASSETS HELD BY, OR DEPOSITS OF,
OR ADVANCES OR LOANS BY, OR OTHER CREDIT EXTENDED BY, OR ANY OTHER
ACQUISITION OF FUNDS BY, ANY OFFICE OF ANY CREDIT PARTY IN RESPECT OF ITS
EURODOLLAR ADVANCES WHICH IS NOT OTHERWISE INCLUDED IN THE DETERMINATION OF A
EURODOLLAR RATE OR AGAINST ANY LETTERS OF CREDIT ISSUED HEREUNDER AND THE
RESULT THEREOF IS TO INCREASE THE COST TO ANY CREDIT PARTY OF MAKING,
RENEWING, CONVERTING OR MAINTAINING ITS EURODOLLAR ADVANCES OR ITS COMMITMENT
TO MAKE SUCH EURODOLLAR ADVANCES, OR TO REDUCE ANY AMOUNT RECEIVABLE UNDER
THE LOAN DOCUMENTS IN RESPECT OF ITS EURODOLLAR ADVANCES, OR TO INCREASE THE
COST TO ANY CREDIT PARTY OF ISSUING OR MAINTAINING THE LETTERS OF CREDIT OR
PARTICIPATING THEREIN, AS THE CASE MAY BE, OR THE COST TO ANY CREDIT PARTY OF
PERFORMING ITS RESPECTIVE FUNCTIONS HEREUNDER WITH RESPECT TO THE LETTERS OF
CREDIT, THEN, IN ANY SUCH CASE, THE BORROWER SHALL PAY SUCH CREDIT PARTY SUCH
ADDITIONAL AMOUNTS AS IS SUFFICIENT TO COMPENSATE SUCH CREDIT PARTY FOR SUCH
ADDITIONAL COST OR REDUCTION IN SUCH AMOUNT RECEIVABLE WHICH SUCH CREDIT
PARTY DEEMS TO BE MATERIAL AS DETERMINED BY SUCH CREDIT PARTY; PROVIDED,
HOWEVER, THAT THE BORROWER SHALL NOT BE RESPONSIBLE FOR COSTS UNDER THIS
SECTION 3.6(a) ARISING MORE THAN 90 DAYS PRIOR TO RECEIPT BY THE BORROWER OF
THE CERTIFICATE FROM THE AFFECTED CREDIT PARTY PURSUANT TO SECTION 3.6(e)
WITH RESPECT TO SUCH COSTS.
(b) Capital Adequacy. IF ANY CREDIT PARTY DETERMINES THAT ANY CHANGE IN LAW
RELATING TO CAPITAL REQUIREMENTS HAS OR WOULD HAVE THE EFFECT OF REDUCING THE
RATE OF RETURN ON SUCH CREDIT PARTY'S CAPITAL OR ON THE CAPITAL OF SUCH
CREDIT PARTY'S HOLDING COMPANY, IF ANY, ON THE EXTENSIONS OF CREDIT TO A
LEVEL BELOW THAT WHICH SUCH CREDIT PARTY (OR ITS HOLDING COMPANY) WOULD HAVE
ACHIEVED OR WOULD THEREAFTER BE ABLE TO ACHIEVE BUT FOR SUCH CHANGE IN LAW
(AFTER TAKING INTO ACCOUNT SUCH CREDIT PARTY'S (OR SUCH HOLDING COMPANY'S)
POLICIES REGARDING CAPITAL ADEQUACY), THE BORROWER SHALL PAY TO SUCH CREDIT
PARTY (OR SUCH HOLDING COMPANY) SUCH ADDITIONAL AMOUNT OR AMOUNTS AS WILL
COMPENSATE SUCH CREDIT PARTY (OR SUCH HOLDING COMPANY) FOR SUCH REDUCTION.
(c) Illegality. NOTWITHSTANDING ANY OTHER PROVISION HEREOF, IF ANY LENDER
SHALL REASONABLY DETERMINE THAT ANY LAW, REGULATION, TREATY OR DIRECTIVE, OR
ANY CHANGE THEREIN OR IN THE INTERPRETATION OR APPLICATION THEREOF, SHALL
MAKE IT UNLAWFUL FOR SUCH LENDER TO MAKE OR MAINTAIN ANY EURODOLLAR ADVANCE
AS CONTEMPLATED BY THIS AGREEMENT, SUCH LENDER SHALL PROMPTLY NOTIFY THE
BORROWER AND THE ADMINISTRATIVE AGENT THEREOF, AND (i) THE COMMITMENT OF SUCH
LENDER TO MAKE SUCH EURODOLLAR ADVANCES OR CONVERT ABR ADVANCES TO EURODOLLAR
ADVANCES SHALL FORTHWITH BE SUSPENDED, (ii) SUCH
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LENDER SHALL FUND ITS PORTION OF EACH REQUESTED EURODOLLAR ADVANCE AS AN ABR
ADVANCE AND (iii) SUCH LENDER'S REVOLVING LOANS AND ACQUISITION LOANS THEN
OUTSTANDING AS SUCH EURODOLLAR ADVANCES, IF ANY, SHALL BE CONVERTED
AUTOMATICALLY TO ABR ADVANCES ON THE LAST DAY OF THE THEN CURRENT INTEREST
PERIOD APPLICABLE THERETO OR AT SUCH EARLIER TIME AS MAY BE REQUIRED BY LAW.
THE COMMITMENT OF ANY SUCH LENDER WITH RESPECT TO EURODOLLAR ADVANCES SHALL
BE SUSPENDED UNTIL SUCH LENDER SHALL NOTIFY THE ADMINISTRATIVE AGENT AND THE
BORROWER THAT THE CIRCUMSTANCES CAUSING SUCH SUSPENSION NO LONGER EXIST. UPON
RECEIPT OF SUCH NOTICE BY EACH OF THE ADMINISTRATIVE AGENT AND THE BORROWER,
SUCH LENDER'S COMMITMENT TO MAKE OR MAINTAIN EURODOLLAR ADVANCES SHALL BE
REINSTATED.
(d) Substituted Interest Rate. IN THE EVENT THAT (i) THE ADMINISTRATIVE
AGENT SHALL HAVE DETERMINED (WHICH DETERMINATION SHALL BE CONCLUSIVE AND
BINDING UPON THE BORROWER) THAT BY REASON OF CIRCUMSTANCES AFFECTING THE
INTERBANK EURODOLLAR MARKET EITHER ADEQUATE AND REASONABLE MEANS DO NOT EXIST
FOR ASCERTAINING THE EURODOLLAR RATE APPLICABLE PURSUANT TO SECTION 3.1 OR
(ii) THE REQUIRED LENDERS SHALL HAVE NOTIFIED THE ADMINISTRATIVE AGENT THAT
THEY HAVE DETERMINED (WHICH DETERMINATION SHALL BE CONCLUSIVE AND BINDING ON
THE BORROWER) THAT THE APPLICABLE EURODOLLAR RATE WILL NOT ADEQUATELY AND
FAIRLY REFLECT THE COST TO SUCH LENDERS OF MAINTAINING OR FUNDING LOANS
BEARING INTEREST BASED ON SUCH EURODOLLAR RATE, WITH RESPECT TO ANY PORTION
OF THE REVOLVING LOANS OR ACQUISITION LOANS, AS THE CASE MAY BE, THAT THE
BORROWER HAS REQUESTED BE MADE AS EURODOLLAR ADVANCES OR EURODOLLAR ADVANCES
THAT WILL RESULT FROM THE REQUESTED CONVERSION OR CONTINUATION OF ANY PORTION
OF THE ADVANCES INTO OR OF EURODOLLAR ADVANCES (EACH, AN "Affected Advance"),
THE ADMINISTRATIVE AGENT SHALL PROMPTLY NOTIFY THE BORROWER AND THE LENDERS
(BY TELEPHONE OR OTHERWISE, TO BE PROMPTLY CONFIRMED IN WRITING) OF SUCH
DETERMINATION, ON OR, TO THE EXTENT PRACTICABLE, PRIOR TO THE REQUESTED
BORROWING DATE OR CONVERSION DATE FOR SUCH AFFECTED ADVANCES. IF THE
ADMINISTRATIVE AGENT SHALL GIVE SUCH NOTICE, (a) ANY AFFECTED ADVANCES SHALL
BE MADE AS ABR ADVANCES, (b) THE ADVANCES (OR ANY PORTION THEREOF) THAT WERE
TO HAVE BEEN CONVERTED TO AFFECTED ADVANCES SHALL BE CONVERTED TO ABR
ADVANCES AND (c) ANY OUTSTANDING AFFECTED ADVANCES SHALL BE CONVERTED, ON THE
LAST DAY OF THE THEN CURRENT INTEREST PERIOD WITH RESPECT THERETO, TO ABR
ADVANCES. UNTIL ANY NOTICE UNDER CLAUSES (i) OR (ii), AS THE CASE MAY BE, OF
THIS SECTION HAS BEEN WITHDRAWN BY THE ADMINISTRATIVE AGENT (BY NOTICE TO THE
BORROWER PROMPTLY UPON EITHER (x) THE ADMINISTRATIVE AGENT HAVING DETERMINED
THAT SUCH CIRCUMSTANCES AFFECTING THE INTERBANK EURODOLLAR MARKET NO LONGER
EXIST AND THAT ADEQUATE AND REASONABLE MEANS DO EXIST FOR DETERMINING THE
EURODOLLAR RATE PURSUANT TO SECTION 3.1 OR (y) THE ADMINISTRATIVE AGENT
HAVING BEEN NOTIFIED BY SUCH REQUIRED LENDERS THAT CIRCUMSTANCES NO LONGER
RENDER THE ADVANCES (OR ANY PORTION THEREOF) AFFECTED ADVANCES), NO FURTHER
EURODOLLAR ADVANCES SHALL BE REQUIRED TO BE MADE BY THE LENDERS, NOR SHALL
THE BORROWER HAVE THE RIGHT TO CONVERT ALL OR ANY PORTION OF THE REVOLVING
LOANS OR THE ACQUISITION LOANS TO OR AS EURODOLLAR ADVANCES.
(e) Payment; Certificates. EACH PAYMENT PURSUANT TO SUBSECTIONS (a) OR (b)
ABOVE SHALL BE MADE WITHIN 10 DAYS AFTER DEMAND THEREFOR, WHICH DEMAND SHALL
BE ACCOMPANIED BY A CERTIFICATE OF THE CREDIT PARTY DEMANDING SUCH PAYMENT
SETTING FORTH THE CALCULATIONS OF THE ADDITIONAL AMOUNTS PAYABLE PURSUANT
THERETO. EACH SUCH CERTIFICATE SHALL BE CONCLUSIVE ABSENT MANIFEST ERROR.
SUBJECT TO THE PROVISIONS OF SECTION 3.6(a), NO FAILURE BY ANY CREDIT PARTY
TO DEMAND, AND NO DELAY IN DEMANDING, COMPENSATION FOR ANY INCREASED COST
SHALL CONSTITUTE A WAIVER OF ITS RIGHT TO DEMAND SUCH COMPENSATION AT ANY
TIME.
SECTION 3.7.TAXES
(a) Payments Free of Taxes. ALL PAYMENTS BY OR ON ACCOUNT OF THE BORROWER
UNDER ANY LOAN DOCUMENT TO OR FOR THE ACCOUNT OF A CREDIT PARTY SHALL BE MADE
FREE AND CLEAR OF, AND WITHOUT ANY DEDUCTION OR WITHHOLDING FOR OR ON ACCOUNT
OF, ANY AND ALL PRESENT OR FUTURE INDEMNIFIED TAXES OR OTHER TAXES, PROVIDED
THAT IF THE BORROWER OR ANY OTHER PERSON IS REQUIRED BY ANY LAW, RULE,
REGULATION, ORDER, DIRECTIVE, TREATY OR GUIDELINE TO MAKE ANY DEDUCTION OR
WITHHOLDING IN RESPECT OF SUCH INDEMNIFIED TAX OR OTHER TAX FROM ANY AMOUNT
REQUIRED TO BE PAID BY THE BORROWER TO OR ON BEHALF OF ANY CREDIT PARTY UNDER
ANY LOAN DOCUMENT (EACH A "Required Payment"), THEN (i) THE BORROWER SHALL
NOTIFY THE ADMINISTRATIVE AGENT AND SUCH CREDIT PARTY OF ANY SUCH REQUIREMENT
OR ANY CHANGE IN ANY SUCH REQUIREMENT AS SOON AS THE BORROWER BECOMES AWARE
THEREOF, (ii) THE BORROWER SHALL PAY SUCH INDEMNIFIED TAX OR OTHER TAX PRIOR
TO THE DATE ON WHICH PENALTIES ATTACH
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<PAGE> 36
THERETO, SUCH PAYMENT TO BE MADE (TO THE EXTENT THAT THE LIABILITY TO PAY IS
IMPOSED ON THE BORROWER) FOR ITS OWN ACCOUNT OR (TO THE EXTENT THAT THE
LIABILITY TO PAY IS IMPOSED ON SUCH CREDIT PARTY) ON BEHALF AND IN THE NAME
OF SUCH CREDIT PARTY, (iii) THE BORROWER SHALL PAY TO SUCH CREDIT PARTY AN
ADDITIONAL AMOUNT SUCH THAT SUCH CREDIT PARTY SHALL RECEIVE ON THE DUE DATE
THEREFOR AN AMOUNT EQUAL TO THE REQUIRED PAYMENT HAD NO SUCH DEDUCTION OR
WITHHOLDING BEEN MADE OR REQUIRED, AND (iv) THE BORROWER SHALL, WITHIN 30
DAYS AFTER PAYING SUCH INDEMNIFIED TAX OR OTHER TAX, DELIVER TO THE
ADMINISTRATIVE AGENT AND SUCH CREDIT PARTY SATISFACTORY EVIDENCE OF SUCH
PAYMENT TO THE RELEVANT GOVERNMENTAL AUTHORITY.
(b) Reimbursement for Taxes and Other Taxes Paid by Credit Party. THE
BORROWER SHALL REIMBURSE EACH CREDIT PARTY, WITHIN TEN DAYS AFTER WRITTEN
DEMAND THEREFOR, FOR THE FULL AMOUNT OF ALL INDEMNIFIED TAXES OR OTHER TAXES
PAID BY SUCH CREDIT PARTY ON OR WITH RESPECT TO ANY PAYMENT BY OR ON ACCOUNT
OF ANY OBLIGATION OF THE BORROWER UNDER THE LOAN DOCUMENTS (INCLUDING
INDEMNIFIED TAXES OR OTHER TAXES IMPOSED OR ASSERTED ON OR ATTRIBUTABLE TO
AMOUNTS PAYABLE UNDER THIS SECTION) AND ANY PENALTIES, INTEREST AND
REASONABLE EXPENSES ARISING THEREFROM OR WITH RESPECT THERETO (OTHER THAN ANY
SUCH PENALTIES, INTEREST OR EXPENSES THAT ARE INCURRED BY SUCH CREDIT PARTY'S
UNREASONABLY TAKING OR OMITTING TO TAKE ACTION WITH RESPECT TO SUCH
INDEMNIFIED TAXES OR OTHER TAXES), WHETHER OR NOT SUCH INDEMNIFIED TAXES OR
OTHER TAXES WERE CORRECTLY OR LEGALLY IMPOSED OR ASSERTED BY THE RELEVANT
GOVERNMENTAL AUTHORITY. A CERTIFICATE AS TO THE AMOUNT OF SUCH PAYMENT OR
LIABILITY DELIVERED TO THE BORROWER BY A CREDIT PARTY SHALL BE CONCLUSIVE
ABSENT MANIFEST ERROR. IN THE EVENT THAT ANY CREDIT PARTY DETERMINES IN GOOD
FAITH THAT IT HAS RECEIVED A REFUND OR CREDIT FOR INDEMNIFIED TAXES OR OTHER
TAXES PAID BY THE BORROWER UNDER THIS SECTION 3.7, SUCH CREDIT PARTY SHALL
PROMPTLY NOTIFY THE BORROWER OF SUCH FACT AND SHALL REMIT TO THE BORROWER THE
AMOUNT OF SUCH REFUND OR CREDIT.
(c) Foreign Credit Parties. ANY FOREIGN CREDIT PARTY THAT IS ENTITLED TO AN
EXEMPTION FROM OR REDUCTION OF WITHHOLDING TAX UNDER THE LAW OF THE
JURISDICTION IN WHICH THE BORROWER IS LOCATED, OR ANY TREATY TO WHICH SUCH
JURISDICTION IS A PARTY, WITH RESPECT T PAYMENTS UNDER THE LOAN DOCUMENTS O
SHALL DELIVER TO THE BORROWER (WITH A COPY TO THE ADMINISTRATIVE AGENT), AT
THE TIME OR TIMES PRESCRIBED BY APPLICABLE LAW, SUCH PROPERLY COMPLETED AND
EXECUTED DOCUMENTATION PRESCRIBED BY APPLICABLE LAW (INCLUDING INTERNAL
REVENUE FORM 4224 OR FORM 1001) OR REASONABLY REQUESTED BY THE BORROWER AS
WILL PERMIT SUCH PAYMENTS TO BE MADE WITHOUT WITHHOLDING OR AT A REDUCED
RATE.
SECTION 3.8.REGISTER
The Administrative Agent will maintain a register for the
recordation of the names and addresses of the Lenders and the Revolving
Commitments and the Acquisition Loan Commitments of, and principal amount of
the Loans owing to, each Lender, and the Letters of Credit outstanding, from
time to time (the "REGISTER"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and each Loan
Party and each Credit Party may treat each party whose name is recorded in
the Register as a Lender hereunder for all purposes of this Agreement.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
In order to induce the Credit Parties to enter into this Agreement and
extend or participate in the Extensions of Credit provided herein, the
Borrower makes the following representations and warranties to the Credit
Parties:
SECTION 4.1.ORGANIZATION AND POWER
Each of the Borrower and its Subsidiaries (i) is duly organized
or formed, validly existing and in good standing under the laws of the
jurisdiction of its organization, (ii) has all requisite power and authority
to own its property and to carry on its business as now conducted, and (iii)
is duly qualified to do business and is in good standing in each jurisdiction
in which the nature of the business conducted therein or the property owned
by it therein makes such qualification necessary, except where such failure
to qualify or be in good standing, individually or in the aggregate, could
not reasonably be expected to result in a Material Adverse effect.
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SECTION 4.2.AUTHORIZATION; ENFORCEABILITY
Each transaction contemplated by the Loan Documents is within the
corporate power of the Borrower and has been duly authorized by its Managing
Person and, if required, by any other Person, including holders of its
Capital Stock. Each Loan Document has been validly executed and delivered by
each Loan Party thereto and constitutes a legal, valid and binding obligation
of each such Loan Party, enforceable in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally and subject to general principles of
equity, regardless of whether considered in a proceeding in equity or at law.
SECTION 4.3.APPROVALS; NO CONFLICTS
Except as provided on Schedule 4.3, no transaction contemplated
by the Loan Documents (i) requires any consent or approval of, registration
or filing with, or any other action by, any Governmental Authority or any
other Person, except such as have been obtained or made and are in full force
and effect, (ii) will violate any applicable law, rule or regulation or the
Organizational Documents of the Borrower or any Subsidiary or any order of
any Governmental Authority, (iii) will violate or result in a default under
any indenture, agreement or other instrument binding upon the Borrower or any
Subsidiary or their assets, or give rise to a right thereunder to require any
payment to be made by the Borrower or any Subsidiary, and (iv) will result in
the creation or imposition of any Lien on any asset of the Borrower or any
Subsidiary other than the Permitted Liens.
SECTION 4.4.FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE
(a) THE BORROWER HAS HERETOFORE FURNISHED TO THE CREDIT PARTIES (i) ITS
FORM 10-Q FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 1998, CONTAINING THE
CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME AND CASH FLOWS OF THE
BORROWER AND THE SUBSIDIARIES AS OF AND FOR SUCH FISCAL QUARTER AND THE
PORTION OF THE FISCAL YEAR THEN ENDED, CERTIFIED BY ITS CHIEF FINANCIAL
OFFICER. SUCH FINANCIAL STATEMENTS PRESENT FAIRLY, IN ALL MATERIAL RESPECTS,
THE FINANCIAL POSITION AND RESULTS OF OPERATIONS AND CASH FLOWS OF THE
BORROWER AND CONSOLIDATED SUBSIDIARIES AS OF SUCH DATE AND FOR SUCH PERIOD IN
ACCORDANCE WITH GAAP, SUBJECT TO YEAR-END AUDIT ADJUSTMENTS AND THE ABSENCE
OF FOOTNOTES.
(b) SINCE DECEMBER 31, 1997, EXCEPT FOR THE ORIGINAL TRANSACTIONS AND THE
TRANSACTIONS, EACH OF THE BORROWER AND EACH SUBSIDIARY WHICH WAS A SUBSIDIARY
AS OF SUCH DATE HAS CONDUCTED ITS BUSINESS ONLY IN THE ORDINARY COURSE AND
THERE HAS BEEN NO MATERIAL ADVERSE CHANGE.
(c) SINCE THE DATE OF ITS ACQUISITION (OR IF NOT ACQUIRED, ITS CREATION),
EACH SUBSIDIARY HAS CONDUCTED ITS BUSINESS ONLY IN THE ORDINARY COURSE AND
THERE HAS BEEN NO MATERIAL ADVERSE CHANGE.
SECTION 4.5.PROPERTIES, ETC.
(a) EACH OF THE BORROWER AND EACH SUBSIDIARY HAS GOOD AND MARKETABLE TITLE
TO, OR VALID LEASEHOLD INTERESTS IN, ALL OF ITS PROPERTY, REAL AND PERSONAL,
MATERIAL TO ITS BUSINESS, SUBJECT TO NO LIENS, EXCEPT PERMITTED LIENS AND
EXCEPT FOR MINOR DEFECTS IN TITLE THAT DO NOT INTERFERE WITH ITS ABILITY TO
CONDUCT ITS BUSINESS AS CURRENTLY CONDUCTED OR TO UTILIZE SUCH PROPERTIES FOR
THEIR INTENDED PURPOSES.
(b) EACH OF THE BORROWER AND EACH SUBSIDIARY OWNS OR IS LICENSED TO USE ALL
INTELLECTUAL PROPERTY MATERIAL TO ITS BUSINESS, AND THE USE THEREOF BY THE
BORROWER OR ANY SUBSIDIARY DOES NOT CONFLICT WITH OR INFRINGE UPON THE VALID
RIGHTS OF OTHERS, EXCEPT FOR ANY SUCH CONFLICTS OR INFRINGEMENTS THAT
INDIVIDUALLY OR IN THE AGGREGATE, COULD NOT REASONABLY BE EXPECTED TO RESULT
IN A MATERIAL ADVERSE EFFECT.
(c) No contract, lease or other agreement to which the Borrower or any
Subsidiary is a party will lapse, be cancelled or otherwise terminate, which
lapse, cancellation or termination, could reasonably be expected to result in
a Material Adverse effect.
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SECTION 4.6.LITIGATION
Except as set forth on Schedule 4.6, there are no actions, suits
or proceedings at law or in equity or by or before any Governmental Authority
(whether purportedly on behalf of the Borrower or any Subsidiary) pending or,
to the knowledge of the Borrower, threatened against the Borrower or any
Subsidiary, or maintained by the Borrower or any Subsidiary or which may
affect the property of any the Borrower or any Subsidiary, (i) that, in the
good faith opinion of the Borrower, would reasonably be expected to have an
adverse determination and that, if adversely determined, could reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
effect or (ii) that involve any of the Transactions. Since the First
Restatement Date, there has been no change in the status of any matter
disclosed on Schedule 4.6 that, individually or in the aggregate, has
resulted in, or materially increased the likelihood of, a Material Adverse
effect.
SECTION 4.7.ENVIRONMENTAL MATTERS
Except as set forth on Schedule 4.7 and except with respect to
any other matters that, individually or in the aggregate, could not
reasonably be expected to result in a Material Adverse effect, neither the
Borrower nor any Subsidiary has (i) received written notice or otherwise
learned of any claim, demand, action, event, condition, report or
investigation indicating or concerning any potential or actual liability
which individually or in the aggregate could reasonably be expected to result
in a Material Adverse effect, arising in connection with any non-compliance
with or violation of the requirements of any applicable laws, rules,
regulations, codes, ordinances, orders, decrees, judgments, injunctions,
notices or binding agreements issued, promulgated or entered into by any
Governmental Authority, relating in any way to the environment, preservation
or reclamation of natural resources, the management, release or threatened
release of any Hazardous Substance (as defined below) or to health and safety
matters (collectively, "ENVIRONMENTAL LAWS"), (ii) to the best knowledge of
the Borrower, any threatened or actual liability in connection with the
release or threatened release of any Hazardous Substance into the environment
which individually or in the aggregate could reasonably be expected to result
in a Material Adverse effect, (iii) received notice of any federal or state
investigation evaluating whether any remedial action is needed to respond to
a release or threatened release of any Hazardous Substance into the
environment for which the Borrower or any Subsidiary is or would be liable,
which liability could reasonably be expected to result in a Material Adverse
effect, or (iv) has received notice that any the Borrower or any Subsidiary
is or may be liable to any Person under any Environmental Law, which
liability could reasonably be expected to result in a Material Adverse
effect. Each of the Borrower and each any Subsidiary is in compliance with
the financial responsibility requirements of Environmental Laws to the extent
applicable, except in those cases in which the failure so to comply would not
reasonably be expected to result in a Material Adverse effect. For purposes
hereof, "HAZARDOUS SUBSTANCE" shall mean any hazardous or toxic substance,
material, waste or other pollutants, including petroleum or petroleum
distillates, asbestos or asbestos containing materials, polychlorinated
biphenyls, radon gas, infectious or medical wastes, radioactive materials or
any other substance or waste regulated pursuant to any Environmental Law.
Since the First Restatement Date, there has been no change in the status of
any matter disclosed on Schedule 4.7 that, individually or in the aggregate,
has resulted in, or materially increased the likelihood of, a Material
Adverse effect.
SECTION 4.8.COMPLIANCE WITH LAWS AND AGREEMENTS; NO DEFAULT
Each of the Borrower and each Subsidiary is in compliance with
all laws, regulations and orders of any Governmental Authority applicable to
it or its property and all indentures, agreements and other instruments
binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse effect. No Default has occurred and is continuing.
SECTION 4.9.INVESTMENT COMPANIES AND OTHER REGULATED ENTITIES
None of the Borrower, any Subsidiary nor any Person controlled
by, controlling, or under common control with, the Borrower or any
Subsidiary, is (i) an "investment company" as defined in, or subject to
regulation under, the Investment Company Act of 1940, as amended, (ii) a
"holding company"
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<PAGE> 39
as defined in, or subject to regulation under, the Public Utility Holding
Company Act of 1935 or the Federal Power Act, as amended, or (iii) subject to
any statute or regulation which prohibits or restricts the incurrence of
Indebtedness for borrowed money, including statutes or regulations relative
to common or contract carriers or to the sale of electricity, gas, steam,
water, telephone, telegraph or other public utility services.
SECTION 4.10. FEDERAL RESERVE REGULATIONS
(a) NEITHER THE BORROWER NOR ANY SUBSIDIARY IS ENGAGED PRINCIPALLY, OR AS
ONE OF ITS IMPORTANT ACTIVITIES, IN THE BUSINESS OF EXTENDING CREDIT FOR THE
PURPOSE OF PURCHASING OR CARRYING ANY MARGIN STOCK. AFTER GIVING EFFECT TO
EACH TRANSACTION AND THE MAKING OF EACH EXTENSION OF CREDIT, MARGIN STOCK
WILL CONSTITUTE LESS THAN 25% OF THE ASSETS (AS DETERMINED BY ANY REASONABLE
METHOD) OF THE BORROWER AND ITS SUBSIDIARIES.
(b) NO PART OF THE PROCEEDS OF ANY EXTENSION OF CREDIT WILL BE USED,
WHETHER DIRECTLY OR INDIRECTLY, AND WHETHER IMMEDIATELY, INCIDENTALLY OR
ULTIMATELY, FOR ANY PURPOSE THAT ENTAILS A VIOLATION OF, OR THAT IS
INCONSISTENT WITH, THE PROVISIONS OF REGULATION U OR X.
SECTION 4.11. ERISA
Each Pension Plan is in compliance with ERISA and the Code, where
applicable, in all material respects and no ERISA Event has occurred or
is reasonably expected to occur that, when taken together with all other such
ERISA Events for which liability is reasonably expected to occur, could
reasonably be expected to result in a Material Adverse effect. The present
value of all accumulated benefit obligations under each Pension Plan (based
on the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $100,000 the fair
market value of the assets of such Pension Plan, and the present value of all
accumulated benefit obligations of all underfunded Pension Plans (based on
the assumptions used for purposes of Statement of Financial Accounting
Standards No. 87) did not, as of the date of the most recent financial
statements reflecting such amounts, exceed by more than $100,000 the fair
market value of the assets of all such underfunded Pension Plans.
SECTION 4.12.TAXES
Each of the Borrower and each Subsidiary has timely filed or
caused to be filed all tax returns and reports required to have been filed
and has paid, or caused to be paid, all Taxes required to have been paid by
it except (i) Taxes being contested in good faith by appropriate proceedings
and for which the Borrower or such Subsidiary, as applicable, has set aside
on its books adequate reserves, or (ii) to the extent that the failure to do
so could not reasonably be expected to result in a Material Adverse effect.
SECTION 4.13.SUBSIDIARIES
(a) AS OF THE FIRST RESTATEMENT DATE, (i) THE BORROWER HAS ONLY THE
SUBSIDIARIES SET FORTH ON, AND THE AUTHORIZED, ISSUED AND OUTSTANDING CAPITAL
STOCK OF THE BORROWER AND ITS SUBSIDIARIES IS AS SET FORTH ON, SCHEDULE 4.13
AND (ii) THE OWNERSHIP INTERESTS IN EACH SUBSIDIARY ARE DULY AUTHORIZED,
VALIDLY ISSUED, FULLY PAID AND NONASSESSABLE AND ARE OWNED BENEFICIALLY AND
OF RECORD BY THE PERSONS SET FORTH ON SUCH SCHEDULE 4.13, FREE AND CLEAR OF
ALL LIENS (OTHER THAN PERMITTED LIENS).
(b) EXCEPT AS SET FORTH ON SCHEDULE 4.13, NEITHER THE BORROWER NOR ANY
SUBSIDIARY HAS ISSUED ANY SECURITIES CONVERTIBLE INTO, OR OPTIONS OR WARRANTS
FOR, ANY COMMON OR PREFERRED EQUITY SECURITIES THEREOF AND THERE ARE NO
AGREEMENTS, VOTING TRUSTS OR UNDERSTANDINGS BINDING UPON THE BORROWER OR ANY
SUBSIDIARY WITH RESPECT TO THE VOTING SECURITIES OF ANY SUBSIDIARY OR
AFFECTING IN ANY MANNER THE SALE, PLEDGE, ASSIGNMENT OR OTHER DISPOSITION
THEREOF, INCLUDING ANY RIGHT OF FIRST REFUSAL, OPTION, REDEMPTION, CALL OR
OTHER RIGHT WITH RESPECT THERETO, WHETHER SIMILAR OR DISSIMILAR TO ANY OF THE
FOREGOING.
SECTION 4.14. ABSENCE OF CERTAIN RESTRICTIONS
No indenture, certificate of designation for preferred stock,
agreement or instrument to which the Borrower or any Subsidiary is a party
(other than this Agreement), prohibits or limits in any way,
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<PAGE> 40
directly or indirectly the ability of any Subsidiary to make Restricted
Payments or loans to, to make any advance on behalf of, or to repay any
Indebtedness to, the Borrower or to another Subsidiary.
SECTION 4.15. LABOR RELATIONS
As of the First Restatement Date, there are no material
controversies pending that involve the Borrower or any Subsidiary which might
result in a Material Adverse effect.
SECTION 4.16. INSURANCE
Schedule 4.16 sets forth a description of all insurance
maintained by or on behalf of the Borrower and the Subsidiaries as of the
First Restatement Date. As of the First Restatement Date, all premiums in
respect of such insurance that are due and payable have been paid.
SECTION 4.17. NO MISREPRESENTATION
The Borrower has disclosed to each Credit Party all agreements,
instruments and corporate or other restrictions to which it or any Subsidiary
is subject, and all other matters known to it, that, individually or in the
aggregate, could reasonably be expected to result in a Material Adverse
effect. No certificate or report from time to time furnished by any of the
Loan Parties in connection with the Transactions contains or will contain a
misstatement of material fact, or omits or will omit to state a material fact
required to be stated in order to make the statements therein contained not
misleading in the light of the circumstances under which made, provided that
any projections or pro-forma financial information contained therein are
based upon good faith estimates and assumptions believed by the Borrower to
be reasonable at the time made, it being recognized by the Credit Parties
that such projections as to future events are not to be viewed as facts, and
that actual results during the period or periods covered thereby may differ
from the projected results.
SECTION 4.18. TRANSACTION DOCUMENTS
On and after the consummation of each Acquisition by the Borrower
or any Subsidiary, the Transaction Documents applicable thereto are in full
force and effect, and neither the Borrower nor such Subsidiary has entered
into, or agreed to, any amendment, supplement, modification or waiver of any
term or condition of any Transaction Document in any way which would
adversely effect any Credit Party.
SECTION 4.19. FINANCIAL CONDITION
On and after each Borrowing Date and each date upon which an
Acquisition by the Borrower or any Subsidiary shall be consummated, neither
the Borrower nor any Subsidiary Guarantor is Insolvent.
SECTION 4.20. YEAR 2000
All of the material computer software, computer firmware,
computer hardware (whether general or special purpose) and other similar or
related items of automated, computerized and/or software system(s) that are
used or relied on by the Borrower or any Subsidiary in the conduct of its
business will not malfunction, will not cease to function, will not generate
incorrect data, and will not produce incorrect results when processing,
providing and/or receiving, (i) data-related data into and between the
twentieth and twenty-first centuries and (ii) date-related data in connection
with any valid date in the twentieth and twenty-first centuries.
SECTION 4.21. MATERIAL AGREEMENTS
The Borrower has not received notice from any party to any
agreements, the cancellation or termination of which individually or in the
aggregate could reasonably be expected to result in a Material Adverse
effect, that such agreement or agreements would be cancelled, not renewed or
otherwise terminated as a result of the consummation of any of the
Transactions.
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<PAGE> 41
ARTICLE 5. CONDITIONS TO EFFECTIVENESS
This Agreement shall not become effective until such date (the "FIRST
RESTATEMENT DATE") as each of the following conditions precedent have been
satisfied (or waived in accordance with Section 11.1):
SECTION 5.1.EVIDENCE OF ACTION
The Administrative Agent shall have received a certificate, dated
the First Restatement Date, of the Secretary or Assistant Secretary or
other analogous counterpart of each Loan Party:
(a) ATTACHING A TRUE AND COMPLETE COPY OF THE RESOLUTIONS OF ITS MANAGING
PERSON AND OF ALL OTHER DOCUMENTS EVIDENCING ALL NECESSARY CORPORATE,
PARTNERSHIP OR OTHER ACTION (IN FORM AND SUBSTANCE SATISFACTORY TO THE
ADMINISTRATIVE AGENT) TAKEN TO AUTHORIZE THE LOAN DOCUMENTS TO WHICH IT IS A
PARTY AND THE TRANSACTIONS CONTEMPLATED THEREBY;
(b) ATTACHING A TRUE AND COMPLETE COPY OF ITS ORGANIZATIONAL
DOCUMENTS;
(c) SETTING FORTH THE INCUMBENCY OF ITS OFFICER OR OFFICERS (OR OTHER
ANALOGOUS COUNTERPART) WHO MAY SIGN THE LOAN DOCUMENTS, INCLUDING THEREIN A
SIGNATURE SPECIMEN OF SUCH OFFICER OR OFFICERS (OR OTHER ANALOGOUS
COUNTERPART); AND
(d) ATTACHING A CERTIFICATE OF GOOD STANDING OF THE SECRETARY OF STATE OF
THE JURISDICTION OF ITS FORMATION AND OF EACH OTHER JURISDICTION IN WHICH IT
IS QUALIFIED TO DO BUSINESS, EXCEPT, IN THE CASE OF SUCH OTHER JURISDICTION,
WHEN THE FAILURE TO BE IN GOOD STANDING IN SUCH JURISDICTION WOULD NOT RESULT
IN A MATERIAL ADVERSE EFFECT.
SECTION 5.2.THIS AGREEMENT
The Administrative Agent (or its counsel) shall have received, in
respect of each Person listed on the signature pages of this Agreement,
either (i) a counterpart signature page hereof signed on behalf of such
Person, or (ii) written evidence satisfactory to the Administrative Agent
(which may include a facsimile transmission of a signed signature page of
this Agreement) that a counterpart signature page hereof has been signed on
behalf of such Person.
SECTION 5.3.NOTES
The Administrative Agent shall have received an amended and
restated Note for each Lender, dated the First Restatement Date, duly
executed by a duly authorized officer of the Borrower.
SECTION 5.4.OPINION OF COUNSEL TO THE LOAN PARTIES
The Administrative Agent shall have received a favorable opinion
of Hogan & Hartson, L.L.P, counsel to the Loan Parties, addressed to the
Credit Parties (and permitting counsel to the Administrative Agent to rely
thereon), dated the First Restatement Date, in form and substance
satisfactory to the Administrative Agent, together with such opinions of
local counsel as the Administrative Agent may reasonably require.
SECTION 5.5.PERFECTION CERTIFICATE
The Administrative Agent (or its counsel) shall have received a
completed Perfection Certificate, dated the First Restatement Date and
signed by an executive officer of the Borrower, together with all attachments
contemplated thereby.
SECTION 5.6.GVG FINANCE COMPANY
The Administrative Agent (or its counsel) shall have received all
certificates, instruments, opinions and other documents required to be
delivered with respect to GVG Finance Company under Sections 7.9 and 7.10 of
the Existing Credit Agreement.
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<PAGE> 42
SECTION 5.7.ABSENCE OF MATERIAL ADVERSE CHANGE
Since December 31, 1997, there shall have occurred no Material
Adverse change and the Administrative Agent shall have received a certificate
of a Financial Officer of the Borrower to the foregoing effect.
SECTION 5.8.OFFICER'S CERTIFICATE
The Administrative Agent shall have received a certificate of a
Financial Officer of the Borrower, dated the First Restatement Date, in all
respects satisfactory to the Administrative Agent certifying that as of the
First Restatement Date (i) no Default exists and (ii) the representations and
warranties contained in the Loan Documents are true and correct.
SECTION 5.9.MASTER ASSIGNMENT
The Administrative Agent shall have received counterparts of the
Master Assignment signed on behalf of each party thereto.
SECTION 5.10. FEES
(a) THE ADMINISTRATIVE AGENT SHALL HAVE RECEIVED A FEE FOR THE ACCOUNT OF
EACH LENDER IN AN AMOUNT EQUAL TO 0.50% OF THE SUM OF SUCH LENDER'S REVOLVING
COMMITMENT AND ACQUISITION LOAN COMMITMENT.
(b) THE ADMINISTRATIVE AGENT SHALL HAVE RECEIVED ALL FEES AND OTHER AMOUNTS
DUE AND PAYABLE TO THE ADMINISTRATIVE AGENT UNDER THE LOAN DOCUMENTS ON OR
PRIOR TO THE FIRST RESTATEMENT DATE, INCLUDING, TO THE EXTENT INVOICED,
REIMBURSEMENT OR PAYMENT OF THE FEES AND DISBURSEMENTS OF THE ADMINISTRATIVE
AGENT'S COUNSEL AND ALL OTHER OUT-OF-POCKET EXPENSES REQUIRED TO BE
REIMBURSED OR PAID BY THE BORROWER HEREUNDER.
SECTION 5.11. OTHER DOCUMENTS
The Administrative Agent shall have received such other
documents, each in form and substance reasonably satisfactory to it, as it
shall reasonably request.
ARTICLE 6. CONDITIONS TO EACH EXTENSION OF CREDIT
The obligation of each Credit Party to make any Extension of
Credit (other than a participation in a Letter of Credit) under this
Agreement shall be subject to the satisfaction of the following conditions
precedent as of the date thereof:
SECTION 6.1.COMPLIANCE
On each Borrowing Date and after giving effect to the
Extensions of Credit thereon (i) no Default shall have occurred or be
continuing; and (ii) the representations and warranties contained in the Loan
Documents shall be true and correct in all material respects with the same
effect as though such representations and warranties had been made on such
Borrowing Date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case such representations
and warranties shall have been true and correct on and as of such earlier
date. Each Extension of Credit and each Credit Request therefor shall
constitute a certification by the Borrower as of such Borrowing Date that
each of the foregoing matters is true and correct in all respects.
SECTION 6.2.CREDIT REQUEST
With respect to each Extension of Credit, the Administrative
Agent shall have received a Credit Request, executed by a duly authorized
officer of the Borrower.
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<PAGE> 43
SECTION 6.3.LAW
Such Extension of Credit shall not be prohibited by any applicable law,
rule or regulation.
ARTICLE 7. AFFIRMATIVE COVENANTS
The Borrower agrees that, so long as any Commitment is in effect and
until the principal of, and interest on, each Loan, all Reimbursement
Obligations, all Fees and all other amounts payable under the Loan Documents
shall have been paid in full:
SECTION 7.1.FINANCIAL STATEMENTS AND INFORMATION
The Borrower shall furnish or cause to be furnished to the
Administrative Agent and each
Lender:
(a) WITHIN 90 DAYS AFTER THE END OF EACH FISCAL YEAR:
(i) a copy of its Form 10-K for such fiscal year containing the audited
consolidated balance sheet and related statements of income, stockholders'
equity and cash flows as of the end of and for such year, setting forth in
each case in comparative form the figures for the previous fiscal year, all
reported on by the Accountants (without (x) a "going concern" or like
qualification or exception, (y) any qualification or exception as to the
scope of such audit or (z) any qualification or exception which relates to
the treatment or classification of any item and which, as a condition to the
removal of such qualification, would require an adjustment to such item, the
effect of which would be to cause the Borrower to be in default of any of its
obligations under Section 8.14 (each, an "IMPERMISSIBLE QUALIFICATION")) to
the effect that such consolidated financial statements present fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidated basis in
accordance with GAAP consistently applied; and
(ii) a copy of its unaudited consolidating balance sheet and related
statements of income, stockholders' equity and cash flows as of the end of
and for such year, setting forth in each case in comparative form the figures
for the previous fiscal year, certified by a Financial Officer of the
Borrower, as being complete and correct in all material respects and as
presenting fairly the consolidating financial condition and the consolidating
results of operations of the Borrower and the Subsidiaries.
(b) WITHIN 45 DAYS AFTER THE END OF EACH OF THE FIRST THREE FISCAL
QUARTERS OF EACH FISCAL YEAR:
(i) a copy of its Form 10-Q for such fiscal quarter consolidated
balance sheet and the related consolidated statements of income and cash
flows as of the end of and for such fiscal quarter and the then elapsed
portion of the fiscal year, setting forth in each case in comparative form
the figures for the corresponding period or periods of (or, in the case of
the balance sheet, as of the end of) the previous fiscal year, all certified
by one of its Financial Officers as presenting fairly in all material
respects the financial condition and results of operations of the Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, subject to normal year-end audit adjustments and
the absence of footnotes; and
(ii) a copy of its consolidating balance sheet and related statements
of income, and cash flows as of the end of and for such fiscal quarter and
the then elapsed portion of such fiscal year, setting forth in each case in
comparative form the figures for the corresponding period or periods of (or,
in the case of the balance sheet, as of the end of) the previous fiscal year,
certified by one of its Financial Officers as presenting fairly in all
material respects the financial condition and results of operations of the
Borrower and its consolidated Subsidiaries on a consolidating basis in
accordance with GAAP consistently applied, subject to normal year-end audit
adjustments and the absence of footnotes, together with a schedule of other
unaudited financial information consisting of consolidating or combining
details in columnar form with such consolidating Subsidiaries separately
identified, in accordance with GAAP consistently applied;
(c) CONCURRENTLY WITH ANY DELIVERY OF FINANCIAL STATEMENTS UNDER
SUBSECTIONS (a) OR (b) ABOVE, A CERTIFICATE (A "Compliance Certificate") OF A
FINANCIAL OFFICER OF THE BORROWER, SUBSTANTIALLY IN THE FORM OF EXHIBIT D,
(i) CERTIFYING AS TO WHETHER A DEFAULT HAS OCCURRED AND, IF SO, SPECIFYING
THE DETAILS THEREOF AND ANY ACTION TAKEN OR PROPOSED TO BE TAKEN WITH RESPECT
THERETO, (ii) SETTING FORTH REASONABLY DETAILED CALCULATIONS DEMONSTRATING
COMPLIANCE WITH SECTION 8.14 AND (iii) STATING WHETHER ANY CHANGE IN GAAP OR
IN THE APPLICATION THEREOF HAS OCCURRED SINCE THE DATE OF THE AUDITED
FINANCIAL
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<PAGE> 44
STATEMENTS REFERRED TO IN SECTION 4.4 AND, IF ANY SUCH CHANGE HAS OCCURRED,
SPECIFYING THE EFFECT OF SUCH CHANGE ON THE FINANCIAL STATEMENTS ACCOMPANYING
SUCH COMPLIANCE CERTIFICATE;
(d) CONCURRENTLY WITH ANY DELIVERY OF FINANCIAL STATEMENTS UNDER SUBSECTION
(a) ABOVE, A CERTIFICATE EXECUTED BY AN EXECUTIVE OFFICER OR A FINANCIAL
OFFICER OF THE BORROWER (i) SETTING FORTH THE INFORMATION REQUIRED PURSUANT
TO SECTIONS 2 AND 5 OF THE PERFECTION CERTIFICATE OR CONFIRMING THAT THERE
HAS BEEN NO CHANGE IN SUCH INFORMATION SINCE THE DATE OF SUCH CERTIFICATE OR
THE DATE OF THE MOST RECENT CERTIFICATE DELIVERED PURSUANT TO THIS SUBSECTION
(e), (ii) CERTIFYING THAT ALL UNIFORM COMMERCIAL CODE FINANCING STATEMENTS OR
OTHER APPROPRIATE FILINGS, RECORDINGS OR REGISTRATIONS, INCLUDING ALL
REFILINGS, RERECORDINGS AND RE-REGISTRATIONS, CONTAINING A DESCRIPTION OF THE
COLLATERAL, HAVE BEEN FILED OF RECORD IN EACH GOVERNMENTAL, MUNICIPAL OR
OTHER APPROPRIATE OFFICE IN EACH JURISDICTION IDENTIFIED PURSUANT TO CLAUSE
(i) ABOVE TO THE EXTENT NECESSARY TO PROTECT AND PERFECT THE SECURITY
INTEREST OF THE ADMINISTRATIVE AGENT FOR A PERIOD OF NOT LESS THAN 18 MONTHS
AFTER THE DATE OF SUCH CERTIFICATE (EXCEPT AS NOTED THEREIN WITH RESPECT TO
ANY CONTINUATION STATEMENTS TO BE FILED WITHIN SUCH PERIOD) AND (iii)
IDENTIFYING IN THE FORMAT OF SCHEDULES 7, 8 AND 10, AS APPLICABLE, EQUITY
INTERESTS (AS DEFINED IN THE SECURITY AGREEMENT), INSTRUMENTS (AS DEFINED IN
THE SECURITY AGREEMENT) AND INTELLECTUAL PROPERTY OF THE BORROWER AND EACH
SUBSIDIARY GUARANTOR IN EXISTENCE ON THE DATE THEREOF AND NOT THEN LISTED ON
SUCH SCHEDULES OR PREVIOUSLY SO IDENTIFIED TO THE ADMINISTRATIVE AGENT;
(e) CONCURRENTLY WITH ANY DELIVERY OF FINANCIAL STATEMENTS UNDER
SUBSECTIONS (a) AND (b) ABOVE, A CERTIFICATE EXECUTED BY A FINANCIAL OFFICER
CERTIFYING AS TO (i) THE THEN OUTSTANDING EXISTING LETTERS OF CREDIT AND THE
COLLATERAL PLEDGED TO THE ISSUERS OF SUCH EXISTING LETTERS OF CREDIT, AND
(ii) ALL INVESTMENTS (INCLUDING SUCH INFORMATION AS SHALL BE SUFFICIENT TO
ENABLE THE ADMINISTRATIVE AGENT TO MAKE A DETERMINATION AS TO WHETHER, IN ITS
GOOD FAITH DETERMINATION, SUCH INVESTMENTS AND THE EARNINGS THEREFROM
SUFFICIENTLY REDUCE THE EXPOSURE OF THE BORROWER AND THE SUBSIDIARIES TO
INTEREST RATE FLUCTUATIONS);
(f) PROMPTLY AFTER THE SAME BECOME PUBLICLY AVAILABLE, COPIES OF ALL
MATERIAL PERIODIC AND OTHER REPORTS, PROXY STATEMENTS AND OTHER MATERIALS
FILED BY THE BORROWER OR ANY SUBSIDIARY WITH THE SEC OR WITH ANY NATIONAL
SECURITIES EXCHANGE, OR DISTRIBUTED BY THE BORROWER TO ITS SHAREHOLDERS
GENERALLY, AS THE CASE MAY BE; AND
(g) PROMPTLY FOLLOWING ANY REQUEST THEREFOR, SUCH OTHER INFORMATION
REGARDING THE BORROWER OR ANY SUBSIDIARY, OR COMPLIANCE WITH THE TERMS OF
THIS AGREEMENT, AS ANY CREDIT PARTY MAY REASONABLY REQUEST.
SECTION 7.2.NOTICE OF MATERIAL EVENTS
The Borrower shall furnish to the Administrative Agent and each
Lender, prompt written notice of the following together with a statement of
a Financial Officer or other executive officer of the Borrower setting forth
the details of the event or development requiring such notice and, if
applicable, any action taken or proposed to be taken with respect thereto:
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(a) THE OCCURRENCE OF ANY DEFAULT;
(b) THE FILING OR COMMENCEMENT OF ANY ACTION, SUIT OR PROCEEDING BY OR
BEFORE ANY GOVERNMENTAL AUTHORITY AGAINST OR AFFECTING THE BORROWER OR ANY
AFFILIATE THEREOF THAT, IF ADVERSELY DETERMINED, COULD IN THE GOOD FAITH
OPINION OF THE BORROWER REASONABLY BE EXPECTED TO RESULT IN A MATERIAL
ADVERSE EFFECT;
(c) ANY LAPSE, REFUSAL TO RENEW OR EXTEND OR OTHER TERMINATION OF ANY
MATERIAL LICENSE, PERMIT, FRANCHISE OR OTHER AUTHORIZATION ISSUED TO THE
BORROWER OR ANY SUBSIDIARY BY ANY PERSON OR GOVERNMENTAL AUTHORITY, WHICH
LAPSE, REFUSAL OR TERMINATION, COULD REASONABLY BE EXPECTED TO RESULT IN A
MATERIAL ADVERSE EFFECT;
(d) THE OCCURRENCE OF ANY ERISA EVENT THAT, ALONE OR TOGETHER WITH ANY
OTHER ERISA EVENTS THAT HAVE OCCURRED, COULD REASONABLY BE EXPECTED TO RESULT
IN A MATERIAL ADVERSE EFFECT;
(e) THE OCCURRENCE OF ANY EQUITY ISSUANCE RESULTING IN NET CASH PROCEEDS;
(f) THE OCCURRENCE OF ANY INSURED DAMAGE TO ANY PORTION OF ANY COLLATERAL
OR THE COMMENCEMENT OF ANY ACTION OR PROCEEDING FOR THE TAKING OF ANY
COLLATERAL OR ANY PART THEREOF OR INTEREST THEREIN UNDER POWER OF EMINENT
DOMAIN OR BY CONDEMNATION OR SIMILAR PROCEEDING THE VALUE OF WHICH WOULD
REASONABLY BE EXPECTED TO EXCEED $250,000; OR
(g) THE OCCURRENCE OF ANY OTHER DEVELOPMENT THAT HAS OR COULD REASONABLY BE
EXPECTED TO RESULT IN, A MATERIAL ADVERSE EFFECT.
SECTION 7.3.EXISTENCE; CONDUCT OF BUSINESS
The Borrower shall, and shall cause each Subsidiary to, do or
cause to be done all things necessary to preserve, renew and keep in full
force and effect (i) its legal existence (provided that the foregoing shall
not prohibit any merger or consolidation not prohibited by Section 8.3), and
(ii) all rights, licenses, permits, privileges and franchises the absence of
which would reasonably be expected to have a Material Adverse effect.
SECTION 7.4.PAYMENT OF OBLIGATIONS
The Borrower shall, and shall cause each Subsidiary to, pay and
discharge when due, its obligations, including obligations with respect to
Taxes, which, if unpaid, could reasonably be expected to result in a Material
Adverse effect, except where (i) the validity or amount thereof is being
contested in good faith by appropriate proceedings diligently conducted, (ii)
the Borrower or such Subsidiary has set aside on its books adequate reserves
with respect thereto in accordance with GAAP and (iii) the failure to make
payment pending such contest could not reasonably be expected to result in a
Material Adverse effect.
SECTION 7.5.MAINTENANCE OF PROPERTIES
The Borrower shall, and shall cause each Subsidiary to, maintain,
protect and keep in good repair, working order and condition (ordinary
wear and tear excepted) at all times, all of its property other than
property, the loss of which would not reasonably be expected to have a
Material Adverse effect.
SECTION 7.6.INSURANCE
The Borrower shall, and shall cause each Subsidiary to, maintain
with financially sound and reputable insurance companies (i) insurance in at
least such amounts and against at least such risks (but including in any
event public liability and business interruption coverage) as are usually
insured against in the same general area by companies engaged in the same or
a similar business and (ii) such other insurance as is required pursuant to
the terms of any Security Document, and furnish to the Administrative Agent,
upon written request, full information as to the insurance carried.
SECTION 7.7.BOOKS AND RECORDS; INSPECTION RIGHTS
The Borrower shall, and shall cause each Subsidiary to, keep
proper books of record and account in which full, true and correct entries
are made of all dealings and transactions in relation to its business and
activities and, at all reasonable times upon reasonable prior notice, permit
representatives of the Credit Parties to (i) visit the offices of the
Borrower and each Subsidiary, (ii) examine such books and records and
Accountants' reports relating thereto, (iii) make copies or extracts
therefrom, (iv) discuss the
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affairs of the Borrower and each such Subsidiary with the respective
officers thereof, (v) to examine and inspect the propert of the Borrower andy
each such Subsidiary and (vi) meet and discuss the affairs of the Borrower
and each such Subsidiary with the Accountants.
SECTION 7.8.COMPLIANCE WITH LAWS
The Borrower shall, and shall cause each Subsidiary to, comply
with all laws, rules, regulations and orders of any Governmental Authority
applicable to it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result
in a Material Adverse effect.
SECTION 7.9.ADDITIONAL SUBSIDIARIES
(a) Domestic Subsidiaries. SUBJECT TO ARTICLE 5, IN THE EVENT THAT ON OR
AFTER THE ORIGINAL EFFECTIVE DATE, ANY PERSON SHALL BECOME A DOMESTIC
SUBSIDIARY, OR ANY SUBSIDIARY (OTHER THAN A SUBSIDIARY GUARANTOR) SHALL AT
ANY TIME BE A DOMESTIC SUBSIDIARY, THE BORROWER SHALL (i) NOTIFY THE
ADMINISTRATIVE AGENT IN WRITING THEREOF WITHIN THREE BUSINESS DAYS THEREOF,
(ii) CAUSE SUCH PERSON TO EXECUTE AND DELIVER TO THE ADMINISTRATIVE AGENT THE
SUBSIDIARY GUARANTEE OR, IF THE SUBSIDIARY GUARANTEE IS THEN IN EFFECT, A
GUARANTEE SUPPLEMENT (AS DEFINED THEREIN), A SECURITY AGREEMENT SUPPLEMENT
(AS DEFINED IN THE SECURITY AGREEMENT) AND TO BECOME A PARTY TO EACH OTHER
APPLICABLE SECURITY DOCUMENT IN THE MANNER PROVIDED THEREIN WITHIN FIVE
BUSINESS DAYS THEREAFTER AND TO PROMPTLY TAKE SUCH ACTIONS TO CREATE AND
PERFECT LIENS ON SUCH PERSON'S ASSETS TO SECURE SUCH PERSON'S OBLIGATIONS
UNDER THE LOAN DOCUMENTS AS THE ADMINISTRATIVE AGENT OR THE REQUIRED LENDERS
SHALL REASONABLY REQUEST, (iii) CAUSE ANY SHARES OF CAPITAL STOCK OF, OR
PROMISSORY NOTES EVIDENCING INDEBTEDNESS OF, SUCH NEW DOMESTIC SUBSIDIARY
OWNED BY OR ON BEHALF OF ANY LOAN PARTY TO BE PLEDGED PURSUANT TO THE
SECURITY AGREEMENT WITHIN FIVE BUSINESS DAYS THEREAFTER, (iv) CAUSE EACH SUCH
NEW DOMESTIC SUBSIDIARY TO DELIVER TO THE ADMINISTRATIVE AGENT ANY SHARES OF
CAPITAL STOCK OR PROMISSORY NOTES EVIDENCING INDEBTEDNESS OF ANY SUBSIDIARY
THAT ARE OWNED BY OR ON BEHALF OF SUCH NEW DOMESTIC SUBSIDIARY WITHIN FIVE
BUSINESS DAYS AFTER SUCH SUBSIDIARY IS FORMED OR ACQUIRED (EXCEPT THAT, IF
ANY SUCH SUBSIDIARY IS A FOREIGN SUBSIDIARY, SHARES OF CAPITAL STOCK OF SUCH
PERSON TO BE SO PLEDGED MAY BE LIMITED AS PROVIDED IN SUBSECTION (b) BELOW
AND, IF REQUESTED BY THE ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE OF
CAPITAL STOCK OF A FOREIGN SUBSIDIARY, THE ADMINISTRATIVE AGENT SHALL RECEIVE
THE DOCUMENTS REFERRED TO IN SUBSECTION (b)(iii) BELOW), AND (v) DELIVER TO
THE ADMINISTRATIVE AGENT A PERFECTION CERTIFICATE WITH RESPECT TO SUCH
SUBSIDIARY AND SUCH ADDITIONAL FINANCING STATEMENTS, GRANTS OF SECURITY
INTEREST AND POWERS OF ATTORNEY (AS EACH SUCH TERM IS DEFINED IN THE SECURITY
AGREEMENT) CERTIFICATES, INSTRUMENTS, OPINIONS AND OTHER DOCUMENTS AS THE
ADMINISTRATIVE AGENT MAY REQUEST.
(b) Foreign Subsidiaries. IN THE EVENT THAT ON OR AFTER THE ORIGINAL
EFFECTIVE DATE, ANY PERSON SHALL BECOME A FOREIGN SUBSIDIARY, THE BORROWER
SHALL (i) NOTIFY THE ADMINISTRATIVE AGENT IN WRITING THEREOF WITHIN THREE
BUSINESS DAYS THEREOF, (ii) CAUSE SUCH PERSON TO EXECUTE AND DELIVER TO THE
ADMINISTRATIVE AGENT AN INTERCOMPANY SUBORDINATION AGREEMENT (iii) CAUSE THE
LESSER OF (x) 65% OF THE OUTSTANDING SHARES OF CAPITAL STOCK OF SUCH FOREIGN
SUBSIDIARY OR (y) ALL OF SUCH SHARES OWNED BY THE LOAN PARTIES, TOGETHER WITH
ALL PROMISSORY NOTES EVIDENCING INDEBTEDNESS OF, SUCH FOREIGN SUBSIDIARY ARE
TO ANY LOAN PARTY TO BE PLEDGED PURSUANT TO THE SECURITY AGREEMENT WITHIN
FIVE BUSINESS DAYS THEREAFTER, PROVIDED, THAT IF REQUESTED BY THE
ADMINISTRATIVE AGENT WITH RESPECT TO THE PLEDGE OF CAPITAL STOCK OF A FOREIGN
SUBSIDIARY, DELIVER TO THE ADMINISTRATIVE AGENT AN ADDITIONAL PLEDGE
AGREEMENT, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
ADMINISTRATIVE AGENT (EACH AN "Additional Pledge Agreement") AND AN OPINION
OF COUNSEL (INCLUDING COUNSEL PRACTICING UNDER THE LAWS OF THE JURISDICTION
UNDER WHICH SUCH FOREIGN SUBSIDIARY WAS FORMED) WITH RESPECT TO THE
ENFORCEABILITY OF SUCH PLEDGE AGREEMENT OR ADDITIONAL PLEDGE AGREEMENT AND
THE VALIDITY AND PERFECTION OF THE LIEN GRANTED THEREIN AND (iv) DELIVER TO
THE ADMINISTRATIVE AGENT SUCH CERTIFICATES, INSTRUMENTS AND OPINIONS AS THE
ADMINISTRATIVE AGENT MAY REQUEST.
SECTION 7.10. ADDITIONAL COLLATERAL
Subject to Article 5, if after the Original Effective Date, the
Borrower or any other Loan Party acquires any property which would constitute
Collateral, the Borrower shall, and shall cause each
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such Loan Party to, execute any and all documents, financing statements,
agreements and instruments, Grants of Security Interests and take all such
further actions (including the filing and recording of financing statements,
fixture filings, mortgages, deeds of trust, control agreements and other
documents), that may be required under any applicable law, or which the
Administrative Agent or the Required Lenders may reasonably request, to
effectuate the Transactions or to grant, preserve, protect or perfect the
Liens created or intended to be created by the Security Documents or the
validity or priority of any such Lien, all at the expense of the Loan
Parties.
SECTION 7.11. HEDGING AGREEMENTS
Within 30 days after the Administrative Agent notifies the
Borrower that in the good faith determination of the Administrative Agent
(which determination shall be binding on the Borrower), the investments of
the Borrower and the Subsidiaries and the earnings therefrom do not
sufficiently reduce the exposure of the Borrower and the Subsidiaries to
interest rate fluctuations, the Borrower shall enter into and maintain
Hedging Agreements, in form and substance reasonably satisfactory to the
Administrative Agent, with respect to an amount equal to not less than 50% of
the sum of the Aggregate Revolving Exposure and Aggregate Acquisition Loan
Exposure at any time.
SECTION 7.12. INTENTIONALLY OMITTED
SECTION 7.13. EXISTING LETTERS OF CREDIT
The Borrower shall use its best efforts to cause Letters of
Credit issued pursuant to this Agreement to be substituted for all Existing
Letters of Credit as soon as practicable, provided that Letters of Credit
issued pursuant to this Agreement shall be substituted for all Existing
Letters of Credit no later than May 6, 1999.
ARTICLE 8. NEGATIVE COVENANTS
The Borrower agrees that, so long as any Commitment is in effect and
until the principal of, and interest on, each Loan, all Reimbursement
Obligations, all Fees and all other amounts payable under the Loan Documents
shall have been paid in full:
SECTION 8.1.INDEBTEDNESS
The Borrower shall not, and shall not permit any Subsidiary to,
create, incur, assume or suffer to exist any liability for Indebtedness,
except:
(a) INDEBTEDNESS DUE UNDER THE LOAN DOCUMENTS;
(b) INDEBTEDNESS OF THE BORROWER OR ANY SUBSIDIARY IN RESPECT OF ANY
EXISTING LETTER OF CREDIT, BUT NOT ANY EXTENSIONS, RENEWALS AND REPLACEMENTS
OF SUCH INDEBTEDNESS, AND OTHER INDEBTEDNESS OF THE BORROWER OR ANY
SUBSIDIARY AS SET FORTH ON SCHEDULE 8.1 AND EXISTING ON THE DATE HEREOF, AND
ANY EXTENSIONS, RENEWALS AND REPLACEMENTS OF SUCH OTHER INDEBTEDNESS;
(c) INDEBTEDNESS OF THE BORROWER TO ANY SUBSIDIARY OR OF SUBSIDIARIES TO
THE BORROWER OR OTHER SUBSIDIARIES, PROVIDED THAT (A) INDEBTEDNESS OF THE
BORROWER OR ANY SUBSIDIARY GUARANTOR TO A SUBSIDIARY THAT IS NOT A SUBSIDIARY
GUARANTOR SHALL BE SUBORDINATED PURSUANT TO THE INTERCOMPANY SUBORDINATION
AGREEMENT, AND (B) IMMEDIATELY AFTER GIVING EFFECT TO ANY INDEBTEDNESS OF ANY
SUBSIDIARY THAT IS NOT A SUBSIDIARY GUARANTOR TO THE BORROWER OR ANY
SUBSIDIARY GUARANTOR, THE AVAILABLE INTERCOMPANY INVESTMENT AMOUNT SHALL NOT
BE LESS THAN $1.00;
(d) GUARANTEES BY THE BORROWER OF INDEBTEDNESS OF ANY SUBSIDIARY OR
GUARANTEES BY ANY SUBSIDIARY OF INDEBTEDNESS OF THE BORROWER OR OF ANY OTHER
SUBSIDIARY, PROVIDED THAT WITH RESPECT TO GUARANTEES BY THE BORROWER OR ANY
SUBSIDIARY GUARANTOR OF INDEBTEDNESS OF A SUBSIDIARY THAT IS NOT A SUBSIDIARY
GUARANTOR, IMMEDIATELY AFTER GIVING EFFECT THERETO, THE AVAILABLE
INTERCOMPANY INVESTMENT AMOUNT SHALL NOT BE LESS THAN $1.00;
(e) (i) INDEBTEDNESS OF THE BORROWER OR ANY SUBSIDIARY (A) INCURRED TO
FINANCE THE ACQUISITION, CONSTRUCTION OR IMPROVEMENT OF ANY FIXED OR CAPITAL
ASSETS, INCLUDING CAPITAL LEASE OBLIGATIONS, (B) ASSUMED IN CONNECTION WITH
THE ACQUISITION OF ANY SUCH ASSETS OR (C) SECURED BY A LIEN ON ANY SUCH
ASSETS, (ii) INDEBTEDNESS OF ANY PERSON THAT BECOMES A SUBSIDIARY OF THE
BORROWER AFTER THE ORIGINAL
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EFFECTIVE DATE, OR (iii) EXTENSIONS, RENEWALS AND REPLACEMENTS OF ANY
INDEBTEDNESS UNDER THIS SUBSECTION 8.1(e) THAT DO NOT INCREASE THE
OUTSTANDING PRINCIPAL AMOUNT THEREOF, PROVIDED THAT (x) EXCEPT WITH RESPECT
TO INDEBTEDNESS UNDER CLAUSE (i)(A) OF THIS SECTION 8.1(e), INDEBTEDNESS
UNDER THIS SUBSECTION 8.1(e), SHALL NOT BE CREATED, ASSUMED OR INCURRED IN
CONTEMPLATION OF OR IN CONNECTION WITH ANY SUCH ACQUISITION OR SUCH PERSON
BECOMING A SUBSIDIARY, AND (y) IMMEDIATELY AFTER GIVING EFFECT THERETO, THE
AVAILABLE DEBT AMOUNT SHALL NOT BE LESS THAN $1.00;
(f) OTHER UNSECURED INDEBTEDNESS OF THE BORROWER OR ANY SUBSIDIARY,
EXCLUDING INDEBTEDNESS (A) OF SUBSIDIARIES TO THE BORROWER OR OTHER
SUBSIDIARIES OR THE BORROWER TO SUBSIDIARIES, (B) UNDER THE LOAN DOCUMENTS,
AND (C) INDEBTEDNESS SUBORDINATED TO THE INDEBTEDNESS UNDER THE LOAN
DOCUMENTS PURSUANT TO A SUBORDINATION AGREEMENT IN FORM AND SUBSTANCE
SATISFACTORY TO THE REQUIRED LENDERS, PROVIDED THAT IMMEDIATELY AFTER GIVING
EFFECT TO SUCH OTHER NON-EXCLUDED INDEBTEDNESS, THE AVAILABLE DEBT AMOUNT
SHALL NOT BE LESS THAN $1.00; AND
(g) OTHER UNSECURED INDEBTEDNESS OF THE BORROWER (THE "Refinancing Debt"),
PROVIDED THAT: (i) NO DEFAULT SHALL EXIST IMMEDIATELY BEFORE AND AFTER GIVING
EFFECT THERETO AND ALL OF THE REPRESENTATIONS AND WARRANTIES CONTAINED IN
ARTICLE 4 SHALL BE TRUE AND CORRECT AS IF THEN MADE, (ii) THE TERMS AND
CONDITIONS OF THE NOTE OR OTHER AGREEMENTS PURSUANT TO WHICH THE REFINANCING
DEBT IS ISSUED (COLLECTIVELY, THE "Refinancing Debt Documents") ARE NO LESS
FAVORABLE TAKEN AS A WHOLE TO THE BORROWER THAN THE TERMS AND CONDITIONS OF
THIS AGREEMENT, (iii) THE REFINANCING DEBT SHALL BE EITHER PARI PASSU WITH,
OR SUBORDINATED TO, THE INDEBTEDNESS UNDER THE LOAN DOCUMENTS, (iv) THE
MATURITY OF SUCH INDEBTEDNESS IS NOT EARLIER THAN ONE YEAR AFTER THE MATURITY
DATE, (v) INTEREST THEREON IS PAYABLE IN CASH AND THE RATE THEREON IS NOT IN
EXCESS OF THE RATE AVAILABLE FOR SIMILAR BORROWINGS BY SIMILAR BORROWERS AT
THE TIME OF THE INCURRENCE OF THE REFINANCING DEBT, (vi) THE NET CASH
PROCEEDS THEREOF ARE APPLIED TO THE PERMANENT REDUCTION OF THE AGGREGATE
ACQUISITION LOAN COMMITMENT AND AGGREGATE REVOLVING COMMITMENT AND THE
PREPAYMENT OF THE LOANS PURSUANT TO SECTIONS 2.3 AND 2.4, AND (vii) THE
ADMINISTRATIVE AGENT RECEIVES A COPY OF THE AGREEMENT, INDENTURE OR OTHER
DOCUMENTS GOVERNING SUCH REFINANCING DEBT, WHICH SHALL BE IN FORM AND
SUBSTANCE REASONABLY SATISFACTORY TO THE REQUIRED LENDERS.
SECTION 8.2.NEGATIVE PLEDGE
The Borrower shall not, and shall not permit any Subsidiary to,
create, incur, assume or suffer to exist any Lien upon any of its property,
whether now owned or hereafter acquired, or assign or sell any income or
revenues (including accounts receivable) or rights in respect of any thereof,
except for the following (collectively, "PERMITTED LIENS"):
(a) ANY CUSTOMARY LIEN;
(b) ANY LIEN ON ANY PROPERTY OR ASSET OF THE BORROWER OR ANY SUBSIDIARY
SECURING OBLIGATIONS IN RESPECT OF THE EXISTING LETTERS OF CREDIT AS SET
FORTH ON SCHEDULE 8.2, AND ANY OTHER LIEN ON ANY PROPERTY OR ASSET OF THE
BORROWER OR ANY SUBSIDIARY AS SET FORTH ON SUCH SCHEDULE AND EXISTING ON THE
DATE HEREOF, PROVIDED THAT, IN EACH CASE, (i) SUCH LIEN SHALL NOT APPLY TO
ANY OTHER PROPERTY OR ASSET OF THE BORROWER OR ANY SUBSIDIARY, AND (ii) SUCH
LIEN SHALL SECURE ONLY THOSE OBLIGATIONS WHICH IT SECURES AS SET FORTH ON
SUCH SCHEDULE, AND ANY EXTENSIONS, RENEWALS AND REPLACEMENTS THEREOF THAT DO
NOT INCREASE THE OUTSTANDING PRINCIPAL AMOUNT THEREOF.
(c) ANY LIEN ON ANY FIXED OR CAPITAL ASSET OF THE BORROWER OR ANY SUBSIDIARY,
PROVIDED THAT SUCH LIEN SHALL EXIST AT THE TIME OF THE ACQUISITION OF SUCH
ASSET, SHALL HAVE BEEN CREATED CONTEMPORANEOUSLY WITH SUCH ACQUISITION TO
SECURE THE PAYMENT OF THE PURCHASE PRICE THEREOF OR SHALL HAVE BEEN INCURRED
PRIOR TO THE ACQUISITION OF SUCH ASSET BY THE BORROWER OR SUCH SUBSIDIARY, OR
PRIOR TO THE TIME SUCH PERSON BECAME A SUBSIDIARY OF THE BORROWER, BUT IN ANY
EVENT SUCH LIEN SHALL NOT HAVE BEEN CREATED IN CONTEMPLATION OF OR IN
CONNECTION WITH THE ACQUISITION OF SUCH ASSET, OR THE CREATION OR ACQUISITION
OF ANY PERSON THAT, AFTER GIVING EFFECT THERETO, IS A SUBSIDIARY OF THE
BORROWER, PROVIDED THAT (i) SUCH LIEN SHALL NOT APPLY TO ANY OTHER PROPERTY
OR ASSETS OF THE BORROWER OR ANY SUBSIDIARY (OTHER THAN FIXED ASSETS WHICH
CONSTITUTE FIXTURES THEREON OR ACCESSIONS THERETO), (ii) AT THE TIME OF
ACQUISITION OF ANY SUCH FIXED ASSET, THE AGGREGATE AMOUNT REMAINING UNPAID ON
ALL LIABILITIES SECURED BY LIENS ON SUCH FIXED ASSET, WHETHER OR NOT ASSUMED
BY THE BORROWER OR A SUBSIDIARY, SHALL NOT EXCEED THE FAIR MARKET VALUE AT
THE TIME OF ACQUISITION OF SUCH FIXED ASSET (AS DETERMINED IN GOOD
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FAITH BY THE BOARD OF DIRECTORS OF THE BORROWER), (iii) AT THE TIME OF THE
INCURRENCE OF SUCH LIABILITIES AND AFTER GIVING EFFECT THERETO AND TO THE
APPLICATION OF THE PROCEEDS THEREOF, NO DEFAULT WOULD EXIST; AND (vi)
IMMEDIATELY AFTER GIVING EFFECT THERETO, THE AVAILABLE DEBT AMOUNT SHALL NOT
BE LESS THAN $1.00.
(d) LIENS ON MARGIN STOCK, IF AND TO THE EXTENT THAT THE VALUE OF THE
MARGIN STOCK OF THE BORROWER AND ITS SUBSIDIARIES EXCEEDS 25% OF
THE ASSETS (AS DETERMINED BY ANY REASONABLE METHOD) OF THE BORROWER AND ITS
SUBSIDIARIES.
SECTION 8.3.FUNDAMENTAL CHANGES
The Borrower shall not, and shall not permit Subsidiaries to,
consolidate or merge into or with any other Person, or permit any other
Person to merge into or consolidate with it or any Subsidiary, or sell,
transfer, lease or otherwise dispose of (in one transaction or in a series of
transactions) all or substantially all of its assets, or all or substantially
all of any class of the Capital Stock of any Subsidiary (in each case,
whether now owned or hereafter acquired), or liquidate or dissolve, or permit
any Subsidiaries to do any of the foregoing, except that so long as
immediately before and after giving effect thereto, no Default shall exist:
(a) THE BORROWER MAY MERGE WITH ANY SUBSIDIARY GUARANTOR AND ANY SUBSIDIARY
GUARANTOR MAY MERGE WITH THE BORROWER OR ANY OTHER SUBSIDIARY GUARANTOR,
PROVIDED THAT IN CONNECTION WITH ANY MERGER INVOLVING THE BORROWER, THE
BORROWER SHALL BE THE SURVIVOR THEREOF;
(b) ANY SUBSIDIARY WHICH IS NOT A SUBSIDIARY GUARANTOR MAY MERGE WITH ANY
OTHER SUBSIDIARY WHICH IS NOT A SUBSIDIARY GUARANTOR;
(c) ANY SUBSIDIARY WHICH IS NOT A SUBSIDIARY GUARANTOR MAY MERGE WITH ANY
SUBSIDIARY GUARANTOR, AND ANY SUBSIDIARY GUARANTOR MAY MERGE WITH ANY
SUBSIDIARY WHICH IS NOT A SUBSIDIARY GUARANTOR, PROVIDED THAT (i) IMMEDIATELY
AFTER GIVING EFFECT TO ANY SUCH MERGER IN WHICH SUCH SUBSIDIARY GUARANTOR IS
THE SURVIVOR, THE AVAILABLE INTERCOMPANY INVESTMENT AMOUNT SHALL NOT BE LESS
THAN $1.00, (ii) WITH RESPECT TO ANY MERGER IN WHICH SUCH SUBSIDIARY
GUARANTOR IS NOT THE SURVIVOR, SUCH MERGER SHALL BE TREATED AS A DISPOSITION
FOR ALL PURPOSES OF SECTIONS 2.4(c)(i) AND 8.6(d);
(d) THE BORROWER OR ANY SUBSIDIARY MAY MERGE WITH ANY PERSON THAT IS NOT A
SUBSIDIARY, PROVIDED THAT (i) IN CONNECTION WITH ANY SUCH MERGER INVOLVING
THE BORROWER, THE BORROWER SHALL BE THE SURVIVOR THEREOF, (ii) WITH RESPECT
TO ANY SUCH MERGER INVOLVING A SUBSIDIARY IN WHICH, IMMEDIATELY AFTER GIVING
EFFECT THERETO, THE SURVIVING PERSON IS NOT A SUBSIDIARY, SUCH MERGER SHALL
BE TREATED AS A DISPOSITION FOR ALL PURPOSES OF SECTIONS 2.4(c)(i) AND
8.6(d), (iii) WITH RESPECT TO ANY SUCH MERGER INVOLVING A LOAN PARTY IN
WHICH, IMMEDIATELY AFTER GIVING EFFECT THERETO, THE SURVIVING PERSON IS A
SUBSIDIARY, PROVIDED THAT (A) IF SUCH SUBSIDIARY IS A DOMESTIC SUBSIDIARY,
(1) IMMEDIATELY AFTER GIVING EFFECT TO ANY SUCH MERGER, THE AVAILABLE OTHER
INVESTMENT AMOUNT SHALL NOT BE LESS THAN $1.00, AND (2) SUCH MERGER SHALL BE
TREATED AS AN ACQUISITION FOR ALL PURPOSES OF SECTION 8.5 AND (B) IF SUCH
SUBSIDIARY IS A FOREIGN SUBSIDIARY, IMMEDIATELY AFTER GIVING EFFECT TO ANY
SUCH MERGER, THE AVAILABLE INTERCOMPANY INVESTMENT AMOUNT SHALL NOT BE LESS
THAN $1.00;
(e) ANY SUBSIDIARY MAY MAKE ANY DISPOSITION PERMITTED BY SECTIONS
8.6(c) OR (d);
(f) Intentionally Omitted;
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(f) THE BORROWER MAY MERGE INTO A NEWLY FORMED CORPORATION INCORPORATED
UNDER DELAWARE LAW, WITH SUCH DELAWARE CORPORATION AS THE SURVIVOR, PROVIDED,
HOWEVER, (i) NO DEFAULT WOULD EXIST IMMEDIATELY BEFORE OR AFTER GIVING EFFECT
THERETO, (ii) SUCH SURVIVING CORPORATION SHALL HAVE EXECUTED AND DELIVERED TO
THE ADMINISTRATIVE AGENT AN ASSUMPTION AGREEMENT IN FORM AND SUBSTANCE
SATISFACTORY TO IT PURSUANT TO WHICH SUCH SURVIVING CORPORATION ASSUMES THE
OBLIGATIONS OF THE BORROWER UNDER THE LOAN DOCUMENTS, (iii) THE SURVIVING
CORPORATION EXECUTES AND DELIVERS TO THE ADMINISTRATIVE AGENT SUCH UCC-1
FINANCING STATEMENTS AND OTHER DOCUMENTS AS THE ADMINISTRATIVE AGENT SHALL
REASONABLY REQUEST IN CONNECTION WITH THE PERFECTION OF THE SECURITY
INTERESTS GRANTED UNDER THE COLLATERAL DOCUMENTS.
SECTION 8.4.INVESTMENTS, LOANS, ADVANCES AND GUARANTEES
The Borrower shall not, and shall not permit any Subsidiary to,
purchase or otherwise acquire, hold or invest in any derivative product, or
any Capital Stock, evidences of indebtedness or other securities (including
any option, warrant or other right to acquire any of the foregoing) of any
Person, or make or permit to exist any investment or any other interest in,
any other Person, except:
(a) INVESTMENTS IN CASH EQUIVALENTS AND INVESTMENT GRADE SECURITIES;
(b) INVESTMENTS EXISTING ON THE DATE HEREOF AS SET FORTH ON SCHEDULE 8.4;
(c) INVESTMENTS BY THE BORROWER OR ANY SUBSIDIARY IN THE CAPITAL STOCK OF
OR DEBT ISSUED BY THE BORROWER AND INVESTMENTS BY ANY SUBSIDIARY IN THE
CAPITAL STOCK OF OR DEBT ISSUED BY ANY OTHER SUBSIDIARY, PROVIDED THAT (i)
THE PROCEEDS OF SUCH INVESTMENT IN A BORROWER OR A SUBSIDIARY GUARANTOR SHALL
BE RECEIVED BY THE BORROWER OR SUCH SUBSIDIARY GUARANTOR, AND (ii)
IMMEDIATELY AFTER GIVING EFFECT TO EACH INVESTMENT BY THE BORROWER OR ANY
SUBSIDIARY GUARANTOR IN THE CAPITAL STOCK OF OR DEBT ISSUED BY ANY SUBSIDIARY
THAT IS NOT A SUBSIDIARY GUARANTOR, THE AVAILABLE INTERCOMPANY INVESTMENT
AMOUNT SHALL NOT BE LESS THAN $1.00;
(d) ACQUISITIONS PERMITTED BY SECTION 8.5;
(e) PURCHASES OR OTHER ACQUISITIONS (INCLUDING THROUGH A DIVIDEND OR
OTHERWISE AND WHETHER IN A SINGLE TRANSACTION OR IN A SERIES OF RELATED
TRANSACTIONS) (i) BY THE BORROWER OR ANY SUBSIDIARY OF ANY PROPERTY OR ASSETS
FROM ANY OTHER SUBSIDIARY OR (ii) BY ANY SUBSIDIARY OF ANY PROPERTY OR ASSETS
FROM THE BORROWER OR ANY OTHER SUBSIDIARY, PROVIDED THAT IMMEDIATELY AFTER
GIVING EFFECT TO ANY SUCH PURCHASE OR ACQUISITION BETWEEN A LOAN PARTY, AS
PURCHASER, AND A SUBSIDIARY WHICH IS NOT A SUBSIDIARY GUARANTOR, AS SELLER,
THE AVAILABLE INTERCOMPANY INVESTMENT AMOUNT SHALL NOT BE LESS THAN $1.00;
AND
(f) GUARANTEES PERMITTED BY SECTION 8.1(d) AND HEDGING AGREEMENTS PERMITTED
BY SECTION 8.8.
Notwithstanding anything in this Agreement to the contrary, all
customer deposits shall be invested in cash, Cash Equivalents and Investment
Grade Securities.
SECTION 8.5.ACQUISITIONS
The Borrower shall not, and shall not permit any Subsidiary to,
at any time, make any purchase or other acquisition (including by way of a
dividend received or otherwise and whether in a single transaction or in a
series of related transactions) of (i) any assets of any other Person that,
taken together, constitute a business unit, (ii) any Capital Stock of any
other Person if, immediately thereafter, such other Person would be a
Subsidiary of the Borrower (iii) any assets of any other Person otherwise not
in the ordinary course of business, or (iv) enter into any binding agreement
to perform any transaction described in clauses (i), (ii) or (iii) above
which is not contingent on obtaining the consent of the Required Lenders
(each transaction described in clauses (i), (ii), (iii) and (iv) above being
referred to as an "ACQUISITION"), except that the Borrower or any Subsidiary
may make Acquisitions, provided that:
(a) INTENTIONALLY OMITTED,
(b) NO DEFAULT SHALL OR WOULD EXIST IMMEDIATELY BEFORE OR AFTER GIVING
EFFECT TO EACH SUCH ACQUISITION, ALL OF THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN ARTICLE 4 SHALL BE TRUE AND CORRECT AS IF THEN MADE AND, IF SUCH
ACQUISITION IS MADE ON OR BEFORE DECEMBER 31, 1999, THE PRO-FORMA LEVERAGE
RATIO SHALL NOT EXCEED 3.10:1.00 (ON A PRO FORMA BASIS GIVING EFFECT TO SUCH
ACQUISITION, ANY INDEBTEDNESS INCURRED IN CONNECTION THEREWITH, AND TAKING
INTO ACCOUNT THE EARNINGS BEFORE INTEREST,
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TAXES, DEPRECIATION AND AMORTIZATION (CALCULATED IN THE MANNER OF THE
CALCULATION OF EBITDA) OF THE PERSON OR BUSINESS ACQUIRED AND EACH OTHER
PERSON OR BUSINESS ACQUIRED DURING THE IMMEDIATELY PRECEDING FOUR FISCAL
QUARTERS), AND THE BORROWER SHALL HAVE DELIVERED TO THE ADMINISTRATIVE AGENT
AND EACH LENDER A CERTIFICATE OF A FINANCIAL OFFICER AS TO THE FOREGOING
MATTERS (CONTAINING CALCULATIONS ON A PRO-FORMA BASIS OF THE FINANCIAL
COVENANTS CONTAINED IN SECTION 8.14 IN REASONABLE DETAIL),
(c) IMMEDIATELY AFTER GIVING EFFECT THERETO, THE AVAILABLE OTHER INVESTMENT
AMOUNT SHALL NOT BE LESS THAN $1.00,
(d) WITH RESPECT TO EACH ACQUISITION MADE IN ANY PERIOD OF FOUR CONSECUTIVE
FISCAL QUARTERS, THE SUM (THE "Acquisition Consideration") OF (i) THE CASH
CONSIDERATION PAID OR AGREED TO BE PAID IN CONNECTION WITH SUCH ACQUISITION
PLUS (ii) THE FAIR MARKET VALUE OF ALL NON-CASH CONSIDERATION PAID OR AGREED
TO BE PAID IN CONNECTION WITH SUCH ACQUISITION PLUS (iii) AN AMOUNT EQUAL TO
THE PRINCIPAL OR STATED AMOUNT OF ALL LIABILITIES ASSUMED OR INCURRED BY SUCH
PERSON OR ANY LOAN PARTY IN CONNECTION THEREWITH PLUS (iv) THE ACQUISITION
CONSIDERATION PAID IN RESPECT OF EACH OTHER SUCH ACQUISITION MADE DURING SUCH
PERIOD SHALL NOT EXCEED $25,000,000,
(e) WITH RESPECT TO EACH ACQUISITION IN RESPECT OF WHICH THE ACQUISITION
CONSIDERATION EXCEEDS $5,000,000, THE BORROWER SHALL HAVE DELIVERED TO THE
ADMINISTRATIVE AGENT AND EACH LENDER WRITTEN NOTICE THEREOF NOT LESS THAN TEN
BUSINESS DAYS PRIOR TO THE CONSUMMATION OF SUCH ACQUISITION,
(f) INTENTIONALLY OMITTED,
(g) THE BORROWER SHALL HAVE DELIVERED TO THE ADMINISTRATIVE AGENT AND EACH
LENDER, A COMPLIANCE CERTIFICATE SIGNED BY A FINANCIAL OFFICER OF THE
BORROWER, IN ALL RESPECTS REASONABLY SATISFACTORY TO THE ADMINISTRATIVE
AGENT, DATED THE DATE OF THE CONSUMMATION OF SUCH ACQUISITION AND
(i) STATING THAT THE BORROWER IS IN COMPLIANCE WITH ALL COVENANTS ON A
PRO-FORMA BASIS AFTER GIVING EFFECT TO SUCH ACQUISITION, AND (ii) ATTACHING A
COPY OF THE PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS OF THE BORROWER
UTILIZED FOR PURPOSES OF PREPARING SUCH COMPLIANCE CERTIFICATE, WHICH
PRO-FORMA CONSOLIDATED FINANCIAL STATEMENTS PRESENT THE BORROWER'S GOOD FAITH
ESTIMATE OF ITS PRO-FORMA CONSOLIDATED FINANCIAL CONDITION AT THE DATE
THEREOF, AFTER GIVING EFFECT TO SUCH ACQUISITION,
(h) THE BORROWER SHALL HAVE COMPLIED WITH THE PROVISIONS OF SECTIONS 7.9
AND 7.10 (INCLUDING THE DELIVERY OF ADDITIONAL SECURITY DOCUMENTS, LEGAL
OPINIONS, CERTIFICATES, ETC.), AND
(i) THE BORROWER SHALL HAVE DELIVERED TO THE ADMINISTRATIVE AGENT SUCH
OTHER INFORMATION, DOCUMENTS AND OTHER ITEMS AS THE ADMINISTRATIVE AGENT
SHALL HAVE REASONABLY REQUESTED.
SECTION 8.6. DISPOSITIONS
The Borrower shall not, and shall not permit any Subsidiary to,
sell, assign, lease, transfer or otherwise dispose of any property or
assets, except:
(a) (i) SALES OF INVENTORY AND UNCONSOLIDATED INVESTMENTS IN THE ORDINARY
COURSE OF BUSINESS, (ii) SALES, ASSIGNMENTS, TRANSFERS OR OTHER DISPOSITIONS
OF ANY PROPERTY OR ASSETS THAT, IN THE REASONABLE OPINION OF THE BORROWER OR
SUCH SUBSIDIARY, AS THE CASE MAY BE, ARE OBSOLETE OR NO LONGER USEFUL IN THE
CONDUCT OF ITS BUSINESS AND (iii) INVESTMENTS IN CASH EQUIVALENTS, AND
INVESTMENT GRADE SECURITIES;
(b) SALES OF MARGIN STOCK, IF AND TO THE EXTENT THAT THE VALUE OF THE
MARGIN STOCK OF THE BORROWER AND THE SUBSIDIARIES EXCEEDS 25% OF THE VALUE OF
THE ASSETS (AS DETERMINED BY ANY REASONABLE METHOD) OF THE BORROWER AND THE
SUBSIDIARIES;
(c) SALES, ASSIGNMENTS, LEASES, TRANSFERS OR OTHER DISPOSITIONS OF ANY
PROPERTY OR ASSETS BY THE BORROWER TO ANY SUBSIDIARY AND BY ANY SUBSIDIARY TO
THE BORROWER OR ANY OTHER SUCH SUBSIDIARY, PROVIDED THAT IMMEDIATELY AFTER
GIVING EFFECT TO ANY SUCH TRANSACTION BETWEEN A LOAN PARTY AND A SUBSIDIARY
WHICH IS NOT A SUBSIDIARY GUARANTOR, THE AVAILABLE INTERCOMPANY INVESTMENT
AMOUNT SHALL NOT BE LESS THAN $1.00; AND
(d) SALES, ASSIGNMENTS, LEASES, TRANSFERS OR OTHER DISPOSITIONS NOT
OTHERWISE DESCRIBED IN THIS SECTION 8.6 (EACH A "Disposition"), PROVIDED THAT
(i) IMMEDIATELY BEFORE AND AFTER GIVING EFFECT TO EACH SUCH DISPOSITION, NO
DEFAULT SHALL OR WOULD EXIST, (ii) 75% OF THE TOTAL CONSIDERATION RECEIVED OR
TO BE RECEIVED THEREFOR BY THE BORROWER OR THE SUBSIDIARIES SHALL BE PAYABLE
IN CASH OR CASH EQUIVALENTS ON OR BEFORE THE CLOSING THEREOF AND SHALL NOT BE
LESS THAN THE FAIR MARKET VALUE THEREOF AS REASONABLY
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<PAGE> 52
DETERMINED BY THE MANAGING PERSON OF THE BORROWER OR SUCH SUBSIDIARY, (iii)
THE ADMINISTRATIVE AGENT AND THE LENDERS SHALL HAVE RECEIVED (A) WRITTEN
NOTICE THEREOF NOT LESS THAN TEN BUSINESS DAYS PRIOR TO EACH SUCH
DISPOSITION, AND (B) A CERTIFICATE IN RESPECT THEREOF SIGNED BY A DULY
AUTHORIZED OFFICER OF THE BORROWER IDENTIFYING THE PROPERTY OR OTHER ASSET
SUBJECT TO SUCH DISPOSITION, AND CERTIFYING THAT THE CONSIDERATION RECEIVED
OR TO BE RECEIVED BY THE BORROWER OR SUCH SUBSIDIARY FOR SUCH PROPERTY HAS
BEEN DETERMINED BY THE MANAGING PERSON THEREOF TO BE NOT LESS THAN THE FAIR
MARKET VALUE OF SUCH PROPERTY AND (z) THE TOTAL CONSIDERATION TO BE PAID IN
RESPECT OF SUCH DISPOSITION, TOGETHER WITH ESTIMATES OF ITEMS TO BE DEDUCTED
THEREFROM IN ARRIVING AT THE NET CASH PROCEEDS THEREOF.
SECTION 8.7.RESTRICTED PAYMENTS
The Borrower shall not, and shall not permit any Subsidiaries to
declare, pay or make any dividend or other distribution, direct or indirect,
on account of any Capital Stock issued by such Person now or hereafter
outstanding (other than a dividend payable solely in shares or other units of
such Capital Stock to the holders of such shares or other units) or any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition, direct or indirect, of any shares of any class of its Capital
Stock now or hereafter outstanding (collectively, "RESTRICTED PAYMENTS"),
except:
(a) RESTRICTED PAYMENTS MADE BY THE BORROWER TO ANY SUBSIDIARY OR MADE BY
ANY SUBSIDIARY TO THE BORROWER OR TO ANY OTHER SUBSIDIARY, PROVIDED THAT (i)
IMMEDIATELY BEFORE AND AFTER GIVING EFFECT THERETO, NO DEFAULT SHALL OR WOULD
EXIST, AND (ii) IN THE CASE OF A RESTRICTED PAYMENT MADE BY A LOAN PARTY TO A
SUBSIDIARY WHICH IS NOT A SUBSIDIARY GUARANTOR, IMMEDIATELY AFTER GIVING
EFFECT THERETO, THE AVAILABLE INTERCOMPANY INVESTMENT AMOUNT SHALL NOT BE
LESS THAN $1.00; AND
(b) RESTRICTED PAYMENTS MADE BY THE BORROWER PRIOR TO MAY 23, 2000 IN
CONNECTION WITH THE REDEMPTION, RETIREMENT, SINKING FUND OR SIMILAR PAYMENT,
PURCHASE OR OTHER ACQUISITION OF SHARES OF COMMON STOCK, PROVIDED THAT (i) NO
DEFAULT WOULD EXIST IMMEDIATELY BEFORE AND AFTER GIVING EFFECT THERETO AND
(ii) THE AGGREGATE AMOUNT OF ALL SUCH RESTRICTED PAYMENTS SHALL NOT EXCEED
$3,000,000.
SECTION 8.8.HEDGING AGREEMENTS
The Borrower shall not, and shall not permit any Subsidiary to,
enter into any Hedging Agreements, other than Hedging Agreements entered
into in the ordinary course of business to hedge or mitigate risks to which
the Borrower or any Subsidiary is exposed in the conduct of its business or
the management of its liabilities.
SECTION 8.9.SALE AND LEASE-BACK TRANSACTIONS
The Borrower shall not, and shall not permit any Subsidiary to,
enter into an arrangement with any Person or group of Persons providing for
the renting or leasing by the Borrower or any Subsidiary of any property or
asset which has been or is to be sold or transferred by the Borrower or any
Subsidiary to any such Person.
SECTION 8.10. LINES OF BUSINESS
The Borrower shall not, and shall not permit any Subsidiary to,
engage in any business other than the Line of Business.
SECTION 8.11. TRANSACTIONS WITH AFFILIATES
The Borrower shall not, and shall not permit any Subsidiary to,
become a party to any transaction with an Affiliate, or permit any
Subsidiary so to do, unless the Borrower's or such Subsidiary's Managing
Person shall have determined that the terms and conditions relating thereto
are as favorable to the Borrower or such Subsidiary as those which would be
obtainable at the time in a comparable arms-length transaction with a Person
other than an Affiliate.
SECTION 8.12. USE OF PROCEEDS
The Borrower shall not use the proceeds of the Loans for any
purpose other than as follows: (i) the Revolving Loans may be used for
general corporate purposes (other than to finance
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<PAGE> 53
Permitted Acquisitions) that are consistent with the provisions hereof,
including the payment of Fees hereunder, and (ii) the Acquisition Loans may
be used solely to finance Permitted Acquisitions.
SECTION 8.13. RESTRICTIVE AGREEMENTS
The Borrower shall not, and shall not permit any Subsidiary to,
directly or indirectly, enter into, incur or permit to exist any agreement
or other arrangement that prohibits, restricts or imposes any condition upon
the ability of any such Subsidiary to pay dividends or other distributions
with respect to any shares of its Capital Stock or to make or repay loans or
advances to the Borrower or any other Subsidiary of the Borrower or to
Guarantee Indebtedness of the Borrower or any other Subsidiary of the
Borrower, provided that the foregoing shall not apply to restrictions and
conditions imposed by applicable law or by this Agreement.
SECTION 8.14. FINANCIAL COVENANTS
(a) Leverage Ratio. THE BORROWER SHALL NOT PERMIT THE LEVERAGE RATIO TO AT
ANY TIME EXCEED THE RATIO SET FORTH BELOW WITH RESPECT TO THE APPLICABLE PERIOD
SET FORTH BELOW:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Period Ratio
- - -----------------------------------------------------------------------------------------------------------------
<S> <C>
First Restatement Date through December 31, 1999 3.25:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 3.00:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2001 through December 31, 2001 2.75:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2002 and thereafter 2.50:1.00
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
(b) Interest Coverage Ratio. THE BORROWER SHALL NOT PERMIT THE INTEREST
COVERAGE RATIO AS OF THE LAST DAY OF ANY FISCAL QUARTER TO BE LESS THAN THE
RATIO SET FORTH BELOW WITH RESPECT TO THE APPLICABLE PERIOD SET FORTH BELOW:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Period Ratio
- - -----------------------------------------------------------------------------------------------------------------
<S> <C>
First Restatement Date through December 31, 1999 3.50:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 4.00:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2001 and thereafter 5.00:1.00
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
(c) Fixed Charge Coverage Ratio. THE BORROWER SHALL NOT PERMIT THE FIXED
CHARGE COVERAGE RATIO AS OF THE LAST DAY OF ANY FISCAL QUARTER TO BE LESS THAN
THE RATIO SET FORTH BELOW WITH RESPECT TO THE APPLICABLE PERIOD SET FORTH BELOW:
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------
Period Ratio
- - -----------------------------------------------------------------------------------------------------------------
<S> <C>
- - -----------------------------------------------------------------------------------------------------------------
First Restatement Date through December 31, 1999 1.30:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2000 through December 31, 2000 1.40:1.00
- - -----------------------------------------------------------------------------------------------------------------
January 1, 2001 and thereafter 1.50:1.00
- - -----------------------------------------------------------------------------------------------------------------
</TABLE>
- 52 -
<PAGE> 54
(d) Minimum Net Worth. THE BORROWER SHALL NOT PERMIT NET WORTH TO BE LESS
THAN:
(i) as of each of December 31, 1998, March 31, 1999, June 30, 1999 and
September 30, 1999, an amount equal to $44,000,000,
(ii) as of each of December 31, 1999, March 31, 2000, June 30, 2000 and
September 30, 2000, an amount equal to $44,000,000 plus the sum for the
fiscal year ended December 31, 1999, of 75% of the net profit (but not net
loss) of the Borrower and the Subsidiaries on a consolidated basis for such
fiscal year,
(iii) as of each of December 31, 2000, March 31, 2001, June 30, 2001 and
September 30, 2001, an amount equal to the amount calculated under clause
(ii) above plus the sum for the fiscal year ended December 31, 2000, of 75%
of the net profit (but not net loss) of the Borrower and the Subsidiaries on
a consolidated basis for such fiscal year,
(iv) as of each of December 31, 2001, March 31, 2002, June 30, 2002 and
September 30, 2002, an amount equal to the amount calculated under clause
(iii) above plus the sum for the fiscal year ended December 31, 2001, of 75%
of the net profit (but not net loss) of the Borrower and the Subsidiaries on
a consolidated basis for such fiscal year,
(v) as of each of December 31, 2002, March 31, 2003, June 30, 2003 and
September 30, 2003, an amount equal to the amount calculated under clause
(iv) above plus the sum for the fiscal year ended December 31, 2003, of 75%
of the net profit (but not net loss) of the Borrower and the Subsidiaries on
a consolidated basis for such fiscal year,
(vi) as of each of December 31, 2003, March 31, 2004, June 30, 2004 and
September 30, 2004, an amount equal to the amount calculated under clause (v)
above.
(e) Capital Expenditures. THE BORROWER SHALL NOT MAKE ANY CAPITAL
EXPENDITURES (OR INCUR ANY OBLIGATION TO MAKE ANY CAPITAL EXPENDITURE) OR
PERMIT ANY SUBSIDIARY TO DO SO, IN ANY FISCAL YEAR IN AN AGGREGATE AMOUNT IN
EXCESS OF THE AMOUNTS SET FORTH BELOW FOR SUCH FISCAL YEAR (TO BE CALCULATED
ON A NONCUMULATIVE BASIS SO THAT AMOUNTS NOT EXPENDED IN A FISCAL YEAR MAY
NOT BE CARRIED OVER AND EXPENDED IN ANY SUBSEQUENT FISCAL YEAR):
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
Fiscal Year Ending Amount
<S> <C>
- - --------------------------------------------------------------------------------
1998 $4,300,000
- - --------------------------------------------------------------------------------
1999 $4,500,000
- - --------------------------------------------------------------------------------
2000 $4,700,000
- - --------------------------------------------------------------------------------
2001 $4,900,000
- - --------------------------------------------------------------------------------
2002 $5,100,000
- - --------------------------------------------------------------------------------
2003 and thereafter $5,300,000
- - --------------------------------------------------------------------------------
</TABLE>
ARTICLE 9. DEFAULTS
SECTION 9.1.EVENTS OF DEFAULT
The following shall each constitute an "EVENT OF DEFAULT"
hereunder:
(a) THE FAILURE OF THE BORROWER TO MAKE (i) ANY PAYMENT OF PRINCIPAL ON ANY
LOAN, OR IN RESPECT OF ANY REIMBURSEMENT OBLIGATION, WHEN DUE AND PAYABLE, OR
(ii) ANY DEPOSIT INTO THE CASH COLLATERAL ACCOUNT WHEN REQUIRED HEREBY; OR
(b) THE FAILURE OF THE BORROWER TO MAKE ANY PAYMENT OF INTEREST, FEES,
EXPENSES OR OTHER AMOUNTS PAYABLE UNDER ANY LOAN DOCUMENT OR OTHERWISE TO THE
ADMINISTRATIVE AGENT WITH RESPECT TO THE LOAN FACILITIES ESTABLISHED
HEREUNDER WITHIN THREE BUSINESS DAYS OF THE DATE WHEN DUE AND PAYABLE; OR
(c) THE FAILURE OF THE BORROWER TO OBSERVE OR PERFORM ANY COVENANT OR
AGREEMENT CONTAINED IN SECTION 7.9, 7.10, 7.11 OR ARTICLE 8; OR
(d) THE FAILURE OF ANY LOAN PARTY TO OBSERVE OR PERFORM ANY OTHER TERM,
COVENANT, OR AGREEMENT CONTAINED IN ANY LOAN DOCUMENT TO WHICH IT IS A PARTY
AND SUCH FAILURE SHALL HAVE CONTINUED UNREMEDIED FOR A PERIOD OF 30 DAYS
AFTER SUCH LOAN PARTY SHALL HAVE OBTAINED KNOWLEDGE THEREOF; OR
(e) ANY REPRESENTATION OR WARRANTY MADE BY ANY LOAN PARTY (OR BY AN OFFICER
THEREOF ON ITS BEHALF) IN ANY LOAN DOCUMENT OR IN ANY CERTIFICATE, REPORT,
OPINION (OTHER THAN AN OPINION OF COUNSEL) OR OTHER DOCUMENT DELIVERED OR TO
BE DELIVERED PURSUANT THERETO, SHALL PROVE TO HAVE BEEN
- 53 -
<PAGE> 55
INCORRECT OR MISLEADING (WHETHER BECAUSE OF MISSTATEMENT OR OMISSION) IN ANY
MATERIAL RESPECT WHEN MADE; OR
(f) THE FAILURE OF ANY LOAN PARTY TO MAKE ANY PAYMENT (WHETHER OF PRINCIPAL
OR INTEREST AND REGARDLESS OF AMOUNT) IN RESPECT OF MATERIAL LIABILITIES WHEN
DUE OR WITHIN ANY GRACE PERIOD FOR THE PAYMENT THEREOF; OR
(g) ANY EVENT OR CONDITION OCCURS THAT RESULTS IN ANY MATERIAL LIABILITY
BECOMING OR BEING DECLARED TO BE DUE AND PAYABLE PRIOR TO THE SCHEDULED
MATURITY THEREOF, OR THAT ENABLES OR PERMITS (WITH OR WITHOUT THE GIVING OF
NOTICE, THE LAPSE OF TIME OR BOTH) THE HOLDER OR HOLDERS OF ANY MATERIAL
LIABILITY OR ANY TRUSTEE OR AGENT ON ITS OR THEIR BEHALF TO CAUSE ANY
MATERIAL LIABILITY TO BE DUE AND PAYABLE, OR TO REQUIRE THE PREPAYMENT,
REPURCHASE, REDEMPTION OR DEFEASANCE THEREOF, IN EACH CASE PRIOR TO THE
SCHEDULED MATURITY THEREOF (IN EACH CASE AFTER GIVING EFFECT TO ANY
APPLICABLE GRACE PERIOD); OR
(h) ANY LOAN PARTY SHALL (i) SUSPEND OR DISCONTINUE ITS BUSINESS (EXCEPT TO
THE EXTENT PERMITTED BY SECTION 7.3), (ii) MAKE AN ASSIGNMENT FOR THE BENEFIT
OF CREDITORS, (iii) GENERALLY NOT BE PAYING ITS DEBTS AS SUCH DEBTS BECOME
DUE, (IV) ADMIT IN WRITING ITS INABILITY TO PAY ITS DEBTS AS THEY BECOME DUE,
(v) FILE A VOLUNTARY PETITION IN BANKRUPTCY, (vi) BECOME INSOLVENT, (vii)
FILE ANY PETITION OR ANSWER SEEKING FOR ITSELF ANY REORGANIZATION,
ARRANGEMENT, COMPOSITION, READJUSTMENT OF DEBT, LIQUIDATION OR DISSOLUTION OR
SIMILAR RELIEF UNDER ANY PRESENT OR FUTURE STATUTE, LAW OR REGULATION OF ANY
JURISDICTION, (viii) PETITION OR APPLY TO ANY TRIBUNAL FOR ANY RECEIVER,
CUSTODIAN OR ANY TRUSTEE FOR ANY SUBSTANTIAL PART OF ITS PROPERTY, (ix) BE
THE SUBJECT OF ANY SUCH PROCEEDING FILED AGAINST IT WHICH REMAINS UNDISMISSED
FOR A PERIOD OF 60 DAYS, (x) FILE ANY ANSWER ADMITTING OR NOT CONTESTING THE
MATERIAL ALLEGATIONS OF ANY SUCH PETITION FILED AGAINST IT OR ANY ORDER,
JUDGMENT OR DECREE APPROVING SUCH PETITION IN ANY SUCH PROCEEDING, (xi) SEEK,
APPROVE, CONSENT TO, OR ACQUIESCE IN ANY SUCH PROCEEDING, OR IN THE
APPOINTMENT OF ANY TRUSTEE, RECEIVER, SEQUESTRATOR, CUSTODIAN, LIQUIDATOR, OR
FISCAL AGENT FOR IT, OR ANY SUBSTANTIAL PART OF ITS PROPERTY, OR AN ORDER IS
ENTERED APPOINTING ANY SUCH TRUSTEE, RECEIVER, CUSTODIAN, LIQUIDATOR OR
FISCAL AGENT AND SUCH ORDER REMAINS IN EFFECT FOR 60 DAYS, OR (xii) TAKE ANY
FORMAL ACTION FOR THE PURPOSE OF EFFECTING ANY OF THE FOREGOING OR LOOKING TO
THE LIQUIDATION OR DISSOLUTION OF THE BORROWER, SUCH SUBSIDIARY OR SUCH OTHER
LOAN PARTY; OR
(i) AN (i) ORDER OR DECREE IS ENTERED BY A COURT HAVING JURISDICTION (A)
ADJUDGING ANY LOAN PARTY BANKRUPT OR INSOLVENT, (B) APPROVING AS PROPERLY
FILED A PETITION SEEKING REORGANIZATION, LIQUIDATION, ARRANGEMENT, ADJUSTMENT
OR COMPOSITION OF OR IN RESPECT OF ANY LOAN PARTY UNDER THE BANKRUPTCY OR
INSOLVENCY LAWS OF ANY JURISDICTION, (C) APPOINTING A RECEIVER, LIQUIDATOR,
ASSIGNEE, TRUSTEE, CUSTODIAN, SEQUESTRATOR (OR OTHER SIMILAR OFFICIAL) OF ANY
LOAN PARTY OR OF ANY SUBSTANTIAL PART OF THE PROPERTY OF ANY THEREOF, OR (D)
ORDERING THE WINDING UP OR LIQUIDATION OF THE AFFAIRS OF ANY LOAN PARTY, AND
ANY SUCH DECREE OR ORDER CONTINUES UNSTAYED AND IN EFFECT FOR A PERIOD OF 60
DAYS OR (ii) ORDER FOR RELIEF IS ENTERED UNDER THE BANKRUPTCY OR INSOLVENCY
LAWS OF ANY JURISDICTION OR ANY OTHER; OR
(j) JUDGMENTS OR DECREES AGAINST ANY LOAN PARTY AGGREGATING IN EXCESS OF
$250,000 (UNLESS ADEQUATELY INSURED BY A SOLVENT UNAFFILIATED INSURANCE
COMPANY WHICH HAS ACKNOWLEDGED COVERAGE), SHALL REMAIN UNPAID, UNSTAYED ON
APPEAL, UNDISCHARGED, UNBONDED OR UNDISMISSED FOR A PERIOD OF 60 CONSECUTIVE
DAYS; OR
(k) ANY OF THIS AGREEMENT, ANY NOTE, OR ANY SECURITY DOCUMENT SHALL CEASE,
FOR ANY REASON, TO BE IN FULL FORCE AND EFFECT, OR ANY LOAN PARTY SHALL SO
ASSERT IN WRITING OR SHALL DISAVOW ANY OF ITS OBLIGATIONS UNDER ANY OF THIS
AGREEMENT, ANY NOTE, OR ANY SECURITY DOCUMENT; OR
(l) ANY LIEN PURPORTED TO BE CREATED UNDER ANY SECURITY DOCUMENT SHALL
CEASE TO BE, OR SHALL BE ASSERTED BY ANY LOAN PARTY NOT TO BE, A VALID AND
PERFECTED LIEN ON, AND SECURITY INTEREST IN, ANY COLLATERAL, WITH THE
PRIORITY REQUIRED BY THE APPLICABLE SECURITY DOCUMENT, EXCEPT AS A RESULT OF
A DISPOSITION THEREOF TO THE EXTENT PERMITTED UNDER THE LOAN DOCUMENTS; OR
(m) AN ERISA EVENT SHALL HAVE OCCURRED THAT, IN THE OPINION OF THE REQUIRED
LENDERS, WHEN TAKEN TOGETHER WITH ALL OTHER ERISA EVENTS THAT HAVE OCCURRED,
COULD REASONABLY BE EXPECTED TO RESULT IN LIABILITY OF THE BORROWER AND ITS
SUBSIDIARIES IN AN AGGREGATE AMOUNT EXCEEDING (i) IN ANY YEAR, $250,000, OR
(ii) FOR ALL PERIODS, $250,000; OR
(n) THE OCCURRENCE OF A CHANGE OF CONTROL.
- 54 -
<PAGE> 56
SECTION 9.2.CONTRACT REMEDIES
(a) UPON THE OCCURRENCE OF AN EVENT OF DEFAULT OR AT ANY TIME THEREAFTER
DURING THE CONTINUANCE THEREOF,
(i) in the case of an Event of Default specified in Section 9.1(h) or 9.1
(i), without declaration or notice to the Borrower, all of the Commitments
shall immediately and automatically terminate, and the Loans, all accrued and
unpaid interest thereon and all other amounts owing under the Loan Documents
shall immediately become due and payable, and
(ii) in all other cases, upon the direction of the Required Lenders, the
Administrative Agent shall, by notice to the Borrower, declare all of the
Commitments to be terminated forthwith, whereupon such Commitments shall
immediately terminate, and/or declare the Loans, all accrued and unpaid
interest thereon and all other amounts owing under the Loan Documents to be
due and payable forthwith, whereupon the same shall immediately become due
and payable.
In the event that the Loans, all accrued and unpaid interest thereon and all
other amounts owing under the Loan Documents shall have been declared due and
payable pursuant to the provisions of this Section, the Administrative Agent
(i) upon the direction of the Required Lenders, shall proceed to enforce the
rights of the holders of the Notes and the Reimbursement Obligations by suit
in equity, action at law and/or other appropriate proceedings, whether for
payment or the specific performance of any covenant or agreement contained in
the Loan Documents and (ii) may exercise any and all rights and remedies
provided to the Administrative Agent by the Loan Documents. To the extent
permitted by law, except as otherwise expressly provided in the Loan
Documents, the Borrower expressly waives presentment, demand, protest and all
other notices of any kind in connection with the Loan Documents are hereby
expressly waived. To the extent permitted by law, the Borrower hereby further
expressly waives and covenants not to assert any appraisement, valuation,
stay, extension, redemption or similar laws, now or at any time hereafter in
force which might delay, prevent or otherwise impede the performance or
enforcement of any Loan Document.
(b) IN THE EVENT THAT THE COMMITMENTS SHALL HAVE TERMINATED OR THE LOANS,
ALL ACCRUED AND UNPAID INTEREST THEREON AND ALL OTHER AMOUNTS OWING UNDER THE
LOAN DOCUMENTS SHALL HAVE BECOME DUE AND PAYABLE PURSUANT TO THE PROVISIONS
OF THIS ARTICLE 9, ANY FUNDS RECEIVED BY ANY CREDIT PARTY FROM OR ON BEHALF
OF THE BORROWER (EXCEPT FUNDS RECEIVED BY ANY LENDER AS A RESULT OF A
PURCHASE FROM ANY OTHER LENDER PURSUANT TO SECTION 2.6(c)) SHALL BE REMITTED
TO, AND APPLIED BY, THE ADMINISTRATIVE AGENT IN THE FOLLOWING MANNER AND
ORDER:
(i) first, to the payment of interest on, and then the principal portion
of, any Loans which the Administrative Agent may have advanced on behalf of
any Lender for which the Administrative Agent has not then been reimbursed by
such Lender or any Loan Party,
(ii) second, to reimburse the Administrative Agent, the Issuer and the
Lenders, in that order, for any expenses due from the Borrower pursuant to
the provisions of Section 11.4,
(iii) third, to the payment of interest on, and then the principal portion
of, the Reimbursement Obligations, (iv) fourth, to the payment of the Fees,
pro rata according to the Fees due and owing to the Credit Parties,
(v) fifth, to the payment of any other fees, expenses or other amounts
(other than the principal of and interest on the Loans) payable by the Loan
Parties to the Credit Parties under the Loan Documents,
(vi) sixth, to the payment, pro rata according to the Total Percentage of
each Lender, of interest due on the Loans,
(vii) seventh, to the payment to the Lenders of, and on a pro rata basis in
accordance with, the unpaid principal amount of the Loans and each amount
then due and payable under each Secured Hedging Agreement, and
(viii)eighth, any remaining funds shall be paid to the Borrower or as a
court of competent jurisdiction shall direct.
ARTICLE 10. THE ADMINISTRATIVE AGENT
SECTION 10.1. APPOINTMENT
Each of the Lenders hereby irrevocably appoints the
Administrative Agent as its agent and authorizes the Administrative Agent to
take such actions on its behalf and to exercise such powers as
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<PAGE> 57
are delegated to the Administrative Agent by the terms hereof, together with
such actions and powers as are reasonably incidental thereto.
SECTION 10.2. INDIVIDUAL CAPACITY
The Person serving as the Administrative Agent hereunder shall
have the same rights and powers in its capacity as a Lender as any other
Lender and may exercise the same as though it were not the Administrative
Agent, and such Person and its Affiliates may accept deposits from, lend
money to and generally engage in any kind of business with the Borrower, any
Subsidiary, or any Affiliate of the Borrower as if it were not the
Administrative Agent hereunder.
SECTION 10.3. EXCULPATORY PROVISIONS
The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of
the foregoing, (1) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (2) the Administrative Agent shall not have any
duty to take any discretionary action or exercise any discretionary powers,
except discretionary rights and powers expressly contemplated hereby that the
Administrative Agent is required to exercise in writing by the Required
Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 11.1), and (3)
except as expressly set forth herein, the Administrative Agent shall not have
any duty to disclose, and shall not be liable for the failure to disclose,
any information relating to the Borrower or any Subsidiary that is
communicated to or obtained by the bank serving as Administrative Agent or
any of its Affiliates in any capacity. The Administrative Agent shall not be
liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
11.1) or in the absence of its own gross negligence or willful misconduct.
The Administrative Agent shall be deemed not to have knowledge of any Default
unless and until written notice thereof is given to the Administrative Agent
by the Borrower or another Credit Party and the Administrative Agent shall
not be responsible for or have any duty to ascertain or inquire into (i) any
statement, warranty or representation made in or in connection with this
Agreement, (ii) the contents of any certificate, report or other document
delivered hereunder or in connection herewith, (iii) the performance or
observance of any of the covenants, agreements or other terms or conditions
set forth herein, (iv) the validity, enforceability, effectiveness or
genuineness of this Agreement or any other agreements, instrument or
document, or (v) the satisfaction of any condition set forth in Articles 5 or
6 or elsewhere herein, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent.
SECTION 10.4. RELIANCE BY ADMINISTRATIVE AGENT
The Administrative Agent shall be entitled to rely upon,
and shall not incur any liability for relying upon, any notice, request,
certificate, consent, statement, instrument, document or other writing
believed by it to be genuine and to have been signed or sent by the proper
Person. The Administrative Agent also may rely upon any statement made to it
orally or by telephone and believed by it to be made by the proper Person,
and shall not incur any liability for relying thereon. The Administrative
Agent may consult with legal counsel (who may be counsel to the Borrower),
independent accountants and other experts selected by it, and shall not be
liable for any action taken or not taken by it in accordance with the advice
of any such counsel, accountants or experts.
SECTION 10.5. RELIANCE BY ADMINISTRATIVE AGENT
The Administrative Agent may perform any and all its duties and
exercise its rights and powers by or through any one or more sub-agents
appointed by the Administrative Agent, provided that no such delegation shall
serve as a release of the Administrative Agent or waiver by the Borrower of
any rights hereunder. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through
their respective Related Parties. The exculpatory provisions of this Article
10 shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any
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such sub-agent, and shall apply to their respective activities in connection
with the syndication of the credit facilities provided for herein as well as
activities as Administrative Agent.
SECTION 10.6. RESIGNATION; SUCCESSOR ADMINISTRATIVE AGENT
Subject to the appointment and acceptance of a successor
Administrative Agent as provided in this Section 10.6, the Administrative
Agent may resign at any time by notifying the Lenders and the Borrower. Upon
any such resignation, the Required Lenders shall have the right, in
consultation with the Borrower, to appoint a successor. If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives
notice of its resignation, then the retiring Administrative Agent may, on
behalf of the Lenders, appoint a successor Administrative Agent which shall
be a bank with an office in New York, New York, and having combined capital
and surplus of at least $250,000,000 or an Affiliate of any such bank. Upon
the acceptance of its appointment as Administrative Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent,
and the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. The fees payable by the Borrower to a successor
Administrative Agent shall be the same as those payable to its predecessor
unless otherwise agreed between the Borrower and such successor. After the
Administrative Agent's resignation hereunder, the provisions of this Article
and Section 11.4 shall continue in effect for the benefit of such retiring
Administrative Agent, its sub-agents and their respective Related Parties in
respect of any actions taken or permitted to be taken by any of them while it
was acting as Administrative Agent.
SECTION 10.7. NON-RELIANCE ON OTHER CREDIT PARTIES
Each Credit Party acknowledges that it has, independently and
without reliance upon the Administrative Agent or any other Credit Party and
based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each
Credit Party also acknowledges that it will, independently and without
reliance upon the Administrative Agent or any other Credit Party and based on
such documents and information as it shall from time to time deem
appropriate, continue to make its own decisions in taking or not taking
action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.
ARTICLE 11. OTHER PROVISIONS
SECTION 11.1. AMENDMENTS AND WAIVERS
(a) NO FAILURE TO EXERCISE AND NO DELAY IN EXERCISING, ON THE PART OF ANY
CREDIT PARTY, ANY RIGHT, REMEDY, POWER OR PRIVILEGE UNDER ANY LOAN DOCUMENT
SHALL OPERATE AS A WAIVER THEREOF; NOR SHALL ANY SINGLE OR PARTIAL EXERCISE
OF ANY RIGHT, REMEDY, POWER OR PRIVILEGE UNDER ANY LOAN DOCUMENT PRECLUDE ANY
OTHER OR FURTHER EXERCISE THEREOF OR THE EXERCISE OF ANY OTHER RIGHT, REMEDY,
POWER OR PRIVILEGE. THE RIGHTS, REMEDIES, POWERS AND PRIVILEGES UNDER THE
LOAN DOCUMENTS ARE CUMULATIVE AND NOT EXCLUSIVE OF ANY RIGHTS, REMEDIES,
POWERS AND PRIVILEGES PROVIDED BY LAW. NO WAIVER OF ANY PROVISION OF ANY LOAN
DOCUMENT OR CONSENT TO ANY DEPARTURE BY ANY LOAN PARTY THEREFROM SHALL IN ANY
EVENT BE EFFECTIVE UNLESS THE SAME SHALL BE PERMITTED BY THIS SECTION, AND
THEN SUCH WAIVER OR CONSENT SHALL BE EFFECTIVE ONLY IN THE SPECIFIC INSTANCE
AND FOR THE PURPOSE FOR WHICH GIVEN. WITHOUT LIMITING THE GENERALITY OF THE
FOREGOING, THE MAKING OF A LOAN SHALL NOT BE CONSTRUED AS A WAIVER OF ANY
DEFAULT, REGARDLESS OF WHETHER ANY CREDIT PARTY MAY HAVE HAD NOTICE OR
KNOWLEDGE OF SUCH DEFAULT AT THE TIME.
(b) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN ANY LOAN
DOCUMENT, WITH THE WRITTEN CONSENT OF THE REQUIRED LENDERS, THE
ADMINISTRATIVE AGENT AND THE APPROPRIATE PARTIES TO THE LOAN DOCUMENTS (OTHER
THAN THE OTHER CREDIT PARTIES) MAY, FROM TIME TO TIME, ENTER INTO WRITTEN
AMENDMENTS, SUPPLEMENTS OR MODIFICATIONS THEREOF AND, WITH THE CONSENT OF THE
REQUIRED LENDERS, THE ADMINISTRATIVE AGENT ON BEHALF OF THE OTHER CREDIT
PARTIES, MAY EXECUTE AND DELIVER TO ANY SUCH PARTIES A WRITTEN INSTRUMENT
WAIVING OR CONSENTING TO THE DEPARTURE FROM, ON SUCH TERMS AND CONDITIONS AS
THE ADMINISTRATIVE AGENT MAY SPECIFY IN SUCH INSTRUMENT, ANY OF THE
REQUIREMENTS OF
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THE LOAN DOCUMENTS OR ANY DEFAULT AND ITS CONSEQUENCES; PROVIDED, HOWEVER,
THAT NO SUCH AMENDMENT, SUPPLEMENT, MODIFICATION, WAIVER OR CONSENT SHALL:
(i) increase the Revolving Commitment or Acquisition Loan Commitment
of any Lender, without such Lender's consent;
(ii) unless agreed to by each Credit Party affected thereby, (A) reduce
the principal amount of any Extension of Credit, or reduce the rate of
interest thereon, or reduce any fees or other obligations payable under the
Loan Documents, (B) extend any date (including the Maturity Date) fixed for
the payment of any principal of or interest on any Extension of Credit, any
fees, or any other obligation payable under the Loan Documents or (C) extend
the expiration date of any Letter of Credit beyond the Maturity Date;
(iii) unless agreed to by all of the Lenders, (A) increase the
Aggregate Revolving Commitment or Aggregate Acquisition Loan Commitment, (B)
change the definition of "Required Lenders" or any other provision hereof
specifying the number or percentage of Lenders required to waive, amend or
modify any rights hereunder or make any determination or grant any consent
hereunder, (C) change Section 2.6 in a manner that would alter the pro rata
sharing of payments required thereby, (D) consent to any assignment or
delegation by any Loan Party of any of its rights or obligations under any
Loan Document, (E) release any Subsidiary Guarantor from its obligations
under the Subsidiary Guarantee (except as expressly provided therein or as a
result of the termination of the existence of such Subsidiary Guarantor in a
transaction permitted by Sections 8.3, 8.4 or 8.6), or (F) release any of the
Collateral from the Liens of the Security Documents, except as may be
expressly permitted thereunder or in connection with a transaction permitted
by Sections 8.3, 8.4 or 8.6), and
(iv) unless agreed to by the Administrative Agent or the Issuer, amend,
modify or otherwise affect the rights or duties of the Administrative Agent
or the Issuer, respectively, under the Loan Documents.
Any such amendment, supplement, modification, waiver or consent
shall apply equally to each Credit Party and shall be binding upon each
Credit Party and each Loan Party to the applicable Loan Document, and upon
all future holders of the Notes and the Reimbursement Obligations. In the
case of any waiver, the Credit Parties and each Loan Party to the applicable
Loan Document shall be restored to their former position and rights hereunder
and under the outstanding Notes and other Loan Documents to the extent
provided for in such waiver, and any Default waived shall not extend to any
subsequent or other Default, or impair any right consequent thereon.
SECTION 11.2. NOTICES
All notices, requests and demands to or upon the respective
parties to the Loan Documents to be effective shall be in writing and, unless
otherwise expressly provided therein, shall be deemed to have been duly given
or made when delivered by hand, one Business Day after having been sent by
overnight courier service, or when deposited in the mail, first-class postage
prepaid, or, in the case of notice by facsimile, when sent to the last
address (including telephone and facsimile numbers) for such party specified
by such party in a written notice delivered to the Administrative Agent and
the Borrower or, if no such written notice was so delivered, as follows:
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(a) IN THE CASE OF ANY LOAN PARTY, TO SUCH LOAN PARTY C/O GLOBAL VACATION
GROUP, INC., 1420 NEW YORK AVENUE NW, SUITE 550, WASHINGTON, DC 20005,
ATTENTION: WALTER BERMAN, CHIEF FINANCIAL OFFICER, TELEPHONE (202) 347-1800,
FACSIMILE (202) 347-0710, WITH A COPIES TO: (i) THAYER EQUITY INVESTORS III,
L.P., 1455 PENNSYLVANIA AVENUE, WASHINGTON, D.C. 20004, ATTENTION ROGER
BALLOU, DANIEL RASKAS, CHRISTOPHER TEMPLE, TELEPHONE: (202) 371-0391,
FACSIMILE: (202) 371-0150, AND (ii) HOGAN & HARTSON, L.L.P., COLUMBIA SQUARE,
555 THIRTEENTH STREET, N.W., WASHINGTON, D.C. 20004; ATTENTION: CHRISTOPHER
J. HAGAN OR J. HOVEY KEMP, ESQ.; TELEPHONE: (202) 637-5600, FACSIMILE: (202)
637-5910;
(b) IN THE CASE OF THE ADMINISTRATIVE AGENT, TO THE BANK OF NEW YORK, ONE
WALL STREET, AGENCY FUNCTION ADMINISTRATION, 18TH FLOOR, NEW YORK, NEW YORK
10286; ATTENTION: SUSAN BARATTA, TELEPHONE: (212) 635-4632, FACSIMILE (212)
635-6365 OR 6366 OR 6367; WITH A COPY TO: THE BANK OF NEW YORK, ONE WALL
STREET, NEW YORK, NEW YORK 10286, ATTENTION: RONALD R. REEDY, VICE PRESIDENT,
TELEPHONE: (212) 635-6724, FACSIMILE: (212) 635-6434; AND
(c) IN THE CASE OF A LENDER, AT ITS ADDRESS FOR NOTICES SET FORTH ON
SCHEDULE 11.2; provided, however, that any notice, request or demand by the
Borrower pursuant to Sections 2.2, 2.3, 2.6 or 3.3 shall not be effective
until received. Any party to a Loan Document may rely on signatures of the
parties thereto which are transmitted by facsimile or other electronic means
as fully as if originally signed.
SECTION 11.3. SURVIVAL
All covenants, agreements, representations and warranties made
by the Borrower herein and in the certificates or other instruments
delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any
Extensions of Credit, regardless of any investigation made by any such other
party or on its behalf and notwithstanding that the Administrative Agent or
any Lender may have had notice or knowledge of any Default or incorrect
representation or warranty at the time any credit is extended hereunder.
SECTION 11.4. EXPENSES; INDEMNITY
(a) THE BORROWER AGREES, ON DEMAND THEREFOR AND WHETHER ANY EXTENSION OF
CREDIT IS MADE (i) TO PAY OR REIMBURSE THE ADMINISTRATIVE AGENT AND ITS
RELATED PARTIES FOR ALL REASONABLE OUT-OF-POCKET EXPENSES INCURRED THEREBY,
INCLUDING THE REASONABLE FEES, CHARGES AND DISBURSEMENTS OF COUNSEL, IN
CONNECTION WITH THE DEVELOPMENT, PREPARATION, EXECUTION, SYNDICATION AND
ADMINISTRATION OF, THE LOAN DOCUMENTS (INCLUDING ANY AMENDMENT, SUPPLEMENT OR
OTHER MODIFICATION THERETO (WHETHER OR NOT EXECUTED OR EFFECTIVE)), ANY
DOCUMENTS PREPARED IN CONNECTION THEREWITH AND THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED THEREBY AND (ii) TO PAY OR REIMBURSE EACH CREDIT
PARTY FOR ALL OF ITS COSTS AND EXPENSES, INCLUDING REASONABLE FEES AND
DISBURSEMENTS OF COUNSEL, INCURRED IN CONNECTION WITH (A) THE PROTECTION OR
ENFORCEMENT OF ITS RIGHTS UNDER THE LOAN DOCUMENTS, INCLUDING ANY RELATED
COLLECTION PROCEEDINGS AND ANY NEGOTIATION, RESTRUCTURING OR "WORK-OUT", AND
(B) THE ENFORCEMENT OF THIS SECTION.
(b) THE BORROWER SHALL, ON DEMAND THEREFOR, INDEMNIFY EACH CREDIT PARTY AND
EACH OF THEIR RESPECTIVE RELATED PARTIES (EACH, AN "Indemnified Person")
AGAINST, AND HOLD EACH INDEMNIFIED PERSON HARMLESS FROM, ANY AND ALL LOSSES,
CLAIMS, DAMAGES, PENALTIES, LIABILITIES AND RELATED EXPENSES, INCLUDING THE
FEES, CHARGES AND DISBURSEMENTS OF ANY COUNSEL, INCURRED BY OR ASSERTED
AGAINST ANY INDEMNIFIED PERSON IN CONNECTION WITH OR IN ANY WAY ARISING OUT
OF ANY LOAN DOCUMENT, ANY OTHER TRANSACTION DOCUMENT OR ANY TRANSACTION,
INCLUDING AS A RESULT OF (i) ANY BREACH BY THE BORROWER OF THE TERMS OF ANY
LOAN DOCUMENT, THE USE OF PROCEEDS OF ANY EXTENSION OF CREDIT OR ANY ACTION
OR FAILURE TO ACT ON THE PART OF THE BORROWER, (ii) THE CONSUMMATION OR
PROPOSED CONSUMMATION OF THE TRANSACTIONS OR ANY OTHER TRANSACTIONS
CONTEMPLATED HEREBY, (iii) ANY EXTENSION OF CREDIT OR THE USE OF THE PROCEEDS
THEREFROM, (iv) ANY ACTUAL OR ALLEGED PRESENCE OR RELEASE OF HAZARDOUS
SUBSTANCE ON OR FROM ANY PROPERTY OWNED OR OPERATED BY THE BORROWER OR ANY
SUBSIDIARY, OR ANY LIABILITY IN RESPECT OF ANY ENVIRONMENTAL LAW RELATED IN
ANY WAY TO THE BORROWER OR ANY SUBSIDIARY, (v) ANY ACTION OR FAILURE TO ACT
ON THE PART OF THE BORROWER OR (vi) ANY ACTUAL OR PROSPECTIVE CLAIM,
LITIGATION, INVESTIGATION OR PROCEEDING RELATING TO ANY OF THE FOREGOING,
WHETHER BASED ON CONTRACT, TORT OR ANY
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OTHER THEORY AND REGARDLESS OF WHETHER ANY INDEMNIFIED PERSON IS A PARTY
THERETO (COLLECTIVELY, THE "Indemnified Liabilities"), PROVIDED THAT SUCH
INDEMNITY SHALL NOT, AS TO ANY INDEMNIFIED PERSON, BE AVAILABLE TO THE EXTENT
THAT SUCH LOSSES, CLAIMS, DAMAGES, LIABILITIES OR RELATED EXPENSES RESULTED
FROM THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF SUCH INDEMNIFIED PERSON.
(c) TO THE EXTENT THAT THE BORROWER FAILS TO PAY ANY AMOUNT REQUIRED TO BE
PAID BY IT TO THE ADMINISTRATIVE AGENT OR ANY OF ITS AFFILIATES UNDER
SUBSECTIONS (a) OR (b) OF THIS SECTION, EACH LENDER SEVERALLY AGREES, ON
DEMAND THEREFOR, TO PAY TO THE ADMINISTRATIVE AGENT SUCH LENDER'S TOTAL
PERCENTAGE OF SUCH AMOUNT (DETERMINED AS OF THE TIME THAT THE APPLICABLE
UNREIMBURSED EXPENSE OR INDEMNIFIED LIABILITY IS SOUGHT).
(d) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE BORROWER SHALL NOT
ASSERT, AND HEREBY WAIVES, ANY CLAIM AGAINST ANY INDEMNIFIED PERSON FOR ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (WHETHER ACCRUED AND
WHETHER KNOWN OR SUSPECTED TO EXIST IN ITS FAVOR) ARISING OUT OF, IN
CONNECTION WITH, OR AS A RESULT OF, THE LOAN DOCUMENTS, THE TRANSACTIONS
CONTEMPLATED THEREBY OR ANY EXTENSION OF CREDIT OR THE USE OF THE PROCEEDS
THEREOF.
SECTION 11.5. SUCCESSORS AND ASSIGNS
(a) THE LOAN DOCUMENTS SHALL BE BINDING UPON AND INURE TO THE BENEFIT OF
EACH OF THE PARTIES THERETO, AND THEIR RESPECTIVE SUCCESSORS AND ASSIGNS,
EXCEPT THAT NO LOAN PARTY MAY ASSIGN OR OTHERWISE TRANSFER ANY OF ITS RIGHTS
OR OBLIGATIONS HEREUNDER WITHOUT THE PRIOR WRITTEN CONSENT OF EACH CREDIT
PARTY (AND ANY SUCH ATTEMPTED ASSIGNMENT OR TRANSFER WITHOUT SUCH CONSENT
SHALL BE NULL AND VOID).
(b) EACH LENDER MAY ASSIGN ALL OR A PORTION OF ITS RIGHTS AND OBLIGATIONS
UNDER THE LOAN DOCUMENTS TO (i) ANY SUBSIDIARY OR AFFILIATE OF SUCH LENDER,
(ii) ANY OTHER LENDER, OR (iii) WITH THE CONSENT OF THE BORROWER, THE
ADMINISTRATIVE AGENT, THE ISSUER (WHICH CONSENTS SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED AND, IN THE CASE OF THE BORROWER'S CONSENT, SHALL NOT BE
REQUIRED DURING THE CONTINUANCE OF AN EVENT OF DEFAULT), ANY OTHER
INSTITUTION, PROVIDED THAT:
(A)............................................EACH SUCH ASSIGNMENT SHALL BE
OF A CONSTANT, AND NOT A VARYING, PERCENTAGE OF THE ASSIGNOR LENDER'S RIGHTS
AND OBLIGATIONS UNDER THE LOAN DOCUMENTS;
(B)............................................EXCEPT IN THE CASE OF AN
ASSIGNMENT TO A LENDER OR AN AFFILIATE OF A LENDER OR AN ASSIGNMENT OF THE
ENTIRE REMAINING AMOUNT OF THE ASSIGNING LENDER'S REVOLVING COMMITMENT AND
ACQUISITION LOAN COMMITMENT, THE AGGREGATE AMOUNT OF THE REVOLVING COMMITMENT
AND ACQUISITION LOAN COMMITMENT OF THE ASSIGNING LENDER SUBJECT TO EACH SUCH
ASSIGNMENT (DETERMINED AS OF THE DATE THE ASSIGNMENT AND ACCEPTANCE AGREEMENT
WITH RESPECT TO SUCH ASSIGNMENT IS DELIVERED TO THE ADMINISTRATIVE AGENT)
SHALL NOT BE LESS THAN $5,000,000; AND
(C)............................................THE ASSIGNOR AND SUCH ASSIGNEE
SHALL DELIVER TO THE ADMINISTRATIVE AGENT THREE COPIES OF AN ASSIGNMENT AND
ACCEPTANCE AGREEMENT EXECUTED BY EACH OF THEM, ALONG WITH AN ASSIGNMENT FEE
IN THE SUM OF $3,500 FOR THE ACCOUNT OF THE ADMINISTRATIVE AGENT AND, IF THE
ASSIGNEE IS NOT THEN A LENDER, SUCH ASSIGNEE SHALL DESIGNATE ITS ADDRESS FOR
NOTICES AND SHALL DELIVER TO THE ADMINISTRATIVE AGENT AND, IF SUCH ASSIGNEE
IS A FOREIGN CREDIT PARTY, THE DOCUMENTS REQUIRED BY SECTION 3.7(c).
Upon receipt of such number of executed copies of each such Assignment and
Acceptance Agreement together with the assignment fee therefor and the
consents required to such assignment, if required, the Administrative Agent
shall record the same and execute not less than two copies of such Assignment
and Acceptance Agreement in the appropriate place, deliver one such copy to
the assignor and one such copy to the assignee, and deliver one photocopy
thereof, as executed, to the Borrower. From and after the Assignment
Effective Date specified in, and as defined in, such Assignment and
Acceptance Agreement, the assignee thereunder shall, unless already a Lender,
become a party hereto and shall, for all purposes of the Loan Documents, be
deemed a "Lender" and, to the extent provided in such Assignment and
Acceptance Agreement, the assignor Lender thereunder shall be released from
its obligations under this Agreement and the other Loan Documents. The
Borrower agrees that, if requested, in connection with each such assignment,
it shall at its own cost and expense execute and deliver to the
Administrative Agent or such assignee a Note, each payable to the order of
such assignee and dated the First Restatement Date. The Administrative Agent
shall be entitled to rely upon the representations and warranties made by the
assignee under each Assignment and Acceptance Agreement.
(c) EACH LENDER MAY GRANT PARTICIPATIONS IN ALL OR ANY PART OF ITS RIGHTS
AND OBLIGATIONS UNDER THE LOAN DOCUMENTS TO (i) ANY SUBSIDIARY OR AFFILIATE
OF SUCH LENDER, (ii) ANY OTHER LENDER, OR (iii) ANY OTHER INSTITUTION
REASONABLY ACCEPTABLE TO THE ADMINISTRATION AGENT, PROVIDED THAT (A) SUCH
LENDER'S OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL
REMAIN UNCHANGED,
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(B) SUCH LENDER SHALL REMAIN SOLELY RESPONSIBLE TO THE OTHER PARTIES TO THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS FOR THE PERFORMANCE OF SUCH
OBLIGATIONS, (C) THE BORROWER AND THE CREDIT PARTIES SHALL CONTINUE TO DEAL
SOLELY AND DIRECTLY WITH SUCH LENDER IN CONNECTION WITH SUCH LENDER'S RIGHTS
AND OBLIGATIONS UNDER THE LOAN DOCUMENTS, (D) THE GRANTING OF SUCH
PARTICIPATION DOES NOT REQUIRE THAT ANY ADDITIONAL LOSS, COST OR EXPENSE BE
BORNE BY THE BORROWER AT ANY TIME, AND (E) THE VOTING RIGHTS OF ANY HOLDER OF
ANY PARTICIPATION SHALL BE LIMITED TO DECISIONS THAT IN ACCORDANCE WITH
SECTION 11.1 REQUIRE THE CONSENT OF ALL OF THE LENDERS.
(d) SUBJECT TO SUBSECTION (e) BELOW, ANY LENDER MAY AT ANY TIME ASSIGN ALL
OR ANY PORTION OF ITS RIGHTS UNDER ANY LOAN DOCUMENT TO ANY FEDERAL RESERVE
BANK.
(e) EXCEPT TO THE EXTENT OF ANY ASSIGNMENT PURSUANT TO SUBSECTION (b)
ABOVE, NO LENDER SHALL BE RELIEVED OF ANY OF ITS OBLIGATIONS UNDER THE LOAN
DOCUMENTS AS A RESULT OF ANY ASSIGNMENT OF OR GRANTING OF PARTICIPATIONS IN,
ALL OR ANY PART OF ITS RIGHTS AND OBLIGATIONS UNDER THE LOAN DOCUMENTS.
SECTION 11.6. COUNTERPARTS; INTEGRATION
Each Loan Document (other than the Notes) may be executed by one
or more of the parties thereto on any number of separate counterparts and
all of said counterparts taken together shall be deemed to constitute one and
the same document. It shall not be necessary in making proof of any Loan
Document to produce or account for more than one counterpart signed by the
party to be charged. Delivery of an executed counterpart of a signature page
of any Loan Document by facsimile shall be effective as delivery of a
manually executed counterpart of such Loan Document. The Loan Documents and
any separate letter agreements between the Borrower and a Credit Party with
respect to fees embody the entire agreement and understanding among the Loan
Parties and the Credit Parties with respect to the subject matter thereof and
supersede all prior agreements and understandings among the Loan Parties and
the Credit Parties with respect to the subject matter thereof.
SECTION 11.7. SEVERABILITY
Every provision of the Loan Documents is intended to be
severable, and if any term or provision thereof shall be invalid, illegal or
unenforceable for any reason, the validity, legality and enforceability of
the remaining provisions thereof shall not be affected or impaired thereby,
and any invalidity, illegality or unenforceability in any jurisdiction shall
not affect the validity, legality or enforceability of any such term or
provision in any other jurisdiction.
SECTION 11.8. GOVERNING LAW
THE LOAN DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES
THEREUNDER SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAW OF THE STATE OF NEW YORK.
SECTION 11.9. JURISDICTION; SERVICE OF PROCESS
Each party to a Loan Document hereby irrevocably submits to the
nonexclusive jurisdiction of any New York State or Federal court sitting in
the City of New York over any suit, action or proceeding arising out of or
relating to the Loan Documents. Each party to a Loan Document hereby
irrevocably waives, to the fullest extent permitted or not prohibited by law,
any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding brought in such a court and any claim
that any such suit, action or proceeding brought in such a court has been
brought in an inconvenient forum. Each Loan Party hereby agrees that a final
judgment in any such suit, action or proceeding brought in such a court,
after all appropriate appeals, shall be conclusive and binding upon it and
may be enforced in other jurisdictions by suit on the judgment or in any
other manner provided by law. Nothing in this Agreement shall affect any
right that a Credit Party may otherwise have to bring any action or
proceeding relating to Loan Documents against the Borrower or its properties
in the courts of any jurisdiction. Each party to a Loan Document hereby
irrevocably consents to service of process in the manner provided for notices
in Section 11.2. Nothing in this Agreement will affect the right of any party
to a Loan Document to serve process in any other manner permitted by law.
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SECTION 11.10. WAIVER OF TRIAL BY JURY
EACH PARTY HERETO HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT,
TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT
BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION.
SECTION 11.11. SAVINGS CLAUSE
This Agreement is intended solely as an amendment of, and
contemporaneous restatement of, the terms and conditions of the Existing
Credit Agreement, and the Notes delivered pursuant hereto are intended to
amend, restate and renew the notes issued under the Existing Credit
Agreement. Notwithstanding anything contained herein to the contrary, it is
the intention of the parties hereto that this Agreement and the Commitments
and Extensions of Credit provided hereunder represent a supplement to, but
not a novation or discharge of, the credit facilities provided by the
Existing Credit Agreement; and the Borrower hereby represents and warrants to
each Credit Party that, after giving effect to the transactions contemplated
by this Agreement, the security interests created by the Security Documents
continue to constitute valid, perfected and first priority security interests
(subject only to Permitted Liens) securing all obligations purported to be
secured thereby, and each of the Security Documents and the security
interests provided therein continue in full force and effect. Nothing in this
Agreement is intended to affect the right of the Lenders to payment of
amounts due under the Existing Credit Agreement for the period prior to the
First Restatement Date and such right shall be determined under the
provisions of the Existing Credit Agreement.
62
<PAGE> 64
IN WITNESS WHEREOF, the parties hereto have caused this Credit
Agreement to be duly executed and delivered by their proper and duly authorized
officers as of the day and year first above written.
GLOBAL VACATION GROUP, INC.
By:
-------------------------
Name:
------------------------
Title:
------------------------
<PAGE> 65
GLOBAL VACATION CREDIT AGREEMENT
Revolving Commitment THE BANK OF NEW YORK,
Individually, as Issuer
$3,889,888.89 and as Administrative Agent
Acquisition Loan Amount By:
--------------------------
Name:
-------------------------
$13,611,111.11 Title:
-------------------------
Address for Notices
The Bank of New York
Agency Function Administration
One Wall Street
18th Floor
New York, NY 10286
Attention: Susan Baratta
Telephone: (212) 635-4632
Facsimile: (212) 635-6365 or 6366 or 6367
with a copy to:
The Bank of New York
One Wall Street
New York, New York 10286
Attention: Ronald R. Reedy
Telephone: (212) 635-6724
Facsimile: (212) 635-6434
64
<PAGE> 66
GLOBAL VACATION CREDIT AGREEMENT
Revolving Commitment BANK OF AMERICA, FSB
$3,333,33.33
Acquisition Loan Amount By:
----------------------------
Name:
----------------------------
$11,666,666,67 Title:
----------------------------
Address for Notices
Bank of America, FSB
6610 Rockledge Drive - 3rd Floor
Bethesda, MD 20817
Attention: Barbara Levy
Telephone: (301) 493-7256
Facsimile: (301) 571-9098
65
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GLOBAL VACATION CREDIT AGREEMENT
Revolving Commitment FIRST UNION NATIONAL BANK
$2,777,777.78
Acquisition Loan Amount By:
--------------------------
Name:
--------------------------
$9,722,222.22 Title:
--------------------------
Address for Notices
First Union Capital Markets
301 South College Street
NC0737, 5th Floor
Charlotte, North Carolina 28288-0737
Attention: Ben Howatt
Telephone: (704) 383-1357
Facsimile: (704) 374-4793
66
<PAGE> 68
GLOBAL VACATION CREDIT AGREEMENT
CONSENTED TO:
SUNSHINE VACATIONS, INC.
GLOBAL VACATION MANAGEMENT COMPANY
HADDON HOLIDAYS, INC.
GLOBETROTTERS, INC.
CLASSIC CUSTOM VACATIONS
MTI VACATIONS, INC.
GVG FINANCE COMPANY
AS TO EACH OF THE FOREGOING:
By:
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Name:
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Title:
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TABLE OF CONTENTS
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ARTICLE 1. DEFINITIONS AND RULES OF INTERPRETATION..............................1
SECTION 1.1. DEFINITIONS.......................................................1
SECTION 1.2. ACCOUNTING TERMS.................................................21
SECTION 1.3. RULES OF INTERPRETATION..........................................21
ARTICLE 2. AMOUNT AND TERMS OF EXTENSIONS OF CREDIT............................22
SECTION 2.1. LOANS............................................................22
SECTION 2.2. PROCEDURE FOR BORROWING..........................................22
SECTION 2.3. TERMINATION OR REDUCTION OF COMMITMENTS..........................23
SECTION 2.4. PREPAYMENTS OF LOANS.............................................26
SECTION 2.5. LETTERS OF CREDIT................................................26
SECTION 2.6. PAYMENTS; PRO RATA TREATMENT AND SHARING OF SET-OFFS.............29
SECTION 2.7. CASH COLLATERAL ACCOUNT..........................................30
ARTICLE 3. INTEREST, FEES, YIELD PROTECTIONS, ETC..............................30
SECTION 3.1. INTEREST RATE AND PAYMENT DATES..................................30
SECTION 3.2. FEES.............................................................31
SECTION 3.3. CONVERSIONS......................................................32
SECTION 3.4. CONCERNING INTEREST PERIODS......................................32
SECTION 3.5. FUNDING LOSS.....................................................33
SECTION 3.6. INCREASED COSTS; ILLEGALITY, ETC.................................33
SECTION 3.7. TAXES............................................................34
SECTION 3.8. REGISTER.........................................................35
ARTICLE 4. REPRESENTATIONS AND WARRANTIES......................................35
SECTION 4.1. ORGANIZATION AND POWER...........................................35
SECTION 4.2. AUTHORIZATION; ENFORCEABILITY....................................36
SECTION 4.3. APPROVALS; NO CONFLICTS..........................................36
SECTION 4.4. FINANCIAL CONDITION; NO MATERIAL ADVERSE CHANGE..................36
SECTION 4.5. PROPERTIES, ETC..................................................36
SECTION 4.6. LITIGATION.......................................................37
SECTION 4.7. ENVIRONMENTAL MATTERS............................................37
SECTION 4.8. COMPLIANCE WITH LAWS AND AGREEMENTS; NO DEFAULT..................37
SECTION 4.9. INVESTMENT COMPANIES AND OTHER REGULATED ENTITIES................37
SECTION 4.10. FEDERAL RESERVE REGULATIONS......................................38
SECTION 4.11. ERISA............................................................38
SECTION 4.12. TAXES............................................................38
SECTION 4.13. SUBSIDIARIES.....................................................38
SECTION 4.14. ABSENCE OF CERTAIN RESTRICTIONS..................................38
SECTION 4.15. LABOR RELATIONS..................................................39
SECTION 4.16. INSURANCE........................................................39
SECTION 4.17. NO MISREPRESENTATION.............................................39
SECTION 4.18. TRANSACTION DOCUMENTS............................................39
SECTION 4.19. FINANCIAL CONDITION..............................................39
SECTION 4.20. YEAR 2000........................................................39
SECTION 4.21. MATERIAL AGREEMENTS..............................................39
ARTICLE 5. CONDITIONS TO EFFECTIVENESS.........................................40
SECTION 5.1. EVIDENCE OF ACTION...............................................40
SECTION 5.2. THIS AGREEMENT...................................................40
SECTION 5.3. NOTES............................................................40
SECTION 5.4. OPINION OF COUNSEL TO THE LOAN PARTIES...........................40
SECTION 5.5. PERFECTION CERTIFICATE...........................................40
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SECTION 5.6. GVG FINANCE COMPANY..............................................40
SECTION 5.7. ABSENCE OF MATERIAL ADVERSE CHANGE...............................41
SECTION 5.8. OFFICER'S CERTIFICATE............................................41
SECTION 5.9. MASTER ASSIGNMENT................................................41
SECTION 5.10. FEES.............................................................41
SECTION 5.11. OTHER DOCUMENTS..................................................41
ARTICLE 6. CONDITIONS TO EACH EXTENSION OF CREDIT..............................41
SECTION 6.1. COMPLIANCE.......................................................41
SECTION 6.2. CREDIT REQUEST...................................................41
SECTION 6.3. LAW..............................................................42
ARTICLE 7. AFFIRMATIVE COVENANTS...............................................42
SECTION 7.1. FINANCIAL STATEMENTS AND INFORMATION.............................42
SECTION 7.2. NOTICE OF MATERIAL EVENTS........................................43
SECTION 7.3. EXISTENCE; CONDUCT OF BUSINESS...................................44
SECTION 7.4. PAYMENT OF OBLIGATIONS...........................................44
SECTION 7.5. MAINTENANCE OF PROPERTIES........................................44
SECTION 7.6. INSURANCE........................................................44
SECTION 7.7. BOOKS AND RECORDS; INSPECTION RIGHTS.............................44
SECTION 7.8. COMPLIANCE WITH LAWS.............................................45
SECTION 7.9. ADDITIONAL SUBSIDIARIES..........................................45
SECTION 7.10. ADDITIONAL COLLATERAL............................................45
SECTION 7.11. HEDGING AGREEMENTS...............................................46
SECTION 7.12. INTENTIONALLY OMITTED............................................46
SECTION 7.13. EXISTING LETTERS OF CREDIT.......................................46
ARTICLE 8. NEGATIVE COVENANTS..................................................46
SECTION 8.1. INDEBTEDNESS.....................................................46
SECTION 8.2. NEGATIVE PLEDGE..................................................47
SECTION 8.3. FUNDAMENTAL CHANGES..............................................48
SECTION 8.4. INVESTMENTS, LOANS, ADVANCES AND GUARANTEES......................49
SECTION 8.5. ACQUISITIONS.....................................................49
SECTION 8.6. DISPOSITIONS.....................................................50
SECTION 8.7. RESTRICTED PAYMENTS..............................................51
SECTION 8.8. HEDGING AGREEMENTS...............................................51
SECTION 8.9. SALE AND LEASE-BACK TRANSACTIONS.................................51
SECTION 8.10. LINES OF BUSINESS................................................51
SECTION 8.11. TRANSACTIONS WITH AFFILIATES.....................................51
SECTION 8.12. USE OF PROCEEDS..................................................51
SECTION 8.13. RESTRICTIVE AGREEMENTS...........................................52
SECTION 8.14. FINANCIAL COVENANTS..............................................52
ARTICLE 9. DEFAULTS............................................................53
SECTION 9.1. EVENTS OF DEFAULT................................................53
SECTION 9.2. CONTRACT REMEDIES................................................55
ARTICLE 10. THE ADMINISTRATIVE AGENT............................................55
SECTION 10.1. APPOINTMENT......................................................55
SECTION 10.2. INDIVIDUAL CAPACITY..............................................56
SECTION 10.3. EXCULPATORY PROVISIONS...........................................56
SECTION 10.4. RELIANCE BY ADMINISTRATIVE AGENT.................................56
SECTION 10.5. RELIANCE BY ADMINISTRATIVE AGENT.................................56
SECTION 10.6. RESIGNATION; SUCCESSOR ADMINISTRATIVE AGENT......................57
SECTION 10.7. NON-RELIANCE ON OTHER CREDIT PARTIES.............................57
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ARTICLE 11. OTHER PROVISIONS....................................................57
SECTION 11.1. AMENDMENTS AND WAIVERS...........................................57
SECTION 11.2. NOTICES..........................................................58
SECTION 11.3. SURVIVAL.........................................................59
SECTION 11.4. EXPENSES; INDEMNITY..............................................59
SECTION 11.5. SUCCESSORS AND ASSIGNS...........................................60
SECTION 11.6. COUNTERPARTS; INTEGRATION........................................61
SECTION 11.7. SEVERABILITY.....................................................61
SECTION 11.8. GOVERNING LAW....................................................61
SECTION 11.9. JURISDICTION; SERVICE OF PROCESS.................................61
SECTION 11.10. WAIVER OF TRIAL BY JURY..........................................62
SECTION 11.11. SAVINGS CLAUSE...................................................62
EXHIBITS:
Exhibit A Form of Note
Exhibit B Form of Credit Request
Exhibit C Form of Notice of Conversion
Exhibit D Form of Compliance Certificate
Exhibit E Form of Assignment and Acceptance Agreement
Exhibit F Form of Intercompany Subordination Agreement
Exhibit G Form of Master Assignment and Assumption Agreement
SCHEDULES:
Schedule 4.3 Exceptions to Section 4.3 (Consents and Approvals)
Schedule 4.6 Litigation
Schedule 4.7 Environmental Matters
Schedule 4.13 Subsidiaries; Capitalization
Schedule 4.16 Insurance
Schedule 8.1 Existing Indebtedness
Schedule 8.2 Existing Liens
Schedule 8. 4 Existing Investments
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EXHIBIT 23.1
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our report dated February 5, 1999 (except with
respect to the matters discussed in Note 11 to the Consolidated
Financial Statements as to which the date is March 17, 1999) with
respect to the consolidated financial statements of Global Vacation
Group, Inc., included with this Form 10-K into the previously filed
Registration Statement on Form S-8 No. 333-70597, filed January 14,
1999 with the Securities and Exchange Commission.
Washington D.C.
March 22, 1999
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED STATEMENT OF OPERATIONS. THE CONSOLIDATED BALANCE SHEET AND THE
ACCOMPANYING NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 30,317
<SECURITIES> 2,346
<RECEIVABLES> 15,866
<ALLOWANCES> (982)
<INVENTORY> 0
<CURRENT-ASSETS> 54,245
<PP&E> 5,158
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,060
<CURRENT-LIABILITIES> 79,112
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> 53,438
<TOTAL-LIABILITY-AND-EQUITY> 134,060
<SALES> 90,421
<TOTAL-REVENUES> 90,421
<CGS> 69,386
<TOTAL-COSTS> 69,386
<OTHER-EXPENSES> 13,027
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 976
<INCOME-PRETAX> 9,010
<INCOME-TAX> (3,908)
<INCOME-CONTINUING> 5,102
<DISCONTINUED> 0
<EXTRAORDINARY> (379)
<CHANGES> 0
<NET-INCOME> 4,723
<EPS-PRIMARY> 0.22
<EPS-DILUTED> 0.22
</TABLE>
