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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 31, 1999
Commission File No. 333-52673
GLOBAL VACATION GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
NEW YORK 13-1894567
- ------------------------------------ ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>
1420 NEW YORK AVENUE, N.W., SUITE 550 WASHINGTON D.C. 20005
- ----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 347-1800
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
--- ---
As of May 12, 1999 there were 14,747,576 shares of Registrant's Common Stock
outstanding.
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INDEX
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<CAPTION>
Page
No.
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PART I. FINANCIAL INFORMATION ........................................................3
Item 1. Financial Statements (unaudited) ..........................................3
Condensed Consolidated Balance Sheets as of
March 31, 1999, and December 31, 1998..........................4
Condensed Consolidated Statements of Operations
For the Three Months Ended March 31, 1999 and 1998.............5
Condensed Consolidated Statements of Cash
Flows for the Three Months Ended March 31, 1999 and 1998 ......6
Notes to Condensed Consolidated Financial Statements ..........7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .......................................10
Results of Operations..........................................11
Liquidity and Capital Resources ...............................12
PART II. OTHER INFORMATION ............................................................16
Item 4. Submission of Matters to a Vote of Security Holders........................16
Item 6. Exhibits and Reports on Form 8-K...........................................16
</TABLE>
2
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ITEM 1. FINANCIAL STATEMENTS
3
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GLOBAL VACATION GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
---------------------------- ---------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents (includes $5,945 and $3,248
of restricted cash, respectively) $ 37,132 $ 30,317
Short-term investments 2,876 2,346
Accounts receivable, net of allowance of $932, and
$982, respectively 14,535 14,884
Loans receivable from shareholders 53 151
Other current assets 5,393 6,547
---------------------------- ---------------------------
Total current assets 59,989 54,245
---------------------------- ---------------------------
Property and equipment, net 6,214 5,158
Related party and other long-term receivables 2,176 2,490
Intangible assets, net 74,894 65,131
Other assets 11,808 7,036
---------------------------- ---------------------------
Total assets $ 155,081 $ 134,060
============================ ===========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 42,235 $ 39,869
Customer deposits 49,352 33,943
Current portion of long-term debt - 5,300
---------------------------- ---------------------------
Total current liabilities 91,587 79,112
Long-term debt, net of current portion 11,713 1,363
Other long-term liabilities 551 -
---------------------------- ---------------------------
Total liabilities 103,851 80,475
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 14,747,576 shares
issued and outstanding, respectively,. 147 147
Deferred compensation (400) (430)
Additional paid-in capital 95,122 95,122
Retained earnings (deficit) (42,924) (41,129)
Treasury stock, 72,000 and 12,000 shares at cost,
respectively (715) (125)
---------------------------- ---------------------------
Total shareholders' equity 51,230 53,585
---------------------------- ---------------------------
Total liabilities and shareholders' equity $ 155,081 $ 134,060
============================ ===========================
</TABLE>
- ----------------------------------------------------------
See Notes to condensed consolidated financial statements.
4
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GLOBAL VACATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
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<CAPTION>
Three Months Ended
------------------------------------------------
March 31,
---------
1999 1998
----------------------- -----------------------
<S> <C> <C>
Net revenues $ 22,759 $ 2,477
Operating expenses 21,421 3,032
----------------------- -----------------------
Gross profit 1,338 (555)
General and administrative expenses 3,067 1,571
Depreciation and amortization 1,046 34
----------------------- -----------------------
Loss from operations (2,775) (2,160)
Other income (expense)
Interest income 455 74
Interest expense (144) (14)
Other 9 -
----------------------- -----------------------
Total 320 60
----------------------- -----------------------
Loss before income taxes and extraordinary item (2,455) (2,100)
Income taxe benefit 917 61
----------------------- -----------------------
Loss before extraordinary item (1,538) (2,039)
Extraordinary item, net of income tax benefit
of $144,000 (257) -
----------------------- -----------------------
Net loss $ (1,795) $ (2,039)
======================= =======================
Dividends on Class A Convertible
Preferred Stock - (150)
----------------------- -----------------------
Net loss available to common
shareholders $ (1,795) $ (2,189)
======================= =======================
Basic and diluted net loss per common share:
Income (loss) per share available to common
shareholder before extraordinary item $ (0.10) $ (0.43)
Extraordinary item per share $ (0.02) $ -
----------------------- -----------------------
Basic and diluted net income(loss)per share
available to common shareholder $ (0.12) $ (0.43)
======================= =======================
Basic and diluted weighted average
shares outstanding 14,706 5,101
======================= =======================
Pro forma loss data:
Historical loss before income taxes as reported $ (2,100)
Pro forma benefit from income taxes 882
-----------------------
Pro forma net loss (1,218)
=======================
Pro forma basic and diluted net loss per share $ (0.23)
=======================
Pro Forma basic and diluted weigthed average
shares outstanding 5,391
=======================
</TABLE>
See Notes to condensed consolidated financial statements.
5
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GLOBAL VACATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------
March 31, 1999 March 31, 1998
------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (1,795) $ (2,039)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 1,030 34
Write-off of deferred financing costs 401 -
Amortization of deferred financing costs 16 2
Amortization of deferred compensation 30 -
Changes in assets and liabilities, excluding effect of
acquisitions
Accounts receivable 1,001 2,752
Other assets 319 63
Accounts payable and accrued expenses (3,561) 277
Customer deposits 9,863 94
Other liabilities (1,172) -
----------------------- -----------------------
Net cash provided by operating activities 6,132 1,183
----------------------- -----------------------
Cash flows from investing activities:
Purchases of property and equipment (1,076) (111)
Net sales (purchases) of investments (530) (30)
Acquisitions, net of cash acquired (2,296) (5,253)
----------------------- -----------------------
Net cash used in investing activities (3,902) (5,394)
----------------------- -----------------------
Cash flows from financing activities:
Net repayments and (borrowings) on loans to/from related parties 411 (1,732)
Distributions to shareholders - (4,995)
Proceeds from borrowings under credit agreement 10,250 15,400
Repayment of borrowings from credit agreement (5,200) -
Deferred financing costs (286) (997)
Redemption of common stock - (10,746)
Proceeds from issuance of common and preferred stock - 4,892
Purchase of treasury stock (590) -
----------------------- -----------------------
Net cash provided by financing activities 4,585 1,822
----------------------- -----------------------
Net increase (decrease) in cash and cash equivalents 6,815 (2,389)
----------------------- -----------------------
Cash and cash equivalents beginning of period 30,317 7,074
----------------------- -----------------------
Cash and cash equivalents end of period $ 37,132 $ 4,685
======================= =======================
<CAPTION>
Supplemental disclosures of cash flow information: 1999 1998
------------------------------------------------------
Cash paid for:
<S> <C> <C>
Taxes $ 170 224
Interest $ 130 -
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
Dividends on Class A Convertible Preferred Stock $ - 150
- ----------------------------------------------------------------------------------------------------
</TABLE>
See Notes to condensed consolidated financial statements.
6
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GLOBAL VACATION GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. General
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. Global Vacation Group,
Inc.'s common stock is traded on the New York Stock Exchange under the symbol
"GVG".
Headquartered in Washington D.C., the Company markets its products under the
brand names Classic Custom Vacations, Globetrotters, and Allied Tours. Classic
Custom Vacations creates 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.
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 and March 1999
and April 1999, the Company completed the acquisitions (together "the
Acquisitions") of Haddon Holidays, Inc. ("Haddon"), Classic Custom Vacations
("Classic"), MTI Vacations, Inc. ("MTI"), Globetrotters, Inc. ("Globetrotters),
Friendly Holidays ("Friendly") and, in a single transaction, Island Resort Tours
("Island") and International Travel and Resorts ("ITR").
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.
2. Summary of Significant Accounting Policies
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.
The quarterly condensed consolidated financial statements included herein
have been prepared by the Company, without audit, pursuant to the rules and
regulations of the SEC and include, in the opinion of the Company, all
adjustments, consisting of normal and recurring adjustments, necessary for a
fair presentation of interim period results. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The Company believes that its
disclosures are adequate to make the information presented not misleading. These
condensed financial statements should be read in conjunction with the financial
statements and notes thereto included in the
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Company's 1998 Form 10-K. The results of operations for the three month period
ended March 31, 1999 are not necessarily indicative of the results to be
expected for the full year.
There have been no significant changes in the accounting policies of the
Company during the periods presented. For a description of these policies, refer
to Note 2 to the Consolidated Financial Statements and related Notes thereto
included in the Company's 1998 Form 10-K.
Net Revenues
Net revenues consist primarily of markups on travel packages. The Company
recognizes net revenue when earned on the date of travel net of all
cancellations and changes to reservations booked. For the three months ended
March 31, 1999 and 1998, net revenues are derived from sale of travel products
and services with a value of $96.2 million, and $17.2 million, respectively,
net of $73.4 million, and $14.7 million, respectively, in direct costs to
suppliers.
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 for March 31, 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, is subject
to Federal and state income taxes.
The Company accounts for state and local 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.
Net Loss 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 1,705,607 and 84,716 shares
of common stock outstanding at March 31, 1999 and 1998, respectively have not
been included in the computation of diluted loss per share for the three months
ended March 31, 1999 and 1998 as such effect would be anti-dilutive. The effect
of preferred stock convertible into common stock outstanding at March 31, 1998,
has not been included in the computation of diluted loss per share for the
three months ended March 31, 1998 as such effect would be anti-dilutive.
The pro forma basic and diluted loss per share for the three months ended
March 31, 1998 gives effect to the conversion of the outstanding convertible
preferred stock into common stock and assumes that the Company was a C
Corporation for the entire period.
New Accounting Standards
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 was effective January
1, 1999, and is applied to all projects in progress upon initial application.
The adoption of SOP 98-1 has not had a material impact on the Company's results
of operations, financial position, or cash flows.
3. Acquisitions
On March 17, 1999, the Company acquired all the outstanding stock of
Friendly, 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. The acquisition was
accounted for as a purchase for financial reporting purposes. The purchase
price has been allocated on a preliminary basis as follows (in thousands):
8
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<TABLE>
<S> <C>
Cash and investments................................... $ 8,105
Accounts receivable.................................... 2,119
Fixed assets and other assets.......................... 3,025
Goodwill............................................... 10,330
Liabilities assumed and direct acquisition costs....... (13,177)
--------
Total........................................ $10,402
========
</TABLE>
The pro forma information presented below (in thousands) reflects the
Acquisitions as if they had occurred on January 1, 1998. 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>
Three Months Ended
March 31,
----------------------------------------
1999 1998
---- ----
<S> <C> <C>
Net revenues........................................... $ 24,973 $ 25,655
Net loss............................................... (2,011) (1,862)
Basic and Diluted loss per share ...................... $ (0.14) $ (0.13)
</TABLE>
In connection with the 1998 acquisitions, the Company recognized
approximately $2.0 million in liabilities as the cost of closing redundant
facilities and terminating certain employees. As of December 31, 1998,
approximately $1.1 million of the accrual remained. During the three months
ended March 31, 1999, the Company charged approximately $291,000 against the
accrual for amounts paid during this period. In connection with the Friendly
acquisition, the Company recognized approximately $2.3 million in liabilities
related to the cost of the Company's consolidation plan for Friendly. This
accrual included costs for severance, facility leases and other contractual
commitments.
4. Commitments and Contingencies
The Company is periodically a party to disputes arising from normal business
activities. In the opinion of management, resolutions 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 on the accompanying financial statements.
Trase-Miller Agreement
On March 31, 1999, the Company exercised its option to purchase Trase Miller
Solutions, Inc. for approximately $30.0 million, subject to certain adjustments.
The Company is presently negotiating with Trase Miller on definitive
documentation and expects the purchase to be complete after conducting its due
diligence.
5. Amended Credit Facility
During the three months ended March 31, 1999, the Company recognized an
extraordinary charge of $257,000, net of income tax effect of $144,000, related
to the restructuring of the Company's 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 an
applicable margin. An annual commitment fee is
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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.
6. Subsequent Events
On April 1, 1999, the Company acquired all the outstanding stock of
International Travel and Resorts, a hotel representative company, and Island
Resort Tours, a wholesale package tour operator that principally sells
popular-priced vacation packages to Caribbean destinations. The terms of the
purchase include cash consideration of $5.0 million and operating result
earnouts of up to $1.25 million. The acquisition will be accounted for as a
purchase for financial reporting purposes.
In April 1999, the Company agreed to extend loans totaling approximately
$1.5 million to two members of senior management. These loans bear interest at
6% per year and must be repaid upon the earlier of March 16, 2003 or
termination of employment. The Company has agreed, however, to waive
approximately 42 percent of the principal of each loan over time if the
executives remain employed through March 2003 and meet certain performance
criteria.
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING INFORMATION
The matters discussed in this Form 10-Q 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 the caption "Risk Factors" in the Company's 1998
Form 10-K which hereby is incorporated by reference, as well as factors
discussed elsewhere in this Form 10-Q, 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.
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 April 1999
acquired the stock or assets of seven other vacation providers. Through these
acquisitions, GVG acquired the outstanding capital stock of Haddon Holidays
Inc. ("Haddon"), Classic Custom Vacations, ("Classic"), Globetrotters Inc.
("Globetrotters"), Friendly Holidays ("Friendly"), Island Resort Tours
("Island"), International Travel and Resorts ("ITR") and substantially all the
assets of MTI Vacations, Inc. ("MTI") (collectively, the "Acquisitions" or the
"Acquired Businesses"). The consideration for the Acquisitions consisted of
cash. Each acquisition has been accounted for under the purchase method of
accounting. The
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accompanying financial statements for the three month period ending March 31,
1999 include the results of operations for each of the Acquisitions from their
respective acquisition dates.
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 insurance premiums and are recognized upon the
commencement of travel. For the three months ended March 31, 1999 and 1998, the
Company had net revenues of $22.8 million and $2.5 million, respectively, and
net loss (before extraordinary charge), of $1.5 million and $2.0 million,
respectively, derived from a total dollar value of travel products and services
of $96.2 million and $17.2 million, respectively.
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.
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 packaged 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 packaged tour industry and earnings generated on
deposits and prepayments are integral to the Company's operating model and
pricing strategies. For the three-month periods ending March 31, 1999 and 1998,
the Company had interest income of $455,000 (18.5% of loss before tax benefit
and extraordinary item) and $74,000 (3.5% of loss before tax benefit),
respectively.
The following table summarizes the Company's historical results of operations
as a percentage of net revenues for the three months ended each of March 31,
1999 and 1998.
HISTORICAL RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
1999 1998
---- ----
Amount % Amount %
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<S> <C> <C> <C> <C>
Net revenues.......................................... $22,759 100.0% $2,477 100.0%
Operating expenses.................................... 21,421 94.1 3,032 122.4
--------------------------------------------------------------------
Gross profit .................................... 1,338 5.9 (555) (22.4)
General and administrative expenses.......... 3,067 13.5 1,571 63.4
Depreciation and amortization......................... 1,046 4.6 34 1.4
--------------------------------------------------------------------
Loss from operations............................. (2,775) (12.2) (2,160) (87.2)
--------------------------------------------------------------------
Interest income....................................... 455 2.0 74 3.0
Interest expense...................................... (144) (0.6) (14) (0.6)
Other, net............................................ 9 -- -- --
--------------------------------------------------------------------
Loss before income taxes and extraordinary item...... (2,455) (10.8) (2,100) (84.8)
Income tax benefit.................................... 917 4.0 61 2.5
--------------------------------------------------------------------
Loss before extraordinary item........................ (1,538) (6.8) (2,039) (82.3)
Extraordinary item, net of income tax benefit of $144. (257) (1.1) -- --
--------------------------------------------------------------------
Net loss............................................ (1,795) (7.9) (2,039) (82.3)
Dividends on Class A Convertible Preferred Stock...... -- -- (150) (6.1)
--------------------------------------------------------------------
Net loss available to common shareholders........... $(1,795) (7.9)% $(2,189) (88.4)%
====================================================================
</TABLE>
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Net revenues for the three months ended March 31, 1999 and 1998, were $22.8
million and $2.5 million, respectively, which reflects the combined net revenues
of the Company and the Acquired Businesses for such periods. The increase in net
revenues of 818.8% for the three months ended March 31, 1999 were primarily due
to the effect of the Acquired Businesses.
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.
Operating expenses for the three months ended March 31, 1999 and 1998, were
$21.4 million and $3.0 million, respectively, or 94.1% and 122.4%, respectively,
of net revenues. The resulting improvement in gross profit is due to the
implementation of certain cost initiatives, an increase in revenue generated per
passenger traveled, as well as the addition of the Acquired businesses who are
not as impacted by seasonality changes.
General and administrative expenses for the three months ended March 31, 1999
and 1998 were $3.1 million and $1.6 million, respectively, or 13.5% and 63.4%,
respectively, of net revenues. As a percentage of net revenues, general and
administrative expenses for the three months ended March 31, 1999 were lower
than the general and administrative expenses for the three month period ended
March 31, 1998 due to reductions in compensation to previous owners and
management.
Depreciation and amortization for the three months ended March 31, 1999 and
1998 was $1.0 million and $34,000 or 4.6% and 1.4%, respectively, of net
revenues. The increase is primarily due to the amortization of certain
intangible assets resulting from the Acquisitions
Interest income for the three months ended March 31, 1999 and 1998 was
$455,000 and $74,000, respectively, or 2.0% and 3.0%, respectively, of net
revenues. The increase is primarily due to cash provided by the Acquisitions.
Interest expense for the three months ended March 31, 1999 and 1998 was
$144,000 and $14,000, respectively. The increase is primarily due to cash
borrowings from the Company's credit facility used in the acquisitions.
The benefit for income taxes for the three months ended March 31, 1999 and
1998 was $917,000 and $61,000, respectively, at a tax rate for 1999 of 37.4%,
reflecting the change to a C Corporation from its prior S Corporation status.
Net Loss for the three months ended March 31, 1999 includes an extraordinary
charge of $257,000, net of tax benefit of $144,000, related to the restructuring
of the Company's credit facility.
Net loss for the three months ended March 31, 1999 and 1998 was $1.8 million
and $2.2 million, respectively, or 7.9%, and 88.4%, respectively, of net
revenues.
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. Although each of the
Acquired Businesses has operated with different investment strategies, the
Company manages cash and investments on a centralized basis. The Company's
investment policy and its credit facility restrict investments to
investment-grade securities.
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
12
<PAGE> 13
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. 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. As of March 31, 1999, the Company had outstanding term loans of
$11.7 million under its Acquisition Facility and $3.9 million in letters of
credit outstanding under its working capital facility. The Company currently
has a total of $29.4 million available under its credit facility with $6.1
million available as revolving loans and $23.3 million available as term loans.
Net cash provided by operating activities for the three months ended March
31, 1999 was $6.1 million as compared to $1.2 million in net cash provided by
operating activities in the first three months of 1998. The increase of
approximately $4.9 million in operating cash flows relates primarily to the
increase in customer deposits in the first three months of 1999 in relation to
the same time period in 1998.
The Company made capital expenditures of $1.1 million in the first three
months of 1999 and $111,000 in the three months ended March 31, 1998. The
Company used $2.3 million of cash, net of cash acquired, for acquisitions in
the three months ended March 31, 1999. The Company borrowed approximately $10.2
million from its credit facility to finance the acquisition of Friendly
Holidays for the period ended March 31, 1999.
The Company intends to continue 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 the 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. 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 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., whom the Company is dependent upon 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, which 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
13
<PAGE> 14
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 "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 the version
being converted to is Y2K compliant. The conversion is planned to be completed
by October 1999. Another operating unit is continuing efforts, begun in 1998, to
convert to the "CODA" accounting system, a vendor software package. The Company
expects this conversion to be completed by October 1999.
During March and April, the Company acquired three additional subsidiaries:
Friendly Holidays Inc., ("Friendly"), Island Resort Tours Inc., ("Island") and
International Travel and Resorts, Inc. ("ITR"). Two of these subsidiaries,
Friendly and Island, are in the process of being migrated to the Y2K compliant
"TripsPro" system for reservations bookings. The migrations are planned to be
completed by October 1999. Enhancements to achieve Y2K compliance for ITR's
reservation system are underway and are scheduled to be completed by September
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
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 was effective January
1, 1999, and is applied to all projects in progress upon initial application.
The adoption of SOP 98-1 has not had a material impact on the Company's results
of operations, financial position, or cash flows.
14
<PAGE> 15
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
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 4. Submission of Matters to a Vote of Security Holders
NONE
ITEM 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.26 Amendment No. 1 to the Amended and Restated Credit Agreement
10.27 Amendment No. 2 to the Amended and Restated Credit Agreement
10.28 Amendment No. 2 dated as of March 16, 1999 to Senior Management
Agreement dated as of March 30, 1998 between the Registrant and
Mr. Ballou.
10.29 Amendment No. 2 dated as of March 16, 1999 to Senior Management
Agreement dated as of March 30, 1998 between the Registrant and
Mr. Lewis
10.30 Amendment No. 2 dated as of March 16, 1999 to Senior Management
Agreement dated as of March 30, 1998 between the Registrant and
Mr. Berman
10.31 Resignation Agreement between the Registrant and Mr. Walter S.
Berman
27.1 Financial Data Schedule
(b) The Registrant filed no reports on Form 8-K during the quarter ended
March 31, 1999.
16
<PAGE> 17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1999
GLOBAL VACATION GROUP, INC.
By:/s/ JAY G. STUART
-------------------
Jay G. Stuart
Executive Vice President,
& Chief Financial Officer
17
<PAGE> 18
Exhibit Index
Exhibits:
<TABLE>
<S> <C>
1) 10.26 Amendment No. 1 to the Amended and Restated Credit Agreement
2) 10.27 Amendment No. 2 to the Amended and Restated Credit Agreement
3) 10.28 Amendment No. 2 dated as of March 16, 1999 to Senior Management Agreement dated
as of March 30, 1998 between the Registrant and Mr. Ballou.
4) 10.29 Amendment No. 2 dated as of March 16, 1999 to Senior Management Agreement dated
as of March 30, 1998 between the Registrant and Mr. Lewis.
5) 10.30 Amendment No. 2 dated as of March 16, 1999 to Senior Management Agreement dated
as of March 30, 1998 between the Registrant and Mr. Berman.
6) 10.31 Resignation Agreement between the Registrant and Mr. Berman.
7) 27.1 Financial Data Schedule
</TABLE>
18
<PAGE> 1
EXHIBIT 10.26
AMENDMENT NO. 1
AMENDMENT NO. 1, dated as of March 23, 1999 (this "AMENDMENT"), to the
First Amended and Restated Credit Agreement, dated as of February 19, 1999, by
and among Global Vacation Group, Inc., the Lenders party thereto and The Bank of
New York, as Administrative Agent (as amended, supplemented or otherwise
modified from time to time, the "CREDIT AGREEMENT").
RECITALS
I. Capitalized terms used herein and not defined herein shall have the meanings
assigned to such terms in the Credit Agreement.
II. The Borrower has requested that the Administrative Agent agree to amend the
Credit Agreement upon the terms and conditions contained in this Amendment, and
the Administrative Agent is willing so to agree.
Accordingly, in consideration of the Recitals and the terms and conditions
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Borrower and the
Administrative Agent hereby agree as follows:
1. Section 1.1 of the Credit Agreement is amended as follows:
(a) The definition of the term "Available Other Investment Amount" is
amended by substituting the words "First Restatement Date" for the
words "Original Effective Date".
(b) The definition of the term "Existing Letters of Credit" is amended
and restated in its entirety as follows:
""EXISTING LETTERS OF CREDIT" means (i) with respect to the
Borrower and each Person that is a Subsidiary as of the First
Restatement Date, the letters of credit referred to in
Schedule 8.1 and existing as of the First Restatement Date and
(ii) with respect to each Person that becomes a Subsidiary
after the First Restatement Date, the letters of credit
referred to in the schedule delivered with respect to such
Person pursuant to Section 8.1(e) and existing as of the date
such Person becomes a Subsidiary."
<PAGE> 2
(c) The definition of the term "Existing Letter of Credit Exposure" is
deleted in its entirety.
(d) The proviso contained in the definition of the term "Leverage
Ratio" is amended and restated in its entirety as follows:
"provided, however, that, notwithstanding anything to the contrary
contained herein, for purposes of this definition, (a) Total Debt
shall not include any Indebtedness in respect of standby letters
of credit and (b) EBITDA shall be computed on a consistent basis
to reflect Acquisitions and Dispositions made by the Borrower and
the Subsidiaries during the Four Quarter Trailing Period as if
they occurred at the beginning of the Four Quarter Trailing
Period".
(e) The parenthetical contained in the definition of the term "Letter
of Credit Commitment" is deleted in its entirety.
2. Clause (ii) of Section 2.1(a) of the Credit Agreement is amended and
restated in its entirety as follows: "(ii) the Aggregate Revolving
Exposure would not exceed the Aggregate Revolving Commitment".
3. Clause (B) of Section 2.4(b)(i) of the Credit Agreement is amended and
restated in its entirety as follows: "(B) the excess of the Aggregate
Revolving Exposure over the Aggregate Revolving Commitment as so reduced
or terminated".
4. Clause (ii) of Section 2.5(a) of the Credit Agreement is amended and
restated in its entirety as follows: "(ii) the Aggregate Revolving
Exposure would not exceed the Aggregate Revolving Commitment".
5. Section 7.13 of the Credit Agreement is amended and restated in its
entirety as follows:
"SECTION 7.13. EXISTING LETTERS OF CREDIT
The Borrower shall cause all Existing Letters of Credit to
expire or otherwise terminate no later than (i) with respect to the
Borrower and each Person that is a Subsidiary as of the First Restatement
Date, May 6, 1999 and (ii) with respect to each Person that becomes a
Subsidiary after the First Restatement Date, the date that is twelve
months after the date such Person becomes a Subsidiary."
6. Section 8.1 of the Credit Agreement is amended as follows:
(a) Subsection (b) is amended and restated in its entirety as follows:
"(b) Subject to Section 7.13, Indebtedness of the Borrower or any
Person that is a Subsidiary as of the First Restatement Date in respect
of any Existing Letters of Credit, but not any extensions, renewals or
replacements of such Indebtedness, and other Indebtedness of the Borrower
or such Person as set forth on Schedule 8.1 and existing as of the First
Restatement Date, and any extensions, renewals and replacements of such
other Indebtedness;"
(b) Subsection (e) is amended as follows: (A) clause (ii) is amended
and restated Iin its entirety as follows: "(ii) subject to Section
7.13, Indebtedness of any Person that becomes a Subsidiary after
the Original Effective Date, provided that, with respect to each
such Person that becomes a Subsidiary after the First Restatement
Date, the Borrower shall have delivered to the Administrative
Agent a schedule in all respects reasonably satisfactory to the
Administrative Agent
<PAGE> 3
setting forth, if any, the Existing Letters of Credit with respect
to such Person" and (B) the following parenthetical is inserted
immediately after the reference "8.1(e)" contained in clause
(iii): "(other than Indebtedness in respect of Existing Letters of
Credit)".
(c) Subsection (f) is amended by inserting the following parenthetical
immediately after the words "unsecured Indebtedness": "(other than
Indebtedness in respect of letters of credit)".
7. Section 8.2(c) of the Credit Agreement is amended and restated in its
entirety as follows:
"(c) (i) any Lien existing on any fixed or capital assets
acquired, constructed or improved by the Borrower or any Subsidiary or
(ii) any Lien existing on any asset prior to the acquisition thereof by
the Borrower or any Subsidiary or existing on any asset of any Person
that becomes a Subsidiary after the Original Effective Date prior to the
time such Person becomes a Subsidiary, provided that (A) such Liens
secure Indebtedness permitted by Section 8.1(e), (B) such Liens shall not
apply to any other assets of the Borrower or any Subsidiary (other than
fixed assets that constitute fixtures thereon or accessions thereto), (C)
with respect to Liens under clause (i) of this Section 8.2(c) only, the
Indebtedness secured by such Liens does not exceed the cost of acquiring,
constructing or improving such fixed or capital assets and (D) with
respect to Liens under clause (ii) of this Section 8.2(c) only, such
Liens shall be not be created in contemplation of or in connection wth
the acquisition of such asset or the creation or acquisition of such
Person, as the case may be, and such Liens shall secure only those
obligations that it secures on the date of such acquisition or creation,
as the case may be, and, to the extent permitted under Section 8.1(e),
any extensions, renewals and replacements thereof that do not increase
the principal amount thereof .".
8. Section 8.5 of the Credit Agreement is amended as follows: (a) clause (d)
is amended by inserting the words "occurring after the First Restatement
Date" immediately after the word "quarters" and (b) clause (e) is amended
by substituting the words "as soon as practicable, but in no event less
than five" for the words "not less than ten".
9. Paragraphs 1 - 8 hereof shall not be effective until such time as the
Required Lenders shall have consented hereto in writing.
10. The Borrower hereby reaffirms and admits the validity and enforceability
of each Loan Document and all of the obligations of each Loan Party under
such Loan Document.
11. In all other respects, the Loan Documents shall remain in full force and
effect, and no amendment in respect of any term or condition of any Loan
Document shall be deemed to be an amendment in respect of any other term
or condition contained in any Loan Document.
12. This Amendment may be executed in any number of counterparts all of
which, when taken together, shall constitute one agreement. In making
proof of this Amendment, it shall only be necessary to produce the
counterpart executed and delivered by the party to be charged.
13. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED TO BE
PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCEABLE IN ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
<PAGE> 4
AS EVIDENCE of the agreement by the parties hereto to the terms and conditions
herein contained, each such party has caused this Amendment to be executed on
its behalf.
GLOBAL VACATION GROUP, INC.
By: /s/ WALTER S. BERMAN
-----------------------------------------
Name: Walter S. Berman
----------------------------------------
Title: Executive Vice President and Chief
Financial officer
---------------------------------------
THE BANK OF NEW YORK,
individually and as Administrative Agent
By: /s/ ROBERT SANTORIELLO
-----------------------------------------
Name: Robert Santoriello
----------------------------------------
Title: Assistant Vice President
---------------------------------------
BANK OF AMERICA, FSB
By: /s/ BARBARA LEVY
-----------------------------------------
Name: Barbara Levy
----------------------------------------
Title: Senior Vice President
---------------------------------------
FIRST UNION NATIONAL BANK
By: /s/ GORGE GONZALEZ
-----------------------------------------
Name: Gorge Gonzalez
----------------------------------------
Title: Senior Vice President
---------------------------------------
<PAGE> 5
AGREED 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: /s/ WALTER S. BERMAN
-----------------------------------
Name: Walter S. Berman
---------------------------------
Title: Executive Vice President and
Chief Financial officer
--------------------------------
<PAGE> 1
EXHIBIT 10.27
AMENDMENT NO. 2
AMENDMENT NO. 2, dated as of May 7, 1999 (this "AMENDMENT"), to the First
Amended and Restated Credit Agreement, dated as of February 19, 1999, by and
among Global Vacation Group, Inc., the Lenders party thereto and The Bank of New
York, as Administrative Agent (as amended, supplemented or otherwise modified
from time to time, the "CREDIT AGREEMENT").
RECITALS
I. Capitalized terms used herein and not defined herein shall have the
meanings assigned to such terms in the Credit Agreement.
II. The Borrower has requested that the Administrative Agent agree to amend
the Credit Agreement upon the terms and conditions contained in this Amendment,
and the Administrative Agent is willing so to agree.
Accordingly, in consideration of the Recitals and the terms and conditions
hereinafter set forth, and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, the Borrower and the
Administrative Agent hereby agree as follows:
1. Section 8.4 of the Credit Agreement is amended as follows:
(a) The following is added immediately before the semicolon in clause (d):
"and option payments in an aggregate amount not exceeding $14,050,000
made by the Borrower to acquire the Capital Stock of Trace Miller
Solutions, Inc.".
(b) The word "and" at the end of clause (e) is deleted.
(c) The period at the end of clause (f) is replaced by "; and".
(d) The following is added as a new clause (g):
"(g) loans and advances made by the Borrower to Roger Ballou
and J. Raymond Lewis in an aggregate principal amount not
exceeding $1,208,000 and $302,000, respectively, at any time
outstanding, together with any evidence thereof, provided that
the proceeds of each such loan or advance shall be used solely
for the purpose of enabling them to pay or satisfy their
respective tax liabilities.".
2. Section 8.5(d) of the Credit Agreement is amended as follows:
(a) The words "with respect to each Acquisition made in any period of four
consecutive fiscal quarters occurring after the First Restatement Date"
are deleted and the following is inserted in their place: "with respect
to each Acquisition made in any period consisting of the then current
fiscal quarter and such number of immediately preceding full consecutive
fiscal quarters as shall have occurred after December 31, 1998 (which
number shall in no event exceed three)".
(b) The following is inserted immediately after the amount "$25,000,000":
"provided that, notwithstanding anything to the contrary contained in any
Loan Document, an additional $20,000,000 of Acquisition Consideration may
be paid solely in connection with the Acquisition of the Capital Stock of
Trace Miller Solutions, Inc., and for purposes of calculating the amounts
referred to in subclauses (i) through (iv) of this
<PAGE> 2
clause (d), the Acquisition Consideration paid in connection with such
Acquisition shall be included only to the extent of the portion thereof
that exceeds $20,000,000".
3. Section 8.11 is amended by adding the following proviso immediately
before the period at the end thereof: "provided that this Section shall
not apply to any transaction permitted under Section 8.4(g)".
4. Paragraphs 1 - 3 hereof shall not be effective until such time as the
Required Lenders shall have consented hereto in writing.
5. The Borrower hereby (a) represents and warrants that all of the
representations and warranties contained in the Loan Documents are true
and correct in all material respects with the same effect as though such
representations and warranties had been made on the date hereof, except
to the extent such representations and warranties specifically relate to
an earlier date, in which case such representations and warranties are
true and correct on and as of such earlier date, and (b) reaffirms and
admits the validity and enforceability of each Loan Document and all of
the obligations of each Loan Party under such Loan Document.
6. In all other respects, the Loan Documents shall remain in full force and
effect, and no amendment in respect of any term or condition of any Loan
Document shall be deemed to be an amendment in respect of any other term
or condition contained in any Loan Document.
7. This Amendment may be executed in any number of counterparts all of
which, when taken together, shall constitute one agreement. In making
proof of this Amendment, it shall only be necessary to produce the
counterpart executed and delivered by the party to be charged.
8. THIS AMENDMENT IS BEING EXECUTED AND DELIVERED IN, AND IS INTENDED TO BE
PERFORMED IN, THE STATE OF NEW YORK AND SHALL BE CONSTRUED AND
ENFORCEABLE IN ACCORDANCE WITH, AND BE GOVERNED BY, THE INTERNAL LAWS OF
THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICT OF LAWS.
<PAGE> 3
AS EVIDENCE of the agreement by the parties hereto to the terms and conditions
herein contained, each such party has caused this Amendment to be executed on
its behalf.
GLOBAL VACATION GROUP, INC.
By: /s/ ROGER H. BALLOU
-----------------------------------
Name: Roger Ballou
----------------------------------
Title: Chairman
---------------------------------
THE BANK OF NEW YORK,
individually and as Administrative Agent
By: /s/ ROBERT SANTORIELLO
-----------------------------------
Name: Robert Santoriello
----------------------------------
Title: Assistant Vice President
---------------------------------
BANK OF AMERICA, FSB
By: /s/ BARBARA LEVY
-----------------------------------
Name: Barbara Levy
----------------------------------
Title: Senior Vice President
---------------------------------
FIRST UNION NATIONAL BANK
By: /s/ GORGE GONZALEZ
-----------------------------------
Name: Gorge Gonzalez
----------------------------------
Title: Senior Vice President
---------------------------------
<PAGE> 4
AGREED TO:
SUNSHINE VACATIONS, INC.
GLOBAL VACATION MANAGEMENT COMPANY
HADDON HOLIDAYS, INC.
GLOBETROTTERS, INC.
CLASSIC CUSTOM VACATIONS
MTI VACATIONS, INC.
GVG FINANCE COMPANY
FRIENDLY HOLIDAYS, INC.
ISLAND RESORT TOURS, INC.
INTERNATIONAL TRAVEL & RESORTS, INC.
AS TO EACH OF THE FOREGOING:
By: /s/ ROGER H. BALLOU
-------------------------------
Name: Roger Ballou
------------------------------
Title: Chairman
-----------------------------
<PAGE> 1
EXHIBIT 10.28
AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT
This Amendment No. 2 (the "AMENDMENT") to that certain Management
Agreement (the "AGREEMENT") dated as of March 30, 1998, as amended, by and
between Roger Ballou (the "EXECUTIVE") and Global Vacation Group, Inc., a New
York corporation (the "COMPANY"), is entered into as of March 16, 1999.
WITNESSETH:
WHEREAS, Thayer Equity Investors III, L.P., a Delaware limited
partnership ("THAYER"), is a third party beneficiary to Sections 2, 3, and 4 of
the Agreement and thus is a required signatory of this Amendment.
WHEREAS, Executive and the Compensation Committee of the Company's Board
of Directors have agreed to vest all of the shares acquired by Executive
pursuant to the Agreement (the "EXECUTIVE SHARES").
WHEREAS, the vesting in full of all of the Executive Shares by the
Company will result in a substantial income tax burden to the Executive.
WHEREAS, the Company has agreed to provide a loan to the Executive (the
"EXECUTIVE LOAN") to pay such income tax upon the terms and conditions set forth
in this Amendment.
WHEREAS, the Company, Thayer and Executive desire to amend the Agreement
and to enter into an amendment to provide for the vesting of the Executive
Shares and the terms and conditions of the Executive Loan to such Executive.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend the Agreement as
follows:
1. AMENDMENT TO SECTION 2(a). Section 2(a) of the Agreement is hereby
amended and restated to read in its entirety as follows:
"(a) Except as otherwise provided in Section 2(d) below, 22,222 shares
(prior to any split, combination or other adjustment after March 30, 1998) or
67% of the Vesting Stock issued pursuant to Section 1(a) above (the "TIME
VESTING SHARES") shall become vested in accordance with the following schedule,
if as of each such date Executive is still employed by the Company or any of its
Affiliates:
<PAGE> 2
<TABLE>
<CAPTION>
Cumulative Percentage of Time
Date Vesting Shares to be Vested
---- ---------------------------
<S> <C>
Closing of the Recapitalization 20%
March 16, 1999 100%
</TABLE>
No Time Vesting Shares may be Transferred by the Executive except in accordance
with the following schedule:
<TABLE>
<CAPTION>
Cumulative Percentage of Time
Date Vesting Shares Permitted to be Transferred
---- -------------------------------------------
<S> <C>
Closing of the Recapitalization 20%
1st Anniversary of Closing
of the Recapitalization 40%
2nd Anniversary of Closing
of the Recapitalization 60%
3rd Anniversary of Closing
of the Recapitalization 80%
4th Anniversary of Closing
of the Recapitalization 100%
</TABLE>
Notwithstanding the foregoing sentence, in the event that Executive's employment
with the Company is terminated by the Company for Cause or by the Executive
without Good Reason, than the Time Vesting Shares not then permitted to be
Transferred under the foregoing schedule as of the date of such termination may
not be Transferred by the Executive until April 1, 2005 (except upon a Sale of
the Company). All Time Vesting Shares may be Transferred by an Executive
(subject to applicable securities laws) in the event that (i) Executive has been
terminated by the Company without Cause or Performance Cause; (ii) Executive has
terminated his employment with the Company for Good Reason; (iii) Executive dies
or is "disabled" (as such term is defined in Section 7(c) hereof); or (iv) a
Sale of the Company occurs. All Time Vesting Shares shall be pledged to the
Company as collateral for that certain Executive Loan (as defined in Section 13
below)."
2. AMENDMENT TO SECTION 2(b). Section 2(b) of the Agreement is hereby
amended and restated to read in its entirety as follows:
"(b) Except as otherwise provided in Section 2(d) below, 11,111 shares
(prior to any split, combination or other adjustment after March 30, 1998) or
33% of the Vesting Stock issued pursuant to Section 1(a) above (the "PERFORMANCE
VESTING SHARES") shall become vested on March 16, 1999. No Performance Vesting
Shares may be Transferred by the Executive prior to March 16, 2003; provided,
however, that if Executive's employment with the Company terminates on or prior
to July 27, 2000, then no Performance Vesting Shares may be Transferred by the
Executive until on or after April 1, 2005. Notwithstanding the foregoing
sentence, all Performance Vesting Shares may be Transferred by an Executive or
his estate (subject to applicable securities laws) in the event that (i)
Executive's employment with the Company has been terminated because of
disability or death or (ii) a Sale of the Company occurs. All Performance Shares
shall be pledged to the Company as collateral for that certain Executive Loan
(as defined in Section 13 below)."
3. AMENDMENT TO SECTION 7(c)(ii)(B). Section 7(c)(ii)(B) of the Agreement
is hereby added to add the following new sentence at the end of such Section:
"Notwithstanding the foregoing, Executive agrees that if he resigns
from employment with the Company without Good Reason (i) at any time prior to
the first anniversary of the date of this Amendment, then Executive shall be
liable for liquidated damages to the Company in an amount equal to three (3)
times the Executive's then current Annual Base Salary; (ii) at any time after
the first anniversary of the date of this Amendment but prior to the end of the
initial Service Term, then Executive shall be liable for liquidated damages to
the Company in an amount equal to two (2) times his then current Annual Base
Salary; and (iii) during the first year of any renewal of the Service Term, then
Executive shall be liable for liquidated damages to the Company in an amount
equal to his then current Annual Base Salary."
4. NEW SECTION 13. A new Section 13 of the Agreement is hereby added to read in
its entirety as follows:
<PAGE> 3
"13. Executive Loan.
(a) Upon the vesting in full of the Time Vesting Shares and the
Performance Vesting Shares on March 16, 1999, the Executive shall have the right
to request, at Executive's option at any time prior to May 1, 2000, a loan from
the Company in an aggregate amount equal to $1,208,000 (the "Executive Loan").
The Executive Loan may be made in one loan or installments from time to time in
an amount(s) equal to the aggregate incremental federal income taxes paid by the
Executive as a result of the vesting in full of the Vesting Shares on March 16,
1999. The Company and Executive shall mutually agree upon the incremental
federal income taxes to be paid by the Executive in consultation with their
respective tax advisors. The Executive Loan shall be evidenced by a promissory
note in the form attached hereto as Annex A.
(b) The Executive Loan shall bear interest at the rate of 6% per annum
and interest will be due and payable semi-annually on each six month anniversary
of the date of the Note. All principal, together with accrued but unpaid
interest, on the Executive Loan will be due and payable in full on the earlier
of (i) ten days after the date that Executive's employment with the Company
ceases or (ii) March 16, 2003. In addition, the Executive Loan shall be prepaid
in whole or in part with any after-tax proceeds received by the Executive from
the sale of any shares of the Company's common stock by Executive (including
upon a Sale of the Company).
(c) Notwithstanding the foregoing, in the event that Executive remains
employed by the Company on March 16, 2000, then 10.56% of the maximum principal
amount of the Executive Loan ever outstanding (as adjusted downward for any
reduction in actual incremental federal income taxes paid by the Executive
pursuant to Section 13(a) above) (the "Loan Amount"), shall be forgiven and
extinguished, and an additional 10.56% of the Loan Amount shall be forgiven and
extinguished on each of the second, third and fourth anniversaries of March 16,
1999 to the extent that Executive remains employed by the Company on such
anniversary dates. In addition, all interest on the Executive Loan shall be
forgiven on March 16, 2003 to the extent that the Company has achieved aggregate
net income (after income taxes) equal to or greater than $69 million for the
four year period beginning January 1, 1999 and ending December 31, 2002;
provided, however, that in the event that the aggregate net income (after income
taxes) of the Company during such time period is greater than $60 million (but
less than $69 million), then a portion of such interest shall be forgiven and
extinguished on a pro rata basis beginning with 0% forgiven at $60 million in
net income with interest forgiven proportionally above such amount until 100% of
such interest is forgiven at $69 million in net income (for example, if $64.5
million in aggregate net income is achieved, then 50% of such interest shall be
forgiven). In the event that the conditions to forgiveness of interest described
in the foregoing sentence have been achieved, all interest previously paid by
the Executive to the Company prior to March 16, 2003 shall, as of such date, be
applied to reduce the then outstanding principal balance of the Executive Loan.
(d) In the event of a Sale of the Company prior to April 16, 2003 in
which the fair value of the consideration paid to the stockholders of the
Company as determined by the Board in good faith would result in a 30%
annualized return to the stockholders of the Company as of March 16, 1999 (based
on a stock price of $8.4375 as of such date), then all interest on the Executive
Loan shall be forgiven and all interest previously paid by the Executive to the
Company prior to the Sale of the Company shall, as of such date, be applied to
reduce the then outstanding principal balance of the Executive Loan."
5. LIMITED AMENDMENTS. Except as expressly set forth herein, the Agreement shall
continue to be, and shall remain, in full force and effect. The amendments set
forth in herein shall not be deemed (i) to be a waiver of, or consent to, or a
modification or amendment of, any other term or condition of the Agreement or
(ii) prejudice any other right or rights which the parties may now have or may
have in the future under or in connection with the Agreement or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
6. EFFECT OF THE AMENDMENT. All references to the Agreement in the Agreement or
any related document shall mean the Agreement as amended by this Amendment.
Except as specifically amended above, the Agreement shall remain in full force
and effect, and is hereby ratified and confirmed.
7. DESCRIPTIVE HEADINGS. The descriptive headings of this Amendment are inserted
for convenience only and do not constitute a part of this Amendment.
8. COUNTERPARTS. This Amendment may be executed and delivered in counterparts,
each of which shall constitute an original, and all of which together shall
constitute one Amendment.
9. FACSIMILE TRANSMISSION. Signatures sent to the other parties by facsimile
transmission shall be binding as evidence of acceptance of the terms hereof by
such signatory party.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
EXECUTIVE:
By: /s/ ROGER BALLOU
----------------------------------
Roger Ballou
GLOBAL VACATION GROUP, INC.
By: /s/ ROGER BALLOU
-----------------------------
Name: J. Raymond Lewis Jr.
-----------------------------
Title: President and Chief
Operating Officer
----------------------------
THAYER EQUITY INVESTORS III, L.P.
By: /s/ CARL J. RICKERTSON
-----------------------------
Name: Carl J. Rickertson
-----------------------------
Title: Member
----------------------------
<PAGE> 1
EXHIBIT 10.29
AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT
This Amendment No. 2 (the "AMENDMENT") to that certain Management
Agreement (the "AGREEMENT") dated as of March 30, 1998, as amended, by and
between Raymond Lewis (the "EXECUTIVE") and Global Vacation Group, Inc., a New
York corporation (the "COMPANY"), is entered into as of March 16, 1999.
WITNESSETH:
WHEREAS, Thayer Equity Investors III, L.P., a Delaware limited
partnership ("THAYER"), is a third party beneficiary to Sections 2, 3, and 4 of
the Agreement and thus is a required signatory of this Amendment.
WHEREAS, Executive and the Compensation Committee of the Company's Board
of Directors have agreed to vest all of the shares acquired by Executive
pursuant to the Agreement (the "EXECUTIVE SHARES").
WHEREAS, the vesting in full of all of the Executive Shares by the
Company will result in a substantial income tax burden to the Executive.
WHEREAS, the Company has agreed to provide a loan to the Executive (the
"EXECUTIVE LOAN") to pay such income tax upon the terms and conditions set forth
in this Amendment.
WHEREAS, the Company, Thayer and Executive desire to amend the Agreement
and to enter into an amendment to provide for the vesting of the Executive
Shares and the terms and conditions of the Executive Loan to such Executive.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend the Agreement as
follows:
1. AMENDMENT TO SECTION 2(a). Section 2(a) of the Agreement is hereby
amended and restated to read in its entirety as follows:
"(c) Except as otherwise provided in Section 2(d) below, 5,555 shares
(prior to any split, combination or other adjustment after March 30, 1998) or
67% of the Vesting Stock issued pursuant to Section 1(a) above (the "TIME
VESTING SHARES") shall become vested in accordance with the following schedule,
if as of each such date Executive is still employed by the Company or any of its
Affiliates:
<TABLE>
<CAPTION>
Cumulative Percentage of Time
Date Vesting Shares to be Vested
---- ---------------------------
<S> <C>
Closing of the Recapitalization 20%
March 16, 1999 100%
</TABLE>
No Time Vesting Shares may be Transferred by the Executive except in accordance
with the following schedule:
<TABLE>
<CAPTION>
Cumulative Percentage of Time
Date Vesting Shares Permitted to be Transferred
---- -------------------------------------------
<S> <C>
Closing of the Recapitalization 20%
1st Anniversary of Closing
of the Recapitalization 40%
2nd Anniversary of Closing
of the Recapitalization 60%
3rd Anniversary of Closing
of the Recapitalization 80%
4th Anniversary of Closing
of the Recapitalization 100%
</TABLE>
<PAGE> 2
Notwithstanding the foregoing sentence, in the event that Executive's employment
with the Company is terminated by the Company for Cause or by the Executive
without Good Reason, than the Time Vesting Shares not then permitted to be
Transferred under the foregoing schedule as of the date of such termination may
not be Transferred by the Executive until April 1, 2005 (except upon a Sale of
the Company). All Time Vesting Shares may be Transferred by an Executive
(subject to applicable securities laws) in the event that (i) Executive has been
terminated by the Company without Cause or Performance Cause; (ii) Executive has
terminated his employment with the Company for Good Reason; (iii) Executive dies
or is "disabled" (as such term is defined in Section 7(c) hereof); or (iv) a
Sale of the Company occurs. All Time Vesting Shares shall be pledged to the
Company as collateral for that certain Executive Loan (as defined in Section 13
below)."
2. AMENDMENT TO SECTION 2(b). Section 2(b) of the Agreement is hereby
amended and restated to read in its entirety as follows:
"(d) Except as otherwise provided in Section 2(d) below, 2,778 shares
(prior to any split, combination or other adjustment after March 30, 1998) or
33% of the Vesting Stock issued pursuant to Section 1(a) above (the "PERFORMANCE
VESTING SHARES") shall become vested on March 16, 1999. No Performance Vesting
Shares may be Transferred by the Executive prior to March 16, 2003; provided,
however, that if Executive's employment with the Company terminates on or prior
to July 27, 2000, then no Performance Vesting Shares may be Transferred by the
Executive until on or after April 1, 2005. Notwithstanding the foregoing
sentence, all Performance Vesting Shares may be Transferred by an Executive or
his estate (subject to applicable securities laws) in the event that (i)
Executive's employment with the Company has been terminated because of
disability or death or (ii) a Sale of the Company occurs. All Performance Shares
shall be pledged to the Company as collateral for that certain Executive Loan
(as defined in Section 13 below)."
3. AMENDMENT TO SECTION 7(c)(ii)(B). Section 7(c)(ii)(B) of the Agreement
is hereby added to add the following new sentence at the end of such Section:
"Notwithstanding the foregoing, Executive agrees that if he resigns
from employment with the Company without Good Reason (i) at any time prior to
the first anniversary of the date of this Amendment, then Executive shall be
liable for liquidated damages to the Company in an amount equal to three (3)
times the Executive's then current Annual Base Salary; (ii) at any time after
the first anniversary of the date of this Amendment but prior to the end of the
initial Service Term, then Executive shall be liable for liquidated damages to
the Company in an amount equal to two (2) times his then current Annual Base
Salary; and (iii) during the first year of any renewal of the Service Term, then
Executive shall be liable for liquidated damages to the Company in an amount
equal to his then current Annual Base Salary."
4. NEW SECTION 13. A new Section 13 of the Agreement is hereby added to
read in its entirety as follows:
"13. Executive Loan.
(a) Upon the vesting in full of the Time Vesting Shares and the
Performance Vesting Shares on March 16, 1999, the Executive shall have the right
to request, at Executive's option at any time prior to May 1, 2000, a loan from
the Company in an aggregate amount equal to $302,000 (the "Executive Loan"). The
Executive Loan may be made in one loan or installments from time to time in an
amount(s) equal to the aggregate incremental federal income taxes paid by the
Executive as a result of the vesting in full of the Vesting Shares on March 16,
1999. The Company and Executive shall mutually agree upon the incremental
federal income taxes to be paid by the Executive in consultation with their
respective tax advisors. The Executive Loan shall be evidenced by a promissory
note in the form attached hereto as Annex A.
(b) The Executive Loan shall bear interest at the rate of 6% per
annum and interest will be due and payable semi-annually on each six month
anniversary of the date of the Note. All principal, together with accrued but
unpaid interest, on the Executive Loan will be due and payable in full on the
earlier of (i) ten days after the date that Executive's employment with the
Company ceases or (ii) March 16, 2003. In addition, the Executive Loan shall be
prepaid in whole or in part with any after-tax proceeds received by the
Executive from the sale of any shares of the Company's common stock by Executive
(including upon a Sale of the Company).
(c) Notwithstanding the foregoing, in the event that Executive
remains employed by the Company on March 16, 2000, then 10.56% of the maximum
principal amount of the Executive Loan ever outstanding (as adjusted downward
for any reduction in actual incremental federal income taxes paid by the
Executive pursuant to Section 13(a) above) (the "Loan Amount"), shall be
forgiven and extinguished, and an additional 10.56% of the Loan Amount shall be
forgiven and extinguished on each of the second, third and fourth anniversaries
of March 16, 1999 to the extent that Executive remains employed by the Company
on such anniversary dates. In addition, all interest on the Executive Loan
shall be forgiven on March 16, 2003 to the extent that the Company has achieved
aggregate net income (after income taxes) equal to or greater than $69 million
for the four year period beginning January 1, 1999 and ending December 31,
2002; provided, however, that in the event that the aggregate net income (after
income taxes)
<PAGE> 3
of the Company during such time period is greater than $60 million (but less
than $69 million), then a portion of such interest shall be forgiven and
extinguished on a pro rata basis beginning with 0% forgiven at $60 million in
net income with interest forgiven proportionally above such amount until 100% of
such interest is forgiven at $69 million in net income (for example, if $64.5
million in aggregate net income is achieved, then 50% of such interest shall be
forgiven). In the event that the conditions to forgiveness of interest described
in the foregoing sentence have been achieved, all interest previously paid by
the Executive to the Company prior to March 16, 2003 shall, as of such date, be
applied to reduce the then outstanding principal balance of the Executive Loan.
(d) In the event of a Sale of the Company prior to April 16, 2003
in which the fair value of the consideration paid to the stockholders of the
Company as determined by the Board in good faith would result in a 30%
annualized return to the stockholders of the Company as of March 16, 1999 (based
on a stock price of $8.4375 as of such date), then all interest on the Executive
Loan shall be forgiven and all interest previously paid by the Executive to the
Company prior to the Sale of the Company shall, as of such date, be applied to
reduce the then outstanding principal balance of the Executive Loan."
5. LIMITED AMENDMENTS. Except as expressly set forth herein, the Agreement shall
continue to be, and shall remain, in full force and effect. The amendments set
forth in herein shall not be deemed (i) to be a waiver of, or consent to, or a
modification or amendment of, any other term or condition of the Agreement or
(ii) prejudice any other right or rights which the parties may now have or may
have in the future under or in connection with the Agreement or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
6. EFFECT OF THE AMENDMENT. All references to the Agreement in the Agreement or
any related document shall mean the Agreement as amended by this Amendment.
Except as specifically amended above, the Agreement shall remain in full force
and effect, and is hereby ratified and confirmed.
7. DESCRIPTIVE HEADINGS. The descriptive headings of this Amendment are inserted
for convenience only and do not constitute a part of this Amendment.
8. COUNTERPARTS. This Amendment may be executed and delivered in counterparts,
each of which shall constitute an original, and all of which together shall
constitute one Amendment.
9. FACSIMILE TRANSMISSION. Signatures sent to the other parties by facsimile
transmission shall be binding as evidence of acceptance of the terms hereof by
such signatory party.
[THIS SPACE INTENTIONALLY LEFT BLANK]
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
EXECUTIVE:
By: /s/ J. RAYMOND LEWIS
---------------------------------------
Raymond Lewis
GLOBAL VACATION GROUP, INC.
By: /s/ ROGER BALLOU
---------------------------------------
Name: Roger Ballou
------------------------------
Title: Chairman and Chief Executive
Officer
-----------------------------
THAYER EQUITY INVESTORS III, L.P.
By: /s/ CARL J. RICKERTSON
---------------------------------------
Name: Carl J. Rickertson
------------------------------
Title: Member
-----------------------------
<PAGE> 1
EXHIBIT 10.30
AMENDMENT NO. 2 TO MANAGEMENT AGREEMENT
This Amendment No. 2 (the "AMENDMENT") to that certain Management
Agreement (the "AGREEMENT") dated as of March 30, 1998, as amended, by and
between Walter S. Berman (the "EXECUTIVE") and Global Vacation Group, Inc., a
New York corporation (the "COMPANY"), is entered into as of March 16, 1999.
WITNESSETH:
WHEREAS, Thayer Equity Investors III, L.P., a Delaware limited
partnership ("THAYER"), is a third party beneficiary to Sections 2, 3, and 4 of
the Agreement and thus is a required signatory of this Amendment.
WHEREAS, the Executive and the Compensation Committee of the Company's
Board of Directors have agreed to vest a portion of the shares acquired by
Executive pursuant to the Agreement (the "EXECUTIVE SHARES").
WHEREAS, the vesting of such Executive Shares by the Company will result
in a substantial income tax burden to the Executive.
WHEREAS, the Company has agreed to offer to provide a loan to the
Executive (the "EXECUTIVE LOAN") to pay such income tax upon the terms and
conditions set forth in this Amendment.
WHEREAS, the Company, Thayer and the Executive desire to modify the
Agreement and to enter into an amendment to provide for the vesting of certain
Executive Shares and the terms and conditions of the Executive Loan offered to
such Executive.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree to amend the Agreement as
follows:
1. AMENDMENT TO SECTION 2(a). Section 2(a) of the Agreement is hereby
amended and restated to read in its entirety as follows:
"(e) Except as otherwise provided in Section 2(d) below, 7,407 shares
(prior to any split, combination or other adjustment after March 30, 1998) or
67% of the Vesting Stock issued pursuant to Section 1(a) above (the "TIME
VESTING SHARES") shall become vested in accordance with the following schedule,
if as of each such date the Executive is still employed by the Company or any of
its Affiliates:
<TABLE>
<CAPTION>
Cumulative Percentage of Time
Date Vesting Shares to be Vested
---- ---------------------------
<S> <C>
Closing of the Recapitalization 20%
March 16, 1999 100%
</TABLE>
No Time Vesting Shares may be Transferred by the Executive except in accordance
with the following schedule:
<TABLE>
<CAPTION>
Cumulative Percentage of Time
Date Vesting Shares Permitted to be Transferred
---- -------------------------------------------
<S> <C>
Closing of the Recapitalization 20%
1st Anniversary of Closing
of the Recapitalization 40%
2nd Anniversary of Closing
of the Recapitalization 60%
3rd Anniversary of Closing
of the Recapitalization 80%
4th Anniversary of Closing
of the Recapitalization 100%
</TABLE>
<PAGE> 2
Notwithstanding the foregoing sentence, in the event that Executive's employment
with the Company is terminated by the Company for Cause or by the Executive
without Good Reason, than the Time Vesting Shares not then permitted to be
Transferred under the foregoing schedule as of the date of such termination may
not be Transferred by the Executive until April 1, 2005 (except upon a Sale of
the Company). All Time Vesting Shares may be Transferred by an Executive
(subject to applicable securities laws) in the event that (i) Executive has been
terminated by the Company without Cause or Performance Cause; (ii) Executive has
terminated his employment with the Company for Good Reason; (iii) Executive dies
or is "disabled" (as such term is defined in Section 7(c) hereof); or (iv) a
Sale of the Company occurs. All Time Vesting Shares shall be pledged to the
Company as collateral for that certain Executive Loan (as defined in Section 13
below)."
2. AMENDMENT TO SECTION 2(b). Section 2(b) of the Agreement is hereby
amended and restated to read in its entirety as follows:
"(f)
(i) Except as otherwise provided in Section 2(d) below,
37,637 shares of the Vesting Stock (after all splits, combinations or other
adjustments made after March 30, 1998 through the date hereof) issued pursuant
to Section 1(a) above (the "PERFORMANCE VESTING SHARES") shall become vested in
accordance with the following schedule if the Investor shall have earned or
deemed to have earned the Return set forth below as of the date of
determination:
<TABLE>
<CAPTION>
Cumulative Percentage
of Performance
Return Vesting Shares "Vested"
- ------ -----------------------
<S> <C>
30% 50%
31% 55%
32% 60%
33% 65%
34% 70%
35% 75%
36% 80%
37% 85%
38% 90%
39% 95%
40% or more 100%
</TABLE>
In addition to the other times set forth in this Agreement in which the Return
will be calculated, the Return will also be calculated for purposes of
determining vesting under this Section 2(b)(i) upon the following circumstances:
(i) if the Investor has sold or transferred more than 50% of its highest total
ownership interest in the Company to any non-Affiliate of the Investor; (ii) if
Executive has been terminated by the Company without Cause or Performance Cause;
(iii) if Executive terminates his employment for Good Reason; or (iv) if
Executive has been terminated because of disability or death. Notwithstanding
anything in this Agreement to the contrary, all Performance Vesting Shares then
outstanding will become Vested Shares on April 1, 2005.
(ii) Except as otherwise provided in Section 2(d) below,
7,551 shares (after all splits, combinations or other adjustments made after
March 30, 1998 through the date hereof) of the Vesting Stock issued pursuant to
Section 1(a) above (the "NON-PERFORMANCE VESTING SHARES") shall become vested on
March 16, 1999. No Non-Performance Vesting Shares may be Transferred by the
Executive prior to March 16, 2003; provided, however, that if Executive's
employment with the Company terminates on or prior to July 27, 2000, then no
Non-Performance Vesting Shares may be Transferred by the Executive until on or
after April 1, 2005. Notwithstanding the foregoing sentence, all Non-Performance
Vesting Shares may be Transferred by an Executive or his estate (subject to
applicable securities laws) in the event that (i) Executive's employment with
the Company has been terminated because of disability or death or (ii) a Sale of
the Company occurs. All Non-Performance Shares shall be pledged to the Company
as collateral for that certain Executive Loan (as defined in Section 13 below)."
3. AMENDMENT TO SECTION 7(c)(ii)(B). Section 7(c)(ii)(B) of the Agreement
is hereby added to add the following new sentence at the end of such Section:
"Notwithstanding the foregoing, Executive agrees that if he resigns
from employment with the Company without Good Reason (i) at any time prior to
the first anniversary of the date of this Amendment, then Executive shall be
liable for liquidated damages to the Company in an amount equal to three (3)
times the Executive's then current Annual Base Salary; (ii) at any time after
the first anniversary of the date of this Amendment but prior to the end of the
initial Service Term, then Executive shall be liable for liquidated damages to
the Company in an amount equal to two (2) times his then current Annual Base
Salary; and
<PAGE> 3
(iii) during the first year of any renewal of the Service Term, then Executive
shall be liable for liquidated damages to the Company in an amount equal to his
then current Annual Base Salary."
4. NEW SECTION 13. A new Section 13 of the Agreement is hereby added to
read in its entirety as follows:
"13. Executive Loan.
(a) Upon the vesting in full of the Time Vesting Shares and the
Performance Vesting Shares on March 16, 1999, the Executive shall have the right
to request, at Executive's option at any time prior to the earlier of (i) May 1,
2000 or (ii) the date of the termination of Executive's employment with the
Company, a loan from the Company in an aggregate amount equal to $_____ (the
"Executive Loan"). The Executive Loan may be made in one loan or installments
from time to time in an amount(s) equal to the aggregate incremental federal
income taxes paid by the Executive as a result of the vesting in full of certain
Vesting Shares on March 16, 1999. The Company and Executive shall mutually agree
upon the incremental federal income taxes to be paid by the Executive in
consultation with their respective tax advisors. The Executive Loan shall be
evidenced by a promissory note in the form attached hereto as Annex A.
(b) The Executive Loan shall bear interest at the rate of 6% per
annum and interest will be due and payable semi-annually on each six month
anniversary of the date of the Note. All principal, together with accrued but
unpaid interest, on the Executive Loan will be due and payable in full on the
earlier of (i) ten days after the date that Executive's employment with the
Company ceases or (ii) March 16, 2003. In addition, the Executive Loan shall be
prepaid in whole or in part with any after-tax proceeds received by the
Executive from the sale of any shares of the Company's common stock by Executive
(including upon a Sale of the Company).
(c) Notwithstanding the foregoing, in the event that Executive
remains employed by the Company on March 16, 2000, then 10.56% of the maximum
principal amount of the Executive Loan ever outstanding (as adjusted downward
for any reduction in actual incremental federal income taxes paid by the
Executive pursuant to Section 13(a) above) (the "Loan Amount"), shall be
forgiven and extinguished, and an additional 10.56% of the Loan Amount shall be
forgiven and extinguished on each of the second, third and fourth anniversaries
of March 16, 1999 to the extent that Executive remains employed by the Company
on such anniversary dates. In addition, all interest on the Executive Loan shall
be forgiven on March 16, 2003 to the extent that the Company has achieved
aggregate net income (after income taxes) equal to or greater than $69 million
for the four year period beginning January 1, 1999 and ending December 31, 2002;
provided, however, that in the event that the aggregate net income (after income
taxes) of the Company during such time period is greater than $60 million (but
less than $69 million), then a portion of such interest shall be forgiven and
extinguished on a pro rata basis beginning with 0% forgiven at $60 million in
net income with interest forgiven proportionally above such amount until 100% of
such interest is forgiven at $69 million in net income (for example, if $64.5
million in aggregate net income is achieved, then 50% of such interest shall be
forgiven). In the event that the conditions to forgiveness of interest described
in the foregoing sentence have been achieved, all interest previously paid by
the Executive to the Company prior to March 16, 2003 shall, as of such date, be
applied to reduce the then outstanding principal balance of the Executive Loan.
(d) In the event of a Sale of the Company prior to April 16, 2003
in which the fair value of the consideration paid to the stockholders of the
Company as determined by the Board in good faith would result in a 30%
annualized return to the stockholders of the Company as of March 16, 1999 (based
on a stock price of $8.4375 as of such date), then all interest on the Executive
Loan shall be forgiven and all interest previously paid by the Executive to the
Company prior to the Sale of the Company shall, as of such date, be applied to
reduce the then outstanding principal balance of the Executive Loan."
5. LIMITED AMENDMENTS. Except as expressly set forth herein, the Agreement shall
continue to be, and shall remain, in full force and effect. The amendments set
forth in herein shall not be deemed (i) to be a waiver of, or consent to, or a
modification or amendment of, any other term or condition of the Agreement or
(ii) prejudice any other right or rights which the parties may now have or may
have in the future under or in connection with the Agreement or any of the
instruments or agreements referred to therein, as the same may be amended or
modified from time to time.
6. EFFECT OF THE AMENDMENT. All references to the Agreement in the Agreement or
any related document shall mean the Agreement as amended by this Amendment.
Except as specifically amended above, the Agreement shall remain in full force
and effect, and is hereby ratified and confirmed.
7 DESCRIPTIVE HEADINGS. The descriptive headings of this Amendment are inserted
for convenience only and do not constitute a part of this Amendment.
8. COUNTERPARTS. This Amendment may be executed and delivered in counterparts,
each of which shall constitute an original, and all of which together shall
constitute one Amendment.
9. FACSIMILE TRANSMISSION. Signatures sent to the other parties by facsimile
transmission shall be binding as evidence of acceptance of the terms hereof by
such signatory party.
<PAGE> 4
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first written above.
EXECUTIVE:
By: /s/ WALTER S. BERMAN
------------------------------------
Walter S. Berman
GLOBAL VACATION GROUP, INC.
By: /s/ ROGER BALLOU
----------------------------
Name: Roger Ballou
-------------------------------
Title: Chairman and Chief Executive
Officer
------------------------------
THAYER EQUITY INVESTORS III, L.P.
By: /s/ CARL J. RICKERTSON
----------------------------
Name: Carl J. Rickertson
-------------------------------
Title: Member
------------------------------
<PAGE> 1
EXHIBIT 10.31
RESIGNATION OF EMPLOYMENT AGREEMENT
This Resignation of Employment Agreement (this "Agreement") is entered
into as of May ___, 1999, by and between WALTER S. BERMAN (the "Executive") and
GLOBAL VACATION GROUP, INC., a New York corporation (the "Company"), and Thayer
Equity Investors III, L.P., a Delaware limited partnership ("Thayer").
W I T N E S S E T H :
WHEREAS, the Company, Thayer and Executive are parties to a Management
Agreement dated March 30, 1998, as amended (the "Management Agreement");
WHEREAS, the Executive currently serves as Executive Vice President and
Chief Financial and Accounting Officer of the Company;
WHEREAS, the Company and the Executive desire to enter into an agreement
to provide for the terms and conditions by which the Executive's employment with
the Company will cease as of May 15, 1999 (the "Resignation Date").
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the parties hereto agree as follows:
ARTICLE I
TERMS AND CONDITIONS OF RESIGNATION
1.1 Resignation of Executive. The Company and the Executive hereby agree
that the employment of Executive as Executive Vice President and Chief Financial
and Accounting Officer of the Company shall cease as of the Resignation Date.
The Executive also resigns, effective as of the Resignation Date, from all
positions, including directorships, which Executive may have in the Company and
in any subsidiaries of the Company, including without limitation, Friendly
Holidays, Inc., Island Resort Tours, Inc., International Travel & Resorts, Inc.,
Classic Custom Vacations, Inc., Haddon Holidays, Inc., MTI Vacations, Inc., GVG
Finance Company and Globetrotters, Inc.
1.2 Severance Pay for Executive. The parties hereby agree that
Executive's resignation pursuant to this Agreement shall be deemed to be a
resignation of Executive without Good Reason pursuant to Section 7 of the
Management Agreement and as a result Executive shall be owed no severance or
other pay from the Company after the Resignation Date. Notwithstanding the
foregoing, in exchange for the mutual promises and covenants contained herein,
Executive is hereby released from the liquidated damages required to be paid by
Executive to the Company pursuant to Section 7(c)(ii)(B) of the Management
Agreement.
1.3 Options. Executive hereby agrees that all stock options by Executive
with respect to the Company's common stock shall terminate and be of no further
force and effect as of the Resignation Date.
1.4 Status of Management Agreement. The Management Agreement is hereby
terminated, including but not limited to the "Repurchase Option" of the Company
and Thayer thereunder and, except for Executive's rights as a shareholder of the
Company, all obligations between Executive and the Company as well as any
benefits to Thayer are hereby governed by this Agreement.
<PAGE> 2
1.5 Mutual Release.
(a) Except in connection with this Agreement, Executive on the one
hand and the Company on the other hand, hereby remise, release and forever
discharge the other and their successors, assigns and affiliates from any and
all manner of action and actions, cause and causes of action, suits, debts,
dues, sums of money, accounts, reckoning, contracts, controversies, agreements,
liabilities, promises, damages, judgments, claims or demands of whatsoever kind
or nature, in law or in equity which either the Executive on the one hand and
the Company on the other hand, may have against the other from the beginning of
the world to the date hereof.
(b) These releases shall include, by way of example and not
limitation, all claims, actions, causes of action, liabilities, demands, rights,
damages, costs, attorneys' fees, expenses and controversies of every kind which
arise out of, relate, or are based on (i) Executive's employment with the
company or the termination thereof, (ii) statements, acts or omissions by
Company and its agents (whether actual or apparent), employees or
representatives whether in their individual or representative capacities, (iii)
express or implied agreements between the parties, and (iv) the Civil Rights Act
of 1866, 1964, and 1991, the Employee's Income Retirement Security Act of 1974,
the Age Discrimination in Employment Act, the Older Workers Benefit Protection
Act, the Rehabilitation Act of 1973, and all other state and federal statutes.
1.6 Warranties.
(a) Warranties. Executive warrants and represents as follows:
(i) He has read this Agreement, and agrees to the conditions
and obligations set forth in it;
(ii) He has had a reasonable time to consider the terms of
this Agreement and after being advised by Company to seek legal counsel;
(iii) He has had 21 days in which to consider the Agreement,
and, if he executes this Agreement less than 21 days from receipt, it is with
the understanding that he had the full 21 days available if he so desired;
(iv) He may revoke this Resignation Agreement for 7 days
following his execution, and this Agreement shall not become enforceable and
effective until 7 days after such execution;
(v) He has not assigned any of his rights or interests under
this Agreement, the Management Agreement, or any other agreement or arrangement
between him and the Company;
(vi) He voluntarily executes this Agreement after having had
full opportunity to consult with legal counsel and without being pressured or
influenced by any statement or representation of any person acting on behalf of
Company including the officers, agents and attorneys for Company; and
(vii) He has full and complete legal capacity to enter into
this Agreement.
(b) Warranties.
<PAGE> 3
(i) The execution, delivery and performance of this Agreement
has been duly authorized by all necessary corporation action of the Company, and
the Agreement has been duly and validly executed and delivered by the Company
and it constitutes the valid and binding obligation of the Company, enforceable
in accordance with its terms and
(ii) The Company has not assigned any of its rights or
interests under this Agreement, the Management Agreement or any other agreement
or arrangement between either of them and the Executive.
1.7 Repurchase of Stock.
(a) In consideration for the payment by the Company of $30,862 or
$.82 per share (the "Purchase Price"), the Executive agrees to sell, transfer
and assign to the Company and the Company agrees to purchase and acquire from
the Executive, the "Performance Vesting Shares" granted to and owned by the
Executive pursuant to the Management Agreement, consisting of 37,637 shares of
the of the Company's Common Stock. On the Resignation Date, the Company shall
deliver a check or a wire transfer of funds to the Executive's account in the
amount of the Purchase Price in exchange for all of the Performance Vesting
Shares.
(b) Executive represents and warrants that:
(i) He has full right, power and authority to enter into and
perform this Agreement and to sell, transfer and assign the Performance Vesting
Shares contemplated above;
(ii) He is the sole beneficial owner of the Performance Vesting
Shares to be sold by it as contemplated above, free and clear of all liens,
claims and encumbrances;
(iii) His execution, delivery and performance of this Agreement
will not violate any agreement binding on him.
1.8 Retained GVG Shares. Executive is the owner of sixty one thousand
seven hundred seventy (61,770) shares of the Company's Common Stock (hereinafter
referred to as the "Restricted Shares") which were granted to Executive as
either "Time Vesting Shares" or "Non-Performance Vesting Shares" pursuant to
Section 2 of the Management Agreement and which are fully vested. Executive
covenants and agrees that, unless a Sale of the Company occurs or Executive
dies, the Restricted Shares may not be Transferred until on or after April 1,
2005. In the event that (i) a Sale of the Company occurs or (ii) Executive dies,
all Restricted Shares may be Transferred by Executive or his estate (subject to
applicable securities laws). On the date of this Agreement, Executive is also
the owner of ninety thousand nine hundred forty nine (90,949) shares of the
Company's Common Stock, which shares are fully vested and are not subject to any
limitations on Transfer other than compliance with applicable securities laws.
1.9 Post-Employment Relationship. Following the Resignation Date,
Executive agrees that, subject to the approval of Executive's future Employer's
and, in Executive's sole discretion based on his other obligations and
commitments, at the request of the Company's Chief Executive Officer or the
Board, he will provide advice and consultation to the Company with respect to a
list of matters to be approved by the Executive and the Company and serving as a
special advisor to the Board. If, during the year following this Agreement, the
Board and Executive agree that it would be mutually beneficial, then the Board
shall use its best efforts to cause Executive to be nominated or appointed as a
member of the Board. In the event that Executive becomes a member of the Board,
then Executive shall be entitled to the same level of compensation and benefits,
including stock option grants, provided to other independent directors serving
on the Company's
<PAGE> 4
board of directors. Executive shall be reimbursed by the Company for all
expenses reasonably incurred in connection with Executive's performance of such
services as an advisor and/or director.
1.10 Mutual Non-Disparagement.
(a) Subsequent to the date hereof, Executive agrees not to
intentionally make to any customer, supplier, employee or business relation or
affiliate of the Company or the general public any statement that materially
disparages the Company, Thayer, or their respective subsidiaries and affiliates
(including their respective officers, directors, shareholders and employees).
(b) Subsequent to the date hereof, the Company agrees not to
intentionally make any general public statement to employees, suppliers,
customers or the general public that materially disparages the Executive.
1.11 Confidential Information and Goodwill; Inventions. Executive
acknowledges and agrees that:
(a) As a necessary function of Executive's employment with the
Company, Executive had access to and utilized Confidential Information which
constitutes a valuable and essential asset of the Company's business.
(b) The Confidential Information, observations arid data obtained by
Executive during the course of his employment concerning the business and
affairs of the Company are the property of the Company, including information
concerning the acquisition opportunities in or reasonably related to the
Business of which Executive became aware during his employment by the Company.
Therefore, Executive agrees that he will not disclose to any unauthorized Person
or use for his own account any of to Confidential Information without the
Board's written consent. Within ten (10) days following the date of this
Agreement, Executive agrees to deliver to the Company all memoranda, notes,
plans, records, reports and other documents (including copies thereof) relating
to the Business or any other Confidential Information.
(c) Executive acknowledges that all inventions, innovations,
developments, improvements, methods, designs, analyses, drawings, software,
reports and all similar or related information (whether or not patented or
patentable) developed by Executive during his employment by the Company which
(i) directly or indirectly relate to the Company or its Affiliates or the
Business, or (ii) resulted from any work performed by Executive while employed
by the Company or its Affiliates belongs to the Company arid its Affiliates and
Executive represents and warrants that, except to the extent previously
transmitted to the Company, no such inventions, innovations, developments,
improvements, methods, designs, analyses, drawings, software, reports and all
similar or related information (whether or not patented or patentable) exist.
1.12 Noncompetition and Nonsolicitation.
(a) Executive acknowledges that in the course of his employment with
the Company he has become familiar with the Company's and its Affiliates' trade
secrets and with other confidential information concerning the Company and that
his services were of special, unique and extraordinary value to the Company and
its Affiliates. Therefore, Executive agrees that, until the later of (i) one
year after the last day that Executive serves the Company as a special advisor
or director (if he serves in either of such capacities) or (ii) May 15, 2000
(the "Noncompete Period"), he shall not directly or indirectly own, manage,
control, participate in, consult with, render services for, or in any manner
engage in any business competing
<PAGE> 5
with the business of the Company and its Subsidiaries or any businesses with
which the Company or its Subsidiaries have firm plans to engage in on the date
of this Agreement; provided, however, that Executive may perform services for
American Express and its affiliates in accordance with past practice; provided,
further, that in no event will such services be performed in connection with
American Express and its affiliates' leisure travel services businesses
(consumer or wholesale) in existence during the Noncompete Period.
(b) During the Noncompete Period and for a period of one (1) year
thereafter, Executive shall not directly or indirectly through another entity
(i) induce or attempt to induce any senior management employee of the Company or
any Subsidiary or, to the actual knowledge of the Executive, any other employee
of the Company or any Subsidiary to leave the employ of the Company or such
Subsidiary, or in any way interfere with the relationship between the Company or
any Subsidiary and any employee thereof or (II) induce or attempt to induce any
customer, supplier, vendor, licensee or other business relation of the Company
or any Subsidiary to cease doing business with the Company or such Subsidiary,
or to modify its business relationship with the Company in a manner adverse to
the Company or any Subsidiary or in any way disparage the Company or its
Subsidiaries to any such customer, supplier, vendor, licensee or business
relation of the Company or any Subsidiary.
(c) If, at the time of enforcement of Section 1.11 or 1.12 of this
Agreement, a court holds that the restrictions stated herein are unreasonable
under circumstances then existing, the parties hereto agree that the maximum
duration, scope or geographical area reasonable under such circumstances shall
be substituted for the stated period, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum
duration, scope and area permitted by law. Because Executive's services are
unique and because Executive has access to Confidential Information, the parties
hereto agree that money damages would be an inadequate remedy for any breach of
this Agreement. Therefore, in the event a breach or threatened breach of this
Agreement, the Company or its successors or assigns may, in addition to other
rights and remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance and/or injunctive or other relief in order
to enforce, or prevent any violations of, the provisions hereof (without posting
a bond or other security).
1.13 Definitions.
(a) "Affiliate" of any Person means any other Person which directly
or indirectly controls, is controlled by or is under common control with such
Person.
(b) "Board" means the Company's board of directors or the board of
directors or similar management body of any successor of the Company.
(c) "Business" means any business of the Company or its Subsidiaries
now or hereafter engaged in, including without limitation to business of
providing travel products.
(d) "Competitive Activity" means any business or activity of
Executive or any third party that is the same as the Business or competitive
with the Business.
(e) "Confidential Information" means all confidential information
and trade secrets of the Company and its Affiliates including, without
limitation, the following: the identity, written lists, or descriptions of any
customers, referral sources or Organizations; financial statements, cost
reports, or other financial information; contract proposals or bidding
information: business plans; training and operations methods and manuals;
personnel records; fee structures; and management systems, policies or
procedures, including related forms and manuals. "Confidential Information"
shall not include any information or
<PAGE> 6
knowledge which: (a) is in the public domain other than by Executive's breach of
this Agreement or (b) is disclosed to Executive lawfully by a third party who is
not under any obligation of confidentiality.
(f) "Management Agreement" has the meaning set forth in the first
WHEREAS clause set forth above.
(g) "Organization" means any organization that has contracted with
the Company for the performance of services in connection with the Business.
(h) "Person" means an individual, a partnership, a limited liability
company, a corporation, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
(i) "Purchase Price" has the meaning set forth in Section 1.7 above.
(j) "Resignation Date" has the meaning set forth in the third
WHEREAS clause set forth above.
(k) "Sale of the Company" means any transaction or series of
transactions pursuant to which any Person(s) other than Thayer and its
Affiliates in the aggregate acquire(s) (i) capital stock of the Company
possessing the voting power (other than voting rights acquiring only in the
event of a default, breach or event of noncompliance) to elect a majority of the
Board (whether by merger, consolidation, reorganization, combination, sale or
transfer of the Company's capital stock, shareholder or voting agreement, proxy,
power of attorney or otherwise) or (ii) all or substantially all of the
Company's assets determined on a consolidated basis.
(l) "Subsidiary" means any corporation of which the Company owns
securities having a majority of the ordinary voting power in electing the board
of directors directly or through one or more subsidiaries.
(n) "Transfer" means to sell, transfer, assign, pledge or otherwise
dispose of all or any portion of any interest (whether with or without
consideration and whether voluntarily or involuntarily or by operation of law,
including upon death).
ARTICLE II
GENERAL PROVISIONS
2.1 Notices. Any notice provided for in this Agreement must be in writing
and must be delivered to the recipient at the address below indicated:
<PAGE> 7
To the Company:
Global Vacation Group, Inc.
Suite 550
1420 New York Avenue, N.W.
Washington, D.C. 20005
Tel: (202) 347-1800
Fax: (202) 347-0710
Attn: Daniel Raskas
Larry Gilbertson
With Copies to:
Hogan & Hartson, L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004
Tel: (202) 637-5771
Fax: (202) 637-5910
Attn: Christopher J. Hagan, Esq.
To the Executive:
Walter S. Berman
7 Polo Field Lane
Great Neck, NY 11020
Tel: (516) 466-9743
Fax: (516) 466-4454
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given five (5) business
days after mailing by first class mail, certified return receipt requested, one
business day after delivery to a receipted courier for next business day
delivery, or upon transmission by telex or facsimile.
2.2 Severability. Except as provided in section 1.12(c), whenever
possible, each provision of this Agreement will be interpreted in such manner as
to be effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not effect any other provision or any other jurisdiction,
but this Agreement will be reformed, construed and enforced in such jurisdiction
as if such invalid, illegal or unenforceable provision had never been contained
herein.
2.3 Complete Agreement. This Agreement, the Management Agreement, and
those documents expressly referred to herein and other documents of even date
herewith embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or representations by
or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
2.4 Counterparts; Facsimile Transmission. This Agreement may be executed
on separate counterparts, each of which is deemed to be an original and all of
which taken together constitute one and the same Agreement. This Agreement may
be executed and delivered by facsimile transmission.
<PAGE> 8
2.5 Defined Terms. Terms not otherwise defined in this Agreement shall
have the meanings assigned to such terms in the Management Agreement.
2.6 Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive and the Company and their
respective successors and assigns, except that Executive may not assign any of
his rights or obligations under Article I.
2.7 Choice of Law. This Agreement shall be governed by the internal law,
and not the law of conflicts, of the State of New York.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first above written.
EXECUTIVE:
-------------------------------------
Walter S. Berman
GLOBAL VACATION GROUP, INC.
By:
-----------------------------
Name:
Title:
THAYER EQUITY INVESTORS III, L.P.
By: TC Equity Partners, LLC
Its: General Partner
By:
-----------------------------
Name:
Title:
<TABLE> <S> <C>
<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> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 37,132
<SECURITIES> 2,876
<RECEIVABLES> 15,467
<ALLOWANCES> (932)
<INVENTORY> 0
<CURRENT-ASSETS> 59,989
<PP&E> 6,214
<DEPRECIATION> 0
<TOTAL-ASSETS> 155,081
<CURRENT-LIABILITIES> 91,587
<BONDS> 0
0
0
<COMMON> 147
<OTHER-SE> 51,083
<TOTAL-LIABILITY-AND-EQUITY> 155,081
<SALES> 22,759
<TOTAL-REVENUES> 22,759
<CGS> 21,421
<TOTAL-COSTS> 21,421
<OTHER-EXPENSES> 4,113
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (144)
<INCOME-PRETAX> (2,455)
<INCOME-TAX> 917
<INCOME-CONTINUING> (1,538)
<DISCONTINUED> 0
<EXTRAORDINARY> (257)
<CHANGES> 0
<NET-INCOME> (1,795)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
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