As filed with the Securities and Exchange Commission on March 10, 2000
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
LEISURE TRAVEL GROUP, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 7011 98-0219586
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Classification Code Number) Identification No.)
Organization)
6 LEYLANDS PARK, NOBS CROOK
COLDEN COMMON
WINCHESTER SO21 1TH ENGLAND
TELEPHONE: 01144-1703-601155 TELECOPIER: 01144-1703-696099
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
RAYMOND J. PEEL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LEISURE TRAVEL GROUP, INC.
COLDEN COMMON
WINCHESTER SO21 1TH ENGLAND
TELEPHONE: 01144-1703-601155 TELECOPIER: 01144-1703-696099
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent for Service)
Copies of communications to:
STEPHEN A. WEISS, ESQ. JAMES ZATOLOKIN, ESQ.
ANTHONY J. MARSICO, ESQ. MARY ANN SAPONE, ESQ.
GREENBERG TRAURIG, LLP POLLET LAW
200 PARK AVENUE, 15TH FLOOR 10900 WILSHIRE BOULEVARD,
NEW YORK, NEW YORK 10166 SUITE 500
TELEPHONE: (212) 801-9200 LOS ANGELES, CA 90024
TELECOPIER: (212) 801-6400 TELEPHONE: (310) 208-1182
TELECOPIER: (310) 208-1154
-----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, check the following box. |_|
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.|_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===========================================================================================
TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING REGISTRATION FEE
PRICE (1)
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<S> <C> <C> <C>
Common Stock, par value $0.001 per share........ $41,400,000 $10,929.60
===========================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) under the Securities Act of 1933, as amended (the
"Securities Act").
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN
OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
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PROSPECTUS
SUBJECT TO COMPLETION, DATED MARCH 10, 2000
3,000,000 SHARES OF COMMON STOCK
LEISURE TRAVEL GROUP, INC.
This is an initial public offering of 3,000,000 shares of our common
stock.
We have applied for quotation of our common stock on the Nasdaq National
Market under the symbol "LTGI."
We anticipate that the initial public offering price will be between
$10.00 and $12.00 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE ___ FOR A DISCUSSION OF CERTAIN
FACTORS THAT YOU SHOULD CONSIDER BEFORE BUYING SHARES OF OUR COMMON STOCK.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF ANYONE'S INVESTMENT IN THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
===============================================================================
PER SHARE TOTAL
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Public Offering Price............................. $________ $__________
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Underwriting Discounts and Commissions............ $________ $__________
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Proceeds, before expenses, to Leisure Travel Group, $________ $__________
Inc...............................................
===============================================================================
The underwriters may, under some circumstances, for 45 days after the date
of this prospectus, purchase up to an additional 450,000 shares of common stock
from us at the initial public offering price, less underwriting discounts and
commissions.
-----------------
The underwriters expect to deliver the shares of common stock at the
offices of Roth Capital Partners Incorporated in Newport Beach, California, on
or about __________, 2000, against payment in immediately available funds.
-----------------
ROTH CAPITAL PARTNERS
I N C O R P O R A T E D
The date of this prospectus is _________, 2000.
<PAGE>
You should rely only on the information contained in this prospectus. We
have not, and the underwriter has not, authorized anyone to provide you with
information that is different. This prospectus may be used only where it is
legal to sell these securities. The information in this prospectus is complete
and accurate as of the date on the front cover, but the information may have
changed since that date.
IN CONNECTION WITH AN UNDERWRITTEN OFFERING, THE SECURITIES AND EXCHANGE
COMMISSION RULES PERMIT THE UNDERWRITER TO ENGAGE IN TRANSACTIONS THAT STABILIZE
THE PRICE OF OUR SECURITIES. THESE TRANSACTIONS MAY INCLUDE, AMONG OTHER THINGS,
PURCHASE FOR THE PURPOSE OF FIXING OR MAINTAINING THE PRICE OF OUR SECURITIES AT
A LEVEL THAT IS HIGHER THAN THE MARKET WOULD DICTATE IN THE ABSENCE OF SUCH
TRANSACTIONS. WE DO NOT KNOW WHETHER THE UNDERWRITER WILL ENGAGE IN ANY
TRANSACTIONS OF THAT SORT. IF THE UNDERWRITER ENGAGES IN ANY TRANSACTIONS OF
THAT TYPE IT MAY DISCONTINUE THEM AT ANY TIME.
-------------------------------
TABLE OF CONTENTS
PROSPECTUS SUMMARY................... __
RISK FACTORS......................... __
CAUTIONARY NOTICE REGARDING .........
FORWARD LOOKING STATEMENTS ....... __
EXCHANGE RATE INFORMATION............ __
USE OF PROCEEDS...................... __
DIVIDEND POLICY...................... __
CAPITALIZATION....................... __
DILUTION............................. __
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL
INFORMATION....................... __
SELECTED FINANCIAL DATA.............. __
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......... __
BUSINESS............................. __
MANAGEMENT........................... __
CERTAIN TRANSACTIONS................. __
PRINCIPAL STOCKHOLDERS............... __
DESCRIPTION OF SECURITIES............ __
SHARES ELIGIBLE FOR FUTURE SALE...... __
UNDERWRITING......................... __
LEGAL MATTERS........................ __
EXPERTS.............................. __
ADDITIONAL INFORMATION............... __
INDEX TO FINANCIAL STATEMENTS....... F-1
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trrravel.com is a trademark of Trravel.com Limited, a 49% owned investment of
Leisure Travel Group, Inc. This prospectus also contains trademarks and
tradenames of other companies.
Information contained on the www.trrravel.com Web site does not constitute a
part of this prospectus.
We publish our financial statements in pounds sterling. For your convenience,
this prospectus contains translations of certain pound sterling amounts into
United States dollar amounts. Unless otherwise indicated, all amounts expressed
in United States dollars are based upon translations of amounts of pounds
sterling into United States dollars at the rate of $1.6117 per pound sterling,
the noon buying rate in New York City for cable transfers in pounds sterling
certified for customs purposes by the Federal Reserve Bank of New York on
October 31, 1999. See "Exchange Rate Information" for historical information
regarding the noon buying rate. We have not actually converted our assets in
pounds sterling into United States dollars. If we were to convert our assets in
pounds sterling into United States dollars the conversion would be at a
different rate.
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PROSPECTUS SUMMARY
The following summary highlights selected information from this prospectus
and may not contain all the information that is important to you. To understand
our business and this offering fully, you should read this entire prospectus
carefully, including the consolidated financial statements and the related notes
beginning on page F-1. All of our operating companies are private limited
companies organized under the laws of England and Wales. Unless the context
otherwise indicates, all references in this prospectus to: (i) "LTGL" refer to
Leisure Travel Group Limited, together with its subsidiaries Miss Ellie's World
Travel Limited and Ilios Travel Limited, prior to our acquisition of all of its
outstanding share capital; (ii) "Travel Group" refer to the business operations
of Miss Ellie's World Travel Limited, Ilios Travel Limited, and Independent
Aviation Limited, a wholly-owned subsidiary of trrravel.com; (iii) "GHG" refer
to Grand Hotel Group Limited, prior to the acquisition of all of its outstanding
share capital by LTGL, (iv) "Grand Hotel Group" refer to the business operations
of Grand Hotel Group Limited; (v) "Leisure Travel Group," "we," "our" and "us"
refer to Leisure Travel Group, Inc., a Delaware corporation, together with its
direct and indirect subsidiaries and investments, after giving effect to the
above acquisitions; and (vi) "year" and "fiscal year" refer to the fiscal year
of Leisure Travel Group ending October 31st.
OUR COMPANY
OVERVIEW
We have been established to become a leading international single-source
provider of attractively priced, specialized holiday and leisure accommodations
and world-wide packaged travel services. Upon completion of this offering, we
will acquire five unique and well-known holiday resort hotels in the United
Kingdom and two retail and group travel providers and tour operators that offer
flexible, independent travel programs. In addition, we will acquire a 49%
ownership interest in trrravel.com Limited, which operates a European on-line
travel Web site offering complete vacation and travel packages direct to
consumers, and also owns and operates a tour operating airline seat provider.
Through consolidation of these and other vacation and travel-related businesses,
we believe that we are able to offer both vacationers and travel agents and tour
operators a single source of competitively priced products and services within
and across multiple holiday and leisure travel segments. We intend to expand our
business by acquiring additional vacation and leisure travel businesses,
including resort hotels, travel providers and tour operators, and utilizing a
consumer-direct, online travel Web site.
On an unaudited pro forma basis, we derived consolidated net income before
taxes of approximately (pound)1.4 million (approximately $2.3 million) from
consolidated net revenues of approximately (pound)29.1 million (approximately
$47.0 million) for the twelve months ended October 31, 1999.
THE GRAND HOTEL GROUP
We operate five holiday resort hotels situated near major seaside resorts
in England and Wales, which offer attractively priced vacation accommodations,
including food and entertainment, for weekend and lengthier stays. The hotels
were formerly owned by a subsidiary of The Rank Group plc and operated as the
Butlin's Provincial Hotels. They were purchased in June 1999 from The Rank Group
by GHG which, until completion of this offering, was controlled by Kevin R.
Leech, our Chairman of the Board and principal stockholder, and certain other
members of our management team.
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The hotels have a total of 1,274 available rooms and achieved
approximately 80% room occupancy in the two-year period ended December 31, 1998.
Approximately 112.5% and 59.6% of our pro forma consolidated net income and
consolidated net revenues, respectively, for the twelve months ended October 31,
1999 were derived from the Grand Hotel Group. The revenues and net income of the
hotels dropped significantly during the six months ended June 30, 1999 due to
the fact that the previous owners, following their decision to sell the Butlin's
Provincial Hotels, delayed the production and distribution of the main holiday
brochure, which inevitably reduced hotel bookings and room occupancy. However,
following GHG's acquisition of the hotels in June 1999, the re-branding of its
name and image and modernization of certain operating policies by our highly
experienced management team, both hotel revenues and profits improved
substantially during the four months ended October 31, 1999. In addition, we
recently secured new agreements with United Kingdom tour coach operators for the
advance purchase of beds, which we anticipate will provide approximately
(pound)2.0 million ($3.2 million) of annual revenues, increased our room and
accommodation rates by an average of 8%, and secured advance bookings at
February 14, 2000 that represent approximately 44% of our target of 651,000
sleeper nights for the remainder of our fiscal year ending October 31, 2000, or
a 78% occupancy rate.
THE TRAVEL GROUP
Our Travel Group offers competitively-priced travel-related services and
accommodations in a variety of holiday destinations in Europe, North America and
South Africa. Located in 8 offices in and around Manchester and Horsham,
England, our retail and group travel and tour operating businesses have over 15
years of experience in providing packaged tours primarily to holiday resorts
located throughout Europe direct to the public and through other tour operators,
as well as special interest tours to major European sporting events, including
horse racing tours throughout the United Kingdom and Europe, and trips for
supporters of the Manchester United Football Club. Our Travel Group also offers
a wide range of private accommodations in a variety of holiday destinations in
southern Europe, such as private country homes and villas with swimming pools in
Tuscany, Sardinia and other regions of Italy, Andalucian haciendas with
exquisite views in Spain and traditional Ottoman-style houses in Turkey. Our
Travel Group has achieved competitive pricing and access to inventory through
negotiated arrangements with major airlines, including Singapore Airlines,
British Airways, Alitalia and Iberia, and auto rental and insurance companies.
The tour operating airline seat provider owned and operated by
trrravel.com Limited, in which we intend to acquire a 49% interest, purchases
blocks of airline seats from airlines and other travel and tour operators for
resale and also acts as an agent in brokering such seats on a commission basis.
THE TRAVEL WEB SITE
The core of the distribution program for our Travel Group services is a
consumer-direct online travel site that provides travelers with immediate access
both to our proprietary booking system and to detailed hotel information and
destination guides. Visitors to our affiliated Web site at www.trrravel.com are
able to compare travel options, rates and availability, and book and purchase a
wide variety of travel services, including our independently tailored vacation
programs and group packages, seven days a week. Our Internet available vacation
and holiday packages include airfare, hotel and related accommodations, car
rental and other items. trrravel.com Limited, which owns and operates the Web
site, intends to derive its revenues from advertising, from monthly booking fees
received from tour operators and travel agents featured on the site and through
commissions received from third party reservation services and travel agents for
direct on-line bookings. We believe that by being able to directly offer travel
services to consumers via the Internet, we will realize savings in operating
expenses
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2
<PAGE>
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that will enable us to maintain better gross margins than many travel
agencies or other travel groups that rely primarily on retail travel agencies
for distribution. trrravel.com Limited was, until completion of this offering,
wholly-owned by Ci4net.com, Inc., a Delaware publicly-traded corporation
controlled by Kevin R. Leech, our Chairman of the Board and principal
stockholder.
OUR MARKETS
Travel and tourism represents one of the largest consumer markets and one
of the fastest growing industries in the United Kingdom. The British Tourist
Authority estimates that in 1998, travel expenditures by overseas visitors in
the United Kingdom totaled more than (pound)12.7 billion (approximately $20.5
billion), and that by the year 2003, overseas visitors will spend around
(pound)18.0 billion (approximately $29.0 billion) a year in the United Kingdom,
44% more than 1998. The British Tourist Authority also estimates that in 1998,
travel expenditures by residents of the United Kingdom in the United Kingdom
totaled more than (pound)14.0 billion (approximately $22.6 billion) which, when
combined with expenditures by overseas visitors, totaled more than (pound)26.7
billion (approximately $43.0 billion) in 1998. Of the (pound)26.7 billion spent
in 1998 on travel in the United Kingdom, approximately (pound)9.3 billion
(approximately $15.0 billion) was spent on accommodations, approximately
(pound)3.5 billion (approximately $5.6 billion) was spent on travel within the
United Kingdom, and approximately (pound)1.1 billion (approximately $1.8
billion) was spent on travel-related services. The European Travel Commission
estimates that travel agencies alone generated approximately $126 billion in
total sales in 1998.
The growth of travel sales through the Internet has created another
channel for travel service providers to sell products and services to travelers.
Online sales of travel services have expanded dramatically in recent years due
to the substantial benefits of e-commerce to both travel service providers and
consumers. By moving their travel services online, travel service suppliers,
retail travel agencies and travel wholesalers can reach a global customer base
from a central location. According to Forrester Research, online travel bookings
are expected to grow to $29.5 billion in 2003 from $3.1 billion in 1998,
representing a compound annual growth rate of 57%.
OUR OPERATING STRATEGY
Our objective is to become a leading international single-source provider
of attractively priced, specialized holiday and leisure accommodations and
world-wide package travel services. To accomplish this objective, we will pursue
an operating strategy that includes the following elements:
o increasing the revenues, profitability and occupancy rate of our
holiday resort hotels by upgrading accommodations and improving
service, increasing our bus and coach tour package business,
offering higher priced weekend packages tailored to a younger
customer base, and improving our average room tariff rate;
o providing added value to consumers by offering complete world-wide
travel planning solutions at competitive prices;
o using the www.trrravel.com Web site as a world-wide marketing tool,
aggressively promoting, advertising and increasing the value and
visibility of our brand in the vacation travel service and resort
hotel industries through high quality service, active marketing and
promotional programs;
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3
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o leveraging our strength in selected travel destinations to achieve
leading positions in these and other high-volume, high-margin
vacation destinations; and
o providing services to other independent tour operators, including
airline seats and holiday villas.
OUR GROWTH STRATEGY
To complement our operating strategy, we have developed a multi-faceted
growth strategy comprised of the following elements:
o continuing to acquire underperforming hotels in Spain and other
European coastal resort areas and implementing operational
initiatives to achieve revenue growth and margin improvements;
o identifying and completing strategic acquisitions of other vacation
and leisure travel businesses, including travel service providers in
the United Kingdom and throughout Europe; and
o enhancing distribution channels by the direct selling of travel and
vacation related services to consumers online while continuing to
support and leverage our strong relationships with existing retail
travel agents.
We were incorporated under the laws of the State of Delaware in February
2000. Our principal executive offices are located at 6 Leylands Park, Nobs
Crook, Colden Common, Winchester SO21 1TH England, and our telephone number at
that address is 011-44-1703-601155.
-------------------------------
UNLESS OTHERWISE STATED, THE INFORMATION IN THIS PROSPECTUS GIVES EFFECT
TO:
o OUR ACQUISITION OF 100% OF THE OUTSTANDING SHARE CAPITAL OF LTGL;
o LTGL'S ACQUISITION OF 100% OF THE OUTSTANDING SHARE CAPITAL OF GHG,
AND 49% OF THE OUTSTANDING SHARE CAPITAL OF trrravel.com Limited.
UNLESS OTHERWISE STATED, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE
EFFECT TO:
o THE REPRESENTATIVE'S WARRANTS;
o THE UNDERWRITERS' OVER-ALLOTMENT OPTION OR ITS EXERCISE; AND
o UP TO _________ SHARES OF COMMON STOCK ISSUABLE UPON THE EXERCISE OF
STOCK OPTIONS.
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4
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The Offering
Common Stock Offered.............. 3,000,000 shares
Common Stock Outstanding
Immediately Following this 8,060,000 shares
Offering..........................
Use of Proceeds................... We intend to use the net proceeds of
this offering:
o together with approximately
(pound)4.0 million (approximately
$6.4 million) of proceeds from a
mortgage refinancing, approximately
(pound)6.4 million ($10.3 million)
to pay in full a (pound)10.4 million
($16.7 million) note of Grand Hotel
Group to a subsidiary of The Rank
Group;
o to expand our travel-related
services business, including
advertising and the development of
the www.trrravel.com Web site;
o to acquire additional resort
hotels; and
o for general corporate and
working capital purposes, including
acquisitions. See "Use of
Proceeds."
Risk Factor....................... An investment in our common stock is
highly speculative, involves a high
degree of risk, and should be made
only by investors who can afford a
complete loss of their investment.
See "Risk Factors" and "Dilution."
Proposed Nasdaq National Market Symbol "LTGI"
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5
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Summary Financial Data
(In thousands, except earnings per share)
The following tables set forth:
o Summary historical combined financial data for GHG (Predecessor) for
the years ended December 31, 1995, 1996, 1997 and 1998 and the six
months ended June 30, 1999, and as of December 31, 1997 and 1998;
o Summary historical financial data for GHG for the four months ended
October 31, 1999 and as of October 31, 1999;
o Summary pro forma consolidated financial data for the twelve months
ended October 31, 1999. This information gives effect to (i) our
acquisition of all of the outstanding share capital of LTGL, (ii)
LTGL's acquisition of all of the outstanding share capital of Miss
Ellie's World Travel Limited, Ilios Travel Limited and GHG, and
(iii) LTGL's acquisition of 49% of the outstanding share capital of
trrravel.com Limited, as if each of those events had occurred on
November 1, 1998 in the case of the pro forma statement of
operations data, and on October 31, 1999 in the case of the pro
forma balance sheet data, except with respect to Miss Ellie's World
Travel Limited, which was acquired by LTGL on July 5, 1999; and
o Summary pro forma as adjusted consolidated balance sheet data as of
October 31, 1999, which are adjusted to give effect to (i) the sale of
the 3,000,000 shares of common stock offered hereby at an assumed
initial public offering price of $11.00 per share (the mid-point of
the range), (ii) the repayment of $6.4 million of a mortgage
financing and (iii) the repayment of $16.7 million outstanding under
the note of Grand Hotel Group to a subsidiary of The Rank Group.
Leisure Travel Group, LTGL, Ilios Travel Limited and GHG have October 31st
as their accounting year end. GHG (Predecessor) had a year end of December 31st.
Miss Ellie's World Travel Limited had a year end of March 31st prior to being
acquired by LTGL.
We derived the summary historical financial data as of December 31, 1997,
and for the years ended December 31, 1995 and 1996 of GHG (Predecessor) from its
unaudited combined financial statements, which are not included in this
prospectus. These unaudited financial statements include, in our opinion, all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of such data.
We derived the summary historical financial data as of December 31, 1998,
and for the years ended December 31, 1997 and 1998 and the six months ended June
30, 1999 from the audited combined financial statements of GHG (Predecessor),
and the summary financial data as of October 31, 1999, for the four months ended
October 31, 1999 from the audited financial statements of GHG, which are
included elsewhere in this prospectus. These financial statements have been
audited by Ernst & Young, our independent auditors.
We have provided the unaudited pro forma consolidated financial data for
informational purposes only. They are not necessarily indicative of future
results of what our operating results would have been had we actually
consummated the acquisition of all the outstanding share capital of LTGL, and
had LTGL actually consummated the acquisition of all the outstanding share
capital of Miss Ellie's World Travel Limited, Ilios Travel Limited and GHG and
49% of the outstanding share capital of trrravel.com on the dates assumed.
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6
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The summary data should be read in conjunction with the information
presented in "Capitalization," "Selected Financial Data," "Unaudited Condensed
Pro Forma Financial Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
the notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998
-------------- ------------- ------------ ------------
(AMOUNTS IN POUNDS STERLING)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Total revenues..................... (pound)20,884 (pound)20,766 (pound)20,622 (pound)19,584
Operating cost and expenses........ 17,096 17,739 17,690 16,848
-------------- ------------- ------------ ------------
Operating profit................... 3,788 3,027 2,932 2,736
Other income (expense), net........ - - - -
-------------- ------------- ------------ ------------
Income (loss) before income
taxes........................... 3,788 3,027 2,932 2,736
Income taxes....................... 1,558 1,303 1,237 1,122
-------------- ------------- ------------ ------------
Net income (loss)................. (pound) 2,230 (pound) 1,724 (pound) 1,695 (pound) 1,614
============== ============= ============ =============
Net income (loss) per share:
Basic and diluted.................
Shares used in computing net
income (loss) per share:
Basic and diluted.................
OTHER DATA:
Depreciation and amortization... (pound)1,115 (pound)1,211 (pound)1,284 (pound)1,174
Cash flows from operating
activities................... 3,785 2,820
Cash flows from investing
activities..................... (1,914) (223)
Cash flows from financing
activities.................... (1,871) (2,597)
<CAPTION>
SIX MONTHS FOUR MONTHS
ENDED ENDED PRO FORMA TWELVE MONTHS
JUNE 30, OCTOBER 31, ENDED
1999 1999 OCTOBER 31, 1999
------------ ------------ -----------------------------------
(Amounts in (Amounts in U.S.
Pounds Sterling) Dollars)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Total revenues..................... (pound)7,118 (pound)6,475 (pound)29,139 $ 46,963
Operating cost and expenses........ 7,804 5,222 27,059 43,611
------------- ------------ ------------- -----------
Operating Profit................... (686) 1,253 2,080 3,352
Other income (expense), net........ - (276) (678) (1,093)
------------- ------------ ------------- -----------
Income (loss) before income
taxes........................... (686) 977 1,402 2,259
Income taxes....................... - 322 647 1,043
------------- ------------ ------------- -----------
Net income (loss)................. (pound) (686) (pound) 655 (pound)755 $ 1,216
============= ============== ============= ===========
Net income (loss) per share:
Basic and diluted................. (pound)0.15 $ 0.24
============= ===========
Shares used in computing net income
(loss) per share:
Basic and diluted................. 5,060 5,060
============= ===========
OTHER DATA:
Depreciation and amortization. (pound)574 (pound)79
Cash flows from operating
activities................... 1,170 2,740
Cash flows from investing
activities..................... (127) (20,368)
Cash flows from financing
activities.................... (1,043) 20,211
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, OCTOBER 31, 1999
---------------------------------- -------------------------------------------------
PRO
FORMA,
1997 1998 ACTUAL PRO FORMA AS ADJUSTED
-------------- ------------- --------- --------- ------------
(Amounts in Pounds Sterling) (Amounts in Pounds Sterling)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).......... (pound)(1,153) (pound)(1,185) (pound)434 (pound)(338) (pound)10,693
Total assets....................... 17,619 16,439 26,086 30,617 41,648
Long-term debt (excluding
current maturities)............. -- -- 20,746 21,075 14,708
Total Stockholders' equity......... 15,302 14,319 655 2,216 19,614
</TABLE>
7
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RISK FACTORS
An investment in our common stock is highly speculative, involves a high
degree of risk, and should be made only by investors who can afford a complete
loss of their investment. You should carefully consider, together with the other
matters referred to in this prospectus, the following risk factors before you
decide to buy our common stock.
BECAUSE WE LACK A COMBINED OPERATING HISTORY, THERE IS LIMITED INFORMATION UPON
WHICH YOU CAN EVALUATE OUR BUSINESS AND PROSPECTS.
A corporate affiliate of Kevin R. Leech, our principal stockholder,
acquired, through LTGL, Miss Ellie's World Travel Limited and Ilios Travel
Limited in July 1999 and January 2000, respectively. Another corporate affiliate
of Mr. Leech and certain members of our management team acquired through GHG all
of the operating assets relating to five hotels formerly known as the Butlin's
Provincial Hotels effective in June 1999. Another corporate affiliate of Mr.
Leech owns 51% of the outstanding share capital of trrravel.com Limited, which
in turn owns 100% of the outstanding share capital of Independent Aviation
Limited, a tour operating airline seat provider. On a pro forma basis for the
twelve months ended October 31, 1999, the hotels operated by the Grand Hotel
Group accounted for approximately 59.6% of our net revenues. Although the Grand
Hotel Group and the two retail and group travel and tour operating businesses
operated by LTGL have each been in operation for more than 15 years, they have
virtually no history of combined operations under common management. In
addition, the profit margins and business dynamics of travel service providers
and tour operators are materially different from those affecting the ownership
and operation of resort hotels.
The historical and pro forma consolidated financial data included in this
prospectus cover periods when the Travel Group and the Grand Hotel Group were
not under common management or control and are not necessarily indicative of the
results that would have been achieved if they had been operated on an integrated
basis or the results that may be realized on a consolidated basis in the future.
Consequently, we have a very limited operating history upon which you may base
an evaluation of us and determine our prospects for achieving our intended
business objectives. We are prone to all of the risks inherent to the
establishment of any new business venture. You should consider the likelihood of
our future success to be highly speculative in light of our limited combined
operating history, as well as the limited resources, problems, expenses, risks,
and complications frequently encountered by similarly situated companies seeking
to upgrade its businesses. To address these risks, we must, among other things:
o maintain and increase our customer base;
o implement and successfully execute our operating and growth
strategies;
o continue to make expenditures to upgrade and refurbish our hotels;
o provide superior customer service;
o continue to develop and upgrade our Web site and electronic booking
system;
o respond to competitive developments; and
o attract, retain and motivate qualified personnel.
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We may not be successful in addressing these risks, and our failure to do
so could have a material adverse effect on our business, prospects, financial
condition, and results of operations.
OUR FUTURE OPERATING RESULTS AND REVENUES ARE UNPREDICTABLE, AND FUTURE
FLUCTUATIONS IN OPERATING RESULTS OR REVENUE SHORTFALLS COULD ADVERSELY AFFECT
THE VALUE OF YOUR INVESTMENT.
Because we have a limited combined operating history as a combined
business operation, and because of the dynamic nature of certain of the markets
in which we compete, our future revenues and earnings may be highly
unpredictable. At the same time, our current and future expense levels are based
on our operating plans and are to a large extent fixed. We are unlikely to be
able to adjust spending quickly to compensate for any revenue shortfall. As a
result, any significant revenue shortfall would have an immediate negative
effect on our results of operations and stock price.
We expect to experience significant fluctuations in our future operating
results due to a variety of factors, many of which we do not control. Factors
that may adversely affect our future operating results include, but are not
limited to:
o our inability to successfully replicate our business model in new
destination markets;
o our inability to develop strong brand recognition, build customer
loyalty and attract new and repeat customers;
o our inability to retain or expand our hotel and airfare supply
arrangements or reductions in discounts we receive on these travel
services;
o decreases in commission rates paid by travel suppliers on published
rates and fares;
o the announcement or introduction of lower prices or new travel
services and products by our competitors;
o any deterioration in general economic conditions, such as a global
recession, or economic conditions specific to the leisure or travel
industry;
o seasonal fluctuations in consumer travel spending patterns;
o unforeseen capital costs or an increasing annual rate of capital
expenditures required to maintain the facilities at our existing
hotels, which were originally built between 1776 and 1931;
o our inability to upgrade and develop our systems and infrastructure;
o our inability to retain or to attract qualified personnel in a
timely and effective manner;
o increases in operating expenses or capital expenditures relating to
expansion of our business, operations and infrastructure that are
not accompanied by increased revenue;
o difficulties in assimilating the operations and personnel of any
acquired business;
o technical difficulties, system downtime or slowdowns in Internet
response times;
o our inability to establish a sufficient level of traffic on our
affiliated Web site;
o adverse U.S. and foreign government regulation; and
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o events affecting the travel industry such as natural disasters, wars
or terrorist attacks.
For any of the foregoing reasons, or for other reasons we do not presently
anticipate, in a future quarter or other fiscal period it is likely that our
operating results will not meet market expectations, including the expectations
of financial analysts. If this occurs, it would have a material and adverse
effect on our stock price.
OUR RESORT HOTELS HAVE HAD DECLINING REVENUES AND PROFITS IN THE PAST.
During the three year period ended December 31, 1998, the net revenues and
net income of the five Butlin's Provincial Hotels owned and operated by The Rank
Group declined slightly. For the six month period ended June 30, 1999, net
revenues were only (pound)7.1 million and the hotels incurred a net loss of
(pound)0.7 million. We believe that the principal reason for these adverse
results was that, following the previous owners' decision to sell the hotels,
they did not expend resources on capital improvements and reduced the marketing
expenditure of the hotels, which resulted in significantly lower bookings at the
beginning of 1999. There can be no assurance that the improved revenues and
operating results realized subsequent to GHG's acquisition of the five hotels in
June 1999 will continue in the future.
Following completion of this offering, we intend to improve revenues and
profitability of the Grand Hotel Group by upgrading our rooms and recreational
facilities, deriving added revenues from volume room sales to coach operators
throughout the United Kingdom and marketing our hotels to a wider audience,
including the younger, more affluent United Kingdom market segment. There can be
no assurance that our marketing efforts will provide an adequate return on
investment or that the hotels will ever achieve or exceed historical
profitability.
OUR GRAND HOTELS MUST SERVICE A SIGNIFICANT AMOUNT OF DEBT AND CAPITAL
EXPENDITURES.
Upon completion of this offering, the Grand Hotel Group will have incurred
approximately (pound)14.0 million (approximately $22.6 million) of mortgage
indebtedness. Such indebtedness is currently amortized over a five year period
and requires annual debt service payments of principal and interest of
approximately (pound)3.5 million ($5.6 million). Following completion of this
offering, we intend to reduce our annual debt service obligations by seeking to
obtain long-term mortgage financing of between 10 and 15 years. However, there
is no assurance that such long-term financing will be available on financially
attractive terms, if at all, or that the cash flow from operations of the hotels
will be adequate to meet our annual debt service obligations.
In addition, we have budgeted approximately (pound)1.6 million ($2.6
million) in capital expenditures to refurbish and construct improvements to our
five existing holiday resort hotels. There is no assurance that cost overruns or
other unforeseen factors may not significantly increase our budgeted capital
expenditures.
OUR PRINCIPAL STOCKHOLDER WILL DERIVE SIGNIFICANT BENEFITS FROM THIS OFFERING.
We intend to apply approximately (pound)6.4 million (approximately $10.3
million), or approximately 37% of the net proceeds of this offering, together
with additional mortgage indebtedness, to retire a (pound)10.4 million note owed
by GHG to a subsidiary of The Rank Group. This note was secured by a bank letter
of credit which, in turn, was obtained through the personal guaranty of our
Chairman of the Board and principal stockholder, Kevin R. Leech. Upon payment of
the note, Mr. Leech will be relieved of his personal guaranty and certain
marketable securities pledged by him to secure his guaranty will be returned to
him. See "Use of Proceeds," "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Overview," "Certain Transactions" and
"Principal Stockholders."
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THERE IS THE POSSIBILITY OF CONFLICTS OF INTEREST WITH OTHER BUSINESSES
CONTROLLED BY OUR PRINCIPAL SHAREHOLDER.
We anticipate that our Travel Group will be engaging in significant
advertising of its travel agency, tour operator and airline seat provision
services on www.trrravel.com and will pay fees and commissions based on on-line
bookings made and transactions closed through use of the Web site. trrravel.com
Limited is currently wholly-owned by Ci4net.com, Inc., a publicly-traded
corporation controlled by Kevin R. Leech, our principal stockholder and Chairman
of the Board. Ci4net.com has agreed upon completion of this offering to
contribute 49% of its equity ownership of trrravel.com Limited to us and will
continue to be solely responsible for the development and maintenance of the
Web site. Although we believe that the fees and commissions we pay to advertise
on www.trrravel.com will be at rates no less favorable than is being charged to
unaffiliated third parties, Mr. Leech's other corporate affiliates will directly
benefit as we increase our advertising on www.trrravel.com. The common control
of our company and the majority owner of trrravel.com Limited could lead to
conflicts of interest in terms of the most effective means of marketing and
advertising our services. In addition, as more people use the Internet to book
their travel accommodations, the business of our travel agencies and tour
operators could be adversely affected.
In addition, Mr. Leech is the principal stockholder of Queensborough
Holdings plc, a publicly traded corporation trading on the London Stock
Exchange. Among Queensborough's holdings is the Burstin Hotel, located in
Folkestone, England, which is a holiday resort hotel similar to those operated
by our Grand Hotel Group, and which competes with our Grand Hotel Group for
guests in the same market. Philip Mason, a director of our company, and Stephen
Last, our Executive Vice President and Chief Financial Officer, are also
executive officers of Queensborough Holdings plc. See "Certain Transactions" and
"Principal Stockholders."
MANY OF OUR ADVANCED BOOKING ARRANGEMENTS ARE SUBJECT TO REDUCTION OR
CANCELLATION.
In connection with the operation of both GHG and our Travel Group certain
advance bookings arrangements with individual customers or other tour operators
are subject to reduction or cancellation. For example, our agreements with bus
tour operators for the purchase of beds at our hotels may be modified or even
cancelled by the operators if anticipated customer bookings or travel demand is
reduced. Similarly, arrangements with tour operators for the brokering or resale
of airline seats are subject to modification or cancellation within a certain
number of days prior to the scheduled trip. In both instances, we seek to hedge
against our cancellation risks by over-booking a limited number of beds or
airline seats and imposing penalties on late cancellations. Although, to date,
traditional levels of cancellations of our advanced bookings have not resulted
in any significant losses of anticipated revenues, there can be no assurance
that factors beyond our control such as unusually adverse weather conditions
during traditional holiday seasons or a general economic downturn would not
result in substantially higher levels of cancellations. If this were to occur it
would materially and adversely affect our business.
IF WE ARE UNABLE TO SUCCESSFULLY REPLICATE OUR BUSINESS MODEL IN NEW MARKETS,
OUR FUTURE GROWTH AND OPERATING RESULTS WOULD BE ADVERSELY AFFECTED.
We have developed a business model designed to provide attractively priced
holiday resort accommodations and travel services to customers primarily located
throughout the United Kingdom. Our growth strategy depends in part upon
substantially replicating this model in new markets across Europe. We cannot be
sure that this business model will be successful in other markets. For example,
as our travel services business expands its network of hotels into new markets,
we may generally receive smaller room blocks and discounts than we receive in
those hotels where we have longstanding relationships. These less favorable
terms are likely to adversely affect gross margins. We believe that,
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unless we prove our ability to successfully distribute hotel rooms in these new
markets, hotel operators will not offer us their most favorable room blocks and
discounts. We cannot assure you that we can reproduce relationships with
strategic hotel partners in the new markets we are entering or that such new
hotel partners will provide us with room blocks and discounts comparable to what
we currently receive. In either case, operating results would be adversely
affected.
WE FACE CONSIDERABLE COMPETITION IN THE TRAVEL SERVICES AND HOTEL MARKETS AND
MAY BE UNABLE TO GAIN A COMPETITIVE POSITION IN THOSE MARKETS.
The travel services market is highly competitive and has relatively low
barriers to entry. We compete primarily with other vacation providers, online
travel reservation services, travel agencies and other distributors of travel
products and services. Many of our current and potential competitors, especially
Air Tours plc, Thomsons plc and First Choice plc, have competitive advantages
due to various factors, which include, among others:
o greater brand recognition;
o longer operating histories;
o larger customer bases;
o significantly greater financial, marketing and other resources; and
o ability to secure products and services from travel suppliers with
greater discounts and on more favorable terms than we can.
Competition within the travel services market is increasing as certain of
our competitors are expanding their size and financial resources through
consolidation. In addition, our travel suppliers may decide to compete more
directly with us and restrict the availability of travel products or services or
our ability to offer such products or services at preferential prices. For
instance, travelers can now use the Internet to purchase travel products and
services directly from suppliers, thereby bypassing both vacation providers such
as us and retail travel agents. Furthermore, some travel providers have a strong
presence in particular geographic areas, which may make it difficult for us to
attract customers in those areas. Increased competition could reduce our
operating margins and profitability, result in a loss of market share and
diminish our brand recognition, which would materially and adversely affect our
business, results of operations and financial condition.
We also expect to face significant competition from other entities engaged
in the business of owning and operating resort hotels and motels. Many of the
world's most recognized lodging, hospitality and entertainment companies possess
significantly greater financial, marketing, personnel and other resources than
we have and may be able to grow at a more rapid rate or more profitably as a
result. Please see "Business--Our Competition" for a discussion of our
competition.
If any of our travel suppliers cease offering their services to us on
negotiated terms or at all, or if they change our pricing and commission
arrangements, our operating results could be materially adversely affected.
Our travel agencies are dependent upon travel suppliers for access to many
of their products and services. Certain travel suppliers, such as Airtours and
Thomsons, offer us:
o pricing that is preferential to published rates, enabling us to
offer complete vacations at prices lower than generally would be
available to individual travelers and retail travel agents;
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o preferential access to inventory of their travel products and
services, enabling us to assemble more desirable vacations for
travelers; or
o in the case of certain travel suppliers, both preferential pricing
and preferential access to inventory.
Our travel suppliers generally can modify their agreements with us upon
relatively short notice. In addition, any decline in the quality of travel
products and services provided by these suppliers, or a perception by travelers
of such a decline, could adversely affect our reputation. The loss of contracts,
changes in our pricing agreements, commission schedules or incentive override
commission arrangements, more restricted access to travel suppliers' products
and services or less favorable public opinion of certain travel suppliers and
resulting low demand for the products and services of such travel suppliers
could have a material adverse effect on our business, financial condition and
results of operations.
WE HAVE HISTORICALLY CONCENTRATED ON SERVICING CERTAIN MARKETS IN THE UNITED
KINGDOM AND PROVIDING VACATIONS TO CERTAIN DESTINATIONS THROUGHOUT EUROPE. OUR
BUSINESS MAY BE MATERIALLY ADVERSELY AFFECTED BY A DOWNTURN IN THE EUROPEAN
TRAVEL SERVICES MARKET.
On a pro forma basis for the twelve months ended October 31, 1999, we
derived approximately 80% of our net revenues from products and services
associated with leisure travel from the United Kingdom, primarily to certain
destinations in Europe. In addition, most of our current employees are located
in the United Kingdom to serve that market exclusively. We expect that travel to
and from the United Kingdom will continue to account for a substantial portion
of our travel services revenue for the foreseeable future. Adverse events or
conditions which affect travel to the United Kingdom and certain other
destinations throughout Europe, such as changes in regional travel patterns,
extreme weather conditions, natural disasters or wars, could have a material
adverse effect on our business, financial condition and results of operations.
MANAGING POTENTIAL GROWTH MAY BE DIFFICULT, TIME CONSUMING AND EXPENSIVE. THE
FAILURE TO PROPERLY MANAGE GROWTH MAY NEGATIVELY AFFECT THE VALUE OF YOUR
INVESTMENT.
We intend to grow our business by utilization of the www.trrravel.com
Web site, making strategic acquisitions of hotel properties and significantly
expanding our travel services and the number of destination markets we serve.
These developments are expected to place a significant strain on our managerial,
operational and financial resources. Our inability to manage our growth
effectively could disrupt operations and have an adverse effect on our revenue.
In addition, being a public company will place new strains on our senior
management, some of whom do not have experience in operating a public company.
We anticipate that further significant growth and development of our business
will be required to expand our customer base and take advantage of market
opportunities. We expect to hire additional key personnel and support staff in
the future. To manage the expected growth of our operations and personnel, we
will be required to:
o improve existing and implement new transaction-processing,
operational, customer service and financial systems, procedures and
controls; and
o expand, train and manage our growing employee base.
We also will be required to expand our finance, administrative and
operations staff, including personnel experienced in site selection and hotel
acquisition. Further, we will be required to maintain and expand our
relationships with various travel service suppliers, other Web sites and other
Web service
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providers, Internet service providers and other third parties necessary to our
business. We cannot be sure that:
o our current and planned personnel, systems, procedures and controls
will be adequate to support our future operations;
o our management will be able to hire, train, retain, motivate and
manage required personnel; or
o our management will be able to successfully identify, manage and
exploit existing and potential market opportunities.
Our productivity and operating results will be negatively affected if we
are unable to manage growth effectively. Please see "Management's Discussion and
Analysis of Financial Condition and Results of Operations," "Business--Our
Growth Strategy," "--Our Employees" and "Management" for a discussion of factors
that may affect our ability to manage potential growth.
WE ARE SUSCEPTIBLE TO A WIDE VARIETY OF RISKS RELATING TO THE ACQUISITION OF
ADDITIONAL TRAVEL SERVICE PROVIDERS AND RESORT HOTELS.
We believe that there are opportunities for consolidation in the travel
services market. One element of our growth strategy is to broaden the scope and
content of our travel services business through the acquisition of existing
complementary businesses. While our management team has experience in completing
or integrating acquisitions, we may not be successful in overcoming problems
encountered in connection with such acquisitions. Even if we are successful,
such acquisitions may be time consuming and costly, which may affect our
operating results. Acquisitions would also expose us to various other risks,
such as those associated with:
o the assimilation of new operations, sites and personnel;
o the diversion of resources from our existing operations, sites and
technologies;
o the inability to generate revenue from acquisitions sufficient to
offset associated acquisition costs;
o the inability to maintain uniform standards, controls, procedures
and policies; and
o the impairment of relationships with employees, suppliers and
customers as a result of integration of new businesses.
Acquisitions may also result in additional expenses associated with
one-time charges or amortization of acquired intangible assets. Furthermore,
although we will conduct due diligence and generally require representations,
warranties and indemnifications from the former owners of acquired travel
services companies, we cannot be sure that such owners will accurately represent
the results of operations, financial condition and business of their companies
or will have the means to satisfy their indemnification obligations. If
misrepresentations are made, the acquisition could have a material adverse
effect on our business, financial condition and results of operations. We do not
have current commitments with respect to any particular acquisition in the
travel services industry, but management regularly evaluates acquisition
opportunities.
In addition, our ability to execute our growth strategy depends to a
significant degree on the existence of attractive resort hotel acquisition
opportunities, our ability both to consummate acquisitions on favorable terms
and to obtain financing for such acquisitions on favorable terms. Our
acquisition
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efforts will be focused initially in the United Kingdom and in Spain, but we may
extend our efforts to certain other key locations throughout Europe. There can
be no assurance that we will consummate the acquisition of any additional resort
hotels. Risks associated with our acquisition activities may include the fact
that:
o acquisition opportunities may be abandoned;
o acquisition costs of a resort may exceed original estimates,
possibly making the resort uneconomical or unprofitable;
o financing may not be available at all or on favorable terms for
acquisitions of holiday resort hotels; and
o acquisitions may not be completed on schedule, resulting in
decreased revenues and increased interest expense.
Moreover, there are numerous potential buyers of resort real estate which are
better capitalized than we are competing to acquire resort properties which we
may consider attractive resort acquisition opportunities. There can be no
assurance that we will be able to compete against such other buyers
successfully. Please see "Business--Our Growth Strategy" for more information
about our acquisition strategy.
WE EXPECT INCREASED OPERATING EXPENSES IN CONNECTION WITH NEW AND EXPANDED
TRAVEL SERVICES. IF THESE SERVICES ARE UNSUCCESSFUL OR REVENUE INCREASES ARE
SIGNIFICANTLY BELOW EXPENSES, THE VALUE OF YOUR INVESTMENT COULD BE NEGATIVELY
AFFECTED.
We currently intend to:
o develop and offer new and expanded travel services;
o further develop our technology and transaction-processing systems;
and
o begin offering travel services to additional destinations throughout
Europe and to certain destinations in North America.
To the extent the expenses we incur to fund these activities are not followed by
increased revenue, we may be unable to maintain profitability. In addition, we
may incur expenses when we enter new markets or offer new services that
significantly exceed the amount we anticipate. If so, our management, financial
and operational resources may be severely strained. Our inability to generate
revenue from such expanded services or products sufficient to offset our
expenses could be damaging to our business. Please see "Business--Our Products
and Services" for details about our planned new and expanded services.
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DECLINES IN CONSUMER VACATION AND TRAVEL SPENDING COULD HARM OUR OPERATING
RESULTS.
The majority of our revenue is derived from consumer spending for vacation
and travel. The travel industry, especially leisure travel, depends on personal
discretionary spending levels and suffers during economic downturns and
recessions. The travel industry is also highly susceptible to unforeseen events,
such as political instability, regional hostilities, terrorism, a rise in fuel
prices or other travel costs, excessive inflation, currency fluctuations,
travel-related accidents, natural disasters, unusual weather patterns or travel
industry related labor strikes. In addition, any adverse changes affecting the
resort hotel industry such as a reduction in demand and increases in
construction or maintenance costs or value-added (sales) taxes, could have a
material adverse effect on our operating results.
WE EXPERIENCE SEASONALITY THAT COULD CAUSE FLUCTUATIONS AND ADVERSELY AFFECT OUR
BUSINESS AND STOCK PRICE.
Seasonality in the vacation resort and travel industry is likely to cause
fluctuations in our operating results which may adversely affect our stock
price. In both our Grand Hotel Group and Travel Group, revenues typically
increase during the spring and summer months and are lower during the fall and
winter months. In addition, our seasonal business has been adversely affected in
the past and could be affected in the future by climactic conditions, such as a
wet or rainy summer season which frequently occurs in the United Kingdom. As our
business continues to expand beyond the United Kingdom, seasonal fluctuations
will affect us in different ways. If seasonality in our business causes
quarterly fluctuations in our revenues and operating profits which are unusually
severe or unexpected, there could be a material adverse effect on our business
and stock price.
In addition, our earnings may be impacted by the timing of the completion
of the acquisition of future resort hotels and the potential impact of weather
or other natural disasters at our resort locations. The combination of the
possible delay in generating revenue after the acquisition of additional resort
hotels, and the expenses associated with start-up unit or room-rental
operations, interest expense, amortization and depreciation expenses from such
acquisitions may materially adversely impact our earnings. Please See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Seasonality and Quarterly Financial Information" for a discussion of
how seasonality is likely to affect our operating results.
WE MAY NEED MORE MONEY, WHICH MAY NOT BE AVAILABLE TO US ON FAVORABLE TERMS OR
AT ALL.
We require substantial working capital to fund our business. We currently
anticipate that the net proceeds of this offering, together with our existing
funds and ability to borrow, will be sufficient to meet our capital requirements
for at least the next 12 months. However, we may need to raise additional funds
in order to support more rapid expansion, develop new or enhanced services,
respond to competitive pressures, acquire complementary businesses or
technologies or take advantage of unanticipated opportunities. If additional
funds are raised through the issuance of equity securities, the percentage
ownership of our stockholders will be reduced, our stockholders may experience
additional dilution in net book value per share or such securities may have
rights, preferences or privileges senior to those of the holders of our common
stock. There can be no assurance that additional financing will be available
when needed on terms favorable to us or at all. If adequate funds are not
available on acceptable terms, we may be unable to develop or enhance our
services and products, take advantage of future opportunities or respond to
competitive pressures, any of which could have a material adverse effect on our
business, financial condition and operating results. Please see "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" for more detailed information
regarding our possible future capital requirements.
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THE LOSS OF OUR SENIOR MANAGEMENT OR OTHER KEY PERSONNEL OR OUR FAILURE TO
ATTRACT ADDITIONAL PERSONNEL COULD NEGATIVELY AFFECT OUR BUSINESS AND DECREASE
THE VALUE OF YOUR INVESTMENT.
Our performance is substantially dependent on the continued services and
performance of our senior management and other key personnel. The loss of the
services of any of our executive officers or other key employees would adversely
affect our ability to manage our business and would likely have a detrimental
effect on our operating results. In particular, we are dependent upon the
services of Kevin R. Leech, our Chairman of the Board, Raymond J. Peel, our
President and Chief Executive Officer, Rod Rodgers, our Senior Executive Vice
President and President of our Grand Hotel Group, David Marriott, our Marketing
Director and Vice President of our Grand Hotel Group, and Stephen Last, our
Executive Vice President and Chief Financial Officer. Prior to this offering,
corporations owned or controlled by Mr. Leech own 76.6% of our outstanding
common stock, none of which is subject to vesting. Other than a (pound)8.5
million key man life insurance policy on the life of Mr. Leech, assigned to Arab
Bank and Irish Nationwide Building Society as collateral for loans extended to
GHG, we do not intend to maintain "key person" life insurance policies on any of
our key personnel.
Our future success also depends on our ability to identify, attract, hire,
train, retain and motivate other highly skilled technical, managerial,
marketing, administrative, and customer service personnel. Competition for such
personnel is intense, and we are not sure that we will be able to successfully
attract, assimilate or retain sufficiently qualified personnel. In particular,
we may encounter difficulties in attracting and retaining a sufficient number of
qualified software developers for our online services and transaction-processing
systems. Failure to retain and attract necessary technical, managerial,
marketing, administrative, and customer service personnel would have a negative
effect on our operating results and stock price. Please see "Business--Our
Employees" and "Management" for more detailed information about our management
team.
OUR GRAND HOTEL GROUP IS SUBJECT TO CERTAIN LICENSING LAWS.
Our Grand Hotel Group is subject to certain licensing laws in England and
Wales related to the selling of alcohol and operation of bars and cocktail
lounges in hotels, as well as various fire, health and safety regulations. A
serious violation could result in a significant fine or even the forced closing
of one or more of our hotels. Please see "Busines--Government Regulation of
our Business" for a more detailed discussion of certain laws that affect our
business.
OUR TRAVEL GROUP IS REQUIRED TO MAINTAIN RENEWABLE LICENSES WITH THE UNITED
KINGDOM CIVIL AVIATION AUTHORITY AND COMPLY WITH NUMEROUS CAA REGULATIONS.
Our travel services business, which makes or arranges advance bookings of
accomodation and airline seats for its customers, must be licensed by the CAA
and is subject to CAA regulations, including the requirement that it maintain an
indemnity bond securing payment for airline seats. The face amount of such bond
ranges from between 5% to 10% of the annual revenues of each of Miss Ellie's,
Ilios and International Aviation Group, the three companies comprising our
Travel Group. In addition, the CAA licenses held by each of such companies are
subject to annual review and renewal and may be revoked, suspended or not
renewed by the CAA for violation of CAA regulations, including the requirement
that each licensed operator report significant increases in annual revenues so
that bonding requirements may be appropriately adjusted. Although none of the
businesses comprising our Travel Group has had its CAA license revoked,
suspended or not renewed, should any of these events occur, such business would
not be able to operate and our revenues and profits would be materially and
adversely affected. Please see "Busines--Government Regulation of our Business"
for a more detailed discussion of certain laws that affect our business.
OUR BUSINESS COULD BE ADVERSELY AFFECTED BY EVOLVING GOVERNMENT REGULATIONS, AND
WE COULD BE SUBJECT TO FINES OR OTHER PENALTIES FOR FAILURE TO COMPLY WITH SUCH
REGULATIONS.
Our travel services business is subject to certain regulation by the
government of the United Kingdom, including the Package Travel, Package Holidays
and Package Tours Regulations 1992. In addition, many travel suppliers,
particularly airlines, are subject to extensive regulation by United States
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federal, state and foreign governments. In addition, the travel industry is
subject to certain special taxes by United States and foreign governments,
including hotel bed taxes, car rental taxes, airline excise taxes and airport
taxes and fees. New or different regulatory schemes or changes in tax policy
could have an adverse impact on the travel industry in general and could have a
material adverse effect on our business, financial condition and results of
operations.
Both the United States and the European Union have recently passed
legislation relating to the Internet. Because these laws are still being
implemented, we are not certain how our business will be impacted by them. We
may be indirectly affected by this new legislation to the extent it impacts our
clients and potential clients. In addition, U.S. and foreign governmental bodies
are considering, and may consider in the future, other legislative proposals
that would regulate the Internet. The adoption of any additional laws or
regulations may impose additional burdens on us or decrease the growth of the
Internet, which could, in turn, decrease the demand for our products and
services and increase our cost of doing business, or otherwise have a negative
effect on our business, operating results and financial condition. Please see
"Busines--Government Regulation of our Business" for a more detailed discussion
of certain laws that affect our business.
WE MAY BE SUBJECT TO VARIOUS ENVIRONMENTAL LAWS AND REGULATIONS THAT IMPOSE
CERTAIN REQUIREMENTS RELATING TO THE OWNERSHIP AND USE OF OUR RESORT HOTELS, AND
WE COULD BE SUBJECT TO FINES OR OTHER PENALTIES FOR FAILURE TO COMPLY WITH SUCH
REGULATIONS.
A variety of laws concerning the protection of the environment and health
and safety apply to the operations, properties and other assets we currently own
and may own in the future. These laws may originate at the European Union,
United Kingdom or local level. These environmental laws govern, among other
things, the discharge of substances into waterways and the quality of water
discharges of substances into sewers, waste and the contamination of land.
Liability can attach to a person who causes or knowingly permits the discharge
of substances to waterways or sewers without a permit authorizing such
discharges or beyond the scope of the applicable permit. The legal regime with
respect to contamination of land in the United Kingdom is expected to change in
April 2000. In general, liability and responsibility for contamination will
remain with the person responsible for the contamination, however, the new
regime formalizes this to be the person who "causes or knowingly permits"
contamination, and in the absence of such a person, the powner or occupier of
the site may be held responsible for remediation. In addition to civil claims,
criminal sanctions can be imposed for violations of environmental laws and any
persons violating these laws can be held responsible for the cost of remedying
the consequences of pollution, contamination or damage. In addition, certain
laws restrict the use of property and the construction of buildings and other
structures. Carrying out development without the appropriate consent or beyond
the scope of the consent can result in regulatory authorities taking action to
require the unauthorized use to cease or unauthorized building or structure to
be removed or modified. Criminal sanctions are available if the authority's
requirements are not satisfied. Any failure to comply with applicable
environmental laws or regulations could have a material adverse effect on our
business. Please see "Business--Environmental Matters" for a discussion of the
environmental laws and regulations that may be applicable to us.
OUR RESORTS MAY BE SUBJECT TO NATURAL AND OTHER DISASTERS FOR WHICH WE MAY NOT
BE ADEQUATELY INSURED.
Our resorts may be subject to natural and other disasters and may be
damaged as a result of such disasters. Although we have insurance customarily
carried for similar properties which we believe is adequate, there are certain
types of losses (such as losses arising from acts of war) that are not generally
insured because they are either uninsurable or not economically insurable and
for which we do not have insurance coverage. Should an uninsured loss or a loss
in excess of insured limits occur, we could lose our capital invested in a
resort, as well as the anticipated future revenues from such resort and would
continue to be obligated on any mortgage indebtedness or other obligations
related to the property. Any such loss could have a material adverse effect on
our business. Please see "Business-- Insurance" for a discussion of our
insurance policies.
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TRRRAVEL.COM WILL DEPEND ON INTERNALLY DEVELOPED TECHNOLOGY SYSTEMS AND INTERNET
CAPACITY TO HANDLE ALL TRAFFIC TO ITS WEB SITE, AND COULD BE SUBJECT TO INTERNET
CAPACITY CONSTRAINTS. IF ITS SYSTEMS FAIL OR DO NOT PERFORM OPTIMALLY, ITS
OPERATIONS AND REVENUE AND OUR INVESTMENT IN TRRRAVEL.COM MAY BE NEGATIVELY
AFFECTED.
The revenues which will be derived from the www.trrravel.com Web site
depends on the number of customers who use the Web site to book their travel
reservations. Accordingly, the satisfactory performance, reliability and
availability of the Web site, transaction-processing systems and network
infrastructure are critical to its operating results, as well as its ability to
attract and retain customers and maintain adequate customer service levels. Any
system interruptions that result in the loss of data, the unavailability of the
Web site or reduced performance of the reservation system would reduce the
volume of reservations and the attractiveness of its service offerings, which
could have a negative effect on the operating results of www.trrravel.com and
adversely impact our investment in such company.
trrravel.com Limited intends to use an internally developed system that
will support the Web site and substantially all aspects of transaction
processing, including making reservations and confirmations. www.trrravel.com
may experience periodic system interruptions and delays that continue to occur
from time to time. Any substantial increase in the volume of traffic on the Web
site or the number of reservations made by customers will require trrravel.com
Limited to expand and upgrade its technology, transaction-processing systems and
network infrastructure. trrravel.com Limited may experience temporary capacity
constraints due to sharply increased traffic during "fare wars" or other
promotions. Capacity constraints such as these may cause unanticipated system
disruptions, slower response times, degradation in levels of customer service,
impaired quality and speed of reservations and confirmations and delays in
reporting accurate financial information.
We cannot be sure that the transaction-processing systems and network
infrastructure of trrravel.com Limited will be able to accommodate the level of
Web site traffic that it experiences, or that it will, in general, be able to
accurately project the rate or timing of increases in such traffic or upgrade
its systems and infrastructure to accommodate future traffic levels on the Web
site. In addition, electronic commerce is characterized by rapid technological
change, changes in user and customer requirements and preferences and changes in
industry standards and practices. The existing technology and systems of
trrravel.com Limited could quickly become obsolete because of the rapidly
changing technologies of electronic commerce. There can be no assurance that
trrravel.com Limited we will be able to effectively upgrade and expand its
transaction-processing systems in a timely manner or to successfully integrate
any newly developed or purchased modules with our existing systems. Upgrading or
expanding such systems would likely be expensive and time-consuming.
The www.trrravel.com Web site is technically maintained in Yate Bristol,
England by Planet Edge Limited, a subsidiary of our affiliate Ci4net.com, Inc.
The www.trrravel.com call center is located at a single facility in Haywards
Heath, England. These systems and operations are vulnerable to damage or
interruption from human error, fire, flood, power loss, telecommunications
failure, break-ins, sabotage, intentional acts of vandalism, natural disasters
and similar events. trrravel.com Limited currently does not have redundant
systems or a disaster recovery plan and does not carry sufficient business
interruption insurance to compensate it for losses that may occur. Despite
implementation of network security measures, their servers are vulnerable to
computer viruses, physical or electronic break-ins and similar disruptions,
which could lead to interruptions, delays, loss of data or the inability to
accept and confirm customer reservations. Any adverse development in the
trrravel.com Limited technology could materially and adversely affect our 49%
ownership interest in trrravel.com Limited.
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IF PROVIDERS OF THE THIRD-PARTY SYSTEMS ON WHICH TRRRAVEL.COM LIMITED RELIES
DECIDE TO NO LONGER OFFER OR MAINTAIN SERVICES, WE COULD BE DIRECTLY AFFECTED
AND THE VALUE OF OUR INVESTMENT IN trrravel.com LIMITED MIGHT DECREASE.
trrravel.com Limited depends on third-party service providers for a
substantial portion of its communications, technology and operating
infrastructure. Any discontinuation of third-party provider services, or any
reduction in performance that requires it to replace these services, could be
disruptive to its business. These third-party providers may experience
interruptions or failures in their systems or services that could temporarily
prevent our customers from accessing or purchasing certain travel services
through the Web site. Any reduction in performance, disruption in Internet or
Web site access or discontinuation of services provided by these Internet
service providers could have a negative effect on our business, operating
results and financial condition.
THE OPERATIONS OF TRRRAVEL.COM LIMITED AND CUSTOMER DATABASES ARE SUSCEPTIBLE TO
SECURITY RISKS, WHICH MIGHT ADVERSELY AFFECT OUR OPERATING RESULTS.
A fundamental requirement for electronic commerce is the secure
transmission of confidential information over public networks. Security measures
may not prevent security breaches. If security measures adopted by trrravel.com
Limited were ever compromised, it could have a detrimental effect on its
reputation, operating results and the value of our investment in such company.
trrravel.com Limited will rely on encryption and authentication technology
licensed from third parties to ensure secure transmission of confidential
information, such as customer credit card numbers. In addition, it plans to
maintain an extensive confidential database of customer profiles and transaction
information. Advances in computer capabilities, new discoveries in the field of
cryptography, or other events or developments may result in a compromise or
breach of the algorithms it intends to use to protect customer transaction data
and personal information contained in its customer database. A person who
circumvents these security measures could steal or misuse proprietary
information or cause interruptions in trrravel.com's operations. Publicized
security problems could increase concerns over the security of online
transactions and the privacy of users, which may also inhibit the Web site's
growth, especially as a means of conducting commercial transactions. To the
extent that trrravel.com or its third-party contractors' activities involve the
storage and transmission of proprietary information, such as credit card numbers
or other personal information, security breaches could expose us to a risk of
loss or litigation and possible liability. Failure to prevent security breaches
will have a negative, effect on our reputation, business and operating results.
TRRRAVEL.COM MAY BE UNABLE TO PROTECT ITS INTELLECTUAL PROPERTY, INCLUDING ITS
TRADEMARKS, WHICH COULD ADVERSELY AFFECT THE VALUE OF OUR INVESTMENT.
We regard the trademark, domain names, service marks, trade dress, trade
secrets, copyrights and similar intellectual property as important to the
success of www.trrravel.com, and rely on foreign and domestic trademark and
copyright law, trade secret protection and confidentiality to protect our
proprietary rights. trrravel.com Limited is pursuing the registration of our key
trademarks in the United States and internationally. Effective trademark,
service mark, copyright and trade secret protection may not available in every
country in which our products and services are made available online. Failure to
effectively protect our intellectual property could adversely affect our
Internet business, result in erosion of the trrravel.com brand name and
adversely impact the value of our minority investment in trrravel.com.
Currently, trrravel.com is the only trademark held by trrravel.com
Limited. As a result of our efforts to protect our rights in the trrravel.com
brand, we could become involved in litigation, which would likely be expensive
and
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time consuming, and could distract management from the operations of the
business. Furthermore, we cannot be sure we would prevail in any such
litigation. If we are unsuccessful in obtaining a trademark for trrravel.com, we
would be required to invest substantial additional amounts in advertising and
brand development with respect to a new trademark. These additional expenditures
would adversely affect our operating results. Please see "Risk Factors--If our
strategy to increase market awareness of our brand through extensive online
advertising fails, we may be unable to substantially grow our business" for a
discussion of the risks and uncertainties inherent in establishing brand
recognition.
We cannot be sure that the steps we have taken to protect our proprietary
rights will be adequate or that third parties will not infringe or
misappropriate our copyrights, trademarks, trade dress and similar proprietary
rights. In the future, litigation may be necessary to enforce our intellectual
property and contractual rights, or determine the validity and scope of the
proprietary rights of others. Such litigation, regardless of the outcome, could
result in substantial costs and diversion of management and technical resources,
either of which could materially harm our business. In addition, other parties
might assert infringement claims against us. We may be subject to legal
proceedings and claims from time to time in the ordinary course of our business,
including claims that we or our licensees have infringed the trademarks and
other intellectual property rights of third parties. If we do not prevail, we
could be required to stop using our trademarks or domain names or to pay
damages. Such claims, even if not meritorious, could result in the expenditure
of significant financial and managerial resources.
WE MAY NOT ACQUIRE OR MAINTAIN OUR DOMAIN NAME IN ALL OF THE COUNTRIES IN WHICH
WE DO BUSINESS, AND WE MAY BE REQUIRED TO EXPEND SIGNIFICANT FUNDS TO PREVENT
INFRINGEMENT OF OUR DOMAIN NAME, WHICH COULD INHIBIT OUR ABILITY TO EXPAND OUR
BUSINESS INTERNATIONALLY.
Affiliates of trrravel.com Limited currently hold the Internet domain
names www.trrrravel.com, www.trrravel.com and www.trravel.com. There is
currently an existing domain name www.travel.com owned by an unrelated third
party, and other third parties may acquire domain names that are similar to,
infringe or otherwise decrease the value of our domain names, trademarks and
other proprietary rights, which may hurt our business. trrravel.com Limited may
be required to expend significant funds in the legal defense of our domain
names. Domain names generally are regulated by Internet regulatory bodies. The
regulation of domain names is subject to change. Regulatory bodies could
establish additional top-level domains, appoint additional domain name
registrars or modify the requirements for holding domain names. The relationship
between regulations governing domain names and laws protecting trademarks and
similar proprietary rights is unclear. As a result, we may not acquire or
maintain the www.trrrravel.com, www.trrravel.com and www.trravel.com domain
names in all of the countries in which we intend to conduct business in the
future.
WE COULD FACE LITIGATION BECAUSE OF OUR WEB PAGE CONTENT, WHICH MIGHT REQUIRE
CONSIDERABLE EFFORT AND EXPENSE TO DEFEND AND RESULT IN SIGNIFICANT LIABILITY.
As a publisher and distributor of online content, trrravel.com Limited
faces potential liability for defamation, negligence, copyright, patent or
trademark infringement and other claims based on the nature and content of the
materials that we publish or distribute. Such claims have been brought, and
sometimes successfully pressed, against other online services. In addition, we
do not and cannot practically screen all of the content generated by other Web
sites that may be linked to our Web site, and we could be exposed to liability
with respect to such content. Although we carry general liability insurance, our
insurance may not cover claims of these types or may not be adequate to
indemnify us for all liability that may be imposed. Any imposition of liability,
particularly liability that is not covered by insurance or is in excess of
insurance coverage, could have a damaging effect on our reputation, operating
results, financial condition and stock price. Please see "Business--Our Products
and Services" for more detailed information concerning our Web page content.
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THE CONVERSION TO THE EURO MAY ADVERSELY AFFECT OUR BUSINESS IN EUROPE.
Due to our operations in the United Kingdom, we may be exposed to certain
risks as a result of the conversion by certain European Union member states of
their respective currencies to the euro. The conversion process commenced on
January 1, 1999. The conversion rates between the member states' currencies and
the euro are fixed by the Council of the European Union. While the United
Kingdom is a member of the European Union, it is not participating in the euro
conversion; however, it may elect to convert to the euro at a later date.
Consequently, we are unsure as to whether the conversion to the euro will have
an adverse impact on our business, but potential risks include the costs of
modifying our software and information systems and changes in the conduct of
business and in the principal European markets for our products and services.
Please See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Effects of the Euro" for a more complete description of
the impact of the conversion to the euro on our financial condition.
MANAGEMENT WILL HAVE BROAD DISCRETION OVER THE USE OF THE PROCEEDS OF THIS
OFFERING, AND MAY USE THESE PROCEEDS IN WAYS YOU MIGHT NOT BELIEVE ARE
DESIRABLE.
The net proceeds of this offering are estimated to be approximately $28.0
million (approximately $32.4 million if the underwriters' over-allotment option
is exercised in full) at an assumed initial public offering price of $11.00 per
share and after deducting the estimated underwriting discount and other
estimated offering expenses. We currently plan to use approximately $25.3
million of such net proceeds, coupled with an additional $6.4 million in bank
borrowings, to retire debt owed to The Rank Group (representing a portion of the
purchase price of the five Butlin's Provincial Hotels), to expand our Travel
Group business, and to acquire additional holiday resort hotels in England and
in other countries in Europe. Accordingly, our management will retain broad
discretion as to the allocation of the remaining approximately $2.7 million of
the net proceeds of this offering, which has been allocated for working capital
and general corporate purposes. The broad discretion we have in the use of
proceeds of this offering involves risks that we will not use such proceeds
effectively or that we will use them in ways with which you may not agree. In
addition, the repayment of our indebtedness to The Rank Group will terminate a
bank letter of credit collateralized by the personal guaranty of and marketable
securities owned by our Chairman of the Board, Kevin R. Leech. Please see "Use
of Proceeds," for a more detailed discussion of how we will allocate proceeds,
and "Certain Transactions" for a discussion of certain direct personal benefits
to Kevin R. Leech from this offering.
BECAUSE OUR DIRECTORS AND OFFICERS WILL OWN A MAJORITY OF OUR OUTSTANDING COMMON
STOCK AFTER THIS OFFERING, YOU AND OTHER INVESTORS WILL HAVE MINIMAL INFLUENCE
ON STOCKHOLDER DECISIONS.
Upon consummation of this offering, our executive officers and directors,
together with their respective affiliates, will beneficially own approximately
59% (approximately 56% if the underwriters, over-allotment option is exercised
in full), of our outstanding common stock. As a result, if they act together,
they will have the ability to control the outcome on all matters requiring
stockholder approval, including the election and removal of directors and any
merger, consolidation or sale of all or substantially all of our assets, and to
control our management and affairs. Such control could discourage others from
initiating potential merger, takeover or other change of control transactions.
As a result, the market price of our common stock could be adversely affected.
Please see "Principal Stockholders" for a more detailed presentation of the
influence our principal stockholders have over us.
OUR BUSINESS COULD STILL BE DISRUPTED BY RESIDUAL CONSEQUENCES OF THE YEAR 2000
PROBLEM.
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally and
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the compliance and remediation work accomplished during the years leading up to
2000 was effective to prevent any problems. We have not experienced any such
computer difficulty; however, computer experts have warned that there may still
be residual consequences of the change in centuries and any such difficulties
may, depending upon their pervasiveness and severity, have a material adverse
effect on our business, financial condition and results of operations. Please
see "Management's Discussion and Analysis of Financial Condition and Results of
operations--Year 2000 Disclosure" for a more detailed discussion of year 2000
issues.
THERE IS NOT CURRENTLY A PUBLIC MARKET FOR OUR COMMON STOCK, THE OFFERING PRICE
OF OUR COMMON STOCK IS ARBITRARY, AND WE MUST SATISFY THE APPLICABLE
REQUIREMENTS FOR OUR COMMON STOCK TO TRADE ON THE NASDAQ NATIONAL MARKET.
There is not currently a public market for our common stock, and an active
trading market may not develop or be sustained. Unless and until a public market
develops, purchasers of our common stock may have difficulty selling their
shares of common stock.
The initial public offering price of the shares was arbitrarily determined
by negotiations between the underwriter and us, and does not necessarily bear
any relationship to our assets, book value, results of operations, or any other
generally accepted indicia of value. See "Underwriting". From time to time after
this offering, the market price of our common stock may experience significant
volatility. Our quarterly results, announcements by us or our competitors
regarding acquisitions or dispositions, new procedures or technology, changes in
general conditions in the economy, and general market conditions could cause the
market price of the common stock to fluctuate substantially. The equity markets
have, on occasion, experienced significant price and volume fluctuations that
have affected the market prices for many companies' common stock and have often
been unrelated to the operating performance of these companies.
THE MARKET FOR OUR COMMON STOCK MAY SUFFER IN THE EVENT OF DELISTING FROM THE
NASDAQ NATIONAL MARKET AND IF OUR COMMON STOCK IS CONSIDERED TO BE "PENNY
STOCK."
Under the currently effective criteria for the maintenance of our listing
of securities on the Nasdaq National Market, a company must have at least $75
million in market capitalization, a minimum bid price of $5.00 per share, and
securities in the hands of the public with a market value of at least $20
million. For continued listing, a company must maintain $50 million in market
value, a minimum bid price of $5.00, and a public float of at least $15 million
If we cannot maintain the standards for continued listing, our common stock
could be subject to delisting from the Nasdaq National Market. Trading, if any,
in our common stock would then be conducted in the over-the-counter market on
the OTC Bulletin Board established for securities that do not meet the Nasdaq
National Market listing requirements or in what are commonly referred to as the
"pink sheets." As a result, an investor may find it more difficult to dispose
of, or to obtain accurate quotations as to the price of, our shares.
If our common stock were delisted from the Nasdaq National Market, and no
other exclusion from the definition of a "penny stock" under the Securities
Exchange Act of 1934, as amended, were available, our common stock would be
subject to the penny stock rules that impose additional sales practice
requirements on broker-dealers who sell these securities to persons other than
established customers and accredited investors. Accredited investors are
generally those investors with net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 together with a spouse. For transactions
covered by these rules, the broker-dealer must make a special suitability
determination for the purchase, and must have received the purchaser's written
consent to the transaction prior to sale. As a result, delisting, if it were to
occur, could materially adversely affect the ability of broker-dealers to sell
our common stock and the ability of purchasers in this offering to sell their
shares in the secondary market.
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INVESTORS MAY HAVE DIFFICULTY SELLING THEIR SHARES OF COMMON STOCK AND THE
MARKET PRICE OF THE COMMON STOCK MAY DECLINE IF THE REPRESENTATIVE OF THE
UNDERWRITERS DISCONTINUES MAKING A MARKET FOR ANY REASON.
A significant number of shares sold in this offering may be sold to
customers of the underwriters. These customers may engage in transactions for
the sale or purchase of the shares through or with the underwriters. Although it
has no obligation to do so, Roth Capital Partners Incorporated, the
representative of the underwriters, intends to make a market in the shares and
may otherwise effect transactions in the common stock. If it participates in the
market, it may influence the market, if one develops, for the common stock. It
may discontinue making a market in the common stock at any time. Moreover, if
Roth Capital Partners sells the shares of common stock issuable upon exercise of
the representative's warrants, it may be required under the Securities Exchange
Act of 1934, as amended, to temporarily suspend its market-making activities.
The price and liquidity of the common stock may be significantly affected by the
degree, if any, of its direct or indirect participation in the market.
INVESTORS IN THIS OFFERING WILL INCUR IMMEDIATE AND SUBSTANTIAL DILUTION.
The initial public offering price per share exceeds the net tangible book
value per share. Accordingly, investors purchasing shares in this offering will
(1) pay a price per share which substantially exceeds the value of our assets
after subtracting our intangible assets and liabilities and (2) contribute 95.2%
of the total amount invested to date to fund us, but will only own 37.2% of the
shares of common stock outstanding. Please see "Dilution" for a discussion of
the dilution that investors in this offering will experience.
FUTURE SALES OF COMMON STOCK BY OUR EXISTING STOCKHOLDERS COULD ADVERSELY AFFECT
OUR STOCK PRICE.
The market price of our common stock would decline as a result of sales of
a large number of shares of our stock in the market after this offering, or the
perception that these sales could occur. These sales also might make it more
difficult for us to sell equity securities in the future at a time and at a
price that we deem appropriate. After this offering, we will have outstanding
8,060,000 shares of common stock. Of these shares, the 3,000,000 shares being
offered in this offering will be freely tradable immediately following this
offering. Our directors and officers and a number of our stockholders who
beneficially hold 5,060,000 shares in the aggregate have entered into lock-up
agreements by which they have agreed that they will not sell, directly or
indirectly, any shares of common stock without the prior written consent of Roth
Capital Partners Incorporated, as representative of the underwriters for a
period of between six and 12 months from the date of this prospectus. The number
of shares of common stock and the dates when these shares will become freely
tradable in the market, subject to the lock-up agreements, is as follows:
Number of Shares Date
---------------- ----
3,000,000 On the date of this prospectus
Within six months of the date of
0 this prospectus
5,060,000 Between six and 12 months from
the date of this prospectus
Following this offering, we intend to file a registration statement to
register for issuance and resale the 1,000,000 shares of common stock reserved
for issuance under our existing stock option plan described in
"Management--Executive Compensation" and "--2000 Stock Option Plan." We expect
that registration statement to become effective immediately upon filing. Shares
issued upon the exercise of
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stock options granted under the 2000 Plan will be eligible for resale in the
public market from time to time subject to vesting and, in the case of some
options, the expiration of the lock-up agreements referred to in the preceding
paragraph.
Upon the closing of this offering, we intend to grant non-qualified stock
options to purchase approximately _________ shares of common stock to a number
of our officers and employees. The exercise price per share of these options is
expected to be the initial public offering price of the common stock. These
option grants are expected to vest in the following manner: ___% per year for
____ years commencing on the one year anniversary of the grant of the option.
None of the shares issuable upon the exercise of these options will be subject
to a lock-up agreement with the underwriters as described below.
OUR CHARTER AND BYLAW PROVISIONS LIMIT THE LIABILITY OF OUR OFFICERS AND
DIRECTORS.
Our charter includes provisions to eliminate, to the full extent permitted
by the Delaware General Corporation Law as in effect from time to time, the
personal liability of our directors for monetary damages arising from a breach
of their fiduciary duties as directors. Our charter also provides that we will
indemnify any director or officer to the extent that such indemnification is
permitted under Delaware law. In addition, our bylaws require us to indemnify,
to the full extent permitted by law, any of our directors, officers, employees
or agents for acts which such person reasonably believes are not in violation of
our corporate purposes as set forth in our charter. As a result of such
provisions, stockholders may be unable to recover damages against our directors
and officers for actions taken by them which constitute negligence, gross
negligence or a violation of their fiduciary duties, which may discourage or
deter stockholders from suing our directors, officers, employees and agents for
breaches of their duty of care, even though such action, if successful, might
otherwise benefit us and our stockholders.
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. These forward-looking
statements are not historical facts, but rather are based on our current
expectations, estimates and projections about our industry, beliefs and
assumptions. Words such as "may," "could," "would," "anticipates," "expects,"
"intends," "plans," "projects," "believes," "seeks," "estimates" and similar
expressions are intended to identify forward-looking statements. These
statements are not guarantees of future performance and are subject to certain
risks, uncertainties and other factors, some of which are beyond our control,
are difficult to predict and could cause actual results to differ materially
from those expressed or forecasted in the forward-looking statements. These
risks and uncertainties are described in "Risk Factors" and elsewhere in this
prospectus. We caution you not to place undue reliance on these forward-looking
statements, which reflect our management's view only as of the date of this
prospectus.
EXCHANGE RATE INFORMATION
The following table sets forth, for the periods indicated, period end,
average, high, and low exchange rate between British pounds sterling and United
States dollars based on the noon buying rate (expressed in United States dollars
per pound sterling). These rates are provided solely for your convenience and
are not necessarily the exchange rates (if any) used by us in the preparation of
the financial statements included elsewhere in this prospectus.
UNITED STATES DOLLARS PER BRITISH POUNDS STERLING
-------------------------------------------------
AVERAGE OF THE
NOON BUYING
RATE ON THE LAST
RATE AT BUSINESS DAY OF
END OF EACH FULL
CALENDAR YEAR PERIOD MONTH HIGH LOW
- ------------- ------ -------- ---- ---
1994........................... 1.5665 1.5393 1.6368 1.4615
1995........................... 1.5535 1.5803 1.6440 1.5302
1996........................... 1.7123 1.5733 1.7123 1.4948
1997........................... 1.6427 1.6397 1.7035 1.5825
1998........................... 1.6628 1.6602 1.7222 1.6144
1999........................... 1,6165 1,6120 1.6793 1.5470
On October 31, 1999, the noon buying rate was $1.6117 = (pound)1.00
(consequently, $1.00 = (pound)0.6205 at this rate), and on March 9, 2000, it
was $1.5816 = (pound)1.00.
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USE OF PROCEEDS
We estimate that we will receive net proceeds of approximately $28.0
million from our sale of the 3,000,000 shares of common stock offered by us
under this prospectus at an assumed initial public offering price of $11.00 per
share, after deducting the underwriting discount and commissions and other
estimated fees and expenses payable by us (approximately $32.4 million if the
over-allotment option is exercised in full). We expect to use the net proceeds
approximately as follows:
o $10.3 million (36.8% of total net proceeds), together with
approximately $6.4 million of net proceeds from a mortgage
refinancing, will be used to retire approximately $16.7 million
((pound)10.4 million) of indebtedness owed by GHG to Butlin's
Limited, a subsidiary of The Rank Group plc, in connection with the
acquisition by GHG of the Butlin's Provincial Hotels from another
Rank Group subsidiary;
o $9.0 million (32.1% of the total net proceeds) to acquire additional
holiday resort hotels located in seaside resort areas in England,
Spain and other locations deemed attractive by our management; and
o $6.0 million (21.4% of total net proceeds) for expansion of our
travel-related services businesses, including advertising and the
acquisition of other tour operators and travel agencies in England
and Europe; and
o $2.7 million (9.7% of the total net proceeds) for working capital
and general corporate purposes.
Simultaneous with the completion of this offering, we are refinancing our
outstanding mortgage indebtedness of approximately $16.1 million ((pound)10.0
million) on our hotels with the banks which had provided original acquisition
debt financing in June 1999. In connection with such refinancing, we anticipate
that we will increase our secured borrowings to a total of approximately $22.6
million ((pound)14.0 million) and will utilize the increased proceeds, together
with $10.3 million of the net proceeds of this offering, to retire our
indebtedness to The Rank Group. The repayment of our indebtedness to The Rank
Group will terminate a bank letter of credit collateralized by the personal
guaranty of and marketable securities owned by our Chairman of the Board, Kevin
R. Leech. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources" and "Certain
Transactions."
Other than as set forth in this prospectus, we currently have no
commitments or agreements and are not involved in any negotiations with respect
to any acquisitions or investments. The allocation of the net proceeds of the
offering discussed above represents management's current estimates only.
Management's plans for the proceeds are subject to change due to unforeseen
opportunities and, as such, actual allocation of the net proceeds may differ
substantially from these estimates. We cannot specify with certainty the
particular uses for the net proceeds to be received upon completion of this
offering. Accordingly, our management team will have broad discretion in using
the net proceeds of this offering. Pending such uses, we intend to invest the
net proceeds of the initial public offering in investment grade interest-bearing
securities. Please see "Risk Factors--Management will have broad discretion over
the use of proceeds of this offering, and may use these proceeds in ways you
might not believe are desirable" for a discussion of uncertainties regarding our
use of proceeds.
We currently anticipate that the net proceeds of this offering, together
with our existing funds and ability to borrow, will be sufficient to meet our
capital requirements for at least the next 12 months. However, we may need to
raise additional funds in order to support more rapid expansion, develop new or
enhanced services, respond to competitive pressures, acquire complementary
business or technologies or take advantage of unanticipated opportunities. If
additional funds are raised through the issuance of
27
<PAGE>
equity securities, the percentage ownership of our stockholders will be reduced,
our stockholders may experience additional dilution in net book value per share
or such securities may have rights, preferences or privileges senior to those of
the holders of our common stock. There can be no assurance that additional
financing will be available when needed on terms favorable to us or at all. If
adequate funds are not available on acceptable terms, we may be unable to
develop or enhance our services and products, take advantage of future
opportunities or respond to competitive pressures, any of which could have a
material adverse effect on our business, financial condition and operating
results. Please see "Risk Factors--We may need more money, which may not be
available to us on favorable terms or at all" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources" for more detailed information regarding our possible future capital
requirements.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock. We
currently expect to retain future earnings, if any, to finance the growth and
development of our business and do not anticipate paying any cash dividends in
the foreseeable future.
28
<PAGE>
CAPITALIZATION
The following table sets forth our capitalization:
o on an actual basis as of October 31, 1999;
o on a pro forma basis assuming our acquisition of all of the
outstanding share capital of LTGL, and LTGL's acquisition of all of
the outstanding share capital of Miss Ellie's World Travel Limited,
Ilios Travel Limited and GHG and 49% of the outstanding share
capital of trrravel.com Limited had been completed on October 31,
1999; and
o pro forma as adjusted to give effect to (i) the sale of 3,000,000
shares of common stock offered by us pursuant to this prospectus,
after deduction of estimated offering expenses and underwriting
discounts, assuming an offering price of $11.00; (ii) the repayment
of $6.4 million of a mortgage financing and (iii) the repayment of
$16.7 million outstanding under the note of Grand Hotel Group to
a subsidiary of The Rank Group.
This table should be read in conjunction with "Unaudited Condensed Pro
Forma Consolidated Financial Information," Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the financial statements
and the notes thereto included elsewhere in this prospectus.
<TABLE>
<CAPTION>
OCTOBER 31, 1999
----------------------------------------------------------------
ACTUAL PRO FORMA
(IN THOUSANDS)
------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Short-term debt:
Short-term borrowings............................ (pound) -- $ -- (pound)1,030 $1,660
Capital lease obligation--current portion........ 143 230 147 237
------------- ------------- ------------- ------------
Total short-term debt............................ (pound)143 $230 (pound)1,177 $1,897
============= ============= ============= =============
Long-term debt:
Notes payable.................................... (pound)20,500 $33,040 (pound)20,825 $33,564
Capital lease obligation--non-current portion.... 246 396 250 403
------------- ------------- ------------- -------------
Total long-term debt............................. 20,746 33,436 21,075 33,967
------------- ------------- ------------- -------------
Stockholders' equity:
Preferred stock, par value $0.001:
no shares authorized, issued and outstanding,
actual; 5,000,000 shares authorized, no shares
issued and outstanding, pro forma and pro forma
as adjusted...................................... -- -- -- --
Common stock, par value $0.001: no
shares authorized, issued and
outstanding, actual; 25,000,000
shares authorized, 5,060,000 shares issued and
outstanding, pro forma, and 8,060,000 shares
issued and outstanding pro forma as adjusted (1)......
-- -- 5 8
Additional paid-in capital............................... -- -- -- --
Accumulated retained earnings............................ 655 1,056 2,211 3,564
------------- ------------- ------------- ------------
Total stockholders' equity...................... 655 1,056 2,216 3,572
------------- ------------- ------------- ------------
Total capitalization...................... (pound)21,401 $34,492 (pound)23,291 $37,539
============= ============= ============= =============
<CAPTION>
-----------------------------
PRO FORMA AS
ADJUSTED
-----------------------------
<S> <C> <C>
Short-term debt:
Short-term borrowings............................ (pound)1,030 $1,660
Capital lease obligation--current portion........ 147 237
------------- -------------
Total short-term debt............................ (pound)1,177 $1,897
============= =============
Long-term debt:
Notes payable.................................... (pound)14,458 $23,302
Capital lease obligation--non-current portion.... 250 403
------------- -------------
Total long-term debt............................. 14,708 23,705
------------- -------------
Stockholders' equity:
Preferred stock, par value $0.001:
no shares authorized, issued and outstanding,
actual; 5,000,000 shares authorized, no shares
issued and outstanding, pro forma and pro forma
as adjusted...................................... -- --
Common stock, par value $0.001: no
shares authorized, issued and
outstanding, actual; 25,000,000
shares authorized, 5,060,000 shares issued and
outstanding, pro forma, and 8,060,000 shares
issued and outstanding pro forma as adjusted (1)...
8 13
Additional paid-in capital............................... 17,395 28,035
Accumulated retained earnings............................ 2,211 3,564
------------- -------------
Total stockholders' equity...................... 19,614 31,612
------------- -------------
Total capitalization...................... (pound)34,322 $55,317
============= =============
</TABLE>
(1) Does not include exercise of the underwriters' over-allotment option or the
issuance of up to 1,000,000 additional shares of common stock upon exercise of
options under the 2000 Plan, of which options to purchase ______ shares have
been granted as at the date of this prospectus.
29
<PAGE>
DILUTION
Purchasers of our common stock in this offering will experience immediate
and substantial dilution in the net tangible book value of the common stock for
this offering. Pro forma net tangible book value per share represents the amount
of our total tangible assets less our total liabilities, divided by the number
of shares of our common stock outstanding. At October 31, 1999, we had a pro
forma net tangible book value of $2.3 million, or approximately $0.45 per share
of our outstanding common stock. After giving effect to (i) our receipt of the
estimated net proceeds from our sale of the 3,000,000 shares of our common stock
offered hereby at an assumed initial public offering price of $11.00 per share
(after deducting underwriting discounts and commissions and estimated offering
expenses payable by us); (ii) the repayment of $6.4 million of a mortgage
financing and (iii) the repayment of $16.7 million outstanding under the note of
Grand Hotel Group to a subsidiary of The Rank Group. Our pro forma net tangible
book value at October 31, 1999 would have been approximately $20.1 milliion or
$2.49 per share of our common stock, representing an immediate increase in net
tangible book value of $2.04 per share to existing stockholders and an immediate
dilution of $8.51 per share to investors in this offering. "Dilution" is
determined by subtracting net tangible book value per share after the offering
from the offering price to investors.
The following table illustrates this per share dilution:
Initial public offering price per share....................... $11.00
Pro forma net tangible book value per share
at October 31, 1999..................................... $ 0.45
Increase attributable to new investors..................... 2.04
------
Pro forma net tangible book value after the offering.......... 2.49
------
Dilution to new investors..................................... $ 8.51
======
The following table summarizes the number of shares of our common stock
purchased from us, the total consideration paid and the average price per share
paid by (i) our existing stockholders on the date of this prospectus and
(ii) new investors purchasing shares of our common stock in this offering,
before deducting the underwriting discounts and commissions and our estimated
offering expenses payable by us.
- -------------------------------------------------------------------------------
TOTAL
SHARES PURCHASED CONSIDERATION PAID AVERAGE
----------------- ------------------ PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------ ------- ------ ------- ---------
Existing Shareholders....... 5,060,000 62.8% $ 1,660,000 4.8% $ 0.33
New Investors............... 3,000,000 37.2% 33,000,000 95.2% $11.00
--------- ---- ---------- ---
Total................. 8,060,000 100.0% 34,660,000 100%
========= ===== ========== ===
- --------------------
30
<PAGE>
UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
The following information, which is unaudited, gives pro forma effect to:
o our acquisition of all of the outstanding share capital of LTGL;
o LTGL's acquisition of all of the outstanding share capital of Miss
Ellie's World Travel Limited, Ilios Travel Limited and GHG; and
o LTGL's acquisition of 49% of the outstanding share capital of
trrravel.com Limited
We have provided the unaudited pro forma consolidated financial data for
informational purposes only. They are not necessarily indicative of future
results of what our operating results would have been had we actually
consummated the acquisition of all of the outstanding share capital of LTGL, and
had LTGL actually consummated the acquisition of all of the outstanding share
capital of Miss Ellie's World Travel Limited, Ilios Travel Limited and GHG and
49% of the outstanding share capital of trrravel.com Limited on the date
assumed.
Effective June 30, 1999, GHG purchased from Rank Holidays Division
Limited, a subsidiary of The Rank Group plc, substantially all of the operating
assets relating to five hotels formerly known as the Butlin's Provincial Hotels,
including the physical properties, equipment, concessions, inventory, cash
reserves, customer lists, records and goodwill. GHG is a private limited company
organized under the laws of England and Wales and is 85% owned by Cygnet
Ventures Limited, a Guernsey corporation controlled by Kevin R. Leech, our
Chairman of the Board and principal stockholder, and 15% owned by certain other
members of our management team. In consideration for the sale of such assets,
GHG paid a subsidiary of The Rank Group (pound)19.0 million (approximately $30.6
million), of which (pound)8.6 million was paid in cash and the balance of
(pound)10.4 million was paid by GHG's issuance of a non-interest-bearing
promissory note due 2002. The GHG note was secured by an irrevocable letter of
credit issued by Citibank, N.A. in favor of Butlin's Limited. The issue of the
letter of credit was obtained through the personal guaranty of Mr. Leech. GHG
financed its cash payment of the purchase price through loans obtained from Arab
Bank plc and Irish Nationwide Building Society secured by charges granted by
Grand Hotel Group, including mortgages on the purchased hotels.
In July 1999, LTGL acquired all of the issued and outstanding share
capital of Miss Ellie's World Travel Limited, a private limited company
organized under the laws of England and Wales. In exchange for such share
capital, LTGL paid an aggregate of (pound)1,030,000 (approximately $1,660,000)
to the former shareholders of Miss Ellie's. LTGL funded the acquisition through
a loan from Red Kite Ventures Limited, an investment company beneficially owned
by Red Kite Trust, the beneficiary of which are members of the family of Kevin
R. Leech, our Chairman of the Board and principal stockholder.
In January 2000, LTGL also acquired all of the issued and outstanding
share capital of Ilios Travel Limited, a private limited company organized under
the laws of England and Wales. In exchange for such share capital, LTGL paid an
aggregate of (pound)325,000 (approximately $524,000) to the former shareholders
of Ilios. As a result of this acquisition, LTGL expanded its travel-related
services and increased its market position and cross-selling opportunities in
other destinations throughout Europe. LTGL also funded this acquisition through
a loan from Red Kite Ventures Limited.
In March 2000, the shareholders of GHG agreed to transfer 100% of the
outstanding share capital of GHG to LTGL in exchange for the issuance of an
aggregate of 3,700,000 shares of our common stock, and the shareholders of LTGL
agreed to transfer to us 100% of the outstanding share capital of LTGL in
exchange for the issuance of an aggregate of 940,000 shares of our common stock.
In
31
<PAGE>
addition, Ci4net.com, Inc. agreed to transfer to us 49% of the outstanding
share capital of trrravel.com Limited in exchange for the issuance of an
aggregate of 220,000 shares of our common stock. All of such transfers are
conditioned upon:
o the completion of this offering and application of a portion of the
net proceeds (together with additional mortgage financing) to retire
all (pound)10.4 million (approximately $16.7 million) of
indebtedness of GHG owed to The Rank Group or its subsidiaries; and
o the capitalization of(pound)1,030,000 (approximately $1,660,000) of
loans made to LTGL by a corporate affiliate of Kevin R. Leech.
We have accounted for such acquisitions using the purchase method of accounting.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Terms of our Acquisitions," "Certain Transactions" and "Principal
Stockholders."
The unaudited condensed pro forma consolidated financial information
represents our management's best estimate of the effects of the transactions
described above. We have presented it to illustrate what our joint operations
might have produced. The following information is not necessarily indicative of
the results of operations and financial position of Leisure Travel Group as they
may be in the future or as they might have been had these acquisitions been
consummated on the date assumed.
The unaudited condensed pro forma consolidated financial information
should be read in conjunction with the historical financial statements included
elsewhere in this prospectus.
32
<PAGE>
Unaudited Condensed Pro Forma Consolidated Statement of Operations
Twelve months ended October 31, 1999
(In thousands, except per share amounts)
The following unaudited condensed pro forma consolidated statement of
operations for the twelve months ended October 31, 1999 gives pro forma effect
to our acquisition of all of the outstanding share capital of LTGL, and LTGL's
acquisition of all of the outstanding share capital of Miss Ellie's World Travel
Limited, Ilios Travel Limited, GHG and 49% of the outstanding share capital of
trrravel.com Limited, after giving effect to the adjustments described in the
notes to unaudited condensed pro forma consolidated financial information, as if
they had occurred on November 1, 1998. The historical financial information for
Leisure Travel Group is based on our unaudited financial statements for the year
ended October 31, 1999. Accordingly, the pro forma consolidated statement of
operations includes the results of Miss Ellie's World Travel Limited for the
period from November 1, 1998 to July 4, 1999, and the results of LTGL, Ilios
Travel Limited and GHG for the twelve months ended October 31, 1999, all of
which results we did not include in our historical results for the year ended
October 31, 1999.
Amounts presented in U.S. dollars have been translated from pounds
sterling at the noon buying rate on October 31, 1999 of (pound)1.00 = $1.6117
solely for your convenience.
<TABLE>
<CAPTION>
MISS
ELLIE'S
LEISURE WORLD ILIOS
TRAVEL TRAVEL TRAVEL
GROUP LTGL LIMITED LIMITED
----- ---- ------- -------
(AMOUNTS IN POUNDS STERLING)
<S> <C> <C> <C> <C>
Revenues (pound) - (pound)4,225 (pound)6,399 (pound)1,136
Operating costs - 4,174 6,035 1,131
--------- ------------ ------------ ------------
Operating profit... - 51 364 5
Other inc/exp - 8 (419) 9
--------- ------------ ------------ ------------
PBT.............. - 59 (55) 14
Income taxes....... - -- -- 4
--------- ------------ ------------ ------------
Net income......... (pound) - (pound)(59) (pound)(55) (pound)10
========= ============ ============ ============
<CAPTION>
PRO FORMA
-----------------------------------------------
GHG trrravel.com ADJUSTMENTS TOTAL TOTAL
------------ ------------ ----------- ----- -----
(AMOUNTS IN
(AMOUNTS IN POUNDS STERLING) US DOLLARS)
<S> <C> <C> <C> <C> <C>
Revenues (pound)17,379 (pound)-- (pound)-- (pound)29,139 $46,963
Operating costs .......... 15,657 -- 62 a 27,059 43,611
------------- --------- ---------- ------------- ---------
Operating profit.......... 1,722 -- (62) 2,080 3,352
Other inc/exp (276) -- (678) (1,093)
------------- --------- ---------- ------------- ---------
PBT..................... 1,446 -- (62) 1,402 2,259
Income taxes.............. 643 647 1,043
------------- --------- ---------- ------------- ---------
Net income................ (pound)803 -- (62) (pound)755 1,216
============= ========= ========== ============= =========
Net income per share:
basic and diluted....... (pound)0.09 $0.15
============= =========
Shares used in computing
net income per share:
basic and diluted....... 8,060 8,060
============= =========
</TABLE>
33
<PAGE>
UNAUDITED CONDENSED PRO FORMA CONSOLIDATED BALANCE SHEET
AT OCTOBER 31, 1999
(IN THOUSANDS)
The following unaudited condensed pro forma consolidated balance sheet at
October 31, 1999 gives pro forma effect to our acquisition of all of the
outstanding share capital of LTGL, and LTGL's acquisition of all of the
outstanding share capital of Miss Ellie's World Travel Limited, Ilios Travel
Limited and GHG and 49% of the outstanding share capital of trrravel.com
Limited, after giving effect to the adjustments described in the notes to
unaudited condensed pro forma consolidated financial information, as if they had
occurred on October 31, 1999, except with respect to Miss Ellie's World Travel
Limited, which was acquired by LTGL on July 5, 1999. The historical financial
information for Leisure Travel Group is based on our unaudited financial
statements for the year ended October 31, 1999. The historical financial
information for GHG is based on its audited financial statements at October 31,
1999. The historical financial information for LTGL and Ilios Travel Limited is
based on their unaudited financial statements at October 31, 1999. Accordingly,
the pro forma consolidated balance sheet reflects the net assets of LTGL and
Ilios Travel Limited and the 49% equity investment in trrravel.com Limited at
October 31, 1999, all of which we did not include in our historical consolidated
balance sheet at October 31, 1999 and the historical balance sheet of GHG, as of
October 31, 1999.
Amounts presented in U.S. dollars have been translated from pounds
sterling at the noon buying rate on October 31, 1999 of (pound)1.00 = $1.6117
solely for your convenience.
<TABLE>
<CAPTION>
LEISURE ILIOS
TRAVEL TRAVEL
GROUP LTGL LIMITED GHG
--------- ------------- ------------- -------------
(AMOUNTS IN POUNDS STERLING)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents .......... (pound)-- (pound)891 (pound)198 (pound)2,583
Accounts receivable ................ -- -- 4 1,754
Holidays paid in advance ........... -- 669 --
Inventories ........................ -- -- -- 312
Prepaid expenses and
other current assets ............. -- 100 7 470
--------- ------------- ------------- -------------
Total current assets ......... -- 1,660 209 5,119
Equipment and fixtures, net ........ -- 341 15 20,709
Goodwill and other
intangibles, net ................. -- 577 -- --
Equity investment .................. -- -- -- --
Debt issuance costs ................ -- -- -- 258
--------- ------------- ------------- -------------
Total assets ................. (pound)-- (pound)2,578 (pound)224 (pound)26,086
========= ============= ============= =============
LIABILITIES
Accounts payable and accrued
liabilities ...................... (pound)-- (pound)458 (pound)118 (pound)2,271
Guest deposits ..................... -- 1,031 -- 2,220
Deferred income tax ............... -- -- -- 51
Short-term borrowings .............. -- 1,030 0 --
Capital lease obligations -
current portion .................. -- -- 4 143
--------- ------------- ------------- -------------
Total current liabilities .... -- 2,519 122 4,685
Long-term debt ..................... -- -- -- 20,500
Capital lease obligations -
noncurrent portion ........ -- -- 4 246
STOCKHOLDERS' EQUITY
Ordinary shares .................... -- -- 30 --
Common stock ....................... -- -- -- --
Additional paid-in capital ......... -- -- -- --
Retained earnings .................. -- 59 68 655
--------- ------------- ------------- -------------
Total stockholders' equity ... -- 59 98 655
--------- ------------- ------------- -------------
Total liabilities and
stockholders' equity. ...... (pound)-- (pound)2,578 (pound)224 (pound)26,086
========= ============ =========== =============
<CAPTION>
PRO FORMA
---------------------------------------------
trrravel.com ADJUSTMENTS TOTAL TOTAL
------------ ------------ ------------- -------
(AMOUNTS
IN U.S. DOLLARS)
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents .......... (pound)-- (pound)3,672 $5,918
Accounts receivable ................ -- 1,758 2,833
Holidays paid in advance ........... -- 669 1,078
Inventories ........................ -- 312 503
Prepaid expenses and
other current assets ............. -- 577 930
--------- ------------ ------------- -------
Total current assets ......... -- 6,988 11,262
Equipment and fixtures, net ........ -- 21,065 33,950
Goodwill and other
intangibles, net ................. -- 227 b 804 1,296
Equity investment .................. -- 1,502 e 1,502 2,421
Debt issuance costs ................ -- 258 416
--------- ------------ ------------- -------
Total assets ................. (pound)-- (pound)1,729 (pound)30,617 $49,345
========= ============ ============= =======
LIABILITIES
Accounts payable and accrued
liabilities ...................... (pound)-- (pound) 2,847 $4,588
Guest deposits ..................... -- 3,251 5,239
Deferred income tax ............... -- 51 82
Short-term borrowings .............. -- 1,030 1,660
Capital lease obligations -
current portion .................. -- 147 237
--------- ------------- -------
Total current liabilities .... -- 7,326 11,806
Long-term debt ..................... -- 325 a 20,825 33,564
Capital lease obligations -
noncurrent portion ............... -- 250 403
STOCKHOLDERS' EQUITY
Ordinary shares .................... -- (30)d -- --
Common stock ....................... -- 5 f 5 8
Additional paid-in capital ......... -- 1,502 e 1,502 2,421
Retained earnings .................. -- (73)c,f 709 1,143
--------- ------------ ------------- -------
Total stockholders' equity ... -- 1,404 2,216 3,572
--------- ------------ ------------- -------
Total liabilities and
stockholders' equity. ...... (pound)-- (pound)1,729 (pound)30,617 $49,345
========= ============ ============= =======
</TABLE>
34
<PAGE>
NOTES TO UNAUDITED CONDENSED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
NOTE 1 - PRO FORMA ADJUSTMENTS
Statement of Operations
The unaudited condensed pro forma consolidated statements of operations
give effect to the following pro forma adjustments:
TWELVE MONTHS ENDED
OCTOBER 31, 1999
----------------
a. Amortization of goodwill arising from acquisition
of Miss Ellie's World Travel Limited ((pound)597)
over 10 years, excluding amortization expense of
pound)20 from July 5, 1999 to October 31, 1999
which has been included in the LTGL amounts, and
goodwill arising on the acquisition of Ilios Travel
((pound)227) over 10 years (pound)62
============
Balance Sheet
The unaudited condensed pro forma consolidated
balance sheet gives effect to the acquisition of LTGL by
Leisure Travel Group and the acquisitions of Ilios Travel
Limited and GHG by LTGL as follows:
The acquisitions, assuming they occurred on October
31, 1999, are summarized as follows:
OCTOBER 31, 1999
----------------
Net liabilities of Ilios Travel
Limited at October 31, 1999 (pound)(98)
Purchase consideration:
Cash 325
-----------
Total cost of investment 325
-----------
Goodwill arising 227
===========
The pro forma balance sheet adjustments are summarized
as follows:
OCTOBER 31, 1999
----------------
a. Incurrence of long-term debt upon acquisition of Ilios (pound) 325
Travel Limited ============
b. Goodwill arising on the acquisition of Ilios Travel (pound) 227
Limited ============
c. Elimination of Ilios Travel Limited retained earnings (pound)(68)
============
d. Elimination of Ilios Travel Limited equity (pound)(30)
============
e. Issuance of 220,000 shares of common stock at the
estimated initial offering price of (pound)6.83
($11.00) per share for the acquisition of 49% of the
outstanding share capital of trrravel.com Limited (pound)1,502
============
f. Issuance of 4,840,000 shares of common stock in
connection with the acquisitions of LTGL and GHG (pound)5
============
35
<PAGE>
SELECTED FINANCIAL DATA
(In thousands)
The following tables set forth:
o Selected historical combined financial data for GHG (Predecessor) for
the years ended December 31, 1995, 1996, 1997 and 1998 and the six
months ended June 30, 1999, and as of December 31, 1995, 1996, 1997 and
1998; and
o Selected historical financial data for GHG for the four months ended
October 31, 1999 and as of October 31, 1999.
We derived the selected historical financial data as of December 31, 1995,
1996 and 1997, and the years ended December 31, 1995 and 1996 of GHG
(Predecessor) from its unaudited combined financial statements, which are not
included in this prospectus. These unaudited financial statements include, in
our opinion, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair presentation of such data.
We derived the selected historical financial data as of December 31, 1998,
and for the years ended December 31, 1997 and 1998 and the six months ended June
30, 1999 from the audited combined financial statements of GHG (Predecessor),
and as of October 31, 1999 and the four months ended October 31, 1999 from the
audited financial statements of GHG, which are included elsewhere in this
prospectus. These statements have been audited by Ernst & Young, our independent
auditors.
The selected data should be read in conjunction with the information
presented in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and the notes thereto
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1995 1996 1997 1998
------------- ------------- ------------- -------------
(AMOUNTS IN POUNDS STERLING)
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS:
Total revenues......................... (pound)20,884 (pound)20,766 (pound)20,622 (pound)19,584
Operating cost and expenses............ 17,096 17,739 17,690 16,848
------------- ------------- ------------- -------------
Operating profit (loss)................ 3,788 3,027 2,932 2,736
Other income (expense), net............ - - - -
------------- ------------- ------------- -------------
Income (loss) before income taxes...... 3,788 3,027 2,932 2,736
Income taxes........................... 1,558 1,303 1,237 1,122
------------- ------------- ------------- -------------
Net income (loss)...................... (pound)2,230 (pound)1,724 (pound)1,695 (pound)1,614
============= ============= ============= =============
OTHER DATA:
Depreciation and amortization.......... (pound)1,115 (pound)1,211 (pound)1,284 (pound)1,174
Cash flows from operations............. (pound)3,785 (pound)2,820
<CAPTION>
SIX MONTHS FOUR MONTHS
ENDED ENDED
JUNE 30, OCTOBER 31,
1999 1999
-------------- -------------
<S> <C> <C>
STATEMENT OF OPERATIONS:
Total revenues......................... (pound)7,118 (pound)6,475
Operating cost and expenses............ 7,804 5,222
------------ ------------
Operating profit (loss)................ (686) 1,253
Other income (expense), net............ - (276)
------------ ------------
Income (loss) before income taxes... (686) 977
Income taxes........................... - 322
------------ ------------
Net income (loss)...................... (pound)(686) (pound)655
============ ============
OTHER DATA:
Depreciation and amortization.......... (pound) 574 (pound)79
Cash flows from operations............. (pound)1,170 (pound)2,740
<CAPTION>
DECEMBER 31,
----------------------------------------------------------------------
1995 1996 1997 1998
------------ ---------- ------------ -------------
(AMOUNTS IN POUNDS STERLING)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).............. (pound)(1,965) (pound)(347) (pound)(1,153) (pound)(1,185)
Total assets........................... 16,850 16,883 17,619 16,439
Long-term debt (excluding current
maturities)........................... - - - -
Total stockholders' equity............. 13,919 15,478 15,302 14,319
<CAPTION>
OCTOBER 31,
1999
-----------
<S> <C>
BALANCE SHEET DATA:
Working capital (deficit).............. (pound)434
Total assets........................... 26,086
Long-term debt (excluding current
maturities) .......................... 20,746
Total stockholders' equity............. 655
</TABLE>
36
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and related notes thereto and "Selected Financial Data" and
"Unaudited Condensed Pro Forma Consolidated Financial Information" included
elsewhere in this prospectus. This prospectus contains forward-looking
statements relating to future events and Leisure Travel Group's future financial
performance. Actual results could be significantly different than those
discussed in this prospectus. Factors that could cause or contribute to such
differences include those set forth in the section entitled "Risk Factors," as
well as those discussed elsewhere in this prospectus.
OVERVIEW AND STRUCTURE
We have been established to become a leading international single-source
provider of attractively priced, specialized holiday and leisure accommodations
and world-wide packaged travel services. Our revenues are derived primarily from
the five holiday resort hotels operated by the Grand Hotel Group and from the
sale of travel-related products and services, including airline tickets, hotel
accommodations, and auto rentals by the Travel Group. We intend to expand our
business by acquiring additional resort hotels, travel agencies and tour
operators located in England and other European countries. Upon completion of
this offering we will also have a 49% equity interest in Trravel.com, Ltd.,
which owns and operates a consumer-direct, online travel Web site and a tour
operating airline seat provider.
Effective June 30, 1999, GHG purchased from a subsidiary of The Rank Group
substantially all of the operating assets of five hotels formerly known as
the Butlin's Provincial Hotels. Four of the hotels are located in seaside resort
areas in Scarborough, Blackpool, Brighton and Margate, England and the fifth
hotel is located in Llandudno, Wales. GHG is a private limited company organized
under the laws of England and Wales, which is 85% owned by Cygnet Ventures
Limited, a Guernsey (Channel Islands) corporation controlled by Kevin R. Leech,
our Chairman of the Board and principal stockholder, and 15% owned by certain
other members of our management team.
In July 1999 and January 2000, LTGL, a private limited company organized
under the laws of England and Wales, acquired Miss Ellie's World Travel Limited
and Ilios Travel Limited, respectively. As a result, LTGL became a provider of
European vacations to and from the United Kingdom as well as a provider of
vacations to Florida (including Disney World) and to Canada, South Africa and
other European destinations. LTGL is wholly owned by Red Kite Ventures Limited,
a Jersey (Channel Islands) corporation controlled by Red Kite Trust, the
beneficiary of which are members of the family of Kevin R. Leech.
In January 2000, Independent Aviation Limited, a wholly-owned subsidiary
of trrravel.com Limited, a private limited company organized under the laws of
England and Wales, acquired from an unaffiliated third party for (pound)200,000
(approximately $322,000) certain assets comprising a tour operating airline seat
provider business. trrravel.com Limited was a wholly-owned subsidiary of
Ci4net.com, Inc., a Delaware corporation whose common stock is publicly-traded
on the OTC Bulletin Board. A corporation controlled by Kevin R. Leech is the
principal stockholder of Ci4net.com, Inc.
In March 2000, the shareholders of GHG agreed to transfer 100% of the
outstanding share capital of GHG to LTGL in exchange for the issuance of an
aggregate of 3,700,000 shares of our common stock, and the shareholders of LTGL
agreed to transfer 100% of the outstanding share capital of LTGL to Leisure
Travel Group in exchange for the issuance of an aggregate of 940,000 shares of
our common stock. In addition, Ci4net.com, Inc. agreed to transfer 49% of the
outstanding share capital of
37
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trrravel.com Limited to Leisure Travel Group in exchange for the issuance of an
aggregate of 220,000 shares of our common stock. All of such transfers are
conditioned upon:
o the completion of this offering and application of a portion of the
net proceeds (together with additional mortgage financing) to retire
all (pound)10.4 million (approximately $16.7 million) of
indebtedness of GHG owed to The Rank Group or its subsidiaries; and
o the capitalization of(pound)1,030,000 (approximately $1,660,000) of
loans made to LTGL by a corporate affiliate of Kevin R. Leech.
OPERATING RESULTS AND REVENUE RECOGNITION
For the year ended December 31, 1998, GHG derived net income before taxes
of approximately (pound)2.7 million (approximately $4.4 million) from net
revenues of approximately (pound)19.6 million (approximately $31.6 million). For
the pro forma twelve months ended October 31, 1999, our Grand Hotel Group
derived net income before taxes of approximately (pound)1.4 million
(approximately $2.3 million) from net revenues of approximately (pound)17.4
million (approximately $28.0 million).
The revenues and net income of the Grand Hotel Group dropped significantly
during the six months ended June 30, 1999 due to the fact that The Rank Group
announced its intention in early 1998 to sell the Butlin's Provincial Hotels and
close certain other Butlin's-branded assets comprised of popular priced vacation
camps throughout England. The announced closure of the Butlin's vacation camps
received extensive publicity throughout Great Britain. However, many potential
consumers thought that the hotels were also being closed, which significantly
reduced advanced bookings. Following its June 30, 1999 acquisition of the
hotels, GHG immediately renamed and rebranded the five hotels. With over five
years experience in operating a similar hotel property in England catering to
the mature private market and coach or bus tour market, our highly experienced
management team established a program to increase occupancy, including a
publicity campaign designed to win back the thousands of couples and families
who had been guests at the hotels, the upgrading and refurbishment of the
hotels, and the improvement of service. As a result of these efforts, operating
income (loss) increased from an operating loss of (pound)0.7 million for the six
months ended June 30, 1999 to an operating income of (pound)1.3 million for the
four months ended October 31, 1999. Revenues were (pound)7.1 million and
(pound)6.5 million for the six months ended June 30, 1999 and the four months
ended October 31, 1999, respectively. Since October 31, 1999 GHG management has:
o implemented agreements with bus or coach tour operators to make
advance purchases of beds, which is anticipated to provide
approximately $3.2 million of revenues to our Grand Hotel Group in
fiscal year ending October 31, 2000;
o raised room and accommodation occupancy charges by an average of 8%
without a perceived fall-off in advance booking rates; and
o commenced a program to offer more upscale entertainment for
higher-priced special weekend holiday packages to attract a younger
more affluent audience.
As a result of these efforts, at February 14, 2000 our advance bookings
represent approximately 44% of our target of approximately 651,000 sleeper
nights for the remainder of fiscal 2000, or a targeted 78% occupancy rate.
Net revenues from providing hotel accommodations are recognized when our
guests check out after their designated vacation stay and make payment. Net
revenues from providing travel services include commissions and markups on
travel products and services, volume bonuses received from travel
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suppliers, cancellation fees and other ancillary fees such as travel insurance
premiums. Such revenues are recognized upon the commencement of travel.
Operating expenses at our holiday resort hotels include food,
housekeeping, cost of personnel, hiring of entertainment, maintenance expenses,
and sales and marketing expenses. Travel service 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. Our
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, depreciation of equipment and other general office
expenses.
We may realize certain savings from our travel service and tour operators
as a result of consolidating certain operating expenses such as
telecommunications, advertising and promotional programs. Such savings cannot be
quantified and accordingly have not been included in our pro forma financial
information. Any such savings will be partially offset by the costs of being a
publicly held company and the incremental increase in costs related to our new
management structure.
We derive a significant portion of our cash flow and pre-tax income from
funds related to customer deposits and prepayments for vacation products and
interest earned on such deposits. Generally, we require a deposit upon booking
hotel or travel reservation. Reservations with our Travel Group are typically
made one to three months prior to departure, and reservations at the hotels
operated by our Grand Hotel Group are typically made one week to four months
prior to occupancy. Additionally, for packaged tours, we generally require that
the entire cost of the vacation be paid in full 30 days before departure, unless
reservations are made closer to departure, in which case we require that the
entire cost be paid upon booking. While the terms vary, we generally pay 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 our operating model and pricing strategies.
TERMS OF OUR ACQUISITIONS
Effective June 30, 1999, GHG purchased from Rank Holidays Division Limited,
a subsidiary of The Rank Group plc, substantially all of the operating assets
relating to five hotels formerly known as the Butlin's Provincial Hotels,
including the physical properties, equipment, concessions, inventory, cash
reserves, customer lists, records and goodwill. Following the acquisition, GHG
renamed the hotels The Grand Ocean Hotel, Brighton, The Grand Hotel,
Scarborough, The Grand Hotel, Margate, The Grand Metropole Hotel, Blackpool and
The Grand Hotel, Llandudno. GHG is a private limited company organized under the
laws of England and Wales that is 85% owned by Cygnet Ventures Limited, a
Guernsey (Channel Islands) corporation controlled by Kevin R. Leech, our
Chairman of the Board and principal stockholder, and 15% owned by certain other
members of our management team. In consideration for the sale of such assets,
GHG paid a subsidiary of The Rank Group (pound)19.0 million (approximately $30.6
million), of which (pound)8.6 million was paid in cash and the balance of
(pound)10.4 million was paid by GHG's issuance of a non-interest-bearing
promissory note due 2002. The GHG note was secured by an irrevocable letter of
credit issued by Citibank, N.A. in favor of Butlin's Limited. The issuance of
the letter of credit was obtained through the personal guaranty of Mr. Leech.
GHG financed its cash payment of the purchase price through loans obtained from
Arab Bank plc and Irish Nationwide Building Society secured by charges granted
by Grand Hotel Group, including mortgages on the purchased hotels. See "Certain
Transactions."
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<PAGE>
In July 1999, LTGL acquired all of the issued and outstanding share
capital of Miss Ellie's World Travel Limited, a private limited company
organized under the laws of England and Wales. In exchange for such share
capital, LTGL paid an aggregate of (pound)1,030,000 (approximately $1,660,000)
to the former shareholders of Miss Ellie's. LTGL funded the acquisition through
a loan from Red Kite Ventures Limited, an investment company beneficially owned
by Red Kite Trust, the beneficiary of which are members of the family of Kevin
R. Leech, our Chairman of the Board and principal stockholder. The terms of the
acquisition provided for certain "earnout" provisions whereby, after our
acquisition of LTGL upon completion of this offering, we may be required to pay
additional cash to the former stockholders of Miss Ellie's equal to the pre-tax
income of Miss Ellie's earned for the twelve month period from April 1999
through March 2000. We anticipate that these payments will be funded through our
cash flows from operations. See "Certain Transactions."
In January 2000, LTGL also acquired all of the issued and outstanding
share capital of Ilios Travel Limited, a private limited company organized under
the laws of England and Wales. In exchange for such share capital, LTGL paid an
aggregate of (pound)325,000 (approximately $524,000) to the former shareholders
of Ilios. As a result of this acquisition, LTGL expanded its travel-related
services and increased its market position and cross-selling opportunities in
other destinations throughout Europe. LTGL also funded this acquisition through
a loan from Red Kite Ventures Limited. See "Certain Transactions."
In January 2000, trrravel.com Limited, a private limited company organized
under the laws of England and Wales, acquired for (pound)200,000 (approximately
$322,000) all of the outstanding share capital of Independent Aviation Limited,
a tour operating airline seat provider. trrravel.com Limited was a wholly-owned
subsidiary of Ci4net.com, Inc., a Delaware corporation whose common stock is
publicly-traded on the OTC Bulletin Board. A corporation controlled by Kevin R.
Leech is the principal stockholder of Ci4net.com, Inc.
PRO FORMA RESULTS OF OPERATIONS
The following table sets forth certain pro forma operating data of Leisure
Travel Group expressed as a percentage of net revenues.
TWELVE MONTHS ENDED
OCTOBER 31, 1999
-------------------
Total revenues........................ 100.0%
Operating costs and expenses.......... 92.9%
Gross profit................. 7.1%
Other income (expense)................ (2.3)%
Income before provision for taxes..... 4.8%
Provision for income taxes............ 2.2%
Net income....................... 2.6%
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<PAGE>
GHG HISTORICAL RESULTS OF OPERATIONS
The following table sets forth certain operating data of GHG expressed as a
percentage of net revenues for the periods indicated.
SIX MONTHS FOUR MONTHS
ENDED ENDED
JUNE 30, OCTOBER
YEAR ENDED DECEMBER 31, 1999 31, 1999
-------------------------- -----------------------
1996 1997 1998
---- ---- ----
Total revenues......... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating cost and
expenses............... 85.4% 85.8% 86.0% 109.6% 80.6%
Operating profit.. 14.6% 14.2% 14.0% (9.6)% 19.4%
Other income (expense). -- -- -- -- (4.3)%
Loss before provision
for taxes.............. 14.6% 14.2% 14.0% (9.6)% 15.1%
Provision for income
taxes.................. 6.3% 6.0% 5.7% - 5.0%
Net loss.......... 8.3% 8.2% 8.3% (9.6)% 10.1%
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
Net Revenues
Revenues consist of accommodation lettings and retail sales (which include
bar, catering and shops). Revenues for 1998 were (pound)19.6 million, which was
a decrease of (pound)1.0 million, or 5.0%, from revenues of (pound)20.6 million
in 1997. There was a reduction in volume between the 1998 and 1997 years due to
a reduction in the numbers of families with children staying at three of the
hotels. However, the average letting income per booking rose 4%, which meant
that the decrease in letting accommodation revenue was (pound)0.5 million.
Consequently, there was additional reduction in the other source of income of
(pound)0.5 million.
The accommodation letting income proportion of the total revenue rose from
72% to 74% with a consequent reduction in the other revenue from 28% to 26%.
Direct cost of revenues
Direct cost of revenues consist of food, entertainment, housekeeping,
restaurant and kitchen expenses and sales and marketing expenses. Direct cost of
revenues for 1998 was (pound)4.6 million, which was a decrease of (pound)0.3
million, or 6.9%, from direct cost of revenues of (pound)4.9 million in 1997.
This decrease was a result of lower sales revenues during the period. Net
margins rose slightly from 76.2% to 76.6% in 1998.
Staff costs
Staff costs are all personnel costs incurred to run the operations of the
hotels which include accommodations, catering, bars, shops, etc. Staff costs do
not include corporate management payroll. Staff costs for 1998 were (pound)5.3
million, which was a decrease of (pound)0.3 million, or 4.5%, from staff costs
of (pound)5.6 million in 1997.
General and administrative
General and administrative expenses consist of all other expenses such as
repairs, maintenance, clerical, computer and other related expenses. General and
administrative expenses for 1998 were (pound)4.0 million, which was a decrease
of (pound)0.1 million, or 1.3%, from general and administrative expenses of
(pound)4.1 million in 1997.
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<PAGE>
Corporate allocation/Sales and marketing
Corporate allocation charges are costs incurred by the previous parent
company of GHG. These costs typically consist of advertising, corporate
management wages and general corporate overhead. Such costs were charged back to
GHG based on a percent of revenues of the five hotels compared to total revenue
of Butlin's Limited.
The company's previous parent charged sales and marketing costs at the
corporate level. Such costs were recharged to GHG based on the size of the
hotels compared to the total Butlin's Limited.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
Net Revenues
Revenues for 1997 decreased (pound)0.1 million, or 0.1%, from revenues of
(pound)20.8 million in 1996. In both 1996 and 1997 the revenue for accommodation
lettings represented 72% of the total revenue and although there was a drop in
the volume of guests visiting the hotels in 1997 (due to the start of a
restructuring of the families with children market) this was offset by an
increase in the average letting income generated from each booking.
Other sales generated during the year remained the same as the previous
year, despite a drop in volume.
Direct cost of revenues
Direct cost of revenues for 1997 decreased (pound)0.2 million, or 3.0%,
from direct cost of revenues of (pound)5.1 million in 1996. This reflects the
savings due to the reduction in volume. Margins on letting income remained the
same in both years at 80% of total revenue. Margins from other sources of
revenue also remain unchanged in 1997.
Staff costs
Staff costs for 1997 increased (pound)0.1 million, or 1.0%, from staff
costs of (pound)5.5 million in 1996.
General and administrative
General and administrative expenses for 1997 decreased (pound)0.2 million,
or 4.1%, from general and administrative expenses of (pound)4.2 million in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Our Grand Hotel Group and Travel Group have historically financed their
activities through cash provided by operations.
We currently anticipate that the net proceeds from this offering, together
with our current cash and cash equivalents and anticipated cash flow from
operations will be sufficient to meet our presently anticipated working capital
and capital expenditure requirements for at least the next twelve months.
Following completion of this offering, we anticipate that we will spend
approximately (pound)1.6 million ($2.6 million) per annum in capital
expenditures to refurbish and construct improvements to our five holiday resort
hotels. In addition, our (pound) 10.0 million of mortgage indebtedness is
currently amortized over a five year period and requires annual debt service
payments of principal and interest of approximately (pound)2.5 million ($4.0
million). Following completion of this offering, we intend to reduce our annual
debt service obligations by seeking to obtain long-term mortgage financing of
between 10 and 15 years. However, there is no assurance that such long-term
financing will be available on financially attractive terms, if at all. We may
need to raise additional funds in order to support more rapid expansion, develop
new or enhanced services, respond to competitive pressures, acquire
complementary business or technologies or take advantage of unanticipated
opportunities. Please see
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"Risk Factors--We may need more money, which may not be available to us on
favorable terms or at all" and "Use of Proceeds" for additional information.
At October 31, 1999, we had an unaudited pro forma net working capital
deficit of approximately (pound)0.3 million (approximately 0.5 million). We have
historically operated with a net working capital deficit due to the fact that we
have invested working capital assets in operating expenses, investments and
fixed assets. Our net working capital deficit has not historically negatively
affected our ability to operate or meet our obligations as they come due. After
the net proceeds of this offering, we expect to have net working capital of
approximately (pound)10.7 million (approximately $17.2 million).
Cash provided by operating activities was (pound)2.7 million ($4.4
million) and (pound)1.2 million ($1.9 million) for the four months ended October
31, 1999 and the six months ended June 30, 1999, respectively. Such amounts
primarily reflect net income/loss, net of depreciation expense, resulting from
revenues from our hotel operations and increases for the respective periods in
the balance of guest deposits. Cash provided by operating activities was
(pound)2.8 million for the year ended December 31, 1998, as compared to
(pound)3.8 million for the year ended December 31, 1997. The decrease in cash
provided by operating activities was primarily the result of a decrease in the
net income, net of depreciation expense, and a decrease in cash provided by
changes in guest deposits and accounts payable, partially offset by the increase
in cash provided by the change in prepaid expenses and other current assets.
Cash used in investing activities was (pound)20.4 million ($32.8 million)
for the four months ended October 31, 1999, which represented the purchase of
the hotels by GHG from a subsidiary of The Rank Group plc. Cash used in
investing activities were (pound)0.1 million ($0.2 million), (pound)0.2 million
and (pound)1.9 million for the six months ended June 30, 1999, and the years
ended December 31, 1998 and 1997, respectively. Such amounts relate to the
acquisition of equipment and fixtures during the respective periods.
Cash provided by financing activities was (pound)20.2 million ($32.6
million) for the four months ended October 31, 1999, which primarily related to
proceeds from the issuance of debt utilized to purchase the hotels and financing
operations. Cash used in financing activities was (pound)1.0 million ($1.7
million), (pound)2.6 million and (pound)1.9 million for the six months ended
June 30, 1999, and the years ended December 31, 1998 and 1997, respectively.
Such amounts relate to the net change in intercompany funding from the parent
company to GHG (Predecessor) during the respective periods.
SEASONALITY AND QUARTERLY FINANCIAL INFORMATION
Seasonality in the vacation resort and travel industry is likely to cause
quarterly fluctuations in our operating results which may adversely affect our
stock price. In both our Grand Hotel Group and Travel Group, our revenues
typically increase during the spring and summer months and are slightly lower
during the fall and winter months. In addition, our seasonal business has been
adversely affected in the past and could be affected in the future by climactic
conditions, such as a wet or rainy summer season which frequently occurs in the
United Kingdom. As our business continues to expand beyond the United Kingdom,
seasonal fluctuations will affect us in different ways. If seasonality in our
business causes quarterly fluctuations in our revenues and operating profits
which are unusually severe or unexpected, there could be a material adverse
effect on our business and stock price.
In addition, our earnings may be impacted by the timing of the completion
of the acquisition of future resort hotels and the potential impact of weather
or other naturals disasters at our resort locations. The combination of the
possible delay in generating revenue after the acquisition of additional resort
hotels, and the expenses associated with start-up unit or room-rental
operations, interest expense, amortization and depreciation expenses from such
acquisitions may materially adversely impact our earnings.
43
<PAGE>
MARKET RISKS
We currently have no significant floating rate indebtedness, hold no
derivative instruments and do not earn income denominated in foreign currencies.
Accordingly, changes in interest rates do not generally have a direct effect on
our financial position. However, to the extent that changes in interest rates
and currency exchange rates affect general economic conditions, we would be
affected by such changes. All of our revenue is recognized in pounds sterling
and almost all of our revenue is from customers in the United Kingdom.
Therefore, we do not believe we have any significant direct foreign currency
exchange risk and do not hedge against foreign currency exchange rate changes.
YEAR 2000 DISCLOSURE
Prior to January 1, 2000, there was a great deal of concern regarding the
ability of computers to adequately recognize 21st century dates from 20th
century dates due to the two-digit date fields used by many systems. Most
reports to date, however, are that computer systems are functioning normally and
the compliance and remediation work accomplished during the years leading up to
2000 was effective to prevent any problems. As of the date of this prospectus,
we have not experienced any such computer difficulty; however, computer experts
have warned that there may still be residual consequences of the change in
centuries and any such difficulties may, depending upon their pervasiveness and
severity, have a material adverse effect on our business, financial condition
and results of operations. Any of the following could have a material adverse
effect on our business, financial condition and results of operations:
o a failure to fully identify all year 2000 dependencies in our
systems;
o a failure to fully identify all year 2000 dependencies in the
systems of third parties with whom we do business;
o a failure of any third party with whom we do business to adequately
address their year 2000 issues;
o the failure of any contingency plans develop to protect our business
and operations from year 2000-related interruptions; and
o delays in the implementation of new systems resulting from year 2000
problems.
EFFECTS OF THE EURO
Under the Treaty on European Economic and Monetary Union, as of January 1,
1999, the euro was introduced as a common currency among the 11 members of the
European Union that are participating in this phase of Economic and Monetary
Union, commonly referred to as EMU. Although the individual currencies of these
countries will continue to be used until 2002, their exchange rates with the
euro are fixed. The euro may now be used for transactions that do not involve
payment using physical notes and coins of the participating countries. These
individual currencies are to be replaced with euro notes and coins (to be
introduced on January 1, 2002) by June 30, 2002 when all countries participating
in EMU are expected to operate with the euro as their exclusive common currency.
The current government of the United Kingdom has stated that the United
Kingdom will not participate in EMU and adopt the euro until after the next
general election at the earliest. We are currently working on the assumption
that the next general election will be in 2001 or 2002 and that the United
Kingdom will enter EMU shortly thereafter following confirmation of the
government's decision through a referendum.
44
<PAGE>
In the event that the United Kingdom adopts the euro, we would face a
number of costs in altering our accounting-related systems for the new currency,
although at present it is too early to estimate these costs. Adoption of the
euro in the United Kingdom would also create greater transparency between prices
offered to our customers in the United Kingdom and prices offered in other
countries that participate in EMU. We do not believe that the adoption of the
euro by eleven countries of the European Union will have an adverse impact on
our liquidity or financial condition.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, FASB issued SFAS No. 133, "Accounting for Derivatives and
Hedging Activities," which establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments embedded in
other contracts (collectively referred to as derivatives) and for hedging
activities. SFAS No. 133 is effective for all fiscal quarters of fiscal years
beginning after June 15, 2000. The adoption of SFAS No. 133 is not expected to
have an impact on our results of operations, financial position, or cash flows.
45
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BUSINESS
GENERAL
We have been established to become a leading international single-source
provider of attractively priced, specialized holiday and leisure accommodations
and world-wide packaged travel services. Upon completion of this offering, we
will acquire five unique and well-known holiday resort hotels in the United
Kingdom and two retail and group travel providers and tour operators that offer
flexible, independent travel programs. In addition, we will acquire a 49%
ownership interest in trrravel.com Limited, which operates a European on-line
travel Web site offering complete vacation and travel packages direct to
consumers, and also owns and operates a tour operating airline seat provider.
Through consolidation of these and other vacation and travel-related businesses,
we believe that we are able to offer both vacationers and travel agents and tour
operators a single source of competitively priced products and services within
and across multiple holiday and leisure travel segments. We intend to expand our
business by acquiring additional vacation and leisure travel businesses,
including resort hotels, travel providers and tour operators, and utilizing a
consumer-direct, online travel Web site.
On an unaudited pro forma basis, we derived consolidated net income before
taxes of approximately (pound)1.4 million (approximately $2.3 million) from
consolidated net revenues of approximately (pound)29.1 million (approximately
$47.0 million) for the twelve months ended October 31, 1999.
We operate five holiday resort hotels situated near major seaside resorts
in England and Wales, which offer attractively priced vacation accommodations,
including food and entertainment, for weekend and lengthier stays. The hotels
were formerly owned by a subsidiary of The Rank Group plc and operated as the
Butlin's Provincial Hotels. They were purchased in June 1999 from The Rank Group
by GHG which, until completion of this offering, was controlled by Kevin R.
Leech, our Chairman of the Board and principal stockholder, and certain other
members of our management team.
The hotels have a total of 1,274 available rooms and achieved
approximately 80% room occupancy in the two-year period ended December 31, 1998.
Approximately 112.5% and 59.6% of our pro forma consolidated net income and
consolidated net revenues for the twelve months ended October 31, 1999 were
derived from the Grand Hotel Group. The revenues and net income of the hotels
dropped significantly during the six months ended June 30, 1999 due to the fact
that the previous owners, following their decision to sell the Butlin's
Provincial Hotels, delayed the production and distribution of the main holiday
brochure, which inevitably reduced hotel bookings and room occupancy. However,
following GHG's acquisition of the hotels in June 1999, the re-branding of its
name and image and modernization of certain operating policies by our highly
experienced management team, both hotel revenues and profits improved
substantially during the four months ended October 31, 1999. In addition, we
recently secured new agreements with United Kingdom tour coach operators for the
advance purchase of beds, which we anticipate will provide approximately
(pound)2.0 million ($3.2 million) of annual revenues, increased our room and
accommodation rates by an average of 8%, and secured advance bookings at
February 14, 2000 that represent approximately 44% of our target of 651,000
sleeper nights for the remainder of our fiscal year ending October 31, 2000, or
a 78% occupancy rate.
Our Travel Group offers competitively-priced travel-related services and
accommodations in a variety of holiday destinations in Europe, North America and
South Africa. Located in 8 offices in and around Manchester and Horsham,
England, our retail and group travel and tour operating businesses have over 15
years of experience in providing packaged tours primarily to holiday resorts
located throughout Europe direct to the public and through other tour operators,
as well as special interest tours to major European sporting events, including
horse racing tours throughout the United Kingdom and Europe, and trips for
supporters of the Manchester United Football Club. Our Travel Group also offers
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a wide range of private accommodations in a variety of holiday destinations in
southern Europe, such as private country homes and villas with swimming pools in
Tuscany, Sardinia and other regions of Italy, Andalucian haciendas with
exquisite views in Spain and traditional Ottoman-style houses in Turkey. Our
Travel Group has achieved competitive pricing and access to inventory through
negotiated arrangements with major airlines, including Singapore Airlines,
British Airways, Alitalia and Iberia, and auto rental and insurance companies.
The tour operating airline seat provider owned and operated by
trrravel.com Limited, in which we intend to acquire a 49% interest, purchases
blocks of airline seats from airlines and other travel and tour operators for
resale and also acts as an agent in brokering such seats on a commission basis.
The core of the distribution program for our Travel Group services is a
consumer-direct online travel site that provides travelers with immediate access
both to our proprietary booking system and to detailed hotel information and
destination guides. Visitors to our affiliated Web site at www.trrravel.com are
able to compare travel options, rates and availability, and book and purchase a
wide variety of travel services, including our independently tailored vacation
programs and group packages, seven days a week. Our Internet available vacation
and holiday packages include airfare, hotel and related accommodations, car
rental and other items. trrravel.com Limited, which owns and operates the Web
site, intends to derive its revenues from advertising, from monthly booking fees
received tour operators and travel agents featured on the site and through
commissions received from third party reservation services and travel agents for
direct on-line bookings. We believe that by being able to directly offer travel
services to consumers via the Internet, we will realize savings in operating
expenses that will enable us to maintain better gross margins than many travel
agencies or other travel groups that rely primarily on retail travel agencies
for distribution. trrravel.com Limited was, until completion of this offering,
wholly-owned by Ci4net.com, Inc., a Delaware publicly-traded corporation
controlled by Kevin R. Leech, our Chairman of the Board and principal
stockholder.
INDUSTRY BACKGROUND
RESORT VACATION HOTELS IN THE UNITED KINGDOM
Similar to specialized holiday hotel packages offered in the United States
by well-known resorts, such as The Greenbrier, in West Virginia and The Concord
Hotel in the Catskills Region of New York State, in England and Wales the Grand
Hotels provide a unique vacation experience which set them apart from customary
business and commercial hotels or expensive holiday resorts in Europe and the
United States which offer "a la carte" accommodations.
Our Grand Hotel Group offers at each of its five hotels a complete fixed
price vacation package experience, including lodging, food and entertainment. We
cater primarily to adults, ages fifty and up, who seek short three- and four-day
"getaway" vacation packages. Except for the Burstin Hotel, located in
Folkestone, England, we know of no other comparable popular price holiday resort
hotels in England or Wales. We believe that the increase in the age 55 plus
population group coupled with greater disposable personal income for this
demographic segment in the United Kingdom will continue to fuel demand and
repeat business for modestly priced accommodations that also provide
entertainment and plentiful food. Our strategy is to expand our customer base by
greater access to the bus or coach tour operator vacation package market, and by
offering higher priced and more sophisticated entertainment on selected weekends
to attract a younger, more affluent audience willing to pay higher prices for
accommodations and entertainment.
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The following table sets forth the approximate number of tourists who,
according to the British Tourist Authority, annually visit the resort areas in
which our Grand Hotel Group are located:
DAY OVERNIGHT
VISITORS VISITORS TOTAL
-------- ---------- -------
(MILLIONS)
Brighton............... 3.5 1.8 5.3
Blackpool 6.9 14.2 21.1
Margate................ 1.5 0.6 2.1
Scarborough............ 3.5 1.1 4.6
Llandudno.............. 4.1 0.2 4.3
---- ---- ----
Total............. 19.5 17.9 37.4
====== ==== ====
THE TRAVEL SERVICE INDUSTRY
Travel and tourism represents one of the largest consumer markets and one of the
fastest growing industries in the United Kingdom. The British Tourist Authority
estimates that in 1998, travel expenditures by overseas visitors in the United
Kingdom totaled more than (pound)12.7 billion (approximately $20.5 billion), and
that by the year 2003, overseas visitors will spend around (pound)18.0 billion
(approximately $29.0 billion) a year in the United Kingdom, 44% more than 1998.
The British Tourist Authority also estimates that in 1998, travel expenditures
by residents of the United Kingdom in the United Kingdom totaled more than
(pound)14.0 billion (approximately $22.6 billion) which, when combined with
expenditures by overseas visitors, totaled more than (pound)26.7 billion
(approximately $43.0 billion) in 1998. Of the (pound)26.7 billion spent in 1998
on travel in the United Kingdom, approximately (pound)9.3 billion (approximately
$15.0 billion) was spent on accommodations, approximately (pound)3.5 billion
(approximately $5.6 billion) was spent in travel within the United Kingdom, and
approximately (pound)1.1 billion (approximately $1.8 billion) was spent on
travel-related services. The European Travel Commission estimates that travel
agencies alone generated approximately $126 billion in total sales in 1998.
The distribution channels for leisure travel are highly fragmented. Travel
service suppliers, such as hotels, airlines and rental car companies, sell
travel services directly to consumers and indirectly through retail travel
agencies and travel wholesalers. The principal distribution channels for leisure
travel services to consumers include:
o DIRECT SALES. Travel service suppliers typically sell their services
directly to consumers through call centers and, more recently,
through their own Web sites. These suppliers generally offer only
their own services, or offer their services in conjunction with
partners from other areas of the travel industry, such as in
hotel/airfare packages. Bookings are generally made at retail, or
"published," rates that suppliers have difficulty deviating from due
to competitive constraints.
o RETAIL TRAVEL AGENCIES. Retail travel agencies offer consumers
travel services at published rates and fares through global
distribution services, as well as discount, or "non-published,"
fares through travel wholesalers. Retail travel agencies receive
commissions and incentives on gross bookings that typically average
5-10%. As travel service suppliers have increasingly sought to cut
costs and drive more traffic through their own booking channels in
recent years, retail travel agencies have experienced shrinking or
capped commissions and increased competition from travel service
suppliers selling directly to consumers.
o TRAVEL WHOLESALERS. Travel wholesalers purchase hotel, airline and
car rental capacity directly from travel service suppliers at
discounts substantially in excess of commissions
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paid on published rates, and generally resell this capacity
individually or in packages through travel agencies.
o TELETEXT SALES. Teletext is a data system presented through
televisons for home viewing. It provides a full range of information
services covering news, financial and classified sales. Travel
information and last minute vacation specials are offered with
destination dates and pricing information included. Viewers may book
their travel plans directly by phone or fax.
ONLINE TRAVEL MARKETING
The Internet has emerged as a global medium for communication, content
delivery and electronic commerce, and Internet use continues to increase
rapidly. International Data Corporation, estimates that the number of users
worldwide with access to the Internet will increase to 320 million in 2002 from
100 million in 1998, representing a compound annual growth rate of approximately
34%. As consumers have become increasingly adept at using the Internet for
evaluating and purchasing a wide variety of goods, the dollar volume of online
commerce transactions has risen dramatically. International Data Corporation
estimates that the volume of goods and services purchased over the Internet will
increase to $400 billion in 2002 from $32 billion in 1998, representing a
compound annual growth rate in excess of 88%.
The growth of travel sales through the Internet has created another
channel for travel service providers to sell products and services to travelers.
Online sales of travel services have expanded dramatically in recent years due
to the substantial benefits of e-commerce to both travel service providers and
consumers. By moving their travel services online, travel service suppliers,
retail travel agencies and travel wholesalers can reach a global customer base
from a central location. According to Forrester Research, online travel bookings
are expected to grow to $29.5 billion in 2003 from $3.1 billion in 1998,
representing a compound annual growth rate of 57%.
A number of approaches have emerged to address the online travel market,
including:
o ONLINE TRAVEL RESERVATION SERVICES. Online travel reservation
services generally have adopted the retail travel agency model and
sell published rates and fares quoted through global distribution
systems on a commission basis. Because global distribution services
are not configured for simultaneous display of multiple hotel
options or hotel/air packages, comparison shopping for these travel
services can be time consuming. A small number of these online
travel reservation services also resell travel packages provided by
wholesalers.
o DIRECT ONLINE SALES BY SUPPLIERS. Airlines, hotels and car rental
companies have begun offering their services online through their
own Web sites. These Web sites frequently access only published
rates for the hosts, or their partners' travel services, thereby
limiting consumer choice and prohibiting convenient comparison
shopping.
o ONLINE TRAVEL WHOLESALERS. A small number of travel wholesalers have
begun offering consumer-direct wholesale travel services online.
These providers typically focus almost exclusively on a single
service, primarily air travel, and lack the strategic relationships
needed to effectively service leisure travel to destination markets.
In addition, many online travel service providers require consumers to
register by providing personal information prior to searching for travel
options. These registration requirements often make these Web sites cumbersome
to use and may give rise to security concerns.
As the online travel services industry continues to evolve and mature, we
believe consumers will increasingly demand an easy to use Web site that provides
a broad range of travel services, including transportation, accommodations,
activities and travel-related content and the ability to
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comparison shop for preferred suppliers, price levels, destinations and
packages. To offer consumers maximum value and competitive prices, the Web site
must have access to wholesale travel pricing in addition to published rates and
fares through a global distribution service. In addition, we believe travel
service suppliers will seek online distribution partners that combine extensive
wholesale travel experience and aggressive online marketing to provide an
effective distribution channel. This will, in turn, help minimize excess
capacity and respond quickly to distressed inventory, while also allowing
suppliers to maintain published rates and fares avoid fare wars.
OUR OPERATING STRATEGY
Our objective is to become a leading international single-source provider
of attractively priced, specialized holiday and leisure accommodations and
world-wide package travel services. To accomplish this objective, we will pursue
an operating strategy that includes the following elements:
o INCREASING REVENUES, PROFITABILITY AND OCCUPANCY RATES AT OUR
HOLIDAY RESORT HOTELS. We have adopted a comprehensive strategy
designed to increase occupancy and revenues and improve
profitability at our holiday resort hotels. Our operating strategy
includes:
o Establishment of a marketing program designed to expand
our core short-break holiday entertainment package for
larger groups during the lower holiday occupancy
periods, generally between January and March, as well as
offering more sophisticated entertainment to attract a
younger, more affluent audience to special weekend
packages which we will offer at higher rates.
o Renovation of our hotels based on strategic plans
designed to address the opportunities presented by each
hotel and the hotel's particular market. Renovations
will include enhancing lobbies, restaurants and public
areas, and upgrading guest rooms. We believe that these
renovations will enable us to increase both occupancy
and average room tariff rates and generate attractive
returns on our investment.
o Increasing our percentage revenues derived from advance
bookings of beds made by bus and coach tour operators.
We have recently entered into agreements with National
Holidays Limited, Caledonian Travel Limited, and others
among England's leading coach vacation package tour
operators, to furnish us with approximately 115,000
sleeper nights through our fiscal year ending October
31, 2000. Based on the historical cancellation rate, we
have accepted bookings for approximately 75% of the beds
we seek to sell to coach tour operators. We anticipate
that revenues in fiscal 2000 from coach operator sales
will represent an incremental increase of(pound)2.0
million ($3.2 million) over our traditional revenues
from direct customer bookings.
o A general price increase, as we believed at the time of
our acquisition that the market was prepared to accept
an adjustment to the traditional rates charged by The
Butlin's Provincial Hotels. In January 2000, we
implemented an average accommodation rate increase of
8%. As at February 14, 2000, we had achieved advanced
bookings for approximately 286,444 bed nights for the
balance of our 2000 fiscal year, or approximately 44% of
our target goal in fiscal 2000 of a 78% occupancy rate.
o PROVIDING VALUE-ADDED VACATION PRODUCTS AND SERVICES. We intend to
increase value for consumers by offering a complete world-wide
travel planning solution, including hotel accommodations, air
travel, and rental cars and other travel related products and
services, while attempting to offer the lowest possible prices. We
believe a strategy based on packaging the products and services of a
wide range of well-known travel suppliers at
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competitive prices will result in sales growth from both new
customers and repeat buyers. We also believe that, because of our
reputation and expertise in certain selected destination markets, we
can
o generally provide better prices and inventory availability
than can be obtained by an individual travel agency or
traveler;
o enhance and simplify access to travel information across
multiple destinations; and
o assemble vacation travel components into convenient packages
for ease of planning and booking, all of which result in the
creation of value-added packaged vacation products and
services.
We intend to implement comprehensive quality assurance monitoring
programs to ensure that the products and services packaged together
will meet traveler expectations.
o ESTABLISHING NATIONAL BRAND NAME RECOGNITION. Using the
www.trrravel.com Web site as a world-wide marketing tool, our
strategy is to promote, advertise and increase the value and
visibility of our brand in the travel service and holiday resort
hotel industries through high quality service, active marketing and
promotional programs. These programs would include advertising on
leading Web sites and other media, conducting an ongoing public
relations campaign and developing business alliances and
partnerships. We plan to increase awareness of our brand by entering
into additional online marketing relationships with advertising
representatives, content providers, Internet service providers and
portals. We believe offering expertise and competitive pricing
through common brands across multiple destinations will provide
greater confidence to travelers in making their vacation choices and
engender consumer loyalty and a pattern of repeat business. We also
will seek opportunities to market our products and services through
travel suppliers and other companies that have established private
label brand names.
o LEVERAGING STRENGTH IN SELECTED TRAVEL DESTINATIONS. Our plan is to
achieve a leading position in several selected high-volume,
high-margin vacation destinations. We believe we currently have a
leading position in the market for vacations in the United Kingdom
and to certain European holiday resorts, including Malaga, located
in Costa del Sol, Spain and Tenerife, located in the Canary Islands
off the Northwest coast of Africa, and a significant presence in the
markets for packaged vacations to Canada, South Africa and Orlando,
Florida. By leveraging this current expertise and through selective
acquisitions of other travel specialists and tour operators, we
intend to increase our market position and cross-selling
opportunities to achieve a leading market presence in other
destinations throughout Europe, including Spain, Italy and Turkey.
We believe having scale and expertise in selected destinations gives
us access to pricing and inventory that provides us with a
significant competitive advantage.
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o IMPROVING OPERATING EFFICIENCIES. We intend to reduce our operating
expenses by (1) capitalizing on enhanced purchasing efficiencies
resulting from combining operations such as telecommunications
systems and brochure production and distribution, (2) implementing
best practices in our management and business systems, particularly
through the use of our Web site, which we believe will produce cost
savings as travel agents and individual travelers use our site to
purchase our products and services, (3) enhancing marketing
relationships with travel suppliers and other related parties and
(4) utilizing outsource providers where appropriate. We believe
successful implementation of these strategies will enable our
operational management to devote more time to sales, service and
customer satisfaction.
o IMPLEMENTING INTEGRATED INFORMATION SYSTEMS. We believe integrating
information systems will improve our ability to offer travelers
value-added vacation products and services and to leverage
maintenance and development costs across a broader customer base. In
addition, integrated systems will facilitate the use of common
operating platforms, and reduce the cost and time requirements of
developing external interfaces such as interfaces to global
distribution systems and supplier systems, and accelerate the
integration of subsequent acquisitions.
o INVESTING IN LEADING TECHNOLOGY. We intend to invest in the
implementation of technology-driven enhancements to the trrravel.com
Web site and transaction-processing systems. In addition, we intend
to develop tighter integration with the booking systems of our
travel suppliers to ensure that our customers are exposed to special
promotional discounts as soon as these discounts are initiated to
help suppliers optimize their yields.
OUR GROWTH STRATEGY
To complement our operating strategy, we have developed a multi-faceted
growth strategy comprised of the following elements:
o ACQUIRE AND IMPROVE ADDITIONAL UNDERPERFORMING RESORT HOTELS. Using
the hotels operated by our Grand Hotel Group as a base, we plan to
capitalize on our management expertise by continuing to acquire
underperforming hotels and implementing operational initiatives to
achieve revenue growth and margin improvements. We plan to
investigate the possibility of acquiring three-star and better
holiday resort hotels having at least 300 rooms in such coastal
vacation spots as Costa del Sol and Costa Brava in Spain as well as
in other southern European resort areas. We will invest significant
capital to renovate newly acquired hotels and, in certain instances,
we plan to re-brand hotels to highlight property improvements to the
marketplace and to improve average room tariff rates and market
share. We believe that our total cost to acquire and renovate hotels
will be significantly less than the cost to construct new hotels
with similar facilities. We expect that our relationships throughout
the industry and our in-house development capabilities will provide
us with a competitive advantage in identifying, evaluating,
acquiring, redeveloping and managing hotels that meet our criteria.
o CONSUMMATING STRATEGIC ACQUISITIONS OF OTHER TRAVEL SERVICE
PROVIDERS. We believe the travel service industry is fragmented and
there are significant opportunities to make selective acquisitions
of travel service providers in the United Kingdom and throughout
Europe. We generally will seek to acquire companies that:
o have desirable destination concentrations;
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o have demonstrated growth and profitability;
o have an emphasis on customer service;
o have an experienced management team; and
o are likely to add some other strategic value (such as a
relationship with a particular travel supplier). We believe
our ability to consummate acquisitions will be enhanced by our
historical performance, the experience and reputation of our
management team, our ability to offer liquidity to the owners
of acquired companies through the receipt of our securities or
cash, our leading presence in certain high-volume,
higher-margin travel destinations and the growth opportunities
available through cross-selling within our markets.
o ENHANCING DISTRIBUTION CHANNELS. We plan to capitalize on the
opportunities presented by the direct selling of vacation products
and services to consumers online while still supporting and
leveraging our strong relationships with other independent retail
travel agents who are significantly smaller than the major agencies
and tour operators such as Air Tours and Thomsons. We intend to
encourage these smaller independent agencies, who currently compete
with us in the United Kingdom, to become an active participant on
the www.trrravel.com Web site. Through the use of the Internet and
as a result of relationships with Internet portals and Internet
service providers, we believe we will penetrate a significant
portion of the vacation travel market that currently books directly
with travel suppliers. We believe our value-added vacation products
and services will allow us to compete effectively with travel
suppliers by:
o generally providing better prices and inventory availability
than can be obtained by an individual travel agency or
traveler;
o enhancing and simplifying access to travel information across
multiple destinations; and
o assembling vacation travel components into convenient packages
for ease of planning and booking.
OUR PRODUCTS AND SERVICES
OUR GRAND HOTEL GROUP
The five holiday hotels operated by GHG accommodated over 180,000 guests
in its 1,274 room in 1998. Our package rates are based on both four night and
three night stays. The five hotels are located in Blackpool, Scarborough,
Brighton and Margate, all seaside resorts located in England, and Llandudno, a
seaside resort located in Wales. The average cost per person per night,
including accommodations, breakfast and evening meal is approximately
(pound)20.00, or approximately $32.00. The Brighton, Llandudno and Margate
hotels cater to family holidays with children's entertainment and play areas,
whereas the Blackpool and Scarborough facilities are limited to adults only.
The principal difference between the hotels operated by our Grand Hotel
Group and other hotels in the United Kingdom is the inclusion of a food and
entertainment package, which is perceived by their guests as a complete holiday
product. This has produced significant repeat business with approximately 35% of
all guests having visited at least one Grand Hotel in the previous four years.
Part of our growth strategy is to expand our core short-break holiday
entertainment package for larger groups during the
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lower holiday occupancy periods, generally between January and March. We also
intend to to offer special "up-market" weekend packages to the younger consumer
at higher prices. Due to our high profile in England, we believe that we can
effectively draw upon our core "holiday break" entertainment package catering to
groups and to private guests, both with an older and mid to down-market profile
as well as a younger, more affluent profile. To do this we intend to utilize
commercial radio, the national press and the Internet. In addition we will
target group repeat and new business by means of:
o one to one sales contact;
o personalized direct mail submissions to organizations;
o brand presence advertising on radio and the trade press;
o familiarization weekends for tour operators;
o hospitality invitations to trade press editors;
o joint promotions with third parties; and
o exhibitions and conferences.
In addition, we will seek to renovate our hotels based on strategic plans
designed to address the opportunities presented by each hotel and the hotel's
particular market. Renovations will include enhancing lobbies, restaurants and
public areas, and upgrading guest rooms. We believe that these renovations will
enable us to increase both occupancy and average room tariff rates and generate
attractive returns on our investment.
The following table sets forth certain information, as of December 31,
1999, regarding each of the hotels operated by GHG, including its location, the
date acquired, the number of existing rooms at the hotel, 1998 occupancy rates
and the facilities offered.
<TABLE>
<CAPTION>
NUMBER 1998
DATE OF OCCUPANCY FACILITIES
RESORT LOCATION ACQUIRED ROOMS RATES OFFERED
- ------------------------ ---------- ------------- ----- --------- ----------------------
<S> <C> <C> <C> <C> <C>
The Grand Ocean Hotel Brighton June 30, 1999 352 74.9% food, entertainment
and leisure facilities
The Grand Metropole Hotel Blackpool June 30, 1999 208 88.2% food and entertainment
The Grand Hotel Margate June 30, 1999 267 74.2% food and entertainment
and leisure facilities
The Grand Hotel Scarborough June 30, 1999 281 81.2% food and entertainment
The Grand Hotel Llandudno June 30, 1999 166 87.3% food and entertainment
</TABLE>
OUR TRAVEL-RELATED SERVICES
We will continue to focus on specific destinations in order to become a
leading provider of value-added vacation products and services while at the same
time providing travel suppliers with efficient and cost effective distribution
of their capacity. We have expertise in and access to the products and services
of a broad range of travel suppliers. Based on customer research, we design our
products and services to offer travelers a wider choice than that of an
individual supplier. We assemble travel products and services in bulk and
combine them to create customized vacations for individual travelers. We create
demand for our products through integrated marketing programs and handle all
reservations, payment processing and supplier processing interfaces. We have
developed the in-depth knowledge of these products and services that a retail
travel agent, which acts as a broker or reseller of the entire spectrum of
travel products and services, is unlikely to acquire.
We provide private label vacation products and services for a variety of
companies located in the United Kingdom, including Marks & Spencer's, British
Telecom, Mercury Telecom, Greater Manchester Police and HSBC.
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UNITED KINGDOM. We are a provider of vacations in the United Kingdom and
have over 15 years of experience in the United Kingdom travel market. We have
relationships with major airlines, such as Singapore Airlines, British Airways,
Alitalia and Iberia, for air travel to, from and within the United Kingdom,
which provide us with preferential access to prices that generally are better
than published fares as well as marketing support. In addition, we utilize a
staff of over 45 employees on location in the United Kingdom to provide
destination management for our packaged vacations products and services. We
believe our extensive experience and established reputation in this market as
well as our airline relationships give us a competitive advantage over other
providers of vacations to and from the United Kingdom. We believe the United
Kingdom travel market will continue to present growth opportunities in the
future and to represent a significant portion of our revenues.
OTHER EUROPEAN VACATION DESTINATIONS. We specialize in packaged vacations
for travelers from the United Kingdom to holiday resorts located throughout
Europe. Tenerife, located in the Canary Islands off the coast of Northwest
Africa, and Malaga, located in Costa del Sol, Spain, are our most popular
European destinations to which we provide flight and packaged vacation services.
We also provide packaged vacations to a variety of other holiday destinations in
southern Europe, such as Italy and Turkey. We intend to increase our presence in
these markets by cross-selling within our existing customer base, by leveraging
our relationships with travel distributors in Europe to create demand for our
brand name products and services and by leveraging our existing relationships
with suppliers to obtain preferential pricing and access to capacity for
European destinations.
CANADA, SOUTH AFRICA AND ORLANDO, FLORIDA. We have an established presence
in the markets for travel to Canada, South Africa and Orlando, Florida. We have
over 15 years of experience in these markets and have established key strategic
relationships, including as one of a limited number of designated providers for
Disney World. We believe our extensive experience and established reputation in
this market as well as our supplier relationships give us a competitive
advantage over other providers of vacations to these destinations.
THE TRAVEL WEB SITE
We intend to utilize as the core distribution program for the travel
products and services offered by our Travel Group a consumer-direct online
travel site that will provide travelers immediate access both to our proprietary
booking system and to detailed hotel information and destination guides.
Visitors to the Web site at www.trrravel.com will be able to compare travel
options, rates and availability, and book and purchase a wide variety of travel
services, including our independently tailored vacation programs and group
packages. Unlike many other travel Web sites, we will not require customers to
pre-register or provide personal information prior to searching our database for
travel options. Visitors simply type in their desired destination and itinerary,
and the booking engine simultaneously displays a range of travel options, rates
and availability for the visitor to compare. At any time, visitors can review
detailed information about each of our destination markets, including in-depth
hotel, shopping and dining information, local news and events and other travel
planning information. We will provide customer support through our call center
seven days a week to answer customer questions and assist in finding the best
travel value for their needs. Customers can either complete travel purchases in
a few easy steps online, or call our call center to purchase travel offline.
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Visitors to the trrravel.com Web site can choose to search for hotel, air
or hotel/air packages. Once a visitor initiates a search, the trrravel.com
booking engine searches to locate the best prices possible for the desired
travel. To complete a purchase, customers select the hotel and/or airline of
their choice and supply basic identification and credit card information. Once
the order is submitted, the customer receives instant online confirmation that
travel has been booked and a subsequent e-mail to verify the transaction.
trrravel.com also provides its customers with the option to complete travel
purchases quickly and efficiently through the call center maintained by us.
Fulfillment is completed with e-tickets, whenever possible, or printed tickets
sent to the customer by second day air.
trrravel.com customers can view detailed information on hotel options and
destination markets at any time while shopping for travel values, all without
leaving the convenience of the Web site.
o HOTEL CONTENT. In addition to rates and availability, we provide
in-depth content on the hotels featured on our Web site, including
pictures of properties and rooms, descriptions of amenities and
locations, our own five star rating system and directions to the
hotel. By selecting and featuring a limited number of hotels in the
economy, mid-price and luxury price ranges in desirable areas of
each market we serve, we assist our customers in finding the
properties best suited to their individual preferences and budget
constraints.
o "LATE DEALS." The trrravel.com home and destination pages feature
multiple "late deals" in cooperation with our strategic partners in
each market we serve by offering cheaper than usual promotional
discounts for a select number of hotels and hotel/air packages.
o LOCAL EVENTS AND ATTRACTIONS. trrravel.com will offer extensive
information on local events and attractions by providing access to
local content providers in each of our destination markets.
o GROUND TRANSPORTATION. trrravel.com will offer access to rental car
reservations and other local transportation options, such as taxi,
limousine and shuttle services.
o MAPS. trrravel.com will provide customers access to detailed and
accurate maps that pinpoint and provide directions to local
attractions, businesses and other addresses requested by the
customer.
o WEATHER REPORTS. trrravel.com will provides access to current
weather information for planning future travel.
We will maintain a call center seven days a week, to assist customers in
using the Web site. The call center will receive and processes orders for
customers more comfortable with that medium, and assist customers in changing or
canceling travel arrangements prior to the dates of travel.
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OUR SALES AND MARKETING PROGRAM
We engage in different marketing and advertising programs depending on the
particular travel service and whether the customers are primarily travel agents
or travelers.
THE GRAND HOTEL GROUP. We employ a systematic approach toward identifying
and targeting segments of demand for each hotel in order to maximize market
penetration. We market our hotels directly to travelers in numerous ways,
principally through local newspaper and magazine advertisements highlighting
toll-free numbers and special travel offers. In addition, we advertise on local
radio and through direct mail utilizing a database guest roster GHG obtained
from The Rank Group when the hotels were purchased. In many cases, the travel
providers contribute to the cost of the advertising and marketing. To market
directly to travel agents, we use dedicated sales personnel, direct mailings and
fax distribution technology. Our sales teams are recruited locally and receive
incentive-based compensation bonuses. All of our sales managers complete a
highly developed sales training program.
THE TRAVEL GROUP. We pursue a fully integrated sales and marketing effort
in support of our proprietary travel products and services. By employing a
multi-faceted marketing approach targeted both to travel distributors and to
individual travelers, we believe we will increase the demand for our products
and services. In addition, we will integrate our own marketing efforts with the
marketing support we receive from certain travel suppliers with whom we have an
established relationship. We believe we will be able to leverage our national
presence and established marketing and sales experience strength into a
competitive advantage. We intend to identify and cultivate new customers and
create cross-selling opportunities within our existing customer base.
A substantial majority of our products and services historically have been
sold through retail travel agencies, and we enjoy strong relationships with many
of these agencies. We intend to pursue marketing opportunities in other
distribution channels as well.
WWW.TRRRAVEL.COM. Using the www.trrravel.com Web site as a world-wide
marketing tool, our strategy is to promote, advertise and increase the value and
visibility of our brand in the travel service and holiday resort hotel
industries through high quality service, active marketing and promotional
programs. These programs would include advertising on leading Web sites and
other media, conducting an ongoing public relations campaign and developing
business alliances and partnerships. We plan to increase awareness of our brand
by entering into additional online marketing relationships with advertising
representatives, content providers, Internet service providers and portals. We
believe offering expertise and competitive pricing through common brands across
multiple destinations will provide greater confidence to travelers in making
their vacation choices and engender consumer loyalty and a pattern of repeat
business. We also will seek opportunities to market our products and services
through travel suppliers and other companies that have established private label
brand names.
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OUR COMPETITION
THE GRAND HOTEL GROUP. Competition in the United Kingdom lodging industry
is based generally on convenience of location, brand affiliation, price, range
of services and guest amenities offered and quality of customer service and
overall product. The Grand Hotel Group competes primarily in the
moderately-priced sector of the full-service segment of the lodging industry in
England and Wales. In each geographic market in which the hotels are located,
there are other full- and limited-service hotels that compete with our hotels.
Our principal competitor in the Southern region of England is the Burstin Hotel
located in Folkestone, England. The Burstin Hotel is owned and operated by
Queensborough Holdings plc and contains 484 bedrooms. Its customer profile is
primarily made up of coach and group operators. In addition, our food and
beverage operations compete with local free-standing restaurants and bars. Many
of these entities possess significantly greater financial, marketing, personnel
and other resources than we do and may be able to grow at a more rapid rate than
we can as result.
THE TRAVEL GROUP. We compete with a variety of other providers of travel
and travel-related products and services. Our principal competitors are other
vacation providers, travel suppliers who sell directly to individual travelers
and travel agencies and other retail and wholesale distributors of travel
products and services. Many of these companies, including Air Tours, Thomsons,
First Choice and JMC (formerly Thomas Cook ) are substantially larger than us,
have greater name recognition and significantly greater financial resources than
we do. We believe we compete for customers based upon the quality of the travel
products and services delivered, price, specialized knowledge, reputation and
convenience.
WWW.TRRRAVEL.COM. The online travel services market is new, rapidly
evolving, intensely competitive and has relatively low barriers to entry. We
believe that competition in the online travel services market is based
predominantly on:
o price;
o selection and availability of hotel rooms and airfares;
o selection of destination markets;
o ease of use of online booking service;
o customer service;
o reliability; and
o travel related content.
As the market for online travel services grows, we believe that companies
already involved in the online travel services industry will increase their
efforts to develop services that compete with our services. Currently, most
travel suppliers sell their services through travel agencies, travel wholesalers
and directly to customers, mainly by telephone. Increasingly, major airlines and
hotels are offering travel products and services directly to consumers through
their own Web sites. Some of these Web sites also include travel products and
services of other travel suppliers. We believe that this trend will continue. We
also face potential competition from Internet companies not yet in the leisure
travel market and travel companies not yet operating online. We are unable to
anticipate which other companies are likely to offer competitive services in the
future. We cannot be sure that the trrravel.com Web site and toll-free call
center will compete successfully with any current or future competitors.
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OUR PROPRIETARY RIGHTS
We regard our trademarks, domain name, service marks, trade dress, trade
secrets, copyrights and similar intellectual property as important to our
success, and rely on foreign and domestic trademark and copyright law, trade
secret protection and confidentiality to protect our proprietary rights. We may
pursue the registration of additional trademarks in the United States and
internationally in the future. Effective trademark, service mark, copyright and
trade secret protection may not available in every country in which our products
and services are made available online. Failure to effectively protect our
intellectual property could adversely affect our business and stock price or
result in erosion of our brand name.
Currently, the only trademark we have is "trrravel.com". As a result of our
efforts to protect our rights in the trrravel.com brand, we could become
involved in litigation, which would likely be expensive and time consuming, and
could distract management from the operations of the business. Furthermore, we
cannot be sure we would prevail in any such litigation. Please see "Risk
Factors--We may be unable to protect our intellectual property, including our
trademarks, which could adversely affect our operating results" for a discussion
about the risks associated with the protection of our proprietary rights.
GOVERNMENT REGULATION OF OUR BUSINESS
Our travel services business is subject to certain regulation by the
government of the United Kingdom, including the Package Travel, Package Holidays
and Package Tours Regulations 1992. In addition, many travel suppliers,
particularly airlines, are subject to extensive regulation by United States
federal, state and foreign governments. In addition, the travel industry is
subject to certain special taxes by United States federal, state, local and
foreign governments, including hotel bed taxes, car rental taxes, airline excise
taxes and airport taxes and fees.
Certain companies in our Travel Group are subject to regulation by the
Civil Aviation Authority. The Air Travel Organisers' Licensing (ATOL) system
provides protection, inter alia, against the consequences of travel organiser
failure for consumers who purchase package holidays, charter flights and
discounted scheduled air tickets.
Under the Civil Aviation (Air Travel Organisers' Licensing) Regulations
1995, it is a legal requirement for most organizers of air travel to hold an Air
Travel License to sell flights and package holidays by air. The main exceptions
are airlines and agents of licensed firms. The Civil Aviation Authority holds
bonds of licensees and, in the event of a failure, manages a repatriation
operation to ensure customers are not stranded abroad, and provides refunds to
those who have paid in advance. The cost of this protection is included in the
price of the holiday booked with an ATOL holder.
The criteria for the grant of an ATOL License is as follows:
1. FITNESS OF APPLICANT
The Civil Aviation Authority must be satisfied as to the fitness of an
applicant, and the fitness of the people controlling the business. It asks for
the history of those controlling the business and it considers the likelihood of
the applicant operating in a proper manner if the license is granted.
2. FINANCES
The applicant must meet certain minimum financial criteria in order to be
granted a license. The assessment is usually based on the applicant's latest
audited accounts. The financial requirements are based on the surplus of "free
assets" in the balance sheet to support the business. A minimum of (pound)30,000
paid up capital under free assets is required and above that there must be an
adequate ratio between free assets and the total turnover of the business. The
ratio varies according to the Civil Aviation Authority's assessment of the risks
involved, the trading record and the experience of the management. For new
applicants the ratio is at least 5% for established license holders with a
record of profitable trading or trading with a license over at least two years
the ratio may reduce in stages. The minimum ratio is 3%.
The Civil Aviation Authority may also look at the position of other
companies in the group.
Licenses are normally valid for one year and expire at the end of March or
the end of September.
In addition, certain companies in our Travel Group are members of The
Association of British Travel Agents Limited who require adherence to a Code of
Conduct covering service standards as well as mirroring the requirements of the
ATOL scheme.
Our Grand Hotel Group is subject to certain licensing laws in England and
Wales relating to the selling of alcohol and the operation of bars and cocktail
lounges in hotels as well as various fire, health and safety regulations. A
serious violation could result in a significant fine or even the forced closing
of one or more of our hotels.
We are also subject to regulations applicable to businesses generally and
laws or regulations directly applicable to electronic commerce. Although there
are currently few laws and regulations directly applicable to electronic
commerce, it is possible that a number of laws and regulations may be adopted
with respect to electronic commerce covering issues such as user privacy,
pricing, content, copyrights, distribution, antitrust and characteristics and
quality of products and services.
ENVIRONMENTAL MATTERS
A variety of laws concerning the protection of the environment and health
and safety apply to the operations, properties and other assets we own. These
laws may originate at the European Union, United Kingdom or local level. These
environmental laws govern, among other things, the discharge of substances into
waterways and the quality of water discharge of substances into sewers, waste
and contamination. Liability can attach to a person who causes or knowingly
permits the discharge of substances to waterways or sewers without a permit
authorizing such discharges or beyond the scope of the applicable permit. The
legal regime with respect to contamination of land in the United Kingdom is
expected to change in April 2000. In general, liability and responsibility for
contamination will remain with the person responsible for the contamination,
however, the new regime formalizes this to be the person who "causes or
knowingly permits" contamination, and in the absence of such a person, the owner
or occupier of the site may be held responsible for remediation. In addition to
civil claims, criminal sanctions can be imposed for violations of environmental
laws and any persons violating these laws can be held responsible for the cost
of remedying the consequences of pollution, contamination or damage. In
addition, certain laws restrict the use of property and the construction of
buildings and other structures. Carrying out development without the appropriate
consent or beyond the scope of the consent can result in regulatory authorities
taking action to require the unauthorized use
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to cease or unauthorized building or structure to be removed or modified.
Criminal sanctions are available if the authority's requirements are not
satisfied. Please see "Risk Factors--We may be subject to various environmental
laws and regulations that impose certain requirements relating to the ownership
and use of our vacation ownership resorts, and we could be subject to fines or
other penalties for failure to comply with such regulations" for a discussion of
the risks we may face as a result of environmental laws applicable to our
business.
OUR EMPLOYEES
As of January 31, 2000, the Travel Group had a total of 47 employees,
consisting of 36 reservation agents and call center employees, six managers and
five executives. As of such date, the Grand Hotel Group had a total of 731
employees, consisting of 652 operational personnel, 30 administrative personnel,
22 sales representatives, and a management team of 27 personnel. Our ability to
attract and retain highly qualified employees will be the principal determinant
of our success. We provide performance-based compensation programs to reward and
motivate significant contributors among our employees. Competition for qualified
personnel in the industry is intense. There can be no assurance that our current
and planned staffing will be adequate to support our future operations or that
management will be able to hire, train, retain, motivate and manage required
personnel. Although none of our employees is represented by a labor union, there
can be no assurance that our employees will not join or form a labor union. We
have not experienced any work stoppages and consider our relations with our
employees to be good.
OUR INSURANCE
We carry comprehensive liability, fire, hurricane, storm, earthquake and
business interruption insurance with respect to our resorts, with policy
specifications, insured limits and deductibles customarily carried for similar
properties which we believe are adequate. There are, however, certain types of
losses (such as losses arising from acts of war) that are not generally insured
because they are either uninsurable or not economically insurable. Should an
uninsured loss or a loss in excess of insured limits occur, we could lose our
capital invested in a resort, as well as the anticipated future revenues from
such resort and would continue to be obligated on any mortgage indebtedness or
other obligations related to the property. Any such loss could have a material
adverse effect on our business. Please see "Risk Factors--Our resorts may be
subject to natural and other disasters for which we may not be adequately
insured" for a discussion of certain related risks.
OUR FACILITIES
Our headquarters are located at 6 Leylands Park, Nobs Crook, Colden
Common, Winchester SO21 1TH England, where we utilize a facility comprising an
aggregate of approximately 6,000 square feet of space that is leased by
Queensborough Holdings plc. Kevin R. Leech, our Chairman, is the Executive
Chairman and 29.7% equity owner of Queensborough Holdings. Such facility houses
our administrative, sales and marketing, customer service and computer and
communications systems facilities. We do not currently pay any rent or fees to
Queensborough Holdings or any other party for the use of these facilities. See
"Certain Transactions--Facilities."
The following table describes our other principal facilities:
LOCATION PRINCIPAL USE APPROX. SQUARE FEET OWNED/LEASED
-------- ------------- ------------------- ------------
Horsham, West Sussex General 930 Leased
administration
and sales
Manchester Tour operating 1,995 Leased
Manchester,
Oldham Road Tour operating 3,040 Leased
Stockport, Cheshire General
administration 1,025 Leased
and sales
Urmston, Cheshire General
administration 930 Owned
and sales
Hale, Cheshire General
administration 730 Leased
and sales
Warrington, Lancshire General
administration 970 Leased
and sales
Addington, Cheshire General
administration 900 Leased
and sales
We believe that these facilities are adequate to meet our needs in the
foreseeable future. If necessary, we may, from time to time, acquire or lease
additional facilities in the future.
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Please see "--Our Grand Hotel Group" for a discussion of the resort
facilities currently owned and operated by our Grand Hotel Group.
LITIGATION
We are not presently involved in any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to our
executive officers and directors as of the date of this prospectus.
Name Age Position
- ---- --- --------
Kevin R. Leech 55 Chairman of the Board
Raymond J. Peel 55 President, Chief Executive Officer and Director and
President of the Travel Group
Rod Rodgers 54 Senior Executive Vice President and Director and
President of the Grand Hotel Group
David Marriott 53 Marketing Director and Vice President of the
Grand Hotel Group
Stephen Last 50 Executive Vice President and
Chief Financial Officer and Director
Philip Mason 49 Director
KEVIN R. LEECH has served as our Chairman of the Board since inception of
our company. Mr. Leech co-founded ML Laboratories plc, an English company listed
on the London Stock Exchange engaged in the research and development of ethical
pharmaceuticals and related products, and is currently its Executive Chairman
and controls 53% of its equity. He is also Executive Chairman and 29.7% equity
owner of Queensborough Holdings plc, an English company listed on the London
Stock Exchange whose principal business is in the leisure sector. Mr. Leech is
also currently the Chairman of the Board and 52.5% equity owner of topjobs.net
plc, an English company whose American depositary shares are quoted on the
Nasdaq National Market and which provides a variety of Internet-based recruiting
services to corporations and recruiting firms, and is a director and 62.5%
equity owner of TownPagesNet.com plc, an English company whose American
depositary shares are listed on the American Stock Exchange and which produces
and delivers TownPages(R), an interactive Internet information service in the
United Kingdom. In addition, Mr. Leech is a director and a 54% equity owner of
Ci4net.com, Inc., a U.S. corporation which invests in Internet businesses and
technologies and is currently traded on the OTC-Electronic Bulletin Board. He is
also a principal shareholder of numerous privately-owned companies resulting
from his role as a provider of private venture capital. In October 1998, Mr.
Leech was awarded an honorary Doctorate of Laws degree from the University of
Manchester (England).
RAYMOND J. PEEL has served as our President and Chief Executive Officer
and as a director since inception of our company, and has served as President of
Leisure Travel Group Limited since January 1998. From 1991 to January 1998, Mr.
Peel served as President of Aircruise Leasing--Charter, a company engaged in the
provision of aircraft and charter seats for independent tour operators to major
European holiday destinations. In 1981, Mr. Peel founded R.P. Marketing, a
company engaged in providing consulting services related to oil pollution
control in connection with moving equipment and personnel, and served as its
President from 1981 to January 1998. In 1985, Mr. Peel also co-founded Paramount
Airways Ltd., a small international airline and holiday company based in the
United Kingdom, and served as its Chief Executive Officer from 1985 to 1990. Mr.
Peel holds a leisure and business degree from Shrewsbury College of Arts and
Technology in England.
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ROD RODGERS has served as a director since inception of our company, and
has served as President of the Grand Hotel Group since July 1, 1999. Mr. Rodgers
will become our Senior Executive Vice President upon completion of this
offering. From July 1996 to June 1999, Mr. Rodgers served as managing director
with M.H. Hotels, where he was instrumental in forming the three-star Epworth
Hotels group. From 1987 to January 1996, Mr. Rodgers served as Chief Executive
Officer with Balmoral Group, a private company focused on the development of a
mid-market three-star hotel group.
DAVID MARRIOTT has served as our Marketing Director since inception of our
company, and has served as Vice President of the Grand Hotel Group since July 1,
1999. From February 1998 to June 1999, Mr. Marriott was self-employed as a hotel
consultant to various hotel organizations in the United Kingdom. From June 1993
to November 1995, Mr. Marriott served as Managing Director for Ascot Holdings
plc's Hotel Burstin, Folkestone, and continued in that capacity from November
1995 to February 1998 following the acquisition of that hotel by Leisure Great
Britain plc in November 1995. From September 1994 to March 1995, Mr. Marriott
served as Joint Director General of Ascot Holdings Spanish Hotel Division, a
division composed of Ascot Holdings plc's hotels and leisure complexes in Spain.
Mr. Marriott has also held senior sales and marketing positions with the medical
division of Smiths Industries, Colgate Palmolive, and Protea Holdings, South
Africa.
STEPHEN LAST has served as our Executive Vice President and Chief
Financial Officer and as a director since the inception of our company. Since
November 1995, Mr. Last has served as Finance Director of Queensborough Holdings
plc, an English company listed on the London Stock Exchange whose principal
business is in the leisure sector. From 1993 to October 1995, Mr. Last served as
an executive for a company founded by Philip Mason to engage in identifying
leisure companies for acquisition. From 1989 to 1993, Mr. Last managed the
integration of Marina Developments plc's newly-acquired property division. From
1974 to 1986, Mr. Last was employed in various capacities by The Rank Group plc,
including Financial Controller for the company's Butlin's Hotels Division.
PHILIP MASON has served as a director since the inception of our company.
Since November 1995, Mr. Mason has been Chief Executive of Queensborough
Holdings plc, an English company listed on the London Stock Exchange whose
principal business is in the leisure sector. In 1993, Mr. Mason established his
own company devoted to identifying and acquiring leisure companies, which he ran
full-time until his employment by Queensborough Holdings in November 1995. From
1987 to 1993, Mr. Mason worked as a Managing Director for Marina Developments
Plc, where he supervised marinas and marina villages in the UK. From 1974 to
1986, Mr. Mason was employed in various capacities by The Rank Group plc,
including Operations Director of a leisure division focused on hotel businesses
and marinas in France, Spain, and the United Kingdom.
Prior to the completion of this offering, we intend to expand our Board of
Directors to add two additional independent directors who are not affiliated
with our company.
There is no family relationship between any of our executive officers and
directors. Other than as disclosed in "Certain Transactions," none of our
directors or executive officers has any material transaction with us in addition
to their status as a director or officer. Each director is elected at our annual
meeting of shareholders and holds office until the next annual meeting of
shareholders, or until his successor is elected and qualified. The bylaws permit
the Board of Directors to fill any vacancy and such director may serve until the
next annual meeting of shareholders or until his successor is elected and
qualified. Officers are elected annually by the Board of Directors and their
terms of office are at the discretion of the Board, subject to the terms of any
employment agreements. Our officers devote full time to our business.
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COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors intends to establish an audit and finance committee
and a compensation and governance committee after this offering. The audit and
finance committee will:
o make recommendations to the board concerning the independent
auditors that conduct annual examinations of our accounts;
o review the scope of our annual audit and meet periodically with the
independent auditors to review their findings and recommendations;
o approve significant accounting policies or changes to existing
policies;
o periodically review our principal internal financial controls; and
o review our annual budget.
The compensation and governance committee will review the compensation of
our executive officers and make recommendations regarding compensation. The
committee will also make recommendations regarding the election of officers and
director nominations to our Board of Directors.
DIRECTOR COMPENSATION
Upon completion of this offering, we expect to grant each director who is
not an officer, employee or consultant an option to purchase ________ shares of
our common stock at ___% of the initial public offering price. Directors who are
not our employees receive $_____ per meeting as compensation for serving on the
Board of Directors, as well as reimbursement of reasonable out-of-pocket
expenses incurred in connection with their attendance at Board of Directors'
meetings. Directors who are also our employees will receive no cash compensation
for serving on the Board of Directors, but will be reimbursed for reasonable
out-of-pocket expenses incurred in connection with their attendance at Board of
Directors' meetings. We anticipate that our Board of Directors will hold
regularly schedules meetings quarterly.
EXECUTIVE COMPENSATION
To date, we have not conducted any operations other than activities
related to this offering. We did not pay any compensation to our executive
officers prior to the date of this prospectus. We anticipate that during 2000
our most highly compensated executive officers and their annualized base
salaries will be: Raymond J. Peel--(pound)100,000; Rod Rodgers--(pound)60,000
and David Marriott--(pound)55,000. Effective when this offering closes, we will
grant these executive officers options to purchase an aggregate of _______
shares of common stock. The initial exercise price of those options will be
$_____ per share. Those options will vest in ___% annual increments, beginning
on the first anniversary of the date this offering closes. See "--2000 Stock
Option Plan."
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EMPLOYMENT AGREEMENT
We will enter into employment agreements with Messrs. Peel, Rodgers and
Marriott, which will become effective when this offering closes. These
agreements will:
o provide for a minimum base salary of (pound)100,000 per annum in the
case of Mr. Peel, (pound)60,000 per annum in the case of Mr.
Rodgers, and (pound)55,000 per annum in the case of Mr. Marriott;
o entitle the employee to participate in all our compensation plans in
which our executive officers participate; and
o have an initial term of three years in the case of Mr. Peel, and six
months in the case of Messrs. Rodgers and Marriott.
Each of these agreements will provide for benefits if the employee dies or
becomes disabled. If the employment of the employee terminates for any reason
other than for cause by us or for good reason by the employee, that termination
will not affect the term of exercisability of any plan stock options that
employee holds. Copies of these agreements are exhibits to the registration
statement of which this prospectus is a part.
2000 STOCK OPTION PLAN
On February 23, 2000, the Board of Directors and a majority of our
shareholders adopted our 2000 Stock Option Plan. The purpose of the plan is to
increase the employees', advisors', consultants' and non-employee directors'
proprietary interest in us and to align more closely their interests with the
interests of our shareholders. The purpose of the plan is also to enable us to
attract and retain the services of experienced and highly qualified employees
and non-employee directors.
We have reserved an aggregate of 1,000,000 shares of common stock for
issuance pursuant to options granted under the plan. As of the date of this
prospectus, ___________ options have been granted under the plan at an exercise
price of $______ per share. The Board of Directors or a committee
of the Board of Directors will administer the plan including, without
limitation, the selection of the persons who will be granted options under the
plan, the type of options to be granted, the number of shares subject to each
option and the option price. As of this date, the Board of Directors has not
established a separate committee.
Options granted under the plan may either be options qualifying as
incentive stock options under Section 422 of the Internal Revenue Code of 1986,
as amended, or options that do not so qualify. Officers, directors and key
employees of and consultants to us and our subsidiaries will be eligible to
receive non-qualified options under the plan. Only our officers, directors and
employees who are employed by us or by any of our subsidiaries thereof are
eligible to receive incentive options. In addition, the plan also allows for the
inclusion of a reload option provision, which permits an eligible person to pay
the exercise price of the option, and any withholding taxes that may be due on
the exercise, with shares of common stock owned by the eligible person and to
receive a new option to purchase shares of common stock equal in number to the
tendered shares. Any incentive option granted under the plan must provide for an
exercise price of not less than 100% of the fair market value of the underlying
shares on the date of such grant, but the exercise price of any incentive option
granted to an eligible employee owning more than 10% of the total combined
voting power of all classes of our common stock or the common stock of any of
our subsidiary companies must be at least 110% of such fair market value as
determined on the date of the grant.
The term of each option and the manner in which it may be exercised is
determined by the Board of Directors or a committee, provided that no option may
be exercisable more than 10 years after the date of its grant and, in the case
of an incentive option granted to an eligible employee owning more than 10% of
our common stock or the common stock of our subsidiary companies, no more than
five years after the date of the grant. In any case, the exercise price of any
stock option granted under the plan will not be less than 85% of the fair market
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value of the common stock on the date of grant. The exercise price of
non-qualified options shall be determined by the Board of Directors or a
committee.
The per share purchase price of shares subject to options granted under
the plan may be adjusted in the event of certain changes in our capitalization,
but any such adjustment shall not change the total purchase price payable upon
the exercise in full of options granted under the plan.
Incentive stock options are nonassignable and nontransferable, except by
will or by the laws of descent and distribution and, during the lifetime of the
optionee, may be exercised only by such optionee. Non-qualified options may be
assignable to the optionee's spouse or children. If an optionee's employment is
terminated for any reason, other than his death or disability or termination for
cause, or if an optionee is not our employee but is a member of our Board of
Directors and his service as a director is terminated for any reason, other than
death or disability, the option granted may be exercised on the earlier of the
expiration date or 30 days following the date of termination. If the optionee
dies during the term of his employment, the option granted to him shall lapse to
the extent unexercised on the earlier of the expiration date of the option or
the date one year following the date of the optionee's death. If the optionee is
permanently and totally disabled within the meaning of Section 22(c)(3) of the
Code, the option granted to him lapses to the extent unexercised on the earlier
of the expiration date of the option or one year following the date of such
disability.
The Board of Directors or a committee may amend, suspend or terminate the
plan at any time, except that no amendment shall be made which (i) increases the
total number of shares subject to the plan or changes the minimum purchase price
therefor (except in either case in the event of adjustments due to changes in
our capitalization), (ii) without the consent of the optionee, affects
outstanding options or any exercise right thereunder, (iii) extends the term of
any option beyond ten years, or (iv) extends the termination date of the plan.
Unless the plan shall be earlier suspended or terminated by the Board of
Directors, the plan shall terminate on approximately 10 years from the date of
the plan's adoption. Any such termination of the plan shall not affect the
validity of any options previously granted thereunder.
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CERTAIN TRANSACTIONS
ACQUISITIONS
Effective June 30, 1999, GHG purchased from Rank Holidays Division Limited,
a subsidiary of The Rank Group plc, substantially all of the operating assets
relating to five hotels formerly known as the Butlin's Provincial Hotels,
including the physical properties, equipment, concessions, inventory, cash
reserves, customer lists, records and goodwill. Following the acquisition, GHG
renamed the hotels The Grand Ocean Hotel, Brighton, The Grand Hotel,
Scarborough, The Grand Hotel, Margate, The Grand Metropole Hotel, Blackpool and
The Grand Hotel, Llandudno. GHG is a private limited company organized under the
laws of England and Wales that is 85% owned by Cygnet Ventures Limited, a
Guernsey (Channel Islands) corporation controlled by Kevin R. Leech, our
Chairman of the Board and principal stockholder, and 15% owned by certain other
members of our management team. In consideration for the sale of such assets,
GHG paid a subsidiary of The Rank Group (pound)19.0 million (approximately $30.6
million), of which (pound)8.6 million was paid in cash and the balance of
(pound)10.4 million was paid by GHG's issuance of a non-interest-bearing
promissory note due 2002. The GHG note was secured by an irrevocable letter of
credit issued by Citibank, N.A. in favor of Butlin's Limited. The issuance of
the letter of credit was obtained through the personal guaranty of Mr. Leech.
GHG financed its cash payment of the purchase price through loans obtained from
Arab Bank plc and Irish Nationwide Building Society secured by charges granted
by Grand Hotel Group, including mortgages on the purchased hotels.
In July 1999, LTGL acquired all of the issued and outstanding share
capital of Miss Ellie's World Travel Limited, a private limited company
organized under the laws of England and Wales. In exchange for such share
capital, LTGL paid an aggregate of (pound)1,030,000 (approximately $1,660,000)
to the former shareholders of Miss Ellie's. LTGL funded the acquisition through
a loan from Red Kite Ventures Limited, an investment company beneficially owned
by Red Kite Trust, the beneficiary of which is Kevin R. Leech, our Chairman of
the Board and principal stockholder. The terms of the acquisition provided for
certain "earnout" provisions whereby, after our acquisition of LTGL upon
completion of this offering, we may be required to pay additional cash to the
former stockholders of Miss Ellie's equal to the pre-tax income of Miss Ellie's
earned for the 12 month period from April 1999 through March 2000. These
payments are to be funded through our cash flows from operations.
In January 2000, LTGL also acquired all of the issued and outstanding
share capital of Ilios Travel Limited, a private limited company organized under
the laws of England and Wales. In exchange for such share capital, LTGL paid an
aggregate of (pound)325,000 (approximately $524,000) to the former shareholders
of Ilios. As a result of this acquisition, LTGL expanded its travel-related
services and increased its market position and cross-selling opportunities in
other destinations throughout Europe. LTGL also funded this acquisition through
a loan from Red Kite Ventures Limited.
In January 2000, trrravel.com Limited, a private limited company organized
under the laws of England and Wales, acquired from an unaffiliated third party
for (pound)200,000 (approximately $322,340) all of the outstanding share capital
of Independent Aviation Limited, a tour operating airline seat provider.
trrravel.com Limited was a wholly-owned subsidiary of Ci4net.com, Inc., a
Delaware corporation whose common stock is publicly-traded on the OTC Bulletin
Board. A corporation controlled by Kevin R. Leech is the principal stockholder
of Ci4net.com, Inc.
In March 2000, the shareholders of GHG agreed to transfer 100% of the
outstanding share capital of GHG to LTGL in exchange for the issuance of an
aggregate of 3,700,000 shares of our common stock, and the shareholders of LTGL
agreed to transfer to us 100% of the outstanding share capital of LTGL in
exchange for the issuance of an aggregate of 940,000 shares of our common stock.
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In addition, Ci4net.com, Inc. agreed to transfer to us 49% of the outstanding
share capital of trrravel.com Limited in exchange for the issuance of an
aggregate of 220,000 shares of our common stock. All of such transfers are
conditioned upon:
o the completion of this offering and application of a portion of the
net proceeds (together with additional mortgage financing) to retire
all (pound)10.4 million (approximately $16.8 million) of
indebtedness of GHG owed to The Rank Group or its subsidiaries; and
o the capitalization of (pound)1,030,000 (approximately $1,660,000) of
loans made to LTGL by a corporate affiliate of Kevin R. Leech.
Upon payment of the (pound)10.4 million of indebtedness of GHG to The Rank
Group or its subsidiaries, Mr. Leech will be relieved of his personal guaranty
and certain marketable securities pledged by him to secure his guaranty will be
returned to him. See "Risk Factors--Our principal stockholder will derive
significant benefits from this offering," "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Terms of our Acquisitions" and
"Principal Stockholders."
OTHER TRANSACTIONS
We anticipate that our Travel Group will be engaging in significant
advertising of its travel agency, tour operator and other services on
www.trrravel.com and will pay fees and commissions based on on-line bookings
made and transactions closed through use of the Web site. trrravel.com Limited
is currently wholly-owned by Ci4net.com, Inc., a publicly-traded Delaware
corporation controlled by Kevin R. Leech, our principal stockholder and Chairman
of the Board. Ci4net.com has agreed upon completion of this offering to
contribute 49% of its equity ownership of trrravel.com Limited to us and will
continue to be solely responsible for the development and maintenance of the
Web site. Although we believe that the fees and commissions we pay to advertise
on www.trrravel.com will be at rates no less favorable than is being charged to
unaffiliated third parties, Mr. Leech's other corporate affiliates will directly
benefit as we increase our advertising on the trrravel.com Web site. The common
control of our company and the majority owner of trrravel.com Limited could lead
to conflicts of interest in terms of the most effective means of marketing and
advertising our services. In addition, as more people use the Internet to book
their travel accommodations, the business of our travel agencies and tour
operators could be adversely affected.
Mr. Leech is the principal stockholder of Queensborough Holdings plc, a
publicly traded corporation trading on the London Stock Exchange. Among
Queensborough's holdings is the Burstin Hotel, located in Folkestone, England,
which is a holiday resort hotel similar to those operated by our Grand Hotel
Group, and which competes with our Grand Hotel Group for guests in the same
market. Philip Mason, a director of our company, and Stephen Last, our Executive
Vice President and Chief Financial Officer, are also executive officers of
Queensborough Holdings plc. See "Risk Factors--There is the possibility of
conflicts of interest with other businesses controlled by our principal
shareholder" and "Principal Stockholders."
FACILITIES
Our headquarters are located in a facility that is currently leased by
Queensborough Holdings plc, an English company listed on the London Stock
Exchange. Kevin R. Leech, our Chairman, is the Executive Chairman and 29.7%
equity owner of Queensborough Holdings. We do not currently pay any rent or fees
to Queensborough Holdings or any other party for the use of these facilities.
See "Business--Our Facilities."
COMPANY POLICY
Our Board of Directors has adopted a policy whereby any future
transactions between Leisure Travel Group and any of our subsidiaries,
affiliates, officers, directors and principal stockholders, or any affiliates of
the foregoing, will be on terms no less favorable to us than could reasonably be
obtained in "arm's-length" transactions with independent third-parties, and any
such transactions will also be approved by a majority of our disinterested
non-management directors.
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PRINCIPAL STOCKHOLDERS
The following table sets forth, as of the date of this prospectus:
o each person who is known by us to be the owner of record or
beneficial owner of more than 5% of the outstanding common stock;
o each of our directors and executive officers;
o all of our directors and executive officers as a group; and
o the number of shares of common stock beneficially owned by each such
person and such group and the percentage of the outstanding shares
owned by each such person and such group.
As used in the table below and elsewhere in this prospectus, the term
"beneficial ownership" with respect to a security consists of sole or shared
voting power, including the power to vote or direct the vote, and/or sole or
shared investment power, including the power to dispose or direct the
disposition, with respect to the security through any contract, arrangement,
understanding, relationship, or otherwise, including a right to acquire such
power(s) during the next 60 days following the date of this prospectus. Except
as otherwise indicated, the stockholders listed in the table have sole voting
and investment powers with respect to the shares indicated. Applicable
percentage ownership is based on 5,060,000 shares of common stock outstanding as
of the date of this prospectus and 8,060,000 shares immediately following the
completion of this offering, assuming no exercise of the underwriters'
over-allotment option. To the extent that any shares are issued upon exercise of
options, warrants or other rights to acquire our securities that are presently
outstanding or granted in the future or reserved for future issuance under our
stock option plan, there will be further dilution to new public investors.
Except as otherwise noted below, the address of each of the persons in the
table is c/o Leisure Travel Group, Inc., 6 Leylands Park, Nobs Crook, Colden
Common, Winchester SO21 1TH England.
<TABLE>
<CAPTION>
PERCENTAGE OF OUTSTANDING
NUMBER OF SHARES COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK BENEFICIALLY OWNED
- ------------------------------------ BENEFICIALLY OWNED BEFORE OFFERING AFTER OFFERING
------------------- -------------- --------------
<S> <C> <C> <C>
Kevin R. Leech.................. 3,878,334(1) 76.6% 48.1%
Cignet Ventures Limited(2)...... 3,145,000 62.2% 39.0%
Philip Mason.................... 370,000 7.3% 4.6%
Raymond J. Peel................. 313,333 6.2% 3.9%
Internet plc(3)................. 313,333 6.2% 3.9%
Red Kite Ventures Limited(4).... 313,334 6.2% 3.9%
Ci4net.com, Inc.(5)............. 220,000 4.3% 2.7%
Milner Laboratories Limited(6).. 200,000 4.0% 2.5%
Stephen Last.................... 74,000 1.5% *
Rod Rodgers..................... 74,000 1.5% *
David Marriott.................. 37,000 * *
All directors and executive
officers as a group (6 persons)... 4,747,666 93.8% 58.9%
</TABLE>
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- -------------------
* indicates beneficial ownership of less than 1% of our outstanding shares
of common stock.
(1) Represents shares of our common stock owned of record by Cignet Ventures
Limited, a Guernsey (Channel Islands) corporation controlled by Mr. Leech,
Red Kite Ventures Limited, a Guernsey (Channel Islands) corporation 100%
beneficially owned by Red Kite Trust, the beneficiary of which is the
Leech family, Ci4net.com, Inc., a publicly-traded Delaware corporation
controlled by Mr. Leech, and Milner Laboratories Limited, a private
limited company controlled by Mr. Leech. Please see "Certain Transactions"
for a detailed discussion of certain business arrangements between Mr.
Leech and/or companies controlled by Mr. Leech, and Leisure Travel Group.
(2) Cignet Ventures Limited is a Guernsey (Channel Islands) corporation
controlled by Kevin R. Leech, our Chairman of the Board and principal
stockholder.
(3) Internet plc is a Seychelles corporation controlled by Lee Cole.
(4) Red Kite Ventures Limited is a Guernsey (Channel Islands) corporation 100%
beneficially owned by Red Kite Trust, the beneficiary of which is the
family of Kevin R. Leech.
(5) Ci4net.com, Inc. is a publicly-traded Delaware corporation controlled by
Mr. Leech.
(6) Milner Laboratories Limited is a private limited company controlled by
Kevin R. Leech.
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DESCRIPTION OF SECURITIES
GENERAL
We are authorized to issue up to 25,000,000 shares of common stock, par
value $.001 per share, and 5,000,000 shares of preferred stock, par value $.001
per share. The following description of our capital stock is not complete and is
qualified in its entirety by our Certificate of Incorporation, as amended, and
bylaws, copies of which have been filed with the Securities and Exchange
Commission.
COMMON STOCK
As of the date of this prospectus, there were 5,060,000 shares of common
stock outstanding held of record by 10 stockholders (not including the shares
issued in this offering). Holders of common stock are entitled to one vote for
each share held of record on each matter submitted to a vote of stockholders.
There is no cumulative voting for the election of directors. Subject to the
prior rights of any class or series of preferred stock which may from time to
time be outstanding, if any, holders of common stock are entitled to receive
ratably, dividends when, as, and if declared by the board of directors out of
funds legally available for that purpose and, upon the liquidation, dissolution,
or winding up of Leisure Travel Group, are entitled to share ratably in all
assets remaining after payment of liabilities and payment of accrued dividends
and liquidation preferences on the preferred stock, if any. Holders of common
stock have no preemptive rights and have no rights to convert their common stock
into any other securities. The outstanding common stock is validly authorized
and issued, fully-paid, and nonassessable. In the event we were to elect to sell
additional shares of common stock following this offering, investors in this
offering would have no prior right to purchase additional shares. As a result,
their percentage equity interest in Leisure Travel Group would be diluted.
The shares of common stock offered in this offering will be, when issued
and paid for, fully paid and not liable for further call or assessment. Holders
of the common stock do not have cumulative voting rights, which means that the
holders of more than one half of the outstanding shares of common stock, subject
to the rights of the holders of the preferred stock, can elect all of our
directors, if they choose to do so. In this event, the holders of the remaining
shares of common stock would not be able to elect any directors. The board of
directors is empowered to fill any vacancies on the board, except vacancies
caused by an increase in the number of directors, which are filled by the
stockholders. Except as otherwise required by Delaware law, and subject to the
rights of the holders of preferred stock, all stockholder action is taken by the
vote of a majority of the outstanding shares of common stock voting as a single
class present at a meeting of stockholders at which a quorum consisting of a
majority of the outstanding shares of common stock is present in person or
proxy.
PREFERRED STOCK
As of the date of the offering, none of our preferred stock has been
issued and our board of directors has no present intention of issuing any
preferred shares in the near future.
Preferred stock may be issued in one or more series and having the rights,
privileges, and limitations, including voting rights, conversion privileges, and
redemption rights, as may, from time to time, be determined by our Board of
Directors. Preferred stock may be issued in the future in connection with
acquisitions, financings, or other matters as the board of directors deems
appropriate. In the event that any shares of preferred stock are to be issued, a
certificate of designation containing the rights, privileges, and limitations of
such series of preferred stock shall be filed with the Secretary of State of the
State of Delaware. The effect of such preferred stock is that our Board of
Directors alone, and subject to, federal securities laws and Delaware law, may
be able to authorize the issuance of preferred stock which could have the effect
of delaying, deferring, or preventing a change in control of
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Leisure Travel Group without further action by the stockholders, and may
adversely affect the voting and other rights of the holders of the common stock.
The issuance of preferred stock with voting and conversion rights may also
adversely affect the voting power of the holders of common stock, including the
loss of voting control to others.
ANTI-TAKEOVER PROVISIONS
Upon consummation of this offering, we will be subject to the provisions
of Section 203 of the Delaware General Corporation Law. Section 203 of the
Delaware Law provides, subject to a number of exceptions, that a Delaware
corporation may not engage in any of a broad range of business combinations with
a person or an affiliate, or an associate of an affiliate, who is an "interested
stockholder" for a period of three years from the date that person became an
interested stockholder unless:
o the transaction resulting in a person becoming an interested
stockholder, or the business combination, is approved by the board
of directors of the corporation before the person becomes an
interested stockholder,
o the interested stockholder acquired 85% or more of the outstanding
voting stock of the corporation in the same transaction that makes
this person an interested stockholder, excluding shares owned by
persons who are both officers and directors of the corporation, and
the shares held by certain employee stock ownership plans, or
o on or after the date the person becomes an interested stockholder,
the business combination is approved by the corporation's board of
directors and by the holders of at least 66-2/3% of the
corporation's outstanding voting stock at an annual or special
meeting, excluding the shares owned by the interested stockholder.
Under Section 203 of the Delaware Law, an "interested stockholder"
is defined as any person who is either the owner of 15% or more of
the outstanding voting stock of the corporation or an affiliate or
associate of the corporation and who was the owner of 15% or more of
the outstanding voting stock of the corporation at any time within
the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested
stockholder.
A corporation may, at its option, exclude itself from coverage of Section
203 of the Delaware law by amending its certificate of incorporation or by-laws,
by action of its stockholders, to exempt itself from coverage, provided that the
amendment to the certificate of incorporation or by-laws does not become
effective until 12 months after the date it is adopted.
REGULATION OF THE INTRODUCTION OF BUSINESS AT ANNUAL MEETINGS OF STOCKHOLDERS
Our by-laws include provisions which regulate the submission by persons
other than our Board of Directors of matters to a vote of stockholders.
Generally, at an annual meeting of the stockholders, the only business conducted
must be brought before the annual meeting either by or at the direction of our
Board of Directors or by any person who is a stockholder of record of Leisure
Travel Group at the time of giving of notice for such meeting, who shall be
entitled to vote at such annual meeting and who complies with the notice
procedures set forth in our bylaws. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must be given timely notice
thereof in writing to the Secretary of Leisure Travel Group. To be timely, a
stockholder's notice must be delivered or mailed to, and received at, our
principal executive offices not less than 60 days nor more than 90 days prior to
the annual meeting, regardless of any postponement, deferrals, or adjournments
of that meeting to a later date; provided, however, that in the event that less
than 70 days' notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, notice by the stockholder to be timely
must be received no later than the close of business on the 10th day following
the day on which notice
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of the date of the annual meeting was mailed or public disclosure was made. A
stockholder's notice to the Secretary shall set forth as to each matter the
stockholder proposes to bring before the annual meeting the following:
o a brief description of the business desired to be brought before the
annual meeting and the reasons for conducting this business at the
annual meeting,
o the name and address, as they appear on our books and records, of
the stockholder proposing this business,
o the class and number of shares of Leisure Travel Group which are
beneficially owned by the stockholder, and
o any material interest of the stockholder in the business he wishes
to bring before the annual meeting.
Notwithstanding anything in our bylaws to the contrary, no business shall
be conducted at the stockholder meeting, except in accordance with the
procedures set forth in our by-laws. The chairman of the meeting, as determined
in accordance with our bylaws, shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
and, in accordance with the provisions of our bylaws, and if he should so
determine, he shall so declare to the meeting and any business not properly
brought before the meeting shall not be transacted. Notwithstanding the
foregoing, a stockholder shall also comply with all applicable requirements of
the Securities Exchange Act of 1934, as amended, with respect to the above.
TRANSFER AGENT
Our transfer agent and registrar for the common stock is Continental Stock
Transfer & Trust Company, 2 Broadway, New York, New York 10004.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 8,060,000 shares of common
stock outstanding. Of these shares, the 3,000,000 shares offered in this
offering will be freely tradeable without further registration under the
Securities Act of 1933, as amended. All of our officers and directors, current
stockholders, and option holders under the 2000 Plan have agreed not to sell, or
otherwise dispose of any of our securities for a period of between six and 12
months from the date of this offering without Roth Capital Partners' prior
written consent.
All of the presently outstanding 5,060,000 shares of common stock are
"restricted securities" within the meaning of Rule 144 under the Securities Act
and, if held for at least one year, would be eligible for sale in the public
market in reliance upon, and in accordance with, the provisions of Rule 144
following the expiration of a one-year period. In general, under Rule 144 as
currently in effect, a person or persons whose shares are aggregated, including
a person who may be deemed to be an "affiliate" of Leisure Travel Group as that
term is defined under the Securities Act, would be entitled to sell within any
three month period a number of shares beneficially owned for at least one year
that does not exceed the greater of (1) 1% of the then outstanding shares of
common stock, or (2) the average weekly trading volume in the common stock
during the four calendar weeks preceding such sale. Sales under Rule 144 are
also subject to requirements as to the manner of sale, notice, and the
availability of current public information about Leisure Travel Group. However,
a person who is not deemed to have been an affiliate of Leisure Travel Group
during the 90 days preceding a sale by such person and who has beneficially
owned such shares of common stock for at least two years may sell such shares
without regard to the volume, manner of sale, or notice requirements of Rule
144.
Prior to this offering, there has been no public market for our
securities. Following this offering, we cannot predict the effect, if any, that
sales of shares of common stock pursuant to Rule 144 or otherwise, or the
availability of these shares for sale, will have on the market price prevailing
from time to time. Nevertheless, sales by the current stockholders of a
substantial number of shares of common stock in the public market could
materially adversely affect prevailing market prices for our common stock. In
addition, the availability for sale of a substantial number of shares of common
stock acquired through the exercise of the representative's warrants or the
outstanding options under the 2000 Plan could materially adversely affect
prevailing market prices for the common stock. See "Risk Factors--Future sales
of common stock by our existing stockholders could adversely affect our stock
price."
Up to 450,000 additional shares of common stock may be purchased by Roth
Capital Partners during the period commencing on the first anniversary of the
date of this prospectus and terminating on the fifth anniversary of the date of
this prospectus through the exercise of the representative's warrants. Any and
all securities purchased upon the exercise of the representative's warrants may
be freely tradeable, provided that we satisfy the securities registration and
qualification requirements in accordance with the terms of the representative's
warrants. See "Underwriting."
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UNDERWRITING
Subject to the terms and conditions contained in the underwriting
agreement, we have agreed to sell to of the underwriters named below, and each
of the underwriters, for which Roth Capital Partners Incorporated is acting as
representative, has severally, and not jointly, agreed to purchase the number of
shares offered in this offering set forth opposite their respective names below.
Number of
Name Shares
----------
Roth Capital Partners Incorporated...............................
_______________________..........................................
-----------
Total ..................................................... 3,000,000
===========
A copy of the underwriting agreement has been filed as an exhibit to the
registration statement of which this prospectus is a part. The underwriting
agreement provides that the obligation of the underwriters to purchase the
shares is subject to some conditions. The underwriters shall be obligated to
purchase all of the shares (other than those covered by the underwriters'
over-allotment option described below), if any are purchased.
Roth Capital Partners has advised us that the underwriters propose to
offer the shares to the public at the public offering price on the cover page of
this prospectus and that they may allow some dealers who are members of the
NASD, and some foreign dealers, concessions not in excess of $__ per share, of
which amount a sum not in excess of $__ per share may in turn be reallowed by
such dealers to other dealers who are members of the NASD and to some foreign
dealers. After the commencement of this offering, the offering price, the
concession to selected dealers, and the reallowance to other dealers may be
changed by Roth Capital Partners.
We have agreed to indemnify the underwriters against some liabilities,
including civil liabilities under the Securities Act of 1933, as amended, or
will contribute to payments the underwriters may be required to make in this
respect thereof.
We have agreed to pay to Roth Capital Partners an expense allowance on a
non-accountable basis, equal to ____% of the gross proceeds derived from the
sale of 3,000,000 shares offered in this offering, or (3,450,000 shares if the
underwriter's over-allotment option is exercised in full). We paid an advance on
this allowance in the amount of $_____.
The following table provides information regarding the amount of the
discount to be paid by us to the underwriters:
TOTAL WITHOUT TOTAL WITH
DISCOUNT EXERCISE OF OVER- EXERCISE OF OVER-
PER SHARE ALLOTMENT OPTION ALLOTMENT OPTION
----------------- ------------------ -----------------
$ $ $
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The following table sets forth the amount and nature of other forms of
compensation to be paid by us to Roth Capital Partners in connection with the
offering:
TYPE OF COMPENSATION TERMS TOTAL AMOUNT
- ------------------------- ------------------------ ------------------------
Non-Accountable Expense __% of the gross $ ($
Allowance proceeds of the if the underwriters'
offering over-allotment option
is exercised in full)
Representative's Warrant to purchase up Dependent upon the
Warrant (1) to 300,000 shares at market price of common
an exercise price per stock at the time of
share of 120% of the exercise
public offering price
Two Year Consulting ____ $______ payable upon
Agreement (2) consummation of this
offering
- -----------------------
(1) Representative's Warrant is issued to Roth Capital Partners Incorporated.
(2) Two year consulting agreement is between Leisure Travel Group and Roth
Capital Partners Incorporated.
We have also agreed to pay some of Roth Capital Partners' expenses in
connection with this offering, including expenses in connection with qualifying
the shares offered in this offering for sale under the laws of such states as
Roth Capital Partners may designate, the placement of tombstone advertisements
and preparing bound volumes of the public offering documents. We estimate that
the total expenses of the offering, excluding the underwriting discount, will be
approximately $__________.
In connection with this offering, we have agreed to sell to Roth Capital
Partners for nominal consideration, the representative's warrant to purchase up
to 300,000 shares of common stock. The representative's warrant is exercisable
for a period of four years commencing one year after the date of this prospectus
at an exercise price per share equal to $__ (120% of the public offering price).
The representative's warrant may not be sold, transferred, assigned, pledged, or
hypothecated for a period of 12 months from the date of this prospectus, except
to members of the selling group. The representative's warrant grants to Roth
Capital Partners, with respect to the registration under the Securities Act of
the securities directly and indirectly issuable upon exercise of the
representative's warrant, one demand registration right during the exercise
period, as well as piggyback registration rights at any time. The
representative's warrant contains anti-dilution provisions providing for
adjustment of the exercise price and number of shares issuable on exercise of
the representative's warrant, upon the occurrence of some events, including
stock dividends, stock splits, and recapitalizations. The holder of the
representative's warrant has no voting, dividend, or other rights as a
Stockholder with respect to shares of common stock underlying the
representative's warrant, unless the representative's warrant shall have been
exercised.
In connection with this offering, we have granted Roth Capital Partners
the right, for the three-year period commencing on the closing date of this
offering, to appoint an observer to attend all meetings of our board of
directors. This designee has the right to notice of all meetings of the board of
directors and to receive reimbursement for all out-of-pocket expenses incurred
to attend these meetings. In addition, the designee will be entitled to
indemnification to the same extent as our directors.
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Roth Capital Partners has advised us that the underwriters do not intend
to confirm sales of the shares offered in this offering to any account over
which they exercise discretionary authority.
We, and each of our officers, directors, and shareholders, have agreed not
to offer, assign, issue, sell, hypothecate, or otherwise dispose of any shares
of our common stock, securities convertible into, or exercisable or exchangeable
for, shares of our common stock, or shares of our common stock received upon
conversion, exercise, or exchange of these securities, to the public without the
prior written consent of Roth Capital Partners for a period of betweem six and
12 months after the date of this prospectus.
We have also granted to the underwriters an option, exercisable during the
45-day period commencing on the date of this prospectus, to purchase at the
public offering price per share, less the underwriting discount, up to an
aggregate of 450,000 shares of common stock. To the extent this option is
exercised, the underwriters will become obligated, subject to some conditions,
to purchase additional shares of common stock. The underwriters may exercise
this right of purchase only for the purpose of covering over-allotments, if any,
made in connection with the sale of shares. Purchases of shares of common stock
upon exercise of the over-allotment option will result in the realization of
additional compensation by the underwriters.
Roth Capital Partners has informed us that it does not expect
discretionary sales by the underwriters to exceed five percent of the shares
offered by this prospectus.
The underwriters have reserved for sale up to ______ shares for our
employees, directors and certain other persons associated with us. These
reserved shares will be sold at the public offering price that appears on the
cover of this prospectus. The number of shares available for sale to the general
public in the offering will be reduced to the extent reserved shares are
purchased by such persons. The underwriters will offer to the general public, on
the same terms as other shares offered by this prospectus, any reserved shares
that are not purchased by such persons.
Rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities in accordance with the rules:
o STABILIZING TRANSACTIONS. The underwriters may make bids or
purchases for the purpose of pegging, fixing or maintaining the
price of the shares, so long as stabilizing bids do not exceed a
specified maximum.
o OVER-ALLOTMENTS AND SYNDICATE COVERAGE TRANSACTIONS. The
underwriters may create a short position in the shares by selling
more shares than are set forth on the cover page of this prospectus.
If a short position is created in connection with the offering, Roth
Capital Partners may engage in syndicate covering transactions by
purchasing shares in the open market. Roth Capital Partners may also
elect to reduce any short position by exercising all or part of the
over-allotment option.
o PENALTY BIDS. If Roth Capital Partners purchases shares in the open
market in a stabilizing transaction or syndicate coverage
transaction, it may reclaim a selling concession from the
underwriters and selling group members who sold those shares as part
of this offering.
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<PAGE>
Stabilization and syndicate covering transactions may cause the price of
the shares to be higher than it would be in the absence of such transactions.
The imposition of a penalty bid might also have an effect on the price of the
shares if it discourages resales of the shares.
Neither we nor the underwriters makes any representation or prediction as
to the effect that the transactions described above may have on the price of the
shares. These transactions may occur on the Nasdaq National Market or otherwise.
If such transactions are commenced, they may be discontinued without notice at
any time.
We and the underwriters expect that the shares will be ready for delivery
on the fourth business day following the date of this prospectus. Under
Securities and Exchange Commission regulations, secondary market trades are
required to settle in three business days following the trade date (commonly
referred to as "T+3"), unless the parties to the trade agree to a different
settlement cycle. As noted above, the shares will settle in T+3. Therefore,
purchasers who wish to trade on the date of this prospectus or during the next
three succeeding business days must specify an alternate settlement cycle at the
time of the trade to prevent a failed settlement. Purchasers of the shares who
wish to trade shares on the date of this prospectus or during the next 3
succeeding business days should consult their own advisors.
LEGAL MATTERS
The validity of the issuance of the common stock offered hereby will be
passed upon for us by Greenberg Traurig, LLP (New York, New York). Certain
matters will be passed upon for the underwriters by Pollet Law, a California
corporation (Los Angeles, California).
EXPERTS
Ernst & Young, independent auditors, have audited the financial statements
of GHG (Predecessor) at December 31, 1998 and for the two years in the period
ending December 31, 1998, and the six months ended June 30, 1999, and Grand
Hotel Group at October 31, 1999 and for the four months then ended, as set forth
in their reports. We have included our financial statements in the prospectus
and elsewhere in the registration statements in reliance on Ernst & Young's
reports, given on their authority as experts in accounting and auditing.
ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1, including the exhibits, schedules and amendments to this
registration statement, under the Securities Act of 1933, as amended, with
respect to the shares of common stock to be sold in this offering. This
prospectus does not contain all the information set forth in the registration
statement. For further information with respect to Leisure Travel Group and the
shares of common stock to be sold in this offering, we make reference to the
registration statement. Although this prospectus contains all material
information regarding Leisure Travel Group, statements contained in this
prospectus as to the contents of any contract, agreement or other document
referred to are not necessarily complete, and in each instance we make reference
to the copy of such contract, agreement or other document filed as an exhibit to
the registration statement, each such statement being qualified in all respects
by such reference.
You may read and copy all or any portion of the registration statement or
any other information we file at the Securities and Exchange Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
request copies of these documents, upon payment of a duplicating
78
<PAGE>
fee, by writing to the Securities and Exchange Commission. Please call the
Securities and Exchange Commission at 1-800-SEC-0330 for further information on
the operation of the public reference rooms. Our Securities and Exchange
Commission filings, including the registration statement, are also available to
you on the Securities and Exchange Commission's Web site (http://www.sec.gov).
As a result of this offering, we will become subject to the information
and reporting requirements of the Securities Exchange Act of 1934, as amended,
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the Securities and Exchange Commission. Such reports,
proxy and information statements and other information may also be inspected at
the offices of Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
79
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
Report of Independent Auditors ..............................................F-2
Audited Financial Statements
Combined Balance Sheet of Grand Hotel Group (Predecessor) at
December 31, 1998 and Balance Sheet of Grand Hotel Group
at October 31, 1999 ......................................................F-3
Combined Statements of Operations of Grand Hotel Group
(Predecessor) for the years ended December 31, 1997 and
1998 and the six months ended June 30, 1999 and Statement
of Operations of Grand Hotel Group for the four months
ended October 31, 1999 ...................................................F-4
Combined Statement of Divisional Equity of Grand Hotel Group
(Predecessor) for the years ended December 31, 1997 and
1998 and the six months ended June 30, 1999 and Statement
of Stockholders' Equity of Grand Hotel Group for the four
months ended October 31, 1999 ............................................F-5
Combined Statements of Cash Flows of Grand Hotel Group
(Predecessor) for the years ended December 31, 1997 and
1998 and the six months ended June 30, 1999 and Statement
of Cash Flows of Grand Hotel Group for the four months
ended October 31, 1999 ...................................................F-6
Notes to the Financial Statements ...........................................F-7
F-1
<PAGE>
Report of Independent Auditors
To the Board of Directors and Shareholders
Grand Hotel Group Limited
We have audited the accompanying combined balance sheet of Grand Hotel
Group (Predecessor) at December 31, 1998 and the related statements of
operations, divisional equity and cash flows for each of the two years in the
period ending December 31, 1998 and the six months ended June 30, 1999 and the
balance sheet of Grand Hotel Group Limited at October 31, 1999 and the related
statement of operations, stockholders' equity and cash flows for the four months
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with United States generally
accepted auditing standards. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of Grand Hotel Group
(Predecessor) at December 31, 1998 and the combined results of its operations
and its combined cash flows for each of the two years in the period ending
December 31, 1998 and the six months ended June 30, 1999 and financial position
of Grand Hotel Group Limited at October 31, 1999 and its results of operations
and its cash flows for the four months then ended, in conformity with United
States generally accepted accounting principles.
Ernst & Young
Reading, England
March 8, 2000
<PAGE>
<TABLE>
<CAPTION>
GRAND HOTEL GROUP LIMITED
BALANCE SHEET
(in thousands except share amounts)
Predecessor Company Company
----------- ------- -------
December 31 October 31 October 31
1998 1999 1999
------------- -------------- ----------
Amounts in Pounds Sterling Amounts in
U.S Dollars
(Note 1)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents (pound) -- (pound) 2,583 $ 4,163
Accounts receivable 140 888 1,431
Receivable from related party -- 866 1,396
Inventories 597 312 503
Prepaid expenses and other current assets 198 470 757
------------- -------------- -------
Total current assets 935 5,119 8,250
Equipment and fixtures:
Freehold land and buildings 10,861 14,211 22,904
Leasehold land and buildings 3,789 5,254 8,468
Fixtures and equipment 11,885 1,323 2,132
------------- -------------- -------
26,535 20,788 33,504
Less accumulated depreciation 11,031 79 127
------------- -------------- -------
15,504 20,709 33,377
Debt issuance cost -- 258 416
------------- -------------- -------
(pound)16,439 (pound) 26,086 $42,043
============= ============== =======
LIABILITIES AND DIVISIONAL EQUITY/STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable (pound) 777 (pound) 772 $ 1,245
Accrued expenses and other liabilities 512 656 1,057
Guest deposits 534 2,220 3,578
Taxes and social security payable 202 843 1,359
Deferred income taxes 95 51 82
Capital lease obligations - current portion -- 143 230
------------- -------------- -------
Total current liabilities 2,120 4,685 7,551
Long term debt -- 20,500 33,040
Capital lease obligations - non current portion 246 396
DIVISIONAL EQUITY/STOCKHOLDERS' EQUITY
Divisional equity 14,319 -- --
Stockholders' equity
Ordinary shares: (pound)1 par value, 1,000 shares
authorized; 200 shares issued and outstanding
at October 31, 1999 -- -- --
Retained earnings -- 655 1,056
------------- -------------- -------
Total Divisional equity/stockholders' equity 14,319 655 1,056
------------- -------------- -------
(pound)16,439 (pound) 26,086 $42,043
============= ============== =======
See accompanying Notes to the Financial Statements
F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRAND HOTEL GROUP LIMITED
STATEMENTS OF OPERATIONS
(in thousands except share and per share amounts)
Predecessor Company Predecessor Company
----------- ------- ----------- -------
Six months Four months Six months Four months
Year ended ended ended ended ended
December 31, June 30, October 31, June 30, October 31,
1997 1998 1999 1999 1999 1999
----------------------------------------------- -------------- -------- --------
Amounts in Pounds Sterling Amounts in U.S. Dollars
-------------------------- (Note 1)
--------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Rooms (pound) 14,954 (pound) 14,466 (pound) 5,069 (pound) 4,756 $ 8,170 $ 7,665
Retail 5,121 4,560 1,797 1,196 2,896 1,928
Other 547 558 252 523 406 843
----------------------------------------------- -------------- -------- --------
Total revenues 20,622 19,584 7,118 6,475 11,472 10,436
Operating costs and expenses:
Direct cost of revenues 4,914 4,577 1,727 1,591 2,783 2,564
Staff costs 5,588 5,336 2,648 1,981 4,268 3,193
Sales and marketing 809 1,208 298 411 480 662
General and administrative 4,056 4,004 2,068 1,160 3,333 1,870
Corporate allocations 1,039 549 489 -- 788 --
Depreciation 1,284 1,174 574 79 925 127
-------------- -------------- -------------- -------------- -------- --------
Total operating cost and
expenses 17,690 16,848 7,804 5,222 12,577 8,416
-------------- -------------- -------------- -------------- -------- --------
Operating profit 2,932 2,736 (686) 1,253 (1,105) 2,020
Interest expense -- -- -- (306) -- (493)
Interest income and other -- -- -- 30 -- 48
-------------- -------------- -------------- -------------- -------- --------
Income before income taxes 2,932 2,736 (686) 977 (1,105) 1,575
Income taxes 1,237 1,122 -- 322 -- 519
-------------- -------------- -------------- -------------- -------- --------
Net income (pound) 1,695 (pound) 1,614 (pound) (686) (pound) 655 $ (1,105) $ 1,056
============== ============== ============== ============== ======== ========
Basic and diluted net income (loss)
per share (pound) 3,275 $ 5,280
============== ========
Shares used in computing basic and
diluted net income (loss) per share 200 200
============== ========
See accompanying Notes to the Financial Statements
F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRAND HOTEL GROUP LIMITED
STATEMENTS OF DIVISIONAL EQUITY/STOCKHOLDERS' EQUITY
(IN THOUSANDS)
Divisional Ordinary Retained
Equity Shares Earnings Total Total
-------------------------------------------------------------- ----------
Amounts in Pounds Sterling Amounts in
-------------------------- US Dollars
(note 1)
----------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1997 (pound) 15,478 (pound) -- (pound) -- (pound) 15,478 $ 24,946
Net decrease in amounts due to parent (1,871) -- -- (1,871) (3,015)
Net income 1,695 -- -- 1,695 2,732
-------------- ---------- -------------- -------------- --------
Balance at December 31, 1997 15,302 -- -- 15,302 24,663
Net decrease in amounts due to parent (2,597) -- -- (2,597) (4,186)
Net income 1,614 -- -- 1,614 2,601
-------------- ---------- -------------- -------------- --------
Balance at December 31, 1998 14,319 -- -- 14,319 23,078
Net decrease in amounts due to parent (1,043) -- -- (1,043) (1,681)
Net loss (686) -- -- (686) (1,105)
-------------- ---------- -------------- -------------- --------
Balance at June 30, 1999 12,590 -- -- 12,590 20,292
============== ========== ============== ============== ========
Balance at July 1, 1999 -- -- -- -- --
Issuance of ordinary shares -- -- -- -- --
Net income -- -- 655 655 1,056
-------------- ---------- -------------- -------------- --------
Balance at October 31, 1999 (pound) -- (pound) -- (pound) 655 (pound) 655 $ 1,056
============== ========== ============== ============== ========
See accompanying Notes to the Financial Statements
F-5
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRAND HOTEL GROUP LIMITED
STATEMENTS OF CASH FLOWS
Predecessor Company
----------- -------
Four
Six months months
Year ended ended ended
December 31, June 30, October 31,
1997 1998 1999 1999
-------------- -------------- -------------- --------------
Amounts in Pounds sterling
--------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) (pound) 1,695 (pound) 1,614 (pound) (686) (pound) 655
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation 1,284 1,174 574 79
Changes in operating assets and liabilities:
Accounts receivable 58 70 43 (888)
Receivable from related parties -- -- -- (866)
Inventory 40 (99) 252 (312)
Prepaid expenses and other current assets (204) 258 (307) (470)
Guest deposits 193 (381) 1,287 2,220
Accounts payable 724 12 (730) 772
Accrued expenses and other liabilities -- -- 155 656
Deferred income taxes -- 95 -- 51
Taxes and social security payable (5) 77 582 843
-------------- -------------- -------------- --------------
Net cash provided by operating activities 3,785 2,820 1,170 2,740
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and fixtures (1,914) (223) (127) (20,368)
-------------- -------------- -------------- --------------
Net cash used in investing activities (1,914) (223) (127) (20,368)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of ordinary shares -- -- -- --
Repayment of debt -- -- -- (260)
Proceeds from issuance of debt -- -- -- 20,760
Payment of capital lease obligation -- -- -- (31)
Payment of debt issuance cost -- -- -- (258)
Change in divisional equity (1,871) (2,597) (1,043) --
-------------- -------------- -------------- --------------
Net cash (used in) provided by financing
activities (1,871) (2,597) (1,043) 20,211
-------------- -------------- -------------- --------------
Net increase in cash and cash equivalents -- -- -- 2,583
Cash and cash equivalents at the beginning
of the year -- -- -- --
-------------- -------------- -------------- --------------
Cash and cash equivalents at the end of
the year (pound) -- (pound) -- (pound) -- (pound) 2,583
============== ============== ============== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest -- -- -- 37
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES
Equipment acquired under capital leases -- -- -- 420
<CAPTION>
Predecessor Company
----------- -------
Six Four
months months
ended ended
June 30, October 31,
1999 1999
-------- --------------
Amounts in U.S. Dollars
(Note 1)
--------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income/(loss) (1,105) 1,056
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 925 127
Changes in operating assets and liabilities:
Accounts receivable 69 (1,431)
Receivable from related parties -- (1,396)
Inventory 406 (503)
Prepaid expenses and other current assets (495) (757)
Guest deposits 2,074 3,578
Accounts payable (1,177) 1,245
Accrued expenses and other liabilities 250 1,057
Deferred income taxes -- 82
Taxes and social security payable 938 1,359
-------- --------------
Net cash provided by operating activities 1,885 4,417
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of equipment and fixtures (204) (32,827)
-------- --------------
Net cash used in investing activities (204) (32,827)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of ordinary shares -- --
Repayment of debt -- (419)
Proceeds from issuance of debt -- 33,459
Payment of capital lease obligation -- (51)
Payment of debt issuance cost -- (416)
Change in divisional equity (1,681) --
-------- --------------
Net cash (used in) provided by financing activities (1,681) 32,573
-------- --------------
Net increase in cash and cash equivalents -- 4,163
Cash and cash equivalents at the beginning
of the year -- --
-------- --------------
Cash and cash equivalents at the end of
the year (pound)-- (pound) 4,163
======== ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest -- 60
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
ACTIVITIES
Equipment acquired under capital leases -- 677
See accompanying Notes to the Financial Statements
F-6
</TABLE>
<PAGE>
GRAND HOTEL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Grand Hotel Group Limited ("Grand Hotel Group" or the "Company"), a United
Kingdom corporation, owns five holiday resort Hotel located in Wales and
the Northern and Southern regions of England. The hotels, which are
situated near major seaside resorts, have 1,274 available rooms and offer
popular priced vacation accommodations, including food and entertainment,
for week-end and lengthier stays. They cater primarily to mature couples
and groups seeking short holiday breaks of between three to four days.
Grand Hotel Group is 85% owned by Cygnet Ventures Limited, a Guernsey
corporation controlled by Kevin R. Leech, and 15% owned by other members
of the Company's directors and management team. On June 30, 1999, the
Company purchased from Rank Holidays Division Limited, a subsidiary of
Rank Organization plc ("Rank") substantially all of the operating assets
relating to five hotels formerly known as the Butlin's Provincial Hotels
(Grand Hotel Group (predecesor)). In consideration for the sale of such
assets, Grand Hotel Group paid the seller the sum of (pound) 19.0 million
(approximately $30.6 million), of which (pound) 8.6 million was paid in
cash and the balance of (pound) 10.4 million was evidenced by a Grand
Hotel Group non-interest bearing note due 2002. The purchase note was
secured by an irrevocable letter of credit issued by Citibank NA in favor
of the seller. Such financial accommodation was obtained through the
personal guaranty of Kevin R. Leech, secured by his pledge of personally
owned securities unrelated to the Company.
The Company has entered into an agreement whereby, upon completion of a
proposed initial public offering by Leisure Travel Group, Inc ("LTG"), a
company principally owned by Kevin Leech, LTG will acquire all outstanding
share capital of Grand Hotel Group in exchange for 3,700,000 shares of
common stock of LTG and arrange repayment of the (pound) 10.4 million
purchase note. The combination will be accounted for using pooling of
interest principles as a combination of entities under common control.
BASIS OF PRESENTATION
The financial statements expressed in Pounds Sterling as of and for the
four months ended October 31, 1999 were translated into United States
Dollars, solely for the convenience of the reader, an exchange rate of
(pound) 1.00 = $1.6117 (which was the noon buying rate at October 31,
1999.)
These financial statements have been prepared to show the performance of
Grand Hotel Group (predecessor) for the two years in the period ended
December 31, 1998 and the six months ended June 30, 1999 and of Grand
Hotel Group for the four months ended October 31, 1999, reflecting the
respective periods of ownership by Rank and Grand Hotel Group.
EQUIPMENT AND FIXTURES
Property and equipment are stated at cost. Costs of improvements are
capitalized. Costs of normal repairs and maintenance are charged to
expense as incurred. Upon the sale or retirement of property and
equipment, the cost and related accumulated depreciation are removed from
the respective accounts, and the resulting gain or loss, if any, is
included in income.
F-7
<PAGE>
GRAND HOTEL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
Depreciation is provided on a straight-line basis over the estimated
useful life of the assets. Leasehold improvements are amortized over the
shorter of the asset life or lease term. The service lives of assets are
as follows:
Freehold land and buildings 50 years
Leasehold land and buildings Over shorter of the useful life or the
lease term
Fixtures and equipment 3-20 years
Equipment financed under a capital lease and accumulated amortization
related to the leased assets were (pounds)420,000 and (pounds)2,000,
respectively. There were no capital leases at December 31, 1998.
Amortization related to capital leases is included in depreciation
expense.
INCOME TAXES
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." Under the
asset and liability method of Statement No. 109, deferred income tax
assets and liabilities are recognized for the future tax consequences
attributable to carry forward losses and differences between the financial
statement carrying amounts of existing assets and liabilities, and their
respective tax bases. Deferred income tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in
the years in which those temporary differences are expected to be
recovered or settled. Deferred income tax assets are recorded at their
likely realizable amount.
USE OF ESTIMATES
The preparation of financial statements in conformity with United States
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.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts for the Company's financial instruments, including
cash, accounts receivable, accounts payable, accrued expenses and
long-term debt approximate fair values.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value. Therefore, the estimates are not
necessarily indicative of the amounts which could be realized or would be
paid in a current market exchange. The effect of using different market
assumptions and/or estimation methodologies may be material to the
estimated fair value amount.
CASH AND CASH EQUIVALENTS
The Company considers investments in highly liquid instruments purchased
with an original maturity of 90 days or less to be cash equivalents. Such
amounts are stated at cost which approximates market value.
As of October 31, 1999, the Company's cash equivalents consisted of
(pound) 1.1 million of weekly treasury deposits and (pound) 1.0 million of
monthly treasury deposits. There were no unrealized gains or unrealized
losses as of October 31, 1999.
F-8
<PAGE>
GRAND HOTEL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
CONCENTRATION OF CREDIT RISK
The Company performs ongoing credit evaluations of its customers'
financial condition and, generally, does not require collateral on
accounts receivable. When required, the Company maintains allowances for
credit losses and such losses have been within management's expectations.
There was no allowance for doubtful accounts established for the periods
presented and write-offs of accounts receivable have not been
significant.
There were no significant customers for any of the periods presented.
REVENUES
Net revenues from providing hotel accomodations are recognized when our
guests check out after their designated vacation stay and make payment.
Net revenues from providing travel services 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. Such revenues are recognized upon commencement
of travel.
ADVERTISING COSTS
Costs related to advertising are expensed as incurred. Advertising expense
was (pound) 178,000 for the four months ending October 31, 1999. There was
no direct advertising expense in previous periods as these costs were part
of the corporate allocations.
INVENTORY
Stocks are stated at the lower of cost, which is calculated on a first in
first out basis, on net realisable value.
PENSION PLAN
The Company operates a defined contribution pension scheme. The pension
costs relating to the scheme represent the contributions payable by the
Company. The contributions are expensed as they become payable in
accordance with the rules of the plan. Amounts charged to expense relating
to the plan for the four months ending October 31, 1999 were
(pound)30,000.
The Company also contributed to three private pensions for directors and
senior employees totaling (pound) 4,000 for the four months ended October
31, 1999.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board ("FASB") has issued Statement of
Financial Accounting Standards 133, which has not yet been adopted by the
Company. SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities" is effective for fiscal years beginning after June 15, 2000.
This standard requires all derivatives to be recognized as either assets
or liabilities on the balance sheet at their fair values. It also
prescribes the accounting to be followed for the changes in the fair
values of derivatives depending upon their intended use and resulting
designation. It supersedes or amends the existing standards which deal
with hedge accounting and derivatives. The Company does not expect the
effect that adopting this standard will have on the U.S. GAAP amounts
reported in its financial statements.
F-9
<PAGE>
GRAND HOTEL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
2. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary difference
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amount used for income tax purposes.
Significant components of the Company's deferred tax assets are as follows
(in thousands):
<TABLE>
<CAPTION>
December 31, October 31,
1998 1999
------------ -----------
<S> <C> <C>
Deferred tax liabilities:
Tax depreciation in excess of book depreciation (pound)95 (pound)51
Total deferred tax liabilities (pound)95 (pound)51
--------- ---------
Net deferred tax liabilities: (pound)95 (pound)51
========= =========
</TABLE>
A reconciliation of the income tax provision at the statutory rate to the
income tax provision at the effective tax rate is as follows:
<TABLE>
<CAPTION>
Years ended December 31,
---------------------------- Six months ended Four months ended
1997 1998 June 30, 1999 October 31, 1999
------------ ------------ ------------- ----------------
<S> <C> <C> <C> <C>
Income taxes computed at the UK statutory rate (pound) 924 (pound) 848 (pound) (328) (pound) 264
Non-qualifying depreciation expense 268 242 116 25
Qualifying depreciation expense, net of capital 45 32 3 33
Non recognizable loss due to sale of hotels -- -- 209 --
------------ ------------ ------------ ------------
Total (pound)1,237 (pound)1,122 (pound) -- (pound) 322
============ ============ ============ ============
</TABLE>
3. LONG-TERM DEBT
In consideration for the purchase of assets hotels of Rank, the Company
issued 100 redeemable non-voting shares to Rank and discharged a liability
of Rank to Butlin's Limited, another subsidiary of Rank, in the amount of
(pound) 19.0 million (approximately $30.6 million), of which (pound) 8.6
million was paid in cash and the balance of (pound) 10.4 million was
settled by Grand Hotel Group's issuance to Butlin's Limited of a
non-interest-bearing promissory note due 2002. The Grand Hotel Group note
is secured by an irrevocable letter of credit issued by Citibank, N.A. in
favor of Butlin's Limited. Grand Hotel Group financed its cash payment of
the purchase price through loans obtained from Arab Bank plc and Irish
Nationwide Building Society secured by charges granted by Grand Hotel
Group, including mortgages on the purchased hotels.
In connection with the purchase of the hotels discussed above, the Company
entered into an agreement with Arab Bank plc and Irish Nationwide Building
Society whereby the companty was to draw down on a loan of up to
(pound) 10 million or 70% of the purchase cost of the hotels (exclusive of
any goodwill attributed to the purchase). The facility matures five years
from the date of drawdown. The facility is to be repaid in instalments of
(pound) 2.5 million each on the second, third and fourth anniversaries of
the drawndown date with the remainder due upon maturity.
The loan is secured by assets (including property), share capital and
(pound) 8.5 million in key man life insurance on Kevin Leech. There are
various financial and non-financial covenants that must be maintained on a
quarterly and annual basis.
F-10
<PAGE>
GRAND HOTEL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
3. LONG-TERM DEBT (CONTINUED)
Upon completion of the acquisition, the Company executed its right to draw
down on the facility for the entire (pound) 10 million at an interest rate
of 1.75% over LIBOR (7.50% as at October 31, 1999).
The Company also entered into a (pound) 100,000 loan with Cygnet, a
company controlled by Kevin Leech, due in 2002 which bears interest at 2%
over the HSBC base rate (7.25% as at October 31, 1999). The loan is
unsecured and is to be used for working capital purposes.
The five year payout of the long-term debt discussed above is as follows:
Years ending October 31 (in thousands):
2000 ......................................... (pound) --
2001 ......................................... 2,500
2002 ......................................... 2,500
2003 ......................................... 13,000
2004 ......................................... 2,500
----------------
(pound) 20,500
================
4. COMMITMENTS
The Company leases facilities and equipment, under noncancelable operating
leases which expire at various times. Following is a schedule of future
minimum lease payments under both operating and capital leases at October
31, 1999:
<TABLE>
<CAPTION>
Operating Capital
Leases Leases
------ ------
<S> <C> <C>
Years ending October 31 (in thousands):
2000 ............................... (pound) 91 (pound) 190
2001 ............................... 91 190
2002 ............................... 87 105
2003 ............................... 69 3
2004 ............................... 58 1
Thereafter.......................... 2,568 --
------------ ------------
Total minimum payments required ............ (pound)2,964 489
============
Less amount representing interest .......... (100)
------------
Present value of future lease payments ..... 389
Less current portion ....................... (143)
------------
Noncurrent portion ......................... $ 246
============
</TABLE>
Rent expense, net of rental income was approximately (pound)61,000 in
1997, (pound)62,000 in 1998, (pound)32,000 for the six months ended June
30, 1999 and (pound)23,000 for the four months ended October 31, 1999.
F-11
<PAGE>
GRAND HOTEL GROUP LIMITED
NOTES TO THE FINANCIAL STATEMENTS
5. RELATED PARTIES
The Company has entered into an agreement with LTG whereby upon completion
of an initial public offering by LTG, it will acquire all of the
outstanding share capital of Grand Hotels Group in exchange for 3,700,000
shares of its common stock. The (pound) 10.4 million loan will also be
paid down at this time. Kevin Leech is the chairman of the board and
principal stockholder of LTG.
F-12
<PAGE>
================================================================================
3,000,000 SHARES
LEISURE TRAVEL GROUP, INC.
COMMON STOCK
-------------------
PROSPECTUS
-------------------
ROTH CAPITAL PARTNERS
I N C O R P O R A T E D
________, 2000
UNTIL ________, 2000 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN
THE DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses in connection with
the sale and distribution of the securities being registered, other than
underwriting discounts and commissions.
SEC registration fee ......................................$ 10,929.60
NASD filing fee ...........................................$ 4,640.00
Nasdaq National Market listing fee ........................$ 72,875.00
Transfer Agent Fees .......................................$ 15,000.00*
Cost of Printing and Engraving ............................$225,000.00*
Legal Fees and Expenses ...................................$250,000.00*
Accounting Fees and Expenses ..............................$150,000.00*
Blue Sky Fees and Expenses ................................$ 15,000.00*
Miscellaneous .............................................$ 6,555.40*
-----------
Total ...........................................$750,000.00*
===========
- ----------
*Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145(a) of the General Corporation Law of the State of Delaware
(the "General Corporation Law") provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that he or she is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or enterprise, against expenses, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the corporation, and, with respect to any criminal action or
proceeding, had no cause to believe his or her conduct was unlawful.
Section 145(b) of the General Corporation Law provides that a Delaware
corporation may indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action or suit by or in
the right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth above, against
expenses actually and reasonably incurred by him or her in connection with the
defense or settlement of such action or suit if he or she acted under similar
standards as set forth above, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
court in which such action or suit was brought shall determine that despite the
adjudication of liability, but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to be indemnified for such
expenses which the court shall deem proper.
Section 145 of the General Corporation Law further provides that to the
extent a director or officer of a corporation has been successful on the merits
or otherwise in the defense of any action, suit
II-1
<PAGE>
or proceeding referred to in subsections (a) and (b) or in the defense of any
claim, issue or matter therein, he or she shall be indemnified against expenses
actually and reasonably incurred by him or her in connection therewith; that
indemnification provided for by Section 145 shall not be deemed exclusive of any
other rights to which the indemnified party may be entitled; and that THE
corporation may purchase and maintain insurance on behalf of such person against
any liability asserted against him or her or incurred by him or her in any such
capacity or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify him or her against such
liabilities under such Section 145.
Section 102(b)(7) of the General Corporation Law provides that a
corporation in its original certificate of incorporation or an amendment thereto
validly approved by stockholders may eliminate or limit personal liability of
members of its board of directors or governing body for monetary damages for
breach of a director's fiduciary duty. However, no such provision may eliminate
or limit the liability of a director for breaching his or her duty of loyalty,
failing to act in good faith, engaging in intentional misconduct or knowingly
violating a law, paying a dividend or approving a stock repurchase or redemption
which was illegal, or obtaining an improper personal benefit. A provision of
this type has no effect on the availability of equitable remedies, such as
injunction or rescission, for breach of fiduciary duty. Our Certificate of
Incorporation contains such a provision.
Article Thirteenth of our Certificate of Incorporation eliminates the
personal liability of directors and/or officers to us or our stockholders for
monetary damages for breach of fiduciary duty as a director; provided that such
elimination of the personal liability of a director and/or officer does not
apply to (i) any breach of such person's duty of loyalty to us or our
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) actions prohibited
under Section 174 of the General Corporation Law (i.e., liabilities imposed upon
directors who vote for or assent to the unlawful payment of dividends, unlawful
repurchases or redemption of stock, unlawful distribution of our assets to the
stockholders without the prior payment or discharge of our debts or obligations,
or unlawful making or guaranteeing of loans to directors and/or officers), or
(iv) any transaction from which the director derived an improper personal
benefit. In addition, Article Fourteenth of our Certificate of Incorporation and
Article VI of our bylaws provide that we shall indemnify our corporate
personnel, directors and officers to the fullest extent permitted by the General
Corporation Law, as amended from time to time.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling us as
disclosed above, we have been informed that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933, as amended, and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
None.
II-2
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS.
---------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
*1.1 Form of Underwriting Agreement between Leisure Travel Group, Inc.
and Roth Capital Partners Incorporated (the "Representative").
3.1 Certificate of Incorporation of the Company.
3.2 By-Laws of the Company.
*4.1 Specimen Common Stock Certificate.
*4.2 Form of Representative's Warrant Agreement between Leisure Travel
Group, Inc. and the Representative, including form of
Representative's Warrant therein.
*5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Employment Agreement, dated as of _________, between Leisure Travel
Group, Inc. and Raymond J. Peel.
*10.2 Employment Agreement, dated as of _________, between Leisure Travel
Group, Inc. and Rod Rogers.
*10.3 Employment Agreement, dated as of _________, between Leisure Travel
Group, Inc. and David Marriott.
10.4 Form of Agreement and Plan of Share Exchange, by and among Leisure
Travel Group, Inc., Leisure Travel Group Limited, and the
Shareholders listed therein.
10.5 Leisure Travel Group, Inc. 2000 Stock Option Plan.
10.6 Form of Incentive Stock Option Agreement.
10.7 Form of Non-qualified Stock Option Agreement.
*10.8 Asset Sale Agreement, dated June 30, 1999, between Rank Holidays
Division Limited and Grand Hotel Group Limited.
10.9 Loan Agreement, dated June 30, 1999, among Grand Hotel Group
Limited, Arab Bank plc and Irish Nationwide Building Society.
10.10 Inter-creditor Agreement, dated June 30, 1999, between Grand Hotel
Group Limited, Cygnet Ventures Limited, Arab Bank plc and Irish
Nationwide Building Society.
10.11 Share Sale Agreement, dated July 5, 1999, among Ellen Doherty, Ellen
Doherty Settlement 1997 and Leisure Travel Group Limited.
II-3
<PAGE>
10.12 Sale Agreement, dated July 5, 1999, between Ellen Doherty and
Leisure Travel Group Limited.
10.13 Agreement for the Acquisition of the Issued Share Capital of Ilios
Travel Limited, dated January 2000, between Nita Eugenie Anne
Beecroft and Leisure Travel Group Limited.
23.1 Consent of Ernst & Young.
*23.2 Consent of Greenberg Traurig, LLP (included in the opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (set forth on signature page of the Registration
Statement).
27.1 Financial Data Schedule.
- ----------
* To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES.
All financial statement schedules have been omitted because the required
information is not applicable or not present in amounts sufficient to require
submission of the schedule, or because the information required is included in
the financial statements or the notes thereto.
II-4
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreements
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer, or controlling
person of the registrant in the successful defense of any action, suit of
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497 (h) under the Securities
Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide
offering thereof.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized in the City of New York, State of New
York on this 9th day of March, 2000.
LEISURE TRAVEL GROUP, INC.
By: /s/ RAYMOND J. PEEL
------------------------------------
Raymond J. Peel
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ RAYMOND J. PEEL President and Chief March 9, 2000
- ------------------------------- Executive Officer
Raymond J. Peel (Principal Executive Officer)
/s/ STEPHEN LAST Executive Vice President March 9, 2000
- ------------------------------- and Chief Financial Officer
Stephen Last (Principal Financial and
Accounting Officer)
/s/ KEVIN R. LEECH Chairman of the Board March 9, 2000
- -------------------------------
Kevin R. Leech
/s/ PHILIP MASON Director March 9, 2000
- -------------------------------
Philip Mason
/s/ RAYMOND J. PEEL Director March 9, 2000
- -------------------------------
Raymond J. Peel
/s/ ROD RODGERS Director March 9, 2000
- -------------------------------
Rod Rodgers
/s/ STEPHEN LAST Director March 9, 2000
- -------------------------------
Stephen Last
II-6
<PAGE>
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
*1.1 Form of Underwriting Agreement between Leisure Travel Group, Inc.
and Roth Capital Partners Incorporated (the "Representative").
3.1 Certificate of Incorporation of the Company.
3.2 By-Laws of the Company.
*4.1 Specimen Common Stock Certificate.
*4.2 Form of Representative's Warrant Agreement between Leisure Travel
Group, Inc. and the Representative, including form of
Representative's Warrant therein.
*5.1 Opinion of Greenberg Traurig, LLP.
*10.1 Employment Agreement, dated as of _________, between Leisure Travel
Group, Inc. and Raymond J. Peel.
*10.2 Employment Agreement, dated as of _________, between Leisure Travel
Group, Inc. and Rod Rogers.
*10.3 Employment Agreement, dated as of _________, between Leisure Travel
Group, Inc. and David Marriott.
10.4 Form of Agreement and Plan of Share Exchange, by and among Leisure
Travel Group, Inc., Leisure Travel Group Limited, and the
Shareholders listed therein.
10.5 Leisure Travel Group, Inc. 2000 Stock Option Plan.
10.6 Form of Incentive Stock Option Agreement.
10.7 Form of Non-qualified Stock Option Agreement.
*10.8 Asset Sale Agreement, dated June 30, 1999, between Rank Holidays
Division Limited and Grand Hotel Group Limited.
10.9 Loan Agreement, dated June 30, 1999, among Grand Hotel Group
Limited, Arab Bank plc and Irish Nationwide Building Society.
10.10 Inter-creditor Agreement, dated June 30, 1999, between Grand Hotel
Group Limited, Cygnet Ventures Limited, Arab Bank plc and Irish
Nationwide Building Society.
10.11 Share Sale Agreement, dated July 5, 1999, among Ellen Doherty, Ellen
Doherty Settlement 1997 and Leisure Travel Group Limited.
<PAGE>
10.12 Sale Agreement, dated July 5, 1999, between Ellen Doherty and
Leisure Travel Group Limited.
10.13 Agreement for the Acquisition of the Issued Share Capital of Ilios
Travel Limited, dated January 2000, between Nita Eugenie Anne
Beecroft and Leisure Travel Group Limited.
23.1 Consent of Ernst & Young.
*23.2 Consent of Greenberg Traurig, LLP (included in the opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (set forth on signature page of the Registration
Statement).
27.1 Financial Data Schedule.
- ----------
* To be filed by amendment.
CERTIFICATE OF INCORPORATION
OF
LEISURE TRAVEL GROUP, INC.
Pursuant to Section 102 of the
Delaware General Corporation Law
- -------------------------------------------------------------------------------
The undersigned, in order to form a corporation pursuant to Section 102 of
the Delaware General Corporation Law, does hereby certify:
FIRST: The name of the corporation is "Leisure Travel Group, Inc."
(the "Corporation").
SECOND: The address, including street, number, city and county, of the
registered office of the Corporation in the State of Delaware is 1013
Centre Road in the City of Wilmington, in the County of New Castle,
Delaware 19805; and the name of the registered agent of the Corporation in
the State of Delaware at such address is Corporation Service Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of capital stock which the
Corporation shall have authority to issue is 30,000,000 shares of capital
stock consisting of:
(a) 25,000,000 shares of common stock, par value $0.001 per share
(the "Common Stock"); and
(b) 5,000,000 shares of preferred stock, par value $0.001 per
share (the "Preferred Stock").
COMMON STOCK
(a) Each share of Common Stock issued and outstanding shall be identical in
all respects one with the other, and no dividends shall be paid on any shares of
Common Stock unless the same dividend is paid on all shares of Common Stock
outstanding at the time of such payment.
(b) Except for and subject to those rights expressly granted to the holders
of the Preferred Stock, or except as may be provided by the Delaware General
Corporation Law, the holders of Common Stock shall have exclusively all other
rights of stockholders including, but not by way of limitation, (i) the right to
receive dividends, when, as and if declared by the Board of Directors out of
assets lawfully available therefor, and (ii) in the event of any distribution of
assets upon liquidation, dissolution or winding up of the Corporation or
otherwise, the right to receive ratably and equally all the assets and funds of
the Corporation remaining after payment to the holders of the Preferred Stock of
the Corporation of the specific amounts which they are entitled to receive upon
such liquidation, dissolution or winding up of the Corporation as herein
provided.
1
<PAGE>
(c) In the event that the holder of any shares of Common Stock shall
receive any payment of any dividend on, liquidation of, or other amounts payable
with respect to, any shares of Common Stock, which he is not then entitled to
receive, he will forthwith deliver the same in the form received to the holders
of shares of the Preferred Stock as their respective interests may appear, or
the Corporation if no shares of Preferred Stock are then outstanding, and until
so delivered will hold the same in trust for such holders or the Corporation.
(d) Each holder of shares of Common Stock shall be entitled to one vote for
each share of such Common Stock held by him, and voting power with respect to
all classes of securities of the Corporation shall be vested solely in the
Common Stock, other than as specifically provided in the Corporation's
Certificate of Incorporation, as it may be amended, or in a certificate of
designation, preferences and rights with respect to the Preferred Stock.
(e) No stockholder shall be entitled to any preemptive right to purchase or
subscribe for any unissued stock of any class or any additional shares of any
class to be issued by reason of any increase in the authorized capital stock of
the Corporation.
PREFERRED STOCK
Authority is hereby vested in the Board of Directors of the Corporation to
provide for the issuance of Preferred Stock and in connection therewith to fix
by resolution providing for the issue of such series, the number of shares to be
included and such of the preferences and relative participating, optional or
other special rights and limitations of such series, including, without
limitation, rights of redemption or conversion into Common Stock, to the fullest
extent now or hereafter permitted by the Delaware General Corporation Law.
FIFTH: The name and mailing address of the Incorporator is as follows:
Name Address
---- -------
Anthony J. Marsico c/o Greenberg Traurig, LLP
200 Park Avenue
15th Floor
New York, New York 10166
SIXTH: The Corporation is to have a perpetual existence.
2
<PAGE>
SEVENTH: The Corporation expressly elects to be subject to the provisions
of Section 203 of the Delaware General Corporation Law.
EIGHTH: The board of directors is expressly authorized to adopt, amend or
repeal the by-laws of the Corporation.
NINTH: Elections of directors need not be by written ballot unless the
by-laws of the Corporation shall otherwise provide.
TENTH: Special meetings of the stockholders of the Corporation may only be
called by the board of directors of the Corporation upon the request of any two
directors, by the holders of one-third or more of the outstanding Common Stock,
or by the duly elected officers of the Corporation.
ELEVENTH: Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of Section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of Section 279 of Title 8 of the Delaware Code
order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as the said court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of the Corporation, as the
case may be, agree to any compromise or arrangement and to any reorganization of
the Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which said application has been made, be binding on all the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
TWELFTH: The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute or by this Certificate of
Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
THIRTEENTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except for liability (i) for any breach of the director's
duty of loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the General Corporation Law of the
State of Delaware, or (iv) for any transaction from which the director derived
an improper personal benefit. If the General Corporation Law of the State of
Delaware is hereafter amended to permit further elimination or limitation of the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extent permitted by
the General Corporation Law of the State of Delaware as so amended. Any repeal
or modification of this Article THIRTEENTH by the stockholders of the
Corporation or otherwise shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
3
<PAGE>
FOURTEENTH: Except as may otherwise be specifically provided in this
Certificate of Incorporation, no provision of this Certificate of Incorporation
is intended by the Corporation to be construed as limiting, prohibiting, denying
or abrogating any of the general or specific powers or rights conferred under
the General Corporation Law upon the Corporation, upon its stockholders,
bondholders and security holders, and upon its directors, officers and other
corporate personnel, including, in particular, the power of the Corporation to
furnish indemnification to directors and officers in the capacities defined and
prescribed by the General Corporation Law and the defined and prescribed rights
of said persons to indemnification as the same are conferred under the General
Corporation Law. The Corporation shall, to the fullest extent permitted by the
laws of the State of Delaware, including, but not limited to Section 145 of the
General Corporation Law of the State of Delaware, as the same may be amended and
supplemented, indemnify any and all directors and officers of the Corporation
and may, in the discretion of the board of directors, indemnify any and all
other persons whom it shall have power to indemnify under said Section or
otherwise under Delaware law, from and against any and all of the expenses,
liabilities or other matters referred to or covered by said Section. The
indemnification provisions contained in the Delaware General Corporation Law
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any By-Law, agreement, resolution of stockholders or
disinterested directors, or otherwise, and shall continue as to a person who has
ceased to be a director, officer, employee or agent, both as to action in his
official capacity and as to action in another capacity while holding such
office, and shall inure to the benefit of the heirs, executors and
administrators of such person.
FIFTEENTH: The number of directors constituting the Board of Directors
shall be determined by the Board of Directors, subject to the by-laws of the
Corporation. Any vacancy in the Board of Directors, whether arising from death,
resignation, removal (with or without cause), an increase in the number of
directors or any other cause, may be filled by the vote of either a majority of
the directors then in office, though less than a quorum, or by the stockholders
at the next annual meeting thereof or at a special meeting called for such
purpose. Stockholders may not apply to request that the Delaware Court of
Chancery summarily order an election to be held to fill any vacancies in the
Board of Directors whether or not, at the time of filling any vacancy or any
newly created directorship, the directors then in office shall constitute less
than a majority of the whole Board of Directors as constituted immediately prior
to any such vacancy or increase. Each director so elected shall hold office
until the next meeting of the stockholders in which the election of directors is
in the regular order of business and until his successor shall have been elected
and qualified.
4
<PAGE>
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of February,
2000 and I affirm that the foregoing certificate is my act and deed and that the
facts stated herein are true.
/s/ ANTHONY J. MARSICO
--------------------------------
Anthony J. Marsico, Incorporator
5
BY-LAWS
OF
LEISURE TRAVEL GROUP, INC.
(A Delaware Corporation)
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office of the Corporation shall
be located in Winchester, England.
SECTION 2. REGISTERED OFFICE. The registered office of the Corporation
shall be established and maintained at 1013 Centre Road in the City of
Wilmington, in the County of New Castle, Delaware 19805.
SECTION 3. OTHER OFFICES. The Corporation may also have an office or
offices other than said principal office at such place or places, either within
or without the United Kingdom, as the Board of Directors shall from time to time
determine or the business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at such place,
either within or without the State of Delaware, as may be fixed from time to
time by the Board of Directors, or at such other place as shall be designated
from time to time by the Board of Directors.
SECTION 2. ANNUAL MEETING. The annual meeting of the stockholders of the
Corporation for the election of directors and for the transaction of such other
business as may properly come before the meeting, shall be designated from time
to time by the Board of Directors.
SECTION 3. SPECIAL MEETINGS. Special meetings of the stockholders, unless
otherwise prescribed by statute, may be called at any time by the Board of
Directors upon the request of any two members of the Board of Directors of the
Corporation, by the holders of one third or more of the outstanding Common
Stock, or by the duly elected officers of the Corporation.
SECTION 4. NOTICE OF MEETINGS. Notice of the place, date and hour of
holding of each annual and special meeting of the stockholders and, unless it is
the annual meeting, the purpose or purposes thereof, shall be given personally
or by mail in a postage prepaid envelope, not less than ten nor more than sixty
days before the date of such meeting, to each stockholder entitled to vote at
such meeting, and, if mailed, it shall be directed to such stockholder at his
address as it appears on the record of stockholders, unless he shall have filed
with the Secretary of the Corporation a written request that notices to him be
mailed at some other address, in which case it shall be directed to him at such
other address. Any such notice for any meeting other than the annual meeting
shall indicate that it is being issued at the direction of the Board of
Directors, the Chairman of the Board, the Vice-Chairman of the Board, the
President or the Secretary, whichever shall have called the meeting. Notice of
any meeting of stockholders shall not be required to be given to any stockholder
who shall attend such meeting in person or by proxy and shall not, prior to the
conclusion of such meeting, protest the lack of notice thereof, or who shall,
either before or after the meeting, submit a signed waiver of notice, in person
or by proxy. Unless the Board of Directors shall fix a new record date for an
adjourned meeting, notice of such adjourned meeting need not be given if the
time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken.
<PAGE>
SECTION 5. QUORUM. At all meetings of the stockholders, the holders of a
majority of the shares of the Corporation issued and outstanding and entitled to
vote thereat shall be present in person or by proxy to constitute a quorum for
the transaction of business, except as otherwise provided by statute. In the
absence of a quorum, the holders of a majority of the shares present in person
or by proxy and entitled to vote may adjourn the meeting from time to time. At
any such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally called.
SECTION 6. ORGANIZATION. At each meeting of the stockholders, the Chairman
of the Board, if one shall have been elected, shall act as chairman of the
meeting. In the absence of the Chairman of the Board or if one shall not have
been elected, the Vice Chairman of the Board, or in his absence or if one shall
not have been elected, the President shall act as chairman of the meeting. The
Secretary, or in his absence or inability to act, the person whom the chairman
of the meeting shall appoint secretary of the meeting, shall act as secretary of
the meeting and keep the minutes thereof.
SECTION 7. ORDER OF BUSINESS. The order of business at all meetings of the
stockholders shall be determined by the chairman of the meeting.
SECTION 8. VOTING. Except as otherwise provided by statute or the
Certificate of Incorporation, each holder of record of shares of the Corporation
having voting power shall be entitled at each meeting of the stockholders to one
vote for each share standing in his name on the record of stockholders of the
Corporation:
(a) on the date fixed pursuant to the provisions of Section 6 of
Article V of these By-Laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or
(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice thereof shall
be given.
<PAGE>
Each stockholder entitled to vote at any meeting of the stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact. Any such proxy shall be delivered to the
secretary of such meeting at or prior to the time designated in the order of
business for so delivering such proxies. Except as otherwise provided by statute
or the Certificate of Incorporation or these By-Laws, any corporate action to be
taken by vote of the stockholders shall be authorized by a majority of the votes
cast at a meeting of stockholders by the holders of shares present in person or
represented by proxy and entitled to vote on such action. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder acting, or by his proxy, if there be such proxy, and
shall state the number of shares voted.
SECTION 9. LIST OF STOCKHOLDERS. A list of stockholders as of the record
date, certified by the Secretary of the Corporation or by the transfer agent for
the Corporation, shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
at least ten days prior to the meeting, either at a place within the city where
the meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
SECTION 10. INSPECTORS. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act or on the request of any stockholder entitled to vote at such
meeting, the chairman of the meeting shall, or if inspectors shall not have been
appointed, the chairman of the meeting may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares outstanding and the voting power of each,
the number of shares represented at the meeting, the existence of a quorum, the
validity and effect of proxies, and shall receive votes, ballots or consents,
hear and determine all challenges and questions arising in connection with the
right to vote, count and tabulate all votes, ballots or consents, determine the
results, and do such acts as are proper to conduct the election or vote with
fairness to all stockholders. On request of the chairman of the meeting or any
stockholder entitled to vote thereat, the inspector shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by him. No director or candidate for the office
of director shall act as an inspector of an election of directors. Inspectors
need not be stockholders.
SECTION 11. ACTION BY CONSENT. Any action required to be taken at any
annual or special meeting of stockholders, or any action which may be taken at
any annual or special meeting, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the action so
taken, shall be signed by the holders of outstanding stock having not less than
the minimum number of votes that would be necessary to authorize or take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Prompt notice of the taking of the corporate action without a meeting
by less than unanimous written consent shall be given to those stockholders who
have not consented in writing.
<PAGE>
ARTICLE III
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. The Board of
Directors may exercise all such authority and powers of the Corporation and do
all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.
SECTION 2. NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE. The number
of directors constituting the Board of Directors shall be determined from time
to time by the Board of Directors, provided that no decrease in the number of
directors shall have the effect of shortening the term of any incumbent
director. Any decrease in the number of directors shall be effective at the time
of the next succeeding annual meeting of the stockholders unless there shall be
vacancies in the Board of Directors, in which case such decrease may become
effective at any time prior to the next succeeding annual meeting to the extent
of the number of such vacancies. All the directors shall be at least eighteen
years of age. Directors need not be stockholders. Except as otherwise provided
by statute or these By-Laws, the directors shall be elected at the annual
meeting of the stockholders. At each meeting of the stockholders for the
election of directors at which a quorum is present, the persons receiving a
plurality of the votes cast at such election shall be elected. Each director
shall hold office until the next annual meeting of the stockholders and until
his successor shall have been elected and qualified, or until his death, or
until he shall have resigned, or have been removed, as hereinafter provided in
these By-Laws.
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors shall be
held at the principal office of the Corporation in the United Kingdom or at such
other place, within or without the United Kingdom, as the Board of Directors may
from time to time determine or as shall be specified in the notice of any such
meeting.
SECTION 4. REGULAR MEETINGS. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be held at the same hour on the next succeeding business day. Notice
of regular meetings of the Board of Directors need not be given except as
otherwise required by statute or these By-Laws.
<PAGE>
SECTION 5. SPECIAL MEETINGS. Special meetings of the Board of Directors may
be called by the Chairman or by a majority of the directors.
SECTION 6. NOTICE OF MEETING. Notice of each special meeting of the Board
of Directors (and of each regular meeting for which notice shall be required)
shall be given by the Secretary as hereinafter provided in this Section 6, in
which notice shall be stated the time and place of the meeting. Except as
otherwise required by these By-Laws, such notice need not state the purposes of
such meeting. Notice of each such meeting shall be mailed, postage prepaid, to
each director, addressed to him at his residence or usual place of business, by
first-class mail, at least five days before the day on which such meeting is to
be held, or shall be sent addressed to him at such place by telegraph, cable,
telex, telecopier or other similar means, or be delivered to him personally or
be given to him by telephone, or other similar means, at least forty-eight hours
before the time at which such meeting is to be held. Notice of any such meeting
need not be given to any director who shall, either before or after the meeting,
submit a signed waiver of notice or who shall attend such meeting without
protesting, prior to or at its commencement, the lack of notice to him.
SECTION 7. QUORUM AND MANNER OF ACTING. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. Each director shall have one vote on
each matter for which directors are entitled to vote. In the absence of a quorum
at any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn such meeting to another time and place. Notice of the time
and place of any such adjourned meeting shall be given to the directors unless
such time and place were announced at the meeting at which the adjournment was
taken. At any adjourned meeting at which a quorum is present, any business may
be transacted which might have been transacted at the meeting as originally
called. The directors shall act only as a Board and the individual directors
shall have no power as such.
SECTION 8. ORGANIZATION. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, shall act as the Chairman
of the meeting, or if one shall not have been elected, the Vice Chairman of the
Board, or in his absence, or if one shall not have been elected, the President,
if he or she is a director (or, in his absence, another director chosen by a
majority of the directors present) shall act as chairman of the meeting and
preside thereat. The Secretary (or, in his absence, any person -- who shall be
an Assistant Secretary, if any of them shall be present at such meeting --
appointed by the Chairman) shall act as secretary of the meeting and keep the
minutes thereof.
SECTION 9. RESIGNATIONS. Any director of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or the Vice Chairman of the Board or the President or
the Secretary. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
<PAGE>
SECTION 10. VACANCIES. Subject to any express provision of the Certificate
of Incorporation, any vacancy in the Board of Directors, whether arising from
death, resignation, removal (with or without cause), an increase in the number
of directors or any other cause, may be filled by the vote of a majority of the
directors then in office, though less than a quorum, or by the stockholders at
the next annual meeting thereof or at a special meeting thereof. Stockholders of
the Company may not apply to request that the Delaware Court of Chancery
summarily order an election to be held to fill vacancies in the Board of
Directors. Each director so elected shall hold office until the next meeting of
the stockholders in which the election of directors is in the regular order of
business and until his successor shall have been elected and qualified.
SECTION 11. REMOVAL OF DIRECTORS. Except as otherwise provided by statute,
any director may be removed, either with or without cause, at any time, by the
stockholders at a special meeting thereof. Except as otherwise provided by
statute, any director may be removed for cause by the Board of Directors at a
special meeting thereof.
SECTION 12. COMPENSATION. The Board of Directors shall have authority to
fix the compensation, including fees and reimbursement of expenses, of directors
for services to the Corporation in any capacity.
SECTION 13. COMMITTEES. The Board of Directors may, by resolution passed by
a majority of the entire Board of Directors, designate one or more committees,
including an executive committee, each committee to consist of two or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
member at any meeting of the committee. Except to the extent restricted by
statute or the Certificate of Incorporation, each such committee, to the extent
provided in the resolution creating it, shall have and may exercise all the
authority of the Board of Directors. Each such committee shall serve at the
pleasure of the Board of Directors and have such name as may be determined from
time to time by resolution adopted by the Board of Directors. Each committee
shall keep regular minutes of its meetings and report the same to the Board of
Directors.
SECTION 14. ACTION BY CONSENT. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee consent in writing to the adoption
of a resolution authorizing the action. The resolution and the written consents
thereto by the members of the Board of Directors or such committee shall be
filed with the minutes of the proceedings of the Board of Directors or such
committee.
SECTION 15. TELEPHONIC MEETING. Unless restricted by the Certificate of
Incorporation or by statute, any one or more members of the Board of Directors
or any committee thereof may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment allowing all persons participating in the meeting to hear each other
at the same time. Participation by such means shall constitute presence in
person at a meeting.
<PAGE>
ARTICLE IV
OFFICERS
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the Corporation shall
be elected by the Board of Directors and shall include the Chairman of the
Board, one or more Vice Presidents, the Secretary, and, if determined by the
Board of Directors, the President and the Treasurer. If the Board of Directors
wishes, it may also elect as officers of the Corporation a Vice Chairman of the
Board and may elect other officers (including one or more Assistant Treasurers
and one or more Assistant Secretaries), as may be necessary or desirable for the
business of the Corporation. Any two or more offices may be held by the same
person. Each officer shall hold office until the first meeting of the Board of
Directors following the next annual meeting of the stockholders, and until his
successor shall have been elected and shall have qualified, or until his death,
or until he shall have resigned or have been removed, as hereinafter provided in
these By-Laws.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Board of Directors or
the Chairman of the Board or the Vice Chairman of the Board, if one shall be
elected, or the President or the Secretary. Any such resignation shall take
effect at the time specified therein or, if the time when it shall become
effective shall not be specified therein, immediately upon its receipt. Unless
otherwise specified therein, the acceptance of any such resignation shall not be
necessary to make it effective.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed, either
with or without cause, at any time, by the Board of Directors at any meeting
thereof.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be a
member of the Board, an officer of the Corporation and, if present, shall
preside at each meeting of the Board of Directors or the stockholders. He shall
perform all duties incident to the office of Chairman, and shall perform such
other duties as may from time to time be assigned to him by the Board of
Directors.
SECTION 5. VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board, if
one shall have been elected, shall be a member of the Board, an officer of the
Corporation, and, if present, shall preside at each meeting of the Board of
Directors if no Chairman of the Board has been elected or if the Chairman of the
Board is absent, or is unable or refuses to act. He shall advise and counsel the
Chairman of the Board and the President, and, in the President's absence, other
executives of the Corporation, and shall perform such other duties as may from
time to time be assigned to him by the Board of Directors.
<PAGE>
SECTION 6. PRESIDENT. The President shall be the chief executive officer of
the Corporation. He shall, in the absence of the Chairman of the Board and the
Vice Chairman of the Board or if either shall not have been elected, preside at
each meeting of the Board of Directors (if he is a director) or the
stockholders. He shall perform all duties incident to the office of President
and chief operating officer and such other duties as may from time to time be
assigned to him by the Board of Directors.
SECTION 7. VICE PRESIDENT. Each Vice President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President. At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice President, or if there shall be
more than one, the Vice Presidents in the order determined by the Board of
Directors (or if there be no such determination, then the Vice Presidents in the
order of their election), shall perform the duties of the President, and, when
so called, shall have the power of and be subject to the restrictions placed
upon the President in respect of the performance of such duties.
SECTION 8. TREASURER. The Treasurer, if one shall then be elected, shall
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of the
Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors.
<PAGE>
SECTION 9. SECRETARY. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of the
Secretary and such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 10. ASSISTANT TREASURER. The Assistant Treasurer, or if there shall
be more than one, the Assistant Treasurers in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. ASSISTANT SECRETARY. The Assistant Secretary, or if there be
more than one, the Assistant Secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 12. OFFICERS' BONDS OR OTHER SECURITY. If required by the Board of
Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his duties, in such amount and with such surety
or sureties as the Board of Directors may require.
SECTION 13. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
<PAGE>
ARTICLE V
SHARES, ETC.
SECTION 1. SHARE CERTIFICATES. Each owner of shares of the Corporation
shall be entitled to have a certificate, in such form as shall be approved by
the Board of Directors, certifying the number of shares of the Corporation owned
by him. The certificates representing shares shall be signed in the name of the
Corporation by the Chairman of the Board or the Vice Chairman of the Board or
the President or a Vice President and by the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer, and sealed with the seal of the
Corporation (which seal may be a facsimile, engraved or printed); provided,
however, that where any such certificate is countersigned by a transfer agent,
or is registered by a registrar (other than the Corporation or one of its
employees), the signatures of the Chairman of the Board, Vice Chairman of the
Board, President, Vice President, Secretary, Assistant Secretary, Treasurer or
Assistant Treasurer upon such certificates may be facsimiles, engraved or
printed. In case any officer who shall have signed any such certificate shall
have ceased to be such officer before such certificate shall be issued, it may
nevertheless be issued by the Corporation with the same effect as if such
officer were still in office at the date of their issue. When the Corporation is
authorized to issue shares of more than one class, there shall be set forth upon
the face or back of the certificate, (or the certificate shall have a statement
that the Corporation will furnish to any shareholder upon request and without
charge) a full statement of the designation, relative rights, preferences, and
limitations of the shares of each separate class, or of the different shares
within each class, authorized to be issued and, if the Corporation is authorized
to issue any class of preferred shares in series, the designation, relative
rights, preferences and limitations of each such series so far as the same have
been fixed and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series.
SECTION 2. BOOKS OF ACCOUNT AND RECORD OF STOCKHOLDERS. There shall be kept
correct and complete books and records of account of all the business and
transactions of the Corporation. There shall also be kept, at the office of the
Corporation, or at the office of its transfer agent, a record containing the
names and addresses of all stockholders of the Corporation, the number of shares
held by each, and the dates when they became the holders of record thereof.
SECTION 3. TRANSFER OF SHARES. Transfers of shares of the Corporation shall
be made on the records of the Corporation only upon authorization by the
registered holder thereof, or by his attorney thereunto authorized by power of
attorney duly executed and filed with the Secretary or with a transfer agent,
and on surrender of the certificate or certificates for such shares properly
endorsed or accompanied by a duly executed stock transfer power and the payment
of all taxes thereon. The person in whose name shares shall stand on the record
of stockholders of the Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation. Whenever any transfer of shares shall be
made for collateral security and not absolutely and written notice thereof shall
be given to the Secretary or to a transfer agent, such fact shall be noted on
the records of the Corporation.
<PAGE>
SECTION 4. TRANSFER AGENTS AND REGISTRARS. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars and may require all certificates for shares of
stock to bear the signature of any of them.
SECTION 5. REGULATIONS. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of the Corporation.
SECTION 6. FIXING OF RECORD DATE. The Board of Directors may fix, in
advance, a date not more than fifty nor less than ten days before the date when
fixed for the holding of any meeting of the stockholders or before the last day
on which the consent or dissent of the stockholders may be effectively expressed
for any purpose without a meeting, as the time as of which the stockholders
entitled to notice of and to vote at such meeting or whose consent or dissent is
required or may be expressed for any purpose, as the case may be, shall be
determined, and all persons who were stockholders of record of voting shares at
such time, and no others, shall be entitled to notice of and to vote at such
meeting or to express their consent or dissent, as the case may be. The Board of
Directors may fix, in advance, a date not more than fifty nor less than ten days
preceding the date fixed for the payment of any dividend or the making of any
distribution or the allotment of rights to subscribe for securities of the
Corporation, or for the delivery of evidences of rights or evidences of
interests arising out of any change, conversion or exchange of shares or other
securities, as the record date for the determination of the stockholders
entitled to receive any such dividend, distribution, allotment, rights or
interests, and in such case only the stockholders of record at the time so fixed
shall be entitled to receive such dividend, distribution, allotment, rights or
interests.
SECTION 7. LOST, DESTROYED OR MUTILATED CERTIFICATES. The holder of any
certificate representing shares of the Corporation shall immediately notify the
Corporation of any loss, destruction or mutilation of such certificate, and the
Corporation may issue a new certificate in the place of any certificate
theretofore issued by it which the owner thereof shall allege to have been lost
or destroyed or which shall have been mutilated. The Board of Directors may, in
its discretion, require such owner or his legal representatives to give to the
Corporation a bond in such sum, limited or unlimited, and in such form and with
such surety or sureties as the Board of Directors in its absolute discretion
shall determine, to indemnify the Corporation against any claim that may be made
against it on account of the alleged loss or destruction of any such
certificate, or the issuance of such new certificate.
<PAGE>
ARTICLE VI
INDEMNIFICATION
Except as may otherwise be specifically provided in the Certificate of
Incorporation, no provision of the Certificate of Incorporation is intended by
the Corporation to be construed as limiting, prohibiting, denying or abrogating
any of the general or specific powers or rights conferred under the General
Corporation Law of the State of Delaware (the "GCL") upon the Corporation, upon
its stockholders, bondholders and security holders, and upon its directors,
officers and other corporate personnel, including, in particular, the power of
the Corporation to furnish indemnification to directors and officers in the
capacities defined and prescribed by the General Corporation Law, as the same
are conferred under the General Corporation Law. The Corporation shall, to the
fullest extent permitted by the laws of the State of Delaware, including but not
limited to Section 145 of the GCL, as the same may be amended and supplemented,
indemnify any and all persons whom it shall have power to indemnify under said
Section or otherwise under Delaware law from and against any and all of the
expenses, liabilities or other matters referred to or covered by said Section.
The indemnification provisions contained in the GCL shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any By-Law, agreement, resolution of stockholders or disinterested directors, or
otherwise, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, both as to action in his official capacity and as to
action in another capacity while holding such office, and shall inure to the
benefit of the heirs, executors and administrators of such person.
ARTICLE VII
GENERAL PROVISIONS
SECTION 1. DIVIDENDS. Subject to statute and the Certificate of
Incorporation, dividends upon the shares of the Corporation may be declared by
the Board of Directors at any regular or special meeting. Dividends may be paid
in cash, in property or in shares of the Corporation, unless otherwise provided
by statute or the Certificate of Incorporation.
SECTION 2. RESERVES. Subject to the Certificate of Incorporation, before
payment of any dividend, there may be set aside out of any funds of the
Corporation available for dividends such sum or sums as the Board of Directors
may, from time to time, in its absolute discretion, think proper as a reserve or
reserves to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the Corporation or for such other purpose as the
Board of Directors may think conducive to the interests of the Corporation. The
Board of Directors may modify or abolish any such reserves in the manner in
which it was created.
SECTION 3. FISCAL YEAR. The fiscal year of the Corporation shall be fixed,
and once fixed, may thereafter be changed, by resolution of the Directors.
<PAGE>
SECTION 4. CHECKS, NOTES, DRAFTS ETC. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.
SECTION 5. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances.
SECTION 6. VOTING OF STOCKS IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board, the
Vice Chairman of the Board, the President or any Vice President, from time to
time, may (or may appoint one or more attorneys or agents to) cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of the shares or other securities of
such other corporations, or to consent in writing to any action by any such
other corporation. In the event one or more attorneys or agents are appointed,
the Chairman of the Board, the Vice Chairman of the Board, the President or any
Vice President may instruct the person or persons so appointed as to the manner
of casting such votes or giving such consent. The Chairman of the Board, the
Vice Chairman of the Board, the President or any Vice President may, or may
instruct the attorneys or agents appointed to, execute or cause to be executed
in the name and on behalf of the Corporation and under its seal or otherwise,
such written proxies, consents, waivers or other instruments as may be necessary
or proper in the premises.
SECTION 7. RELATED PARTY TRANSACTIONS. The Corporation shall not engage in
any transaction with any of its directors, officers or shareholders owning,
directly or indirectly, 5% of the shares of Common Stock of the Corporation,
unless such transaction has been approved by both a majority of the entire Board
of Directors, as well as by a majority of the independent outside directors or
by a majority of the Corporation's Disinterested Stockholders. As used herein,
the term "Disinterested Stockholder" shall mean any record holder of Common
Stock of the Corporation who is not: (i) an officer, director or employee, or
former officer, director or employee, of the Corporation or any subsidiary or
affiliate (as that term is defined in the Securities Act of 1933, as amended,
and the regulations promulgated thereunder) of the Corporation; (ii) an
affiliate of any such present or former officer, director or employee of the
Corporation; or (iii) a holder, directly or indirectly, of five (5%) percent or
more of any class or series of voting securities of the Corporation or any
affiliate thereof.
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ARTICLE VIII
FORCE AND EFFECT OF BY-LAWS
These By-Laws are subject to the provisions of the GCL and the
Corporation's Certificate of Incorporation, as it may be amended from time to
time. If any provision in these By-Laws is inconsistent with a provision in the
GCL or the Certificate of Incorporation, the provision of the GCL or the
Certificate of Incorporation shall govern. Wherever in these By-Laws references
are made to more than one incorporator, director or stockholder, they shall, if
this is a sole incorporator, director or stockholder corporation, be construed
to mean the solitary person; and all provisions dealing with the quantum of
majorities or quorums shall be deemed to mean the action by the one person
constituting the Corporation.
ARTICLE IX
AMENDMENTS
These By-Laws may be amended or repealed or new By-Laws may be adopted at
an annual or special meeting of stockholders at which a quorum is present or
represented, by the vote of the holders of shares entitled to vote thereon
provided that notice of the proposed amendment or repeal or adoption of new
By-Laws is contained in the notice of such meeting. These By-Laws may also be
amended or repealed or new By-Laws may be adopted by the Board of Directors at
any regular or special meeting of the Board of Directors; provided that Article
VII, Section 7 of these By-Laws may only be amended or repealed, or new By-Laws
adopted which have the effect of amending or repealing Article VII, Section 7 of
these By-Laws, by the vote or written consent of the holders of a majority of
the outstanding shares of capital stock entitled to vote thereon which is held
by Disinterested Stockholders. If any By-Law regulating an impending election of
directors is adopted, amended or repealed by the Board of Directors, there shall
be set forth in the notice of the next meeting of the stockholders for the
election of directors the By-Law so adopted, amended or repealed, together with
a concise statement of the changes made. By-Laws adopted by the Board of
Directors may be amended or repealed by the stockholders.
FORM OF
AGREEMENT AND PLAN OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (the "Agreement") dated this
__ day of March, 2000, by and among LEISURE TRAVEL GROUP, INC., a Delaware
corporation (the "Company"), LEISURE TRAVEL GROUP LIMITED, a private limited
company organized under the laws of England and Wales ("LTGL"), CIGNET VENTURES
LIMITED, a private limited company organized under the laws of Guernsey Channel
Islands ("Cignet"), RED KITE VENTURES LIMITED, a private limited company
organized under the laws of ________ ("Red Kite"), WARREN CAPITAL LIMITED, a
private limited company organized under the laws of England and Wales ("WCL"),
CI4NET.COM, INC., a Delaware corporation ("Ci4net"), RAYMOND J. PEEL ("Peel"),
MILNER ESTATES, a ________ ("Milner"), PHILIP MASON ("Mason"), STEPHEN LAST
("Last"), ROD RODGERS ("Rodgers"), and DAVID MARRIOTT ("Marriott"). Red Kite,
WCL, Ci4net and Milner are sometimes hereinafter collectively referred to herein
as the "LTGL Shareholders," Cignet, Mason, Rodgers and Last are sometimes
hereinafter collectively referred to herein as the "GHG Shareholders," and the
LTGL Shareholders and the GHG Shareholders are sometimes hereinafter
collectively referred to herein as the "Shareholders." The Company and the
Shareholders are hereinafter sometimes collectively referred to as the
"Parties."
WHEREAS, the Board of Directors of the Company deems it advisable and
in the best interests of the Company that the Company acquire all of the issued
and outstanding share capital of LTGL, which currently owns 100% of the share
capital OF MISS ELLIE'S WORLD TRAVEL LIMITED, a private limited company
organized under the laws of England and Wales ("Miss Ellie's) and ILIOS TRAVEL
LIMITED, a private limited company organized under the laws of England and Wales
("Ilios"); and
WHEREAS, the shareholders and Board of Directors of the Company and
LTGL deems it advisable and in the best interests of the Company and LTGL that
LTGL acquire all of the issued and outstanding share capital of GRAND HOTEL
GROUP LIMITED, a private limited company organized under the laws of England and
Wales ("GHG"); and
WHEREAS, the shareholders and Board of Directors of the Company and
LTGL deems it advisable and in the best interests of the Company and LTGL that
LTGL also acquire 49% of the issued and outstanding share capital of
TRRRAVEL.COM, LTD., a private limited company organized under the laws of
England and Wales ("Trrravel.com"), and
WHEREAS, the case of each of the above acquisitions, the holders of the
share capital of each of LTGL, GHG and Trrravel.com will receive in exchange for
the share capital of such Acquired Corporations newly issued shares of common
stock, par value $0.001 per share, of the Company (the "Company Common Stock"),
all upon and subject to the terms and conditions contained in this Agreement
(the "Share Exchange"); and
<PAGE>
WHEREAS, the shareholders of each of the Acquired Corporations and the
Company have approved and adopted this Agreement as a "plan of reorganization"
within the meaning of Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended.]
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions, and conditions contained herein, and for other good and
valuable consideration, the adequacy and receipt of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings, unless the context shall otherwise require:
(a) "ACQUIRED CORPORATIONS" shall mean the collective reference to LTGL
(including its Miss Ellie's and Ilios subsidiaries), GHG and Trrravel.com.
(b) "LTGL ESCROWED SHARES" shall mean the ordinary shares of LTGL.
(c) "GHG ESCROWED SHARES" shall mean the ordinary shares of GHG.
(d) "TRRRAVEL.COM ESCROWED SHARES" shall mean the ordinary shares of
Trrravel.com.
(e) "COMPANY COMMON STOCK" shall mean the common stock, par value
$0.001 per share of the Company.
(f) "COMPANY IPO" shall mean the initial public offering of shares of
Company Common Stock pursuant to a registration statement on Form S-1 or other
applicable form of registration (the "Registration Statement") which shall be
declared effective by the United States Securities and Exchange Commission
("SEC"), and the trading of such shares of Company Common Stock on the Nasdaq
Stock Exchange or other national securities exchange in the United States.
(g) "EFFECTIVE DATE" shall mean the date on which the SEC shall declare
effective the Registration Statement and related prospectus in connection with
the Company IPO.
(h) "RANK INDEBTEDNESS" shall mean all indebtedness for money borrowed,
whether or not evidenced by notes, which shall be owed on the Effective Date by
GHG or any subsidiary of GHG to The Rank Group plc or any of its subsidiaries or
affiliates.
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ARTICLE II
TERMS AND PROVISIONS OF SHARE EXCHANGE
Section 2.01 SHARE EXCHANGE.
(a) TRANSFER OF SHARE CAPITAL OF ACQUIRED CORPORATIONS. Upon the terms
and subject to the conditions herein contained, including, without limitation,
the conditions contained in Section ____ hereof, at the Effective Date:
(i) the GHG Shareholders shall sell, assign, transfer and
deliver to LTGL, and LTGL shall acquire from the GHG Shareholders all
right, title and interest in and to _______ GHG Escrowed Shares,
representing all, and not less than all, of the outstanding share
capital of GHG as at the Effective Date, free and clear of all liens
and encumbrances thereon;
(iiii) Ci4net shall sell, assign, transfer and deliver to
LTGL, and LTGL shall acquire from Ci4net all right, title and interest
in and to _______ Trrravel.com Escrowed Shares, representing 49% of the
issued and outstanding share capital of Trrravel.com as at the
Effective Date, free and clear of all liens and encumbrances thereon;
and
(iii) immediately following the transfers contemplated by
clauses (i) and (ii) of this Section 2.01(a), the LTGL Shareholders
shall sell, assign, transfer and deliver to the Company, and the
Company shall acquire from the LTGL Shareholders all right, title and
interest in and to an aggregate of _______ LTGL Escrowed Shares,
representing all, and not less than all, of the outstanding share
capital of LTGL as at the Effective Date, free and clear of all liens
and encumbrances thereon;
In furtherance of the foregoing, on the Effective Date:
(x) the GHG Shareholders shall deliver to LTGL share
certificates representing all of the issued and outstanding share
capital of GHG as at the Effective Date, duly endorsed in blank for
transfer,
(y) Ci4net shall deliver to LTGL share certificates
representing 49% of the issued and outstanding share capital of
Trrravel.com as at the Effective Date, duly endorsed in blank for
transfer; and
(z) the LTGL Shareholders shall deliver to the Company share
certificates representing all of the issued and outstanding share
capital of LTGL as at the Effective Date, duly endorsed in blank for
transfer,
(b) ISSUANCE OF COMPANY COMMON STOCK. In consideration for the transfer
and assignment of all the issued and outstanding share capital of GHG and 49% of
the issued and outstanding share capital of Trrravel.com to LTGL, and the
transfer and assignment of all the issued and outstanding share capital of LTGL
to the Company, and
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against delivery of the certificates representing such share capital as provided
in Section 1.1(a) hereof, at the Effective Date, the Company shall issue an
aggregate of 5,060,000 shares of Common Stock to the Shareholders, as follows:
(i) to the GHG Shareholders an aggregate of 3,700,000 shares
of Company Common Stock, in the individual amounts among the GHG
Shareholders as set forth opposite their respective names on SCHEDULE 1
annexed hereto and made a part hereof;
(ii) to the LTGL Shareholders, an aggregate of 940,000 shares
of Company Common Stock, in the individual amounts among the GHG
Shareholders as set forth opposite their respective names on SCHEDULE 2
annexed hereto and made a part hereof; and
(iii) to Ci4net, an aggregate of 220,000 shares of Company
Common Stock.
Section 2.02 TAKING OF NECESSARY ACTION. The Company, LTGL and the
Shareholders shall take all such actions as may be necessary or appropriate in
order to effectuate the transactions contemplated by this Agreement. If, at any
time after the Effective Date, any further action is necessary or desirable to
carry out the purposes of this Agreement, to vest the Company with title to 100%
of the issued and outstanding LTGL Escrowed Shares, or to vest LTGL with title
to 100% of the issued and outstanding GHG Escrowed Shares and 49% of the issued
and outstanding Trrravel.com Escrowed Shares, the officers and directors of
LTGL, GHG or Trrravel.com, as the case may be, at their expense, shall take such
necessary or desirable action in order to effectuate the transactions
contemplated by this Agreement.
Section 2.03 STOCK LEGENDS. Certificates representing shares of the
Company Common Stock shall bear a legend restricting transfer of the shares of
the the Company Common Stock represented by such certificate in substantially
the form set forth below:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
and may not be transferred, nor will any assignee or endorsee hereof be
recognized as an owner hereof by the issuer for any purpose, unless a
registration statement under the Securities Act with respect to such
shares shall then be in effect or unless the availability of an
exemption from registration with respect to any proposed transfer or
disposition of such shares shall be established to the satisfaction of
counsel for the issuer."
the Company shall, from time to time, make stop transfer notations in its
records to ensure compliance in connection with any proposed transfer of the
shares with the Securities Act, and all applicable state securities laws.
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Section 2.04 FEES AND EXPENSES. the Company shall be responsible for
all fees and expenses incurred in connection with the negotiation, execution,
delivery and performance of this Agreement and the transactions contemplated
hereby, including, without limitation, the professional fees of counsel for the
Shareholders incurred in connection with the Share Exchange.
ARTICLE III
COMPANY REPRESENTATIONS AND WARRANTIES
The following representations and warranties are hereby made (i) by the
Company to the Shareholders with respect only to the Company, (ii) by LTGL and
the LTGL Shareholders to the Company with respect only to LTGL and its Miss
Ellie's and Ilios subsidiaries, (iii) by the GHG Shareholders to the Company and
LTGL with respect only to GHG and (iv) by Ci4net to the Company and LTGL with
respect only to Trrravel.com.
Section 3.01 ORGANIZATION; AUTHORIZATION. It is a corporation duly
organized, validly existing, and in good standing under the laws of the state or
country of its incorporation and has full power and authority to carry on its
business as it now is being conducted and to own the properties and assets it
now owns. It is duly qualified to do business as a foreign corporation and is in
good standing in every jurisdiction in which the conduct of its business or
ownership of its property requires such qualification; and, subject to the
requisite approval of and authorization by the holders of its capital stock, it
has full power and authority to enter into this Agreement and to carry out the
transactions contemplated herein.
Section 3.02 NO DEFAULTS. It is not a party to or bound by any contract
or agreement, or subject to any charter provision or other legal restriction
(other than restrictions applicable to corporations or businesses generally),
which adversely affects its business, operations, properties, assets, or
condition, financial or otherwise. It is not in default under any material
contract, lease, agreement, or other undertaking to which it is a party or by
which it is bound. Subject to the requisite approval of and authorization by the
holders of its capital stock, neither the execution and delivery of this
Agreement, the consummation of the transactions contemplated hereby, nor
compliance with the terms and conditions hereof will conflict with, result in a
breach of the unwaived terms and conditions of, or constitute a default under
its articles of incorporation or bylaws or any contract, agreement, commitment,
or other undertaking to which it is a party or by which it is bound.
Section 3.03 GOVERNMENTAL CONSENTS. Except for the requirements of the
United States Securities Act of 1933, as amended (the "Securities Act")and any
applicable state securities laws, and any applicable laws of the United Kingdom
or the United States no consent or approval of, or filing or registration with,
any governmental or regulatory authority is required in connection with the
performance of the terms of this Agreement.
Section 3.04 EXAMINATION OF DOCUMENTS. All original documents and other
information relating to its affairs will be made available, and copies of any
such
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documents will be furnished, upon request to the other party and its
counsel. Included among the documents to be made available are all articles of
incorporation and amendments, bylaws and amendments, minutes of all
incorporators, directors and shareholders meetings or consent minutes with
respect to actions taken by incorporators, directors, or shareholders, all
financial statements, tax returns, and all material contracts, leases, and
agreements to which it is a party or an intended beneficiary.
Section 3.05 TITLE TO ASSETS. It has good and marketable title to all
of its properties and assets, both real and personal, free and clear of all
security interest liens, claims, equities of others, and restrictions on the
right to transfer, except as disclosed in writing to the Company.
Section 3.06 TAX RETURNS AND PAYMENTS. All of its tax returns and
reports required by law to be filed have been duly filed, and all taxes,
assessments, fees, and other governmental charges (other than those presently
payable without interest or penalty or those which are being contested in good
faith by appropriate proceedings diligently conducted and which are disclosed in
the Exceptions Schedule) upon it or upon any of its properties, assets,
interest, or income which are due or are to become due have been paid or
adequately reserved against. None of its federal income tax returns is currently
under examination by the Inland Revenue.
Section 3.07 NO LITIGATION. Except as disclosed in writing to the
Company:
(a) there is no action, proceeding, claim, or investigation pending or
threatened against it or to which any of its assets or properties are subject
before any court or any governmental department, commission, board, bureau,
agency, or instrumentality which involves the possibility of any judgment or
liability or which might adversely affect its assets, business, or goodwill and,
after investigations it knows of no basis or grounds for any such action,
proceeding, claim, or investigation; and
(b) there is no outstanding order, writ, injunction, or decree of any
court, government department, commission, board, bureau, government agency, or
instrumentality, or any arbitration award, against it.
Section 3.08 NO MATERIAL ADVERSE CHANGES. Between the date of this
Agreement and the Effective Date, as a condition precedent to the obligations
hereunder, it will not, without the Company's prior written consent, it will not
engage in any material transaction not in the ordinary course of its business,
make or declare any dividends or distributions of its capital, surplus, or
profits, or redeem or issue any shares of its common stock or other securities.
There will be no changes in its assets, properties, liabilities, or financial
condition from those shown in its financial statements or in its condition,
other than changes which do not materially affect, singly or in the aggregate,
its business, assets, properties, or financial condition. Other than as
disclosed to the Company, it will not borrow any amounts or incur any
liabilities other than pursuant to contracts entered into in the ordinary course
of business; discharge any lien or encumbrance or satisfy any liabilities other
than current liabilities incurred in the ordinary
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course of business; mortgage, pledge, or subject to lien or charge or any other
encumbrance any of its assets or properties; sell, assign, or transfer any of
its assets except in the ordinary course of business; waive any rights of
substantial value; or loan money to any of its directors, officers, or
shareholders.
Section 3.09 BOOKS AND RECORDS COMPLETE. Its books and records are
accurate and complete and there are no matters for which proper entry has not
been made in such books and records.
Section 3.10 INSURANCE. It is adequately insured with respect to risks
usually insured against by companies owning properties and conducting business
similar to those owned and conducted by it. All policies are presently in force
and paid in full and will continue to be so without interruption until the
Effective Date.
Section 3.11 NO BROKERAGE FEES. Except as disclosed in the Registration
Statement, no agent, broker, investment banker, person, or firm acting on its
behalf, to the best of its knowledge, is or will be entitled to any broker's or
finder's fee or any other commission or fee, directly or indirectly, in
connection with any of the transactions contemplated hereby, except for the
Brokers.
Section 3.11 COMPLIANCE WITH CERTAIN LAWS. It is in full compliance
with all laws material and applicable to its business, including, without
limitation, laws (i) regulating atmospheric, water, and other pollution or
damage to the environment, (ii) regulating the ownership and operation of
hotels, travel agencies, tour operators and requirements of the CAA in respect
of airline seat bookings, and (iii) prohibiting discrimination based on race,
creed, color, sex, age, disability, or national origin.
Section 3.12 AUTHORIZATION. Its shareholders and Board of Directors
have duly authorized the execution and delivery of this Agreement and all
documents and transactions called for hereunder, and, this Agreement constitutes
a valid and binding obligation of the corporation in accordance with the
Agreement's terms. Each shall deliver to the other a certified copy of
resolutions of its Board of Directors pertaining to the foregoing. It has taken
or will exert its best efforts to take, prior to the Effective Date, all action
required by law, its Articles of Association, Memorandum of Association,
Certificate of Incorporation and Bylaws, as applicable, and otherwise to
authorize the execution, delivery, and performance of this Agreement.
Section 3.13 CONTRACTS. Other than as set forth or described in the
Registration Statement, it is not a party to any material agreement,
understanding or other contractual obligation ("Contract") binding upon it, the
non-performance of which by either a party to this Agreement or the other party
to such Contract, would have a material adverse effect on the business,
financial condition or prospects of such party hereto.
Section 3.14 PROPERTY AND EQUIPMENT. The property and equipment as
shown on its most recent balance sheet are in good operating condition and state
of repair, reasonable wear and tear excepted. The use of its real property
conforms in all material
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respects with applicable ordinances, regulations, zoning, or building codes, and
other applicable laws.
Section 3.15 SHARE OWNERSHIP. The Shareholders who have executed this
Agreement are the record and beneficial owners of 100% of the share capital of
each of the Acquired Corporations and there are no options, warrants, rights or
other agreements or understandings, written or oral, to sell, issue or purchase
any additional share capital of any of the Acquired Corporations. There are not
issued or outstanding any options, warrants, or rights to subscribe for,
purchase, or receive ordinary shares or preference shares or any other
securities convertible into ordinary shares of preference shares of any of the
Acquired Corporations.
Section 3.16 REPRESENTATIONS TRUE. No representation or warranty
contained herein, nor any statement or certificate furnished hereunder or in
connection herewith, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
ARTICLE V
COVENANTS
Section 5.01 PRESERVATION OF BUSINESS; ACCESS TO DOCUMENTS. From and
after the date of this Agreement and until the Effective Date, the parties
hereto hereby covenant and agree with each other that the Company and each of
the Acquired Corporations shall:
(a) use its best efforts to preserve its business organization,
goodwill, and business relationships intact and to retain the services of its
officers and key employees;
(b) provided the same does not violate any statute, order, decree,
rule, regulation, or contract, give each other and its authorized agents full
access, during normal business hours, upon reasonable notice, to all of its
assets, properties, books, records, agreements, and commitments and furnish such
representatives during such period with all such information concerning its
affairs as the other may reasonably request; provided. however that each party
and its authorized agents shall hold in confidence all documents and information
thus acquired or learned concerning the parties and, if the transactions
contemplated by this Agreement are not consummated, all such documents shall
immediately thereafter be returned to the appropriate parties;
(c) take all necessary corporate and any other action, and use its best
efforts to obtain all consents, approvals, and agreements required to carry out
the transactions contemplated in this Agreement and to satisfy, or cause to be
satisfied, the conditions specified herein; and
(d) maintain in full force and effect insurance policies providing
coverages and amount of coverage as now provided.
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Section 5.02 BUSINESS IN ORDINARY COURSE. Except as specifically
authorized by this Agreement, until the Effective Date, none of the Acquired
Corporations shall do any of the following except with the prior written consent
of the Company:
(a) effect any general salary increase except in line with its past
practices;
(b) enter into any written employment agreement;
(c) increase the base compensation or other benefits of any employee by
more than 10%;
(d) make any contribution to any trust or plan for the benefit of
employees not required by the present terns thereof or in accordance with its
past practices;
(e) make any change in any employee benefit plan which would materially
increase the cost thereof or adopt any new employee benefit plan;
(f) issue or commit to issue any capital stock or other ownership
interests.
(g) grant or omit to grant any options, warrants, or other rights to
subscribe for or purchase or otherwise acquire any shares of capital stock or
other ownership interests or issue or commit to issue any securities convertible
into or exchangeable for shares of its common stock or other ownership
interests;
(h) declare, set aside, or pay any dividend or distribution with
respect to its common stock or other ownership interests;
(i) directly or indirectly redeem, purchase, or otherwise acquire or
commit to acquire any of its common stock or other ownership interest or
directly or indirectly terminate or reduce or commit to terminate or reduce any
bank line of credit or the availability of any funds under any loan or financing
agreement;
(j) effect a split or reclassification of any capital stock or
recapitalization;
(k) change its articles of incorporation, bylaws, or other governing
instruments, except to effectuate the transactions contemplated by this
Agreement;
(1) borrow or agree to borrow any funds except pursuant to existing
bank lines of credit or other existing loan agreements or financing
arrangements; or
(m) waive or commit to waive any right of substantial value.
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ARTICLE VI
CONDITIONS PRECEDENT TO THE SHARE EXCHANGE
The obligations of the parties under this Agreement are subject to the
satisfaction of the following express conditions precedent at or before the
Effective Date:
Section 6.01 COMPLIANCE WITH LAWS. All statutory requirements for the
valid consummation by it of the transactions contemplated by this Agreement
shall have been fulfilled.
Section 6.02 DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated herein and all documents incident
thereto shall be reasonably satisfactory in form and substance to it and its
counsel.
Section 6.03 PAYMENT OF RANK INDEBTEDNESS. Subject only to consummation
of the Company IPO within five business days following the Effective Date and
receipt of the net proceeds thereof, the Company will apply sufficient net
proceeds from such Company IPO which, when coupled with other available funds,
will be sufficient to (a) retire and pay in full all Rank Indebtedness, and (b)
cause the release of all personal guarantees of Kevin R. Leech or his affiliates
and all collateral securing a bank letter of credit issued by Citibank, N.A. in
favor of the holder of such Rank Indebtedness.
Section 6.04 CAPITALIZATION OF CERTAIN LOANS. On the Effective Date,
Red Kite or another applicable corporate affiliate of Kevin R. Leech, shall
capitalize as share equity in the Company an aggregate of (pound)1,030,000 of
loans made to LTGL or its subsidiaries; provided that except for the shares of
Company Common Stock issued pursuant to this Agreement, no other form of
consideration shall be issued or paid for the capitalization of the aforesaid
loans.
Section 6.05 OPINIONS OF COUNSEL. Unless waived in writing by the
parties prior to the Effective Date, the Company and each Acquired Corporation
shall have caused its counsel to prepare and deliver to the other an opinion,
dated as of the Effective Date, in form and substance satisfactory to the other,
to the effect that:
(a) It has been duly incorporated and is a validly existing corporation
in good standing under the laws of its state or country of incorporation, with
full corporate power and authority to own and operate its properties and to
carry on its business as presently being conducted.
(b) It is duly qualified and licensed to transact business in each
state or other jurisdiction in which it transacts business and by each
governmental authority by which it is required to be licensed, except for
jurisdictions in which failure to qualify would not materially and adversely
affect its business, operations, or financial condition.
(c) It has an authorized capital as set forth in Article IV hereinabove
and the outstanding shares of its common stock stated as issued and outstanding
have been duly and validly issued and are fully paid and nonassessable and
contain no preemptive rights.
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To the best knowledge of such counsel, there are no outstanding options,
warrants, or other rights to subscribe for, purchase, or receive shares of its
common stock or securities convertible into its common stock, other than as set
forth in Article IV hereinabove.
(d) Neither the execution and delivery of this Agreement nor compliance
with the terms of this Agreement will conflict with or result in a material
breach of any of the terms, conditions, or provisions of, or constitute a
material default under its Articles of Association, Memorandum of Association,
Certificate of Incorporation or bylaws or any material note, indenture,
mortgage, deed of trust, or other material agreement or instrument known to such
counsel to which it is a party or by which it or any of its property is bound,
or any existing law, order, rule, regulation, writ, injunction, or decree known
to such counsel of any government, governmental instrumentality, agency, body,
arbitration tribunal, or court, domestic or foreign, having jurisdiction over it
or its properties.
(e) This Agreement has been duly authorized and executed by it, and all
corporate action by it required to authorize the Share Exchange has been taken.
(f) Such counsel knows of no material litigation, proceeding, or
governmental investigation pending or threatened against or relating to it or
its properties or business.
In rendering such opinion, counsel may rely on certificates of its
officers as to matters of fact and, as to matters of law, may rely on opinions
of local counsel chosen by it provided that copies of such opinions of such
other counsel accompany the opinion delivered by counsel.
Section 6.06 CERTIFICATE OF PRESIDENT AND SECRETARY. The Company and
each Acquired Corporation shall have furnished to the other a certificate of the
President or Vice President and the Secretary of the respective company, dated
as of the Effective Date, to the effect that the representations and warranties
of the respective company in this Agreement are true and correct at and as of
the Effective Date, that no error, misstatement, or omission has been discovered
or is known with respect to such representations and warranties, and that the
respective company has complied with all the agreements and has satisfied all
the covenants on its part to be performed at or prior to the Effective Date.
Section 6.07 NO MATERIAL ADVERSE CHANGE. Between the date of execution
of this Agreement and the Effective Date, neither the Company nor any of the
Acquired Corporations: (a) except in the ordinary course of its business, shall
have incurred any liabilities or obligations (direct or contingent) or disposed
of any of its assets, or entered into any material transaction or suffered or
experienced any materially adverse change in its condition, financial or
otherwise, and (b) shall have increased its issued and outstanding ordinary
shares, preference shares, common stock or any other securities, or rights,
options, warrants or other instruments convertible into or exercisable for
ordinary shares, preference shares, common stock.
11
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ARTICLE VII
TERMINATION, FURTHER ASSURANCES, AND MISCELLANEOUS
Section 7.01 TERMINATION AND POSTPONEMENT. This Agreement and the Share
Exchange contemplated hereby may be terminated, and the transactions provided
for herein abandoned, , as follows:
(a) at any time prior to but not after the Effective Date by mutual
consent of the the Company and Cignet, or
(b) at the sole option of Cignet, at any time following five (5)
business days after the Effective Date if the Company IPO shall not have been
consummated and the Rank Indebtedness paid in full within five (5) business days
following such Effective Date
In the event of the termination and abandonment of this Agreement and
the Share Exchange contemplated hereby, this Agreement shall become void and of
no effect, without any liability on the part of any party or its directors,
officers, or shareholders.
Section 7.02 SURVIVAL. All agreements, representations, and warranties
made hereunder or in connection with the transactions contemplated hereby shall
survive the Effective Date and remain effective in accordance with the terms
hereof.
Section 7.03 LIABILITY. In the event that this Agreement shall be
terminated pursuant to Section 7.01 hereinabove, all further obligations of the
Company and the Shareholders under this Agreement shall terminate without
further liability to the other.
Section 7.04 ASSIGNMENT. This Agreement may not be assigned nor any of
the performances hereunder delegated by operation of law or otherwise by any
party hereto, and any purported assignment or delegation shall be void.
Section 7.05 HEADINGS. The article and section headings of this
Agreement are inserted for convenience of reference only and do not constitute a
part of this Agreement.
Section 7.06 BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs,
successors, legal representatives, assigns, and transferors.
Section 7.07 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement of the parties hereto with respect to the subject matter hereof. There
are no representations, warranties, conditions, or other obligations except as
herein specifically provided. Any waiver, amendment, or modification hereof must
be in writing. A waiver in one instance shall not be deemed to be a continuing
waiver or waiver in any other instance.
Section 7.08 COUNTERPARTS. This Agreement may be executed in
counterparts and each counterpart hereof shall be deemed to be an original, but
all such counterparts
12
<PAGE>
together shall constitute but one agreement an original, but all such
counterparts together shall constitute but one agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LEISURE TRAVEL GROUP, INC.
a Delaware corporation
By:
-------------------------------
LEISURE TRAVEL GROUP LIMITED
a private limited company organized under the laws of England and Wales
By:
-------------------------------
CIGNET VENTURES LIMITED
a private limited company organized under the laws of Guernsey (Channel Islands)
By:
-------------------------------
RED KITE VENTURES LIMITED
a private limited company organized under the laws of Guernsey (Channel Islands)
By:
-------------------------------
WARREN CAPITAL LIMITED
a private limited company organized under the laws of England and Wales
By:
-------------------------------
CI4NET.COM, INC.
a Delaware corporation
By:
-------------------------------
RAYMOND J. PEEL
13
<PAGE>
MILNER ESTATES
By:
------------------------------
PHILIP MASON
-----------------------------
STEPHEN LAST
------------------------------
ROD RODGERS
------------------------------
DAVID MARRIOTT
14
<PAGE>
ESCROW AGREEMENT
THIS AGREEMENT is made and entered into as of the date set forth below,
by and among LEISURE TRAVEL GROUP, INC., a Delaware corporation (the "Company"),
LEISURE TRAVEL GROUP LIMITED, a private limited company organized under the laws
of England and Wales ("LTGL"), CIGNET VENTURES LIMITED, a private limited
company organized under the laws of Guernsey (Channel Islands) ("Cignet"), RED
KITE VENTURES LIMITED, a private limited company organized under the laws of
________ ("Red Kite"), WARREN CAPITAL LIMITED, a private limited company
organized under the laws of England and Wales ("WCL"), CI4NET.COM, INC., a
Delaware corporation ("Ci4net"), RAYMOND J. PEEL ("Peel"), MILNER ESTATES, a
________ ("Milner"), PHILIP MASON ("Mason"), STEPHEN LAST ("Last"), ROD RODGERS
("Rodgers"), and DAVID MARRIOTT ("Marriott") and GREENBERG TRAURIG LLP, a law
firm with offices located at 200 Park Avenue, New York, New York 10166 (the
"Escrow Agent"). Red Kite, WCL, Ci4net and Milner are sometimes hereinafter
collectively referred to herein as the "LTGL Shareholders," Cignet, Mason,
Rodgers and Last are sometimes hereinafter collectively referred to herein as
the "GHG Shareholders," and the LTGL Shareholders and the GHG Shareholders are
sometimes hereinafter collectively referred to herein as the "Shareholders."
WITNESSETH
WHEREAS, on or about ____________, 2000, the Company and the
Shareholders entered into an Agreement and Plan of Share Exchange (the
"Agreement") under which (a) LTGL agreed to purchase (i) from the GHG
Shareholders, all of the outstanding share capital of GHG and (ii) from Ci4net,
49% of the outstanding share capital of Trrravel.com and (b) the Company agreed
to purchase from the Shareholders all of the outstanding share capital of LTGL;
and
WHEREAS, each of the Shareholders have agreed to deposit said shares in
escrow in order implement the Agreement, and have executed this Agreement to
evidence the terms of said escrow with the Escrow Agent.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, and other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. The parties hereby designate, constitute and appoint Escrow Agent as
the "Escrow Agent" under this Agreement.
2. The Escrow Agent hereby acknowledges receipt of certificates
evidencing ordinary shares of each of LTGL, MISS ELLIE'S WORLD TRAVEL LIMITED, a
private limited company organized under the laws of England and Wales ("Miss
Ellie's) and ILIOS TRAVEL LIMITED, a private limited company organized under the
laws of England and Wales
15
<PAGE>
("Ilios"), GHG and Trrravel.com in the amounts set forth on SCHEDULE A annexed
hereto and made a part hereof (collectively, the "Escrowed Escrowed Shares"),
together with stock powers duly executed in blank by the Shareholders of record
of such Escrowed Escrowed Shares
3. The Escrowed Shares are to be held by Escrow Agent in escrow and
disposed of pursuant to and strictly in accordance with the terms and conditions
of this Agreement. Escrow Agent shall hold the Escrowed Shares in a safe place,
provided that Escrow Agent shall not be obligated to obtain insurance covering
the loss and/or destruction of the Escrowed Shares unless the Parties so request
and advance the Escrow Agent sufficient funds to pay for said insurance. The
Escrow Agent undertakes to perform only such duties as are expressly set forth
in this Agreement, and no implied duties or obligations of the Escrow Agent
shall be read into this Agreement.
4. The Escrow Agent shall at all times be authorized to deliver the
Escrowed Shares in accordance with the terms of the Agreement or with written
instructions executed by Kevin R. Leech or Cignet, as representative of all of
the Shareholders (the "Representative"), all the Parties. In the event the
Escrow Agent shall receive a written claim of default under the Agreement by any
of the Parties, then the Escrow Agent shall not release the Escrowed Shares from
escrow unless and until the Escrow Agent shall have received written
instructions from the Representative as the proper deliver of the Escrowed
Shares or Escrow Agent has received direction from a court of competent
jurisdiction (after expiration of any applicable appeal period) as to the proper
party entitled to receipt of the Escrowed Shares. Escrow Agent shall be
authorized to file an action in interpleader to determine the proper party
entitled to the Escrowed Shares; and the defaulting party, as determined in such
proceeding, shall indemnify and hold harmless the Escrow Agent from all costs
and expenses, including reasonable attorney's fees associated with the
proceeding. Escrow Agent may act in reliance upon any writing or instrument or
signature which it in good faith believes to be genuine and may assume that any
person purporting to give any writing, notice, advice, or instruction in
connection with the provisions hereof has been duly authorized to do so. Escrow
Agent shall not be liable in any manner for the sufficiency or correctness as to
form, manner of execution or validity of any instrument deposited in this escrow
nor as to the identity, authority or right of any persons executing the same;
and its duties hereunder shall be limited to the safekeeping of the Escrowed
Shares and for the disposition of same in accordance with this Agreement. Escrow
Agent hereby executes this Agreement for the sole and exclusive purpose of
evidencing its Agreement of the provisions hereof.
5. The Parties hereby agree to indemnify and hold the Escrow Agent
harmless from any and all claims, liabilities, losses, actions, suits or
proceedings at law or in equity, or any other expense, fees, or charges of any
character or nature, which it may incur or with which it may be threatened by
reason of its acting as Escrow Agent under this Agreement; and in connection
therewith, to indemnify the Escrow Agent against any and all expenses, including
reasonable attorney's fees and the cost of defending any action, suit or
proceeding or resisting any claim.
16
<PAGE>
6. The Escrow Agent may consult with counsel of its own choice and
shall have full and complete authorization and protection for any action taken
or suffered by it and hereunder in good faith and in accordance with the opinion
of such counsel. The Escrow Agent shall otherwise not be liable for any mistakes
of fact or error in judgment, or for any acts or omissions of any kind unless
caused by its willful misconduct or gross negligence.
7. All reasonable out-of-pocket expenses of Escrow Agent in connection
with the services rendered under this Agreement shall be paid by the Company.
8. Upon release and/or delivery of all Escrowed Shares in accordance
with the terms of the Agreement and this Agreement, this Agreement shall
terminate and the parties shall be released hereunder except with respect to the
indemnification obligations in favor of the Escrow Agent.
9. The provisions of this Agreement may not be amended, supplemented,
waived or changed orally, but only by a writing signed by the party as to whom
enforcement of any such amendment, modification, supplement or waiver is sought
and making specific reference to this Agreement.
10. Escrow Agent shall have no duties or responsibilities other than
those expressly set forth herein. Escrow Agent shall not be liable for any
action taken or omitted by it, or any action suffered by it, except for gross
negligence or willful misconduct. The Escrow Agent shall not be bound by any
notice or demand unless evidenced by a writing delivered to Escrow Agent signed
by the proper party or parties.
11. This Agreement contains the entire understanding between and among
the parties hereto with respect to the subject matter hereof, and shall be
binding upon and inure to the benefit of such parties, and their respective
heirs, successors in interest and legal representatives.
12. This Agreement is governed by, and is to be construed in accordance
with, the laws of the State of New York, United States of America.
This Agreement may be executed in counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
LEISURE TRAVEL GROUP, INC.
a Delaware corporation
By:
-------------------------------
17
<PAGE>
LEISURE TRAVEL GROUP LIMITED
a private limited company organized under the laws of England and Wales
By:
-------------------------------
CIGNET VENTURES LIMITED
a private limited company organized under the laws of Guernsey (Channel Islands)
By:
-------------------------------
RED KITE VENTURES LIMITED
a private limited company organized under the laws of Guernsey (Channel Islands)
By:
-------------------------------
WARREN CAPITAL LIMITED
a private limited company organized under the laws of England and Wales
By:
-------------------------------
CI4NET.COM, INC.
a Delaware corporation
By:
------------------------------
RAYMOND J. PEEL
18
<PAGE>
MILNER ESTATES
By:
-----------------------------
PHILIP MASON
-----------------------------
STEPHEN LAST
------------------------------
ROD RODGERS
------------------------------
DAVID MARRIOTT
ESCROW AGENT:
GREENBERG TRAURIG, LLP
By:
------------------------------
STEPHEN A. WEISS, SHAREHOLDER
19
LEISURE TRAVEL GROUP, INC.
2000 STOCK OPTION PLAN
INTRODUCTION
Leisure Travel Group, Inc., a Delaware corporation (hereinafter referred to
as the "Corporation"), hereby establishes an incentive compensation plan to be
known as the "LEISURE TRAVEL GROUP, INC. 2000 STOCK OPTION PLAN" (hereinafter
referred to as the "Plan"), as set forth in this document. The Plan permits the
grant of Non-Qualified Stock Options and Incentive Stock Options.
The Plan shall become effective on February 23, 2000. However, it shall be
rendered null and void and have no effect, and all Options granted hereunder
shall be canceled, if the Plan is not approved by a majority vote of the
Corporation's stockholders within twelve (12) months of the date the Plan is
adopted by the Corporation's Board of Directors.
The purpose of the Plan is to promote the success and enhance the value of
the Corporation by linking the personal interests of Optionees to those of the
Corporation's stockholders by providing Optionees with an incentive for
outstanding performance. The Plan is further intended to assist the Corporation
in its ability to motivate, and retain the services of, Optionees upon whose
judgment, interest and special effort the successful conduct of its and its
subsidiaries' operations is largely dependent.
<PAGE>
I
DEFINITIONS
For purposes of the Plan, the following terms shall be defined as follows
unless the context clearly indicates otherwise:
(a) "Award Agreement" shall mean the written agreement, executed by an
appropriate officer of the Corporation, pursuant to which an Option is granted.
(b) "Board of Directors" shall mean the Board of Directors of the
Corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended, and
the rules and regulations thereunder.
(d) "Committee" shall mean the Board of Directors or any committee of two
or more persons designated by the Board of Directors to perform the functions of
the Committee hereunder.
(e) "Common Stock" shall mean the common stock of the Corporation as
authorized from time to time.
(f) "Consultant" shall mean an individual who is in a Consulting
Relationship with the Corporation or any Parent or Subsidiary.
(g) "Consulting Relationship" shall mean the relationship that exists
between an individual and the Corporation (or any Parent or Subsidiary) if (i)
such individual or (ii) any entity of which such individual is an executive
officer or owns a substantial equity interest has entered into a written
consulting contract with the Corporation or any Parent or Subsidiary.
(h) "Corporation" shall mean Leisure Travel Group, Inc., a Delaware
corporation.
(i) "Disability" shall have the same meaning as the term "permanent and
total disability" under Section 22(e)(3) of the Code.
(j) "Employee" shall mean a common law employee of the Corporation or of
any Parent or Subsidiary.
(k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder.
(l) "Executive" means an employee of the Corporation or of any Parent or
Subsidiary whose compensation is subject to the deduction limitations set forth
under Code Section 162(m).
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<PAGE>
(m) "Fair Market Value" of the Corporation's Common Stock on a Trading Day
shall mean the last reported sale price for Common Stock or, in case no such
reported sale takes place on such Trading Day, the average of the closing bid
and asked prices for the Common Stock for such Trading Day, in either case on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading, or if the Common Stock is not listed or admitted to
trading on any national securities exchange, but is traded in the
over-the-counter market, the closing sale price of the Common Stock or, if no
sale is publicly reported, the average of the closing bid and asked quotations
for the Common Stock, as reported by the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or any comparable system or, if
the Common Stock is not listed on NASDAQ or a comparable system, the closing
sale price of the Common Stock or, if no sale is publicly reported, the average
of the closing bid and asked prices, as furnished by two members of the National
Association of Securities Dealers, Inc. who make a market in the Common Stock
selected from time to time by the Corporation for that purpose. In addition, for
purposes of this definition, a "Trading Day" shall mean, if the Common Stock is
listed on any national securities exchange, a business day during which such
exchange was open for trading and at least one trade of Common Stock was
effected on such exchange on such business day, or, if the Common Stock is not
listed on any national securities exchange but is traded in the over-the-counter
market, a business day during which the over-the-counter market was open for
trading and at least one "eligible dealer" quoted both a bid and asked price for
the Common Stock. An "eligible dealer" for any day shall include any
broker-dealer who quoted both a bid and asked price for such day, but shall not
include any broker-dealer who quoted only a bid or only an asked price for such
day. In the event the Corporation's Common Stock is not publicly traded, the
Fair Market Value of such Common Stock shall be determined by the Committee in
good faith.
(n) "Good Cause" shall, with respect to any Optionee, have the equivalent
meaning (or the same meaning as "cause" or "for cause") set forth in any
employment agreement between the Optionee and the Corporation or Parent or
Subsidiary or, in the absence of any such agreement, such term shall mean (i)
the Optionee's willful or gross misconduct or willful or gross negligence in the
performance of his duties for the Corporation or for any Parent or Subsidiary
after prior written notice of such misconduct or negligence and the continuance
thereof for a period of 30 days after receipt by such Optionee of such notice,
(ii) the Optionee's intentional or habitual neglect of his duties for the
Corporation or for any Parent or Subsidiary after prior written notice of such
neglect, (iii) the Optionee's theft or misappropriation of funds or other
property of the Corporation or of any Parent or Subsidiary, fraud, criminal
misconduct, breach of fiduciary duty or dishonesty in the performance of his
duties on behalf of the Corporation or any Parent or Subsidiary or commission of
a felony, or crime of moral turpitude or any other conduct reflecting adversely
upon the Corporation or any Parent or Subsidiary, (iv) the Optionee's violation
of any covenant not to compete or not to disclose confidential information with
respect to the Corporation or any Parent or Subsidiary or (v) the direct or
indirect breach by the Optionee of the terms of a consulting contract with the
Corporation or any Parent or Subsidiary.
(o) "Good Reason" shall, with respect to any Optionee, have the equivalent
meaning set forth in any employment agreement between the Optionee and the
Corporation or any Parent or Subsidiary or, in the absence of any such
agreement, the meaning, if any, that may be set forth in the applicable Option
granted to such Optionee.
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<PAGE>
(p) "Incentive Stock Option" shall mean a stock option satisfying the
requirements for tax-favored treatment under Section 422 of the Code.
(q) "Non-Qualified Option" shall mean a stock option which does not satisfy
the requirements for, or which is not intended to be eligible for, tax-favored
treatment under Section 422 of the Code.
(r) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock
Option granted pursuant to the provisions of Section VI hereof.
(s) "Optionee" shall mean an individual who is granted an Option under the
terms of the Plan.
(t) "Outside Directors" shall mean members of the Board of Directors of the
Corporation who are classified as "outside directors" under Section 162(m) of
the Code.
(u) "Parent" shall mean a parent corporation of the Corporation within the
meaning of Section 424(e) of the Code.
(v) "Securities Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations thereunder.
(w) "Subsidiary" shall mean a subsidiary corporation of the Corporation
within the meaning of Section 424(f) of the Code.
(x) "Termination of Consulting Relationship" shall mean the cessation,
abridgment or termination of a Consultant's Consulting Relationship with the
Corporation or any Parent or Subsidiary as a result of (i) the Consultant's
death or Disability, (ii) the cancellation, annulment, expiration, termination
or breach of the written consulting contract between the Corporation (or any
Parent or Subsidiary) and the Consultant (or any other entity) giving rise to
the Consulting Relationship or (iii) if the written consulting contract is not
directly between the Corporation (or any Parent or Subsidiary) and the
Consultant, the Consultant's termination of service with, or sale of all or
substantially all of his equity interest in, the entity which has entered into
the written consulting contract with the Corporation, Parent or Subsidiary.
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<PAGE>
II
ADMINISTRATION
The Plan shall be administered by the Committee, which shall be composed of
the entire Board of Directors or of two or more Non-Employee Directors, as
defined in Rule 16b-3(b)(3) promulgated under the Exchange Act (to the extent
Section 16 of the Exchange Act is applicable to Options granted hereunder) and
who also qualify as "Outside Directors" (but only with respect to the period
during which Options granted hereunder are subject to the deduction limitations
of Section 162(m) of the Code). Subject to the provisions of the Plan, the
Committee may establish from time to time such regulations, provisions,
proceedings and conditions of awards which, in its sole opinion, may be
advisable in the administration of the Plan. A majority of the Committee shall
constitute a quorum, and, subject to the provisions of Section V of the Plan,
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee,
shall be the acts of the Committee as a whole.
-5-
<PAGE>
III
SHARES AVAILABLE
Subject to the adjustments provided in Section VII of the Plan, the
aggregate number of shares of the Common Stock which may be granted for all
purposes under the Plan shall be 1,000,0000 shares. Shares of Common Stock
underlying awards of securities (derivative or not) shall be counted against the
limitation set forth in the immediately preceding sentence and may be reused to
the extent that the related Option to any individual is settled in cash,
expires, is terminated unexercised, or is forfeited. Common Stock granted to
satisfy Options under the Plan may be authorized and unissued shares of the
Common Stock, issued shares of such Common Stock held in the Corporation's
treasury or shares of Common Stock acquired on the open market.
-6-
<PAGE>
IV
ELIGIBILITY
Officers and key employees of the Corporation (or of any Parent or
Subsidiary) who are Employees, and Consultants, and directors of the Corporation
or of any Parent or Subsidiary, shall be eligible to participate in the Plan.
Where appropriate under the Plan, directors who are not Employees shall be
referred to as "employees" and their service as directors as "employment".
-7-
<PAGE>
V
AUTHORITY OF COMMITTEE
The Plan shall be administered by, or under the direction of, the
Committee, which shall administer the Plan so as to comply at all times with
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder, to the extent such compliance is required, and shall otherwise have
plenary authority to interpret the Plan and to make all determinations specified
in or permitted by the Plan or deemed necessary or desirable for its
administration or for the conduct of the Committee's business. All
interpretations and determinations of the Committee may be made on an individual
or group basis and shall be final, conclusive and binding on all interested
parties. Subject to the express provisions of the Plan, the Committee shall have
authority, in its discretion, to determine the persons to whom Options shall be
granted, the times when such Options shall be granted, the number of Options,
the exercise price of each Option, the period(s) during which an Option shall be
exercisable (whether in whole or in part), the restrictions to be applicable to
Options and the other terms and provisions thereof (which need not be
identical). In addition, the authority of the Committee shall include, without
limitation, the following:
(a) Financing. The arrangement of temporary financing for an Optionee by
registered broker-dealers, under the rules and regulations of the Federal
Reserve Board, for the purpose of assisting an Optionee in the exercise of an
Option, such authority to include the payment by the Corporation of the
commissions of the broker-dealer;
(b) Procedures for Exercise of Option. The establishment of procedures for
an Optionee (i) to exercise an Option by payment of cash, (ii) to have withheld
from the total number of shares of Common Stock to be acquired upon the exercise
of an Option that number of shares having a Fair Market Value, which, together
with such cash as shall be paid in respect of fractional shares, shall equal the
Option exercise price of the total number of shares of Common Stock to be
acquired, (iii) to exercise all or a portion of an Option by delivering that
number of shares of Common Stock already owned by him having a Fair Market Value
which shall equal the Option exercise price for the portion exercised and, in
cases where an Option is not exercised in its entirety, and subject to the
requirements of the Code, to permit the Optionee to deliver the shares of Common
Stock thus acquired by him in payment of shares of Common Stock to be received
pursuant to the exercise of additional portions of such Option, the effect of
which shall be that an Optionee can in sequence utilize such newly acquired
shares of Common Stock in payment of the exercise price of the entire Option,
together with such cash as shall be paid in respect of fractional shares and
(iv) to engage in any form of "cashless" exercise. The Committee may, in its
sole discretion, require that an exercise described under any one or more of the
methods described under clauses (ii), (iii) or (iv) of the immediately preceding
sentence (to the extent such exercise is, or is deemed to constitute, an
exercise effected by the tendering of Common Stock) be consummated with Common
Stock (i) held by the Optionee for at least six (6) months or (ii) acquired by
the Optionee other than under the Plan or a similar program.
(c) Withholding. The establishment of a procedure whereby a number of
shares of Common Stock may be withheld from the total number of shares of Common
Stock to be issued upon exercise of an Option or for the tender of shares of
Common Stock owned by any Optionee to meet any obligation of withholding for
taxes incurred by the Optionee upon such exercise. The Committee may, in its
sole discretion, require that if any such withholding is effected by the
tendering of Common Stock, such withholding shall be consummated with Common
Stock (i) held by the Optionee for at least six (6) months or (ii) acquired by
the Optionee other than under the Plan or a similar program.
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<PAGE>
VI
STOCK OPTIONS
The Committee shall have the authority, in its discretion, to grant
Incentive Stock Options or to grant Non-Qualified Stock Options or to grant both
types of Options. Notwithstanding anything contained herein to the contrary, an
Incentive Stock Option may be granted only to common law employees of the
Corporation or of any Parent or Subsidiary now existing or hereafter formed or
acquired, and not to any director or officer who is not also such a common law
employee. In order for an Option grant to satisfy the "performance-based
compensation" exemption to the deduction limitation under Code Section 162(m),
the maximum number of shares of Common Stock subject to Options which may be
granted to any single Executive during any one calendar year, beginning with the
year grants under the Plan first become subject to such deduction limitations,
is [NUMBER]. The terms and conditions of the Options shall be determined from
time to time by the Committee; provided, however, that the Options granted under
the Plan shall be subject to the following:
(a) Exercise Price. The Committee shall establish the exercise price at the
time any Option is granted at such amount as the Committee shall determine;
provided, however, that the exercise price for each share of Common Stock
purchasable under any Option which is intended to satisfy the performance-based
compensation exemption to the deduction limitation under Section 162(m) of the
Code or any Incentive Stock Option granted hereunder shall be such amount as the
Committee shall, in its best judgment, determine to be not less than one hundred
percent (100%) of the Fair Market Value per share of Common Stock at the date
the Option is granted; and provided, further, that in the case of an Incentive
Stock Option granted to a person who, at the time such Incentive Stock Option is
granted, owns shares of stock of the Corporation or of any Parent or Subsidiary
which possess more than ten percent (10%) of the total combined voting power of
all classes of shares of stock of the Corporation or of any Parent or
Subsidiary, the exercise price for each share of Common Stock shall be such
amount as the Committee, in its best judgment, shall determine to be not less
than one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock at the date the Option is granted. The exercise price will be subject to
adjustment in accordance with the provisions of Section VII of the Plan.
(b) Payment of Exercise Price. The exercise price per share of Common Stock
with respect to each Option shall be payable at the time the Option is
exercised. Such price shall be payable in cash or pursuant to any of the other
methods set forth in Sections V(a) or (b) hereof, as determined by the
Committee. Shares of Common Stock delivered to the Corporation in payment of the
exercise price shall be valued at the Fair Market Value of the Common Stock on
the date preceding the date of the exercise of the Option.
(c) Exercisability of Options. Except as provided in Section VI(e) hereof,
each Option shall be exercisable in whole or in installments, and at such
time(s), and subject to the fulfillment of any conditions on, and to any
limitations on, exercisability as may be determined by the Committee at the time
of the grant of such Options. The right to purchase shares of Common Stock shall
be cumulative so that when the right to purchase any shares of Common Stock has
accrued such shares of Common Stock or any part thereof may be purchased at any
time thereafter until the expiration or termination of the Option.
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<PAGE>
(d) Expiration of Options. No Incentive Stock Option by its terms shall be
exercisable after the expiration of ten (10) years from the date of grant of the
Option; provided, however, in the case of an Incentive Stock Option granted to a
person who, at the time such Option is granted, owns shares of stock of the
Corporation or of any Parent or Subsidiary possessing more than ten percent
(10%) of the total combined voting power of all classes of shares of stock of
the Corporation or of any Parent or Subsidiary, such Option shall not be
exercisable after the expiration of five (5) years from the date such Option is
granted.
(e) Exercise Upon Optionee's Termination of Employment or Termination of
Consulting Relationship. If the employment of an Optionee by the Corporation or
by any Parent or Subsidiary is terminated for any reason, any Incentive Stock
Option granted to such Optionee may not be exercised later than three (3) months
(one (1) year in the case of termination due to death or Disability) after the
date of such termination of employment. For purposes of determining whether any
Optionee has incurred a termination of employment (or a Termination of
Consulting Relationship), an Optionee who is both an employee (or a Consultant)
and a director of the Corporation and/or any Parent or Subsidiary shall (with
respect to any Non-Qualified Option that may have been granted to him) be
considered to have incurred a termination of employment (or a Termination of
Consulting Relationship) only upon his termination of service both as an
employee (or as a Consultant) and as a director. Furthermore, (i) if an
Optionee's employment (or Consulting Relationship) is terminated by the
Corporation or by any Parent or Subsidiary for Good Cause or (ii) if an Optionee
voluntarily terminates his employment other than for Good Reason or Disability
or without the written consent of the Committee (or incurs a voluntary
Termination of Consulting Relationship other than for Disability), regardless of
whether such Optionee continues to serve as a director of the Corporation or of
any Parent or Subsidiary, then the Optionee shall, at the time of such
termination of employment (or Termination of Consulting Relationship), forfeit
his rights to exercise any and all of the outstanding Option(s) theretofore
granted to him.
(f) Maximum Amount of Incentive Stock Options. Each Option under which
Incentive Stock Options are granted shall provide that to the extent the sum of
(i) the Fair Market Value of the shares of Common Stock (determined as of the
time of the grant of the Option) subject to such Incentive Stock Option plus
(ii) the fair market values (determined as of the date(s) of grant of the
option(s)) of all other shares of Common Stock subject to incentive stock
options granted to an Optionee by the Corporation or any Parent or Subsidiary,
which are exercisable for the first time by any person during any calendar year,
exceed(s) One Hundred Thousand Dollars ($100,000), such excess shares of Common
Stock shall not be deemed to be purchasable pursuant to Incentive Stock Options.
The terms of the immediately preceding sentence shall be applied by taking all
options, whether or not granted under the Plan, into account in the order in
which they are granted.
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<PAGE>
(g) Dividend Equivalents for Outstanding Options. The Committee may, in its
sole discretion, provide that amounts equivalent to dividends shall be payable
with respect to one or more shares of Common Stock subject to vested but
unexercised Option(s) granted to an Optionee. Subject to the terms contained in
the appropriate Option, dividend equivalents related to an Optionee's Options(s)
shall be credited to a suspense account (and remain the property of the
Corporation) at such times (and in such amounts) as are dividends payable to the
then shareholders of record of the Corporation's Common Stock. Dividend
equivalents shall be payable to the Optionee in cash or in Common Stock, as set
forth under the terms of the Option, if and at such time as the related
Option(s) are exercised.
(h) Reload Options. (i) Concurrently with the award of an Option (for these
purposes, the "Primary Option") to an Optionee, the Committee may, in its sole
discretion, authorize the award of an additional Option or Options (hereinafter
referred to as "Reload Options") to such Optionee providing for the purchase of
shares of Common Stock in an amount equal to the sum of:
(A) the number of shares of Common Stock, if any, used to
exercise the Primary Option; and
(B) to the extent authorized by the Committee, the number of
shares of Common Stock used to satisfy any tax withholding requirement
related to the exercise of the Primary Option.
For purposes of this subsection (h), upon its exercise a Reload Option
shall be treated as a Primary Option.
(ii) The grant of a Reload Option will become effective upon the
exercise of the Primary Option. At the discretion of the Committee, a
Reload Option may be an Incentive Stock Option.
(iii) To the extent that the exercise of any Option will result in the
award of a Reload Option, the Award Agreement under which such Option is
granted must provide that the exercise of such Primary Option will result
in the award of a related Reload Option, which will be evidenced under a
separate Award Agreement. The terms of such Award Agreement shall include,
among other items, provisions providing that (A) the exercise price per
share of Common Stock available for purchase under the Reload Option shall
be no less than 100% of the Fair Market Value of such Common Stock on the
date the Reload Option is granted and (B) the term of the Reload Option
shall not extend beyond the remaining term of the Primary Option.
(iv) Notwithstanding the above, no Reload Option will be granted
pursuant to the exercise of a Primary Option if such exercise occurs after
the termination of the Optionee's employment with the Corporation and each
Parent or Subsidiary.
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VII
ADJUSTMENT OF SHARES; MERGER OR
CONSOLIDATION, ETC. OF THE CORPORATION
(a) Recapitalization, Etc. In the event there is any change in the
outstanding Common Stock of the Corporation by reason of any reorganization,
recapitalization, stock split, stock dividend, combination of shares or
otherwise, there shall be substituted for or added to each share of Common Stock
theretofore appropriated or thereafter subject, or which may become subject, to
any Option, the number and kind of shares of stock or other securities into
which each outstanding share of Common Stock shall be so changed or for which
each such share shall be exchanged, or to which each such share shall be
entitled, as the case may be, and the per share price thereof also shall be
appropriately adjusted. Notwithstanding the foregoing, (i) each such adjustment
with respect to an Incentive Stock Option shall comply with the rules of Section
424(a) of the Code and (ii) in no event shall any adjustment be made which would
render any Incentive Stock Option granted hereunder to be other than an
incentive stock option for purposes of Section 422 of the Code.
(b) Merger, Consolidation or Change in Control of Corporation. Upon (i) the
merger or consolidation of the Corporation with or into another corporation
(pursuant to which the stockholders of the Corporation immediately prior to such
merger or consolidation will not, as of the date of such merger or
consolidation, own a beneficial interest in shares of voting securities of the
corporation surviving such merger or consolidation having at least a majority of
the combined voting power of such corporation's then outstanding securities), if
the agreement of merger or consolidation does not provide for (1) the
continuance of the Options granted hereunder or (2) the substitution of new
options for Options granted hereunder, or for the assumption of such Options by
the surviving corporation, (ii) the dissolution, liquidation, or sale of all or
substantially all the assets of the Corporation to a person unrelated to the
Corporation or to a direct or indirect owner of a majority of the voting power
of the Corporation's then outstanding voting securities (such sale of assets
being referred to as an "Asset Sale") or (iii) the Change in Control of the
Corporation, then the holder of any such Option theretofore granted and still
outstanding (and not otherwise expired) shall have the right immediately prior
to the effective date of such merger, consolidation, dissolution, liquidation,
Asset Sale or Change in Control of the Corporation to exercise such Option(s) in
whole or in part without regard to any installment provision that may have been
made part of the terms and conditions of such Option(s); provided that all
conditions precedent to the exercise of such Option(s), other than the passage
of time, have occurred. The Corporation, to the extent practicable, shall give
advance notice to affected Optionees of such merger, consolidation, dissolution,
liquidation, Asset Sale or Change in Control of the Corporation. Unless
otherwise provided in the subject Award Agreement or merger, consolidation or
Asset Sale agreement, all such Options and which are not so exercised shall be
forfeited as of the effective time of such merger, consolidation, dissolution,
liquidation or Asset Sale (but not in the case of a Change in Control of the
Corporation). In the event the Corporation becomes a subsidiary of another
corporation (the "New Parent Corporation") with respect to which the
stockholders of the Corporation (as determined immediately before such
transaction) own, immediately after such transaction, a beneficial interest in
shares of voting securities of the New Parent Corporation having at least a
majority of the combined voting power of such New Parent Corporation's then
outstanding securities, there shall be substituted for Options granted
hereunder, options to purchase common stock of the New Parent Corporation. The
substitution described in the immediately preceding sentence shall be effected
in a manner such that any option granted by the New Parent Corporation to
replace an Incentive Stock Option granted hereunder shall satisfy the
requirements of Section 422 of the Code.
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<PAGE>
(c) Definition of Change in Control of the Corporation. As used herein, a
"Change in Control of the Corporation" shall be deemed to have occurred if any
person (including any individual, firm, partnership or other entity) together
with all Affiliates and Associates (as defined under Rule 12b-2 of the General
Rules and Regulations promulgated under the Exchange Act) of such person (but
excluding (i) a trustee or other fiduciary holding securities under an employee
benefit plan of the Corporation or any subsidiary of the Corporation, (ii) a
corporation owned, directly or indirectly, by the stockholders of the
Corporation in substantially the same proportions as their ownership of the
Corporation, (iii) the Corporation or any subsidiary of the Corporation or (iv)
only as provided in the immediately following sentence, an Optionee together
with all Affiliates and Associates of the Optionee) who is not a stockholder or
an Affiliate or Associate of a stockholder of the Corporation on the date of
stockholder approval of the Plan is or becomes the Beneficial Owner (as defined
in Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of
securities of the Corporation representing Fifty Percent (50%) or more of the
combined voting power of the Corporation's then outstanding securities. The
provisions of clause (iv) of the immediately preceding sentence shall apply only
with respect to the Option(s) held by the Optionee who, together with his
Affiliates or Associates, if any, is or becomes the direct or indirect
Beneficial Owner of the percentage of securities set forth in such clause.
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<PAGE>
VIII
MISCELLANEOUS PROVISIONS
(a) Administrative Procedures. The Committee may establish any procedures
determined by it to be appropriate in discharging its responsibilities under the
Plan. All actions and decisions of the Committee shall be final.
(b) Assignment or Transfer. No grant or award of any Option (other than a
Non-Qualified Option) or any rights or interests therein shall be assignable or
transferable by an Optionee except by will or the laws of descent and
distribution or pursuant to a domestic relations order. During the lifetime of
an Optionee, Incentive Stock Options granted hereunder shall be exercisable only
by the Optionee.
(c) Investment Representation. With respect to shares of Common Stock
received pursuant to the exercise of an Option, the Committee may require, as a
condition of receiving such securities, that the Optionee furnish to the
Corporation such written representations and information as the Committee deems
appropriate to permit the Corporation, in light of the existence or nonexistence
of an effective registration statement under the Securities Act, to deliver such
securities in compliance with the provisions of the Securities Act.
(d) Withholding Taxes. In the case of the issuance or distribution of
Common Stock or other securities hereunder upon the exercise of any Option, the
Corporation, as a condition of such issuance or distribution, may require the
payment (through withholding from the Optionee's salary, reduction of the number
of shares of Common Stock or other securities to be issued, or otherwise) of any
federal, state, local or foreign taxes required to be withheld. Each Optionee
may satisfy the withholding obligations by paying to the Corporation (or the
appropriate Parent or Subsidiary) a cash amount equal to the amount required to
be withheld or, subject to the Committee's consent thereto, by tendering to the
Corporation (or to the appropriate Parent or Subsidiary) a number of shares of
Common Stock having a value equivalent to such cash amount, or by use of any
available procedure approved by the Committee as described under Section V(c)
hereof.
(e) Costs and Expenses. The costs and expenses of administering the Plan
shall be borne by the Corporation and shall not be charged against any award nor
to any individual receiving an Option.
(f) Funding of Plan. The Plan shall be unfunded. The Corporation shall not
be required to segregate any of its assets to assure the payment of any Option
under the Plan. Neither the Optionees nor any other persons shall have any
interest in any fund or in any specific asset or assets of the Corporation or
any other entity by reason of any Option, except to the extent expressly
provided hereunder.
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<PAGE>
(g) Other Incentive Plans. The adoption of the Plan does not preclude the
adoption by appropriate means of any other incentive plan for employees.
(h) Plurals and Gender. Where appearing in the Plan, the masculine gender
shall include the feminine and neuter genders, and the singular shall include
the plural, and vice versa, unless the context clearly indicates a different
meaning.
(i) Headings. The headings and sub-headings in the Plan are inserted for
the convenience of reference only and are to be ignored in any construction of
the provisions hereof.
(j) Severability. In case any provision of the Plan shall be held illegal
or void, such illegality or invalidity shall not affect the remaining provisions
of the Plan, but shall be fully severable, and the Plan shall be construed and
enforced as if said illegal or invalid provisions had never been inserted
herein.
(k) Liability and Indemnification. (i) Neither the Corporation nor any
Parent or Subsidiary shall be responsible in any way for any action or omission
of the Committee, or any other fiduciaries in the performance of their duties
and obligations as set forth in the Plan. Furthermore, neither the Corporation
nor any Parent or Subsidiary shall be responsible for any act or omission of any
of their agents, or with respect to reliance upon advice of their counsel,
provided that the Corporation and/or the appropriate Parent or Subsidiary relied
in good faith upon the action of such agent or the advice of such counsel.
(ii) Neither the Corporation, any Parent or Subsidiary, the Committee,
nor any agents, employees, officers, directors or shareholders of any of
them, nor any other person shall have any liability or responsibility with
respect to the Plan, except as expressly provided herein.
(l) Incapacity. If the Committee shall receive evidence satisfactory to it
that a person entitled to exercise any Option is, at the time when such Option
becomes exercisable, a minor, or is physically or mentally incompetent to
receive such Option and to give a valid release thereof, and that another person
or an institution is then maintaining or has custody of such person and that no
guardian, committee or other representative of the estate of such person shall
have been duly appointed, the Committee may permit such Option to be exercised
by such other person or institution, including a custodian under a Uniform Gifts
to Minors Act or corresponding legislation (who shall be an adult, a guardian of
the minor or a trust company), and the release by such other person or
institution shall be a valid and complete discharge for the exercise of such
Option.
(m) Cooperation of Parties. All parties to the Plan and any person claiming
any interest hereunder agree to perform any and all acts and execute any and all
documents and papers which are necessary or desirable for carrying out the Plan
or any of its provisions.
(n) Governing Law. All questions pertaining to the validity, construction
and administration of the Plan shall be determined in accordance with the laws
of the State of Delaware.
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<PAGE>
(o) Nonguarantee of Employment or Consulting Relationship. Nothing
contained in the Plan shall be construed as a contract of employment (or as a
consulting contract) between the Corporation (or any Parent or Subsidiary), and
any employee or Optionee, as a right of any employee or Optionee to be continued
in the employment of (or in a Consulting Relationship with) the Corporation (or
any Parent or Subsidiary), or as a limitation on the right of the Corporation or
any Parent or Subsidiary to discharge any of its employees (or Consultants), at
any time, with or without cause (but subject to the terms of any applicable
employment or consulting agreement).
(p) Notices. Each notice relating to the Plan shall be in writing and
delivered in person, by recognized overnight courier or by certified mail to the
proper address. Except as otherwise provided in any Award Agreement with respect
to the exercise thereunder, all notices to the Corporation or the Committee
shall be addressed to it at [ADDRESS], Attn: [OFFICER]. All notices to
Optionees, beneficiaries or other persons acting for or on behalf of such
persons shall be addressed to such person at the last address for such person
maintained in the Committee's records.
(q) Written Agreements. Each Option shall be evidenced by a signed written
agreement between the Corporation and the Optionee containing the terms and
conditions of the award.
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<PAGE>
IX
AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Corporation shall have the right to amend,
suspend or terminate the Plan at any time, provided that no amendment shall be
made which shall increase the total number of shares of the Common Stock of the
Corporation which may be issued and sold pursuant to Incentive Stock Options,
reduce the minimum exercise price in the case of an Incentive Stock Option or
modify the provisions of the Plan relating to eligibility with respect to
Incentive Stock Options unless such amendment is made by or with the approval of
the stockholders of the Corporation within 12 months of the effective date of
such amendment, but only if such approval is required by any applicable
provision of law. Furthermore, no amendment to the Plan may change (i) the
maximum amount of Options that may be granted on an annual basis or (ii) the
exercise price of any options granted hereunder without the prior approval of
the Corporation's stockholders in the manner required under Section 162(m) of
the Code; provided, however, that such stockholder consent is required only
during such period that the deduction limitations under Code Section 162(m)
apply to Options granted under the Plan. The Board of Directors of the
Corporation shall also be authorized to amend the Plan and the Options granted
thereunder to maintain qualification as "incentive stock options" within the
meaning of Section 422 of the Code, if applicable. Except as otherwise provided
herein, no amendment, suspension or termination of the Plan shall alter or
impair any vested Option previously granted under the Plan without the consent
of the holder thereof.
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<PAGE>
X
TERM OF PLAN
The Plan shall automatically terminate on the day immediately preceding the
tenth (10th) anniversary of the date the Plan was adopted by the Board of
Directors of the Corporation, unless sooner terminated by such Board of
Directors. No Options may be granted under the Plan subsequent to the
termination of the Plan.
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<PAGE>
- --------------------------------------------------------------------------------
LEISURE TRAVEL GROUP, INC.
2000 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
---------------
EFFECTIVE AS OF FEBRUARY 23, 2000
FORM OF INCENTIVE STOCK OPTION AGREEMENT
AGREEMENT made as of this [__] day of [______], 2000 (the "Date of
Grant") between Leisure Travel Group, Inc., a Delaware corporation (hereinafter
referred to as the "Company"), and [______], residing at [______] (hereinafter
referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires, in connection with the employment of the
Employee and in accordance with its 2000 Stock Option Plan (the "Plan"), to
provide the Employee with an opportunity to acquire Common Stock, $.001 par
value (hereinafter referred to as "Common Stock"), of the Company on favorable
terms and thereby increase his proprietary interest in the continued progress
and success of the business of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by the
Committee, the Company, subject to the terms of the Plan and this Agreement,
hereby grants to the Employee as a matter of separate inducement and agreement,
and in addition to and not in lieu of salary or other compensation for services,
the right to purchase (hereinafter referred to as the "Option") an aggregate of
[NUMBER] shares of Common Stock, subject to adjustment as provided in the Plan
(such shares, as adjusted, hereinafter being referred to as the "Shares"). The
Option is intended to qualify as an incentive stock option under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of shares of Common Stock covered by
the Option will be [$____] per share, being not less than [100%] [110%] of the
Fair Market Value of one share of Common Stock on the Date of Grant, subject to
adjustment as provided in the Plan.
3. Exercise of Option. The Option shall be exercisable on the terms and
conditions hereinafter set forth:
(a) The Option shall become exercisable cumulatively as to the
following amounts of the number of Shares originally subject thereto (after
giving effect to any adjustment pursuant to the Plan), on the dates
indicated:
(i) as to [ ] Shares on or after [ ];
(ii) as to [ ] Shares on or after [ ];
<PAGE>
(iii) as to [ ] Shares on or after [ ];
(iv) as to [ ] Shares on or after [ ]; and
(v) as to [ ] Shares on or after [ ].
(b) The Option may be exercised pursuant to the provisions of this
Section 3, by notice and payment to the Company as provided in Sections 9
and 14 hereof.
4. Term of Option. The term of the Option shall be a period of [NUMBER - NO
MORE THAN 10/5] years from the Date of Grant, subject to earlier termination or
cancellation as provided in this Agreement. This Option, to the extent
unexercised, shall expire on the day immediately prior to the [___TH - NO LATER
THAN 10TH/5TH] anniversary of the Date of Grant. The holder of the Option
[SHALL] [SHALL NOT] have [ANY] rights to dividends [AND] [OR ANY] other rights
of a stockholder with respect to any shares of Common Stock subject to the
Option until such shares shall have been issued to him (as evidenced by the
appropriate entry on the books of the Company or a duly authorized transfer
agent of the Company) provided that the date of issuance shall not be earlier
than the date this Option is exercised and payment of the full purchase price of
the shares of Common Stock (with respect to which this Option is exercised) is
made to the Company.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option attempted contrary to the provisions of the Plan, or
any levy of execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make any such
assignment, transfer, pledge, hypothecation or other disposition of the Option
will cause the Option to terminate immediately upon the happening of any such
event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Company or any Parent or Subsidiary may have under this Agreement or
otherwise.
6. Exercise Upon Cessation of Employment. (a) If the Employee at any time
ceases to be an employee of the Company and of any Parent or Subsidiary [(I)] by
reason of his discharge for Good Cause [OR (II) DUE TO HIS VOLUNTARY TERMINATION
OF EMPLOYMENT WITHOUT THE WRITTEN CONSENT OF THE COMMITTEE], the Option shall,
at the time of such termination of employment, terminate and the Employee shall
forfeit all rights hereunder. If, however, the Employee for any other reason
(other than Disability or death) ceases to be such an Employee, the Option may,
subject to the provisions of Section 5 hereof, be exercised by the Employee to
the same extent the Employee would have been entitled under Section 3 hereof to
exercise the Option immediately prior to such cessation of employment, at any
time within [________DAYS/MONTHS - NO LATER THAN 3 MONTHS] after such cessation
of employment, at the end of which period the Option, to the extent not then
exercised, shall terminate and the Employee shall forfeit all rights hereunder,
even if the Employee subsequently returns to the employ of the Company or any
Parent or Subsidiary. In no event, however, may the Option be exercised after
the expiration of the term provided in Section 4 hereof.
<PAGE>
(b) The Option shall not be affected by any change of duties or
position of the Employee so long as he continues to be an [A FULL-TIME]
employee of the Company or of any Parent or Subsidiary thereof. If the
Employee is granted a temporary leave of absence of less than 91 days, such
leave of absence shall be deemed a continuation of his employment by the
Company or of any Parent or Subsidiary thereof for the purposes of this
Agreement, but only if and so long as the employing corporation consents
thereto.
7. Exercise Upon Death or Disability. (a) If the Employee dies while he is
employed by the Company or by any Parent or Subsidiary, [AND ON OR AFTER THE
FIRST DATE UPON WHICH HE WOULD HAVE BEEN ENTITLED TO EXERCISE THE OPTION UNDER
THE PROVISIONS OF SECTION 3 HEREOF], the Option may, subject to the provisions
of Section 5 hereof, be exercised [WITH RESPECT TO ALL OR ANY PART OF THE SHARES
OF COMMON STOCK AS TO WHICH THE DECEASED EMPLOYEE HAD NOT EXERCISED THE OPTION
AT THE TIME OF HIS DEATH (REGARDLESS OF WHETHER THE OPTION WAS FULLY EXERCISABLE
AT SUCH TIME)] [(TO THE SAME EXTENT THE EMPLOYEE WOULD HAVE BEEN ENTITLED UNDER
SECTION 3 HEREOF TO EXERCISE THE OPTION IMMEDIATELY PRIOR TO HIS DEATH)], by the
estate of the Employee (or by the person or persons who acquire the right to
exercise the Option by written designation of the Employee) at any time within
[________ DAYS/MONTHS/YEARS] after the death of the Employee, at the end of
which period the Option, to the extent not then exercised, shall terminate and
the estate or other beneficiaries shall forfeit all rights hereunder. In no
event, however, may the Option be exercised after the expiration of the term
provided in Section 4 hereof.
(b) In the event that the employment of the Employee by the Company
and any Parent or Subsidiary is terminated by reason of the Disability of
the Employee [AND ON OR AFTER THE FIRST DATE UPON WHICH HE WOULD HAVE BEEN
ENTITLED TO EXERCISE THE OPTION UNDER THE PROVISIONS OF SECTION 3 HEREOF],
the Option may, subject to the provisions of Section 5 hereof, be exercised
[WITH RESPECT TO ALL OR ANY PART OF THE SHARES OF COMMON STOCK AS TO WHICH
HE HAD NOT EXERCISED THE OPTION AT THE TIME OF HIS DISABILITY OR RETIREMENT
(REGARDLESS OF WHETHER THE OPTION WAS FULLY EXERCISABLE AT SUCH TIME)] [(TO
THE SAME EXTENT THE EMPLOYEE WOULD HAVE BEEN ENTITLED UNDER SECTION 3
HEREOF TO EXERCISE THE OPTION IMMEDIATELY PRIOR TO HIS EMPLOYMENT
TERMINATION DUE TO DISABILITY)] by the Employee within the period ending
[________ DAYS/MONTHS/YEARS - NO LATER THAN 1 YEAR] after the date of such
termination of employment, at the end of which period the Option, to the
extent not then exercised, shall terminate and the Employee shall forfeit
all rights hereunder even if the Employee subsequently returns to the
employ of the Company or any Parent or Subsidiary. In no event, however,
may the Option be exercised after the expiration of the term provided in
Section 4 hereof.
8. Registration. At the time of issuance, the shares of Common Stock
subject hereto and issuable upon the exercise hereof may not be registered under
the Securities Act of 1933, as amended, and, if required upon the request of
counsel to the Company, the Employee will give a representation as to his
investment intent with respect to such shares prior to their issuance as set
forth in Section 9 hereof. The Company may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
<PAGE>
9. Method of Exercise of Option. (a) Subject to the terms and conditions of
this Agreement, the Option shall be exercisable by notice in the manner set
forth in Exhibit A hereto (the "Notice") and provision for payment to the
Company in accordance with the procedure prescribed herein. Each such Notice
shall:
(i) state the election to exercise the Option and the number of
Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to investment
intent, if required by counsel to the Company with respect to such
Shares, in a form satisfactory to counsel to the Company;
(iii) be signed by the Employee or the person or persons entitled
to exercise the Option and, if the Option is being exercised by any
person or persons other than the Employee, be accompanied by proof,
satisfactory to counsel to the Company, of the right of such other
person or persons to exercise the Option;
(iv) include payment of the full purchase price for the shares of
Common Stock to be purchased pursuant to such exercise of the Option;
and
(v) be received by the Company on or before the date of the
expiration of this Option. In the event the date of expiration of this
Option falls on a day which is not a regular business day at the
Company's executive office in [CITY/STATE] then such written Notice
must be received at such office on or before the last regular business
day prior to such date of expiration.
(b) Payment of the purchase price of any shares of Common Stock, in
respect of which the Option shall be exercised, shall be made by the
Employee or such person or persons at the place specified by the Company on
the date the Notice is received by the Company (i) by delivering to the
Company a certified or bank cashier's check payable to the order of the
Company, [(II) BY DELIVERING TO THE COMPANY PROPERLY ENDORSED CERTIFICATES
OF SHARES OF COMMON STOCK (OR CERTIFICATES ACCOMPANIED BY AN APPROPRIATE
STOCK POWER) WITH SIGNATURE GUARANTIES BY A BANK OR TRUST COMPANY, (III) BY
HAVING WITHHELD FROM THE TOTAL NUMBER OF SHARES OF COMMON STOCK TO BE
ACQUIRED UPON THE EXERCISE OF THIS OPTION A SPECIFIED NUMBER OF SUCH SHARES
OF COMMON STOCK, (IV) BY ANY FORM OF "CASHLESS" EXERCISE OR (V) BY ANY
COMBINATION OF THE FOREGOING.] [FOR PURPOSES OF THE IMMEDIATELY PRECEDING
SENTENCE, AN EXERCISE EFFECTED BY THE TENDER OF COMMON STOCK (OR DEEMED TO
BE EFFECTED BY THE TENDER OF COMMON STOCK) MAY ONLY BE CONSUMMATED WITH
COMMON STOCK HELD BY THE EMPLOYEE FOR A PERIOD OF SIX (6) MONTHS OR
ACQUIRED BY THE EMPLOYEE OTHER THAN UNDER THE PLAN (OR A SIMILAR PLAN
MAINTAINED BY THE COMPANY).]
<PAGE>
(c) The Option shall be deemed to have been exercised with respect to
any particular shares of Common Stock if, and only if, the preceding
provisions of this Section 9 and the provisions of Section 10 hereof shall
have been complied with, in which event the Option shall be deemed to have
been exercised on the date the Notice was received by the Company. Anything
in this Agreement to the contrary notwithstanding, any Notice given
pursuant to the provisions of this Section 9 shall be void and of no effect
if all of the preceding provisions of this Section 9 and the provisions of
Section 10 shall not have been complied with.
(d) The certificate or certificates for shares of Common Stock as to
which the Option shall be exercised will be registered in the name of the
Employee (or in the name of the Employee's estate or other beneficiary if
the Option is exercised after the Employee's death), or if the Option is
exercised by the Employee and if the Employee so requests in the notice
exercising the Option, will be registered in the name of the Employee and
another person jointly, with right of survivorship and will be delivered as
soon as practical after the date the Notice is received by the Company
(accompanied by full payment of the exercise price), but only upon
compliance with all of the provisions of this Agreement.
(e) If the Employee fails to accept delivery of and pay for all or any
part of the number of Shares specified in such Notice, his right to
exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be
exercised only with respect to full Shares.
(f) The Company shall not be required to issue or deliver any
certificate or certificates for shares of its Common Stock purchased upon
the exercise of any part of the Option prior to the payment to the Company,
upon its demand, of any amount requested by the Company for the purpose of
satisfying its liability, if any, to withhold federal, state or local
income or earnings tax or any other applicable tax or assessment (plus
interest or penalties thereon, if any, caused by a delay in making such
payment) incurred by reason of the exercise of this Option or the transfer
of shares thereupon. Such payment shall be made by the Employee in cash or,
with the written consent of the Company, by tendering to the Company shares
of Common Stock equal in value to the amount of the required withholding.
In the alternative, the Company may, at its option, satisfy such
withholding requirements by withholding from the shares of Common Stock to
be delivered to the Employee pursuant to an exercise of the Option a number
of shares of Common Stock equal in value to the amount of the required
withholding.
[(G) UPON THE EMPLOYEE'S EXERCISE OF THIS OPTION IN A MANNER THAT
WOULD SATISFY THE REQUIREMENTS SET FORTH UNDER THE PLAN FOR THE ISSUANCE OF
RELOAD OPTIONS, THE EMPLOYEE SHALL BE AWARDED SUCH RELOAD OPTIONS PROVIDING
FOR (I) THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR PURCHASE
THEREUNDER, (II) THE EXERCISE PRICE AND (III) THE TERM OF SUCH RELOAD
OPTIONS AS SET FORTH IN THE PLAN. THE OTHER CONDITIONS RELATED TO THE
EXERCISE OF SUCH RELOAD OPTIONS SHALL BE THE SAME AS SET FORTH HEREUNDER
WITH RESPECT TO THIS OPTION. ANY RELOAD OPTION GRANTED PURSUANT TO THIS
PROVISION SHALL, TO THE EXTENT PERMITTED BY LAW, BE CONSIDERED TO BE AN
INCENTIVE STOCK OPTION.]
<PAGE>
10. Approval of Counsel. The exercise of the Option and the issuance and
delivery of shares of Common Stock pursuant thereto shall be subject to approval
by the Company's counsel of all legal matters in connection therewith,
including, but not limited to, compliance with the requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, and the requirements of any
stock exchange or automated trading medium upon which the Common Stock may then
be listed or traded.
11. Resale of Common Stock. (a) If so requested by the Company, upon any
sale or transfer of the Common Stock purchased upon exercise of the Option
[(SUBJECT TO THE PROVISIONS OF SECTIONS 11(B) AND (C), HEREOF)], the Employee
shall deliver to the Company an opinion of counsel satisfactory to the Company
to the effect that either (i) the Common Stock to be sold or transferred has
been registered under the Securities Act and that there is in effect a current
prospectus meeting the requirements of Section 10(a) of said Act which is being
or will be delivered to the purchaser or transferee at or prior to the time of
delivery of the certificates evidencing the Common Stock to be sold or
transferred, or (ii) such Common Stock may then be sold without violating
Section 5 of said Act.
[(b) (I) IF THE EMPLOYEE, ANY OTHER PERSON WHO ACQUIRES SHARES OF
COMMON STOCK BY WAY OF THE EXERCISE OF THIS OPTION (SUCH SHARES OF COMMON
STOCK, FOR PURPOSES OF THIS SECTION 11(B) BEING REFERRED TO AS THE
"SHARES"), OR ANY OTHER PERSON WHO SUBSEQUENTLY ACQUIRES ANY OF SUCH SHARES
DESIRES TO TRANSFER ANY OF SUCH SHARES, SUCH PERSON ("OFFEROR") SHALL
FIRST, IN WRITING, OFFER TO SELL ALL OF SUCH SHARES TO THE COMPANY, AT THE
LESSER OF (A) THE "THIRD PARTY OFFER PRICE" (AS DEFINED IN SECTION
11(B)(IV) HEREOF) OR (B) THE "FORMULA PRICE" (AS DEFINED IN SECTION
11(B)(V) HEREOF) AND UPON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH,
AND THE COMPANY SHALL HAVE A PERIOD OF THIRTY (30) DAYS AFTER THE RECEIPT
OF SUCH OFFER IN WHICH TO ACCEPT OR REJECT THE SAME. IF THE COMPANY ELECTS
TO ACCEPT SUCH OFFER, SUCH ACCEPTANCE MUST BE TO THE FULL EXTENT PERMITTED
BY LAW, AND IT SHALL SO SIGNIFY ITS ACCEPTANCE THEREOF WITHIN SUCH THIRTY
(30) DAY PERIOD BY A DULY SIGNED NOTICE TO THE OFFEROR. IF THE ACCEPTANCE
IS FOR LESS THAN ALL OF THE SHARES OFFERED, SUCH ACCEPTANCE SHALL BE
CONTINGENT UPON ACCEPTANCE OF THE BALANCE OF THE SHARES PURSUANT TO SECTION
11(b)(II) HEREOF.
(II) IF THE COMPANY, FOR ANY REASON, FAILS TO ACCEPT IN ITS
ENTIRETY THE OFFER MADE PURSUANT TO SECTION 11(B)(I) ABOVE WITHIN THE
THIRTY (30) DAY PERIOD THEREIN PROVIDED, THE OFFEROR SHALL,
IMMEDIATELY UPON THE EXPIRATION OF SUCH THIRTY (30) DAY PERIOD, OFFER
TO SELL ALL OF SUCH SHARES (OR SUCH LESSER AMOUNT WHERE THE COMPANY
CANNOT LEGALLY ACCEPT THE OFFER IN FULL), AT THE PRICE AND UPON THE
TERMS AND CONDITIONS AS SET FORTH IN SECTION 11(B)(I) HEREOF, RATABLY
TO THE OTHER SHAREHOLDERS OF THE COMPANY (THE "SHAREHOLDERS"), AND
SUCH OTHER SHAREHOLDERS SHALL HAVE A FURTHER PERIOD OF THIRTY (30)
DAYS WITHIN WHICH TO ACCEPT SUCH OFFER, WHICH ACCEPTANCE MUST, IN THE
AGGREGATE, BE FOR ALL AND NOT PART OF THE SHARES SO OFFERED. IF A
SHAREHOLDER ELECTS TO ACCEPT THE SHARES OFFERED, HE SHALL SO SIGNIFY
BY DULY SIGNED WRITTEN NOTICE TO THE OFFEROR. SUCH SHAREHOLDER MAY
INDICATE IN HIS ACCEPTANCE THAT HE WILL PURCHASE ANY SHARES NOT
ACCEPTED BY THE OTHER SHAREHOLDER(S) TO WHOM THE OFFER WAS MADE.
NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 11(B)(I) OR IN THIS
SECTION 11(B)(II), THE COMPANY AND/OR THE OFFEREE SHAREHOLDERS MAY,
EITHER DURING THE THIRTY (30) DAY PERIOD REFERRED TO IN SECTION
11(B)(I) OR THE THIRTY (30) DAY PERIOD REFERRED TO IN THIS SECTION
11(B)(II) AGREE TO PURCHASE SHARES FROM THE OFFEROR IN SUCH
PROPORTIONS AS THE COMPANY AND/OR THE OFFEREE SHAREHOLDERS MAY AGREE,
SO LONG AS ALL OF THE SHARES OFFERED FOR SALE ARE PURCHASED BY THEM,
AND SO LONG AS THEY SHALL SO SIGNIFY WITHIN EITHER SUCH THIRTY (30)
DAY PERIOD BY A DULY SIGNED NOTICE TO THE OFFEROR.
<PAGE>
(III) IN THE EVENT OF THE ACCEPTANCE OF ANY OFFER BY WRITTEN
NOTICE, TRANSMITTED BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, THE CLOSING SHALL BE HELD WITHIN THIRTY (30) DAYS AFTER THE
GIVING OF SUCH ACCEPTANCE, EXCEPT THAT SHOULD SUCH DATE FALL ON A
WEEKEND, LEGAL OR RELIGIOUS HOLIDAY, THEN THE CLOSING SHALL BE HELD ON
THE FOLLOWING BUSINESS DAY AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS OR SUCH OTHER PLACE AS MAY BE DESIGNATED BY THE PARTIES. ON
CLOSING, THE PARTIES SHALL DELIVER ALL OF THE INSTRUMENTS AND
DOCUMENTS REQUIRED TO BE DELIVERED BY THIS AGREEMENT, AGAINST THE
PAYMENT REQUIRED HEREUNDER.
(IV) IN THE EVENT THAT THERE IS NO ELECTION TO PURCHASE ALL OF
THE SHARES OFFERED PURSUANT TO SECTIONS 11(B)(I) AND 11(B)(II),
HEREOF, THE OFFEROR SHALL THEREAFTER HAVE THE RIGHT TO DISPOSE OF HIS
SHARES FREE OF ANY RESTRICTIONS IMPOSED BY THE TERMS HEREOF, PROVIDED,
HOWEVER, THAT THE COMPANY AND THE REMAINING (OFFEREE) SHAREHOLDERS
SHALL AT ALL TIMES HAVE THE RIGHT OF FIRST REFUSAL TO PURCHASE THE
SHARES SO OFFERED ON THE SAME TERMS AND CONDITIONS AS ARE SET FORTH IN
ANY BONA FIDE OFFER MADE TO THE OFFEROR BY A THIRD PARTY PURCHASER
WHICH BONA FIDE OFFER THE OFFEROR IS WILLING TO ACCEPT FOR THE SALE OF
HIS SHARES ("THIRD PARTY OFFER" WITH THE PURCHASE PRICE SET FORTH IN
SUCH THIRD PARTY OFFER BEING REFERRED TO AS THE "THIRD PARTY OFFER
PRICE") AT A PURCHASE PRICE EQUAL TO THE LESSER OF (A) THE THIRD PARTY
OFFER PRICE OR (B) THE FORMULA PRICE. IF THE OFFEROR RECEIVES A THIRD
PARTY OFFER, IT SHALL BE REDUCED TO WRITING AND A COPY THEREOF SHALL
BE PROVIDED TO THE COMPANY AND THE OFFEREE SHAREHOLDERS, TOGETHER WITH
A WRITTEN NOTICE INDICATING (I) THE OFFEROR'S INTENT TO SELL HIS
SHARES IN ACCORDANCE WITH THE TERMS THEREOF, AND (II) THE RIGHT OF
FIRST REFUSAL OF THE COMPANY AND THE OFFEREE SHAREHOLDERS WITH RESPECT
THERETO. THE COMPANY AND/OR THE OFFEREE SHAREHOLDERS SHALL BE REQUIRED
TO SIGNIFY THEIR ELECTION TO PURCHASE THE SHARES OFFERED UNDER THIS
SECTION 11(B)(IV) WITHIN TEN (10) DAYS FROM THE RECEIPT OF THE
AFORESAID NOTICE BY A NOTICE SUCH AS THAT REQUIRED PURSUANT TO
PROVISIONS OF SECTIONS 11(B)(I) AND 11(B)(II), ABOVE. IF NO SUCH
NOTICE OF ELECTION IS GIVEN, THE OFFEROR SHALL HAVE THE RIGHT TO SELL
HIS SHARES PURSUANT TO SUCH THIRD PARTY OFFER ON TERMS NO MORE
FAVORABLE TO THE PURCHASER THAN CONTAINED THEREIN, DURING A PERIOD OF
NINETY (90) DAYS FOLLOWING THE EXPIRATION OF SUCH TEN (10) DAY PERIOD.
IF SUCH SALE IS NOT CONSUMMATED WITHIN SUCH NINETY (90) DAY PERIOD THE
RIGHT OF FIRST REFUSAL HEREIN PROVIDED SHALL BE REINSTATED.
(V) [DETERMINATION OF FORMULA PRICE].
(VI) NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION 11(B) TO
THE CONTRARY, THE TRANSFER OF ANY ONE OR MORE OF THE SHARES BY THE
EMPLOYEE DURING HIS LIFETIME OR, UPON HIS DEATH, BY WILL OR INTESTACY,
TO ANY MEMBER OF THE EMPLOYEE'S "IMMEDIATE FAMILY" OR TO ANY TRUST
BENEFITING ANY MEMBER OF THE EMPLOYEE'S IMMEDIATE FAMILY SHALL BE
EXEMPT FROM THE PROVISIONS OF THIS SECTION 11(B). FOR PURPOSES OF THE
IMMEDIATELY PRECEDING SENTENCE, THE TERM "IMMEDIATE FAMILY" SHALL MEAN
THE EMPLOYEE'S SPOUSE, LINEAL DESCENDENT OR ANTECEDENT, BROTHER OR
SISTER. IN THE CASE OF SUCH A TRANSFER, THE TRANSFEREE (ANY EACH
SUCCESSOR TO SUCH TRANSFEREE) SHALL RECEIVE AND HOLD SUCH SHARES
SUBJECT TO THE OTHER PROVISIONS OF THIS SECTION 11(B), AND THERE SHALL
BE NO FURTHER TRANSFER OF SUCH SHARES EXCEPT IN ACCORDANCE WITH THE
OTHER TERMS OF THIS SECTION 11(B).
<PAGE>
(VII) THE PROVISIONS OF THIS SECTION 11(B) SHALL TERMINATE WITH
RESPECT TO ANY SHARES UPON THE FIRST SALE OF COMMON STOCK OF THE
COMPANY TO THE GENERAL PUBLIC PURSUANT TO A REGISTRATION STATEMENT
FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT.]
[(C) THE EMPLOYEE AGREES THAT, IF SO REQUESTED BY THE COMPANY OR ANY
REPRESENTATIVE OF THE UNDERWRITERS (THE "MANAGING UNDERWRITER") IN
CONNECTION WITH ANY REGISTRATION OF THE OFFERING OF ANY SECURITIES OF THE
COMPANY UNDER THE SECURITIES ACT, THE EMPLOYEE WILL NOT SELL OR OTHERWISE
TRANSFER ANY SHARES OR OTHER SECURITIES OF THE COMPANY DURING THE SIX (6)
MONTH PERIOD (OR SUCH LONGER OR SHORTER PERIOD AS MAY BE REQUESTED IN
WRITING BY THE MANAGING UNDERWRITER AND AGREED TO IN WRITING BY THE
COMPANY) (THE "MARKET STANDOFF PERIOD") FOLLOWING THE EFFECTIVE DATE OF A
REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT. SUCH
RESTRICTION SHALL APPLY ONLY TO THE FIRST REGISTRATION STATEMENT OF THE
COMPANY TO BECOME EFFECTIVE UNDER THE SECURITIES ACT THAT INCLUDES
SECURITIES TO BE SOLD ON BEHALF OF THE COMPANY TO THE PUBLIC IN AN
UNDERWRITTEN PUBLIC OFFERING UNDER THE SECURITIES ACT. THE COMPANY MAY
IMPOSE STOP-TRANSFER INSTRUCTIONS WITH RESPECT TO SECURITIES SUBJECT TO THE
FOREGOING RESTRICTIONS UNTIL THE END OF SUCH MARKET STANDOFF PERIOD.]
[(D)] The Common Stock issued upon exercise of the Option shall bear
the following (or similar) legend if required by counsel for the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNLESS, IN THE OPINION OF COUNSEL
FOR THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
[FURTHERMORE, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO A RIGHT OF FIRST REFUSAL IN FAVOR OF THE
COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN
COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF COMPANY].
12. Reservation of Shares. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of Common Stock
as will be sufficient to satisfy the requirements of this Agreement.
<PAGE>
13. Limitation of Action. The Employee and the Company each acknowledges
that every right of action accruing to him or it, as the case may be, and
arising out of or in connection with this Agreement against the Company or a
Parent or Subsidiary, on the one hand, or against the Employee, on the other
hand, shall, irrespective of the place where an action may be brought, cease and
be barred by the expiration of three years from the date of the act or omission
in respect of which such right of action arises.
14. Notices. Each notice relating to this Agreement shall be in writing and
delivered in person, by recognized overnight courier or by certified mail to the
proper address. All notices to the Company or the Committee shall be addressed
to them at Leisure Travel Group, Inc., 6 Leylands Park, Nobs Creek, Colden
Commen, Winchester SO21 1TH England, Attn: Raymond J. Peel. All notices to the
Employee shall be addressed to the Employee or such other person or persons at
the Employee's address above specified. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to that effect.
15. Benefits of Agreement. This Agreement shall inure to the benefit of the
Company, the Employee and their respective heirs, executors, administrators,
personal representatives, successors and permitted assignees.
16. Severability. In the event that any one or more provisions of this
Agreement shall be deemed to be illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
17. Governing Law. This Agreement will be construed and governed in
accordance with the laws of the State of Delaware.
18. Disposition of Shares. By accepting this Agreement, the Employee agrees
that in the event he shall dispose (whether by sale, exchange, gift or any like
transfer) of any shares of Common Stock of the Company (to the extent such
shares are deemed to have been purchased pursuant to this incentive stock
option) acquired by him pursuant hereto within two years of the Date of Grant of
this Option or within one year after the acquisition of such shares pursuant
hereto, he will notify the [OFFICER] of the Company no later than 15 days from
the date of such disposition of such date or dates and the number of shares
disposed of by him and the consideration received, if any, and, upon
notification from the Company, promptly forward to the [OFFICER] of the Company
any amount requested by the Company for the purpose of satisfying its liability,
if any, to withhold federal, state or local income or earnings tax or any other
applicable tax or assessment (plus interest or penalties thereon, if any, caused
by any delay in making such payment) incurred by reason of such disposition.
[19. ACKNOWLEDGEMENT OF EMPLOYEE. THE EMPLOYEE REPRESENTS AND WARRANTS THAT
AS OF THE DATE OF GRANT OF THE OPTION, HE DOES NOT OWN (WITHIN THE MEANING OF
SECTION 422(B)(6) OF THE CODE) SHARES POSSESSING MORE THAN 10% OF THE TOTAL
COMBINED VOTING POWER OF ALL CLASSES OF SHARES OF THE COMPANY OR OF ANY PARENT
OR SUBSIDIARY.]
<PAGE>
[20.] Employment. Nothing contained in this Agreement shall be construed as
(a) a contract of employment between the Employee and the Company or any Parent
or Subsidiary, (b) a right of the Employee to be continued in the employ of the
Company or of any Parent or Subsidiary, or (c) a limitation of the right of the
Company or of any Parent or Subsidiary to discharge the Employee at any time,
with or without cause (subject to any applicable employment agreement).
[21.] Definitions. Unless otherwise defined herein, all capitalized terms
used in this Agreement shall have the same definitions as set forth in the Plan.
[22.] Incorporation of Terms of Plan. This Agreement shall be interpreted
under, and subject to, all of the terms and provisions of the Plan, which are
incorporated herein by reference.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Date
of Grant set forth above.
[ ]
By:________________________________
Name:
Title:
-----------------------------------
[Name of Employee]
ATTEST:
-----------------------------------
Social Security Number
- -------------------------
<PAGE>
EXHIBIT A
INCENTIVE OPTION EXERCISE FORM
[DATE]
[Company Name]
[Address]
[City, State and Zip Code]
Attention: [OFFICER]
Dear Sirs:
Pursuant to the provisions of the Incentive Stock Option Agreement dated
[______] (the "Agreement"), whereby you have granted to me an Incentive Stock
Option (the "Option") to purchase up to [______] shares of the Common Stock of
Leisure Travel Group, Inc. (the "Company") subject to the terms of the
Agreement, I hereby notify you that I elect to exercise my option to purchase
[______] of the shares of Common Stock covered by such Option at the [$___] per
share price specified therein. In full payment of the price for the shares being
purchased hereby, I am delivering to you herewith (i) certified or bank
cashier's check payable to the order of the Company in the amount of
$____________, or (ii) a certificate or certificates for [______] shares of
Common Stock of the Company, and which have a fair market value as of the date
hereof of $___________, [and a certified or bank cashier's check, payable to the
order of the Company, in the amount of $________________]. Any such stock
certificate or certificates are endorsed, or accompanied by an appropriate stock
power, to the order of the Company, with my signature guaranteed by a bank or
trust company or by a member firm of the New York Stock Exchange. I hereby
acknowledge that I am purchasing these shares for investment purposes only and
not for resale in violation of any federal or state securities laws.
Very truly yours,
------------------------------
[Address]
(For notices, reports, dividend checks and
other communications to stockholders.)
<PAGE>
[DRAFT 8/4/99]
OPTION NO. [9_]-ISO-[__]
================================================================================
- --------------------------------------------------------------------------------
LEISURE TRAVEL GROUP, INC.
2000 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
INCENTIVE STOCK OPTION
GRANTED TO
----------------------------
OPTIONEE
- ------------------------- -------------------------
Number of Shares Price per Share
DATE GRANTED:____________ EXPIRATION DATE:_________
================================================================================
FORM OF
NON-QUALIFIED STOCK OPTION AGREEMENT
AGREEMENT made as of this [_________] day of [ ], 2000 (the "Date of
Grant") between Leisure Travel Group, Inc., a Delaware corporation (hereinafter
referred to as the "Company"), and [_________], residing at [_________]
(hereinafter referred to as the "Employee").
W I T N E S S E T H:
WHEREAS, the Company desires, in connection with the employment of the
Employee and in accordance with its 2000 Stock Option Plan (the "Plan"), to
provide the Employee with an opportunity to acquire Common Stock, $.001 par
value (hereinafter referred to as "Common Stock"), of the Company on favorable
terms and thereby increase his proprietary interest in the continued progress
and success of the business of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
herein set forth and other good and valuable consideration, the Company and the
Employee hereby agree as follows:
1. Confirmation of Grant of Option. Pursuant to a determination by the
Committee, the Company, subject to the terms of the Plan and this Agreement,
hereby grants to the Employee as a matter of separate inducement and agreement,
and in addition to and not in lieu of salary or other compensation for services,
the right to purchase (hereinafter referred to as the "Option") an aggregate of
[NUMBER] shares of Common Stock, subject to adjustment as provided in the Plan
(such shares, as adjusted, hereinafter being referred to as the "Shares"). The
Option is not intended to qualify as an incentive stock option under Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price of shares of Common Stock covered by
the Option will be [$____] per share, subject to adjustment as provided in the
Plan.
3. Exercise of Option. The Option shall be exercisable on the terms and
conditions hereinafter set forth:
(a) The Option shall become exercisable cumulatively as to the
following amounts of the number of Shares originally subject thereto (after
giving effect to any adjustment pursuant to the Plan), on the dates
indicated:
(i) as to [_________] Shares on or after [_________];
(ii) as to [_________] Shares on or after [_________];
(iii) as to [_________] Shares on or after [_________];
<PAGE>
(iv) as to [_________] Shares on or after [_________]; and
(v) as to [_________] Shares on or after [_________].
(b) The Option may be exercised pursuant to the provisions of this
Section 3, by notice and payment to the Company as provided in Sections 9
and 14 hereof.
4. Term of Option. The term of the Option shall be a period of [NUMBER]
years from the Date of Grant, subject to earlier termination or cancellation as
provided in this Agreement. This Option, to the extent unexercised, shall expire
on the day immediately prior to the [___TH] anniversary of the Date of Grant.
The holder of the Option [SHALL] [SHALL NOT] have [ANY] rights to dividends
[AND] [OR ANY] other rights of a stockholder with respect to any shares of
Common Stock subject to the Option until such shares shall have been issued to
him (as evidenced by the appropriate entry on the books of the Company or a duly
authorized transfer agent of the Company) provided that the date of issuance
shall not be earlier than the date this Option is exercised and payment of the
full purchase price of the shares of Common Stock (with respect to which this
Option is exercised) is made to the Company.
5. Non-transferability of Option. The Option shall not be assigned,
transferred or otherwise disposed of, or pledged or hypothecated in any way, and
shall not be subject to execution, attachment or other process, except as may be
provided in the Plan. Any assignment, transfer, pledge, hypothecation or other
disposition of the Option attempted contrary to the provisions of the Plan, or
any levy of execution, attachment or other process attempted upon the Option,
will be null and void and without effect. Any attempt to make any such
assignment, transfer, pledge, hypothecation or other disposition of the Option
will cause the Option to terminate immediately upon the happening of any such
event; provided, however, that any such termination of the Option under the
foregoing provisions of this Section 5 will not prejudice any rights or remedies
which the Company or any Parent or Subsidiary may have under this Agreement or
otherwise.
6. Exercise Upon Cessation of Employment. (a) If the Employee at any time
ceases to be an employee of the Company and of any Parent or Subsidiary [(I)] by
reason of his discharge for Good Cause [OR (II) DUE TO HIS VOLUNTARY TERMINATION
OF EMPLOYMENT WITHOUT THE WRITTEN CONSENT OF THE COMMITTEE], the Option shall,
at the time of such termination of employment, terminate and the Employee shall
forfeit all rights hereunder. If, however, the Employee for any other reason
(other than Disability or death) ceases to be such an Employee, the Option may,
subject to the provisions of Section 5 hereof, be exercised by the Employee to
the same extent the Employee would have been entitled under Section 3 hereof to
exercise the Option immediately prior to such cessation of employment, at any
time within [________DAYS/MONTHS/YEARS] after such cessation of employment, at
the end of which period the Option, to the extent not then exercised, shall
terminate and the Employee shall forfeit all rights hereunder, even if the
Employee subsequently returns to the employ of the Company or any Parent or
Subsidiary. In no event, however, may the Option be exercised after the
expiration of the term provided in Section 4 hereof.
<PAGE>
(b) The Option shall not be affected by any change of duties or
position of the Employee so long as he continues to be an [A FULL-TIME]
employee of the Company or of any Parent or Subsidiary thereof. If the
Employee is granted a temporary leave of absence, such leave of absence
shall be deemed a continuation of his employment by the Company or of any
Parent or Subsidiary thereof for the purposes of this Agreement, but only
if and so long as the employing corporation consents thereto.
7. Exercise Upon Death or Disability. (a) If the Employee dies
while he is employed by the Company or by any Parent or Subsidiary, [AND ON OR
AFTER THE FIRST DATE UPON WHICH HE WOULD HAVE BEEN ENTITLED TO EXERCISE THE
OPTION UNDER THE PROVISIONS OF SECTION 3 HEREOF], the Option may, subject to the
provisions of Section 5 hereof, be exercised [WITH RESPECT TO ALL OR ANY PART OF
THE SHARES OF COMMON STOCK AS TO WHICH THE DECEASED EMPLOYEE HAD NOT EXERCISED
THE OPTION AT THE TIME OF HIS DEATH (REGARDLESS OF WHETHER THE OPTION WAS FULLY
EXERCISABLE AT SUCH TIME)] [(TO THE SAME EXTENT THE EMPLOYEE WOULD HAVE BEEN
ENTITLED UNDER SECTION 3 HEREOF TO EXERCISE THE OPTION IMMEDIATELY PRIOR TO HIS
DEATH)], by the estate of the Employee (or by the person or persons who acquire
the right to exercise the Option by written designation of the Employee) at any
time within [________ DAYS/MONTHS/YEARS] after the death of the Employee, at the
end of which period the Option, to the extent not then exercised, shall
terminate and the estate or other beneficiaries shall forfeit all rights
hereunder. In no event, however, may the Option be exercised after the
expiration of the term provided in Section 4 hereof.
(b) In the event that the employment of the Employee by the Company
and any Parent or Subsidiary is terminated by reason of the Disability of
the Employee [AND ON OR AFTER THE FIRST DATE UPON WHICH HE WOULD HAVE BEEN
ENTITLED TO EXERCISE THE OPTION UNDER THE PROVISIONS OF SECTION 3 HEREOF],
the Option may, subject to the provisions of Section 5 hereof, be exercised
[WITH RESPECT TO ALL OR ANY PART OF THE SHARES OF COMMON STOCK AS TO WHICH
HE HAD NOT EXERCISED THE OPTION AT THE TIME OF HIS DISABILITY OR RETIREMENT
(REGARDLESS OF WHETHER THE OPTION WAS FULLY EXERCISABLE AT SUCH TIME)] [(TO
THE SAME EXTENT THE EMPLOYEE WOULD HAVE BEEN ENTITLED UNDER SECTION 3
HEREOF TO EXERCISE THE OPTION IMMEDIATELY PRIOR TO HIS EMPLOYMENT
TERMINATION DUE TO DISABILITY)] by the Employee within the period ending
[________ DAYS/MONTHS/YEARS] after the date of such termination of
employment, at the end of which period the Option, to the extent not then
exercised, shall terminate and the Employee shall forfeit all rights
hereunder even if the Employee subsequently returns to the employ of the
Company or any Parent or Subsidiary. In no event, however, may the Option
be exercised after the expiration of the term provided in Section 4 hereof.
8. Registration. At the time of issuance, the shares of Common Stock
subject hereto and issuable upon the exercise hereof may not be registered under
the Securities Act of 1933, as amended, and, if required upon the request of
counsel to the Company, the Employee will give a representation as to his
investment intent with respect to such shares prior to their issuance as set
forth in Section 9 hereof. The Company may register or qualify the shares
covered by the Option for sale pursuant to the Securities Act of 1933, as
amended, at any time prior to or after the exercise in whole or in part of the
Option.
<PAGE>
9. Method of Exercise of Option. (a) Subject to the terms and conditions of
this Agreement, the Option shall be exercisable by notice in the manner set
forth in Exhibit A hereto (the "Notice") and provision for payment to the
Company in accordance with the procedure prescribed herein. Each such Notice
shall:
(i) state the election to exercise the Option and the number of
Shares with respect to which it is being exercised;
(ii) contain a representation and agreement as to investment
intent, if required by counsel to the Company with respect to such
Shares, in a form satisfactory to counsel to the Company;
(iii) be signed by the Employee or the person or persons entitled
to exercise the Option and, if the Option is being exercised by any
person or persons other than the Employee, be accompanied by proof,
satisfactory to counsel to the Company, of the right of such other
person or persons to exercise the Option;
(iv) include payment of the full purchase price for the shares of
Common Stock to be purchased pursuant to such exercise of the Option;
and
(v) be received by the Company on or before the date of the
expiration of this Option. In the event the date of expiration of this
Option falls on a day which is not a regular business day at the
Company's executive office in [CITY/STATE] then such written Notice
must be received at such office on or before the last regular business
day prior to such date of expiration.
(b) Payment of the purchase price of any shares of Common Stock, in
respect of which the Option shall be exercised, shall be made by the
Employee or such person or persons at the place specified by the Company on
the date the Notice is received by the Company (i) by delivering to the
Company a certified or bank cashier's check payable to the order of the
Company or (ii) if consented to by the Company in writing, (A) by
delivering to the Company properly endorsed certificates of shares of
Common Stock (or certificates accompanied by an appropriate stock power)
with signature guaranties by a bank or trust company, (B) by having
withheld from the total number of shares of Common Stock to be acquired
upon the exercise of this Option a specified number of such shares of
Common Stock, (C) by any form of "cashless" exercise or (D) by any
combination of the foregoing. [FOR PURPOSES OF THE IMMEDIATELY PRECEDING
SENTENCE, AN EXERCISE EFFECTED BY THE TENDER OF COMMON STOCK (OR DEEMED TO
BE EFFECTED BY THE TENDER OF COMMON STOCK) MAY BE CONSUMMATED WITH COMMON
STOCK HELD BY THE EMPLOYEE FOR SIX (6) MONTHS OR ACQUIRED BY THE EMPLOYEE
OTHER THAN UNDER THE PLAN (OR A SIMILAR PLAN MAINTAINED BY THE COMPANY).]
<PAGE>
(c) The Option shall be deemed to have been exercised with respect to
any particular shares of Common Stock if, and only if, the preceding
provisions of this Section 9 and the provisions of Section 10 hereof shall
have been complied with, in which event the Option shall be deemed to have
been exercised on the date the Notice and related payment were received by
the Company. Anything in this Agreement to the contrary notwithstanding,
any Notice given pursuant to the provisions of this Section 9 shall be void
and of no effect if all of the preceding provisions of this Section 9 and
the provisions of Section 10 shall not have been complied with.
(d) The certificate or certificates for shares of Common Stock as to
which the Option shall be exercised will be registered in the name of the
Employee (or in the name of the Employee's estate or other beneficiary if
the Option is exercised after the Employee's death), or if the Option is
exercised by the Employee and if the Employee so requests in the notice
exercising the Option, will be registered in the name of the Employee and
another person jointly, with right of survivorship and will be delivered as
soon as practical after the date the Notice is received by the Company
(accompanied by full payment of the exercise price), but only upon
compliance with all of the provisions of this Agreement.
(e) If the Employee fails to accept delivery of and pay for all or any
part of the number of Shares specified in such Notice, his right to
exercise the Option with respect to such undelivered Shares may be
terminated in the sole discretion of the Committee. The Option may be
exercised only with respect to full Shares.
(f) The Company shall not be required to issue or deliver any
certificate or certificates for shares of its Common Stock purchased upon
the exercise of any part of the Option prior to the payment to the Company,
upon its demand, of any amount requested by the Company for the purpose of
satisfying its liability, if any, to withhold federal, state or local
income or earnings tax or any other applicable tax or assessment (plus
interest or penalties thereon, if any, caused by a delay in making such
payment) incurred by reason of the exercise of this Option or the transfer
of shares thereupon. Such payment shall be made by the Employee in cash or,
with the written consent of the Company, by tendering to the Company shares
of Common Stock equal in value to the amount of the required withholding.
In the alternative, the Company may, at its option, satisfy such
withholding requirements by withholding from the shares of Common Stock to
be delivered to the Employee pursuant to an exercise of the Option a number
of shares of Common Stock equal in value to the amount of the required
withholding.
[(G) UPON THE EMPLOYEE'S EXERCISE OF THIS OPTION IN A MANNER THAT
WOULD SATISFY THE REQUIREMENTS SET FORTH UNDER THE PLAN FOR THE ISSUANCE OF
RELOAD OPTIONS, THE EMPLOYEE SHALL BE AWARDED SUCH RELOAD OPTIONS PROVIDING
FOR (I) THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR PURCHASE
THEREUNDER, (II) THE EXERCISE PRICE AND (III) THE TERM OF SUCH RELOAD
OPTIONS AS SET FORTH IN THE PLAN. THE OTHER CONDITIONS RELATED TO THE
EXERCISE OF SUCH RELOAD OPTIONS SHALL BE THE SAME AS SET FORTH HEREUNDER
WITH RESPECT TO THIS OPTION. ANY RELOAD OPTION GRANTED PURSUANT TO THIS
PROVISION SHALL BE CONSIDERED TO BE A NON-QUALIFIED STOCK OPTION.]
<PAGE>
10. Approval of Counsel. The exercise of the Option and the issuance and
delivery of shares of Common Stock pursuant thereto shall be subject to approval
by the Company's counsel of all legal matters in connection therewith,
including, but not limited to, compliance with the requirements of the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder, and the requirements of any
stock exchange or automated trading medium upon which the Common Stock may then
be listed or traded.
11. Resale of Common Stock. (a) If so requested by the Company, upon any
sale or transfer of the Common Stock purchased upon exercise of the Option
[(SUBJECT TO THE PROVISIONS OF SECTIONS 11(B) AND (C), HEREOF)], the Employee
shall deliver to the Company an opinion of counsel satisfactory to the Company
to the effect that either (i) the Common Stock to be sold or transferred has
been registered under the Securities Act and that there is in effect a current
prospectus meeting the requirements of Section 10(a) of said Act which is being
or will be delivered to the purchaser or transferee at or prior to the time of
delivery of the certificates evidencing the Common Stock to be sold or
transferred, or (ii) such Common Stock may then be sold without violating
Section 5 of said Act.
[(B) (I) IF THE EMPLOYEE, ANY OTHER PERSON WHO ACQUIRES SHARES OF
COMMON STOCK BY WAY OF THE EXERCISE OF THIS OPTION (SUCH SHARES OF COMMON
STOCK, FOR PURPOSES OF THIS SECTION 11(B) BEING REFERRED TO AS THE
"SHARES"), OR ANY OTHER PERSON WHO SUBSEQUENTLY ACQUIRES ANY OF SUCH SHARES
DESIRES TO TRANSFER ANY OF SUCH SHARES, SUCH PERSON ("OFFEROR") SHALL
FIRST, IN WRITING, OFFER TO SELL ALL OF SUCH SHARES TO THE COMPANY, AT THE
LESSER OF (A) THE "THIRD PARTY OFFER PRICE" (AS DEFINED IN SECTION
11(B)(IV) HEREOF) OR (B) THE "FORMULA PRICE" (AS DEFINED IN SECTION
11(B)(V) HEREOF) AND UPON THE TERMS AND CONDITIONS HEREINAFTER SET FORTH,
AND THE COMPANY SHALL HAVE A PERIOD OF THIRTY (30) DAYS AFTER THE RECEIPT
OF SUCH OFFER IN WHICH TO ACCEPT OR REJECT THE SAME. IF THE COMPANY ELECTS
TO ACCEPT SUCH OFFER, SUCH ACCEPTANCE MUST BE TO THE FULL EXTENT PERMITTED
BY LAW, AND IT SHALL SO SIGNIFY ITS ACCEPTANCE THEREOF WITHIN SUCH THIRTY
(30) DAY PERIOD BY A DULY SIGNED NOTICE TO THE OFFEROR. IF THE ACCEPTANCE
IS FOR LESS THAN ALL OF THE SHARES OFFERED, SUCH ACCEPTANCE SHALL BE
CONTINGENT UPON ACCEPTANCE OF THE BALANCE OF THE SHARES PURSUANT TO SECTION
11(B)(II) HEREOF.
(II) IF THE COMPANY, FOR ANY REASON, FAILS TO ACCEPT IN ITS
ENTIRETY THE OFFER MADE PURSUANT TO SECTION 11(B)(I) ABOVE WITHIN THE
THIRTY (30) DAY PERIOD THEREIN PROVIDED, THE OFFEROR SHALL,
IMMEDIATELY UPON THE EXPIRATION OF SUCH THIRTY (30) DAY PERIOD, OFFER
TO SELL ALL OF SUCH SHARES (OR SUCH LESSER AMOUNT WHERE THE COMPANY
CANNOT LEGALLY ACCEPT THE OFFER IN FULL), AT THE PRICE AND UPON THE
TERMS AND CONDITIONS AS SET FORTH IN SECTION 11(B)(I) HEREOF, RATABLY
TO THE OTHER SHAREHOLDERS OF THE COMPANY (THE "SHAREHOLDERS"), AND
SUCH OTHER SHAREHOLDERS SHALL HAVE A FURTHER PERIOD OF THIRTY (30)
DAYS WITHIN WHICH TO ACCEPT SUCH OFFER, WHICH ACCEPTANCE MUST, IN THE
AGGREGATE, BE FOR ALL AND NOT PART OF THE SHARES SO OFFERED. IF A
SHAREHOLDER ELECTS TO ACCEPT THE SHARES OFFERED, HE SHALL SO SIGNIFY
BY DULY SIGNED WRITTEN NOTICE TO THE OFFEROR. SUCH SHAREHOLDER MAY
INDICATE IN HIS ACCEPTANCE THAT HE WILL PURCHASE ANY SHARES NOT
ACCEPTED BY THE OTHER SHAREHOLDER(S) TO WHOM THE OFFER WAS MADE.
NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 11(B)(I) OR IN THIS
SECTION 11(B)(II), THE COMPANY AND/OR THE OFFEREE SHAREHOLDERS MAY,
EITHER DURING THE THIRTY (30) DAY PERIOD REFERRED TO IN SECTION
11(B)(I) OR THE THIRTY (30) DAY PERIOD REFERRED TO IN THIS SECTION
11(B)(II) AGREE TO PURCHASE SHARES FROM THE OFFEROR IN SUCH
PROPORTIONS AS THE COMPANY AND/OR THE OFFEREE SHAREHOLDERS MAY AGREE,
SO LONG AS ALL OF THE SHARES OFFERED FOR SALE ARE PURCHASED BY THEM,
AND SO LONG AS THEY SHALL SO SIGNIFY WITHIN EITHER SUCH THIRTY (30)
DAY PERIOD BY A DULY SIGNED NOTICE TO THE OFFEROR.
<PAGE>
(III) IN THE EVENT OF THE ACCEPTANCE OF ANY OFFER BY WRITTEN
NOTICE, TRANSMITTED BY REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT
REQUESTED, THE CLOSING SHALL BE HELD WITHIN THIRTY (30) DAYS AFTER THE
GIVING OF SUCH ACCEPTANCE, EXCEPT THAT SHOULD SUCH DATE FALL ON A
WEEKEND, LEGAL OR RELIGIOUS HOLIDAY, THEN THE CLOSING SHALL BE HELD ON
THE FOLLOWING BUSINESS DAY AT THE COMPANY'S PRINCIPAL PLACE OF
BUSINESS OR SUCH OTHER PLACE AS MAY BE DESIGNATED BY THE PARTIES. ON
CLOSING, THE PARTIES SHALL DELIVER ALL OF THE INSTRUMENTS AND
DOCUMENTS REQUIRED TO BE DELIVERED BY THIS AGREEMENT, AGAINST THE
PAYMENT REQUIRED HEREUNDER.
(IV) IN THE EVENT THAT THERE IS NO ELECTION TO PURCHASE ALL OF
THE SHARES OFFERED PURSUANT TO SECTIONS 11(B)(I) AND 11(B)(II),
HEREOF, THE OFFEROR SHALL THEREAFTER HAVE THE RIGHT TO DISPOSE OF HIS
SHARES FREE OF ANY RESTRICTIONS IMPOSED BY THE TERMS HEREOF, PROVIDED,
HOWEVER, THAT THE COMPANY AND THE REMAINING (OFFEREE) SHAREHOLDERS
SHALL AT ALL TIMES HAVE THE RIGHT OF FIRST REFUSAL TO PURCHASE THE
SHARES SO OFFERED ON THE SAME TERMS AND CONDITIONS AS ARE SET FORTH IN
ANY BONA FIDE OFFER MADE TO THE OFFEROR BY A THIRD PARTY PURCHASER
WHICH BONA FIDE OFFER THE OFFEROR IS WILLING TO ACCEPT FOR THE SALE OF
HIS SHARES ("THIRD PARTY OFFER" WITH THE PURCHASE PRICE SET FORTH IN
SUCH THIRD PARTY OFFER BEING REFERRED TO AS THE "THIRD PARTY OFFER
PRICE") AT A PURCHASE PRICE EQUAL TO THE LESSER OF (A) THE THIRD PARTY
OFFER PRICE OR (B) THE FORMULA PRICE. IF THE OFFEROR RECEIVES A THIRD
PARTY OFFER, IT SHALL BE REDUCED TO WRITING AND A COPY THEREOF SHALL
BE PROVIDED TO THE COMPANY AND THE OFFEREE SHAREHOLDERS, TOGETHER WITH
A WRITTEN NOTICE INDICATING (I) THE OFFEROR'S INTENT TO SELL HIS
SHARES IN ACCORDANCE WITH THE TERMS THEREOF, AND (II) THE RIGHT OF
FIRST REFUSAL OF THE COMPANY AND THE OFFEREE SHAREHOLDERS WITH RESPECT
THERETO. THE COMPANY AND/OR THE OFFEREE SHAREHOLDERS SHALL BE REQUIRED
TO SIGNIFY THEIR ELECTION TO PURCHASE THE SHARES OFFERED UNDER THIS
SECTION 11(B)(IV) WITHIN TEN (10) DAYS FROM THE RECEIPT OF THE
AFORESAID NOTICE BY A NOTICE SUCH AS THAT REQUIRED PURSUANT TO
PROVISIONS OF SECTIONS 11(B)(I) AND 11(B)(II), ABOVE. IF NO SUCH
NOTICE OF ELECTION IS GIVEN, THE OFFEROR SHALL HAVE THE RIGHT TO SELL
HIS SHARES PURSUANT TO SUCH THIRD PARTY OFFER ON TERMS NO MORE
FAVORABLE TO THE PURCHASER THAN CONTAINED THEREIN, DURING A PERIOD OF
NINETY (90) DAYS FOLLOWING THE EXPIRATION OF SUCH TEN (10) DAY PERIOD.
IF SUCH SALE IS NOT CONSUMMATED WITHIN SUCH NINETY (90) DAY PERIOD THE
RIGHT OF FIRST REFUSAL HEREIN PROVIDED SHALL BE REINSTATED.
(V) [DETERMINATION OF FORMULA PRICE].
(VI) NOTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION 11(B) TO
THE CONTRARY, THE TRANSFER OF ANY ONE OR MORE OF THE SHARES BY THE
EMPLOYEE DURING HIS LIFETIME OR, UPON HIS DEATH, BY WILL OR INTESTACY,
TO ANY MEMBER OF THE EMPLOYEE'S "IMMEDIATE FAMILY" OR TO ANY TRUST
BENEFITING ANY MEMBER OF THE EMPLOYEE'S IMMEDIATE FAMILY SHALL BE
EXEMPT FROM THE PROVISIONS OF THIS SECTION 11(B). FOR PURPOSES OF THE
IMMEDIATELY PRECEDING SENTENCE, THE TERM "IMMEDIATE FAMILY" SHALL MEAN
THE EMPLOYEE'S SPOUSE, LINEAL DESCENDENT OR ANTECEDENT, BROTHER OR
SISTER. IN THE CASE OF SUCH A TRANSFER, THE TRANSFEREE (ANY EACH
SUCCESSOR TO SUCH TRANSFEREE) SHALL RECEIVE AND HOLD SUCH SHARES
SUBJECT TO THE OTHER PROVISIONS OF THIS SECTION 11(B), AND THERE SHALL
BE NO FURTHER TRANSFER OF SUCH SHARES EXCEPT IN ACCORDANCE WITH THE
OTHER TERMS OF THIS SECTION 11(B).
<PAGE>
(VII) THE PROVISIONS OF THIS SECTION 11(B) SHALL TERMINATE WITH
RESPECT TO ANY SHARES UPON THE FIRST SALE OF COMMON STOCK OF THE
COMPANY TO THE GENERAL PUBLIC PURSUANT TO A REGISTRATION STATEMENT
FILED WITH, AND DECLARED EFFECTIVE BY, THE SECURITIES AND EXCHANGE
COMMISSION PURSUANT TO THE PROVISIONS OF THE SECURITIES ACT.]
[(C) THE EMPLOYEE AGREES THAT, IF SO REQUESTED BY THE COMPANY OR ANY
REPRESENTATIVE OF THE UNDERWRITERS (THE "MANAGING UNDERWRITER") IN
CONNECTION WITH ANY REGISTRATION OF THE OFFERING OF ANY SECURITIES OF THE
COMPANY UNDER THE SECURITIES ACT, THE EMPLOYEE WILL NOT SELL OR OTHERWISE
TRANSFER ANY SHARES OR OTHER SECURITIES OF THE COMPANY DURING THE SIX (6)
MONTH PERIOD (OR SUCH LONGER OR SHORTER PERIOD AS MAY BE REQUESTED IN
WRITING BY THE MANAGING UNDERWRITER AND AGREED TO IN WRITING BY THE
COMPANY) (THE "MARKET STANDOFF PERIOD") FOLLOWING THE EFFECTIVE DATE OF A
REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT. SUCH
RESTRICTION SHALL APPLY ONLY TO THE FIRST REGISTRATION STATEMENT OF THE
COMPANY TO BECOME EFFECTIVE UNDER THE SECURITIES ACT THAT INCLUDES
SECURITIES TO BE SOLD ON BEHALF OF THE COMPANY TO THE PUBLIC IN AN
UNDERWRITTEN PUBLIC OFFERING UNDER THE SECURITIES ACT. THE COMPANY MAY
IMPOSE STOP-TRANSFER INSTRUCTIONS WITH RESPECT TO SECURITIES SUBJECT TO THE
FOREGOING RESTRICTIONS UNTIL THE END OF SUCH MARKET STANDOFF PERIOD.]
[(D)] The Common Stock issued upon exercise of the Option shall bear
the following (or similar) legend if required by counsel for the Company:
THE SHARES EVIDENCED BY THIS CERTIFICATE MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE FIRST BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR UNLESS, IN THE OPINION OF COUNSEL
FOR THE COMPANY, SUCH REGISTRATION IS NOT REQUIRED.
[FURTHERMORE, THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO A RIGHT OF FIRST REFUSAL IN FAVOR OF THE
COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN
COMPANY AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF COMPANY].
12. Reservation of Shares. The Company shall at all times during the term
of the Option reserve and keep available such number of shares of the Common
Stock as will be sufficient to satisfy the requirements of this Agreement.
<PAGE>
13. Limitation of Action. The Employee and the Company each acknowledges
that every right of action accruing to him or it, as the case may be, and
arising out of or in connection with this Agreement against the Company or a
Parent or Subsidiary, on the one hand, or against the Employee, on the other
hand, shall, irrespective of the place where an action may be brought, cease and
be barred by the expiration of three years from the date of the act or omission
in respect of which such right of action arises.
14. Notices. Each notice relating to this Agreement shall be in writing and
delivered in person, by recognized overnight carrier or by certified mail to the
proper address. All notices to the Company or the Committee shall be addressed
to them at Leisure Travel Group, Inc., 6 Leylands Park, Nobs Creek, Colden
Commen, Winchester SO21 1TH England, Attn: Raymond J. Peel. All notices to the
Employee shall be addressed to the Employee or such other person or persons at
the Employee's address above specified. Anyone to whom a notice may be given
under this Agreement may designate a new address by notice to that effect.
15. Benefits of Agreement. This Agreement shall inure to the benefit of the
Company, the Employee and their respective heirs, executors, administrators,
personal representatives, successors and assigns.
16. Severability. In the event that any one or more provisions of this
Agreement shall be deemed to be illegal or unenforceable, such illegality or
unenforceability shall not affect the validity and enforceability of the
remaining legal and enforceable provisions hereof, which shall be construed as
if such illegal or unenforceable provision or provisions had not been inserted.
17. Governing Law. This Agreement will be construed and governed in
accordance with the laws of the State of [JURISDICTION].
18. Employment. Nothing contained in this Agreement shall be construed as
(a) a contract of employment between the Employee and the Company or any Parent
or Subsidiary, (b) as a right of the Employee to be continued in the employ of
the Company or of any Parent or Subsidiary, or (c) as a limitation of the right
of the Company or of any Parent or Subsidiary to discharge the Employee at any
time, with or without cause (subject to any applicable employment agreement).
19. Definitions. Unless otherwise defined herein, all capitalized terms
used in this Agreement shall have the same definitions as set forth in the Plan.
20. Incorporation of Terms of Plan. This Agreement shall be interpreted
under, and subject to, all of the terms and provisions of the Plan, which are
incorporated herein by reference.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Date
of Grant set forth above.
[ ]
By:________________________________
Name:
Title:
-----------------------------------
[Name of Employee]
-----------------------------------
Social Security Number
ATTEST:
- -------------------------
<PAGE>
EXHIBIT A
NON-QUALIFIED STOCK OPTION EXERCISE FORM
[DATE]
[Company Name]
[Address]
[City, State and Zip Code]
Attention: [OFFICER]
Dear Sirs:
Pursuant to the provisions of the Non-Qualified Stock Option Agreement
dated [_________] (the "Agreement"), whereby you have granted to me a
Non-Qualified Option (the "Option") to purchase up to [_________] shares of the
Common Stock of Leisure Travel Group, Inc. (the "Company") subject to the terms
of the Agreement, I hereby notify you that I elect to exercise my option to
purchase [_________] of the shares of Common Stock covered by such Option at the
[$___] per share price specified therein. In full payment of the price for the
shares being purchased hereby, I am delivering to you herewith (i) certified or
bank cashier's check payable to the order of the Company in the amount of
$____________,(1) (or (ii) a certificate or certificates for [_________] shares
of Common Stock of the Company, and which have a fair market value as of the
date hereof of $___________, [and a certified or bank cashier's check, payable
to the order of the Company, in the amount of $________________].(2) (Any such
stock certificate or certificates are endorsed, or accompanied by an appropriate
stock power, to the order of the Company, with my signature guaranteed by a bank
or trust company or by a member firm of the New York Stock Exchange. I hereby
acknowledge that I am purchasing these shares for investment purposes only and
not for resale in violation of any federal or state securities laws.
Very truly yours,
------------------------------
[Address]
(For notices, reports, dividend checks and
other communications to stockholders.)
- --------
(1) $_____________ of this amount is the purchase price of the shares, and the
balance represents payment of withholding taxes as follows: Federal
$_____________, State $_________ and Local $_______.
(2) $_____________ of this amount is at least equal to the current market
value of one share of Common Stock of the Company, and the balance
represents payment of withholding taxes as follows: Federal $________,
State $_______ and Local $______.
<PAGE>
[DRAFT 8/4/99]
OPTION NO. [9_]-NQO-[__]
- --------------------------------------------------------------------------------
LEISURE TRAVEL GROUP, INC.
2000 STOCK OPTION PLAN
- --------------------------------------------------------------------------------
NON-QUALIFIED STOCK OPTION
GRANTED TO
----------------------------
OPTIONEE
- ------------------------- -------------------------
Number of Shares Price per Share
DATE GRANTED:____________ EXPIRATION DATE:_________
================================================================================
Date: 30th June 1999
Grand Hotel Group Limited
as Borrower
The Lenders
Specified herein as Lenders
Arab Bank plc
as Administrative Agent
Arab Bank plc
as Security Agent and Trustee
Arab Bank plc
as Hedge Provider
Loan Agreement
providing for a secured loan facility in the maximum
of(pound)10,000,000
<PAGE>
Contents
No Heading Page
Clauses
1. Definitions and Interpretation 2
1.1 Defined Terms 2
1.2 Construction of Certain Terms 22
1.3 Construction of Certain References 24
1.4 Headings 25
2. The Facility 25
2.1 Amount and Currency 25
2.2 Participation of Lenders 25
2.3 Purpose 25
3. The Lenders 26
3.1 Obligations of Lenders 26
3.2 Interests of Lenders 26
4. Availability and Drawing 27
4.1 Number of Advances 27
4.2 Maximum Amount 27
4.3 Conditions Precedent 27
4.4 Procedure 27
4.5 Transfer of Funds 28
4.6 Cancellation of Unused Facility 29
4.7 No Waiver of Conditions 29
4.8 Authorisations for Disbursements 29
4.9 Failure to Draw 30
5. Interest Periods 30
5.1 Selection by Borrower 31
5.2 Determination of Interest Periods 31
5.3 Deemed Selection 32
6. Interest 33
6.1 Interest Rate 33
6.2 Hedging Arrangements 33
6.3 Payment of Interest 34
6.4 Day Count Fraction 34
6.5 Currency 34
6.6. Mandatory Costs Rate 34
7. Repayment and Prepayment 34
7.1 Repayment 34
<PAGE>
7.2 Prepayment 35
7.3 Obligation to Prepay Following Notice 35
7.4 No Premature Repayment 36
7.5 Amounts and Currency of Repayments and Prepayments 36
8. Security 36
8.1 Security 36
8.2 Security Agent as Trustee 37
9. Maintenance of Security 37
9.1 Covenants 37
9.2 Calculations and Further Covenant 38
9.3 Failure to Comply 39
9.4 Valuations 40
9.5 Improvements to the Properties 40
10. Single Currency 44
11. Representations and Warranties 44
11.1 Representations 44
11.2 Lenders' Reliance 50
11.3 Knowledge of Lenders 50
11.4 Repetition 51
12. Undertakings 51
12.1 Specific Undertakings 51
12.2 General 62
13. Changes in Circumstances 63
13.1 Illegality 63
13.2 Increased Costs 64
13.3 Market Disruption 67
13.4 Prepayment 71
13.5 Certificate 71
14. Payments 72
14.1 Procedure 72
14.2 Default Interest 74
14.3 Withholding; Gross-up 75
14.4 Credit Against Tax 76
14.5 Agency Payments 77
14.6 Currency of Account 78
14.7 Appropriation of Payments 78
14.8 Qualifying Lenders 78
14.9 Double Taxation Treaties 79
15. Default 80
15.1 Events of Default 80
15.2 Acceleration 85
<PAGE>
16. Expenses, Fees and Commissions 86
16.1 Initial and Continuing Costs 86
16.2 Enforcement Costs 87
16.3 Stamp Duty 87
16.4 Arrangement Fee 88
16.5 Reimbursement by Borrower 88
17. Indemnities 88
17.1 General 88
17.2 Currency Indemnity 90
17.3 Independent Obligations 91
17.4 Double Counting 91
18. The Agents 91
18.1 Appointment 91
18.2 Duties of Administrative Agent 92
18.3 Duties of Security Agent 94
18.4 Performance of Duties 94
18.5 Agents' Discretions 97
18.6 Limitation of Responsibilities 99
18.7 The Agents as a Lender 100
18.8 No Reliance on Agents 100
18.9 Lenders' Indemnity 101
18.10 Change of Agents 102
18.11 Signing of Transfer Certificates 103
18.12 Security Agent as Trustee 104
18.13 Acceptance of Title, Value and Valuation Bases 111
18.14 Rule 146 of the Land Registration Rules 111
18.15 The Borrower and the Agents 111
18.16 Agents of the Lenders 112
18.17 Agents' Knowledge 112
19. Transfer 112
19.1 Agreement Binding on Successors 112
19.2 Borrower's Assignment 113
19.3 Novation 113
19.4 Assignment 115
19.5 Lending Offices 116
19.6 Disclosure of Information 116
19.7 Costs 116
20. Set-Off/Pro-Rata Sharing 117
20.1 Set Off 117
20.2 Pro-Rata Sharing 118
21. Notices 120
21.1 Address 120
21.2 Method and Receipt 120
21.3 Deemed Notice 121
<PAGE>
22. Calculations and Evidence of Debt 121
22.1 Accounts 121
22.2 Evidence 121
22.3 Certificates and Determinations 121
23. Severability 122
24. Waivers; Rights Cumulative 122
25. Counterparts 123
26. Governing Law and Jurisdiction 123
26.1 Law 123
26.2 Submission to Jurisdiction 123
26.3 Other Jurisdictions 123
The First Schedule 125
The Lenders and their Commitments 125
The Second Schedule 126
Form of Notice of Drawing 126
The Third Schedule 129
Form of Transfer Certificate 129
The Fourth Schedule 135
Conditions Precedent Documents 135
The Fifth Schedule 141
Calculation of Mandatory Costs Rate 141
<PAGE>
THIS AGREEMENT is made the 30th* day of June* 1999
BETWEEN:
(1) GRAND HOTEL GROUP LIMITED a company registered under the laws of England
and Wales under number 3657769 and whose registered office is situate at
Derbyshire House, 737a Wilmslow Road, Didsbury, Manchester M20 6WF*, as
borrower ;
(2) THE LENDERS, the respective names and offices of which are set out in the
First Schedule, as lenders;
(3) ARAB BANK plc, in its capacity as administrative agent for the Lenders
and the Hedge Provider;
(4) ARAB BANK plc, in its capacity as security agent and trustee for the
Secured Parties; and
(5) ARAB BANK plc, in its capacity as Hedge Provider under the Hedging
Arrangements.
WHEREBY IT IS AGREED as follows:
The Lenders have, at the request of the Borrower, agreed to the provision to the
Borrower of a secured loan facility in the maximum amount of (pound)10,000,000
upon the terms and subject to the conditions hereinafter contained and in
particular, but without limitation, Clause 4.2.
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* Inserted in manuscript on executed Agreement
<PAGE>
NOW IT IS AGREED as follows:
1. Definitions and Interpretation
1.1 Defined Terms
In this Agreement, the Recitals and the Schedules and Appendices, unless
there is something in the subject or context inconsistent therewith, the
following expressions shall have the following meanings, namely:
"Accounting Statement" means a financial statement in a form
approved by the Administrative Agent for the
purposes of Clause 12.1 (b): such financial
statement, unless the Administrative Agent
otherwise agrees, to be in the form of the
sample statement set out in Appendix 6;
"Acquisition Agreement" means the asset sale agreement dated the same
date as this Agreement between Rank Holidays
Division Limited (1) and the Borrower (2) for
the acquisition by the Borrower of the
Assets, together with all associated
documents;
"Administrative Agent" means Arab Bank plc, in its
<PAGE>
capacity as administrative agent for the
Lenders and the Hedge Provider and includes
any successor administrative agent appointed
hereunder;
"Approved Valuer" means such valuer or firm of valuers as may
be appointed by the Administrative Agent from
time to time (in its discretion) and
"Approved Valuation" means a valuation
carried out by an Approved Valuer;
"Agents" means the Administrative Agent and the
Security Agent, and "Agent" means either of
them, as the context requires;
"Assets" means the Properties, the Hotel Business and
the other assets to be acquired by the
Borrower under the Acquisition Agreement and
as specified therein;
"Availability Period" means the period commencing on the date of
this Agreement and ending on the date falling
three months after such date or such later
date as the Lenders
<PAGE>
may agree in their absolute discretion at the
request of the Borrower;
"Basis Point" means one hundredth of one per cent. (0.01%);
"Borrower" means Grand Hotel Group Limited, a company
registered under the laws of England and
Wales under number 3657769 whose registered
office is situate at 6 Leylands Park, Colden
Common, Winchester, Hampshire;
"Borrower's Charge" means the legal charge and debenture to be
executed by the Borrower pursuant to Clause
8.1(a);
"Calculation Period" means each period of 12 months ending on a
Reporting Date;
"Certificate of Title" means the certificates of title given to the
Agents and the Lenders (and their successors,
assignees and transferees) in relation to the
Properties by Messrs. Herbert Smith and dated
29 June* 1999;
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* Inserted in manuscript on executed Agreement
<PAGE>
"Commitment" in relation to a Lender means, (a) if the
Lender is a Lender on the date of this
Agreement, the amount set out opposite that
Lender's name in the First Schedule and the
amount of any other Lender's Commitment
acquired by that Lender under Clause 19
(Transfer); and (b) if the Lender becomes a
Lender after the date of this Agreement, the
amount of that Lender's Commitment acquired
by it under Clause 19 (Transfer), and "Total
Commitments" means the aggregate for the time
being of all the Commitments of all the
Lenders;
"Completion Date" means the date on which the sale and purchase
of the Assets to the Borrower is actually
completed;
"Corporate Account means an application in the Security Agent's
Application" standard form requesting the opening of one
or more accounts with the Security Agent;
"Drawdown Date" means the date on which the
<PAGE>
Facility is drawn by the Borrower hereunder;
"Encumbrance" means any mortgage, charge (whether fixed or
floating), pledge, lien, hypothecation, or
other interest or arrangement of any kind
conferring or having a commercial effect
analogous to conferring security;
"Event of Default" means any of those events specified in Clause
15.1 (Events of Default);
"Facility" means the loan facility made available to the
Borrower pursuant to this Agreement;
"Facility Amount" means at any time the amount calculated in
accordance with Clause 4.2 at such time;
"Hedge Provider" means Arab Bank plc, in its capacity as
counterparty to the Hedging Arrangements with
the Borrower;
"Hedging Arrangements" means the ISDA Agreement and/or each
confirmation, agreement or other document or
matter evidencing or
<PAGE>
constituting an interest rate management
arrangement relating to the Loan or part
thereof, all Hedging Arrangements to be in
form and substance acceptable to the Lenders
in their absolute discretion;
"Hedging Arrangements
Charge" means the charge to be executed by the
Borrower pursuant to Clause 8.1(c);
"Hedging Arrangements
Commencement Date" means the date on which the Hedging
Arrangements come into effect;
"Hotel Business" means, as the context requires, the business
of owning and operating hotels at each of the
Properties carried on up to the date of the
Acquisition Agreement by Butlin's Limited
(or an associated company thereof) or the
business of owning and operating hotels at
each of the Properties to be carried on by
the Borrower from the Completion Date;
"Improvement Programme" means the detailed programme and budget for
improvements to the Properties referred to in
<PAGE>
Clause 9.5;
"Indebtedness" means, with respect to any person, any
indebtedness or obligation (whether present
or future) created, issued, guaranteed,
incurred or assumed by such person for
payment or repayment of money;
"Inter-Creditor means the agreement between the Borrower,
Agreement" Cygnet Ventures Limited, the Agents, the
Lenders, and the Hedge Provider, referred to
in Clause 8.1(d);
"Interest Costs" in relation to a Calculation Period means the
aggregate of all interest, fees, commissions,
discounts (other than trade discounts) and
other costs, charges and expenses accruing
due from the Borrower during such Calculation
Period under this Agreement (after deducting
all amounts payable by the Hedge Provider
under the Hedging Arrangements but with the
addition of all amounts
<PAGE>
(other than the initial premium) payable by
the Borrower to the Hedge Provider under the
Hedging Arrangements in each case after the
application of Section 2(a) (Netting) of the
ISDA Agreement, where applicable);
"Interest Period" means a period by reference to which interest
is to be calculated and payable on the Loan
or any other amount hereunder as selected or
determined pursuant to Clause 5 (Interest
Periods);
"ISDA Agreement" means an agreement in the form of the
International Swaps and Derivatives
Association Master Agreement
(Multicurrency-Cross Border) 1992 Edition a
copy of which is attached as Appendix 5 (or
such other form as may from time to time be
specified by the Hedge Provider) entered into
between the Hedge Provider and the Borrower
for the purposes of effecting interest rate
hedging and/or interest
<PAGE>
rate management arrangements in respect of
the interest arising on some or all of the
Loan;
"Key-man Charge" means the assignment to be executed by the
Borrower pursuant to Clause 8.1(b);
"Key-man Policy" means a key-man life assurance policy taken
out by the Borrower on the life of Mr Kevin
Leech in the sum of not less
than(pound)8,500,000 (eight million five
hundred thousand pounds) with such life
assurance company or office and in such form
and on such terms as are acceptable to the
Administrative Agent and where the context
admits includes any replacement life
assurance policy taken out by the Borrower or
renewal thereof;
"Lender" means each of the banks or other financial
institutions specified in the First Schedule
and their respective successors in title,
Transferees and assigns;
<PAGE>
"Lending Office" means each branch office of a Lender through
which such Lender is for the time being
acting for the purposes of this Agreement;
"LIBOR" means, in relation to any Interest Period or
other period by reference to which interest
is to be determined, the rate per annum which
appears on display page 3750 on the Telerate
Service (or such other page as may replace
that page on that service or on such other
page and service as the Administrative Agent
may determine to have succeeded such service)
for deposits in Sterling for a period
comparable to such Interest Period or other
period as aforesaid, as at 11:00am on the
Quotation Date for such Interest Period or
other period or, if no such rate is so
displayed, the arithmetic mean (rounded
upwards, if necessary, to the nearest
one-sixteenth of one per cent (1/16%)) of the
respective rates quoted
<PAGE>
to the Administrative Agent by each Reference
Bank as the rates at which deposits in
Sterling are offered by prime banks to such
Reference Bank in the London Interbank Market
for a period comparable to such Interest
Period or other period at 11:00am on the
Quotation Date for such Interest Period or
other such period. If any Reference Bank
fails to provide a quotation, then LIBOR
shall be determined by reference to the rates
offered by the quoting Reference Banks
provided that if fewer than two Reference
Banks provide a quotation then LIBOR for such
Interest Period or such other period shall be
determined in accordance with Clause 13.3;
"Loan" means the aggregate principal amount advanced
by the Lenders hereunder or (as the context
requires) the amount thereof for the time
being outstanding hereunder;
<PAGE>
"Loan Note" means the (pound)10,400,000 non-interest
bearing loan note to be issued to Butlin's
Limited by the Borrower as required by the
Acquisition Agreement;
"Majority Lenders" means those Lenders the aggregate of whose
Outstandings comprise at least 66 2/3% of the
Loan or, if the Loan has not then been made,
Lenders the aggregate of whose Commitments
represent at least 66 2/3% of the Total
Commitments;
"Mandatory Costs Rate" means the additional interest rate on the
Loan (expressed as a rate per annum) to
compensate the Lenders for the cost of
complying with the Sterling mandatory liquid
costs requirements and for the cost of the
fee payable to the Financial Services
Authority as specified in Clause 6.6
(Mandatory Costs Rate);
"Margin" means 200 Basis Points (2%) per annum;
"Net Operating Profit" means the net operating
<PAGE>
profit (calculated as set out in the
Accounting Statement) of the Borrower such
profit being calculated before deduction of
the cost of the Improvement Programme and
before deduction for depreciation;
"Notice of Drawing" means a notice of drawing in respect of the
Facility substantially in the form set out in
the Second Schedule issued by the Borrower
requesting that the Facility be advanced
hereunder;
"Outstandings" means, in relation to a Lender at any time,
the aggregate principal amount of its share
of the Loan at such time and "Total
Outstandings" at any time means the
Outstandings of all the Lenders at such time;
"Participating Member
State" means a member of the European Community
established by the Treaty of Rome of 25 March
1957 (as amended by the Single European Act
1986 and the Maastricht Treaty (signed on 1
February 1992) and as amended from time to
time) which has for the time being adopted
the
<PAGE>
single currency in accordance with the
aforesaid treaty;
"Permitted Charge" means a second ranking security interest to
be executed by the Borrower in favour of
Cygnet Ventures Limited such security being
subject to the Inter-Creditor Agreement and
described in the Third Schedule thereto;
"Permitted Encumbrance" means:
(a) any lien or right of set-off arising (in
either case) by operation of law (or by
agreement to the same effect) in the
ordinary course of the Borrower's
business having regard to the custom in
the relevant trade for the settlement of
accounts;
(b) the Permitted Charge; and
(c) any other Encumbrance approved in
writing by the Administrative Agent;
<PAGE>
"Potential Event of
Default" means any event or circumstance which, with
the giving of notice and/or lapse of time
and/or upon the Administrative Agent making a
determination under Clause 15.1 (Events of
Default), would constitute an Event of
Default;
"Properties" means the properties briefly known as Ocean
Hotel Saltdean, The Grand Hotel Scarborough,
The Grand Hotel Margate, The Metropole Hotel
Blackpool and the Grand Hotel Llandudno as
more particularly described in the Schedule
to the Borrower's Charge and where the
context admits includes any one or more of
the properties and any part or parts thereof
and "Property" has a corresponding meaning;
"Purchase Price" means the aggregate amount payable by the
Borrower for the purchase of the Assets as
specified in Clause 3.1 of the Acquisition
Agreement exclusive of Value Added Tax and
any other Tax, less the amount payable under
the Acquisition Agreement in respect of any
goodwill;
<PAGE>
"Qualifying Lender" means (a) a bank (as defined in Section 840A
of the Income and Corporation Taxes Act 1988)
which is within the charge to corporation tax
as respects interest which would be payable
to it hereunder in accordance with Section
349(3) of the Income and Corporation Taxes
Act 1988 or (b) a bank or financial
institution to which payments of interest may
otherwise be made by the Borrower under the
Security Documents without deduction of
United Kingdom Taxes;
"Quotation Date" means, in relation to any period for which an
interest rate is to be determined hereunder,
the day conclusively determined by the
Administrative Agent to be the day on which
quotations would ordinarily be given by prime
banks in the London Interbank Market for
deposits in Sterling for delivery on the
first day of that period, provided that if
for any such period the
<PAGE>
Administrative Agent determines that
quotations would ordinarily be given on more
than one date, the Quotation Date for that
period shall be the last of those dates;
"Reference Banks" means the principal London offices of Arab
Bank plc, The Hongkong and Shanghai Banking
Corporation Limited, Chase Manhattan Bank and
any bank appointed by the Administrative
Agent to replace a Reference Bank with the
consent of the Borrower (not to be
unreasonably withheld or delayed) and
"Reference Bank" has a corresponding meaning;
"Repayment Date" means each of the dates falling 24, 36, 48
and 60 months after the Drawdown Date, the
last of such dates being the "Final Repayment
Date";
"Repayment Instalment" means each instalment for repayment of the
Loan, in each case as provided in Clause 7.1;
"Reporting Date" means 31 January, 30 April,
<PAGE>
31 July and 31 October in each year or, where
such date is not a Sunday, the immediately
preceding Sunday;
"Secured Asset" means any asset over which an Encumbrance is,
or is to be, created by or pursuant to any
Security Document;
"Secured Obligations" means all monies which are now or at any time
hereafter may be or become due or owing by
the Borrower to either of the Agents or any
of the Lenders or the Hedge Provider under or
pursuant to any of the Security Documents and
any other liabilities, whether actual or
contingent, now existing or hereafter
incurred by the Borrower to either of the
Agents or any of the Lenders or the Hedge
Provider under or pursuant to any of the
Security Documents (whether in either case
due, owing or incurred by the Borrower alone
or jointly with any other person(s) and in
whatever name, firm or
<PAGE>
style and whether as principal or surety);
"Secured Parties" means the Agents and the Lenders and the
Hedge Provider;
"Security Agent" means Arab Bank plc, in its capacity as
security agent and trustee for the Secured
Parties and includes any successor security
agent appointed hereunder;
"Security Documents" means this Agreement, the Borrower's Charge,
the Key-man Charge, the Hedging Arrangements
Charge, the Hedging Arrangements, the
Inter-Creditor Agreement, and any further
agreement or document entered into under or
pursuant to the terms of any Security
Document or otherwise entered into or given
at any time as security for the Secured
Obligations;
"Standby Letter of
Credit" the standby letter of credit issued or to be
issued to Butlin's Limited by Citibank, N.A.
as required by the Acquisition Agreement;
<PAGE>
"Subordinated Loan" means the loan facility of up to
(pound)100,000 made available to the Borrower
by Cygnet Ventures Limited and referred to in
the Inter-Creditor Agreement;
"Taxes" means any present or future taxes, levies,
duties or charges, including any interest
thereon and penalties in respect thereof, and
any fees, deductions or withholdings of a
similar nature and "Tax" and "Taxation" shall
be construed accordingly;
"Transfer Certificate" means an instrument executed pursuant to
Clause 19.3;
"Transferee" means a Qualifying Lender to which a Lender
transfers all or part of such Lender's
rights, benefits and obligations under this
Agreement and the other Security Documents
pursuant to Clause 19 (Transfer);
"Valuation Basis" means the Estimated Realisation Price (as
defined in the RICS Appraisal and Valuation
Manual as from time to time
<PAGE>
amended by the RICS) or, if the same is
replaced or no longer published, such
reasonably comparable valuation basis as the
Administrative Agent may select;
"Value" means at any time in relation to any real
property (including the Properties) the value
of the interest held therein by the Borrower
on the Valuation Basis at such time,
determined by an Approved Valuer.
1.2 Construction of Certain Terms
Any reference in this Agreement to:
an "account" shall include a sub-account opened by the person with whom
the account is maintained;
a "business day" means a day (other than a Saturday or a Sunday) on which
banks in London are open for business (excluding any day on which such
banks are open solely for the purpose of settling payments in Euro) and
on which the London interbank market is operating;
a "dispute" means any litigation or administrative or arbitration
proceeding before or of any court, tribunal, arbitrator or
<PAGE>
governmental or municipal authority, any labour dispute, any dispute with
any governmental or municipal authority and any other dispute of any
kind;
a "month" is a reference to a period starting on one day in a calendar
month and ending on the numerically corresponding day in the next
calendar month (and references to "months" shall be construed
accordingly) save that, where any such period would otherwise end on a
day which is not a business day, it shall end on the next business day
and, where applicable, interest shall continue to accrue accordingly,
unless that day falls in the calendar month succeeding that in which it
would otherwise have ended, in which case it shall end on the preceding
business day provided that, if a period starts on the last business day
in a calendar month or if there is no numerically corresponding day in
the month in which that period ends, that period shall end on the last
business day in that latter month;
a "subsidiary" means (i) a subsidiary as defined in Section 736 of the
Companies Act 1985 (as amended by Section 144 of the Companies Act 1989)
and (ii) unless the context otherwise requires, a subsidiary undertaking
within the meaning of Section 258 of the Companies Act 1985 (as inserted
by Section 21 of the Companies Act 1989);
a time of day shall be to London time; and
the "winding-up" of a person includes the
<PAGE>
amalgamation, reconstruction, reorganisation, administration,
dissolution, liquidation, winding-up, merger or consolidation of that
person, and any equivalent or analogous procedure under the law of any
jurisdiction in which the person is incorporated or resident or carries
on a material part of its business or has material assets.
1.3 Construction of Certain References
Unless the context otherwise requires, any reference in this Agreement
to:
a Clause, Appendix or Schedule shall be construed as a reference to a
clause hereof or appendix or schedule hereto;
a sub-clause shall be construed as a reference to a sub-clause of the
Clause in which such reference appears;
a paragraph shall be construed as a paragraph of the sub-clause in which
such reference appears;
this Agreement or any other agreement or document shall be construed as a
reference to this Agreement or, as the case may be, such other agreement
or document as the same may have been, or may from time to time be,
amended, varied, supplemented or novated;
the singular shall include the plural and vice versa;
any statute or regulation shall be construed as a
<PAGE>
reference to such statute or regulation as the same may have been, or may
from time to time be, amended or re-enacted;
"Sterling" and the sign "(pound)" means the lawful currency for the time
being of the United Kingdom and
"Euro" means the lawful currency of the Participating Member States;
1.4 Headings
Clause, Schedule and Appendix headings are for ease of reference only.
2. The Facility
2.1 Amount and Currency
Upon and subject to the terms and conditions of this Agreement and in
reliance upon the representations and warranties in Clause 11
(Representations and Warranties) the Lenders agree to make available to
the Borrower a loan facility in an amount not exceeding the Facility
Amount.
2.2 Participation of Lenders
Each Lender will participate in the Facility through its Lending Office
in the proportion borne by its Commitment to the Total Commitments.
2.3 Purpose
The proceeds of the Facility are to be applied by the Borrower in or
towards payment of the amount
<PAGE>
of the Purchase Price payable upon the Completion Date, and in the
payment of associated costs and expenses. Neither the Lenders nor the
Agents shall be concerned to ensure that such application takes place.
3. The Lenders
3.1 Obligations of Lenders
Save as provided in this Clause, the obligations of each Lender hereunder
are several; the failure of any Lender to carry out its obligations
hereunder shall not relieve any other Lender, the Agents or the Borrower
from any of its or their respective obligations to the parties hereto and
neither the Agents nor any Lender shall be responsible for the
obligations of any Lender or (as the case may be) any other Lender
hereunder.
3.2 Interests of Lenders
Notwithstanding any other term of this Agreement, the interests of the
Lenders are several and the aggregate amount outstanding at any time
hereunder from the Borrower to any Lender or to either of the Agents for
its own account is a separate and independent debt. Save as expressly
provided herein or in any of the other Security Documents each of the
Agents and every Lender shall each have the right to protect and enforce
its rights arising out of this Agreement and it shall not be necessary
for any Lender or (as the case may be) either Agent to be joined as an
additional party in any proceedings for this purpose.
<PAGE>
4. Availability and Drawing
4.1 Number of Advances
Subject to the terms and conditions of this Agreement the Borrower shall
be entitled to draw the whole of the Facility by a single drawing.
4.2 Maximum Amount
The amount of the Facility made available to the Borrower hereunder shall
be the lesser of the following amounts:
(a) the sum of(pound)10,000,000;
(b) 70% of the Purchase Price; and
(c) 70% of the lower of the Approved Valuations of the Properties
referred to in paragraph 7 of the Fourth Schedule.
4.3 Conditions Precedent
The Facility may not be drawn unless the Administrative Agent has
received, in form and substance satisfactory to it, all the documents
listed in the Fourth Schedule.
4.4 Procedure
Subject to:
(a) the conditions set out in Clause 4.3 having been satisfied;
(b) no Event of Default and no Potential Event of Default having
occurred;
<PAGE>
(c) the Administrative Agent having received by not later than 10:00am
one business day before the Drawdown Date (or by such later time
as the Administrative Agent after consultation with the Lenders
may agree) a Notice of Drawing (which shall be irrevocable) by
telex or facsimile or letter duly completed and signed on behalf
of the Borrower by a person duly authorised;
(d) the Drawdown Date being the Completion Date;
(e) the Administrative Agent having received irrevocable instructions
addressed to it by the Borrower requesting that the Loan be
disbursed by applying the proceeds in or towards the acquisition
of the Properties and in the payment of associated costs and
expenses approved by the Administrative Agent; and
(f) the Administrative Agent having received all fees costs and
expenses then due and payable to it and/or agreed under Clause 16
(Expenses, Fees and Commission),
the Borrower may, on any business day during the Availability Period,
draw the Facility.
4.5 Transfer of Funds
On the Drawdown Date each Lender shall pay to the Administrative Agent
the amount in Sterling notified by the Administrative Agent to such
Lender as the amount of such Lender's participation in the Facility to be
advanced on
<PAGE>
the Drawdown Date. All sums to be advanced by the Lenders shall be
remitted to the Administrative Agent for value on the Drawdown Date to
the account of the Administrative Agent in accordance with Clause 14
(Payments). The Administrative Agent shall pay the sums received by it as
directed by the Borrower in accordance with Clause 4.4(e).
4.6 Cancellation of Unused Facility
Any part of the Facility which is not drawn at the earlier of the expiry
of the Availability Period or the Drawdown Date shall be cancelled and
shall not thereafter be available to the Borrower.
4.7 No Waiver of Conditions
If the Administrative Agent in its discretion allows the Borrower to draw
the Facility notwithstanding that some or all of the conditions specified
in this Clause 4 (Availability and Drawing) have not been satisfied the
Lenders shall not thereby be deemed to have waived any such conditions
and the Borrower covenants with the Administrative Agent and the Lenders
to satisfy such conditions, or to procure that such conditions are
satisfied, upon request from the Administrative Agent within such time
limit as shall have been agreed and, failing agreement, immediately.
4.8 Authorisations for Disbursements
The Borrower hereby irrevocably and
<PAGE>
unconditionally instructs and authorises the Lenders and the
Administrative Agent to advance the Facility upon and subject to the
terms hereof by paying the proceeds thereof by disbursement to the
"Payee" named in the Notice of Drawing (less any deductions which the
Administrative Agent is authorised to make) and upon any such
disbursement to any such "Payee" and the deduction of any deductions so
authorised the Borrower agrees that the Lenders shall be deemed (in
proportion to the respective amounts made available by them to the
Administrative Agent) to have made to the Borrower the Loan in the
aggregate of the amount so disbursed and any such deductions which shall
satisfy pro tanto the obligations of the Lenders to lend such amount to
the Borrower hereunder.
4.9 Failure to Draw
If for any reason the Facility is not drawn hereunder after receipt by
the Administrative Agent of a Notice of Drawing pursuant to Clause 4.4,
the Borrower will pay to each Lender (other than a Lender which fails to
make available its portion of the Loan by reason of its own negligence or
default) such amount as such Lender may certify (such certification to be
conclusive in the absence of manifest error) as necessary to compensate
it for any resulting loss or expense on account of funds acquired,
contracted for or utilised in order to fund its participation in the
Loan.
5. Interest Periods
<PAGE>
5.1 Selection by Borrower
Subject to the provisions of this Clause 5 (Interest Periods) and Clause
6 (Interest), the Borrower may by notice received by the Administrative
Agent not later than 10:00am on the third business day before the first
day of each Interest Period (other than the first Interest Period, when
the selection will be made in the Notice of Drawing, and subject to
Clause 5.2 below) select the duration of such Interest Period. In the
absence of a selection by the Borrower Clause 5.3 shall apply.
5.2 Determination of Interest Periods
Subject to the provisions of Clause 6 (Interest) each Interest Period in
relation to the Loan shall have a duration of 3, 6, 9 or 12 months, (or
such other period as may be agreed with the Administrative Agent after
consultation with the Lenders), as selected or deemed to have been
selected by the Borrower in accordance with Clause 5.1, but so that:
(a) the first Interest Period applicable to the Loan shall commence on
the Drawdown Date and shall end on the last day of the period
selected by the Borrower pursuant to Clause 5.1 or deemed selected
by the Borrower pursuant to Clause 5.3;
(b) save as otherwise provided in this Agreement, each subsequent
Interest Period shall commence on the expiry of the preceding
Interest Period;
<PAGE>
(c) any Interest Period which would otherwise end on a day which is
not a business day, shall be extended to end on the next
succeeding business day unless that day falls in the calendar
month succeeding that in which it would otherwise have ended, in
which case it shall end on the immediately preceding business day;
(d) any Interest Period which would otherwise overrun a Repayment Date
shall be shortened to end on such Repayment Date; and
(e) the right to select the duration of Interest Periods shall
determine on the Hedging Arrangements Commencement Date and from
the Hedging Arrangements Commencement Date Interest Periods shall
(notwithstanding Clause 5.3) be coterminous with the periods by
reference to which payments are to be calculated pursuant to the
Hedging Arrangements.
5.3 Deemed Selection
If the Borrower shall fail to select the duration of an Interest Period
in accordance with Clauses 5.1 and 5.2 then the Borrower shall be deemed,
subject as aforesaid, to have selected a duration of 3 months or such
other period as the Administrative Agent may (after consultation with the
Lenders) specify for such Interest Period.
<PAGE>
6. Interest
6.1 Interest Rate
The rate of interest applicable to the Loan during an Interest Period
applicable thereto shall be the rate per annum determined by the
Administrative Agent to be the aggregate of (i) the Margin and (ii) LIBOR
for such Interest Period and (iii) the Mandatory Costs Rate.
6.2 Hedging Arrangements
(a) The Borrower has executed and delivered to the Hedge Provider the
ISDA Agreement.
(b) On the Drawdown Date the Borrower shall enter into such
confirmations pursuant to the ISDA Agreement to take effect from
such date (being the Drawdown Date or the last day of an Interest
Period) as the Hedge Provider may specify.
(c) Without prejudice to the generality of the foregoing the dates on
which payments fall to be made pursuant to the Hedging
Arrangements shall coincide with the dates on which interest is to
be paid on the Loan under this Agreement.
(d) For so long as the Loan remains outstanding the Hedge Provider
shall be entitled to pay to the Security Agent any payments which
the Hedge Provider is required to pay to the Borrower under the
Hedging Arrangements and for the avoidance of doubt, any sums
which
<PAGE>
the Borrower is required to pay to the Hedge Provider under the
Hedging Arrangements shall be sums due under and secured by the
Security Documents in accordance with their terms.
6.3 Payment of Interest
The Borrower shall, subject to the provisions of Clause 13 (Changes in
Circumstances), 14 (Payments) and 15 (Default), pay interest accrued on
the Loan calculated in accordance with this Clause 6 on the last day of
each Interest Period.
6.4 Day Count Fraction
Interest relative to each Interest Period shall accrue from day to day on
the basis of a year of 365 days and for the actual number of days
elapsed.
6.5 Currency
All interest on the Loan shall be calculated and paid in Sterling.
6.6. Mandatory Costs Rate
The provisions of the Fifth Schedule shall apply to the calculation of
the Mandatory Costs Rate in respect of the Loan.
7. Repayment and Prepayment
7.1 Repayment
The Borrower shall on each Repayment Date repay a repayment instalment in
respect of the principal amount of the Loan in the amount of
(pound)2,500,000
<PAGE>
and on the Final Repayment Date shall repay the remaining outstanding
amount of the Loan by a single payment, together with any other amounts
due, owing or incurred by it pursuant to this Agreement.
7.2 Prepayment
If the Borrower has provided the Administrative Agent with not less than
10 business days' prior written notice of its intention to do so, the
Borrower may prepay without premium or penalty the whole or any part of
the Loan (and, if part, being an integral multiple of (pound)250,000) on
the last day of any Interest Period. On any prepayment the Borrower shall
pay to the Administrative Agent for the account of the Lenders all such
breakage and other costs and expenses as are referred to in Clause 17.1
and as may be applicable. Any amount prepaid shall be applied in or
towards discharge of the Repayment Instalments in inverse order of their
maturity.
7.3 Obligation to Prepay Following Notice
Any notice given by the Borrower under Clause 7.2 shall be irrevocable,
shall specify the date on which the prepayment is to be made and the
amount to be prepaid and shall on that date oblige the Borrower to pay to
the Administrative Agent for the account of the Lenders the amount
therein stated and at the same time to pay all accrued interest and other
amounts (including any due under Clause 17 (Indemnities)) falling due in
respect of such prepayment.
<PAGE>
7.4 No Premature Repayment
The Borrower shall not repay or prepay all or any part of the Loan except
at the times and in the manner expressly provided for in this Agreement
and shall not be entitled to re-borrow any amount repaid or prepaid.
7.5 Amounts and Currency of Repayments and Prepayments
Each repayment and prepayment under this Agreement shall be made in
Sterling and the Borrower shall at the same time pay all accrued interest
and other amounts (including any due under Clause 17 (Indemnities))
falling due in respect of such repayment or prepayment.
8. Security
8.1 Security
As continuing security for the discharge of all the Secured Obligations
the Borrower shall:
(a) execute and deliver to the Security Agent a deed or deeds of
charge and debenture substantially in the form set out in Appendix
1 including a charge by way of legal mortgage over the freehold
and leasehold interests in the Properties and a floating charge
over the undertaking and other property and assets of the
Borrower;
(b) execute and deliver to the Security Agent a security agreement
containing an assignment of all its right title and interest in
the Key-man Policy substantially in the form set
<PAGE>
out in Appendix 2;
(c) execute and deliver to the Security Agent a security agreement
containing an assignment of all its right title and interest in
the Hedging Arrangements substantially in the form set out in
Appendix 3; and
(d) execute and deliver and procure the execution and delivery by
Cygnet Ventures Limited to the Security Agent of an inter-creditor
agreement substantially in the form set out in Appendix 4.
8.2 Security Agent as Trustee
The Secured Obligations shall be secured by the interests and rights
granted in favour of the Security Agent as trustee for the Agents and the
Lenders under the Security Documents and such interests and rights shall
be held by the Security Agent upon trust for the benefit of the Secured
Parties in such shares and ranking in such order as shall be from time to
time applicable pursuant to any agreement between the Secured Parties.
9. Maintenance of Security
9.1 Covenants
The Borrower covenants with the Agents and the Lenders:
(a) to ensure that the Net Operating Profit in each and every
Calculation Period ending on
<PAGE>
or after 30 July 2000 is at least equal to 125% of the aggregate
of (1) the Interest Costs for such Calculation Period and (ii) (in
respect of each Calculation Period ending on or after 30 July
2001) (pound)2,500,000;
(b) to ensure that the amount of the Loan does not at any time exceed
70% of the Value of the Properties at such time; and
(c) use all reasonable endeavours to procure* that a Key-man Policy is
maintained until all sums due and to become due from the Borrower
under or in connection with the Security Documents have been paid
or repaid in full and without limitation, shall use all reasonable
endeavours to obtain a new Key-man Policy upon substantially the
same terms from a life office acceptable to the Administrative
Agent to take effect on and from the expiry of the term of the
initial Key-man Policy
9.2 Calculations and Further Covenant
For the purposes of Clause 9.1 (a):
(a) the covenant contained in Clause 9.1(a) shall be applied by
reference to the Net Operating Profits specified in the Accounting
Statement to be supplied by the Borrower pursuant to Clause 12.1
(b) for the three monthly period ending on each Reporting Date
(falling on or after 30 July 2000) aggregated
- --------
* Inserted in manuscript on executed Agreement
<PAGE>
with the Net Operating Profits specified in the Accounting
Statements for the three immediately preceding Reporting Dates, to
the intent that the covenant in Clause 9.1(a) shall be applied on
the basis of a rolling Calculation Period of twelve months ending
on each Reporting Date (falling on or after 30 July 2000)
(b) the Borrower further covenants with the Agent and the Lenders to
ensure that the Net Operating Profit in each accounting year of
the Borrower (applied by reference to the annual audited financial
statements of the Borrower referred to in Clause 12.1(a)) is at
least equal to 125% of the aggregate of (i) the Interest Costs in
relation to the Calculation Period or Periods (or parts thereof)
falling within and corresponding to each such financial year and
(ii) (in respect of each financial year ending on or after 30 July
2001) (pound)2,500,000;
(c) the Administrative Agent may at any time and from time to time
require the Borrower to supply further information and evidence as
to the calculation of each Accounting Statement.
9.3 Failure to Comply
If at any time the Administrative Agent determines that the provisions of
Clause 9.1 (b) are for the time being not complied with, the Borrower
shall within 10 business days after the Administrative Agent has notified
it of such fact
<PAGE>
in writing repay all or part of the Loan (as the Administrative Agent may
specify) such that the provisions of Clause 9.1 (b) are thenceforth
complied with.
9.4 Valuations
An Approved Valuation of the Properties may if required by the
Administrative Agent be carried out at the expense of the Borrower not
more frequently than once every twelve months. The Administrative Agent
shall arrange for such Approved Valuation if required by the Majority
Lenders. The Administrative Agent shall also if requested by the Majority
Lenders arrange for additional Approved Valuations of the Properties to
be carried out. If any such additional Approved Valuation indicates that
on the date it was requested the Borrower was complying with Clause 9.1
(b) the cost thereof shall be borne by the Lenders, and if such
additional Approved Valuation indicates that on such date the Borrower
was not so complying, the cost of such additional Approved Valuation
shall be borne by the Borrower.
9.5 Improvements to the Properties
(a) The Borrower shall within 60 days of the Drawdown Date produce to
the Administrative Agent (in sufficient copies for each of the
Lenders) a detailed programme of and budget for improvements to
the Properties together with plans, specifications, costs,
estimates and a works programme at an anticipated cost
<PAGE>
of not less than (pound)1,500,000 (exclusive of all Taxes) and
shall provide all such further information in relation thereto as
the Administrative Agent or the Lenders may reasonably require.
(b) The Borrower shall obtain the written approval of the
Administrative Agent which may be withheld at its absolute
discretion or given subject to any condition or conditions (after
consultation with the Lenders) to the Improvement Programme before
implementing any of the relevant improvements.
(c) Subject to obtaining the written approval referred to in Clause
9.3(b) the Borrower shall forthwith apply for and use all
reasonable endeavours to obtain all planning and other consents
licences and/or certificates which may be required in connection
with the Improvement Programme (and supply copies to the
Administrative Agent) and shall commence and proceed diligently to
complete or procure the completion of the Improvement Programme
and supply evidence satisfactory to the Administrative Agent that
by no later than the expiry of the period of eighteen months from
the Drawdown Date (i) the Borrower has from its own resources
spent not less than(pound)1,500,000 (exclusive of all Taxes) on
the Improvement Programme and (ii) that the Improvement Programme
has been completed in all material respects.
<PAGE>
(d) The Borrower will permit the Agents (and all persons authorised by
them) to enter the Properties on reasonable prior notice at any
time in order to inspect the progress of the Improvement
Programme.
(e) None of the Secured Parties shall have any liability in respect of
the Improvement Programme and no inspection or approval by any of
the Secured Parties of the Improvement Programme and works carried
out under it will constitute any warranty or representation as to
the design, fitness or satisfactory completion of the Improvement
Programme.
(f) Before preparing the Improvement Programme the Borrower will
submit to the Administrative Agent for approval the names of the
contractors, architect, structural engineer and any other
professional advisors the Borrower intends to employ in connection
with the Improvement Programme (in each case where the value or
fee for the relevant contract or appointment exceeds
(pound)100,000) and prior to commencing the Improvement Programme
the Borrower will if requested by the Administrative Agent procure
that the construction contractor, architect and any other members
of the professional team shall execute deeds undertaking a duty of
care in favour of the Security Agent in connection with the design
construction and implementation of the Improvement Programme in
the BPFA form or in such other form as the
<PAGE>
Administrative Agent may reasonably require.
(g) Immediately on entering into a contract for or in respect of the
execution of the Improvement Programme where the value of the
relevant contract exceeds(pound)100,000 the Borrower will execute
a security assignment of such construction contract and of all
other warranties and contracts relating to the Improvement
Programme as the Administrative Agent may require in favour of the
Security Agent in such a form as the Administrative Agent shall
require and will also use its reasonable endeavours to procure
that the relevant contractor will enter into a step-in agreement
with the Security Agent in such form as the Administrative Agent
shall reasonably require by which the relevant contractor
undertakes not to determine the relevant contract as a result of
the Borrower's failure without first notifying the Security Agent
and to permit the Security Agent or a receiver appointed by the
Security Agent to take over the relevant contract in the event
that the Security Agent should exercise the security rights under
the Borrower's Charge.
(h) If the Borrower shall obtain any performance bond or other
security for the performance by the construction contractor of the
terms of the construction contract then it will assign the benefit
of such bond to the Security Agent by way of security.
<PAGE>
10. Single Currency
Each of the parties to this Agreement acknowledges that if the United
Kingdom becomes a Participating Member State Sterling will or may be
replaced by the Euro. The other parties to this Agreement agree to amend
the provisions of this Agreement if notified by the Administrative Agent
(after consultation with the Lenders) that any amendments are required to
ensure that this Agreement reflects market practice in the London
Interbank Market at the relevant time following the United Kingdom
becoming a Participating Member State including without limitation any
amendments required in the duration of Interest Periods, the definition
of business day, the day-count fraction, or in any other administrative
provisions of this Agreement.
11. Representations and Warranties
11.1 Representations
The Borrower represents and warrants to the Agents and each of the
Lenders that:
(a) the Borrower is a private limited liability company, duly
incorporated and validly existing under the laws of the England
and Wales and has power to carry on its business as it is now
being conducted and to own property and other assets;
(b) the Borrower has been incorporated specifically to acquire the
Properties and the Hotel Business and to run the Hotel
<PAGE>
Business with the assistance of the Facility and the Borrower has
not previously traded or incurred liabilities except in connection
with the acquisition of the Properties and the Hotel Business and
this Facility and in particular (but without prejudice to the
generality of the foregoing) the Borrower has not entered into any
guarantee or borrowed money from any other person or company other
than the Lenders or by the Subordinated Loan or by the issue of
the Loan Note or entered into any transaction having a similar
effect nor has the Borrower created nor is there subsisting any
Encumbrance on or over the whole or any part of the Borrower's
undertaking or assets (including, but without limitation,
revenues), present or future other than in favour of the Security
Agent by the Permitted Charge or liens arising in the ordinary
course of business;
(c) the execution, delivery and performance of this Agreement and the
other Security Documents are within the corporate powers of the
Borrower, have been duly authorised by all necessary corporate and
other action and do not contravene any provision of applicable law
or of the Memorandum and Articles of Association of the Borrower
or any contract or agreement binding on the Borrower;
(d) the obligations and liabilities expressed to be assumed by each of
the Borrower under each of the Security Documents are legal, valid
<PAGE>
and binding obligations of the Borrower binding on it in
accordance with their respective terms, and, without prejudice to
the foregoing, the Borrower's Charge, the Key-man Charge, and* the
Hedging Arrangements Charge * create (inter alia) valid first
priority charges over the assets thereby charged and which are not
subject to any prior ranking Encumbrances or, other than Permitted
Encumbrances (excluding for this purpose the Permitted Charge),
Encumbrances ranking pari passu;
(e) all necessary certificates, consents or approvals required for the
use of each of the Properties in the manner presently used for the
Hotel Business have been duly obtained and are in full force and
effect;
(f) there are no pending or, to its knowledge having made due and
proper enquiry, threatened actions or proceedings before any court
or administrative agency against the Borrower other than actions
or proceedings details of which have been disclosed to the
Administrative Agent and which are being disputed in good faith,
nor is the Borrower in breach of or in default under any agreement
to which it is a party or which is binding on it or any of its
assets, to an extent or in a manner which may have a
- --------
* Inserted in manuscript on executed Agreement
* Amended in manuscript on executed Agreement
<PAGE>
material adverse effect on the financial condition or operations
of the Borrower or materially impair the Borrower's ability to
perform its obligations under this Agreement or any other Security
Document and there are no pending or, to its knowledge having made
due and proper enquiry, threatened disputes or proceedings arising
out of or in connection with the Properties other than disputes or
proceedings, details of which have been disclosed to the
Administrative Agent and which are being disputed in good faith;
(g) the Borrower has not taken any corporate or other action nor have
any legal proceedings been started or (to the best of its
knowledge and belief) other steps taken or threatened against the
Borrower for its winding-up, dissolution or re-organisation, or
for the appointment of a receiver, trustee, administrator or
similar officer of it or him of any or all of its assets or
revenues;
(h) the whole of the Borrower's issued share capital is legally owned
as follows:-
Name Number of Ordinary Shares
Cygnet Ventures Limited 85
Philip Mason 6
Patricia Mason 4
Stephen Last 2
<PAGE>
Rod Rodgers 2
David Marriott 1
(i) save as provided in the Security Documents, the execution of this
Agreement and the other Security Documents and the Borrower's
exercise of its rights and performance of its obligations
hereunder and thereunder will not result in the existence of, nor
oblige the Borrower to create, any Encumbrance over all or any of
its present or future revenues or assets;
(j) all Accounting Statements and financial statements from time to
time delivered to the Agents or the Lenders by the Borrower will
be prepared in accordance with accounting principles generally
accepted in the United Kingdom and consistently applied, and give
a true and fair view of the financial condition of the Borrower
and its subsidiaries (if any) at the date to which they were
prepared and the results of the Borrower's operations during the
financial year ending on such date or, in the case of the
Accounting Statements, a true and fair view of the information
required to be contained therein for the relevant period; since
publication of any such financial statements delivered there has
been no adverse change in the business or financial condition of
the Borrower or any of its subsidiaries (if any) which is material
in the context of the Borrower's ability to perform its
obligations under this Agreement
<PAGE>
or the other Security Documents;
(k) the information provided by or on behalf of the Borrower in
connection with the negotiation of the Facility and the
preparation of the Security Documents was true, complete and
accurate in all material respects when supplied, and (to the best
of the Borrower's information and belief) since the date of such
supply there has been no material adverse change in the position
of the Borrower rendering such information misleading;
(l) no Event of Default or Potential Event of Default has occurred and
is continuing;
(m) the Borrower has complied in all material respects with all
Taxation laws in all jurisdictions in which it is subject to
Taxation and has paid all Taxes due and payable by it and no
claims are being asserted against it in respect of Taxes save for
assessments in relation to the ordinary course of its business or
claims contested in good faith and in respect of which adequate
provision has been made and disclosed in the latest accounts of
the Borrower or information in respect of which has been delivered
to the Administrative Agent hereunder; and
(n) the Borrower is not (nor would be with the giving of notice or the
lapse of time or both) in breach of or in default under any
<PAGE>
agreement relating to any Indebtedness to which it is a party or
by which it may be bound, where the amount of such Indebtedness is
in excess of (pound)75,000.
11.2 Lenders' Reliance
The Borrower acknowledges that it has made the representations and
warranties referred to in Clause 11.1 with the intention of persuading
the Agents and the Lenders to enter into this Agreement and that the
Agents and the Lenders have entered into this Agreement on the basis of,
and in full reliance on, each of such representations and warranties. The
Borrower warrants to the Agents and the Lenders that each of such
representations and warranties is true and correct in all material
respects as of the date of this Agreement and that none of them omits any
matter, the omission of which makes any of such representations and
warranties misleading in any material respect.
11.3 Knowledge of Lenders
The rights and remedies of the Agents and the Lenders in relation to any
misrepresentation or breach of warranty on the part of the Borrower shall
not be prejudiced by any investigation by or on behalf of the Agent or
the Lenders into the affairs of the Borrower or the Hotel Business, by
the execution or the performance of this Agreement or by any other act or
thing which may be done by, or on behalf of the Agents or the Lenders in
connection with this Agreement and
<PAGE>
which might, apart from this Clause, prejudice such rights or remedies.
11.4 Repetition
The representations and warranties made by the Borrower pursuant to
Clause 11.1 and the warranty made by the Borrower pursuant to Clause 11.2
(other than that made in Clause 11.1(b)) shall survive the execution of
this Agreement and the drawing of the Facility hereunder and shall be
deemed to be repeated on the date of the Notice of Drawing, at the
beginning of each Interest Period as if made at and in respect of the
circumstances existing at each such time.
12. Undertakings
12.1 Specific Undertakings
The Borrower undertakes with the Agents and each of the Lenders that from
and after the date hereof and until all sums due and to become due from
the Borrower under or in connection with the Security Documents have been
paid or repaid in full the Borrower shall:-
(a) as soon as the same become available, but in any event within 180
days after the end of each of its financial years, deliver to the
Administrative Agent sufficient copies for each of the Lenders of
the financial statements relating to the Borrower and its
subsidiaries (if any) for such financial year (including its
balance sheet and profit and loss account) prepared and audited in
<PAGE>
accordance with generally accepted accounting practice in the
United Kingdom, consistently applied, approved by the Borrower's
Board of Directors and certified by a duly authorised officer of
the Borrower as giving a true and fair view of the financial
condition of the Borrower and its subsidiaries (if any) as at the
end of the period to which those financial statements relate and
of the results of its and their operations during such period;
(b) deliver to the Administrative Agent sufficient copies for each of
the Lenders as soon as the same become available but in any event
within 30 days after each Reporting Date, financial statements and
management accounts of the Borrower signed by a director or
directors of the Borrower for the period of three months ending on
such Reporting Date, such statements and accounts to be in the
form of the Accounting Statement and prepared in accordance with
generally accepted accounting practice in the United Kingdom and
shall (without limitation) certify the Net Operating Profit for
each such period, and if the Administrative Agent so requests the
Borrower will procure that such statements and accounts shall be
certified by the Borrower's auditors as giving a true and fair
view of the information contained therein by not later than 60
days after the relevant Reporting Date;
<PAGE>
(c) deliver to the Administrative Agent (in sufficient copies for each
of the Lenders if the Administrative Agent so requests) promptly
upon becoming aware of them, details of any litigation,
arbitration or administrative proceedings which are current, or to
its knowledge having made due and proper enquiry threatened or
pending in relation to the Borrower and which if adversely
determined would or is likely to give rise to a liability on the
part of the Borrower in excess of (pound)75,000;
(d) from time to time at the request of the Administrative Agent,
furnish the Administrative Agent with such information about the
Properties, the Hotel Business, or the financial condition of the
Borrower, as the Administrative Agent may reasonably require;
(e) obtain, comply with the terms of and do all that is necessary to
maintain in full force and effect all authorisations, approvals,
licences, certificates and consents required in or by all
applicable laws and regulations to enable the Borrower and the
Shareholders lawfully to enter into and perform their respective
obligations under the Security Documents, and to authorise the use
of the Properties in the manner in which the Properties are from
time to time used;
(f) promptly upon becoming aware of the same inform the Administrative
Agent of the
<PAGE>
occurrence of any Potential Event of Default or Event of Default
and on the date hereof, on each day on which it delivers financial
statements to the Administrative Agent under Clauses 12.1(a) or
(b) and also upon receipt of a written request to that effect from
the Administrative Agent confirm that no such event has occurred;
(g) promptly notify the Administrative Agent of:
(i) any Encumbrance of which the Borrower becomes aware
attaching to the assets or revenues of the Borrower (other
than an Encumbrance created in favour of the Agents
pursuant to the Security Documents or a Permitted
Encumbrance); and
(ii) any occurrence (including without limitation any third
party claim or liability) of which the Borrower becomes
aware which would be likely to affect the ability of the
Borrower to perform its obligations under any of the
Security Documents;
(h) not without the prior written consent of the Administrative Agent,
which may be withheld at its absolute discretion or given subject
to any condition or conditions (after consultation with the
Lenders);
(i) grant or authorise the grant of any lease, tenancy or
licence of all or any
<PAGE>
part of the Properties (save for any licences granted to
hotel guests in the course of the Borrower's business as
hoteliers and any other licence for a period (including any
period or periods for which the licensee may have a right
of renewal) not exceeding 12 months and in each such case
so long as no tenancy or other proprietary interest or
security of tenure is created thereby);
(ii) grant, enter into, or authorise any agreement for the
operation of all or any part of the Hotel Business or the
Properties as a franchise or on a franchise basis or with
any person or persons to operate or manage all or any part
of the Hotel Business or the Properties (including without
limitation any reservations service agreement) or for the
Hotel Business to be operated under any flag or as part of
a group including hotels other than the Properties;
provided that (1) in the event that any such written consent is
given by the Administrative Agent, the Borrower will promptly at
its cost, supply such documents and other information relating
thereto as the Administrative Agent may reasonably require; (2)
without limitation to its discretion to decline to give any such
consent or to impose further conditions to the giving of any
<PAGE>
consent) the Administrative Agent may, upon giving any consent in
relation to any matter falling within paragraph (ii) above require
an undertaking from the relevant person or person with the
Security Agent not to determine the relevant agreement without
first giving notice to the Security Agent and agreeing to continue
such agreement with or for the benefit of the Secured Parties, and
from the Borrower to perform its obligations under and to use all
reasonable endeavours to enforce the terms of such agreement and
to maintain such agreement in force, and to notify the
Administrative Agent of any notice received under such agreement
(including without limitation) any report or communication in
respect of any shortfall or decline in operational standards and
(3) the Administrative Agent hereby consents to the Borrower
entering into the Butlin's Licence, the RLMS Services Agreement,
the Butlin's Services Agreement and the LSA Services Agreement (as
those terms are defined in the Acquisition Agreement);
(i) from and after the Completion Date:-
(i) obtain, comply with the terms of and do all things
necessary to maintain in full force and effect all
authorisations, approvals, certificates, licences and
consents required in or by all applicable rules and
regulations for the use of the Properties for the purpose
of
<PAGE>
the Hotel Business;
(ii) insure the Properties at all times in their full
reinstatement values in accordance with the terms of the
Borrower's Charge and subject thereto against such risks as
the Administrative Agent shall reasonably require and
pending any such requirement against such risks as a
prudent owner of the Properties would reasonably be
expected to cover which insurance shall include full cover
against risks of terrorism (to the extent available on
reasonably commercial terms) to the satisfaction of the
Administrative Agent and to procure that the Security Agent
is nominated as loss payee under such policy (or, if the
Security Agent shall so direct, that such insurance is
effected in the joint names of the Borrower and the
Security Agent); and
(iii) effect and maintain such insurance in respect of the Hotel
Business as a reasonably prudent operator of a business
comparable with the Hotel Business may effect or as the
Administrative Agent may from time to time require
including (but not limited to) third party liability and
business interruption insurance in such amount as the
Administrative Agent shall reasonably require and to
procure that
<PAGE>
the Security Agent is nominated as loss payee under such
policy (or, if the Security Agent shall so direct, that
such insurance is effected in the joint names of the
Borrower and the Security Agent).
(j) not without the prior written consent of the Lenders:-
(i) save in favour of the Security Agent in accordance with the
Security Documents, create or permit to be created or to
subsist any Encumbrance on or over the whole or any part of
the Borrower's undertaking or assets (including, but
without limitation, revenues), present or future other than
Permitted Encumbrances; or
(ii) except in accordance with the Security Documents, borrow or
raise any money or incur credit or give any guarantees,
indemnities or other assurances against financial loss,
other than by the issue of the Loan Note or by the
Subordinated Loan;
(k) not exercise or omit to exercise any right or discretion in
relation to the Properties or the Hotel Business in such a way as
may adversely affect the value thereof or the interest of the
Lenders and the Security Agent therein and, without limitation,
not to exercise any right to break or determine any
<PAGE>
lease under which any of the Properties is held prior to the
expiry of the full contractual term thereof without the prior
written consent of the Lenders;
(l) not without the prior written consent of the Administrative Agent
(after consultation with the Lenders) or save pursuant to the
Improvement Programme to construct any new buildings or structure
on the Properties or alter or remove the existing structures or
buildings or any part or parts thereof or any fixtures therein;
(m) deliver to the Administrative Agent (in sufficient copies for each
of the Lenders) copies of all documents despatched by the Borrower
to its shareholders (or any class of them) or its creditors
generally (or any class of its creditors) at the same time that
they are despatched;
(n) permit each of the Agents and any person (being an accountant,
auditor, solicitor, valuer or other professional adviser of such
Agent) authorised by either of such Agents to have, at all
reasonable times during normal business hours and on reasonable
notice, access to the Properties and the accounting books and
records of the Borrower;
(o) pay and discharge all Taxes prior to the date on which the same
become overdue unless, and only to the extent that, such Taxes
shall be contested in good faith by appropriate
<PAGE>
proceedings, pending determination of which payment may lawfully
be withheld;
(p) promptly and in any event within any applicable period provided
for the same in any applicable statute, law or regulation deliver
all necessary forms and documents required to be delivered to or
registered with any governmental, statutory or other body or
agency in connection with the Security Documents and any of the
transactions contemplated thereunder;
(q) not without the prior written consent of the Administrative Agent
sell, transfer, lease, lend or otherwise dispose of any of its
undertaking and assets from time to time owned by it with a value
in excess of (pound)75,000;
(r) not, without the prior written consent of the Administrative Agent
(after consultation with the Lenders), make any change in the
Hotel Business which would result in a substantial change in such
business (including, without limitation, the name under which any
of the Properties is operated as a hotel), nor carry on any other
business which is substantial in relation to the Hotel Business as
at present conducted;
(s) not, without the prior written consent of the Administrative Agent
(after consultation with the Lenders), merge or consolidate with
any other person or enter into any joint venture
<PAGE>
or partnership agreement;
(t) not, without the prior written consent of the Administrative Agent
(after consultation with the Lenders), incorporate any company as
its subsidiary or acquire any shares or securities issued by any
company;
(u) not, without the prior written consent of the Administrative Agent
(after consultation with the Lenders), make any redemption of any
of its shares, purchase any of its shares or otherwise reduce its
issued share capital from time to time, nor declare or pay any
dividend or other distribution on its shares nor to make any
repayment or partial repayment of the stock constituted by or
under the Loan Note prior to 23 June 2002 nor make or agree to the
conversion of such stock nor consent to the transfer of such stock
other than as permitted by the Loan Note nor* agree to any
variation of the terms of the Loan Note ;
(v) take all steps available to the Borrower which are reasonably
required by the Administrative Agent so as to enable interest
payable hereunder to be made without deduction of Tax;
(w) procure the delivery by no later than 30 September 1999 to the
Administrative Agent from a suitably qualified professional person
- --------
* Amended in manuscript on executed Agreement
<PAGE>
or firm acceptable to the Administrative Agent of a certificate
addressed to the Administrative Agent and the Lenders confirming
that all computer and other systems used in connection with the
Hotel Business and/or the Properties are Millennium compliant; and
(x) comply in all respects with its obligations under the Acquisition
Agreement and will (subject always to the terms of the Acquisition
Agreement Charge) enforce or procure enforcement of the
Acquisition Agreement and its rights under the Acquisition
Agreement in accordance with its terms and will not amend or vary
the same in any material respect or grant any waiver of time or
indulgence under the Acquisition Agreement and will so far as is
within its power of procurement proceed to completion of the
Acquisition Agreement in accordance with its terms.
12.2 General
The Borrower hereby agrees that at any time and from time to time upon
the written request of the Administrative Agent and/or the Security Agent
the Borrower will promptly and duly execute, deliver and do any and all
such further acts, instruments, documents, matters and things as either
of the Agents may reasonably require for the purpose of obtaining the
full benefit or intended benefit of this Agreement and the other Security
Documents and of the rights, title,
<PAGE>
interest and powers granted or intended to be granted herein and therein.
13. Changes in Circumstances
13.1 Illegality
If for any reason it becomes unlawful or prohibited by law or regulatory
requirement or any judgment, order or direction of any court, tribunal or
authority binding upon a Lender for any Lender to make or maintain its
participation in the Loan or to give effect to any of its obligations
owed to the Borrower as contemplated by this Agreement or to fund in the
London Interbank Market the whole or any part of its participation in the
Loan, such Lender shall inform the Administrative Agent and the
Administrative Agent shall thereupon give notice to the Borrower to that
effect and thereupon the Borrower shall prepay such Lender's
participation in the Loan on the latest date as may be required by the
relevant law or regulatory requirement in accordance with and subject to
the provisions of Clause 13.4. Without prejudice to the obligations of
the Borrower to so prepay, the Administrative Agent, the Lender so
affected and the Borrower shall negotiate in good faith during the period
of 30 days next succeeding the giving of such notice with a view to
agreeing an alternative basis mutually acceptable to such Borrower and
the Lender for such Lender to make or maintain its participation in the
Loan.
<PAGE>
13.2 Increased Costs
If by reason of the introduction of or any change in any applicable law,
treaty, regulation or regulatory requirement or any change in the
interpretation or application of any of the foregoing by any judicial,
governmental or other competent body or authority or if by reason of
compliance by any Lender or either of the Agents with any applicable
directive, request or requirement (whether or not having the force of law
but with which banks normally comply) of any central bank (including, but
not limited to, the European Central Bank) or governmental, fiscal or
other authority (including, but not limited to, a directive, request or
requirement relating to any Lender's allocation of capital for the
purpose of its business):-
(a) the cost to any Lender of making, funding or maintaining its
participation in the Loan (including, without prejudice to the
generality of the foregoing increased costs as a result of changes
or modifications in any applicable reserve requirements or capital
adequacy requirements or supervisory fees) or of otherwise giving
effect to this Agreement or any of the arrangements contemplated
hereby is increased; and/or
(b) any sum received or receivable by any Lender or either of the
Agents under or in connection with this Agreement or any of the
other Security Documents or the effective return to any Lender or
either of the Agents
<PAGE>
under or in connection with this Agreement or any of the other
Security Documents is reduced; and/or
(c) any Lender or either of the Agents makes any payment or forgoes
any interest or other return on or calculated by reference to the
amount of any sum received or receivable by it under or in
connection with this Agreement or any of the other Security
Documents; and/or
(d) any Lender suffers a reduction in the rate of return on its
overall capital in respect of this Agreement below a level which
might reasonably have been expected at the date hereof and which
it would otherwise have been able to achieve; and/or
(e) any Lender or either of the Agents is subject to liability to Tax
in connection with its Commitment or share of Outstandings (if
any) or any part thereof or in connection with any of the Security
Documents,
in any such case by or in an amount (in this Clause referred to as the
"Relevant Amount") which such Lender or such Agent deems material, then
and in any such case:
(i) the claimant (being such Lender or, as the case may be,
such Agent wishing to make a claim under this Clause) shall
promptly notify the Borrower in writing (in the case of
such Lender, through the
<PAGE>
Administrative Agent) of the happening of such event;
(ii) the Borrower shall pay from time to time to the
Administrative Agent for the account of the claimant, on
demand made to it, such amounts as the claimant may specify
to be necessary to compensate the claimant for the Relevant
Amount; and
(iii) in the case of a demand made by a Lender, the Borrower
shall be at liberty at any time after the receipt of such
notice, so long as the circumstances giving rise to such
Relevant Amount continue, on giving not less than five
business days' irrevocable notice to the Administrative
Agent and such Lender, to prepay all (but not part only) of
such Lender's participation in the Loan in accordance with
and subject to the provisions of Clause 13.4,
and the right to make any such demand as is referred to in Clause
13.2(ii) shall survive the repayment or prepayment of the Loan.
Provided that the Borrower shall have no obligation to make payment
pursuant to Clause 13.2(ii) where any increased cost:
(a) is compensated for by the payment of the Mandatory Costs Rate;
<PAGE>
(b) is compensated for by the operation of Clause 14.3 (Withholding)
or would have been compensated for by the operation of such clause
but for a Lender ceasing to be a Qualifying Lender;
(c) which represents Tax on, or any change in the rate of Tax on, the
overall net income, profits or gains of a Lender (or the overall
net income of a division or branch of the Lender) imposed in the
jurisdiction in which its principal office or Lending Office for
the time being is situate or in which it is resident for Tax
purposes or is carrying on business and by virtue thereof is
subject to Tax in that jurisdiction; or
(d) is attributable to a Lender incurring, after the date of this
Agreement, a commitment to lend (or lending pursuant to any such
commitment) in breach of any regulation of any central bank or
other fiscal, monetary or other authority having jurisdiction over
that Lender.
13.3 Market Disruption
(a) Notwithstanding anything to the contrary contained in this
Agreement, if:-
(i) the Administrative Agent receives notice from a Lender (an
"Affected Lender") at any time that the relevant LIBOR
calculated as provided in this Agreement would not or does
not accurately reflect
<PAGE>
the cost to it of funding its participation in the Loan
during the Interest Period in question or that by reason of
circumstances generally affecting the London Interbank
Market it is impracticable for the Affected Lender to fund
or continue to fund its portion of the Loan during such
period; or
(ii) in respect of any Interest Period in respect of which
interest is to be determined by reference to the rates
quoted by the Reference Banks no Reference Bank or only one
Reference Bank furnishes a quotation to the Administrative
Agent for the purpose of determining LIBOR on the
applicable Quotation Date; or
(iii) the Administrative Agent determines that at 11:00am on the
applicable Quotation Date in respect of any such Interest
Period as is referred to in Clause 13.3(a)(ii) none or one
only of the Reference Banks was being offered deposits in
Sterling in the London Interbank Market for the Interest
Period in question,
the Administrative Agent shall give notice to the Borrower and to
the Lenders stating the circumstances which have caused the notice
to be given. The Loan shall (subject to the other terms and
conditions of this Agreement) nonetheless be made on the requested
Drawdown
<PAGE>
Date if it has not already been made. The Administrative Agent (on
behalf of and after consultation with the Lenders or, as the case
may be, the Affected Lender) and the Borrower shall negotiate in
good faith during the period (hereinafter called the "negotiation
period") of 30 days next succeeding the giving of such notice to
the Borrower with a view to agreeing an alternative basis
acceptable to the Borrower and the Lenders or, as the case may be,
the Affected Lender for funding or continuing to fund the Loan to
the Borrower whether with the currency of the Loan or with some
other currency or otherwise and/or for determining the interest
rates and/or Interest Periods from time to time applicable to the
Loan.
(b) If the Administrative Agent and the Borrower are unable during the
negotiation period to agree upon an alternative basis as aforesaid
acceptable to the Borrower and the Lenders or, as the case may be,
the Affected Lender, the Interest Period or Interest Periods
applicable to the Loan (or affected part thereof) following such
notification shall each be deemed to be or have been of a duration
of one month (or such other period as the Administrative Agent may
consider appropriate) and the Administrative Agent shall set out
the Interest Period or Interest Periods and the rate or rates of
interest applicable in respect of such Interest Period or Interest
Periods, which rate or rates
<PAGE>
shall represent the cost as determined by each Lender or, as the
case may be, the Affected Lender (and notified to the
Administrative Agent) of funding its participation(s) in the Loan
from whatever source or sources it shall think fit during the
Interest Period or Interest Periods in question plus a rate of
interest per annum equal to the Margin and the Mandatory Costs
Rate. The foregoing procedure shall be repeated as often as may be
necessary and interest accruing under this Clause 13.3 shall
accrue from day to day and shall be payable by the Borrower on the
last day of each Interest Period so set.
(c) Once the circumstances which have caused this Clause 13.3 to be
implemented have ceased to exist, the other provisions of this
Agreement regarding the calculation and payment of interest in
respect of the Loan shall operate with effect from the end of the
current Interest Period set by paragraph (b) of this Clause 13.3.
(d) The Borrower shall be at liberty at any time after the setting of
an interest rate or interest rates by the Administrative Agent as
aforesaid (but only so long as the circumstances which have caused
this Clause 13.3 to be implemented continue to exist) on giving
not less than five business days' irrevocable prior written notice
to the Administrative Agent and the Lenders or as the case may be
an Affected Lender to repay to the Administrative Agent for the
account of the Lenders or as
<PAGE>
the case may be an Affected Lender all (but not part only) of the
Loan or the affected part thereof to which such interest rate or
interest rates apply in accordance with and subject to the
provisions of Clause 13.4.
13.4 Prepayment
Where any Lender's participation in the Loan is prepaid by the Borrower
pursuant to any of the provisions of this Clause 13 the Borrower shall
simultaneously with such prepayment pay to the Administrative Agent for
the account of such Lender accrued interest on any sum prepaid and all
other sums payable by the Borrower to or for the account of such Lender
pursuant to this Agreement together with such amount as may be specified
by such Lender to be necessary to compensate it for any loss (including,
without limitation loss of profit) incurred by it for the remainder (if
any) of the then current Interest Period(s) as a consequence of such
prepayment together also with any amounts which may be payable under
Clause 17 but no other premium or penalty and the amount of the Loan
shall be reduced accordingly.
13.5 Certificate
The certificate of the Administrative Agent or, as the case may be, any
Lender as to any of the matters referred to in this Clause (accompanied
<PAGE>
by reasonable documentation and details in respect of any relevant
calculations) shall, save for any manifest error, be conclusive and
binding on the Borrower.
14. Payments
14.1 Procedure
(a) All sums to be advanced by the Lenders to the Borrower shall be
paid by the Lenders to the account of the Administrative Agent
specified by the Administrative Agent to the Lenders for that
purpose and shall be paid by the Administrative Agent to the
Borrower to such account or accounts as the Borrower may notify to
the Administrative Agent for that purpose.
(b) All repayments and prepayments under Clause 7 (Repayment and
Prepayment), payments of interest to be made under Clauses 6
(Interest), 13 (Changes in Circumstances) or this Clause 14 and
payments under Clauses 16 (Expenses, Fees and Commissions) and 17
(Indemnities) and other payments to the Lenders by the Borrower
hereunder shall be made by the Borrower to the Administrative
Agent for the account of the Lenders in Sterling in cleared funds
on the date due for payment to such account as the Administrative
Agent may notify to the Borrower for this purpose. The
Administrative Agent shall forthwith distribute such payments to
the Lenders in accordance with their respective
<PAGE>
entitlements hereunder.
(c) If any sum becomes due for payment hereunder on a day which is not
a business day, such payment shall be made on the next succeeding
business day and interest shall be increased accordingly unless
such next succeeding business day falls in another calendar month
in which event such payment shall be made on the immediately
preceding business day.
(d) (i) Unless the Administrative Agent shall have been notified by
a Lender not later than one business day prior to the
Drawdown Date that such Lender will not make available its
portion of the Facility the Administrative Agent may assume
that such Lender has made its portion available to the
Administrative Agent. If the Administrative Agent makes an
amount available to the Borrower which has not (but should
have) been made available to the Administrative Agent by a
Lender, the Administrative Agent shall be entitled to
recover the relevant amount from such Lender on demand, or
failing this, the Borrower shall on request made by the
Administrative Agent to the Borrower refund such amount,
together with interest thereon at the rate determined by
the Administrative Agent (save in the case of manifest
error) to be equal to the cost to the Administrative Agent
of
<PAGE>
funding such amount for the period until receipt by the
Administrative Agent thereof.
(ii) If the Administrative Agent makes an amount available to a
Lender which has not (but should have) been made available
to the Administrative Agent by the Borrower, such Lender
shall on request refund such amount to the Administrative
Agent together with interest thereon at the rate determined
by the Administrative Agent to be equal to the cost to the
Administrative Agent of making available such amount for
the period until receipt by the Administrative Agent
thereof.
14.2 Default Interest
In any event of non-payment by the Borrower of any sum due from it on the
date upon which the same is due and payable pursuant to this Agreement
the Borrower shall pay interest on demand made on the Borrower on such
sum from and including the date of such non-payment to the date of actual
payment (as well after as before judgment) at the rate per annum
determined by the Administrative Agent from time to time to be the
aggregate of (i) the Margin, (ii) 2% per annum, (iii) LIBOR for such
consecutive periods as the Administrative Agent may determine (provided
that for the first two business days following default the rate of
interest applicable shall be overnight LIBOR), and (iv) the Mandatory
Costs
<PAGE>
Rate in respect of such unpaid sum.
14.3 Withholding; Gross-up
All payments to be made by the Borrower under this Agreement, whether in
respect of principal, interest, fees or otherwise, shall (save insofar as
required by law to the contrary) be paid in full without set-off or
counterclaim and free and clear of and without any deduction or
withholding or payment for or on account of any Taxes that may be imposed
in the United Kingdom or any other jurisdiction from which payment may be
made by the Borrower under this Agreement. If the Borrower shall be
required by law to effect any deduction or withholding or payment as
aforesaid from or in connection with any payment made under this
Agreement for the account of any Lender or, as the case may be, for the
account of or for either Agent's own account (the person for whose
account the payment is made being herein referred to as the "Payee")
then:
(a) the Borrower shall promptly notify the Administrative Agent upon
becoming aware of the relevant requirements to deduct any such
deduction or withholding or payment;
(b) the Borrower shall ensure that such deduction or withholding or
payment does not exceed the minimum legal liability therefor,
shall remit the amount of such Tax to the appropriate Taxation
authority and shall forthwith pay to the Administrative Agent for
the account of the Payee such additional
<PAGE>
amount as will result in the immediate receipt by the Payee of the
full amount which would otherwise have been receivable hereunder
had no such deduction or withholding or payment been made; and
(c) the Borrower shall not later than 50 days after each deduction or
withholding or payment of any Taxes forward to the Administrative
Agent documentary evidence reasonably required by the Payee in
respect of the payment of any Taxes which the Administrative Agent
shall forward to the Payee upon receipt by the Administrative
Agent.
14.4 Credit Against Tax
If the Borrower makes a payment pursuant to Clause 14.3 or Clause 14.5 to
or for account of any Lender and such Lender (or in the case of Clause
14.5 the relevant Agent) determines (which determination shall be in its
sole discretion but exercised in good faith) that it has received or been
granted a credit against or relief or remission for, or repayment of, any
tax paid or payable by it in respect of or calculated with reference to
the deduction or withholding giving rise to such payments, such Lender
(or in the case of Clause 14.5 the relevant Agent) shall, to the extent
that it can do so without prejudice to the retention of the amount of
such credit, relief, remission or repayment, pay to the Borrower such
amount as such Lender (or in the case of Clause 14.5 the relevant Agent)
shall
<PAGE>
have determined (which determination shall be in its sole discretion but
exercised in good faith) to be attributable to such deduction or
withholding and which will leave such person (after such payment) in no
better or worse position than it would have been in if the Borrower had
not been required to make such deduction or withholding. Nothing herein
contained shall interfere with the right of a Lender or either Agent to
arrange its tax affairs in whatever manner it thinks fit nor oblige any
Lender or either Agent to disclose any information relating to its tax
affairs or any computations in respect thereof or in respect of payments
under this Agreement.
14.5 Agency Payments
If either Agent is obliged by law or any regulatory action or decision to
make any deduction or withholding from any payment to any of the Lenders
(an "agency payment") which represents an amount or amounts received by
such Agent from the Borrower under the Security Documents, the Borrower
shall pay directly to the relative Lender such sum (an "agency
compensating sum") as will, after taking into account any deduction or
withholding which the Borrower is obliged to make from the agency
compensating sum, enable such Lender to receive, on the due date for
payment of the agency payment, an amount equal to the agency payment
which such Lender would have received in the absence of any obligation to
make any deduction or withholding.
<PAGE>
14.6 Currency of Account
Sterling shall be the currency of account and payment of each and every
sum due from the Borrower under the Security Documents except that any
payment by the Borrower in respect of any cost, loss, expense, liability,
duties or taxes referred to in Clauses 16 (Expenses, Fees and
Commissions) and/or 17 (Indemnities) shall be made in the currency in
which the same were incurred by the relevant Secured Party.
14.7 Appropriation of Payments
If the Administrative Agent receives a payment insufficient to discharge
all the amounts then due and payable by the Borrower under this
Agreement, the Administrative Agent shall have an absolute and unfettered
right to appropriate any payments received from the Borrower, or amounts
recovered under the Security Documents to such indebtedness of the
Borrower hereunder (and whether to principal, interest or any other sums
payable hereunder) as the Administrative Agent may determine, to the
exclusion of any right on the part of the Borrower to make an
appropriation in respect of such payments.
14.8 Qualifying Lenders
Each Lender confirms as at the date hereof, or, in the case of a Lender
which is a Transferee, successor in title or assign, on the date of the
relevant transfer, assignment or succession, that it is a Qualifying
Lender. If otherwise than as a result of the introduction of, change in,
or
<PAGE>
change in the interpretation or application of, any law or regulation or
any published practice or published concession of a relevant taxing
authority occurring after the date of this Agreement or the date upon
which any rights under this Agreement were assigned or transferred to
that Lender as Transferee or assignee or the date upon which it succeeded
to such rights as successor in title, a Lender is not or ceases to be a
Qualifying Lender the Borrower shall not be required to pay to such
Lender under this Clause 14 any amount in respect of Taxes in excess of
the amount it would have been obliged to pay if that Lender had been or
had not ceased to be a Qualifying Lender.
14.9 Double Taxation Treaties
If a Lender is resident in a country with which the United Kingdom has an
appropriate double taxation treaty under which that Lender would be
entitled to receive principal, interest and fees under this Agreement
from the Borrower without withholding of United Kingdom income tax then
(unless such Lender is able to receive such principal interest and fees
without such withholding other than by virtue of such double tax action
treaty) that Lender shall apply to the appropriate authorities for such
exemption and shall deliver to the Inland Revenue such United Kingdom
Inland Revenue forms as may be required for that Lender to claim such
exemption from United Kingdom withholding tax and the Borrower shall not
be required to pay to that Lender under this Clause 14 any amount in
respect of Taxes in
<PAGE>
excess of the amount it would have been obliged to pay if such
application had been made and such Inland Revenue forms had been so
delivered.
15. Default
15.1 Events of Default
Each of the following events (whether or not arising as a result of
events or circumstances beyond the control of the Borrower) shall
constitute an Event of Default, namely if:
(a) the Borrower shall fail to pay any principal, interest, fees or
any other sum payable pursuant to this Agreement or any other
Security Document on the date upon which the same is due and
payable and at the place at and in the currency in which it is
expressed to be payable pursuant to this Agreement unless the
failure is due solely to technical or administrative reasons
beyond its control and the relevant amount is duly paid within 2
business days after the due date; or
(b) the Borrower shall commit any breach (other than as referred to in
Clause 15.1(a)) of or default in the due performance or observance
of any of its obligations or undertakings contained in this
Agreement or the other Security Documents and such breach, if
capable of remedy, is not remedied within 20 business days after
the Borrower becomes aware of it; or
(c) any representation or warranty or statement
<PAGE>
made or deemed to be made or repeated by the Borrower in
connection with the negotiation of this Agreement or in any
Security Document or in any notice, certificate or statement of
fact referred to in or delivered under any of the Security
Documents is or shall prove to be untrue or incorrect in any
material respect or misleading when made or deemed or to be made
or repeated hereunder; or
(d) any of the Security Documents is not or ceases to be in full force
and effect or the validity or enforceability of any of the terms
of any of the Security Documents shall be contested by the
Borrower or any other party thereto (other than any of the Secured
Parties), or at any time any act, condition or thing required to
be done, fulfilled or performed in order (i) to enable the
Borrower lawfully to enter into, or exercise its rights under and
perform the obligations expressed to be assumed by it in each
Security Document, or (ii) to ensure that the obligations
expressed to be assumed by the Borrower in each Security Document
are legal, valid and enforceable, is not done fulfilled or
performed when due; or
(e) any Indebtedness of the Borrower (including, but without
limitation, the Loan Note or the Subordinated Loan) in excess of
(pound)10,000 in aggregate or (in the case of trade supplies in
the ordinary course of business) in excess of (pound)100,000 in
aggregate:-
<PAGE>
(i) is declared to be or otherwise becomes due and payable
prior to its specified maturity by reason of an event of
default or default; or
(ii) is not paid when due or within any applicable grace period,
or any creditor or creditors of the Borrower become(s) entitled to
declare any such Indebtedness due and payable prior to its
specified maturity, and in any such case such declaration is not
challenged by the commencement of bona fide legal proceedings; or
(f) any Encumbrance securing Indebtedness over any asset of the
Borrower (including, without limitation, the Permitted Charge)
becomes enforceable or a creditor or encumbrancer attaches or
takes possession of, or a distress, execution, sequestration or
other process is levied or enforced upon or sued out against, any
of the undertaking and assets of the Borrower; or
(g) the Borrower:
(i) is, or is deemed for the purposes of any law to be, unable
or admits its inability to pay its debts as they fall due;
or
(ii) suspends making payments on all or any class of its debts
or announces an
<PAGE>
intention to do so, or a moratorium is declared in respect
of any of its Indebtedness; or
(iii) commences negotiations with one or more of its creditors
with a view to the general readjustment or rescheduling of
all or part of its Indebtedness which it would otherwise
not be able to pay as it falls due; or
(iv) proposes or enters into any composition or other
arrangement for the benefit of its creditors generally or
any class of creditors; or
(h) the Borrower takes any action (including petition, proposal or
convening a meeting) or any legal proceedings are started or other
steps are taken for:-
(i) the Borrower to be adjudicated or found insolvent; or
(ii) the winding-up or dissolution of the Borrower (other than
in connection with a solvent reconstruction, the terms of
which have been previously approved in writing by the
Majority Lenders); or
(iii) the appointment of a trustee, receiver, administrative
receiver, administrator or similar officer of the Borrower
or the whole or any part of its undertaking and assets; or
<PAGE>
(i) any adjudication, order or, as the case may be, appointment is
made under or in relation to any of the proceedings referred to in
Clause 15.1(h); or
(j) any event occurs or proceeding is taken with respect to the
Borrower in any jurisdiction to which it is subject which has an
effect equivalent or similar to any of the events mentioned in
Clauses 15.1(g) or (h); or
(k) the Borrower suspends or ceases, or threatens to suspend or cease,
to carry on the whole or a substantial part of its business or
sells or otherwise disposes of the whole or any substantial part
of its business, undertaking or assets, or threatens to do any of
the same without the prior written consent of the Lenders; or
(l) the Borrower fails to perform any of its obligations (being
obligations which the Administrative Agent determines in its
discretion to be material) under any other agreement between the
Borrower and an Agent, or any of the Lenders, as the case may be;
or
(m) any of the holdings of, or the beneficial ownership of any of, the
issued share capital of the Borrower changes without the previous
written consent of the Majority Lenders; or
(n) any change shall occur in the business or financial condition of
the Borrower from that disclosed to the Lenders which, in the
<PAGE>
reasonable opinion of the Majority Lenders, constitutes an adverse
change material to the ability of the Borrower to perform its
obligations under any of the Security Documents; or
(o) all or any part of the Properties is compulsorily purchased or the
applicable local authority makes an order for the compulsory
purchase of the same; or
(p) any destruction of or damage to the Properties occurs which in the
opinion of the Majority Lenders is material and where such damage
or the cost of reinstatement is not fully covered by insurance
effected pursuant to Clause 12.1; or
(q) it is or becomes unlawful for the Borrower to perform any of its
obligations or purported obligations under the Security Documents;
or
(r) any event occurs or proceeding is taken with respect to the
Borrower in any jurisdiction to which it is subject which has an
effect equivalent or similar to any of the events mentioned in
Clauses 15.1(a) to (f), (h) or (k) to (o).
15.2 Acceleration
At any time after the happening of an Event of Default the Administrative
Agent may and shall if so requested by the Majority Lenders by notice in
writing to the Borrower:
<PAGE>
(a) declare that the Loan and all interest thereon and all other sums
payable by the Borrower pursuant to this Agreement and any other
Security Document have become immediately due and payable
whereupon the same shall become immediately due and payable by the
Borrower; and/or
(b) declare that the Facility shall be cancelled forthwith, whereupon
the same shall be so cancelled.
16. Expenses, Fees and Commissions
16.1 Initial and Continuing Costs
The Borrower shall pay to the Administrative Agent on demand made on the
Borrower all expenses (including, but not limited to the expense of
Approved Valuations as provided by Clause 9.4 (though only for additional
Approved Valuations in accordance with Clause 9.4) and the Approved
Valuations and other surveys and reports referred to in the Fourth
Schedule and all other survey report valuation and legal fees and all
fees of the internal specialists of the Administrative Agent) (and all
Value Added Tax and similar Taxes thereon, if any) properly and
reasonably incurred or (in the case of its internal specialists)
notionally and reasonably incurred by the Administrative Agent and the
Lenders in connection with the negotiation, preparation, execution and
printing of this Agreement and the other Security Documents and the
arrangement of the Facility, the Hedging Arrangements (but so
<PAGE>
that for the avoidance of doubt the premium payable in respect of the
Hedging Arrangements shall be paid to and retained by the Hedge Provider)
and any amendment, extension or consent or any other matter not of a
routine administrative nature arising out of or in connection with any
Security Document.
16.2 Enforcement Costs
The Borrower shall pay to the Administrative Agent on demand made on the
Borrower all expenses certified by either of the Agents or by any Lender
through the Administrative Agent as having been incurred by it (including
the fees payable or notionally payable to any internal specialists of the
Administrative Agent at their normal charging rate) in protecting or
preserving any of the rights of the Agents or such Lender against or
relating to the Borrower or in enforcing any of such rights or in suing
for or recovering any sum due to the Agents or such Lender hereunder from
the Borrower or in investigating any Potential Event of Default.
16.3 Stamp Duty
The Borrower shall pay on demand made on the Borrower all stamp,
documentary and other like duties and taxes, if any, to which this
Agreement and any other Security Document may be subject or give rise
(including, without limitation, any such duties and taxes as are payable
on or in connection with the acquisition of the Properties and the Hotel
Business or the enforcement of this
<PAGE>
Agreement) and shall indemnify the Administrative Agent on behalf of the
Lenders against any and all liabilities with respect to or resulting from
any delay or omission on the part of the Borrower to pay any such duties
or taxes. Demand under this Clause 16.3 shall be made by the
Administrative Agent on the Borrower.
16.4 Arrangement Fee
The Borrower shall pay to the Administrative Agent in Sterling
immediately on the Drawdown Date an arrangement fee of one per cent (1%)
of the Facility Amount. Such fee shall be paid to the Administrative
Agent for the account of the Lenders listed in the First Schedule and
shall be divided between them in such proportions as they shall have
agreed.
16.5 Reimbursement by Borrower
If the Borrower fails to perform any of its obligations under this Clause
16 (Expenses, Fees and Commissions), the Borrower shall forthwith
reimburse the Administrative Agent for any payment made by it under this
Clause.
17. Indemnities
17.1 General
Subject to Clause 17.4 the Borrower shall upon demand and without
prejudice to any other rights which either Agent or any Lender may have
under any Security Document indemnify and keep indemnified each Agent,
each Lender and the Hedge
<PAGE>
Provider against any funding or other cost, loss, expense or liability
(including, without limitation, any losses, costs or expenses sustained
or incurred in liquidating deposits taken to fund or maintain the Loan,
or sustained or incurred in connection with the cancellation,
termination, reduction or rearrangement of the Hedging Arrangements)
which it may sustain or incur as a result of:-
(a) the Facility not being made available to the Borrower by reason of
non-fulfilment of any of the conditions in Clause 4 (Availability
and Drawing) (other than by reason of the negligence or default of
the Agent or Lender otherwise entitled to such indemnity), or the
Borrower purporting to revoke a Notice of Drawing; or
(b) the occurrence or continuance of any Event of Default or Potential
Event of Default and/or the declaration of the Loan to be
immediately due and payable; or
(c) any party or any Agent on its behalf (whether by reason of
mandatory prepayment or otherwise) receiving or recovering all or
any part of the Loan or overdue sum otherwise than on the last day
of an Interest Period relating to the Loan or overdue sum and/or
otherwise than on the relevant Repayment Date; or
(d) the Borrower making a payment other than in accordance with Clause
14 (Payments) unless
<PAGE>
the Administrative Agent has given its prior written consent to
such payment in a specified manner,
17.2 Currency Indemnity
(a) If, for any reason, any payment due from the Borrower under or in
connection with any Security Document is made or is satisfied in a
currency (the "Other Currency") other than the currency in which
the relevant payment under this Agreement is due (the "Contractual
Currency"), then to the extent that the payment (when converted
into the Contractual Currency at the rate of exchange on the date
of payment or, in the case of the liquidation or insolvency of the
Borrower, at the rate of exchange on the latest date permitted by
applicable law for the determination of liabilities in such
liquidation or insolvency) actually received by the party entitled
thereto falls short of the amount expressed to be due under the
terms of this Agreement or, as the case may be, such other
Security Document, the Borrower shall, as a separate and
independent obligation, indemnify the party entitled thereto and
hold such party harmless against the amount of such shortfall.
(b) If on any occasion the Contractual Currency so purchased exceeds
the amount payable hereunder in the Contractual Currency to the
party entitled thereto then, subject to the Borrower having no
further obligation, actual
<PAGE>
or contingent, to such party under this Agreement, such party
shall refund to the Borrower the excess amount of the Contractual
Currency so purchased.
(c) For the purpose of this Clause "rate of exchange" means the rate
at which the party entitled thereto is able on the relevant date
to purchase the Contractual Currency with the Other Currency and
shall take into account any premium and other costs of exchange.
17.3 Independent Obligations
The above indemnities shall constitute separate and independent
obligations of the Borrower from the other respective obligations under
this Agreement, shall give rise to a separate and independent cause of
action against the Borrower and shall apply irrespective of any
indulgence granted by the Lenders or by the Agents from time to time.
17.4 Double Counting
None of the Agents or the Lenders shall be entitled to make any recovery
by way of indemnity if and to the extent that they would thereby recover
more than once in respect of the same loss.
18. The Agents
18.1 Appointment
Each Lender and the Hedge Provider irrevocably appoints the
Administrative Agent to act as its
<PAGE>
agent for the purpose of this Agreement and the Security Agent to act as
its agent and trustee for the purpose of the Security Documents and
irrevocably authorises each of them to take such action and exercise such
rights, powers and discretions as are specifically delegated to it by
this Agreement or the other Security Documents and such other action,
rights, powers and discretions as are reasonably incidental thereto.
However, no Agent may begin any legal action or proceeding in the name of
a Lender or the Hedge Provider without its consent. The relationship
between the Administrative Agent and the Lenders is of agent and
principal only. The Administrative Agent shall not be a trustee for any
Lender or the Hedge Provider, nor an agent or trustee for the Borrower or
any other party thereto, under or in relation to any Security Document.
The Security Agent shall not be an agent or trustee for the Borrower or
any other party thereto other than the Secured Parties under or in
relation to any Security Document.
18.2 Duties of Administrative Agent
The Administrative Agent shall:
(a) promptly send to each Lender details of each communication
received by it from the Borrower under this Agreement (except that
details of any communication relating to a particular Lender shall
be sent to that Lender only), details of any Transfer Certificate
executed by any other Lender and provide such other information
relating to
<PAGE>
the Facility as any Lender may reasonably request;
(b) promptly send to each Lender a copy of any legal opinion delivered
under this Agreement and of any document or information received
by it under Clause 4 (Availability and Drawing);
(c) subject to the other provisions of this Clause 18 (The Agents),
act in accordance with any instructions from the Majority Lenders
or, if so instructed by the Majority Lenders, refrain from
exercising a right, power or discretion vested in it under this
Agreement, provided however that except with the prior written
consent of all the Lenders, the Administrative Agent shall not be
entitled to (i) extend the due date or reduce the amount of any
payment of principal, interest or other amount payable under this
Agreement, (ii) change the currency in which any amount is payable
under this Agreement, (iii) increase any Lender's Commitment, (iv)
extend the Availability Period, (v) amend the definition of
"Majority Lenders" in Clause 1.1, (vi) amend the provisions of
Clauses 9.1, 9.2, 9.3, 9.4, 9.5, or 15.2 (vii) change the
Valuation Basis or (viii) amend this Clause 18.2; and
(d) have only those duties, obligations and responsibilities of a
solely mechanical and administrative nature, expressly specified
in this Agreement.
<PAGE>
18.3 Duties of Security Agent
The Security Agent shall:
(a) subject to the other provisions of this Clause 18 (The Agents),
act in accordance with any instructions from the Majority Lenders
or, if so instructed by the Majority Lenders, refrain from
exercising a right, power or discretion vested in it under this
Agreement or the other Security Documents, provided however that
except with the prior written consent of all the Lenders, the
Security Agent shall not be entitled to (i) extend the due date or
reduce the amount of any payment of principal, interest or other
amount payable under the Security Documents, (ii) change the
currency in which any amount is due or payable under the Security
Documents, or (iii) amend the definition of "Majority Lenders" for
the purposes of the Security Documents;
(b) notify the Lenders as soon as reasonably practicable if it has
actual knowledge or express notice of the occurrence of an Event
of Default or Potential Event of Default; and
(c) have only those duties, obligations and responsibilities expressly
specified in the Security Documents.
18.4 Performance of Duties
Each Agent:
<PAGE>
(a) may perform any of its duties, obligations and responsibilities
under the Security Documents by or through its personnel or
agents;
(b) may refrain from exercising any right, power or discretion vested
in it under the Security Documents until it has received
instructions from the Majority Lenders or (subject to the
Inter-Creditor Agreement) the Hedge Provider (provided that
instructions have been requested) as to whether (and, if it is to
be, the way in which) it is to be exercised and shall in all cases
be fully protected when acting, or (if so instructed) refraining
from acting, in accordance with instructions from the Majority
Lenders or (as the case may be) the Hedge Provider;
(c) may treat (i) the Lender which makes available any share of the
Loan as the person entitled to repayment of that share unless all
or part of it has been assigned or transferred (and the
Administrative Agent has received notice of that assignment or
transfer) in accordance with Clause 19 (Transfer); and (ii) the
office(s) notified by a Lender to the Administrative Agent for
this purpose before the signing of this Agreement (or, as the case
may be, in the relevant Transfer Certificate or notice of
assignment) as its Lending Office(s) unless the Administrative
Agent has received from that Lender a notice of change of Lending
<PAGE>
Office in accordance with Clause 19 (Transfer). Each Agent may act
on any such assignment and/or notice until it is superseded by a
further assignment and/or notice;
(d) shall not be required to do anything which would or might in its
reasonable opinion be contrary to any law or directive or
otherwise render it liable to any person which is not a party to
the Security Documents and may do anything which is in its
reasonable opinion necessary to comply with any law or directive;
(e) shall not be required to make any enquiry as to default by the
Borrower (unless specifically so instructed by the Majority
Lenders) in the performance or observance of any of the provisions
of the Security Documents or as to the existence of any Event of
Default or Potential Event of Default unless that Agent acquires
actual knowledge to the contrary or has been notified in writing
thereof by a Lender;
(f) may refrain from taking any step (or further step) to protect or
enforce the rights of any person under the Security Documents
until it has been indemnified (or received confirmation that it
will be so indemnified) and/or secured to its satisfaction against
any and all actions, charges, costs, losses, expenses or
liabilities (including legal, accountants' and other professional
fees)
<PAGE>
which would or might be brought, made or preferred against or
suffered, sustained or incurred by it as a result; and
(g) shall notify the Lenders and (if appropriate) seek instructions of
the Lenders in relation to any material communication from the
Borrower and, in particular, shall seek the consent of the Lenders
if the Borrower requests the Administrative Agent to consent to
the grant of any matter referred to in Clause 12.1 (h) or to
structural alterations to the Properties or to capital expenditure
in excess of (pound)100,000 (other than in relation to the
Improvement Programme in respect of which Clause 9.5 shall apply)
and the Lenders shall not unreasonably withhold or delay the
giving of such instructions.
18.5 Agents' Discretions
Each Agent may:
(a) assume that any representation made by the Borrower or any other
party thereto in connection with the Security Documents is true;
(b) assume that no Event of Default has occurred and that the Borrower
is not in breach of or default under the Security Documents;
(c) assume that any right, power, authority or discretion vested in
this Agreement upon the Majority Lenders or any other person has
not been exercised;
<PAGE>
(d) rely on any communication, certificate, legal opinion or other
document reasonably believed by it to be genuine;
(e) rely as to any matter of fact which might reasonably be expected
to be within the knowledge of any person, on a written statement
by that person and on any communication or document believed by it
to be genuine;
(f) obtain and pay for the advice or services of any lawyers,
accountants, surveyors or other experts in relation to the
negotiation, preparation, execution and enforcement of the
Security Documents as may to it seem necessary or desirable and
rely on any such advice;
(g) retain for its own benefit and without liability to account any
fee or other sum receivable by it in connection with its agency
and subject always to Clause 20 (Set Off/Pro-Rata Sharing) for its
account; and
(h) subject to the interests of the Lenders not being thereby
prejudiced accept deposits from, lend money to, provide any
advisory or other services or engage in any kind of banking or
other business with, any party to any Security Document or related
company of any party (and, in each case, may do so without
liability to account to any Lender).
<PAGE>
18.6 Limitation of Responsibilities
No Agent nor any of their respective personnel or agents shall be:
(a) responsible for the adequacy, accuracy, completeness or
reasonableness of any representation, warranty, statement,
projection, assumption or information provided by the Borrower to
any Lender, or contained in any Security Document or any notice or
other document delivered under or in connection with any Security
Document including, but without limitation, any financial
statement delivered by the Borrower or on its behalf under Clauses
12.1(a) or (b) or otherwise and any Approved Valuation or other
valuation, survey or report relating to the Properties and/or the
Hotel Business;
(b) responsible for the execution, delivery, validity, legality,
adequacy, enforceability or admissibility in evidence of any
Security Document or any such notice or other document or for the
satisfaction or failure by the Borrower to satisfy any condition
precedent to the utilisation of the Facility; or
(c) responsible for the collectability of amounts payable under any
Security Documents;
(d) responsible for the accuracy of any statements (whether written or
oral) made in or in connection with any Security Documents; or
<PAGE>
(e) liable for anything done or not done by it or any of them under or
in connection with any Security Document save in the case of its
or their own gross negligence or wilful misconduct (but so that
this Clause 18.6(e) shall not be construed to impose any liability
in respect of any matter for which liability is under any other
provision of this Clause excluded).
18.7 The Agents as a Lender
Each Agent shall have the same rights and powers with respect to its
Commitments and Outstandings (if any) as any other Lender and may
exercise those rights and powers as if it were not also acting as an
Agent.
18.8 No Reliance on Agents
Without affecting the responsibility of the Borrower for information
supplied by it or on its behalf in connection with any Security Document,
each Lender and the Hedge Provider confirms that it has itself been, and
will at all times continue to be, solely responsible for making its own
independent investigation and appraisal of the business, financial
condition, prospects, creditworthiness, status and affairs of the
Borrower or any other person and has not relied, and will not at any time
rely, on any Agent or other Lender:
(a) to provide it with any information relating to the business,
financial condition, prospects, creditworthiness, status or
<PAGE>
affairs of the Borrower or any other person, whether coming into
its possession before or after the drawing of the Facility
(except, in the case of the Administrative Agent, as stated in
Clause 18.2 or as provided otherwise in this Agreement); or
(b) to check or enquire into the adequacy, accuracy, completeness or
reasonableness of any representation, warranty, Approved Valuation
or other valuation survey, report, statement, projection,
assumption or information at any time provided by or on behalf of
the Borrower or any other person under or in connection with any
Security Document (whether or not that information has been or is
at any time circulated to it by any Agent including, but without
limitation, any financial statement delivered by the Borrower or
on its behalf under Clauses 12.1 (a) or (b) or otherwise and any
such representation, warranty, valuation, statement projection,
assumption as information relating to the Hotel Business); or
(c) to assess or keep under review the business, financial condition,
prospects, creditworthiness, status or affairs of the Borrower or
any other person nor the value or adequacy of the Properties.
18.9 Lenders' Indemnity
To the extent that the Borrower does not do so on
<PAGE>
demand or is not obliged to do so, each Lender shall on demand indemnify
each Agent in the proportion borne by its Outstandings to all the
Outstandings at the relevant time (or, if there are then no Outstandings,
in the proportion borne by its Commitments to the Total Commitments)
against any cost, expense or liability mentioned in Clause 16 (Expenses,
Fees and Commissions) or sustained or incurred by that Agent in complying
with any instructions from the Majority Lenders or otherwise sustained or
incurred by it (in its capacity as an Agent) in connection with its
duties, obligations and responsibilities under the Security Documents
except routine administrative costs and expenses of that Agent or to the
extent that they are sustained or incurred as a result of the gross
negligence or wilful misconduct of that Agent or any of its personnel or
agents.
18.10 Change of Agents
Notwithstanding the irrevocable appointments in Clause 18.1, an Agent may
resign at any time if it gives at least 30 days' notice in writing to the
Borrower and the Lenders and an Agent may at any time be removed by the
Majority Lenders giving not less than 30 days' notice to the Agent.
However, no resignation or removal shall be effective until the successor
has been appointed and accepted its appointment in accordance with this
Clause 18.10. The Majority Lenders may appoint a successor to the
resigning or removed Agent but, if the successor has not been so
appointed and accepted its appointment
<PAGE>
within 15 days after the date of the notice of resignation or, as the
case may be, removal, the resigning Agent and the Majority Lenders may
appoint a successor Agent. Any appointment of a successor must be in
writing, signed by the person(s) appointing that successor and delivered
to that successor. Any acceptance of such appointment must be in writing,
signed by the person appointed and delivered to the person(s) appointing
that successor. The other parties to this Agreement shall be promptly
informed of the acceptance by a successor Agent. Upon the successor
accepting its appointment, the resigning or, as the case may be, the
removed Agent shall be automatically discharged from any further
obligation under the Security Documents and its successor and each of the
other parties to the Security Documents shall have the same rights and
obligations among themselves as they would have had if the successor had
been the original Agent party to this Agreement and the other Security
Documents. The resigning or, as the case may be, the removed Agent shall
provide its successor with (or with copies of) such records as its
successor requires to carry out its duties under the Security Documents.
18.11 Signing of Transfer Certificates
The Borrower, the Security Agent and each Lender (except for the Lender
and the Transferee seeking the relevant assignment and/or novation)
irrevocably authorises the Administrative Agent to sign each Transfer
Certificate on their behalf.
<PAGE>
18.12 Security Agent as Trustee
Notwithstanding that the Security Agent is entitled to remuneration, the
Security Agent shall have all the rights, powers, privileges and
immunities which gratuitous trustees have or may have in England and by
way of supplement to the Trustee Act 1925 it is expressly declared as
follows (provided nevertheless that nothing in any of the following
provisions of this Clause 18.12 shall exempt the Security Agent from or
indemnify it against any liability for breach of trust in any case in
which the Security Agent has failed to show the degree of diligence and
care required of it having regard to the provisions of this Agreement and
the Security Documents or in the case of gross negligence or wilful
misconduct of the Security Agent):-
(a) As between the Lenders and the Security Agent in relation to any
of the provisions of any Security Document, or any agreement,
matter or thing relating to the Borrower or any Secured Asset, the
Security Agent may act on the opinion or advice of or any
information obtained from any lawyer, accountant, architect,
engineer, surveyor, broker, consultant, valuer, appraiser or other
expert, whether obtained by the Security Agent or a Lender, and
shall not be responsible for any loss occasioned by so acting
provided the Security Agent acts in good faith.
(b) Any opinion, advice or information referred
<PAGE>
to in paragraph (a) may be sent or obtained by letter, telex
message, facsimile transmission, cablegram, telephone or any other
means. The Security Agent shall not be liable for acting on any
opinion, advice or information purporting to be so conveyed
although the same shall contain some error or shall not be
authentic.
(c) The Security Agent may accept as sufficient evidence a certificate
signed by any person believed by it (after due enquiry) to be a
director or other responsible officer of any person as to any fact
or matter upon which the Security Agent may require to be
satisfied. The Security Agent shall be in no way responsible for
any loss that may be occasioned by acting on any such certificate.
(d) The Security Agent shall not be liable for any failure, omission,
or defect in perfecting any of the security given or created by or
pursuant to the Security Documents including without prejudice to
the generality of the foregoing (i) failure to obtain any licence,
consent certificate or other authority for the execution,
delivery, validity, legality, adequacy, performance,
enforceability or admissibility in evidence of any Security
Document, (ii) failure to register the same in accordance with the
provisions of any of the documents of title of the Borrower to any
of the Secured Assets and/or of any Security Document and (iii)
<PAGE>
failure to effect or procure registration of or otherwise protect
any of the security given or created by or pursuant to the
Security Documents by registering under the Land Registration Act
1925 or any other applicable registration laws in any relevant
jurisdiction by any notice, caution, filing, registration or other
entry prescribed by or pursuant to the provisions of the said
laws.
(e) Subject to Clause 4 (Availability and Drawing) hereof the Security
Agent may accept without enquiry, requisition, objection or
investigation such title (if any) as the Borrower may have to any
Secured Asset (or any part thereof) and shall not be liable for
any failure or omission to ascertain or investigate the title of
the Borrower or other person to any asset now or at any time
hereafter subject or purporting to be subject to any Encumbrance
created by or pursuant to the Security Documents.
(f) The Security Agent and every receiver, delegate, sub-delegate,
attorney, agent or other person validly appointed under the
Security Documents may indemnify itself or himself out of the
Secured Assets (or any proceeds thereof) against all actions,
charges, claims, costs, damages, demands, expenses, liability,
loss or proceedings which may be brought, made or preferred
against or suffered, incurred or sustained by it or him, acting
reasonably in relation to,
<PAGE>
in connection with or arising out of the entry into any Security
Document, the taking or holding of any of the security given or
created by or pursuant to the Security Documents and/or in the
execution of any power, trust, authority or discretion vested in
any of them by any Security Documents and/or in respect of any
other matter or thing done or omitted to be done pursuant to any
Security Documents and/or acting as Security Agent.
(g) The Security Agent may place any or all title deeds and other
documents certifying, representing or constituting the title to
any of the Secured Assets and for the time being in its hands in
any safe deposit, safe or receptacle selected by the Security
Agent or with any banker or banking company or company whose
business includes undertaking the safe custody of documents or any
solicitor or firm of solicitors and may pay all reasonable sums
required to be paid on account of or in respect of any deposit of
such documents. The Security Agent may in its absolute discretion
make any such arrangements as are appropriate as chargee of the
Secured Assets for allowing the Borrower or its solicitors or
auditors or other advisers access to or possession of any such
title deeds and other documents when necessary or convenient.
(h) The Security Agent shall not be bound to give notice to any person
of the execution of any
<PAGE>
Security Document or the occurrence of any Event of Default
(however described) under any Security Document (or any event or
circumstance which with the giving of notice and/or the passing of
time and/or the fulfilment of any other requirement would become
such an event of default) or whether any event has occurred as a
result of which the security constituted by any Security Document
may become enforceable and, (subject also to paragraph 18.4(e))
until it shall have actual knowledge or express notice to the
contrary, the Security Agent shall be entitled to assume that no
such event has happened and that the Borrower is observing and
performing all the obligations on its part contained in the
relevant Security Document.
(i) The Security Agent may perform any of its duties, obligations and
responsibilities under any Security Document by or through any of
its officers and personnel and/or may employ and pay an agent to
transact or concur in transacting any business and to do or concur
in doing any acts required to be done by the Security Agent
(including the receipt and payment of money). Any agent who is a
lawyer, accountant, architect, auctioneer, engineer, surveyor,
broker, consultant, valuer, appraiser or other person engaged in
any profession or business shall be entitled to be paid all
reasonable and usual professional and other charges for business
<PAGE>
transacted and acts done by him or any partner or employee of his
in connection with any Security Document.
(j) The Security Agent may whenever it thinks fit delegate by power of
attorney or otherwise to any person or persons or fluctuating body
of persons (whether being a joint trustee or not) all or any of
the trusts, powers, authorities and discretions vested in the
Security Agent by any Security Document. Any such delegation may
be made upon such terms and conditions (including power to
sub-delegate) and subject to such regulations as the Security
Agent may in the interests of the Secured Parties think fit but
such terms, conditions and regulations shall not be inconsistent
with any of the provisions of any Security Document. Any
delegation by the Security Agent pursuant to this paragraph
18.12(j) shall not in any way relieve the Security Agent from any
liability or obligation under any Security Document. The Security
Agent shall as soon as reasonably practicable give notice to any
party to a Security Document of any such delegation (or any
renewal, extension or termination thereof) under that Security
Document or this Agreement. Any Lender may require such delegation
of authority to be revoked or withdrawn without giving reasons
therefor to the Security Agent.
(k) Neither the Security Agent nor any director
<PAGE>
or officer of a corporation acting as Security Agent shall by
reason of its or his fiduciary position be in any way precluded
from entering into or being interested in any contract or
financial or other transaction or arrangement with the Borrower or
any person associated with the Borrower including (without
prejudice to the generality of this provision) any contract,
transaction or arrangement of a banking, insurance or property
advisory nature or any contract, transaction or arrangement in
relation to the making of loans or the provision of financial
facilities to, or the purchase, placing or underwriting of or
subscribing or procuring subscriptions for or otherwise acquiring,
holding or dealing with any property, notes, stocks, shares,
debenture stock, debentures, bonds or other securities of, the
Borrower, or any person associated as aforesaid or from accepting
or holding the trusteeship of any other trust deed constituting or
securing any other securities issued by the Borrower, or any such
person so associated or any other office or profit under the
Borrower or any such person so associated and shall be entitled to
retain and shall not be in any way liable to account to any person
for any profit made or share of brokerage or commission or
remuneration or other benefit received thereby or in connection
therewith.
(l) Any investment may, at the discretion of the Security Agent, be
made or retained in the
<PAGE>
names of nominees.
18.13 Acceptance of Title, Value and Valuation Bases
The Agents may accept without investigation, requisition or objection
such title as any person may have to the undertakings, property and
assets which are subject to the Security Documents and shall not be bound
or concerned to examine or enquire into any defect or failure in the
title of any person nor liable to any other Secured Party or any other
person for any failure on the part of either Agent to give notice to any
third party of the Security Documents to which it is party or otherwise
perfect or register the security thereby created.
18.14 Rule 146 of the Land Registration Rules
Each of the Lenders and the Hedge Provider hereby confirms and agrees
that it does not wish to be registered in accordance with Rule 146 of the
Land Registration Rules 1925 as the joint proprietor of any mortgage or
charge created pursuant to any Security Document and accordingly
authorises the Security Agent to hold such mortgage or charge in its sole
name as agent and trustee for the Secured Parties and hereby requests HM
Land Registry to register the Security Agent as the agent and trustee of
any such mortgage or charge.
18.15 The Borrower and the Agents
The Borrower shall be entitled to rely on any direction, instruction,
certificate, document or
<PAGE>
other communication made by either Agent and shall not be required to
enquire whether it is made with the authority of the Lenders, and
performance of any obligation arising under this Agreement or the
Security Documents in reliance on any such shall be deemed to be proper
performance of the obligation in question.
18.16 Agents of the Lenders
Save as expressly provided in the Security Documents, the Agents are
appointed hereunder and thereunder solely as the agents of the Lenders
and the Hedge Provider, and the foregoing provisions of this Clause 18
(The Agents) apply solely to the Agents in their capacity as agents for
the Lenders.
18.17 Agents' Knowledge
Information obtained by either Agent in any capacity other than in its
capacity as Agent and or through any department other than the department
having specific responsibility for the administration of the Loan and the
Security Documents shall not be imputed to such Agent.
19. Transfer
19.1 Agreement Binding on Successors
This Agreement and the other Security Documents shall benefit and bind
the parties, any Transferee in respect of which a Transfer Certificate
becomes effective in accordance with Clause 19.3, their permitted
assignees and their
<PAGE>
respective successors as if they were named as parties and executed this
Agreement. Any reference in any Security Document to any party shall be
construed accordingly.
19.2 Borrower's Assignment
The Borrower may not assign or transfer all or any part of its rights or
obligations under any Security Document.
19.3 Novation
Any Lender may at any time (after consultation with the Administrative
Agent and, through the Administrative Agent, the Borrower) novate all or
part of its Commitments and/or assign all or part of its Outstandings and
its rights and benefits under the Security Documents to any Qualifying
Lender without the consent of any party. Any such novation and/or
assignment shall (subject to Clause 19.4 in the case of an assignment
only) be made by delivering to the Administrative Agent a duly completed
and executed Transfer Certificate substantially in the form of the Third
Schedule. On receipt of such a Transfer Certificate, the Administrative
Agent shall countersign it for and on behalf of itself and the other
parties to this Agreement and subject to the terms of that Transfer
Certificate:
(a) by virtue of such Transfer Certificate, the relevant Lender shall
assign to the Transferee its rights to receive repayment or
prepayment in accordance with `this Agreement of the Outstandings
summarised in that
<PAGE>
Transfer Certificate and all its rights and benefits under the
Security Documents in respect thereof (such rights and benefits,
and the corresponding obligations of the Borrower to make such
repayment or prepayment and obligations of any other party in
respect thereof under the Security Documents, being herein
referred to as the "Assigned Rights" and the "Corresponding
Obligations" respectively);
(b) to the extent that in such Transfer Certificate the relevant
Lender seeks to assign its Outstandings and/or novate its
Commitments, the Borrower under the Security Documents and that
Lender shall each be released from further obligations to each
other and their respective rights against each other shall be
cancelled, except that the Assigned Rights shall be assigned
pursuant to paragraph (a) above rather than released or cancelled
pursuant to this paragraph (b) (such rights and obligations, other
than the Assigned Rights and the Corresponding Obligations, being
referred to as "Discharged Rights and Obligations");
(c) the Borrower and the relevant Transferee shall each assume
obligations towards each other and/or acquire rights against each
other corresponding to the Discharged Rights and Obligations but
which differ from the Discharged Rights and Obligations only
insofar as the Borrower and that Transferee
<PAGE>
have assumed and/or acquired the same in place of the Borrower and
that Lender; and
(d) the Transferee and the other parties to this Agreement (other than
the Borrower) shall acquire (by assignment, in the case of
Assigned Rights) the same rights and assume (by virtue of the
assignment of Assigned Rights in the case of Corresponding
Obligations) the same obligations between themselves as they would
have acquired and assumed had that Transferee been an original
party to this Agreement as a Lender with the rights and/or
obligations acquired or assumed by it as aforesaid (and, to that
extent, the original Lender and those other parties shall each be
released from further obligations to each other).
19.4 Assignment
Any Lender may (after consultation with the Administrative Agent and,
through the Administrative Agent, the Borrower) at any time assign all or
part of its Outstandings to any Qualifying Lender without the consent of
any party. Upon notice of any assignment being received by the
Administrative Agent, the assignee shall acquire the same rights in
respect of the Outstandings assigned to it as it would have had if it had
been an original party to this Agreement in respect of those
Outstandings. If and to the extent that all or part of a Lender's rights
are assigned in accordance with any of the provisions of this Clause, the
assignee shall,
<PAGE>
upon notice of the assignment being received by the Administrative Agent,
become entitled to a corresponding share of all rights of the assignor
under the Security Documents (including the benefit of such assignor's
rights in each Security Document) and this Clause (and the relevant
Transfer Certificate or assignment).
19.5 Lending Offices
The initial Lending Office(s) of each Lender has/have been notified by
that Lender to the Administrative Agent. Any Lender may at any time
change any of its Lending Office(s) in relation to all or a specified
part of any of its Commitments and/or Outstandings by notifying the
Administrative Agent and the Borrower of the fax number, telex number and
address of its new Lending Office(s).
19.6 Disclosure of Information
Each of the Lenders and the Agents may disclose such information
regarding the Borrower or the Shareholders and the Security Documents as
it may think fit to any other party hereto and to any actual or potential
Transferee, assignee participant or sub-participant or any other person
with whom such Lender or Agent may enter into or be considering entering
into contractual relations in relation to this Agreement or the other
Security Documents.
19.7 Costs
For the avoidance of doubt the costs of any
<PAGE>
Lender effecting any assignment or transfer of any of its rights and
interests hereunder shall not be borne by the Borrower.
20. Set-Off/Pro-Rata Sharing
20.1 Set Off
The Borrower authorises each of the Agents and the Lenders to apply
(without prior notice) any credit balance (whether or not then due) to
which the Borrower is at any time beneficially entitled on any account
at, any sum held to its order by and/or any liability or obligation
(whether or not matured) of, any office of such Agent or such Lender in
or towards satisfaction of any sum then due and payable by it to such
Agent or such Lender under the Security Documents and unpaid and, for
that purpose, to convert one currency into another (provided that nothing
in this Clause 20.1 shall be effective to create a charge). No party
shall be obliged to exercise any of its rights under this Clause 20.1,
which shall be without prejudice and in addition to any right of set-off,
combination of accounts, lien or other right (including the benefit of
the Security Documents) to which it is at any time otherwise entitled
(whether by operation of law, contract or otherwise). Each Lender shall
notify the Administrative Agent and the Borrower forthwith upon the
exercise or purported exercise of any right of set-off giving full
details in relation thereto and the Administrative Agent shall inform the
other Lenders forthwith.
<PAGE>
20.2 Pro-Rata Sharing
If at any time the proportion received or recovered (whether by direct
payment, by exercise of any right of set-off, combination of accounts or
lien, or otherwise) by any Lender in respect of the total sum which has
become due to it from the Borrower under the Security Documents before
that time exceeds the proportion received or recovered by the Lender(s)
receiving or recovering the smallest proportion (if any), then:
(a) such Lender shall promptly notify the Administrative Agent and
within 2 business days after receiving a request from the
Administrative Agent, that Lender shall pay to the Administrative
Agent an amount equal to the excess and the Administrative Agent
shall notify the Borrower of the receipt of such amount;
(b) the Administrative Agent shall promptly distribute that payment as
if it were made by the Borrower; and
(c) as between the Borrower and the Lenders, that excess amount shall
be treated as having been paid to the Lenders to which (and in the
proportions in which) it is distributed under (b) above, rather
than as having been paid to that Lender.
Within 2 business days after any Lender receives or recovers any such sum
otherwise than by
<PAGE>
payment through the Administrative Agent, that Lender shall notify the
Administrative Agent of the amount and currency so received or recovered,
how it was received or recovered and whether it represents principal,
interest or other sums. If all or part of any amount so received or
recovered by that Lender (the "Relevant Lender") required thereafter to
be repaid to the Borrower has to be refunded by it (with or without
interest), each Lender to whom any part of that amount has been
distributed shall repay to the Administrative Agent for the account of
the Relevant Lender (within 2 business days after receiving a request
from the Administrative Agent on behalf of the Relevant Lender) its
proportionate share of the amount to be repaid to the Borrower and of any
interest required to be paid by the Relevant Lender on that amount in
respect of all or any part of the period from the date of the relevant
distribution to the date of that payment to the Relevant Lender.
Any amount received or recovered by a Lender under a novation,
assignment, sub-participation or the like shall be ignored for the
purpose of this Clause 20.2. Furthermore, a Lender shall not be obliged
to share any amount which it has (i) alone received on its own account
under Clause 13 (Changes in Circumstances) or (ii) received or recovered
as a result of taking legal proceedings with any other Lender which had
an opportunity to participate in those legal proceedings but did not do
so and did not take separate legal proceedings.
<PAGE>
21. Notices
21.1 Address
Unless otherwise notified by the relevant party, any notice or other
communication hereunder shall be given, if to the Administrative Agent or
to the Security Agent at PO Box 138, 15 Moorgate, London EC2R 6LP marked
for the attention of the Credit Department, if to the Borrower at 6
Leylands Park, Nobbs Crook, Colden Common, Winchester, Hampshire SO21
1TH, marked for the attention of Philip Mason (and copied to Richard
Saleh & Co., Derbyshire House, 737a Wilmslow Road, Didsbury, Manchester,
marked for the attention of Richard Saleh), and if to any Lender
hereunder to the Lending Office of that Lender.
21.2 Method and Receipt
Any notice or other communication to be given or made pursuant to this
Agreement may be given or made by letter delivered personally or by
registered first class prepaid letter (airmail if overseas), facsimile
transmission, telegram or cable and shall, save as specified below, be
effective, in the case of a facsimile upon sending or, in the case of any
other communication, when actually received, provided that if any
communication would become effective under the foregoing provisions of
this Clause on a day which is not a working day, or outside normal
working hours on a day which is a working day, at the place of receipt,
it shall become effective at the next opening of business in such place.
<PAGE>
21.3 Deemed Notice
Any notice or other communication given or made to either Agent by the
Borrower shall be deemed to have been given or made to each of the
Lenders.
22. Calculations and Evidence of Debt
22.1 Accounts
The Administrative Agent shall maintain in its books a control account or
accounts in which shall be recorded (i) the amount of any principal,
interest or other sums due or to become due from the Borrower to the
Lenders hereunder and (ii) the amount of any sum received or recovered by
the Administrative Agent for the account of the Lenders hereunder.
22.2 Evidence
In any legal action or proceeding arising out of or in connection with
this Agreement, the entries made in the accounts maintained pursuant to
Clause 22.1 shall, in the absence of manifest error, be prima facie
evidence of the existence and amounts of the obligations of the Borrower
therein recorded.
22.3 Certificates and Determinations
A certificate of the Administrative Agent as to (i) the amount by which a
sum payable to it hereunder is to be increased under Clauses 13 (Changes
in Circumstances) or 14 (Payments) or (ii) the amount for the time being
required to
<PAGE>
indemnify any Lender against any such cost or liability as is mentioned
in Clauses 13 (Changes in Circumstances) or 14 (Payments) or as to any
other calculation (whether as to interest, currency exchange rates or
otherwise) to be made by the Administrative Agent hereunder shall, in the
absence of manifest error, be prima facie evidence in any legal action or
proceeding arising out of or in connection with this Agreement.
23. Severability
Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
24. Waivers; Rights Cumulative
No delay or omission of the Agents or any Lender in exercising any right,
power or privilege hereunder or otherwise available to it at law shall
impair such right, power or privilege or be construed as a waiver of such
right, power or privilege nor shall any single or partial exercise of any
such right, power or privilege preclude any further exercise thereof or
the exercise of any other right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights
or
<PAGE>
remedies provided by law.
25. Counterparts
This Agreement may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when
executed and delivered to the Security Agent shall constitute an
original, but all the counterparts shall together constitute but one and
the same instrument.
26. Governing Law and Jurisdiction
26.1 Law
This Agreement shall be governed by and construed in accordance with
English law.
26.2 Submission to Jurisdiction
For the exclusive benefit of the Agents and the Lenders, the Borrower
irrevocably agrees that the courts of England are to have jurisdiction to
settle any disputes which may arise out of or in connection with this
Agreement and the other Security Documents and irrevocably submits to the
jurisdiction of such courts and agrees that accordingly any suit, action
or proceeding arising out of or in connection with this Agreement
(together in this Clause referred to as "Proceedings") may be brought in
such courts.
26.3 Other Jurisdictions
Nothing contained in this Clause shall limit the right of the Agents or
any Lender to take
<PAGE>
Proceedings against the Borrower in any other court of competent
jurisdiction, nor shall the taking of Proceedings in one or more
jurisdictions preclude the taking of Proceedings in any other competent
jurisdiction, whether concurrently or not.
IN WITNESS whereof the hands of the parties or their duly authorised attorneys
or representatives the day and year first above written.
<PAGE>
The First Schedule
The Lenders and their Commitments
Commitments
Arab Bank plc, London Branch (pound)5,000,000
Irish Nationwide Building Society, London Branch (pound)5,000,000
----------
(pound)10,000,000
----------
<PAGE>
The Second Schedule
Form of Notice of Drawing
From: [*Borrower]
To: [Administrative Agent] [Date]1999
(pound)[ o ] Loan Agreement dated [ o ] 1999
We refer to the above agreement (the "Loan Agreement") made between ourselves as
Borrower, yourselves as Administrative Agent and Security Agent and Hedge
Provider and the banks and other lending or financial institutions referred to
therein. Terms defined in the Loan Agreement shall have the same meanings when
used herein.
We hereby give you irrevocable notice that pursuant to the Loan Agreement and on
[*date of proposed drawing], we wish to draw [the whole of the Facility]/[the
sum of (pound)[ ]] on the terms and subject to the conditions contained therein.
[*Selection of Interest Period]
We confirm that at the date hereof the representations and warranties set out in
Clause 11 (Representations and Warranties) of the Loan Agreement are correct as
if made with reference to the facts and circumstances now prevailing and that no
Event of Default or Potential Event of Default has occurred.
<PAGE>
We hereby authorise you to deduct from this advance:-
(a) the arrangement fee payable pursuant to Clause 16 (Expenses, Fees and
Commission); and
(ii) the fees, costs and expenses incurred in connection with the valuation
and surveying of the security and the preparation of the Security
Documents and all stamp duty and Land Registry fees (including expedition
fees) and other fees pursuant to Clause 16 (Expenses, Fees and
Commission).
We hereby direct that the amount of the Loan shall be remitted [by CHAPS
payment] to the following:-
<PAGE>
Payee:
Payee's Bank Details:
Bank:
Branch:
Sort Code:
Account No:
or to such other banks for the credit of such account as the Payee shall direct
and we confirm that a payment in accordance with these instructions shall be
effective as if it were paid to us direct.
..................................................
A duly authorised signatory for and on behalf of
Grand Hotel Group Limited
<PAGE>
The Third Schedule
Form of Transfer Certificate
To: [Insert name of Administrative Agent]
[Insert address of Administrative Agent]
Attention: [ ]
[*Borrower]
(pound) [ o ] Loan Agreement
dated [ o ] 1999
1. This Transfer Certificate relates to the above loan agreement (the "Loan
Agreement", which term shall include any amendments or supplements
thereto), and the other Security Documents referred to therein. Terms
defined in the Loan Agreement have the same meaning in this Transfer
Certificate.
In this Transfer Certificate :
"Existing Lender" means [ o ]; and
"Transferee" means [ o ].
2. The Existing Lender (i) confirms that the details in the Schedule to this
Transfer Certificate under the heading "Rights to be Assigned and/or
Obligations to be Novated" accurately summarises the
<PAGE>
Outstandings which are to be assigned and/or Commitments which are to be
novated by this Transfer Certificate and (ii) requests the Transferee to
accept and procure the transfer to the Transferee of the portion
specified in the Schedule hereto of, as the case may be, such
Outstandings and/or its Commitment by counter-signing and delivering this
Transfer Certificate to the Administrative Agent at its address for the
service of notices specified in the Loan Agreement.
3. The Transferee hereby requests the Administrative Agent to accept this
Transfer Certificate as being delivered to the Administrative Agent
pursuant to and for the purposes of Clause 19 (Transfer) of the Loan
Agreement so as to take effect in accordance with the terms thereof on
the Transfer Date or on such later date as may be determined in
accordance with the terms thereof.
4. The Transferee:
(a) confirms that it has received a copy of the Loan Agreement
together with such other documents and information as it has
requested in connection with this transaction;
(b) confirms that it has not relied and will not rely on the Existing
Lender to check or enquire on its behalf into the legality,
validity, effectiveness, adequacy or completeness of any such
documents or information;
(c) confirms and agrees that it has not relied and
<PAGE>
will not rely on any of the Existing Lender, the Agents, or the
Lenders to assess or keep under review on its behalf the financial
condition, creditworthiness, condition, affairs, status or nature
of the Borrower or any other party to the Security Documents, and
has not relied and will not rely on any of the Existing Lender,
the Agent or the Lenders to ensure that the Borrower or any other
party to the Security Documents are not in breach of or default
under any of the same; and
(d) if not already a Lender, appoints the Agents to act as its agents
as provided in the Loan Agreement and agrees to be bound by the
Loan Agreement (including, but not limited to, Clause 19
(Transfer)).
5. The Transferee undertakes with the Existing Lender and each of the other
parties to the Loan Agreement that it will perform, in accordance with
their terms, all those obligations which, by the terms of the Loan
Agreement, will be assumed by it upon delivery of the executed copy of
this Transfer Certificate to the Administrative Agent.
6. On execution of this Transfer Certificate by the Administrative Agent on
their behalf, the Borrower, the Lenders and the Agents accept the
Transferee as a party to the Loan Agreement in substitution for the
Existing Lender with respect to all those rights and obligations which,
by the terms of the Loan Agreement and other Security Documents, will be
assumed by the Transferee after delivery of the
<PAGE>
executed copy of this Transfer Certificate to the Administrative Agent.
7. None of the Existing Lender, the Lenders or the Agents:
(a) makes any representation or warranty or assumes any responsibility
with respect to the legality, validity, effectiveness, adequacy or
enforceability of any of the Loan Agreement and the Security
Documents, or with respect to whether the Borrower or any other
party to the Security Documents has complied with its obligations
thereunder (including, without limitation, under Clause 4
(Availability and Drawing) of the Loan Agreement); or
(b) assumes any responsibility for the financial condition of the
Borrower or any other party to any Security Document or any other
document or for the performance and observance by the Borrower or
any other party to the Security Documents or any other document of
its or their obligations and any and all conditions and
warranties, whether express or implied by law or otherwise, are
hereby excluded.
8. The Existing Lender hereby gives notice that nothing herein or in the
Loan Agreement (or any document relating thereto) shall oblige the
Existing Lender to (i) accept a re-transfer from the Transferee of the
whole or any part of its rights, benefits and/or obligations under the
Loan Agreement transferred pursuant hereto or (ii) support any losses
directly or indirectly sustained
<PAGE>
or incurred by the Transferee for any reason whatsoever including,
without limitation, the non-performance by the Borrower or any other
party to the Security Documents (or any document relating thereto) of its
obligations under any such document. The Transferee hereby acknowledges
the absence of any such obligation as is referred to in (i) or (ii)
above.
9. This Transfer Certificate and the rights and obligations of the parties
hereunder shall be governed by and construed in accordance with English
law.
10. The Transferee warrants and represents to the Borrower that it is a
Qualifying Lender as defined in Clause 1.1 of the Loan Agreement.
THE SCHEDULE
1. Existing Lender :
2. Transferee :
3. Transfer Date :
4. Commitment :
Lender's Commitment Portion Transferred
<PAGE>
5. Facility:
Amount of Drawdown and
Lender's Participation Repayment Date Portion Transferred
6. Rights to be Assigned and/or Obligation to be Novated :
7. Transferee's Lending Office details :
Address :
Telephone Number :
Telex No. :
Fax No. :
<PAGE>
The Fourth Schedule
Conditions Precedent Documents
1. A copy of the Borrower's Certificate of Incorporation, Memorandum and
Articles of Association and other constitutive documents certified by a
duly authorised officer of the Borrower as a true copy and as in force on
the date of this Agreement.
2. A copy, certified a true copy by a duly authorised officer of the
Borrower, of a resolution of the Board of Directors of the Borrower
satisfactory to the Administrative Agent approving the execution,
delivery and performance of this Agreement and the other Security
Documents and of the power of attorney (if any) under which the Security
Documents are to be executed and the terms and conditions hereof and
thereof and authorising a named person or persons or appointing an
attorney to sign on behalf of the Borrower this Agreement and the
Security Documents referred to above and any documents or further
agreements required or to be delivered by the Borrower pursuant hereto
and/or thereto.
3. A specimen signature, authenticated by a duly authorised officer of each
of the Borrower in respect of each of the persons referred to in
paragraph 2 above.
4. This Agreement, the Corporate Account Application, the Borrower's Charge,
the Key-man Charge, the
<PAGE>
Hedging Arrangements Charge and any power or powers of attorney under
which they are executed, duly executed by the Borrower and any other
parties thereto (as appropriate), together with signed acknowledgements
of notices of assignment in respect of the Key-man Charge* from the
issuer of the Key-man Policy*.
5. The Inter-Creditor Agreement duly executed by the Borrower and the other
parties thereto.
6. A legal opinion in form and substance satisfactory to the Administrative
Agent from English solicitors to the Agents and the Lenders, as to such
matters as the Administrative Agent may require and a legal opinion in
form and substance satisfactory to the Administrative Agent from Guernsey
Solicitors to the Agents and the Lenders in relation to the
Inter-Creditor Agreement and Cygnet Ventures Limited.
7. Two Approved Valuations of the Properties in form and substance
acceptable to the Administrative Agent addressed to the Lenders.
8. A structural survey of the Properties in form and substance acceptable to
the Administrative Agent from surveyors acceptable to the Administrative
Agent and addressed to the Lenders.
9. The Certificate of Title.
- --------
* Amended in manuscript on executed Agreement
* Amended in manuscript on executed Agreement
<PAGE>
10. Evidence satisfactory to the Administrative Agent of the Purchase Price
(including, without limitation, any amount attributed to goodwill).
11. The ISDA Agreement duly executed by the parties thereto and the
confirmation or confirmations or other evidence of the trade comprising
the Hedging Arrangements.
12. Satisfactory evidence of the discharge of Encumbrances over the
Properties (apart from the security constituted by the Security
Documents).
13. Official priority searches in favour of the Security Agent of the
registers of title to the Properties maintained by HM Land Registry which
confirm a period of priority of not less than 21 days after the Drawdown
Date which reveal no entries adverse to the interests of the Borrower and
the Agents and other Secured Parties (save for existing security which is
discharged on or before the Drawdown Date) and such other searches in
respect of the Properties and/or the Hotel Business as the Administrative
Agent may require.
14. Such Land Registry forms as the Administrative Agent may require in
connection with the registration of the Borrower's title to the
Properties and the security created over the Properties by or pursuant to
the terms of the Security Documents, duly completed by or on behalf of
the Borrower, together with a cheque for the payment of all land
registration fees (including
<PAGE>
land registration expedition fees if the Administrative Agent so
requires) payable in connection with such registration or an authority to
apply an appropriate part of the Loan in discharge of those fees.
15. Such evidence as the Administrative Agent may require that the Properties
and the Hotel Business are insured in accordance with the terms of this
Agreement and the Borrower's Charge (including, without limitation, cover
against risks of terrorism) and that the interest of the Security Agent
as agent and trustee for the Agents and the Lenders is noted on the
relevant policy or policies of insurance and that such policy nominates
the Security Agent, as agent and trustee for the Agents the Lender, as
loss payee (or, if the Security Agent so requires, that the relevant
policy or policies have been effected in the joint names of the Borrower
and the Security Agent).
16. An audited opening balance sheet of the Borrower in a form agreed between
the Borrower and the Administrative Agent.
17. The Key-man Policy together with such confirmations as the Administrative
Agent may require that the Key-man Policy is and remains in full effect
and that the first premium has been paid.
18. A copy, certified a true copy by a duly authorised officer of the
Borrower of the executed Acquisition Agreement, the Loan Note, the
Permitted Charge, all documentation relating to the Subordinated Loan,
<PAGE>
any indemnity guarantee or undertaking given by the Borrower to Mr Kevin
Leech, Cygnet Ventures Limited, Citibank, N.A., Milner Laboratories
Limited, or any other person in any way relating to the Standby Letter of
Credit or any liability thereunder or in respect thereof, and of the
Disclosure Letter, Butlin's Licence, RLMS Services Agreement, Butlin's
Services Agreement and LSA Services Agreement (as those terms are defined
in the Acquisition Agreement).
19. The Administrative Agent being satisfied that the warranties,
representations, undertakings and indemnities from Rank Holidays Division
Limited in the Acquisition Agreement (and associated documents) in favour
of the Borrower are in form and substance satisfactory to it and its
solicitors.
20. Confirmation that all steps required for completion of the Acquisition
Agreement in accordance with its terms (except in so far as the Facility
may be required for this purpose) have been completed.
21. An undertaking from the directors of the Borrower to the Lenders that the
Borrower will not take any action to determine the Lease of the Metropole
Hotel Blackpool dated 26 March 1965 pursuant to the tenant's break clause
contained in the Lease.
22. Evidence that the Borrower has obtained such defective title insurance to
the Properties as the Administrative Agent may require.
23. A copy of any other authorisation or other
<PAGE>
document, opinion or assurance which the Administrative Agent considers
to be necessary or desirable in connection with the entry into and
performance of, the transactions contemplated by this Agreement or any of
the other Security Documents, or for the validity or enforceability of
this Agreement and any of the other Security Documents.
<PAGE>
The Fifth Schedule
Calculation of Mandatory Costs Rate
The Mandatory Costs Rate is an addition to the interest rate on the Loan to
compensate the Lenders for the cost attributable to the Loan resulting from the
imposition from time to time under or pursuant to the Bank of England Act 1998
(the "Act") and/or by the Bank of England and/or the Financial Services
Authority (the "FSA") (or other United Kingdom governmental authorities or
agencies) of a requirement to place non-interest-bearing or Special Deposits
(whether interest bearing or not) with the Bank of England and/or pay fees to
the FSA calculated by reference to liabilities used to fund the Loan.
The Mandatory Costs Rate will be the rate determined by the Administrative Agent
as being the following :
(a) such amount as expresses the cost to each of the Lenders attributable to
its participation in the Loan resulting from the imposition from time to
time under or pursuant to the Act or by the Bank of England and/or the
FSA (or other United Kingdom governmental authorities or agencies) (or
pursuant to any further or alternative legislation, regulation or
requirements applicable to any Lender including, but not by way of
limitation, any imposed by the European Central Bank after the United
Kingdom has become a Participating Member State) of a requirement to
place non interest-bearing cash ratio deposits or special deposits
(whether interest bearing or not) with the Bank of England and/or pay
fees to the FSA calculated by reference to liabilities
<PAGE>
used to fund the participation of each Lender in the Loan or further or
alternative requirements as aforesaid; and
(b) during such period as the United Kingdom shall be a Participating Member
State such amount as expresses the cost to each of the Lenders
attributable to its participation in the Loan resulting from the
imposition by the European Central Bank pursuant to any legislation
regulation or requirement from time to time applicable to any Lender of
any requirement whether or not the same or similar to that referred to in
the preceding paragraph which shall affect the cost to any Lender of
maintaining its participation in the Loan as well as (if applicable) the
amount referred to in the preceding paragraph.
Each Lender shall supply such information and in such detail as the
Administrative Agent may require for the purposes of calculating the above
amounts. If any Lender fails to notify any rate or figures to the Administrative
Agent, the Mandatory Costs Rate shall be determined on the basis of the rate(s)
or figure(s) notified to the Administrative Agent by the remaining Lender(s).
The Mandatory Costs Rate attributable to the Loan or other sum for any period
shall be calculated at or about 11.00 a.m. (London time) on the first day of
such period for the duration of such period.
The determination of the Mandatory Costs Rate in relation to any period shall,
in the absence of manifest error, be conclusive and binding on all parties
hereto.
<PAGE>
Signatories
Borrower
GRAND HOTEL GROUP LIMITED
By: Stephen John Last
Philip Mason
Address: 6 Leylands Park
Colden Common
Winchester
Hampshire
Telephone:
Facsimile: 01489 896931
Lenders
ARAB BANK plc
By: Frederick Stonehouse
Address: PO Box 138
15 Moorgate
London EC2R 6LP
Telephone: 0171 315 8500
Facsimile: 0171 600 7620
IRISH NATIONWIDE BUILDING SOCIETY
By: Gary McCollum
Address: 252 Westminster Bridge Road
London SE1 7PD
Telephone:
Facsimile:
<PAGE>
Administrative Agent
ARAB BANK plc
By: Frederick Stonehouse
Address: PO Box 138
15 Moorgate
London
EC2R 6LP
Telephone: 0171 315 8500
Facsimile: 0171 600 7620
Security Agent
ARAB BANK plc
By: Frederick Stonehouse
Address: PO Box 138
15 Moorgate
London
EC2R 6LP
Telephone: 0171 315 8500
Telex:
Facsimile: 0171 600 7620
<PAGE>
Hedge Provider
ARAB BANK plc
By: Frederick Stonehouse
Address: PO Box 138
15 Moorgate
London
EC2R 6LP
Telephone: 0171 315 8500
Facsimile: 0171 600 7620
Date: 30 June 1999
Grand Hotel Group Limited
as Borrower
Cygnet Ventures Limited
as Junior Creditor
The Lenders
as Lenders
Arab Bank plc
as Administrative Agent
Arab Bank plc
as Security Agent and Trustee
Arab Bank plc
as Hedge Provider
Inter-Creditor Agreement
Field Fisher Waterhouse 35 Vine Street London EC3N 2AA
<PAGE>
Contents
No Heading Page
Clauses
1. Interpretation 2
1.1 Defined Terms 2
1.2 Construction of certain terms 9
2. Consents 10
2.1 Creditors 10
2.2 Borrower 10
2.3 Hedging Arrangements Charge 10
3. Subordination 10
4. Undertakings of Cygnet 11
5. Documentation 11
6. Undertakings of Cygnet 12
7. Non-Permitted Recoveries 13
8. Payments 13
8.1 Payments under the Hedging Arrangements 13
8.2 Order of Payments 14
8.3 Loan Agreement and Charges Prevail 14
9. Agreed Priorities and Application 15
10. Retention of Property Deeds, Custody of Assets and Insurance 16
10.1 Deeds etc 16
10.2 Insurance Proceeds 17
11. Unenforceability 17
12. Appointment of Receiver 17
12.1 Consultation 17
12.2 Crystallisation 19
12.3 Co-operation by Cygnet 19
13. Release of Secured Assets 20
<PAGE>
13.1 Prior to the Enforcement Date 20
13.2 After the Enforcement Date 20
14. Effective Security 20
14.1 Creditors' Remedies 20
14.2 Purchaser 21
15. Indulgence 21
16. Disclosure 21
17. Memorandum 21
18. HM Land Registry 21
19. Discharge 21
20. Assignment/Representations 22
21. Waiver of Defences 23
22. Notices 24
23. Variation 25
24. Counterparts 26
25. Law and Jurisdiction 26
1. First Schedule 27
2. Second Schedule 28
3. Third Schedule 29
Signatories 30
<PAGE>
THIS INTER-CREDITOR AGREEMENT is made the 30th * day of June 1999
BETWEEN:-
(1) GRAND HOTEL GROUP LIMITED, as borrower under the Loan Agreement defined
below;
(2) CYGNET VENTURES LIMITED;
(3) THE LENDERS whose names are specified in the First Schedule;
(4) ARAB BANK plc, in its capacity as Administrative Agent under the Loan
Agreement;
(5) ARAB BANK plc, in its capacity as Security Agent under the Loan
Agreement;
(6) ARAB BANK plc, in its capacity as party to the Hedging Arrangements; and
WHEREAS:
(A) By the Loan Agreement the Lenders have agreed to make available to the
Borrower a loan facility of up to (pound)10,000,000 on the terms stated
therein.
(B) In accordance with the Loan Agreement the Borrower has also entered into
an interest rate management agreement with the Hedge Provider the benefit
of which has been assigned to the Security Agent as trustee for the
Senior Creditors.
(C) The Borrower has created security over various assets as security for the
performance by the Borrower of its obligations under the Loan Agreement
and the other Security Documents.
(D) By the Facility Letter Cygnet has agreed to make available to the
Borrower a loan facility of (pound)100,000 and to provide the Indemnity
on the terms stated therein.
- --------
* Inserted in manuscript in executed Agreement
1
<PAGE>
(E) The Borrower has issued a Loan Stock Instrument (the "Loan Stock
Instrument") to Butlin's Limited ("Butlin's") as part consideration for
the price payable to Rank under an asset sale agreement relating to
Butlin's Provincial Hotels and the Loan Stock Instrument has been secured
by the issue to Butlin's of a Standby Letter of Credit (the "Standby
Letter of Credit") by Citibank, N.A in the maximum principal amount of
(pound)10,400,000.
(F) Mr Leech has entered into a facility letter (the "Citibank Facility
Letter") in respect of the issue of the Standby Letter of Credit.
(G) Cygnet has undertaken by the Indemnity to indemnify Mr Leech against any
liability incurred by Mr Leech to Citibank, N.A. pursuant to the Citibank
Facility Letter.
(H) Milner has entered into a mortgage of shares in respect of 5,820,000
ordinary shares in ML Laboratories Plc (the "Milner Charge") in favour of
Citibank, N.A. as security for the Standby Letter of Credit and Cygnet
has also undertaken by the Indemnity to indemnify Milner against any
liability incurred by Milner to Citibank, N.A. pursuant to, or any loss
to Milner as the result of the exercise of any rights by Citibank, N.A.,
under the Milner Charge.
(I) The Borrower has granted security to Cygnet as security for its
obligations under the Facility Letter.
(J) The principal purpose of this Deed is to regulate the ranking of claims,
the priority of security interests and the enforcement of rights between
the Lenders, the Hedge Provider and Cygnet.
NOW IT IS HEREBY AGREED as follows:-
1. Interpretation
1.1 Defined Terms
In this Deed, in addition to terms defined in the Recitals, unless the
context otherwise requires the following words and expressions shall have
the following meanings:-
"Administrative Agent" means Arab Bank plc in its capacity as
administrative agent for the Lenders and the Hedge
Provider;
2
<PAGE>
"Agents" means the Administrative Agent and the Security
Agent, and "Agent" means either of them, as the
context requires;
"Borrower" means Grand Hotel Group Limited, a company
registered under the Laws of England and Wales
under number 3657769 whose registered office is
situate at Derbyshire House, 737a Wilmslow Road,
Didsbury, Manchester M20 6WF;
"Charges" means the Senior Charges and the Junior Charge;
"Creditors" means the Senior Creditors and Cygnet and
"Creditor" means any of them;
"Crystallisation" means first crystallisation of any of the floating
charges contained in the Charges whether arising
by operation of law or effected pursuant to the
express provisions of the relevant Charge and
"Crystallise" and "Crystallised" shall have a
corresponding meaning;
"Cygnet" Cygnet Ventures Limited, a company registered
under the Laws of Guernsey under number 35357
whose registered office is at National Westminster
House, Le Truchot, St Peter Port, Guernsey,
Channel Islands;
"Enforcement Date" means the earliest of:-
(i) the first date on which any Creditor (or the
Security Agent on its or their behalf in the
case of the Senior Lenders) appoints a
Receiver of all or any part of the property
of the Borrower or
3
<PAGE>
takes any other step to enforce the Charges
or any part thereof;
(ii) the first date on which the Borrower is wound
up voluntarily or ordered to be wound up
compulsorily;
"Facility Letter" means the facility letter dated 28 June 1999 from
Cygnet to the Borrower;
"Hedge Provider" means Arab Bank plc in its capacity as
counterparty to the Hedging Arrangements;
"Hedge Provider's means the beneficial interest of the Hedge
Security Interest" Provider and the Agents (in their capacities as
agents for the Hedge Provider) in the Senior
Charges;
"Hedge Provider's means the aggregate amount of all monies due from
Indebtedness" time to time to the Hedge Provider (in its
capacity as such) together with any interest
accrued due and payable thereon and any
commission, fees, costs and expenses payable by
the Borrower under the Security Documents;
"Hedging
Arrangements" means an agreement in the form of the
International Swaps and Derivatives Association
Master Agreement (Multicurrency Cross Border) 1992
Edition (the "ISDA Agreement") entered into
between the Hedge Provider and the Borrower and a
confirmation between the Hedge Provider and the
Borrower and a confirmation between the Hedge
Provider and the Borrower evidencing or
constituting on interest rate management agreement
under the ISDA
4
<PAGE>
Agreement, both the ISDA Agreement and the
confirmation being dated 30 June * 1999;
"Indemnity" means the deed of indemnity executed by Cygnet in
favour of Mr Leech and Milner, as referred to in
Recitals (G) (H) and (I);
"Junior Charge" means the debenture details of which are specified
in the Third Schedule and the assignments,
mortgages, charges and other security interests
created thereby or pursuant thereto and made
between the Borrower and Cygnet and any other
security interest now or hereafter securing any
Junior Indebtedness including (for the avoidance
of doubt) any fixed charge arising on the
Crystallisation of any charges created thereby);
"Junior Indebtedness" means all present and future sums, liabilities and
obligations payable or owing by the Borrower to
Cygnet (whether actual or contingent, jointly or
severally or otherwise howsoever) including,
without limitation, the principal amount and all
other monies (including interest, commissions and
fees, legal and other costs and expenses and any
payment by way of indemnity or counter-indemnity)
due from time to time to Cygnet from the Borrower
under the Facility Letter, and any other liability
or obligation under or secured by the Junior
Charge;
"Lenders" means the bank or banks and financial institutions
set out in the First Schedule and includes their
successors in title,
- --------
* Inserted in manuscript in executed Agreement
5
<PAGE>
Transferees and assignees under the Loan
Agreement;
"Lenders'
Indebtedness" means the aggregate principal amount and all other
monies (including interest, commissions and fees,
legal and other costs and expenses) due from time
to time to the Agents and the Lenders by the
Borrower under the Loan Agreement and the other
Security Documents;
"Lenders' Security
Interest" means the beneficial interest of the Lenders and
of the Agents (in their capacity as agents for the
Lenders) in the Senior Charges;
"Loan Agreement" means a loan agreement dated 30 June* 1999
herewith and made between the Borrower (1) the
Lenders (2) Arab Bank plc in its capacity as
administrative agent for the Lenders and the Hedge
Provider (3) Arab Bank plc in its capacity as
security agent and trustee for the Senior
Creditors (4) and Arab Bank plc in its capacity as
hedge provider (5);
"Milner" means Milner Laboratories Limited (Registered in
Jersey) whose registered office is at 33-39
Columberi, St Helier, Jersey Channel Islands;
"Mr Leech" means Kevin Ronald Leech of La Vignette, Rue la
Vignette, St Saviour, Jersey, Channel Islands;
"Permitted Demand" (a) at any time prior to the making of any demand
for the repayment of the Senior Indebtedness
pursuant to the Loan Agreement
- --------
* Inserted in manuscript in executed Agreement
6
<PAGE>
and prior to the appointment of a Receiver of
the Borrower by or on behalf of the Senior
Lenders (or any of them) or the commencement
of any liquidation or administration of the
Borrower, a demand upon the Borrower which
states that repayment of the amount or
liability demanded is subject to the terms of
this Deed; and
(b) at any other time, any demand made upon the
Borrower,
Provided always that, in each such case, such
demand is without prejudice to the subordination
of the Junior Indebtedness to the Senior
Indebtedness herein contained and to the other
terms of this Deed.
"Permitted Payments" means payments and receipts of scheduled interest,
commissions and costs payable under the Facility
Letter and principal of up to (pound)100,000
payable under the Facility upon expiry of the
period specified in paragraph 3 of the Facility
Letter) but only so long as no Senior Indebtedness
is due and unpaid and no Event of Default or
Potential Event of Default has occurred and is
continuing unremedied under the Loan Agreement and
for the avoidance of doubt no payment which is or
represents (directly or indirectly) or is any way
attributable to or liability which arises in
connection with or as a result of the payment of
the principal amount of (pound)10,400,000 (or any
part thereof) represented by the Loan Stock
Instrument and/or the Standby Letter of Credit
shall be a Permitted Payment notwithstanding the
terms of the
7
<PAGE>
Facility Letter, to the intent that no payment
shall be made in respect of the said principal
amount of (pound)10,400,000 until the Senior
Indebtedness has been irrevocably paid in full;
"Receiver" means a receiver, receiver and manager,
administrative receiver, administrator or other
person appointed to carry out the duties of any
such person;
"Security Agent" means Arab Bank plc in its capacity as security
agent and trustee for the Secured Parties;
"Security Interests" means the Lenders' Security Interest and the Hedge
Provider's Security Interest;
"Senior Charges" means the legal charges and debentures, the
security agreements and the other instruments of
which details are specified in the Second Schedule
and the assignments, mortgages, charges and other
security interests created thereby or pursuant
thereto and made between the Borrower and the
Security Agent as agent and trustee for the Senior
Creditors and any other security interest now or
hereafter securing any Senior Indebtedness
including (for the avoidance of doubt) any fixed
charge arising on the Crystallisation of any
charges created thereby;
"Senior Creditors" means the Lenders, the Agents and the Hedge
Provider and "Senior Creditor" means any of them;
"Senior Indebtedness" means the Lenders' Indebtedness and the Hedge
Provider's Indebtedness.
8
<PAGE>
1.2 Construction of certain terms
In this Deed unless the context otherwise requires:
(a) terms defined in the Loan Agreement have, unless expressly defined
in this Deed, the same meaning in this Deed;
(b) clause and schedule headings are for ease of reference only;
(c) references to a Clause or Schedule shall be construed as a
reference to a clause hereof or schedule hereto;
(d) a sub-clause shall be construed as a reference to a sub-clause of
the clause in which such reference appears;
(e) a paragraph shall be construed as a paragraph of the sub-Clause in
which such reference appears;
(f) any reference to any statute or regulation shall be construed as a
reference to such statute as regulation as the same may have been,
or may from time to time be, amended or re-enacted;;
(g) the singular shall include the plural and vice versa
(h) a reference to a person includes bodies corporate and
unincorporate;
(i) a reference to this Deed, the Loan Agreement, the Indemnity, the
Charges (or any of them) or any other document shall be construed
as a reference to this Deed or, as the case may be, the Loan
Agreement or such other document as the same may have been or may
from time to time by, amended, supplemented or novated;
(j) a reference to a person (including the parties hereto) includes
its successors and assigns and persons deriving title through or
under such person. Without limitation, a reference to the Agents
(or either of them) includes any successor appointed under the
Loan Agreement; and
(k) a reference in this Deed to a creditor's enforcing a security
interest include references to:
9
<PAGE>
(i) its retaining or applying in or towards the discharge of a
liability of the Borrower any amount which it receives by
virtue of an assignment of, or other security interest
over, an insurance policy or receivable owned by the
Borrower; and
(ii) taking or retaining possession of any moveable property,
including any negotiable instrument, document of title or
other document owned by the Borrower.
2. Consents
2.1 Creditors
The Senior Creditors consent to the execution by the Borrower of the
Junior Charge and, subject to the terms of this Deed, to the existence of
the Junior Indebtedness.
2.2 Borrower
The Borrower hereby agrees to the terms of this Deed and undertakes with
the Creditors, to observe the provisions hereof and not to do or omit to
do anything which may prejudice or affect the enforcement of such
provisions, but none of the undertakings in this Deed are given to, or
shall be enforceable by, the Borrower.
2.3 Hedging Arrangements Charge
The Hedge Provider confirms that notwithstanding the provisions of
Section 7 (Transfer) of the ISDA Agreement it consents and agrees to the
execution of the Hedging Arrangements Assignment in favour of the
Security Agent as agent and trustee for the Senior Lenders.
3. Subordination
The rights of Cygnet in respect of the Junior Indebtedness are
subordinated to the Senior Indebtedness and accordingly payment by the
Borrower of any amount of the Junior Indebtedness (other than Permitted
Payments) is conditional upon the Borrower having irrevocably paid in
full all of the Senior Indebtedness.
10
<PAGE>
4. Undertakings of the Borrower
So long as the Senior Indebtedness is outstanding the Borrower will not,
without the prior written consent of the Senior Creditors:
(a) secure all or any part of the Junior Indebtedness other than by
way of the Debenture specified in the Third Schedule;
(b) make a loan or provide credit to or acquire any bill bond or
security issued by Cygnet, Mr Leech or Milner;
(c) redeem, purchase or otherwise acquire any of the Junior
Indebtedness;
(d) save by means of Permitted Payments, repay or prepay any principal
amount of, or pay any interest, fees or commissions (but without
prejudice to accrual thereof) on, or by reference to, or on
account of the Junior Indebtedness;
(e) take or omit to take any action whereby the subordination of the
Junior Indebtedness or any part thereof to the Senior Indebtedness
would be terminated or impaired;
(f) incur any Junior Indebtedness other than under and on the terms of
the Junior Charge and the Facility Letter and will procure that at
all times the maximum principal amount of or contingent liability
in respect of the Junior Indebtedness shall not exceed the lesser
of (1) the principal amount due under the Facility Letter
aggregated with a sum equal to the amount for the time being
unpaid under the Loan Stock Instrument and (2) (pound)10,500,000,
together with, in each case, any and all interest, costs, fees and
expenses payable in connection therewith.
(g) give notice of any assignment or any other security created by the
Junior Charge to any other person and if, notwithstanding but
without prejudice to the foregoing, any such notice is given, to
join with the Senior Lenders in notifying such person of the
priority afforded to the Senior Charges by this Deed.
5. Documentation
This Deed, the Facility Letter, and the Junior Charge and the Indemnity
form the entire agreement as to the Junior Indebtedness.
11
<PAGE>
If there is any inconsistency between the terms of this Deed and the
terms on which the Junior Indebtedness was or is incurred by the
Borrower, the terms of this Deed shall prevail. If there are any other
terms relating to the Junior Indebtedness existing at the date hereof and
not comprised in this Deed, the Facility Letter the Indemnity and the
Junior Charge, such terms shall be of no further force and effect. Any
amendment to the Junior Charge the Facility Letter or the Indemnity made
or purported to be made without the consent of the Senior Creditors shall
be void.
6. Undertakings of Cygnet
So long as the Senior Indebtedness is outstanding, Cygnet will not
without the prior written consent of the Senior Creditors or save as
expressly otherwise permitted by this Deed:
(a) assign or purport to assign to any person the whole or any part of
the Junior Indebtedness;
(b) save in respect of Permitted Payments, purport to set off at any
time any amount of the Junior Indebtedness against any amount
payable by Cygnet to the Borrower;
(c) save in respect of Permitted Payments or by a Permitted Demand,
attempt to obtain repayment from the Borrower or prepayment or
payment on account of principal or payment of any interest, fees
or commissions (but without prejudice to accrual thereof) on, or
by reference to, any of the Junior Indebtedness;
(d) petition for, or vote in favour of, any resolution or take any
other action whatsoever for, or which may lead to, the
administration, winding-up or dissolution of the Borrower;
(e) take or omit to take any action whereby the subordination of the
Junior Indebtedness or any part thereof to the Senior Indebtedness
would be terminated or impaired;
(f) permit any Junior Indebtedness to arise other than under and on
the terms of the Facility Letter or the Junior Charge and will
procure that at all times the maximum principal amount of or
contingent liability in respect of the Junior Indebtedness shall
not exceed the lesser of (1) the principal amount due under the
12
<PAGE>
Facility Letter aggregated with a sum equal to the amount for the
time being unpaid under the Loan Stock Instrument and (2)
(pound)10,500,000, together with, in each case, any and all
interest, costs, fees and expenses payable in connection
therewith;
(g) amend or supplement the Indemnity;
(h) notwithstanding Clause 3 of the Indemnity (but without prejudice
to Clause 3 of this Deed and any other provision of this Deed by
which the Junior Indebtedness is subordinated to the Senior
Indebtedness) not to make any payment under the Indemnity without
due enquiry as to whether the amount demanded from Cygnet under
the Indemnity relates to a payment which is properly due and
payable under any Undertaking (as defined in the Indemnity);
(i) give notice of any assignment or other security created by the
Junior Charge to any other person and if, notwithstanding and
without prejudice to the foregoing, any such notice is given to
join with the Senior Lenders in notifying such person of the
priority afforded to the Senior Charges by this Deed.
7. Non-Permitted Recoveries
If, notwithstanding (and without prejudice to) Clauses 3, 4 and 6, Cygnet
shall receive any payment from the Borrower in respect of the Junior
Indebtedness (save for Permitted Payments) before the Senior Indebtedness
has been discharged in full (whether before or after the commencement of
any liquidation or other insolvency or rescheduling or restructuring of
debts of the Borrower) then to the extent of the outstanding Senior
Indebtedness Cygnet will hold any sums so received and its entitlement in
respect thereof upon trust for the Senior Creditors and will pay the same
to the Senior Creditors forthwith upon receipt.
8. Payments
8.1 Payments under the Hedging Arrangements
(a) All payments (after the application of Section 2(c) (Netting) of
the ISDA Agreement, where applicable) falling due from the Hedge
Provider to the Borrower under the Hedging Arrangements shall be
paid by the Hedge Provider to the
13
<PAGE>
Security Agent (or retained in the capacity of Security Agent
where the Hedge Provider and the Security Agent are the same
person) pursuant to the Hedging Arrangements Charge (unless and
until the Hedging Arrangements Charge has been released by the
Security Agent).
(b) All payments (after the application of Section 2(c) (Netting) of
the ISDA Agreement, where applicable) falling due from the
Borrower to the Hedge Provider under the Hedging Arrangements
shall be paid by the Borrower to the Security Agent.
(c) The Agents shall utilise all payments specified in Clause 8.1(a)
by the Security Agent paying the same to the Administrative Agent
and by the Administrative Agent utilising or appropriating the
same in or towards payment of interest payable on the Loan
pursuant to the Loan Agreement or otherwise in or towards payment
or discharge of the obligations of the Borrower to the Agents and
the Lenders under the Loan Agreement.
(d) Unless and until an Event of Default shall have occurred pursuant
to the Loan Agreement the Security Agent shall utilise all
payments specified in Clause 8.1(b) by paying the same to the
Hedge Provider (or retaining the same in the capacity of Hedge
Provider where the Security Agent and the Hedge Provider are the
same person) to retain for its own account.
(e) All the parties hereby irrevocably instruct and authorise the
Hedge Provider, the Security Agent, the Administrative Agent and
the Borrower to effect payments in accordance with the foregoing
provisions.
8.2 Order of Payments
Unless and until an Event of Default shall have occurred pursuant to the
Loan Agreement payments or utilisations pursuant to Clause 8.1(d) shall
be made in priority to payments to or by the Agents for the account of
the Lenders in respect of interest falling due under the Loan Agreement.
8.3 Loan Agreement and Charges Prevail
14
<PAGE>
Nothing contained in this Clause 8 shall as between the Senior Creditors
and the Borrower vary any matters agreed between the Senior Creditors and
the Borrower and contained in the Loan Agreement or the Senior Charges.
9. Agreed Priorities and Application
9.1 The Creditors respectively confirm that the details of their respective
Charges specified in the Second Schedule and the Third Schedule (and, in
the case of Cygnet, the Facility Letter and Indemnity) and the copies
thereof provided to the other parties to this Deed (as appended to this
Deed) are true, complete and accurate in all respects and the Charges
have to be best of their knowledge and belief not Crystallised. It is
hereby agreed and declared between the Creditors that for the purpose of
this Deed (but not so as to prejudice or affect any rights or remedies of
any Creditor against the Borrower), the priorities of the Charges and the
Security Interests shall rank in point of security as between the
Creditors so that:-
(a) the Senior Charges shall rank prior to the Junior Charge in all
respects; and
(b) the Lenders' Security Interest shall in respect of the Lender's
Indebtedness rank in priority to the Hedge Provider's Security
Interest.
9.2 Accordingly upon enforcement of each or any of the Charges all monies
and/or assets received in respect thereof by the Creditors (or, in the
case of the Senior Lenders, either of the Agents on their behalf) or any
Receiver appointed by or at the request of any or all of them shall be
applied (after retention of sufficient monies to make payment in
satisfaction of the costs, charges, expenses and liabilities incurred by
the Receiver, including the remuneration of the Receiver) first in or
towards satisfaction of the Lenders' Indebtedness in priority to any
payment to the Hedge Provider or Cygnet or any other person, secondly
(subject only to payment of the Lenders' Indebtedness) shall be next
applied in or towards satisfaction of the Hedge Provider's Indebtedness
in priority to any payment to Cygnet or any other person, and thirdly
(subject to payment of the Lenders' Indebtedness and the Hedge Provider's
Indebtedness) shall next be applied by payment to Cygnet in or towards
satisfaction of the Junior Indebtedness.
15
<PAGE>
9.3 The priorities set forth above shall rank as provided in this Clause
notwithstanding:-
(a) the nature of the Charges and the Security Interests and the
respective dates or times of their execution, creation or
registration;
(b) the respective date or dates or time or times at which any of the
Creditors received notice of any of the Charges held by the other
Creditors and the respective date or dates or time or times at
which monies may be or have been advanced or become owing or
payable or secured under the Charges;
(c) the appointment of any liquidator, Receiver, administrator or
similar officer in relation to the Borrower; and
(d) any other provisions contained in the Charges or the other
Security Documents.
10. Retention of Property Deeds, Custody of Assets and Insurance
10.1 Deeds etc
(a) The Creditors agree that where the requirements of the Charges
conflict as to the deposit of deeds and documents, the relevant
deeds and documents, if required to be deposited under the Senior
Charges (or any of them), shall be held with and deposited with
the Security Agent during the subsistence of the Senior Charges
(or any of them) and such deposit shall be deemed to be a
sufficient performance of any obligation of the Borrower to
deposit deeds and documents under the Charges.
(b) For the avoidance of doubt and for the purposes of the Senior
Charges, the Lenders, the Agents and the Hedge Provider confirm
that the Security Agent is approved as a custodian of any assets
charged to the Security Agent as agent and trustee for the Agents,
the Lenders and the Hedge Provider and the Security Agent hereby
confirms that it holds and will hold such assets and the accounts
to which they are credited in accordance with and subject to the
Senior Charges and the Lenders' Security Interest, the Hedge
Provider's Security
16
<PAGE>
Interest and this Deed. Forthwith upon any discharge of the
Lenders' Security Interest in respect of any such property or
assets the Security Agent will unless and until otherwise
instructed by the Hedge Provider hold such assets for the Hedge
Provider in accordance with the Senior Charges.
10.2 Insurance Proceeds
In the event of any monies being received prior to the Enforcement Date
under any insurance covering any of the property or assets charged under
the Charges such monies shall (subject to the rights of any landlord or
the holder of any prior encumbrance or the obligation to any tenant) be
applied in replacing, restoring or reinstating the property or assets
destroyed, damaged or lost unless the Majority Lenders shall otherwise
direct in writing.
11. Unenforceability
If any of the Charges shall be released or be or become wholly or partly
invalid or unenforceable the Creditor in whose favour such Charges is
given shall itself bear the loss resulting and shall not be entitled to
share in moneys derived from the assets over which it has no effective
security but the Creditors shall not themselves challenge or question the
validity or enforceability of the Charges.
12. Appointment of Receiver
12.1 Consultation
If any Senior Creditor wishes pursuant to the powers in the Senior
Charges to appoint a Receiver of the Borrower or to exercise its power of
sale under or otherwise enforce any of the Senior Charges or wishes the
Security Agent to do so it shall forthwith inform the other Creditors and
endeavour to agree with them on the method by which the Charges will be
enforced. In such event the Creditors shall consult together with a view
to agreeing upon the method of enforcement and where appropriate upon a
suitable person or persons to be appointed as Receiver (and such
consultation and agreement shall also precede the removal of any such
agreed Receiver and any appointment of a successor) and shall co-operate
with each other in ensuring that the net proceeds after deduction of the
expenses of realisation are paid in accordance with the provisions of
this Deed provided that
17
<PAGE>
(a) nothing herein contained shall prevent the Lenders, or the
Security Agent (but not the Hedge Provider or Cygnet) so
appointing a Receiver of the Borrower forthwith without such
consultation or agreement where the appointor reasonably believes
that the immediate appointment of a Receiver is necessary to
protect its interests (or in the case of the Security Agent, the
interests of the Senior Creditors or any of them) but the
appointor shall as soon as practicable thereafter inform the other
Creditors of such appointment and consult with the other Creditors
with a view to the retention in office of such Receiver or (if not
agreed) to the removal of such Receiver and the appointment of a
successor;
(b) in case of dispute between the Majority Lenders and the other
Creditors or any of them the Majority Lenders shall be entitled to
determine whether or not a Receiver is appointed and whether or
not any power of sale is exercised or the security is otherwise
enforced and the Hedge Provider shall not be entitled to appoint a
Receiver or to otherwise enforce the Charges without the consent
of the Majority Lenders;
(c) no action taken by the Senior Creditors or any of them or by a
Receiver appointed by any of them shall be invalid or ineffectual
because of any failure to consult in accordance with this Clause;
(d) for the avoidance of all doubt, until the Senior Indebtedness has
been irrevocably paid in full Cygnet shall not without the prior
written specific consent of the Senior Creditors be entitled to
take any step to enforce the Junior Indebtedness (including, but
without limitation, by the exercise of its power of sale or by
appointing a Receiver), nor to serve on the Borrower a demand for
payment of or an account of any Junior Indebtedness (other than a
Permitted Demand), nor make any direction or requirement
whatsoever under Clause 6 of the Junior Charge and in favour of
the Senior Creditors but not the Borrower hereby waives the
requirement under that clause for payment of Charged Debts (as
defined in the Junior Charge) into a particular account to the
extent inconsistent with the terms of the Senior Charges or any
agreement or arrangement from time to time between the Borrower
and the Security Agent.
18
<PAGE>
12.2 Crystallisation
Each Creditor hereby covenants with each of the other Creditors to notify
each of them forthwith in writing after it becomes aware of the
Crystallisation of any charge contained in its Charges. Cygnet covenants
with the Senior Creditors (while any Senior Indebtedness remains
outstanding) not without the prior written specific consent of the Senior
Creditors to take any step (whether under Clause 7 of the Junior Charge
or otherwise) which would or might Crystallise the floating charge
created under the terms of the Junior Charge provided that this Clause
12.2 shall not prevent Cygnet serving a Permitted Demand on the Borrower.
12.3 Co-operation by Cygnet
(a) Cygnet shall co-operate with the Senior Creditors in realising the
assets charged to them under the Senior Charges or otherwise
exercising their Security Interests and shall execute any deeds or
documents and take any steps which the Senior Creditors or any of
them may reasonably request for the purpose of enabling or
facilitating any exercise by the Senior Creditors or any of them
or by any Receiver appointed by or on their behalf, of any of
their or his powers under the Senior Charges or the general law or
for any similar or related purpose including, but without
limitation, any deed or document which the Senior Lender may
request for the purpose of ensuring that (or avoiding any
uncertainty that) a person who is to acquire an asset covered by
the Senior Charges upon any exercise of the security conferred by
the Senior Charges (whether by sale by the Security Agent, any
Receiver or otherwise) will acquire good title to such asset free
from the Junior Charge. Without limitation, Cygnet hereby
irrevocably consents to the sale of the assets charged by the
Senior Charges by the Security Agent or by any Receiver appointed
by the Security Agent or any other Senior Lender for the purpose
of any restriction or other entry which may be made on the title
to any of the said assets at HM Land Registry and by which such
consent is required.
(b) Cygnet irrevocably and by way of security appoints the Security
Agent as its attorney and on its behalf and in its name (or
otherwise) to execute any deeds or documents or take any other
steps which it is obliged to execute or take under sub-clause (a).
19
<PAGE>
13. Release of Secured Assets
13.1 Prior to the Enforcement Date
If at any time prior to the Enforcement Date the Loan or any part thereof
is irrevocably and unconditionally repaid or prepaid in whole and in
accordance with and subject to the terms of the Loan Agreement and upon
such repayment and in accordance with such terms the Lender's Security
Interest (or any part of it) is to be released the Agents, the Lenders,
and the Hedge Provider will release the Senior Charges subject to and
conditionally upon:
(a) the Borrower paying to the Hedge Provider any amount which may be
payable pursuant to Clause 17 of the Loan Agreement in respect of
such prepayment;
(b) the rights (if any) of the Hedge Provider in accordance with the
terms of this Deed in the proceeds of any sale or other disposal
of the Secured Assets being preserved to the Hedge Provider's
reasonable satisfaction following such prepayment if the Hedging
Arrangements then remain in effect; and
(c) no Event of Default having then occurred.
13.2 After the Enforcement Date
If at any time after the Enforcement Date any such repayment or
prepayment shall occur as is contemplated in Clause 13.1 and the amount
realised from the enforcement of the Charges is insufficient to discharge
in full the Lender's Indebtedness and the Hedge Provider's Indebtedness,
the release by the Hedge Provider shall not be subject to the
satisfaction of the condition specified in Clause 13.1 above, and the
Hedge Provider shall be obliged to release the Secured Assets to enable
the same to be realised.
14. Effective Security
14.1 Creditors' Remedies
No provision contained in this Deed shall as between the Borrower and any
Creditor affect or prejudice any rights or remedies of any Creditor under
the Charges which shall remain in full force and effect as effective
continuing securities for all moneys obligations and
20
<PAGE>
liabilities therein mentioned subject only to the ranking of the Security
Interests and the Charges as herein provided.
14.2 Purchaser
No purchaser dealing with any Senior Creditor or any Receiver appointed
by any Senior Creditor shall be concerned in any way with the provisions
of this Deed but shall assume that the Creditors or any such Receiver
acting on behalf of them as the case may be are acting in accordance with
the provisions of this Deed.
15. Indulgence
Each Creditor shall (subject in the case of Cygnet to Clauses 3,4 and 6)
be entitled until the date upon which a Receiver is appointed without
reference to the others to grant time or indulgence and to release
compound or otherwise deal with or receive moneys from any person liable
or to deal with exchange release modify or abstain from perfecting or
enforcing any of the rights which it may now or hereafter have against
the Borrower or otherwise without prejudicing its rights under this Deed.
16. Disclosure
The Creditors shall be at liberty from time to time to disclose to each
other information concerning the affairs of the Borrower in such manner
and to such extent as they shall from time to time desire.
17. Memorandum
Each Creditor agrees to endorse a Memorandum of this Deed upon the
Charges and acknowledges the right of each of the other Creditors to
production and to delivery of a copy of the same.
18. HM Land Registry
The parties to this Deed hereby apply to the Registrar to note in the
appropriate manner at HM Land Registry the priority arrangements agreed
in this Deed in so far as the same affect any registered land comprised
in the Charges where an entry relating to the Charges has been made on
the register in accordance with the terms of this Deed.
19. Discharge
21
<PAGE>
This Deed shall cease to have effect as regards any Creditor when the
Security Interest under the Charge or Charges (as the case may be) which
have been created in its respective favour is/are finally discharged but
shall remain in full force and effect until such time.
20. Assignment/Representations
(a) Each Creditor covenants with each of the other Creditors not (save
as permitted in this Clause) to assign or transfer the benefit of
its Charges unless the assignee or transferee first agrees in
writing with the Creditor transferring its interest and the other
Creditors to be bound by the provisions of this Deed including
this provision. This provision shall apply to each and every
successive assignment or transfer. For the avoidance of doubt,
notwithstanding the foregoing, there shall be no restriction on
the ability of the Lenders assigning or transferring their
interests under the Loan Agreement and the Security Documents in
accordance with their respective terms.
(b) Cygnet shall not effect any such transfer without the consent of
the Majority Lenders.
(c) Cygnet warrants and represents to the Senior Creditors that:
(i) this Deed is binding on it in all respects;
(ii) this Deed is within its power and has been duly authorised;
and
(iii) this Deed does not and will not breach any instrument,
agreement or undertaking or violate any applicable law,
rule or regulation;
(iv) all consents and authorisations necessary in relation to
this Deed have been obtained and are in force;
(v) during the three months before the date of this Deed Cygnet
has not entered into any arrangement which would have
contravened this Deed if it had been entered into after the
date of this Deed; and
22
<PAGE>
(vi) it is at the date of this Deed, and will remain at the date
of any transfer referred to in sub-clause (b) the
registered holder of not less than 85% of the issued share
capital in the Borrower.
(d) Cygnet and the Borrower jointly and severally warrant and
represent to the Senior Lenders that:
(i) the Borrower has not given any form of security to Mr Leech
or Milner which secures any obligation or liability
(present or future, actual or contingent, given alone or
jointly) of Mr Leech or Milner to Citibank, N.A. in
relation to the Standby Letter of Credit, other than
insofar as the Junior Charge secures obligations given by
Cygnet under the Indemnity; and
(ii) the Borrower has no obligation or liability to Citibank,
N.A. (present or future, actual or contingent, given alone
or jointly, express or implied) in relation to the Standby
Letter of Credit.
(e) References in this Clause to the transfer or assignment of the
benefit of a Charge include any declaration of trust and an
equitable charge.
21. Waiver of Defences
The subordination effected by this Deed and the obligations of Cygnet
hereunder shall not be affected by any act, omission or circumstances
which, but for this provision, might operate to release or otherwise
exonerate Cygnet from its obligations hereunder or affect such
obligations including, without limitation, and whether or not known to
Cygnet or the Senior Creditors:
(a) any time or indulgence granted to or composition with the Borrower
or any other person; or
(b) the taking, variation (no matter how fundamental or expensive),
compromise, renewal or release of or refusal to effect or enforce,
any rights, remedies or securities against or granted by the
Borrower or any other person; or
23
<PAGE>
(c) any legal limitation, disability or other circumstances relating
to the Borrower or to any other person or any amendment to, or
variation of the terms of the Loan Agreement or other Security
Documents or any other document or security.
22. Notices
Except as otherwise provided in this Deed
(a) each communication to be made hereunder shall be made in writing
and shall be served by sending the same by pre-paid first class
post or telex or facsimile transmission to the addressed to the
party to be served or notified as follows
(i) to the Administrative Agent or the Security Agent or the
Hedge Provider or Arab Bank plc in its capacity as Lender
at PO Box 138, 15 Moorgate, London EC2R 6LP marked for the
attention of the Credit Department (fax no. 0171 600 7620);
(ii) to Irish Nationwide Building Society at 252 Westminster
Bridge Road, London SE1 7PD marked for the attention of
Gary McCollum (fax no. __________________);
(iii) to the Borrower at 6 Leylands Park, Colden Common,
Winchester, Hampshire marked for the attention of Philip
Mason (fax no. 01703 696088) and copied to Richard Saleh &
Co at Derbyshire House, 737a Wilmslow Road, Didsbury,
Manchester M20 6WF marked for the attention of Mr Saleh
(fax no 0161 434 9212);
(iv) to Cygnet at National Westminster House, Le Truchot, St
Peter Port, Guernsey, Channel Islands marked for the
attention of Neil Crocker (fax no. 01481 728493) and copied
to Richard Saleh & Co at Derbyshire House, 737a Wilmslow
Road, Didsbury, Manchester M20 6WF marked for the attention
of Mr Saleh (fax no. 0161 434 9212).
(b) any notice sent by post as provided in this clause before the last
scheduled collection of letters from the place of posting shall be
deemed to have been served on the next succeeding business day (or
on the third succeeding business day in the case of a letter sent
to or from the Channel Islands) and in
24
<PAGE>
proving the service of the same it will be sufficient to prove
that the relevant letter was properly stamped addressed and placed
in the post. Any notice sent by telex or facsimile and duly
despatched to a current telex number with confirmed answerback or
facsimile number of the addressee shall be deemed to be received
at the time of despatch if such time is during business hours on a
business day but shall otherwise be deemed to be received at the
opening of business on the next following business day.
(c) Cygnet irrevocably appoints Mr Richard Saleh of Derbyshire House,
737a Wilmslow Road, Didsbury, Manchester M20 6WF to receive, for
and on its behalf, service of process in proceedings in England.
Such service shall be deemed completed on delivery to the process
agent (whether or not it is forwarded to and received by Mr Leech
or Cygnet). If for any reason either the process agent ceases to
be able to act as such or no longer has an address in England
Cygnet irrevocably agrees to appoint a substitute process agent
acceptable to the Senior Creditors and to deliver to the Senior
Creditors (such acceptance not to be unreasonably withheld) a copy
of the new agent's acceptance of that appointment within fifteen
days.
23. Variation
23.1 No variation to this Deed is effective for any purpose unless it has been
specifically agreed to in writing by the Senior Creditors.
23.2 The Senior Creditors do not need:
(a) the consent of Cygnet to effect a variation of this Deed which
alters only the obligations of the Borrower and the corresponding
rights of the Senior Creditors or any of them;
(b) the Borrower's consent to effect a variation of this Deed which
alters only the obligations of Cygnet and the corresponding rights
of the Senior Creditors or any of them.
25
<PAGE>
24. Counterparts
This Deed may be executed in any number of counterparts and by the
different parties on equivalent counterparts and each shall when so
executed be deemed an original
25. Law and Jurisdiction
This Deed shall be governed by and construed in all respects in
accordance with English law, and the parties hereby submit to the
non-exclusive jurisdiction of the English Courts.
Nothing herein contained shall restrict the right of any party hereto to
initiate proceedings in any other jurisdiction.
EXECUTED as a Deed and delivered on the date stated at the beginning of this
document
26
<PAGE>
1. First Schedule
The Lenders at the date of this Deed:
Arab Bank plc
Irish Nationwide Building Society
27
<PAGE>
2. Second Schedule
Senior Charges
Document
Debenture
Key-Man Charge
Hedging Arrangements Charge
each being dated the same date as this Deed and made between the Grand Hotel
Group Limited (1) and Arab Bank plc as security agent and trustee for the Senior
Creditors (2)
28
<PAGE>
3. Third Schedule
Junior Charge
Date Document Parties
30 June 1999* Debenture Grand Hotel Group Limited (1)
Cygnet Ventures Limited (2)
- --------
* Inserted in manuscript in executed Agreement
29
<PAGE>
Signatories
The Borrower
30
<PAGE>
Signed as a deed by
GRAND HOTEL GROUP LIMITED
acting by a director and
its secretary (or two directors)
Director....................Philip Mason
Secretary/Director..........Stephen Last
Cygnet
Signed as a deed by RICHARD SALEH as
attorney for and in the name of CYGNET
VENTURES LIMITED under a Power of Richard Saleh
Attorney dated 22 June 1999 in the
presence of:-
Signature of witness:.....AJ Pendlesbury
Name:.....................AJ Pendlesbury
Address:737a Wilmslow Road, Didsbury,
Manchester, M20 6WE
The Lenders
Signed as a deed by FREDERICK STONEHOUSE
as attorney for and in the name of ARAB
BANK plc under a Power of Attorney Frederick Stonehouse
dated 15th August 1998 in the presence of:-
Signature of witness:....Stuart McIntyre
Name:....................Stuart McIntyre
Address:.......15 Moorgate, London, EC2R
6LP (Banker)
31
<PAGE>
Executed as a deed by IRISH NATIONWIDE
BUILDING SOCIETY by its authorised Stan Purcell
signatories
The Administrative Agent
Signed as a deed by FREDERICK STONEHOUSE
as attorney for and in the name of ARAB
BANK plc under a Power of Attorney Frederick Stonehouse
dated 15th August 1998 in the presence
of:-
Signature of witness: ...Stuart McIntyre
Name: ...................Stuart McIntyre
Address: 15 Moorgate, London, EC2R 6LP
(Banker)
The Security Agent
Signed as a deed by FREDERICK STONEHOUSE
as attorney for and in the name of ARAB
BANK plc under a Power of Attorney Frederick Stonehouse
dated 15th August 1998 in the presence
of:-
Signature of witness:....Stuart McIntyre
Name: ...................Stuart McIntyre
Address: 15 Moorgate, London, EC2R 6LP
(Banker)
32
<PAGE>
The Hedge Provider
Signed as a deed by FREDERICK STONEHOUSE
as attorney for and in the name of ARAB
BANK plc under a Power of Attorney Frederick Stonehouse
dated 15th August 1998 in the presence
of:-
Signature of witness: ...Stuart McIntyre
Name: ...................Stuart McIntyre
Address: 15 Moorgate, London, EC2R 6LP
(Banker)
33
SHARE SALE AGREEMENT
Date: 5th May 1999
Parties:
(1) ELLEN DOHERTY of 5 Woodlands Way, Alkrington, Middleton, Manchester M24
1WL; ("ED"); and
(2) ELLEN DOHERTY of 5 Woodlands Way as above and ANTHONY THOMAS DEMPSEY of
Steam Packet House, 76 Cross Street Manchester M2 4JU ("the Trustees") as
trustees of the Ellen Doherty Settlement 1997 ("the Trust"); and
(3) LEISURE TRAVEL GROUP LIMITED (Co. No: 3764239) of Trafalgar House, 11
Waterloo Place, London SW1 ("the Purchaser").
RECITALS
A. Miss Ellie's World Travel Limited is a private limited company
incorporated in England under the Companies Act 1985 under number 2000814
("the Company").
B. It has been agreed that the Vendors will sell and the Purchaser will
purchase the entire issued share capital of the Company (as defined
below) on the terms of this Agreement.
1
<PAGE>
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1 In this Agreement the following words and expressions have the following
meanings unless they are inconsistent with the context:
"Agreed Form" the form agreed between the parties on or
prior to the date of this agreement and
initialled for the purpose of identification
by their respective solicitors;
"the Original Agreement" means an agreement between ED and the
Purchaser dated 16 November 1998;
"Shares" means 50,000 issued ordinary shares of
(pound)1 each of the Company being the whole
of the issued share capital of the Company;
"Vendors" means, together, ED and the Trustees.
1.2 Clause headings in this Agreement are for ease of reference only and do
not affect the construction of any provision.
1.3 Except where the context otherwise requires words denoting the singular
include the plural and vice versa, words denoting any one gender include
all genders and words denoting persons include corporations and vice
versa.
1.4 Unless otherwise stated, a reference to a clause or sub-clause is a
reference to a clause or a sub-clause of this Agreement.
2
<PAGE>
1.5 Save where the context does not permit, words and phrases used in the
Original Agreement shall bear the same meaning herein.
2. Agreement for Sale
2.1 Subject to the terms and conditions of this Agreement the Vendors shall
sell and the Purchaser shall purchase the Shares free from all liens,
charges and encumbrances and with all rights attaching to them, with
effect from the date of this Agreement for the consideration set out in
clause 3.
3. Purchase Consideration
3.1 The purchase consideration for the Shares shall be the aggregate of:
3.1.1 the sum of (pound)70,000 already paid and received by ED on behalf
of the Vendors, and
3.1.2 the sum of (pound)845,000 payable in cash to the Vendor at
completion.
4. Completion
4.l Completion of the purchase of the Shares shall take place at the offices
of the Purchaser's Solicitors as soon as reasonably practicable and in
any event by 9th July 1999 when the Vendors shall deliver to the
Purchaser duly completed and signed transfers in favour of the Purchaser
of the Shares together with the relative share certificates and all those
other act and things set out in clause 5 of the Original Agreement shall
be performed.
4.2 A Board Meeting of the Company shall be held at which the transfers
referred to in clause 4.1 shall be approved (subject to stamp duty
adjudication).
3
<PAGE>
4.3 The Purchaser shall satisfy that part of the consideration for the Shares
as set out in clause 3.1.2 by the payment (by telegraphic transfer) to
the Vendors' Solicitors in cleared funds of the amount referred to
therein.
4.4 ED shall enter into a new service agreement with the Company in the
Agreed Form at Completion.
5. Warranties by ED
5.l ED warrants to the Purchaser in the terms of clause 6 of the Original
Agreement save that so far as clause 6.1.1. the Vendors will have the
said power and in relation to clause 6.1.4 the Vendors are so entitled.
5.2 ED warrants to the Purchaser in the same terms as she warranted in clause
6 of the Original Agreement that the Company has carried on its
business in its ordinary course since 16th November 1998 and overall
there has been no material adverse change in the business of the Company
since that date.
6. Restrictive Agreement
ED hereby undertakes to the Purchaser in the same terms as she did in
clause 7 of the Original Agreement to the Purchaser as therein defined.
7. General
7.1 ED hereby repeats as at 31st January 1999 the warranties contained in
Schedule 4 of the Original Agreement subject to the Disclosure Letter
which related to that agreement (and subject also to the contends of the
management accounts to 31st March 1999 which have been delivered to the
Purchaser and subject also to the limitations contained in the Original
Agreement).
4
<PAGE>
7.2 This Agreement constitutes the entire agreement between the parties
hereto with respect to the matters dealt with herein and supersedes any
previous agreement between the parties hereto in relation to such
matters. Each of the parties hereto hereby acknowledges that in entering
into this agreement it has not relied on any representation or warranty
save as expressly set out herein or in any document referred to herein.
No variation of this agreement shall be valid or effective unless made by
one or more instruments in writing signed by such of the parties hereto
which would be affected by such variation.
7.3 The constitution, validity and performance of this agreement shall be
governed by the laws of England and the parties hereby irrevocably agree
that they will submit to the non-exclusive jurisdiction of the English
Courts.
7.4 The parties confirm that save as set out in this Agreement the Original
Agreement is of no continuing effect.
7.5 The parties agree that the liability of the Trustees under the terms of
this Agreement shall be limited to the value of the Trust assets in the
hands of the Trustees from time to time.
7.6 The parties agree that clause 8.6 of the Original Agreement shall be
deemed incorporated in this Agreement.
5
<PAGE>
AS WITNESS the hands of the parties the day and year first before written
Signed by )
ELLEN DOHERTY ) /s/ ELLEN DOHERTY
in the presence of:- )
76 CROSS ST. MANCHESTER
Signed by )
ELLEN DOHERTY (as a Trustee) ) /s/ ELLEN DOHERTY
in the presence of:- )
Signed by )
ANTHONY THOMAS DEMPSEY ) /s/ ANTHONY THOMAS DEMPSEY
(as a Trustee and without personal liability))
in the presence:- )
Signed by )
LEISURE TRAVEL GROUP LIMITED ) /s/ ILLEGIBLE
acting by )
Director
6
================================================================================
Dated 5th July 1999
(1) ELLEN DOHERTY
(2) LEISURE TRAVEL GROUP LIMITED
SALE AGREEMENT
relating to a life interest under the Ellen Doherty Settlement 1997
---Wacks Caller---
Steam Packet House
76 Cross Street
Manchester
M2 4JU
Tel: 0161 957 8888
Fax: 0161 957 8899
================================================================================
<PAGE>
SALE AGREEMENT
DATE: 5th July 1999
PARTIES:
(1) ELLEN DOHERTY of 5 Woodlands Way, Alkrington, Middleton, Manchester, M24
1WL; ("ED"); and
(2) LEISURE TRAVEL GROUP LIMITED (Company No. ___) whose registered office is
situated at _____________ ("the Purchaser").
RECITALS
A. Miss Ellie's World Travel Limited is a private limited company
incorporated in England under the Companies Act 1985 under number 2000814
("the Company").
B. The Ellen Doherty Settlement 1997 ("the Trust") is registered as the
holder of 46,999 ordinary shares of (pound)1 each, fully paid within the
share capital of the Company (the "Trusts Shareholding") which according
to the Articles of Association of the Company entitle it to all dividends
declared in respect of the current financial period.
C. ED is entitled as a right to receive the income from the Trust during her
lifetime. This includes inter alia, the right to receive dividends
payable in respect of the Trusts Shareholding.
D. ED is a director of the Company and believes (but without any implied
warranty or representation) that there is over (pound)400,000 in
Distributable Profits for year ended 31st March 1999 within the Company
which is capable of being declared as dividends to the shareholders of
the Company and that in view of current profitablity this figure should
increase significantly during the current financial year.
<PAGE>
E. ED, as the beneficiary of the Trust has the right to receive all such
dividends as may be paid for the period ended 31st March 1999 to the
Trustees in relation to the Trusts Shareholding.
F. The parties agree that as no Audited Accounts are available for the
Company in respect of the year ended 31st March 1999 and given that the
Company is likely to retain a proportion of its profits for investment in
the future, ED shall sell to the Purchaser her anticipated entitlement
under the Interest (as hereinafter defined) in the Trust in respect of
the right to receive any dividend declared by the company, on the terms
and conditions set out in this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
1.1 In this Agreement the following words and expressions have the following
meanings unless they are inconsistent with the context:
"Audited Accounts" means the Company's audited accounts (as
defined for the purposes of part VIII
Companies Act 1985) for the financial year in
question including the notes to those
accounts and the associated directors report,
such accounts having been prepared on the
same accounting basis and principles as the
previous years audited accounts;
"Distributable Profits" means the amount of Shareholder's Funds
contained within the balance sheet of the
Company's Audited Accounts;
"Escrow Account" the client account of Wacks Caller;
"The Interest" means ED's rights to receive any dividends
paid to the Trust by the Company in respect
of the Trust's shareholding in the Company;
"Miss Ellie Profits" the after tax profits of the Company as shown
by the Audited Accounts for the year ended
31st March 2000 before deducting
<PAGE>
any expenditure or liability incurred by the
Company or one of its subsidiaries unless it
was:
(i) agreed with ED; or
(ii) contained or provided for in a budget
agreed with ED; or
(iii) in the ordinary course of business of
the Company as conducted before today.
"Shares" means 50,000 issued ordinary shares of
(pound)1 each of the Company being the whole
of the issued share capital of the Company.
1.2 Clause headings in this Agreement are for ease of reference only and do
not affect the construction of any provision.
1.3 Except where the context otherwise requires words denoting the singular
include the plural and vice versa, words denoting any one gender include
all genders and words denoting persons include corporations and vice
versa.
1.4 Unless otherwise stated, a reference to a clause or sub-clause is a
reference to a clause or a sub-clause of this Agreement.
2. Agreement for Sale
2.1 Subject to the terms and conditions of this Agreement ED shall sell and
Purchase the interest free from all liens, charges and encumbrances and
with all rights attaching to it, with effect from the date of this
Agreement for the consideration set out in clause 3.
3. Purchase Consideration
3.1 The purchase consideration for the Interest shall be the aggregate of:-
3.1.1 the sum of(pound)30,000 payable in cash to ED at completion; and
3.1.2 a sum equal to the lesser of (pound)265,000 and the sum shown in
the Audited Accounts as
<PAGE>
"profits on ordinary activities after taxation" of the Company for
the year ended 31st March 1999 such payment to be without
prejudice to any set off or counterclaim in respect of ED's
anticipated dividend from the Company for the year ending 31 March
1999;
3.1.3 such sum as equals the Miss Ellie Profits as shown by the
Audited Accounts for the year ended 3lst March 2000 and
paid in accordance with clause 5.
4. Completion
4.1 Completion of the purchase of the Interest shall take place at the
offices of the Purchaser's Solicitors as soon as practicable after
execution of this Agreement and in any event by 9th July 1999. Upon
receipt by ED of consideration set out in clause 3.1.1 above, ED shall
procure that the Trustees shall deliver to the Purchaser a duly executed
mandate instructing the Company to pay all dividends due under the
Interest directly to the Purchaser, and that a Meeting of the Trustees
will be held at which the mandate referred to in this clause 4.1 shall be
approved.
4.2 The Purchaser shall satisfy the initial part of the consideration for the
Interest, as set out in Clauses 3.1.1, and 3.1.2 by the payment to ED's
Solicitors in cleared funds of those amounts.
4.3 The Purchaser shall satisfy the consideration set out in clauses 3.1.2
and 3.1.3 respectively (less any payments on account made in accordance
with clause 5) by the payment to ED's Solicitors within 14 days of the
signature by the auditors of the Audited Accounts of the Company for the
years ended 31st March 1999 and ending 31st March 2000 respectively and
the Purchaser agrees to use is best endeavours to adopt the Audited
Accounts for the year ended 31st March 2000 as soon as practicable and in
any event prior to 30th September 2000.
5. Payments on Account
5.1 The parties will procure that a copy of each set of management accounts
of the Company will be delivered to the Trustees (it being the duty of ED
so to do whilst she remains a director of the Company) which shall be
accompanied at the end of each calendar quarter by a statement of the
estimate of the Company of the Miss Ellie Profits as at the end of that
quarter.
<PAGE>
5.2 The Purchaser shall within 14 days of receipt by it of each set of
quarterly management accounts in accordance with clause 5.1 pay into the
Escrow Account an amount equal to that quarters' Miss Ellie Profits (as
adjusted in accordance with the definition above) as shown by that set of
quarterly management accounts (less in each case the aggregate of the
payments (if any) previously made under this sub-clause) being an amount
of the consideration payable under clause 3.1.3.
5.3 Payments to the Escrow Account under this clause shall be made by means
of telegraphic transfer to the Vendor's Solicitors.
5.4 Interest accruing on money in the Escrow Account shall be paid to the
party to whom that money is paid pursuant to the terms of this Agreement.
6. Warranties by ED
6.1 ED warrants that she is entitled to transfer the full beneficial
ownership of the Interest to the Purchaser on the terms of this Agreement
without the consent of any third party.
6.2 ED warrants that the Audited Accounts of the Company as at 31st March
1999 will reveal net assets (the "1999 Assets") not materially less in
value than those comprised to the unaudited management accounts of the
Company as at 30th September 1998 (the "1998 Assets") and in the event of
the 1999 Assets being materially less the damages payable by ED to the
Purchaser shall be (pound)1 for every (pound)1 by which the 1999 Assets
are materially less than the 1998 Assets and that those assets in Balance
Sheet as at 31 March 1999 comprise assets of a materially similar nature
to those in the said management accounts.
7. General
7.1 The Purchaser agrees that in consideration of today entering into this
Agreement it shall not prior to the signature of the Audited Accounts to
31st March 2000, and shall procure that so far as it is able no third
party shall change the accounting reference date of the Company or change
the Company's auditors PROVIDED ALWAYS that if the Purchaser wishes to
change the said accounting reference date it shall be obliged to produce
accounts to 31st March 2000 to the same standards and policies as the
Audited Accounts as if 31st March 2000 was the actual accounting
<PAGE>
reference date.
7.2 The Purchaser further agrees that (subject to ED complying with her
service agreement with the Company in all material respects) it shall
allow ED to continue to exercise day to day control over the affairs of
the Company and that ED shall be permitted, without interference by the
Purchaser or at all, to conduct the business of the Company as she
reasonably sees fit in accordance with her service agreement with the
Company and will not change any bank mandate of the Company pending
payment under clause 3.1.2 save for the addition of Mr Richard Smith as
an additional signatory on the basis that no cheque shall be signed or
instruction Given to the Company's bankers until payment has been made
under clause 3.1.2 without the consent of ED. In the event of a breach of
this clause 7.2, and ED shall have terminated her service agreement with
the Company, the consideration payable under 3.1.3 shall be
(pound)150,000.
7.3 The Purchaser and ED shall use all reasonable endeavours to maximise the
Miss Ellie Profits.
7.4 This Agreement constitutes the entire agreement between the parties
hereto with respect of the matters dealt with herein and supersedes any
previous agreement between the parties hereto in relation to such
matters. Each of the parties hereto hereby acknowledges that in entering
into this agreement it has not relied on any representation or warranty
save as expressly set out herein or in any document referred to herein.
No variation of this agreement shall be valid or effective unless made by
one or more instruments in writing signed by such of the parties hereto
which would be affected by such variation.
7.5 The constitution, validity and performance of this agreement shall be
governed by the laws of England and the parties hereby irrevocably agree
that they will submit to the non-exclusive jurisdiction of the English
Courts.
AS WITNESS the hands of the parties the day and year first before written.
Signed by )
ELLEN DOHERTY ) /s/ ELLEN DOHERTY
in the presence of )
<PAGE>
Signed by )
LEISURE TRAVEL GROUP ) /s/ Illegible
LIMITED, acting by:- )
Director
DATED January 2000
---------------------
AGREEMENT FOR THE
ACQUISITION OF THE ISSUED
SHARE CAPITAL OF
Ilios Travel Limited
BY
LEISURE TRAVEL GROUP LIMITED
McFadden, Pilkington & Ward
City Tower B Level Four
40 Basinghall Street
London EC2V 5DE
Tel: 0207 638 8788
Fax: 0207 638 8799
<PAGE>
CONTENTS
CLAUSE PAGE
- ------ ----
1. INTERPRETATION
2. AGREEMENT FOR SALE
3. PURCHASE CONSIDERATION
4. COMPLETION
5. WARRANTIES AND UNDERTAKINGS
6. RESTRICTIVE AGREEMENT
7. GENERAL
SCHEDULE 1 Shareholders
SCHEDULE 2 Details of the Company
SCHEDULE 3 The Property
SCHEDULE 4 Warranties
SCHEDULE 5 Deed of Indemnity
SCHEDULE 6 Vendor's Protection
SCHEDULE 7 Shareholders' Undertaking
2
<PAGE>
THIS AGREEMENT is made on January 2000
----------------
BETWEEN:
(1) NITA EUGENIE ANNE BEECROFT of Stylehurst Paddock, Vannlake Road, Weire
Street, Ockley, Surrey RH5 5JD (the "Vendor"); and
(2) LEISURE TRAVEL GROUP LIMITED a Company incorporated in England of
Trafalgar House, 11Waterloo Place, London SW1 (the "Purchaser")
RECITALS
(A) Details relating to the Company and it Subsidiaries are set out in
Schedule 2.
(B) The Vendor is not the beneficial owner of all of the Shares but will
agree in this Agreement to procure the transfer thereof to the Purchaser.
(C) The Shares are registered in the names of the Shareholders as set out in
Schedule 1.
(D) The Vendor is willing to sell, or procure to be sold, the Shares to the
Purchaser on the terms and subject to the conditions set out in this
Agreement free from Encumbrances.
(E) The Vendor hereby makes representations to the Purchaser in the terms of
the Warranties to the intent that the Purchaser should rely on such
Warranties in entering into this Agreement.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 The following provisions shall have effect for the interpretation of this
Agreement.
1.2 The following words, expressions and abbreviations shall, unless the
context otherwise requires, have the following meanings:-
"Activities" means any activity, operation or process carried
out by the Company at the Property whether or not
currently owned, occupied or used by the Company;
"Agreed Form" means the form agreed between the parties on or
prior to the Completion of this Agreement and
initialled for the purposes of identification by
their respective solicitors;
"Business Day" means a day (other than Saturday or Sunday) on
which banks generally are open for business in
London;
3
<PAGE>
"CA" means the Companies Act 1985;
"CAA'90" means the Capital Allowances Act 1990;
"CAA" means the Civil Aviation Authority;
"Completion" means the completion of the sale and purchase of
the Shares in accordance with clause 5;
"Completion Date" shall have the meaning assigned to it in clause 4;
"Company" means Ilios Travel Limited;
"Deed of Indemnity" means a deed of indemnity in the form set out in
Schedule 5;
"Disclosure Letter" means a letter at the Completion Date together
with the attachments thereto addressed by the
Vendor's Solicitors on behalf of the Vendor to the
Purchaser's Solicitors on behalf of the Purchaser
disclosing exceptions to the Warranties;
"Distribution" means a distribution as defined by sections 209 to
211 (inclusive) of the ICTA and section 418 of the
ICTA;
"Encumbrances" means any mortgage, charge (whether fixed or
floating), pledge, lien, security interest or
other third party right or interest (legal or
equitable) over or in respect of the relevant
asset, security or right;
"Environment" means any and all living organisms (including
without limitation, man ecosystems, property and
the media of air (including without limitation air
in buildings, natural or manmade structures, below
or above ground) water, (as defined in Section
104(1) of the Water Resources Act 1991 and within
drains and sewers) and land (including under any
water as described above and whether above or
below surface);
"Environmental means any consent, approval, permit, licence,
Consent" order, filing, authorisation, exemption,
registration, permission, reporting or notice
requirement and any related agreement required
under any Environmental Law;
"Environmental Laws" means all international, EU, national, or local
statutes, which for the avoidance of doubt shall
include section 57 and schedule 22 of the
Environment Act 1995 and the guidance and
regulations adopted under those provisions,
by-laws, orders,
4
<PAGE>
regulations or other law or subordinate
legislation or common law, all orders, ordinances,
decrees or regulatory codes of practice,
circulars, guidance notes and equivalent controls
concerning the protection of human health or which
have as a purpose or effect the protection or
prevention of harm to the Environment or health
and safety which are binding in relation to the
Property and/or upon the Company in the relevant
jurisdiction in which the Company has been or is
operating on or before Completion;
"ICTA" means the Income and Corporation Taxes Act 1988;
"ITA" means the Inheritance Tax Act 1984 and any
reference thereto shall include any enactment
repealed or modified thereby as if section 275 of
the ITA applied in like manner to this Agreement;
"Last Accounts Date" means 31st October 1999 (being the date to which
the Principal Accounts have been prepared);
"Planning Acts" means the Town and Country Planning Acts for the
time being in force;
"Principal Accounts" means the audited profit and the loss accounts for
the year ended on the Last Accounts Date and the
audited balance sheet of the Company as at the
Last Accounts Date including the audited balance
sheet as at that date and the audited profit and
loss account for that year and the directors'
report and notes;
"Property" means the property of the Company shortly
described in Schedule 3;
"Purchaser's
Solicitors" means McFadden, Pilkington & Ward, City Tower B
Level 4, 40 Basinghall Street, London EC2V 5DE;
"Shareholders" means the persons whose names are listed in
Schedule 1 as holders of the Shares;
"Shareholders'
Undertaking" means the undertaking under seal of even date
herewith executed by the Shareholders and set out
in Schedule 7;
"Shares" means the whole of the issued and allotted share
capital of the Company;
5
<PAGE>
"subsidiary" means a subsidiary company as the same is defined
in s.736 CA;
"Taxation" means all forms of taxation including:-
(a) any charge, tax, duty or levy upon income,
profits, chargeable gains or development
value, land, any interest in land or in any
other property, or documents or supplies or
other transactions;
(b) income tax, corporation tax, capital gains
tax, inheritance tax, value added tax, stamp
duty, stamp duty reserve tax, capital duty,
customs and other import duties, national
insurance contributions, general rates, water
rates or other local rates;
(c) any liability for sums equivalent to any such
charge, tax, duty, levy or rates or for any
related penalty, fine or interest;
"TGCA" means the Taxation of Chargeable Gains Act 1992
and any reference thereto shall include any
enactment repealed or modified thereby;
"VATA" means the Value Added Tax Act 1994;
"Vendor's Solicitors" means James Tingley & Co, 9 London Road, Sevenoaks
TN13 1AH;
"Warranties" means the representations and warranties,
covenants and undertakings set out in Clause 6 and
Schedule 4.
"Warranty Claim" means any claim made by the Purchaser for breach
of any of the Warranties or any claim made by the
Company under the Deed of Indemnity;
1.3 References to "FA" followed by a stated year means the Finance Act of
that year.
1.4 Words, expressions and abbreviations defined in the Deed of Indemnity
shall have the same meanings in this Agreement and the Deed of Indemnity
shall apply to this Agreement.
1.5 References to the parties hereto include the respective successors in
title to the whole of their respective undertakings and, in the case of
individuals, to their respective estates and personal representatives.
6
<PAGE>
1.6 References to persons shall include bodies corporate and unincorporated,
associations, partnerships and individuals. Words denoting the singular
shall include the plural and words denoting any gender shall include all
genders.
1.7 References to statutes or statutory provisions include references to any
orders or regulations made thereunder and references to any statute,
provision, order or regulation include references to that statute,
provision, order or regulation as amended, modified, re-enacted or
replaced from time to time whether before or after the date hereof
(subject as otherwise expressly provided herein) and to any previous
statute, statutory provision, order or regulation amended, modified,
re-enacted or replaced by such statute, provision, order or regulation.
1.8 Headings to clauses, paragraphs and descriptive notes in brackets
relating to provisions of taxation statutes are for information only and
shall not form part of the operative provisions of this Agreement and
shall be ignored in construing the same.
1.8 References to recitals, clauses and Schedules are to recitals to, clauses
of and Schedules to this Agreement. The recitals and Schedules form part
of the operative provisions of this Agreement and references to this
Agreement shall, unless the context otherwise requires, include
references to the recitals and the Schedules.
2. AGREEMENT FOR SALE
2.1 Subject to the terms and conditions of this Agreement with effect from
and including Completion, the Vendor shall sell or procure the sale of
with full title guarantee and the Purchaser shall purchase the Shares
free from all liens, charges and encumbrances and with all rights
attaching to them.
2.2 The Vendor hereby waive any pre-emption rights they may have in relation
to any of the Shares under the articles of association of the Company or
otherwise.
3. PURCHASE CONSIDERATION
3.1 The purchase consideration for the Shares shall be the sum
of(pound)325,000 (Three hundred and twenty five thousand pounds).
4. COMPLETION
4.1 Completion will, subject to clause 4.5, take place on or before 14th
January 2000 (the "Completion Date") at the offices of the Company when
all the transactions mentioned in the following sub-clauses shall take
place.
4.2 The Vendor shall deliver to the Purchaser:-
7
<PAGE>
4.2.1 duly completed and signed transfers in favour of the Purchaser or
as it may direct in respect of the Shares together with the
relative share certificates;
4.2.2 duly completed and signed transfers in favour of the Purchaser or
as it may direct of all the Shares together with the relative
share certificates;
4.2.3 the Deed of Indemnity duly executed by the Vendor and the Company;
4.2.4 the Shareholders' Undertaking;
4.2.5 the resignation of the existing auditors of the Company confirming
that they have no outstanding claims of any kind and containing a
statement under CA s 394(1) that there are no such circumstances
as are mentioned in that section;
4.2.6 the statutory books of the Company complete and up to date and
their certificate of incorporation and common seals;
4.2.7 the title deeds relating to the Property;
4.2.8 the appropriate forms to amend the mandates given by the Company
to bankers;
4.2.9 written confirmation from the Vendor that there are no subsisting
guarantees given by the Company in favour of or on behalf of the
Vendor and that the Vendor will not be indebted to the Company or
vice versa.
4.3 Board meetings of the Company shall be held at which:-
4.3.1 such persons as the Purchaser may nominate shall be appointed
additional directors;
4.3.2 the transfers referred to in clauses 4.2.1 or 4.2.2 (as the case
may be) shall be approved (subject to stamping); and
4.3.3 the resignation referred to in clause 4.2.5 shall be submitted and
accepted.
4.4 Upon completion of the matters referred to in clauses 4.2 and 4.3 the
Purchaser shall deliver to the Vendor's Solicitors by a bankers draft
drawn on a London Clearing Bank or such other payment method as the
Vendor's solicitors may reasonably approve the sum of the consideration
referred to in Clause 3.1.
4.5 Completion shall be conditional upon the approval of this Agreement and
the transaction for which it provides by Ernst & Young in connection with
an issue of shares by the Purchaser in the USA. If such condition shall
not have been fulfilled before the Completion Date, this Agreement shall
be null and void unless prior to the Completion Date the parties shall
have agreed in writing to the contrary.
8
<PAGE>
5. WARRANTIES AND UNDERTAKINGS BY THE VENDOR
5.1 The Vendor warrants to the Purchaser that:-
5.1.1 the Vendor has and will have full power and authority to enter
into and perform this Agreement and the Deed of Indemnity which
constitute or when executed will constitute binding obligations on
her in accordance with their respective terms;
5.1.2 the Shares will at Completion constitute the whole of the issued
and allotted share capital of the Company ;
5.1.3 there is, and at Completion will be, no pledge, lien or other
encumbrance on, over or affecting the Shares and there is, and at
Completion will be, no agreement or arrangement to give or create
any such encumbrance and no claim has been or will be made by any
person to be entitled to any of the foregoing;
5.1.4 the Vendor and the Shareholders will be entitled to transfer the
full legal and beneficial ownership of the Shares to the Purchaser
on the terms of this Agreement without the consent of any third
party;
5.1.5 the information in Schedule 2 is true and accurate in all
respects;
5.1.6 save as set out in the Disclosure Letter, the Warranties in
Schedule 4 are, to the best of the knowledge and belief of the
Vendor, true and accurate in all material respects at the date of
this Agreement;
5.1.7 the contents of the Disclosure Letter and all of the accompanying
documents are, to the best of the knowledge and belief of the
Vendor, true and accurate in all material respects and fully,
clearly and accurately disclose every matter to which they relate.
5.2 The Vendor undertakes in relation to any Warranty which refers to the
knowledge, information or belief of the Vendor, that she has made
relevant enquiries into the subject matters of that Warranty.
5.3 Each of the Warranties is without prejudice to any other Warranty and,
except where expressly stated otherwise, no clause contained in this
Agreement shall govern or limit the extent or application of any other
clause.
5.5 The rights and remedies of the Purchaser in respect of any breach of the
Warranties shall not be affected by Completion, or failing to exercise or
delaying the exercise of any right or remedy or by any other event or
matter whatsoever, except a specific and duly authorised written waiver
or release, and no single or partial exercise of any right or remedy
shall preclude any further or other exercise.
9
<PAGE>
5.6 None of the information supplied by the Company or its professional
advisers prior to the date of this Agreement to the Vendor or her agents,
representatives or advisers in connection with the Warranties and the
contents of the Disclosure Letter, or otherwise in relation to the
business or affairs of the Company, shall be deemed a representation,
warranty or guarantee of its accuracy by the Company to the Vendor, and
the Vendor waives any claims against the Company which they might
otherwise have in respect of it.
5.7 The Vendor shall procure that prior to Completion the Purchaser, its
agents, representatives, accountants and solicitors are given promptly on
request all such facilities and information regarding the business,
assets, liabilities, contracts and affairs of the Company, and of the
documents of title and other evidence of ownership of its assets, as the
Purchaser may require.
5.8 The provisions set out in Schedule 5 shall have effect in relation to the
Vendor's liability under the Warranties, representations, undertakings
and indemnities contained or referred to herein or in the Deed of
Indemnity.
5.9 The Purchaser acknowledges that it has not been induced to enter into
this Agreement by any representation or warranty other than the
Warranties.
6. RESTRICTIVE AGREEMENT
6.1 For the purpose of assuring to the Purchaser the full benefit of the
businesses and goodwill of the Company, the Vendor undertakes by way of
further consideration for the obligations of the Purchaser under this
Agreement as separate and independent agreements that they will not in
competition with the Purchaser:-
6.1.1 at any time after Completion disclose to any person, or itself use
for any purpose, and shall use her best endeavours to prevent the
publication or disclosure of, any information concerning the
business, accounts or finances of the Company any of its clients'
or customers' transactions or affairs, which may, or may have,
come to her knowledge;
6.1.2 for a period of two years after Completion either on her own
account or for any other person directly or indirectly solicit,
interfere with or endeavour to entice away from the Company any
person who to its knowledge is now or has during the years
preceding the date of this Agreement been a client, customer or
employee of, or in the habit of dealing with, the Company;
6.1.3 for a period of two years after Completion, without the
Purchaser's prior written consent either alone or jointly with or
as manager, agent for or employee of any person, directly or
indirectly carry on or be engaged or concerned or interested in
any business similar to any business carried on by the Company at
the date of this Agreement.
10
<PAGE>
7. GENERAL
7.1 No announcement of any kind shall be made in respect of the subject
matter of this Agreement unless specifically agreed between the parties.
Any announcement by either party shall in any event be issued only after
prior consultation with the other party
7.2 If this Agreement shall cease to have effect the Purchaser will release
and return to the Company all documents concerning it provided to the
Purchaser or its advisers in connection with this Agreement and will not
use or make available to any other person any information which it or its
advisers have been given in respect of the Company and which is not in
the public domain.
7.3 If any of the Shares shall at any time be sold or transferred, the
benefit of each of the Warranties may be assigned to the purchaser or
transferee of those shares who shall accordingly be entitled to enforce
each of the Warranties against the Vendor as if he were named in this
Agreement as the Purchaser.
7.4 This Agreement shall be binding upon each party's successors and assigns
and personal representatives (as the case may be) but, except as
expressly provided above, none of the rights of the parties under this
Agreement or the Warranties may be assigned or transferred.
7.3 Save where expressly otherwise provided, all expenses incurred by or on
behalf of the parties, including all fees or agents, representatives,
solicitors, accountants and actuaries employed by any of them in
connection with the negotiation, preparation or execution of this
Agreement shall be borne solely by the party who incurred the liability
and the Company shall not have any liability in respect of them.
7.4 Time shall be of the essence of this Agreement, both as regards the dates
and periods specifically mentioned and as to any dates and periods which
may by Agreement in writing between or on behalf of the Vendor and the
Purchaser be substituted for them.
7.5 Any notice required to be given by any of the parties under this
Agreement may be sent by post to the address of the addressee as set out
in this Agreement or to such other address as the addressee may from time
to time have notified for the purpose of this clause. Communications sent
by post shall be deemed to have been received two Business Days after
posting. In proving service by post it shall only be necessary to prove
that the communication was contained in an envelope which was duly
addressed and posted in accordance with this clause.
7.6 The operative law relating to this Agreement shall be that of England and
Wales
AS WITNESS the hands of the parties hereto or their duly authorised
representatives on the date set out above
11
<PAGE>
SIGNED by NITA EUGENIE )
ANNE BEECROFT in the ) /s/ NITA EUGENIE ANNE BEECROFT
presence of: )
SIGNED by ,)
Director, for and on behalf of )
LEISURE TRAVEL GROUP ) /s/ Illegible
LIMITED in the presence of: )
12
<PAGE>
SCHEDULE 1
Shareholders' Holdings of Shares
Name and Address No. of Shares Consideration
Nita Eugenie Anne Beecroft 29,999 (pound)324,989.17
Stylehurst Paddock,
Vannlake Road
Weire Street
Ockley,
Surrey RH5 5JD
and
Matthew Eric Beecroft
65 Tennyson Street
London SW8 3SU
Matthew Eric Beecroft 1 (pound)10.83
65 Tennyson Street
London SW8 3SU
13
<PAGE>
SCHEDULE 2
Details of the Company
Ilios Travel Limited
Company Number: 1459479
Incorporated : 6th November 1979
Authorised share capital: (pound)100,000
Divided into 100 ordinary shares of
(pound)1 each
Issued share capital: (pound)30,000
Directors: Nita Eugenie Anne Beecroft
Carol Lesley Wood
Secretary: Carol Lesley Wood
Registered office: 18 Market Square
Horsham
West Sussex RH12 1EU
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SCHEDULE 3
The Property
Address Tenure Expiry of Lease
18 Market Square and Leasehold 6th November 2000
18A Market Square
Horsham
West Sussex
Subject to the following Sub-lease
18A Market Square Leasehold 5th November 2000
Horsham
West Sussex
Tenant Leaders Limited
28 New Road
Brighton
East Sussex
Rent (pound)10,000 per annum
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SCHEDULE 4
Warranties
1. Constitution
2. Accounts
3. Business
4. Directors and Employees
5. Property
6. The Group and its Bankers
7. Accuracy of Information
8. Tax
9. Environmental Matters
10. Intellectual Property
11. Information Technology and Millennium Compliance
12. Pensions
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1. CONSTITUTION
1.1 Memorandum and Articles
The Memorandum and Articles of Association of the Company in the form of
the copy attached to the Disclosure Letter are complete and accurate and
have embodied therein or annexed thereto copies of all resolutions and
agreements as are referred to in section 380 of the Companies Act 1985,
and all amendments thereto (if any) were duly and properly made.
1.2 Register of Members
The Register of Members of the Company contains true and accurate records
of the members from time to time and the Company has not been subject to
any application under the Companies Act 1985 for rectification of such
register.
1.3 Returns
All such resolutions returns and other documents required by the
Companies Act 1985 to be delivered to the Registrar of Companies have
been duly delivered and are true and accurate in all material respects.
1.4 Powers of Attorney
The Company has not executed any power of attorney or conferred on any
person other than its directors, officers and employees any authority to
enter into any transaction on behalf of or to bind the Company in any
way.
1.5 Subsidiaries
The Company has no subsidiaries and does not own any shares or stock in
the capital of nor has any beneficial interest in any other company or
business organisation and does not take part in the management of any
other company or business organisation.
2. ACCOUNTS
2.1 The Principal Accounts
The Principal Accounts comply with the provisions of the Companies Act
1985 as applicable and have been prepared in accordance with all relevant
statutes and with generally accepted accounting principles and practices
and give a true and fair view of all the assets and liabilities (whether
present or future, actual or contingent) and of the state of affairs,
financial position and results of the Company as at and up to the Last
Accounts Date.
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2.2 Accounting Policy
The Principal Accounts have been prepared on a basis fully consistent
with the basis upon which all audited accounts of the Company have been
prepared.
2.3 Stock in Trade
The Company has no stock in trade.
2.4 Off Balance Sheet Financing
The Company has not engaged in any financing (including without prejudice
to the generality of the foregoing the incurring of any borrowing or any
indebtedness in the nature of borrowing including without limitation
liabilities in the nature of acceptances or acceptance credits) of a type
which would not be required to be shown or reflected in the Principal
Accounts.
2.5 Accounting Reference Date
The Company has notified to the Registrar of Companies 31st October as
being its accounting reference date pursuant to the Companies Act 1985.
2.6 Books of Account
The Company has properly kept and maintained all necessary books of
account (reflecting in accordance with generally accepted accounting
principles and practices all transactions effected by the Company or to
which it is or has been a party) minute books records register of members
and other statutory books. All such documents contain in all material
respects full and accurate records of all matters required to be recorded
therein and all deeds and documents (properly stamped where stamping is
necessary for enforcement thereof) belonging to the Company or which
ought to be in its possession and the common seal of the Company are in
its possession.
2.7 Management Accounts
Any management accounts prepared by the Company since the Last Accounts
Date were compiled with due care, on the same basis as the management
accounts of the Company had been prepared during the previous accounting
period prior to the Last Accounts Date and give a fair representation of
the financial position of the Company from the period from the Last
Accounts Date to the date to which they were drawn up and the state of
affairs of the Company as at the date to which they were drawn up.
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3. BUSINESS
3.1 Business since the Last Accounts Date
Since the Last Accounts Date the business of the Company has been
conducted in the ordinary course of business as a licensed tour operator.
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3.2 Acquisition and Disposal of Assets
The Company has not since the Last Accounts Date acquired or agreed to
acquire any asset for a consideration which is higher than the market
value at the time of acquisition and nor has disposed of or agreed to
dispose of any asset for a consideration which is lower than the market
value or the value thereof as shown in its books at the time of disposal.
3.3 Charges and Title to Assets
The Company has not created or agreed to create or suffered to arise any
Encumbrance over any part of its undertaking or assets and the Company
has and will at Completion have a good title to all the assets included
in the Principal Accounts and to all other assets (tangible or
intangible) used for the purpose of its business at the date hereof and
to all assets acquired since the Last Accounts Date and prior to
Completion.
3.4 Debts
All debts owed to the Company as recorded in the Company's books and
records are good and collectable in the ordinary course of business and
will realise their full face value within three months of Completion. The
rights of the Company in respect of such debts are valid and enforceable
and not subject to any defence, right of set-off or counterclaim,
withholding or other deduction and no act has been done or omission
permitted whereby any of them has ceased or might cease to be valid and
enforceable in whole or in part. No amount included in the Principal
Accounts as owing to the Company at the Last Accounts Date has been
released for an amount less than the value at which it was included in
the Principal Accounts or is now regarded by the Vendor as irrecoverable
in whole or in part. The Company has not factored or discounted any of
its debts or other receivables or agreed to do so.
3.5 Leasing etc. Agreements
Full and accurate details of any hiring or leasing agreements, hire
purchase agreement, credit or conditional sale agreement, agreement for
payment on deferred terms or any other similar agreement to which the
Company is a party are contained in the Disclosure Letter and copies
annexed thereto.
3.6 Onerous Obligations
The Company is not a party to any contract, transaction, arrangement or
liability which is Material and outside the ordinary course of business
of the Company and which:-
3.6.1 is of an unusual or abnormal nature;
3.6.2 is for a fixed term of more than six months;
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3.6.3 is of a long term nature (that is, unlikely to have been fully
performed, in accordance with its terms, more than six months
after the date on which it was entered into or undertaken);
3.6.4 is incapable of termination in accordance with its terms, by the
Company, on 60 days' notice or less;
3.6.5 involves payment by the Company by reference to fluctuations in
the index of retail prices, or any other index or in the rate of
exchange for any currency;
3.6.6 involves an aggregate outstanding expenditure by the Company of
more than (pound)25,000;
3.6.7 restricts its freedom to engage in any activity or business or
confines its activity or business to a particular place.
Material is to be defined as material in the context of the affairs of
the Company.
3.7 Supply Contracts
All agreements or arrangements for the supply of services to or by the
Company which involve or are likely to involve the supply of services the
aggregate sale value of which will represent in excess of ten per cent of
the turnover for the preceding financial year of the Company have been
disclosed to the Purchaser in writing. The Company has not been notified
of nor is the Vendor aware of any breach of any of its obligations under
any contract, transaction or arrangement to which it is a party or which
binds it.
3.8 Events of Default
3.8.1 No event has occurred or is subsisting which constitutes or
results in or would with the giving of notice and/or lapse of time
constitute or result in a default or the acceleration of any
obligation under any agreement or arrangement to which the Company
is a party or by which it or any of its properties, revenues or
assets are bound.
3.8.2 The Company is not a party to any agreement or arrangement which
is capable of termination (without liability for compensation) by
any other person on a change in the management control or
shareholding of the Company or by reason of the sale of the Shares
under this Agreement.
3.9 Guarantees etc.
The Company has not given any guarantee, indemnity, warranty or bond
incurred any other similar obligation or created any security for or in
respect of liabilities, actual or contingent, of any other person.
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3.10 Options over shares etc.
Since the Last Accounts Date no share or loan capital has been created or
issued or agreed to be created or issued and there are not any options or
other agreements outstanding which call or give any person the right to
call (whether or not subject to conditions) for the issue of any share or
loan capital of the Company and the Vendor is not under any obligation of
any kind whatsoever whether actual or contingent to sell, charge or
otherwise dispose of any of the Shares or any interest therein to any
other person.
3.11 Litigation
The Company is not engaged in any litigation, arbitration, prosecution or
other legal proceedings (whether as plaintiff, defendant or third party)
and there are no such proceedings pending or threatened or any
proceedings in respect of which the Company is or might be liable to
indemnify any other person concerned therein, there are no claims, facts
or events which are likely to give rise to any such proceedings and the
Company is not engaged in and has not in the last six years been engaged
in and no facts or events exist or have occurred which are likely to
cause it to be involved in proceedings or enquiries before any government
or municipal board of enquiry or commission or any other administrative
body (whether judicial quasi-judicial or otherwise) in which any
favourable judgment or decision would or might adversely affect the
business of the Company or the value of any of its assets.
3.12 Business name
The Company does not carry on, and has not in the past three years
carried on, any business under any name other than its corporate name.
3.13 Property in other companies
The Company is not liable to offer for sale transfer or otherwise dispose
of or purchase or otherwise acquire any assets, including shares held by
it in other bodies corporate under their articles of association or
agreement or arrangement or to take or suffer any action upon the
happening of any such event.
3.14 Insurance
3.14.1 The Company has produced to the Purchaser all insurance policies
in effect in relation to its business and assets and all such
policies are in full force and effect and not voidable.
3.14.2 The Company is now, and has at all material times been covered
against accident, damage, injury, third party loss (including
product liability), loss of profits and has at all times effected
such insurances as are required by law.
3.14.3 So far as the Vendor is aware, there are no circumstances which
might lead to any liability under such insurance being avoided by
the insurers or the premiums being increased and there is no claim
outstanding under any such policy nor is the
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Vendor aware of any circumstances likely to give rise to a claim.
3.15 Licences
The Company has, so far as the Vendor are aware, all licences,
permissions, permits, consents and authorisations required for the
carrying on of its business and, so far as the Vendor is aware, is not in
breach of the terms or conditions of such licences, permissions, permits,
consents and authorisations and, so far as the Vendor is aware, there are
no pending or threatened proceedings which might in any way affect such
licences, permissions, permits, consents and authorisations and the
Vendor is not aware of any other reason why any of them should be
suspended, threatened or revoked or be invalid.
3.16 Grants
The Company has neither applied for nor received any financial assistance
from any supranational, national or local agency, body or authority.
4. DIRECTORS AND EMPLOYEES
4.1 The names of the Directors and Secretary shown in Schedule 2, are true
and complete and no person not named therein as such is a director of the
Company.
4.2 The particulars of all employees annexed to the Disclosure Letter show
all remuneration and other benefits:-
4.2.1 actually provided; and
4.2.2 which the Company is bound to provide (whether now or in the
future)
to each officer and employee of the Company and are true and complete and
include particulars of and details of participation in all profit
sharing, incentive, bonus, commission, share option, medical, permanent
health insurance, directors and officers insurance, travel, car,
redundancy and other benefit schemes, arrangements and understandings
(the "Schemes") operated for all or any employees or former employees of
the Company or their dependants whether legally binding on the Company or
not.
4.3 The particulars of all employees in the Disclosure Letter is correct.
4.4 There are no standard terms and conditions, staff handbooks and policies
which apply to employees of the Company.
4.5 There are no service agreements or contracts of employment between the
Company and any of its directors or employees containing any provision in
addition to the matters required to be contained under section 1 of the
ERA. All employees of the Company have received a written statement of
particulars of their employment as required by section 1
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of the ERA.
4.6 So far as the Vendor is aware, there are no training schemes,
arrangements or proposals, whether past or present, in respect of which a
levy may henceforth become payable by the Company under the Industrial
Training Act 1982 (as amended) and pending Completion no such schemes,
arrangements or proposals will be established or undertaken.
4.7 Since the Last Accounts Date the Company has not made, announced or
proposed any changes to the emoluments or benefits of or any bonus to any
of its directors, officers or employees and the Company is under no
obligation to make any such changes with or without retrospective
operation.
4.8 No past or present directors, officer or employee has currently any claim
against the Company:
4.8.1 in respect or any accident or injury which is not fully covered by
insurance; or
4.8.2 in breach of contract of services or for services; or
4.8.3 for loss of office or arising out of or connected with the
termination of his office of employment (including any redundancy
payment) and, so far as the Vendor is aware, there is no event
which would or might give rise to any such claim.
4.9 The Company has maintained adequate and suitable records regarding the
service of its directors, officers and employees and such records comply
with the requirements of the Data Protection Act 1984.
4.10 There are no amounts owing or agreed to be loaned or advanced by either
the Vendor or the Company to any directors, officers and employees of the
Company (other than amounts representing remuneration accrued due for the
current pay period, accrued holiday pay for the current holiday year or
for reimbursement of expenses).
4.11 No current director, officer or employee of the Company has given or
received notice to terminate his or her employment.
4.12 Save in accordance with their respective contracts there are no
directors, officers or employees of the Company who are absent on grounds
of disability or other leave of secondment, maternity leave or absence.
5. PROPERTY
5.1 Title
5.1.1 The Property comprises all the properties owned, occupied or
otherwise used in connection with their business by the Company.
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5.1.2 The Property occupied or otherwise used by the Company in
connection with its business is so occupied or used by right of
ownership or under lease or licence, and the terms of any such
lease or licence have been disclosed to the Purchaser.
5.1.3 The Company is the legal and beneficial owners of its leasehold
interest in the Property.
5.1.4 The information contained in Schedule 3 as to the tenure of the
Property is true and correct.
5.1.5 The Company has good title to the Property.
5.2 Encumbrances
5.2.1 The Property is free from any mortgage, debenture, charge,
rent-charge, lien or other encumbrance securing the repayment of
monies or other obligation or liability of the Company or any
other person.
5.2.2 The Property is not subject to any outgoings other than general
rates, water rates and insurance premiums and in the case of
leasehold property rent and service charges and as may be stated
in the leases.
5.2.3 Where any such matters as are referred to in clauses 5.2.1 and
5.2.2 have been disclosed in the Disclosure Letter, neither the
Vendor nor the Company has received any notice of breach of any of
the obligations and liabilities imposed and arising under such
clauses. Any payments in respect of them which are due and payable
have been duly paid.
5.2.4 The Property is not subject to any option, right or pre-emption or
right of first refusal.
5.3 Planning Matters
Neither the vendor nor the Company has received or is aware of any notice
of breach in connection with any of the matters set out below:
5.3.1 The use of the Property for the purposes of the Planning Acts.
5.3.2 Planning permission for development purposes.
5.3.3 Building regulation consents.
5.3.4 Planning permissions, orders, and regulations issued under the
Planning Acts, the
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London Building Acts and building regulation consents and bye-laws
for the time being in force with respect to the Property.
5.3.5 Agreements under the Town and Country Planning Act 1971 s 52 made
with respect to the Property.
5.3.6 All agreements made under the Highways Act 1980 s 38 with respect
to the Property.
5.3.7 Requirements in connection with the Property being of special
historic or architectural importance or located in a conservation
area.
5.3.8 Any development charges, monetary claims and liabilities under the
Planning Acts or any other such legislation.
5.4 Statutory Obligations
Neither the Vendor nor the Company has received notice of breach in
connection with any of the matters listed below:
5.4.1 Compliance being made with all applicable statutory and by-law
requirements with respect to the Property, and in particular (but
without limitation) with the requirements as to fire precautions
and under the Public Health Acts and the Offices, Shops and
Railway Premises Act 1963.
5.4.2 Outstanding and unobserved or unperformed obligation with respect
to the Property necessary to comply with the requirements (whether
formal or informal) of any competent authority exercising
statutory or delegated powers.
5.4.3 Any licences whether under the Licensing Acts 1964 or otherwise
which apply to the Property.
5.5 Adverse Orders
Neither the Vendor nor the Company has received any of the following:
5.5.1 Compulsory purchase notices, orders or resolutions affecting any
of the Property.
5.5.2 Closing, demolition or clearance orders, enforcement notice or
stop notices affecting the Property.
5.6 Condition of the Property
5.6.1 There are no disputes with any adjoining or neighbouring owner
with respect to boundary walls and fences or with respect to any
easement, right or means of access to the Property.
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5.6.2 The principal means of access to the Property is over roads which
have been taken over by the local or other highway authority and
which have been taken over by the local or other highway authority
and which are maintainable at the public expense and no means of
access to the Property is shared with any other party nor subject
to rights of determination by any other party.
5.6.3 The Property enjoys the main service of water, drainage,
electricity and/or gas.
5.6.4 The Property is not located in an area or subject to circumstances
particularly susceptible to flooding.
5.7 Insurance
5.7.1 The Property is insured in its respective full reinstatement value
for not less than two years' loss of rent and against third party
and public liabilities to an adequate extent.
5.7.2 All premiums payable in respect of insurance policies with respect
to the Property which have become due have been duly paid and no
circumstances have arisen which would vitiate or permit the
insurers to avoid such policies.
5.7.3 The information in the Disclosure Letter with respect to the
insurance policies is up to date and true and accurate in all
respects.
5.8 Leasehold Property
5.8.1 The Company has paid the rent due under the lease of the Property
and neither the Vendor nor the Company has received any notice in
connection with the observation and performance of the covenants
on the part of the tenant and the conditions contained in any
leases (which expressions includes underleases) under which the
Property are held, and the last demands (or receipts for rent if
issued) were unqualified.
5.8.2 All licences, consents and approvals required from the landlords
and any superior landlords under any leases of the Property have
been obtained and the covenants on the part of the tenant
contained in such licences, consents and approvals have been duly
performed and observed.
5.8.3 There are no rent reviews under the leases of the Property held by
the Company currently in progress.
5.8.4 There is not outstanding and unobserved or unperformed any
obligation necessary to comply with any notice or other
requirement given by the landlord under any leases of the
Property.
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5.8.5 There is no obligation to reinstate the Property by removing or
dismantling any alteration made to it by the Company or any
predecessor in title to the Company.
5.9 Tenancies
5.9.1 The Property is held subject only to and with the benefit of the
tenancies (which expression includes subtenancies) as set out in
Schedule 3 and none other.
5.9.2 With respect to such tenancies the details in the Disclosure
Letter are correct.
5.9.3 The Vendor is not aware of any material or persistent breaches of
covenant by a tenant of the Property including the covenants to
pay rent.
5.9.4 The Vendor shall procure (and the Purchaser agrees to) the service
by the Company prior to the Completion Date of a Tenant's Request
for a new tenancy pursuant to Section 26 of the Landlord and
Tenant Act 1954 in respect of the Lease of the Company's premises
dated 6th November 1985 to take effect as soon as possible under
the terms of such Act.
6. THE COMPANY AND ITS BANKERS
6.1 Borrowings
The total amount borrowed by the Company from its bankers or any other
party does not exceed its facilities and the total amount borrowed by the
Company from whatsoever source does not exceed any limitation on its
borrowing contained in its articles of association, or in any debenture
or loan stock deed or other instrument.
6.2 Continuance of Facilities
Full and accurate details of all overdrafts, loans, leases or other
financial facilities outstanding or available to the Company have been
supplied to the Purchaser and (save for entry into this Agreement)
neither the Vendor nor the Company has done anything whereby the
continuance of any such facilities in full force and effect might be
affected or prejudiced.
6.3 Bank Accounts
A statement of all the bank accounts of the Company and of the credit or
debit balances on such accounts as at a date not more than seven days
before the date hereof has been supplied to the Purchaser. The Company
has no other bank or deposit accounts (whether in credit or overdrawn).
Since such statement there have been no payments out of any such accounts
except for routine payments and the balances on current account are not
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now substantially different from the balances shown on such statements.
7. DISCLOSURE OF ALL MATERIAL MATTERS
So far as the Vendor is aware and to the best of her knowledge
information and belief after relevant enquiry, all information contained
or referred to in this Agreement (including the Schedules and the
documents in Agreed Terms) and in the Disclosure Letter or in any
annexure thereto or which has otherwise been disclosed by or on behalf of
the Vendor to the Purchaser or its advisers/others on or prior to the
date hereof is true and accurate in all material respects and the Vendor
is not aware of any other fact or matter which renders any such
information misleading because of any omission, ambiguity or for any
other reason. So far as the Vendor is aware and to the best of her
knowledge information and belief, the Vendor has disclosed to the
Purchaser all information and facts relating to the Company and its
business, assets and undertaking (including financial information) which
are or may be material for disclosure to a purchaser of the Company on
the terms of this Agreement and all information and facts so disclosed
are true and accurate in all material respects.
8. TAXATION
8.1 Returns
The Company has made all returns and supplied all information and given
all notices to the Inland Revenue or other authority as reasonably
requested or required by law within any requisite period and all such
returns and information and notices are correct and accurate in all
respects and are not the subject of any dispute and there are no facts or
circumstances likely to give rise to or be the subject of any such
dispute.
8.2 Disclosures
All statements and disclosures made to any authority in connection with
any provision of the taxation statutes whatsoever were when made and
remain complete and accurate in all material respects.
8.3 Clearances
No action has been taken by the Company in respect of which any consent
or clearance from the Inland Revenue or other authority was required save
in circumstances where such consent or clearance was validly obtained and
where any conditions attaching thereto were and will, immediately
following Completion, continue to be met.
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8.4 Claims and Elections
The Company has not made nor is subject to any claim or election under
any or all of the following:-
8.4.1 sections 2/9(1) to (6) of the TCGA (foreign assets: delayed
remittances);
8.4.2 section 35 of the TCGA (capital gains rebasing to 31 March 1982);
8.4.3 section 24 of the TCGA (assets of negligible value or lost or
destroyed);
8.4.4 sections 154 and 175 of the TCGA and sections 152 and 153 of the
TCGA. (roll-over relief);
8.4.5 sections 242 of the ICTA (surplus franked investment income)
8.4.6 section 247 of the ICTA (group income)
8.4.7 sections 584, 585 or 723 of the ICTA (foreign income etc; delayed
remittances);
8.4.8 section 75 of the FA 1986 (stamp duty on reconstructions etc.)
8.4.9 section 161 TCGA (appropriations to and from Stock).
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8.5 Payment of tax by instalments
The Company has not made an election or arrangement for the payment of
tax by instalments under sections 280 and 48 of the TCGA.
8.6 Deed of Indemnity
So far as the Vendor is aware, no event has occurred which would or might
give rise to claim under the Deed of Indemnity upon or after the
execution thereof.
PROVISION FOR AND PAYMENT OF TAX
8.7 General
The Principal Accounts make reasonable provision or reserve in respect of
any period ended on or before the Last Accounts Date for all tax assessed
or liable to be assessed on the Company or for which it is accountable at
the Last Accounts Date whether or not the Company has or may have any
right of reimbursement against any other person including in particular
(but without prejudice to the generality of the foregoing) tax in respect
of property (of whatever nature) income, profits or gains held, earned,
accrued or received by or to any person on or before the Last Accounts
Date or by reference to any event occurring act done or circumstances
existing on or before that date including distributions made down to such
date or provided for in the Principal Accounts and reasonable provision
has been made and shown in the Principal Accounts for deferred taxation
in accordance with generally accepted accounting principles.
8.8 Payment of Tax
8.8.1 The Company has duly and punctually paid all tax to the extent
that the same ought to have been paid and is not liable nor has it
within three years prior to the date hereof been liable to pay any
penalty or interest in connection therewith.
8.8.2 Without prejudice to clause 8.8.1 the Company has paid on the due
date:-
(i) all value added tax and customs and excise duties (at the
correct tariff rate) in respect of goods or services sold
or supplied or imported;
(ii) all tax due in respect of payments made by it to any person
which ought to have been made under deduction of tax and
all such tax has been properly deducted from all such
payments made;
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(iii) all advance corporation tax due in respect of dividends and
other distributions made or paid by it; and
(iv) all social security contributions (both employers and
employees) due in respect of its employees and
ex-employees.
8.9 Pay As You Earn
The Company has properly operated the PAYE system and National Insurance
Contribution system deducting tax as required by law from all payments to
or treated as made to or benefits provided for its employees,
ex-employees or independent contractors (including any such payments
within section 134 of the ICTA) and duly accounted to the Inland Revenue
in connection with any such payments made or benefits provided, and no
PAYE audit or National Insurance or VAT audit in respect of the Company
has been made by the Inland Revenue, Contribution Agency or HM Customs &
Excise nor has the Company been notified that any such audit will be made
and the Company has complied with all other obligations in respect of
National Insurance.
8.10 Give as You Earn
Details of any payroll deduction scheme pursuant to section 202 of ICTA
operated by the Company are set out in the Disclosure Letter and any such
scheme has been operated in accordance with that section and regulations
made thereunder.
8.11 Secondary Liability
No transaction or event has occurred in consequence of which the Company
is or may be held liable for any tax or deprived of relief or allowances
otherwise available to it or may otherwise be held liable for or to
indemnify any person in respect of any tax for which some other company
or person was primarily liable (whether by reason of any such other
company being or having been a member of the same group of companies or
otherwise).
CORPORATION TAX
8.12 Changes in Trade etc.
8.12.1 Within the period of three years ending with the date hereof there
has been no major change in the nature or conduct of any trade or
business carried on by the Company within the meaning of section
245 or 768 of ICTA.
8.12.2 There has been no cessation or discontinuance of any trade carried
on by the Company nor has the scale of activities in any trade
carried on by the Company within three years hereof become small
or negligible.
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8.12.3 Prior to the execution of this Agreement no change of ownership of
the Company has taken place such that either or both of sections
245 or 768 of ICTA has or may be applied to deny relief in respect
of loss or losses of the Company or surplus advance corporation
tax.
8.13 Trading Assets
In the event that any asset shown in the Principal Accounts as a fixed
asset is disposed of immediately following Completion the proceeds
derived from such asset will not be treated as a trading receipt for tax
purposes.
8.14 Deductions
The Company has not made any payment or incurred any liability to make
any payment which could be disallowed as a deduction in computing the
taxable profits of the Company or as a charge on the Company's income
including (but without prejudice to the generality of the foregoing) any
payment which could be disallowed under sections 74 (general rules as to
deductions not allowable), 338-340 (allowance of charges on income),
779-789 (leased assets), section 787 (restriction of relief for payments
of interest) or section 125 of the ICTA (annual payments for non-taxable
consideration).
8.15 Sales and undervalue/overvalue
All transactions entered into by the Company have been entered into on an
arm's length basis and the consideration (if any) charged or received or
paid by the Company on all transactions entered into by it has been equal
to the consideration which might have been expected to be charged
received or paid (as appropriate) between independent persons dealing at
arm's length and no notice or enquiry pursuant to section 770 of the ICTA
has been made in connection with any of such transactions.
8.16 Appropriations
Since the Last Accounts Date the Company has not appropriated any of its
assets to or from trading stock.
8.17 Chargeable Policies
The Company is not and will not become liable to tax in respect of any
policy of insurance (including any life policy or life annuity contracts)
whether or not acquired as original beneficial owner.
8.18 Deep Discount Securities
8.18.1 The Company has not issued or acquired any deep discount
securities as defined by paragraph 1 (1) of schedule 4 of the
ICTA.
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8.18.2 In so far as the Company has issued or acquired any deep discount
securities as defined by paragraph 1(1) of schedule 4 of the ICTA
it has issued or acquired (as the case may be) a relevant
certificate in terms of paragraph 13 of schedule 4 of the ICTA.
8.19 Foreign Borrowings
The Company has not made borrowings in foreign currency whereby a
liability to tax may arise or may have arisen or a claim for tax has been
made.
8.20 Pension Fund Surplus
Since the Last Accounts Date the Company has not received any payment to
Schedule 22 of the ICTA applies.
CAPITAL ASSETS
8.21 Capital Allowances
8.21.1 No balancing charge in respect of any capital allowances claimed
or given would arise if any assets of the Company were to be
realised for a consideration equal to the amount of the book value
thereof as shown or included in the Principal Accounts.
8.21.2 All necessary conditions for all capital allowances (as defined in
section 832(1) of the ICTA) claimed by the Company were at all
material times satisfied and remain satisfied and the Company has
not since the Last Accounts Date become liable for any balancing
charge.
8.22 Finance Leases
8.22.1 The Company is not nor has been the lessee under any leases of
plant or machinery save for the leases specified in the Disclosure
Letter (the "Leases").
8.22.2 The machinery or plant subject to the Leases has in the period
which is the requisite period in respect of any expenditure
thereon by an owner or lessor for the purposes of section 39(1) of
the CAA been used and only been used for a qualifying purpose as
defined by the section.
8.22.3 No assets subject to the Leases have at any time been leased by
the Company or its lessees to a person who is not resident in the
UK and does not use the machinery or plant for the purposes of a
trade carried on there.
8.22.4 So far as the Vendor is aware there is no revenue investigation,
revenue enquiry or other circumstance which dictates that any
person who is or was a lessor or owner of equipment subject to any
of the Leases will or may be denied the first year allowances and
writing down allowances by reference to which the initial rental
under that Lease was calculated.
8.23 Investment grants
The Company has not received any investment grant or similar payment or
allowance receivable by virtue of any statute.
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DISTRIBUTION
8.24 Repayments of Share Capital
8.24.1 The Company has not at any time after 6 April 1965 repaid or
agreed to repay or redeemed or agreed to redeem or purchase or
agreed to purchase (or made any contingent purchase contract
within the meaning of section 165 of the Companies Act 1985) in
respect of any of its issued share capital or any class thereof.
Further the Company has not after 6 April 1965 capitalised or
agreed to capitalise in the form of shares, debentures or other
securities or in paying up amounts unpaid on any shares,
debentures or other securities any profits or reserves of any
class or description or passed or agreed to be passed any
resolution to do so.
8.24.2 The Company has not made (and will not be deemed to have made) any
distribution within the meaning of sections 209, 210 and 236 of
ICTA since 5 April 1965 except dividends properly authorised and
shown in the Principal Accounts nor is the Company bound to make
any such distribution.
8.25 Payments to be treated as distributions
The Company has not issued any securities (within the meaning of section
254(1) of ICTA) which remain in issue where the interest payable thereon
fails to be treated as a distribution.
CHARGEABLE GAINS
8.26 Sales at Book Value
No chargeable gain or profit (disregarding the effects of any indexation
relief available) would arise if any assets of the Company (other than
trading stock) were to be realised for a consideration equal to the
amount of the book value thereof as shown or included in the Principal
Accounts.
8.27 Value shifting
The Company has been involved in any scheme or affected by any
arrangements whereby the value of any asset has been or will be reduced
such that sections 29 and/or 30 of TCGA might be applicable.
8.28 Valuation of Assets
8.28.1 The Company has not made any disposal of part of an asset part of
which is still
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owned by the Company at the date hereof which has required or may
or will require any computation under section 42 of the TCGA (part
disposals of assets).
8.28.2 The Company has not disposed of or acquired any assets so that
section 17 of TCGA might apply to restrict the consideration
deemed to be given on such disposal or acquisition.
8.29 Chargeable debts
No gains chargeable to corporation tax on chargeable gains will accrue to
the Company on the disposal of any debt owing to it.
8.30 Reconstructions
The Company has been involved in any share for share exchange or any
scheme of reconstruction or amalgamation such as are mentioned in section
135 and 136 of the TCGA or section 139 of the TCGA under which shares or
debentures have been or will be issued or assets have been or will be
transferred.
8.31 Corporate Bonds
There has been no relevant transaction to which section 117(8) of TCGA
can apply to a corporate bond held by the Company.
8.32 Depreciatory transactions
No loss which has arisen or which may hereafter arise on a disposal by
the Company of shares in or securities of any company is liable to be
reduced by virtue of the application of section 176 of TCGA (transactions
in a group) or section 177 of TCGA (dividend stripping).
8.33 Transfers by way of gift
The Company has not made any such transfer of an asset at an undervalue
as is mentioned in section 125 of TCGA or received any assets by way of a
gift as mentioned in section 282 of TCGA.
ANTI AVOIDANCE PROVISIONS
8.34 Tax Schemes
The Company has not entered into nor been a party to nor otherwise
involved in any scheme or arrangement designed wholly or partly for the
purpose of avoiding or deferring tax.
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8.35 Transactions in Securities
The Company has not:-
8.35.1 become liable for tax; or
8.35.2 received and will receive or be the subject of or be adversely
affected by any claim for tax arising under or imposed by or
resulting from the operation of sections 703-709 of ICTA (whether
alone or in conjunction with any other provisions of any taxation
statutes whatsoever) and which wholly or partly results or arises
from or is computed by reference in circumstances existing or
events occurring at any time on or before the date hereof whether
alone or in conjunction with other circumstances arising before or
after Completion.
8.36 Transactions in Land
The Company has not:-
8.36.1 become liable for tax; or
8.36.2 received and will not receive or be the subject of or be adversely
affected by any claim for tax
arising under or imposed by or resulting from the operation of sections
776-778 of ICTA (whether alone or in conjunction with any other
provisions of any taxation statutes whatsoever) and which wholly or
partly results or arises from or is computed by reference to
circumstances existing or events occurring at any time on or before the
date hereof whether alone or in conjunction with other circumstances
arising before or after Completion.
8.37 Sale and lease back of land
Since 22 June 1971 the Company has not entered into any transaction as is
mentioned in sections 34-37 or section 780 of ICTA.
8.38 Transactions between dealing and associated company
The Company has not entered into any transaction mentioned in section 774
of ICTA.
8.39 Loans or Credit
The Company has been involved in transactions such that section 786 of
ICTA (transactions associated with loans or credit) might apply.
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FOREIGN ELEMENT
8.40 Treasury Consents
The Company has not without the prior consent of the Treasury entered
into any of the transactions specified in 765(1)(c) or (d) of ICTA
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8.41 Company Migration
Since 15 March 1988, no election has been made by the Company as the
principal company as defined in section 187 of TCGA (postponement of
charge on deemed disposal of assets by company ceasing to be resident in
the United Kingdom) nor has any company over which the Company had
control or which was a member of the same group of companies as the
Company ceased to be resident in the United Kingdom otherwise than in
compliance with section 130 of the FA 1988.
8.42 Transfers to non-resident company
The Company has not made any such transfer as is mentioned in section 140
of the TCGA.
8.43 Double Taxation
The Company has not made nor is entitled to make any claim under part
XVIII of the ICTA and in respect of any such claims disclosed all
necessary conditions for all foreign tax credit claimed or to be claimed
by it were at all material times and remain satisfied and in particular
(but without prejudice to the generality of the foregoing) the Company
holds all tax deduction certificates or other documentation necessary for
production to HM Inland Revenue in respect of such foreign tax.
8.44 Controlled Foreign Companies
The Company does not have and never has had an interest in a controlled
foreign company within the meaning of section 747 of ICTA such that all
or any of the chargeable profits of the controlled foreign company have
been or with or may be apportioned to the Company.
8.45 Offshore Funds
The Company has not on or after 1 January 1984 disposed of and does not
now have a material interest in an offshore fund which at any material
time was or is a non-qualifying offshore fund within the meaning of
section 757 of ICTA such that a disposal thereof by it has given rise or
will or may give rise to an offshore income gain.
8.46 Agency for Non Residents
The Company is not nor has been assessable to tax by virtue of section 78
of the Taxes Management Act 1998
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CLOSE COMPANY
8.47 The Company is a close company as defined by section 414 ICTA.
GROUPS OF COMPANIES
8.48 Group Relief
The Disclosure Letter contains particulars of all arrangements relating
to group relief under sections 402-413 of ICTA to which the Company is or
has been a party and:-
8.48.1 all claims by the Company for group relief were when made and are
now valid and have been or will be allowed by way of relief from
corporation tax;
8.48.2 the Company has not made nor is liable to make any payment for
group relief otherwise than in consideration for the surrender of
the group relief allowable to it by way of relief from corporation
tax;
8.48.3 the Company has received all payments due to it under any
arrangement or agreement for surrender of group relief by it;
8.48.4 no such payment exceeds or could exceed the amount permitted by
section 402(6) of ICTA;
8.48.5 there exists or existed for any period of account in respect of
which a surrender has been made or purports to have been made no
arrangements such as are specified in section 410(1)-(6) of ICTA.
8.49 Advance Corporation Tax
The Disclosure Letter contains particulars of all arrangements for the
surrender under section 240 of ICTA of any amount of advance corporation
tax and in respect of receipts and surrenders disclosed:-
8.49.1 the Company has not paid nor is liable to pay for the benefit of
any advance corporation tax which is or may become incapable of
set off against its liability to corporation tax;
8.49.2 the Company has received all payments due to it for all surrenders
or purported surrenders of advance corporation tax made by it;
8.49.3 no such payment exceeds or could exceed the amount permitted by
section 240(8) of ICTA; and
8.49.4 there exists or existed for any period in respect of which a claim
under section 240 of ICTA has been or is to be made no
arrangements such as are specified in sub-section (11) of that
section whereby any person could obtain control of the Company or
of any subsidiary to which such surrender purports or is purported
to be made.
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8.50 Intra-Group Transfers
The Company has not acquired any asset other than trading stock from any
other company belonging at the time of acquisition to the same group of
companies as the Company within the meaning of section 170 of TCGA and no
member of any group of companies of which the Company is or has at any
material time been the principal company (as defined in section 170(2)(b)
of TCGA) has so acquired any asset.
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INHERITANCE TAX
8.51 Gifts
8.51.1 The Company is nor will become, liable to be assessed to capital
transfer tax or inheritance tax as donor or donee of any gift or
transferor or transferee of value (actual or deemed) nor as a
result of any disposition chargeable transfer or transfer of value
(actual or deemed) made by or deemed to be made by any other
person.
8.51.2 The Company has been a party to associated operations in relation
to a transfer of value within the meaning of section 268 of ITA.
8.51.3 No asset owned by the Company is subject to any sale, mortgage or
charge by virtue of s212 of ITA.
8.52 Inland Revenue Charge
There is no unsatisfied liability to capital transfer tax attached or
attributable to the Shares or any asset of the Company and in consequence
no person has the power to raise the amount of such tax by sale or
mortgage of or by a terminable charge on any of the Shares or assets of
the Company as mentioned in section 212 of ITA and none of the Shares or
assets of the Company are subject to an Inland Revenue charge within
section 237 of ITA.
VALUE ADDED TAX
8.53 Value Added Tax
8.53.1 The Company is a registered taxable person for the purpose of the
VAT legislation and has not at any time been treated as a member
of a group of companies for such purpose and has not made any
application to be so treated and no circumstances exist whereby
the Company would or might become liable for value added tax as an
agent or otherwise by virtue of section 47 of VATA.
8.53.2 The Company has complied in all respects with the requirements and
provisions of VATA and all regulations and orders made thereunder
(the "VAT legislation") and has made and maintained and will
pending Completion make and maintain accurate and up-to-date
records invoices accounts and other documents required by or
necessary for the purposes of VAT legislation and each the Company
has at all times punctually paid and made all payments and returns
required thereunder.
8.53.3 That (without prejudice to the generality of clause 8.53.2) the
Company has not:-
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(i) taken part in conduct involving dishonesty as described in
section 60 of VATA;
(ii) committed any serious misdeclaration or neglect as
described in section 63 of VATA;
(iii) issued unauthorised invoices or failed to do anything
contemplated by section 67 of VATA;
(iv) failed to comply with any regulatory requirements described
in section 69 of VATA;
(v) been notified of any assessment within sections 59 and 74
of VATA or a surcharge notice under section 59 of VATA;
(vi) made any agreement with the Commissioners of Customs and
Excise which agreement has not been put in writing as
contemplated by section 85 of VATA.
8.53.4 The Company has not made any exempt supplies in consequence of
which it is or will be unable to obtain credit for all input tax
paid by it during any VAT quarter ending after the Last Accounts
Date.
STAMP DUTY
8.54 Stamp Duty and Capital Duty
The Company has duly paid all capital duty and loan capital duty for
which it is or has at any time been liable and all documents in the
enforcement of which it is or may be interested have been duly stamped
and since the Last Accounts Date the Company has not been a party to any
transaction whereby it was or is or could become liable to stamp duty
reserve tax.
FINANCE ACT 1996
8.55 Loan Relationships
The Company is not a party to any loan relationship as defined in Chapter
11 of the Finance Act 1996 which may give rise to any debits or credits
as there mentioned.
9. ENVIRONMENTAL MATTERS
9.1 Consents
The Company does not require any Environmental Consent, nor has received
any notice of any requirement for any Environmental Consent.
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9.2 Liability
The Company is in compliance with all environmental laws which are
currently applicable to its business (other than breaches which are
unintentional, minor or insignificant in effect).
There are no civil criminal arbitration or administrative actions claims
proceedings or suits pending or threatened against the Company arising
from or relating to Environmental Consents or Environmental Laws and
there are no circumstances which may lead to such actions claims
proceedings or suit.
10. INTELLECTUAL PROPERTY
10.1 The use by the Company of its Intellectual Property does not infringe the
rights of any third party.
10.2 There are no claims or proceedings in existence or threatened in respect
of the use by the Company of its Intellectual Property and there are no
circumstances likely to give rise to any such claims or proceedings
11. INFORMATION TECHNOLOGY AND MILLENIUM COMPLIANCE
11.1 None of the business systems forming part of the Company's Intellectual
Property has been copied wholly or substantially from any other material.
11.2 All the business systems, excluding software, used in the business of the
Company are owned and operated by and are under the control of the
Company and are not wholly or partly dependent on any facilities which
are not under the ownership operation or control of the Company. No
action will be necessary to enable such systems to continue to be used in
the business of the Company to the same extent and in the same manner as
they have been used prior to the date hereof.
11.3 The Company is validly licensed to use the software used in its business
and no action will be necessary to enable it to continue to use such
software to the same extent and in the same manner as they have been used
prior to Completion.
11.4 The Disclosure Letter sets out or has annexed to it copies of all
disaster recovery agreements used in the course of the business of the
Company.
11.5 The performance of the business systems used in the business of the
Company will not be adversely affected by either any changes in and to
data information used therein or any changes to inputs and other
manipulations of data in relation to dates from 1 January 2000 and
thereafter.
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11.6 The Disclosure Letter has annexed to it copies of all computer hardware
and software maintenance agreements, all such agreements being in full
force and effect.
12. PENSIONS
12.1 The Company is not under a legal obligation or moral liability or
obligation and is not a party to any ex-gratia arrangement or promise to
pay pensions, gratuities, super-annuation allowances or the like, or
otherwise to provide "relevant benefits" within the meaning of s.612 of
the Income and Corporation Taxes Act 1988 to or for any of its past or
present officers or employees or their dependents; and there are no
retirement benefit or pension or death benefit or similar schemes or
arrangements in relation to or binding on the Company or to which the
Company contributes.
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SCHEDULE 5
1. Interpretation
1.1 The provisions of this Schedule 5 shall operate to limit or qualify the
liability of the Vendor under or in connection with any term of this
Agreement and the Warranties and indemnities in the Indemnity ("such
liabilities") and references to "such liabilities" shall be construed
accordingly.
1.2 In the Warranties, reference to "material" shall mean material in the
context of the business of the Company as a whole.
2. Cap
2.1 Notwithstanding any other provision hereof the maximum aggregate
liability of the Vendor in respect of all breaches of this Agreement and
the Warranties and the tax Deed shall not exceed (pound)325,000.
3. Time Limits
3.1 Subject to the provisions of paragraph 3.2 of this Schedule, no claim
shall be brought against the Vendor in respect of such liabilities unless
notice in writing of any such claim (specifying in reasonable detail the
nature of the breach and so far as is practicable the amount claimed in
respect thereof) has been given to the Vendor within twelve months of
Completion and any such claim which may have been made shall (if it has
not been previously satisfied settled or withdrawn) be deemed to have
been withdrawn on the expiration of six months from the date of the said
notice unless proceedings in respect thereof shall have been both issued
and served on the Vendor before such expiration.
3.2 No claim or claims shall be brought against the Vendor in respect of
which the subject matter relates to Taxation unless notice in writing of
any such claim (specifying in reasonable detail the nature of the claim
and so far as practicable the amount claimed in respect thereof) has been
given to the Vendor within six years of Completion and any such claim
which may have been made shall (if it has not been previously satisfied
settled or withdrawn) be deemed to have been withdrawn on the expiration
of six months from the date of the said notice unless proceedings in
respect thereof shall have been both issued and served on the Vendor
before such expiration.
4. Small Claims and Threshold
4.1 Notwithstanding the other provisions of this Schedule 5:-
4.1.1 no claim shall be brought in respect of any breach of any of the
Warranties or indemnities unless the amount of loss sustained in
respect of which a claim may properly be brought shall exceed the
sum of (pound)5,000 (such a claim which exceeds
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that sum being herein referred to as a "Qualifying Claim"); and
4.1.2 no claim shall be brought in respect of any Qualifying Claim
unless the loss thereby sustained (when aggregated with any other
Qualifying Claims) exceeds (pound)25,000 whereupon all Qualifying
Claims and not merely the excess over (pound)25,000 may be
brought.
5. No Double Claims
5.1 Neither the Purchaser nor the Company shall be entitled to recover
damages in respect of any claim for breach of this Agreement or otherwise
obtain reimbursement or restitution more than once in respect of any one
breach of any of the Warranties contained in the Agreement or the
indemnities contained in the Deed of Indemnity and so that for this
purpose any recovery by the Purchaser shall be deemed to be a recovery
under either of the Warranties or indemnities and further any recovery in
respect of a claim for breach of any of the Warranties shall satisfy any
liability in respect of the circumstances giving rise to such claim and
vice versa.
6. General Limitations
6.1 The Vendor shall have no liability in respect of such liabilities and
accordingly no claim may be brought in respect thereof if and to the
extent that any one or more of the following provisions may apply:-
6.1.1 such liabilities are wholly or partly attributable to any
voluntary act omission transaction or arrangement of the Purchaser
or the Company after the date hereof;
6.1.2 either the Company or the Purchaser is entitled to claim
indemnified (and then only to the extent of the indemnity) against
any loss or damage suffered by any of them under the terms of any
insurance policy for the time being in force;
6.1.3 such liabilities arise in connection with any fact, matter or
circumstance fairly disclosed in the Disclosure Letter or
subsequently disclosed by the Vendor to the Purchaser or in the
schedules to this Agreement;
6.1.4 such liabilities arise in connection with any matter provided for
under the terms of this Agreement or arising from the
implementation of the same;
6.1.5 either such liabilities arise in connection with any exceptions or
matters included mentioned provided for reserved or referred to in
the Principal Accounts or the audited accounts for the two
previous accounting periods of the Company or in the notes thereto
or the subject matter of the claim giving rise to such liabilities
was taken into account in computing the amount of any such
provision or reserve or is noted therein;
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6.1.6 such liabilities arise wholly or partly out of as a result of or
in connection with:-
6.1.6.1 any change in the nature of the business of the Company
(or in the manner of conducting the same) between the
date hereof and Completion which is authorised by the
Purchaser pursuant to this Agreement; or
6.1.6.2 any asset acquired or disposed of by the Company between
the date hereof and completion which is authorised by the
Purchaser pursuant to this Agreement; or
6.1.6.3 any statutory provision not in force at the date hereof
or any change in any statutory provision hereafter or any
decision of the Courts altering the generally accepted
interpretation of any statutory provision or the
withdrawal of any extra statutory concession previously
made by or any change in practice of the Inland Revenue
or other taxation authority or any increase in the rates
of Taxation in force at the date hereof;
6.1.6.4 the passing of a resolution for the winding up of the
Company after the date hereof; or
6.1.6.5 any change in the format, matter, bases, priorities and
principles used in the preparation of the accounts of the
Company from those used and adopted in the Principal
Accounts;
6.1.7 the loss or liability resulting from such liabilities has been or
is made good or otherwise compensated for at no expense to the
Purchaser and/or the Company;
6.1.8 the loss or liability resulting from such liabilities is less than
the aggregate of any over-provision made in the Principal Accounts
in respect of any liability and any undervalue of any asset
recorded in the Principal Accounts.
7. Purchaser's Covenant
7.1 The Purchaser hereby covenants with the Vendor that:
7.1.1 It is not aware of any fact, matter or thing as may be
inconsistent with any Warranty or that may give rise to any
liability on the part of the Vendor hereunder; and
7.1.2 It will procure repayment by the Company on or before 31st March
2000 of the Loan of (pound)10,000 made by the Vendor or take an
assignment thereof from the Vendor for a consideration equal to
the outstanding amount of such loan.
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8. Subsequent Recovery from Third Party
8.1 The Purchaser shall reimburse to the Vendor forthwith an amount equal to
any sum paid by the Vendor in respect of any claim for such liabilities
which is subsequently recovered by or paid to the Company by any other
person (including but not limited to insurance payments) (less any
reasonable costs and expenses incurred by the Company in making such
recovery).
9. Assignment of Claim
9.1 Where having discharged any claim for breach of the Warranties the Vendor
requests the assignment to it of any right of the Purchaser or of the
Company to make recovery in whole or in part from any third party, the
Purchaser will assign at Vendor's expense or procure the assignment to
the Vendor of such right and, if the same is not legally capable of
effective assignment, will, subject to being indemnified to the
reasonable satisfaction of the Purchaser pursue such claim on behalf of
the Vendor and deliver over upon receipt to the Vendor all amounts
recovered.
10. Reliefs
10.1 Any such liabilities shall not extend to any part of the loss or damage
suffered by the Purchaser or the Company to the extent that such part
shall be used or shall be capable of being used by the Purchaser or the
Company or any present or future subsidiaries of either of them to offset
in whole or in part any past present or future liability to Taxation.
11. Third Party Claim
11.1 Where the Company or the Purchaser is entitled (whether by reason of
insurance or payment discount or otherwise) to recover from some other
person any sum in respect of Taxation or any other damage or liability
the subject of a claim against the Vendor under this Agreement or for
which a claim could be made hereunder (and whether before or after the
Vendor has made payment hereunder) the Purchaser shall if so required by
the Vendor and at her own cost and expense take or (as the case may
require) procure that the Company takes all steps (whether by way of a
claim against its insurers or otherwise) as the Vendor may reasonably
require to enforce such recovery and shall keep the Vendor informed to
their reasonable satisfaction of the progress of any action taken.
Thereafter any claim against the Vendor shall be limited (in addition to
the limitations on the liability of the Vendor referred to in this
Schedule 5) to the amount by which the loss or damage suffered by the
Purchaser as a result of such breach shall exceed the amount (if any) so
recovered. The Purchaser shall not be entitled to make any claim in
respect of such liabilities if it or the Company fails to act in
accordance with the reasonable instructions of the Vendor in conducting
any claim against a third party.
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12. Right to Fight
12.1 The Vendor shall be entitled to require the Purchaser or the Company to
take all such reasonable steps or proceedings as the Vendor may consider
appropriate in order to mitigate any claim in respect of such liabilities
or in respect of the undertakings in this Agreement and the Purchaser
shall procure that the Company shall act in accordance with any such
requirements (subject to the Purchaser and/or the Company being
indemnified by the Vendor against all reasonable costs and expenses
incurred in connection therewith). For the purpose of enabling the Vendor
to remedy a breach or to mitigate or otherwise determine the amount of
any claim or to decide what steps or proceedings should be taken in order
to mitigate any claim the Purchaser shall:-
12.1.1 give notice to the Vendor within fourteen days of any breach or
circumstance giving or likely to give rise to a breach coming to
its notice or to the notice of the Company;
12.1.2 make or procure to be made available to the Vendor or her duly
authorised representatives all relevant personnel, books of
accounts, records and correspondence of the Company for the
purpose of enabling the Vendor to ascertain or extract any
relevant information; and
12.1.3 make no admission of the fact or amount of any liability on the
part of the Company or the Purchaser without the prior written
consent of the Vendor such consent not to be unreasonably
withheld.
The Purchaser shall not be entitled to make any claim in respect of a
breach of Warranty if it or the Company fails to give the said notice or
to act in accordance with the reasonable instructions of the Vendor in
conducting any dispute or negotiation in relation to the claim in
accordance with this paragraph 12.
13. Reliance on Statements
13.1 No claim shall be made against the Vendor in respect of any warranty,
representation, indemnity, covenant, undertaking or otherwise arising out
of or in connection with the sale of the issued share capital of the
Company except where the same is expressly contained in this Agreement or
the Schedules hereto or the Disclosure Letter and the Purchaser confirms
that it has not relied upon or been induced to enter into this Agreement
by any warranty, representation, indemnity, covenant or undertaking given
by any person which is not expressly contained in this Agreement.
14. No Rescission
14.1 Any breach of any of the Warranties or any other provision of this
Agreement by the Vendor shall give rise only to an action by the
Purchaser for damages and shall not entitle the Purchaser to rescind this
Agreement, save as expressly provided for in clause 4.2 of this
Agreement.
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Duty to Mitigate
15.1 Nothing in this Agreement shall be deemed to relieve the Purchaser from
its common law duty to the Vendor to mitigate their loss and without
prejudice to the generality of the foregoing the Purchaser shall take and
shall do all things in its power to procure that the Company shall take
all practicable and reasonable steps to avoid or mitigate any loss or
liability which may give rise to a claim under the Warranties or this
Agreement.
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SCHEDULE 6
Deed of Indemnity
THIS DEED OF INDEMNITY is made on ________________ 199
BETWEEN:-
(1) NITA EUGENIE ANNE BEECROFT of Stylehurst Paddock, Vannlake Road, Weire
Street, Ockley, Surrey RH5 5JD (the "Covenantor"); and
(2) LEISURE TRAVEL GROUP LIMITED whose office is at Trafalgar House 11
Waterloo Place London SW1 (the "Purchaser" which expression shall include
its successors and assigns).
RECITAL
This Deed of Indemnity is entered into pursuant to the provisions of an
agreement (the "Sale Agreement") made on 1999 pursuant to which the Purchaser
agreed to purchase the whole of the share capital of the Company.
THE PARTIES AGREE AS FOLLOWS:-
1. INTERPRETATION
1.1 Subject to clause 1.2 and unless the context otherwise indicates, words
expressions and abbreviations defined in the Sale Agreement shall have
the same meanings in this deed and any provisions of the Sale Agreement
concerning matters of construction or interpretations shall mutatis
mutandis apply to this deed.
1.2 The following words, expressions and abbreviations used in this deed
shall, unless the context otherwise requires, have the following
meanings:-
"Claim for Tax" means any of the following:-
(a) any liability to make a payment of Tax and any claim, assessment,
demand, notice or other document issued or action taken by or on
behalf of any person authority or body whatsoever and of
whatsoever country which claims payment of Tax or any submission,
return or correspondence from which it appears likely that there
may be a liability to Tax or Claim for Tax within (b) below, or
(b) any non-availability or loss of or reduction of any Relief
(including in particular a right to repayment) to the extent that
such Relief has been reflected in the Net
52
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Assets of the Company as shown by the Principal Accounts.
"Company" shall have the same meaning as in the Sale Agreement.
"Group" shall be deemed to include the Company and any subsidiary.
"Group Relief" means any of the following:-
(a) relief surrendered or claimed pursuant to chapter IV part X of the
ICTA 1988;
(b) advance corporation tax surrendered or claimed pursuant to section
240 of the ICTA 1988;
(c) a Transferred Tax Refund.
"income profits or gains" includes any other measure by reference to
which Tax is computed;
"Purchaser's Relief" means any Relief to the extent that the same
either:-
(a) has been reflected in the Net Assets of the Company as shown by
the Principal Accounts; or
(b) arises in respect of periods after the Last Accounts Date;
"Relevant Event" means every event, act, omission, default, occurrence,
circumstance, transaction, dealing or arrangement of any kind whatsoever
done or omitted to be done by the Covenantor or the Company or which in
any way concerns or effects the Company whether or not done or omitted to
be done by the Company or the Covenantor;
"Relief" means any allowance, credit, exemption, deduction or relief
from, in computing against or in respect of Tax or any right to the
repayment of Tax;
"Tax" means any tax, and any duty, impost, levy or charge in the nature
of tax, whether domestic or foreign, and any fine, penalty or interest
connected therewith including (without prejudice to the foregoing)
corporation tax, advance corporation tax, income tax, national insurance
and social security contribution, capital gains tax, inheritance tax,
petroleum revenue tax, value added tax, customs excise and import duties,
stamp duty, stamp duty reserve tax, insurance premium tax, air passenger
duty, rates and water rates and any other payment whatsoever which the
Company is or may be or become bound to make to any person by reason of
any taxation statutes;
"taxation statutes" means all statutes, decrees, orders and regulations
whether domestic or foreign providing for or imposing any Tax;
"Transferred Tax Refund" means a tax refund relating to an accounting
period as defined
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by section 102(3) of the FA 1989 in respect of which a notice has been
given pursuant to section 102(2) of the FA 1989.
"Utilisation of a Purchaser's Relief" means the utilisation or set off of
a Purchaser's Relief available to the Company.
1.3 References to income, profits or gains being earned accrued or received
before a particular date shall include deemed income profits or gains
treated as earned accrued or received prior thereto.
2. INDEMNITY
2.1 Subject to clause 2.2 the Covenantor hereby covenant with the Purchaser
to pay from time to time to the Purchaser:-
(a) such sums as would if paid to the Company indemnify and keep
indemnified the Company against each and every Claim for Tax where
the Claim for Tax in question arises whether in whole or in part:-
(i) in connection with or as a consequence of one or more
Relevant Events occurring or entered into on or before
Completion; or
(ii) in respect of or by reference to any income profits or
gains earned, accrued or received on or before Completion;
or
(iii) in consequence of the combined effect of two or more
Relevant Events of which at least one shall have occurred
on or before Completion but only in circumstances where
such Claim for Tax would not have been suffered by the
Company but for the failure of any person (other than a
Companies falling within the definition of the Companies
for the purposes of this deed) to discharge or pay any
liability for Tax;
(b) such sums as would if paid to the Company indemnify and keep
indemnified the Company against:-
(i) each and every loss in whole or in part of the right to
receive any payment for Group Relief to the extent that the
payment has been reflected in the Net Assets of the Company
as shown by the Principal Accounts; and/or
(ii) any liability to make any payment for Group Relief and/or
any liability to repay any repayment received for Group
Relief to the extent that any such liability has not been
reflected in the Net Assets of the Company as shown by the
Principal Accounts;
(c) such sums as will indemnify and keep indemnified the Purchaser and
such further sums as would if paid to the Company and/or any
subsidiary or holding company of the Purchaser (or any subsidiary
of any such holding companies) indemnify the
54
<PAGE>
same against all costs and expenses incurred or payable in
connection with:-
(i) any Claim for Tax the subject of a claim under clause
2.1(a), including all legal proceedings relating thereto
and the settlement of any Claim for Tax and/or rebuttal of
any contention or in connection with any legal proceedings
and reasonable steps taken to avoid any Claim for Tax or
contention whether actual, threatened and/or anticipated;
(ii) any loss or liability as mentioned in clause 2.1(b)
including all legal proceedings relating thereto.
2.2 If any Claim for Tax or liability which would have otherwise given rise
to a Claim for Tax shall be reduced or avoided in consequence of any
Utilisation of a Purchaser's Relief this deed shall apply as if such
Purchaser's Relief had not been available so that the amounts paid by the
Covenantor hereunder shall be the amounts which would have been payable
in the absence of that or any other Purchaser's Relief.
2.3 The covenant contained in clause 2.1(a) shall not apply:-
(a) to any Claim for Tax to the extent that any Tax giving rise to the
same has been paid prior to the Last Accounts Date or that a full
and sufficient provision or reserve for the liability to which the
same relates has been made in the Principal Accounts and for the
purposes of this clause 2.3(a) no provision or reserve shall be
prevented from being full and sufficient if the same proves to be
inadequate by reason only of an increase in rates of Tax announced
after the date of the Sale Agreement;
(b) to any Claim for Tax to the extent that the same shall have arisen
in consequence of any act or transaction which could reasonably
have been avoided and which was carried out without the agreement
of the Covenantor by the Purchaser or the Company after Completion
otherwise than in the ordinary course of business of the Company,
and which the Purchaser was or should reasonably have been aware
would give rise to the Claim for Tax in question; or
(c) to any Claim for Tax to the extent that it arises in the ordinary
course of business of the Company after the Last Accounts Date but
on or before Completion and for this purpose, but without
limitation, the following shall not be regarded as being in the
ordinary course of business:-
(i) the declaration or payment of any dividend or the making of
any other distribution; or
(ii) any transaction entered into by the Company in the
circumstances where the consideration (if any) received by
or as the case may be, paid by the Company in respect
thereof is less than or more than the consideration deemed
to have been received or paid for Tax purposes but to the
extent
55
<PAGE>
only of the Claim for Tax arising in respect of the amount
by which the deemed consideration exceeds or is less than
the actual consideration; or
(iii) the Company ceasing or being deemed to cease, for Tax
purposes, to be the member of any group or associated with
any other company or person whether in consequence of the
entering into of the Sale Agreement or anything done under
it or otherwise; or
(iv) a Relevant Event which gives rise to a liability of the
Company in respect of the income, profits or gains, whether
actual or deemed, of any non-resident person;
(v) any other Relevant Event which gives rise to a liability to
Tax on deemed (as opposed to actual) income, profits or
gains.
(d) to the Company becoming or being deemed to become or ceasing or
being deemed to cease, for Tax purposes, to be a member of any
group or associated with any other company or person whether in
consequence of the entering into of the Sale Agreement or anything
done under it or otherwise;
(e) to any Claim for Tax to the extent that the same is increased as a
result of any failure by the Purchaser or the Company to comply
with its obligations under clause 5.
2.4 In computing the amount to be paid by the Covenantor under this Deed in
respect of any Claim for Tax no account shall be taken of any Tax for
which the Company would have been liable in respect of such amount had it
in fact been paid to the Company.
2.5 All sums payable by the Covenantor under this Deed shall be paid free and
clear of all deductions or withholding (including Tax) unless the
deduction or withholding is required by law, in which event or in the
event that the Purchaser shall incur any liability for Tax chargeable or
assessable in respect of any payment pursuant to this deed, the
Covenantor shall pay such additional amounts as shall be required to
ensure that the net amount received and retained by the Purchaser (after
Tax) will equal the full amount which would have been received and
retained by it had no such deduction or withholding been made and/or no
such liability to Tax been incurred and in applying this clause 2.5 no
account shall be taken of the extent to which any liability for Tax may
be mitigated or offset by any Relief available to the Purchaser so that
where such Relief is available the additional amount payable hereunder
shall be the amount which would have been payable in the absence of such
availability.
3. TIMING
3.1 Where the Covenantor becomes liable to make any payment pursuant to
clause 2, the due date for the making of that payment shall be:-
56
<PAGE>
(a) in so far as the claim arises pursuant to clause 2.1(a) seven days
before the day on which a payment of Tax becomes due under or in
consequence of the Claim for Tax in question or seven days before
the day on which any repayment (or increased repayment) of Tax
which but for such Claim for Tax would have been available, would
have been due and for this purpose it shall be assumed that the
repayment would have become due at the earliest possible date;
(b) in so far as the liability arises pursuant to clause 2.1(b) nine
months after the end of the accounting period of the Company in
relation to which the Group Relief surrender was made or where the
liability arises as a consequence of a liability to repay any
payment received for or to make any payment for Group Relief,
seven days before the date on which the Company is liable to repay
or pay such amounts;
(c) in so far as the claim arises pursuant to clause 2.1(c), seven
days before the day on which the costs and expenses fall due for
payment;
(d) in so far as the claim arises pursuant to clause 2.2 the date on
which payment would have become due under sub-clause (a) above had
no Purchaser's Relief been available and for this purpose it shall
be assumed that the Claim for Tax would have been made and all Tax
would have become due at the earliest possible date (assuming no
application for postponement).
3.2 Where but for the non-availability, loss or reduction of any Purchaser's
Relief the Company could have surrendered the same to another company by
way of Group Relief this Deed and in particular clause 3.1(a) shall apply
as if the Tax which could have been saved as a consequence of any such
surrender would have been saved by the Company but for the said
non-availability, loss or reduction and at the same time.
3.3 For the purposes hereof where Tax is due or a repayment due is lost or
reduced or a Group Relief Payment is lost or reduced or falls to be
repaid or where, but for a Utilisation of a Purchaser's Relief Tax would
be due or costs and expenses fall due for payment, on more than one
occasion then paragraphs (a) to (d) of clause 3.1 shall apply separately
on each such occasion.
3.4 If any sum due under clause 2 is not paid by the Covenantor by the later
of the due date and the date seven days after the date of the demand made
therefor the same shall carry interest (from such later date until the
date of payment) at the rate of four per cent, over the base rate for the
time being of Barclays Bank Plc (or in the absence of such rate at such
equivalent rate as the Purchaser shall select) save that interest shall
not start to run in respect of any payments of Tax above until seven days
before the day on which the Company makes the payment of Tax due.
4. REBATE
4.1 If the Purchaser or as the case may be the Company is entitled to recover
from any person
57
<PAGE>
(other than the Covenantor the Purchaser or the Company) in respect of
any claim for tax which gives rise to a liability on the part of the
Covenantor under this Deed then:-
(a) the Purchaser shall give the Covenantor full details of the
entitlement as soon as practicable;
(b) subject to the Purchaser and the Company being indemnified to the
reasonable satisfaction of the Purchaser by the Covenantor against
all costs, expenses and other liabilities which may be thereby
incurred by the Purchaser or the Company or the Purchaser shall at
the request of the Covenantor take all reasonable and appropriate
steps to recover or procure the recovery of the sum keeping the
Covenantor fully informed of the progress of any action taken
provided that neither the Purchaser nor the Company shall be
required to take any action which they consider to be prejudicial
to their commercial interests.
4.2 The Purchaser undertakes that if after the Covenantor have paid in full
any amount due hereunder in respect of any claim for tax the Purchaser or
the Company is or becomes entitled to receive and receives (from any
person other than the Covenantor) a payment in respect of such claim for
tax the Purchaser shall or shall procure that the Company shall pay to
the Covenantor a sum equal to the lesser of:-
(a) the amount of any payment so received after deduction therefrom of
an amount equal to any costs reasonably and properly incurred in
obtaining it and any taxation liability in respect of it; and
(b) the amount paid by the Covenantor hereunder in respect of the
taxation liability in question.
4.3 If the liability of the Company to make an actual payment of tax is
reduced in consequence of the utilisation of a relief which would not
have arisen but for the circumstances giving rise to a claim for tax in
respect of which the Covenantor are liable under this Deed (relevant
relief) then:
(a) the Purchaser shall procure that details of the reduction in tax
liability are given to the Covenantor; and
(b) the Purchaser shall procure that as soon as practicable and after
the date on which the tax which has been reduced would otherwise
have been paid any payment made by the Covenantor in respect of
the Relevant Claim is paid to the Covenantor up to the amount of
the reduction (after deducting therefrom any reasonable and proper
costs and expenses incurred by the Purchaser or the Company in
obtaining such reduction) and that any interest or repayment
supplement received relating to the reduction so far as repaid is
also forthwith paid to the Covenantor.
58
<PAGE>
5. CONDUCT OF CLAIMS
5.1 If the Purchaser shall become aware of any claim which is likely to give
rise to a liability on the Covenantor hereunder the Purchaser shall by
way of covenant but not as a condition precedent to the liability of the
Covenantor hereunder gives notice thereof or procure that notice thereof
is given as soon as reasonably practical to the Covenantor and if
possible giving an estimate of the sums involved and shall not make any
communication with any taxation authority in relation to such claim.
5.2 As regards any claim the Purchaser shall take or shall procure that the
Company shall take any such action as the Covenantor may by written
notice given to the Purchaser reasonably request cause the claim to be
withdrawn or to dispute, resist, appeal against, compromise or defend the
claim and any determination in respect thereof or to apply to postpone
(so far as legally possible) the payment of any tax pending the
determination of any appeal but subject to the Purchaser and the Company
being indemnified and secured to the reasonable satisfaction of the
Purchaser by the Covenantor against all losses (including any additional
taxation liability) interest, costs, damages and expenses which may be
thereby incurred by the Purchaser or the Company and provided that :
(a) any request made by the Covenantor pursuant to this Clause 5.2
shall be made within a reasonable time of receipt by the
Covenantor of any notice given by the Purchaser to the Covenantor
in accordance with Clause 5.1 and if on the expiry of the period
of 14 days commencing on the date of receipt by the Covenantor of
such notice the Covenantor shall not have given to the Purchaser
notice of the Covenantor's intention in respect of the claim or
shall not have provided satisfactory indemnities or securities in
accordance with this Clause 5.2 the Purchaser and the Company
shall be entitled to be satisfied or settle or deal with the claim
on such terms as they shall in their absolute discretion think fit
without prejudice to their rights and remedies under this Deed;
(b) the Purchaser and the Company shall not be obliged to comply with
any request of the Covenantor which involves contesting any
assessment for taxation before any court or any other appellant
body unless they have been advised in writing by leading tax
Counsel instructed by agreement between the Purchaser and the
Covenantor at the expense of the Covenantor that an appeal against
the assessment for taxation in question will on the balance of
probably be won by the Purchaser or as the case may be the
Company;
(c) neither the Purchaser nor the Company shall be obliged to take any
action which is likely to increase the future taxation liability
of the Company in the group of companies of which the Purchaser is
for the time being a member; and
(d) the Purchaser may require the Covenantor to take in the name of
the Company the action requested in accordance with this Clause
5.2 on such terms as the Purchaser in its absolute discretion
thinks fit.
5.3 The Purchaser shall procure that the Company ensures that a claim to
which this Deed
59
<PAGE>
applies is so far as is reasonably practicable dealt with separately from
claims to which it does not apply and that any claim to which it does
apply is not paid prematurely.
5.4 The Purchaser shall supply to the Covenantor copies of all material
written correspondence with the Inland Revenue in relation to any
dispute, failed negotiations or other proceedings conducted by or at the
request of the Covenantor pursuant to Clause 5.2.
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<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this deed on the date set
out above
SIGNED by NITA EUGENIE ANNE ) /s/ NITA EUGENIE ANNE BEECROFT
BEECROFT in the presence of: )
SIGNED by )
duly authorised by LEISURE ) /s/ Illegible
TRAVEL GROUP LIMITED )
61
<PAGE>
SCHEDULE 7
Shareholders Undertaking
We, Nita Eugenie Anne Beecroft and Matthew Eric Beecroft, being the registered
shareholders of all of the shares in Ilios Travel Limited (the "Company") give
this Undertaking pursuant to Clause 4 of an agreement of even date herewith made
between Nita Eugenie Anne Beecroft and Leisure Travel Group Limited (the
Agreement") concerning the sale of such shares.
1. Words and phrases defined in the Agreement shall bear the same meanings
in this Undertaking.
2. The Shares are held as set out in Schedule 1 to the Agreement.
3. We acknowledge receipt of the consideration for the Shares set out
opposite our names in Schedule 1.
4. We severally undertake to Leisure Travel Group Limited that if the Vendor
or the Covenantor shall be liable under the terms of the Agreement
(including but without limitation the Warranties and the Deed of
Indemnity) to make any payment to Leisure Travel Group Limited, we shall
on demand make such payment.
5. Our several liabilities hereunder shall be limited to the amount of
consideration we have received.
6. The provisions of Clause 7 of the Agreement shall apply to this
Undertaking mutatis mutandis.
IN WITNESS WHEREOF the parties hereto have executed this undertaking as a Deed
on the 1999
EXECUTED AS A DEED by NITA )
EUGENIE ANNE BEECROFT in the )
presence of: )
EXECUTED AS A DEED by )
MATTHEW ERIC BEECROFT in the )
presence of: )
62
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Financial Data", "Selected Financial Data" and "Experts" and to the use of our
report dated March 9, 2000, in the Registration Statement (Form S-1) and related
Prospectus of Leisure Travel Group, Inc. for the registration of 3,000,000
shares of its common stock.
/s/ ERNST & YOUNG
-------------------
Ernst & Young
Reading, England
March 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001108634
<NAME> LEISURE TRAVEL GROUP, INC.
<MULTIPLIER> 1,000
<CURRENCY> Pound Sterling
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-END> OCT-31-1999
<EXCHANGE-RATE> 1.6117
<CASH> 2,583
<SECURITIES> 0
<RECEIVABLES> 888
<ALLOWANCES> 0
<INVENTORY> 312
<CURRENT-ASSETS> 5,119
<PP&E> 20,788
<DEPRECIATION> 79
<TOTAL-ASSETS> 26,086
<CURRENT-LIABILITIES> 4,685
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 655
<TOTAL-LIABILITY-AND-EQUITY> 26,086
<SALES> 6,475
<TOTAL-REVENUES> 6,475
<CGS> 0
<TOTAL-COSTS> 5,222
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 306
<INCOME-PRETAX> 977
<INCOME-TAX> 322
<INCOME-CONTINUING> 655
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 655
<EPS-BASIC> 3,275
<EPS-DILUTED> 3,275
</TABLE>
