-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LhL9GN74TfrZj3opdG7Nl34XzFCb1g1YbpvLrKpN/pnI+Vr/k1iHmTMez4fnInA4 y3Rt5YSvJBs9Vo89bDnLeA== 0001144204-05-012102.txt : 20050419 0001144204-05-012102.hdr.sgml : 20050419 20050419170002 ACCESSION NUMBER: 0001144204-05-012102 CONFORMED SUBMISSION TYPE: 425 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20050419 DATE AS OF CHANGE: 20050419 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: RCG COMPANIES INC CENTRAL INDEX KEY: 0000722839 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 232265039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 425 SEC ACT: 1934 Act SEC FILE NUMBER: 001-08662 FILM NUMBER: 05759809 BUSINESS ADDRESS: STREET 1: 6836 MORRISON BOULEVARD STREET 2: SUITE 200 CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043665054 MAIL ADDRESS: STREET 1: 6836 MORRISON BLVD STREET 2: SUITE 200 CITY: CHARLOTTE STATE: NC ZIP: 28211 FORMER COMPANY: FORMER CONFORMED NAME: ERESOURCE CAPITAL GROUP INC DATE OF NAME CHANGE: 20001113 FORMER COMPANY: FORMER CONFORMED NAME: FLIGHTSERV COM DATE OF NAME CHANGE: 19990716 FORMER COMPANY: FORMER CONFORMED NAME: PROACTIVE TECHNOLOGIES INC DATE OF NAME CHANGE: 19950921 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RCG COMPANIES INC CENTRAL INDEX KEY: 0000722839 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 232265039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 425 BUSINESS ADDRESS: STREET 1: 6836 MORRISON BOULEVARD STREET 2: SUITE 200 CITY: CHARLOTTE STATE: NC ZIP: 28211 BUSINESS PHONE: 7043665054 MAIL ADDRESS: STREET 1: 6836 MORRISON BLVD STREET 2: SUITE 200 CITY: CHARLOTTE STATE: NC ZIP: 28211 FORMER COMPANY: FORMER CONFORMED NAME: ERESOURCE CAPITAL GROUP INC DATE OF NAME CHANGE: 20001113 FORMER COMPANY: FORMER CONFORMED NAME: FLIGHTSERV COM DATE OF NAME CHANGE: 19990716 FORMER COMPANY: FORMER CONFORMED NAME: PROACTIVE TECHNOLOGIES INC DATE OF NAME CHANGE: 19950921 425 1 form8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------- FORM 8-K ------------- CURRENT REPORT Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) April 15, 2005 ------------- RCG COMPANIES INCORPORATED - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) ------------- Delaware 1-8662 23-2265039 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 6836 Morrison Blvd., Ste. 200, Charlotte, North Carolina 28211 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) (704) 366-5054 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) (Former name or former address, if changed since last report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |X| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry into a Material Definitive Agreement. Item 2.01. Completion of Acquisition or Disposition of Assets. Item 2.03. Creation of a Direct Financial Obligation. On April 15, 2005, RCG Companies Incorporated (the "Registrant") closed the acquisition by merger of OneTravel, Inc. ("OneTravel"), pursuant to the previously announced Agreement and Plan of Merger, dated February 10, 2005, by and among OneTravel, OT Acquisition Corporation, Terra Networks Asociadas, S.L., Amadeus Americas, Inc. and Avanti Management, Inc. (collectively, the "Shareholders"). The terms of the acquisition provide for a total purchase price of $25.5 million, plus or minus the amount of net working capital (current assets over current liabilities) of OneTravel as of the closing. $2.5 million of the total consideration was paid by the Registrant as a deposit upon signing. $10.5 million of the total consideration, plus the estimated working capital adjustment of $827,488, was paid in cash at closing, and the remaining $12.5 million was paid at closing by the issuance of six-month, interest-free, convertible promissory notes to the Shareholders. The notes are convertible into common stock of the Registrant at the option of the note-holder. The Registrant's obligation to issue shares of common stock upon conversion is subject in all respects to the rules or regulations of the American Stock Exchange and stockholder approval. The conversion price per share of common stock of the Registrant will initially equal $0.6875. This conversion price will be adjusted to equal 125% of the market price of the Registrant's common stock in the event that the Registrant's contemplated one for ten reverse stock split is approved by its stockholders, and the average market value of the Registrant's common stock is lower that the split adjusted conversion price for the twenty trading days immediately following the effectuation of the reverse stock split. The Registrant has agreed to file a registration statement with the Securities and Exchange Commission in order to register the resale of the shares issuable upon conversion of the convertible promissory notes. The Registrant has the right to extend the maturity of the convertible note by up to five months upon payment of an extension fee to the note-holders of an aggregate of $125,000 per each one month extension. The Registrant funded the closing consideration for this transaction by utilizing a portion of the proceeds received from the closing of its previously announced Securities Purchase Agreement with 12 institutional investors for a private placement of Series C Convertible Preferred Stock totaling $31,110,165, and associated warrants. OneTravel is a privately held provider of online and offline discount travel products and services, offering its customers the ability to search for and book a full range of travel products. OneTravel also has proprietary dynamic packaging search engine technology that allows its customers to customize their own vacations by combining air, hotel and land options. OneTravel operates a direct-to-consumer business through a variety of Web sites. In addition to OneTravel.com, it operates 11thHour.com, CheapSeats.com and DiscountHotels.com. OneTravel also provides technology solutions and support services that enable other businesses to operate in the online travel arena. Through OneTravel's long-standing partner program, OneTravel has developed turnkey solutions for organizations such as The Travel Channel, Sam's Club and SideStep. The convertible promissory notes have been issued pursuant to the exemption from registration provided by Section 4(2) and Rule 506 of Regulation D of the Securities Act of 1933, as amended. This summary description of the transaction does not purport to be complete and is qualified in its entirety by reference to the agreements and other documents that are filed as Exhibits hereto. The press release issued by the Registrant on April 19, 2005 relating to the transaction is filed herewith as Exhibit 99.1 ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Business Acquired. All required financial statements with respect to the acquired OneTravel, Inc. will be filed by amendment pursuant to Item 9(a)(1) within 71 days from the date of which this report is required to be filed. (b) Pro Forma Financial Information. All required pro forma financial information with respect to the acquired OneTravel, Inc. will be filed by amendment pursuant to Item 9(b)(1) within 71 days from the date of which this report is required to be filed. (c) Exhibits. Exhibit No. Description ----------- ----------- 4.1 Form of Convertible Promissory Note 10.1 Agreement and Plan of Merger, dated February 10, 2005, by and among the Registrant, OT Acquisition Corporation, Terra Networks Asociadas, S.L., Amadeus Americas, Inc., Avanti Management, Inc. and OneTravel, Inc. 10.2 Registration Rights Agreement, dated April 15, 2005, by and among the Registrant, Terra Networks Asociadas, S.L., Amadeus Americas, Inc., Avanti Management, Inc. and Libra Securities LLC. 10.3 Form of Security Agreement 99.1 Press Release issued April 19, 2005 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: April 19, 2005 RCG COMPANIES INCORPORATED By: /s/ Marc E. Bercoon ------------------------ Marc E. Bercoon, Chief Financial Officer Exhibit Index Exhibit No. Description - ----------- ----------- 4.1 Form of Convertible Promissory Note 10.1 Agreement and Plan of Merger, dated February 10, 2005, by and among the Registrant, OT Acquisition Corporation, Terra Networks Asociadas, S.L., Amadeus Americas, Inc., Avanti Management, Inc. and OneTravel, Inc. 10.2 Registration Rights Agreement, dated April 15, 2005, by and among the Registrant, Terra Networks Asociadas, S.L., Amadeus Americas, Inc., Avanti Management, Inc. and Libra Securities LLC. 10.3 Form of Security Agreement 99.1 Press Release issued April 19, 2005 EX-4.1 2 ex4.txt THIS SECURITY AND THE SECURITIES RECEIVABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. THE OFFERING OF THIS SECURITY AND THE SECURITIES RECEIVABLE UPON THE CONVERSION HEREOF HAVE NOT BEEN REVIEWED OR APPROVED BY ANY STATE'S SECURITIES ADMINISTRATOR. THIS SECURITY AND THE SECURITIES RECEIVABLE UPON THE CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS REGISTERED OR QUALIFIED UNDER THE ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS THE CORPORATION RECEIVES AN OPINION OF COUNSEL ACCEPTABLE TO COUNSEL FOR THE CORPORATION STATING THAT REGISTRATION, QUALIFICATION OR OTHER SUCH ACTIONS ARE NOT REQUIRED UNDER ANY SUCH LAWS. CONVERTIBLE PROMISSORY NOTE [$12,500,000] _____________, 2005 [We anticipate four notes - one for each of the three Shareholders and one for Libra in amounts based on their pro rata portion of the aggregate $12,500,000] RCG COMPANIES INCORPORATED, a Delaware corporation (the "Corporation"), hereby promises to pay to the order of [Shareholder or Libra] (or a permitted assignee hereunder, the "Lender"), the principal amount of [____________ ($____________)] in accordance with the provisions of this Convertible Promissory Note (this "Note"). This Note is issued as partial consideration for the [services rendered by Lender in connection with][consummation of the transactions set forth in] that certain Agreement and Plan of Merger by and among the Corporation, the Lender, Onetravel, Inc., a Texas corporation, and the other parties named therein (the "Merger Agreement"). This Note is subject to that certain Security Agreement, of even date herewith, by and among the Corporation and the Lender (the "Security Agreement"). 1. Principal Amount. The amount on the face of this Note shall constitute the principal amount of this Note (the "Principal Amount"). The Principal Amount shall not bear interest. 2. Payment of Principal Amount. To the extent this Note has not been converted as set forth herein, the Corporation shall pay the Principal Amount of this Note in full on the date that is one hundred eighty (180) days after the date hereof, or on the next succeeding Business Day if such date is not a Business Day (after giving effect to any Extension thereof pursuant to the following sentence, the "Maturity Date"). Notwithstanding the foregoing, the Corporation may extend, upon five (5) days' written notice, the Maturity Date by up to six (6) periods of thirty (30) days each (each, an "Extension"), by payment of the sum of [$125,000 divided by the noteholder's pro rata holding of the Notes] in cash prior to the Maturity Date in effect pursuant to this Section 2 before the effect of any such Extension; provided, however, that in the event that the Corporation pays the Closing Deposit Amount (as defined in the Merger Agreement), the number of Extensions available to the Corporation shall be no more than five (5). This Note may be prepaid by the Corporation, in whole or in part, at any time prior to the Maturity Date. 3. Conversion of the Note into Common Stock. (a) Optional Payment in Cash or Conversion. Upon written notice delivered not less than thirty (30) days prior to the Maturity Date, the Lender may require in its sole discretion that the Principal Amount of this Note shall be (i) paid by the Corporation at the Maturity Date by wire transfer of immediately available funds to an account designated by the Lender without presentment or notation of payment, or (ii) subject to the provisions of Section 3(f) below, converted into Common Stock pursuant to the terms set forth in Section 3(b) below upon surrender of this Note to the Corporation (a "Conversion"). In the event that such written notice is not delivered in accordance with this Section 3(a), at the Maturity Date, a Conversion of this Note shall automatically occur. (b) Computation of the Number of Shares of Common Stock upon Conversion. In the event of a Conversion, as of the Maturity Date, the Lender shall receive a number of fully paid and non-assessable shares of Common Stock, equal to the amount computed by dividing (i) the Principal Amount by (ii) the Conversion Price (the "Conversion Shares"). Notwithstanding the foregoing, the Corporation shall not issue any fractional shares upon any conversion hereunder. If the conversion would result in the issuance of a fraction of a Conversion Share less than 0.5, the Corporation shall round such fraction of a Conversion Share down to the nearest whole Conversion Share. If the conversion would result in the issuance of a fraction of a Conversion Share equal to or greater than 0.5, the Corporation shall round such fraction of a Conversion Share up to the nearest whole Conversion Share. (c) Notices. In the event of a Conversion, prior to or upon the Maturity Date, the Corporation shall give written notice to the Lender setting forth the Lender's Principal Amount and the number of Conversion Shares to be received. (d) Note Conversion Deliveries. In the event of a Conversion, on the Maturity Date, the following shall occur: (i) the Lender shall surrender its originally executed Note to the Corporation, and such Note shall be deemed canceled; (ii) the Corporation shall deliver to the Lender a certificate or certificates representing the number of shares of Common Stock, issuable by reason of such conversion and computed in accordance with Section 3(b) above, in such name or names and such denomination or denominations as the Lender has specified; and 2 (iii) the Lender will deliver a certificate to the Corporation stating that the representations and warranties of the Lender set forth in Section 11.5 of the Merger Agreement are true and correct as of the Maturity Date. (e) Issuance Taxes. The issuance of certificates for Common Stock upon such conversion shall be made without charge to the Lender for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of Conversion Shares (but excluding any income or similar taxes attributable to the Lender). Upon such conversion, the Corporation shall take all such actions as are necessary in order to insure that the Conversion Shares issuable with respect to such Conversion shall be validly issued, fully paid and nonassessable. Upon such conversion, the Lender shall be entitled to the same rights and benefits accorded to the other holders of Common Stock. (f) Limitation on Number of Shares Issuable Hereunder. The Corporation shall not be obligated to issue any Conversion Shares unless the Corporation obtains approval by the Corporation's stockholders of the Corporation's issuance of all of the Conversion Shares. In the event that upon any Conversion of this Note the Lender shall not be permitted to receive all of the Conversion Shares otherwise issuable to the Lender due to the provisions of this Section 3(f), the Corporation shall pay the remaining Principal Amount of this Note at the Maturity Date in cash by wire transfer of immediately available funds. At the next meeting of the Corporation's stockholders, the Corporation will seek the approval by the stockholders of Lender's ability to convert the Note into all the Conversion Shares and the Corporation's Board of Directors shall recommend such approval. 4. Negative Covenants. Without the approval of the Lender, the Corporation shall not: (a) create or suffer to exist any lien upon or security interest in any of its assets, other than the liens and security interests in favor of the Lender granted by the Corporation in accordance with the Security Agreement executed of even date herewith, or which are "Permitted Liens" thereunder, and other liens for other Notes of even date herewith, and liens that are junior to the obligations under this Note (collectively, "Permitted Liens"); (b) merge, dissolve, liquidate, consolidate with or into another Person, or dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to or in favor of any person; (c) sell, transfer, license, lease, or otherwise dispose (including pursuant to any sale and leaseback transaction) of any of its property, except: (i) dispositions of obsolete or worn out property, whether now owned or hereafter acquired, in the ordinary course of business; (ii) dispositions in the ordinary course of business; and (iii) dispositions of equipment or real property to the extent that (A) such property is exchanged for credit against the purchase price of similar replacement property or (B) the proceeds of such disposition are reasonably promptly applied to the purchase price of such replacement property; 3 (d) declare or make, directly or indirectly, any dividend or other distribution (whether in cash, securities, or other property) with respect to any capital stock or other equity interest of the Corporation or any subsidiary thereof, or any payment (whether in cash, securities, or other property) on account of the purchase, redemption, retirement, acquisition, cancellation, or termination of any such capital stock or other equity interest, or on account of any return of capital to the Corporation's stockholders, partners or members (or the equivalent person thereof) (each, a "Restricted Payment"), except that, so long as no Event of Default shall have occurred and be continuing at the time of any action described below or would result therefrom: (i) each subsidiary may make Restricted Payments to the Corporation and any other person that owns an equity interest in such subsidiary, ratably according to their respective holdings of the type of equity interest in respect of which such Restricted Payment is being made; (ii) the Corporation and each subsidiary may declare and make dividend payments or other distributions payable solely in the common stock or other common equity interests of such person; and (iii) the Corporation may purchase, redeem, or otherwise acquire equity interests issued by it or securities convertible into or exercisable for equity interests with the proceeds received from the substantially concurrent issue of new shares of its common stock or other common equity interests or securities convertible into or exercisable for equity interests, and may also redeem the Financing Securities at an initial scheduled redemption date that is at least 20 days after the Maturity Date and all available extensions; (e) engage in any material line of business substantially different from those lines of business conducted by the Corporation on the date hereof or any business substantially related or incidental thereto; or (f) enter into any contract (other than this promissory note, the Security Agreement, and any comparable document contemplated under the Merger Agreement) that limits the ability of any subsidiary of the Corporation to make distributions or dividends to the Corporation or to otherwise transfer property to the Corporation. In addition, the Corporation will provide written notice to Lender prior to, incurring any indebtedness, other than the indebtedness hereunder, indebtedness incurred in contemplation of the repayment of the indebtedness hereunder, indebtedness incurred in the ordinary course of the Corporation's business and indebtedness in favor of the other parties to the Merger Agreement; 5. Events of Default. (a) Events of Default. For purposes of this Note, an Event of Default shall be deemed to have occurred if: 4 (i) The Corporation fails to properly (a) pay the entire Principal Amount of this Note when due at the Maturity Date or (b) convert this Note on the terms and conditions specified herein; (ii) Any Event of Default exists under the Convertible Promissory Notes dated of even date herewith, executed by the Corporation in favor of each of [Amadeus Americas, Inc. f/k/a Amadeus NMC Holding, Inc., a Delaware corporation] [Terra Networks Asociadas, S.L., a company organized and existing under the laws of the Kingdom of Spain] [Avanti Management, Inc., a Pennsylvania corporation] [Libra Securities, L.L.C.]; (iii) the Corporation, pursuant to or within the meaning of Title 11, U.S. Code, or any similar Federal or state law for the relief of debtors (collectively, "Bankruptcy Law"), (A) commences a voluntary case, (B) consents to the entry of an order for relief against it in an involuntary case, (C) consents to the appointment of a receiver, trustee, assignee, liquidator or similar official (a "Custodian"), (D) makes a general assignment for the benefit of its creditors or (E) admits in writing that it is generally unable to pay its debts as they become due; (iv) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that (A) is for relief against the Corporation in an involuntary case, (B) appoints a Custodian of the Corporation or (C) orders the liquidation of the Corporation; (v) the Corporation breaches in any material respect any representation, warranty, covenant or other term or condition of this Note, Section 9.7(c) of the Merger Agreement or the Security Agreement, except, in the case of a breach of a covenant which is curable, only if such breach continues for a period of at least thirty (30) consecutive calendar days after written notice thereof to the Corporation; or (vi) the maturity of greater than $2,000,000 in the aggregate of indebtedness for borrowed money of the Corporation and its subsidiaries is accelerated and becomes due prior to its stated maturity date due to a breach or default by the Corporation and its subsidiaries of any representation, warranty, covenant or agreement contained in the agreements governing such indebtedness. (b) Consequences of Events of Default. If an Event of Default has occurred and be continuing, for any reason whatsoever (and whether such occurrence shall be voluntary or involuntary or come about or be effected by operation of law or otherwise), the Principal Amount of this Note shall automatically become immediately due and payable, without presentment, demand, protest or other requirements of any kind, all of which are hereby expressly waived by the Corporation; provided, that, notwithstanding the foregoing, the rights and remedies of the Lender upon an Event of Default are governed by that certain Intercreditor Agreement dated of even date herewith, executed by the Corporation, the Lender, and [Amadeus Americas, Inc. f/k/a Amadeus NMC Holding, Inc., a Delaware corporation] [Terra Networks Asociadas, S.L., a company organized and existing under the laws of the Kingdom of Spain] [Avanti Management, Inc., a Pennsylvania corporation] [Libra Securities, L.L.C.] [and other financing sources pari passu with this Note]. 5 6. Replacement of Note. Upon receipt of evidence satisfactory to the Corporation of the loss, theft, destruction or mutilation of this Note and, if requested in the case of any such loss, theft or destruction, upon delivery of an indemnity bond or other agreement or security satisfactory to the Corporation or, in the case of any such mutilation, upon surrender and cancellation of this Note, the Corporation will issue a new Note of like tenor and amount, in replacement of such lost, stolen, destroyed or mutilated Note. 7 Amendment and Waiver. Except as otherwise expressly provided herein, the provisions of this Note may be amended and the Corporation may take any action herein prohibited, or omit to perform any act herein required to be performed by it, only if the Corporation has obtained the written consent of the holder of this Note. 8. Assignment. This Note may not be transferred or assigned by the Lender without the prior written consent of the Corporation. Any transfer shall be made in accordance with applicable securities laws. In the event of a transfer of this Note in accordance with the terms hereof, the Lender shall be deemed to have assigned its rights under the Security Agreement to such assignee. 9. Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be given in accordance with Section 16.1 of the Merger Agreement. 10. Remedies, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note and the Security Agreement, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the Lender's right to pursue actual damages for any failure by the Corporation to comply with the terms of this Note. The Corporation acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Lender and that the remedy at law for any such breach may be inadequate. The Corporation therefore agrees that, in the event of any such breach or threatened breach, the Lender shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required. 11. Payment of Collection, Enforcement and Other Costs. If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Lender otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note, or (b) there occurs any bankruptcy, reorganization, receivership of the Corporation or other proceedings affecting the Corporation's creditors' rights and involving a claim under this Note, then the Corporation shall pay the costs incurred by the Lender for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including but not limited to reasonable attorneys fees and disbursements. 6 12. Failure or Indulgence not Waiver. No failure or delay on the part of the Lender in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. 13. Waiver of Notice. To the extent permitted by law, the Corporation hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. 14. Security Agreement. The Corporation and the Lender have entered into a Security Agreement dated of even date herewith, which secures the prompt and complete payment, performance and observance when due (whether at stated maturity, by acceleration or otherwise) of all of the "Obligations" defined therein. 15. Registration Rights. The Corporation and the Lender shall enter into a registration rights agreement of even date herewith regarding the registration of the Common Stock with the United States Securities and Exchange Commission. 16. Definitions. For the purposes of this Note, the following terms have the meaning set forth below: (a) "Business Day" shall mean a day other than Saturday, Sunday or a public holiday on which banks are closed under the laws of the State of New York. (b) "Common Stock" shall mean shares of the Corporation's common stock, $0.04 par value per share. (c) "Conversion Price" shall initially be $0.6875. In the event that the conversion price of the Series C Convertible Preferred Stock of the Corporation is adjusted to the Reset Amount pursuant to Section 6(f)(ii) of the Series C Certificate of Designations as a consequence of the Reverse Stock Split, then at such time the Conversion Price shall automatically adjust to an amount equal to 125% of the conversion price of the Series C Preferred Stock of the Corporation as adjusted to reflect the Reset Amount; provided, however, that the Lender will be entitled to the benefit of this adjustment to the Conversion Price only if the Lender delivers to the Corporation no later than fourteen (14) days following the date of issuance of this Note an agreement in writing confirming that neither it nor any Person acting on its behalf or pursuant to any understanding with it has or will engage in or close out any transactions in the securities of the Corporation (including Short Sales) from the date hereof through the earlier of (i) the Business Day following the Reset Period, or (ii) 270 days from the date hereof; provided, further, that the Corporation shall notify the Lender in writing within one (1) Business Day should any such adjustment occur. In addition, the Conversion Price and the amount and kind of securities issuable upon conversion of this Note shall be subject to adjustment from time to time in accordance with the provisions of this Section 16(c). 7 (1) Adjustments to Conversion Price. (i) Subdivision or Combination of Common Stock. In case the Corporation shall at any time subdivide (by any stock split, stock dividend or otherwise) its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and, conversely, in case the outstanding shares of Common Stock shall be combined into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. (ii) Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the Corporation (other than in connection with a merger or reorganization, which is covered by (iii) below) shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities, properties or assets (including cash) with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate provisions shall be made whereby the Lender shall thereupon have the right to receive upon the conversion of this Note, upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of this Note, such shares of stock, securities, property or assets (including cash) as may be issued or payable with respect to or in exchange for the shares of Common Stock immediately theretofore receivable upon such conversion had such reorganization or reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests of the Lender to the end that the provisions hereof (including without limitation provisions for adjustments of the Conversion Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter deliverable upon the exercise of such conversion rights. (iii) Mergers and Consolidations. If the Corporation shall merge or consolidate with or into any other Person, then the Lender shall have the right to receive upon conversion of this Note, upon the terms and conditions specified therein, and in lieu of the shares of Common Stock immediately theretofore receivable upon the conversion of this Note, such shares of stock, securities, property or assets (including cash) as may be issued or payable with respect to or in exchange for the shares of Common Stock immediately theretofore receivable upon such conversion had the Lender converted this Note immediately prior to such merger or consolidation. 8 (2) Notice of Adjustment. Upon any adjustment of the Conversion Price, then and in each such case the Corporation shall give prompt written notice thereof (but in no event in less than ten (10) Business Days), by delivery in person, certified or registered mail, return receipt requested, telecopier or telex, addressed to the Lender at the address of the Lender, as provided to the Corporation, which notice shall state the Conversion Price resulting from such adjustment, setting forth in reasonable detail the method upon which such calculation is based. (3) Due Issuance of Shares Upon Conversion. The Corporation covenants and agrees that all shares of Common Stock or any such other securities which may be issued upon any whole or partial conversion of this Note will, upon issuance, be validly issued, fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof. (4) Stock to be Reserved. The Corporation will at all times reserve and keep available out of its authorized Common Stock, solely for the purpose of issuance upon the conversion of this Note as herein provided, such number of shares of Common Stock as shall then be issuable upon the conversion hereof. The Corporation covenants that, to the extent permitted by law, it will from time to time take all such action as may be required to assure that the par value per share of the Common Stock is at all times equal to or less than the Conversion Price in effect at the time. The Corporation will not take any action that results in any adjustment of the Conversion Price if the total number of shares of Common Stock issued and issuable after such action upon conversion of this Note would, when added to the number of shares of Common Stock then reserved for issuance, exceed the total number of shares of Common Stock then authorized by the Corporation's Certificate of Incorporation. (5) Issue Tax. The issuance of certificates for shares of Common Stock upon conversion of this Note shall be made without charge to the Lender for any United States issuance tax in respect thereof, provided that the Corporation shall not be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of any certificate in a name other than that of the Lender. (6) Closing of Books. The Corporation will at no time close its transfer books against the transfer of any shares of Common Stock issued or issuable upon the conversion of the Note in any manner which interferes with the timely conversion of such Note, except as may otherwise be required to comply with applicable securities laws. (d) "Financing Securities" shall mean the Common Stock, convertible notes, convertible preferred stock and/or warrants issued by the Corporation in connection with its financing of the acquisition of Onetravel, Inc. under the Merger Agreement. 9 (e) "Person" shall mean any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated association, corporation or other entity or any government entity. (f) "Reset Amount" shall have the meaning set forth in the Series C Certificate of Designations. (g) "Reset Period" shall have the meaning set forth in the Series C Certificate of Designations. (h) "Reverse Stock Split" shall have the meaning set forth in the Series C Certificate of Designations. (i) "Securities Act" shall mean the Securities Act of 1933, as amended, or any similar federal law then in force. (j) "Series C Certificate of Designations" shall mean the Certificate of Designations of the Corporation with respect to the Series C Preferred Stock of the Corporation. (k) "Short Sales" include, without limitation, all "short sales" as defined in Rule 200 promulgated under Regulation SHO under the Securities Exchange Act of 1934, as amended, and all types of direct and indirect stock pledges, forward sale contracts, options, puts, calls, swaps, and similar arrangements (including on a total return basis), and sales and other transactions through non-US broker dealers or foreign regulated holders. 17. Severability. Whenever possible, each provision of this Note shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Note is held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of this Agreement. 18. Entire Agreement. This Note, the Merger Agreement and the Security Agreement and the other writings referred to herein or therein contain the entire agreement among the Corporation and the Lender with respect to the transactions contemplated hereby and supersede all prior agreements or understandings, written or oral, between the Corporation and the Lender. 19. Amendments; Waiver. This Note may be amended, or any provision of this Note may be waived, only in a writing signed by the Corporation and the Lender. 20. Construction; Headings. This Note shall be deemed to be jointly drafted by the Corporation and the Lender and shall not be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note. 10 21. Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Delaware, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Delaware. [signature page follows] 11 IN WITNESS WHEREOF, the Corporation has, through its duly authorized officer, executed and delivered this Note as of the date first written above. RCG COMPANIES INCORPORATED By: ______________________________ Name: ____________________________ Its: _____________________________ EX-10.1 3 agreement.txt AGREEMENT AND PLAN OF MERGER By and Among TERRA NETWORKS ASOCIADAS, S.L., AMADEUS AMERICAS, INC. and AVANTI MANAGEMENT, INC. RCG COMPANIES INCORPORATED, as the Buyer, and ONETRAVEL, INC. Dated February 10, 2005 AGREEMENT AND PLAN OF MERGER This Agreement and Plan of Merger (the "Agreement") is entered into as of February 10, 2005, by and among Amadeus Americas, Inc. f/k/a Amadeus NMC Holding, Inc., a Delaware corporation ("Amadeus"); Terra Networks Asociadas, S.L., a company organized and existing under the laws of the Kingdom of Spain ("Terra"); Avanti Management, Inc., a Pennsylvania corporation ("Avanti" and together with Amadeus and Terra are each individually referred to as a "Shareholder" and collectively as the "Shareholders"); OneTravel, Inc., a Texas corporation (the "Company"); OT Acquisition Corporation, a Texas corporation ("Merger Sub"); RCG Companies Incorporated, a Delaware corporation (the "Buyer"); and the Shareholder Representative (as defined herein). The Shareholders, the Company, Merger Sub and the Buyer are each a "party" to this Agreement and together are "parties" to this Agreement. R E C I T A L S WHEREAS, the Board of Directors of each of the Company, Merger Sub and the Buyer has determined to engage in the transactions contemplated hereby, pursuant to which (i) Merger Sub will merge with and into the Company (the "Merger"); (ii) the capital stock of Merger Sub shall be converted into shares of common stock, par value $0.001 per share, of the Company ("Common Stock"); and (iii) each share of Common Stock outstanding immediately prior to the Effective Time (as defined below) (such shares of Common Stock and any associated rights are referred to in this Agreement as "Shares") shall be converted into the right to receive the Merger Consideration Per Share in the manner herein described, all upon the terms and subject to the conditions set forth herein. WHEREAS, the Board of Directors of the Company has approved and resolved, subject to the terms of this Agreement, to recommend that the shareholders of the Company approve the Merger and this Agreement. WHEREAS, the Boards of Directors of the Buyer and Merger Sub have approved the Merger and this Agreement. The Buyer, as the sole shareholder of Merger Sub, has approved the Merger and this Agreement. AGREEMENT NOW, THEREFORE, in consideration of the mutual representations, warranties and covenants contained herein, and other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties hereto covenant and agree as follows with the intent to be legally bound: 1. Definitions. For purposes of this Agreement, the following terms shall have the meanings herein specified: "Accountant" has the meaning set forth in Section 4(c)(8) of this Agreement. "Affiliate" means, with respect to any person, any other person controlling, controlled by or under common control with such person. The term "Control" as used in the preceding sentence means, with respect to a corporation, the right to exercise, directly or indirectly, more than 50% of the voting rights attributable to the shares of the controlled corporation and, with respect to any person other than a corporation, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such person. "Adjusted Cash Merger Consideration" has the meaning set forth in Section 4(c)(3) of this Agreement. "Agreement" has the meaning set forth in the opening paragraph of this Agreement. "Allen & Co. Broker Agreement" has the meaning set forth in Section 10.22 of this Agreement. "Allen & Co. Warrants" has the meaning set forth in Section 12.15 of this Agreement. "Amadeus" has the meaning set forth in the opening paragraph of this Agreement. "Amadeus/Terra Loans" means those certain loans made by Amadeus, Terra and Terra Networks to the Company as described on Schedule 1 of the Disclosure Schedule. "Arrangement" means (i) any written lease, agreement, contract, commitment or license or (ii) any enforceable understanding or enforceable oral lease, agreement, contract, commitment or license; by which a Person (a) has or may acquire any rights, (b) has or may become subject to any obligation or liability, or (c) any of the assets owned or used by it is or may become bound. "Articles of Merger" has the meaning set forth in Section 2.3 of this Agreement. "Avanti" has the meaning set forth in the opening paragraph of this Agreement. "Buyer" has the meaning set forth in the opening paragraph of this Agreement. "Buyer Bringdown Certificate" has the meaning set forth in Section 13.3(a) hereof. "Buyer Capital Stock" has the meaning set forth in Section 9.2 of this Agreement. "Buyer Common Stock" means the common stock, par value $0.04 per share, of the Buyer. "Buyer Indebtedness" means, with respect to the Buyer and its Subsidiaries, at any date, without duplication: (i) all obligations of such Person for borrowed money or in respect of loans or advances, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or debt securities, (iii) any commitment by which a Person assures a creditor against loss (including contingent reimbursement obligations with respect to letters of credit and bankers' acceptances), (iv) all obligations arising from cash/book overdrafts, (v) all obligations of such Person secured by a Lien on such Person's assets, (vi) all guarantees of such 3 Person in connection with any of the foregoing and any other indebtedness guaranteed in any manner by a Person (including guarantees in the form of an agreement to repurchase or reimburse), (vii) all capital lease obligations (but not operating leases), (viii) all indebtedness for the deferred purchase price of property with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the Ordinary Course of Business), (ix) all other liabilities classified as non-current liabilities in accordance with GAAP as of the Closing Date and (x) all accrued interest, prepayment premiums or penalties related to any of the foregoing. "Buyer Intellectual Property" has the meaning set forth in Section 9.9 of this Agreement. "Buyer Options" has the meaning set forth in Section 9.2 of this Agreement. "Buyer Preferred Stock" means Buyer's Series A 6% Convertible Preferred Stock and Buyer's Series B 6% Redeemable Participating Preferred Stock. "Cap" has the meaning set forth in Section 15.1(b)(iii) of this Agreement. "Claim" and "Claims" have the meanings set forth in Section 15.1(a) of this Agreement. "Closing" has the meaning set forth in Section 8 of this Agreement. "Closing Date" has the meaning set forth in Section 8 of this Agreement. "Closing Deposit Amount" has the meaning set forth in Section 8 of this Agreement. "Code" means the Internal Revenue Code of 1986, as amended. "Company" has the meaning set forth in the opening paragraph of this Agreement. "Company Bringdown Certificate" has the meaning set forth in Section 13.2(a) hereof. "Company Subsidiary" means 11thhour.com, Inc., a South Carolina corporation wholly-owned by the Company. "Common Stock" has the meaning set forth in the Recitals of this Agreement. "Company Expenses" has the meaning set forth in Section 12.7(a) of this Agreement. "Company Indebtedness" means, with respect to the Company and its Subsidiaries, at any date, without duplication: (i) all obligations of such Person for borrowed money or in respect of loans or advances, (ii) all obligations of such Person evidenced by bonds, debentures, notes or other similar instruments or debt securities, (iii) any commitment by which a Person assures a creditor against loss (including contingent reimbursement obligations 4 with respect to letters of credit and bankers' acceptances), (iv) all obligations arising from cash/book overdrafts, (v) all obligations of such Person secured by a Lien on such Person's assets, (vi) all guarantees of such Person in connection with any of the foregoing and any other indebtedness guaranteed in any manner by a Person (including guarantees in the form of an agreement to repurchase or reimburse), (vii) all capital lease obligations (but not operating leases), (viii) all indebtedness for the deferred purchase price of property with respect to which a Person is liable, contingently or otherwise, as obligor or otherwise (other than trade payables and other current liabilities incurred in the Ordinary Course of Business), (ix) all other liabilities classified as non-current liabilities in accordance with GAAP as of the Closing Date and (x) all accrued interest, prepayment premiums or penalties related to any of the foregoing. "Company Indebtedness Closing Schedule" has the meaning set forth in Section 13.2(h) of this Agreement. "Computer Software" has the meaning set forth in Section 10.7(a)(v) of this Agreement. "Confidential Information" has the meaning set forth in Section 12.3 of this Agreement. "Convertible Promissory Notes" means 180-day non-interest bearing secured convertible promissory notes of Buyer with an aggregate principal balance of $12,500,000, secured by a lien on the assets of Buyer, convertible into shares of Buyer Common Stock at a price per share equal to the lesser of (a) $2.25 per share or (b) twenty-five percent (25%) greater than the price per share of Buyer Common Stock paid by Buyer's financing sources in connection with Buyer's financing of the cash component of the Merger Consideration, with such other terms as set forth therein, substantially in the form of Exhibit A attached hereto. "Copyrights" has the meaning set forth in Section 10.7(a)(iii) of this Agreement. "Effective Date" has the meaning set forth in Section 2.3 of this Agreement. "Effective Time" has the meaning set forth in Section 2.3 of this Agreement. "Employee Benefit Plans" has the meaning set forth in Section 10.21 of this Agreement. "Environmental Laws" has the meaning set forth in Section 10.11(d) of this Agreement. "ERISA" means the Employee Retirement Income Security Act of 1974 or any successor law, and regulations and rules issued pursuant to that Act or any successor law. "Escrow Agent" shall mean Wachovia Bank, N.A. "Escrow Agreement" shall mean that certain Escrow Agreement, dated of even date herewith, by and among the Escrow Agent, the Company, the Buyer and the Shareholders, substantially in the form of Exhibit B attached hereto. "Estimated Working Capital Amount" has the meaning set forth in Section 4(c)(2) of this Agreement. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 5 "Facilities" includes real property, leaseholds, or other interests currently or formerly owned or operated by the Company or its Subsidiaries and all buildings, plants, structures or equipment currently or formerly owned or operated by the Company or its Subsidiaries. "Final Adjustment Amount" has the meaning set forth in Section 4(c)(3) of this Agreement. "Final Statement of Working Capital" has the meaning set forth in Section 4(c)(3) of this Agreement. "Final Working Capital Amount" has the meaning set forth in Section 4(c)(3) of this Agreement. "Financial Statements" means the financial statements described in Section 10.14 of this Agreement. "GAAP" means United States generally accepted accounting principals consistently applied. "Governmental Authority" includes the following: (a) a national, state, country, city, town, village, district or other jurisdiction of any nature; (b) federal, state, local, municipal, foreign, or other government; (c) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal); (d) multi-national organization or body; and (e) a body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority or power of any nature. "Governmental Authorization" means an approval, consent, license, permit, waiver or other authorization issued, granted, given, or otherwise made available by or under the authority of a Governmental Authority or pursuant to a Legal Requirement. "Hazardous Materials" has the meaning set forth in Section 10.11(d) of this Agreement. "IGT" means IGT Services, Inc., a Delaware corporation. "Indemnified Party" has the meaning set forth in Section 15.3 of this Agreement. "Indemnifying Party" has the meaning set forth in Section 15.3 of this Agreement. "Initial Deposit Amount" means the sum of $2,500,000 in cash. "Intellectual Property" has the meaning set forth in Section 10.7 of this Agreement. "Interested Party" has the meaning set forth in Section 12.3 of this Agreement. "Knowledge" (a) the Company and its Subsidiaries will be deemed to have "Knowledge" of a particular fact or other matter if any of Philip A. Ferri, Norman Knowles, Henry Wang or Steven J. Pello is actually aware of the fact or other matter; (b) each of the Shareholders and the Buyer will be deemed to have "Knowledge" of a particular fact or other matter if any individual who is serving as a director, executive officer, supervisory personnel, partner, executor or trustee of such Person (or in any similar capacity) is actually aware of the fact or other matter. 6 "Law" or "Laws" means all laws, ordinances, regulations, judgments, orders, decrees or rules of any court, arbitrator or Governmental Authority. "Lease Documents" has the meaning set forth in Section 10.17 of this Agreement. "Leased Real Property" has the meaning set forth in Section 10.17 of this Agreement. "Legal Requirements" includes federal, state, local, municipal, foreign, international, and multinational laws, including administrative orders, constitutions, ordinances, regulations, statutes and treaties. "Letter of Transmittal" has the meaning set forth in Section 5(a) of this Agreement. "Libra Securities" has the meaning set forth in Section 10.22 of this Agreement. "Licenses" has the meaning set forth in Section 10.7(a)(vi) of this Agreement. "Lien" means any mortgage, charge, community property interest, condition, equitable interest, option, right of first refusal, pledge, security interest, encumbrance, lien or restriction of any kind, including, without limitations, (i) any restriction or use, voting, transfer, receipt of income, or exercise of any other attribution of ownership; (ii) any conditional sale or other title retention agreement; (iii) any lease in the nature thereof; and (iv) the filing of or an agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction or under any other applicable law or regulation, and including any lien or charge arising under any federal, state or local laws. "Materially Adverse" means, with respect to any matters or events, that such matters or events, together with all other matters, events or facts, would have, or might reasonably be expected to have, a material adverse effect on the condition, business, assets, prospects or operations of any Person taken as a whole with its Subsidiaries; provided, however, that with respect to such Person, any material changes to such Person's business, assets, prospects or operations as a result of (i) this Agreement or the Transactions or any public announcement or similar publicity with respect to this Agreement or the Transactions; or (ii) changes in such Person's industry or general economic conditions in the United States or the world shall not be deemed to have had or to in the future have a Materially Adverse effect on such Person or its condition, business, assets, prospects or operations. "Material Contracts" means, whether or not in writing, (a) Arrangements entered into outside of the Ordinary Course of Business; (b) Arrangements involving an obligation which cannot or in reasonable probability will not be performed or terminated within one year from the date entered into; (c) Arrangements affecting ownership of, title to, use of, or any interest in real estate; (d) Intellectual Property licensing agreements and all other agreements and commitments with respect to Intellectual Property rights, including Arrangements with current or former employees, consultants or contractors 7 regarding the appropriation or the non-disclosure of any Intellectual Property; (e) Arrangements, whether in the Ordinary Course of Business or not, which involve capital expenditures, future payments, performance of services or delivery of goods and/or materials, to or by the Company which in the case of any single or series of related Arrangements, involve value in excess of One Hundred Thousand Dollars (U.S.$100,000); (f) powers of attorney that are currently effective and outstanding; (g) Arrangements with respect to borrowed moneys, guarantees, letters of credit or the creation of a Lien; (h) Arrangements involving employment, severance obligations or other Employee Benefit Plans; (i) Arrangements containing restrictions on the conduct of the Company's or its Subsidiaries' business, including, without limitation, grants of exclusivity with respect to products, services or geographic areas and non-competition and non-solicitation restrictions; (j) Arrangements regarding ownership of or investments in any Person (including, but not limited to, investments in joint ventures or minority investments; (k) Arrangements with airlines or hotels for the purchase of services at other than published rates; (l) other Arrangements that are material to the conduct of the Company's and its Subsidiaries' business; and (m) each amendment, supplement and modification (whether oral or written) in respect to any of the foregoing. "Merger" has the meaning set forth in the Recitals of this Agreement. "Merger Consideration" has the meaning set forth in Section 3(b) of this Agreement. "Merger Consideration Per Share" means the Merger Consideration to be distributed with respect to each Share in accordance with this Agreement. "Merger Expenses" means (i) the aggregate amount to satisfy and discharge all Company Indebtedness including, without limitation, the Amadeus/Terra Loans; (ii) the Stay Pay Bonuses; (iii) all payments to Michael Thomas pursuant to the terms of the Separation Agreement and Release of Claims, effective as of October 1, 2004, by and between the Company and Michael Thomas; (iv) the costs associated with any directors and officers insurance policy of the Company; and (v) all of the costs and expenses incurred by the Company in connection with this Agreement and the Related Documents and the Transactions, including, without limitation, all costs and expenses related to the cancellation or termination of Options, and the fees, costs and expenses of Libra Securities and any other broker or finder employed, authorized or retained by any of the Company, the Shareholders or their respective Representatives (including, but not limited, to Allen & Company Incorporated). "Merger Sub" has the meaning set forth in the opening paragraph of this Agreement. "Net Merger Consideration" means the amount of the Merger Consideration less the aggregate amount of the Merger Expenses. "Net Merger Consideration Per Share" means the Net Merger Consideration to be distributed with respect to each Share in accordance with this Agreement. "Options" has the meaning set forth in Section 5(c) of this Agreement. "Option Consideration" has the meaning set forth in Section 5(c) of this Agreement. 8 "Order" means any award, decision, injunction, judgment, order, ruling, subpoena, or verdict entered, issued, made, or rendered by any court, administrative agency, or other Government Authority or by any arbitrator. "Ordinary Course of Business" means an action taken by a Person will be deemed to have been taken in the "Ordinary Course of Business" only if all of the following are true: (a) such action is consistent with the past practices of such Person and is taken in the ordinary course of the normal day-to-day operations of such Person; (b) such action is not required to be authorized by the board of directors of such Person (or by any person or group of Persons exercising similar authority) and is not required to be specifically authorized by the parent company (if any) of such Person; and (c) such action is similar in nature and magnitude to actions customarily taken, without any authorization by the board of directors (or by any Person or group of Persons exercising similar authority), in the ordinary course of the normal day-to-day operations of other Persons that are in the same line of business as such Person. "party" and "parties" has the meaning set forth in the opening paragraph of this Agreement. "Paying Agent Agreement" means that certain Paying Agent Agreement, dated as of the Closing Date, by and among the Company, the Buyer, the Escrow Agent and the Shareholders, substantially in the form of Exhibit C attached hereto. "Patents" has the meaning set forth in Section 10.7(a)(i) of this Agreement. "Permitted Liens" means (i) liens for Taxes, assessments, governmental charges or levies or mechanics' and other statutory liens which are not material in amount relative to the property affected and which are not yet delinquent or can be paid without penalty or are being contested in good faith by appropriate Proceedings in respect thereof; and (ii) imperfections of title which are not substantial in amount relative to the property affected and which do not materially interfere with the present use of the property subject thereto or affected thereby. "Person" (whether or not such term is capitalized) means all natural persons, corporations, trusts, associations, joint ventures, limited liability companies and other entities, and governments, agencies and political subdivisions. "Policies" has the meaning set forth in Section 10.20 of this Agreement. "Pre-Closing Statement of Working Capital" has the meaning set forth in Section 4(c)(2) of this Agreement. "Preferred Stock" means the preferred stock, par value $0.001 per share, of the Company. "Proceeding" means any action, arbitration, audit, hearing, investigation, proceeding or suit (whether civil, criminal, administrative, investigative, or informal) commenced, brought, conducted, or heard by or before, or otherwise involving, any Governmental Authority or arbitrator. 9 "Proprietary Rights Agreement" has the meaning set forth in Section 10.13(a)(ii) of this Agreement. "Related Documents" has the meaning set forth in Section 13.1(b) of this Agreement. "Related Person" with respect to a particular individual includes all of the following: (a) each other member of such individual's Family; (b) any Person that is directly or indirectly controlled by such individual or one or more members of such individual's Family; (c) any Person in which such individual or members of such individual's Family hold (individually or in the aggregate) a Material Interest; and (d) any Person with respect to which such individual or one or more members of such individual's Family serves as a director, officer, partner, executor, or trustee (or in a similar capacity). With respect to a specified Person other than an individual, "Related Person" includes all of the following: (a) any Person that directly or indirectly controls, is directly or indirectly controlled by, or is directly or indirectly under common control with such specified Person; (b) any Person that holds a Material Interest in such specified Person; (c) each Person that serves as a director, officer, partner, executor or trustee of such specified Person (or in a similar capacity); (d) any Person in which such specified Person holds a Material Interest; (e) any Person with respect to which such specified Person serves as a general partner or a trustee (or in a similar capacity); and (f) any Related Person of any individual described in clause (b) or (c). For purposes of this definition, (a) the "Family" of an individual includes (i) the individual, (ii) the individual's spouse, (iii) any other natural person who is related to the individual or the individual's spouse within the second degree, and (iv) any other natural person who resides with such individual, and (b) "Material Interest" means direct or indirect beneficial ownership (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of voting securities or other voting interests representing at least 10% of the outstanding voting power of a Person or equity securities or other equity interests representing at least 10% of the outstanding equity securities or equity interests in a Person. "Representative" with respect to a particular Person, means any director, officer, employee, agent, consultant, advisor, or other representative of such Person, including legal counsel, accountants, and financial advisors. "SEC" means the U.S. Securities and Exchange Commission. "SEC Documents" has the meaning set forth in Section 9.8 of this Agreement. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Security Agreements" means those certain Security Agreements by and among the Buyer and each of the Shareholders, to be entered into pursuant to the terms of the Convertible Promissory Notes, substantially in the form of Exhibit F attached hereto. "Share Certificates" has the meaning set forth in Section 5(a) of this Agreement. 10 "Shares" has the meaning set forth in the Recitals of this Agreement. "Shareholder" and "Shareholders" have the meanings set forth in the opening paragraph of this Agreement. "Shareholder Representative" has the meaning set forth in Section 16.12 of this Agreement. "Software Documentation" means all documents, other written material (including user and support manuals, flowcharts and other supporting documentary, architecture documents, design documents, requirements documents, specifications documents and computer material) and source codes which have been created by or for the Company or its Subsidiaries or acquired by the Company or its Subsidiaries relating to, explaining or assisting in the use of the Computer Software. "Software Rights" means all intellectual property comprised within the Computer Software including, but not limited to, all property and contract rights related to the Computer Software which are necessary or incidental to the development, support, marketing, production, licensing or sale of the Computer Software; all intellectual property comprised within all other of the Company's and its Subsidiaries' systems, concepts or ideas related to the Computer Software whether completed, in development or contemplated; all intellectual property comprised within customer support and other marketing databases related to the Computer Software; all intellectual property comprised within the Software Documentation; and all intellectual property used or required to be used by the Company and its Subsidiaries in connection with its business. "Stay Pay Bonuses" means the following bonuses paid to certain members of management of the Company at the Closing: (a) Philip A. Ferri - $96,482 (b) Norman Knowles - $92,500 (c) Steven J. Pello - $87,500 (d) Henry Wang - $62,500 "Stock Option Plans" has the meaning set forth in Section 5(c) of this Agreement. "Subsidiary" means, with respect to any Person, any corporation, limited liability company, partnership, association or other business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof; or (ii) if a limited liability company, partnership, association or other business entity, a majority of the partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a 11 Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association or other business entity if such Person or Persons shall be allocated a majority of limited liability company, partnership, association or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association or other business entity. Buyer's Subsidiaries for all purposes hereunder excludes Lifestyles Innovations, Inc., a Nevada corporation. "Surviving Corporation" has the meaning set forth in Section 2.2 of this Agreement. "Taxes" means all taxes imposed of any nature and by any Governmental Authority, including, without limitation, all federal, state, local or foreign net income, alternative or add-on minimum, assets, gross income, gross receipts, sales, use, ad valorem, value-added, franchise, profits, license, withholding, communications, payroll, employment, excise, severance, stamp, occupation, premium, profit-sharing payments, property, social benefit contributions, windfall profits or similar taxes, duties, assessments, fees, levies or other similar governmental charges of any kind whatsoever, together with any interest, penalties, additions to tax or additional amounts imposed thereon or imposed with respect to any such interest, penalties, additions to tax or other additional amounts. "Tax Return" means all returns (including any information return), reports, statements, schedules, notices forms or other documentation or information filed or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation, documentation or enforcement of or compliance with any legal requirement relating to any Tax. "Terra" has the meaning set forth in the opening paragraph of this Agreement. "Terra Networks" means Terra Networks, S.A., a company organized under the laws of the Kingdom of Spain. "Texas Law" has the meaning set forth in Section 2.2 of this Agreement. "Threshold Amount" has the meaning set forth in Section 15.1(c) of this Agreement. "Trademarks" has the meaning set forth in Section 10.7(a)(ii) of this Agreement. "Trade Secrets" has the meaning set forth in Section 10.7(a)(iv) of this Agreement. "Transactions" means the transactions contemplated by this Agreement. "Transfer Taxes" has the meaning set forth in Section 12.7(b) of this Agreement. "URLs" has the meaning set forth in Section 10.7(a)(vii) of this Agreement. "Working Capital Adjustment" has the meaning set forth in Section 4(c)(3) of this Agreement. 12 "Working Capital Amount" means an amount equal to the sum of the current assets of the Company (excluding the Merger Expenses to the extent they appear in the current liabilities of the Company) minus the sum of the current liabilities of the Company (excluding the Merger Expenses to the extent they appear in the current assets of the Company), determined in accordance with GAAP. "Working Capital Review Period" has the meaning set forth in Section 4(c)(4) of this Agreement. "Working Capital Settlement Amount" means an amount equal to the greater of twenty percent (20%) of the Estimated Working Capital Amount or $100,000. 2. Deposit; The Merger. 2.1 Initial Deposit. Contemporaneously with the execution of this Agreement by the parties, Buyer shall pay to the Escrow Agent the Initial Deposit Amount by wire transfer of immediately available funds in accordance with the terms of the Escrow Agreement. 2.2 Merger. Subject to the terms and conditions of this Agreement, Merger Sub will be merged with and into the Company in accordance with the laws of the State of Texas ("Texas Law"), whereupon the separate existence of Merger Sub shall cease, and the Company shall be the surviving corporation (the Company following the Merger is sometimes referred to herein as the "Surviving Corporation"). 2.3 Articles of Merger and Certificate of Merger. As soon as practicable after satisfaction of, or to the extent permitted hereunder, waiver of, all of the conditions to the Merger, the Company and Merger Sub shall file Articles of Merger (the "Articles of Merger") with the Secretary of State of the State of Texas and make all such other filings or recordings required by Texas Law in connection with the Merger. The Merger shall become effective at such time as the Articles of Merger is duly filed with the Secretary of State of the State of Texas, in accordance with the relevant provisions of Texas Law (the "Effective Time"). The date on which the Effective Time shall occur is referred to herein as the "Effective Date." 2.4 Surviving Corporation. From and after the Effective Time, the Surviving Corporation shall possess all of the rights, privileges, powers and franchises and be subject to all of the restrictions, disabilities and duties of the Company and Merger Sub, all as provided under Texas Law. 3. Conversion of Shares. (a) At the Effective Time: (i) each share of common stock of Merger Sub outstanding immediately prior to the Effective Time shall automatically and without any action on the part of the holder thereof, be converted into one share of common stock of the Surviving Corporation. 13 (ii) each issued and outstanding Share that is held in the treasury of the Company shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and no Merger Consideration shall be delivered or deliverable therefor. (iii) each issued and outstanding Share shall automatically and without any action on the part of the holder thereof cease to be outstanding and be converted into the right to receive the Net Merger Consideration Per Share, if any, payable in the manner provided in Section 5 hereof. All such Shares, when so converted, shall no longer be outstanding and shall automatically be cancelled and retired and shall cease to exist, and each holder of a certificate representing any of such Shares shall cease to have any rights with respect thereto, except the right to receive the Net Merger Consideration Per Share, if any, therefor upon the surrender of such certificate in accordance with Section 5 hereof. (b) "Merger Consideration" means (i) the Initial Deposit Amount, plus (ii) the Convertible Promissory Notes, plus (iii) the Closing Deposit Amount, if any, plus (iv) $10,500,000 in cash. 4. Merger Consideration Payment; Working Capital Adjustment. (a) Upon the Effective Time, subject to the satisfaction or waiver of the conditions set forth in Sections 13.1, 13.2 and 13.3 hereof, the Buyer or Merger Sub shall deliver to the Escrow Agent the Merger Consideration (as adjusted in accordance with Section 4(c)(2) below). Subject to the last sentence of this Section, the parties agree that the cash portion of the Net Merger Consideration shall be distributed to the shareholders of the Company in accordance with their percentage ownership of the Shares. Furthermore, the parties agree that the Convertible Promissory Notes shall be issued to the Shareholders and/or IGT as determined among the Shareholders individually and IGT at Closing. In lieu of accepting a Convertible Promissory Note as part of the Net Merger Consideration, each of the remaining shareholders of the Company shall be paid in cash from the cash portion of the Net Merger Consideration an amount equal to the principal amount of the Convertible Promissory Notes such shareholder would have received in accordance with their pro rata percentage ownership of the Shares. By way of example, the attached Exhibit E is an estimate of the cash amounts to be paid to the Company's shareholders. At the Closing, the parties will prepare a closing statement in the Form of Exhibit E with the actual amounts of Merger Consideration and Merger Expenses. (b) Upon receipt of the Merger Consideration, the Escrow Agent shall first pay the Merger Expenses from the cash portion of the Merger Consideration then distribute the Net Merger Consideration, minus the Working Capital Settlement Amount, to the shareholders of the Company in accordance with Section 4(a) and 5 and the terms of the Paying Agent Agreement and the Escrow Agreement. The Company and the Shareholders acknowledge and agree that neither the Buyer, the Surviving Corporation, nor the Merger Sub has, or shall have, any responsibility or liability for the payment of the Merger Expenses or the distribution of the Net Merger Consideration to the shareholders of the Company, except distribution to the Escrow Agent and the Paying Agent as set forth in this Section 4. In accordance with the terms of the Escrow Agreement and the Paying Agent Agreement, the Escrow Agent shall retain the Working Capital Settlement Amount from the cash portion of the Net Merger Consideration until the parties determine the Final Working Capital Adjustment Amount. 14 (c) The parties agree that the cash portion of the Net Merger Consideration will be subject to the following adjustments: (1) The cash portion of the Net Merger Consideration shall be adjusted, dollar for dollar, to the extent that the Final Working Capital Amount as set forth on the Final Statement of Working Capital is greater or less than the Estimated Working Capital Amount as set forth on the Pre-Closing Statement of Working Capital. (2) At least three (3) days prior to the Closing, the Company will estimate the Working Capital Amount as of the Closing Date (the "Estimated Working Capital Amount"), prepare a preliminary statement (the "Pre-Closing Statement of Working Capital") of the Estimated Working Capital Amount and deliver the Pre-Closing Statement of Working Capital to the Buyer. In the event that the Estimated Working Capital Amount is less than the zero (0), then the cash portion of the Net Merger Consideration shall be reduced by such amount. In the event that the Estimated Working Capital Amount is more than zero (0), then the cash portion of the Net Merger Consideration shall be increased by such amount. (3) Within thirty (30) days following the Closing Date, the Surviving Corporation, with the assistance and cooperation of the Buyer, shall prepare and deliver to the Shareholder Representative a statement (the "Final Statement of Working Capital") setting forth (i) the actual Working Capital Amount as of the Closing Date (the "Final Working Capital Amount"), (ii) the difference between the Final Working Capital Amount and zero (0) (the "Working Capital Adjustment"), (iii) the cash portion of the Net Merger Consideration plus or minus the Working Capital Adjustment as appropriate (the "Adjusted Cash Merger Consideration"), and (iv) the difference between the cash portion of the Net Merger Consideration paid by the Buyer at the Closing (adjusted as set forth in Section 4(c)(2) above) and the Adjusted Cash Merger Consideration (such difference referred to herein as the "Final Adjustment Amount"). (4) The Shareholders shall have fifteen (15) days following the Shareholder Representative's receipt of the Final Statement of Working Capital (the "Working Capital Review Period") to review the same. On or before the expiration of the Working Capital Review Period, the Shareholder Representative shall deliver to the Buyer a written statement accepting or objecting to the Final Statement of Working Capital. In the event that the Shareholders shall object to the Final Statement of Working Capital, such statement shall include a detailed itemization of the Shareholders' objections and their reasons for such objections. If no such statement is delivered by the Shareholder Representative to the Buyer within the Working Capital Review Period, the Shareholders shall be conclusively deemed to have accepted the Final Statement of Working Capital. 15 (5) If the cash portion of the Net Merger Consideration paid by the Buyer at the Closing (adjusted as set forth in Section 4(c)(2)) is greater than the Adjusted Cash Merger Consideration, then the Escrow Agent shall pay the Buyer the Final Adjustment Amount from the Working Capital Settlement Amount (as a reduction to the cash portion of the Merger Consideration) by wire transfer of immediately available funds within ten (10) days of the determination by the Shareholders and the Buyer of the Final Statement of Working Capital. If the cash portion of the Net Merger Consideration paid by the Buyer at the Closing (adjusted as set forth in Section 4(c)(2)) is less than the Adjusted Cash Merger Consideration, then the Buyer shall pay the Escrow Agent the Final Adjustment Amount (as additional cash Merger Consideration) by wire transfer of immediately available funds within ten (10) days of the determination by the Shareholders and the Buyer of the Final Statement of Working Capital. (6) The Final Statement of Working Capital shall be prepared from the books and records of the Surviving Corporation in accordance with GAAP applied on a basis consistent with that used in the preparation of the Financial Statements. (7) In the event that the Shareholders shall accept or shall be conclusively deemed to have accepted the Final Statement of Working Capital as prepared and delivered by the Shareholder Representative, the Final Statement of Working Capital shall be used for the purposes of determining any adjustment to the cash portion of the Merger Consideration in accordance with this Section 4. In the event, however, that the Shareholder Representative shall object to the Final Statement of Working Capital within the Working Capital Review Period, the Shareholder Representative and the Buyer shall promptly meet and in good faith attempt to resolve such objection(s). Any such objection(s) which cannot be resolved between the Buyer and the Shareholder Representative within thirty (30) days following the Buyer's receipt of the Shareholders' statement of objection(s) shall be resolved in accordance with the procedures set forth in Section 4(c)(8). The Final Statement of Working Capital, as adjusted to reflect the adjustments agreed upon by the Buyer and the Shareholders or determined in accordance with Section 4(c)(8), shall be used for purposes of determining any adjustment to the cash portion of the Merger Consideration in accordance with Section 4(c)(1). (8) If the Buyer and the Shareholders cannot resolve the objection(s) of the Shareholders to the Final Statement of Working Capital in accordance with Section 4(c)(7) above, either the Buyer or the Shareholders, by written notice to the other, may elect to have any such disagreement tendered to and resolved by a mutually acceptable firm of independent certified public accountants of recognized national standing ("Accountant") to make a determination as to the subject matter of such disagreement, which determination shall be final and binding on the parties hereto for the purpose of this Agreement. The final determination of the Accountant with respect to the Working Capital Amount shall be considered the "Final Working Capital Amount" for purposes of this Agreement. The Buyer and the Shareholders shall each pay one-half of the fees and expenses charged by such Accountant. If the Buyer and the Shareholders are unable to agree on the Accountant within the aforementioned thirty (30) day period, then the Accountant shall be 16 Deloitte & Touche. The Accountant shall be instructed to use every reasonable effort to perform its function as efficiently and inexpensively as possible within thirty (30) days following submission of the matter to it and, in any case, as soon as practicable after such submission to it. The Accountant shall be limited to deciding each such disagreement in an amount which shall be equal to or in between the amounts proposed by the Buyer and the Shareholders, and no more and no less. The determination by the Accountant shall be based solely on written materials provided to it by the parties and on presentations by the Shareholders, on the one hand, and the Buyer, on the other hand, and shall not involve any independent review. (9) The Shareholder Representative shall represent the Shareholders in connection with all matters under this Section 4(c). 5. Exchange of Certificates. (a) At and after the Effective Time, each certificate representing outstanding Shares will be deemed held by the holder of record as recorded on the stock records of the Company immediately prior to the Effective Time. As soon as practicable after the Effective Time (but in no event less than five (5) days after the Effective Time), the Surviving Corporation and the Shareholder Representative shall cause the Escrow Agent in accordance with the terms of the Paying Agent Agreement to mail to each record holder of Shares a form of letter of transmittal ("Letter of Transmittal") and instructions for use in surrendering the certificates for such Shares (the "Share Certificates") for cancellation and receiving the Net Merger Consideration to which such holder shall be entitled therefor, if any. By execution and delivery of a Letter of Transmittal, a holder shall be deemed to consent to the terms of the Merger set forth in this Agreement, including the appointment of a Shareholder Representative pursuant to Section 16.11. Promptly after receipt of any Share Certificates, the Escrow Agent shall notify the Buyer and the Shareholder Representative of such receipt and the Escrow Agent shall deliver to the holder thereof it, his or her portion of the Net Merger Consideration. (b) The Net Merger Consideration, if any, delivered upon the surrender of Share Certificates in accordance with the terms hereof will be delivered by the Escrow Agent to the holder of record as recorded on the stock records of the Company immediately prior to the Effective Time. After the Effective Time, there will be no further registration of transfers of the Shares on the stock transfer books of the Company. If, after the Effective Time, Share Certificates are presented for transfer or for any other reason, they will be canceled and exchanged and the Net Merger Consideration, if any, will be delivered in exchange therefor in accordance with this Section 5. The Escrow Agent shall accept Share Certificates upon compliance with such reasonable terms and conditions as the Escrow Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. (c) The Company shall take such action in order that, at the Effective Time, any options, warrants, rights, calls, agreements, convertible notes, convertible securities or other commitments granted under any Company stock option plan or agreement or pursuant to which any Person has the right to acquire Common Stock, whether through acquisition or conversion (collectively, as such plans or agreements may have been amended, supplemented or modified from 17 time to time, the "Stock Option Plans") that are unexercised or unconverted, whether or not then exercisable or convertible (the "Options"), shall be extinguished by virtue of the Merger and converted into the right to receive, for each share of Common Stock subject to such Option, an amount in cash equal to the excess, if any, of the Net Merger Consideration Per Share over the per share exercise price of such Option (such excess being referred to as the "Option Consideration"), and such amount less the amount of any required withholding taxes shall be paid to the holder of such Option. The surrender of an Option in exchange for the Option Consideration shall constitute a release of any and all rights the holder had or may have had in the Option. All Stock Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant of any other interest in respect of the capital stock of the Company shall be extinguished as of the Effective Time. The Surviving Corporation or the Shareholder Representative, as applicable, shall be entitled to deduct and withhold from the Net Merger Consideration otherwise payable pursuant to this Agreement to any former holder of Options such amounts as the Surviving Corporation or the Shareholder Representative, as the case may be, may be required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law. To the extent so withheld, such amounts shall be treated for all purposes of this Agreement as having been paid to the former holder of Options in respect of which such deduction and withholding was made. (d) Upon and after the Effective Time, until Share Certificates representing Shares are surrendered pursuant to this Section 5, such certificates shall not represent an ownership right in the Company and shall be deemed, for all purposes, solely to evidence ownership of the right to receive the Net Merger Consideration Per Share, if any, in accordance with Section 5. (e) Any portion of the Net Merger Consideration (including any earnings thereon) which remains undistributed to the holders of the Shares for one (1) year after the Effective Time shall be delivered to the Surviving Corporation, upon demand, and any holders of shares of Shares who theretofore have not complied with this Section 5 thereafter shall look only to the Surviving Corporation and only as general creditors thereof for payment of their claim for any Merger Consideration. 6. Dissenting Shares. Notwithstanding Section 3, Shares outstanding immediately prior to the Effective Time and held by a holder who has not voted in favor of the Merger or consented thereto in writing and who has demanded appraisal for such Shares in accordance with Texas Law shall not be converted into a right to receive the Merger Consideration, unless such holder fails to perfect or withdraws or loses the right to appraisal. If after the Effective Time such holder fails to perfect or withdraws or loses the right to appraisal, such Shares shall be treated as if they had been converted as of the Effective Time into a right to receive the Net Merger Consideration. The Company shall give prompt notice to the Buyer of any demands received by the Company for appraisal of any shares of Common Stock, together with copies of any correspondence or filings related thereto, and the Buyer shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. Prior to the Effective Time, the Company shall not, without the prior written consent of the Buyer, make any payment with respect to, or settle or offer to settle, any such appraisal demands, or agree to do any of the foregoing. 18 7. The Surviving Corporation. 7.1 Articles of Incorporation. The Articles of Incorporation of Merger Sub as in effect immediately prior to the Effective Time shall be the Articles of Incorporation of the Surviving Corporation. 7.2 Bylaws. The Bylaws of Merger Sub in effect immediately prior to the Effective Time shall be the Bylaws of the Surviving Corporation. 7.3 Directors and Officers. From and after the Effective Time, until successors are duly elected or appointed and qualified in accordance with applicable law, the directors and the initial officers of Merger Sub at the Effective Time shall become directors and the officers of the Surviving Corporation and the Officers and Directors of the Company shall cease to act as such at such time. 8. Closing. The closing of the Transactions (the "Closing") in accordance with the terms and conditions of this Agreement shall take place at the offices of Haynes and Boone, L.L.P., located at 399 Park Avenue, New York, New York 10022, at 10:00 a.m. E.S.T. or such other location and time of day as the Company, the Shareholders and the Buyer mutually agree upon, which date shall be no later than March 14, 2005 (including any extension thereof pursuant to this Section 8, the "Closing Date"). The Closing Date may be extended for up to thirty-one (31) days following March 14, 2005 until April 14, 2005 by Buyer upon at least five (5) days prior written notice to the Company before March 14, 2005 and payment to the Escrow Agent of $100,000 by wire transfer of immediately available funds (the "Closing Deposit Amount"). The Closing may, with the consent of all parties, take place by delivering an exchange of documents by facsimile transmission with originals to follow by overnight mail service courier. If the Closing occurs, all the representations and warranties contained in Articles 9, 10 and 11 are deemed to be remade as of the Closing Date (in addition to having been given as of the date hereof) (other than any representation or warranty that expressly relates to a specific date, which representation and warranty shall be correct on the date so specified), without giving effect to any notices given pursuant to 12.6(a) or (b) hereof. 9. Representations and Warranties of the Buyer and Merger Sub. The Buyer and, where applicable, Merger Sub hereby, jointly and severally, represent, warrant and covenant to the Company and the Shareholders the following: 9.1 Organization, Good Standing and Qualification. The Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. Merger Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The Buyer and Merger Sub are each duly qualified to transact business and in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties. Merger Sub conducted no business prior to the date hereof. 9.2 Capitalization and Voting Rights. The authorized capital stock of the Buyer as of the date of this Agreement consists of: 19 (i) 200,000,000 shares of Buyer Common Stock, of which 28,906,009 shares are issued and outstanding as of the Close of business on February 9, 2005; and (ii) 10,000,000 shares of Buyer Preferred Stock, of which 1,529,209 shares are issued and outstanding as of the Close of business on February 9, 2005. The outstanding shares of Buyer Common Stock and Buyer Preferred Stock (collectively, "Buyer Capital Stock") are all duly and validly authorized and issued, fully paid and nonassessable. Set forth on Schedule 9.2 of the Disclosure Schedule is a listing as of the date of this Agreement of all outstanding options, warrants, rights, calls, agreements, convertible notes, convertible securities or other commitments granted under any Buyer stock option plan or agreement or pursuant to which any Person has the right to acquire Buyer Capital Stock, whether through acquisition or conversion (collectively, the "Buyer Options"), or agreements for the purchase or acquisition from the Buyer of, or securities convertible into, any shares of Buyer Capital Stock, including the number of shares of Buyer Capital Stock subject thereto, and as of the date hereof there are no other Arrangements relating to the issuance, sale, grant, transfer, redemption or purchase by the Buyer of any equity or other securities of the Buyer. None of the outstanding equity securities or other securities of the Buyer was issued in violation of preemptive or subscription rights, the Securities Act or any other Legal Requirement. No shares of Buyer Capital Stock are held by the Buyer in its treasury as of the date of this Agreement. 9.3 Subsidiaries. Except as set forth on Schedule 9.3, other than Merger Sub, the Buyer does not presently own or control, directly or indirectly, any interest in any other corporation, association, or other business entity. Except as set forth on Schedule 9.3 of the Disclosure Schedule, the Buyer is not a participant in any joint venture, partnership, or similar arrangement, nor has the Buyer entered into, or have the present intent to enter into, any Arrangement to acquire any equity securities or other security of any Person or any direct or indirect equity or ownership interest in any other business. 9.4 Authorization. Other than stockholder approval of the issuance of the Buyer Common Stock issuable upon conversion of the Convertible Promissory Notes and registration thereof with the appropriate Governmental Authority and stock exchange, all corporate action on the part of the Buyer and Merger Sub and its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the Related Documents, and the performance of all obligations of the Buyer and Merger Sub hereunder and thereunder has been taken or will be taken prior to the Closing. This Agreement, and each Related Document to which it is a party will after the Closing will constitute, constitutes the valid and legally binding obligations of the Buyer and/or Merger Sub, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. 20 9.5 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Buyer or Merger Sub is required in connection with the consummation of the Transactions, except for such other filings required pursuant to applicable federal and state securities laws and blue sky laws, which filings will be effected within the required statutory period and filings in connection with AMEX listing requirements. 9.6 Legal Proceedings; Order. (a) Except as set forth in Schedule 9.6 of the Disclosure Schedule, there is no pending Proceeding (i) that has been commenced by or against the Buyer or Merger Sub or that otherwise related to or may affect the business of, or any of the assets owned or used by, the Buyer or Merger Sub, except such as would not have a Materially Adverse effect on the Buyer or Merger Sub; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Transactions. To the Knowledge of the Buyer, no such Proceeding has been threatened in a writing delivered to the Buyer. (b) Except as set forth in Schedule 9.6 of the Disclosure Schedule: (i) there is no Order to which the Buyer or Merger Sub, or any of the assets owned or used by the Buyer or Merger Sub, is subject; (ii) to the Knowledge of the Buyer, no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which the Buyer or Merger Sub, or any of the assets owned or used by the Buyer or Merger Sub, is subject; and (iii) the Buyer and Merger Sub have not received, at any time, any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which the Buyer or Merger Sub, or any of the assets owned or used by the Buyer or Merger Sub, is or has been subject. 9.7 SEC Documents; Buyer Indebtedness. (a) The Buyer has made available to the Company a true and complete copy of each report, schedule, registration statement and definitive proxy statement filed by the Buyer with the SEC since December 31, 2003 (collectively, the "SEC Documents"), which are all the documents (other than the preliminary materials) that the Buyer was required to file with the SEC since December 31, 2003. Except as set forth on Schedule 9.7(a) of the Disclosure Schedule, as of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations of the SEC thereunder applicable to the SEC Documents, and none of the SEC Documents contained as of their respective dates any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. 21 (b) Except as set forth on Schedule 9.7(b) of the Disclosure Schedule, the financial statements of the Buyer, included in the SEC Documents, including the notes and schedules thereto, complied as to form in all material respects with the rules and regulations of the SEC with respect thereto, were prepared in accordance with GAAP applied on a consistent basis during the periods involved and fairly present the consolidated financial position of the Buyer and its consolidated Subsidiaries as of their respective dates and the consolidated results of operations and the consolidated cash flows of the Buyer and its consolidated Subsidiaries for the periods presented therein in accordance with applicable requirements of GAAP (subject, in the case of the unaudited statements, to normal, recurring adjustments, none of which are material) applied on a consistent basis during the periods presented. (c) Schedule 9.7(c) of the Disclosure Schedule describes all Buyer Indebtedness, including the identity of the Persons to whom such Buyer Indebtedness is owed and the principal amount of such Buyer Indebtedness as of the date hereof. 9.8 Intellectual Property. The Buyer and its Subsidiaries own, possess or license, or to the Buyer's Knowledge, can acquire on reasonable terms, adequate patents, patent rights, licenses, inventions, copyrights, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures), trademarks, service marks, trade names or other intellectual property (collectively, "Buyer Intellectual Property") necessary to carry on the business of now operated by them, and neither the Buyer nor any of its Subsidiaries have received any notice or otherwise has Knowledge of any infringement of or conflict with asserted rights of any Person with respect to any Buyer Intellectual Property (including Buyer Intellectual Property which is licensed) or of any facts or circumstances which would render any Buyer Intellectual Property invalid or inadequate to protect the interests of the Buyer or any of its Subsidiaries therein, and which infringement or conflict (if the subject of any unfavorable decision, ruling or finding) or invalidity or inadequacy, singly or in the aggregate, could reasonably be expected to result in a Materially Adverse effect on the Buyer or its Subsidiaries. 9.9 Compliance with Other Instruments. The Buyer and its Subsidiaries are not in violation of any provision of (a) their Certificate of Incorporation or Bylaws or other charter documents, each as amended to date, nor, to the Knowledge of the Buyer, except as set forth on Schedule 9.9 of the Disclosure Schedule, of (b) any Arrangement, instrument, judgment, order, writ, decree or contract, statute, rule or regulation to which the Buyer or its Subsidiaries or their assets is subject and a violation of which could have a Materially Adverse effect on the Buyer or its Subsidiaries. Except as set forth on Schedule 9.9 of the Disclosure Schedule, the execution, delivery and performance of this Agreement and the consummation of the Transactions will not result in any such violation, or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision or an event that results in the acceleration of any payment or other obligation of the Buyer or its Subsidiaries, the creation of any Lien upon any assets of the Buyer or its Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal of any material Governmental Authorization applicable to the Buyer, its Subsidiaries, their business or operations or any of their assets or properties. 22 9.10 Buyer's and Merger Sub's Counsel. The Buyer and Merger Sub acknowledges that the Buyer and Merger Sub have had the opportunity to review this Agreement, the exhibits and the schedules attached hereto and the Related Documents and the transactions contemplated herein and therein with the Buyer's and Merger Sub's own legal counsel. 9.11 No Brokers. The Buyer and Merger Sub have not employed or authorized anyone to represent them as a broker or finder in connection with the Transactions, and no broker or other person is entitled to any commission or finder's fee from the Buyer or Merger Sub in connection with the Transactions. 9.12 Compliance with Legal Requirements; Governmental Authorizations. (a) Except as set forth in Schedule 9.12 of the Disclosure Schedule: (i) the Buyer and its Subsidiaries are and at all times have been in material compliance with each Legal Requirement that is or was applicable to them or to the conduct of operations of their business or the ownership or use of any of their assets, except where the failure to comply would not have a Materially Adverse effect on the Buyer or its Subsidiaries; and (ii) the Buyer and its Subsidiaries have not received at any time any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding (a) any actual, alleged, possible, or potential violation of or failure to comply with any Legal Requirement, or (b) any actual, alleged, possible, or potential obligation on the part of the Buyer or its Subsidiaries to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. (b) Except as set forth on Schedule 9.12 of the Disclosure Schedule, the Buyer and its Subsidiaries have each Governmental Authorization necessary to permit the Buyer and its Subsidiaries to lawfully conduct and operate their business in the manner they currently conduct and operate such business and to permit the Buyer and its Subsidiaries to own and use their assets in the manner in which they currently own and use such assets, except where such failure could not have a Materially Adverse effect on the Buyer and Merger Sub. 10. Representations and Warranties of the Company. The Company hereby represents and warrants to the Buyer the following: 10.1 Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Texas. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Materially Adverse effect on its business or properties. 23 10.2 Capitalization and Voting Rights. The authorized capital stock of the Company consists of: (i) 200,000,000 Shares, of which 198,937,652 Shares are issued and outstanding; and (ii) 2,000,000 shares of Preferred Stock, none of which are issued and outstanding. The outstanding Shares are owned of record and beneficially by the shareholders of the Company in the numbers specified in Schedule 10.2 of the Disclosure Schedule attached hereto. The outstanding Shares are all duly and validly authorized and issued, fully paid and nonassessable. Set forth on Schedule 10.2 of the Disclosure Schedule is a description of all outstanding Options or agreements for the purchase or acquisition from the Company of, or securities convertible into, any shares of its capital stock, including the number of shares of capital stock of the Company subject thereto, the grant dates and exercise prices thereof and the names of the holders thereof, and there are no other Arrangements relating to the issuance, sale, grant, transfer, redemption or purchase by the Company of any equity or other securities of the Company. The Company has delivered to the Buyer true and complete copies of all Arrangements governing the Options. Except as set forth on Schedule 10.2 of the Disclosure Schedule, all outstanding warrants to purchase shares of the capital stock of the Company shall have been either exercised by the holder thereof or expired pursuant to the terms thereof as of immediately prior to the Closing. None of the outstanding equity securities or other securities of the Company was issued in violation of preemptive or subscription rights, the Securities Act or any other Legal Requirement. No shares of Common Stock or Preferred Stock are held by the Company in its treasury as of the date of this Agreement. Except as set forth on Schedule 10.2 of the Disclosure Schedule, the Company is not a party to, and has no Knowledge of, any voting agreement, irrevocable proxy or other Arrangement with respect to the voting of the Shares. Assuming that the Buyer (i) owns 100% of the capital stock of Merger Sub, free and clear of all Liens, and (ii) Merger Sub has issued no options, warrants or other Arrangements for the purchase of its capital stock, each as immediately prior to the Effective Time, at the Effective Time upon giving effect to the Merger, the Buyer will own 100% of the outstanding capital stock of the Surviving Corporation, free and clear of all Liens, and no Options will be outstanding. 10.3 Subsidiaries. The Company owns all of the issued and outstanding capital stock of the Company Subsidiary, and no Person has the right (contractual or other) to acquire any capital stock of the Company Subsidiary. The Company Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the State of South Carolina. The Company Subsidiary is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a Materially Adverse effect on its business or properties. Except for the Company Subsidiary, the Company has no Subsidiaries. Except as set forth on Schedule 10.3 of the Disclosure Schedule, the Company is not a participant in any joint venture, partnership, or similar arrangement, nor has the Company entered into, or have the present intent to enter into, any Arrangement to acquire any equity securities or other security of any Person or any direct or indirect equity or ownership interest in any other business. 24 10.4 Authorization. All corporate action on the part of the Company and its officers, directors and shareholders necessary for the authorization, execution and delivery of this Agreement and the Related Documents and the performance of all obligations of the Company hereunder and thereunder has been taken or will be taken prior to the Closing. The Board of Directors of the Company, at a meeting duly called and held, or pursuant to a written consent duly adopted resolutions (a) determining that the terms of the Merger and the other Transaction are fair to, and in the best interests of, the Company's shareholders; (b) approving this Agreement; and (c) recommending that the Company's shareholders approve and adopt this Agreement and approve the Merger. This Agreement constitutes the valid and legally binding obligations of the Company, enforceable in accordance with its terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. No state takeover statutes or similar statute or regulation applies or purports to apply to the Company with respect to this Agreement, the Merger or any other Transactions. The only vote of holders of any class or series of Company capital stock necessary to approve and adopt this Agreement and approve and consummate the Merger is the affirmative approval and adoption thereof by the holders of a two-thirds majority of the Shares. 10.5 Governmental Consents. No consent, approval, order or authorization of, or registration, qualification, designation, declaration or filing with, any Governmental Authority on the part of the Company is required in connection with the consummation of the Transactions, except for such other filings required pursuant to applicable federal and state securities laws and blue sky laws, which filings will be effected within the required statutory period. 10.6 Legal Proceedings; Order. (a) Except as set forth in Schedule 10.6 of the Disclosure Schedule, there is no pending Proceeding (i) that has been commenced by or against the Company or its Subsidiaries or that otherwise related to or may affect the business of, or any of the assets owned or used by, the Company or its Subsidiaries, except for civil litigation by private litigants praying for damages that do not exceed $10,000 in any case or $50,000 in the aggregate; or (ii) that challenges, or that may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the Transactions. Except as set forth in Schedule 10.6 of the Disclosure Schedule, to the Knowledge of the Company, no such Proceeding has been threatened in a writing delivered to the Company. (b) Except as set forth in Schedule 10.6 of the Disclosure Schedule: (i) there is no Order to which the Company or its Subsidiaries, or any of the assets owned or used by the Company or its Subsidiaries, is subject; (ii) to the Knowledge of the Company, no event has occurred or circumstance exists that may constitute or result in (with or without notice or lapse of time) a violation of or failure to comply with any term or requirement of any Order to which the Company or its Subsidiaries, or any of the assets owned or used by the Company or its Subsidiaries, is subject; and 25 (iii) the Company and its Subsidiaries have not received, at any time, any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding any actual, alleged, possible, or potential violation of, or failure to comply with, any term or requirement of any Order to which the Company or its Subsidiaries, or any of the assets owned or used by the Company or its Subsidiaries, is or has been subject. 10.7 Intellectual Property. (a) Intellectual Property Assets. The term "Intellectual Property" includes the following: (i) all United States, international and foreign patents, patent applications and statutory invention registrations, together with all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations thereof, all inventions therein, all rights therein provided by international treaties or conventions and all improvements thereto, and all other rights of any kind whatsoever of the Company or its Subsidiaries accruing thereunder or pertaining thereto (collectively, the "Patents"); (ii) all trademarks (including, without limitation, service marks), certification marks, collective marks, trade dress, logos, domain names, product configurations, trade names, business names, corporate names and other source identifiers, whether or not registered, whether currently in use or not, including, without limitation, all common law rights and registrations and applications for registration thereof, and all other marks registered in the U.S. Patent and Trademark Office or in any office or agency of any State or Territory of the United States or any foreign country, and all rights therein provided by international treaties or conventions, all reissues, extensions and renewals of any of the foregoing, together in each case with the goodwill of the business connected therewith and symbolized thereby, and all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of the Company or its Subsidiaries accruing thereunder or pertaining thereto (collectively, the "Trademarks"); (iii) all copyrights, copyright applications, copyright registrations and like protections in each work of authorship, whether statutory or common law, whether published or unpublished, any renewals or extensions thereof, all copyrights of works based on, incorporated in, derived from, or relating to works covered by such copyrights, together with all rights corresponding thereto throughout the world and all other rights of any kind whatsoever of the Company or its Subsidiaries accruing thereunder or pertaining thereto (collectively, the "Copyrights"); 26 (iv) all confidential and proprietary information, including, without limitation, know-how, trade secrets, manufacturing and production processes and techniques, inventions, research and development information, technical data, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information of the Company or its Subsidiaries (collectively, the "Trade Secrets"); (v) all of the Company's and its Subsidiaries' computer software programs and databases (including, without limitation, source code, object code and all related applications and data files), firmware, and documentation and materials relating thereto, and all Software Rights with respect to the foregoing, together with any and all options, warranties, service contracts, program services, test rights, maintenance rights, improvement rights, renewal rights and indemnifications and any substitutions, replacements, additions or model conversions of any of the foregoing (collectively, the "Computer Software"); (vi) all license agreements, permits, authorizations and franchises of the Company and its Subsidiaries, whether with respect to the Patents, Trademarks, Copyrights, URLs, Trade Secrets or Computer Software, or with respect to the patents, trademarks, copyrights, trade secrets, computer software or other proprietary right of any other Person, and all income, royalties and other payments now or hereafter due and/or payable with respect thereto, subject, in each case, to the terms of such license agreements, permits, authorizations and franchises (collectively, the "Licenses"); and (vii) all URLs, domain names or other names or addresses relating to the Company's or its Subsidiaries' operations with respect to the Internet (including, without limitation, registrations and applications for registration thereof with Network Solutions or other applicable private or public URL registries, domestic and foreign), together with all intellectual property and all other rights of any kind whatsoever of the Company or its Subsidiaries accruing thereunder, pertaining thereto or associated therewith, including, without limitation, all registrations, applications, renewals, reissues, extensions, links (including, without limitation, meta tags), and connections (collectively, the "URLs") (b) Agreements. Schedule 10.7 of the Disclosure Schedule contains a list of all Arrangements relating to Intellectual Property to which the Company or its Subsidiaries is a party or by which the Company or its Subsidiaries is bound, except for any license implied by the sale of a product and perpetual, paid-up licenses for commonly available software programs with a value of less than Ten Thousand Dollars (U.S. $10,000) under which the Company or its Subsidiaries is the licensee. There are no outstanding and, to the Company's Knowledge, no threatened disputes or disagreements with respect to any such Arrangements. Except as disclosed in Schedule 10.7 of the Disclosure Schedule, neither the Company nor its Subsidiaries, nor, to the Knowledge of the Company, any third party is in breach of any Arrangement relating to the use by the Company or its Subsidiaries of any Intellectual Property owned by other Persons. The Company and its Subsidiaries have not granted nor are obligated to grant a license, assignment or other right with respect to any Intellectual Property, except as disclosed in Schedule 10.7 to the Disclosure Schedule. 27 (c) Know-How. The Intellectual Property includes all such assets which are reasonably necessary for the operation of the Company's and its Subsidiaries' businesses as it is currently conducted and as currently proposed to be conducted by the Company. The Company or its Subsidiaries is the owner of all right, title, and interest in and to all Intellectual Property, free and clear of all Liens, and, except as set forth on Schedule 10.7 of the Disclosure Schedule, has the right to use all of the Intellectual Property. Except as set forth in Schedule 10.7 of the Disclosure Schedule, no Arrangement or understanding exists between the Company or its Subsidiaries and any third party which would impede or prevent the continued use of such right, title and interest of the Company or its Subsidiaries in and to the Intellectual Property as the Company or its Subsidiaries had prior to the Closing and used in the conduct of its business, or would require the payment of any fees to any third party. (d) Patents, Trademarks, Copyrights and URLs. (i) Schedule 10.7 of the Disclosure Schedule contains a list of all of the Patents, Trademarks, Copyrights and URLs. Except as set forth on Schedule 10.7 of the Disclosure Schedule, the Company or its Subsidiaries is the owner of all right, title, and interest in and to each of the Patents, the Trademarks, the Copyrights and the URLs, free and clear of all Liens. (ii) Except as set forth on Schedule 10.7 of the Disclosure Schedule, to the Knowledge of the Company, no Patent, Trademark, Copyright or URL is infringed or has been challenged or threatened in any way. Except as set forth on Schedule 10.7 of the Disclosure Schedule, none of the Intellectual Property infringes or, to the Company's Knowledge, is alleged to infringe, any patent, trademark, service mark, copyright or URL of any third party. (e) Trade Secrets. (i) The Company and its Subsidiaries have taken commercially reasonable precautions to protect the secrecy, confidentiality and value of the Trade Secrets. (ii) The Company and its Subsidiaries have good title and the right (but not necessarily the exclusive right) to use the Trade Secrets. To the Company's Knowledge, the Trade Secrets are not part of the public knowledge or literature, and have not been used, divulged, or appropriated either for the benefit of any Person (other than the Company and its Subsidiaries) or to the detriment of the Company or its Subsidiaries. To the Company's Knowledge, no Trade Secret is subject to any adverse claim or has been challenged or threatened in any way. 28 (f) Computer Software. Schedule 10.7 of the Disclosure Schedule contains a list of all the Computer Software. The Company or its Subsidiaries is the owner of all right, title, and interest in and to the Computer Software, free and clear of all Liens, and the Computer Software may be used by the Company or its Subsidiaries following the Closing in the same manner as such were used prior to the Closing without the payment of additional fees. (g) Licenses. (i) Schedule 10.7 of the Disclosure Schedule contains a list of all Licenses. (ii) All Licenses are rightfully used and authorized for use by the Company or its Subsidiaries pursuant to a valid Arrangements with respect to such Licenses. The Company or its Subsidiaries have all rights with respect to Licenses reasonably necessary to carry out the Company's or its Subsidiaries' activities, including without limitation, if necessary to carry out such activities, rights to make, use, exclude others from using, reproduce, modify, adapt, create derivative works based on, translate, distribute (directly and indirectly), transmit, display and perform publicly all third-party Intellectual Property Rights making up each such License. (iii) The Company and its Subsidiaries is not, nor as a result of the execution or delivery of this Agreement, or performance of the Company's obligations hereunder, will the Company or its Subsidiaries be, in violation of any License. 10.8 Compliance with Other Instruments. The Company and its Subsidiaries are not in violation of any provision of (a) its Articles of Incorporation or Bylaws, each as amended to date; or, except as set forth on Schedule 10.8 of the Disclosure Schedule, (b) any material Arrangement, instrument, judgment, order, writ, decree or contract to which the Company or its Subsidiaries or their assets is subject; or, except as set forth on Schedule 10.8 of the Disclosure Schedule, (c) to the Knowledge of the Company, any statute, rule or regulation to which the Company or its Subsidiaries or their assets is subject. Except as set forth on Schedule 10.8 of the Disclosure Schedule, the execution, delivery and performance of this Agreement and the consummation of the Transactions will not result in any such violation, or be in conflict with or constitute, with or without the passage of time and giving of notice, either a default under any such provision or an event that results in the acceleration of any payment or other obligation of the Company or its Subsidiaries as a result of a change of control of the Company or otherwise, the creation of any Lien upon any assets of the Company or its Subsidiaries or the suspension, revocation, impairment, forfeiture or nonrenewal of any material Governmental Authorization applicable to the Company or its Subsidiaries, their business or operations or any of their assets or properties. 29 10.9 Related-Party Transactions. Except as set forth in Schedule 10.9 of the Disclosure Schedule, the Company and its Subsidiaries have not purchased, acquired or leased any property or services from, or sold, transferred or leased any property or services to, or loaned or advanced any money to, or borrowed any money from, or entered into or been subject to any management, consulting or similar agreement with, engaged in any other significant transaction, or is a party to any Arrangement with any Related Person. Except as set forth in Schedule 10.9 of the Disclosure Schedule, no Related Person is indebted to the Company or its Subsidiaries, nor is the Company or its Subsidiaries indebted (or committed to make loans or extend or guarantee credit) to any Related Person. Except as set forth on Schedule 10.9 of the Disclosure Schedule, to the Company's Knowledge, no Related Person has any direct or indirect ownership interest in any firm or corporation with which the Company or its Subsidiaries is affiliated or with which the Company or its Subsidiaries has a business relationship, or any firm or corporation that competes with the Company or its Subsidiaries, except that Related Persons, may own stock in publicly traded companies that may compete with the Company or its Subsidiaries. 10.10 Permits. Except as set forth on Schedule 10.10 of the Disclosure Schedule, the Company and its Subsidiaries have all Governmental Authorizations necessary for and material to the conduct of their business. Except as set forth on Schedule 10.10 of the Disclosure Schedule, the Company and its Subsidiaries are not in default in any material respect under any such Governmental Authorization. 10.11 Environmental Laws. (a) The Company and its Subsidiaries have not received notice of any investigation or inquiry by any Governmental Authority under any Environmental Laws (as defined below) relating to the ownership or operation of the assets or business of the Company or its Subsidiaries. The Company and its Subsidiaries have not disposed of any Hazardous Material (as defined below) on any of its Facilities and, except as set forth on Schedule 10.11 of the Disclosure Schedule, to the Knowledge of the Company, no condition exists in or on any of the Facilities which would subject the Company or its Subsidiaries to any remedial obligations under any Environmental Laws. (b) Except as set forth on Schedule 10.11 of the Disclosure Schedule, to the Knowledge of the Company, no prior owner or operator of the Facilities has caused or allowed the generation, use, treatment, storage or disposal of Hazardous Materials at any Facility owned, leased or operated by the Company or its Subsidiaries, or used in connection with its assets except in accordance with all Environmental Laws or except to the extent the same would not result in a Materially Adverse effect on the ownership or operation of the assets or business of the Company or its Subsidiaries. (c) The Company and its Subsidiaries have not received inquiry or notice nor does the Company or its Subsidiaries have any reason to suspect or believe that it will receive inquiry or notice of any actual or potential Proceedings or losses related to or arising under any Environmental Law and related to the ownership or operation of the assets or business of the Company or its Subsidiaries. 30 (d) For purposes of this Agreement, "Environmental Laws" means any and all Laws pertaining to (x) the control of any potential pollutant or protection of the air, water or land, (y) solid, gaseous or liquid waste generation, handling, treatment, storage, disposal or transportation, or (z) exposure to hazardous, toxic or other substances alleged to be harmful. For purposes of this Agreement, the term "Hazardous Material" means (i) any substance which is listed or defined as a hazardous substance, hazardous constituent, or solid waste pursuant to any Environmental Laws and (ii) petroleum (including crude oil and any fraction thereof), natural gas and natural gas liquids. 10.12 Title to Personal Property and Assets. The Company and its Subsidiaries own or have a valid right to use all assets which are reasonably necessary for the operation of the Company's and its Subsidiaries' businesses, respectively, as they are currently conducted. The personal property and assets the Company and its Subsidiaries own are owned by the Company and its Subsidiaries, respectively, free and clear of all Liens and loans, except (i) as reflected in Schedule 10.12 of the Disclosure Schedule; (ii) for statutory liens for the payment of current Taxes that are not yet delinquent; and (iii) for Liens that arise in the Ordinary Course of Business and minor defects in title, none of which, individually or in the aggregate, materially impair the Company's or its Subsidiaries' ownership or use of such personal property or assets. With respect to the personal property and assets it leases, the Company and its Subsidiaries are in material compliance with such leases and, to the Company's Knowledge, hold a valid leasehold interest free of any Liens, subject to clauses (i) through (iii) above. Schedule 10.12 of the Disclosure Schedule contains a list of all of the equipment leases of the Company and its Subsidiaries. 10.13 Employees; Labor Relations; Compliance. (a) Employees. Schedule 10.13 of the Disclosure Schedule contains a list of the following information for each current management employee of the Company and its Subsidiaries: name; job title; current compensation paid or payable and any change in compensation since January 1, 2004; vacation accrued; and service credited for purposes of vesting and eligibility to participate under the Company's Plans. (b) Labor Relations; Compliance. Except as set forth on Schedule 10.13 of the Disclosure Schedule, there has not been, there is not presently pending or existing, and to the Knowledge of the Company there is not threatened, (a) any employee grievance process; (b) any Proceeding against or affecting the Company or its Subsidiaries relating to the alleged violation of any Legal Requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission, or any comparable Governmental Authority, organizational activity, or other labor or employment dispute against or affecting the Company or its Subsidiaries or their Facilities; or (c) any application for certification of a collective bargaining agent. The Company and its Subsidiaries have complied in all material respects with all Legal Requirements relating to employment, equal employment opportunity, nondiscrimination, immigration, wages, hours, benefits, collective bargaining, the payment of social security and similar Taxes, occupational safety and health, and plant closing. The Company and its Subsidiaries are not liable for the payment of any compensation, damages, Taxes, fines, penalties, or other amounts, however designated, for failure to comply with any of the foregoing Legal Requirements. The Company and or its Subsidiaries have timely paid all overtime wages to their employees as required by law. 31 10.14 Financial Statements. The Company has previously delivered to the Buyer the audited balance sheet of the Company and the related audited statements of income, changes in shareholders' equity, and cash flow for the Company for the year(s) ended December 31, 2003 and December 31, 2002 and the unaudited balance sheet of the Company and the related unaudited statements of income, changes in shareholders' equity, and cash flow for the Company for the period ended December 31, 2004, including in each case the notes thereto (collectively, the "Financial Statements"). The Financial Statements (i) fairly present the financial conditions and results of operations, changes in shareholders' equity and cash flow of the Company as at the respective dates of and for the periods referred to in the Financial Statements, subject, in the case of the December 31, 2004 interim financial reports to, normal recurring year-end adjustments (the effect of which will not, as individually or in the aggregate, be Materially Adverse) of the Company as at the respective dates indicated, and (ii) have been prepared in accordance with GAAP, through the periods involved. The unaudited balance sheet of the Company as of January 31, 2005 to be delivered to the Buyer pursuant to Section 12.10 will fairly present the financial condition of the Company as of January 31, 2005 and will be prepared in accordance with GAAP, subject to normal year-end adjustments and the absence of footnotes 10.15 Absence of Certain Changes. Except as otherwise set forth on Schedule 10.15 of the Disclosure Schedule, since December 31, 2003, there has not been (i) any declaration, set aside or payment of dividends by the Company or its Subsidiaries, any transfer of assets or any distribution or payment in respect of shares of capital stock or other securities of the Company or its Subsidiaries of any kind whatsoever by the Company or its Subsidiaries to its shareholders; (ii) change in the Company's or its Subsidiaries' authorized or issued capital stock; grant of any stock option or right to purchase shares of capital stock of the Company or its Subsidiaries; or issuance of any security convertible into such capital stock; grant of any registration rights; purchase, redemption, retirement, or other acquisition by the Company or its Subsidiaries for any shares of any such capital stock; (iii) any incurrence, assumption or guarantee by the Company or its Subsidiaries of any debt for borrowed money or any debt or liability, outside of the Ordinary Course of Business; (iv) any change in any method of accounting or accounting practice or policy by the Company or its Subsidiaries, or in any manner of keeping the books, accounts or records of the Company or its Subsidiaries, or any reclassification of non-current assets to current assets, or any reclassification of current liabilities to non-current liabilities; (v) any damage, destruction or loss of any assets or property of the Company or its Subsidiaries, whether or not covered by insurance Materially Adversely affecting the properties, assets, business, financial condition or prospects of the Company and its Subsidiaries taken as a whole; (vi) any sale or transfer of a material portion of the Company's or its Subsidiaries' assets outside of the Ordinary Course of Business or any cancellation of a material claim of or debt for borrowed money owed to the Company or its Subsidiaries outside of the Ordinary Course of Business; (vii) any creation, subjection or assumption of any Lien on any asset of either to Lien of any assets, except Liens for taxes not yet due; (viii) any material amendment, modification or termination of any Material Contract except in the Ordinary Course of Business; (ix) amendment to the Articles of Incorporation and 32 the Bylaws of the Company or its Subsidiaries; (x) any payment or increase in, or commitment to increase by the Company or its Subsidiaries of any bonuses, salaries or other compensation or benefit to any officer, shareholder, director or (except in the Ordinary Course of Business) consultants, independent contractor or employee or entry into any employment severance, or grant of or agreement to pay any severance or termination pay to any officer, shareholder, director or (except in the Ordinary Course of Business) to any consultant, independent contractor or employee of the Company or its Subsidiaries, any entering into of any employment, deferred compensation or other similar Arrangement by the Company or its Subsidiaries (or any amendment to any such existing agreement) with any officer, director or any employee; (xi) any adoption of, or increase in benefits payable under, any profit sharing, bonus, deferred compensation, savings, insurance, pension, retirement, or other employee benefit plan for or with any employees of the Company or its Subsidiaries; as any adoption, or payment under, any severance or termination pay policy, employment agreement or collective bargaining agreement; (xii) any incurrence of, assumption of, or taking any property subject to, any indebtedness (excluding trade payables and other liabilities incurred in the Ordinary Course of Business); or (xiii) entry into the termination of or receipt of notice of termination of any Material Contract; (xiv) any agreement, whether oral or written, by the Company or its Subsidiaries to do any of the foregoing; (xv) any other event or condition of any character which is Materially Adverse. 10.16 Owned Real Property. The Company and its Subsidiaries do not own any real property. 10.17 Leased Real Property. Schedule 10.17 of the Disclosure Schedule correctly identifies all real property leased by the Company and its Subsidiaries (collectively, the "Leased Real Property"). The Company and its Subsidiaries has the right to use its Leased Real Property, free and clear of any and all Liens, except for Permitted Liens. True and correct copies of the documents under which the Leased Property is leased (collectively, the "Lease Documents") have been delivered to Buyer. The Lease Documents are unmodified and in full force and effect, and there are no other agreements, written or oral, between the Company or its Subsidiaries and any third parties claiming an interest in the Company's or its Subsidiaries' interest in the Leased Real Property or otherwise relating to the Company's or its Subsidiaries' use and occupancy thereof. The Company and its Subsidiaries are not in default under the Lease Documents, and no defaults (whether or not subsequently cured) by the Company or its Subsidiaries have been alleged thereunder. To the Company's Knowledge, each landlord named in any of the Lease Documents is not in default thereunder, and no defaults (whether or not subsequently cured) by such landlord have been alleged thereunder. 10.18 Material Contracts; Company Indebtedness. (a) Material Contracts. The documents reflected on Schedule 10.18(a) of the Disclosure Schedule is a list of all Material Contracts entered into by the Company or its Subsidiaries, a true and complete copy of each of which has been delivered to the Buyer by the Company. Except as set forth in Schedule 10.18(a) of the Disclosure Schedule, each Material Contract is in full force and effect and is valid and enforceable in accordance with its terms, (i) the Company and its Subsidiaries are in 33 full compliance with all applicable terms and requirements of each Material Contracts, (ii) to the Knowledge of the Company, each other Person that has or had any obligation or liability under any Material Contract is in full compliance with all applicable terms and requirements of such Material Contract, and (iii) the consummation of this Agreement or the Transactions by the Company will not contravene, conflict with, or result in a violation or breach of, or give the Company or its Subsidiaries or other Person the right to declare a default or exercise any remedy under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, from any other Person at any time any notice or other communications (whether oral or written) regarding any actual, alleged possible, or potential violation or breach of, or default under, any Material Contract. (b) Company Indebtedness. Schedule 10.18(b) describes all Company Indebtedness, including the identity of the Persons to whom such Company Indebtedness is owed and the principal amount of such Company Indebtedness as of the date hereof. 10.19 Tax Matters. Except as set forth in Schedule 10.19 of the Disclosure Schedule, the Company and its Subsidiaries have timely filed all Tax Returns required to have been filed by them, and have paid or will have paid, or will have accrued for purposes of calculating the Working Capital Amount, all Taxes due to any taxing authority as of the with respect to all taxing periods ending on or prior to the Effective Time, or otherwise attributable to all periods ending prior to the date hereof; and all such Tax Returns are true, correct and complete in all material respects. The Company and its Subsidiaries have not received notice that any taxing authority has asserted against the Company or its Subsidiaries any deficiency in Taxes or claim for additional Taxes in connection with any tax period. There is no pending or, to the Company's Knowledge, threatened action, audit, Proceeding or investigation with respect to the assessment or collection of Taxes or a claim for refund made by the Company or its Subsidiaries with respect to Taxes previously paid. All amounts that are required to be collected or withheld by the Company or its Subsidiaries, or with respect to Taxes of the Company or its Subsidiaries, have been duly collected or withheld, and all such amounts that are required to be remitted to any taxing authority have been duly remitted. As of the date hereof, the Company is not, and as not been during the five (5) year period ending on the date hereof, a "United States real property holding corporation" (within the meaning of Section 897 of the Code). 10.20 Insurance. The properties and assets of the Company and its Subsidiaries which are of an insurable character are insured by independent carriers against loss or damage by fire, casualty, errors and omissions, and other risks, and the Company and its Subsidiaries have liability and occupational hazards insurance with independent carriers, in each case to the extent and in the manner customary for companies engaged in a similar business or owning similar assets. All insurance policies held by the Company or its Subsidiaries (collectively, the "Policies") are (and will continue following the consummation of the Transactions) in full force and effect and are of the types and in amounts providing protection for the Company or its Subsidiaries consistent with sound business practices and prudent risk management applicable to businesses of the size and nature of the Company or its Subsidiaries and are sufficient for compliance with all Legal Requirements and Arrangements to which the Company or its Subsidiaries is a party or by which it is bound. The Company and its Subsidiaries have not received any notice of cancellation in respect of insurance coverage under the Policies. The Company and or its Subsidiaries have paid all premiums due and have otherwise performed all of their obligations, under each of the Policies, and the Company and its Subsidiaries have given notice to the insurers of all claims insured thereunder. The Company and its Subsidiaries have not entered into any self-insurance Arrangements. There are no pending or, to the Knowledge of any of the Company, threatened terminations or material premium increases with respect to any of the Policies and the Company and its Subsidiaries are in compliance with all conditions contained therein. 34 10.21 Employee Benefit Plans and Agreements. Schedule 10.21 of the Disclosure Schedule sets forth a true and complete list of each Employee Benefit Plan (as hereinafter defined) of the Company and its Subsidiaries. The Company and its Subsidiaries do not have nor have maintained nor contributed (nor had an obligation to contribute) to within the six (6) years immediately preceding the date of this Agreement (i) any plan which is subject to Title IV of ERISA, (ii) any multi-employer plan, as defined in Section 3(37) of ERISA or Section 412 of the Code. For purposes of this Agreement, "Employee Benefit Plan" means any of the following, whether provided internally or outsourced: personnel policy, stock option plan, profit sharing plan, retirement, stock purchase plan, life, medical, vision, health, disability or accident plan, bonus plan, incentive award plan, severance pay plan or policy, deferred compensation plan or policy, executive compensation or supplemental income plan or policy, or any other employee benefit plan, agreement, practice, program, policy or other Arrangement, to the extent that the foregoing generally apply to current or former employees or groups of employees of the Company or its Subsidiaries, whether such plan is mandated, required or otherwise provided by the Company or its Subsidiaries in accordance with Law, Arrangements with any union, syndicate, collective bargaining agreement or otherwise. The Company and its Subsidiaries have performed all material obligations, whether arising by operation of law or by contract, required to be performed by them in connection with their Employee Benefit Plans, and there have been no material defaults or violations by any other party to such Employee Benefit Plans for which the Company or its Subsidiaries could be liable. All reports and disclosures relating to such Employee Benefit Plans required to be filed with or furnished to any Governmental Authority or any Employee Benefit Plan participant or beneficiary have been filed or furnished in accordance with applicable law in a timely manner for which the Company or its Subsidiaries could have a material liability, and each such Employee Benefit Plan has been administered in material compliance with its governing documents. Each Employee Benefit Plan may be terminated by the Company or its Subsidiaries without further liability (other than costs, filing fees, and expenses required to receive an IRS determination letter to make distribution from such terminated Employee Benefit Plan) to the Company or its Subsidiaries. There are no actions, suits or claims pending or, to the Knowledge of the Company, threatened against or with respect to any of the Employee Benefit Plans of the Company or its Subsidiaries, other than for routine claims for benefits. All contributions required to be made to the Employee Benefit Plans of the Company or its Subsidiaries pursuant to its terms and provisions have been timely made. Except as disclosed on Schedule 10.21 of the Disclosure Schedule, the execution and delivery of this Agreement and the consummation of the Transactions will not, due solely to a change in control, ownership or similar concept, (a) require the Company or its Subsidiaries to make a larger contribution to, or pay greater benefits under, any of its Employee Benefit Plans than it otherwise would or (b) create or give rise to any additional vested rights or service credits under any Employee Benefit Plan. 35 No "prohibited transaction" within the meaning of Section 406 of ERISA and/or Section 4975 of the Code exists which could subject the Company or its Subsidiaries to a material liability or civil penalty assessed pursuant to Section 502(i) of ERISA or a Tax imposed by Section 4975 of the Code. Neither the Company nor its Subsidiaries nor any administrator or agent of the Company or its Subsidiaries, has engaged in any transaction or acted or failed to act in a manner which is likely to subject the Company or its Subsidiaries to a material liability for a breach of fiduciary or other duty under ERISA or any other applicable Law. The Transactions will not be a, or cause any, prohibited transaction within the meaning of Sections 406 and 4975 of ERISA and the Code, respectively. Except as disclosed in Schedule 10.21 of the Disclosure Schedule, the Company and its Subsidiaries have complied with the continuation coverage provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, with respect to all current employees and former employees and other "qualified beneficiaries" (as defined in Code Section 4980B(g)(l) and ERISA Section 607(3)) in all material respects. No Employee Benefit Plan provides medical benefits beyond termination of employment or retirement other than contribution coverage mandated by Law. The Company and its Subsidiaries have maintained workers' compensation coverage as required by applicable state law through purchase of insurance and not by self-insurance or otherwise, except as disclosed in Schedule 10.21 to the Disclosure Schedule prior to the execution of this Agreement. Except as required by Law and except as disclosed on Schedule 10.21 of the Disclosure Schedule, the consummation of the Transactions will not accelerate the time of vesting or the time of payment, or increase the amount, of compensation due to any employee, officer, former employee or former officer of the Company or its Subsidiaries. There are no Arrangements providing for payments that could subject any Person to liability for Tax under Section 4999 of the Code. The Company and its Subsidiaries have maintained records of the names of all persons covered under each group health plan it maintains and the duration of each such person's coverage. The Company and its Subsidiaries have complied in all material respects with all of the group health plan requirements enacted by the Health Insurance Portability and Accountability Act of 1996, and the regulations related thereto and issued thereunder. 10.22 Brokers. Except for Libra Securities, LLC ("Libra Securities"), the Company has not employed or authorized anyone to represent it as a broker or finder in connection with the Transactions, and no broker except for Libra Securities or other person is entitled to any commission or finder's fee from the Company in connection with such Transactions. That certain engagement letter, dated August 30, 1999, between the Company and Allen & Company Incorporated (the "Allen & Co. Broker Agreement") expired in accordance with its terms prior to the beginning of discussions concerning any transaction between any of the Company, the Shareholders and their respective Representatives, on the one hand, and the Buyer and its Representatives, on the other hand. 10.23 Books and Records. The books of account, minute books, stock record books, and other reports of the Company and its Subsidiaries, all of which have been made available to the Buyer, are complete and correct in all material respects and have been maintained in accordance with reasonable business practices. At the Closing all of those books and records will be in the possession of the Company's legal counsel. 36 10.24 No Undisclosed Liabilities. Except as set forth in Schedule 10.24 of the Disclosure Schedule, the Company and its Subsidiaries have no liabilities or obligations of any nature except for liabilities or obligations reflected or reserved against in the Financial Statements, and current liabilities incurred in the Ordinary Course of Business since the respective dates thereof. 10.25 Compliance with Legal Requirements; Governmental Authorizations. (a) Except as set forth in Schedule 10.25 of the Disclosure Schedule: (i) the Company and its Subsidiaries are and at all times have been in material compliance with each Legal Requirement that is or was applicable to them or to the conduct of operations of their business or the ownership or use of any of their assets, except where the failure to comply could not have a Materially Adverse effect on the Company or its Subsidiaries; and (ii) the Company and its Subsidiaries have not received at any time any notice or other communication (whether oral or written) from any Governmental Authority or any other Person regarding (a) any actual, alleged, possible, or potential violation of or failure to comply with any Legal Requirement, or (b) any actual, alleged, possible, or potential obligation on the part of the Company or its Subsidiaries to undertake, or to bear all or any portion of the cost of, any remedial action of any nature. (b) Except as set forth on Schedule 10.25 of the Disclosure Schedule, the Company and its Subsidiaries have each Governmental Authorization necessary to permit the Company and its Subsidiaries to, in all material respects, lawfully conduct and operate their business in the manner they currently conduct and operate such business and to permit the Company and its Subsidiaries to own and use their assets in the manner in which they currently own and use such assets. 11. Representations and Warranties of the Shareholders. The Shareholders hereby, severally but not jointly, represent and warrant to the Buyer the following: 11.1 Authorization. All action on the part of each Shareholder necessary for the authorization, execution and delivery of this Agreement and the performance of all obligations of such Shareholder hereunder has been taken or will be taken prior to the Closing. This Agreement constitutes the valid and legally binding obligations of each Shareholder, enforceable in accordance with their respective terms, except (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally; and (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies. 37 11.2 Brokers. The Shareholders have not employed or authorized anyone to represent them as a broker or finder in connection with the Transactions, and no broker or other person is entitled to any commission or finder's fee from the Shareholders in connection with the Transactions. The Allen & Co. Broker Agreement expired in accordance with its terms prior to the beginning of discussions concerning any transaction between any of the Company, the Shareholders and their respective Representatives, on the one hand, and the Buyer and its Representatives, on the other hand, and no amounts are owed or will be owing by the Company thereunder due to the execution of this Agreement, the consummation of the Transactions or otherwise. 11.3 Shares. Each of the Shareholders is the record and beneficial owner of those outstanding Shares set forth in Schedule 10.2 of the Disclosure Schedule as owned by such Shareholder, free and clear of all Liens. Except as set forth on Schedule 10.2 of the Disclosure Schedule, none of the Shareholders is a party to, or has Knowledge of, any voting agreement, irrevocable proxy or other Arrangement with respect to the voting of the Shares. Assuming that the Buyer (i) owns 100% of the capital stock of Merger Sub, free and clear of all Liens, and (ii) Merger Sub has issued no options, warrants or other Arrangements for the purchase of its capital stock, each as immediately prior to the Effective Time, at the Effective Time upon giving effect to the Merger, the Buyer will own 100% of the outstanding capital stock of the Surviving Corporation, free and clear of all Liens, and no Options will be outstanding. 11.4 Shareholder's Counsel. Each of the Shareholders acknowledges that such Shareholder has had the opportunity to review this Agreement, the exhibits and the schedules attached hereto and the Related Documents and the transactions contemplated herein and therein with such Shareholder's own legal counsel. 11.5 Investment Representations. (a) Each of the Shareholders is acquiring a Convertible Promissory Note for its own account and not with a view to the public sale or distribution thereof. (b). Each of the Shareholders is aware that the Convertible Promissory Notes and the shares of Buyer Common Stock issuable upon exercise thereof have not been, and when issued will not be, registered under the Securities Act, or registered or qualified under any state securities law, on the ground that the Convertible Promissory Notes and such shares of Buyer Common Stock are being issued by the Buyer without any public offering within the meaning of Section 4(2) of the Securities Act, and therefore will be subject to restrictions on transfer and will not be freely tradable. The Shares of Buyer Common Stock issuable upon exercise of the Convertible Promissory Notes may contain applicable securities law legends and transfer restrictions. (c) Each of the Shareholders has received such documents, materials and information as it deems necessary or appropriate for evaluating an investment in the Buyer. Each of the Shareholders has carefully read and understands these materials and has made such further investigation as was deemed appropriate to obtain additional information to verify the accuracy of such materials and to evaluate the merits and risks of this investment. Each of the Shareholders has had an opportunity to ask questions of and receive answers from the Buyer concerning the terms and conditions of this investment, and all such questions have been answered to the full satisfaction of each of the Shareholders. 38 (d) The Convertible Promissory Notes were not offered to the Shareholders by any means of general solicitation or general advertising. (e) Each of the Shareholders has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Buyer. Each of the Shareholders understands that no United States federal or State agency or any other government or any governmental agency has passed on or made any recommendation or endorsement of the Convertible Promissory Notes and the shares of Buyer Common Stock issuable upon the conversion thereof or the fairness or suitability of such an investment, nor have such authorities passed upon or endorsed the merits of the offering of the Convertible Promissory Notes. (f) Each of the Shareholders is an "accredited investor" as defined in Rule 501 promulgated under the Securities Act. Each of the Shareholders is able to bear the economic risk of an investment in the Convertible Promissory Notes 12. Covenants. 12.1 Conduct of Business. (a) Except with the written consent of the Buyer (which will not be unreasonably withheld), or as otherwise expressly permitted or required by the terms of this Agreement from the date hereof to the Closing, the Company shall conduct its business in the Ordinary Course of Business in substantially the same manner as presently conducted and shall make all reasonable efforts consistent with past practices to preserve the relationships of the Company with customers, suppliers and others with whom the Company deals. (b) Without limiting the generality of the foregoing paragraph (a), the Company, without the written consent of the Buyer, will not: (i) amend or propose to amend its Articles of Incorporation or Bylaws (or comparable governing instruments); (ii) issue, sell or otherwise dispose of any of its capital stock, or grant any options, warrants or other rights to purchase or obtain (including upon conversion, exchange or exercise) any of its capital stock; (iii) declare, set aside or pay any dividend or make any distribution with respect to its capital stock (whether in cash or in kind), or redeem, purchase or otherwise acquire any of its capital stock; 39 (iv) create, incur, assume or guarantee any indebtedness or capitalized lease obligations or make any loan or advance or extend any credit to any Person (other than trade credits extended in the Ordinary Course of Business); (v) (A) make any capital expenditures, other than maintenance, repairs, and replacements in the Ordinary Course of Business, (B) acquire the stock or assets of, or merge or consolidate with, any other Person, (C) voluntarily incur any material liability or obligation (absolute, accrued, contingent or otherwise) in excess of One Hundred Thousand Dollars (U.S.$100,000) other than in the Ordinary Course of Business, or (D) sell, transfer, mortgage, pledge or otherwise dispose of, or encumber, or agree to sell, transfer, mortgage, pledge or otherwise dispose of or encumber, any assets or properties (real, personal or mixed) material to the Company other than in the Ordinary Course of Business; (vi) except as set forth in Schedule 12.1 of the Disclosure Schedule, increase in any manner the wages, salaries, bonus, compensation or other benefits of any of its officers or employees or enter into, establish, amend or terminate any employment, consulting, retention, change in control, collective bargaining, bonus or other incentive compensation, profit sharing, health or other welfare, stock option or other equity, pension, retirement, vacation, severance, termination, deferred compensation or other compensation or benefit plan, policy, agreement, trust, fund or arrangement with, for or in respect of, any share holder, officer, director, other employee, agent, consultant or affiliate other than as required pursuant to the terms of agreements in effect on the date of this Agreement, or enter into or engage in any compensation agreement, arrangement or transaction with any of its directors, officers, employees or affiliates except current compensation and benefits in the Ordinary Course of Business; (vii) except as set forth on Schedule 12.1 of the Disclosure Schedule, enter into, terminate or amend any Material Contract, other than the purchase of inventory in the Ordinary Course of Business; (viii) discharge any obligations (including accounts payable) other than on a timely basis in the Ordinary Course of Business, or delay or defer the payment of any accounts payable beyond the date such payable is due without penalty; (ix) sell, give away or otherwise dispose of any inventory, other than in the Ordinary Course of Business; or (x) authorize any of, or agree to commit to do any of, the foregoing actions. (c) The Company shall use commercially reasonable efforts to comply in all material respects with all Laws applicable to it or any of its properties, assets or business and maintain in full force and effect all the Permits necessary for, or otherwise material to, such business. 40 12.2 Access to Information. During the period from the date hereof until the Closing or the earlier termination of this Agreement in accordance with Section 14 hereof, the Company shall afford to the Buyer and its accountants, counsel and other representatives reasonable access during normal business hours to all the properties, books, contracts, commitments, Tax Returns and records of the Company; provided, however, that such access does not unreasonably disrupt the normal operations of the Company. 12.3 Confidentiality. The Company and the Buyer hereto acknowledge that each such party has had, and may from time to time have, access to confidential records, data, customers lists, trade secrets and other confidential information owned or used by the Company or the Buyer (each, an "Interested Party") in the course of its business (the "Confidential Information"). Accordingly, the Company and the Buyer each agree (a) to hold all Confidential Information in strict confidence, (b) not to disclose Confidential Information of any Interested Party to any Person (except to such Interested Party or any Affiliate, employee, agent or Representative thereof), and (c) not to use, directly or indirectly, any of such Confidential Information of any Interested Party for any competitive or commercial purpose; provided, however, that the Company or the Buyer may disclose Confidential Information to its and its Affiliates', officers, directors, employees, agents, attorneys and Representatives if such Persons agree to comply with this Section 12.3; and provided, further, that, notwithstanding anything to the contrary contained herein, the Company and the Buyer shall not be subject to any of the limitations set forth above with respect to any Confidential Information which (i) is now, or hereafter becomes, through no act or failure to act on the part of such party that constitutes a breach of this Section 12.3, generally known or available to the public; (ii) is hereafter furnished to such party by a third party, who, to the knowledge of such receiving party, is not under any obligation of confidentiality to the related Interested Party; (iii) is disclosed with the written approval of the related Interested Party; (iv) is required to be disclosed by law (including securities law), court order or similar compulsion; (v) is required or is reasonably necessary to be provided pursuant to or in connection with any Proceeding involving the parties hereto; or (vi) is independently developed by employees or agents of such party and/or its Affiliates which or who have had no access to the relevant portions of the Confidential Information. 12.4 Commercially Reasonable Efforts to Consummate. Subject to the terms and conditions of this Agreement, each party shall use its commercially reasonable efforts to cause the Closing to occur, including defending against any Proceedings, judicial or administrative, challenging this Agreement or the consummation of the transactions contemplated hereby, and seeking to have any preliminary injunction, temporary restraining order, stay or other legal restraint or prohibition entered or imposed by any court or other Governmental Authority that is not yet final and nonappealable vacated or reversed; provided, however, that none of the Company, the Shareholder or their Affiliates shall be required to make any material monetary expenditure, commence or participate in any litigation or offer or grant any material accommodation (financial or otherwise) to any third Person. 12.5 Exclusivity. From the date of this Agreement until the earlier of the Closing or the termination of this Agreement pursuant to Section 14 hereof, none of the Shareholders or the Company shall, and none of the Shareholders or the Company shall permit their respective Representatives or brokers to, (a) take 41 any action to solicit, initiate submission of or encourage, any Acquisition Proposal (as hereinafter defined), or (b) continue, initiate, participate or engage in negotiations with, or disclose any non-public information (other than in the Ordinary Course of Business or otherwise required by Law, court order or similar compulsion), relating to the Company, or to any Person other than the Buyer and its Affiliates and representatives. The term "Acquisition Proposal" as used herein means any offer, proposal or indication of interest in connection with (a) the acquisition or purchase of all or (other than in the Ordinary Course of Business) a portion of the assets of the Company; (b) a merger, consolidation or other business combination to which the Company is a party; (c) the acquisition of more than 10% of the capital stock of the Company (other than acquisition of Common Stock resulting from the exercise of Options outstanding as of the date hereof); or (d) the acquisition of any Shares from any of the Shareholders. 12.6 Notice of Prospective Breach; Right to Terminate or Waiver of Such Right. (a) Each party shall immediately notify the other parties in writing upon such party becoming aware of the occurrence, or failure to occur, of any event, which occurrence or failure to occur caused or would be reasonably likely to cause (i) any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date of this Agreement to the Closing as if such representation and warranty were made at such time or (ii) any material failure of any party hereto or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it under this Agreement. (b) The Company shall give prompt notice to the Buyer if any of the following occur after the date of this Agreement: (i) receipt of any notice or other communication in writing from any third party alleging that the consent of such third party is or may be required in connection with the Transactions, provided that such consent would have been required to have been disclosed in this Agreement; (ii) receipt of any material notice or other communication from any Governmental Authority in connection with the Transactions; (iii) the occurrence of an event which would be reasonably likely to have a Materially Adverse effect on the Company; or (iv) the commencement or threat of any Proceeding involving or affecting the Company or any of its respective properties or assets, or, to its Knowledge, any employee, agent, director or officer, in his or her capacity as such, of the Company which, if pending on the date hereof, would have been required to have been disclosed in this Agreement or which relates to the consummation of the Transactions. 12.7 Expenses and Transfer Taxes. (a) Whether or not the Closing takes place, all costs and expenses incurred by the Company in connection with this Agreement and the Related Documents and the Transactions, including, without limitation, the fees, costs and expenses of Libra Securities and any other broker or finder employed, authorized or retained by any of the Company, the Shareholders or their respective Representatives (including, but not limited to, Allen & Company Incorporated), shall be considered Merger Expenses at Closing and paid at Closing or at such other time as they come due if the Closing takes place. All such expenses shall be set forth on the Schedule 12.7 of the Disclosure Schedule, which schedule will be delivered to the Buyer at Closing if the Closing takes place or promptly following the termination of this Agreement. Whether or not the Closing takes place, all costs and expenses incurred by the Buyer, Merger Sub and the Shareholders in connection with this Agreement and the Related Documents and the Transactions contemplated hereby and thereby shall be paid by such party incurring such expense. 42 (b) All United States transfer, documentary, sales, use, registration, value-added and other similar Taxes (including all applicable United States real estate transfer Taxes and United States real property transfer gains Taxes and including any filing and recording fees) and related amounts (including any penalties, interest and additions to Tax) incurred in connection with this Agreement, the Related Documents and the Transactions ("Transfer Taxes") shall be paid by the Buyer. Each party shall use reasonable efforts to avail itself of any available exemptions from any such Transfer Taxes, and to cooperate with the other parties in providing any information and documentation that may be necessary to obtain such exemptions. 12.8 Publicity. From the date hereof through the Closing Date, no public release or announcement concerning the transactions contemplated hereby shall be issued by the Company, the Buyer, Merger Sub, or the Shareholders without the prior consent of the Company, the Buyer, Merger Sub, and the Shareholders (which consent shall not be unreasonably withheld, conditioned or delayed), except as such release or announcement may be required by Law or the rules or regulations of any United States or foreign securities exchange, in which case the party required to make the release or announcement shall allow the other parties reasonable time to comment on such release or announcement in advance of such issuance. 12.9 Shareholder Meeting or Shareholder Consent. The Company shall cause a meeting of its shareholders (the "Shareholder Meeting") to be duly called and held as soon as reasonably practicable following the date of this Agreement for the purpose of voting on the approval and adoption of this Agreement and the approval of the Merger and the other Transactions, unless a vote of shareholders of the Company is not required by Texas Law. The Board of Directors of the Company shall recommend approval and adoption of this Agreement and the Merger by the Company's shareholders. At the Shareholder Meeting, the Shareholders and their respective Affiliates will vote all Shares owned by them in favor of approval and adoption of this Agreement, and the approval of the Merger and the other Transactions. Notwithstanding the foregoing, in lieu of a Shareholder Meeting, in accordance with Texas Law the shareholders of the Company may approve and adopt this Agreement and approve the Merger and the other Transactions by a written consent(s) signed by the holder(s) of Shares having not less than the minimum number of votes that would be necessary to take such actions at a meeting at which the holders of all Shares entitled to vote on the actions were present and voted. 12.10 Completion of Audits and Delivery of Financial Statements. Prior to the Effective Time, the Company shall use its commercially reasonable efforts to complete the audit of its financial statements for the year ended December 31, 2004 on or before March 15, 2005. Following the Effective Time, the Buyer shall use its commercially reasonable efforts to cause the Surviving Corporation to complete the audit of its financial statements for the year ended December 31, 2004 on or before March 15, 2005, or if the Effective Time is after March 15, 2005, promptly thereafter as commercially reasonable, and deliver a copy thereof to Terra and Amadeus. The Company shall deliver a copy of its unaudited balance sheet as of January 31, 2005 to the Buyer at least five (5) days prior to the Closing. 43 12.11 Non-Solicitation. For a period of one (1) year from the Closing, none of the Shareholders shall, and each of the Shareholders shall cause their Affiliates and Related Persons not to, without the prior written consent of the Surviving Corporation, directly or indirectly, as agent, consultant, distributor, representative, stockholder, manager, partner or in any other capacity, recruit or solicit for employment or engagement, any person who is then employed or engaged by the Company, or who was employed or engaged by the Buyer within six (6) months of such contact. For a period of one (1) year from the Closing, none of the Shareholders shall, and each of the Shareholders shall cause their Affiliates and Related Persons not to, without the prior written consent of the Surviving Corporation, directly or indirectly, as agent, consultant, distributor, representative, stockholder, manager, partner or in any other capacity, employ or engage or recruit or solicit for employment or engagement, any of Philip A. Ferri, Norman Knowles, Henry Wang or Steven J. Pello. 12.12 Letters of Credit. For a period of six (6) months following the Effective Time, the Shareholders shall cause the letters of credit for the benefit of the Company listed on Exhibit D attached hereto to remain in full force and effect for the benefit of the Surviving Corporation, without amendment or modification. The Surviving Corporation shall pay a monthly fee in advance to the Shareholders who are parties to or otherwise guarantee such letters of credit equal in the aggregate to one percent (1%) of the amount of such letters of credit. In the event that the Shareholders are required to cause such letters of credit to remain in effect for the benefit of the Surviving Corporation for greater than three (3) months following the Effective Date, the Surviving Corporation shall, or shall cause its lenders to, provide guarantees of such letters of credit in form reasonably satisfactory to the Shareholders. 12.13 Payment of Amadeus/Terra Loans. In conjunction with the Closing, the Buyer shall satisfy and discharge the Company Indebtedness set forth on the Company Indebtedness Closing Schedule, including the Amadeus/Terra Loans which amounts shall reduce the amount of the Merger Consideration payable to the Shareholders of the Company in accordance with Section 4(b). 12.14 Company Warrants. The Company shall give at least thirty (30) days prior written notice of the consummation of the Merger to the holders of all outstanding warrants to purchase shares of capital stock of the Company which by their terms require at least thirty (30) days notice to the holder prior to a "Termination Event" (as defined in such warrant) or the consummation of the Merger, and all such warrants shall have been exercised by the holder thereof or expired as of immediately prior to the Closing. The Company shall have provided the Buyer with satisfactory written evidence of such notice and of such warrant exercise or expiration prior to the Closing. 12.15 Allen & Company Warrants. Prior to the Closing, the Company will use its commercially reasonable best efforts to cancel the 350,020 warrants to purchase the capital stock of the Company represented by that certain Warrant Certificate, dated September 9, 1999, issued by the Company to Allen & Company Incorporated (the "Allen & Co. Warrants"), at no cost to the Company, and the Company shall use its commercially reasonable best efforts to provide the Buyer with satisfactory written evidence thereof. 44 12.16 Stay Pay Bonuses. The Buyer agrees that if any of the Stay Pay Bonuses are repaid to the Surviving Corporation or the Buyer following the Closing Date, then the Buyer shall or shall cause the Surviving Corporation to immediately pay such funds to the Escrow Agent for distribution to the shareholders of the Company. 12.17 2004 Financial Statements. Following the Closing, the Shareholders shall cooperate with the Surviving Corporation and the Buyer with respect to the preparation of the audit of the financial statements of the Company and its Subsidiaries for the 2004 fiscal year and shall cause Terra to satisfy the requirements of Section 13.2(j) with respect thereto. 13. Conditions Precedent. 13.1 Conditions to Each Party's Obligation. The obligation of the Buyer, Merger Sub, the Shareholders and the Company to consummate the Merger is subject to the satisfaction or waiver on or prior to the Closing of the conditions set forth below. (a) No Injunctions or Restraints. No Law or injunction enacted, entered, promulgated, enforced or issued by any Governmental Authority or other legal restraint or prohibition preventing the consummation of the transactions contemplated hereby shall be in effect; provided, however, that each of the Company, the Buyer and Merger Sub shall have used its commercially reasonable efforts to prevent the entry of any such injunction or other order and to appeal as promptly as possible any such injunction or other order that may entered. (b) Each of the parties hereto and, where applicable, the Shareholder Representative shall have entered into such other agreements as the parties hereto shall mutually agree, including but not limited to the Escrow Agreement (the "Related Documents"). (c) The holders of the Convertible Promissory Notes shall have entered into an Inter-creditor Agreement in a form required by the Buyer's present and future lenders (subject to the approval of the holders of the Convertible Promissory Notes, not to be unreasonably withheld) regarding such holders' security interests under the Security Agreements (the "Inter-creditor Agreement"). The Inter-creditor Agreement shall provide that the security interests of the holders of the Convertible Promissory Notes under their respective Security Agreements shall be (i) pari passu with the security interests of the Buyer's lenders who finance the cash portion of the Merger Consideration and the Buyer's lenders who financed approximately $7,000,000 on or about February 8, 2005; and (ii) senior to the security interests all of the Buyer's other lienholders other than Permitted Liens. 45 13.2 Conditions to Obligation of the Buyer and Merger Sub. The obligation of the Buyer and Merger Sub to consummate the Merger is subject to the satisfaction (or waiver by the Buyer) on or prior to the Closing of the conditions set forth below. (a) Representations and Warranties. The representations and warranties of the Company made in this Agreement considered individually and collectively shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (other than any representation or warranty that expressly relates to a specific date, which representation and warranty shall be correct on the date so specified), without giving effect to any notices given pursuant to Section 12.6(a) or (b) hereof, except where the failure to comply would not have a Materially Adverse effect on the Company or its Subsidiaries. The Buyer shall have received a certificate signed by an authorized officer of the Company (the "Company Bringdown Certificate") certifying as to fulfillment of the conditions set forth in this Section 13.2(a) with respect to the Company and setting forth any notices given or required to be given by the Company pursuant to Sections 12.6(a) or (b) from the date of this Agreement through the Closing Date. (b) Performance of Obligations. The Company shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by the Company by the time of the Closing, and the Buyer shall have received a certificate signed by an authorized officer of the Company certifying as to fulfillment of the conditions set forth in this Section 13.2(b) with respect to the Company. (c) Secretary's Certificate. The Buyer shall have received a certificate, dated as of the Closing Date, signed by the Secretary of the Company and certifying as to (i) its Articles of Incorporation and Bylaws and the incumbency of officers executing this Agreement and each of the Related Documents to which the Company is a party; and (ii) the resolutions of the board of directors of the Company authorizing the execution, delivery and performance by the Company of this Agreement and each of the Related Documents to which the Company is a party. (d) Consents. The Company shall have received all material consents or approvals required in connection with the Transactions. (e) Approval by Company Shareholders. This Agreement and the Merger shall have been approved and adopted by the shareholders of the Company in accordance with Texas Law. (f) Opinion of Counsel. Counsel for the Company shall have delivered to the Buyer an opinion letter with respect to matters customarily addressed in such letters in connection with transactions similar to this Agreement, the Merger and the other Transactions, in form and substance acceptable to the Buyer and its counsel. 46 (g) Dissenting Shares. Holders of no more than two percent (2%) Shares outstanding as of the Closing Date shall demand appraisal for such Shares in accordance with Texas law. (h) Company Indebtedness Closing Schedule. The Buyer shall have received a schedule which describes all Company Indebtedness as of the Closing, including the identity of the Persons to whom such Company Indebtedness is owed, the principal amount of such Company Indebtedness as of the Closing and any prepayment fees or penalties with respect thereto, which schedule shall be certified as being true, correct and complete in all respects by the President of the Company and each of the Shareholders (the "Company Indebtedness Closing Schedule"). The information set forth on the Company Indebtedness Closing Schedule shall not vary materially from the information set forth on Schedule 10.18(b), subject to the delay between the date of this Agreement and the Closing Date and actions taken by the Company as set forth on Schedule 12.1 of the Disclosure Schedule. (i) Pay-off Letters. The Buyer shall have received pay-off letters and Lien releases, if applicable, with respect to the Amadeus/Terra Loans satisfied and discharged by the Buyer at Closing. (j) Company Financial Statements and Pro Forma Information. Prior to Closing, the Company shall deliver to the Buyer financial statements of the Company and its Subsidiaries (including, if necessary, audited financial statements of the Company and its Subsidiaries for the 2002 and 2003 fiscal years of the Company and its Subsidiaries), and pro forma financial information, in form and substance as required to be included in the filings of the Buyer with the SEC. Such financial statements and pro forma financial information shall include all adjustment necessary to comply with SEC-required GAAP (including, but not limited to, all adjustments required to be presented in order to push down the purchase accounting applied by the Shareholders and their affiliates to the Company). (k) FIRPTA Certificate. The Company shall deliver to the Buyer a FIRPTA Certificate executed by an authorized officer of the Company in order for the Buyer to be exempt from withholding any portion of the Merger Consideration. (l) Termination of Agreements. The Buyer shall have received evidence in form and substance satisfactory to the Buyer of termination of those Arrangements of the Company and the shareholders of the Company or the other holders of securities of the Company set forth on Schedule 13.2(l). 13.3 Conditions to the Obligation of the Company and the Shareholders. The obligation of the Company and the Shareholders to consummate the Merger is subject to the satisfaction (or waiver by the Company) on or prior to the Closing of the conditions set forth below. 47 (a) Representations and Warranties of the Buyer and Merger Sub. The representations and warranties of the Buyer and Merger Sub made in this Agreement shall be true and correct as of the date hereof and as of the Closing Date as though made on and as of the Closing Date (other than any representation or warranty that expressly relates to a specific date, which representation and warranty shall be correct on the date so specified), without giving effect to any notices given pursuant to Section 12.6(a) or (b) hereof, except where the failure to comply would not have a Materially Adverse effect on the Buyer or Merger Sub. The Company and the Shareholders shall have received a certificate signed by an authorized officer (the "Buyer Bringdown Certificate") of the Buyer and Merger Sub certifying as to fulfillment of the conditions set forth in this Section 13.3(a) with respect to the Buyer and Merger Sub and setting forth any notices given or required to be given by the Buyer pursuant to Sections 12.6(a) or (b) from the date of this Agreement through the Closing Date. (b) Performance of Obligations of the Buyer. The Buyer and Merger Sub shall have performed or complied in all material respects with all obligations and covenants required by this Agreement to be performed or complied with by the Buyer and Merger Sub by the time of the Closing, and the Company shall have received a certificate signed by an authorized officer of the Buyer and Merger Sub to such effect. (c) Secretary's Certificate. The Company shall have received a certificate, dated as of the Closing Date, signed by the Secretary of each of the Buyer and Merger Sub, respectively, and certifying as to (i) its Articles of Incorporation and Bylaws or other charter document and the incumbency of officers executing this Agreement and each of the Related Documents to which the Buyer or Merger Sub, respectively, is a party; and (ii) the resolutions of the board of directors of the Buyer or Merger Sub, respectively, authorizing the execution, delivery and performance by the Buyer and Merger Sub, respectively of this Agreement and each of the Related Documents to which the Buyer or Merger Sub, respectively, is a party. 13.4 Frustration of Closing Conditions. Neither the Buyer nor the Company may rely on the failure of any condition set forth in this Section 13 to be satisfied if such failure was caused by such party's failure to act in good faith or to use its commercially reasonable efforts to cause the Closing to occur, as required by Section 12.4. 14. Termination. 14.1 Termination. (a) This Agreement may be terminated and, subject to Section 14.2, the transactions contemplated by this Agreement abandoned at any time prior to the Closing: (i) by mutual written consent of the Company and the Buyer; (ii) by either the Company or the Buyer, if the Closing does not occur on or prior to the Closing Date set forth in Section 8 hereof; provided, however, that the right to terminate this Agreement under this clause (ii) shall not be available to either party whose failure to fulfill any obligation under this Agreement has been the cause of, or resulted in, the failure of the Closing to occur on or before such date; 48 (iii) by the Company or the Buyer, in writing, if any of the conditions set forth in Section 13.1 shall have become incapable of fulfillment; (iv) by the Company, in writing, if any of the conditions set forth in Section 13.3 shall have become incapable of fulfillment, and shall not have been waived by the Company; or (v) by the Buyer, in writing, if any of the conditions set forth in Section 13.2 shall become incapable of fulfillment, and shall not have been waived by the Buyer; provided, however, that the party seeking termination of this Agreement pursuant to clause (ii), (iii), (iv) or (v) is not in breach of any of its representations, warranties, covenants or agreements contained in this Agreement that is causing the failure by the other party to satisfy a condition set forth in Section 13. (b) In the event of the termination of this Agreement by the Company or the Buyer pursuant to this Section 14.1, written notice thereof shall forthwith be given to the other party and the Shareholder Representative, and, subject to Section 14.2, the Transactions shall be terminated, without further action by any party. If the Transactions are terminated as provided herein: (i) the Buyer shall return all documents and other material received from the Company relating to the Transactions, whether so obtained before or after the execution hereof, to the Company; and (ii) all Confidential Information received by the Buyer with respect to the business of the Company shall be treated in accordance with Section 12.3, which shall remain in full force and effect notwithstanding the termination of this Agreement. 14.2 Effect of Termination. If this Agreement is terminated and the transactions contemplated hereby are abandoned as described in Section 14.1, this Agreement shall become null and void and of no further force and effect, except for the provisions of Sections 12.3, 12.5, 12.7(a), 12.8, this Section 14 and Section 16. Notwithstanding the foregoing, in the event this Agreement is terminated by the Company as a consequence of a material breach by the Buyer of its obligations hereunder, the Company shall be entitled to retain the Initial Deposit Amount and the Closing Deposit Amount, if any, as liquidated damages with respect to the termination of this Agreement and the abandonment of the Transactions, and the Buyer shall have no further liability to the Company or any other party hereto in connection with such termination and abandonment or other failure of the Buyer to consummate the Transactions. 49 15. Indemnification. 15.1 Shareholders Indemnification. (a) Following the Closing, to the fullest extent permitted by applicable law, the Shareholders shall, severally, but not jointly, indemnify, defend and hold the Surviving Corporation, the Buyer, Merger Sub and their respective Representatives harmless from and against any claims, actions, causes of action, assessments, losses, demands, damages, (including incidental and consequential damages) judgments, liabilities, costs and expenses, including without limitation, costs of defense, reasonable out-of-pocket attorneys' fees, costs and expenses, interest, penalties and reasonable expenses or diminution of value (whether or not involving a third-party claim) ("Claims" or "Claim"), asserted against, imposed upon, suffered or incurred by, the Surviving Corporation, the Buyer, Merger Sub and their respective Representatives arising out of or relating to (i) the breach of any representation or warranty set forth in Articles 10 or 11 hereof as of the date hereof or as of the Closing Date without giving effect to any notices given pursuant to Sections 12.6 (a) or (b) hereof or the Company Bringdown Certificate; (ii) the default or failure to perform by the Company or any of the Shareholders of any of the terms or covenants to be performed by the Company or the Shareholders in this Agreement; (iii) any claim for a commission or fee by a broker or finder acting on behalf of any of the Company or the Shareholders or any of their respective Representatives, or any other expenses required to be paid by the Shareholders pursuant to Section 12.7(a) hereof (including, but not limited to, claims by Libra Securities and Allen & Company Incorporated); (iv) any claim with respect to the Allen & Company Warrants; and (v) any claims with respect to the Company Indebtedness (excluding operating leases) other than as specifically identified on the Company Indebtedness Closing Schedule in the amounts specifically set forth thereon, including the Amadeus/Terra Loans, and paid as part of the Merger Expenses; provided, however, that the right to present a Claim for indemnification pursuant to the terms of this Article 15 under this clause (v) of Section 15.1(a) shall survive the Closing for a period of twelve (12) months thereafter. (b) Notwithstanding the foregoing, other than in the case of fraud or willful misconduct, the Shareholders shall not be obligated to indemnify the Surviving Corporation, the Buyer, Merger Sub and their respective Representatives under this Agreement or in connection with the Transactions: (i) against Claims to the extent caused by the gross negligence or willful misconduct of the Buyer, Merger Sub or their respective Representatives; (ii) with respect to the Shareholders, each considered individually, for any amounts greater than such Shareholder's pro rata portion of the Merger Consideration (excluding any consideration received by Amadeus and Terra (including Terra Networks) from the Merger Consideration for the payment of the Amadeus/Terra Loans); 50 (iii) subject to the limitations described in clause (vi) below, with respect to the Shareholders considered jointly, for any Claims arising out of or relating to Section 15.1(a)(i) above, other than in connection with a breach of the representations or warranties contained in Section 10.4, Section 11.1, Section 11.5, the last sentence of Section 10.2, the last sentence of Section 10.13(b), and the last sentence of Section 11.3, any amounts in the aggregate greater than 16.66% of the Merger Consideration (excluding any consideration received by Amadeus and Terra (including Terra Networks) from the Merger Consideration for the payment of the Amadeus/Terra Loans) (the "Cap"); (iv) subject to the limitations described in the other clauses of this Section 15.1(b), unless the Indemnified Party (as defined below) seeks indemnification for each Claim from all Shareholders, with each Shareholder liable as to any Claim only for an amount equal to the Claim multiplied by a fraction, the numerator of which is such Shareholder's pro rata portion of the Merger Consideration (excluding any consideration received by Amadeus and Terra (including Terra Networks) from the Merger Consideration for the payment of the Amadeus/Terra Loans) and the denominator of which is the aggregate Merger Consideration payable to the Shareholders (excluding any consideration received by Amadeus and Terra (including Terra Networks) from the Merger Consideration for the payment of the Amadeus/Terra Loans); (v) for any Claims arising out of or relating to Section 15.1(a)(i) above, other than in connection with a breach of the representation or warranty contained in Section 10.4, Section 11.1, Section 11.5, the last sentence of Section 10.2, the last sentence of Section 10.13(b), and the last sentence of Section 11.3, until such Claims exceed Two Hundred Thousand Dollars (U.S. $200,000) (the "Threshold Amount"), and then only for such Claims in excess of the Threshold Amount; and (vi) notwithstanding clause (iv) hereof above to the contrary, for any Claim(s) arising out of or relating to a breach of the obligations of the Shareholders under Section 12.11 unless the Indemnified Party seeks indemnification for such Claim(s) from only the Shareholders who is alleged to have breached Section 12.11 and not from the other Shareholders who at such time remain in compliance with the terms of Section 12.11. (c) For purposes of the Shareholders indemnification obligations hereunder only, the Cap shall be calculated based upon the actual Merger Consideration received by the Shareholders in cash or its equivalent and to the extent the Shareholders have not received payment of the principal amount of the Convertible Promissory Notes or shares of Buyer Common Stock upon the proper conversion of such Convertible Promissory Notes then the term "Merger Consideration" as used in Section 15.1(b)(iii) shall be adjusted proportionally (i.e. increased or decreased) to reflect the amount actually paid to the Shareholders in cash or its equivalent (i.e., Buyer Common Stock upon conversion). 51 (d) For purposes of clarity, the parties agree that the phrase "without giving effect to any notices given pursuant to Sections 12.6(a) or (b) or the Company / Buyer Bringdown Certificate" shall mean that the delivery of notice with respect to the matters set forth on such notice or certificate shall not serve as a cure of a breach of any representation or warranty contained in this Agreement, and that the right to indemnification pursuant to this Article 15 in connection with any such breach shall continue notwithstanding such notice or certificate. 15.2 Buyer Indemnification. (a) Following the Closing, to the fullest extent permitted by applicable law, the Buyer and Merger Sub shall, jointly and severally, indemnify, defend and hold the Company, the Shareholders and their respective Representatives harmless from and against any Claims asserted against, imposed upon, suffered or incurred by the Company, the Shareholders and their respective Representatives arising out of (i) the breach of any representation or warranty set forth in Article 9 hereof as of the date hereof or as of the Closing Date without giving effect to any notices given pursuant to Sections 12.6 (a) or (b) hereof or the Buyer Bringdown Certificate; (ii) the default or failure to perform by the Buyer or Merger Sub of any of the terms or covenants to be performed by the Buyer or Merger Sub in this Agreement; and (iii) any claim for a commission or fee by a broker or finder acting on behalf of any of the Buyer or Merger Sub or any of their respective Representatives. (b) Notwithstanding the foregoing, other than in the case of fraud or willful misconduct, the Buyer shall not be obligated to indemnify the Shareholders and their respective Representatives under this Agreement or in connection with the Transactions: (i) for any Claims arising out of or relating to Section 15.2(a)(i), other than in connection with a breach of the representation or warranty contained in Section 9.4, any amounts in the aggregate greater than the Cap; and (ii) for any Claims arising out of or relating to Section 15.2(a)(i), other than in connection with a breach of the representation or warranty contained in Section 9.4, until such Claims exceed the Threshold Amount, and then only for such Claims in excess of the Threshold Amount. 15.3 Indemnification; Notice and Settlement. For purposes of this Section 15, the term "Indemnifying Party" when used in connection with a particular Claim means the Person (whether one or more) having an obligation to indemnify with respect to such Claim pursuant to this Section 14, and the term "Indemnified Party" when used in connection with a particular Claim means the Person (whether one or more) having the right to be indemnified with respect to such Claim pursuant to this Section 15. The following procedures will apply to the indemnification obligations set forth in this Agreement: 52 (a) Direct Claims. If any Indemnified Party should have a Claim against any Indemnifying Party hereunder that does not involve a Claim against such Indemnified Party by a third party, the Indemnified Party will transmit to the Indemnifying Party a written notice with respect to such Claim, specifying the basis therefore and the amount of such Claim; provided, however, that any failure or delay in providing such notice to the Indemnifying Party will not relieve the Indemnifying Party of any obligation hereunder except to the extent and only to the extent the Indemnifying Party was actually prejudiced by such delay or failure. If a Claim may be deemed to involve both a direct Claim (and thus subject to the terms of this Section 15.3(a)) and a Claim involving a third party (and thus subject to the terms of Section 15.3(b)), it will be treated hereunder as a Claim involving a third party. (b) Third Party Claims. Promptly after receipt of written notice of a Claim involving a third party, the Indemnified Party against whom such Claim is asserted will give the Indemnifying Party written notice of any such Claim, specifying the basis therefore and the amount of such Claim; provided, however, that any failure or delay in providing such notice to the Indemnifying Party will not relieve the Indemnifying Party of any obligations hereunder except to the extent and only to the extent the Indemnifying Party was actually prejudiced by such delay or failure. The Indemnifying Party will promptly designate counsel chosen by it and reasonably acceptable to the Indemnified Party to represent the Indemnified Party in connection with such Claim and the Indemnifying Party will pay all costs of investigation, litigation or arbitration incurred in connection with such Claim including, without limitation, fees and expenses of such counsel. The Indemnifying Party will not be liable for the fees or expenses of separate counsel for the Indemnified Party, unless the counsel designated by the Indemnifying Party is unable, due to ethical considerations, to fully represent the Indemnified Party with respect to such Claim, in which case the Indemnifying Party will be liable for the reasonable fees and expenses of one separate counsel for the Indemnified Party. Unless the Indemnifying Party has delivered to the Indemnified Party a written statement in form and substance acceptable to the Indemnified Party acknowledging and confirming that a subject Claim is fully within the scope of the indemnification obligations of the Indemnifying Party under this Agreement, the Indemnified Party will have the sole right to direct the conduct of the defense of such Claim and to settle or compromise such Claim on such terms as the Indemnified Party will determine in its sole discretion without prejudice to the rights of the Indemnified Party to seek indemnity under this Agreement. If the Indemnifying Party delivers to the Indemnified Party the written statement referred to in the preceding sentence, the subject Claim may not be settled or compromised without the prior written consent of the Indemnifying Party. The Indemnified Party will use its reasonable efforts to cooperate fully with respect to the defense of any Claim. Unless the Indemnifying Party has delivered to the Indemnified Party a written statement in form and substance acceptable to the Indemnified Party acknowledging and confirming that a subject Claim is fully within the scope of indemnification obligations of the Indemnifying Party under this Agreement, if after the passage of a reasonable period of time after 53 notice of any Claim, the Indemnifying Party has not initiated a defense against such Claim, the Indemnified Party will have the right to undertake the defense, compromise or settlement of such Claim at any time prior to settlement, compromise or final determination thereof and any action so taken by the Indemnified Party with regard to such defense, compromise or settlement will be deemed to be within the protection afforded by this Agreement; provided, however, that any settlement of any such Claim shall require the prior written consent of the Indemnifying Party, which consent shall not be unreasonably withheld or delayed. Anything in this Section 15.3 to the contrary notwithstanding, (i) if there is a reasonable possibility that a Claim may materially adversely affect the Indemnified Party other than as a result of money damages or other money payments that are within the protection afforded by this Agreement, the Indemnified Party will have the right, at the Indemnified Party's cost and expense, to defend, and, with the consent of the Indemnifying Party (which consent will not be unreasonably withheld or delayed), to compromise or settle such claim; and (ii) the Indemnifying Party will not settle or compromise any Claim or consent to the entry of any judgment that does not include as an unconditional term thereof the giving by the claimant or plaintiff to the Indemnified Party a full, irrevocable and unconditional release from all liability in respect of such Claim. In the event that there is more than one Indemnified Party or more than one Indemnifying Party with respect to any Claim, any notice contemplated by this Section 15.3 to be given to the Indemnified Party or the Indemnifying Party will be deemed to be given for purposes hereof if it is given to any Indemnified Party, in the case of notices to the Indemnified Party, or to any Indemnifying Party, in the case of notices to the Indemnifying Party. 15.4 Survival; Non-Waiver of Rights. The representations and warranties made or deemed made by any party to another shall survive the Closing for a period of twelve (12) months thereafter, and the delivery of all documents, funds and investments delivered pursuant hereto and shall not be affected or deemed waived by reason of the fact that another party or its Representatives knew or should have known that any such representations, warranties, covenants or agreement is or might be inaccurate in any respect, except that the representations and warranties made in Sections 10.19 (Tax Matters) and 10.21 (Employee Benefit Plans and Agreements) shall survive the Closing until the expiration of the applicable statutes of limitations, plus thirty (30) days, the representations and warranties contained in the last sentence of Section 10.2 shall survive until the second anniversary of the Closing Date, and the representations and warranties set forth in the last sentence of Section 10.13(b) (overtime payment) shall survive without termination. Any furnishing of information by any party to another pursuant to, or otherwise in connection with, this Agreement, including, without limitation, any information contained in any document, contract, book or record of the delivering party to which another party shall have access or any information obtained by, or made available to, any party as a result of any investigation made by or on behalf of such party prior to or after the date of this Agreement, shall not affect such party's right to rely on any representation, warranty, covenant or agreement made or deemed made by another party in this Agreement and shall not be deemed a waiver thereof. 54 15.5 Exclusivity of Indemnification Provisions. The parties acknowledge and agree that the purpose of the representations and warranties, and covenants and obligations in this Agreement is to give the aggrieved party the right to be indemnified pursuant to this Section 15.5. Accordingly, the parties agree that breaches of such representations and warranties will not be deemed to constitute fraud or misrepresentation under state or federal law. Additionally, the following limitations will apply other than in the case of fraud or willful misconduct: THE INDEMNIFICATION PROVISIONS AS PROVIDED IN THIS AGREEMENT WILL BE THE SOLE AND EXCLUSIVE REMEDY AND RECOURSE FOR ANY BREACH OF THIS AGREEMENT BY THE COMPANY OR THE SHAREHOLDERS OR ANY OTHER CLAIM BY THE BUYER UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS AND THE BUYER AND MERGER SUB WILL HAVE NO OTHER ENTITLEMENT, REMEDY OR RECOURSE, WHETHER IN CONTRACT, TORT OR OTHERWISE, AGAINST THE SHAREHOLDERS, OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES UNDER OR WITH RESPECT TO THIS AGREEMENT, ALL OF SUCH ENTITLEMENTS, REMEDIES AND RECOURSE BEING HEREBY EXPRESSLY WAIVED BY THE BUYER AND MERGER SUB TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS. IN ADDITION, THE AMOUNT OF THE CAPS APPLICABLE TO THE SHAREHOLDERS SET FORTH IN SECTION 15.1 WILL BE THE MAXIMUM AMOUNT OF THE INDEMNIFICATION OBLIGATIONS OF THE SHAREHOLDERS HEREUNDER, AND NEITHER THE SHAREHOLDERS NOR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES WILL HAVE FURTHER PERSONAL OR OTHER LIABILITY THEREFOR. TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, THE BUYER AND MERGER SUB WILL NOT BE ENTITLED TO ANY FURTHER INDEMNIFICATION RIGHTS OR CLAIMS OF ANY NATURE WHATSOEVER HEREUNDER, ALL OF WHICH THE BUYER AND MERGER SUB HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS. THE INDEMNIFICATION PROVIDED IN THIS AGREEMENT WILL BE THE SOLE AND EXCLUSIVE REMEDY AND RECOURSE FOR ANY BREACH OF THIS AGREEMENT BY THE BUYER OR MERGER SUB OR ANY OTHER CLAIM BY THE SHAREHOLDERS UNDER OR WITH RESPECT TO THIS AGREEMENT OR ANY OF THE TRANSACTIONS AND THE SHAREHOLDERS WILL HAVE NO OTHER ENTITLEMENT, REMEDY OR RECOURSE, WHETHER IN CONTRACT, TORT OR OTHERWISE, AGAINST THE SURVIVING CORPORATION, BUYER OR MERGER SUB OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES UNDER OR WITH RESPECT TO THIS AGREEMENT, ALL OF SUCH ENTITLEMENTS, REMEDIES AND RECOURSE BEING EXPRESSLY WAIVED BY THE SHAREHOLDERS TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS. TO THE EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS, THE SHAREHOLDERS WILL NOT BE ENTITLED TO ANY FURTHER INDEMNIFICATION RIGHTS OR CLAIMS OF ANY NATURE WHATSOEVER HEREUNDER, ALL OF WHICH THE SHAREHOLDERS HEREBY WAIVE TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LEGAL REQUIREMENTS. 55 16. Miscellaneous. 16.1 Notices. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if delivered personally, mailed by certified mail (return receipt requested) or sent by overnight delivery service, telegram, or facsimile transmission to the parties at the following addresses or at such other addresses as shall be specified by the parties by like notice: (a) if to Terra Terra Networks Asociadas, S.L. Via De Las Dos Castillas 33 Complejo Atica Edificio 1 Pozuelo De Alarcon 28223 Madrid Spain Attn.: General Counsel Telephone: (34) 91-452-3000 Facsimile: (34) 91-452-3042 (b) if to Amadeus: Amadeus Americas, Inc. 9250 NW 36th Street Miami, Florida 33178 Attn: General Counsel Telephone: (305) 499-6500 Facsimile: (305) 499-6939 (c) if to the Company prior to the Closing, OneTravel, Inc. 258 Main Street, Third Floor East Greenville, Pennsylvania 18041 Attn: Philip Ferri, Chief Executive Officer Telephone: (215) 541-1030 Facsimile: (215) 541-9098 56 with a copy to: Haynes and Boone, L.L.P. One Houston Center 1221 McKinney, Suite 2100 Houston, Texas 77010 Attn.: Bryce D. Linsenmayer, Esq. Telephone: (713) 547-2007 Facsimile: (713) 547-2300 (d) if to the Shareholder Representative after the Closing: Joanna Franyie Romano, Esq. General Counsel Terra Networks USA 1201 Brickell Avenue, Suite 700 Miami, Florida Telephone: (305) 714-8555 Facsimile: (305) 714-8713 (e) if to the Surviving Corporation, Buyer or Merger Sub: RCG Companies Incorporated 6836 Morrison Blvd. Suite 220 Charlotte, North Carolina 28211 Attn.: Executive Vice President Telephone: (704) 366-5054 Facsimile: (704) 366-5056 57 with a copy to: Katten Muchin Zavis Rosenman 525 W. Monroe Chicago, Illinois 60661-3693 Attn.: Matthew S. Brown, Esq. Telephone: (312) 902-5207 Facsimile: (312) 218-7869 (f) if to Avanti: Avanti Management, Inc. 2000 Miller Road Spinnerstown, Pennsylvania 18968 Telephone: (215) 853-2514 Facsimile: (484) 229-0277 Notice so given shall, in the case of notice so given by mail, be deemed to be given three (3) business days after the date mailed, in the case of notice so given by overnight delivery service, on the date of actual delivery, in the case of notice so given by telegram, facsimile transmission, on the date of actual transmission if such transmission occurs during normal business hours on a business day or, if transmission does not so occur, on the next business day, or, in the case of personal delivery, on the date of such delivery. 16.2 Severability. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any applicable law, then such contravention or invalidity shall not invalidate the entire Agreement. Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. 16.3 Parties in Interest. All the terms and provisions of this Agreement shall be binding upon and inure to the benefit of and be enforceable by the respective successors and assigns of the parties hereto. This Agreement shall not run to the benefit of or be enforceable by any Person other than a party to this Agreement or their successors and assigns. 16.4 CHOICE OF LAW. THIS AGREEMENT WILL BE GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF DELAWARE. 16.5 Counterparts; Delivery by Facsimile. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. This Agreement and each other agreement or instrument entered into in connection herewith or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects and for all purposes as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense. 16.6 Complete Agreement. This Agreement, the Disclosure Schedule and those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements, letters of intent, or 58 representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way. The parties intend that each representation, warranty, and covenant contained in this Agreement shall have independent significance. If any party has breached any representation, warranty, or covenant contained in this Agreement in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the party has not breached shall not detract from or mitigate the fact that the party is in breach of the first representation, warranty or covenant. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. All words used in this Agreement will be construed to be of such gender or number as the circumstances require. 16.7 Waiver of Jury Trial. Each of the parties hereto hereby irrevocably waives any and all right to trial by jury of any claim or cause of action in any legal proceeding arising out of or related to this Agreement or the transactions or events contemplated hereby or any course of conduct, course of dealing, statements (whether verbal or written) or actions of any party hereto. The parties each agree that any and all such claims and causes of action shall be tried by the court without a jury. Each of the parties further waives any right to seek to consolidate any such legal proceeding in which a jury trial has been waived with any other legal proceeding in which a jury trial cannot or has not been waived. 16.8 Further Assurances. Each party covenants that at any time, and from time to time, after the Closing it will execute such additional instruments and take such actions as may be reasonably requested by the other parties to confirm or perfect or otherwise further carry out the intent, agreements and purposes of this Agreement. 16.9 Assignment. No party shall assign this Agreement or their obligations hereunder without the prior written consent of the other parties hereto. 16.10 Waiver. The rights and remedies of the parties to this Agreement are cumulative and not alternative. Neither the failure nor any delay by any party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege and no single or partial exercise of any such right, power, or privilege will preclude any other further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other party; (b) no waiver that may be given by a party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one party will be deemed to be a waiver of any obligation of such party or of the right of the party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement. 16.11 Consent to Specific Performance. Each party hereto therefore consents to an order of specific performance with respect to any of its obligations hereunder. Any party against whom an order for specific performance is sought hereby waives any claim or defense therein that the moving party has an adequate remedy at law or that money damages would provide an adequate remedy. It shall, however, be the election of the moving party as to whether or not to seek specific performance. 59 16.12 Appointment of Shareholder Representative. Each holder of Shares shall, by virtue of such holder's execution and delivery of a Letter of Transmittal, be deemed to constitute and appoint Joanna Franyie Romano, with full power of substitution and resubstitution, for him/her and in his/her name, place and stead, or, in the case of his/her death or incapacity, any replacement representative appointed in writing by those holders of Shares who held a majority of outstanding Shares (on a fully diluted basis) immediately preceding the Closing and their respective heirs, successors and assigns (the "Shareholder Representative") to act as the representative of any and all of such holders with respect to any matter arising in connection with this Agreement and to make on behalf of any or all holders, individually and collectively, any decisions and take all actions that they would be entitled to make pursuant to this Agreement (but for the appointment of the Shareholder Representative) including any decision or action that may prejudice the rights of any holder or may have an adverse effect with respect to any holder. The Shareholder Representative shall be considered a nominee and agent of the holders of Shares. Any decision or action of the Shareholder Representative made on behalf of any or all holders of Shares shall be binding on such holders, their heirs, successors and assigns. The Buyer and Merger Sub shall, with respect to any decision or action by the Shareholder Representative, be entitled to rely upon any written notice, instruction, certificate or request of the Shareholder Representative. Each holder of Shares, by virtue of such holder's execution and delivery of a Letter of Transmittal, agrees severally, but not jointly, to indemnify and hold harmless the Shareholder Representative from and against all obligations, liabilities, claims, costs, fees, expenses (including costs and expenses of counsel) owed or due to any third party (including any other holder) of whatsoever nature and kind arising out of, associated with or resulting from the exercise by the Shareholder Representative, or the failure to exercise by the Shareholder Representative, of his/her powers and the performance or non-performance of his/her duties hereunder, provided that the foregoing shall be inapplicable in any case of gross negligence or willful misconduct on the part of the Shareholder Representative. The Shareholder Representative shall not be liable to the holders for any action taken or omitted by the Shareholder Representative in good faith under this Agreement, except for gross negligence or willful misconduct. 16.13 Jurisdiction; Service of Process. Any action or Proceeding seeking to enforce any provision of, or based on any right arising out of, this Agreement may be brought against any of the parties in the courts of the State of Florida, County of Miami-Dade, or, if it has or can acquire jurisdiction, in the United States District Court for the Southern District of Florida, and each of the parties consents to the jurisdiction of such courts (and of the appropriate appellate courts) in any such action or proceeding and waives any objection to venue laid therein. [Signature page follows] 60 IN WITNESS WHEREOF, the parties hereto execute this Agreement as of the date first written above. COMPANY BUYER ONETRAVEL, INC. RCG COMPANIES INCORPORATED By: \s\ Philip A. Ferri By: \s\ William A. Goldstein ------------------------- ------------------------ Name: Philip A. Ferri Name: William A. Goldstein Title: President Title: Chairman SHAREHOLDERS MERGER SUB TERRA NETWORKS ASOCIADAS, S.L. OT ACQUISITION CORPORATION By: /s/ Juan Rovira --------------------------- Name: Juan Rovira By: \s\ William A. Goldstein ------------------------- ------------------------ Title: Director Name: William A. Goldstein ------------------------ Title: Chairman AMADEUS AMERICAS, INC. f/k/a AMADEUS NMC HOLDING, INC. SHAREHOLDER REPRESENTATIVE By: \s\ Edna Wehby Lopez ------------------------- Name: Edna Wehby Lopez Title: President \s\ Joanna Franyie Romano ---------------------------- JOANNA FRANYIE ROMANO AVANTI MANAGEMENT, INC. By: \s\ Michael Thomas -------------------------- Name: Michael Thomas Title: CEO and President 61 EX-10.2 4 registr.txt REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "AGREEMENT") is made and entered into as of April 15, 2005, by and among RCG Companies Incorporated, a Delaware corporation (the "COMPANY"); Amadeus Americas, Inc. f/k/a Amadeus NMC Holding, Inc., a Delaware corporation ("AMADEUS"); Terra Networks Asociadas, S.L., a company organized and existing under the laws of the Kingdom of Spain ("TERRA"); Avanti Management, Inc., a Pennsylvania corporation ("AVANTI"); and Libra Securities, LLC, a Delaware limited liability company ("LIBRA SECURITIES" and together with Amadeus, Terra and Avanti are each individually referred to as a "HOLDER" and collectively as the "HOLDERS"). This Agreement is made pursuant to the Agreement and Plan of Merger, dated February 10, 2005, by and among the Company, OneTravel, Inc., a Texas corporation, Amadeus, Terra, Avanti and OT Acquisition Corporation, a Texas corporation (the "MERGER AGREEMENT"). 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "CONVERTIBLE PROMISSORY NOTES" means those certain Convertible Promissory Notes issued by the Company to Amadeus, Terra, Avanti and Libra Securities pursuant to the Merger Agreement. (b) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. (c) "HOLDER" or "HOLDERS" means the holder or holders, as the case may be, from time to time of Registrable Securities. The initial Holders are Amadeus, Terra, Avanti and Libra Securities. (d) "PROCEEDING" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened. (e) "PROSPECTUS" means the prospectus included in a Registration Statement (including, without limitation, a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A promulgated under the Securities Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of the Registrable Securities covered by a Registration Statement, and all other amendments and supplements to the Prospectus, including post-effective amendments, and all material incorporated by reference or deemed to be incorporated by reference in such Prospectus. (f) "REGISTRABLE SECURITIES" means, as of the Filing Date, all of the Conversion Shares, as such term is defined in the Convertible Promissory Notes. (g) "REGISTRATION STATEMENT" means the registration statement required to be filed hereunder, including the Prospectus, amendments and supplements to such registration statement or Prospectus, including pre- and post-effective amendments, all exhibits thereto, and all material incorporated by reference or deemed to be incorporated by reference in such registration statement. (h) "SECURITIES ACT" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 2. Required Registration. As soon as practicable, but in no event later than the 90th day, following the date hereof (the "FILING DATE"), the Company shall prepare and file with the Commission a Registration Statement covering the resale of 100% of the Registrable Securities. The Registration Statement shall be on Form S-3 (unless the Company is not then eligible to register for resale the Registrable Securities on Form S-3, in which case such registration shall be on another appropriate form in accordance herewith) and shall contain (unless otherwise directed by the Holders) substantially the "PLAN OF DISTRIBUTION" attached hereto as Annex A. Subject to the terms of this Agreement, the Company shall use its reasonable commercial efforts to cause the Registration Statement to be declared effective under the Securities Act as promptly as possible after the filing thereof, but in any event prior to the 120th calendar day following the date hereof or the 180th calendar day following the date hereof in the case of a review by the Commission. The Company shall promptly notify the Holders of the effectiveness of the Registration Statement and any post-effective amendment thereto once the Company receives notification of such effectiveness from the Commission. 3. Registration Procedures. In connection with the Company's registration obligations hereunder, the Company shall: (a) use its reasonable commercial efforts to prepare and file with the Commission such amendments and supplements to the Registration Statement and the Prospectus included therein as may be necessary to effect and maintain the effectiveness of such Registration Statement as may be required by the applicable rules and regulations of the Commission and the instructions applicable to the form of such Registration Statement (provided, however, that the Company shall not be obliged to maintain the effectiveness of such Registration Statement longer than through the earlier of (i) the second anniversary of the date hereof, (ii) the date on which the Holders may sell all Registrable Securities held by the Holders without regard to any volume limitation pursuant to Rule 144(k) of the Securities Act or (iii) such time as all Registrable Securities held by the Holders have been sold pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule of similar effect); (b) promptly deliver to each Holder, without charge, as many copies of the Prospectus and each amendment or supplement thereto as such Holder may reasonably request in connection with resales by the Holder of Registrable Securities. Subject to the terms of this Agreement, the Company hereby consents to the use of such Prospectus and each amendment or supplement thereto by each of the selling Holders in connection with the offering and sale of the Registrable Securities covered by such Prospectus and any amendment or supplement thereto, except after the giving of any notice pursuant to Section 3(c); (c) notify the Holders of Registrable Securities to be sold (which notice shall, pursuant to clauses (ii) through (vi) hereof, be accompanied by an instruction to suspend the use of the Prospectus until the requisite changes have been made) as promptly as reasonably possible, (i)(A) when a Prospectus or 2 any Prospectus supplement or post-effective amendment to a Registration Statement is proposed to be filed and (B) with respect to a Registration Statement or any post-effective amendment, when the same has become effective; (ii) of any request by the Commission or any other Federal or state governmental authority for amendments or supplements to a Registration Statement or Prospectus or for additional information; (iii) of the issuance by the Commission or any other federal or state governmental authority of any stop order suspending the effectiveness of a Registration Statement covering any or all of the Registrable Securities or the initiation of any Proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of any of the Registrable Securities for sale in any jurisdiction, or the initiation or threatening of any Proceeding for such purpose; (v) of the occurrence of any event or passage of time that makes the financial statements included in a Registration Statement ineligible for inclusion therein or any statement made in a Registration Statement or Prospectus or any document incorporated or deemed to be incorporated therein by reference untrue in any material respect or that requires any revisions to a Registration Statement, Prospectus or other documents so that, in the case of a Registration Statement or the Prospectus, as the case may be, it will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading; and (vi) the occurrence or existence of any pending corporate development with respect to the Company that the Company believes may be material and that, in the determination of the Company, makes it not in the best interest of the Company to allow continued availability of the Registration Statement or Prospectus; provided that any and all of such information shall remain confidential to each Holder unless (I) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (II) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. (d) use its commercially reasonable efforts to register or qualify or cooperate with the selling Holders in connection with the registration or qualification (or exemption from the registration or qualification) of such Registrable Securities for the resale by the Holder under the securities or Blue Sky laws of such jurisdictions within the United States as any Holder reasonably requests in writing, and to keep each registration or qualification (or exemption therefrom) effective during the Effectiveness Period; provided, that the Company shall not be required to qualify generally to do business in any jurisdiction where it is not then so qualified, subject the Company to any material tax in any such jurisdiction where it is not then so subject or file a general consent to service of process in any such jurisdiction; and (e) file all documents required to be filed with the Commission pursuant to Section 13, 14 or 15 of the Exchange Act within the time periods required by the Exchange Act and the rules and regulations promulgated thereunder. (f) The Company may require each selling Holder to furnish to the Company such information regarding such Holder and such Holder's method of distribution of Registrable Securities as the Company from time to time reasonably requests in writing. Each such Holder agrees to notify the Company as promptly as practicable of any inaccuracy or change in information previously furnished by such Holder to the Company or of the occurrence of any event in either case as a result of which any Prospectus relating to such registration contains or would contain an untrue statement of a material fact regarding such 3 Holder or the distribution of such Registrable Securities or omits to state any material fact regarding such Holder or the distribution of such Registrable Securities required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, and promptly to furnish to the Company any additional information required to correct and update any previously furnished information or required so that such prospectus shall not contain, with respect to such Holder or the distribution of such Registrable Securities, an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing. The Company shall hold in confidence and not make any disclosure of information concerning a Holder of Registrable Securities provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement. During any periods that the Company is unable to meet its obligations hereunder with respect to the registration of the Registrable Securities because any Holder fails to furnish such information pursuant to the Company's request, any failure by the Company to comply hereunder that may occur solely because of such delay shall be excused until such information is delivered to the Company. (g) Each of the Holders will comply with the provisions of the Securities Act with respect to disposition of the Registrable Securities to be included in any Registration Statement filed by the Company. 4. Registration Expenses. All fees and expenses in connection with the performance of this Agreement by the Company shall be borne by the Company; provided, however, that in no event shall the Company be responsible for the fees, costs and expenses of counsel for any Holder, any broker or similar commissions or any transfer taxes relating to the Registrable Securities sold by the Holders. 5. Transfer of Registrable Securities after Registration. Each of the Holders agrees that it will not effect any disposition of the Registrable Securities that would constitute a sale within the meaning of the Securities Act, except as contemplated in the Registration Statement or as otherwise permitted by law. 6. Indemnification. (a) Indemnification by the Company. Subject to the provisions of this Section 6, the Company agrees to indemnify and hold harmless the Holders, the Holders' respective officers, directors, trustees, partners, members, employees and agents, and each person, if any, who controls or is under common control with any of the Holders within the meaning of the Securities Act (each, a "HOLDER INDEMNITEE"), against any losses, claims, damages, liabilities or expenses, joint or several, to which such Holder Indemnitees may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written 4 consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained or incorporated by reference in the Registration Statement, including financial statements and schedules, and all other documents filed as a part thereof, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A, or pursuant to Rule 434, under the Securities Act, or in the Prospectus related thereto, in the form first filed with the Commission pursuant to Rule 424(b) under the Securities Act or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) filing is required, or any amendment or supplement to the Registration Statement or Prospectus, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them, in light of the circumstances under which they were made, not misleading, and will reimburse the Holder Indemnitee for reasonable legal and other expenses as such expenses are incurred by such Holder Indemnitee or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Company will not be liable in any such case to a Holder Indemnitee to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon (i) an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by or on behalf of a Holder expressly for use in the Registration Statement, the Prospectus or any amendment or supplement thereto, or (ii) the failure of the applicable Holder to comply with the covenants and agreements contained in this Agreement regarding the resale of the Registrable Securities, or (iii) any untrue statement or omission of a material fact required to make such statement not misleading in any Prospectus that is corrected in any subsequent Prospectus or supplement thereto that was delivered to the applicable Holder a reasonable amount of time before the pertinent sale or sales by such Holder or (iv) a direct claim against the Company by such Holder Indemnitee if such Holder Indemnitee is a person that is under common control with any Holder (as opposed to a third-party claim against such Holder Indemnitee). (b) Indemnification by the Holders. Subject to the provisions of this Section 6, each Holder will, severally and not jointly, indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement and each person, if any, who controls the Company within the meaning of the Securities Act, against any losses, claims, damages, liabilities or expenses to which the Company, each of its directors, each of its officers who signed the Registration Statement or controlling person may become subject, under the Securities Act, the Exchange Act, or any other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Holder), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon (i) any failure on the part of such Holder to comply with the covenants and agreements contained in this Agreement regarding the resale of the Registrable Securities or (ii) any untrue or alleged untrue statement of any material fact contained in the Registration Statement, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case 5 to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with written information furnished to the Company by or on behalf of such Holder expressly for use therein and such Holder will reimburse the Company, each of its directors, each of its officers who signed the Registration Statement and each controlling person for reasonable legal and other expenses as such expenses are incurred by the Company, each of its directors, each of its officers who signed the Registration Statement and each controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that the Holder shall not be liable for any such untrue or alleged untrue statement or omission or alleged omission of which the Holder has delivered to the Company in writing a correction of such untrue statement or omission of a material fact a reasonable amount of time before the occurrence of the transaction from or upon which such loss, claim, damage, liability or expense arose or was based. (c) Indemnification Procedures. (i) Promptly after receipt by an indemnified party under this Section 6 of notice of the threat or commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 6, promptly notify the indemnifying party in writing of the claim; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise under the indemnity agreement contained in this Section 6 to the extent it is not prejudiced as a result of such failure. (ii) In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it or other indemnified parties that are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, which approval shall not be unreasonably withheld, the indemnifying party will not be liable to such indemnified party under this Section 6 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless: (A) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by such indemnifying party representing all of the indemnified parties who are parties to such action), or 6 (B) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of action, in each of which cases the reasonable fees and expenses of counsel shall be at the expense of the indemnifying party. (d) Contribution. If the indemnification provided for in this Section 6 is required by clause (i) of Section 6(a) or clause (iii) of Section 6(b) but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under this Section 6 in respect to any losses, claims, damages, liabilities or expenses referred to in this Agreement, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses referred to in this Agreement in such proportion as is appropriate to reflect the relative fault of the Company and the Holders in connection with the statements or omissions, the inaccuracies in the representations and warranties in this Agreement or the breach of covenants and agreements in this Agreement that resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative fault of the Company and the Holders shall be determined by reference to, among other things, whether the untrue or alleged statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation or warranty relates to information supplied by the Company or by such Holder and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in Section 6(e), any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in Section 6(c) with respect to the notice of the threat or commencement of any threat or action shall apply if a claim for contribution is to be made under this Section 6(d); provided, however, that no additional notice shall be required with respect to any threat or action for which notice has been given under Section 6 for purposes of indemnification. The Company and the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6(d) were determined solely by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in this paragraph. Notwithstanding the provisions of this Section 6(d), no Holder shall be required to contribute any amount in excess of the amount by which the total proceeds received by it from the sale of the Registrable Securities exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Holders' obligations to contribute pursuant to this Section 6(d) are several and not joint. (e) Limits on Liability. In no event shall the aggregate liability hereunder (i) of the Company exceed the aggregate Principal Amounts of all of the Convertible Promissory Notes; or (ii) of a Holder exceed (A) the aggregate Principal Amount of the Convertible Promissory Note made in favor of such Holder (or such Holder's successor(s) or assignor(s)) with respect to the matters described in clause (i) of Section 6(b), and (B) the gross proceeds to such Holder as a result of the sale of Registrable Securities pursuant to a Registration Statement, Prospectus or any amendment or supplement thereto with respect to the matters described in clause (ii) of Section 6(b). 7 7. Rule 144 Information. Until the earlier of (a) the date on which the Registrable Securities may be resold by the Holders without registration and without regard to any volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar effect or (b) all of the Registrable Securities have been sold pursuant to the Registration Statement or Rule 144 under the Securities Act or any other rule of similar effect, the Company shall file all reports required to be filed by it under the Securities Act, the rules and regulations promulgated thereunder and the Exchange Act so long as it is subject to such requirements and shall take such further reasonable action to the extent required to enable the Holders to sell the Registrable Securities pursuant to Rule 144 under the Securities Act (as such rule may be amended from time to time). 8. Notices. Any notice provided pursuant to this Agreement shall be given in accordance with the notice provisions of the Merger Agreement. Notice to Libra Securities shall be given to: Libra Securities, LLC 630 Fifth Avenue Suite 1919 New York, New York 10111 Attention: Frank Sena Telephone: (212) 332-4150 Facsimile: (212) 322-4155 With a copy to: Libra Securities, LLC 11766 Wilshire Blvd., Suite 870 Los Angeles, California 90025 Attention: General Counsel Telephone: (310) 312-5600 Facsimile: (310) 312-5640 9. Modification; Amendment; Termination. This Agreement may not be modified or amended except pursuant to an instrument in writing signed by the Company and the Holders. 10. Entire Agreement. This Agreement and the agreements referenced herein supersede all other prior oral or written agreements between the parties with respect to the matters discussed herein and contains the entire understanding with respect to the matters covered herein. 11. Headings. The headings of Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to "Section" or "Sections" refer to the corresponding Section or Sections of this Agreement. 8 12. Severability. If any provision of this Agreement shall be held to be illegal, invalid or unenforceable under any applicable law, then such contravention or invalidity shall not invalidate the entire Agreement. Such provision shall be deemed to be modified to the extent necessary to render it legal, valid and enforceable, and if no such modification shall render it legal, valid and enforceable, then this Agreement shall be construed as if not containing the provision held to be invalid, and the rights and obligations of the parties shall be construed and enforced accordingly. 13. Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the state of Delaware and the federal law of the United States of America, without giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any other jurisdiction. 14. Counterparts; Delivery by Facsimile. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, with the same effect as if all parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. This Agreement and each other agreement or instrument entered into in connection herewith or contemplated hereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, shall be treated in all manner and respects and for all purposes as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine as a defense to the formation or enforceability of a contract and each such party forever waives any such defense. 15. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns; provided that the Holders may not assign their rights or obligations hereunder without the consent of the Company. 16. No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person. [SIGNATURE PAGES FOLLOWS] 9 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed and delivered by their respective duly authorized officers or representatives as of the date first written above. COMPANY: RCG COMPANIES INCORPORATED By: \s\ Marc E. Bercoon ----------------------------- Name: Marc E. Bercoon Title: Chief Financial Officer 10 HOLDERS: TERRA NETWORKS ASOCIADAS, S.L. By: /s/ Juan Rovira -------------------------------------------------- Name: Juan Rovira ------------------------------------------------ Title: Director ----------------------------------------------- AMADEUS AMERICAS, INC. F/K/A AMADEUS NMC HOLDING, INC. By: /s/ Edna Wehby Lopez -------------------------------------------------- Name: Edna Wehby Lopez ------------------------------------------------ Title: President ----------------------------------------------- AVANTI MANAGEMENT, INC. By: /s/ Michael Thomas -------------------------------------------------- Name: Michael Thomas ------------------------------------------------ Title: CEO and President ----------------------------------------------- LIBRA SECURITIES, LLC By: /s/ Robert G. Morrish -------------------------------------------------- Name: Robert G. Morrish ------------------------------------------------ Title: Executive Vice President ----------------------------------------------- ANNEX A PLAN OF DISTRIBUTION Each Selling Stockholder (the "SELLING STOCKHOLDERS") of the common stock ("COMMON STOCK") of the Company and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their shares of Common Stock on AMEX or any other stock exchange, market or trading facility on which the shares are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Stockholder may use any one or more of the following methods when selling shares: o ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; o block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction; o purchases by a broker-dealer as principal and resale by the broker-dealer for its account; o an exchange distribution in accordance with the rules of the applicable exchange; o privately negotiated transactions; o broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share; o a combination of any such methods of sale; o any other method permitted pursuant to applicable law. The Selling Stockholders may also sell shares under Rule 144 under the Securities Act of 1933, as amended (the "SECURITIES ACT"), if available, rather than under this prospectus. Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. Each Selling Stockholder does not expect these commissions and discounts relating to its sales of shares to exceed what is customary in the types of transactions involved. The Selling Stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Stockholder has informed the Company that it does not have any agreement or understanding, directly or indirectly, with any person to distribute the Common Stock. 12 The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the shares. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act. Because Selling Stockholders may be deemed to be "underwriters" within the meaning of the Securities Act, they will be subject to the prospectus delivery requirements of the Securities Act. In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 under the Securities Act may be sold under Rule 144 rather than under this prospectus. Each Selling Stockholder has advised us that they have not entered into any agreements, understandings or arrangements with any underwriter or broker-dealer regarding the sale of the resale shares. There is no underwriter or coordinating broker acting in connection with the proposed sale of the resale shares by the Selling Stockholders. We agreed to use our commercially reasonable efforts to keep this prospectus effective until the earlier of (i) the date on which the shares may be resold by the Selling Stockholders without registration and without regard to any volume limitations by reason of Rule 144(k) under the Securities Act or any other rule of similar effect, (ii) all of the shares have been sold pursuant to the prospectus or Rule 144 under the Securities Act or any other rule of similar effect, or (iii) the second anniversary the date of the Registration Rights Agreement to which this Annex A Plan of Distribution is attached. The resale shares will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale shares may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with. Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale shares may not simultaneously engage in market making activities with respect to our common stock for a period of two business days prior to the commencement of the distribution. In addition, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of shares of our common stock by the Selling Stockholders or any other person. We will make copies of this prospectus available to the Selling Stockholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale. 13 EX-10.3 5 security.txt SECURITY AGREEMENT THIS SECURITY AGREEMENT (this "Agreement") dated as of April ___, 2005, is among RCG Companies Incorporated, a Delaware corporation (together with its successors and assigns, "Debtor"), and [Amadeus Americas, Inc. f/k/a Amadeus NMC Holding, Inc., a Delaware corporation] [Terra Networks Asociadas, S.L., a company organized and existing under the laws of the Kingdom of Spain] [Avanti Management, Inc., a Pennsylvania corporation] [Libra Securities, LLC, a Delaware limited liability company] ("Secured Party"). W I T N E S S E T H: - - - - - - - - - - WHEREAS, this Agreement is made pursuant to the Agreement and Plan of Merger, dated February 10, 2005, by and among OneTravel, Inc., a Texas corporation, the Debtor, Amadeus Americas, Inc. f/k/a Amadeus NMC Holding, Inc., a Delaware corporation ("Amadeus"), Terra Networks Asociadas, S.L., a company organized and existing under the laws of the Kingdom of Spain ("Terra"), Avanti Management, Inc., a Pennsylvania corporation ("Avanti"), and OT Acquisition Corporation, a Texas corporation (the "Merger Agreement"); WHEREAS, Debtor has entered into a Convertible Promissory Note dated as of the date hereof with the Secured Party (the "Promissory Note"); and WHEREAS, all of Debtor's obligations, liabilities and indebtedness under the Promissory Note are to be secured pursuant to this Agreement; NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which hereby are acknowledged, the parties hereto agree as follows: 1. Definitions. The following terms have the following meanings (such definitions to be applicable to both the singular and plural forms of such terms): Arrangement means (i) any written lease, agreement, contract, commitment or license or (ii) any enforceable understanding or enforceable oral lease, agreement, contract, commitment or license; by which Debtor (a) has or may acquire any rights, (b) has or may become subject to any obligation or liability, or (c) any of the assets owned or used by it is or may become bound. Collateral means all of the assets of the Debtor, wherever located, now owned or in the future existing or acquired by Debtor, and all proceeds and products thereof, and any substitutes or replacements therefore, including but not limited to the following items and types of property of the Debtor: (a) All personal property and fixture property of every kind and nature including, without limitation, all accounts, chattel paper (whether tangible or electronic), goods (including inventory, equipment, and any accessions thereto), software, instruments, investment property, documents, deposit accounts, money, commercial tort claims, letters of credit or letter-of-credit rights, supporting obligations, tax refunds, and general intangibles (including payment intangibles); (b) All rights, titles, and interests of Debtor in and to all outstanding stock, equity, or other investment securities owned by Debtor, including, without limitation, all capital stock of any subsidiary of the Debtor; (c) All rights, titles, and interests of Debtor in and to all promissory notes and other instruments payable to Debtor, including, without limitation, all inter-company notes from subsidiaries ("Collateral Notes") and all rights, titles, interests, and liens and encumbrances Debtor may have, be, or become entitled to under all present and future loan agreements, security agreements, pledge agreements, deeds of trust, mortgages, guarantees, or other documents assuring or securing payment of or otherwise evidencing the Collateral Notes; (d) The Partnership Interests (as defined below) and all rights of Debtor with respect thereto, including, without limitation, all of Debtor's distribution rights, income rights, liquidation interest, accounts, contract rights, general intangibles, notes, instruments, drafts, and documents relating to the Partnership Interests; (e) (i) All copyrights (whether statutory or common law, registered or unregistered), works protectable by copyright, copyright registrations, copyright licenses, and copyright applications of Debtor, including, without limitation, all of Debtor's right, title, and interest in and to all copyrights registered in the United States Copyright Office or anywhere else in the world; (ii) all renewals, extensions, and modifications thereof; (iii) all income, licenses, royalties, damages, profits, and payments relating to or payable under any of the foregoing; (iv) the right to sue for past, present, or future infringements of any of the foregoing; and (v) all other rights and benefits relating to any of the foregoing throughout the world; in each case, whether now owned or hereafter acquired by Debtor ("Copyrights"); (f) (i) All patents, patent applications, patent licenses, and patentable inventions of Debtor, including, without limitation, registrations, recordings, and applications thereof in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof, and all of the inventions and improvements described and claimed therein; (ii) all continuations, divisions, renewals, extensions, modifications, substitutions, reexaminations, continuations-in-part, or reissues of any of the foregoing; (iii) all income, royalties, profits, damages, awards, and payments relating to or payable under any of the foregoing; (iv) the right to sue for past, present, and future infringements of any of the foregoing; and (v) all other rights and benefits relating to any of the foregoing throughout the world; in each case, whether now owned or hereafter acquired by Debtor ("Patents"); (g) (i) All trademarks, trademark licenses, trade names, corporate names, company names, business names, fictitious business names, trade styles, service marks, certification marks, collective marks, logos, other business identifiers, all registrations, recordings, and applications thereof, including, without limitation, registrations, recordings, and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States, any state thereof or any other country or any political subdivision thereof; (ii) all reissues, extensions, and renewals thereof; (iii) all income, royalties, damages, and payments now or hereafter relating to or payable under any of the foregoing, including, without limitation, damages or payments for past or future infringements of any of the foregoing; (iv) the right to sue for past, present, and future infringements of any of the foregoing; (v) all rights corresponding to any of the foregoing throughout the world; and (vi) all goodwill associated with and symbolized by any of the foregoing, in each case, whether now owned or hereafter acquired by Debtor ("Trademarks"); 2 (h) All of Debtor's computer software, programs and databases (including, without limitation, source code, object code and all related applications and data files), firmware and documentation and materials relating thereto, together with any and all maintenance rights, service rights, programming rights, hosting rights, test rights, improvement rights, renewal rights and indemnification rights and any substitutions, replacements, improvements, error corrections, updates and new versions of any of the foregoing; (i) All of Debtor's rights, titles, and interests in other proprietary rights not included in the Copyrights, Patents and Trademarks, whether now owned or hereafter acquired by Debtor, including without limitation: (i) any knowledge or information that is material to Debtor's business and that enables Debtor to operate its business with the accuracy, efficiency, or precision necessary for commercial success, or otherwise affords Debtor a commercial advantage for the possession or knowledge thereof; (ii) any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof that is material to the operation of Debtor's business and developed by Debtor, its employees, or agents, which could potentially be eligible for protection as Patent(s), but whether or not currently the subject of Patent(s); and (iii) all information or other items recognized as "trade secrets" under state or federal law and all comparable rights recognized in foreign jurisdictions or conventions or by treaty; (j) (i) All of debtor's rights, titles, and interests in, to, and under the Arrangements, including, without limitation, all rights of Debtor to receive moneys due and to become due under or pursuant to the Arrangements, (ii) all rights of Debtor to receive proceeds of any insurance, indemnity, warranty, or guaranty with respect to the Arrangements, (iii) all claims of Debtor for damages arising out of or for breach of or default under the Arrangements, and (iv) all rights of Debtor to compel performance and otherwise exercise all rights and remedies under the Arrangements; (k) All present and future automobiles, trucks, truck tractors, trailers, semi-trailers, or other motor vehicles or rolling stock, now owned or hereafter acquired by such Debtor; (l) Any and all material deposit accounts, bank accounts, investment accounts, or securities accounts, now owned or hereafter acquired or opened by Debtor and any account which is a replacement or substitute for any of such accounts, together with all monies, instruments, certificates, checks, drafts, wire transfer receipts, and other property deposited therein and all balances therein; 3 (m) All present and future distributions, income, increases, profits, combinations, reclassifications, improvements, and products of, accessions, attachments, and other additions to, tools, parts, and equipment used in connection with, and substitutes and replacements for, all or part of the Collateral described above; (n) All present and future accounts, contract rights, general intangibles, chattel paper, documents, instruments, cash and noncash proceeds, and other rights arising from or by virtue of, or from the voluntary or involuntary sale or other disposition of, or collections with respect to, or insurance proceeds payable with respect to, or proceeds payable by virtue of warranty or other claims against the manufacturer of, or claims against any other Person with respect to, all or any part of the Collateral heretofore described in this clause or otherwise; and (o) All present and future security for the payment to any company of any of the Collateral described above and goods which gave or will give rise to any such Collateral or are evidenced, identified, or represented therein or thereby. Event of Default means the occurrence of any Event of Default as defined in the Promissory Note. Jurisdiction of Organization means the jurisdiction under whose law Debtor is organized on the date hereof. Obligations means the obligations of the Debtor under the Promissory Note. Partnerships shall mean (a) any partnership, joint venture, or limited liability company in which Debtor shall, at any time, become a limited or general partner, venturer, or member, or (b) any partnership, joint venture, or corporation formed as a result of the restructure, reorganization, or amendment of the Partnerships. Partnership Agreements shall mean partnership agreements, joint venture agreements, or organizational agreements for any of the Partnerships (together with any modifications, amendments or restatements thereof), and "Partnership Agreement" means any one of the Partnership Agreements. Partnership Interests shall mean all of Debtor's right, title and interest now or hereafter accruing under the Partnership Agreements with respect to all distributions, allocations, proceeds, fees, preferences, payments, or other benefits, which Debtor now is or may hereafter become entitled to receive with respect to such interests in the Partnerships and with respect to the repayment of all loans now or hereafter made by Debtor to the Partnerships. Permitted Liens means (a) liens for taxes, assessments, governmental charges or levies or mechanics' and other statutory liens which are not material in amount relative to the property affected and which are not yet delinquent or can be paid without penalty or are being contested in good faith by appropriate proceedings in respect thereof; (b) imperfections of title which are not substantial in amount relative to the property affected and which do not materially interfere with the present use of the property subject thereto or affected thereby; and (c) liens arising from travel agency regulations relating to customer funds. 4 Records means information which is inscribed on a tangible medium or which is stored in an electronic or other medium and is retrievable in perceivable form. UCC means the Uniform Commercial Code as in effect in the Jurisdiction of Organization from time to time; provided that, as used in Section 9 hereof, "UCC" shall mean the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction. 2. Grant of Security Interest. As security for the prompt and complete payment, performance and observance when due (whether at stated maturity, by acceleration or otherwise) of all of the Obligations, Debtor hereby assigns to Secured Party and grants to Secured Party a continuing security interest in and to (and a setoff right against) the Collateral. 3. Warranties. Debtor warrants that: (i) no financing statements, other than any which may have been filed on behalf of Secured Party or as disclosed on Schedule 3 attached hereto, covering any of the Collateral is on file in any public office; (ii) Debtor is the lawful owner of all Collateral free of all liens and claims other than the security interests hereunder, liens with respect to the financing statements disclosed on Schedule 3 attached hereto, and Permitted Liens, with full power and authority to execute this Agreement and perform Debtor's obligations hereunder, and to subject the Collateral to the security interest hereunder; (iii) this Agreement is a legal, valid and binding obligation of Debtor, enforceable in accordance with its terms, except that the enforceability of this Agreement may be limited by bankruptcy, insolvency, fraudulent conveyance, fraudulent transfer, reorganization, moratorium or other similar laws now or hereafter in effect relating to creditors' rights generally and by general principles of equity (regardless of whether enforcement is sought in a proceeding in equity or at law); (iv) Debtor's Jurisdiction of Organization is Delaware, Debtor's chief executive office and principal place of business is located in Charlotte, North Carolina, Debtor's tax identification number and organizational identification number are correctly set forth on the financing statement listing Secured Party as "Secured Party," and Debtor maintains a place of business in the following locations: Atlanta, Georgia and ________. 4. Collections, etc. Until such time during the occurrence a continuance of an Event of Default as the Secured Parties shall notify Debtor of the revocation of such power and authority, Debtor (a) will, at its own expense, endeavor to collect, as and when due, all amounts due under any of the Collateral as Debtor may deem advisable, and (b) may grant, in the ordinary course of business, to any party obligated on any Collateral, any rebate, refund or allowance to which such party may be lawfully entitled, and may accept, in connection therewith, the return of Goods, the sale or lease of which shall have given rise to such Collateral. The Secured Party, however, may, at any time that an Event of Default exists, whether before or after any revocation of such power and authority or the maturity of any of the Obligations, notify any parties obligated on any of the Collateral to make payment to the Secured Party of any amounts due or to become due thereunder and enforce collection of any of the Collateral by suit or otherwise and surrender, release or exchange all or any part thereof, or compromise or extend or renew for any period (whether or not longer than the original period) any indebtedness thereunder or evidenced thereby. Upon the request of the Secured Party during the occurrence and continuance of an Event of Default, Debtor will, at its own expense, notify any or all parties obligated on any of the Collateral to make payment to the Secured Party of any amounts due or to become due thereunder. 5 Upon request by the Secured Party during the occurrence and continuance of an Event of Default, Debtor will forthwith, upon receipt, transmit and deliver to the Secured Party, in the form received, all cash, checks, drafts and other instruments or writings for the payment of money (properly endorsed, where required, so that such items may be collected by the Secured Party) which may be received by Debtor at any time in full or partial payment or otherwise as proceeds of any of the Collateral. Except as the Secured Party may otherwise consent in writing, any such items which may be so received by Debtor after receipt of the Secured Party's request pursuant to the preceding sentence, will not be commingled with any other of its funds or property, but will be held separate and apart from its own funds or property and upon express trust for the Secured Party until delivery is made to the Secured Party. Debtor will comply with the terms and conditions of any consent given by the Secured Party pursuant to the foregoing sentence. The Secured Party (or any designee of the Secured Party) is authorized to endorse, in the name of the Debtor, any item, howsoever received by the Secured Party, representing any payment on or other proceeds of any of the Collateral; provided Secured Party shall only be entitled to exercise such authorization upon the occurrence and during the continuance of an Event of Default. 5. Certificates, Schedules and Reports. Debtor will from time to time, as the Secured Party may reasonably request, deliver to the Secured Party such schedules, certificates and reports respecting all or any of the Collateral at the time subject to the security interest hereunder. Any such schedule, certificate or report shall be executed by a duly authorized officer of Debtor and shall be in such form and detail as the Secured Party may specify. Debtor shall immediately notify the Secured Party of the occurrence of any event causing any loss or depreciation in the value of any Collateral which is material to Debtor taken as a whole, and such notice shall specify the amount of such loss or depreciation. 6. Agreements of Debtor. Debtor (a) will deliver such financing statements (and hereby authorizes Secured Party to file any financing statement as Secured Party deems necessary to perfect its security interest in the Collateral) and, upon request of the Secured Party, other documents (and pay the cost of filing or recording the same in all public offices reasonably deemed appropriate by the Secured Party) and do such other acts and things all as the Secured Party may from time to time request to establish and maintain a valid security interest in the Collateral to secure the payment of the Obligations; (b) will keep its Records concerning the Collateral in such a manner as will enable the Secured Party or its designees to determine at any time the status of the Collateral; (c) will furnish to the Secured Party such information concerning Debtor and the Collateral as the Secured Party may from time to time reasonably request; (d) will permit the Secured Party and their designees, from time to time, on reasonable notice and at reasonable times and intervals during normal business hours to inspect Debtor's Collateral, and to inspect and audit all Records and other papers in the possession of Debtor pertaining to the Collateral, and will, upon request of the Secured Party during the existence of a Default, deliver to the Secured Party all of such Records and papers; (e) will promptly pay when due all material license fees, registration fees, taxes, assessments and other charges which may be levied upon or assessed against the ownership, operation, possession, maintenance or use of its Collateral; (f) will take all steps reasonably necessary to protect, preserve and maintain all of its rights in the Collateral; (g) will keep all of the tangible Collateral in the United States of America; (h) will reimburse the Secured Party for all expenses, including reasonable attorney's fees and charges, incurred by the Secured Party in seeking to collect or enforce any rights in respect of Debtor's Collateral; and (i) will not change its Jurisdiction of Organization from that which is in effect on the date hereof without ten (10) days' prior written notice to Secured Party. 6 7. Events of Default. Whenever an Event of Default exists, the Secured Party may exercise from time to time any right or remedy available to it under applicable law (provided nothing herein shall limit Secured Party's ability to exercise any right it may otherwise have under the Promissory Note due to the existence of an Event of Default). Debtor agrees, in case of an Event of Default, to assemble, at its expense, all its Collateral at a convenient place or places acceptable to the Secured Party. Any notification of intended disposition of any of the Collateral required by law shall be deemed reasonably and properly given if given at least ten (10) days before such disposition. Any proceeds of any disposition by the Secured Party of any of the Collateral may be applied by the Secured Party to payment of expenses in connection with the Collateral, including reasonable attorney's fees and charges, and any balance of such proceeds may be applied by the Secured Party toward the payment of such of the Obligations, and in such order of application, as the Secured Party may from time to time elect. Notwithstanding the foregoing, the rights and remedies of Secured Party upon an Event of Default are governed by that certain Intercreditor Agreement, dated of even date herewith, executed by Amadeus, Terra, Avanti, and Libra Securities, LLC, a Delaware limited liability company. 8. Additional Agreements of Debtor; Authorization of Secured Party. (a) Debtor hereby irrevocably appoints Secured Party as its attorney-in-fact and proxy, with full authority in the place and stead of Debtor and in the name of Debtor or otherwise, from time to time in such Secured Party's discretion, to take any action and to execute any instrument which such Secured Party may deem necessary or advisable to accomplish the purposes of this Agreement, including, without limitation, (i) to ask, demand, collect, sue for, recover, compound, receive and give acquittance and receipts for moneys due and to become due under or in respect of any Collateral, (ii) to receive, endorse, and collect any drafts or other instruments, documents and chattel paper in connection with clause (i) above, (iii) to file any claims or take any action or institute any proceedings which such Secured Party may deem necessary or desirable for the collection of any Collateral or otherwise to enforce the rights of such Secured Party with respect to any Collateral, and (iv) to execute assignments, licenses and other documents to enforce the rights of such Secured Party with respect to any Collateral; provided that such Secured Party agrees not to act as attorney-in-fact and proxy of the Debtor unless an Event of Default is then in existence. This power is coupled with an interest and is irrevocable until all of the Obligations are indefeasibly paid in full. 7 (b) If Debtor fails to perform any agreement contained herein, the Secured Party may perform, or cause performance of, such agreement or obligation, in the name of Debtor or the Secured Party, and the expenses of the Secured Party incurred in connection therewith shall be payable to the Secured Party on demand and shall be secured by the Collateral. (c) The powers conferred on the Secured Party hereunder are solely to protect its interest in the Collateral and shall not impose any duty upon it to exercise any such powers. Except for the safe custody of any Collateral in its possession and the accounting for moneys actually received by it hereunder, the Secured Party shall have no duty as to any Collateral or as to the taking of any necessary steps to preserve rights against prior parties or any other rights pertaining to any Collateral. (d) Anything herein to the contrary notwithstanding (i) Debtor shall remain liable under all licenses, contracts and otherwise with respect to any of the Collateral to the extent set forth therein to perform all of its obligations thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by the Secured Party of any of their rights hereunder shall not release Debtor from any of its obligations under any licenses, contracts or otherwise in respect of the Collateral, and (iii) the Secured Party shall not have any obligation or liability by reason of this Agreement under any licenses, contracts or with respect to any of the other Collateral, nor shall the Secured Party be obligated to perform any of the obligations or duties of Debtor thereunder or to take any action to collect or enforce any claim for payment assigned hereunder. 9. Miscellaneous. The Secured Party shall be deemed to have exercised reasonable care in the custody and preservation of any of the Collateral in its possession if it takes such action for that purpose as Debtor requests in writing, but failure of the Secured Party to comply with any such request shall not of itself be deemed a failure to exercise reasonable care, and no failure of the Secured Party to preserve or protect any right with respect to such Collateral against prior parties, or to do any act with respect to the preservation of such Collateral not so requested by Debtor, shall be deemed of itself a failure to exercise reasonable care in the custody or preservation of such Collateral. Any notice provided pursuant to this Agreement shall be given in accordance with the notice provisions of the Merger Agreement. Debtor agrees to pay all expenses, including reasonable attorney's fees and charges paid or incurred by the Secured Party in endeavoring to collect the Obligations, or any part thereof, and in enforcing this Agreement against Debtor, and such obligations will themselves be Obligations. No delay on the part of the Secured Party in the exercise of any right or remedy shall operate as a waiver thereof, and no single or partial exercise by the Secured Party of any right or remedy shall preclude other or further exercise thereof or the exercise of any other right or remedy. 8 This Agreement shall remain in full force and effect until the Obligations are paid in full in cash or converted in full pursuant to the terms of the Promissory Note. If at any time all or any part of any payment theretofore applied by the Secured Party to any of the Obligations is or must be rescinded or returned by the Secured Party for any reason whatsoever (including the insolvency, bankruptcy or reorganization of Debtor), such Obligations shall, for the purposes of this Agreement, to the extent that such payment is or must be rescinded or returned, be deemed to have continued in existence, notwithstanding such application by the Secured Party, and this Agreement shall continue to be effective or be reinstated, as the case may be, as to such Obligations, all as though such application by the Secured Party had not been made. This Agreement shall be construed in accordance with and governed by the laws of the State of Delaware applicable to contracts made and to be performed entirely within such State, subject, however, to the applicability of the UCC of any jurisdiction in which any Collateral may be located at any given time if required under the UCC. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement. The rights and remedies of, and the privileges and actions permitted to be taken hereunder by, the Secured Party may only be undertaken with the unanimous consent of the Secured Party, and no individual Secured Party may exercise any such right or remedy or undertake any such privilege or action without the express consent of the other Secured Party hereunder. The rights and privileges of the Secured Party hereunder shall inure to the benefit of its successors and assigns. This Agreement may be executed in any number of counterparts and by the different parties hereto on separate counterparts, and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. Debtor represents and warrants to the Secured Party that the representations and warranties made by Debtor herein are true and correct. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; SIGNATURE PAGE FOLLOWS] 9 IN WITNESS WHEREOF, this Agreement has been duly executed as of the day and year first written above. DEBTOR: RCG COMPANIES INCORPORATED By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- SECURED PARTY: [TERRA NETWORKS ASOCIADAS, S.L.] By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- [AMADEUS AMERICAS, INC. f/k/a AMADEUS NMC HOLDING, INC.] By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- [AVANTI MANAGEMENT, INC.] By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- [LIBRA SECURITIES, LLC] By: -------------------------------------------------- Name: ------------------------------------------------ Title: ----------------------------------------------- 10 SCHEDULE 3 FINANCING STATEMENTS -------------------- None. EX-99.1 6 ex99.txt RCG CLOSES $31 MILLION FINANCING AND ONETRAVEL ACQUISITION TUESDAY APRIL 19, 2005 CHARLOTTE, NC -- APRIL 19, 2005 -- RCG Companies Incorporated (AMEX: RCG), a diversified travel and leisure company, announced today it has closed on a $31 million private placement of RCG convertible preferred stock and associated warrants. The financing included institutional investor Special Situations Funds, among others. The Company also announced that it has closed on the acquisition of 100% of the outstanding stock of OneTravel, Inc. (http://www.onetravel.com) Both of these transactions, including the use of proceeds, were announced in the Company's April 15, 2005 press release. Commenting on the closings, RCG Chairman William Goldstein noted: "It is great to have this financing and the OneTravel deal under our belt. The quality of the institutional investors we have secured provide a great shareholder base. These transactions begin a new era for RCG. First, we plan to rename the company and change our ticker symbol to reflect our 100% focus on travel. We also plan to divest ourselves of all non-travel related assets. We will also be recommending that our shareholders approve a 1 for 10 reverse stock split at our upcoming annual meeting, as part of the recapitalization that this financing achieves. This reverse split will better position us to attract additional institutional investors to our stock, which is critical to the success of a public company. We now feel that we have all of the pieces put together to effectively compete in the online and offline travel space on both a domestic and international level. Although we are proud of our current run rate of in excess of $25 million per month in gross bookings, we feel we can continue to grow significantly as this run rate does not reflect any of the cross selling synergies we expect to realize through this consolidation. Our pricing is strong and we encourage everyone to regularly compare our prices to other online sites including USA InterActive Corp.'s Expedia (Nasdaq: IACI), Cendant Corp.'s Orbitz (NYSE: CD) and Sabre Holdings Corp.'s Travelocity (NYSE: TSG)." Roth Capital Partners and Bryant Park Capital acted as co-placement agents for the financing transaction. Libra Securities, LLC acted as financial advisor for OneTravel in connection with the sale. ABOUT RCG COMPANIES INCORPORATED RCG Companies Incorporated (www.rcgcompanies.com) derives a majority of its revenues from its travel business subsidiaries, FS SunTours, Inc., which sells leisure and vacation travel packages under the SunTrips(R) brand (http://www.suntrips.com), Farequest Holdings, Inc., which is a leading online and offline provider of a full range of travel services operating under the name 1-800-CHEAPSEATS (www.1800cheapseats.com), and the newly acquired OneTravel, Inc. (www.onetravel.com). RCG's other wholly owned subsidiary, Logisoft Corp. (www.logisoft.com), operates in the software and information technology services sector. Statements in this news release about anticipated or expected future revenue or shareholder value growth or expressions of future goals or objectives, including statements regarding whether current plans to grow and strengthen the Company's business will be implemented or accomplished, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements in this release are based upon information available to the Company on the date of this release. Forward-looking statements involve risks and uncertainties, including the risk that the Company will be unable to grow or strengthen its business due to a lack of capital or a change in market demand for its products and services or to fully or effectively integrate all business units or the inability to realize anticipated cost savings or revenue and stockholder value growth opportunities associated with the acquisition of Farequest and the recent acquisition of One Travel. There is also a risk that the Company's shareholders will not approve certain matters related to the sale of preferred stock, which would trigger a redemption, which the Company may not be able to fund. The Company has previously mentioned in conference calls that gross bookings are not equal to gross revenues under generally accepted accounting principles, so no inference can be made about profitability based on gross bookings unless expressly stated by the Company. The Company is also subject to those risks and uncertainties described in the Company's filings with the Securities and Exchange Commission, including the Company's historical losses and negative cash flow, its need for additional capital, and that future financing, if available, will dilute the Company's current common stockholders. Additionally, forward-looking statements concerning the performance of the travel and leisure industry are based on current market conditions and risks, which may change as the result of certain regulatory, political or economic events, a shift in consumer travel preferences, as well as those risks and uncertainties described in the Company's filings with the Securities and Exchange Commission, which could cause actual events or results to differ materially from the events or results described in the forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements. INVESTOR CONTACT: RCG COMPANIES INCORPORATED BRYAN CRUTCHFIELD, DIRECTOR INVESTOR RELATIONS (917) 443-9336 CRUTCH@1800CHEAPSEATS.COM MARC BERCOON, CFO (770) 730-2860 MARC@1800CHEAPSEATS.COM -END- -----END PRIVACY-ENHANCED MESSAGE-----