ITEM
2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant
to the Asset Purchase Agreement, at the Closing, we sold the Assets of
TraveLeaders to TLAG. Excluded from the sale of the Assets of
TraveLeaders were the cash and cash equivalents of TraveLeaders.
The total
purchase price for the Assets was $14,000,000 (the “Purchase Price”), payable as
follows:
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a)
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$6,000,000
in cash at Closing, minus the value of certain liabilities assumed by
TLAG; and
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b)
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Up
to $8,000,000 in the form of contingent consideration as described in the
Guaranteed Promissory Note (the “Buyer
Note”).
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The Buyer
Note bears interest at the rate of 7% per annum, only as provided
below. The Buyer Note is payable at any time without any prepayment
penalty. If an event of default occurs as defined in the Buyer Note,
the Buyer Note bears interest at 10% per annum, as provided in further detail in
the Buyer Note. The Buyer Note is guaranteed by TAG II, Inc., as described
in greater detail below. The balance of the Buyer Note is payable as
follows:
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a)
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From
the Closing to the date of the Initial Payment (as defined below), the
Buyer Note shall not bear interest;
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b)
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An
initial payment of $2,000,000 shall be made under the Buyer Note five (5)
business days after the First Year EBITDA (as defined below) is
determined, which determination date is required to occur prior to May 15,
2009 (the “Initial Payment”), which Initial Payment shall be adjusted
based on the Earnings Before Interest, Taxes, Depreciation and
Amortization (“EBITDA”) of the Assets for the period from December 30,
2007 to December 27, 2008 (the “First Year EBITDA”), the Purchase Price
will be reduced or increased by four (4) times the amount by which the
First Year EBITDA is less than or greater than $3,500,000 (the “EBITDA
Price Adjustment”). Provided however, that the Purchase Price
shall not be decreased to less than $6,000,000. The difference
between the $6,000,000 Purchase Price floor and the EBITDA Price
Adjustment is the Initial Payment
Amount;
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c)
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Interest
on the Buyer Note, at the rate of 7% per annum shall accrue on the Buyer
Note from the date of the Initial Payment until the note is paid in full,
payable quarterly in arrears;
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d)
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If
additional payments are due after the adjusted payment described in (b)
above and the payment of the Initial Payment, a payment of no more than
$4,000,000 shall be made on the first anniversary of the Initial Payment
date; and
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e)
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If
any remaining balance is due on the Buyer Note after the payments
described in (b) and (d) above, the remaining principal and any
accrued and unpaid interest shall be made on the second anniversary of the
Initial Payment date.
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TLAG was
also required to pay us, in addition to the Purchase Price, the lesser of
$100,000 or (ii) 3.0% of the amount needed to discharge any tax liens relating
to the purchased Assets.
We agreed
in connection with the Asset Purchase Agreement to change the name of American
Leisure Equities Corporation, such that the company’s amended name would not
include any of the following words, “TraveLeaders,” “Travel,” or
“Leader.”
American
Leisure Group Limited, our majority shareholder and TAG II, Inc., the sole
member of TLAG (“TAG”) also entered into a Strategic Alliance Agreement,
pursuant to which TAG agreed to offer its products to ALG for resale to ALG’s
customers at prices no less favorable to ALG than any other customer of TAG and
ALG agreed to offer rooms in its resorts to TAG at prices no less favorable than
room rates offered by ALG to any other customer. ALG and TAG also
agreed to work together to identify and develop co-marketing and joint marketing
programs in the future. The Strategic Alliance Agreement has a term
of five (5) years, and can be extended by the parties for an additional three
(3) years, unless the agreement is terminated as provided in the Strategic
Alliance Agreement.
Additionally,
in connection with the Closing, ALG entered into a Guaranty Agreement with TAG,
pursuant to which ALG guaranteed the performance by us of every obligation of
the Asset Purchase Agreement. Similarly, TAG entered into a Guaranty
Agreement with us, whereby TAG guaranteed the performance by TLAG of every
obligation of the Asset Purchase Agreement and Buyer Note.
Finally,
TLAG, TraveLeaders and us entered into a Non-Compete Agreement in connection
with the Closing, whereby we and TraveLeaders agreed that for a period of five
(5) years, we would not directly or indirectly permit our name to be used by or
participate in any business or enterprise that engages or proposes to engage in
the business of operating travel agents in the United States of America, except
as in connection with our pre-existing operations of Hickory Travel Systems,
Inc. and as otherwise provided in the Non-Compete
Agreement. Furthermore we and TraveLeaders agreed that for a period
of five (5) years, we would not directly or indirectly induce or attempt to
induce any customer of TLAG, supplier, licensee, or other business relation to
cease doing business or reduce its level of business with TLAG or any of its
affiliates, except as provided in the Non-Compete Agreement.
TLAG
assumed responsibility to repay the loan owed by TraveLeaders to Regions Bank as
part of the consideration for the purchase of the Assets.
