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
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(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: _____________________________